Recticel

Untitled Embracing a new future 2021 Annual Report The FSC ® certication provides an assurance that the wood and paper used for this annual report have been harvested in a socially and environmentally responsible manner. The FSC’s Chain of Custody certication provides a way in which the material can be tracked from the certied initial source through the manufacturing process to the end user. Recticel annual report 2021 2 Over the lifetime of their use, the insulation products we sold in 2021 will offset our total 2021 carbon footprint by 51 TIMES * * Ratio between avoided emissions and carbon footprint scope 1,2 & 3. It is based on 2021 revenues of the business lines Insulation, Bedding and Engineered Foams, excluding FoamPartner which was acquired on 31 March 2021. Our impact on climate change CLIMATE POSITIVE MULTIPLE CARBON FOOTPRINT INDICATOR CARBON INTENSITY + 11% - 4% - 17% + 76% + 17% RECYCLING SUSTAINABLE R&D PROJECTS Compared to 2020 Recticel annual report 2021 3 Embracing change 10 November 2020 • Announcement of acquisition FoamPartner • Two-leg strategy with focus on Insulation and Engineered Foams 19 March 2021 • Announcement of acquisition Gór-Stal Sp. z o.o. (board business) 19 May 2021 • Greiner AG launches unsolicited offer on Recticel 30 June 2020 • Closing of divestment Automotive Interiors business line • Closing of divestment Eurofoam joint venture 26 February 2021 • Launch of divestment process Bedding business line 19 February 2019 • Closing of divestment of Proseat joint venture 1 April 2021 • Closing of FoamPartner acquisition • Integration of Flexible Foams & FoamPartner to create Engineered Foams business line Recticel annual report 2021 4 December 2021 06/12 • SGM approves divestment of Engineered Foams business line to Carpenter Co. 07/12 • Announcement of binding agreement with Carpenter Co. for divestment of Engineered Foams business line 24/12 • SGM approves divestment of Bedding business line to Aquinos Group 28 February 2022 • Baltisse NV buys 22.6% of Recticel shares from Greiner AG April 2022 14/04 • Exercising put option to sell 25% in Proseat JV to Sekisui 29/04 • Closing of Trimo d.o.o. acquistion 18 November 2021 • Announcement of binding agreement with Aquinos Group for divestment Bedding business line 11 January 2022 • Greiner AG unsolicited offer expires March 2022 21/03 • Announcement of acquisition of Trimo d.o.o. 31/03 • Closing of Bedding business line divestment to Aquinos Group 11 October 2021 • Strategy update with focus on Insulation • Announcement of intended divestment of Engineered Foams to Carpenter Co. Recticel annual report 2021 5 A conversation with the Chairman of the Board of Directors and the Chief Executive Ocer Johnny Thijs Chairman of the Board of Directors Johnny Thijs and Olivier Chapelle reﬂect on a year in which Recticel weathered a range of challenges, including the continuing pandemic and unexpected business developments. They share some insights into their plans and expectations for 2022 and explain the new and positive direction that the company is taking. Olivier Chapelle Chief Executive Officer Recticel annual report 2021 6 Recticel undertook a major strategic overhaul between 2019 and early 2021, with the intention of basing the company on two pillars, Insulation and Engineered Foams. How did these two business lines perform financially in 2021? These two businesses performed above expectations in 2021, as we confirmed on 19 May 2021 by a substantial increase in our profit guidance. Both businesses were able to cope with the successive waves of the pandemic without impacts on performance. In addition, they managed to pass through raw material cost increases into the selling prices in real time. As a consequence, Recticel generated record results in 2021. Moreover, our Engineered Foams business has successfully integrated the activities of FoamPartner, acquired on 31 March 2021, and has delivered the expected synergies. The next twelve months will bring another major strategic change, as Recticel evolves into a pure player in insulation. Why did you decide to take this direction? In September 2020, we defined a strategy based upon two activities, Insulation and Engineered Foams. They both had solid growth perspectives and offered a natural hedge against business cyclicality, given their very complementary product, segment and geographic positioning. As a consequence, we announced in February 2021 our intention to divest the Bedding activities, a process that we immediately initiated. The execution of this strategy was progressing according to plan and the evolution of our stock price reﬂected the support of the market. We were forced to change that strategy by the unsolicited takeover bid by Greiner on all Recticel shares, following their acquisition of the 27% participation of Compagnie du Bois Sauvage. We deemed the Greiner offer unfavourable and unacceptable for all stakeholders: customers, employees and shareholders. We designed a bold defence to fend off the Greiner offer: the sale of Engineered Foams to Carpenter Co. and subsequent development of Recticel into a pure insulation player. The strategy revision is another token of our company’s agility. In March you announced that you have signed an agreement to acquire the insulated panel specialist Trimo d.o.o.. How important is this acquisition for Recticel’s future? This is a key development for our company because it will enable us to accelerate growth with a category – insulated panels – that complements our existing insulation boards, vacuum insulated panels and thermo-acoustic boards. It will also enable Recticel to enter into the industrial building segment and to reinforce our presence in a region of Europe in which we had no substantial presence. In 2021, you embarked on a renewed sustainability journey with firm objectives for 2025. Will Recticel continue to work towards those goals as an Insulation company? In fact, we embarked on our sustainability journey in 2015 and have since updated our objectives with a new set of even more ambitious targets to be reached by 2025. As a pure insulation player, our contribution is essentially about fighting climate change, which is the core of our sustainability objectives. As a major industrial player specialising in chemistry, are ESG commitments important in your daily business? Yes, we have firm commitments to environmental and social contribution, and we have continued to update them with more ambitious targets. As well as considering the impact of our products on climate change, we also develop solutions that will enable full circularity of our product offerings. Our ESG commitments are equally important for our shareholders, given the increased focus of investors and shareholders on companies that deliver ESG contributions. Last year’s business environment was still largely dominated by the COVID-19 pandemic. What was the impact on Recticel and your customers? The 2020 COVID-19 pandemic and the subsequent very steep recovery put a lot of pressure on supply chains, and in the case of Recticel, on the supply of raw materials. Tight supply and higher prices for the raw materials we use made it challenging for us to deliver to our customers on time, in full. Our supply chain teams have done an excellent job in meeting our customer’s expectations. And our commercial teams have been extremely reactive, quickly adapting selling prices in order to mitigate margin impact. That has been achieved quite successfully. What can Recticel partners and shareholders expect in the coming year? We sincerely thank our employees, customers and shareholders for their contributions, their trust and their support, which have enabled our company to emerge successfully from difficult and perilous circumstances in 2021. In particular, we thank our shareholders for supporting our new strategy, as demonstrated in the shareholder meetings held in December 2021. We now look forward to a future focused on our insulation activities, and all our stakeholders can expect ambition, growth and success in the future, with a first milestone of doubling our sales by 2025. Recticel annual report 2021 7 The transformation of Recticel 1 2 Recticel has always been a Group embracing change and evolving in ways that add value for our stakeholders and for wider society. The transformation that began in 2010 – involving restructuring of our business activities and rationalisation of our manufacturing footprint – resulted in significant performance improvement. As soon as we had achieved that landmark, we embarked on a programme of reshaping and investing to boost the business, optimise our portfolio and streamline our organisation. In 2020, despite the disruption caused by the global COVID-19 pandemic, Recticel was perfectly positioned for further strategic transformation. We divested our Automotive Interiors business line and our Eurofoam joint venture. In 2021, we acquired FoamPartner and formed the new Recticel Engineered Foams business line. We began the process of divesting our Bedding business line, entering into a binding agreement with Aquinos Group in November. We also announced our acquisition of the thermal insulation board business of Gór-Stal Sp. z o.o. in Poland. This binding agreement was later cancelled by the owners. Recticel is taking the appropriate legal steps to enforce the acquisition and obtain full damages. Sustainable innovation has remained at the core of everything we do. It is vital not just for the development of our portfolio of products and services, but also for the creation of state-of-the-art business strategies that sustain our future. When circumstances changed again in 2021, we did not hesitate to revisit our strategy. Following an unsolicited offer from Greiner AG to acquire the majority share in our company, we immediately focused on reviewing all our options with the aim of protecting the interests of our shareholders and employees. In December 2021, we signed an agreement with Carpenter Co. for the divestment of the recently formed Recticel Engineered Foams business line. We are satisfied that Carpenter Co. is a strong strategic fit for Recticel Engineered Foams, with a highly complementary footprint and product portfolio. The deal enables us to pursue our insulation business and ESG objectives while safeguarding the potential of the Engineered Foams business line and its highly skilled employees, as well as the interests of all our stakeholders. March 2022 saw the closing of the Bedding business line divestment to Aquinos Group, as well as a pivotal development in the execution of our new strategy: the acquisition of Trimo d.o.o., one of Europe’s leading providers of sustainable premium insulated panels for the construction industry, with operations in Slovenia and Serbia. Recticel is now confidently beginning a new chapter in its history, with a strategy founded on sustainable innovation. In 2022, we will move forward as a pure play insulation company, a specialised business with a wealth of experience and a set of further refined objectives. These include the goals set out in our Sustainability Strategy, which was revised for 2021-2025 and which is supported by two pillars: the Sustainable Innovation Plan and the People Priority Plan. Based on clearly defined material aspects and KPIs, our Sustainability Strategy will continue to ensure that we maximise our positive climate impact, boost circular efficiencies, drive market-driven innovation to develop sustainable solutions for our customers and help to protect and engage our employees and other stakeholders. With the long-term needs and challenges of our business sectors and society as our compass, it is sustainability that nourishes and sustains our competitiveness. Restructuring of the business activities & rationalising the manufacturing footprint [2010-2018] Reshaping & investing to boost the business [2018-2022] Recticel annual report 2021 8 Recticel at a glance Our mission, vision and values M€ 1,032.8 3,556 43 19 consolidated sales sites employees Present in countries * Continuing operations: Insulation & Engineered Foams. The Bedding sale is accounted for in discontinued operations as per IFRS 5 in the 2021 nancial reporting. Recticel around the world At 31.12.2021 Key data Europe Asia United States % of consolidated net sales 88% 6% 6% Number of employees 3,082 283 191 Number of sites 30 8 5 Our corporate mission, vision and values have guided us through a process of change. We consistently leverage our expertise to offer competitive, high value-added solutions that generate shared value for our customers, employees, other stakeholders and society. We aim to be the leading solution provider in all our markets by responding to key global challenges such as climate change, energy conservation, a growing and ageing population, and noise pollution. To achieve this, we focus on efficiency, mutual benefits, innovation and long-term sustainability. Our values describe how we interact, do business and work together at Recticel as we successfully execute our corporate strategy and realise our objectives. In the coming months, we will revisit our mission, vision and values and refine them to truly underpin our future as a pure play insulation specialist. innovate to create value We We strive for results We act with respect & integrity We take and feel ownership accountable We to win cooperate Recticel annual report 2021 9 Highlights of 2021 and early 2022 Insulation – TURVAC Through its TURVAC joint venture, the Recticel Insulation business line won a significant contract with two major international pharmaceutical companies for the delivery of high- performing thermal vacuum insulated panels (VIP) needed to transport and store ultra-low temperature vaccines. Sustainable Innovation - PUReSmart PUReSmart project partner Covestro commissioned a new plant for chemical recycling. The PUReSmart chemical recycling project is coordinated by Recticel and funded by the EU’s Horizon 2020 Innovation and Research programme. Recticel Engineered Foams Recticel completed the acquisition of the Swiss-based company FoamPartner, which then merged with the Recticel Flexible Foams business line to form the new Engineered Foams business line. Insulation – TECUN Insulation To further establish the Insulation business line as a Centre of Excellence, a new e-learning platform was launched to share and improve its employees’ technical product and application knowledge. January 2021 March 2021 April 2021 Engineered Foams Engineered Foams – New Shepard By supplying foams for Blue Origin’s sub-orbital reusable launch vehicle, New Shepard, Recticel was part of the system’s historic first human ﬂight on 20 July 2021. Recticel also supplied high-performance foam-based thermal and acoustic protection systems for the company’s New Glenn rocket fairing. July 2021 Recticel – ESG ratings MSCI upgraded Recticel’s ESG rating from ‘A’ to ‘AA’ (on a scale from AAA to CCC), ranking the Group in the top 6% of the MSCI Commodities Chemicals universe. CDP positioned Recticel among the 33% of companies that have a B score or higher. September 2021 Engineered Foams – NIVA TM Recticel Engineered Foams launched a new range of foams free from halogenated fire retardants (TCCP) for a more natural sleep experience. DISCLOSURE INSIGHT ACTION Recticel annual report 2021 10 Recticel – ESG ratings Based on a limited Core Framework analysis, Sustainalytics ranked Recticel as ‘Medium’ within the Commodity Chemicals universe. October 2021 Engineered Foams – Award Recticel Engineered Foams won the prestigious UTECH Europe Automotive Award for product and innovation with OBoSky ® Nature, a particularly fine-pored foam for headliners with a very homogeneous cell structure and uniform colour. November 2021 Recticel – Aquinos Group Recticel signed a deal with Aquinos Group, a Portuguese privately owned industrial group active in the upholstery and bedding market, for the divestment of the Bedding business line. The deal was closed on 31 March 2022. Engineered Foams – Carpenter Co. Recticel signed a deal with Carpenter Co., an American privately owned industrial group and one of the world’s largest producers of foam products, for the sale of the Recticel Engineered Foams business line. December 2021 Insulation – Eurowall ® E Recticel Insulation introduced Eurowall ® E insulation boards with Euroclass E fire classification for cavity wall insulation. The boards are designed to meet the new fire safety regulation for buildings from 10 to 25 m height, which will come into force in Belgium on 1 July 2022. January 2022 Insulation – PEFC certified Recticel Insulation obtained the renowned PEFC label for its multilayer thermal insulation solutions, making it the first PIR/ PUR manufacturer authorised to use this environmental label. February 2022 Recticel – Trimo d.o.o. Recticel expands its insulation activities with the acquisition of the insulated panel specialist Trimo d.o.o. (Slovenia). Recticel - Proseat Exercising put option to sell 25% in Proseat JV to Sekisui. April 2022 Recticel annual report 2021 11 2021 Financial results Consolidated Net Sales Consolidated Net Sales annual growth rate in million EUR Earnings After Taxes Earnings After Taxes as % of net sales in million EUR 2017 2018 2019 2020 2021 23.9 28.8 2.1 % 2.6 % 2.4 % 7. 6 % 5.2 % 24.7 63.2 53.3 in million EUR 2017 2018 2019 2020 2021 1,135 1,118 8.3 % -1.6 % -7.1 % 67.4 % 1,039 617 1,033 Combined Adjusted EBITDA (2017-2019) & Consolidated Adjusted EBITDA (2020 & 2021) Consolidated Adjusted EBITDA as % of net sales in million EUR 2017 2018 2019 2020 2021 105.5 103.8 9.3 % 9.3 % 11.0 % 7. 2 % 10.6 % 114.7 44.4 109.2 * In 2021, the Bedding business line has been accounted for as discontinued operation (IFRS 5). The 2020 figures have been restated accordingly. Previous years have not been restated and are shown as published (grey colour). Recticel annual report 2021 12 Gross Dividend per Share Gross Divided per share 2017 2018 2019 2020 2021 0.22 0.24 0.24 0.26 0.29 Total Equity versus Net Financial Debt Gearing and Leverage Ratio Total Equity GearingConsolidated Net Financial Debt Leverage in million EUR 2017 2017 80% 2 1. 6 1. 2 0.8 0.4 0 48% 32% 16% 0% 64% 2018 20182019 20192020 20202021 2021 261.8 33.3% 87.1 84.6 265.0 31.9% 275.4 61.2% 168.6 1.8 1.1 1.1 334.8 391.3 147.8 37.8% 4.6 1.6 0.1 1.4% Recticel (Euronext™: REC.BE – Reuters: RECTt.BR – Bloomberg: REC.BB) is listed on the Euronext™ stock exchange in Brussels and is part of the BEL Mid ® index (Euronext™: BELM – Reuters: BELM – Bloomberg: BELM; index weighting: 2.65% - situation 11 April 2022). Price RECTICEL BEL20 BELM BELS -60% -40% -20% 0% 20% 40% 60% Volume RECTICEL Jan Mar May Jul Sep Nov Jan Mar 0 200k 400k Share Price Evolution vs BEL20, BEL Mid, BEL Small (period 01.01.2021-20.04.2022) Recticel BEL20 BELSBELM Jan -60% -40% -20% 0% 20% 40% 60% Mar MarMay Jul Sep Nov Jan in EUR Recticel annual report 2021 13 2021 Sustainability results PEOPLE PRIORITY PLAN SUSTAINABLE INNOVATION PLAN CLIMATE ACTION PLAN TRANSITION TO A CIRCULAR ECONOMY INNOVATION FOR SOCIETAL NEEDS LOWER HS&E IMPACT AN INSPIRING & REWARDING PLACE TO WORK 2020 2021 Target Target year Year to year progress CLIMATE POSITIVE MULTIPLE (ratio between avoided emissions and carbon footprint scope 1, 2, 3) 46 51 75 2030 RECTICEL CARBON FOOTPRINT INDICATOR (ratio between tonnes of CO 2 e scope 1, 2, 3 and tonnes production volume, compared to 100% activity level of 2013) 82 79 60 2030 CARBON INTENSITY (ratio between tonnes of CO 2 e scope 1&2 and €m revenue, compared to 100% in 2020) 100 83 75 2025 RECYCLING Tonnes of post-consumer ﬂexible polyurethane foam produced by Recticel from recycled mattresses 1,059 1,864 ≥5,000 2025 R&D PROJECTS - % of active R&D projects classified as sustainable - Number of sustainable R&D projects ready to be brought to market 58 68 5 80 ≥3 2025 2025 FREQUENCY 1: Number of Lost Time Accidents x 1,000,000 / Number of hours performed 5.3 6.4 ≤2 2025 FREQUENCY 2: Number of [Lost Time Accidents + Restricted Work Cases + Medical Treatment Cases] x 1,000,000 / number of hours performed 10.4 ≤5 2025 % EMPLOYEE PARTICIPATION IN E-LEARNING - Legal e-learning - Cybersecurity GENDER DIVERSITY in senior management 94% 96% 18% 25% 2030 11% - 4% - 17% 76% 17% 21% A detailed description of our strategy and progress during 2021 can be found in our Non-Financial Information Statement (Chapter 2.3 of this Annual Report). New target defined in 2021 * Recticel annual report 2021 14 About this report In this report, we present financial and non-financial information relating to the Recticel Group for 2021 and early 2022. The 2021 annual report is structured to emphasise the Group’s new strategy as well as our enduring commitment to positive transformation with sustainability at its core. Part 1 of the report – A New Future Built on Sustainable Innovation – explains how Recticel continues to place innovation front and centre, in both its business strategy and its ESG approach. Section 1 describes the background to our decision to move forward as a pure play insulation company, summarising the market context and illustrating how this strategic reorientation supports our sustainability goals. Section 2 contains a review of all Recticel business lines in 2021. Section 3 sets out the Group’s ESG approach and our progress in relation its Sustainable Innovation Plan and People Priority Plan. Part 2 – Management Report – provides the financial results and financial status of the Recticel Group. This part of the report also includes the Corporate Governance section and the Non-Financial Information statement. This report is available online. For greater insight into Recticel, visit our corporate website: www.recticel.com Recticel annual report 2021 15 TABLE OF CONTENTS 1. A NEW FUTURE BUILT ON SUSTAINABLE INNOVATION 17 1.1. Transforming to a pure play insulation company 18 1.1.1. Insulation market trends and challenges 19 1.1.2. Insulation boards in residential buildings 21 1.1.3. Insulated panels in industrial construction 23 1.1.4. Our pure insulation product portfolio: unlocking sustainability 25 1.1.5. Our sustainability compass 26 1.2. 2021 business review: innovation for sustained value 31 1.2.1. Recticel Insulation 32 1.2.2. Recticel Engineered Foams 33 1.2.3. Recticel Bedding 34 1.3. 2021 ESG approach: innovation for a better world 35 1.3.1. Our sustainability strategy 36 1.3.2. Sustainable Innovation Plan 37 1.3.3. People Priority Plan 38 1.3.4. Digitalisation 39 1.3.5. Training and Development 40 1.3.6. We never compromise on safety 40 1.3.7. Cybersecurity 41 1.3.8. Pursuing ESG ratings and transparency 41 1.3.9. 2021 Board of Directors & Management Committee 43 2. MANAGEMENT REPORT 45 2.1. Report of our Board of Directors 46 2.1.1. Consolidated Group results 48 2.1.2. Financial position 52 2.1.3. Market segments 53 2.1.4. Profit appropriation policy 55 2.1.5. Dividend payment 55 2.2. Corporate governance statement 56 2.2.1. Applicable rules and reference code 57 2.2.2. Internal control and risk management 57 2.2.3. External audit 58 2.2.4. Composition of the Board of Directors 59 2.2.5. Committees set up by the Board of Directors 62 2.2.6. The Executive Management 64 2.2.7. Remuneration report for financial year 2020 65 2.2.8. Transactions and other contractual ties between the Company 75 and members of the Board of Directors or members of the Management committee 2.2.9. Insider trading and market manipulation 75 2.2.10. Diversity policy 75 2.2.11. Relationships with the reference shareholders and other 76 elements related to possible public takeover bids and others 2.2.12. Statement on non-financial information 77 2.3. Non-financial information statement 78 2.3.1. Introduction 79 2.3.2. Activities of the company 80 2.3.3. A strategy for sustainability: 81 Growing together towards a PUre future 2.3.4. Recticel targets and results 88 2.3.5. Independent limited assurance report on selected sustainability 99 indicators of the non-financial information statement 2.3.6. Taxonomy eligibility 101 2.3.7. ESG performance 102 2.4. Financial report 103 2.4.1. Consolidated financial statements 104 2.4.2. Notes to the consolidated financial statements for the year 112 ending 31 December 2021 2.4.3. Recticel NV/SA - General information 179 2.4.4. Recticel NV/SA - Condensed statutory accounts 180 2.4.5. Risk factors and risk management 182 2.4.6. Declaration by the responsible officers 185 2.4.7. Auditor’s report on the consolidated financial statements 185 for the year ending 31 December 2021 3. GLOSSARY 189 4. KEY FIGURES 2013-2021 192 Recticel annual report 2021 16 1. A new future built on sustainable innovation Recticel annual report 2021 17 1.1 Transforming to a pure play insulation company Following the divestments of the Recticel Engineered Foams and Bedding business lines, Recticel will be a pure play insulation company. This strategic change presents significant potential for our shareholders and other stakeholders. We will move forward with no debt in a market that has solid long-term fundamentals. For investors, the insulation segment is less cyclical, offers more visibility and provides cleaner margins. The move will also give us unprecedented opportunities to pursue our R&D objectives and intensify our sustainability efforts. In March 2022, we announced a key move in the execution of our new strategy: the signing of an agreement to acquire Trimo d.o.o., one of Europe’s leading providers of sustainable premium insulated panels for the building industry. Trimo d.o.o. currently operates from two sites (Trebnje, Slovenia, and Šimanovci, Serbia) and sells its insulated panels and building solutions in more than 60 countries around the world. In 2021, Trimo employed about 480 people and generated net sales of EUR 138.4 million. The company’s products, technologies and markets are a perfect complement to our current portfolio. The acquisition, which was closed on 29 April 2022, will enable Recticel to expand in an adjacent insulation category while increasing its geographic reach. Recticel annual report 2021 18 Today’s industrial landscape, and indeed society in general, is impacted by a limited number of megatrends. These have not changed significantly in the last decade and are set to dominate for the coming years as well. They include rapid urbanisation, clean energy transition, disruptive technology developments, health considerations, demographic and social changes, and climate change and resource shortages. While all of these shape our lives, the environmental challenges – which include climate action failure, biodiversity loss and ecosystem collapse as well as natural resource depletion – will have the greatest impact on our basic human needs. Scarce resources and global heating: our biggest challenges As the earth’s population continues to escalate, it is increasingly difficult to sustain the demand for food, energy and materials. There is an urgent need for solutions that are more energy-efficient, less wasteful and less reliant on our planet’s dwindling resources. The creation of a circular economy is one such solution. Other possibilities include the optimisation of raw materials. Recticel focuses on both of these and also considers the environmental impact of its products throughout their entire lifecycle, from responsible sourcing of raw materials to the dismantling and recycling of components at the end of the product’s life. Along with the scarcity of resources, the need to address climate change is an increasingly urgent factor in all industrial activities and decisions. Year-end data compiled by NASA (National Aeronautics and Space Administration) and NOAA (National Oceanic and Atmospheric Administration) indicates that 2021 was the sixth-hottest year on record, with temperatures 1.10°C warmer than at the beginning of the 20th century. The world is lagging behind on the commitments made in the 2015 Paris Agreement to limit global warming to below 2°C. The COP 26 conference in 2021 resulted in renewed agreements to revisit and strengthen emissions targets, as well as the introduction of new measures to cut methane emissions and fossil fuels. In April 2022, the Intergovernmental Panel on Climate Change (IPCC) confirmed that the time for action is now and that the greenhouse gas emissions can be halved by 2030 1 . Rapid urbanisation Clean energy transition Disruptive technology developments Health considerations Demographic and social changes Climate change and resource shortages Of these, climate change and resource scarcity will have the biggest impact on our basic human needs. Source: NASA GISS & NOAA NCEl global temperature anomalies averaged and adjusted to early industrial baseline (1881-1910). Data as of 13/01/2022. Source: https://www.adlittle.com/en/insights/prism/trends-megatrends https://www.weforum.org/reports/global-risks-report-2022 1 https://www.ipcc.ch/2022/04/04/ipcc-ar6-wgiii-pressrelease/ HOTTEST GLOBAL YEARS ON RECORD 10 1.1.1 Insulation market trends and challenges 2013 +0.2° +0.6° +1.0° +1.4°C 2010 2014 2018 2021 2015 2017 2019 2020 2016 Recticel annual report 2021 19 Energy consumption in residential housing Europe’s buildings account for 40% of today’s total energy use. In the EU, they also account for around 36% of total CO 2 emissions. Prioritising sustainable construction is key to achieving the 2050 climate goals defined by the European Commission (see section 1.1.5). Sustainable construction minimises energy demand in the building use phase and, in a second step, opimises the utilisation of materials. This helps to strike a vital balance between economic and social development and environmental protection. Renovating the EU building stock will improve energy efficiency while driving the clean energy transition 1 . Insulation is one of the most effective tools in achieving that balance. BELGIUM BULGARIA CYPRUS DENMARK GERMANY ESTONIA FINLAND FRANCE GREECE HUNGARY IRELAND CROATIA LATVIA LITHUANIA LUXEMBOURG MALTA THE NETHERLANDS AUSTRIA POLAND PORTUGAL ROMANIA SLOVENIA SLOVAKIA SPAIN CZECH REPUBLIC UNITED KINGDOM SWEDEN ITALY 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 73.5% 52.5% 62.5% 66.0% 72.7% 66.9% 64.9% 54.5% 71.7% 60.5% 66.6% 68.3% 70.3% 78.7% 20.4% 63.4% 69.0% 65.3% 28.2% 62.9% 61.2% 67.1% 43.1% 68.5% 63.5% 54.8% 35.4% EU28 63.6% In Europe (EU28 – 2018), space heating accounts for 63.6% of the total energy consumption in the residential sector. Residential houses consume energy for heating, cooling and ventilation, the production of warm water, cooking, use of electrical appliances and lighting. 64% Space heating 17% Hot water 3% Cooking 3% Lighting 13% Appliances * Breakdown of energy consumption in existing homes Source: https://ec.europa.eu/info/news/focus-energy-efficiency-buildings-2020-lut-17_enSource: EuroStat. Disaggregated final energy consumption in households - quantities Source: https://ec.europa.eu/info/news/focus-energy-efficiency-buildings-2020-lut-17_en SOME KEY FIGURES FOR EU BUILDINGS 75% 1% 63.6% 34m 85-95% of buildings in the EU are energy inecient per annum is the rate at which today’s building stock is being renovated of EU residential energy consumption is for space heating Europeans cannot aord to keep their homes adequately heated of today’s EU buildings will still be in use in 2050 1 https://energy.ec.europa.eu/topics/energy-efficiency/energy-efficient-buildings/renovation-wave_en Recticel annual report 2021 20 1.1.2 Insulation boards in residential buildings With space heating accounting for almost 64% of the average household’s energy consumption, it makes sense that thermal insulation is the most effective way to improve the energy performance of residential buildings and keep the energy bill under control. -10 kWh/m 2 /year The scale of the potential energy savings means that, as a pure play insulation company, Recticel will have a very significant role in improving the energy efficiency of buildings and the sustainability of the construction industry. TERRACE HOUSE Built: 1956 Protected volume: 460 m³ Initial energy score: 730 kWh/m 2 /year ROOF INSULATION Using 14 cm Powerroof ® insulation boards (lambda value 0.022 W/mK) Energy score after installation: 345 kWh/m 2 /year EXTERIOR WALL INSULATION Using 16 cm Powerwall ® insulation boards (lambda value 0.022 W/mK) Energy score after installation: 273 kWh/m 2 /year REPLACEMENT OF WINDOWS Low-E glass + aluminium profiles (combined total: 1.64 W/mK) Energy score after installation: 109 kWh/m 2 /year FLOOR INSULATION Using 14 cm Euroﬂoor ﬂoor insulation boards (lambda value 0.022 W/mK) Energy score after installation: 213 kWh/m 2 /year SOLAR PANELS 10 m² monocrystalline or polycrystalline Energy score after installation: 64 kWh/m 2 /year -376 kWh/m 2 /year 1 -81 kWh/m 2 /year 2 -48 kWh/m 2 /year 3 -60 kWh/m 2 /year ENERGY-EFFICIENT BOILER Energy score after installation: 157 kWh/m 2 /year 4 -56 kWh/m 2 /year 5 -15 kWh/m 2 /year 7 8 TOTAL ENERGY SAVING: 666 kWh/m²/year Total saved thanks to airtight roof, wall and ﬂoor insulation: 537 kWh/m²/year. -20 kWh/m 2 /year 6 AIR TIGHTNESS TESTING Energy score after installation: 89 kWh/m 2 /year SOLAR BOILER With 8 m² solar collectors Energy score after installation: 74 kWh/m 2 /year Source: www.isolatiebarometer.be Recticel annual report 2021 21 PIR insulation boards: a driving force in sustainable construction While the general benefits of insulation are clear, there are further benefits to be derived specifically by choosing polyurethane as an insulation material. This is due to the varying thermal insulation capacities, densities and installation requirements of different materials. PIR insulation boards make a particular contribution to economic and environmental sustainability in a number of ways. SUPERIOR THERMAL EFFICIENCY PIR offers huge potential for energy savings. Depending on the thickness and the facings used, it can achieve thermal conductivity from as low as 0.022 W/mK to 0.028 W/mK. This makes it one of the most efficient insulation materials commonly available on the market. The increased energy efficiency reduces carbon emissions from the building, mitigating climate change. It also leads to savings on energy bills and greater comfort for residents. MORE LIVING SPACE As PIR achieves equivalent performance to other materials with less thickness, it increases options to optimise indoor living space and reduce building footprints. This can lead to economic gains for building owners through reduced investment costs and/or enhanced income from rent or sale of the building. The thinner profile also allows greater ﬂexibility in designing airtightness solutions. The space-saving qualities of PIR insulation boards also have further benefits in logistics; they require less storage space and lead to fuel savings and reduced emissions from transportation. LOW WEIGHT With around 97% of its volume consisting of trapped gas, polyurethane foam is one of the lightest insulation materials available. In some applications, the weight ratio between a PIR solution and an alternative insulation solution can be 1:6 or even 1:10. Lightweight PIR insulation boards create efficiencies throughout the logistics process as well as facilitating quick, easy installation and reducing the cost of some structural elements. In addition to this, the high strength-to-weight ratio of polyurethane foam contributes to very competitive life cycle costs. LOW INDOOR AIR EMISSIONS Given that people spend about 90% of their time in buildings, maintaining good indoor air quality is crucial for our health. This means selecting materials that are non-toxic and release the lowest possible level of emissions, especially in view of the need to make building envelopes airtight in order to avoid thermal losses. Of all the insulation products on the market today, PIR insulation produces one of the lowest levels of indoor air emissions. WALKABILITY WITHOUT DEFORMATION PIR insulation has a compressive strength of over 150 kPa and is unaffected by loads experienced in normal roof maintenance. This means that PIR boards can be walked on without deformation and help to maintain the performance of the waterproofing membrane. This is a specific requirement for ﬂat roofs, which are often exposed to high dynamic mechanical loads during the construction process and routine maintenance. Benefits of insulation with PIR boards 150 20 30 40 60 300 450 Necessary thickness d (mm) Higher thickness for same insulation level PIR insulation with lowest thickness PIR Cellular foam glass Glass wool/Stone wool for thermal resistance value R=7,5 (m 2 K/W) d= R x ʎ XPS / EPS mm mW/(mK) PIR foam = Polyisocyanurate, a thermoset plastic used as rigid thermal insulation Source: ISOPA Recticel annual report 2021 22 The need to build energy-efficient buildings quicky and economically is a primary driver of today’s construction industry. This has created a compelling case for prefabrication and pre-assembled materials. Real-life evidence shows that prefabrication can save 5% or more in industrial waste, improve site safety, reduce budgets by 6% or more and accelerate project schedules by a month or more. 1 Metal-faced insulated panels are a key example of prefabricated building materials that support energy-efficient buildings. They are widely used for façade, wall and roof cladding, as well as for partition walls, in industrial and commercial buildings. Consisting of a core of insulating material (PUR/PIR or mineral wool) between sheet metal skins, these panels offer high load-bearing capacity, high and standardised technical specifications and fast installation. They are lightweight, cost-efficient and customisable. They meet the demands for compliance with increasingly stringent building regulations and construction cost pressures. Perhaps most importantly in the light of the recent escalation in energy costs, they promote greater energy efficiency. Meeting design challenges Insulated panels can be designed to meet almost every architectural and structural challenge in the construction industry. They are available in a wide variety of configurations, with architects and engineers playing a critical role in specifying the right panels, based primarily on technical specifications but also on aesthetics, depending on the application. 1 https://www.nist.gov/system/files/documents/el/economics/Prefabrication-Modularization-in-the- Construction-Industry-SMR-2011R.pdf Galeria Kosice Shopping Location: Košice, Slovakia 1.1.3 Insulated panels in industrial construction Recticel annual report 2021 23 SINGLE FACTORY-MANUFACTURED UNIT • Meet accelerated project schedules • Up to 20% cost reduction • 30-50% faster construction/assembly time • 100% design adherence ENERGY EFFICIENCY & SUSTAINABILITY • High and consistent insulation values • Minimise thermal shortage • Mineral wool insulated panels are up to 98% recyclable SAFETY & PERFORMANCE • Very good fire resistance with high-index PIR and mineral wool • Excellent insulation quality allows building cold stores and freezers • Superior acoustics with mineral wool as core DESIGN FLEXIBILITY • Choice of profiles, colours, coating types and positioning • Wide range of lengths, extensive accessories • Space savings / more leasable space LIGHTWEIGHT FACTORY SYSTEM • Minimise field decisions • Minimise erector impact on product quality • Easy to handle • Frame and foundation cost savings DURABILITY • Maintain insulation properties over lifetime of building • Low maintenance • Low life cycle costs Insulated panels: a driving force in sustainable construction The overall market of insulated panels in construction is expected to grow in volume by 2-4% by annum, underpinned by the increasing importance of thermal insulation and the strong trend towards zero net-energy building. Insulated panels meet the requirements of the pre-fabrication megatrend by enabling regulatory compliance in a fast, cost-efficient and scalable manner. The strict building regulations and standards on thermal insulation, acoustic performance, air tightness and energy efficiency make insulated panels a structurally attractive building component. Insulated panels offer a unique set of benefits in construction. Their optimal structural and physical properties allow great design freedom, while their advanced technical qualities contribute to a high-quality, all-round solution. Recticel annual report 2021 24 Recticel has identified insulated panels as a key component in its future portfolio, enabling both diversification and expansion on several levels. By adding insulated panels to its offering, Recticel will have achieved a truly comprehensive portfolio of premium products with differentiated performance to meet the broadest spectrum of applications. Embracing the future with a diversified portfolio The new Recticel portfolio of insulation products covers an exceptional range of high performing thermal and acoustic solutions. 1.1.4 Our pure insulation product portfolio: unlocking sustainability VACUUM INSULATED PANELS • Ultra-high performance thermal vacuum insulated panels (VIP) • Very thin dimensions • Suitable for ﬂat roofs and terraces • Go to market: insulation type set by client, architect • Sales via wholesalers INFO: our VIP are also suitable for temperature-controlled packaging used for transport of ultra-low temperature (ULT) vaccines, food, etc. THERMO-ACOUSTIC BOARDS • Acoustic insulation for interior walls to reduce airborne sound • Panels with fibre bonded end-of-life foam (FBF) • For DIY and contractors • Go to market: insulation type set by client, architect • Sales via distributors, wholesalers, DIY INSULATION BOARDS • Thermal insulation PIR boards • Product of choice for residential new build & renovation • Suitable for agricultural projects and ﬂat roof insulation of industrial buildings (can be combined with insulated panels for wall cladding) • Go to market: insulation type set by client, architect • Sales via distributors, wholesalers, DIY INSULATED PANELS • Prefabricated mineral wool thermal insulated panels • Especially non-residential new build, in particular logistics & industrial • Go to market: project sales only, with strict & standardised technical specifications set by the client, architect, regulator, insurer • Mostly direct sales Logistics & warehousing Residential building Manufacturing Agro building Sport Commercial Offices Special projects Recticel annual report 2021 25 1.1.5 Our sustainability compass Sustainability is profoundly embedded in Recticel’s overall strategy. We are committed to finding responsible solutions for climate change, the depletion of natural resources and the world’s growing and ageing population. Our sustainability strategy and targets are profoundly rooted in the United Nations Sustainable Development Goals and the European Green Deal. UN Sustainable Development Goals The United Nations Sustainable Development Goals (SDGs) set in 2015 are universal targets and indicators designed to help countries and end poverty, protect the planet and ensure global prosperity as part of a sustainable development agenda. Recticel has identified six SDGs that are most impactful, relevant and embedded in our company’s Sustainability Strategy: ⊲ ⊲ ⊲ Climate Action Plan Transition to a circular economy Innovation for societal needs 13. CLIMATE ACTION ⊲ ⊲ ⊲ ⊲ ⊲ Transition to a circular economy Innovation for societal needs Climate Action Plan Lower HS&E impacts of our activities and products Sustainable partnerships 12. RESPONSIBLE CONSUMPTION AND PRODUCTION ⊲ ⊲ ⊲ Climate Action Plan Innovation for societal needs Sustainable partnerships 11. SUSTAINABLE CITIES AND COMMUNITIES ⊲ ⊲ ⊲ Sustainable partnerships Lower HS&E impacts of our activities and products An inspiring and rewarding place to work 8. DECENT WORK AND ECONOMIC GROWTH ⊲ ⊲ ⊲ Innovation for societal needs Lower HS&E impacts of our activities and products An inspiring and rewarding place to work 3. GOOD HEALTH AND WELL-BEING ⊲ ⊲ We take responsibility for our own activities, but also in our sphere of inﬂuence upstream (raw materials sourcing) as well as downstream (use and end-of-life) We invest in close relation- ships with the stakeholders: customers, suppliers, knowledge institutes and universities, investors and communities along our value chain 17. SUSTAINABLE PARTNERSHIPS ⊲ ⊲ ⊲ Climate Action Plan Transition to a circular economy Innovation for societal needs 13. CLIMATE ACTION ⊲ ⊲ ⊲ ⊲ ⊲ Transition to a circular economy Innovation for societal needs Climate Action Plan Lower HS&E impacts of our activities and products Sustainable partnerships 12. RESPONSIBLE CONSUMPTION AND PRODUCTION ⊲ ⊲ ⊲ Climate Action Plan Innovation for societal needs Sustainable partnerships 11. SUSTAINABLE CITIES AND COMMUNITIES ⊲ ⊲ ⊲ Sustainable partnerships Lower HS&E impacts of our activities and products An inspiring and rewarding place to work 8. DECENT WORK AND ECONOMIC GROWTH ⊲ ⊲ ⊲ Innovation for societal needs Lower HS&E impacts of our activities and products An inspiring and rewarding place to work 3. GOOD HEALTH AND WELL-BEING ⊲ ⊲ We take responsibility for our own activities, but also in our sphere of inﬂuence upstream (raw materials sourcing) as well as downstream (use and end-of-life) We invest in close relation- ships with the stakeholders: customers, suppliers, knowledge institutes and universities, investors and communities along our value chain 17. SUSTAINABLE PARTNERSHIPS ⊲ ⊲ ⊲ Climate Action Plan Transition to a circular economy Innovation for societal needs 13. CLIMATE ACTION ⊲ ⊲ ⊲ ⊲ ⊲ Transition to a circular economy Innovation for societal needs Climate Action Plan Lower HS&E impacts of our activities and products Sustainable partnerships 12. RESPONSIBLE CONSUMPTION AND PRODUCTION ⊲ ⊲ ⊲ Climate Action Plan Innovation for societal needs Sustainable partnerships 11. SUSTAINABLE CITIES AND COMMUNITIES ⊲ ⊲ ⊲ Sustainable partnerships Lower HS&E impacts of our activities and products An inspiring and rewarding place to work 8. DECENT WORK AND ECONOMIC GROWTH ⊲ ⊲ ⊲ Innovation for societal needs Lower HS&E impacts of our activities and products An inspiring and rewarding place to work 3. GOOD HEALTH AND WELL-BEING ⊲ ⊲ We take responsibility for our own activities, but also in our sphere of inﬂuence upstream (raw materials sourcing) as well as downstream (use and end-of-life) We invest in close relation- ships with the stakeholders: customers, suppliers, knowledge institutes and universities, investors and communities along our value chain 17. SUSTAINABLE PARTNERSHIPS ⊲ ⊲ ⊲ Climate Action Plan Transition to a circular economy Innovation for societal needs 13. CLIMATE ACTION ⊲ ⊲ ⊲ ⊲ ⊲ Transition to a circular economy Innovation for societal needs Climate Action Plan Lower HS&E impacts of our activities and products Sustainable partnerships 12. RESPONSIBLE CONSUMPTION AND PRODUCTION ⊲ ⊲ ⊲ Climate Action Plan Innovation for societal needs Sustainable partnerships 11. SUSTAINABLE CITIES AND COMMUNITIES ⊲ ⊲ ⊲ Sustainable partnerships Lower HS&E impacts of our activities and products An inspiring and rewarding place to work 8. DECENT WORK AND ECONOMIC GROWTH ⊲ ⊲ ⊲ Innovation for societal needs Lower HS&E impacts of our activities and products An inspiring and rewarding place to work 3. GOOD HEALTH AND WELL-BEING ⊲ ⊲ We take responsibility for our own activities, but also in our sphere of inﬂuence upstream (raw materials sourcing) as well as downstream (use and end-of-life) We invest in close relation- ships with the stakeholders: customers, suppliers, knowledge institutes and universities, investors and communities along our value chain 17. SUSTAINABLE PARTNERSHIPS Recticel annual report 2021 26 The European Green Deal The European Green Deal is a set of proposals adopted by the European Commission in 2019 with the overarching aim of making the European Union the first climate neutral continent by 2050. This green transition will fundamentally transform the business environment and the economy in Europe. It is seen as a major opportunity for European industry, creating markets for clean technologies in many sectors, including construction and renovation, with the potential to renovate 35 million buildings by 2030 1 . The aim of building renovation is to save energy, protect against extremes of heat and cold and tackle energy poverty. Effective thermal insulation is essential to meet these goals. Reduce net greenhouse gas emissions by at least 55% by 2030, compared with 1990 No net emissions of greenhouse gases by 2050 Reducing greenhouse gas emissions As part of the European Green Deal roadmap adopted in December 2019, all EU Member States pledged to reduce greenhouse gas (GHG) emissions by at least 55% by 2030, compared to 1990 levels. This will fundamentally transform Europe into a low-carbon industrial region. Companies are required to conduct a full GHG emission inventory, with emissions classified into 3 scopes, as illustrated below. The Greenhouse Gas Protocol (https://ghgprotocol.org) sets the world’s most widely used standards for companies and organisations to measure and manage their emissions. For Recticel’s activities, the biggest GHG impact along the value chain is related to product life cycle emissions coming from raw materials and waste management (scope 3). Over the lifetime of their use, the insulation products we sold in 2021 will offset 51 times the Recticel carbon footprint indicator for the year (+5 times compared to 2020, with the business lines Insulation, Bedding and Engineered Foams in scope (without FoamPartner, acquired on 31/03/2021)). Once the strategic repositioning of Recticel as pure play insulation company is completed, this positive contribution will only increase. European Green Deal A zero pollution Europe Transition to a circular economy Towards a Green CAP (Common Agriculture Policy) Take everyone along (Just Transition Mechanism) Clean, reliable and affordable energy Preserving Europe’s natural capital Achieving climate neutrality Farm to Fork Financing the transition Sustainable transport 1 https://ec.europa.eu/info/strategy/priorities-2019-2024/european-green-deal/delivering-european-green-deal_en Greenhouse gases Greenhouse gases - like carbon dioxide (CO 2 ), methane (CH 4 ), nitrous oxide (NO 2 ) and chloroﬂuorocarbons (CFCs) - absorb and emit radiant energy within the thermal infrared range, causing the earth greenhouse effect. CFCs 3% NO 2 7% CH 4 10% CO 2 80% Recticel annual report 2021 27 SCOPE 1 SCOPE 3 SCOPE 2 Direct emissions from owned or controlled resources These are GHG emissions generated directly by the company, through its sites, facilities and activities. Scope 1 includes: • Stationary combustion: all fuels that produce GHG emissions • Mobile combustion: all vehicles owned or controlled by the company and burning fuel • Fugitive emissions: leaks from GHGs (e.g. refrigeration or AC units) • Process emissions: GHG emissions released during industrial processes and on-site manufacturing Indirect emissions from purchased electricity, steam, heating and cooling for own use (upstream activities) These are indirect GHG emissions from the energy consumption required to manufacture a product, purchased from a utility provider. Indirect emissions not included in Scope 2 that occur in the value chain of the company (upstream and downstream activities) These are indirect GHG emissions produced throughout a product’s lifecycle. The GHG Protocol separates Scope 3 emissions into 15 categories. Those relevant for Recticel Insulation are: UPSTREAM ACTIVITIES • Purchased goods and services (i.e. raw materials) • Capital goods (e.g. buildings, vehicles, machinery) • Transportation and distribution (warehousing) • Production waste and wastewater treatment • Business travel • Employee commuting DOWNSTREAM ACTIVITIES • End-of-life treatment of sold products • Transportation and distribution (warehousing) Cradle-to-Cradle: Scope 1, 2, 3 with end-of-life (EOL) treatment of sold products Cradle-to-Gate: Scope 1, 2, 3 without end-of-life (EOL) treatment of sold products Recticel annual report 2021 28 Recticel Insulation 2021 SCOPE 1, 2 & 3 Carbon Footprint Avoided Emissions CO 2 metric tons of CO 2 e 472K times 98 * metric tons CO 2 e 75,000 0 150,000 225,000 300,000 SCOPE 1 - 3.5 KT Direct emissions Indirect emissions from purchased electricity Raw materials Waste management Others PRODUCT LIFE CYCLE EMISSIONS SCOPE 2 - 2.1 KT SCOPE 3 - 466.7 KT Our 2021 GHG impact as pure play insulation company An internal, non-audited assessment of the Insulation business on its own for scope 1, 2 & 3 indicates that the Insulation products sold in 2021 will offset over the lifetime of their use 98 times the carbon footprint of the Insulation business line. Evolving to a pure insulation player, Recticel is firmly committed to implement further measures to reduce the direct and indirect emissions in scope 1, 2 & 3. This would result in substantially increasing its climate positive multiple in excess of 100. Over the lifetime of the use of the insulation products sold in 2021, more than 46 million tons of CO 2 emissions will be avoided. This represents more than 78,000 long haul ﬂights 1 . * Ratio between avoided emissions and carbon footprint scope 1, 2 & 3. 1 www.carbonindependent.org/22.html – 250 kg CO 2 e/hour ﬂying/passenger Recticel annual report 2021 29 The regulation defines performance thresholds for taxonomy-aligned economic activities which comply with all of the following requirements: a) The economic activity contributes substantially to one or more of the six environmental objectives. b) It does not significantly harm any of the other environmental objectives. c) It is carried out in compliance with the minimum safeguards (e.g. OECD Guidelines on Multinational Enterprises and the UN Guiding Principles on Business and Human Rights). d) It complies with the technical screening criteria in the Climate Delegated Act supplementing the Taxonomy Regulation. The thresholds will open doors to green financing for companies, project promoters and issuers who want to improve their environmental performance, as well as helping to identify which activities are already environmentally friendly. For the reporting period 2021, companies need to report on the proportion of taxonomy-eligible, i.e. substantially contributing to climate change adaptation or mitigation, and taxonomy non-eligible economic activities. Of these taxonomy-eligible activities, as of 2023, for the reporting period 2022, companies need to report on the taxonomy-aligned economic activities that meet the criteria as set forward by the Taxonomy Regulation. Climate change mitigation Climate change adaptation Sustainable use and protection of water and marine resources Transition to a circular economy Pollution prevention and control Protection and restoration of biodiversity and ecosystems EU taxonomy for sustainable activities To finance the green transition and the European Green Deal, the European Commission developed the EU Taxonomy: a classification system to identify truly sustainable economic activities. The Taxonomy Regulation is a key component of the European Commission’s action plan to redirect capital ﬂows towards sustainable projects and activities, especially given the need to make businesses, societies and economies more resilient against climate and environmental shocks as we recover from the COVID-19 pandemic. It entered into force in July 2021 and will create security for investors, protect private investors from greenwashing, mitigate market fragmentation and help shift investments where they are most needed. 1 The EU Taxonomy Regulation sets out six environmental objectives. Recticel embraces this initiative and supports the European Commission’s action plan to redirect capital ﬂows towards a more sustainable economy. Recticel’s insulation activities in 2021 are considered taxonomy-eligible for the environmental objective of climate change mitigation. They help to improve energy efficiency by offering insulation solutions that will reduce energy consumption in buildings (see also Section 2.3.3). As it progresses in its transition journey, the vast majority of Recticel’s activities as a pure play insulation company are expected to be taxonomy-aligned for the environmental objective of climate change mitigation. 62.18% Eligible 1 https://ec.europa.eu/commission/presscorner/detail/en/ip_21_1804 Recticel taxonomy-eligible and taxonomy non-eligible economic activities TURNOVER 2021 CAPEX 2021 OPEX 2021 37.82% 73.39% 61.29% 26.61% 38.71% Non-Eligible 2021, business lines Insulation, Engineered Foams, Bedding Recticel annual report 2021 30 1.2 2021 Business review: innovation for sustained value Recticel contributes to daily comfort with high-performance thermal insulation solutions for the construction industry and an extensive range of polyurethane foam products for industrial and domestic applications. Whilst focusing on industry-leading, customised solutions supported by sustainable innovations, we strive to provide responsible answers to societal challenges. With 3,556 employees operating in 43 locations in 19 countries, Recticel realised in 2021 consolidated sales of EUR 1,032.8 million (excluding the Bedding sales accounted for in discontinued operations as per IFRS 5). VALUE-ADDING PORTFOLIO GLOBAL FOOTPRINT INNOVATION CAPABILITIES MARKET EXPERTISE PEOPLE EXCELLENCE Distinguished portfolio of industry-leading products and services tailored to customer needs. Unique footprint with the most comprehensive foaming and converting technologies. Powerful R&D network with numerous labs and application competence centres across the globe. Extensive know-how in building insulation, mobility, industrial,medical, consumer goods and comfort applications. Experience, skills, dedication and a high service mindset. Innovative solutions that meet social needs such as wellbeing, climate change, circular economy. SUSTAINABILITY FOCUS Recticel annual report 2021 31 1.2.1 Recticel Insulation Our Insulation business line offers a distinguished portfolio of thermal and acoustic insulation products used in construction and renovation projects. These products are marketed under well-known brands and product names such as Eurowall ® , Powerroof ® , Powerdeck ® , Powerwall ® and Xentro ® . Recticel’s PIR insulation is the preferred option for residential building insulation, offering substantially better performance than common alternatives. Following the announced divestments of the Bedding and Engineered Foams business lines, leading up to Recticel’s new path as a pure player in insulation, we announced on 22 March 2022 the acquisition of Trimo d.o.o.. As a pure play mineral wool insulated panel manufacturer, Trimo d.o.o. focuses on mid to high-end applications of roof and wall cladding in the non-residential market. The acquisition was closed on 29 April 2022. Insulated panels are a strategic portfolio expansion that fit within Recticel’s current insulation solutions: PIR thermal insulation boards, high-performing vacuum insulated panels (VIP) and thermo-acoustic boards with fibre bonded end-of-life foam (FBF). The acquisition is a 3-step adjacency play, from a product (insulation board vs insulated panels), a market (residential vs industrial) and technology (PUR/PIR vs mineral wool) perspective, with geographical expansion into Central and South-East Europe. Insulation boards Insulated panels Vacuum insulated panels Thermo- acoustic boards Stoke-on-Trent (GBR) PIR insulation boards Burntwood (GBR) Flat and tapered roof insulation Wevelgem (BEL) PIR insulation boards Angers (FRA) Thermo-acoustic boards Bourges (FRA) PIR insulation boards Turvac JV, Šoštanj (SLO) Vacuum insulated panels Trimo, Trebnje (SLO) Mineral wool insulated panels Trimo, Šimanovci (SRB) Mineral wool Insulated panels Mäntsälä (FIN) PIR insulation boards Consolidated net sales Insulation in million EUR 2019 2020 2021 247.2 249.2 390.6 Recticel annual report 2021 32 1.2.2 Recticel Engineered Foams The key to the success of PU foams is their seemingly endless versatility. They can be tailored to almost any application and we are continually innovating to optimise our product range in line with new demands and ideas. Many everyday goods would be unimaginable without the unique benefits of PU foam, which include silencing, sealing, filtering, carrying, protecting, supporting and comforting attributes. Recticel Engineered Foams offers wide-ranging expertise, foams and systems, spanning industrial, automotive and comfort applications. The Engineered Foams business line was founded on 31 March 2021, following the merger of FoamPartner, the Swiss-based global provider of high added-value technical foams and the Recticel Flexible Foams business line. This resulted in a unique global manufacturing footprint with comprehensive foaming and converting technologies. On 16 May 2021, Greiner AG launched a conditional voluntary public takeover bid on Recticel. This forced the Recticel management to review its strategic intent in the interest of all its stakeholders, including employees, customers and shareholders. To defend against the unsolicited offer, a Special Shareholders Meeting on 6 December 2021 approved the sale of the Engineered Foams business line to the US company Carpenter Co.. This transaction is expected to be closed around mid-2022. 7 fields of expertise CARRYING COMFORTING FILTERING PROTECTING SEALING SILENCING SUPPORTING 14 converting (only) sites 16 foaming & converting sites Consolidated net sales Engineered Foams in million EUR 2019 2020 2021 361.1 (restated) 318.5 (restated) 583.6 Recticel annual report 2021 33 1.2.3 Recticel Bedding As part of the strategic transformation process, the Bedding business line was identified as a non-core activity. In February 2021, the Group announced its intention to launch a divestment process for the Bedding business line while pursuing further external growth opportunities. The Bedding business line develops and produces consumer-ready mattresses, slat bases and box springs, primarily marketed under popular brand names such as Beka ® , Lattoﬂex ® , Literie Bultex ® , Schlaraffia ® , Sembella ® , Superba ® and Swissﬂex ® , as well as ingredient brands including GELTEX inside ® and Bultex ® . On 31 March 2022, Recticel completed the sale of its Bedding activities to Aquinos Group. The Aquinos Group, founded in 1985, is privately owned and headquartered in Sinde-Tábua (Portugal). It is one of the largest producers of furniture upholstery and mattresses in Europe with, post-merger, more than 5,100 employees, production sites in seven countries and revenue of €670 m. The Bedding sale is accounted for in discontinued operations as per IFRS 5 in the 2021 financial reporting. Recticel annual report 2021 34 1.3 2021 ESG approach: innovation for a better world To truly make a difference, we are dedicated to daily improvement in every aspect of our environmental, social and governance (ESG) performance. This means continually evaluating our progress in relation to both financial and non-financial criteria. The Sustainable Innovation Plan and People Priority Plan that were updated in 2021 are the pillars of our ESG approach and contain solid objectives for 2025. We are profoundly committed to the digital transformation as a way of unifying our business, enabling new ways of working and sustaining our future. Our ambition is to be an exemplary employer, attracting and caring for a diverse and highly skilled workforce. This includes raising safety standards and awareness wherever we operate. We protect and enhance our business through continuous education for our people on topics ranging from business ethics, competition law, data protection to cybersecurity and many more. Lastly, we seek to earn and fully deserve the trust of our stakeholders by continually raising the bar with transparent objectives. We constantly strive to pursue better ESG ratings to demonstrate our commitment. Recticel annual report 2021 35 1.3.1 Our sustainability strategy Since 2013, sustainability has been a key driver of our Group strategy. Sustainability shapes our portfolio development and our innovation priorities and, as a result, it nourishes our long-term competitiveness. The long-term needs and challenges for our sectors and our society, such as climate change, are our compass. Innovation and people are key in achieving our sustainability goals. Sustainability is considered along our entire value chain, from raw material sourcing to product manufacturing, consumption and end-of-life. We take responsibility for our own in-company activities and for those within our sphere of inﬂuence, upstream as well as downstream. Working closely with our stakeholders, we defined the six most important material aspects for Recticel with the biggest potential to turn sustainability into a keener competitive edge. These aspects form the basis of the two pillars supporting our sustainability strategy: our Sustainable Innovation Plan and People Priority Plan. RAW MATERIALS CUSTOMER END-OF-LIFE PREPARING PROCESSING ASSEMBLING DISTRIBUTION • An inspiring and rewarding place to work • Transition to a circular economy • Sustainable partnerships • Climate Action Plan • Innovation for societal needs • Lower HS&E impact of our activities and products SPHERE OF INFLUENCE Sustainable partnerships Lower HS&E impact of our activities & products An inspiring and rewarding place to work SUSTAINABLE INNOVATION PLAN PEOPLE PRIORITY PLAN Climate Action Plan Transition to a circular economy Innovation for societal needs Recticel annual report 2021 36 1.3.2 Sustainable Innovation Plan All our innovations are driven by societal needs. Knowing that sustainability adds value and drives success for all stakeholders, we innovate to support healthy, sustainable lifestyles, reduce carbon emissions and use resources with the utmost efficiency. Considering the entire value chain, Recticel is a climate-positive company 1 , with a clear ambition to excel further on our sustainability roadmap. We are implementing a Climate Action Plan to further reduce our carbon footprint and increase the positive impact of our insulation activities. Our efforts focus on responsible selection of raw materials, sustainable and more energy-efficient processes and on increasing the sustainability of our products. Recticel’s overriding sustainability ambition is to lead the transition to a circular economy and a low-carbon society for our industry while promoting well-being by offering innovative solutions to enhance comfort in daily life. We support a sustainable economic model built on preservation of natural resources, eco-design, responsible production and end-of-life solutions. Therefore, we aim to lead the way in implementing new chemical recycling solutions for ﬂexible PU; in supporting exploration of chemical recycling solutions for rigid foam; and in mechanical recycling and reuse of ﬂexible PU waste as interim steps on our journey to full circularity. Together with our stakeholders, including customers, employees, suppliers, the industry and knowledge institutes and universities, we are constantly exploring ways to develop new lower-carbon (bio-based, renewable or recyclable) raw materials for our polyurethane solutions. We investigate all options to efficiently eliminate waste across our entire value chain and introduce eco-design products that are easy to dismantle, recycle or reuse at the end-of-life phase. SUSTAINABLE INNOVATION PLAN Sustainability index (% of active R&D projects classified as sustainable (scope: innovation pipeline Sustainable Innovation Department)) Number of R&D projects ready to be brought to market (scope: innovation pipeline Sustainable Innovation Department) Tonnesof post-consumer polyurethane foam produced by Recticel from recycled mattresses Climate-Positive Multiple (ratio between avoided emissions and carbon footprint scope 1, 2, 3) 1 Recticel carbon footprint reduction (scope 1, 2, 3 intonnesof CO 2 equivalent) 2 Carbon intensity reduction (ratio scope 1 and 2, intonnesof CO 2 e/mioEUR revenue) 3 We reviewed our scoring methodology during the limited assurance process in 2020 as it was too strict for certain sustainable projects to meet the criteria. The revised version was used to score our R&D projects over 2021. Still some projects, fully focusing on circularity, did not meet the threshold values. This suggests that to for a project to be classified as sustainable, the metrics of the Sustainability Index should be considered along other, qualitative factors. Compared to the result over last year, we see an increase of 10% althought we did not achieve our target of 80%. We consider that the choices of the projects are fully in line with our strategic intentions. We introduced this new KPI in 2021 to measure our sustainable innovation performance. Using our sustainability index, our stage gate process methodology and financial criteria, we consider a R&D project ready to be brought to market when it has successfully completed all development and initial production requirements. As a result, we classified 5 R&D projects as ready to go to market, which exceeds our target. At this stage, we do not want to disclose specific details about all five projects. In general, we can say that some projects are related to the replacement of fire retardants (more sustainable). In September 2021, our Engineered Foams business line launched NIVA, a new range of TCPP-free foam for bedding and furniture. TCPP is a commonly used fire-retardant currently under risk assessment by the European Chemicals Agency (ECHA) and might become restricted in its use. Recticel proactively anticipated this by developing the NIVA range. Other R&D projects focus on developing new fiber-bonded foam applications using post-consumer foam. We expect that the positive impact due to the growth of the Insulation business will continue. In addition, we will further implement all ongoing actions to reduce our carbon footprint. For 2030, we foresee that, without a change of scope, we would increase our multiple from 51 to 75. After the closing of the divestments of Bedding (expected Q1) and Engineered Foams (expected mid 2022), Recticel will become a pure-play Insulation company. We estimate that the multiple will then triple to 150 of more by 2030. No fundamental changes in carbon footprint reduction in 2021. We expect to see significant impact when more raw materials with renewable or recycled content become available in larger quantities and when the recycling of post- consumer foam will be more generally implemented. We introduced this new KPI in 2021, a year in which we saw a steep price increase of all raw materials (chemical and non-chemical) and of energy costs affecting our suppliers. Recticel has succeeded in factoring these costs into the prices of its products, where necessary. A a result, with comparable sales volumes and energy consumption, revenue increased leading to a 17% reduction in carbon intensity compared to the previous year. We selected this KPI in 2015 to express our commitment to replacing post-industrial polyurethane (PU) foam with post-consumer PU foam. We initially used a traditional bonded foam technology for products such as carpet underlays. We subsequently succeeded in introducing a new fiber-bonded foam technology to transform post- consumer PU foam into acoustic thermal insulation panels. As of 2021, we only consider post-consumer PU foam and realise a 76% increase compared to 2020. In the course of 2022, we expect to switch to post-consumer PU foam in our bonded foam technology, significantly increasing our volumes and bringing our 2025 target within reach. 1 Using appropriate method of calculation per type of product and using appropriate conversion factors calculated by a third party. 2 Expressed in tonnes of CO 2 equivalent compared to the 100% activity level in 2013 (scope: production sites). The method of calculation is derived from the Cradle to Grave method. (2013 baseline, target in line with EU Green Deal target of -55% vs 1990). 3 Scope 1 defined as direct emissions from owned or operated resources (e.g. company facilities, company vehicles) and scope 2 as generation of purchased electricity, steam, heating and cooling (GHG Protocol). Company car emissions are calculated based on data extrapolated from first quarter 2021 distance figures (in km). We applied a correction factor of 50% due to Covid impact (teleworking). INNOVATION FOR SOCIETAL NEEDS 2021 2021 2021 2021 2021 2030 Target 2030 Target 2025 Target 2025 Target 2025 Target TRANSITION TO A CIRCULAR ECONOMY CLIMATE ACTION PLAN MATERIAL ASPECT KPI RESULTS COMMENTS 51 21% 17% 1,864 5 75 40% 25% 5,000 2021 2025 Target 68% 80% ≥3 1 Our thermal insulation solutions for building renovations and new constructions contribute to a low-carbon society. In 2021, CO 2 emissions avoided by these insulation solutions offset more than 51 times the carbon footprint of all Recticel activities combined Recticel annual report 2021 37 1.3.3 People Priority Plan People are central to our Sustainability Strategy. We passionately believe that, to create a better society, we must act together and share knowledge, expertise and technology. This means maintaining the highest standards and principles on human rights, labour, the environment and anti-corruption. We maintain strong partnerships across our industry and beyond and support social projects relating to our strategy. We constantly seek to reduce the HS&E impact of our activities and products and are committed to workplace and product safety. As an employer, we strive to create an inspiring and rewarding place to work. We build our community on inclusiveness and respect, believing that diversity improves the quality of decision making and overall performance. PEOPLE PRIORITY PLAN Gender diversity in senior management 6 %employee participation in e-learning including Legal, Cybersecurity, Safety, as well as expanding new offerings based on specific needs detected during the annual Employee Performance Management Discussion (EPMD) 6 Frequency2 (Lost Time Accidents + Restricted Work Cases + MedicalTreatment Cases representingthe average on Group level for all our plants and offices) 5 Frequency1 (Lost Time Accidents representingthe average on Group level for all our plants and offices) 4 In 2021, we introduced company-wide a behaviour-based safety approach, already successfully implemented in our Insulation business line. The result for 2021 is disappointing and does not reﬂect the determination with which the teams are bringing safety to everyone’s attention. We continue to work on our Golden Safety Rules & Principles to change safety awareness and behaviour to achieve our target by 2025. We introduced this new KPI in 2021 to further increase the number of women in senior management positions across the Recticel organisation. Recticel strives to create a community where everyone is included and respected, bringing people together for a better world. We believe that a diverse team in terms of gender, nationality and professional experience improves the quality of decision making, and ultimately improves overall performance. The result of 2021 is the starting point for the path that should lead us to enhanced gender equality by 2030. We introduced this new KPI in 2021 as part of our overall safety approach to change people’s behaviour by adding to our lagging KPI (Frequency 1, Lost Time Accidents) also a leading KPI (Frequency 2). Reporting on restricted work cases and medical treatment (Frequency 2) allows us to identify unsafe situations or behaviours, carry out a root cause analysis and take appropriate action to prevent future accidents. Although the 2021 figures do not reﬂect this yet, this approach will help us to meet the targets by 2025. In 2021, we only report on the e-learnings that are mandatory for office employees due to the importance of the topics covered. In a next phase, we will extend this to the Safety programme and new development offerings. The mandatory Legal programme comprises three modules: Data Protection; Ethics Policy; and Basics of Contract Law. Data Protection and Ethics Policy were launched in 2018, Basics of Contract Law in 2019. Ethics Policy was repeated in 2020. New office employees have to complete the three modules within two months after they join the company. For each module, the status ‘completed’ is only achieved if the office employee obtains a test result of minimum 80%. The mandatory cybersecurity programme was launched in 2018. It was updated in 2020. In 2021, the mandatory cybersecurity programme was delivered through a new series of quarterly microlearnings on password security, phishing, social engineering, and working remotely. Participants only pass a course with a minimum score of 70% on the final test. After each microlearning, a fake phishing mail was sent to the participants’ mailbox in order to test their reaction. The results were shared within the organisation to continue emphasising the importance of acting cybersafe at all times. New office employees have to complete the basic cybersecurity modules within a week after they join the company. 4 Number of LTAs x 1,000,000 / number of hours performed. 5 Number of LTAs + RWS + MTC x 1,000,000 / number of hours performed. 6 The results include FoamPartner employees (since 31 March 2021 integrated in the Engineered Foams division). AN INSPIRING AND REWARDING PLACE TO WORK LOWER HS&E IMPACT OF OUR ACTIVITIES AND PRODUCTS MATERIAL ASPECT KPI COMMENTS 2021 2021 2021 2021 2021 2025 Target 2025 Target 2030 Target Legal programme: Cybersecurity programme: RESULTS 6,41 10,4 18% Data protection: 94% Ethics policy: 94% Basics of contract law: 94% DIGIWIZZ: 96% ≤ 2 ≤ 5 25% Recticel annual report 2021 38 1.3.4 Digitalisation HR4U Due to the increasing complexity of business processes and projects, we implemented a cloud-based HR4U tool that allows us to manage our HR processes and data in a uniform and streamlined way throughout all the countries and locations where Recticel operates. The transition to HR4U is a significant driver of further business integration and enhances the leverage of our employer branding and attractiveness. In 2020 two modules were introduced: Employee Central, which is the heart of the HR system and the basis for all the company’s HR processes, and Compensation Management, which contains all functionalities related to the management of employee remuneration. The implementation of these two modules allowed us to run the ASR (Annual Salary Review) cycle for all white-collar employees in the new system. At the end of 2021 we went live with the Performance Management module. This module allows us to run the performance appraisals for all white-collar workers in the same system. HR4U aims to make approval ﬂows and administration checks easier for managers and HR. Once all the modules are implemented, HR4U will be a key element of the user- friendly digital workplace we are building. It will optimise our recruiting, onboarding, and compensation processes while giving employees a better view of their career path and performance. New ways of working Triggered by the first COVID-19 lockdown in 2020, the Recticel Management Committee launched a workgroup to reﬂect upon New Ways of Working at Recticel. As an outcome, a new set of principles was agreed, providing guidance to Recticel employees and line managers in all countries and locations when working from home. The aim is to provide employees with more ﬂexibility in organising their work to the benefit of the employee and the employer, considering every aspect of ‘people, planet and profit’. The guiding idea is that all employees should have the same opportunity to work part-time from home, if their job allows it, and within the limits of the local Country legislation. These Group principles have been converted into Country-specific ‘Homework Policies’. This important step is made possible by the introduction of new digital communication tools, enabling a more collaborative, agile and remote way of working. Compensation Management Personnel Administration Performance & Goals Bonus Management 2020 2021 2022 ONEDRIVE TEAMS FOLDERS (Teams / OneDrive) DIGITAL WORKPLACE (Teams) KNOWLEDGE PORTAL (SharePoint) TOOLS LIBRARY NEWS & ANNOUNCEMENTS APPLICATIONS KNOWLEDGE COLLABORATION PERSONAL Recticel annual report 2021 39 1.3.5 Training and Development 1.3.6 We never compromise on safety Recticel puts great emphasis on attracting, onboarding and developing skilled employees. In 2021, the regular employee performance management discussions (EPMD) with our ca. 1,500 white-collar employees were carried out online and supported by HR4U. These discussions are essential to enhance the reward, retention, succession and career planning processes. In 2020 we saw a suspension of all ‘on-site’ training modules planned under the Recticel University (RECUN) due to the impact of COVID-19. However, in 2021 we worked on a new RECUN programme consisting of online classes where participants meet and interact in a virtual classroom environment. The learning focus for 2021 was Change Management and Project Management. The virtual classroom training environment is complemented by peer learning, where employees can engage in a learning community. Complementary to the RECUN programme, we are consistently increasing our e-learning offering with the aim of reaching all white-collar employees. In 2021 all white-collar employees were given access to a broad catalogue of e-learning materials that allow them to train and develop themselves in a self-paced way on topics identified during the EPMD processes. Legal e-learning and training sessions For many years, Recticel has endeavoured to reach a higher level of integrity and compliance within its organisation. Three legal e-learning modules were made compulsory for all white-collar employees. They deliver the necessary knowledge on the Recticel Ethics Policy, Data Protection procedure, and the basics of Contract Law. In 2021 we launched a new procurement e-learning module that provides an overview of Recticel purchasing policy and processes. This e-learning offering is complemented by a wide range of legal and compliance e-learning modules, as well as legal online and classroom training sessions. The legal e-learning modules are very interactive and appealing. Today, employees can do self- paced e-learning courses on a variety of legal subjects such as Intellectual Property, Group Bribery Policy, Product Liability, and EU Competition Law Compliance. We continue to raise awareness on safety. It is embedded in our Core Value of acting with respect and integrity. Through our global Simply Safe initiative, we introduced a clear framework of Golden Safety Principles and Golden Safety Rules. Our ‘Stop! Think! Act!’ mantra reminds everyone that we should all try to change our habits to guarantee a safe working environment. Whenever we notice a hazard, or whenever we start a new task, we should stop, think and then act. Since 2018, we have been holding an annual Recticel Global Safety Day. It relays the important message that safety is everyone’s responsibility. In 2021, during the COVID-19 pandemic, we organised a Safety Day at every Recticel site to kick off a fresh new safety campaign. Under the overall theme ‘It’s MY choice’, the campaign drives home the message of individual responsibility and understanding that minor changes can transform our safety performance. “It’s my choice to do a start-work risk assessment in every new situation.” David Lucas Team Leader, Belgium “It’s my choice to stay behind the safety fences.” Zineb Khchyeb Converting Operator, Morocco “It’s my choice to keep my distance from loaded forklifts, as the load could fall and injure me.” Onet Ionut Shift Leader, Romania “It’s my choice to use earplugs during my entire work shift to prevent irreversible hearing loss.” Elżbieta Kucharek Supervisor Sewing Department, Poland “It’s my choice to pay attention to my own safety and that of my colleagues.” Michael De Zaeger Operator Mattress Department, Belgium “It’s my choice to remove the lm from the oor immediately after unpacking goods to avoid slipping accidents.” Ilona Kreuzmann Operator Production Department, Germany Recticel annual report 2021 40 1.3.7 Cybersecurity The impact of cybersecurity breaches can be huge both in terms of financial loss and reputational damage. Enhancing cybersecurity, raising awareness amongst our employees and robust planning and communication in the aftermath of a cybersecurity attack therefore remain high on our agenda. We set up a Cyber Security Committee (CSC) which is a multidisciplinary body responsible for cybersecurity incident response and recovery. In the event of a cybersecurity beach, the CSC will activate the Cyber Incident Response Team (CIRT) to provide the first response in order to contain a cybersecurity incident or stop a cyberattack. Via a dedicated training programme and specific alert messages, we help our employees to remain cautious. We implemented an e-learning module to prevent cybersecurity breaches, covering phishing, malware, safe web browsing and working from home. The modules combined short videos with assessments to test employee understanding of these four topics. In 2021, specific e-learning was released on password security, phishing, social engineering and working remotely. This was supplemented with unannounced tests where users received fake ‘phishing’ emails. These tests allow employees to consciously improve their awareness regarding cyberattack techniques, and to recognise and report them efficiently. Stay safe online DIGIWIZZ It’s time to explore, learn and become cyber-secure! Go to DIGIWIZZ on RICK poster_digiwizz_A1_2018_0720.indd 1 25/07/18 07:09 DIGIWIZZ Think before you click Go to DIGIWIZZ on RICK It’s time to explore, learn and become cyber-secure! poster_digiwizz_A1_2018_0720.indd 2 25/07/18 07:09 Watch out for fake bait Go to DIGIWIZZ on RICK DIGIWIZZ It’s time to explore, learn and become cyber-secure! poster_digiwizz_A1_2018_0720.indd 3 25/07/18 07:09 1.3.8 Pursuing ESG ratings and transparency Our ambition is to be a leader in our industry for climate change action and an equitable society. For many years, Recticel has been committed to strong performance on both financial and non-financial criteria. Transparency on objectives and performance is key to earning and retaining the trust and support of stakeholders interested in companies with solid environmental, social and governance (ESG) commitments and scores. Environmental criteria determine how the company performs as a steward of the planet. Social criteria define how it manages relationships with employees, suppliers, customers and the communities where it operates. Governance criteria are a set of rules, best practices and processes that determine how the organisation is managed and controlled. ESG ratings measure our performance, providing transparency and clarity to our stakeholders as well as identifying the areas where we can continue to improve. For the latest update on our ESG ratings, consult https://www.recticel.com/sustainability-innovation/esg-performance/our-esg-ratings Recticel annual report 2021 41 MSCI The MSCI ESG rating provides institutional investors with a more robust ESG integration tool designed to support ESG risk mitigation and long term value creation. MSCI ESG Ratings uses a rules-based methodology designed to measure a company’s resilience to long-term, industry material environmental, social and governance (ESG) risks. In 2021, MSCI upgraded our rating from ‘A’ to ‘AA’ (on a scale from AAA to CCC), ranking us in the top 6% of the MSCI Commodities Chemicals universe (September 2021). In its assessment, MSCI particularly highlights: • Our robust carbon mitigation plan with an aggressive target to carbon footprint reduction. • Recticel’s fully independent formal policy on bribery and corruption overseen at executive level. CCC B BB BBB A AA AAA CDP CDP is a global non-profit that runs the world’s leading environmental disclosure platform. The organisation drives companies and governments to reduce their greenhouse gas emissions, safeguard water resources and protect forests. More than 13,000 companies with over 64% of global market capitalisation disclosed environmental data through CDP in 2021. Recticel participated for the first time in 2021 and was awarded a B (on a scale from A to D-) for climate change disclosure. This positions us among the 33% of companies worldwide that have a B score or higher. CDP particularly recognises the fact that Recticel is leading within its industry on: • Emission reduction initiatives • Governance DISCLOSURE INSIGHT ACTION D- D C- C B- B A- A Sustainalytics The Sustainalytics ESG Risk Ratings measure a company’s exposure to industry- specific material ESG risks and how well a company is managing those risks. This multi-dimensional way of measuring ESG risk combines the concepts of management and exposure to arrive at an absolute assessment of ESG risk. Sustainalytics identifies five categories of ESG risk severity that could impact a company’s enterprise value. Based on a limited Core Framework analysis, Sustainalytics ranked Recticel as ‘Medium’ within the Commodity Chemicals universe (19 October 2021). EcoVadis On 6 January 2022, we received a bronze medal from EcoVadis for our sustainability efforts in the ‘Manufacture of plastic products’ category. This ranks Recticel in the top 50% of companies rated by EcoVadis. EcoVadis is one of the world’s largest provider of business sustainability ratings, with more than 90,000+ rated companies. Their assessment covers how well a company has integrated sustainability in its business and management system with regard to environment, labour & human rights, ethics and sustainable procurement. 27.8AA B SEVERE HIGH MEDIUM LOW NEGLIGIBLE INSUFFICIENT PARTIAL MODERATE ADVANCED OUTSTANDING Recticel annual report 2021 42 1.3.9 2021 Board of Directors & Management Committee Board of Directors On 31 December 2021, the Board consisted of 1 executive director, 2 non-executive directors and 6 independent directors. Johnny Thijs is Chairman of the Board and Olivier Chapelle is Managing Director. From left to right Benoit Deckers / Kurt Pierloot / Elisa Vlerick / Olivier Chapelle (Managing Director) / Johnny Thijs (Chairman) / Ingrid Merckx / Luc Missorten / Carla Sinanian / Frédéric Van Gansberghe Recticel annual report 2021 43 Management Committee The Board of Directors has entrusted the day-to-day management of Recticel to its Managing Director and Chief Executive Officer, who is assisted by the Management Committee. From left to right François Desné, Group General Manager Engineered Foams / Dirk Verbruggen, Chief Financial & Legal Officer (Chief Financial Officer as of 01.09.2021) / Ralf Becker, Group General Manager Insulation Jean-Pierre De Kesel, Chief Sustainable Innovation Officer (retired on 31.03.2022) / Olivier Chapelle, Chief Executive Officer / François Petit, Chief Procurement Officer (retired on 31.03.2022) Jean-Pierre Mellen, Chief Financial Officer (retired on 31.08.2021) / Betty Bogaert, Chief Information & Digitalisation Officer / Rob Nijskens, Chief Human Resources Officer Recticel annual report 2021 44 2. Management report Recticel annual report 2021 45 2.1 Report of our Board of Directors Recticel annual report 2021 46 Recticel Annual Results 2021 • Net sales increase from EUR 616.9 million 1/2 to EUR 1,032.8 million (+67.4%), of which +34.0% organic growth, +0.6% currency effect and a +32.8% contribution from FoamPartner 2 • Adjusted EBITDA: from EUR 44.4 million 1/2 to EUR 109.2 million (+145.9%) • Result of the period (share of the Group): from EUR 63.2 million to EUR 53.5 million (-15.3%), including EUR 4.9 million result from discontinued operations (2020: EUR 71.3 million) • Net financial debt: EUR 147.8 million (30 September 2021: EUR 189.0 million) • Proposal to pay a gross dividend of EUR 0.29 per share OUTLOOK Given the important scope changes expected in Recticel during 1H2022, with the closing of the Bedding and Engineered Foams divestments, the variability linked to the timing of these closings and the subsequent alignment of our organization setup, the Group does not provide an outlook for the full year at this stage. However, the business continues to develop well in 2022 with top and bottom line growth, and as Recticel is now becoming a pure Insulation player, we are working on an accelerated growth plan in order to double the Insulation sales by 2025. Olivier Chapelle (CEO): “We are happy with the very positive sales and profitability development in 2021, a year marked by deep changes in our Company. Changes which were planned and announced, such as the acquisition and integration of FoamPartner and the divestment of the Bedding activities. Changes which came as a consequence of the unsolicited takeover bid by Greiner AG, such as the divestment of our newly created Engineered Foams business segment. The Insulation and Engineered Foams businesses performed very well in a very volatile environment. The chemical raw materials supply remains tight, and prices are showing little signs of stabilisation. Transportation and labour costs are increasing at an unprecedented rate, while the steep energy cost inﬂation has a minor impact given the very low energy intensity of our business. Our commercial teams continue to adapt pricing where necessary. Moreover, lockdowns or mobility restrictions in countries such as Germany, the Netherlands and Austria, coupled with direct or indirect supply chain shortages (microchips) have added further challenges to the business environment. In that context, Recticel showed strong resilience and generated solid profitability and free cash ﬂow. The integration of FoamPartner in Engineered Foams is continuing according to plan, and we confirm the targets to close the Bedding divestment to Aquinos Group and the Engineered Foams divestment to Carpenter Co. respectively before the end of 1Q2022 and around mid-2022. I am grateful and proud of all Recticel teams and employees, who during this extremely busy year 2021, characterised by a challenging business environment, big M&A projects, and an unexpected takeover bid, have remained focussed, committed, positive, and extremely professional. They have enabled Recticel to generate this strong performance.” 1 As announced in the press release of 15 February 2022, the Bedding activities which are currently in the process of being divested to the Aquinos Group, have been accounted for as Discontinued Operations (IFRS 5). The Bedding activities that will not be transferred to Aquinos Group are incorporated to the Engineered Foams segment. For comparison reasons, the formerly published 2020 and 2021 income statements and cash ﬂow statements have been restated accordingly. 2 FoamPartner is fully consolidated as of 01 April 2021. Recticel annual report 2021 47 2.1.1 Consolidated Group results in million EUR FY2020 restated¹ FY2021 Δ% Sales 616.9 1 032.8 67.4% Gross profit 106.7 187.4 75.7% as % of sales 17.3% 18.1% Income from associates 1 0.7 0.4 -47.2% Adjusted EBITDA 44.4 109.2 145.9% as % of sales 7.2% 10.6% EBITDA 38.3 89.7 134.4% as % of sales 6.2% 8.7% Adjusted operating profit (loss) 16.6 66.1 297.0% as % of sales 2.7% 6.4% Operating profit (loss) 9.1 46.5 411.0% as % of sales 1.5% 4.5% Financial result (3.6) (4.5) n.m. income from other associates 3 (5.8) 0.5 n.m. Impairment on other associates (5.5) 0.0 n.m. Change in fair value of option structures 1.1 (7.3) n.m. Income taxes (3.5) 14.3 n.m. Result of the period of continuing operations (8.2) 49.5 n.m. Result of discontinued operations 71.3 4.9 n.m. Result of the period (share of the Group) 63.2 53.5 -15.3% Result of the period (share of the Group) - base (per share, in EUR) 1.13 0.96 -15.6% 31 Dec 2020 31 Dec 2021 Δ% Total Equity 334.8 391.3 16.9% Net Financial Debt (incl. IFRS 16 - Leases) 2/4 4.6 147.8 n.m. Gearing ratio (Net financial debt/Total Equity) 1.4% 37.8% Leverage ratio (Net financial debt/EBITDA) 0.1 1.6 3 Income from associates = income from associates considered as being part of the Group’s core business are integrated in Operating profit (loss); i.e. Orsafoam. Income from other associates = income from associates not considered as being part of the Group’s core business are not integrated in Operating profit (loss); i.e. Proseat and Ascorium (formerly Automotive Interiors). 4 Excluding the drawn amounts under non-recourse factoring programs: EUR 25.2 million per 31 December 2021 versus EUR 0.0 million per 31 December 2020 and EUR 45.2 million per 30 June 2021 The following changes in the scope of consolidation took place in 2021: • Acquisition of Swiss-based FoamPartner Group. FoamPartner has been fully integrated in the business line Engineered Foams as of 01 April 2021. • Application of IFRS 5 to the Bedding activities in process of being sold to Aquinos Group. As the conditions to apply IFRS 5 have not been fully met with regard to the Engineered Foams divestment to Carpenter - given the ongoing carve- out and regulatory approval process -, this segment remains included in the Group reporting as before. Changes in the scope of consolidation in 2020: • Partial divestment of the Ascorium (formerly Automotive Interiors) activities at the end of June 2020, which are now operated through TEMDA2, the 51/49% Admetos/Recticel joint venture. • Disposal of the 50% participation in the Eurofoam group (Flexible Foams) at the end of June 2020. The results of the Automotive joint-ventures over 2021 are reported under ‘Income from other associates’. Sales of chemical raw materials at cost to the Proseat and TEMDA2 companies are integrated under “Corporate/Eliminations”. Recticel annual report 2021 48 Net Sales: EUR 1,032.8 million versus EUR 616.9 million 1/2 in 2020. Breakdown of net sales by segment in million EUR FY2020 restated¹ 1Q2021 restated¹ 2Q2021 restated¹ 3Q2020 restated¹ 4Q2021 FY2021 Δ % Engineered Foams 318.5 100.5 173.5 155.8 153.8 583.6 83.2% Insulation 249.2 86.9 101.5 99.2 103.0 390.6 56.7% Corporate / Eliminations 49.1 18.9 22.4 8.4 9.0 58.7 19.5% TOTAL NET SALES 616.9 206.2 297.4 263.4 265.8 1 032.8 67.4% in million EUR restated¹ restated¹ 2021 versus 2020 restated 1Q2020 2Q2020 1H2020 1Q2021 2Q2021 1H2021 Δ 1Q Δ 2Q Δ 1H Engineered Foams 85.7 57.8 143.5 100.5 173.5 273.9 17.3% 199.9% 90.9% Insulation 60.7 52.0 112.7 86.9 101.5 188.4 43.1% 95.1% 67.1% Corporate / Eliminations 15.3 5.8 21.1 18.9 22.4 41.3 23.4% 288.0% 95.9% TOTAL NET SALES 161.7 115.6 277.3 206.2 297.4 503.6 27.6% 157.2% 81.6% in million EUR restated¹ restated¹ 2021 versus 2020 restated 3Q2020 4Q2020 2H2020 3Q2021 4Q2021 2H2021 Δ 3Q Δ 4Q Δ 2H Engineered Foams 83.2 91.8 175.0 155.8 153.8 309.6 87.3% 67.5% 76.9% Insulation 65.0 71.5 136.5 99.2 103.0 202.2 52.6% 44.0% 48.1% Corporate / Eliminations 10.4 17.7 28.0 8.4 9.0 17.4 -18.9% -49.2% -38.0% TOTAL NET SALES 158.5 181.0 339.6 263.4 265.8 529.2 66.1% 46.8% 55.8% in million EUR restated¹ restated¹ 2021 versus 2020 restated 1H2020 2H2020 FY2020 1H2021 2H2021 FY2021 Δ 1H Δ 2H Δ FY Engineered Foams 143.5 175.0 318.5 273.9 309.6 583.6 90.9% 76.9% 83.2% Insulation 112.7 136.5 249.2 188.4 202.2 390.6 67.1% 48.1% 56.7% Corporate / Eliminations 21.1 28.0 49.1 41.3 17.4 58.7 95.9% -38.0% 19.5% TOTAL NET SALES 277.3 339.6 616.9 503.6 529.2 1 032.8 81.6% 55.8% 67.4% Both segments reported substantially higher comparable sales during each quarter of 2021. Fourth quarter 2021: 4Q2021 sales increased by 46.8% from EUR 181.0 million 1 to EUR 265.8 million; of which +11.1% organic growth including currency impact and +35.7% from FoamPartner sales (EUR 64.6 million). Full-year 2021: FY2021 sales increased by 67.4% from EUR 616.9 million 1/2 to EUR 1,032.8 million; of which 34.0% organic growth, +0.6% currency impact and +32.8% from FoamPartner (EUR 202.6 million 2 ). For both segments the sales growth has been driven by supportive demand in most markets, in combination with price increases mitigating the substantial impact of higher purchase prices for chemical raw material and other components. Recticel annual report 2021 49 Adjusted EBITDA: EUR 109.2 million versus EUR 44.4 million 1/2 in 2020. Adjusted EBITDA margin of 10.6% versus 7.2% 1/2 in 2020. Breakdown of the Adjusted EBITDA by segment in million EUR 1H2020 restated¹ 2H2020 restated¹ FY2020 restated¹ 1H2021 restated¹ 2H2021 FY2021 Δ 1H Δ 2H Δ FY Engineered Foams 11.1 20.8 31.9 31.7 31.6 63.3 185.3% 52.0% 98.5% Insulation 11.3 16.4 27.7 28.8 33.8 62.6 155.6% 105.8% 126.1% Corporate (6.5) (8.6) (15.1) (7.8) (8.9) (16.6) 19.1% 2.9% 9.9% TOTAL ADJUSTED EBITDA 15.9 28.5 44.4 52.8 56.4 109.2 232.2% 97.8% 145.9% Adjusted operating profit (loss): EUR 66.1 million versus EUR 16.6 million 1/2 in 2020. Adjusted operating profit (loss) margin of 6.4% versus 2.7% 1/2 in 2020. Breakdown of the Adjusted operating profit (loss) by segment in million EUR 1H2020 restated¹ 2H2020 restated¹ FY2020 restated¹ 1H2021 restated¹ 2H2021 FY2021 Δ 1H Δ 2H Δ FY Engineered Foams 3.9 13.4 17.3 18.8 14.1 33.0 385.6% 5.3% 90.5% Insulation 5.9 11.2 17.1 23.4 28.2 51.6 295.2% 152.3% 201.7% Corporate (7.7) (10.0) (17.8) (8.8) (9.7) (18.5) 14.1% -3.6% 4.1% TOTAL ADJUSTED OPERATING PROFIT (LOSS) 2.0 14.6 16.6 33.4 32.7 66.1 1528.9% 124.1% 297.0% Adjustments to Operating profit (loss) in million EUR 1H2020 restated¹ 2H2020 restated¹ FY2020 restated¹ 1H2021 restated¹ 2H2021 FY2021 Restructuring charges and provisions (1.4) (0.6) (2.0) (1.8) (1.0) (2.8) Other (0.3) (4.9) (5.2) (6.9) (9.8) (16.7) TOTAL IMPACT ON EBITDA (1.7) (5.5) (7.2) (8.7) (10.8) (19.5) Impairments (2.1) (0.4) (2.4) 0.0 0.0 0.0 TOTAL IMPACT ON OPERATING PROFIT (LOSS) (3.8) (5.9) (9.7) (8.7) (10.8) (19.5) Adjustments to Operating profit (loss) on continuing operations in 2021 include mainly: • Reorganisation charges in Engineered Foams in The Netherlands, France, Germany and Switzerland (EUR -2.2 million) and at Corporate level (EUR -0.6 million). • Other adjustments relate mainly to legal and advisory fees (EUR -15.3 million) for (i) the acquisition of FoamPartner (Engineered Foams), (ii) the preparation of the divestment of the Bedding division, (iii) the dealings related to the Greiner offer, (iv) the preparation of the divestment of Engineered Foams to Carpenter, (v) a revaluation allowance for investment property in Belgium (EUR +4.2 million) and (vi) the realisation of a fair value adjustment on inventories by application of IFRS 3 (reversal of inventory step up values resulting from purchase price allocations (EUR -3.4 million). The strong increase in Adjusted EBITDA generated by Engineered Foams and Insulation results primarily from (i) positive sales volumes in comparison to 2020, which was heavily affected by the COVID-19 crisis, (ii) compensation of raw material cost inﬂation by increased selling prices, (iii) further efficiency and mix improvements, and (iv) the integration of FoamPartner as from 01 April 2021. Recticel annual report 2021 50 EBITDA: EUR 89.7 million versus EUR 38.3 million 1/2 in 2020. EBITDA margin of 8.7% versus 6.2% 1/2 in 2020. Breakdown of EBITDA by segment in million EUR 1H2020 restated¹ 2H2020 restated¹ FY2020 restated¹ 1H2021 restated¹ 2H2021 FY2021 Δ 1H Δ 2H Δ FY Engineered Foams 10.3 20.4 30.7 24.9 30.6 55.5 141.5% 50.3% 81.0% Insulation 11.2 16.3 27.5 28.7 33.7 62.4 156.4% 106.6% 126.9% Corporate (6.3) (13.6) (19.9) (9.5) (18.6) (28.2) 51.1% 37.3% 41.7% TOTAL EBITDA 15.2 23.1 38.3 44.1 45.6 89.7 190.1% 97.7% 134.4% Operating profit (loss): EUR 46.5 million versus EUR 9.1 million 1/2 in 2020. Operating profit (loss) margin of 4.5% versus 1.5% 1/2 in 2020. Breakdown of Operating profit (loss) by segment in million EUR 1H2020 restated¹ 2H2020 restated¹ FY2020 restated¹ 1H2021 restated¹ 2H2021 FY2021 Δ 1H Δ 2H Δ FY Engineered Foams 2.0 12.8 14.8 12.0 13.2 25.2 510.3% 2.5% 69.9% Insulation 5.8 11.1 16.9 23.3 28.1 51.4 298.3% 153.6% 203.5% Corporate (7.6) (15.0) (22.6) (10.6) (19.4) (30.1) 38.9% 29.8% 32.9% TOTAL OPERATING PROFIT (LOSS) 0.2 9.0 9.1 24.7 21.9 46.5 15204.2% 143.9% 409.5% Financial result: from EUR -3.6 million 1/2 to EUR -4.5 1/2 million: Net interest charges: EUR -5.8 million versus EUR -2.5 million 1 in 2020. ‘Other net financial income and expenses’: EUR +1.2 million versus EUR -1.1 million 1 in 2020. This item comprises mainly interest capitalisation costs under provisions for pension liabilities (EUR -0.1 million versus EUR -0.3 million1 in 2020) and exchange rate differences (EUR+1.2 million versus EUR -1.4 million 1 in 2020). Income from other associates: EUR +0.5 million (versus EUR -5.8 million in 2020) relates to the positive result of TEMDA2 (at 49%). As Recticel recognized an impairment loss of EUR -5.5 million at the end of 2020, as a result of which the investment in Proseat was reduced to zero, the FY2021 income statement of Recticel was not impacted by the loss of Proseat. Fair value of option structures: EUR -7.3 million (2020: EUR +1.1 million), results from an adjustment of the fair value of the put/ call structure on the Proseat participation to zero (EUR -4.9 million) and the recognition of an additional provision for a potential negative strike price of the Proseat put/call option structure (EUR -2.5 million). The put/call structure on the remaining 49% participation in Ascorium (formerly Automotive Interiors) has been maintained at a “zero” value, given the uncertainties over the period until the earliest exercise date of the options, in 2024. Income and deferred taxes: from EUR -3.5 million 1 to EUR +14.3 million: • Current income tax: EUR -8.8 million (2020: EUR -3.4 million 1 ); • Deferred tax: EUR +23.2 million (2020: EUR -0.1 million 1 ). The positive deferred tax impact results from the increased profit expectations in Belgium (including the gains on the carve- out of the Bedding and Engineered Foams activities), as well as in France and Spain, where tax loss carry-forwards are available, leading to the recognition of additional deferred tax assets. Result of the period from continuing operations: EUR +49.5 million 2 versus EUR -8.2 million 1/2 in 2020. Result from discontinued operations: EUR +4.9 million 1 versus EUR +71.3 million in 2020 The result from discontinued operations represents the result after taxes of the period of the Bedding activities sold to Aquinos Group (EUR +3.5 million) and the result following the settlements related to the divestment of the Ascorium (formerly Automotive Interiors) activities (EUR +1.4 million). As a reminder, the total result of discontinued operations in 2020 was composed of: • the net gain related to the divestment of the 50% participation in the Eurofoam group, • the net loss realised on the sale of 49% of the Ascorium (formerly Automotive Interiors) activities, and • the pro rata share of the 2020 result of the period after taxes of Eurofoam (50%) and Ascorium (formerly Automotive Interiors) activities (100%) • the net result related to the Bedding activities divested to Aquinos for which 2020 was restated Consolidated result of the period (share of the Group): EUR +53.5 million versus EUR 63.2 million in 2020. Recticel annual report 2021 51 2.1.2 Financial position in million EUR 31 DEC 2020 31 MAR 2021 30 JUN 2021 30 SEP 2021 31 DEC 2021 TOTAL EQUITY 334.8 - 354.8 - 391.3 Net financial debt excluding factoring (47.9) 132.2 145.3 130.3 103.8 + Lease debt (IFRS 16) 52.5 63.1 61.3 58.7 44.0 Net Financial Debt 4.6 195.3 206.6 189.0 147.8 + Drawn amounts under factoring programs 0.0 43.3 45.2 41.4 25.2 TOTAL NET FINANCIAL DEBT 4.6 238.6 251.8 230.4 173.0 Gearing ratio (incl. IFRS 16) 1.4% - 58.2% - 37.8% Leverage ratio (incl. IFRS 16) 0.1 - 2.6 - 1.6 The Group confirms that all conditions under the financial arrangements with its banks are respected. Recticel annual report 2021 52 2.1.3 Market segments 2.1.3.1 Engineered Foams in million EUR 1H2020 restated¹ 2H2020 restated¹ FY2020 restated¹ 1H2021 restated¹ 2H2021 FY2021 Δ 1H Δ 2H Δ FY Sales 143.5 175.0 318.5 273.9 309.6 583.6 90.9% 76.9% 83.2% Adjusted EBITDA 11.1 20.8 31.9 31.7 31.6 63.3 185.3% 52.0% 98.5% as % of sales 7.7% 11.9% 10.0% 11.6% 10.2% 10.8% EBITDA 10.3 20.4 30.7 24.9 30.6 55.5 141.5% 50.3% 81.0% as % of sales 7.2% 11.6% 9.6% 9.1% 9.9% 9.5% Adjusted operating profit (loss) 3.9 13.4 17.3 18.8 14.1 33.0 385.4% 5.4% 90.5% as % of sales 2.7% 7.7% 5.4% 6.9% 4.6% 5.6% Operating profit (loss) 2.0 12.8 14.8 12.0 13.2 25.2 510.3% 2.5% 69.9% as % of sales 1.4% 7.3% 4.7% 4.4% 4.3% 4.3% Sales Fourth quarter 2021 The positive trend of 9M2021 continued in 4Q2021. Including FoamPartner (EUR 64.6 million) – which was consolidated as of 01 April 2021 – 4Q2021 sales amounted to EUR 153.8 million (+67.5%). Like-for-like 2 sales excluding the contribution from FoamPartner, slightly decreased by 2.8%, from EUR 91.8 million 1 in 4Q2020 to EUR 89.2 million in 4Q2021. Full-year 2021 Over 2021, including the contribution from FoamPartner (EUR 202.6 million), total sales increased by 83.2% from EUR 318.5 million 1 to EUR 583.6 million, including a +0.4% impact from exchange rate differences. Full-year like- for-like 1 sales increased by 19.6%, from EUR 318.5 million 1 to EUR 381.0 million. Apart from the FoamPartner integration as of 2Q21, the increase in sales is attributable to a volume growth in combination with higher selling prices, compensating for the steep surge in chemical raw material prices which followed several force majeure events and other supply issues in the upstream value chain since September 2020. Profitability Despite the steep surge in material costs, higher volumes, a good product-mix, the integration of FoamPartner and active pricing management led to a like-for-like Adjusted EBITDA margin improvement to 10.8% versus 10.0% in 2020. EBITDA includes adjustments for EUR -7.8 million (2020: EUR -1.2 million), mainly (i) EUR -2.2 million restructuring charges in The Netherlands, France and at FoamPartner, (ii) EUR -2.8 million costs and expenses for legal and advisory services relating to the acquisition of FoamPartner, (iii) a EUR +0.8 million reversal of provisions for claims and onerous contracts and (iv) a EUR -3.5 million reversal of inventory step up values resulting from the purchase price allocation on the FoamPartner acquisition. Recticel annual report 2021 53 2.1.3.2 Insulation in million EUR 1H2020 2H2020 FY2020 1H2021 2H2021 FY2021 Δ 1H Δ 2H Δ FY Sales 112.7 136.5 249.2 188.4 202.2 390.6 67.1% 48.1% 56.7% Adjusted EBITDA 11.3 16.4 27.7 28.8 33.8 62.6 155.6% 105.8% 126.1% as % of sales 10.0% 12.0% 11.1% 15.3% 16.7% 16.0% EBITDA 11.2 16.3 27.5 28.7 33.7 62.4 156.4% 106.6% 126.9% as % of sales 9.9% 11.9% 11.0% 15.3% 16.7% 16.0% Adjusted operating profit (loss) 5.9 11.2 17.1 23.4 28.2 51.6 295.2% 152.3% 201.7% as % of sales 5.2% 8.2% 6.9% 12.4% 14.0% 13.2% Operating profit (loss) 5.8 11.1 16.9 23.3 28.1 51.4 298.3% 153.6% 203.5% as % of sales 5.2% 8.1% 6.8% 12.4% 13.9% 13.2% Sales Fourth quarter 2021 The strong trend of 9M2021 (+61.8%) continued in 4Q2021. Sales increased by 44.0% from EUR 71.5 million in 4Q2020 to EUR 103.0 million in 4Q2021. Volumes remained strong and selling prices continued to slightly increase, compensating for the higher chemical raw materials costs resulting from the still tight supply chain. The plant in Finland further increased its output. Volumes of VIP-products from the Slovenian joint venture Turvac remain very supportive. Full-year 2021 Over 2021 sales increased by 56.7% from EUR 249.2 million to EUR 390.6 million, including a currency impact of +1.1%. The sales increase results from a combined effect of (i) a solid volume development and (ii) selling price increases compensating for the steep surge in chemical raw material prices (i.e. MDI). In addition, the plant in Finland increased its output. Also the demand for high performance VIP insulation materials for the transportation and storage of COVID-19 vaccines remained robust. EC stimulus plans and green regulatory incentives will remain a key volume driver in Europe in 2022 and beyond. Profitability Adjusted EBITDA margin of 16.0% versus 11.1% in 2020. Despite the tight MDI supply, leading to increasing chemical raw material prices over the year, profitability improved strongly on the back of higher volumes, good pricing management and the further ramp-up of the plant in Finland, which is expected to break-even in 2022 on a full-year basis. Recticel annual report 2021 54 2.1.4 Profit appropriation policy The Annual General Meeting agrees on the appropriation of the amounts available for distribution based on a proposal from the Board of Directors. The Board of Directors presented the following appropriation of the results to the General Meeting: in EUR Group Recticel Profit/(Loss) for the financial year 66,288,524.25 Profit/(Loss) brought forward from previous year + 52,132,613.10 Profit/(Loss) to be added to legal reserves - 2,532,517.81 Profit/(Loss) to be added to other reserves - 0.00 Result to be appropriated = 115,888,619.54 Gross dividend ¹ - 16,229,391.80 Profit to be carried forward = 99,659,227.74 ¹ Gross dividend per share of EUR 0.29, resulting in a net dividend after tax of EUR 0.203 per ordinary share. 2.1.5 Dividend payment Subject to approval of the profit appropriation by the General Meeting of 31 May 2022, a dividend of EUR 0.29 gross will be paid per ordinary share, or EUR 0.203 net (-30% withholding tax). This dividend will be payable from 07 June 2022. KBC Bank acts as paying agent.Payments for the registered shares will take place via bank transfer to the shareholders’ bank accounts. € 0.35 0.29 0.26 0.240.24 0.22 0.18 0.14 € 0.30 € 0.25 € 0.20 € 0.15 € 0.10 € 0.05 € 0.00 2016 2017 2018 2019 2020 2021 Gross divided per share 2022 DIVIDEND KEY DATA Gross dividend per share EUR 0.29 Ex-coupon date 02 June 2022 Record date 03 June 2022 Dividend payment date 07 June 2022 When drawing up its proposal, the Board of Directors strives for the ideal balance between ensuring a stable dividend for shareholders and maintaining sufficient investment and self-financing opportunities to secure the company’s longer-term growth. Recticel annual report 2021 55 2.2 Corporate Governance statement Recticel annual report 2021 56 2.2.1 Applicable rules and reference code Recticel publishes its Corporate Governance Charter on its website (www.recticel.com) in accordance with the requirements of the Belgian Corporate Governance Code 2020. The latest version is dated 27 April 2020. Any interested party can download the Charter there, or request a copy from the company’s registered office. The Charter contains a detailed description of the governance structure and the company’s governance policy. As of this year, Recticel uses the new Belgian Governance Code of 2020 as reference code, which can be found on the website of the Corporate Governance Committee (www. corporategovernancecommittee.be). Recticel complies with all recommendations contained in the reference code, except for the cases where it is explicitly stated in this statement below. This chapter contains more factual information regarding corporate governance in general and, the application of the Belgian Corporate Governance Code 2020 (hereinafter also “the Code”) during the last financial year in particular. Recticel confirms its explicit choice for the monistic governance structure under the Belgian Companies and Associations Code. The Board of Directors is therefore authorized to undertake all necessary or useful actions to achieve the company’s objective, except those that only the general meeting is authorized to perform by law. The authority granted to the Board of Directors was not further limited in the articles of association. The terms of reference of the Board of Directors are described in more detail in Recticel’s Corporate Governance Charter. 2.2.2 Internal control and risk management Every entity exists to create value for the stakeholders and this forms the basis of risk management for every company. The challenge that faces the Board of Directors and executive management is in determining how much uncertainty they wish to accept in their strive for creating value. The value is maximized if the administration is successful in creating an optimal balance between growth and turnover on the one hand and the connected risks on the other. Identifying and quantifying the risks and setting up and maintaining an efficient control mechanism is the responsibility of Recticel Group’s Board of Directors and executive management. The framework for internal control and risk management applied by the Recticel Group is based on the COSO (Committee of Sponsoring Organisations of the Treadway Commission) model and is in line with the requirements imposed by the Belgian Corporate Governance Code, taking into account the Recticel Group’s size and specific needs. Since mid-2010 the Board of Directors and the executive management have reviewed the framework for internal control and risk management and an amended Compliance programme is implemented. The basis is formed by the revised Code of Ethics, applicable on all Recticel directors, corporate officers and employees, and published on Recticel’s website: (https://www.recticel.com/sites/default/files/who_we_are/ discover_the_recticel_group/business_ethics_integrity/01_ Ethics_policy_English.pdf). Important matters like ethics, safety, health and environment, quality, conﬂicts of interest, anti-trust, fraud and others are being dealt with. Corporate policies have been elaborated to cover these principles that are further explained in the Business Control Guide, which provides more concrete and detailed guidelines, for instance guidelines on the level of Tax management, Treasury management, Accounting policies, Investments, Purchases, Mergers and Takeovers, and such. The internal financial reporting and control occurs based on the Group Accounting Manual, Group Accounting Methodology and Cost Accounting Methodology. This Business Control Guide includes the general delegation of deciding powers and responsibilities for specific areas of competence. The Board of Directors and executive management regularly reviews the most important risks that the Recticel Group is exposed to and submits a list of priorities. A general description of the risks can be found in the financial part of this annual report. One of the objectives of the internal control and risk management system is also to ensure a timely, complete and accurate communication. To this end the Business Control Guide and all other guidelines contain the necessary regulations on roles and responsibilities. Also, the necessary attention is given to ensuring the security and confidentiality of the data exchange, if and when necessary. In the event of violation of internal or external laws and regulations, the Recticel Group has also implemented a Group Recticel annual report 2021 57 Policy for the Reporting of Misconduct and the Protection of Whistle-blowers to enable anyone to report on behaviour that may represent a violation of the applicable Code of Conduct, the Group Corporate Policies or any other laws and regulations. Finally, the Audit committee, amongst others, has the task of informing and advising the Board of Directors regarding the annual follow up of the systems of internal control and risk management. The Internal Audit Department works based on an Internal Audit Charter and has the primary function of delivering reports with opinions and other information indicating to which extent the internal audit meets predetermined criteria. The Internal Audit aims at providing the reasonable assurance that the strategic, operational, compliance and reporting objectives of the Recticel Group can be realized in the most efficient way. To this end they seek to ensure the following objectives: • the reliability and integrity of the information; • compliance with policies, plans, procedures, laws and agreements; • safeguarding of assets; • economical and efficient use of resources; • achieving the goals set by operations and programs 2.2.3 External audit The external audit of Recticel SA/NV’s company and consolidated annual accounts has been entrusted by the Annual General Meeting of 2021 to the limited liability cooperative company PWC Bedrijfsrevisoren, with registered office at Culliganlaan 5, B-1831 Diegem, Belgium, represented by Mr Marc DAELMAN, in order to exercise control over the financial years ended December 31, 2021, 2022 and 2023. The Auditor conducts its audits in accordance with the International Standards on Auditing (ISA) and delivers a report, which confirms if the company’s annual accounts and the consolidated financial statements of the company reﬂect a true and fair view of the assets, financial condition and results of the company. The Audit committee investigates and discusses these bi-annual reports in the presence of the Auditor, and afterwards also with the Board of Directors. The remuneration of PwC (in its capacity as Auditor) for the audit of Recticel NV’s annual and consolidated annual accounts intended in article 3:65 of the Belgian Companies and Associations Code, amounted to EUR 1.037K for 2021. The global amount of the remuneration for additional services of the Statutory Auditor and parties related to the Statutory Auditor amounts to 229 KEUR at the level of the Recticel Group. The detail of these fees is included in the notes to VOL 6.18.2. in the statutory annual accounts as well as in the notes in the financial part of the consolidated annual report. The annual fees of the statutory auditor amount to 356 KEUR, including domestic expenses and excluding IBR contribution, travel and accommodation expenses abroad and VAT. Recticel annual report 2021 58 Name Function Type Year of birth Start of Mandate End of Mandate Primary Function outside of Recticel Membership Committee Johnny THIJS¹ Chairman Independent 1952 2015 2022 President Electrabel, Hospital Logistics / Director Essers AC / RC Olivier CHAPELLE² Managing Director Executive 1964 2009 2022 Director Cofinimmo MC Ingrid MERCKX³ Director Independent 1966 2012 2022 Independent Consultant for IMRADA BV and RODINA NV AC Luc MISSORTEN 4 Director Independent 1955 2015 2024 Director of GIMV, Director of Scandinavian Tobacco Group AC / RC Kurt PIERLOOT 5 Director Independent 1972 2015 2024 CEO Bleckmann RC Elisa VLERICK 6 Director Independent 1986 2019 2022 Partner at 9.5 Ventures VC fund, Executive director Vlerick Group. Filip BALCAEN 7 Director Non-executive 1960 9/3/22 2025 Executive Chairman of Baltisse NV 1 in his capacity as Permanent Representative of THIJS JOHNNY BV 2 in his capacity as Permanent Representative of OLIVIER CHAPELLE SRL 3 in her capacity as Permanent Representative of IMRADA BV 4 in his capacity as Permanent Representative of LUBIS BV 5 in his capacity as Permanent Representative of CARPE VALOREM BV 6 in her capacity as Permanent Representative of MOROXCO BV 7 from 9/3/2022 in his capacity as Permanent Representative of BALTISSE BV AC = Audit Committee RC = Remuneration & Nomination Committee MC = Management Committee 2.2.4 Composition of the Board of Directors Recticel’s Board of Directors currently consists of seven members. There are seven non-executive directors, five of which are independent. OLIVIER CHAPELLE SRL/BV, represented by Mr. Olivier CHAPELLE, Managing Director, is the executive director. The Managing Director represents the management and one director represent the reference shareholder. With reference to the obligation to have at least 1/3 of the members of the Board of Directors of the opposite gender as provided by article 7:86 of the Belgian Companies’ and Associations Code, the Board of Directors reviewed different options during the last years in order to increase the number of female members. At present, two out of the seven directors are women. As a result, the obligation of article 7:86 of the Belgian Companies’ and Associations Code is complied with. The following table provides an overview of the current members of Recticel's Board of Directors. Member of the Board of Directors of Recticel who resigned before the end of their mandate • Carla SINANIAN, Independent Director, from 2020 till 12/1/2022 • Benoit DECKERS 1 , Non-executive, from 2015 till 23/2/2022, Member of the Audit Committee • Frédéric VAN GANSBERGHE 2 , Non-executive, from 2014 till 23/2/2022, Member of the Remuneration & Nomination Committee 1 in his capacity as Permanent Representative of COMPAGNIE DU BOIS SAUVAGES SERVICES SA 2 in his capacity as Permanent Representative of COMPAGNIE DU BOIS SAUVAGE NV Recticel annual report 2021 59 Amendments since the previous annual report – statutory appointments – presentation of new directors As proposed by the Board of Directors and based upon the recommendation made by the Remuneration and Nomination committee, the following has been decided during the Ordinary General Meeting dated 25 May 2021: • Renewal of the mandate of THIJS JOHNNY BV, permanently represented by Mr. Johnny THIJS, as non-executive and independent director for a new term of one year ending after the Ordinary General Meeting of 2022. • Renewal of the mandate of COMPAGNIE DU BOIS SAUVAGE SERVICES NV, permanently represented by Mr. Benoit DECKERS, as a non-executive director for a new term of three years ending after the Ordinary General Meeting of 2024. • Renewal of the mandate of COMPAGNIE DU BOIS SAUVAGE SA, permanently represented by Mr. Frédéric VAN GANSBERGHE, as non-executive director for a new term of three years ending after the Ordinary General Meeting of 2024. • Renewal of the mandate of LUBIS BV, permanently represented by Mr. Luc MISSORTEN, as non-executive and independent director for a new term of three years ending after the Ordinary General Meeting of 2024. • Renewal of the mandate of CARPE VALOREM BV, permanently represented by Mr. Kurt PIERLOOT, as non- executive and independent director for a new term of three years ending after the Ordinary General Meeting of 2024. • Confirmation as independent director of THIJS JOHNNY BV, permanently represented by Mr. Johnny THIJS within the meaning of article 7:87 of the Companies and Associations Code. Both Mr. Johnny THIJS and THIJS JOHNNY BV meet all criteria as stated in article 7:87 of the Companies and Associations Code (as further elaborated in the field of functional, family and financial criteria as provided by principle 3.5. Of the Corporate Governance Code 2020). • Confirmation as independent director of LUBIS BV, permanently represented by Mr. Luc MISSORTEN within the meaning of article 7:87 of the Companies and Associations Code. Both Mr. Luc MISSORTEN and LUBIS BV meet all the criteria as stated in article 7:87 of the Companies and Associations Code (as further elaborated in the field of functional, family and financial criteria as provided for by principle 3.5. Of Corporate Governance Code 2020). • Confirmation as independent director of CARPE VALOREM BV, permanently represented by Mr. Kurt PIERLOOT, within the meaning of article 7:87 of the Companies and Associations Code. Both Mr. Kurt PIERLOOT and CARPE VALOREM BV meet all the criteria as stated in article 7:87 of the Companies and Associations Code (as further elaborated in the field of functional, family and financial criteria as provided for by principle 3.5. Of the Corporate Governance Code 2020). • Acknowledgment and acceptance of the resignation of the Statutory Auditor DELOITTE Bedrijfsrevisoren, received by letter dated January 15, 2021 and based on the legal limitation of the number of years during which the same auditor can act pursuant to Article 41 of the EU Regulation No. 537/2014. • Appointment as statutory auditor, on proposal of the audit committee, for a period of three years ending after the Ordinary General Meeting of 2024, of the civil company in the form of a cooperative company with limited liability “PWC Bedrijfsrevisoren”, with registered office at Woluwe Garden, Woluwedal, 18, B-1932 Sint-Stevens-Woluwe”, represented by Mr Marc DAELMAN, in order to audit the financial years ended December 31, 2021, 2022 and 2023. The annual fees of the statutory auditor amount to EUR 356,065, including domestic expenses and excluding IBR contribution, travel and accommodation expenses abroad and VAT. Upon advice of the Remuneration & Nomination Committee, the Board of Directors proposes at the Ordinary General Meeting of 31 May 2022 to approve the following: • Renewal of the mandate of THIJS JOHNNY BV, permanently represented by Mr. Johnny THIJS, as non-executive and independent director for a new term of one year ending after the Ordinary General Meeting of 2023. • Renewal of the mandate of OLIVIER CHAPELLE BV, permanently represented by Mr. Olivier CHAPELLE as executive director for a new term of three year ending after the Ordinary General Meeting of 2025. • Renewal of the mandate of MOROXCO BV, permanently represented by Ms Elisa VLERICK, as non-executive and independent director for a new term of three year ending after the Ordinary General Meeting of 2025. • Renewal of the mandate of IMRADA BV, permanently represented by Ms Ingrid MERCKX, as non-executive and independent director for a new term of three year ending after the Ordinary General Meeting of 2025. • Acceptation of the resignation of Ms Carla SINANIAN as non- executive and independent director, with effect on 12 January 2022. It was decided not to replace her. • Acceptation of the resignation of COMPAGNIE DU BOIS SAUVAGE S.A., permanently represented by Mr. Frédéric VAN GANSBERGHE, as non-executive director, with effect on 23 February 2022. In accordance with article 18 of the articles of association, COMPAGNIE DU BOIS SAUVAGE NV will be replaced by BALTISSE NV, permanently represented by Filip BALCAEN, as from March 9, 2022. • Acceptation of the resignation of COMPAGNIE DU BOIS SAUVAGE SERVICES S.A., permanently represented by Mr. Benoit DECKERS, as non-executive director, with effect on 23 February 2022. It was decided not to replace it. • Confirmation of the appointment of BALTISSE NV, permanently represented by Mr. Filip BALCAEN as non- executive director for a term of three year ending after the Ordinary General Meeting of 2025. • Confirmation as independent director of THIJS JOHNNY BV, permanently represented by Mr. Johnny THIJS within the meaning of article 7:87 of the Companies and Associations Code. Both Mr. Johnny THIJS and THIJS JOHNNY BV meet all criteria as stated in article 7:87 of the Companies and Associations Code (as further elaborated in the field of functional, family and financial criteria as provided by principle 3.5. Of the Corporate Governance Code 2020). • Confirmation as independent director of MOROXCO BV, permanently represented by Ms. Elisa VLERICK within the meaning of article 7:87 of the Companies and Associations Code. Both Ms. Elisa VLERICK and MOROXCO BV meet all the criteria as stated in article 7:87 of the Companies and Associations Code (as further elaborated in the field Recticel annual report 2021 60 of functional, family and financial criteria as provided for by principle 3.5. Of Corporate Governance Code 2020). • Confirmation as independent director of IMRADA BV, permanently represented by Ms. Ingrid MERCKX within the meaning of article 7:87 of the Companies and Associations Code. Both Ms. Ingrid MERCKX and IMRADA BV meet all the criteria as stated in article 7:87 of the Companies and Associations Code (as further elaborated in the field of functional, family and financial criteria as provided for by principle 3.5. Of Corporate Governance Code 2020). Functioning of the Board of Directors The Board of Directors gathered a total of 10 times in 2021. One meeting handled mainly the 2021 budget and two meetings handled the establishment of the annual accounts as per 31 December 2020 and the mid-year accounts as per 30 June 2021. Each meeting also addressed the state of affairs per business line and the most important current acquisition and/or divestment files. Other subjects (human resources, external communication, litigations and legal issues, delegations of authority and such) are discussed as and when necessary. The written decision procedure was not applied in 2021. Mr. Dirk VERBRUGGEN, Chief Financial & Legal Officer (representing Roffoelkin BV), acts as Secretary of the Board of Directors. The individual attendance rate of the directors at the meetings in 2021 was: Name Attendance Rate in 2021 Johnny THIJS 10/10 Olivier CHAPELLE 10/10 Benoit DECKERS¹ 8/10 Ingrid MERCKX 10/10 Luc MISSORTEN 10/10 Kurt PIERLOOT 10/10 Frédéric VAN GANSBERGHE² 7/10 Elisa VLERICK 10/10 Carla SINANIAN³ 10/10 1 until 23/2/2022 in his capacity as Permanent Representative of Compagnie du Bois Sauvage Services SA 2 until 23/2/2022 in his capacity as Permanent Representative of Compagnie du Bois Sauvage SA 3 until 12/1/2022 The Board of Directors organises a self-assessment of its functioning as well as an assessment of its interaction with the members of the Management committee on a regular basis. Such self-assessment starts through a questionnaire to be remitted to and completed by each individual director. The results of the questionnaire are then be discussed and further analysed during a subsequent meeting of the Board of Directors. The last assessment took place in the middle of the year 2017. The individual assessment of the directors is done by the Remuneration and Nomination Committee. A formal assessment by an external partner was scheduled for 2020 but has not yet been completed due to circumstances and is still ongoing today; the Board of Directors is of the opinion that this deviation from 9.1. of the 2020 Corporate Governance Code does not pose any particular problems. Recticel annual report 2021 61 2.2.5 Committees set up by the Board of Directors 2.2.5.1 The Audit committee In accordance with article 7:99 of the Belgian Companies and Associations Code, the audit committee supervises amongst others the financial reporting process, the effectiveness of the internal control and risk management systems of the company, the internal audit, the statutory control of the annual accounts and the consolidated accounts, and the Auditor's independence. The Audit committee’s terms of reference are included in the Corporate Governance Charter that also describes more in detail the tasks of the Audit Committee. The Audit committee currently consists of four members. All members are non-executive directors and three members, one of which is the Chairman, are independent directors in the sense of article 7:87,§1 of the Belgian Companies and Associations Code iuncto principle 3.5 of the Corporate Governance Code 2020. Mr. Dirk VERBRUGGEN, Chief Financial & Legal Officer (representing Roffoelkin BV), acts as Secretary of the Audit committee. The composition of the Audit committee complies with the stipulations of Recticel NV’s articles of association and the relevant provisions of the Belgian Companies and Associations Code. In accordance with Article 7: 100 Belgian Companies and Associations Code, Recticel declares that the Chairman of the Audit Committee, Mr Luc MISSORTEN, has the necessary expertise in the field of accounting and auditing. The chairman and other members of the Audit Committee also have collective expertise in the area of the Company's activities. The following table contains the members of the Audit committee during the financial year 2021 to date. Name Function Attendance Rate in 2021 Luc MISSORTEN¹ Chairman 5/5 Johnny THIJS² Member 5/5 Ingrid MERCKX 3 Member 5/5 Benoit DECKERS 4 Member 5/5 1 In his capacity as Permanent Representative of LUBIS BV 2 In his capacity as Permanent Representative of THIJS JOHNNY BV 3 In her capacity as Permanent Representative of IMRADA BV 4 until 23/2/2022 in his capacity as Permanent Representative of COMPAGNIE DU BOIS SAUVAGES SERVICES SA The Audit committee convened five times in 2021. Two meetings were devoted primarily to the audit of the annual accounts per 31 December 2020 and the interim accounts per 30 June 2021. All meetings also focus on the internal audit program, risk management, compliance, taxation and IFRS related accounting questions. There was at least two times a meeting with the statutory auditor and the person responsible for internal audit. The Audit Committee conducts regularly an informal self- assessment of its functioning during one of its meetings and reserves the necessary time to discuss and analyse the same. In the beginning of 2017, a formal assessment was conducted. A formal assessment by an external partner was scheduled for 2020 but has not yet been completed due to circumstances and is still ongoing today; the Board of Directors is of the opinion that this deviation from 9.1. of the 2020 Corporate Governance Code does not pose any particular problems. Recticel annual report 2021 62 2.2.5.2 The Remuneration and Nomination Committee The Remuneration and Nomination Committee makes proposals to the Board of Directors regarding the remuneration policy and the individual remuneration of directors and members of the Management committee and prepares and explains the remuneration report at the Ordinary General Meeting. They also make the necessary proposals regarding the evaluation and re-appointment of directors as well as the appointment and induction of new directors. The terms of reference of the Remuneration and Nomination Committee are included in Recticel’s Corporate Governance Charter. The Remuneration and Nomination Committee consists of four members, all non-executive directors, of which three are independent directors. Mr. Dirk VERBRUGGEN, Chief Financial & Legal Officer (representing Roffoelkin BV), fulfils the role of secretary of the Remuneration and Nomination Committee. The composition of the Remuneration and Nomination committee meets the requirements with respect to the Belgian Companies and Associations Code, as well as the requirements of the Corporate Governance Code 2020. The committee is composed as follows: Name Function Attendance Rate in 2021 Johnny THIJS¹ Chairman 2/2 Kurt PIERLOOT² Member 2/2 Frédéric VAN GANSBERGHE ³ Member 2/2 Luc MISSORTEN 4 Member 2/2 1 in his capacity as Permanent Representative of THIJS JOHNNY BV 2 in his capacity as Permanent Representative of CARPE VALOREM BV 3 until 23/2/2022 in his capacity as Permanent Representative of COMPAGNIE DU BOIS SAUVAGE SA 4 in his capacity as Permanent Representative of LUBIS BV In accordance with the article 7:100 of the Belgian Companies and Associations Code, Recticel declares that the Remuneration and Nomination committee possesses the necessary expertise in the area of remuneration policy. The Remuneration and Nomination committee convened two times in 2021. These meetings dealt with the fixed and variable remuneration of the executive management as well as with the election and re-election of directors. The CEO was present at the discussion about the remuneration of the other members of the executive management. The Remuneration and Nomination Committee conducts regularly an informal self-assessment of its functioning during one of its meetings and reserves the necessary time to discuss and analyse the same. A formal assessment by an external partner was scheduled for 2020 but has not yet been completed due to circumstances and is still ongoing today; the Board of Directors is of the opinion that this deviation from 9.1. of the 2020 Corporate Governance Code does not pose any particular problems. 2.2.5.3 The Strategy committees There were seven ad hoc strategy committees in 2021 following the unsolicited takeover bid by Greiner AG. These meetings dealt primarily with the in depth analysis of the Greiner bid, the effects on the business, the effects on the future of the company and possible alternatives to counter the Greiner bid and ensure a future in the best interest of the company Regarding a possible conﬂict of interest on the part of the directors affiliated with Compagnie du Bois Sauvage SA the Strategy committee was formed by all independent members of the Board of Directors and without Olivier Chapelle: Name Function Attendance Rate in 2021 Johnny THIJS¹ Chairman 7/7 Luc MISSORTEN² Member 7/7 Kurt PIERLOOT³ Member 7/7 Ingrid MERCKX 4 Member 7/7 Elisa VLERICK 5 Member 7/7 Carla SINANIAN 6 Member 7/7 1 in his capacity as Permanent Representative of THIJS JOHNNY BV 2 in his capacity as Permanent Representative of LUBIS BV 3 in his capacity as Permanent Representative of CARPE VALOREM BV 4 in her capacity as Permanent Representative of IMRADA BV 5 in her capacity as Permanent Representative of MOROXCO BV 6 until 12/1/2022 Recticel annual report 2021 63 2.2.6 The Executive Management The Board of Directors has entrusted the day-to-day management of the company to its Managing Director and Chief Executive Officer, “OLIVIER CHAPELLE” SRL/BV, located in 1180 Brussels, Avenue de la Sapinière 28, represented by its General Manager and permanent representative, Mr. Olivier CHAPELLE. The Managing Director is assisted by the Management committee, of which the members (for the period 2021 to present) are indicated in the following list: Name Function Olivier CHAPELLE 1 Chief Executive Officer Ralf BECKER Group General Manager Insulation Betty BOGAERT Chief Information & Digitalisation Officer Jean-Pierre DE KESEL² Chief Sustainable Innovation Officer François DESNÉ Group General Manager Engineered Foams Rob NIJSKENS 3 Chief Human Resources Officer François PETIT 4 Chief Procurement Officer Jean-Pierre MELLEN 5 Dirk VERBRUGGEN 6-7-8 Chief Financial & Legal Officer 1 In his capacity as permanent representative of OLIVIER CHAPELLE SRL 2 until 31/3/2022 in his capacity as permanent representative of SUSTAINALOGIC BV 3 as of 01/03/2021 4 until 31/3/2022 5 until 31/8/2021 Chief Financial Officer and until 31/12/2021 Member of the Management Committee 6 from 1/4/2021 in his capacity as permanent representative of ROFFOELKIN BV 7 until 31/8/2021 General Counsel & General Secretary 8 from 1/9/2021 Chief Financial & Legal Officer On 31 August 2021 Mr. Jean-Pierre Mellen resigned as the Chief Financial Officer to be succeeded by Mr. Dirk Verbruggen (in his capacity as the permanent representative of ROFFOELKIN BV) on 1st September 2021 who will act in the capacity of Chief Financial & Legal Officer from this date on. Mr. Jean-Pierre Mellen remains a member of the management committee until 31 December 2021 and will remain to provide support for special assignments until August 2022. On 1st March 2021 Rob Nijskens took over as the Chief HR Officer from Bart Massant. The Management committee has an advisory role vis-à-vis the Board of Directors as a whole and is not an executive committee in the sense of article 7:104 of the Belgian Companies and Associations Code. Recticel annual report 2021 64 2.2.7 Remuneration report for financial year 2021 b 2021 remuneration outcomes • The remuneration levels reﬂect the solid profitability and free cash ﬂow levels of Recticel in 2021, together with the successful implementation of the foreseen organisational changes such as the acquisition and integration of FoamPartner, and the divestment of the Bedding division. Annual bonus awards In accordance with our policy, Group Consolidated Net Cash Flow before dividends and Adjusted EBITDA are key drivers to determine the level of the annual bonus awards. • The level of Consolidated Net Cash Flow reached by the Group generated a pay out at the maximum (125% of the pay out opportunity). • The level of Group Adjusted EBITDA was above target and generated a pay out of 125% of the pay out opportunity. For the Business Lines Bedding, the level of Adjusted EBITDA that was achieved did not trigger a bonus pay out. For Engineered Foams and Insulation, the pay out is 99.5% and 125% respectively. Further details are provided in the “STI” section of this report. Stock options - The 2017 stock option grant vested on January 1, 2021. Another grant was made in May 2021 at a strike price of EUR 12.44. Management Committee membership – On 1st September 2021, Dirk Verbruggen was appointed Chief Financial Officer and Chief Legal Officer, in replacement of Jean-Pierre Mellen. On 1st March 2021, Rob Nijskens took over from Bart Massant as Chief HR Officer. c Shareholder engagement The Annual General Meeting held on 25th May 2021 approved the 2020 remuneration report with 73.37% of shareholder votes. In establishing its remuneration policy and its future revisions, Recticel endeavours to take into account the votes and views of the shareholders. Recticel is committed to an open and transparent dialogue with its shareholders on remuneration as well as other governance matters. d Looking ahead Considering the strategic reorientation of the Group and the foreseen divestments of the Bedding and Engineered Foams Divisions, the Board of Directors, upon recommendation of the Remuneration and Nomination Committee, decided to adjust the performance criteria to award bonuses for performance year 2022. For Group General Managers, the Group Net Cash Flow will be replaced by the Free Cash Flow of their respective Division. For the other members of the Management Committee, it will be replaced by the Free Cash Flow of the Insulation business line, and the Group Adjusted EBITDA will be replaced by the Adjusted EBITDA of the Insulation business line. In addition, in order to further embed the deployment of our sustainability strategy across the organization, the bonus award will also depend on the accomplishment of an ESG objective that will be determined for each division. 2.2.7.1 Introduction a 2021 business results • The year 2021 delivered very positive sales and profitability developments. The Net sales increased by 67% from EUR 616.9 million to 1,032.8 million, thanks to the contribution of Foam Partner and also strong organic growth. The Adjusted EBITDA increased by 145.9%, from EUR 44.4 million to 109.2 million. • The Insulation and Engineered Foams businesses performed very well in a very volatile environment. Pricing was continuously adapted to incorporate the tight supply of raw materials and the increase of other costs such as transportation, labour and energy. • Moreover, lockdowns or mobility restrictions in countries such as Germany, the Netherlands and Austria, coupled with direct or indirect supply chain shortages (microchips) have added further challenges to the business environment. • Major organisational changes took place in the course of the year: the foreseen acquisition and the integration of FoamPartner, the planned divestment of the Bedding activities, and the divestment of the Engineered Foams business segment following the unsolicited takeover bid by Greiner AG. Recticel annual report 2021 65 2.2.7.2 Our Remuneration Policy at a glance The remuneration policy was reviewed and validated by the Remuneration Committee on February 25, 2019 and approved by the Board of Directors on February 27, 2019. The policy was adopted during the General Meeting of Shareholders on May 28, 2019 and became effective as of January 1, 2019. It is available for consultation on the company website. The contents of the policy were established following the requirements of the Shareholder Rights Directive, the Belgian Companies and Associations Code and the new Corporate Governance Code 2020. a Directors Per policy terms, Directors receive a fixed fee / retainer and an attendance fee, whereas Committee Members receive attendance fees. Directors Board Committee Chair Member Chair Member Fixed Fee € 30,000 € 15,000 N/A N/A Attendance fee € 5,000 € 2,500 € 5,000 € 2,500 In accordance with the policy, Non-Executive Board Members do not receive variable and/ or equity-related remuneration as referred to under principle 7.6. of the Corporate Governance Code 2020. Recticel considers that the Corporate Governance Code’s goals of promoting the achievement of strategic objectives in accordance with the company’s risk appetite and behavioural norms and promoting sustainable value creation are better served by remunerating the non-executive directors entirely in cash to avoid any conﬂicts of interest and guarantee their complete financial independence. Non-Executive Board Members are not entitled to receive benefits. Expenses incurred when travelling abroad will be arranged for by Recticel directly. Executive Directors are remunerated in accordance with the remuneration policy for the members of the Management Committee and any director fees paid to the Executive Directors are deducted from the remuneration received as a member of the Management Committee. The level and structure of remuneration paid to the Directors is regularly assessed against “BEL Mid” market practice. b Management Committee The level as well as the structure of the remuneration of the Management Committee members is reviewed annually by the Remuneration and Nomination Committee, which consequently presents a proposal to the Board of Directors for approval. When determining the remuneration levels for the members of the Management Committee, Recticel considers a Belgian frame of reference comprising companies similar in size (as compared on the basis of revenues) and exclusive of the Financial Sector. The objective is to establish target remuneration levels that, as a general rule, are at or around the median market level and this as far as the performance of the Company can afford it. Recticel annual report 2021 66 The total remuneration package of the Management Committee members consists of the following elements. Element Operation and performance criteria Base Pay Individual’s role, experience, performance and market practice are considered when determining salary levels. Any director fees paid to the Executive Directors are deducted from the remuneration received as a member of the Management Committee. Other Benefits The Management Committee Members receive benefits in line with Recticel’s remuneration policy, including hospitalization, disability coverage and a company car. Members operating through a management company do not receive perquisites and benefits, though certain costs may be invoiced separately. One-Year Variable (STI) Operation: - For threshold performance: the bonus pay-out will be nil. - For target performance: the bonus pay-out will be 75% of base pay for the CEO and 37.5% for the other Management Committee members. - For maximum performance: the bonus pay-out will be 117.5% of base pay for the CEO. For the other Management Committee members, it is 58.00% or 58.75% depending on whether they head a Business Line or a Function - No deferral policy is applicable. Performance criteria: The annual bonus is linked to both collective targets (both at group and divisional level, the latter only for positions with a divisional scope) and personal targets. Collective objectives are all quantitative and financially driven (e.g. Net Cash Flow, Adjusted EBITDA, …). Personal objectives include at least one target related to sustainable development. For performance year 2021, the Board of Directors decided that the same performance criteria as the ones used in 2020 (Group Consolidated Net Cash Flow before dividends, and Group and Business Line Adjusted EBITDA) must be used in the same proportions to award bonuses. Article 7:91 of the Belgian Companies and Associations Code prescribes the need to spread variable remuneration payments over a three year period in case certain thresholds are passed. The 25% threshold was passed in the case of the Managing Director and CEO, Olivier Chapelle SRL, represented by Olivier Chapelle. Hence the Board of Directors proposed to the 2021 General Shareholder meeting to approve a deviation from the said rule in line with the possibility offered by the legislation. This proposal was approved during the 2021 General Shareholders’ meeting. Multi-Year Variable (LTI) The long-term incentive plan is granted by means of stock options. Options granted in 2021 cannot be exercised before 1st January 2025, nor can they be exercised later than 11th May 2028. Dismissal period or severance pay On termination of the employment of a member of the Management Committee by the company, Recticel will apply a notice of 12 months, unless other applicable legal mandatory provisions require to apply a higher number of months. Pension Members of the Management Committee employed in Belgium before 2003 are included in the Recticel Group Defined Benefit Plan, members hired externally since 2003 are included in the Recticel Group Defined Contribution Plan. Contract The CEO and two other members of the Management Committee provide services through a management company. Clawback No clawback provisions are in place for the annual bonus plan, in deviation of principle 7.12 of the Corporate Governance Code 2020. Recticel considers that based on general principles of law, the company can recover payments (1) if they were undue or (2) in case of fraud. The company does not wish to renegotiate existing agreements with Management Committee members to provide for additional clawback possibilities. Shareholding guidelines The members of the Management Committee are encouraged to build stock ownership in the company up to an amount equivalent to 50% of their annual gross base pay over a period of 5 years, preferably by keeping part of the stocks that they purchase under the existing stock option plan. On 1st March 2021, Rob Nijskens joined the Management Committee as Chief HR Officer. Rob Nijskens is employed in the Netherlands. His terms and conditions follow the above policy but in the case of the pension and the other benefits which follow the standards of Recticel in the Netherlands. CEO & Other Members of the Management Comittee Group General Managers Other Management Committee Members Collective Personal Personal Objectives Personal Objectives Combined Group Net Cash Flow Combined Group Net Cash Flow Business Line Adjusted EBITDA Group Adjusted EBITDA Recticel annual report 2021 67 2.2.7.3 Remuneration of the Non-Executive Directors The following table sets out the total remuneration for each Non-Executive Director in 2021, in EUR. Name of Director Fixed Fee Attendance Fees THIJS JOHNNY BV, represented by Johnny THIJS 30,000 95,000 OLIVIER CHAPELLE SRL, represented by Olivier CHAPELLE 15,000 22,500 COMPAGNIE DU BOIS SAUVAGE SERVICES SA, represented by Benoit DECKERS¹ 15,000 27,500 COMPAGNIE DU BOIS SAUVAGE SA, represented by Frédéric VAN GANSBERGHE² 15,000 20,000 IMRADA BV, represented by Ingrid MERCKX 15,000 47,500 CARPE VALOREM BV, represented by Kurt PIERLOOT 15,000 42,500 MOROXCO BV, represented by Elisa VLERICK 15,000 37,500 LUBIS BV, represented by Luc MISSORTEN 15,000 62,500 Carla SINANIAN³ 15,000 37,500 1 Until 23/2/2022 in his capacity as Permanent Representative of COMPAGNIE DU BOIS SAUVAGES SERVICES SA. 2 Until 23/2/2022 in his capacity as Permanent Representative of COMPAGNIE DU BOIS SAUVAGE NV. 3 Until 12/1/2022 2.2.7.4 Remuneration of the Management Committee Members a Total Remuneration An overview of the total remuneration of the CEO and the other members of the Management Committee in 2021 can be found in the table below. Incumbent name 1 – Fixed Remuneration 2 – Variable Remuneration 3 – Extraordinary items 4 – Pension Expense 5 – Total Remuneration (1+2+3+4) Proportion of fixed and variable remuneration Base Pay Other Benefits One-Year Variable Multi-Year Variable Fixed (1+4)/(5-3) Variable (2)/(5-3) OLIVIER CHAPELLE SRL represented by Olivier CHAPELLE (CEO)¹ € 590,000 € 965 € 693,250 € 223,200 NA NA € 1,507,415 39% 61% Other Members of the Management Committee 2 € 2,292,656 € 184,801 € 1,176,478 € 651,000 NA € 217,540 € 4,522,475 60% 40% 1 Only the CEO receives feesas Executive Director. These are deducted from the base pay. Fees therefore are not presented in a separate column in the table above. 2 The table includes Jean-Pierre Mellen as CFO until 31st August 2021, Dirk Verbruggen as Chief Financial & Legal Officer as of 1st September 2021, Bart Massant as CHRO until 28th February 2021 and Rob Nijskens as CHRO as of 1st March 2021. Proportion of fixed and variable remuneration - CEO Proportion of fixed and variable remuneration - Other Fixed Variable Fixed Variable Recticel annual report 2021 68 b Fixed remuneration Base pay + Other Benefits Fixed Remuneration Base pay The table below shows the base pay actually paid in 2021 to the CEO and the other members of the Management Committee and how it compares to 2020. Incumbent Name 2021 2020 without pay cut³ 2021 vs. 2020 2020 with pay cut³ OLIVIER CHAPELLE SRL represented by Olivier CHAPELLE (CEO and Group General Manager Bedding)¹ € 590,000 € 570,000 103.5% € 529,095 Other Members of the Management Committee 2 € 2,292,656 € 2,229,551 102.8% € 2,073,116 1 The base pay levels for OLIVIER CHAPELLE SRL include the fees received as a Member of the Board of Directors (EUR 37,500 in 2021). 2 The table includes Jean-Pierre Mellen as CFO until 31st August 2021, Dirk Verbruggen as Chief Financial & Legal Officer as of 1st September 2021, Bart Massant as CHRO until 28th February 2021 and Rob Nijskens as CHRO as of 1st March 2021. 3 While a large part of the workforce was impacted by the system of temporary unemployment due to the Covid pandemic, Recticel implemented a pay cut of 30% for the members of its Management Committee during the second quarter of 2021. Other benefits The amounts mentioned in the column “Other benefits” in the total remuneration table in section 2.1.7.4. a) relate to the following benefits: insurances (death, disability, medical), company car (leasing costs), fuel costs, mobile phone costs and schooling costs, and exclude pension. c Variable Remuneration One-year variable + Multi-year variable Variable Remuneration STI (“One-Year Variable”) 2021 Performance against Targets. The achievement of the performance targets was measured during a period of time that started on 1st January 2021 and ended on 31st December 2021. As per our remuneration policy, the evaluation of the CEO’s performance was done by the Remuneration and Nomination Committee on the basis of audited company results before presenting a proposal to the Board of Directors. The evaluation of the other Management Committee members was done by the CEO on the basis of audited company results, who then discusses this with the Remuneration and Nomination Committee before presenting a proposal to the Board of Directors. STI pay out for the performance year 2021 Beneficiary STI Objectives % Weight Actual Pay Out (% base salary) Actual Amount CEO Collective Objectives Group Consolidated Net Cash Flow before dividends 35.00% 43.75% € 258,125 Adjusted EBITDA (Group) 35.00% 43.75% € 258,125 Personal objectives 30.00% 30.00% € 177,000 Total 100.00% 117.5% € 693,250 Other members of the Management Committee Collective Objectives Group Consolidated Net Cash Flow before dividends 35.00% 21.88% € 462,865 Adjusted EBITDA (Business Line or Group, depending on role) 35.00% 21.32% € 447,823 Personal objectives 30.00% 12.70% € 265,790 Total 100.00% 55.90% € 1,176,478 LTI (“Multi-Year Variable”) (i) Grant made in 2021 The theoretical value of the options at grant is calculated by applying the Black & Scholes formula, taking into account certain assumptions regarding dividend payment (dividend yield: 1.48%, interest rate: 0.00001%, and volatility 34%). For the grant in May 2021, the value amounted to EUR 2.29/warrant. Name of Director (position) Number of options granted Strike Price Total Theoretical Value at Grant OLIVIER CHAPELLE (Chief Executive Officer & Group General Manager Bedding) 120,000 € 12.44 € 274,800 Ralf BECKER (Group General Manager Insulation) 30,000 € 12.44 € 68,700 François DESNE (Group General Manager Engineered Foams) 30,000 € 12.44 € 68,700 Betty BOGAERT (Chief Information & Digitalisation Officer) 30,000 € 12.44 € 68,700 Jean-Pierre DE KESEL (Chief Sustainable Innovation Officer) 30,000 € 12.44 € 68,700 Jean-Pierre MELLEN (Chief Financial Officer)¹ 30,000 € 12.44 € 68,700 Rob NIJSKENS (Chief Human Resources Officer)² 30,000 € 12.44 € 68,700 François PETIT (Chief Procurement Officer) 30,000 € 12.44 € 68,700 Dirk VERBRUGGEN (Chief Financial & Legal Officer) 30,000 € 12.44 € 68,700 1 Member of the Management Committee until 31st August 2021. 2 Member of the Management Committee as of 1st March 2021. Recticel annual report 2021 69 (ii) 2021 Vesting The following stock options, relating to the April 2017 grant, vested on January 1st, 2021. Name of Director (position) Number of options vested Strike Price Share Price at Vesting Value at Vesting OLIVIER CHAPELLE (Chief Executive Officer & Group General Manager Bedding) 60,000 € 7.00 € 10.72 € 223,200 Ralf BECKER (Group General Manager Insulation) 25,000 € 7.00 € 10.72 € 93,000 Betty BOGAERT (Chief Information & Digitalisation Officer) 25,000 € 7.00 € 10.72 € 93,000 Jean-Pierre DE KESEL (Chief Sustainable Innovation Officer) 25,000 € 7.00 € 10.72 € 93,000 François DESNE (Group General Manager Engineered Foams) 25,000 € 7.00 € 10.72 € 93,000 Bart MASSANT (Chief Human Resources Officer) 25,000 € 7.00 € 10.72 € 93,000 Jean-Pierre MELLEN (Chief Financial Officer)¹ 25,000 € 7.00 € 10.72 € 93,000 Dirk VERBRUGGEN (Chief Financial & Legal Officer) 25,000 € 7.00 € 10.72 € 93,000 1 Member of the Management Committee until 31st August 2021. Notes: Rob Nijskens was appointed as Chief Human Resources Officer on 1st March 2021. No stock option grant was made to him in 2017 and no options vested in 2021. d Extraordinary items There are no extraordinary items to be reported in 2021. e Pension expenses Name of Director (position) Pension expense OLIVIER CHAPELLE SRL, represented by Mr. Olivier CHAPELLE, Chief Executive Officer Includedinfee Other Members of the Management Committee € 217,540 For Members of the Management Committee other than the CEO, Recticel reports the actual contributions paid into the plan for DC plan beneficiaries. For DB plan beneficiaries, Recticel reports the service cost as the plan is a collective plan. f Additional disclosure • Recticel did not apply any clawback provisions during the year under review. • The level of shareholdership of the non-executive directors on 31st December 2021 is displayed in the table below. Level of shareholdership of the non-executive directors Director Number of shares Johnny Thijs 22,949 Olivier Chapelle 272,598 Benoit Deckers 2,700 Compagnie du Bois Sauvage 15,094,410 Ingrid Merckx 0 Luc Missorten 0 Kurt Pierloot 0 Frédéric Van Gansberghe 0 Elisa Vlerick 0 • The following table shows the level of shareholdership of the CEO and the other members of the Management Committee. It shows that the actual level of shareholdership of the CEO and of the other Members of the Management Committee is higher than the policy requirement. Level of shareholdership of the management committee members Shareholdership Number of shares held on 31 December 2021 Value of the stock on 31st Dec 2021 Total value of shares held Actual level of shareholdership (% base pay) Target level of shareholdership (% base pay) CEO 272,598 € 17.52 € 4,775,917 809% 50% Other Management Committee Members 152,842 € 17.52 € 2,677,792 133% on average 50% The fulfilment of the shareholding guideline by the CEO and each Other Management Committee Member is determined by comparing the value of the number of shares held on 31st December 2021 to 50% of their annual base pay on 31st December 2021. The value of the shares held is obtained by multiplying the number of shares held on 31 st Dec 2021 by the closing price of the stock on that date (€ 17.52). Recticel annual report 2021 70 2.2.7.5 Share-based remuneration The tables below detail the opening and closing balance, as well as movements during the year in terms of share-based remuneration for each of the Management Committee Members. In line with the information presented in previous tables, shares have been valued at fair value at grant and at market value at vesting. Incumbent Name Main conditions of the share option plans Information regarding the reported financial year Opening Balance During the year Closing Balance Specification of the plan Award date Vesting date Exercise period Strike price of the option Share options outstanding at the beginning of the year Share options awarded Share options vested Share options exercised Share options awarded and unvested Share options vested but unexercised Number Value Number Value OLIVIER CHAPELLE (Chief Executive Officer & Group General Manager Bedding) 2016 grant 29/04/2016 01/01/2020 01/01/2020 – 28/04/2025 € 5.73 445,000 2017 grant 30/06/2017 01/01/2021 01/01/2021 – 29/06/2024 € 7.00 60,000 2018 grant 25/04/2018 01/01/2022 01/01/2022 – 24/04/2025 € 10.21 2019 grant 28/06/2019 01/01/2023 01/01/2023 – 27/06/2026 € 7.90 2020 grant 03/03/2020 01/01/2024 01/01/2024 – 02/03/2027 € 6.70 2021 grant 12/05/2021 01/01/2025 01/01/2025 – 11/05/2028 € 12.44 120,000 460,000 105,000 Ralf BECKER (Group General Manager Insulation) 2016 grant 29/04/2016 01/01/2020 01/01/2020 – 28/04/2025 € 5.73 125,000 2017 grant 30/06/2017 01/01/2021 01/01/2021 – 29/06/2024 € 7.00 25,000 2018 grant 25/04/2018 01/01/2022 01/01/2022 – 24/04/2025 € 10.21 2019 grant 28/06/2019 01/01/2023 01/01/2023 – 27/06/2026 € 7.90 2020 grant 03/03/2020 01/01/2024 01/01/2024 – 02/03/2027 € 6.70 2021 grant 12/05/2021 01/01/2025 01/01/2025 – 11/05/2028 € 12.44 30,000 115,000 40,000 François DESNÉ (Group General Manager Engineered Foams) 2017 grant 30/06/2017 01/01/2021 01/01/2021 – 29/06/2024 € 7.00 110,000 25,000 2018 grant 25/04/2018 01/01/2022 01/01/2022 – 24/04/2025 € 10.21 2019 grant 28/06/2019 01/01/2023 01/01/2023 – 27/06/2026 € 7.90 2019 grant 28/06/2019 01/01/2023 01/01/2023 – 27/06/2026 € 7.90 2020 grant 03/03/2020 01/01/2024 01/01/2024 – 02/03/2027 € 6.70 - 2021 grant 12/05/2021 01/01/2025 01/01/2025 – 11/05/2028 € 12.44 30,000 115,000 25,000 Recticel annual report 2021 71 Incumbent Name Main conditions of the share option plans Information regarding the reported financial year Opening Balance During the year Closing Balance Specification of the plan Award date Vesting date Exercise period Strike price of the option Share options outstanding at the beginning of the year Share options awarded Share options vested Share options exercised Share options awarded and unvested Share options vested but unexercised Number Value Number Value Betty BOGAERT (Chief Information & Digitalisation Officer) 2016 grant 29/04/2016 01/01/2020 01/01/2020 – 28/04/2025 € 5.73 125,000 2017 grant 30/06/2017 01/01/2021 01/01/2021 – 29/06/2024 € 7.00 25,000 2018 grant 25/04/2018 01/01/2022 01/01/2022 – 24/04/2025 € 10.21 2019 grant 28/06/2019 01/01/2023 01/01/2023 – 27/06/2026 € 7.90 2020 grant 03/03/2020 01/01/2024 01/01/2024 – 02/03/2027 € 6.70 2021 grant 12/05/2021 01/01/2025 01/01/2025 – 11/05/2028 € 12.44 30,000 115,000 40,000 Jean-Pierre DE KESEL (Chief Sustainable Innovation Officer) 2016 grant 29/04/2016 01/01/2020 01/01/2020 – 28/04/2025 € 5.73 110,000 2017 grant 30/06/2017 01/01/2021 01/01/2021 – 29/06/2024 € 7.00 25,000 2018 grant 25/04/2018 01/01/2022 01/01/2022 – 24/04/2025 € 10.21 2019 grant 28/06/2019 01/01/2023 01/01/2023 – 27/06/2026 € 7.90 2020 grant 03/03/2020 01/01/2024 01/01/2024 – 02/03/2027 € 6.70 2021 grant 12/05/2021 01/01/2025 01/01/2025 – 11/05/2028 € 12.44 30,000 115,000 25,000 Bart MASSANT (Chief Human Resources Officer) 2016 grant 29/04/201 01/01/2020 01/01/2020 – 28/04/2025 € 5.73 85,000 2017 grant 30/06/2017 01/01/2021 01/01/2021 – 29/06/2024 € 7.00 25,000 2018 grant 25/04/2018 01/01/2022 01/01/2022 – 24/04/2025 € 10.21 2019 grant 28/06/2019 01/01/2023 01/01/2023 – 27/06/2026 € 7.90 2020 grant 03/03/2020 01/01/2024 01/01/2024 – 02/03/2027 € 6.70 85,000 25,000 Jean-Pierre MELLEN (Chief Financial Officer) 2016 grant 29/04/2016 01/01/2020 01/01/2020 – 28/04/2025 € 5.73 110,000 2017 grant 30/06/2017 01/01/2021 01/01/2021 – 29/06/2024 € 7.00 25,000 2018 grant 25/04/2018 01/01/2022 01/01/2022 – 24/04/2025 € 10.21 2019 grant 28/06/2019 01/01/2023 01/01/2023 – 27/06/2026 € 7.90 2020 grant 03/03/2020 01/01/2024 01/01/2024 – 02/03/2027 € 6.70 2021 grant 12/05/2021 01/01/2025 01/01/2025 – 11/05/2028 € 12.44 30,000 115,000 25,000 Recticel annual report 2021 72 Incumbent Name Main conditions of the share option plans Information regarding the reported financial year Opening Balance During the year Closing Balance Specification of the plan Award date Vesting date Exercise period Strike price of the option Share options outstanding at the beginning of the year Share options awarded Share options vested Share options exercised Share options awarded and unvested Share options vested but unexercised Number Value Number Value Rob NIJSKENS (Chief Human Resources Officer) 2018 grant 25/04/2018 01/01/2022 01/01/2022 – 24/04/2025 € 10.21 15,000 2019 grant 28/06/2019 01/01/2023 01/01/2023 – 27/06/2026 € 7.90 2020 grant 03/03/2020 01/01/2024 01/01/2024 – 02/03/2027 € 6.70 2021 grant 12/05/2021 01/01/2025 01/01/2025 – 11/05/2028 € 12.44 30,000 45,000 - François PETIT (Chief Procurement Officer) 2016 grant 29/04/2016 01/01/2020 01/01/2020 – 28/04/2025 € 5.73 90,000 2017 grant 30/06/2017 01/01/2021 01/01/2021 – 29/06/2024 € 7.00 2018 grant 25/04/2018 01/01/2022 01/01/2022 – 24/04/2025 € 10.21 2019 grant 28/06/2019 01/01/2023 01/01/2023 – 27/06/2026 € 7.90 2020 grant 03/03/2020 01/01/2024 01/01/2024 – 02/03/2027 € 6.70 - 2021 grant 12/05/2021 01/01/2025 01/01/2025 – 11/05/2028 € 12.44 30,000 115,000 5,000 Dirk VERBRUGGEN (Chief Financial & Legal Officer) 2015 grant 23/06/2015 01/01/2019 01/01/2019 – 22/06/2021 € 5.73 135,000 10,000 2016 grant 29/04/2016 01/01/2020 01/01/2020 – 28/04/2025 € 5.73 2017 grant 30/06/2017 01/01/2021 01/01/2021 – 29/06/2024 € 7.00 25,000 2018 grant 25/04/2018 01/01/2022 01/01/2022 – 24/04/2025 € 10.21 2019 grant 28/06/2019 01/01/2023 01/01/2023 – 27/06/2026 € 7.90 2020 grant 03/03/2020 01/01/2024 01/01/2024 – 02/03/2027 € 6.70 2021 grant 12/05/2021 01/01/2025 01/01/2025 – 11/05/2028 € 12.44 30,000 115,000 40,000 Recticel annual report 2021 73 2.2.7.6 Termination indemnities In accordance with his employee status, indemnities were due to Bart Massant and their level was determined in accordance with the remuneration policy of the Group. 2.2.7.7 Derogations There are no derogations to report for the year 2021. 2.2.7.8 Annual Change in Remuneration and Pay Ratio a Annual Change in Remuneration of Directors versus the Wider Workforce & Company Performance. The following table displays the variation of the remuneration of the CEO and the other members of the Management Committee between 31st Dec 2019 and 31st Dec 2021 against the evolution of Group Consolidated Net Cash Flow before dividends, the Adjusted EBITDA and the Net Profit. The average remuneration of the other employees for the year 2021 will be published in the 2022 remuneration report as the data are not available at the time of the publication of this report. Annual change in remuneration 2021 2020 2019 2021 vs. 2020 2020 vs. 2019 Total remuneration of the CEO (in EUR)¹ 1,507,415 1,216,383 895,466 124% 136% Average total remuneration of the other members of the Management Committee (in EUR)¹/² 589,632 473,056 440,578 125% 107% Average total remuneration of the other employees (in EUR) 59,876 57,653 59,508 104% 97% Group Net Cash Flow before dividends (in mio EUR)³ 54.9 197.1 23.6 28% 835% Group Adjusted EBITDA (in mio EUR) 4 118.6 58.8 114.7 202% 51% Net Profit (share of the Group, in mio EUR) 53.5 63.1 24.7 85% 255% Sustainability KPIs Seeseparatesustainabilityreport. Notes 1 The data takes into account the 30% pay cut implemented in the second quarter of 2020 against the background of the COVID pandemic. From 2019 to 2020, the increase reported for the CEO is mainly due to the fact that in 2019 the level of Group Adjusted EBITDA did not generate a bonus pay out. For some of the other Management Committee members heading a Business Line, the level of Adjusted EBITDA that was reached for their Business Line in 2019 generated a pay out. From 2020 to 2021, the difference is explained by the pay cut implemented in the 2d quarter of 2020 and the increase of the share price. 2 The remuneration of the Management Committee members (excl. CEO) is presented as a Full Time Equivalent average: the total remuneration paid during that year divided by the number of Full Time Equivalent Management Committee members in that year. 3 The Group Net Cash Flow before dividends is expressed on a Consolidated basis for the year 2019. It is expressed on a consolidated basis as of year 2020. The important year-on-year variation of the Group Net Cash Flow between 2019 and 2020 is due to the proceeds of the divestments of the Automotive Division and of the participation in the joint venture with Eurofoam in the first half of 2020. b Pay Ratio The pay ratio compares the highest remuneration of the Management Committee (that is the remuneration of the CEO) with the lowest Remuneration at Recticel NV. On 31st December 2021, the highest remuneration was 45 times the lowest remuneration; this is a pay ratio of 45:1. Recticel annual report 2021 74 2.2.8 Transactions and other contractual ties between the Company and members of the Board of Directors or members of the Management committee Chapter VII.1. of the Recticel Corporate Governance Charter describes Recticel NV's policy on related party transactions that are not governed by the legal conﬂict of interest scheme. The application of this policy is explained hereafter. During the year 2021, two conﬂicts of interest arose between a director and the company as referred to in article 7:96 of the Belgian Companies and Associations’ Code. The procedure of Article 7:97 was not applied in 2021. Reference is made here to the statutory annual report, which contains an extract of the minutes of the concerned board meetings in this regard. 2.2.9 Insider trading and market manipulation The company policy regarding the prevention of insider trading and market manipulation is further explained in chapter VII.2 of Recticel’s Corporate Governance Charter as well as in the new Dealing Code which has been adopted by the Board of Directors and published on the website of Recticel (www.recticel.com). These measures include the implementation of restrictions on the execution of transactions («closed periods») applicable since 2006. Mr. Dirk VERBRUGGEN was appointed as Compliance Officer, responsible for monitoring the observance of these regulations . 2.2.10 Diversity policy Recticel strives to create a community where everyone is included and respected, bringing people together for a better world. We believe that a diverse team improves the quality of decision making, and ultimately improves overall performance. Recticel has currently not established a formal specific diversity policy, but is an equal employer in all aspects of recruitment and selection, and is committed to a fair and consistent approach to recruitment and selection. Recticel works actively to develop a positive employer image amongst the internal and external stakeholders. Recticel commits to hire all candidates irrespective of age, disability, gender reassignment, marriage or civil partnership, pregnancy and maternity, race, religion and belief, sex and sexual orientation or hours of work. Recticel also commits to offering learning opportunities to all employees irrespective of age, disability, gender reassignment, marriage or civil partnership, pregnancy and maternity, race, religion and belief, sex and sexual orientation or hours of work. Recticel is proud to be present in 20 countries, with employees of different nationalities. Currently one woman is represented in the Management Committee. Furthermore, one third of the members of the Board of Directors is a woman, in accordance with article 7:86 of the Companies and Associations Code. The selection process of the members of the Board of Directors is described in the Corporate Governance Charter of Recticel, with the aim to come to a composition that is diverse in all its aspects, both at the level of gender, background, professional experience, competence and education. Recticel annual report 2021 75 2.2.11 Relationships with the reference shareholders, other elements related to possible public takeover bids and others Here follows the overview of the shareholders who, under the statutes of the law, have addressed a notification to the company and to the FSMA: Name Date of notification Number of shares Percentage of shares at the moment of notification¹ Percentage of shares at balance sheet date Percentage of voting rights attached to shares at balancesheet date² Own shares 13/05/2015 326,800 0.61% 0.58% 0.00% KBC Asset Management NV 19/03/2022 1,648,964 3.01% 2.94% 2.96% Janus Henderson Group Plc 11/01/2022 2,763,803 4.94% 4.93% 4.96% Greiner AG 03/01/2022 2,446,678 4.37% 4.36% 4.39% Baltisse NV 03/01/2022 12,647,732 22.60% 22.56% 22.70% Public Not applicable 36,221,943 64.62% 65.00% TOTAL (EXCLUDING OWN SHARES) 55,729,120 100.00% TOTAL (INCLUDING OWN SHARES) 56,055,920 100.00% 1 The percentage of shares is calculated based upon the number of existing shares at the moment of the notification. 2 The percentage of voting rights is calculated based upon the 56.055.920 existing shares per 30 March 2022 based upon the information the Company has received from its shareholders per 30 March 2022, which can be different from the actual situation. The calculation has been adjusted to take into account the suspension of the voting rights of the 326,800 own shares held by the Company as foreseen by the law. The company has not concluded a relationship agreement with the main shareholder BALTISSE NV in accordance with principle 8.7 of the Corporate Governance Code 2020, as there is a sufficient line of representation of the main shareholder through its representation within the Board of Directors. The capital structure, with the number of shares and warrants of the company can be found in the chapter “Information on the Share” on the Recticel website (www.recticel.com). An amendment of the articles of association of Recticel can only be obtained, following the special majorities of article 37 of the Articles of Association. The Board of Directors submits its proposals regarding the appointment or re-election of directors to the general meeting of the shareholders. The Remuneration and Nomination Committee recommends one or several candidates to the Board, taking into account the needs of the company and following the appointment procedure and the selection criteria drawn up by the Board for that purpose. The composition of the Board is determined based on the necessary diversity and complementary skills, experience and knowledge. The general meeting of the shareholders appoints the directors of their choice with a simple majority of the votes cast. Directors can likewise be dismissed “ad nutum” by the general meeting with a majority of the votes cast, before the normal expiry of his or her term of office. If a position of director becomes vacant as a result of resignation, incapacity or death, the Board may provisionally fill the vacancy, upon recommendation from the Remuneration and Nomination Committee. There are no legal or statutory limitations on transfer of securities. There are no securities with special control rights. There are no legal or statutory restrictions on the exercise of voting rights, for as far as the shareholder is legally represented at the Ordinary General Meeting, and his/her voting rights have not been suspended for any reason. There are no agreements between the Company and its directors or employees that would provide for compensations after a public takeover bid, the directors resigning or departing without any valid reason, or the employment of the employees being terminated. Recticel annual report 2021 76 The following agreements, whereby the company is party, contain the clauses that take effect, undergo changes or end, in the event of a change of control over Recticel SA/NV: • The “Amendment and Restatement Agreement, as agreed on 25 February 2016 between Recticel SA/NV and Recticel International Services NV on the one hand and ING Belgium SA/NV, BNP Paribas Fortis SA/NV, Commerzbank Aktiengesellschaft, Filiale Luxembourg and KBC Bank NV on the other hand, for an amount of EUR 175,000,000, whereby, in case of a change of control over the Company, or over a subsidiary that is also an obligor under the amendment and restatement agreement, each of the banks participating in the Facility will have the right to request prepayment and cancellation of their respective Facility commitment, and if banks representing a special majority of the total Facility amount request such, then the total Facility will have to be prepaid and cancelled. This agreement completes and modifies the “Facility Agreement” for an amount of 175,000,000 EUR as signed on 9 December 2011 between the aforementioned parties. • The Recticel Group's Stock Option Plans of April 2014, June 2015, April 2016, June 2017, April 2018, June 2019 (warrant plans April 2014, June 2015, April 2016, June 2017, April 2018, June 2019, March 2020, May 2021) issued by the Board of Directors Administration that contain a clause 6.2./5.2 which gives the beneficiaries the right to exercise their warrants, if applicable under the conditions determined by the Board of Directors, immediately in the event of a change of control (that is, in the event of a transfer, in one or more transactions, more than fifty percent (50%) of the voting rights) or in the case of the launch of a public share purchase offer. These clauses were specifically approved by Recticel’s General Shareholder Meeting or will be submitted for approval at the General Meeting on 31 May 2022. In line with article 7:151 of the Belgian Companies and Associations Code, for such a clause to take effect requires the approval of the General Shareholder meeting. The Board of Directors is not aware of shareholder agreements that give rise to restrictions on the transfer of securities and / or the exercise of voting rights. The Board of Directors does not currently have any authority to issue shares. The Board of Directors is authorized to acquire own shares of the Company as long as the fractional value of the Company's shares held in portfolio does not exceed 20% of its issued capital, at a unit price that may not be less than 20%. below the average of the last twenty closing prices on Euronext Brussels prior to the date of acquisition, and not higher than the same average plus 20%. This purchase authorization is valid until July 17, 2022. 2.2.12 Statement on non-financial information. The statement on non-financial information in accordance with article 3:6,§4 of the Belgian Companies and Associations Code has been enclosed to the statutory annual report of Recticel NV/ SA and the consolidated annual report of the Recticel Group. Recticel annual report 2021 77 2.3 Non-financial information statement Recticel annual report 2021 78 2.3.1 Introduction First sustainability strategy and roadmap 2015 – 2020 Recticel’s sustainability journey started in 2013 with the Management Committee’s declaration to put sustainability at the forefront of the Group strategy. A company-wide project was launched to determine how to embed sustainability in its Group and division strategy. After stakeholder consultation, this resulted in a 2015 – 2020 roadmap focusing on six material aspect clustered in a Sustainable Innovation Plan and a People Priority Plan. A key performance indicator and 2020 target was selected for each material aspect. 1 In 2015, the sustainability strategy was embedded in the Recticel Group strategy. Renewed sustainability roadmap 2021 - 2025 As part of the revision process of our sustainability strategy and in view of preparing our second roadmap, we consulted our internal stakeholders and conducted multi-actor stakeholder engagements with customers, suppliers, knowledge institutes, universities and authorities end of 2020, early 2021. This annual report covers the renewed sustainability roadmap’s material aspects, KPIs (Key Performance Indicators) and targets for 2021 – 2025. 11 KPIs and 8 commitments have been selected to turn our sustainability ambitions into actionable goals. 1 See Recticel website for more information Sustainable Innovation Plan INNOVATION FOR SOCIETAL NEEDS OF ACTIVE R&D PROJECTS CLASSIFIED AS SUSTAINABLE reporting on % supplies compliant with the Recticel Supplier Sustainability Requirements and audited based on risk assessment LOST TIME ACCIDENTS [Representing the average on Group level for all our plants] [Representing the average on Group level for all our plants] LOST TIME ACCIDENTS + RESTRICTED WORK CASES + MEDICAL TREATMENT CASES reinforcing R&D partnerships with customers, knowledge institutes, universities and strategic suppliers on sustainable development implementing a collective sustainability objective for senior managers in 2022 connected to the Sustainability Strategy follow-up and reporting on well-being scores through annual Employee Performance Management Discussion (EPMD) progress reporting on workforce engagement maximising e-learning for our employees continuation and expansion of long-term partnerships for social projects (ratio between avoided emissions and carbon footprint over the complete value chain) of post-consumer polyurethane foam from recycled mattresses production with lower CO 2 e raw material in % of total raw material consumption (in line with EU Sustainable Carbon Cyclesplan of 20% by 2030) project, a breakthrough in chemical recycling of ﬂexible polyurethane foam 2023: successful completion of the (scope 1, 2, 3 in tonnes CO 2 e vs 2013, target in line with EU Green Deal -55% vs 1990) gender diversity in senior management by 2030 (ratio scope 1, 2 in tonnes of COe/million EUR revenue vs 2020) CLIMATE-POSITIVE MULTIPLE RECTICEL CARBON FOOTPRINT CARBON INTENSITY SUSTAINABLE R&D PROJECTS READY TO BE BROUGHT TO MARKET EACH YEAR 80% -40% FREQUENCY 1 FREQUENCY 2 5,000 10% PUReSmart TONNES 75 BY 2030 BY 2030 -25% 25% ≥3 ≤2 ≤5 CLIMATE ACTION PLAN TRANSITION TO A CIRCULAR ECONOMY People Priority Plan WE COMMIT TO WE COMMIT TO WE COMMIT TO SUSTAINABLE PARTNERSHIPS AN INSPIRING AND REWARDING PLACE TO WORK LOWER HS&E IMPACT OF OUR ACTIVITIES AND PRODUCTS the pursuit of zero chemical hazard impact of our activities and products Recticel annual report 2021 79 Reporting Since 2015, we report every year on our progress against our targets. The first two years in separate sustainability reports, since 2018 in our annual report in which we integrated the reporting on non-financial information such as environmental, social, human rights, anti-bribery and anti-corruption topics. The information about diversity is available in our Corporate Governance Statement. The reporting over 2021 was prepared using the recommendations of the GRI (Global Reporting Initiative) Standards, option Core. It is aligned with the Non-Financial Reporting Directive as well as the EU Taxonomy Regulation. Limited assurance Since 2017, a limited assurance is performed by an independent auditor. Over 2021 this includes 10 KPIs covering five material aspects. 2 Scope On 31 December 2021, the Recticel Group consisted of 53 locations with 5,145 employees in 21 countries (including pro rata joint ventures). For this reporting, the 40 fully-owned Recticel subsidiaries employing 4,103 people in 19 countries are in scope (excluding pro rata joint ventures and 12 former FoamPartner sites integrated within the Engineered Foams business line as of 31 March 2021). Strategic overhaul of the Group On 17 November 2021, Recticel announced that it has signed a binding agreement to divest its Bedding business line to Aquinos, a Portuguese privately owned industrial group. Aquinos a dedicated player in the European bedding and furniture markets with strong commercial and industrial capabilities to leverage the potential of our Bedding brands, technologies, locations and teams. The closing was completed on 31 March 2022 3 . Since then, the Recticel Group consists of 3,556 employees operating in 43 locations in 19 countries (including pro rata joint ventures). On 7 December 2021, Recticel announced that it had signed a deal with Carpenter, one of the world’s largest producers of foam products, for the sale of its Recticel Engineered Foams business line. The synergies between the Recticel Engineered Foams business and Carpenter’s foams business will result in one of the world’s largest vertically integrated manufacturer of polyurethane foams and specialty polymer products. The closing is expected around mid-2022. From now on, Recticel will focus exclusively on its Insulation activities, presenting excellent growth prospects in a high-value added business segment driven by climate change. It perfectly illustrates our sustainability motto to grow together with our stakeholders towards a PUre future. The acquisition of Trimo 4 , one of Europe’s leading providers of sustainable premium insulated panels for the building industry, announced on 22 March 2022, is a key step in our growth direction. 2.3.2 Activities of the company Recticel is an international industrial player with an ambitious goal: to take the daily experience of comfort to a new level in quality and innovation. We rely on our expertise in the transformation of polyurethane chemistry to meet customer and societal challenges responsibly, and to generate added value for our clients, shareholders, partners and employees. For a further description of the activities of Recticel and the strategic overhaul of the Recticel Group, reference is made to ‘1. A new future built on sustainable innovation’. 2 See ‘Summary Table’ 3 See Recticel completes the sale of its Bedding activities to Aquinos Group | Recticel 4 See Recticel expands its insulation activities with the acquisition of the insulated panel specialist Trimo | Recticel Recticel annual report 2021 80 2.3.3 A strategy for sustainability: Growing together towards a PUre future 2.3.3.1 Recticel’s ambition Recticel’s ambition is to lead the transition to a circular economy and a low-carbon society within our industry. Growing together towards a PUre future expresses our firm commitment to reducing any negative effects of our activities and to optimising Recticel’s positive impact across the value chain, from raw materials sourcing to product manufacturing, consumption and end-of-life. Since 2013, sustainable innovation is a key driver at the heart of our Group strategy. It was created to respond to key societal challenges, such as climate change, energy conservation, CO 2 reduction, well-being for and an aging and increasing population. Sustainability shapes our portfolio strategy and our innovation priorities, and as a result, it nourishes our long-term competitiveness. The long-term needs and challenges or our sectors and our society are our compass. 2.3.3.2 Focus on innovation and people – six important aspects Innovation and people are key in achieving our ambitions. Our company will create more shared value through innovation focused on societal needs and aligned with stakeholder expectations. Our sustainability strategy has always been built on two pillars: Sustainable Innovation Plan and People Priority Plan, bringing together our most important or material aspects. Sustainability shapes our innovation priorities and product portfolio strategy and is the main driver behind all our research and development efforts. Every day, through technological advances, we renew our commitment to finding responsible solutions to challenges such as climate change, transitioning to a circular economy and low-carbon society, as well as increasing well-being. Sustainable partnerships Lower HS&E impact of our activities & products An inspiring and rewarding place to work SUSTAINABLE INNOVATION PLAN PEOPLE PRIORITY PLAN Climate Action Plan Transition to a circular economy Innovation for societal needs Recticel annual report 2021 81 Our path to circularity Our products are predominantly, though not exclusively, based on polyurethane (PU). This versatile material allows us to develop long-lasting high-quality and durable solutions that promote comfort in our daily life such as insulation panels or mattresses. From the start of the sustainability strategy in 2015, Recticel put the challenge of readying polyurethane for the circular economy front and centre. Through clear focus and long-term R&D partnerships across our value chain, we have laid the foundations for our two paths to circularity. Mechanical recycling, or re-using end-of-life polyurethane and transforming it into a new value- added product, and chemical recycling or breaking down end-of-life polyurethane to its original chemical building blocks and transforming them endlessly into virgin polyurethane. Engaging our stakeholders Sustainability leads to change and helps us to retain and motivate our people and attract the best talent to help us achieve our ambitions. Long-term partnerships with suppliers, customers, research institutes and non-governmental organisations are essential in realising changes along our value chain to contribute to a better tomorrow. Sustainability is considered along our entire value chain, from raw material sourcing to product manufacturing, consumption and end-of-life. We take responsibility for our own in-company activities and for those within our sphere of inﬂuence, upstream as well as downstream. Recticel supports the Sustainable Development Goals (SDG) launched in 2015 by the United Nations. This universal set of targets and indicators is designed to help countries and end poverty, protect the planet and ensure global prosperity as part of a new sustainable development agenda. By upholding recognized standards and principles on human rights, labour, the environment and anti-corruption, business makes an essential contribution to the SDGs. Recticel has identified six SDGs that are most impactful, relevant and strategically embedded in our company’s sustainability strategy: RAW MATERIALS CUSTOMER END-OF-LIFE PREPARING PROCESSING ASSEMBLING DISTRIBUTION • An inspiring and rewarding place to work • Transition to a circular economy • Sustainable partnerships • Climate Action Plan • Innovation for societal needs • Lower HS&E impact of our activities and products SPHERE OF INFLUENCE ⊲ ⊲ ⊲ Climate Action Plan Transition to a circular economy Innovation for societal needs 13. CLIMATE ACTION ⊲ ⊲ ⊲ ⊲ ⊲ Transition to a circular economy Innovation for societal needs Climate Action Plan Lower HS&E impacts of our activities and products Sustainable partnerships 12. RESPONSIBLE CONSUMPTION AND PRODUCTION ⊲ ⊲ ⊲ Climate Action Plan Innovation for societal needs Sustainable partnerships 11. SUSTAINABLE CITIES AND COMMUNITIES ⊲ ⊲ ⊲ Sustainable partnerships Lower HS&E impacts of our activities and products An inspiring and rewarding place to work 8. DECENT WORK AND ECONOMIC GROWTH ⊲ ⊲ ⊲ Innovation for societal needs Lower HS&E impacts of our activities and products An inspiring and rewarding place to work 3. GOOD HEALTH AND WELL-BEING ⊲ ⊲ We take responsibility for our own activities, but also in our sphere of inﬂuence upstream (raw materials sourcing) as well as downstream (use and end-of-life) We invest in close relation- ships with the stakeholders: customers, suppliers, knowledge institutes and universities, investors and communities along our value chain 17. SUSTAINABLE PARTNERSHIPS ⊲ ⊲ ⊲ Climate Action Plan Transition to a circular economy Innovation for societal needs 13. CLIMATE ACTION ⊲ ⊲ ⊲ ⊲ ⊲ Transition to a circular economy Innovation for societal needs Climate Action Plan Lower HS&E impacts of our activities and products Sustainable partnerships 12. RESPONSIBLE CONSUMPTION AND PRODUCTION ⊲ ⊲ ⊲ Climate Action Plan Innovation for societal needs Sustainable partnerships 11. SUSTAINABLE CITIES AND COMMUNITIES ⊲ ⊲ ⊲ Sustainable partnerships Lower HS&E impacts of our activities and products An inspiring and rewarding place to work 8. DECENT WORK AND ECONOMIC GROWTH ⊲ ⊲ ⊲ Innovation for societal needs Lower HS&E impacts of our activities and products An inspiring and rewarding place to work 3. GOOD HEALTH AND WELL-BEING ⊲ ⊲ We take responsibility for our own activities, but also in our sphere of inﬂuence upstream (raw materials sourcing) as well as downstream (use and end-of-life) We invest in close relation- ships with the stakeholders: customers, suppliers, knowledge institutes and universities, investors and communities along our value chain 17. SUSTAINABLE PARTNERSHIPS Recticel annual report 2021 82 European Green Deal The European Green Dealis the European Commission’s plan tomake the EU's economy sustainable by turning climate and environmental challenges into opportunities and making the transition just and inclusive for all. Recticel fully supports these objectives. Our renewed sustainability strategy 2021 – 2025 will continue to advance the key policy areas of the European Green Deal. Our carbon reduction objectives are in line with the European Union’s greenhouse gas emission reduction target of -55% reduction by 2030. We fully support the Renovation Wave plan to renovate buildings, responsible for over a third of EU emissions. While 75% of existing buildings in the EU are considered energy inefficient, only 1% currently undergo renovation each year. Recticel is well-positioned to help address this issue through its high-performance insulation solutions. 5 We proactively monitor new directives from the Chemicals strategy for Sustainability. In our sustainability roadmap for 2025, we commit to the pursuit of zero chemical hazard impact of our activities and our products. Our target to achieve 10% production with lower-carbon raw materials is aligned with the EU’s Sustainable Carbon Cycles plan to achieve 20% of carbon used in chemical and plastics products from sustainable non-fossil source by 2030. New initiatives to promote circular economy processes and sustainable consumption, such as the Sustainable Products Initiative, are expected in 2022 to achieve the EU’s climate neutrality target. Recticel will continue to engage in partnerships along the value chain to further a circular economy. For more information about Recticel’s eligibility following the EU’s Taxonomy Regulation for sustainable activities, see ‘Taxonomy Eligibility’. 5 See ‘1. A new future built on sustainable innovation’ 2.3.3.3 Sustainable innovation programmes driving the change Our Sustainable Innovation Department, the strategic R&D Centre of the Group, has been organized since 2016 around three long-term innovation programmes that benefit our customers in their markets: Low Lambda, Silencing, and Fit 2 next to a Corporate programme: Following the strategic overhaul of the Recticel Group and decision to focus on its insulation activities, the R&D programmes linked to Bedding and Engineered Foams have been transferred to the respective business lines in the course of 2021. The fourth, or Corporate Sustainability innovation programme, is dedicated to exploring new ways to prepare polyurethane for circularity polyurethane, in partnerships with stakeholders, over the entire value chain: from raw materials, to production, to end-of-life. Carbon4PUR SWEETWOODS VITRIMAT NIPU-EJD PUReSmart Valpumat * R&D projects funded by SUSTAINABLE R&D PARTNERSHIPS In areas with highest CO 2 impact: raw materials (60%), end-of-life (35%) RAW MATERIALS END-OF-LIFE PREPARING PROCESSING ASSEMBLING DISTRIBUTION CUSTOMER European Green Deal A zero pollution Europe Transition to a circular economy Towards a Green CAP (Common Agriculture Policy) Take everyone along (Just Transition Mechanism) Clean, reliable and affordable energy Preserving Europe’s natural capital Achieving climate neutrality Farm to Fork Financing the transition Sustainable transport Fit 2 Silencing Low Lambda Corporate Sustainability Engineerd Foams Bedding Engineerd Foams Insulation Insulation Engineerd Foams Insulation Bedding Recticel annual report 2021 83 2.3.3.3.1 Raw materials Innovation and efficiency initiatives have reduced our use of raw materials and are complemented by our choice of lower-carbon raw materials with bio-based or recycled content. In partnership with Covestro, Recticel was in 2018 the first company worldwide to use a CO 2 -based polyol in its ﬂexible foam production for products such as mattresses. Two long-term fundamental R&D projects centred on rigid foam for insulation applications, further illustrate Recticel’s commitment to become less dependent on fossil resources: Carbon4PUR Carbon capture and utilization is also at the heart of the Carbon4PUR project, a EU Horizon 2020 Research and Innovation Programme project. With Covestro as project coordinator, the consortium of research-oriented industry and application-oriented science has been working together on an interdisciplinary basis since 2017. The use of process gases from steel industry has been investigated in order to move closer to the goal of climate neutrality. The 14 project partners have focused on expanding the technology platform that Covestro first successfully implemented in 2015 for the use of CO 2 as new, alternative feedstock for the chemical industry. In the Carbon4PUR project, carbon monoxide (CO) derived from steel mill process gases has now also been tapped as a raw material source for circular plastics. CO and various gas mixtures were successfully converted by Covestro in Leverkusen, Germany, into polyols as intermediates for polyurethane. These high- performance materials were upscaled and then tested in rigid foams for insulation boards by Recticel. The tests demonstrated that the rigid foam insulation boards, partially made with polyol based on the Carbon4PUR technology, are comparable with the market reference in terms of their key technical specifications. The Carbon4PUR project started on 1 October 2017 with a duration of 36 months. Due to the Covid-19 impact, the consortium decided to extend the project until 31 March 2021. For more information: https://www.carbon4pur.eu or watch the project’s closing video. This project has received funding from the European Union’s Horizon 2020 Research and Innovation programme under grant agreement N° 768919. The information contained in this document has been prepared solely for the purpose of providing information about the Carbon4PUR consortium and its project. The document reﬂects only the Carbon4PUR consortium’s view, and the European Commission is not responsible for any use that may be made of the information it contains. SWEETWOODS SWEETWOODS, a Bio-Based Industries Joint Undertaking (BBI JU) funded project, focuses on bio-based materials such as wood to replace fossil fuel. The project aims at demonstrating the successful and profitable production of high-purity lignin, derived from low-quality wood residues and sugars, on an industrial level. The fractionation technology concept was successfully commissioned in 2021 and further validated by the project coordinator Fibenol (formerly Graanul Biotech). The first tons of hydrolysis lignin and cellulosic sugars have been delivered to the project partners for application trials and further modification. The whole plant commissioning and industrial supply of high purity hydrolysis lignin and cellulosic sugars is scheduled for 2022. Recticel is currently evaluating on lab scale which (depolymerised) lignin types are most suitable for incorporation in rigid foam for insulation boards. These will be further upscaled and screened on a semi-industrial scale. The SWEETWOODS project started on 1 June 2018 with a duration of 36 months. The consortium decided to extend the project until 31 May 2023. For more information: https://sweetwoods.eu SWEETWOODS has received funding from the Bio-Based Industries Joint Undertaking under the European Union’s Horizon 2020 Research and Innovation programme, under grant agreement N° 792061. The SWEETWOODS project results presented reﬂect only the author's view. The Commission is not responsible for any use that may be made of the information it contains. Since 2020, Recticel also participates in research initiatives funded by the European Commission’s Marie Sklodawska-Curie Actions (MSCA). The MSCA help develop training networks and promote staff exchanges. They encourage collaboration and sharing of ideas between different industrial sectors and research disciplines, breaking down barriers between academia, industry and business. Recticel is proud to be part of two such projects in the field of raw materials: VITRIMAT On March 1 st , 2020, VITRIMAT started up for a period of three years. The project receives funding from the European Union’s Horizon 2020 research and innovation programme under the Marie Sklodowska-Curie grant agreement. VITRIMAT has the ambition of bridging a critical training gap between cutting-edge European academic research on vitrimers and industrial developments of daily life products. Vitrimers are a new class of materials combining the best features of thermoplastic and thermoset materials. VITRIMAT offers a world-class multidisciplinary and inter-sectoral training platform, where PhD students are conducting their PhD research. First research ways are identified and fitted towards industrial applicability. The project combines the expertise of six academic partners-pioneers in vitrimers and advanced composite materials with one national technical centre and eight industrial partners, including Recticel, that are world leaders in the chemistry adhesives, thermosets and composites for consumer goods, construction and automotive applications. Recticel annual report 2021 84 VITRIMAT has received funding from the European Union’s Horizon 2020 research and innovation programme under the Marie Sklodowska-Curie Grant Agreement N° 860911. This presentation reﬂects only the author’s view. The European Union is not liable for any use that may be made of the information contained herein. For more information: https://vitrimat.eu NIPU-EJD On January 1st, 2021, NIPU-EJD started up for a period of four years. The project receives funding from the European Union’s Horizon 2020 research and innovation programme under the Marie Sklodowska-Curie grant agreement. NIPU-EJD is a European Joint Doctorate program aiming at novel Non- Isocyanate PolyUrethanes and is set up by a consortium formed by seven academic beneficiaries together with eight non-academic partners including Recticel. The program vision of NIPU-EJD is to create a new generation of high-skilled, creative, entrepreneurial scientists, who will be the future leaders in the development of sustainable non-isocyanate polyurethane (NIPU) systems. NIPU-based systems respond to the urgent needs for sustainability in terms of raw materials innovation, improved safety, production processes and recycling. NIPU has received funding from the European Union’s Horizon 2020 research and innovation programme under the Marie Sklodowska-Curie Grant Agreement N° 955700.This presentation reﬂects only the author’s view. The European Union is not liable for any use that may be made of the information contained herein. For more information: http://www.nipu-ejd. eu/consortium/ 2.3.3.3.2 Production We estimate that raw materials and end-of- life are responsible for respectively 60% and 35% of our carbon footprint. This is where the main focus of our sustainability efforts lies. At the same time, we are also fully committed to reducing the impact of our own production. Waste reduction Including sustainability in our production processes reduces our carbon footprint and increases our operational excellence. Together with industrial partners and knowledge institutes, we explore ways to reduce production waste and design products that are eco-friendly and easy to dismantle. We have developed a fiber-bonded foam technology which in a first step allowed us to transform ﬂexible polyurethane foam production waste into acoustic insulation building applications. We have further optimized this technology to be able to process polyurethane originating from end-of-life mattresses. These acoustic insulation panels reduce sound by up to 12 dB while conserving energy. Energy consumption Since 2013, we have systematically recorded annual energy costs and consumption data across the Group and have strived to make our operations more energy-efficient. In 2020 we introduced our Electricity Sustainability Roadmap, an ambitious action plan to reduce the CO 2 impact related to electricity usage by 75% in 2025. We are reaching that target following three paths in parallel: • Build up and implement an energy saving plan at each plant; • Develop smart efficient lighting; • Selectively implement a number of solar panels and windmills projects to generate green electricity. The Roadmap prioritizes our plants in Europe. The three paths have been defined based on the lessons learned from projects on energy usage that have already been carried out, as well as from extensive energy audits conducted in 19 plants. The reduction of electricity use by optimizing lighting is achieved in close consultation with the local plant teams. This entails replacing current lighting with new, smart installations to find the perfect balance between energy saving (such as automatically dimming the light when sunshine enters the production area) and safe working conditions. So far 57,000 m 2 have been relighted, saving 1,280 GWh. More projects are in the pipeline and expected to be rolled out in 2022. To increase our green energy production, we also explored the opportunities to install solar panels and wind turbines at our sites. End 2021, a total of 55,000 m 2 of solar panels cover the roofs of Recticel sites. Projects to install another 33,000 m 2 of solar panels on the ground are currently in the end-phase. The projects to install wind turbines require a lot of time and consultation. Currently, one project has been submitted to the authorities for approval. 2.3.3.3.3 End-of-life New mechanical and chemical recycling processes will allow us to recycle valuable end-of-life materials, paving the way for new value-added applications. Mechanical recycling re-uses end-of-life polyurethane and transforms it into a new value-added product, while chemical recycling breaks down end- of-life polyurethane to its original chemical building blocks and transforms these into virgin polyurethane again. At the beginning of our sustainability roadmap in 2015, we concentrated our R&D efforts on collecting and recycling post-consumer ﬂexible polyurethane foam from products with a lifespan of up to 10 years such as mattresses. With partners along the value chain, we have succeeded in developing solutions to give this valuable material a new life, for example by transforming it into acoustic thermal insulation boards. In parallel, PUreSmart, a ground-breaking chemical recycling R&D project funded by the EU Horizon 2020 Innovation & Research programme, is showing very promising results and could be a breakthrough for turning ﬂexible polyurethane foam into a fully circular material. We have now extended our R&D focus to insulation boards which keep their energy- saving properties for up to 50 years. A first study on how to collect and re-use their post- consumer rigid polyurethane foam has been completed. We intend to set up a research project with partners across the value chain to further explore all options. Recticel annual report 2021 85 MECHANICAL RECYCLING Recticel has engaged in a number of partnerships to set up an effective collection and reuse of end-of-life materials via mechanical recycling. On January 1 st , 2021, the authorities in Belgium introduced the extended producer responsibility (EPR) for mattresses. Recticel is one of the founding fathers of Valumat, a Belgian non-profit organization created by actors across the mattress industry, that will carry out the obligations for collecting and recycling of end-of-life mattresses in Belgium. The objectives are to achieve 65% collection and 50% re-use or recycling of the materials by 2025. An important role is reserved for eco-innovation and design for circularity. In the course of 2022, a project group within Valumat will focus on these topics. We are also intending to support the mattress collection and recycling initiative in the Netherlands where the EPR scheme will start on January 1 st , 2022. As early as 2013, the French authorities introduced the collection and recycling of mattresses and furniture. Eco-Mobilier, the non-profit eco-organisation approved by the French Ministry of Ecology, Sustainable Development and Energy, has been set up to organise the collection, sorting, recycling and reusing of these end-of-life material streams. Valpumat Recticel is part of the Valpumat project, or Valorization of the PolyUrethane of MATtresses, launched in 2017 by Eco-mobilier. Since 2020, Recticel processes end-of-life foam in one of its plants in France transforming this valuable material into innovative acoustic insulation solutions for building and construction, automotive and industry applications. CHEMICAL RECYCLING PUReSmart We are proud to participate in, and be the project leader of, the groundbreaking PUReSmart chemical recycling project. The project is funded by the European Union’s Horizon 2020 Innovation and Research programme to develop a complete circular product life cycle and turn polyurethane into a truly sustainable material: recover the used material (e.g., mattresses) and turn them into building blocks for existing or new products. The PUReSmart consortium is an end-to-end collaboration spanning the entire polyurethane reprocessing value chain and gathering nine partners from six different countries. The project aims to breakdown polyurethane into its two building blocks being polyol and isocyanate in an optimized mass balance to have full one to one circularity. Project partner Covestro, leading producer of advanced polymers and high-performance plastics, has recently started operating a pilot plant for ﬂexible foam recycling at its Leverkusen site to confirm the positive laboratory results achieved to date. The first tests are showing highly promising results on very high yield and selective recovery of the original polyol component and full replacement in new polyurethane formulations. Pilot tests are ongoing to confirm the equally promising results for the isocyanate component. Covestro´s goal here is to industrialize chemical recycling processes for used ﬂexible foams and ultimately to remarket both recovered raw materials. Despite the ongoing impact of the Covid-19 pandemic, the project team managed to remain on schedule regarding the intermediate project deliverables. In all work packages, breakthrough steps are already made. This will move the whole project far beyond the state-of-the-art. This is also proven by several patents related to the smart chemolysis process and the earlier decision by Covestro of a scale-up from laboratory scale to semi- industrial level on short-term for the chemical recycling process. The PUReSmart project started in January 2019 and will end in December 2022. More information on the current project status can be found on the PUReSmart website. This project has received funding from the European Union’s Horizon 2020 Research and Innovation programme under grant agreement N° 814543. The PUReSmart project results presented reﬂect only the author's view. The Commission is not responsible for any use that may be made of the information it contains. European and national initiatives In 2019, Recticel signed the Declaration of the Circular Plastics Alliance which promotes voluntary actions for a well-functioning EU market in recycled plastics. The alliance wants to reach the target of 10 million tons of recycled plastics used to make new products every year in Europe, by 2025. This target was set by the European Commission in its 2018 Plastics Strategy as part of its efforts to boost plastics recycling in Europe. The Circular Plastics Alliance announced in September 6 a new roadmap to 2025 including development of an EU-wide monitoring system on recycled plastics; an updated work plan on design-for-recycling covering packaging, construction, agriculture, home appliances that account for over 60% of plastic waste collected in Europe. Recticel also supports the Moonshot initiative launched by the Flemish government in Belgium. In this ambitious industrial innovation programme hosted by Catalisti, Flemish universities, research institutes and industries join hands to develop breakthrough technologies by 2040 to create new climate-friendly processes and products. Recticel has joined the Advisory Board of two Moonshot programmes: Biobased Chemistry and Circularity of Carbon in Materials. 6 Commitments and deliverables of the Circular Plastics Alliance (europa.eu) Recticel annual report 2021 86 2.3.3.4 Our climate change strategy Sustainability has always been at the heart of our activities. Considering the entire value chain, Recticel is a climate-positive company. Our thermal insulation solutions for building renovations and new constructions contribute to a low-carbon society. In 2021, CO 2 emissions avoided by these insulation solutions offset more than 51 times the carbon footprint of all Recticel activities combined. 7 From now on, Recticel will focus exclusively on its Insulation activities, presenting excellent growth prospects in a high-value added business segment driven by climate change. It perfectly illustrates our sustainability motto to grow together with our stakeholders towards a PUre future. The acquisition of Trimo 8 , one of Europe’s leading providers of sustainable premium insulated panels for the building industry, announced on 22 March 2022, is a key step in our growth direction. Since the launch of our sustainability strategy in 2015, we are committed to not only optimising our positive impact across the value chain but also to reducing at the same time any negative effects of our activities. We renewed our strategy in 2020 and have confirmed, following stakeholder engagement sessions, the three areas in which we can make a significant contribution to mitigating climate change. Climate Action Plan; Transition to a circular economy; and Innovation for societal needs have been incorporated in our Sustainable Innovation Plan with aggressive targets for 2025 and 2030. 9 One company alone cannot fulfil these ambitions. We invest in partnerships with stakeholders (suppliers, customers but also industry, authorities, knowledge institutes and universities) along our value chain, often in long-term R&D projects, to shape tomorrow’s future. In 2021, Recticel participated for the first time in the comprehensive CDP Climate Change questionnaire. Disclosing is the first step to drive environmental action and provide transparency on how we manage climate related risks and opportunities through a solid risk management process and governance. CDP awarded Recticel a B (on a scale from A to D-) for climate change disclosure. This positions us among the 33% of companies worldwide that have a B score or higher. CDP particularly recognised the fact that Recticel is leading within its industry on emission reduction initiatives and governance. 10 2.3.3.5 Risk management Since the beginning of our sustainability journey, we see sustainability as an opportunity to create shared value for the company and society. Our sustainability journey is closely interwoven with the Recticel Group risk management assessment, which enables Recticel to identify, manage and mitigate the main issues that could impact our business. Assisted by the Audit Committee, the Board of Directors defines the Group’s major risks. Placing sustainability at the centre of Recticel’s strategy takes these risks into account, and avoids or minimizes any adverse effects of potential risk on the company. 7 The 2021 results expressed in tonnes of CO 2 e can be found in the ‘Summary Table’ at the end of the Non-Financial Information statement 8 See Recticel expands its insulation activities with the acquisition of the insulated panel specialist Trimo 9 See ‘Recticel Targets & Results’ 10 See Our ESG ratings – transparency on our sustainability performance | Recticel SUSTAINABILITY STRATEGY CORPORATE RISKS IDENTIFIED Failure to succesfully innovate, develop and introduce new products. Safety, health and the environment: new regulations and its impact. Price volatility of major chemicals. Failure to obtain raw materials. Potential misconduct by employees and managers or third-party contracters. Safety, health and the environment, new regulations and their impacts. Attracting and retaining qualified personnel. Innovation for societal needs Finding solutions for a circular economy and low-carbon society. Climate Action Plan CO 2 emissions avoided by our insulation solutions offset 51 times the carbon footprint of our activities combined. Transition to a circular economy Seeking news ways to prevent, reuse and recycle production and end-of-life foam and transform it into new value-added products. Sustainable partnerships Developing comprehensive codes, policies and trainings to provide an ethical framework beyond compliance for employees. Recticel’s Supplier Sustainability Requirements incorporated in the General Terms and Conditions. Lower HS&E impacts of our activities and products Working towards zero environmental accidents, injuries and occupational illness. Committing to pursue zero chemical hazard impact of our activities and products. An inspiring and rewarding place to work Encouraging employees to feel engaged, develop their talents and contribute to company goals. Recticel annual report 2021 87 COVID-19 As the COVID-19 pandemic continues, we are taking every precaution to protect our employees, customers, suppliers, shareholders and their families from its impact. A Covid Crisis Team presided by the CEO, comprising the Chief Human Resources Officer, the Corporate HS&E Manager and the HS&E Managers from the business lines, closely monitors the pandemic’s evolution and adapts its Group Health & Safety guidelines accordingly. Since the start of the COVID-pandemic in 2020, Recticel Crisis Response Teams have been activated in every country and are monitoring the situation closely to ensure that the correct actions are taken, in line with Group as well as local guidelines and local legislation. As a responsible company, we are committed to remaining ﬂexible and responsive to the situation as it evolves, so that we can serve our customers and help communities through the challenges ahead. For more information about how we ensured business continuity, see ‘1. A new future built on sustainable innovation’. 2.3.4 Recticel targets and results For the six material aspects described hereabove, Recticel defined clear targets to be met by 2025 or 2030. These are measured through key performance indicators (KPI). In addition, we also report on our commitments on an annual basis. The summarized overview of our 2021 results can be found in the ‘Summary Table’ and in the ‘Sustainability Strategy Summary’ followed by the ‘Independent limited assurance report’ at the end of this Non-Financial Information statement. The results relate to the 100% Recticel owned entities. Joint ventures are not in scope. Over 2021, we exclude the former FoamPartner sites integrated as of 31 March 2021 in the Engineered Foams business line. 2.3.4.1 Targets related to the environment 2.3.4.1.1 Climate Action Plan KPI 1: Climate-Positive Multiple (ratio between avoided emissions and carbon footprint scope 1, 2, 3) 11 Target: 75 (by 2030) Result: 51 We expect that the positive impact due to the growth of the Insulation business will continue. In addition, we will further implement all ongoing actions to reduce our carbon footprint. For 2030, we foresee that, without a change of scope, we would increase our multiple from 51 to 75. After the closing of the divestments of Bedding (completed on 31 March 2022) and Engineered Foams (expected mid-2022), Recticel will become a pure-play insulation company. We estimate that the multiple will then triple to 150 of more by 2030. KPI 2: Recticelcarbon footprint (scope 1, 2, 3 intonnesof CO 2 equivalent) 12 Target : Reduction of 40% by 2030 (2013 baseline, target in line with EU Green Deal -55% vs 1990) Result: 79% (21% reduction versus the 2013 basis) No fundamental changes in carbon footprint reduction in 2021. We expect to see significant impact when more raw materials with renewable or recycled content become available in larger quantities and when the recycling of post-consumer foam will be more generally implemented. 11 Recticel Carbon Footprint Indicator expressed in tonnes of CO 2 equivalent compared to the 100% activity level in 2013. (scope: production sites). The method of calculation is derived from the Cradle to Grave method. 12 Using appropriate methods of calculation per type of product and using appropriate conversion factors calculated by a third party Recticel annual report 2021 88 KPI 3: Carbon intensity (ratio between scope 1 and 2, intonnesof CO 2 e/MioEUR revenue) 13 Target: Reduction of 25% by 2025 (baseline: 2020) Result: 17% We introduced this new KPI in 2021, a year in which we saw a steep price increase of all raw materials (chemical and non-chemical) and of energy costs affecting our suppliers. Recticel has succeeded in factoring these costs into the prices of its products, where necessary. As a result, with comparable sales volumes and energy consumption, revenue increased leading to a 17% reduction in carbon intensity compared to the previous year. Background The aim of the 2015 United Nations COP 21 Paris Agreement is to fight climate change by limiting the increase of the global temperature above pre-industrial as much as possible. Recticel contributes to this goal by optimizing its carbon footprint throughout the value chain, alongside its partners. We focus on introducing raw materials with lower GWP (global warming potential) values as well as lower-carbon impact raw materials, improving the energy efficiency of our activities, and developing more sustainable products and end-of-life solutions that support a circular economy. We estimate that, in 2021, the CO 2 emissions avoided by our insulation solutions offset over 51 times our carbon impact throughout the value chain. To optimize our carbon footprint, we want to reduce our negative impact and increase our positive impact in a significant way. In line with these goals, we focus on areas in our value chain where the biggest progress in carbon footprint reduction can be made: upstream (raw materials) and downstream (usage and end-of-life phases). In parallel, we have introduced in 2020 a company-wide electricity sustainability roadmap to reduce the impact of our company’s electricity usage by 75% in 2025 14 . We measure the success of our efforts through carbon intensity, providing transparency on the scope 1 and scope 1 emissions compared to our sales. 2.3.4.1.2 Transition to a circular economy KPI 1: Tonnesof post-consumer ﬂexible polyurethane foam produced by Recticel from recycled mattresses Target: 5,000tonnesby 2025 Result: 1,864 tonnes We selected this KPI in 2015 to express our commitment to replacing post-industrial polyurethane (PU) foam with post-consumer PU foam. We initially used a traditional bonded foam technology for products such as carpet underlays. We subsequently succeeded in introducing a new fiber-bonded foam technology to transform post-consumer PU foam into acoustic thermal insulation panels. As of 2021, we only consider post-consumer PU foam and realise a 76% increase compared to 2020. In the course of 2022, we expect to switch to post-consumer PU foam in our bonded foam technology, significantly increasing our volumes and bringing our 2025 target within reach. KPI 2: Ratio between lower-carbon raw materials 15 and overall raw material consumption Target: 10% by 2025 Result: We will report on this KPI earliest as of 2023. End 2018, Recticel was the first company world-wide to introduce Covestro’s innovative CO 2 polyol in the ﬂexible foams production of mattresses such as Geltex. We continued our R&D partnerships with our suppliers which will result in the coming years in more lower carbon footprint raw materials. New products will be launched by mid-2022 based on renewable and recycled polyols. Commitment: PUReSmartproject, a breakthrough in chemical recycling of ﬂexible polyurethane foam We are proud to support, and be the project leader of, the groundbreaking PUReSmart chemical recycling project. The project is funded by the European Union’s Horizon 2020 Innovation and Research programme to develop a complete circular product life cycle and turn polyurethane into a truly sustainable material: recover the used material (e.g., mattresses) and turn them into building blocks for existing or new products. Project partner Covestro, leading producer of advanced polymers and high-performance plastics, has recently started operating a pilot plant for ﬂexible foam recycling at its Leverkusen site to confirm the positive laboratory results achieved to date. The first tests are showing highly promising results on very high yield and selective recovery of the original polyol component and full replacement in new polyurethane formulations. Pilot tests are ongoing to confirm the equally promising results for the isocyanate component. Covestro´s goal here is to industrialize chemical recycling processes for used ﬂexible foams and ultimately to remarket both recovered raw materials. 16 In parallel with the technical studies, an environmental Life Cycle Analysis (LCA) is carried out. The first indicative results confirm the original assumption of approximately 30% carbon footprint reduction. Background Recticel supports the transition from the linear ‘take, make, dispose’ economic model to a circular economy. We do this by concentrating our R&D efforts on raw materials and on end- of-life, the two areas where innovation along the value chain can have the biggest impact on minimizing demand for constrained natural resources. Partnerships throughout the value chain are key to transform our industry. As for raw materials, we have set ourselves the ambitious target of further increasing the percentage of lower-carbon raw materials we use to manufacture our products. Our 2025 target of 10% is in line with the EU’s Sustainable Carbon Cycles plan’s ambition of realizing 20% of carbon used in the chemical and plastic products from sustainable non- fossil sources by 2030. This requires close cooperation with our suppliers and long-term R&D partnerships throughout the value chain to explore, test and introduce raw materials with a lower carbon footprint into our production processes. 17 13 Scope 1 defined as direct emissions from owned or controlled sources such as company facilities, company vehicles) and scope 2 as generation of purchased electricity, steam, heating and cooling (GHG Protocol) 14 See ‘Energy consumption’ 15 Renewable, bio-based, Carbon Capture and Utilisation, recycled, mass balanced approach 16 See ‘Chemical recycling’ 17 See ‘Sustainable innovation programmes driving the change’ Recticel annual report 2021 89 2.3.4.1.3 Innovation for societal needs KPI 1: Sustainability Index (scope: innovation pipeline Sustainable Innovation Department (hereinafter “SID”)) Target: 80% of active R&D projects classified as sustainable according to the Sustainability Index. Result: 68% (scoring performed over R&D projects active in December 2021) We reviewed our scoring methodology during the limited assurance process in 2020 as it was too strict for certain sustainable projects to meet the criteria. The revised version was used to score our R&D projects over 2021. Still some projects, fully focusing on circularity, did not meet the threshold values. This suggests that for a project to be classified as sustainable, the metrics of the Sustainability Index should be considered amongst other, qualitative factors. Compared to the result over last year, we see an increase of 10% although we did not achieve our target of 80%. We consider that the choices of the projects are fully in line with our strategic intentions. KPI 2: Sustainable R&D projects ready to be brought to market Target: ≥ 3 every year Result: 5 We introduced this new KPI in 2021 to measure our sustainable innovation performance. Using our sustainability index, our stage gate process methodology and financial criteria, we consider a R&D project ready to be brought to market when it has successfully completed all development and initial production requirements. As a result, we classified 5 R&D projects as ready to go to market which exceeds our target. At this stage, we do not want to disclose specific details about all five projects. In general, we can say that some projects are related to replacement of fire retardants (more sustainable). In September 2021, our Engineered Foams business line launched NIVA, a new range of TCPP-free foam for bedding and furniture. TCPP is a commonly used fire-retardant currently under risk assessment by the European Chemicals Agency (ECHA) and might become restricted in its use. Recticel proactively anticipated this by developing the NIVA range. Other R&D projects focus on developing new fiber-bonded foam applications using post- consumer foam. Background Our continued growth depends on our ability to respond to complex and dynamic societal needs. Therefore we strive to develop innovative solutions that contribute to mitigating climate change, maximize resource efficiency, reduce carbon emissions and support sustainable, healthy lifestyles. Sustainability is at the core of Recticel’s strategy, and sustainable innovation programmes, led by our Sustainable Innovation Department (SID), shape our company’s future. Sustainability index to assess performance We have aligned our R&D efforts with market expectations and societal needs and introduced our Sustainability Index to assess their performance. In 2014, we developed our own methodology to score all research and development projects, spearheaded by the Sustainable Innovation Department. The resulting Sustainability Index, now in its 2 nd generation, is a way to measure, track and compare the sustainability performance of active R&D projects. It comprises criteria linked to Planet and People aspects. Projects are scored by the Programme Innovation Manager, Corporate Sustainability Innovation Manager and corporate sustainability experts. In the Planet aspect, criteria such as carbon footprint, reduced by saving resources, recycling and reusing end-of-life materials, are considered. The People aspect concerns criteria for social responsibility, such as health, safety and environment (HS&E) as well as social impact. Each development is rescored on an annual basis or when the project enters a new phase, with scorings reviewed when significant changes are made to a project’s scope, or when important new research data have become available. People or Planet criteria can be rescored either in a positive or negative way depending on new insights or developments on the market or the product. Measuring sustainable innovation success In 2021, we introduced a new KPI to assess the success of our Sustainable Innovation Department’s R&D innovation programmes. We do this by measuring the number of sustainable R&D projects ready to be brought to market each year. Active R& projects are evaluated based on their sustainability index score, the stage gate process methodology and financial criteria. Recticel annual report 2021 90 2.3.4.2 Targets related to social matters and personnel 2.3.4.2.1 Sustainable partnerships Commitment: Ensure that supplies are compliant with the Recticel Supplier Sustainability Requirements and audited based on risk assessment Our partners are indispensable in helping us to achieve a more sustainable value chain. In 2015, we introduced the Recticel Supplier Sustainability Requirements (RSSR) to ensure safe, environmental-friendly, ethical and respectful working and human rights conditions throughout the supply chain. We integrated the RSSR in our General Terms and Conditions in 2017. As a condition of doing business with Recticel, suppliers and their subcontractors must authorize Recticel and its representatives (including third parties) to perform audits both on-site and off-site. We have committed to developing an action plan to verifying and audit our suppliers based on risk assessment. Due to the strategic overhaul of the Recticel Group in 2021, the action plan has been delayed. Commitment: Reinforce R&D partnerships with customers, knowledge institutes, universities and strategic suppliers on sustainable development Our vision is to be the leading global provider of durable solutions in all our core markets by responding to key global challenges such as climate change, energy conservation, a growing and ageing population, and noise pollution. To achieve this, we strongly believe in short-term efficiency, mutual benefits of partnerships along the value chain, innovation and long-term sustainability. In 2021, we entered new partnerships with 31 parties, ranging from universities, customers to suppliers in order to lower the carbon footprint of our products and solutions. Commitment: Continue and expand long- term partnerships for social projects As an international company active in 19 countries and 40 sites, Recticel supports projects and initiatives on bothlocal andGroup levels.On a local level, countries or sitessupport those initiatives that resonate most in their communities. The support given can vary from financial contributions to the provision of goods and services.On a corporate level, Recticel favours those projects which are linked to our core values, our sustainability strategy or theUnited Nations Sustainable Development Goals. We focus particularly onthose where Recticel expertise and activities are most relevant, such as: 'Climate Action','Responsible Consumption and Production', Sustainable Cities and Communities’, ‘Decent Work And Economic Growth', 'Good Health and Well-being', and 'Partnerships for the Goals'. Close The Gap is an international non-profit organisation that aims to bridge the digital divide by offering high-quality, pre-owned computers donated by large and medium- sized corporations or public organisations to educational, medical, entrepreneurial and social projects in developing and emerging countries. Recticel joined this initiative in 2015. To date, 3000 PCs have been refurbished and given a second life.Besidesthe social dimension of this project, the environmental benefit is impressive: giving one computer a second life avoids the use of 250 kg of fossil fuels, 20 kg of chemicals and 1.5 tonnes of water. The initiative is aperfect fit with our ambition to reduce the negative impact of our activities and increase their positive impact. YouthStart Belgium is a licensed Partner of NFTE Global, a worldwide organisation offering training programmesin entrepreneurship to underprivileged youth and young adults. YouthStart Belgium started in 1998. Together with all NFTE partners around the world, more than 800,000 young people were trained to achieve their dreams. This project fits perfectlywith our commitment to create an inspiring and rewarding place to work where talents can develop. It also stimulates young adults to pursue their dreams,take up responsibilities, be innovative and perhapsbuild their own company. Recticel’s Living The Values Award (LTVA) campaign is organized periodically to recognize and reward Recticel colleagues and teams worldwide who lead by example. The five winners or representatives of the winning teams are invited by the Management Committee to the LTVA ceremony in Brussels. The winners receive a personal reward and donate, on behalf of Recticel, to a charity of their choice. So far the winners have supported charities in Belgium, China, Senegal, the UK, Germany, the US, Poland, Finland and the Czech Republic. 2.3.4.2.2 Lower HS&E impact of our activities and products KPI 1: Frequency1(Lost Time Accidents representingthe average on Group level for all our plants and offices) Target: ≤2 by 2025 (number of LTAs x 1,000,000 / number of hours performed). Result: 6,41 In 2021, we introduced company-wide a behaviour- based safety approach, already successfully implemented in our Insulation business line. The result for 2021 is disappointing and does not reﬂect the determination with which the teams are bringing safety to everyone's attention. We continue to work on our Golden Safety Rules & Principles to change safety awareness and behaviour to achieve our target by 2025. KPI 2: Frequency 2 (Lost Time Accidents + Restricted Work Cases + MedicalTreatment Cases) Target: ≤5 by 2025 (number of LTAs+RWC+MTC x 1,000,000 / number of hours performed). Result: 10,4 We introduced this new KPI in 2021 as part of our overall safety approach to change people's behaviour by adding to our lagging KPI (Frequency 1, Lost Time Accidents) also a leading KPI (Frequency 2). Reporting on restricted work cases and medical treatment (Frequency 2) allows us to identify unsafe situations or behaviours, carry out a root cause analysis and take appropriate action to prevent future accidents. Although the 2021 figures do not reﬂect this yet, this approach will help us to meet the targets by 2025. Recticel annual report 2021 91 Commitment: Proactive approach towards compliance on the substances within the European Green Deal Chemicals Strategy for Sustainability by striving for a zero chemical hazard impact of our activities and products In order to minimize our impact on health, safety and environment within our activities and on our products, Recticel is taking a pro-active approach even going beyond legal frameworks such as REACH within the Chemicals Strategy for Sustainability. We have installed an internal procedure to ban chemicals beyond actual and up-coming legislation and directives. In 2021, Engineered Foams launched Niva, a new range of fire-retardant foams for bedding and furniture. Flame resistance characteristics are crucial to ensure the safety and legal compliance of materials used in bedding and upholstery products. One of the main fire retardants is TCPP, a halogenated P-ester fire retardant, which is highly effective.However, legislation is set to become even more stringent, and it is inevitable that such substances will eventually be phased out in mattress production and replaced by halogen-free alternatives. Recticel has proactively anticipated this challenge with the development of the NIVA range. Background The Recticel Corporate HS&E Policy defines strategic objectives to minimize all HS&E risks and environmental impacts inherent to the company’s activities and products. This is above and beyond our basic obligation to comply with all applicable health, safety and environmental regulations. We perform root cause analyses and implement corrective and preventive actions on critical operations. Recticel foaming sites adhere to strict regulations (such as SEVESO and/or COMAH), and several plants have certified health & safety and/or environmental management systems (OHSAS 18001 and/ or ISO 14001-certified). Recticel is an active member of national and European professional associations such as EUROPUR, PU Europe, Essenscia and Federplast. The Group HS&E Manual provides guidance for the implementation of the HS&E Policy. QHS&E managers in our business lines drive and support the change in safety culture by developing operational standards, improving working environments, raising awareness and training personnel. Corporate HS&E and Sustainability Steering Committee Management commitment to HS&E is reinforced by our Corporate HS&E and Sustainability Steering Committee (CHSSC) spearheaded by our CEO. It defines Group strategies and policies regarding HS&E and sustainability, advises and assists the business lines with their implementation and follows up on progress. By sharing knowledge and unifying HS&E practices, such as standardized root cause analysis, and HS&E rules company-wide, we seek to make our processes more efficient. We have implemented an integrated Group HS&E tool to support alignment, improve follow-up and reporting, underpin best practices and facilitate the monitoring of changing regulations. We never compromise on safety We continue to raise awareness on safety. It is embedded in our Core Value of acting with respect and integrity. Through our global Simply Safe initiative we introduced a clear framework of Golden Safety Principles and Golden Safety Rules. Our Stop! Think! Act! mantra reminds everyone that we should all try to change our habits to guarantee a safe working environment. Whenever we notice a hazard, or whenever we start a new task, we should stop, think and then act. Since 2018 we hold every year a Recticel Global Safety Day. It relays the important message: safety is everyone’s responsibility. In 2021, during the COVID-19 pandemic, we organized a Safety Day in every Recticel site to kick-off a fresh new safety campaign. Under the overall theme “It’s MY choice”, the campaign drives home the message of individual responsibility and understanding that minor changes that can transform our safety performance. At the same time, the winners of the 2020 Annual Safety Awards were announced: • Recticel Engineered Foams in Alfreton, UK Plant with Lowest Accident Frequency Rate • Recticel Insulation in Wevelgem, Belgium Plant with Highest Accident Frequency Rate Improvement • Recticel Insulation Business Line with Highest Accident Frequency Rate Improvement 2.3.4.2.3 An inspiring and rewarding place to work KPI 1: %employeeparticipationin e-learningincludingLegal, Cybersecurity, Safety, as well asexpandingnewofferingsbased on specific needs detected during the annual Employee Performance Management Discussion (EPMD) Target: Maximize e-learning Result: Legal programme: Data Protection: 94%; Ethics Policy: 94%; Basics of Contract Law: 94%; Cybersecurity Programme: DIGIWIZZ: 96% In 2021, we only report on the e-learnings that are mandatory for office employees due to the importance of the topics covered. In a next phase, we will extend this to the Safety programme and new development offerings. The mandatory Legal programme comprises three modules: Data Protection; Ethics Policy; and Basics of Contract Law. Data Protection and Ethics Policy were launched in 2018, Basics of Contract Law in 2019. Ethics Policy was repeated in 2020. New office employees have to complete the three modules within two months after they join the company. For each module, the status 'completed' is only achieved if the office employee obtains a test result of minimum 80%. The mandatory cybersecurity programme was launched in 2018. It was updated in 2020. In 2021, the mandatory cybersecurity programme was delivered through a new series of quarterly microlearnings on password security, phishing, social engineering, and working remotely. Participants only pass a course with a minimum score of 70% on the final test. After each microlearning, a fake phishing mail was sent to the participants’ mailbox in order to test their reaction. Recticel annual report 2021 92 The results were shared within the organisation to continue emphasising the importance of acting cybersafe at all times. New office employees have to complete the basic cybersecurity modules within a week after they join the company. The new colleagues from FoamPartner, since 31 March 2021 integrated in the Engineered Foams business line, are included in the 2021 result for both programmes KPI 2: Gender diversity in senior management Target: 25% by 2030 Result: 18% We introduced this new KPI in 2021 to further increase the number of women in senior management positions across the Recticel organisation. Recticel strives to create a community where everyone is included and respected, bringing people together for a better world. We believe that a diverse team in terms of gender, nationality and professional experience improves the quality of decision making, and ultimately improves overall performance. The result of 2021 is the starting point for the path that should lead us to enhanced gender equality by 2030. The new colleagues from FoamPartner, since 31 March 2021 integrated in the Engineered Foams business line, are included in the 2021 result. Commitment: Implement in 2022 a collective sustainability objective for senior management connected to the sustainability strategy When we launched our sustainability roadmap 2021 – 2025, we committed to introducing a collective sustainability objective for senior management positions across the organisation. Senior managers play a pivotal role in translating our sustainability targets into SMART actions for their business line or function.The collective sustainability objective is connected to our renewed sustainability strategy with ambitious targets for 2025 and 2030 to reduce our carbon footprint. Commitment: Follow-up on well-being score through the annual Employee Performance Management Discussion (EPMD) In December 2020, Recticel introduced HR4U, a new tool for managing HR processes and data for white collar employees in a uniform and streamlined way across the organization. The annual employee performance management discussion (EPMD) became an integral part of HR4U in 2021. In parallel, the section on well-being was revised for the 2021 cycle to ask for voluntary feedback on the employee’s daily work. Employees have the opportunity to give an overall score on how they are doing in their daily work and to share additional feedback on topics such as work content, workload and work relationships. The EPMD will be closed end of March 2022 after which the HR organisation will analyse the input for further follow-up. Commitment: Continue to improve employee engagement End of March 2021, Recticel closed the acquisition of FoamPartner, a global provider of high value-added technical foams solutions offering significant complementarity and synergy with Recticel. 1,100 FoamPartner colleagues joined the Flexible Foams business line to form the new Recticel Engineered Foams business line, almost doubling the number of employees of the division. 18 See also ‘Diversity Statement’ in ‘Corporate Governance Statement’ Employee engagement was high on the agenda of this acquisition, Recticel Group largest ever. A Pulse Check campaign was set up to regularly collect, share and respond to employee feedback along the integration process. Three successive Pulse Checks took place in nine months. The questions in the surveys addressed both the integration process and cultural aspects. The findings were shared within the organisation and helped defining appropriate measures for improvement. Background Recticel’s skilled and creative employees enable us to excel and achieve our sustainable growth ambitions. Success comes from being able to attract, motivate and retain a talented pool of workers. We seek to offer all our employees a stimulating and rewarding place to work, a place where they feel engaged, contribute to company goals, and where their talents can develop. We foster a collaborative and result-driven culture based on cooperation, respect,integrity and accountability. We encourage colleagues, customers and partners to innovate together to deliver winning solutions. Our human resources strategy aims to ensure the availability, engagement, motivationand continuous development of our employees. We act with respect and integrity Recticel strives to create a community where everyone is included and respected, bringing people together for a better world. We believe that a diverse team in terms of gender, nationality and professional experience improves the quality of decision making, and ultimately improves overall performance. Recticel is present in 19 countries with many nationalities. Recticel is an equal employer and training and development, and is committed to a fair and consistent approach to recruitment and selection. Recticel wants to hire all candidates irrespective of age, disability, gender reassignment, marriage or civil partnership, pregnancy and maternity, race, religion and belief, sex and sexual orientation or hours of work. Recticel is an equal opportunity employer who offers men and women the same opportunities to develop their talents, build a career and balance work-life by offering the opportunity to work full-time or part-time at every stage of this career 18 . Recticel annual report 2021 93 Currently one woman is represented in the Management Committee. Furthermore, one third of the members of the Board of Directors is a woman, in accordance with article 7:86 of the Belgian Companies and Associations Code. The selection process of the members of the Board of Directors is described in the Corporate Governance Charter of Recticel, with the aim to come to a composition that is diverse in all its aspects, both at the level of gender, nationality, background, professional experience, competence and education. See also ‘1. A new future built on sustainable innovation’ and corporate website. Total number of employees by employment contract by gender Total number of employees by employment contract by region permanent permanent temporary temporary male male female female western europe eastern europe rest of the world 6,000 6,000 4,000 4,000 2,000 2,000 0 0 total total 5,100 5,100 214 172 3,224 3,563 1,590 777 474 4,814 4,814 72 114 0 286 286 Total number of employees by employment type by gender 6,000 4,000 2,000 0 total 5,100 160 3,278 4,632 1,354 308 468 * Workforce profile based on 100% Recticel owned entities (excluding JVs, including FoamPartner employees (since 31 March 2021 integrated in the Engineered Foams division)). fulltime parttime WORKFORCE PROFILE Recticel annual report 2021 94 2.3.4.3 Targets related to ethics and integrity From the start of the sustainability strategy in 2015 until 2020 included, Recticel had established a target to increase the number of legal e-learnings wit 5% per year (cumulative) compared to 460 in 2015. In 2020, the result was 2,866, a 623% increase compared to the baseline. The legal trainings have now been integrated in KPI 1 for ‘An inspiring and rewarding place to work’. Background The legal training creates, increases and maintains awareness with Recticel employees regarding legislation as well as internal codes and policies to limit the company’s risks of non-compliance. Acting with respect and integrity is one of our core values. Respectful behaviour acknowledges the worth, dignity and uniqueness of others. We have created codes and policies to ensure we do business honestly, respectfully, and in full compliance with international rules and regulations. A clear set of values and respectful behaviours unites our organisation. Redefined in 2016, our values align our actions and attitudes towards internal and external stakeholders. Behaviours associated with the five key values give direction to our employees and stakeholders. Recticel highly values the importance of legal training, especially for those target groups who, due to the nature of their professional activities, are at a higher risk of being exposed to noncompliant situations, bribery or corruption. Our Corporate Legal Team regularly provides face- to-face training sessions and subject specific e-learning modules. Ethics and compliance as part of our DNA Corporate compliance is embedded in all our policies. We have developed guidelines for awareness creation, templates for reporting compliance issues, whistleblowing procedures and speak-up communication channels that enable employees to address issues in a variety of ways. Recticel is aware of corporate risks, and we apply due diligence to both our own operations and supply chain. Where specific risks or exposure to noncompliant situations, bribery or corruption have been identified, policies are implemented that provide guidelines on how to avoid or mitigate them. Recently, the whistleblowing procedure has been updated, translated in 14 languages and published in early 2020 in order to complement our Ethics Policy of 2017. 2.3.4.4 Targets related to human rights Regarding the respect of human rights, Recticel has, as a precautionary measure, taken over the obligation in its purchasing conditions that its suppliers do business in an ethical, correct, transparent, trustworthy and social responsible way and that they guarantee that nor their personnel or subcontractors are involved in discrimination, violation of human rights, corruption, violation of antitrust laws, child labor, forced labor, slavery or other unacceptable labor working conditions or terms. In this framework, the suppliers need to comply strictly with the ‘Recticel Supplier Sustainability Requirements (RSSR)’. At first request of Recticel the suppliers need to be able to demonstrate that they respect this RSSR. Recticel is committed to putting a control mechanism in place to conduct audits within the supply chain based on risk assessment (see ‘Sustainable Partnerships’). Summary The table on the next page provided a summary of Recticel’s sustainability strategy regarding the five material aspects, ten KPIs and targets in scope over 2021: Recticel annual report 2021 95 Sustainability Index (percentage of active R&D projects classified a sustainable) Sustainable R&D projects ready to be brought to market 5 Tonnesof post-consumer polyurethane foam produced by Recticel from recycled mattresses Frequency1(Lost Time Accidents representingthe average on Group level for all our plants and offices) Frequency 2 (Lost Time Accidents + Restricted Work Cases + MedicalTreatment Cases representing the average on Group level for all our plants and offices) %employeeparticipationin e-learningincludingLegal, Cybersecurity, Safety, as well asexpandingnewofferingsbased on specific needs detected during the annual Employee Performance Management Discussion (EPMD) 1 Legal programme: - Data protection: 94% - Ethics policy: 94% - Basics of contract law: 94% Cybersecurity programme: - DIGIWIZZ: 96% Gender diversity in senior management 1 Climate-Positive Multiple (ratio between avoided emissions and carbon footprint scope 1, 2, 3) Recticelcarbon footprint (scope 1, 2, 3 intonnesof CO 2 equivalent) Carbon intensity (ratio scope 1 and 2, intonnesof CO 2 e/mioEUR revenue) 68% 1,864 6,41 10,4 18% 51 INNOVATION FOR SOCIETAL NEEDS TRANSITION TO A CIRCULAR ECONOMY LOWER HS&E IMPACT OF OUR ACTIVITIES AND PRODUCTS CLIMATE ACTION PLAN INSPIRING AND REWARDING PLACE TO WORK MATERIAL ASPECT KPI 2021 919,659 27,41 SUMMARY TABLE Recticel’s material topics and related KPIs (table subject to PwC limited assurance) () * The Independent Limited Assurance report by PwC covering 2021 can be found as an annex to the Non-Financial Information Statement of Recticel. 1 The results include FoamPartner employees (since 31 March 2021 integrated in the Engineered Foams division). Recticel annual report 2021 96 Sustainability strategy summary SUSTAINABLE INNOVATION PLAN Sustainability index (% of active R&D projects classified as sustainable (scope: innovation pipeline Sustainable Innovation Department)) Number of R&D projects ready to be brought to market (scope: innovation pipeline Sustainable Innovation Department) Tonnesof post-consumer polyurethane foam produced by Recticel from recycled mattresses Climate-Positive Multiple (ratio between avoided emissions and carbon footprint scope 1, 2, 3) 1 Recticel carbon footprint reduction (scope 1, 2, 3 intonnesof CO 2 equivalent) 2 Carbon intensity reduction (ratio scope 1 and 2, intonnesof CO 2 e/mioEUR revenue) 3 We reviewed our scoring methodology during the limited assurance process in 2020 as it was too strict for certain sustainable projects to meet the criteria. The revised version was used to score our R&D projects over 2021. Still some projects, fully focusing on circularity, did not meet the threshold values. This suggests that to for a project to be classified as sustainable, the metrics of the Sustainability Index should be considered along other, qualitative factors. Compared to the result over last year, we see an increase of 10% althought we did not achieve our target of 80%. We consider that the choices of the projects are fully in line with our strategic intentions. We introduced this new KPI in 2021 to measure our sustainable innovation performance. Using our sustainability index, our stage gate process methodology and financial criteria, we consider a R&D project ready to be brought to market when it has successfully completed all development and initial production requirements. As a result, we classified 5 R&D projects as ready to go to market, which exceeds our target. At this stage, we do not want to disclose specific details about all five projects. In general, we can say that some projects are related to the replacement of fire retardants (more sustainable). In September 2021, our Engineered Foams business line launched NIVA, a new range of TCPP-free foam for bedding and furniture. TCPP is a commonly used fire-retardant currently under risk assessment by the European Chemicals Agency (ECHA) and might become restricted in its use. Recticel proactively anticipated this by developing the NIVA range. Other R&D projects focus on developing new fiber-bonded foam applications using post-consumer foam. We expect that the positive impact due to the growth of the Insulation business will continue. In addition, we will further implement all ongoing actions to reduce our carbon footprint. For 2030, we foresee that, without a change of scope, we would increase our multiple from 51 to 75. After the closing of the divestments of Bedding (expected Q1) and Engineered Foams (expected mid 2022), Recticel will become a pure-play Insulation company. We estimate that the multiple will then triple to 150 of more by 2030. No fundamental changes in carbon footprint reduction in 2021. We expect to see significant impact when more raw materials with renewable or recycled content become available in larger quantities and when the recycling of post- consumer foam will be more generally implemented. We introduced this new KPI in 2021, a year in which we saw a steep price increase of all raw materials (chemical and non-chemical) and of energy costs affecting our suppliers. Recticel has succeeded in factoring these costs into the prices of its products, where necessary. A a result, with comparable sales volumes and energy consumption, revenue increased leading to a 17% reduction in carbon intensity compared to the previous year. We selected this KPI in 2015 to express our commitment to replacing post-industrial polyurethane (PU) foam with post-consumer PU foam. We initially used a traditional bonded foam technology for products such as carpet underlays. We subsequently succeeded in introducing a new fiber-bonded foam technology to transform post- consumer PU foam into acoustic thermal insulation panels. As of 2021, we only consider post-consumer PU foam and realise a 76% increase compared to 2020. In the course of 2022, we expect to switch to post-consumer PU foam in our bonded foam technology, significantly increasing our volumes and bringing our 2025 target within reach. 1 Using appropriate method of calculation per type of product and using appropriate conversion factors calculated by a third party. 2 Expressed in tonnes of CO 2 equivalent compared to the 100% activity level in 2013 (scope: production sites). The method of calculation is derived from the Cradle to Grave method. (2013 baseline, target in line with EU Green Deal target of -55% vs 1990). 3 Scope 1 defined as direct emissions from owned or operated resources (e.g. company facilities, company vehicles) and scope 2 as generation of purchased electricity, steam, heating and cooling (GHG Protocol). Company car emissions are calculated based on data extrapolated from first quarter 2021 distance figures (in km). We applied a correction factor of 50% due to Covid impact (teleworking). INNOVATION FOR SOCIETAL NEEDS 2021 2021 2021 2021 2021 2030 Target 2030 Target 2025 Target 2025 Target 2025 Target TRANSITION TO A CIRCULAR ECONOMY CLIMATE ACTION PLAN MATERIAL ASPECT KPI RESULTS COMMENTS 51 21% 17% 1,864 5 75 40% 25% 5,000 2021 2025 Target 68% 80% ≥3 Recticel annual report 2021 97 PEOPLE PRIORITY PLAN Gender diversity in senior management 6 %employee participation in e-learning including Legal, Cybersecurity, Safety, as well as expanding new offerings based on specific needs detected during the annual Employee Performance Management Discussion (EPMD) 6 Frequency2 (Lost Time Accidents + Restricted Work Cases + MedicalTreatment Cases representingthe average on Group level for all our plants and offices) 5 Frequency1 (Lost Time Accidents representingthe average on Group level for all our plants and offices) 4 In 2021, we introduced company-wide a behaviour-based safety approach, already successfully implemented in our Insulation business line. The result for 2021 is disappointing and does not reﬂect the determination with which the teams are bringing safety to everyone’s attention. We continue to work on our Golden Safety Rules & Principles to change safety awareness and behaviour to achieve our target by 2025. We introduced this new KPI in 2021 to further increase the number of women in senior management positions across the Recticel organisation. Recticel strives to create a community where everyone is included and respected, bringing people together for a better world. We believe that a diverse team in terms of gender, nationality and professional experience improves the quality of decision making, and ultimately improves overall performance. The result of 2021 is the starting point for the path that should lead us to enhanced gender equality by 2030. We introduced this new KPI in 2021 as part of our overall safety approach to change people’s behaviour by adding to our lagging KPI (Frequency 1, Lost Time Accidents) also a leading KPI (Frequency 2). Reporting on restricted work cases and medical treatment (Frequency 2) allows us to identify unsafe situations or behaviours, carry out a root cause analysis and take appropriate action to prevent future accidents. Although the 2021 figures do not reﬂect this yet, this approach will help us to meet the targets by 2025. In 2021, we only report on the e-learnings that are mandatory for office employees due to the importance of the topics covered. In a next phase, we will extend this to the Safety programme and new development offerings. The mandatory Legal programme comprises three modules: Data Protection; Ethics Policy; and Basics of Contract Law. Data Protection and Ethics Policy were launched in 2018, Basics of Contract Law in 2019. Ethics Policy was repeated in 2020. New office employees have to complete the three modules within two months after they join the company. For each module, the status ‘completed’ is only achieved if the office employee obtains a test result of minimum 80%. The mandatory cybersecurity programme was launched in 2018. It was updated in 2020. In 2021, the mandatory cybersecurity programme was delivered through a new series of quarterly microlearnings on password security, phishing, social engineering, and working remotely. Participants only pass a course with a minimum score of 70% on the final test. After each microlearning, a fake phishing mail was sent to the participants’ mailbox in order to test their reaction. The results were shared within the organisation to continue emphasising the importance of acting cybersafe at all times. New office employees have to complete the basic cybersecurity modules within a week after they join the company. 4 Number of LTAs x 1,000,000 / number of hours performed. 5 Number of LTAs + RWS + MTC x 1,000,000 / number of hours performed. 6 The results include FoamPartner employees (since 31 March 2021 integrated in the Engineered Foams division). AN INSPIRING AND REWARDING PLACE TO WORK LOWER HS&E IMPACT OF OUR ACTIVITIES AND PRODUCTS MATERIAL ASPECT KPI COMMENTS 2021 2021 2021 2021 2021 2025 Target 2025 Target 2030 Target Legal programme: Cybersecurity programme: RESULTS 6,41 10,4 18% Data protection: 94% Ethics policy: 94% Basics of contract law: 94% DIGIWIZZ: 96% ≤ 2 ≤ 5 25% Recticel annual report 2021 98 2.3.5 Independent limited assurance report on selected sustainability indicators of the non-financial information statement PwC Bedrijfsrevisoren bv - PwC Reviseurs d'Entreprises srl - Risk Assurance Services Maatschappelijke zetel/Siège social: Culliganlaan 5, B-1831 Diegem T: +32 (0)2 710 4211, F: +32 (0)2 710 4299, www.pwc.com BTW/TVA BE 0429.501.944 / RPR Brussel - RPM Bruxelles / ING BE43 3101 3811 9501 - BIC BBRUBEBB / BELFIUS BE92 0689 0408 8123 - BIC GKCC BEBB To the Board of Directors of Recticel NV INDEPENDENT LIMITED ASSURANCE REPORT ON SELECTED SUSTAINABILITY INDICATORS OF THE NON-FINANCIAL INFORMATION STATEMENT 2021 OF RECTICEL NV AND ITS SUBSIDIARIES _______________ This report has been prepared in accordance with the terms of our engagement contract dated 8 November 2021 (the “Agreement”), whereby we have been engaged to issue an independent limited assurance report in connection with selected Sustainability Indicators in the non-financial information statement 2021 as included in the Annual Report of Recticel NV and its subsidiaries as of and for the year ended 31 December 2021 (the “Report”). The Directors’ responsibility The Directors of Recticel NV (“the Company”) are responsible for the preparation and presentation of the selected Sustainability Indicators presented in the Summary Table “Recticel’s material topics and related KPIs” as included in the non-financial information statement 2021 of the Annual Report of Recticel NV and its subsidiaries (the “Subject Matter Information”), in accordance with the criteria disclosed in the Report (the “Criteria”). This responsibility includes the selection and application of appropriate methods for the preparation of the Subject Matter Information, for ensuring the reliability of the underlying information and for the use of assumptions and estimates for individual sustainability disclosures which are reasonable in the circumstances. Furthermore, the responsibility of the Directors includes the design, implementation and maintenance of systems and processes relevant for the preparation of the Subject Matter Information that is free from material misstatement, whether due to fraud or error. Auditor’s responsibility Our responsibility is to express an independent conclusion about the Subject Matter Information based on the procedures we have performed and the evidence we have obtained. We conducted our work in accordance with the International Standard on Assurance Engagements 3000 (Revised) “Assurance Engagements other than Audits or Reviews of Historical Financial Information” (ISAE 3000), issued by the International Auditing and Assurance Standards Board. This standard requires that we comply with ethical requirements and that we plan and perform the engagement to obtain limited assurance as to whether any matters have come to our attention that cause us to believe that the Subject Matter Information has not been prepared, in all material respects, in accordance with the Criteria. Recticel annual report 2021 99 2 of 3 The procedures performed in a limited assurance engagement vary in nature and timing from, and are less in extent than for, a reasonable assurance engagement. Consequently, the level of assurance obtained in a limited assurance engagement is substantially lower than the assurance that would have been obtained had a reasonable engagement been performed. The selection of such procedures depends on our professional judgement, including the assessment of the risks of material misstatement of the Subject Matter Information in accordance with the Criteria. The scope of our work comprised the following procedures: ● assessing and testing the design and functioning of the systems and processes used for data- gathering, collation, consolidation and validation, including the methods used for calculating and estimating the Subject Matter Information as of and for the year ended 31 December 2021 presented in the Report; ● conducting interviews with responsible officers; ● reviewing, on a limited test basis, relevant internal and external documentation; ● performing an analytical review of the data and trends in the information submitted for consolidation; ● considering the disclosure and presentation of the Subject Matter Information. The scope of our work is limited to assurance over the Subject Matter Information. Our assurance does not extend to information in respect of earlier periods or to any other information included in the Report. Our independence and quality control Our engagement has been carried out in compliance with the legal requirements in respect of auditor independence, particularly in accordance with the rules set down in articles 12, 13, 14, 16, 20, 28 and 29 of the Belgian Act of 7 December 2016 organizing the audit profession and its public oversight of registered auditors, and with other ethical requirements of the International Code of Ethics for Professional Accountants (including International Independence Standards) issued by the International Ethics Standards Board for Accountants (IESBA Code), which is founded on fundamental principles of integrity, objectivity, professional competence and due care, confidentiality and professional behaviour. Our firm applies International Standard on Quality Control 1 and accordingly maintains a comprehensive system of quality control including documented policies and procedures regarding compliance with ethical requirements, professional standards and applicable legal and regulatory requirements. 3 of 3 Our conclusion Based on the procedures we have performed and the evidence we have obtained, nothing has come to our attention that causes us to believe that the selected Sustainability Indicators presented in the Summary Table “Recticel’s material topics and related KPIs” for the year ended 31 December 2021, as included in the non-financial information statement 2021 of the Annual Report of Recticel NV and its subsidiaries have not been prepared, in all material respects, in accordance with the criteria disclosed in the Report. Other ESG related information The other information comprises all of the ESG related information in the Report other than the Subject Matter Information and our assurance report. The directors are responsible for the other ESG related information. As explained above, our assurance conclusion does not extend to the other ESG related information and, accordingly, we do not express any form of assurance thereon. In connection with our assurance of the Subject Matter Information, our responsibility is to read the other ESG related information and, in doing so, consider whether the other ESG related information is materially inconsistent with the Subject Matter Information or our knowledge obtained during the assurance engagement, or otherwise appears to contain a material misstatement of fact. If we identify an apparent material inconsistency or material misstatement of fact, we are required to perform procedures to conclude whether there is a material misstatement of the Subject Matter Information or a material misstatement of the other information, and to take appropriate actions in the circumstances. Other matter - restriction on use and distribution of our report Our report is intended solely for the use of the Company, to whom it is addressed, in connection with their Report as of and for the year ended 31 December 2021 and should not be used for any other purpose. We do not accept or assume and deny any liability or duty of care to any other party to whom this report may be shown or into whose hands it may come. Diegem, 28 April 2022 PwC Bedrijfsrevisoren BV/Reviseurs d'Entreprises SRL Represented by Marc Daelman 1 Registered auditor 1 Marc Daelman BV, member of the Board of Directors, represented by its permanent representative Marc Daelman Recticel annual report 2021 100 2.3.6 Taxonomy eligibility Introduction The Taxonomy Regulation is a key component of the European Commission’s action plan to redirect capital ﬂows towards a more sustainable economy. It represents a major step towards achieving carbon neutrality by 2050 in line with European Union goals as the Taxonomy is a classification system for environmentally sustainable economic activities. In the following section, Recticel presents the share of the group turnover, capital expenditure (Capex) and operating expenditure (Opex) for the reporting period 2021, which are associated with Taxonomy-eligible economic activities 19 related to the first two environmental objectives, climate change mitigation and climate change adaptation, in accordance with Art. 8 Taxonomy Regulation and Art. 10 (2) of the Art. 8 Delegated Act. Taxonomy-eligibile economic activities We have examined the relevant Taxonomy-eligible economic activities based on our activities in 2021, and assigned them to the economic activities of our entire Insulation business line in accordance with Annex I and II of the Climate Delegated Act. The table below indicates for which environmental objective the activities qualify as eligible over 2021: 19 See Definitions 20 See Recticel expands its insulation activities with the acquisition of the insulated panel specialist Trimo | Recticel Relevant judgement on the taxonomy-eligibility of our activities Our taxonomy-eligibility assessment is based on the economic activities in scope for the financial reporting year 2021 by the Taxonomy Regulation covering climate mitigation and climate adaptation. We consider Recticel’s insulation activities over 2021 to be taxonomy-aligned for the environmental objective of climate mitigation. This narrow definition expresses no opinion on Taxonomy-eligibility of current economic activities contributing to protection of water and marine resources, transition to a circular economy, prevention of pollution or protection of biodiversity and ecosystems. 3.5 Manufacture of energy efficiency equipment for buildings The description of activity 3.5 in Annex I to the Climate Delegated Act states that: ‘An economic activity shall qualify as contributing substantially to climate change mitigation where that activity contributes substantially to the stabilisation of greenhouse gas concentrations in the atmosphere at a level which prevents dangerous anthropogenic interference with the climate system consistent with the long-term temperature goal of the Paris Agreement through the avoidance or reduction of greenhouse gas emissions or the increase of greenhouse gas removals, including through process innovations and products innovations.’ Our insulation activities help to improve energy efficiency by offering insulation solutions that will reduce energy consumption in buildings. Referring to the technical screening criteria for substantial contribution to climate change mitigation, they are aligned with ‘(e): insulating products with a lambda value lower or equal to 0,06 W/MK.’ Recticel announced in 2021 a strategic repositioning of the Group by divesting the Bedding division (closing completed on 31 March 2022) and Engineered Foams business line (closing expected mid-2022). From now on, Recticel will focus exclusively on its Insulation activities, presenting excellent growth prospects in a high-value added business segment driven by climate change. It perfectly illustrates our sustainability motto to grow together with our stakeholders towards a PUre future. The acquisition of Trimo 20 , one of Europe’s leading providers of sustainable premium insulated panels for the building industry, announced on 22 March 2022, is a key step in our growth direction. Our Insulation business line offers high quality PU- and PIR-based thermal insulation products used in construction and renovation projects. Conserving energy and promoting a low- carbon society are key objectives for our Insulation business. Over the lifetime of their use, the insulation products we sold in 2021 will offset 51 times our carbon footprint for the year. 3.5 Manufacture of energy efficiency equipment for buildings 25.21 ELIGIBLE ECONOMIC ACTIVITY DESCRIPTION NACE CODE CLIMATE CHANGE MITIGATION CLIMATE CHANGE ADAPTATION TAXONOMY-ELIGIBLE ECONOMIC ACTIVITIES Recticel annual report 2021 101 Our activities The eligible turnover, Capex and Opex relate solely to the Insulation segment 21 . Capex comprises investments for growth, such as expansion investments and productivity improvements, as well as going-concern investments, such as Health, Safety and Environment, replacement and other general Capex. The eligible Opex comprises primarily research & development expenses. 21 See Financial Report 2.4.2.3.1 Relevant judgement on the taxonomy-non-eligibility of our activities We consider that, over 2021, our Bedding and Engineered Foams activities are Taxonomy-non- eligible for climate change mitigation or climate mitigation. This narrow definition expresses no opinion on Taxonomy-eligibility of current economic activities contributing to protection of water and marine resources, transition to a circular economy, prevention of pollution or protection of biodiversity and ecosystems. Definitions Taxonomy-eligible economic activity means an economic activity that is described in the delegated acts supplementing the Taxonomy Regulation (i.e. the Climate Delegated Act as of now) irrespective of whether that economic activity meets any or all of the technical screening criteria laid down in those delegated acts. Taxonomy-non-eligible economic activity means any economic activity that is not described in the delegated acts supplementing the Taxonomy Regulation. Taxonomy-aligned economic activity means an economic activity that complies with all of the following requirements: a) the economic activity contributes substantially to one or more of the environmental objectives; b) it does not significantly harm any of the environmental objectives; c) it is carried out in compliance with the minimum safeguards; and d) it complies with technical screening criteria in the delegated acts supplementing the Taxonomy Regulation (i.e. Climate Delegated Act as of now). 2.3.7 ESG performance Since many years, Recticel has been committed to achieving robust performance on both financial and non-financial criteria. Transparency on objectives and performance is key in earning and retaining the trust and support of all stakeholders interested in companies with solid environmental, social and governance (ESG) commitments and scores. More information about our ESG scores is available on our corporate website. * See Financial report 2.4.2.4.8 ‘Business Combinations’. ** Opex here defined as reported R&D expenses, excluding Bedding but including repair and maintenance. PROPORTION OF TAXONOMY-ELIGIBLE AND TAXONOMY- NON-ELIGIBLE ECONOMIC ACTIVITIES IN TOTAL TURNOVER, CAPEX AND OPEX Total (MEUR) Proportion of Taxonomy-eligible economic activities (in %) Proportion of Taxonomy-non-eligible economic activities (in %) Turnover 1,032,9 37,82 62,18 Capital expenditure (Capex) * 15,0 26,61 73,39 Operating expenditure (Opex) ** 9,2 38,71 61,29 Eligible turnover: 37,82% Non-eligible turnover: 62,18% Eligible CAPEX: 26,61% Eligible OPEX: 38,71% Non-eligible CAPEX: 73,39% Non-eligible OPEX: 61,29% Recticel annual report 2021 102 2.4 Financial report Recticel annual report 2021 103 2.4.1 Consolidated financial statements The consolidated financial statements have been authorised for issue by the Board of Directors on 27 April 2022. They have been prepared in accordance with IFRS accounting policies, details of which are given below. 2.4.1.1 Consolidated income statement in thousand EUR Group Recticel Notes 2021 2020 restated ¹ Sales 2.4.2.3. 1,032,795 616,883 Cost of sales (845,405) (510,223) Gross profit 2.4.2.4.1. 187,390 106,660 General and administrative expenses 2.4.2.4.2. (66,733) (44,230) Sales and marketing expenses 2.4.2.4.2. (44,892) (32,408) Research and development expenses 2.4.2.4.2. (9,186) (7,927) Impairment of goodwill, intangible and tangible assets 2.4.2.3. (27) (2,352) Other operating revenues 2.4.2.4.3. 20,121 19,043 Other operating expenses 2.4.2.4.3. (40,512) (30,383) Income from associates 2.4.2.5.5. 371 703 ² Operating profit (loss) 2.4.2.4.4. 46,532 9,106 Interest income 1,065 908 Interest expenses (6,838) (3,384) Other financial income 7,136 3,106 Other financial expenses (5,901) (4,218) Financial result 2.4.2.4.5. (4,538) (3,588) Income from other associates 451 (5,790) ² Impairment other associates 0 (5,525) Change in fair value of option structures (7,315) 1,103 Result of the period before taxes 35,130 (4,694) Income taxes 2.4.2.4.6. 14,335 (3,470) Result of the period after taxes - continuing operations 49,465 (8,164) Result from discontinued operations 2.4.2.4.7. 4,876 71,319 Result of the period after taxes - continuing and discontinued operations 54,341 63,155 of which share of the Group 53,522 63,151 of which non-controlling interests 819 4 * The accompanying notes are an integral part of this income statement. 1 As announced in the press release of 15 February 2022, the Bedding activities which are currently in the process of being divested to the Aquinos Group, have been accounted for as Discontinued Operations (IFRS 5). The Bedding activities that will not be transferred to Aquinos Group are incorporated in the Engineered Foams segment. For comparison purposes, the formerly published 2020 income statements and cash ﬂow statements have been restated accordingly. 2 A distinction has been made between Income from associates - included in operating profit (loss) - and Income from other associates - excluded from operating profit (loss). Income from associates: income from associates considered as being part of the Group’s core business are integrated in Operating profit (loss); i.e. Orsafoam Income from other associates: income from associates not considered as being part of the Group’s core business are not integrated in Operating profit (loss); i.e. Proseat and TEMDA2 (Ascorium, formerly Automotive Interiors) Recticel annual report 2021 104 2.4.1.2 Earnings per share 2.4.1.3 Consolidated statement of comprehensive income in thousand EUR Group Recticel Notes 2021 2020 Result for the period after taxes 54,341 63,155 Other comprehensive income Actuarial gains (losses) on employee benefits recognized in equity 7,351 420 Deferred taxes on actuarial gains (losses) on employee benefits (1,469) 0 Currency translation differences that will not subsequently be recycled to profit and loss (274) 161 Share in other comprehensive income in joint ventures & associates that will not subsequently be recycled to profit and loss 2.4.2.5.5. 0 (262) Items that will not subsequently be recycled to profit and loss 5,608 319 Hedging reserves 0 (70) Currency translation differences that subsequently may be recycled to profit and loss 10,795 (9,227) Foreign currency translation reserve difference recycled in the income statement 0 18,311 Deferred taxes on retained earnings 0 (113) Share in other comprehensive income in joint ventures & associates that subsequently may be recycled to profit and loss 2.4.2.5.5. 0 (2,098) Items that subsequently may be recycled to profit and loss 10,795 6,803 Other comprehensive income net of tax 16,403 7,122 Total comprehensive income for the period 70,744 70,277 Total comprehensive income for the period 70,744 70,277 Total comprehensive income for the period attributable to the owners of the parent 69,926 70,273 Total comprehensive income for the period attributable to non-controlling interests 819 4 Total comprehensive income for the period attributable to the owners of the parent 69,926 70,273 Total comprehensive income for the period attributable to the owners of the parent - Continuing operations 63,889 (9,662) Total comprehensive income for the period attributable to the owners of the parent - Discontinued operations 6,037 79,935 * The accompanying notes are an integral part of this statement of comprehensive income. in EUR Group Recticel Notes 2021 2020 restated Number of shares outstanding (including treasury shares) 55,963,420 55,742,920 Weighted average number of shares outstanding (before dilution effect) 55,519,330 55,174,425 Weighted average number of shares outstanding (after dilution effect) 56,282,863 55,381,032 Earnings per share Earnings per share - continuing operations 0.89 (0.15) Earnings per shares - discontinued operations 0.09 1.29 Earnings per share of continuing and discontinued operations 0.98 1.14 Earnings per share from continuing operations Earnings per share from continuing operations - Basic 2.4.2.4.9. 0.89 (0.15) Earnings per share from continuing operations - Diluted 2.4.2.4.10. 0.88 (0.15) Earnings per share from discontinued operations Earnings per share from discontinued operations - Basic 2.4.2.4.9. 0.09 1.29 Earnings per share from discontinued operations - Diluted 2.4.2.4.10. 0.09 1.29 Net book value 6.99 6.01 The basic earnings per share are calculated on the basis of the weighted average number of shares outstanding during the period. The diluted earnings per share are calculated on the basis of the weighted average number of shares outstanding during the period, adjusted for dilutive subscription rights. Recticel annual report 2021 105 2.4.1.4 Consolidated statement of financial position in thousand EUR Group Recticel Notes 31 Dec 2021 31 Dec 2020 Capital 2.4.2.5.12. 139,909 139,357 Share premium 132,087 131,267 Share capital 271,996 270,624 Treasury shares (1,450) (1,450) Other reserves (13,037) (22,487) Retained earnings 129,176 98,760 Hedging and translation reserves (4,270) (11,372) Elements of comprehensive income of discontinued operations 7,367 0 Equity (share of the Group) 389,782 334,075 Equity attributable to non-controlling interests 1,524 705 TOTAL EQUITY 391,306 334,780 Employee benefit liabilities 2.4.2.5.13. 39,135 52,342 Provisions 2.4.2.5.14. 21,993 18,979 Deferred tax liabilities 2.4.2.4.6. 36,229 12,173 Financial liabilities 2.4.2.5.15. 208,505 70,426 Other amounts payable 25 26 Non-current liabilities 305,887 153,946 Provisions 2.4.2.5.14. 3,386 1,598 Financial liabilities 2.4.2.5.15. 59,064 14,403 Trade payables 2.4.2.5.16. 120,247 88,923 Current contract liabilities 2.4.2.5.8. 9,081 15,183 Income tax payables 4,466 1,045 Deferred payables for share investments 18,749 0 Other amounts payable 2.4.2.5.16. 66,885 88,879 Liabilities directly associated with assets classified as held for sale 2.4.2.5.16. 76,668 0 Current liabilities 358,546 210,031 TOTAL EQUITY AND LIABILITIES 1,055,739 698,757 * The accompanying notes are an integral part of this statement of financial position. See also note 2.4.2.4.7. on Discontinued operations and 2.4.2.4.8. on Business combinations. in thousand EUR Group Recticel Notes 31 Dec 2021 31 Dec 2020 Intangible assets 2.4.2.5.1. 34,945 14,806 Goodwill 2.4.2.3.1. 13,721 24,139 Property, plant & equipment 2.4.2.5.2. 313,406 173,000 Right-of-use assets 2.4.2.5.3. 62,603 75,377 Investment property 7,564 3,331 Investments in associates 2.4.2.5.4. 12,709 12,351 Investments in other associates 2.4.2.5.5. 10,361 11,030 Non-current receivables 2.4.2.5.6. 18,730 25,760 Deferred tax assets 2.4.2.4.6. 46,845 25,298 Non-current assets 520,884 365,092 Inventories 2.4.2.5.7. 112,897 90,833 Trade receivables 2.4.2.5.9. 141,596 102,726 Other receivables and other financial assets 2.4.2.5.9. 15,869 57,929 Income tax receivables 4,660 1,452 Other investments 0 170 Cash and cash equivalents 2.4.2.5.10. 118,367 79,255 Assets classified as held for sale 2.4.2.5.11. 141,466 1,300 Current assets 534,855 333,665 TOTAL ASSETS 1,055,739 698,757 Recticel annual report 2021 106 2.4.1.5 Consolidated cash ﬂow statement in thousand EUR Group Recticel Notes 2021 2020 restated Operating profit (loss) 2.4.2.4.4. 46,532 9,106 Amortisation of intangible assets 2.4.2.5.1. 4,790 1,543 Depreciation of tangible assets 2.4.2.5.2. 38,082 25,828 (Reversal) Impairment losses on intangible assets 2.4.2.5.1. 0 9 (Reversal) Impairment losses on tangible assets 2.4.2.5.2. 0 2,254 (Write-back)/Write-offs on assets (20) 1,325 Changes in provisions (5,376) 8,210 (Gains) / Losses on disposals of intangible and tangible assets (2,614) (130) Income from associates (371) (704) Other non-cash elements (3,448) 606 GROSS OPERATING CASH FLOW BEFORE WORKING CAPITAL MOVEMENTS 77,576 48,048 Inventories (12,900) (4,753) Trade receivables (16,338) (60,869) Other receivables 44,948 (1,074) Trade payables 32,772 30,310 Other payables (9,036) 19,440 Changes in working capital 39,446 (16,946) Trade & Other long term debts maturing within 1 year 11 16 Tax credit (non-current receivables) 7 74 Income taxes paid (8,112) (3,445) Cash ﬂow from operating activities (discontinued operations) 3,796 (24,603) NET CASH FLOW FROM OPERATING ACTIVITIES (a) 112,724 3,146 Interests received 49 166 Dividends received 25 229 Acquisition FoamPartner, net of cash acquired (219,901) 0 Investments in and subscriptions to capital increases 0 (973) Increase of loans and receivables (670) (26,099) Decrease of loans and receivables 320 40,066 Investments in intangible assets 2.4.2.5.1. (1,865) (4,214) Investments in property, plant and equipment 2.4.2.5.2. (11,542) (18,942) Disposals of intangible assets 2.4.2.5.1. 36 0 Disposals of property, plant and equipment 2.4.2.5.2. 5,500 4,388 Proceeds from affiliates and joint ventures disposals 0 176,303 Disposals of investments held for sale 17 1,967 Recticel annual report 2021 107 in thousand EUR Group Recticel Notes 2021 2020 restated (Increase)/Decrease of investments available for sale 0 16 Cash ﬂow from divestment (investment) activities (discontinued operations) (5,470) (7,238) NET CASH FLOW FROM DIVESTMENT (INVESTMENT) ACTIVITIES (b) (233,500) 165,669 Interests paid on financial debt (c) (3,551) (1,687) Interests paid on lease debt (c) (104) (125) Dividends paid (14,451) (13,254) Increase (Decrease) of capital 1,372 1,797 Increase of financial debt 201,507 87,186 Decrease of financial debt 0 (202,204) Decrease of lease debt (d) (17,995) (13,189) Cash ﬂow from financing activities (discontinued operations) (3,018) 1,803 NET CASH FLOW FROM FINANCING ACTIVITIES (e) 163,760 (139,674) Effect of exchange rate changes (f) 3,480 1,635 CHANGES IN CASH AND CASH EQUIVALENTS (a)+(b)+( e)+(f) 46,463 30,776 NET FREE CASH FLOW (a)+(b)(c)+(d) (142,426) 153,813 in thousand EUR Group Recticel Notes 2021 2020 restated Net cash position opening balance (continued operations) 76,790 Net cash position opening balance (discontinued operations) 2,465 Net cash position opening balance (g) 79,255 48,479 Net cash position closing balance (h) 125,718 79,255 Net cash position closing balance (discontinued operations) 7,352 Net cash position closing balance (continued operations) 118,367 CHANGES IN CASH AND CASH EQUIVALENTS (h)-(g) 46,463 30,776 * The accompanying notes are an integral part of this cash ﬂow statement. Recticel annual report 2021 108 Changes in financial liabilities For the year ending 31 December 2021 in thousand EUR Group Recticel 31 Dec 2020 Cash ﬂows in 2021 Non-cash changes New leases Reassessment IFRS 16 Interests accrued Fair value of hedging instruments Actualisation Amortisation Transfer Exchange differences Transfer to held for sale Change in scope 31 Dec 2021 Long term borrowings 14,701 143,756 0 0 0 0 59 877 (620) 196 (1,958) 7,773 164,783 Short term borrowings 2,708 (13,481) 0 0 35 0 (0) 0 (246) (13) (252) 62,933 51,683 Lease liabilities 66,868 (19,114) 3,652 5,671 2,155 0 107 0 (1) 1,217 (17,544) 7,404 50,415 Accrued interest liabilities 553 (3,925) 0 0 3,691 (59) 0 0 (63) 227 (3) 267 689 Total liabilities from financing activities 84,830 107,237 3,652 5,671 5,881 (59) 166 877 (931) 1,626 (19,757) 78,377 267,570 Change in scope relates to FoamPartner (Engineered Foams). See also note 2.4.2.5.15. – Financial liabilities and note 2.4.2.5.3. – Right-of-use assets. For the year ending 31 December 2020 in thousand EUR Group Recticel 31 Dec 2019 Cash ﬂows in 2020 Non-cash changes New leases Reassessment IFRS 16 Interests accrued Fair value of hedging instruments Actualisation Amortisation Transfer Exchange differences Change in scope 31 Dec 2020 Long term borrowings 19,773 (5,564) 0 0 0 0 54 286 0 152 0 14,701 Short term borrowings 100,922 (98,161) 0 0 0 0 0 (70) 0 (5) 23 2,708 Lease liabilities 96,398 (20,852) 18,638 (48) 2,742 0 129 0 (219) (1,398) (28,524) 66,868 Accrued interest liabilities 657 (1,753) 0 0 1,536 2 0 (0) 0 120 (9) 553 Total liabilities from financing activities 217,750 (126,329) 18,638 (48) 4,278 2 184 216 (219) (1,131) (28,510) 84,830 Change in scope relates to TEMDA2 GmbH (Ascorium - formerly Automotive Interiors). See also note 2.4.2.5.15. – Financial liabilities and note 2.4.2.5.3. – Right-of-use assets. Recticel annual report 2021 109 2.4.1.6 Statement of changes in shareholders’ equity For the year ending 31 December 2021 in thousand EUR Group Recticel Capital Share premium Treasury shares Other reserves Retained earnings Translation differences and hedging reserves Total shareholders' equity Non-controlling interests Total equity Equity at the beginning of the period 139,357 131,267 (1,450) (22,487) 98,766 (11,378) 334,075 705 334,780 Restatement IFRS 16 * 0 0 0 0 (1,906) 0 (1,906) 0 (1,906) Dividends 0 0 0 0 (14,469) 0 (14,469) 0 (14,469) Stock options (IFRS 2) 0 0 0 786 0 0 786 0 786 Capital movements ¹ 552 820 0 0 0 0 1,372 0 1,372 Shareholders' movements 552 820 0 786 (14,469) 0 (12,311) 0 (12,311) Profit or loss of the period 0 0 0 0 53,522 0 53,522 819 54,341 Other comprehensive income 0 0 0 7,077 (1,469) 10,794 16,403 0 16,403 Changes in scope 0 0 0 117 (117) 0 0 0 0 Total comprehensive income 0 0 0 7,194 51,936 10,794 69,925 819 70,744 Equity at the end of the period 139,909 132,087 (1,450) (14,507) 134,327 (584) 389,783 1,524 391,306 1 see note 2.4.5.12. Adjustment for reassessment of assumptions on dismantling and restoration costs. Recticel annual report 2021 110 For the year ending 31 December 2020 in thousand EUR Group Recticel Capital Share premium Treasury shares Other reserves Retained earnings Translation differences and hedging reserves Total shareholders' equity Non-controlling interests Total equity Equity at the beginning of the period 138,494 130,334 (1,450) (25,621) 51,227 (18,288) 274,696 701 275,397 Dividends 0 0 0 0 (13,299) 0 (13,299) 0 (13,299) Stock options (IFRS 2) 0 0 0 609 0 0 609 0 609 Capital movements 1 863 933 0 0 0 0 1,796 0 1,796 Shareholders' movements 863 933 0 609 (13,299) 0 (10,894) 0 (10,894) Profit or loss of the period 0 0 0 0 63,151 0 63,151 4 63,155 Other comprehensive income 0 0 0 2,464 (2,252) 6,910 7,122 0 7,122 Total comprehensive income 0 0 0 2,464 60,899 6,910 70,273 4 70,277 Reclassification 0 0 0 61 (61) 0 0 0 0 Equity at the end of the period 139,357 131,267 (1,450) (22,487) 98,766 (11,378) 334,075 705 334,780 1 see note 2.4.5.12. Recticel annual report 2021 111 2.4.2 Notes to the consolidated financial statements for the year ending 31 December 2021 2.4.2.1 Summary of significant accounting policies 2.4.2.1.1 Statement of compliance - basis of preparation Recticel NV/SA (the ‘‘Company’’) is a public limited liability company incorporated in Belgium and listed on Euronext Brussels. The Company’s consolidated financial statements include the financial statements of the Company, its subsidiaries, interests in jointly controlled entities (joint ventures) and in associates, both accounted for under the equity method (together referred to as ‘‘the Group’’). The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as endorsed by the European Union. The accounting standards applied in the consolidated financial statements for the year ended 31 December 2021 are consistent with those used to prepare the consolidated financial statements for the year ended 31 December 2020, except for changes in accounting policies mentioned in the note here below. 2.4.2.1.2 Changes in accounting policies and disclosures Endorsement status of the new standards as at 31 December 2021 (EFRAG status report 10 December 2021) The following amendments to standards are mandatory for the first time for the financial year beginning 1 January 2021 and have been endorsed by the European Union: • Amendments to IFRS 4 Insurance Contracts – deferral of IFRS 9 (effective 01/01/2021). This amendment changes the fixed expiry date for the temporary exemption in IFRS 4 Insurance Contracts from applying IFRS 9 Financial Instruments, so that entities would be required to apply IFRS 9 for annual periods beginning on or after 1 January 2023. • Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 Interest Rate Benchmark Reform – Phase 2 (effective 01/01/2021). These amendments address issues that might affect financial reporting after the reform of an interest rate benchmark, including its replacement with alternative benchmark rates. The amendments are effective for annual periods beginning on or after 1 January 2021, with earlier application permitted. • Amendment to IFRS 16 Leases Covid 19-Related Rent Concessions (effective 01/06/2020, with early application permitted). If certain conditions are met, the Amendment would permit lessees, as a practical expedient, not to assess whether particular covid-19-related rent concessions are lease modifications. Instead, lessees that apply the practical expedient would account for those rent concessions as if they were not lease modifications. The following new standard and amendments have been issued, are not mandatory for the first time for the financial year beginning 1 January 2021 but have been endorsed by the European Union: • IFRS 17 ‘Insurance contracts’ (effective 1 January 2023). This standard replaces IFRS 4, which currently permits a wide variety of practices in accounting for insurance contracts. IFRS 17 will fundamentally change the accounting by all entities that issue insurance contracts and investment contracts with discretionary participation features. On 17 March 2020, IASB decided to defer pop effective date to annual reporting periods beginning on or after 1 January 2023. The endorsement includes the amendments issued by the Board in June 2020, which are aimed at helping companies implement the Standard and making it easier for them to explain their financial performance. The EU regulation provides an optional exemption from applying the annual cohort requirement that relates to the timing of the recognition of the profit in the contract, the contractual service margin, in profit or loss. Entities making use of the exemption are not applying IFRSs as issued by the IASB and need to disclose the fact. • Amendment to IFRS 16 Leases Covid 19-Related Rent Concessions beyond 30 June 2021 (effective 01/04/2021, with early application permitted). The amendments extend, by one year, the May 2020 amendment that provides lessees with an exemption from assessing whether a COVID-19-related rent concession is a lease modification. In particular, the amendment permits a lessee to apply the practical expedient regarding COVID-19-related rent concessions to rent concessions for which any reduction in lease payments affects only payments originally due on or before 30 June 2022 (rather than only payments originally due on or before 30 June 2021). The amendment is effective for annual reporting periods beginning on or after 1 April 2021 (earlier application permitted, including in financial statements not yet authorised for issue at the date the amendment is issued). • Amendments to IFRS 3 Business Combinations; IAS 16 Property, Plant and Equipment; IAS 37 Provisions, Contingent Liabilities and Contingent Assets as well as Annual Improvements Recticel annual report 2021 112 (effective 1 January 2022). The package of amendments includes narrow-scope amendments to three Standards as well as the Board’s Annual Improvements, which are changes that clarify the wording or correct minor consequences, oversights or conﬂicts between requirements in the Standards. • Amendments to IFRS 3 Business Combinations update a reference in IFRS 3 to the Conceptual Framework for Financial Reporting without changing the accounting requirements for business combinations. • Amendments to IAS 16 Property, Plant and Equipment prohibit a company from deducting from the cost of property, plant and equipment amounts received from selling items produced while the company is preparing the asset for its intended use. Instead, a company will recognise such sales proceeds and related cost in profit or loss. • Amendments to IAS 37 Provisions, Contingent Liabilities and Contingent Assets specify which costs a company includes when assessing whether a contract will be loss-making. • Annual Improvements 2018-2020 make minor amendments to IFRS 1 First-time Adoption of International Financial Reporting Standards, IFRS 9 Financial Instruments, IAS 41 Agriculture and the Illustrative Examples accompanying IFRS 16 Leases. The following amendments have been issued, but are not mandatory for the first time for the financial year beginning 1 January 2021 and have not been endorsed by the European Union: • Amendments to IAS 1 ‘Presentation of Financial Statements: Classification of Liabilities as current or non-current’ (effective 01/01/2023), affect only the presentation of liabilities in the statement of financial position — not the amount or timing of recognition of any asset, liability income or expenses, or the information that entities disclose about those items. They: • Clarify that the classification of liabilities as current or non-current should be based on rights that are in existence at the end of the reporting period and align the wording in all affected paragraphs to refer to the "right" to defer settlement by at least twelve months and make explicit that only rights in place "at the end of the reporting period" should affect the classification of a liability; • Clarify that classification is unaffected by expectations about whether an entity will exercise its right to defer settlement of a liability; and make clear that settlement refers to the transfer to the counterparty of cash, equity instruments, other assets or services. • Amendments to IAS 1 Presentation of Financial Statements and IFRS Practice Statement 2: Disclosure of Accounting policies (effective 1 January 2023). The amendments aim to improve accounting policy disclosures and to help users of the financial statements to distinguish between changes in accounting estimates and changes in accounting policies. The IAS 1 amendment requires companies to disclose their material accounting policy information rather than their significant accounting policies. Further, the amendment to IAS 1 clarifies that immaterial accounting policy information need not be disclosed. To support this amendment, the Board also amended IFRS Practice Statement 2, ‘Making Materiality Judgements’, to provide guidance on how to apply the concept of materiality to accounting policy disclosures. The amendments are effective for annual reporting periods beginning on or after 1 January 2023. Earlier application is permitted (subject to any local endorsement process). • Amendments to IAS 8 Accounting policies, Changes in Accounting Estimates and Errors: Definition of Accounting Estimates (effective 1 January 2023). The amendment to IAS 8, ‘Accounting Policies, Changes in Accounting Estimates and Errors’, clarifies how companies should distinguish changes in accounting policies from changes in accounting estimates. The amendments are effective for annual reporting periods beginning on or after 1 January 2023. Earlier application is permitted (subject to any local endorsement process). • Amendments to IAS 12 Income Taxes: Deferred Tax related to Assets and Liabilities arising from a Single Transaction (effective 1 January 2023). The amendments clarify how companies account for deferred tax on transactions such as leases and decommissioning obligations. The main change in the amendments is an exemption from the initial recognition exemption of IAS 12.15(b) and IAS 12.24. Accordingly, the initial recognition exemption does not apply to transactions in which equal amounts of deductible and taxable temporary differences arise on initial recognition. The amendments are effective for annual reporting periods beginning on or after 1 January 2023. Early adoption is permitted. • Amendments to IFRS 17 Insurance contracts: Initial Application of IFRS 17 and IFRS 9 – Comparative Information (issued on 9 December 2021, effective 1 January 2023). The amendment is a transition option relating to comparative information about financial assets presented on initial application of IFRS 17. The amendment is aimed at helping entities to avoid temporary accounting mismatches between financial assets and insurance contract liabilities, and therefore improve the usefulness of comparative information for users of financial statements. The following standard is mandatory since the financial year beginning 1 January 2016 (however not yet subjected to EU endorsement). The European Commission has decided not to launch the endorsement process of this interim standard but to wait for the final standard: • IFRS 14, ‘Regulatory deferral accounts’ (effective 1 January 2016). It concerns an interim standard on the accounting for certain balances that arise from rate–regulated activities. IFRS 14 is only applicable to entities that apply IFRS 1 as first-time adopters of IFRS. It permits such entities, on adoption of IFRS, to continue to apply their previous GAAP accounting policies for the recognition, measurement, impairment and derecognition of regulatory deferral accounts. The interim standard also provides guidance on selecting and changing accounting policies (on first–time adoption or subsequently) and on presentation and disclosure. Recticel annual report 2021 113 2.4.2.1.3 General principles Currency of accounts The financial statements are presented in thousand euro (EUR) (unless specified otherwise), which is the currency of the primary economic environment in which the Group operates. The financial statements of foreign operations are translated in accordance with the policies set out below under ‘Foreign Currencies’. Historical cost convention The financial statements have been prepared on the historical cost basis, except as disclosed in the accounting policies below. Investments in equity instruments which are not quoted in an active market and whose fair value cannot be reliably measured by alternative valuation methods are carried at cost. Foreign currencies Foreign currency transactions - Transactions in currencies other than EUR are accounted for at the exchange rates prevailing at the date of the transactions. At each reporting date, monetary assets and liabilities that are denominated in foreign currencies are translated at closing rate. Non-monetary assets and liabilities carried at fair value and denominated in foreign currencies are translated at the exchange rates prevailing at the date the fair value was determined. Gains and losses resulting from such translations are recognised in the financial result of the income statement. Translation from functional currency to the presentation currency - For purposes of presenting consolidated financial statements, the assets and liabilities of the Group’s foreign operations are translated at closing rate. Income and expenses are translated at the average exchange rates for the period unless exchange rates ﬂuctuate significantly. Resulting exchange differences are recognised in other comprehensive income and accumulated in equity (attributable to non-controlling interests as appropriate). On disposal of a foreign operation (i.e. a disposal of the Group's entire interest in a foreign operation, or a disposal involving loss of control over a subsidiary that includes a foreign operation, a disposal involving loss of joint control over a jointly controlled entity that includes a foreign operation, or a disposal involving loss of significant inﬂuence over an associate that includes a foreign operation), exchange differences accumulated in equity are recognised in the income statement. In addition, in relation to a partial disposal of a subsidiary that does not result in the Group losing control over the subsidiary, the proportionate share of accumulated exchange differences is re-attributable to non-controlling interests and are not recognised in profit or loss. For all other partial disposals (i.e. partial disposals of associates or jointly controlled entities (joint ventures) that do not result in the Group losing significant inﬂuence or joint control), the proportionate share of the accumulated exchange differences is reclassified to profit or loss. Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate. Consolidation principles Consolidated financial statements include subsidiaries and interests in jointly controlled entities (joint ventures) and associates accounted for under the equity method. Consolidated financial statements are prepared using uniform accounting policies for like transactions and other events in similar circumstances. All intra-group transactions, balances, income and expenses are eliminated in consolidation. • Subsidiaries Subsidiaries are entities that are controlled directly or indirectly. Control is the power to govern the financial and operating policies of an entity to obtain benefits from its activities. Consolidation of subsidiaries starts from the date Recticel controls the entity until the date such control ceases. Changes in the Group’s interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions. The carrying amounts of the Group’s interests and the non-controlling interests are adjusted to reﬂect the changes in their relative interests in the subsidiary. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognised directly in equity. However, when the Group loses control of a subsidiary, the profit or loss on disposal is calculated as the difference between (i) the aggregate of the fair value of the consideration received and the fair value of any retained interest and (ii) the previous carrying amount of the assets (including goodwill) and liabilities of the subsidiary and any non-controlling interests. Amounts previously recognised in other comprehensive income in relation to the subsidiary are accounted for (i.e. reclassified to profit or loss or transferred directly to retained earnings) in the same manner as would be required if the relevant assets or liabilities were disposed of. The fair value of any investment retained in the former subsidiary at the date when control is lost is regarded as the fair value on initial recognition for subsequent accounting under IFRS 9 Financial Instruments or, when applicable, the cost on initial recognition of an investment in an associate or jointly controlled entity. • Joint Ventures and Associates The results and assets and liabilities of joint ventures and associates are incorporated in these consolidated financial statements using the equity method of accounting, except when the investment is classified as held for sale, in which case it is accounted for in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations. Under the equity method, an investment in a joint venture and an associate is initially recognised in the consolidated statement of financial position at cost and adjusted thereafter to recognise the Group's share of the profit or loss and other comprehensive income of the venture and the associate. When the Group's share of losses of a venture and an associate exceeds the Group's interest in that joint venture and associate (which includes any long-term interests that, in substance, form part of the Group's net investment in the joint venture and associate), the Group discontinues recognising its share of further losses. Additional losses are recognised only to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the joint venture and associate. Any excess of the cost of acquisition over the Group's share of the net fair value of the Recticel annual report 2021 114 identifiable assets, liabilities and contingent liabilities of a joint venture and an associate recognised at the date of acquisition is recognised as goodwill, which is included within the carrying amount of the investment. Any excess of the Group's share of the net fair value of the identifiable assets, liabilities and contingent liabilities over the cost of acquisition, after reassessment, is recognised immediately in profit or loss. IAS 28.28 only permits recognition of the gain or loss from downstream transactions “to the extent of unrelated investors’ interests in the associate or joint venture”. However, the standard does not specifically address the treatment of revenue derived from transactions with equity-method investees (i.e. revenue from the sale of goods, or interest revenue) and whether that revenue should be eliminated from the consolidated financial statements. In respect of the treatment of revenues derived from transactions with joint ventures and associates (i.e. sales services, interest revenue, …), the Group has opted not to eliminate its interest in these transactions. As a matter of example, Recticel receives EUR 100 interest income on a loan provided to a 50/50 joint venture. Under the accounting policy adopted by Recticel this interest income would be accounted for as EUR 100 interest income of the Group. The cost incurred by the joint venture would be accounted for on a proportional (50%) basis through “results in joint ventures and associates” without making any adjustment for the proportional interest held by Recticel. The requirements of IAS 36 are applied to determine whether it is necessary to recognise any impairment loss with respect to the Group’s investment in a joint venture and an associate. When necessary, the entire carrying amount of the investment (including goodwill) is tested for impairment in accordance with IAS 36 Impairment of Assets as a single asset by comparing its recoverable amount (higher of fair value and fair value less costs to sell) with its carrying amount. Any impairment loss recognised forms part of the carrying amount of the investment. Any reversal of that impairment loss is recognised in accordance with IAS 36 to the extent that the recoverable amount of the investment subsequently increases. Upon disposal of a joint venture and an associate that results in the Group losing significant inﬂuence over that joint venture and associate, any retained investment is measured at fair value at that date and the fair value is regarded as its fair value on initial recognition as a financial asset in accordance with IFRS 9. The difference between the previous carrying amount of the joint venture and associate attributable to the retained interest and its fair value is included in the determination of the gain or loss on disposal of the joint venture and associate. In addition, the Group accounts for all amounts previously recognised in other comprehensive income in relation to that joint venture and associate on the same basis as would be required if that joint venture and associate had directly disposed of the related assets or liabilities. Therefore, if a gain or loss previously recognised in other comprehensive income by that joint venture and associate would be reclassified to profit or loss on the disposal of the related assets or liabilities, the Group reclassifies the gain or loss from equity to profit or loss (as a reclassification adjustment) when it loses significant inﬂuence over that joint venture and associate. Investments accounted for using the equity method are currently only consisting of associates. In the income statement, the results from associates are split between ‘Associates’ and ‘Other associates’. As such, ‘Associates’ are considered as being part of the Group’s core business and are integrated in Operating profit (loss); i.e. currently Orsafoam; whereas ‘Other associates’ are not considered as being part of the Group’s core business and are not integrated in Operating profit (loss); i.e. currently Proseat and TEMDA2 (Automotive Interiors). • Discontinued operations A discontinued operation is a component of the group that either has been disposed of or is classified as held for sale and represents a business line for which there is a plan to dispose of. Recticel classifies a non-current asset (or disposal group) as held for sale if its carrying amount will be recovered principally through a sale transaction rather than through continuing use if all of the conditions of IFRS 5 are met. A disposal group is defined as a group of assets to be disposed of and liabilities directly associated with those assets that will be transferred. Immediately before classification as held for sale, the company measures the carrying amount of the asset (or all the assets and liabilities in the disposal group) in accordance with applicable IFRS. On initial classification as held for sale, non-current assets and disposal groups are recognized at the lower of carrying amount and fair value less costs to sell. Impairment losses on initial classification as held for sale are included in profit or loss. The same applies to gains and losses on subsequent re-measurement. Non- current assets classified as held for sale are no longer depreciated or amortized. • Business combinations Acquisitions of businesses are accounted for using the acquisition method. The consideration for each acquisition is measured at the aggregate of the fair values (at the date of exchange) of assets given, liabilities incurred or assumed, and equity instruments issued by the Group in exchange for control of the acquiree. Acquisition-related costs are recognised in profit or loss as incurred. When Recticel acquires an entity or business, the identifiable assets and liabilities of the acquiree are recognised at their fair value at acquisition date, except for: • deferred tax assets or liabilities and liabilities or assets related to employee benefit arrangements are recognised and measured in accordance with IAS 12 Income Taxes and IAS 19 Employee Benefits respectively; • liabilities or equity instruments related to share-based payment transactions of the acquiree or the replacement of an acquiree’s share-based payment transactions with share-based payment transactions of the Group are measured in accordance with IFRS 2 Share-based Payment at the acquisition date; and • assets (or disposal groups) that are classified as held for sale in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations are measured in accordance with that Standard. Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree, and the fair value of the acquirer’s previously held equity interest in the acquiree (if any) over the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed. Where such a difference is negative, Recticel annual report 2021 115 the excess is, after a reassessment of the values, recognised as income immediately as a bargain purchase gain. Non-controlling interests (minority shareholders) that are present ownership interests and entitle their holders to a proportionate share of the entity’s net assets in the event of liquidation may be initially measured either at fair value or at the non-controlling interests’ proportionate share of the recognised amounts of the acquiree’s identifiable net assets. The choice of measurement basis is made on a transaction- by-transaction basis. If Recticel increases its interest in an entity or business over which it did not yet exercise control (in principle increasing its interest up to and including 50% to 51% or more) (a business combination achieved in stages), the Group’s previously held equity interest in the acquiree is remeasured to fair value at the acquisition date (i.e. the date when the Group obtains control) and the resulting gain or loss, if any, is recognised in profit or loss. If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the Group reports provisional amounts for the items for which the accounting is incomplete. Those provisional amounts are adjusted during the measurement period (maximum one year after acquisition date), or additional assets or liabilities are recognised, to reﬂect new information obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the amounts recognised as of that date. Intangible assets acquired separately Intangible assets with finite useful lives that are acquired separately are carried at cost less accumulated amortisation and accumulated impairment losses. Amortisation is recognised on a straight-line basis over their estimated useful lives. The estimated useful life and amortisation method are reviewed at the end of each reporting period, with the effect of any changes in estimate being accounted for on a prospective basis. Intangible assets with indefinite useful lives that are acquired separately are carried at cost less accumulated impairment losses. Internally-generated intangible assets - research and development expenditure Expenditure on research activities is recognised as an expense in the period in which it is incurred. An internally-generated intangible asset arising from development (or from the development phase of an internal project) is recognised if, and only if, all the following have been demonstrated: • the technical feasibility of completing the intangible asset so that it will be available for use or sale; • the intention to complete the intangible asset and use or sell it; • the ability to use or sell the intangible asset; • how the intangible asset will generate probable future economic benefits; • the availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset; and • the ability to measure reliably the expenditure attributable to the intangible asset during its development. The amount initially recognised for internally- generated intangible assets is the sum of the expenditure incurred from the date when the intangible asset first meets the recognition criteria listed above. Where no internally- generated intangible asset can be recognised, development expenditure is recognised in profit or loss in the period in which it is incurred. Intangible assets acquired in a business combination Intangible assets acquired in a business combination and recognised separately from goodwill are initially recognised at their fair value at the acquisition date (which is regarded as their cost). After initial recognition, intangible assets acquired in a business combination are reported at cost less accumulated amortisation and accumulated impairment losses, on the same basis as intangible assets that are acquired separately. Derecognition of intangible assets An intangible asset is derecognised on disposal, or when no future economic benefits are expected from use or disposal. Gains or losses arising from derecognition of an intangible asset, measured as the difference between the net disposal proceeds and the carrying amount of the asset, and are recognised in profit or loss when the asset is derecognised. Goodwill Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree, and the fair value of the acquirer’s previously held equity interest in the acquiree (if any) over the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed. Goodwill arising on an acquisition of a business is carried at cost less accumulated impairment losses, if any, and is presented separately in the consolidated statement of financial position. Goodwill is reviewed for impairment at least annually. Any impairment loss is recognised immediately in the income statement and is not subsequently reversed. On disposal of a subsidiary, associate or jointly controlled entity, the related goodwill is included in the determination of the profit or loss on disposal. Property, plant and equipment An item of property, plant and equipment is recognised if it is probable that associated future economic benefits will ﬂow to the Group and if its cost can be measured reliably. After initial recognition, all items of property, plant and equipment are stated at cost, less accumulated depreciation and impairment losses, except for land which is not depreciated. Cost includes all direct costs and all expenditure incurred to bring the asset to its working condition and location for its intended use. Properties in the course of construction for production, supply or administrative purposes are carried at cost, less any recognised impairment loss. Cost includes professional fees and, for qualifying assets, borrowing costs capitalised in accordance with the Group's accounting policy. Such properties are classified to the appropriate categories of property, plant and equipment when completed and ready for Recticel annual report 2021 116 intended use. Depreciation of these assets, on the same basis as other property assets, commences when the assets are ready for their intended use. Subsequent expenditure related to an item of property, plant and equipment is expensed as incurred. Depreciation is provided over the estimated useful lives of the various classes of property, plant and equipment using the straight-line method. Depreciation starts when the assets are ready for their intended use. The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis. Project-related assets are depreciated over the production period of the project. In case of reallocation of fully depreciated assets, the latter might require a reconditioning. These reconditioning costs are amortised over the term of the new project, without additional revaluation or reversal of any impairments. The estimated useful lives of the most significant items of property, plant and equipment are within the following ranges: Land improvements : 25 years Offices : 25 to 40 years Industrial buildings : 25 years Plants : 10 to 15 years Machinery Heavy : 11 to 15 years Medium : 8 to 10 years Light : 5 to 7 years Pre-operating costs : 4 years Equipment : 5 to 10 years Furniture : 5 to 10 years Hardware : 3 to 10 years Vehicle ﬂeet Cars : 4 years Trucks : 7 years The gain or loss arising on the disposal or retirement of an asset is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in the income statement. Leases The Group has several leases for properties, machinery and equipment and cars and the rental contracts are typically closed for a fixed period. Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions. Leases are recognised as a right-of-use asset and corresponding liability at the date of commencement of the lease, i.e. when the leased asset is available for use by the Group. Each lease payment is allocated between the liability and finance cost. The finance cost is charged to the income statement over the lease period to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The right-of-use asset is depreciated over the shorter of the asset’s useful life and the lease term on a straight-line basis if the lease does not include a purchase option. If a purchase option is available and the Group judges that it is reasonably certain to be exercised, the right-of-use asset is depreciated over its useful life. Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the following lease payments: • fixed payments (including in-substance fixed payments), less any lease incentives receivable; • variable lease payments that are based on an index or a rate; and • purchase option, if any - if the lessee is reasonably certain to exercise that option. The lease payments are discounted using the interest rate implicit in the lease, if that rate can be determined, or the Group’s incremental borrowing rate. Right-of-use assets are measured at cost comprising the following: • the amount of the initial measurement of lease liability; • any lease payments made at or before the commencement date; • any initial direct costs (except for the leases already existing at transition date), and • dismantling costs. Right-of-use assets are presented separately and lease liabilities as part of financial liabilities in the statement of financial position. All lease payments that are due within 12 months are classified as current liabilities. All lease payments that are due at least 12 months after the reporting date are classified as non-current liabilities. Lease payments related to short-term leases and leases of low-value assets are recognised on a straight-line basis as an expense in profit or loss. Short-term leases are leases with a lease term of 12 months or less. Low-value assets comprise mainly IT-equipment (laptops, tablets, mobile phones, pc’s) and small items of office equipment and furniture. Some leases contain variable lease payments. Payments that vary due to the use of the underlying asset are variable lease payments (e.g. lease of property based on the number of square meters used). These variable lease payments are recognised as expense as incurred. There are no material lease agreements whereby the Group is lessor; except for one building rented to the Eurofoam group. Impairment of tangible and intangible assets Except for goodwill and intangible assets with an indefinite useful life which are tested for impairment at least annually, other tangible and intangible fixed assets are reviewed for impairment when there is an indication that their carrying amount will not be recoverable through use or sale. If an asset does not generate cash ﬂows that are independent from other assets, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. The recoverable amount is the higher of fair value less costs to sell or value-in-use and the carrying amount. In assessing the fair value or value-in-use, the estimated future cash ﬂows are discounted to their present value using a pre-tax discount rate that reﬂects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash ﬂows have been adjusted. If the recoverable amount of an asset (or cash- generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised as an expense immediately. Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no Recticel annual report 2021 117 impairment loss been recognised for the asset (or cash-generating unit) in previous years. However, impairment losses on goodwill are never reversed. Non-current assets held for sale Non-current assets and disposal groups are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable and the asset (or disposal group) is available for immediate sale in its present condition. Management must be committed to the sale, which should be expected to qualify for recognition as a completed sale within one year from the date of classification. Non-current assets (and disposal groups) classified as held for sale are measured at the lower of their previous carrying amount and fair value less costs to sell. Investment property Investment property, which is property held to earn rentals and/or for capital appreciation, is stated at its fair value at the reporting date. Gains or losses arising from changes in the fair value of investment property are included in profit or loss for the period in which they arise. Financial assets Financial assets are recognised or derecognised on the trade date which is the date the Group undertakes to purchase or sell the asset. Financial assets are initially measured at fair value, except for trade receivables. Trade receivables are measures at their transaction price. Transaction costs that are directly attributable to the acquisition or issue of financial assets are added to the fair value of the financial assets on initial recognition, except for financial assets at fair value through profit or loss, where the transaction costs are recognised immediately in profit or loss. After initial recognition, financial assets are measured at either amortised cost or fair value, based on the classification of the financial assets. • Classification of financial assets The classification of financial assets depends on the entity’s business model for managing the financial assets and the contractual terms of the cash ﬂows. Management determines the classification of its financial assets at initial recognition. Debt instruments (such as loans, trade and other receivables, cash and cash equivalents) are subsequently measured at amortised cost using the effective interest method, less any impairment if they are held for collection of contractual cash ﬂows where those cash ﬂows represent solely payments of principal and interest. The effective interest method is a method of calculating the amortised cost of a debt instrument and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees and margin points paid or received) through the expected life of the debt instrument, or, where appropriate, a shorter period, to the net carrying amount on initial recognition. Financial investments (equity investments) are normally measured in the consolidated statement of financial position at fair value through profit or loss. However, the Company can make an irrevocable election at initial recognition to measure the investment at fair value through other comprehensive income (“FVTOCI”), with dividend income recognised in profit or loss. Equity investments in non- listed companies are designated as financial assets at FVTOCI. • Impairment of financial assets IFRS 9 requires a forward-looking expected credit loss (“ECL”) approach to assess impairments of financial assets. As such, the Group recognises an allowance for ECLs for all debt instruments not held at fair value through profit or loss and contract assets. IFRS 9 provides a simplified approach for measuring the loss allowance at an amount equal to lifetime expected credit losses for trade receivables without a significant financing component (short-term trade receivables). These credit losses are the expected credit losses that result from all possible default events over the expected life of those trade receivables, using a provision matrix that considers historical information on defaults adjusted for forward-looking information. For long-term loans to related parties the general impairment assessment model is applied. IFRS 9 requires the Group to measure the loss allowance for a financial instrument at an amount equal to the lifetime expected credit loss if the credit risk on that financial instrument has increased significantly since initial recognition, or if the financial instrument is a purchased or originated credit-impaired financial asset. On the other hand, if the credit risk on a financial instrument has not increased significantly since initial recognition (except for a purchased or originated credit-impaired financial asset), the Group is required to measure the loss allowance for that financial instrument at an amount equal to 12 months expected credit loss. Management has concluded that it would require undue cost and effort to determine the credit risk of each loan on their respective dates of initial recognition. Accordingly, the Group recognises lifetime expected credit losses for these loans until they are derecognised. IFRS 9 applies the same measurement approach to loan commitments and financial guarantee contracts (other than measured at fair value through profit or loss). • Derecognition of financial assets The Group derecognises a financial asset only when the contractual rights to the cash ﬂows from the assets expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. If the Group neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Group recognises its retained interest in the asset and an associated liability for the amounts it may have to pay.If the Group retains substantially all the risks and rewards of ownership of a transferred financial asset, the Group continues to recognise the financial asset and also recognises a collateralised borrowing for the proceeds received. On the entire derecognition of a financial asset in its entirety, the difference between the asset’s carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss that had been Recticel annual report 2021 118 recognised in other comprehensive income and accumulated in equity, is recognised in profit or loss. On the partial derecognition of a financial asset other than its entirety (i.e. when the Group retains an option to repurchase part of a transferred asset), the Group allocates the previous carrying amount of the financial asset between the part it continues to recognise under continuing involvement, and the part it no longer recognises on the basis of the relative fair values of those parts on the date of the transfer. The difference between the carrying amount allocated to the part that is no longer recognised and the sum of the consideration is recognised in profit or loss. Inventories Inventories are stated at the lower of cost and net realisable value. Cost comprises direct materials and where applicable, direct labour costs and those overheads that have been incurred in bringing the inventories to their present location and condition. Cost is calculated using the weighted average method. Net realisable value represents the estimated selling price less all estimated costs of completion and costs necessary to make the sale. Financial liabilities and equity instruments An instrument is classified as a financial liability or as an equity instrument according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all its liabilities. Equity instruments issued by the Company are recorded at the proceeds received, net of direct issuance costs. Financial liabilities Financial liabilities (including interest-bearing borrowings and trade payables) are initially measured at fair value minus, in the case of a financial liability not at fair value through profit or loss, transaction costs that are directly attributable to the issue of the financial liability. Subsequently, they are measured at amortised cost, except for derivative instruments. • Interest-bearing borrowings and payables Interest-bearing borrowings are recorded at the proceeds received, net of transaction costs incurred. Borrowings are subsequently stated at amortised cost using the effective interest method. Any difference between the proceeds (net of transaction costs) and the redemption value (including premiums payable on settlement or redemption) is recognised in the income statement over the period of the borrowing. Trade payables which are not interest-bearing are stated at cost, being the fair value of the consideration to be paid. • Derivative financial instruments Derivative instruments with a negative fair value are classified at fair value through profit and loss (“FVTPL”), unless they are designated and effective as hedges. Hedge accounting The Group may designate certain derivatives, in respect of interest rate risk and foreign exchange rate risk, as hedging instruments in a cash ﬂow hedge relationship. At the inception of the hedge relationship, the entity documents the relationship between the hedging instrument and the hedged item, along with its risk management objectives and its strategy for undertaking various hedge transactions. Furthermore, at the inception of the hedge and on an ongoing basis, the Group documents whether the hedging instrument is effective in offsetting changes in fair values or cash ﬂows of the hedged item attributable to the hedged risk. • Cash ﬂow hedges Changes in the fair value of derivative financial instruments that are designated and effective as hedges of future cash ﬂows are recognised directly in equity and the ineffective portion is recognised immediately in the income statement. If the cash ﬂow hedge of a firm commitment or a forecasted transaction results in the recognition of an asset or a liability, then, at the time the asset or liability is recognised, the associated gains or losses on the derivative that had previously been recognised in equity are included in the initial measurement of the asset or liability. For hedges that do not result in the recognition of an asset or a liability, amounts deferred in equity are recognised in the income statement in the same period in which the hedged item affects net profit or loss. • Net investment hedge Hedges of net investments in foreign operations are accounted for similarly to cash ﬂow hedges. Any gain or loss on the hedging instrument relating to the effective portion of the hedge is recognised in other comprehensive income and accumulated in the foreign currency reserve. The gain or loss to the ineffective portion is recognised immediately in profit and loss. • Fair value hedges A derivative instrument is recognised as fair value hedge when it hedges the exposure to variation of the fair value of the recognised assets or liabilities. Derivatives classified as a fair value hedge and the hedged assets or liabilities are carried at fair value. The corresponding changes of the fair value are recognised in the income statement. Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated, or exercised, or no longer qualifies for hedge accounting. At that time, any cumulative gain or loss on the hedging instrument recognised in equity is retained in equity until the forecasted transaction occurs. If a hedged transaction is no longer expected to occur, the net cumulative gain or loss recognised in equity is transferred to net profit or loss for the period. Employee benefit liabilities • Post-employment benefits In accordance with the laws and practices of each country, the affiliated companies of the Group operate defined benefit and defined contribution retirement benefit plans. It is Group policy to operate defined contribution plans for newly-hired employees where this is possible and appropriate. Contributions payable to defined contribution plans are recognised as an expense in the period in which the related employees’ service is rendered. Recticel annual report 2021 119 For defined benefit plans, the amount recognised in the statement of financial position is the present value of the defined benefit obligation less the fair value of any plan assets. If the amount to be recognised in the statement of financial position is an asset, the asset recognised is restricted to the asset ceiling, which is defined as the present value of any economic benefits available in the form of refunds from the plan or reductions in future contributions to the plan. For funded plans subject to a minimum funding requirement, where contributions payable to cover an existing shortfall on the minimum funding basis in respect of service already received are not available as a refund or reduction in future contributions after they are paid into the plan, an additional liability is recognised, where necessary, in accordance with IFRIC 14. In the income statement, current and past service costs (including curtailments), settlement costs and administration expenses are charged in ‘‘other operating revenues & expenses’’, while the net interest cost is booked in ‘‘other financial income & expenses’’. The present value of the defined benefit obligation and the related current and past service costs are calculated by qualified actuaries using the projected unit credit method. The discount rate is based on the prevailing yields of high-quality corporate bonds with a currency and term consistent with the currency and term of the benefit obligations. For currencies for which there is no deep market in such bonds, government bonds are taken into account. No provisions for death in service is included in the defined- benefit obligations as it is fully insured, and the Group has no intention not to continue this insurance policy. As there is no market price available for group insurance contracts, the fair value of such contracts is estimated by discounting the expected future cash ﬂows (i.e. the amounts guaranteed by the insurer) using a discount rate that reﬂects both the risk associated with the plan assets and the maturity or expected disposal date of those assets. The risk associated with these assets is based on the market situation at the reporting date. Remeasurements include: • actuarial gains and losses resulting from differences between previous actuarial assumptions and actual experience, and from changes in actuarial assumptions; • the return on plan assets; and • any changes in the effect of the asset ceiling or additional liability recognised under IFRIC 14, excluding amounts included in net interest. Such remeasurements are recognised in other comprehensive income. Past service costs, arising from plan amendments, are recognised immediately as an expense. Defined contribution pension plans in Belgium and Switzerland are ‘hybrid’ pension plans that qualify as defined benefit plans for IFRS purposes, because they are by law subject to minimum guaranteed rates of return and have to guarantee minimum annuity conversion rates. There is therefore a risk that the Company may have to pay additional contributions related to past service. Any such additional contributions will depend on the actual investment returns and the future evolution of the minimum guarantees. • Termination benefits A liability and expense for termination benefits is recognised at the earlier of (a) the date when the offer of those benefits can no longer be withdrawn, and (b) the date when costs are recognised for a restructuring that is within the scope of IAS 37 and involves the payment of termination benefits. Share-based payments Equity-settled share-based payments to employees and others providing similar services are measured at the fair value of the equity instrument at the grant date. Fair value is measured by use of a Black & Scholes model. Further details on how the fair value of equity-settled share-based transactions has been determined can be found in note 2.4.2.6.2. The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the Group’s estimate of shares that eventually will be vested. The above policy is applied to all equity-settled share-based payments that were granted after 7 November 2002 and that vested after 01 January 2005. No amount has been recognised in the financial statements in respect of the other equity-settled shared- based payments. Provisions • General Provisions are recognised when (i) the Group has a present obligation (legal or constructive) as a result of a past event, (ii) it is probable that the Group will be required to settle the obligation, and (iii) a reliable estimate can be made of the amount of the obligation. The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. Where the effect of the time value of money is material, the amount is the present value of expenditures required to settle the obligation. Impacts of changes in discount rates are generally recognised in the financial result. When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, a receivable is recognised as an asset if it is virtually certain that reimbursement will be received if the Group settles the obligation. • Onerous contracts An onerous contract is a contract in which the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be received under it. Present obligations arising from onerous contracts are recognised and measured as provisions. • Restructurings A restructuring provision is recognised when the Group has developed a detailed formal plan for the restructuring and has, by starting to implement the plan or announcing its main features to those affected by it, raised a valid expectation with those affected that it will carry out the restructuring. The measurement of a restructuring provision includes only the direct expenditures arising from the restructuring, which are those amounts that are both necessarily entailed by the restructuring and not associated with the ongoing activities of the entity. Recticel annual report 2021 120 • Environmental liabilities Recticel analyses twice a year all its environmental risks and the corresponding provisions. The Group measures these provisions to the best of its knowledge of applicable regulations, the nature and extent of the pollution, clean-up techniques, and other available information. Revenue recognition IFRS 15 establishes the principles that an entity applies when reporting information about the nature, amount, timing and uncertainty of revenue and cash ﬂows from a contract with a customer. Applying IFRS 15, an entity recognises revenue to depict the transfer of promised goods or services to the customer in an amount that reﬂects the consideration to which the entity expects to be entitled in exchange for those goods or services. Customers obtain control of products when the goods are delivered to and have been accepted at their premises. Invoices are generated and revenue is recognised at that point in time. To recognise revenue, IFRS 15 applies a “five steps” model: • identify the contract(s) with a customer. • identify the performance obligations in the contract. • determine the transaction price. • allocate the transaction price to each performance obligation. • recognise revenue when a performance obligation is satisfied by transferring a promised good or service to a customer (which is when the customer obtains control of that good or service). • Transaction price The transaction price is the amount of consideration to which an entity expects to be entitled in exchange for transferring promised goods or services to a customer. If the consideration promised in a contract includes a variable amount, an entity must estimate the amount of consideration to which it expects to be entitled in exchange for transferring the promised goods or services to a customer. The most common types of variable consideration that can be identified are: • Volume discounts (Engineered Foams, Bedding, Insulation) • Year-end rebates (Engineered Foams, Bedding, Insulation) • Adjustments to cope with changes in raw material prices on a prospective basis (Engineered Foams). It is not unusual to agree on yearly supply agreements with the customer which fixes the selling prices of the goods for the relevant year. These agreements do not include any commitments to volumes made by the customer. The amount of revenue recognised is adjusted for expected rebates and discounts. A contract liability is being recognised upon selling the goods to the customer and released when the credit note is issued. If a credit note is issued to the customer to compensate for quality claims, this shall be recognised as a reduction of the revenues. The most common types of considerations paid to the customer (in bedding and insulation) relate to: • Participation to ﬂyers • Participation to advertising campaigns • Promotional in-store activities The considerations paid to participate in the customer’s ﬂyers shall be deducted from revenue as the services provided by the customer to the Group can generally not be considered as being distinct. Interest income & expenses Interest income/expenses is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts/ outﬂows throughout the expected life of the financial asset/liability to that asset/liability’s net carrying amount. Dividend income Dividend income from investments is recognised when the shareholders’ rights to receive payment have been established. Government grants Government grants are not recognised until there is reasonable assurance that the Group will comply with the conditions attaching to them and that the grants will be received. Government grants relating to staff training costs are recognised as income over the periods required to match them with the related costs and are deducted from the related expense. Government grants relating to property, plant & equipment are treated by deducting the received grants from the carrying amount of the related assets. These grants are recognised as income over the useful life of the depreciable assets. Income taxes The tax expense represents the sum of the current tax expense and deferred tax expense. The current tax expense is based on the taxable profit for the year. The taxable profit differs from the result of the period before taxes as reported in the income statement because it excludes items of income or expenditure that are taxable or deductible in other years and items that will never become taxable or deductible. The Group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting date. Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax base used in the computation of taxable profit. It is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit. Recticel annual report 2021 121 Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and associates, and interests in joint ventures, except where the Group is able to control the reversal of the temporary difference and when it is probable that the temporary difference will not reverse in the foreseeable future. No deferred tax liabilities have been recognised on undistributed retained earnings of subsidiaries, associates and joint ventures, as the impact is not material. The carrying amount of deferred tax assets is reviewed at least at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the income statement, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. 2.4.2.1.4 Major sources of estimation uncertainty and key judgments No key judgements were made in the preparation of the financials and there were no major sources of estimation uncertainty. All other items noted below are related to normal judgements and estimates Drawing up the annual accounts in accordance with IFRS requires management to make the necessary judgments, estimates and assumptions. The management bases its estimates and assumptions on past experience and other reasonable assessment criteria. These are reviewed periodically, and the effects of such reviews are taken into account in the annual accounts of the period concerned. Future events which may have a financial impact on the Group are also included in this. The estimated results of such possible future events may consequently diverge from the actual impact on results. Judgments and estimates were made, inter alia, regarding: • impairments of goodwill, intangible assets, property, plant and equipment and right-of- use assets; • determination of loss allowances for expected credit losses; • determination of write-downs on inventories; • determination of provisions for restructurings; • determination of provisions for onerous contracts; • determination of provisions for contingent liabilities, litigations and other exposures; • valuation of post-employment defined benefit obligations, other long-term employee benefits and termination benefits; • the recoverability of deferred tax assets; • the recognition of revenue related to the sale of moulds over a period of 4 years; • the assessment of the lease term is used as judgement within IFRS 16; • business combinations including fair value accounting and goodwill determination. It is not excluded that future revisions of such estimates and judgments could trigger an adjustment in the value of the assets and liabilities in future financial years. Impairments on goodwill, intangible assets and property, plant and equipment and right-of-use assets For amortizable long-term assets, an impairment assessment will in first place be made at the level of the individual asset. Only when it is not possible to estimate a recoverable value on an individual level, the evaluation will be made at the level of the cash generating unit (hereafter “CGU”) to which the asset belongs. For amortizable long-term assets, an impairment analysis should be performed in case of impairment indicators. If such indicators exist, an impairment analysis shall be performed at the CGU level. For goodwill (and other not depreciated long term assets) an impairment test is performed at least annually. The carrying amount can be allocated on a reasonable and consistent basis. The allocation of goodwill to a CGU or a group of CGUs also takes account of the synergies of the business combination expected by the decision maker. Goodwill can be allocated for impairment testing to a group of CGUs, if the chief operating decision maker considers this as the most appropriate allocation. There is a link between the level at which goodwill is tested for impairment and the level of internal reporting that reﬂects the way the entity manages its operations and with which the goodwill is associated (as such it cannot exceed the level of the reported segments as defined by IFRS 8). The CGU level is defined following the market and production capacities. This approach leads to the determination of five CGUs in Engineered Foams and three CGUs in Insulation: • CGU “Engineered Foams - United Kingdom”; • CGU “Engineered Foams - Continental Europe”; • CGU “Engineered Foams - Scandinavia”; • CGU “Engineered Foams - USA”; • CGU “Engineered Foams – Asia”. • CGU “Insulation - United Kingdom”; • CGU “Insulation - Continental Europe”; • CGU “Insulation – Scandinavia”. An impairment analysis was performed for the CGUs: • CGU “Engineered Foams - United Kingdom”; • CGU “Engineered Foams - Continental Europe”; • CGU “Engineered Foams - Scandinavia”; considering the goodwill allocated to them. Recticel annual report 2021 122 For the other CGUs, current and expected results do not provide any particular impairment indicator, which would necessitate further impairment testing. 100% of the net book value of total goodwill was subject to impairment testing, and is composed as follows: For 2021: in thousand EUR Group Recticel Engineered Foams Insulation Total United Kingdom 3,221 988 4,208 Continental Europe 1,060 3,056 4,116 Scandinavia 5,396 0 5,396 Total net book value of goodwill 9,676 4,044 13,721 For 2020: in thousand EUR Group Recticel Engineered Foams Bedding Insulation Total United Kingdom 3,015 0 923 3,938 Continental Europe 1,062 0 2,211 3,273 Scandinavia 5,328 0 0 5,328 Other 0 11,600 0 11,600 Total net book value of goodwill 9,405 11,600 3,134 24,139 The net book value of the assets, other than goodwill, retained for impairment tests, represents about 91.4% of the total property, plant and equipment, 23.2% of the total intangible assets and 45.5% of the total right-of-use assets. The examined assets relate to (i) the Engineered Foams’ activities in the United Kingdom, Continental Europe and Scandinavia and to (ii) the Insulation operations of the Group. The below table provides an overview of impairments recognised by segment: For 2021: in thousand EUR Group Recticel Engineered Foams Insulation Total United Kingdom Continental Europe Scandinavia Goodwill 3,221 1,060 5,396 4,044 13,721 Other intangible assets 39 6,916 587 550 8,092 Property, plant & equipment 3,577 184,596 7,006 91,189 286,368 Assets under construction 968 12,667 274 2,778 16,687 Right-of-useassets 19,582 3,863 2,917 2,112 28,474 Total net book value 27,387 209,102 16,180 100,674 353,343 of which impairments recognised during the period 0 0 0 27 27 Footnote: Working capital is not included in the analysis. Recticel annual report 2021 123 For 2020: in thousand EUR Group Recticel Engineered Foams Insulation Total United Kingdom Continental Europe Scandinavia Goodwill 3,015 1,062 5,328 3,134 12,539 Other intangible assets 11 501 309 1,063 1,884 Property, plant & equipment 2,501 43,721 7,055 93,371 146,648 Assets under construction 1,189 7,004 1,056 3,736 12,985 Right-of-useassets 12,615 2,864 3,917 3,891 23,287 Total net book value 19,331 55,152 17,665 105,195 197,343 of which impairments recognised during the period 0 (1,273) 0 0 (1,273) Footnote: Working capital is not included in the analysis. Impairment charges are not linked to the general impairment analysis but relate mainly to (i) idle assets in Engineered Foams in Spain (EUR -1.3 million) and (ii) idle assets in Bedding following the closure of the Hassfurt (Germany) plant (EUR -1.1 million), which was sold in 2020 For the impairment test of the items included in the table above, certain assumptions were made. The impairment tests have been applied on the “cash-generating units” (“CGU”) on the basis of the principles set out above. The recoverable amount of the total CGU is determined on the basis of the value-in-use model. When determining its expected future cash ﬂows, the Group takes into account prudent, though realistic, assumptions regarding the evolution of its markets, its sales, the raw materials prices, the impact of past restructurings and the gross margins, which all are based on (i) the past experiences of the management and/or (ii) which are in line with trustworthy external information sources. It can however not be excluded that a future reassessment of assumptions and/or market analysis induced by future developments in the economic environment might lead to the recognition of additional impairments. For the discounting of the future cash ﬂows, a uniform overall Group-based pre-tax discount rate of 7.1% is used for all CGUs (8.2% in 2020). This pre-tax discount rate is based on a (long-term) weighted average cost of capital based on the current market expectations of the time value of money and risks for which future cash ﬂows must be adjusted; the risks being implicit in the cash ﬂows. For countries with a higher perceived risk (i.e. emerging markets), the level of investments is very limited (1.2% of total fixed assets); hence no separate pre-tax discount rate is used. The pre-tax discount rate for impairment testing is based on the following assumptions: (EUR based) Group target ratios: 2021 2020 Gearing: net financial debt/total equity 50% 50% % net financial debt 33% 33% % total equity 67% 67% Pre-tax cost of debt 1.64% 2.32% 1 Pre-tax cost of equity = (R f + (E m * ᵝ) + S p )/(1-T) 12.74% 12.83% Risk free interest rate = R f 0.00% 0.10% Beta = ᵝ 1.27 1.39 Market equity risk premium = E m 6.0% 6.0% Small cap premium = S p 1.65% 1.65% Corporate tax rate = T 21.3% 21.6% Assumed inﬂation rate 1.9% 1.1% Pre-tax WACC (weighted average cost of capital) 7.1% 8.2% 1 the 2020 pre-tax cost of debt integrates the impact of the FoamPartner acquisition (cfr 2.4.2.4.8. Business combinations) Recticel annual report 2021 124 The discount factors are reviewed at least annually. Due to the COVID-19 crisis, some assumptions of the sensitivity analysis have been modified compared to the assumptions used per year-end 2020. A first sensitivity analysis (A) is performed to measure the impact of a changing WACC rate on the outcome of the impairment tests. A second sensitivity analysis (B) is performed to measure the impact of a changing gross margin (- 1%) on the outcome of the impairment tests. A third sensitivity analysis (C) is performance to measure the impact of a changing sales volume level (-5.0%). A fourth sensitivity analysis is performed to measure the combined impact of the above sensitivity analyses. Key assumptions The dynamics of the business model, budgets and projected cash ﬂows are based on stable cost structures which reﬂect inﬂation rates on labour and other costs, stable fixed costs and capital expenditure (except for the CGU Engineered Foams – United Kingdom). Gross margins and operating results are sensitive to the volatility of chemical raw material costs, which are unpredictable. Therefore, the budgets assume that increases or decreases in material costs are compensated through adaptations of the sales prices. For the CGU “Engineered Foams – United Kingdom”, “Engineered Foams – Continental Europe” and “Engineered Foams – Scandinavia” the value-in-use model projections are based on budgets and financial plans covering in total a three- year period with a sales growth rate of 2.00% as from the second year. After this 3-year period, a perpetuity value is taken into account without growth rate. For the first year (i.e. 2022) EBITDA is based on the full-year 2021 level and the full-year effect of the efficiency measures taken in 2021. On this basis, the value-in-use of the CGU “Engineered Foams – United Kingdom” amounts to 2.3 times (2020: 2.6 times) the net asset book value, the value-in-use of the CGU “Engineered Foams – Continental Europe” amounts to 1.6 times (2020: 2.9 times) the net asset book value, and the value-in-use of the CGU “Engineered Foams – Scandinavia” amounts to 5.7 times (2020: 6.0 times) the net asset book value. Sensitivity analysis A first sensitivity analysis (A) is performed to measure the impact of a changing WACC rate (+1%) on the outcome of the impairment tests (see overview table below). A second sensitivity analysis (B) is performed to measure the impact of a changing gross margin on sales (-1%) on the outcome of the impairment tests – applied on the business plan 2022-2024 and the perpetuity (see overview table below). A third sensitivity analysis (C) is performed to measure the impact of a changing sales volume level (-5% as from 2023) on the outcome of the impairment tests (see overview table below). A fourth sensitivity analysis is performed to measure the combined impact of the above sensitivity analyses. For the sensitivity analyses it is assumed that all other parameters of the underlying assumptions, such as market evolution, sales, raw materials prices, impact of past restructurings and gross margins, operating charges, working capital needs, capital expenditure, …, remain unchanged. in thousand EUR Sensitivity Discounted Cash Flow / Net asset base (including right-of-use assets) Base case 1% increase of WACC (A) 1% decrease of gross margin on sales (B) 5% decrease of net sales (C) Combination of (A), (B) and (C) Engineered Foams - United Kingdom 2.3 times book value 2.0 times book value 2.1 times book value 1.5 times book value 1.2 times book value Engineered Foams - Continental Europe 1.6 times book value 1.5 times book value 1.5 times book value 1.1 times book value 0.9 times book value Engineered Foams - Scandinavia 5.7 times book value 5.1 times book value 5.4 times book value 4.5 times book value 3.8 times book value Recticel annual report 2021 125 Loss allowances for expected credit losses A loss allowance for expected credit losses is recognised for trade debtors for which a risk of total or partial non-recovery of outstanding receivables exists due to the debtor’s poor financial condition or for economic, legal or political reasons. The decision to classify a receivable as doubtful will be made by the management on the basis of all information available to them at any time. In line with the Group accounting principles, details on the amounts of the loss allowance for expected credit losses can be found in note 2.4.2.5.9. Since the outbreak of the COVID-19 crisis the Group’s credit management processes have proven their effectiveness leading to a reducing trend in the number of overdue customers, and no significant credit losses. COVID-19 did not lead to an increase of the default rates used to calculate the expected credit losses. The amount of expected credit losses on external guarantees is assessed at each reporting date to reﬂect changes in credit risk since the guarantee was granted. When determining whether the credit risk of a guarantee has increased significantly since the issuance and when estimating expected credit losses, Recticel considers reasonable and supportable information that is relevant and available without undue cost or effort. This includes both quantitative and qualitative information and analysis, based on the Group’s historical experience and informed credit assessment and including forward-looking information. Loans granted to Associates included a subordinated vendor loan of EUR 10 million (maturity 2027) granted on 30 June 2020 to TEMDA2 GmbH, the Automotive joint venture which acquired the Automotive Interiors activities (cfr. 2.4.2.4.7.). On the basis of the assessment performed by the management no adjustment is to be made to the value of the latter loan. Put/call options on discontinued operations Proseat and Automotive Interiors On 19 February 2019, Recticel announced the closing of the transactions as a result of which Sekisui Plastics Co., Ltd. acquired 75% in Proseat. Since then Recticel holds a 25% participation in Proseat with the option to sell this remaining participation after three years. As per 30 June 2021 the fair value of the Proseat option has been reduced from EUR 4.9 million to zero, and further to EUR -2.5 million by 31 December 2021. In April 2022, Recticel notified Sekisui that it wishes to exercise its put option. On 01 July 2020, Recticel announced the closing of the divestment of its Automotive Interiors business to TEMDA2 GmbH, a new joint venture with Admetos. Recticel holds a participation of 49% in this new joint venture. The agreement contains reciprocal call/put options - for Admetos to acquire, or Recticel to sell its remaining 49% share -, which are exercisable as from March 2024. A valuation of the put/call structure on the remaining 49% participation in the Automotive joint venture TEMDA2/Ascorium has been made per 31 December 2021, valuing the fair value of the option amounted to zero (same as per 31 December 2020). Both put/call option structures have been recognised as derivative financial instruments at fair value with changes in fair value to be recognised in profit or loss. The value of both options have been calculated using the Black & Sholes option price formula, with the following key assumptions : (i) spot price equal to the estimated enterprise value (Proseat) and equity value (TEMDA2) per end December 2021, (ii) automotive parts’ sector volatility (32.2%), (iii) maturity based on terms and conditions set out in the initial share purchase agreement, (iv) a risk-free interest rate of -0.75% and (iv) a dividend yield of 0%. Provisions for restructurings and onerous contracts A restructuring provision is recognised when the Group has developed a detailed formal plan for the restructuring and has, by starting to implement the plan or announcing its main features to those affected by it, raised a valid expectation in those affected that it will carry out the restructuring. An onerous contract is a contract in which the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be received under it. In line with the Group accounting principles, details on the amounts of provisions for restructurings and onerous contracts can be found in notes 2.4.2.3.1., 2.4.2.4.3. and 2.4.2.5.14. Provisions for contingent liabilities, litigations and other exposures Any significant litigation (tax and other, including threat of litigation) is reviewed by Recticel’s in-house lawyers with the support, when appropriate, of external counsels at least every half-year. This review includes an assessment of the need to recognise provisions and/or to re-measure existing provisions together with the Finance department and the Insurance department. Further details are provided in note 2.4.2.6.9. Valuation of post-employment defined benefit obligations, other long-term employee benefits and termination benefits The actuarial assumptions used in determining the defined benefit obligations at December 31, and the annual cost, can be found in note 2.4.2.5.13. All main employee benefit plans are assessed annually by independent actuaries. Discount rates and inﬂation rates are defined centrally by management. Other assumptions (such as future salary increases and demographic assumptions) are defined at a local level. All plans are supervised by the Group’s central Human Resources department with the help of a central actuary to check the acceptability of the results and ensure consistency in reporting. Current and deferred tax All tax returns are prepared in good faith based on the available information, with often the assistance of external tax advisors. There are several tax audits ongoing in the Group, notably in The Netherlands and Poland. While the ultimate outcome of these tax audits is not certain, the Group has considered the merits of its filing positions in the overall evaluation of potential tax liabilities and believes that adequate liabilities are recorded in the consolidated financial statements. However, important tax corrections can never be excluded. In such case, Recticel will defend its position, always in full collaboration with the tax authorities. The tax audit in Germany, which was still ongoing in 2020, has been closed without material corrections. Deferred tax assets are recognised for deductible temporary differences and unused tax losses and other tax attributes to the extent that future taxable profits are expected to be Recticel annual report 2021 126 available against which they can be used. For this purpose, management reviews the recognition of deferred tax assets based on the business plans of the entities concerned. Net deferred tax assets decreased from EUR 13.1 million on 31 December 2020 to EUR 10.6 million on 31 December 2021, following the acquisition of FoamPartner and the fair value accounting as per IFRS 3. Deferred tax assets are recognised mainly in Belgium (Recticel NV/SA – EUR 33.2 million), France (Recticel SAS – EUR 8.6 million), the United Kingdom (Recticel Ltd. - EUR 6.2 million) and Spain (Recticel Iberica – EUR 5.7 million), (amounts before offset with deferred tax liabilities). Assets held for sale - Discontinued operations In accordance with accounting standard IFRS 5, the Bedding segment – which per 31 December 2021 was in the process of being transferred to the Aquinos Group has been reclassified as assets and liabilities held for sale. The operating result of the Bedding segment has been presented in the consolidated financials as Result from Discontinued Operations. For comparison reasons, the formerly published 2020 financials have been restated accordingly. Despite the fact that for the Engineered Foams segment (i) a decision for divestment has been taken by the Board of Directors, (ii) a binding offer was received, (iii) a shareholders’ approval was received, IFRS 5 has not been applied because legal carve-outs still have to be executed and regulatory anti- trust approvals still have to be received. This segment remains included in the Group reporting as before. Investment property Investment property, which is property held to earn rentals and/or for capital appreciation, is stated at its fair value at the reporting date. The fair value assessment as per 31 December 2021 led Recticel to increase the value of its investment property by EUR 4.2 million. This gain, arising from the change in the fair value of investment property, is included in profit or loss for the period. 2.4.2.1.5 COVID-19 impact In the preparation of the consolidated financial statements for the year ended 31 December 2021, management considered the current economic environment and the impact of COVID-19. Despite the negative impact on the performance and cash ﬂows during 2021 on the Bedding division (which has been divested on 31 March 2022), Recticel maintains a solid financial and liquidity position and meets its financial covenants. As such, management concluded the company is able to continue as a going concern with no long-term impact from COVID-19. 2.4.2.1.6 Brexit The annual turnover of the Group in the UK represents 18.0% of total consolidated sales in 2021. The products the Group sells in the UK are mainly produced locally. The direct impact of Brexit concerns (i) the import of chemical raw materials necessary for local production, as these raw materials are not available in the UK, and (ii) a currency exchange rate risk. The Brexit treaty concluded in 2020 between the European Union and the United Kingdom has led to the elimination of possible risks with regard to the supply of raw materials. 2.4.2.1.7 Climate change The Group’s operations are generally speaking not energy intensive. Consequently, Recticel’s activities and products have a limited negative impact on the emission of greenhouse gases. Moreover, this is overcompensated by Recticel’s Insulation activities, that produce high-performance thermal insulation boards which over their product lifetime substantially overcompensate any negative impact on climate change from the Group’s operations. Going forward, Recticel will become an even more “green company” as its insulation products will reduce the impact of heating buildings; hence it positively mitigates impact on climate change. Climate change might negatively impact the supply chain (raw material availability and prices), however, the Group is looking into alternative solutions such as (chemical and mechanical) recycling of life-end products. 2.4.2.1.8 Russia-Ukraine conﬂict Currently Recticel has no local operations in Russia and Ukraine. Neither does Recticel export to Russia and Ukraine. Consequently, there is no direct impact observed nor to be expected. However, it is not excluded that future operations and business are affected indirectly by the conﬂict. These indirect impacts may come from supply issues, an inﬂationary macro-economic environment, credit risks on customers and increasing financing costs. It is expected that these eventual impacts on operations and financial position should remain limited for the Group. Recticel annual report 2021 127 2.4.2.2 Changes in scope of consolidation The following changes in the scope of consolidation took place during the year 2021: Acquisition of the Swiss-based FoamPartner group - a global provider of high value-added technical foam solutions in the Mobility, Industrial Specialties and Living & Care markets. FoamPartner is fully integrated in the consolidated statements from 01 April 2021 and is reported under the segment Engineered Foams. The acquired FoamPartner companies are: • FoamPartner Germany GmbH - Germany, which merged with FoamPartner Converting Center GmbH, Germany, FoamPartner Leverkusen GmbH, Germany and FoamPartner Delmenhorst GmbH, Germany • Frina Mousse sàrl – France (in liquidation) • FoamPartner Switzerland AG - Switzerland, which merged with Buttikofer AG, Switzerland • FoamPartner Holding AG - Switzerland • FoamPartner America Inc - USA • FoamPartner Singapore - Singapore • FoamPartner Polyurethane Materials (Changzhou) Co., Ltd. - China • FoamPartner Trading (Shanghai) Ltd - China End-2021, Recticel Bedding Belgium SA/NV was set up in the context of the carve-out of the Bedding activities which are to be sold to Aquinos (see 2.4.2.4.7 Discontinued operations). So, following the agreement reached with the Aquinos Group on the divestment of the Group’s Bedding activities, and in accordance with IFRS 5, the Bedding activities are presented as discontinued operations in the consolidated financial statements. For legal entities impacted by disposal of Bedding activities, see note 2.4.2.5.4. Despite the fact that for the Engineered Foams segment (i) a decision for divestment has been taken by the Board of Directors, (ii) a binding offer was received, (iii) a shareholders’ approval was received, IFRS 5 has not been applied because legal carve-outs still have to be executed and regulatory anti- trust approvals still have to be received. The following changes in the scope of consolidation took place during the year 2020: On 01 July 2020, Recticel announced the closing of the divestment of its Automotive Interiors business to TEMDA2 GmbH, a new joint venture with Admetos. Recticel continues to hold a participation of 49% in this new joint venture. The agreement contains reciprocal call/put options - for Admetos to acquire, or Recticel to sell its remaining 49% share -, which are exercisable as from March 2024. The disposal of the Automotive Interiors activities comprises the following companies: • Recticel UREPP Belgium NV - Belgium • Ningbo Recticel Automotive Parts Co. Ltd – China • Shenyang Recticel Automotive Parts Co. Ltd – China • Shenyang II Recticel Automotive Parts Co. Ltd – China • Langfang Recticel Automotive Parts Co. Ltd – China • Changchun Recticel Automotive Parts Co. Ltd – China • RAI Most s.r.o. – Czech Republic • Recticel Czech Automotive s.r.o. – Czech Republic • Recticel Interiors CZ s.r.o. – Czech Republic • Recticel Automobilsysteme GmbH – Germany • Recticel North America Inc – United States The new joint venture TEMDA2 GmbH has been integrated following the equity method under the heading ‘Investments in other associates’. Furthermore, Recticel sold its 50% stake in Eurofoam to its joint-venture partner Greiner AG. The Eurofoam joint venture was established in 1992 to develop ﬂexible foams activities in Eastern Europe. In 1997, the joint venture was extended by both partners’ contribution of their existing activities in Austria and Germany. Eurofoam is headquartered in Vienna (Austria) and operates in various Central and Eastern European countries. It employs approximately 2,100 people and realized sales of EUR 400 million in 2019. In accordance with IFRS 5, both above- mentioned businesses have been presented as discontinued operations in the consolidated income statement. Details are disclosed in note 2.4.2.4.7. Recticel annual report 2021 128 2.4.2.3 Business and geographical segments 2.4.2.3.1 Business segments Following the intended disposal of the Bedding segment (2022), the principal market segments for Recticel’s goods and services are reported as from 2021 under three operating segments: Engineered Foams, Insulation and Corporate. IFRS 8 requires operating segments to be identified on the basis of the internal reporting structure of the Group that allows a regular performance review by the chief operating decision maker and an adequate allocation of resources to each segment. The information reported to the Group’s chief operating decision maker for the purpose of resource allocation and performance assessment per segment is more specifically focussed on Sales, EBITDA, Operating profit (loss), Capital Employed and Operational Cash Flow per segment. For more details on these segments, reference is made to the first part of this annual report. Information regarding the Group’s reportable segments is presented below. Inter-segment sales are made at conditions which are applicable under the framework of the Group Transfer Pricing Policy. Income statement for the year 2021 in thousand EUR Group Recticel Engineered Foams Insulation Corporate & Eliminations Total SALES External sales 2 583,559 390,558 58,679 1,032,795 Inter-segment sales 0 0 0 0 Total sales 583,559 390,558 58,679 1,032,795 OPERATING PROFIT (LOSS) Unallocated corporate expenses¹ (30,051) Operating profit (loss) 25,168 51,415 (30,051) 46,532 Financial result (4,538) Income from other associates, impairments other associates and change in fair value of option structures (6,864) Result for the period before taxes 35,130 Income taxes 14,335 Result for the period after taxes - Continuing operations 49,465 Result for the period after taxes - Discontinued operations 4,876 Result for the period after taxes - Continuingand discontinued operations 54,341 of which non-controlling interests 819 of which share of the Group 53,522 1 Relates to headquarters’ costs which include EUR 16.6 million consultancy fees (see note 2.4.2.4.3.). 2 External sales Corporate represents sales of chemical raw materials at cost to Proseat and TEMDA2 companies. Recticel annual report 2021 129 Income statement for the year 2020 (restated) in thousand EUR Group Recticel Engineered Foams Insulation Corporate & Eliminations Total SALES External sales (2) 318,528 249,246 49,110 616,883 Inter-segment sales 0 0 0 0 Total sales 318,528 249,246 49,110 616,883 OPERATING PROFIT (LOSS) Unallocated corporate expenses¹ (22,645) Operating profit (loss) 14,812 16,939 (22,645) 9,106 Financial result (3,588) Income from other associates and change in fair value of option structures (10,212) Result for the period before taxes (4,694) Income taxes (3,470) Result for the period after taxes - Continuing operations (8,164) Result for the period after taxes - Discontinued operations 71,319 Result for the period after taxes - Continuingand discontinued operations 63,155 of which non-controlling interests 4 of which share of the Group 63,151 1 Includesheadquarters’ costs: EUR 14.7 million (2019: EUR 14.4 million) and R&D expenses (Corporate Programme): EUR 2.4 million (2019: EUR 2.5 million). 2 External sales Corporate represents sales of chemical raw materials at cost to Proseat and TEMDA2 companies. Other information 2021 in thousand EUR Group Recticel Engineered Foams Insulation Corporate Total Depreciation and amortisation 30,327 10,980 1,869 43,175 Impairment losses recognised in profit and loss 0 27 0 27 EBITDA 55,494 62,422 (28,181) 89,734 Capital expenditure/additions 9,726 3,998 1,302 15,026 Other information 2020 (restated) in thousand EUR Group Recticel Engineered Foams Insulation Corporate Total Depreciation and amortisation 14,582 10,575 2,633 27,790 Impairment losses recognised in profit and loss 1,273 0 95 1,368 EBITDA 30,667 27,513 (19,890) 38,290 Capital expenditure/additions 7,964 4,707 3,487 16,158 Recticel annual report 2021 130 EBITDA EBITDA per segment is commented in the first part of this annual report (section Report by the Board of Directors). The breakdown of the goodwill per business line in thousand EUR Group Recticel 31 Dec 2021 31 Dec 2020 United Kingdom 3,221 3,015 Continental 1,060 1,062 Scandinavia 5,396 5,328 Total Engineered Foams 9,677 9,405 Continental 3,056 2,211 United Kingdom 988 923 Total Insulation 4,044 3,134 Total goodwill 13,721 12,539 Adjustments to Operating profit (loss) per segment in thousand EUR Group Recticel Engineered Foams Insulation Corporate Total 2021 Restructuring charges and provisions (2,171) (77) (568) (2,816) Other (5,622) (87) (10,986) (16,695) Impairments 0 (27) 0 (27) TOTAL (7,793) (191) (11,554) (19,537) 2020 restated Restructuring charges and provisions (865) (165) (13) (1,043) Other (351) 0 (4,745) (5,096) Impairments (1,273) 0 (95) (1,368) TOTAL (2,489) (165) (4,853) (7,507) Recticel annual report 2021 131 For 2021 • Reorganisation charges in Engineered Foams in The Netherlands, France, Germany and Switzerland (EUR -2.2 million) and at Corporate level (EUR -0.6 million). • Other adjustments relate mainly to legal and advisory fees (EUR -15.3 million) for (i) the acquisition of FoamPartner (Engineered Foams), (ii) the preparation of the divestment of the Bedding division, (iii) the dealings related to the Greiner offer, (iv) the preparation of the divestment of Engineered Foams to Carpenter, (v) a revaluation allowance for investment property in Belgium (EUR +4.2 million) and (vi) the realisation of a fair value adjustment on inventories by application of IFRS 3 (reversal of inventory step up values resulting from purchase price allocations (EUR -3.4 million). For 2020 (restated) • Restructuring charges (EUR -1.0 million) refer to additional restructuring measures in execution of the Group's rationalisation plan. • Other adjustments relate mainly to non-recurring costs relating to due diligence and legal fees and expenses linked to the FoamPartner acquisition. • Impairments relate to idle assets in Flexible Foams in Spain (EUR 1.3 million). 2.4.2.3.2 Geographical repartition and disaggregation of sales The Group’s operations are mainly located in the European Union. Sales (by destination) The following tables provide an analysis of the Group’s sales and fixed assets by geographical market. in thousand EUR Group Recticel 2021 2020 restated Belgium 124,305 102,379 France 127,456 99,667 Germany 109,919 22,759 Other EU countries 296,786 193,473 European Union 658,466 418,279 United Kingdom 191,101 136,555 Other 183,227 62,049 TOTAL 1,032,795 616,883 Reliance on major customers In 2021, none of the customers represented more than 10% of total sales. The top-10 customers of the Group represent 14.9% (2020 restated: 22.8%) of total consolidated sales. Intangible assets – Property, plant & equipment – Right-of-use assets – Investment property in thousand EUR Group Recticel Acquisitions, including own production 31 Dec 2021 31 Dec 2020 2021 2020 Belgium 76,618 86,413 7,645 13,554 France 34,533 36,070 2,830 2,671 Germany 105,905 8,582 4,733 1,394 Other EU countries 37,551 79,967 4,434 22,108 European Union 254,607 211,032 19,642 39,728 China 32,276 2,053 1,115 1,152 Switzerland 63,071 2,401 1,487 29 United Kingdom 50,165 42,900 2,361 1,801 Other 18,398 8,127 3,331 1,259 TOTAL 418,518 266,512 27,936 43,969 Recticel annual report 2021 132 2.4.2.4 Income statement 2.4.2.4.1 Gross profit On a like-for-like basis, the gross profit increased by 75.7% from 106.7 million (restated) to EUR 187.4 million. The higher gross profit is primarily explained by the increase of sales after a weak 2020 which was heavily impacted by the COVID-19 pandemic, especially in the first half-year. In addition, the improvement is explained by active pricing management to pass on the higher raw material costs in the selling prices, further efficiency and mix improvements and the positive contribution from FoamPartner. 2.4.2.4.2 General and administrative expenses - Sales and marketing expenses – Research and development expenses General and administrative expenses increased by EUR 22.5 million to EUR 66.7 million on a like- for-like basis. This increase is mainly explained by a gradual normalisation in 2021, compared to 2020 during which the COVID-19 pandemic had led to tight cost saving measures and temporary unemployment measures. For the same reason, Sales and marketing expenses increased from EUR 32.4 million (restated) to EUR 44.9 million, as well as Research and development expenses that increased from EUR 7.9 million (restated) to EUR 9.2 million. 2.4.2.4.3 Other operating revenues and expenses in thousand EUR Group Recticel 2021 2020 restated Other operating revenues 20,121 19,043 Other operating expenses (40,512) (30,383) TOTAL (20,391) (11,340) Restructuring charges (including site closure, onerous contracts and clean-up costs) (2,816) (1,043) Gain (Loss) on disposal of intangible, tangible and right-of-use assets 2,736 136 Gain (Loss) on investment operations 27 (90) Revaluation investment property 4,233 0 IAS 19 Pensions and other similar obligations (1,100) (251) IAS 19 Operating expenses (932) (1,063) Provisions 2,749 (3,347) Fees consultancy and subcontractors (16,597) 0 Other expenses (13,696) (10,638) Insurances commission (Recticel RE) 3,639 4,423 Other revenues 1,364 534 TOTAL (20,391) (11,340) Restructuring In 2021, reorganisation charges (EUR -2.8 million) relate to restructuring measures in Engineered Foams in The Netherlands, France, Germany and Switzerland (EUR -2.2 million) and at Corporate level (EUR -0.6 million). In 2020, restructuring charges (EUR -2.0 million) relate to additional restructuring measures in execution of the Group's rationalisation plan, mainly reorganisation charges in Engineered Foams (EUR 0.9 million). Revaluation investment property In 2021, this item relates to a revaluation of investment property at fair value in Belgium. Fees consultancy and subcontractors In 2021, this item relates to legal and advisory fees for (i) the acquisition of FoamPartner (Engineered Foams), (ii) the preparation of the divestment of the Bedding division, (iii) the dealings related to the Greiner offer and (iv) the preparation of the divestment of Engineered Foams to Carpenter. Recticel annual report 2021 133 2.4.2.4.4 Operating profit (loss) The components (by nature) of the Operating profit (loss) are as follows: in thousand EUR Group Recticel 2021 2020 restated Sales 1,032,795 616,883 Purchases and changes in inventories (595,574) (329,680) Other goods and services (154,391) (102,888) Labour costs (212,458) (151,176) Amortisation and depreciation on non-current assets (42,832) (27,312) Impairments on non-current assets (27) (2,352) Amounts written back/(off) on affiliated investments (334) (207) Amounts written back/(off) on inventories (290) (658) Amounts written back/(off) on receivables 310 (461) Provisions 2,761 (2,404) Gain/(Loss) on disposal intangible and tangible assets 2,736 136 Gain/(Loss) on disposal on investments 27 (91) Gain/(Loss) on trade receivables (99) 83 Operating taxes (5,268) (4,898) Other operating expenses (6,062) (9,004) Own production 3,027 2,778 Operating subsidies 1,040 890 Commissions and royalty income 107 3,680 Operating lease income 1,461 1,553 Revaluation investment property 4,233 0 Service fees 173 740 Other operating income 14,823 12,791 Income from associates 371 703 Operating profit (loss) 46,532 9,106 Sales: Sales increased by 67.4% from EUR 616.9 million to EUR 1,032.8 million; of which +32.8% from FoamPartner (EUR 202.6 million). For both segments the sales growth has been driven by supportive demand in most markets, in combination with price increases mitigating the substantial impact of higher purchase prices for chemical raw material and other components. More details per segment can be found in the comments on the financial figures in the Report of the Board of Directors. Purchases and changes in inventories increased as a result of higher sales and on average higher chemical raw materials prices and higher volumes compared to 2020 which was impacted by the COVID-19 pandemic. Other goods and services comprise transportation costs (EUR 48.3 million versus EUR 34.5 million in 2020), operating lease expenses (EUR 1.8 million versus EUR 1.7 million in 2020), supplies (EUR 16.8 million versus EUR 11.3 million in 2020), fees (EUR 30.3 million versus EUR 15.0 million in 2020), repair and maintenance costs (EUR 12.3 million versus EUR 8.6 million in 2020), advertising/fairs/exhibition costs (EUR 2.1 million versus EUR 2.2 million in 2020), travel expenses (EUR 2.3 million versus EUR 1.7 million in 2020), administrative expenses (EUR 6.3 million versus EUR 4.6 million in 2020), insurance expenses (EUR 10.5 million versus EUR 8.6 million in 2020), waste removal and environmental expenses (EUR 3.2 million versus EUR 5.7 million in 2020), security expenses (EUR 1.1 million versus EUR 1.3 million in 2020). Labour costs increased compared to 2020, which was heavily impacted by the COVID-19 lockdowns imposed in most countries during the second quarter and the use – where possible - of temporary unemployment. Income from associates decreased due to the lower result from Orsafoam. 2.4.2.4.5 Financial result in thousand EUR Group Recticel 2021 2020 restated Interest on lease liabilities (1,665) (1,666) Interest on long-term bank loans (3,056) (558) Interest on short-term bank loans & overdraft (2,054) (1,026) Net interest charges on Interest Rate Swaps and Foreign Currency Swaps 42 (112) Total borrowing cost (6,733) (3,362) Interest income from bank deposits 220 68 Interest income from financial receivables 786 825 Interest income from financial receivables and cash 1,006 893 Interest charges on other debts (90) (40) Interest income on other receivables 22 34 Total other interest (69) (5) Interest income and expenses (5,795) (2,474) Exchange rate differences 1,347 (828) Net interest cost IAS 19 (149) (290) Other financial result 59 5 Total other financial result 1,257 (1,113) FINANCIAL RESULT (4,538) (3,587) Recticel annual report 2021 134 2.4.2.4.6 Income taxes 1. Income tax charges in thousand EUR Group Recticel 2021 2020 restated Recognised in the income statement Current tax expense: Current year¹ 8,841 3,534 Adjustments in respect of prior year 3 (125) Total current tax expense 8,844 3,409 Deferred tax expense: Origination and reversal of temporary differences and tax losses 1,080 (3,617) Unrecognised deferred tax assets on current year's losses² 2,987 4,544 Recognition of deferred tax assets previously not recognised³ (27,599) (1,538) Derecognition of previously recognised deferred tax assets 31 387 Effect of changes in tax rates on deferred taxes 427 (136) Adjustments for prior periods 60 1,622 Other deferred tax expenses (164) (1,201) Total deferred tax expense (23,179) 61 Total tax expense on continuing operations (14,335) 3,470 1 The current tax expenses increased in 2021 compared to 2020 as a result of higher profit before tax. 2 The unrecognised deferred tax assets on current year's losses mainly relate to losses incurred in Germany in 2021 and to losses incurred in Germany and Spain in 2020. 3 Additional deferred tax assets have been recognised in Belgium, France and Spain in 2021 compared to 2020 as a result of increased profit expectations, including gains on the carve-out of the Bedding and Engineered Foams activities. in thousand EUR Group Recticel 2021 2020 restated Reconciliation of effective tax rate Profit (loss) before taxes - continuing operations 35,130 (4,692) Minus income from associates (371) (703) Minus income from other associates (451) 5,790 Result before tax and income from (other) associates 34,308 395 Group's domestic tax rate 25.00% 25.00% Tax at the Group's domestic income tax rate 8,577 99 Effect of different tax rates of subsidiaries operating in different jurisdictions (2,781) (3,452) Tax effect of non-deductible expenses 4,171 2,784 Tax effect of non-taxable income (904) (597) Tax effect of tax incentives (365) (144) Unrecognised deferred tax assets on current year's losses 2,987 4,544 Recognition of deferred tax assets previously not recognised (27,599) (1,538) Derecognition of deferred tax assets previously recognised 31 387 Effect of changes in tax rates on deferred taxes 427 (136) Tax effect of current and deferred tax adjustments related to prior years 65 1,302 Other 1,056 221 Tax expense for the year - continuing operations (14,335) 3,470 in thousand EUR Group Recticel 2021 2020 restated Deferred tax charged or (credited) directly to equity Impact of IAS 19R on equity 1,469 113 Total 1,469 113 Recticel annual report 2021 135 2. Deferred tax assets and liabilities in thousand EUR Group Recticel 31 Dec 2020 31 Dec 2021 Deferred tax assets Deferred tax liabilities Net Recognised in the income statement Recognised in other comprehensive income Acquired in business combinations Transfer to discontinued operations Translation differences Other Net Deferred tax assets Deferred tax liabilities Recognised deferred tax assets and liabilities Intangible assets¹ 4,690 (345) 4,345 (92) (1) (5,664) (38) 26 0 (1,424) 4,060 (5,485) Property, plant & equipment¹/² 669 (15,781) (15,112) (1,866) 0 (18,310) 2,584 (297) 0 (33,002) 1,367 (34,369) Investments 101 0 101 250 0 289 0 20 4,987 5,648 5,648 (0) Receivables 35 (799) (764) (52) 275 (448) 9 (0) (4,450) (5,430) 634 (6,063) Inventories 322 0 322 1,262 0 (1,298) (38) 67 0 315 329 (15) Cash and cash equivalents 8 (0) 8 0 0 (0) (7) 0 (1) (0) 0 (0) Tax-free reserves 1,871 (4,932) (3,061) (106) 0 0 (19) 31 4 (3,151) 42 (3,193) Early retirements and defined benefits 7,268 0 7,268 2,488 (1,744) 79 (18) 62 7 8,141 8,141 0 Provisions for other risks and charges 1,865 (6,653) (4,788) (847) 0 (840) (247) 30 (9) (6,701) 1,614 (8,315) Interest-bearing borrowings and loans 10,392 (724) 9,668 1,786 0 0 (2,056) 263 (545) 9,116 10,632 (1,516) Other liabilities 2,438 (157) 2,281 (491) 0 502 (234) 22 35 2,115 2,349 (234) Tax loss carry-forwards² 12,532 0 12,532 21,106 0 1,641 (356) (1) 0 34,922 34,922 (1) Other tax attributes 325 0 325 (259) 0 0 1 (0) 0 68 68 (0) Total 42,516 (29,392) 13,124 23,179 (1,469) (24,050) (419) 223 28 10,617 69,806 (59,190) Set-off (17,218) 17,218 - (22,961) 22,961 Total (as provided in the statement of financial position) 25,298 (12,173) - 46,846 (36,229) The total net deferred tax assets decreased from EUR 13.1 million at 31 December 2020 to EUR 10.6 million at 31 December 2021. The main changes in 2021 are relating to the following items: 1 An increase of deferred tax liabilities on intangible assets and property, plant & equipment primarily due to the deferred tax liabilities computed on the step-up basis resulting from the purchase price allocation of the acquisition of FoamPartner (impact of EUR 22.7 million included in the column Acquired in business combinations). 2 An increase of deferred tax assets on tax loss carry forwards as a result of the recognition in 2021 of deferred tax assets previously not recognised on losses in Belgium (EUR 17.1 million), France (EUR 5.9 million) and Spain (EUR 3.6 million) - impact included in the amount of EUR 21.1 million recognised in the income statement. Recticel annual report 2021 136 Tax loss carry-forwards – amounts by expiration date: in thousand EUR Group Recticel 2021³ 2020 ¹/² One year 951 0 Two years 1,044 2,322 Three years 364 8,529 Four years 0 313 Five years and thereafter 9,201 134,101 Without time limit 360,681 396,757 TOTAL 372,242 542,022 1 The total amount of tax losses carried forward per 31 December 2020 (EUR 542 million) includes EUR 128.2 million of tax loss carryforwards for the US of which EUR 127.5 million were lost in 2021 due to the earlier divestment of the TEMDA2 (Ascorium) (formerly Automotive Interiors) activities. 2 The total amount of tax losses carried forward per 31 December 2020 also includes the tax losses carried forward of the entities of the Bedding activities (EUR 26.4 million) which were reported within the discontinued operations in 2021 and of Proseat NV (EUR 19,7 million) which has been liquidated in 2021. 3 At 31 December 2021, EUR 34.9 million of deferred tax assets are recognised in respect of tax losses, representing EUR 139.6 million of tax losses carried forward out of a total amount of tax losses carried forward of EUR 372 million. Deferred tax assets in relation to losses which are not recognised relate mainly to Germany (Recticel Verwaltung EUR -173 million) and Spain (Recticel Iberica: EUR -50 million). Deferred tax assets recognised and unrecognised by the Group apply to the following elements as at 31 December 2021: in thousand EUR Group Recticel Total potential deferred tax assets¹ Recognised deferred tax assets 2/3 Not recognized deferred tax assets 1/2 Temporary differences 36,732 34,816 1,916 Tax losses carried forward 104,265 34,922 69,343 Other tax attributes 3,357 68 3,289 Total before set-off 144,354 69,806 74,548 1 The variances in total potential deferred tax assets and non recognised deferred tax assets in 2021 compared to 2020 are mainly due to: - the attribution of the losses in the US to the TEMDA2 (Ascorium) (formerly Automotive Interiors) activities which were divested (impact of EUR 27.9 million) - the exclusion of the Bedding division which is reported within the discontinued assets (impact of EUR 2.4 million) - the liquidation of Proseat NV (impact of EUR 4.9 million). 2 The remaining variance on non-recognised deferred tax assets is primarily due to the recognition in 2021 of deferred tax assets not recognised in 2020, in Belgium (EUR 17.1 million), France (EUR 5.9 million) and Spain (EUR 3.6 million). 3 At 31 December 2021 deferred tax assets of EUR 69.8 million are recognised mainly in Belgium (EUR 33.2 million), in France (EUR 8.6 million), United Kingdom (EUR 6.2 million) and Spain (EUR 5.7 million). These deferred tax assets have been recognised as it is expected that future taxable profit will be available against which the related deductible temporary differences, unused tax losses and tax attributes can be utilized. Deferred tax assets recognised and unrecognised by the Group apply to the following elements as at 31 December 2020: in thousand EUR Group Recticel Total potential deferred tax assets Recognised deferred tax assets Not recognized deferred tax assets Temporary differences 37,648 29,659 7,989 Tax losses carried forward 141,369 12,532 128,838 Other tax attributes 3,981 325 3,654 Total before set-off 182,998 42,516 140,481 Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and associates, and interests in joint ventures, except where the Group is able to control the reversal of the temporary difference and when it is probable that the temporary difference will not reverse in the foreseeable future. Except for the undistributed profit in Estonia, no deferred tax liabilities have been recognised on undistributed retained earnings of subsidiaries. Recticel annual report 2021 137 2.4.2.4.7 Discontinued operations For the period ending 31 December 2021 The result of the period after taxes of the discontinued operations (EUR 4.9 million) comprises: • The net result of Bedding (EUR +3.5 million), and • The net result of EUR +1.4 million in relation with TEMDA2 (Ascorium, formerly Automotive Interiors) Bedding On 18 November 2021 Recticel entered into a binding agreement with Aquinos Group for the sale of its Bedding Activities. At the special shareholders meeting on 24 December 2021 all proposed resolutions regarding the sale of the Bedding business line to Acquinos were approved. The Sales and Purchase Agreement (“SPA”) was signed on 28 December 2021. The business generated sales of EUR 208,6 million for the year ending 31 December 2021 and represents disposed net assets of EUR 65,1 million as of 31 December 2021. The transaction was expected to be closed during the first quarter of 2022. Following the application of IFRS 5, Bedding activities have been accounted for as discontinued operations. IFRS 5 has been applied on the basis of the following facts : (i) decision by the Board of Directors to divest the Bedding activities, (ii) received a binding offer, (iii) obtention of a shareholders’ approval, (iv) execution of legal carve-outs and (v) no anti-trust issues to be expected. The results of these Bedding activities are composed as follows: in thousand EUR Profit and loss account Bedding 2020 2021 Sales 211,909 208,555 Cost of sales (161,540) (165,169) Gross profit (loss) 50,369 43,386 General and administrative expenses (13,719) (12,013) Sales and marketing expenses (28,217) (27,805) Research and development expenses (1,354) (2,081) Impairment of goodwill, intangible and tangible assets (88) 0 Other operating revenues 1,544 1,584 Other operating expenses (3,791) (3,208) Operating profit (loss) 4,744 (137) Financial result (1,557) (1,203) Result of the period before taxes 3,187 (1,340) Income taxes (554) (964) Net result of the period 2,633 (2,304) Adjustments consolidation 0 5,805 Total net result at level of Recticel NV/SA 2,633 3,501 An impairment analysis has been made under IFRS 5 (i.e. lower of fair value – cost to sell versus carrying assets) and didn’t result in an impairment. The net assets of Bedding are as follows: in thousand EUR Assets and liabilities 31 Dec 2021 Bedding Goodwill 11,079 Intangible assets 7,658 Property, plant and equipment 22,536 Right-of-use assets 24,564 Other financial assets 257 Deferred taxes 6,304 Prepaid for defined benefit plans 1 Non-current assets 72,399 Inventories 33,372 Trade receivables 23,517 Other receivables and other financial assets 4,358 Income tax receivables 281 Other investments 187 Cash and cash equivalents 7,352 Reclassification to assets held for sale 0 Current assets 69,067 TOTAL ASSETS OVER WHICH CONTROL WAS LOST 141,466 Pensions and similar obligations 6,206 Provisions 2,192 Financial liabilities 19,241 Other amounts payable 3 Non-current liabilities 27,642 Provisions 189 Financial liabilities 516 Trade payables 24,789 Current contract liabilities 7,964 Income tax payables 102 Other amounts payable 15,212 Current liabilities 48,772 TOTAL LIABILITIES OVER WHICH CONTROL WAS LOST 76,414 NET ASSETS DISPOSED OF 65,052 Recticel annual report 2021 138 In accordance with IFRS 5, the balance sheet per 31 December 2020 has not been restated, and the balance sheet per 31 December 2021 has been restated with balance sheet positions of continuing versus discontinued operations being eliminated. Transactions between the discontinued operations of Bedding and the other continuing activities are eliminated, both at income statement and financial position level. These transactions relate mainly to purchases of raw materials by Bedding (EUR 50.7 million) and net short-term financings (EUR 25.5 million). In the income statement per 31 December 2020 and 2021 transactions between continuing and discontinued operations have been eliminated. At 31 December 2021 the other comprehensive income comprises hedging reserves (EUR 3.0 million) and currency translation adjustments (EUR 3.6 million) that will be recycled in the income statement (result from discontinued operations) at the moment of the closing of the divestment of Bedding. The cash ﬂow statement of the discontinued operations is as follows: in thousand EUR Cash ﬂows 2021 2020 Operating profit (loss) (571) 4,744 Income from discontinued operations 1,375 68,692 Amortisation of intangible assets 613 675 Depreciation of tangible assets 6,541 16,830 Amortisation of deferred long term and upfront payment 562 1,339 (Reversal) Impairment losses on goodwill, intangible and tangible assets 0 1,193 (Write-back)/Write-offs on assets (391) (186) (Write-back)/Write-offs on shares affiliates 0 220 Changes in provisions 481 (594) (Gains) / Losses on disposals of shares affiliates 0 (101,674) GROSS OPERATING CASH FLOW BEFORE WORKING CAPITAL MOVEMENTS 8,610 (8,762) Inventories (3,607) (288) Trade receivables 5,417 4,669 Other receivables (11,929) 650 Trade payables 9,127 (13,006) Other payables (3,588) (6,233) Changes in working capital (4,581) (14,209) Trade & Other long term debts maturing within 1 year (11) 111 Tax credit (non-current receivables) (7) 0 Income taxes paid (215) (1,743) NET CASH FLOW FROM OPERATING ACTIVITIES 3,796 (24,603) Interests received 0 131 Dividends received 0 (113) Investments in and subscriptions to capital increases 0 (1,403) Decrease of loans and receivables 0 27 Investments in intangible assets (2,327) (198) Transfers fromInvestments in Pproperty, plant and equipment (2,595) (5,373) Net deferred charges long term (559) (545) Disposals of intangible assets 2 0 Disposals of property, plant and equipment 26 252 Disposals of investments held for sale (17) 0 (Increase)/Decrease of investments available for sale 0 (16) NET CASH FLOW FROM DIVESTMENT (INVESTMENT) ACTIVITIES (5,470) (7,238) Interests paid on financial debt (36) (459) Increase of financial debt 0 10,337 Decrease of financial debt (2,983) (691) Decrease of lease debt 0 (7,384) NET CASH FLOW FROM FINANCING ACTIVITIES (3,018) 1,803 Effect of exchange rate changes (f) (0) 0 CHANGES IN CASH AND CASH EQUIVALENTS (4,693) (30,038) NET FREE CASH FLOW (1,710) (39,684) Recticel annual report 2021 139 • TEMDA2 GmbH (formerly Automotive Interiors) For the period ending 31 December 2021 Following the finalization of the closing accounts per 31 December 2021 for the Automotive Interiors divestment, a settlement was reached between Recticel and the purchaser with regard to certain amounts to be taken into consideration for deduction from the purchase price, as well as a claimed breach of the agreement. The settlement of the Automotive Interiors divestment led to a positive result of EUR 1.4 million as per 31 December 2021. For the period ending 31 December 2020 On 30 June 2020, the Group has completed the divestment of its 50% stake in the Eurofoam Flexible Foams joint venture to Greiner, as well as the divestment of its Automotive Interiors division to TEMDA2 GmbH, a newly created company in which Admetos holds 51% and Recticel holds a 49% minority participation. The contractual framework for the divestment of Automotive Interiors contained - besides customary post-closing price adjustments for working capital normalisation and cash/debt items at the level of the divested entities - specific arrangements to compensate the joint-venture for adverse conditions that may occur beyond the control of Recticel with regard to: (i) the potential impact of the COVID-19 pandemic on the Automotive Interiors operations and (ii) future cost of the insurance coverage of the joint-venture. The first item related specifically to a potential compensation for the loss of contribution margin over the period 01 July – 31 December 2020 - compared to the contribution margin taken into account in the reference business plan -, as a consequence of a shortfall in sales induced by the potential negative impact of the COVID-19 pandemic. The total compensation amounted to EUR 0,5 million and has been fully settled as of April 2021. For the second item, a provision had been recognised based on the estimated potential additional insurance costs. The financing of the new joint-venture includes a EUR 25 million acquisition term loan and a EUR 20 million Revolving Credit facility to finance working capital needs of the joint-venture financing facilities. The financing is supported by guarantees issued by the Group, while the agreement provides for a refinancing as of 2022. The Automotive Interiors divestment agreement contains reciprocal call/put options for Admetos to acquire, or Recticel to sell, its remaining 49% share, exercisable as from March 2024 at a price calculated on the basis of a pre-agreed EBITDA multiple. in thousand EUR Gross profit Disposal of Eurofoam Disposal of Automotive Interiors Total gain (loss) on transaction 124,428 (41,225) Net result of the period 3,813 (18,330) Total profit (loss) discontinued activities 128,241 (59,555) in thousand EUR Group Recticel Total shareholders' equity Of which continuing operations Of which discontinued operations Equity at the beginning of the period 334,075 332,745 1,330 Restatement IFRS 16 * (1,906) 0 (1,906) Dividends (14,469) (14,469) 0 Stock options (IFRS 2) 786 786 0 Capital movements ¹ 1,372 1,372 0 Shareholders' movements (12,311) (12,311) 0 Profit or loss of the period 53,522 48,646 4,876 Other comprehensive income 16,403 13,337 3,066 Changes in scope 0 0 0 Total comprehensive income 69,925 61,983 7,942 Equity at the end of the period 389,783 382,417 7,366 1 see note 2.4.5.12. Adjustment for reassessment of assumptions on dismantling and restoration costs. Recticel annual report 2021 140 The results are composed as follows: in thousand EUR Profit and loss account 2020 Eurofoam TEMDA2 GmbH (previously Automotive Interiors) Sales 0 55,303 Cost of sales 0 (55,166) Gross profit (loss) 0 137 General and administrative expenses 0 (6,801) Sales and marketing expenses 0 (2,847) Research and development expenses 0 (815) Impairment of goodwill, intangible and tangible assets 0 (1,106) Other operating revenues 127,123 574 Other operating expenses (2,695) (55,985) Income from other associates 3,813 11,656 Operating profit (loss) 128,241 (55,187) Financial result 0 (2,556) Result of the period before taxes 128,241 (57,743) Income taxes 0 (1,812) Net result of the period 128,241 (59,555) The impact of the discontinued operations on the cash ﬂow statement can be found in note 2.4.1.5 Consolidated cash ﬂow statement. For the period ending 31 December 2020 The capital gain (loss) on the divestment of respectively Eurofoam and the Automotive Interiors activities can be summarized as follows: in thousand EUR Capital gain (loss) on disposal Eurofoam TEMDA2 GmbH (previously Automotive Interiors) Full consideration received 184,547 2,390 Net assets disposed (44,944) (22,360) Cumulative translation differences related to the net assets disposed (11,770) (6,757) Provisions for post-closing price adjustments and specific arrangements (865) (12,798) Transaction fees and other expenses (2,540) (1,700) Capital gain (loss) on disposal 124,428 (41,225) 2.4.2.4.8 Business combinations For the period ending 31 December 2021 On 31 March 2021 Recticel acquired 100% of the shares of FoamPartner for an enterprise value of CHF 270 million, CHF 20 million of the price being payable in January 2022. This represents an 8.6x average 2019A-2020F normalized EBITDA multiple. FoamPartner is a global provider of high value-added technical foam solutions in the Mobility, Industrial Specialties and Living & Care markets. There is significant complementarity and synergy upside with Recticel. FoamPartner was founded in 1937 and has been a member of Conzzeta AG since 1980. It is an innovative polyurethane foams supplier offering over 200 specialty foams and tailored solutions for industrial, mobility and comfort applications. The group is headquartered in Wolfhausen, Switzerland and operates through a footprint of 12 sites located in the USA, China, Germany, Switzerland and France, and a sales network in 58 countries. FoamPartner employs about 1,100 people and generated net sales of CHF 297 million in 2019 and CHF 257 million in 2020. Recticel combined the FoamPartner business with the Recticel Flexible Foams division, to form the new Engineered Foams business segment. Financing has been secured by a syndicated acquisition facility which was arranged and fully underwritten by KBC Bank and to which Belfius Bank, BNP Paribas Fortis, Commerzbank and LCL confirmed their participation. The acquisition facility has a 3-year tenor with two 1-year extension options. Details of the purchase consideration are as follows in million CHF and million EUR: Purchase consideration in million CHF in million EUR Purchase consideration 167.9 155.9 Net financial debt 88.8 82.2 Debt-like items and working capital adjustments 13.3 12.2 Total purchase consideration 270.0 250.3 The change in the total purchase consideration (EUR 250.3 million versus EUR 246.4 million per 30 June 2021) is mainly due to currency impacts (CHF/EUR) and settlements in the closing accounts. Recticel annual report 2021 141 The enterprise value of CHF 270 million (EUR 248.3 million), can be reconciled as follows to the cash ﬂow from investment activities as per 31 December 2021: in million EUR Consideration payable to customersid Total purchase consideration 250.3 Debt-like items and working capital adjustments (12.2) Deferred payment payable in January 2022 (18.2) Consideration paid 219.9 Compared to 30 June 2021, the receivable on Conzzeta AG has been settled resulting in a consideration paid per 31 December 2021 of EUR 219.9 million. The assets and liabilities recognized as a result of the acquisition are as follows: in million EUR Assets and liabilities Customer list 16.3 Cash-in from disposals ofOther intangible assets 10.4 Property, plant and equipment 178.2 Right-of-use assets 7. 4 Inventories 38.2 Trade receivables 54.8 Cash and cash equivalents 19.6 Provisions -2.9 Employee benefit liabilities (net) -1.1 Financial liabilities -103.9 Lease liabilities -7.4 Trade payables -30.6 Net deferred taxes -23.1 Net identifiable assets acquired 155.9 Goodwill 0.0 Total net debt, debt-like items and working capital adjustments 94.4 Total purchase consideration - '000 EUR 250.3 Total purchase consideration - '000 CHF 270.0 The fair value of the acquired customer list and customer contracts of EUR 16.3 million and part of Property, Plant and Equipment of EUR 178.2 million was provisional as per 30 June 2021 and has been finalized per the 31 December 2021 following the receipt of the final valuations for those assets. Other fair value adjustments relate to inventory step up adjustment (EUR 3.4 million) and Marketing and Technology related intangible assets (EUR 4.8 million). Deferred tax liabilities of EUR -24.7 million have been provided for in relation to these fair value adjustments. Next to that, EUR 1.6 million deferred tax assets have been recognized on tax losses caried forward in the US. Acquisition-related costs Acquisition-related costs of EUR 3.7 million relate to real estate transfer taxes and advisor fees and are included under ‘’other operating expenses in the income statement as per 31 December 2021. Revenue and profit contribution The acquired business contributed revenues of EUR 205.4 million and an adjusted operating profit of EUR 3.1 million and a net result of EUR -5.4 million to the group for the period from 1 April 2021 to 31 December 2021. If the acquisition had occurred on 1 January 2021, consolidated revenue, consolidated adjusted operating profit and consolidated net result (attributable to the owners of the parent) for the year-ended 31 December 2021 would have been EUR 1.103 million, EUR 66.4 million and EUR 28.8 million respectively. Staff As a result of the acquisition of FoamPartner the average number of people employed increased by 851 full time equivalents. For the period ending 31 December 2020: None Recticel annual report 2021 142 2.4.2.4.9 Dividends Amounts recognised as distributions to equity holders in the period. Dividend for the period ending 31 December 2020 of EUR 0.26 per share. Proposed dividend for the period ending 31 December 2021 of EUR 0.29 per share, leading to a total pay-out of EUR 16,229,392 (2020: EUR 14,493,159), including the portion attributable to the treasury shares (326,800 in total per 31 December 2021). The proposed dividend is subject to approval by the shareholders at the Annual General Meeting and has not been included as a liability in these financial statements. 2.4.2.4.10 Basic earnings per share The calculation of the basic and diluted earnings per share is based on the following data: Group Recticel 2021 2020 Net profit (loss) for the period (in thousand EUR) 54,341 63,155 Net profit (loss) from continuing operations 49,465 (8,164) Net profit (loss) from discontinued operations 4,876 71,319 Weighted average shares outstanding Ordinary shares on 01 January (excluding treasury shares) 55,416,120 55,070,639 Exercised subscription rights 220,500 345,481 Ordinary shares on 31 December (excluding treasury shares) 55,636,620 55,416,120 Weighted average shares outstanding 55,519,330 55,174,425 * Number of treasury shares held per 31 December 326,000 326,800 in EUR Group Recticel 2021 2020 Basic earnings per share 0.98 1.14 Basic earnings per share from continuing operations 0.89 (0.15) Basic earnings per share from discontinued operations 0.09 1.29 2.4.2.4.11 Diluted earnings per share Computation of the diluted earnings per share: in thousand EUR Group Recticel 2021 2020 Dilutive elements Net profit (loss) from continuing operations 49,465 (8,164) Net profit (loss) from discontinued operations 4,876 71,319 Profit (loss) attributable to ordinary equity holders of the parent entity including assumed conversions 54,341 63,155 Weighted average ordinary shares outstanding 55,519,330 55,174,425 Stock option plans - subscription rights ¹ 763,533 206,607 Weighted average shares for diluted earnings per share 56,282,863 55,381,032 in EUR Group Recticel 2021 2020 Diluted earnings per share 0.97 1.14 Diluted earnings per share from continuing operations 0.88 (0.15) Diluted earnings per share from discontinued operations 0.09 1.29 1 Per 31 December 2021, all outstanding subscription right plans as from April 2016 are in-the-money. The outstanding subscription right plans which are out-of-the-money are disclosed as anti-dilutive. Recticel annual report 2021 143 2.4.2.5 Statement of financial position 2.4.2.5.1 Intangible assets For the year ending 31 December 2021: in thousand EUR Group Recticel 31 Dec 2020 Development costs Trademarks, patents & licenses Client portfolio goodwill Other intangible assets Assets under construction and advance payments Total At the end of the preceding period Gross book value 409 49,374 7,728 274 10,331 68,116 Accumulated amortisation (409) (37,458) (7,000) (240) (190) (45,298) Accumulated impairment 0 (6,332) 0 0 (1,681) (8,013) Net book value at the end of the preceding period 0 5,584 728 34 8,459 14,806 Movements during the year: Business combinations 0 4,762 16,347 5,707 0 26,816 Acquisitions 0 2,210 14 2 2,005 4,231 Amortisation 0 (3,252) (2,105) (117) 0 (5,474) Transfers from one heading to another 0 7,098 65 (5,489) (653) 1,021 Transfer to discontinued operations 0 (3,156) 0 0 (4,543) (7,699) Exchange rate differences 0 281 867 123 (27) 1,244 At the end of the current period 0 13,527 15,916 260 5,241 34,945 Gross book value 153 58,434 24,527 1,824 5,955 90,893 Accumulated amortisation (153) (38,585) (8,611) (1,564) (102) (49,015) Accumulated impairment 0 (6,322) 0 0 (612) (6,934) Net book value at the end of the period 0 13,527 15,916 260 5,242 34,945 Useful life (in years) 3-5 3-10 5-10 5 maximum n.a. Reference is also made to note 2.4.2.1.4. - Key judgments and major sources of estimation uncertainty and note 2.4.2.4.8. – Business combinations. The above figures contain the impact of the discontinued operations (Bedding), of which impact is included in line item Transfer to discontinued operations. As such total amortisation in the above table comprise EUR -0.6 million related to Bedding (discontinued). In 2021, the item ‘Business combinations’ relates to the acquisition of FoamPartner. Total acquisition of intangible assets amounted to EUR 4.2 million, compared to EUR 3.7 million in 2020. The investments in intangible assets in 2021 mainly related to “Assets under construction and advance payments” for new developments and licence costs related to the roll-out of the SAP IT platform (EUR 2.1 million). For the year ending 31 December 2020: in thousand EUR Group Recticel Development costs Trademarks, patents & licenses Client portfolio goodwill Other intangible assets Assets under construction and advance payments Total At the end of the preceding period      Gross book value 12,356 52,693 5,745 279 8,450 79,523 Accumulated amortisation (11,905) (39,928) (4,842) (234) (253) (57,162) Accumulated impairment (5) (6,370) 0 0 (1,681) (8,056) Net book value at the end of the preceding period 447 6,395 903 45 6,516 14,306  Movements during the year: Discontinued operations (365) (467) (0) (9) (92) (933) Acquisitions 0 73 0 4 3,607 3,685 Impairments 0 (9) 0 0 0 (9) Amortisation (207) (1,820) (176) (16) 0 (2,218) Transfers from one heading to another 132 1,462 0 9 (1,569) 34 Exchange rate differences (7) (51) 0 (0) (4) (62) At the end of the current period 0 5,584 728 34 8,458 14,804 Gross book value 409 49,374 7,728 274 10,331 68,116 Accumulated amortisation (409) (37,458) (7,000) (240) (190) (45,298) Accumulated impairment 0 (6,332) 0 0 (1,681) (8,013) Net book value at the end of the period 0 5,584 728 34 8,459 14,806 Useful life (in years) 3-5 3-10 5-10 5 maximum n.a. Recticel annual report 2021 144 Reference is also made to note 2.4.2.1.4. - Key judgments and major sources of estimation uncertainty and note 2.4.2.4.8. – Business combinations. In 2020, the item ‘Discontinued operations’ relates to the discontinued Automotive Interiors operations. Total acquisition of intangible assets amounted to EUR 3.7 million, compared to EUR 4.6 million in 2019. The investments in intangible assets in 2020 mainly related to “Assets under construction and advance payments” for new developments and licence costs related to the roll- out of the SAP IT platform (EUR 3.2 million). 2.4.2.5.2 Property, plant & equipment For the year ending 31 December 2021: in thousand EUR Group Recticel Land & buildings Plant, machinery & equipment Furniture & vehicles Leases & similar rights Other tangible assets Assets under construction Total At the end of the preceding period Gross value 195,308 323,510 26,416 0 231 15,507 560,972 Accumulated depreciation (107,741) (256,452) (20,979) 0 (163) 0 (385,335) Accumulated impairments (1,012) (1,624) (1) 0 0 0 (2,637) Net book value at the end of the preceding period 86,555 65,434 5,436 0 68 15,507 173,000  Movements during the year Business combinations 125,791 42,230 3,521 0 0 6,655 178,197 Acquisitions 198 1,436 248 0 6 12,249 14,137 Impairments 0 (27) 0 0 0 0 (27) Depreciation (7,870) (18,739) (2,284) 0 (6) 0 (28,899) Sales and scrapped (711) (27) (36) 0 0 0 (773) Transfers from one heading to another (0) 15,195 0 0 0 (16,555) (1,361) Exchange rate differences 5,654 1,667 112 0 (3) 226 7,656 Transfer to discontinued operations (13,645) (11,880) (606) 0 0 (2,394) (28,526) At the end of the period 195,972 95,290 6,390 0 65 15,689 313,406  Gross value 299,231 457,232 28,753 0 204 15,689 801,108 Accumulated depreciation (102,955) (360,418) (22,363) 0 (139) 0 (485,875) Accumulated impairments (304) (1,524) 0 0 0 0 (1,828) Net book value at the end of the period 195,972 95,290 6,390 0 65 15,689 313,406 Reference is also made to note 2.4.2.1.4. - Key judgments and major sources of estimation uncertainty and note 2.4.2.4.8. – Business combinations. The above figures contain the impact of the discontinued operations (Bedding), of which impact is included in line item Transfer to assets held for sale. As such total depreciation in the above table comprise EUR -0.3 million related to Bedding (discontinued). In 2021, the item ‘Business combinations’ relates to the acquisition of FoamPartner. Total acquisitions of tangible assets amounted to EUR 14.1 million, compared to EUR 21.5 million in 2020 (impacted by COVID-19 pandemic). Assets under construction mainly relate to Belgium (EUR 2.9 million), France (EUR 2.7 million), Germany (EUR 2.4 million), United Kingdom (EUR 1.6 million), Finland (EUR 0.7 million), Spain (EUR 0.7 million), The Netherlands (EUR 0.6 million), Poland (EUR 0.5 million), China (EUR 0.4 million) and Switzerland (EUR 0.4 million). At 31 December 2021, the Group had entered into contractual commitments for the acquisition of property, plant & equipment amounting to EUR 0.7 million (2020: EUR 0.2 million) Recticel annual report 2021 145 For the year ending 31 December 2020: in thousand EUR Group Recticel Land & buildings Plant, machinery & equipment Furniture & vehicles Leases & similar rights Other tangible assets Assets under construction Total At the end of the preceding period Gross value 218,664 522,391 29,411 0 1,106 22,806 794,378 Accumulated depreciation (124,477) (401,925) (23,309) 0 (1,010) (241) (550,962) Accumulated impairments (3,905) (11,854) (19) 0 0 (22) (15,800) Net book value at the end of the preceding period 90,282 108,613 6,082 0 97 22,543 227,617 Movements during the year Discontinued operations (3,745) (38,126) (772) 0 (16) (4,086) (46,746) Acquisitions 37 1,526 240 0 1 19,653 21,456 Impairments (95) (1,095) (5) 0 0 0 (1,195) Depreciation (4,659) (18,168) (1,963) 0 (9) 0 (24,800) Sales and scrapped (65) (62) (31) 0 0 (1) (158) Transfers from one heading to another 6,202 14,303 1,965 0 (1) (22,450) 19 Exchange rate differences (1,400) (1,557) (80) 0 (3) (152) (3,193) At the end of the period 86,555 65,434 5,436 0 68 15,507 173,000 Gross value 195,308 323,510 26,416 0 231 15,507 560,972 Accumulated depreciation (107,740) (256,452) (20,979) 0 (163) 0 (385,335) Accumulated impairments (1,012) (1,624) (1) 0 0 0 (2,637) Net book value at the end of the period 86,555 65,434 5,436 0 68 15,507 173,000 In 2020, the item ‘Discontinued operations’ relates to the discontinued Automotive Interiors operations. Reference is also made to note 2.4.2.4.7. – Discontinued operations. Total acquisitions of tangible assets amounted to EUR 21.5 million, compared to EUR 49.1 million in 2019. The decrease is mainly explained by a reduced capital expenditure program due to the COVID-19 crisis and the divestment from the more capital intensive Automotive Interiors business at the end of June 2020 (cfr Discontinued operations). Assets under construction mainly relate to Belgium (EUR 6.8 million), Bedding in Germany (EUR 0.4 million) and Poland (EUR 0.7 million) and Flexible Foams in France (EUR 2.3 million), the United Kingdom (EUR 1.6 million) and The Netherlands (EUR 1.8 million). At 31 December 2020, the Group had entered into contractual commitments for the acquisition of property, plant & equipment amounting to EUR 0.2 million (2019: EUR 4.3 million). In 2020, impairment losses recognised in profit and loss are mainly related to idle assets in Flexible Foams in Spain (EUR 1.3 million) and in Bedding following the closure of the Hassfurt plant (Germany) (EUR 1.1 million). Recticel annual report 2021 146 2.4.2.5.3 Right-of-use assets For the year ending 31 December 2021: in thousand EUR Group Recticel Land & buildings Plant, machinery & equipment Furniture & vehicles Total At the end of the preceding period Gross value 91,380 8,404 14,253 114,037 Accumulated depreciation (27,282) (3,938) (7,073) (38,293) Accumulated impairments (321) (46) 0 (367) Net book value at the end of the preceding period 63,777 4,419 7,180 75,377 Movements during the year Business combinations 7,254 29 122 7,405 Adjustment for reassessment of assumptions on dismantling and restoration costs 3,870 0 0 3,870 New leases 107 196 3,296 3,599 Lease reassessment 5,108 385 560 6,053 Depreciation (8,542) (1,740) (4,521) (14,804) Ended contracts (2,070) (95) (532) (2,697) Exchange rate differences 1,206 174 67 1,446 Transfer to discontinued operations (15,949) (195) (1,502) (17,646) At the end of the period 54,760 3,173 4,670 62,603  Gross value 83,510 7,993 11,346 102,849 Accumulated depreciation (28,401) (4,774) (6,676) (39,851) Accumulated impairments (349) (46) (395) Net book value at the end of the period 54,759 3,173 4,671 62,603 Contractual tenor (in years) 6 - 12 3 - 12 4 Reference is also made to note 2.4.2.4.8. – Business combinations. The above figures contain the impact of the discontinued operations (Bedding), of which impact is included in line item Transfer to assets held for sale. As such total depreciation in the above table comprise EUR -0.3 million related to Bedding (discontinued). The item Lease reassessment relates mainly to the reassessment of the economic lifetime of the leased buildings in the United Kingdom (EUR 3.6 million) and in the United States (EUR 1.3 million). The weighted average underlying incremental borrowing rate of the right-of-use asset agreements per 31 December 2021 was 3.0% (3.7% per 31 December 2020). Recticel annual report 2021 147 For the year ending 31 December 2020: in thousand EUR Group Recticel Land & buildings Plant, machinery & equipment Furniture & vehicles Total At the end of the preceding period Gross value 107,173 19,041 16,545 142,759 Accumulated depreciation (25,935) (5,606) (5,698) (37,239) Accumulated impairments (364) (46) 0 (410) Net book value at the end of the preceding period 80,874 13,389 10,846 105,110  Movements during the year Discontinued operations (20,411) (5,471) (1,348) (27,230) Acquisitions 16,619 352 1,668 18,639 Lease reassessment 1,029 17 1,329 2,375 Impairments (88) 0 0 (88) Depreciation (9,505) (3,493) (5,180) (18,178) Sales and scrapped (2,408) (24) (32) (2,464) Exchange rate differences (2,334) (350) (102) (2,786) At the end of the period 63,777 4,419 7,180 75,377  Gross value 91,380 8,404 14,253 114,037 Accumulated depreciation (27,282) (3,938) (7,073) (38,293) Accumulated impairments (321) (46) 0 (367) Net book value at the end of the period 63,777 4,419 7,180 75,377 Contractual tenor (in years) 6 - 12 3 - 12 4 Reference is also made to note 2.4.2.4.7. – Discontinued operations. Acquisitions include (i) a new lease contract for the International Headquarters of the Group in Belgium (EUR 2.9 million; 12 years with early-termination option), (ii) the renewal of the lease of the Bedding building in Poland (EUR 10.2 million; 11 years without purchase option), (iii) the renewal of the lease of a building in Czech Republic (EUR 1.2 million; 10 years without purchase option) and (iv) the renewal of a lease for the Bedding building in Sweden (EUR 1.5 million; 3 years without purchase option). The weighted average underlying incremental borrowing rate of the right-of-use asset agreements per 31 December 2020 was 3.7% (3.2% per 31 December 2019). The below table comprises the recognised lease charge during the financial period. At 31 December 2021, the Group had entered into contractual commitments for the acquisition of right-of-use assets amounting to EUR 0.9 million. in thousand EUR Group Recticel 31 Dec 2021 31 Dec 2020 Low value leases 54 358 Short term leases 168 235 Services under leases 2,598 2,514 Other considerations 0 509 Total leases 2,821 3,616 Recticel annual report 2021 148 2.4.2.5.4 Subsidiaries, joint ventures, associates and other associates Unless otherwise indicated, the percentage shareholdings shown below are identical to the percentage voting rights. 1. SUBSIDIARIES CONSOLIDATED ACCORDING TO THE FULL CONSOLIDATION METHOD % shareholding in Subsidiaries 31 Dec 2021 31 Dec 2020 Austria  Sembella GmbH Aderstrasse 35 - 4850 Timelkam 100.00 (f) 100.00 Belgium    s.c. sous forme de s.a. Balim b.v. onder vorm van n.v. Bourgetlaan 42 - 1130 Haren 100.00 100.00 s.a. Finapal n.v. Bourgetlaan 42 - 1130 Haren 100.00 100.00 s.a. Recticel International Services n.v. Bourgetlaan 42 - 1130 Haren 100.00 100.00 Recticel Bedding Belgium b.v. Diebeke, 20 - 9500 Geraardsbergen 100.00 (f) - s.a. Proseat n.v. Bourgetlaan 42 - 1130 Haren - (a) 100.00 China Recticel Foams (Shanghai) Co Ltd 525, Kang Yi Road - Kangyiao Industrial Zone, 201315 Shanghai 100.00 100.00 Recticel Flexible Foam (Wuxi) Co Ltd No 30, Wanquan Road; Xishan Economic and Technological Developement Zone, Wuxi City 100.00 100.00 FoamPartner Polyurethane Materials (Changzhou) Co., Ltd. 330, Huanghe Road (West) - Changzhou City - 213000 Changzhou 100.00 (b) 0.00 FoamPartner Trading (Shanghai) Ltd HiTech Plaza 2410, No. 488 Wuning Rd (South) - 200042 Shanghai 100.00 (b) 0.00 Estonia    Recticel ou Peterburi tee 48a - 11415 Talinn 100.00 100.00 Finland    Recticel oy Nevantie 2, 45100 Kouvola 100.00 100.00 Recticel Insulation oy Gneissitie, 2 - 04600 Mäntsälä 100.00 100.00 France    Recticel s.a.s. 71, avenue de Verdun - 77470 Trilport (since 1 March 2019) 100.00 100.00 Recticel Insulation s.a.s. 1, rue Ferdinand de Lesseps - 18000 Bourges 100.00 100.00 Frina Mousse sàrl (in liquidation) 1 Rue Jasmin, 68270 Wittenheim 100.00 0.00 % shareholding in Subsidiaries 31 Dec 2021 31 Dec 2020 Germany    Recticel Automobilsysteme GmbH - (a) 100.00 Recticel Deutschland Beteiligungs GmbH Schlaraffiastrasse 1-10 - 44867 Bochum 6 - Wattenscheid 100.00 100.00 Recticel Grundstücksverwaltung GmbH Schlaraffiastrasse 1-10 - 44867 Bochum 6 - Wattenscheid 100.00 100.00 Recticel Engineered Foams GmbH (formely Recticel Dämmsysteme GmbH) Schlaraffiastrasse 1-10 - 44867 Bochum 6 - Wattenscheid 100.00 (c) 100.00 Recticel Schlafkomfort GmbH Schlaraffiastrasse 1-10 - 44867 Bochum 6 - Wattenscheid 100.00 (f) 100.00 Recticel Verwaltung GmbH & Co. KG Schlaraffiastrasse 1-10 - 44867 Bochum 6 - Wattenscheid 100.00 100.00 Luxembourg Recticel RE s.a. 23, Avenue Monterey, L-2163 Luxembourg 100.00 100.00 Recticel Luxembourg s.a. 23, Avenue Monterey, L-2163 Luxembourg 100.00 100.00 India Recticel India Private Limited 407, Kapadia Chambers, 599 JSS Road, Princess Street, Marine Lines (East), 400002 Mumbai Maharashtra 100.00 100.00 Recticel annual report 2021 149 % shareholding in Subsidiaries 31 Dec 2021 31 Dec 2020 Morroco Recticel Maroc s.à.r.l.a.u. Ilot K, Module 4, Atelier 2, Zone Franche d'Exportation de Tanger 100.00 100.00 The Netherlands  Recticel B.V. Spoorstraat 69 - 4041 CL Kesteren 100.00 (f) 100.00 Recticel International B.V. Spoorstraat 69 - 4041 CL Kesteren 100.00 100.00 Norway Recticel AS Øysand - 7224 Mehus 100.00 100.00 Poland    Recticel Sp. z o.o. Ul. Graniczna 60, 93-428 Lodz 100.00 (f) 100.00 Recticel International Services Sp.z..o.o. Ul. Lakowa 29, 90-554 Lodz Poland 100.00 (d) - Romania    Recticel Bedding Romania s.r.l. Miercurea Sibiului, DN1, FN, ground ﬂoor room 2 3933 Sibiu County 100.00 (f) 100.00 Singapore FoamPartner Singapore Pte. Ltd 8, Ubi Road 2, #07-21 Zervex 100.00 (b) - Slovenia Turvac d.o.o. Primorska 6b, 3325 Šoštanj 74.00 74.00 Sweden    Recticel AB Södra Storgatan 50 b.p. 507 - 33228 Gislaved 100.00 100.00     Spain Recticel Iberica s.l. Cl. Catalunya 13, Pol. Industrial Cam Ollersanta Perpetua de Mogoda 08130 100.00 100.00 % shareholding in Subsidiaries 31 Dec 2021 31 Dec 2020 Switzerland    Recticel Bedding (Schweiz) AG Bettenweg 12 Postfach 65 - 6233 Büron - Luzern 100.00 (f) 100.00 Recticel Engineered Foams Switzerland AG Oberwolfhauserstrasse 9 - 8633 Wolfhausen 100.00 (b) - FoamPartner Holding AG c/o Sielva Management SA - Gubelstrasse 11 - 6300 Zug 100.00 (b)(e) 0.00     Tu r k e y Recticel Teknik Sünger Izolasyon Sanayi ve Ticaret a.s. Orta Mahalle, 30 - 34956 Istanbul 100.00 100.00    United Kingdom    Gradient Insulations (UK) Limited Blue Bell Close Clover Nook Industrial Park - DE554RD Alfreton 100.00 100.00 Recticel (UK) Limited Blue Bell Close Clover Nook Industrial Park - DE554RD Alfreton 100.00 100.00 Recticel Limited Blue Bell Close Clover Nook Industrial Park - DE554RD Alfreton 100.00 100.00 United States of America    FoamPartner Americas Inc 2923 Technology Drive - Rochester Hills, MI 48309 100.00 (b) 0.00 The Soundcoat Company Inc. Burt Drive 1 PO Box 25990 - NY 11729 Deer Park County of Suffolk 100.00 100.00 (a) Liquidated on 31 March 2021 (b) Consolidated since 01 April 2021 (c) Recticel Engineered Foams GmbH has been merged with FoamPartner Germany GmbH, which itself merged with FoamPartner Converting Center GmbH, FoamPartner Leverkusen GmbH and FoamPartner Delmenhorst GmbH, Germany (d) Incorporated as from 01 October 2021 (e) former FoamPartner Switzerland AG, which merged with Buttikofer AG, Switzerland and was renamed (f) entitiy that will be discontinued following the disposal of the Bedding activities Recticel annual report 2021 150 Significant restrictions to realise assets or settle liabilities Recticel NV/SA, or some of its subsidiaries have provided guarantees for (i) an aggregate amount of EUR 0.8 million in favour of OVAM regarding the sanitation and rehabilitation projects on some of its sites and/or sites of its subsidiaries, (ii) an aggregate amount of EUR 0.8 million in favour of the Walloon Département du Sol et des Déchets – DSD, and (iii) and aggregate amount of EUR 2.2 million in favour of various local public entities in France (Préfectures). Recticel NV/SA also provides guarantees and comfort letters (for a total amount of EUR 90.8 million) to and/or on behalf of various direct or indirect subsidiaries, of which the material (> EUR 1 million) ones are: • on behalf of Recticel Iberica S.L.: EUR 1.8 million; • on behalf of Recticel Bedding Romania s.r.l.: EUR 1.3 million; • on behalf of Recticel Ltd.: EUR 17.5 million, of which an estimated EUR 6.5 million (GBP 5.5 million) for the pension fund; • on behalf of Recticel Verwaltung GmbH: EUR 5.0 million; • on behalf of Recticel Insulation s.a.s. in the framework of a real estate lease: EUR 13.0 million; • on behalf of Recticel Teknik Sünger Izolasyon Sanayi ve Ticaret a.s.: EUR 1.2 million; • on behalf of Recticel Bedding Schweiz AG: EUR 2.2 million; • on behalf of Recticel Insulation OY: EUR 15.5 million in the framework of a real estate investment loan; • on behalf of Recticel International Services NV/SA: EUR 3.0 million; and • on behalf of Recticel Sp.z.o.o., mainly in the framework of a real estate lease: EUR 30.3 million. Under the syndicated credit facility agreement, the maximum dividend authorised for distribution, excluding the portion attributable to the treasury shares, amounts to the highest of (i) 50% of the consolidated net income of the Group for the previous financial year and (ii) EUR 14.0 million. The gross dividend over 2021 – to be paid in 2022 – proposed to the Annual General Meeting amounts to EUR 0.29 per share, leading to a total dividend pay-out of EUR 16.2 million (excluding treasury shares). This amount is below the above-mentioned 50% maximum pay-out limit. 2. ASSOCIATES ACCOUNTED FOR USING THE EQUITY METHOD % shareholding in Associates 31 Dec 2021 31 Dec 2020 Germany Proseat Europe GmbH Hessenring 32 - 64546 Mörfelden-Walldorf 25.00 25.00 TEMDA2 GmbH Gut Hochschloss 1 - 82396 Pähl 49.00 49.00 (f) Italy Orsa Foam S.p.a. Via A. Colombo, 60 21055 Gorla Minore (VA) - Italy 33.00 33.00 (f) Since 30 June 2020 following the partial disposal of the Automotive Interiors activities. Apart of having the approval from the controlling shareholder(s) to distribute dividends, there are no specific restrictions on the ability of associates to transfer funds to Recticel in the form of cash dividends, or to repay loans or advances made by Recticel. Recticel NV/SA also provides guarantees and comfort letters, for a total amount of EUR 74.7 million, to and/or on behalf of various direct or indirect joint ventures, of which the material (> EUR 1 million) ones are: • on behalf of Proseat Europe GmbH: EUR 27.7 million; • on behalf of TEMDA2 GmbH: EUR 25.0 million; • on behalf of various Automotive Interiors companies: EUR 20.0 million; and • on behalf of Orsafoam: EUR 2.0 million. 3. NON-CONSOLIDATED ENTITIES Some subsidiaries more than 50% controlled are not consolidated because they are (still) non-material. As soon as they have reached a sufficient size, however, they will be included in the scope of consolidation. % shareholding in Non-consolidated entities 31 Dec 2021 31 Dec 2020 Czech Republic  Matrace Sembella s.r.o. (in liquidation) Hrabinská 498/19 - 73701 Ceský Tesín 100.00 100.00 China  Recticel Shanghai Ltd No. 518, Fute North Road, Waigaoqiao Free Trade Zone - 200131 Shanghai 100.00 100.00 Recticel annual report 2021 151 2.4.2.5.5 Interests in joint ventures, associates and other associates A list of the significant investments in joint ventures and associates is included in note 2.4.2.5.4. in thousand EUR Group Recticel Joint ventures Associates Other Associates 31 Dec 2021 Joint ventures Associates Other Associates 31 Dec 2020 At the end of the preceding period 0 12,351 11,030 23,381 39,843 25,623 0 65,465 Movements during the year Capital increase 0 0 0 0 0 0 960 960 Remeasurement gains/losses on defined benefit plans 0 0 0 0 (258) 0 (17) (275) Income tax relating to components of other comprehensive income 0 0 0 0 0 0 0 0 Other comprehensive income net of tax 0 0 0 0 (258) 0 (17) (275) Group's share in the result for the period 0 371 (682) (311) ¹ (334) 704 (5,791) (5,421) Translation differences 0 0 0 0 (1,399) 0 (243) (1,641) Comprehensive income for the period 0 371 (682) (311) (1,991) 704 (6,050) (7,337) Dividends distributed 0 0 0 0 3,640 0 0 3,640 ³ Change in scope 0 0 0 0 (41,492) (3,024) 10,692 (33,823) ² Reclassification 0 0 0 0 0 (10,953) 10,953 0 4 Impairment 0 0 0 0 0 0 (5,524) (5,524) 5 Other 0 (13) 13 0 0 0 0 0 At the end of the period 0 12,709 10,361 23,070 0 12,351 11,030 23,381 1 In 2021, only the result of TEMDA2 GmbH is recognised. As Recticel’s investment in Proseat is reduced to zero as per 31 December 2020, additional losses are recognised by a provision (liability) only to the extent that Recticel has legal or constructive obligations or made payments on behalf of Proseat. As Recticel does not have such obligation, the loss of Proseat in 2021 did not result in an additional loss in the consolidated accounts of Recticel. 2 In 2020, the item ‘Change in scope’ relates mainly to the sale of 50% participation in Eurofoam and the transfer of the remaining 25% stake in Proseat to the item Other associates. 3 Dividends distributed by the Eurofoam group prior to the divestments. 4 In 2020 a reclassification was made of the interests in associates. Associates considered as being part of the Group’s core business (i.e. Orsafoam) are reported under the item ”Interest in associates”, whereas associates not considered as being part of the Group’s core business (i.e. Proseat and Automotive Interiors) are reported under the item “Interests in other associates”. (cfr. 2.4.2.4.7.) 5 Impairment loss relates to Proseat Recticel annual report 2021 152 Pro forma key figures for associates and other associates: (on a 100% basis) in thousand EUR Group Recticel Associates Other associates ORSAFOAM PROSEAT TEMDA2 * 31 Dec 2021 31 Dec 2020 31 Dec 2021 31 Dec 2020 31 Dec 2021 31 Dec 2020 Aggregated figures (sum of individual company ledgers before eliminations) Non-current assets 40,874 44,456 89,172 90,456 65,756 61,965 Current assets 84,473 68,146 69,764 78,984 67,137 98,514 Total assets 125,347 112,602 158,936 169,440 132,893 160,479 Non-current liabilities (14,695) (12,827) (71,510) (68,483) (60,975) (78,926) Current liabilities (56,513) (47,384) (101,198) (78,869) (44,134) (80,838) Total liabilities (71,208) (60,211) (172,708) (147,352) (105,109) (159,764) Net equity 54,139 52,391 (13,772) 22,088 27,784 715 Revenue 109,224 80,489 220,084 206,881 147,906 81,228 Profit or (loss) of the period 1,734 2,159 (38,058) (20,677) 1,151 (1,269) in thousand EUR Group Recticel ORSAFOAM PROSEAT TEMDA2 31 Dec 2021 31 Dec 2020 31 Dec 2021 31 Dec 2020 31 Dec 2021 31 Dec 2020 Net equity (Group share) 17,866 18,594 (3,443) 5,522 13,614 3,797 Reversal of real estate revaluation (4,727) (6,337) 0 0 0 0 Corrections on opening balance 78 81 0 0 (3,223) 7,246 Impairment 0 0 (5,524) (5,524) 0 0 Other (508) 31 8,967 2 0 0 Carrying amount of interests in associate 12,709 12,369 0 0 10,391 11,043 The Group did not incur significant contingent liabilities for its interests in associates or other associates. Proseat released a loss of EUR -13.8 million (or EUR -3.4 million for Recticel’s share). As Recticel recognised an impairment loss of EUR -5.5 million at the end of 2020, as a result of which the investment in Proseat was reduced to zero, the fully-year 2021 income statement was not impacted by the loss of Proseat. No losses for Proseat will be recognized due to the fact that Recticel doesn't provide any financial support any longer, with exception to the provision that was made in connection to the exercise of the option (EUR 2.5 million). Recticel annual report 2021 153 2.4.2.5.6 Other financial assets in thousand EUR Group Recticel 31 Dec 2021 31 Dec 2020 Financial investments 610 534 Loans to affiliates 10,207 10,207 Other loans 1,380 1,568 Non-current financial receivables 11,588 11,775 Cash advances and deposits 576 426 Other receivables 1,044 1,043 Non-current other receivables 1,620 1,469 Derivatives - Option valuation 0 4,865 TOTAL 13,818 18,643 The item ‘Loans to affiliates’ relates mainly to a new loan to TEMDA2 (EUR 10.0 million) The loan to Proseat s.r.o. of EUR 10.0 million was fully reimbursed in 2020. The item ‘Other loans’ relates to loans granted by Recticel SAS, France (EUR 1.4 million; 2020: EUR 1.6 million) to some of its employees. The carrying amounts of these non-current receivables approximate the fair value since the interest rate is a variable rate in line with market conditions. The maximum exposure to credit risk equals to the carrying amounts of these assets as recognised on the statement of financial position. There are no due but unpaid receivables, nor impairments on the outstanding receivables. There are no specific guarantees offered for the outstanding receivables. The item ’Cash advances and deposits’ are mainly related to guarantees provided for rents and supplies (water, electricity, telecom, waste treatment, …). The item ‘Derivatives – Option valuation’ is related to the divestment of Proseat (see note 2.4.2.5.5.) 2.4.2.5.7 Inventories in thousand EUR Group Recticel 31 Dec 2021 31 Dec 2020 Raw materials & supplies - Gross 66,366 50,782 Raw materials & supplies - Amounts written off (3,753) (3,401) Raw materials & supplies 62,613 47,381 Work in progress - Gross 10,440 10,506 Work in progress - Amounts written off (388) (375) Work in progress 10,053 10,130 Finished goods - Gross 38,503 26,391 Finished goods - Amounts written off (1,749) (1,335) Finished goods 36,753 25,056 Traded goods - Gross 3,373 8,804 Traded goods - Amounts written off (242) (752) Traded goods 3,130 8,052 Down payments - Gross 21 1 Down payments - Amounts written off 0 0 Down payments 21 1 Contracts in progress - Gross 328 213 Contracts in progress - Gross - Moulds 0 0 Contracts in progress 328 213 TOTAL INVENTORIES 112,897 90,833 Amounts written-off on inventories during the period (7,084) (2,713) Amounts written-back on inventories during the period 7,140 2,205 Total inventories increased due to impact of acquisition of FoamPartner and as a result of higher raw material prices. Recticel annual report 2021 154 2.4.2.5.8 Contract assets and contract liabilities The following schedule presents the overview of contract assets and liabilities following application of IFRS 15 and includes both the impact of the opening balance and the movements of the period. For the year ending 31 December 2021: in thousand EUR Group Recticel Opening balance Release to income statement Reclassification Exchange differences Transfer to discontinued operations Change in scope Closing balance at the end of the period Current contract assets - Contracts in progress Tooling & Packaging 213 (167) 281 0 0 0 328 Current contract assets 213 (167) 281 0 0 0 328 Contract liabilities - Expected rebates and volume discounts 15,183 7,178 (6,175) 424 (7,964) 435 9,081 Current contract liabilities 15,183 7,178 (6,175) 424 (7,964) 435 9,081 The decrease of the contract assets and contract liabilities is mainly explained by the disposal of the Bedding activities. For the year ending 31 December 2020: in thousand EUR Group Recticel Opening balance Consideration payable to customers Release to income statement Reclassification Exchange differences Change in scope Closing balance at the end of the period Non-current contract assets - Consideration payable to a customer 813 0 (209) (84) (7) (513) 0 Non-current contract assets - Contracts in progress Moulds 8,869 0 (5,742) 3,646 (30) (6,742) 0 Non-current contract assets - Contracts in progress Tooling & Packaging 1,456 0 (458) 1,702 (30) (2,671) 0 Non-current contract assets 11,138 0 (6,409) 5,264 (67) (9,926) 0 Current contract assets - Consideration payable to a customer 273 0 (122) 84 (14) (221) 0 Current contract assets - Contracts in progress Moulds 10,263 0 (469) (1,645) (56) (8,093) 0 Current contract assets - Contracts in progress Tooling & Packaging 765 0 (190) 734 (11) (1,297) 0 Current contract assets 11,300 0 (781) (827) (81) (9,611) 0 Total contract assets 22,438 0 (7,190) 4,437 (148) (19,537) 0 Current contract assets - Contracts in progress Moulds 3,453 0 1,453 (2,004) (1) (2,901) 0 Current contract assets - Contracts in progress Tooling & Packaging 2,953 0 905 (2,494) 18 (1,169) 213 Total 28,844 0 (4,832) (61) (131) (23,607) 213 Recticel annual report 2021 155 in thousand EUR Group Recticel Opening balance Consideration payable to customers Release to income statement Reclassification Exchange differences Change in scope Closing balance at the end of the period Non-current contract liabilities - Mould revenue recognition before SOP (start of production) 2,357 0 2,466 (2,924) 0 (1,898) 0 Non-current contract liabilities - Mould revenue recognition after SOP (start of production) 13,498 0 (8,633) 4,882 (34) (9,712) 0 Non-current contract liabilities - Tooling & Packaging revenue recognition before SOP (start of production) 2,517 0 1,913 (3,260) 16 (1,186) 0 Non-current contract liabilities - Tooling & Packaging revenue recognition after SOP (start of production) 1,968 0 0 1,592 (29) (3,531) 0 Non-current contract liabilities 20,339 0 (4,255) 289 (47) (16,327) 0 Contract liabilities - Expected rebates and volume discounts 15,385 0 3,566 (3,437) (290) (41) 15,183 Contract liabilities - Long term agreements 366 0 900 0 (7) (1,260) 0 Contract liabilities - Moulds revenue recognition 16,005 0 (1,019) (1,837) (91) (13,058) 0 Contract liabilities - Tooling & Packaging revenue recognition 1,076 0 (861) 1,629 (11) (1,833) 0 Current contract liabilities 32,832 0 2,586 (3,644) (399) (16,191) 15,183 Total contract liabilities 53,172 0 (1,669) (3,355) (446) (32,519) 15,183 In the Automotive Interiors activity (divested in June 2020), Recticel developed a polyurethane-based technology for the manufacturing of interior trim components. For optimum implementation of this application, based on the specifications given by its customers, Recticel ensures the manufacturing of the moulds with its own suppliers during the pre-operating phase, before starting production of components. At the end of this subcontracting process, the moulds are sold to the customer. Recticel annual report 2021 156 2.4.2.5.9 Trade receivables, other receivables and other financial assets in thousand EUR Group Recticel 31 Dec 2021 31 Dec 2020 Trade receivables 146,563 108,325 Loss allowance for expected credit losses (4,967) (5,599) Total trade receivables 141,596 102,726 Other receivables ¹ 11,324 17,711 Derivatives (forward exchange contracts) 180 0 Loans carried at amortised cost 4,365 40,219 Other financial assets ² 4,545 40,219 Other receivables and other financial assets ¹ / ² 15,869 57,930 Trade receivables at the reporting date 2021 comprise amounts receivable from the sale of goods and services for EUR 141.6 million (2020: EUR 102.7 million). In 2021, other receivables amounting to EUR 11.3 million relate to (i) VAT receivable (EUR 4.5 million), (ii) advances paid to third parties for operating costs spread over several financial years (EUR 2.9 million), (iii) prepayments, tax credits and subsidies, and contractual commitments with co-contractors (EUR 3.9 million). In 2020, other receivables amounting to EUR 17.7 million relate to (i) VAT receivable (EUR 6.2 million), (ii) advances paid to third parties for operating costs spread over several financial years (EUR 5.2 million), (iii) prepayments, tax credits and subsidies, and contractual commitments with co-contractors (EUR 6.3 million). In 2021, other financial assets (EUR 4.5 million) mainly consist mainly of, a receivable of EUR 3.2 million (2020: EUR 34.9 million) relating to the continuing involvement under non-recourse factoring programs in Belgium, France and The Netherlands and loans of EUR 0.6 million to other associates (2020: EUR 4.5 million). In 2020, other financial assets (EUR 40.2 million) mainly consist of, a receivable of EUR 34.9 million (2019: EUR 11.7 million) relating to the continuing involvement under non-recourse factoring programs in Belgium, France, The Netherlands and the United Kingdom and loans of EUR 4.5 million to other associates (2019: EUR 0.2 million). Factoring To confine credit risks, non-recourse factoring programs were established for a total amount of EUR 40.0 million, which EUR 25.2 million was drawn down per 31 December 2021. in thousand EUR Group Recticel 31 Dec 2021 31 Dec 2020 Factoring without recourse Gross amount 28,361 34,094 Continuing involvement (3,198) (34,094) Net amount 25,162 0 Retention amount recognized in debt 0 0 Total amount factoring without recourse 25,162 0 The average outstanding amounts of receivables vary between 10% and 15% of total sales. A strict credit follow-up is organised through a centralised credit management organisation. The continuing involvement represents the retention of contractual rights as specified in the terms and conditions under the factoring agreement. Movement in loss allowance for expected credit losses in thousand EUR Group Recticel 31 Dec 2021 31 Dec 2020 At the end of the preceding period (5,599) (4,825) Additions (124) (1,117) Reversals 479 693 Non-recoverable amounts 10 7 Reclassification 247 (637) Exchange differences 36 117 Change in scope (1,007) 0 Transfer to assets held for sale 991 163 Total at the end of the period (4,967) (5,599) The non-recoverable amounts refer to trade receivable balances which have been written-off as the Group considers that these are not recoverable. Recticel annual report 2021 157 2.4.2.5.10 Cash and cash equivalents Cash and cash equivalents include cash held by the Group and short-term bank deposits with an original maturity of three months and less. The carrying amount of these assets approximates to their fair value. There are no specific restrictions that apply to cash and cash equivalents. 2.4.2.5.11 Assets held for sale and discontinued operations Discontinued operations In 2021 this item relates to the Bedding activities which are to be sold to Aquinos. Reference is made note 2.4.2.4.7. In 2020 this item related to the Automotive Interiors divestment agreement which contains reciprocal call/put options for Admetos to acquire, or Recticel to sell, its remaining 49% share, exercisable as from March 2024 at a price calculated on the basis of a pre-agreed EBITDA multiple. The current value option is estimated at zero value. Assets held for sale In 2020 this item relates to the idle site of Legutiano (Spain). 2.4.2.5.12 Share capital in thousand EUR Group Recticel 2021 2020 Number of shares Number of shares issued and fully paid at 01 January 55,742,920 55,397,439 Number of shares issued and fully paid at 31 December 55,963,420 55,742,920 of which number of treasury shares at 31 December 326,800 326,800 in thousand EUR Group Recticel 31 Dec 2021 31 Dec 2020 Issued and fully paid shares 139,909 139,357 The change in share capital is explained by the exercise of subscription rights in 2021. Recticel manages its share capital, without any corrections or adjustments. There are no external capital restrictions applicable on the share capital, except for the ‘syndicated revolving credit financing facility and the acquisition financing facility, which are subject to some financial covenants. One covenant limits the annual dividend payment to highest of (i) 50% of the consolidated net income of the Group for the previous financial year and (ii) EUR 14.0 million. 2.4.2.5.13 Employee benefit liabilities in thousand EUR Group Recticel 31 Dec 2021 31 Dec 2020 Post-employment benefits: defined benefit plans 36,572 50,465 Other long-term benefits and termination benefits 2,563 1,877 Net liabilities at 31 December 39,135 52,342 • Post-employment benefits: defined benefit plans Over 99% of the defined benefit obligation is concentrated in five countries: Belgium (40%), United Kingdom (25%), Switzerland (23%), France (7%) and Germany (4%). Within these five countries Recticel operates funded and unfunded defined benefit retirement plans. These plans typically provide retirement benefits related to remuneration and period of service. The following information describes the largest retirement plans, which make up 88% of the total defined benefit obligation. in thousand EUR Group Recticel Defined benefit obligation Assets Funded status Adjustment due to asset ceiling/ additional liability under IFRIC 14 Net liability/ (asset) Belgium 65,115 (49,536) 15,579 0 15,579 United Kingdom 39,651 (41,803) (2,152) 5,923 3,771 Switzerland 37,453 (39,105) (1,652) 1,652 0 Other countries 18,612 (1,390) 17,222 0 17,222 Total 160,831 (131,834) 28,997 7,575 36,572 Belgium The defined benefit and hybrid pension plans in Belgium are plans funded through group insurances. Only the employer pays contributions to fund the plans. The defined benefit plans are closed for new employees since 2003; most hybrid plans are still open to new employees. The plans function in, and comply with, a regulatory framework and comply with the local minimum funding requirements. Plan participants are entitled to a lump sum on retirement at age 65. The pension benefits provided by the plans are related to the employees’ salary. Active members also receive a benefit on death in service. The assumed form of benefit payment is in all cases a lump sum, but the plans foresee the option to convert to annuity. Recticel annual report 2021 158 United Kingdom Recticel sponsors one defined benefit plan in the United Kingdom. It is a funded pension plan which is closed to new entrants and to further accrual of benefits for existing members. The plan is governed via a trust which is legally separate from Recticel and is administered by a board of Trustees composed of both employer-appointed and member-nominated Trustees. The Trustees are required by law to act in the interest of the beneficiaries of the plan, and are responsible for the investment policy in respect of plan assets and for the day-to-day administration of the benefits. The plan functions in and complies with a regulatory framework and is subject to local minimum funding requirements. Under the plan, participants are entitled to annual pensions on retirement at age 65 based on the final pensionable salary and the years of service. Members also receive benefits on death. UK legislation requires that the liabilities of defined benefit pension schemes are calculated for funding purposes on a prudent basis. The last funding valuation of the plan was carried out as at 31 December 2019 and showed a deficit of GBP 3.0 million. A new recovery plan was agreed in March 2021 to eliminate this deficit by 31 October 2022. Recticel agreed to pay a total amount of GBP 5.4 million as recovery contributions during the period 01 January 2020 to 31 December 2024. The outstanding amount at 31 December 2021 is GBP 3.3 million. Switzerland Recticel sponsors two hybrid pension plans in Switzerland, one of which relates to continuing operations. Both employer and employees pay contributions to fund this plan. The plan is open to new employees. The plan is funded through a collective foundation which is legally separate from Recticel and whose board of Trustees is composed equally of representatives of the employer and employees. The Trustees are required by law to act in the interest of all relevant beneficiaries and are responsible for the investment policy with regard to the assets and the administration and financing of the benefits. The plan operates in accordance with a regulatory framework and complies with the local minimum funding requirements. Under the plan, participants are insured against the financial consequences of old age, disability and death. • Risks associated with defined benefit pension plans The most significant risks associated with Recticel’s defined benefit plans are: Asset volatility: The liabilities are calculated using a discount rate set with reference to corporate bond yields. If assets underperform this yield, this will create a deficit. The schemes hold a significant proportion of equities which, though expected to outperform corporate bonds in the long-term, create volatility and risk in the short-term. The allocation to equities is monitored to ensure it remains appropriate given the long-term obligations. Changes in bond yields: A decrease in corporate bond yields will increase the value placed on the liabilities for accounting purposes, although this will be partially offset by an increase in the value of the bond holdings. Inﬂation risk: The benefit obligations are linked to inﬂation, and higher inﬂation will lead to higher liabilities (although, in some cases, caps on the level of inﬂationary increases are in place to protect against extreme inﬂation). The majority of the assets are either unaffected by or only loosely correlated with inﬂation, meaning that an increase in inﬂation will also increase the deficit. Life expectancy: Many of the obligations are to provide benefits for the life of the member or take into account member mortality rates, so increases in life expectancy will result in an increase in the liabilities. Currency risk: The risk that arises from the change in price of the euro against other currencies. in thousand EUR Group Recticel 31 Dec 2021 31 Dec 2020 Evolution of the net liability during the year is as follows: Net liability at 01 January 50,465 55,543 Changes in scope of consolidation (274) (2,860) Expense recognised in the income statement 9,424 7,491 Employer contributions (9,886) (8,955) Amount recognised in other comprehensive income (7,417) (419) Exchange differences 302 (335) Discontinued net liability (6,042) 0 Net liability at 31 December 36,572 50,465 Changes in scope of consolidation relate in 2021 to the acquisition of FoamPartner, and in 2020 to the partial divestment of the Automotive Interiors division. Recticel annual report 2021 159 in thousand EUR Group Recticel 31 Dec 2021 31 Dec 2020 Pension costs recognised in profit and loss and other comprehensive income: Service cost:  Current service cost 9,531 7,417  Employee contributions (957) (269)  Past service cost (including curtailments) 332 (390)  Cost or gain on settlement 0 102  Administration expenses 362 314 Net interest cost:  Interest cost 976 1,283  Interest income (818) (987)  Interest on asset ceiling/ additional liability recognised under IFRIC 14 (2) 21 Pension expense recognised in profit and loss 9,424 7,491 Remeasurements in other comprehensive income  Return on plan assets (in excess of)/below that recognised in net interest (3,878) (6,084)  Actuarial (gains)/losses due to changes in financial assumptions (7,599) 8,271  Actuarial (gains)/losses due to changes in demographic assumptions (1,401) 128  Actuarial (gains)/losses due to experience (6,734) (1,548)  Changes in the asset ceiling impact, excluding amounts recognised in net interest cost 6,766 95  Changes in additional liability recognised under IFRIC 14, excluding amounts recognised in net interest cost 5,429 (1,281) Total amount recognised in other comprehensive income (7,417) (419) Total amount recognised in profit and loss and other comprehensive income 2,007 7,072 In 2021, amounts for past service costs, curtailments and settlements relate to a plan change in France and personnel movements related to the FoamPartner acquisition. In 2020, they related to plan changes in Belgium and to Guaranteed Minimum Pension equalisation in the United Kingdom. The amounts above are in respect of both continuing and discontinued operations. in thousand EUR Group Recticel 31 Dec 2021 31 Dec 2020 Amounts recorded in the statement of financial position in respect of the defined benefit plans are: Defined benefit obligations for funded plans 152,260 168,673 Fair value of plan assets (131,834) (127,831) Funded status for funded plans 20,426 40,842 Defined benefit obligations for unfunded plans 8,571 7,793 Total funded status at 31 December 28,997 48,635 Effect of the asset ceiling/ additional liability recognised under IFRIC 14 7,575 1,830 Net liabilities at 31 December 36,572 50,465 The key actuarial assumptions used at 31 December (weighted averages) are: Discount rate 0.91% 0.50% Future pension increases 0.93% 0.83% Expected rate of salary increases 1.72% 1.80% Inﬂation 1.80% 1.73% The mortality assumptions are based on recent mortality tables. The mortality tables of the United Kingdom, Germany and Switzerland assume that life expectancies will increase in future years. Movement of the plan assets Fair value of plan assets at 01 January 127,831 128,340 Changes in scope of consolidation 37,791 (5,127) Interest income 818 987 Employer contributions 9,886 8,955 Employee contributions 957 269 Benefits paid (direct & indirect, including taxes on contributions paid) (7,400) (9,513) Return on plan assets in excess of/(below) that recognised in net interest, excl. interest income 3,878 6,084 Settlement gains/(losses) 0 (47) Administration expenses (362) (314) Exchange differences 6,206 (1,803) Discontinued plan assets (47,771) 0 Fair value of plan assets at 31 December 131,834 127,831 The funded plans’ assets are invested in mixed portfolios of shares and bonds, or insurance contracts. The plan assets do not include direct investments in Recticel shares, Recticel bonds or any property used by Recticel companies. Recticel annual report 2021 160 Unit-linked insurance contracts are investments in debt, equity and cash instruments managed by an insurance company, in which Recticel holds a specific number of fund units of which the net asset value is declared on a regular basis. Non-unit-linked insurance contracts are pure insurance policies with only limited financial investment risk. Unit-linked insurance contracts (non-quoted) 44.65% Government bonds (quoted) 15.52% Non unit-linked insurance contracts (non-quoted) 25.39% Equity (quoted) 9.55% Corporate bonds (quoted) 4.89% Cash 5.16% Mortgages 19.91% Real Estate 17.95% Equity 7.93% Bonds 49.05% Asset classes of unit-linked insurance contacts Plan assets portfolio mix at 31 December 2021 in thousand EUR Group Recticel 31 Dec 2021 31 Dec 2020 Movement of the defined benefit obligation Defined benefit obligation at 01 January 176,466 180,817 Changes in scope of consolidation 37,517 (7,987) Current service cost 9,531 7,417 Interest cost 976 1,283 Benefits paid (direct & indirect, including taxes on contributions paid) (7,400) (9,513) Actuarial (gains)/losses on liabilities arising from changes in financial assumptions (7,599) 8,271 Actuarial (gains)/losses on liabilities arising from changes in demographic assumptions (1,401) 128 Actuarial (gains)/losses on liabilities arising from experience (6,734) (1,548) Past service cost (including curtailments) 332 (390) Settlement (gains)/losses 0 55 Exchange differences 5,976 (2,067) Discontinued defined benefit obligation (46,833) 0 Defined benefit obligation at 31 December 160,831 176,466 Split of the defined benefit obligation per population Active members 94,274 90,417 Members with deferred benefit entitlements 40,740 37,067 Pensioners/Beneficiaries 25,817 48,982 Total defined benefit obligation at 31 December 160,831 176,466 Changes in the effect of the asset ceiling/ additional liability under IFRIC 14 Asset ceiling/additional liability impact at 01 January 1,830 3,066 Interest on asset ceiling/additional liability (2) 21 Changes in the asset ceiling/additional liability, excluding amounts recognised in net interest cost 12,195 (1,186) Exchange differences 532 (71) Discontinued asset ceiling/additional liability (6,980) 0 Asset ceiling/additional liability impact at 31 December 7,575 1,830 Weighted average duration of the defined benefit obligation at 31 December 12 years 13 years Sensitivity of defined benefit obligation to key assumptions at 31 December % increase in defined benefit obligation following a 0.25% decrease in the discount rate 3.40% 3.52% % decrease in defined benefit obligation following a 0.25% increase in the discount rate -3.32% -3.32% % decrease in defined benefit obligation following a 0.25% decrease in the inﬂation rate -1.22% -1.32% % increase in defined benefit obligation following a 0.25% increase in the inﬂation rate 1.24% 1.37% For plans where a full valuation has been performed the sensitivity information shown above is exact and based on the results of this full valuation. For plans where results have been rolled forward from the last full actuarial valuation, the sensitivity information above is approximate and takes into account the duration of the liabilities and the overall profile of the plan membership. Recticel annual report 2021 161 in thousand EUR Group Recticel 2022 Estimated contributions for the coming year Expected employer contributions for defined benefit plans 8,871 • Post-employment benefits: defined contribution plans The amount recognised as an expense for defined contribution plans in respect of continuing operations was EUR 2,589,396 (2020 restated: EUR 2,424,281). 2.4.2.5.14 Provisions For the year ending 31 December 2021: in thousand EUR Group Recticel Litigations Defective products Environmental risks Restructuring Provisions for onerous contracts and dilapidation costs Other risks Total At the end of the preceding year 25 1,382 2,358 1,367 1,838 13,608 20,577 Movements during the year Changes in scope 0 619 0 1,724 522 75 2,940 Increases 0 454 0 2,777 241 2,450 5,921 Utilisations 0 (43) (355) (1,979) (1,000) (716) (4,093) Write-backs 0 (282) (400) (27) (1,340) (2,349) (4,398) Transfer from one heading to another 0 90 0 352 1,335 (1,340) 438 Transfer to liabilities held for sale (25) (1,279) 0 (1,079) 2 0 (2,380) Adjustment for reassessment of assumptions on dismantling and restoration costs 0 0 0 0 5,693 0 5,693 Exchange rate differences 0 49 1 3 505 124 682 At year-end 0 990 1,604 3,138 7,796 11,852 25,380 Non-current provisions (more than one year) 0 990 1,396 0 7,796 11,813 21,995 Current provisions (less than one year) 0 (0) 208 3,138 0 39 3,385 TOTAL 0 990 1,604 3,138 7,796 11,852 25,380 Provisions for defective products are mainly related to warranties granted for products in the Insulation and Engineered Foams division. The provisions are generally calculated on the basis of 1% of yearly turnover, which corresponds to the management’s best estimate of the risk under 12-month warranties. When historical data are unavailable, the level of the provisions is compared to the yearly effective rate of liabilities, and if necessary, the amount of provision is adjusted. Provisions for environmental risks cover primarily (i) the identified risk at the Tertre (Belgium) site (see section 2.4.2.6.9.1.) and (ii) other pollution risks in Belgium. EUR 0.4 million of this provision has been used in 2021 to cover clean-up costs on the site in Tertre. Provisions for reorganisation relate to (i) the acquisition of FoamPartner (EUR 1.7 million) and (ii) the outstanding balance of expected expenses mainly relating to reorganisations in The Netherlands (EUR 2.4 million), Germany (EUR 0.1 million) and France (EUR 0.1 million). Provisions for onerous contracts relate mainly to the buildings in the United Kingdom (EUR 7.3 million). Provisions for other risks relate mainly to legal costs and fees for legacy remediation and litigations (see 2.4.6.9. – Contingent assets and liabilities) as well as management assessments with regards to post-closing settlements linked to the disposal of the Automotive Interiors activities. (cfr 2.4.2.4.7.) For the major risks (i.e. environmental, reorganisation and other risks) the cash outﬂow is expected to occur within a two years’ horizon. Recticel annual report 2021 162 2.4.2.5.15 Financial liabilities Financial liabilities carried at amortised cost include mainly interest-bearing borrowings: in thousand EUR Group Recticel Non-current liabilities Current liabilities 31 Dec 2021 31 Dec 2020 31 Dec 2021 31 Dec 2020 Secured Lease liabilities 43,723 55,726 6,692 11,142 Bank loans 164,782 12,867 925 901 Total secured 208,506 68,593 7,617 12,043 Unsecured Other loans 0 1,834 0 260 Current bank loans 0 0 1 275 Commercial paper 0 0 49,992 0 Bank overdrafts 0 0 580 1,152 Other financial liabilities 0 0 873 673 Total unsecured 0 1,834 51,447 2,360 Total liabilities carried at amortised cost 208,506 70,427 59,064 14,403 Gross financial debt: interest-bearing borrowings, including continuing involvement of off-balance sheet non-recourse factoring programs in thousand EUR Group Recticel 31 Dec 2021 31 Dec 2020 Drawn amounts under the various available interest-bearing borrowing facilities Outstanding amounts under club deal facility 152,840 0 Outstanding amounts under lease liabilities 43,723 55,726 Outstanding amounts under other non-current loans 11,943 14,701 Outstanding amounts under non-current gross interest-bearing borrowing facilities (a) 208,506 70,427 Outstanding amounts under bank overdrafts 580 1,152 Outstanding amounts under current bank loans 926 1,176 Outstanding amounts under lease liabilities 6,692 11,142 Outstanding amounts under factoring programs - retention amount 0 0 Outstanding amounts under commercial paper programs ¹ 49,992 0 Outstanding amounts under other current loans 0 260 Outstanding amounts under other financial liabilities 873 673 Outstanding amounts under current gross interest-bearing borrowing facilities (b) 59,064 14,403 Total outstanding amounts under gross interest-bearing borrowings (c)=(a)+(b) 267,570 84,830 Outstanding amounts under non-recourse factoring programs (d) 25,162 0 Total outstanding amounts under gross interest-bearing borrowings and factoring programs (e)=(c)+(d) 292,732 84,830 Weighted average lifetime of non-current interest-bearing borrowings (in years) 2.50 4.70 Weighted average interest rate of gross financial debt at fixed interest rate 2.26% 2.24% Interest rate range of gross financial debt at fixed interest rate 1.46% - 2.62% 1.46% - 2.62% Weighted average interest rate of gross financial debt at variable interest rate 1.40% 2.02% Interest rate range of gross financial debt at variable interest rate 0.60% - 3.70% 0.80% - 3.70% Weighted average interest rate of total gross financial debt 1.50% 2.24% Percentage of gross financial debt at fixed interest rate 11.8% 100.00% Percentage of gross financial debt at variable interest rate 88.2% 0.00% 1 The amount drawn under the commercial paper program is to be covered at any time by the undrawn amount under the club deal facility. Therefor the reported unused amount under the EUR 175 million club deal revolving credit facility is after deduction of the issued amounts under the commercial paper program. Recticel annual report 2021 163 The fair value of ﬂoating rate borrowings is close to amortised cost. The majority of the Group’s financial debt is centrally contracted and managed through Recticel International Services NV/SA, which acts as the Group’s internal bank. (i) Lease liabilities Lease liabilities comprise (i) following the application of IFRS 16, the leases for property, plant and equipment, furniture and vehicles (see note 2.4.2.1.2.1.1.), and (ii) leases formerly classified as ‘finance leases’. These finance leases consist mainly of three leases: • the lease financing of the Insulation plant in Bourges (France), with an outstanding amount of EUR 3.4 million as of 31 December 2021 and is at ﬂoating rate, hedged by interest rate swap (cfr 2.4.2.5.17); • the lease financing buildings in Belgium, with an outstanding amount of EUR 2.0 million as of 31 December 2021 and is at a fixed rate; • the additional lease to finance the extension of the Insulation plant in Wevelgem (Belgium) in 2017, with an outstanding amount of EUR 6.3 million as of 31 December 2021 and is at a fixed rate. (ii) Bank loans – “syndicated credit facility” On 04 December 2020 the Group entered into: • a new EUR 100 million syndicated revolving credit facility to replace the EUR 175 million ‘club deal’ facility maturing in February 2021, and • a EUR 205 million acquisition financing facility to finance the acquisition of FoamPartner, closed on 31 March 2021. The outstanding balance on 31 December 2021 of the acquisition financing facility is EUR 155 million, as a redemption of EUR 50 million was made on 31 December 2021 to the banks. Both facilities have a 3-year tenor with two 1-year extension options and have been arranged and underwritten by KBC Bank. The participating banks are Belfius Bank, BNP Paribas Fortis, Commerzbank and LCL. The new EUR 100 million syndicated revolving credit facility has effectively replaced the existing EUR 175 million ‘club deal’ facility as of 01 February, 2021. (iii) Other bank loans In 2018, Recticel concluded a secured fixed rate bilateral bank loan of EUR 15.5 million for the financing of the new greenfield Insulation plant in Finland. The tenor of this amortising bank loan is 15 years, with maturity in March 2033. The outstanding amount at 31 December 2021 is EUR 12.9 million. (iv) Commercial paper program In 2017, the Group started through Recticel NV/SA a short-term commercial paper program (TCN – Titres de Créances Négociables) in France for an amount of EUR 100 million, which was increased in 2018 to EUR 150 million. This TCN-program is used to complement the financing of day-to-day working capital needs of the Group. The amount issued under the TCN-program is to be covered by the unused amount under the club deal/syndicated credit facility. Following the refinancing and reduction of the amount of the syndicated revolving credit facility, the short-term commercial paper program has been reduced to EUR 100 million as of 01 February 2021. The commercial paper program has an outstanding amount of EUR 50 million on 31 December 2021. The ‘syndicated revolving credit financing facility and the acquisition financing facility, are subject to financial covenants. No covenants are in place for other financial liabilities. Other financial liabilities For interest rate swaps reference is made to 2.4.2.5.17. in thousand EUR Group Recticel 31 Dec 2021 31 Dec 2020 Other financial debt 192 121 Interest accruals 368 330 Total 560 451 Recticel annual report 2021 164 2.4.2.5.16 Trade and other payables Trade payables principally comprise amounts outstanding for trade purchases. Trade payables increased to EUR 120.2 million (2020: EUR 88.9 million) as a result of the higher activity level of the last quarter of 2021 and increased raw materials costs. Other current amounts payable decreased by EUR 22.0 million is composed as follows: in thousand EUR Group Recticel 31 Dec 2021 31 Dec 2020 Other non current liabilities maturing within one year 0 158 VAT payable - local and foreign 9,431 10,231 Other tax payables 1,458 1,620 Payroll, social security 36,920 33,912 Dividend payable 482 444 Result transfer (fiscal unit) 0 2,964 Other debts 3,906 26,029 Accrued liabilities - operating 11,235 9,081 Deferred income - operating 2,289 3,242 Deferred income - insurance premium 725 725 Deferred income - gain on sale and leaseback 439 472 Total 66,885 88,878 The major movements are linked to the net impact of the Discontinued liabilities (Bedding) and the acquisition of FoamPartner; and also to the termination of existing reverse factoring programs with two suppliers. 2.4.2.5.17 Financial instruments and financial risks The following table presents the financial instruments by category of IFRS 9 and the fair value level for the financial assets and liabilities measured at fair value: in thousand EUR Group Recticel category under IFRS 9 31 Dec 2021 31 Dec 2020 Fair value level Financial assets Transactional hedges - operational FVTPL 4 0 2 Derivatives not designed in a hedge relationship FVTPL 177 69 2 Current trade receivables AC 141,597 102,726 2 Other non-current receivables AC 1,620 6,334 2 Other receivables AC 11,324 17,711 2 Other receivables AC 12,944 24,045 2 Loans to affiliates AC 10,207 10,207 2 Other loans AC 1,380 1,568 2 Non-current loans AC 11,588 11,775 2 Financial receivables AC 4,365 40,150 2 Loans to affiliates AC 15,952 51,925 2 Cash and cash equivalents AC 118,367 79,255 2 Other investments FVTOCI 599 523 2 Financial liabilities Interest rate swaps designated as cash ﬂow hedge relationship CFH 36 95 2 Transactional hedges - operational FVTPL 15 46 2 Derivatives not designated in a hedge relationship FVTPL 269 83 2 Non-current financial liabilities at amortised cost AC 208,506 70,427 2 Current financial liabilities at amortised cost AC 58,744 14,180 2 Trade payables AC 120,245 88,922 2 Other non-current payables AC 25 26 2 Other payables AC 66,885 88,878 2 Other payables AC 66,911 88,903 2 AC = financial assets or liabilities at amortised cost CFH = cash ﬂow hedge FVTPL = Financial assets or liabilities at fair value through profit or loss FVTOCI = financial assets at fair value through other comprehensive income Recticel annual report 2021 165 The Group uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique: Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities Level 2: other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or indirectly Level 3: techniques which use inputs which have a significant effect on the recorded fair value that are not based on observable market data. During the reporting period ending 31 December 2021, there were no transfers between Level 1 and Level 2 fair value measurements, and no transfers into and out of Level 3 fair value measurements. Financial risk management • Credit risk The Group’s principal current financial assets are cash & cash equivalents, trade and other receivables, and investments, which represent the Group’s maximum exposure to credit risk in relation to financial assets. The Group’s credit risk is primarily attributable to its trade receivables. The amounts presented in the statement of financial position are net of loss allowances for expected credit losses, estimated by the Group’s management based on prior experience and their assessment of the current economic environment. The risk profile of the trade receivables portfolio is segmented by business line and based on the conditions of sale observed on the market. At the same time, it is confined by the agreed limits of the general conditions of sale and the specifically agreed conditions, adapted accordingly. The latter also depend on the degree of industrial and commercial integration of the customer, as well as on the level of market competitiveness. The trade receivables portfolio in Flexible Foams, Bedding and Insulation consists of a large number of customers distributed among various markets, for which the credit risk is assessed on an on-going basis and based on which the commercial and financial conditions are granted. In addition, the credit risks on trade receivables, except for Automotive associates, are mostly covered by credit insurance policies which the Group manages centrally and harmonises. In case of transfer of these receivables to the factoring company, the latter becomes the beneficiary of these credit insurance policies. The credit risk management is also strengthened by an organisation which is to a great extent centralised and enabled by the SAP FSCM software and best practice regarding the collection of receivables. Credit terms granted on sales vary in function of the customer credit assessment, the business line and the country of operations. There is a limited credit risk assessment on shareholder loans granted to the other associates. Shareholder loans to other associates are provided in accordance with rules foreseen in the joint venture agreements, which are subject to the evolution of the operational business performance. • Interest rate risk management Recticel is hedging the interest rate risk linked to its interest- bearing borrowings on a global basis. The main derivative instruments used to convert ﬂoating rate debt into fixed rate debt are Interest Rate Swaps (IRS). The amount of fixed rate arrangements in relation to total financial debt is reviewed on an on-going basis by the Finance Committee and adjusted as and when deemed appropriate. In this, the Finance Committee aims at maintaining an appropriate balance between fixed and ﬂoating rate arrangements based on a philosophy of sound spreading of interest rate risks. In an interest rate swap (“IRS”) agreement, the Group undertakes to pay or receive the difference between the amounts of interest at fixed and ﬂoating rates on a nominal amount. This type of agreement enables the Group to fix the rate on a portion of its ﬂoating rate debt in order to be protected against the risk of higher interest charges on a loan at ﬂoating interest rates. The market value of the portfolio of interest rate swaps on the reporting date is the discounted value of the future cash ﬂows from the contract, using the interest rate curves at that date. The current portfolio of IRS covers a portion of interest-bearing borrowings for EUR 10 million until July 2024. The weighted average tenor of the IRS portfolio is 2.5 years. On 31 December 2021, the fair value of the interest rate swaps was estimated at EUR -0.01 million. All financial leases (EUR 11.8 million, of which EUR 2.0 million relate to a sale & lease back in Belgium) and a bank loan of EUR 12.8 million are at fixed rate or hedged; whereas most other bank debt is contracted at ﬂoating rate. Sensitivity to interest rates The Group’s interest rate risk exposure derives from the fact that it finances at both fixed and variable interest rates. The Group manages the risk centrally through an appropriate structure of loans at fixed and variable interest rates and through interest rate swaps (IRS). The interest rate hedges are evaluated regularly to bring them in line with the Group’s view on the trend in interest rates on the financial markets, with the aim of optimising interest charges throughout the various economic cycles. Hedge accounting in accordance with IFRS 9 is not applied. Profit and loss impact from interest rate hedges Had the interest rates yield curve risen by 100 basis points, with all other parameters unchanged, the Group’s profit on the IRS portfolio in 2021 would have increased by EUR +0.05 million, comparable to 2020. Conversely, had the interest rates yield curve fallen by 100 basis points, with all other parameters unchanged, the Group’s profit on the IRS portfolio in 2021 would have decreased by EUR -0.0 million, compared to EUR -0.3 million in 2020. Recticel annual report 2021 166 • Currency risk management It is the Group’s policy to hedge foreign exchange exposures resulting from financial and operational activities via Recticel International Services NV/SA (RIS), which acts as internal bank of the Group. This hedging policy is mainly implemented through forward exchange contracts. Hedge accounting under IFRS 9 is not applied for currency risk management. In general, the Group concludes forward exchange contracts to cover currency risks on incoming and outgoing payments in foreign currency. The Group may also conclude forward exchange contracts and option contracts to cover currency risks associated with planned sales and purchases of the year, at a percentage which varies according to the predictability of the payment ﬂows. At reporting date, forward exchange contracts were outstanding for a nominal amount of EUR 59.1 million and with a total fair value of EUR -0.11 million. Sensitivity analysis on currency risks The Group deals mainly in 6 currencies outside the euro zone: GBP, USD, CHF, SEK, PLN, and CNY. The following table details the sensitivity of the Group to a positive or negative variation, compared to the annual variation in the pairs of currencies during the previous financial year. The sensitivity analysis covers only the financial amounts in foreign currency which are recognised in the statement of financial position and which are outstanding at 31 December and determines their variations at the conversion rates based on the following assumptions: USD and GBP 10%; PLN, CHF and SEK 5%. The following table details the Group’s sensitivity in profit or loss to a respectively 10% increase (or decrease) of the US Dollar and Pound Sterling against the Euro, and 5% increase and decrease of the Polish Zloty, Swedish Krona and Swiss Franc against the Euro. The percentages applied in this sensitivity analysis represent the management’s assessment of the volatility of these currency exchange rates. The sensitivity analysis includes only outstanding foreign currency denominated monetary assets and liabilities and adjusts their translation at the period end for a 10%, respectively 5%, change in foreign currency rates. The sensitivity analysis includes external loans as well as loans to foreign operations within the Group where the denomination of the loan is in a currency other than the functional currency of the lender or the borrower. It includes also the foreign exchange derivatives (not designated as hedging instruments). A positive number indicates an increase in profit or loss when the Euro weakens by respectively 10% against the US Dollar or the Pound Sterling, or 5% against the Polish Zloty, Swedish Krona or Swiss Franc. For a respectively 10% strengthening of the Euro against the US Dollar or the Pound Sterling, or 5% against the Polish Zloty, Swedish Krona or Swiss Franc, there would be a comparable opposite impact on the profit or loss (i.e. the impact would be negative). in thousand EUR Group Recticel Strengthening of USD versus EUR Strengthening of GBP versus EUR Strengthening of SEK versus EUR Strengthening of CHF versus EUR Strengthening of PLN versus EUR Strengthening of CNY versus EUR 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 Historical average variation 10% 10% 10% 10% 5% 5% 5% 5% 5% 5% - 5% Profit or (loss) recognized in the P&L account 517 393 (601) (191) (17) 2 1,815 (256) 757 (21) - 1,240 Financial assets * 0 16,426 211 10,527 2,355 3,033 28,489 (692) 8,918 1,079 - 37,086 Financial liabilities * (4,892) (12,492) (225) (3,447) (1,838) (2,107) (10,310) (3,877) (52) (12) - (12,295) Derivatives 10,065 0 (6,000) (8,986) (867) (877) 18,123 (553) 6,279 (1,490) - 0 Total net exposure 5,174 3,934 (6,014) (1,906) (350) 49 36,303 (5,121) 15,145 (423) - 24,791 * Includes trade and other receivables and trade and other payables Financial assets and liabilities represent the foreign currency exposure of the different subsidiaries of the Group in relation to their local currency. Recticel annual report 2021 167 • Liquidity risk The financing sources are well diversified, and the bulk of the debt is irrevocable and long-term or backed-up by long-term commitments. It includes as of February 01, 2021 a new 3-year EUR 100 million syndicated revolving credit facility, with two 1-year extension options. On 31 March 2021, EUR 205 million has been drawn under a new acquisition facility which has been put in place in relation with the acquisition of FoamPartner. On 31 December 2021, a redemption of EUR 50 million was made to the banks, bringing the total outstanding amount of the acquisition facility to EUR 155 million. In addition to the long-term loans, the Group has a diversified range of short-term financing sources, including a commercial paper program and non-recourse factoring facilities. The diversified financing structure and the availability of committed unused credit facilities for EUR 103.6 million guarantee the necessary liquidity to ensure the future activities and to meet the short- and medium-term financial commitments. The Group does not enter in financial instruments that require cash deposits or other guarantees (i.e. margin calls). The new syndicated facility that replaced the former club deal facility as of 01 February 2021 is subject to bank covenants based on an adjusted leverage ratio and an adjusted interest cover, on a consolidated basis. These bank covenants will continue to be determined on the basis of the generally accepted accounting principles that were in place at the moment of the closing of the club deal agreement (“frozen GAAP”). The adoption of IFRS 16 has no impact on the measurement of these covenants. All conditions under the financial arrangements with its banks are respected. Under the new syndicated facility agreement, the maximum dividend authorised for distribution, excluding the portion attributable to the treasury shares, amounts to the highest of (i) 50% of the consolidated net income of the Group for the previous financial year and (ii) EUR 14.0 million The gross dividend over 2021 – to be paid in 2022 – proposed to the Annual General Meeting amounts to EUR 0.29 per share, leading to a total dividend pay-out of EUR 16.1 million (excluding treasury shares). This amount falls below the above-mentioned 50% maximum pay-out limit. The following table presents the unused credit facilities available to the Group: in thousand EUR Group Recticel 31 Dec 2021 31 Dec 2020 Unused amounts under non-current financing facilities Undrawn available commitments under the club deal facility¹ 50,000 175,000 Total available under non-current facilities 50,000 175,000 Unused amounts under current financing facilities Undrawn under current on-balance facilities 45,050 40,995 Undrawn under off-balance factoring programs 0 56,219 Total available under current facilities 45,050 97,214 Total unused amounts under financing facilities 95,050 272,214 1 The amount drawn under the commercial paper program is to be covered at any time by the undrawn amount under the syndicated credit facility. Therefor the reported unused amount as of 31 December 2021 of EUR 50 million under the EUR 100 million syndicated credit facility is after deduction of the issued amounts under the commercial paper program. • Maturity analysis of financial liabilities For the year ending 31 December 2021: in thousand EUR Group Recticel Maturing within 1 year Maturing between 1 and 5 years Maturing after 5 years Total Future financial changes Carrying amount (a) (b) (c) (a)+(b)+(c) Lease liabilities 12,917 26,556 16,315 55,789 (5,374) 50,415 Bank loans 1,766 160,664 8,862 171,292 (5,585) 165,707 Other loans 0 0 0 0 0 0 Interest-bearing borrowings 14,683 187,220 25,178 227,082 (10,959) 216,123 Other financial liabilities - Non-derivative 51,163 Other financial liabilities - Derivative 284 Total 267,570 Non-current financial liabilities 208,505 Current financial liabilities 59,064 Total 267,569 Recticel annual report 2021 168 For the year ending 31 December 2020: in thousand EUR Group Recticel Maturing within 1 year Maturing between 1 and 5 years Maturing after 5 years Total Future financial changes Carrying amount (a) (b) (c) (a)+(b)+(c) Lease liabilities 15,703 37,748 24,020 77,471 (10,603) 66,868 Bank loans 1,266 5,064 10,128 16,458 (2,690) 13,768 Other loans 270 1,001 1,020 2,291 (197) 2,094 Interest-bearing borrowings 17,239 43,813 35,168 96,221 (13,490) 82,731 Other financial liabilities - Non-derivative 1,877 0 0 1,877 0 1,877 Other financial liabilities - Derivative 223 0 0 223 0 223 Total 84,830 Non-current financial liabilities 70,427 Current financial liabilities 14,403 Total 84,830 Reference is also made to notes 2.4.2.1.5. (COVID), 2.4.2.1.6. (Brexit), 2.4.2.1.7. (Climate change) and 2.4.2.1.8. (Russia-Ukraine crisis). Recticel annual report 2021 169 2.4.2.5.18 Business combinations and disposals In 2021, business combinations related to the acquisition of FoamPartner since 01 April 2022 (see note 2.4.2.4.8.). In 2021, business disposals related to the Bedding activities which are in the process of being sold to Aquinos (see note 2.4.2.4.7.). In 2020, the Automotive Interiors business has been disposed of and is considered a discontinued operation in the 2020 consolidated financial statements (see note 2.4.2.4.7.). Likewise, the 50% participation in the Eurofoam group was sold. 2.4.2.5.19 Capital management The overview below defines the capital components which management considers key in order to realise its capital structure target ratio (i.e. Total net financial debt/Total equity) of less than 50%. in thousand EUR Group Recticel 31 Dec 2021 31 Dec 2020 Hedging liabilities 320 223 Non-current financial liabilities 208,506 70,427 Current portion of non current financial liabilities 7,617 12,303 Current financial liabilities 50,567 1,547 Interest accruals 368 330 Gross financial debt 267,378 84,830 Cash and cash equivalents (118,367) (79,255) Hedging assets (180) (69) Net financial debt 148,830 5,506 Drawn amounts under off-balance non-recourse factoring programs 25,162 (810) Total net financial debt 173,993 4,697 Total equity 391,306 334,780 Ratios Net financial debt / Total equity 38.0% 1.6% Total net financial debt / Total equity 44.5% 1.4% Recticel annual report 2021 170 2.4.2.6 Miscellaneous 2.4.2.6.1 O-balance sheet items Recticel NV/SA, or some of its subsidiaries have provided various parental corporate guarantees and comfort letters for commercial and/or financial commitments towards third parties. Compared to the situation per 31 December 2020, most outstanding guarantees and/or comfort letters remained in place; save for some minor adjustments in some committed amounts. During the year 2021, Recticel NV/SA issued the following material (> EUR 1 million) new additional guarantees and/or comfort letters: For other associates: on behalf of Proseat Europe GMBH: EUR 6.75 million. in thousand EUR Group Recticel 31 Dec 2021 31 Dec 2020 Guarantees given or irrevocably promised by Recticel SA/NV as security for debts and commitments of companies 169,563 160,734 These guarantees include mainly parental corporate guarantees and letters of comfort for commitments contracted by subsidiaries with banks (EUR 114.1 million), lessors (EUR 45.2 million), governmental institutions (EUR 3.8 million) and other third parties (EUR 6.5 million). The amount of expected credit losses on external guarantees is assessed at each reporting date to reﬂect changes in credit risk since the guarantee was granted. When determining whether the credit risk of a guarantee has increased significantly since the issuance and when estimating expected credit losses, Recticel considers reasonable and supportive information that is relevant and available without undue cost or effort. This includes both quantitative and qualitative information and analysis, based on the Group’s historical experience and informed credit assessment and including forward-looking information. 2.4.2.6.2 Share-based payments The Recticel Group has implemented a warrant plan for its leading managers. The table below gives the overview of all outstanding subscription rights per 31 December 2021: Issue Number of warrants issued Number of subscription rights outstanding Exercise price in EUR Exercise period Fair value of subscription rights at moment of issue in EUR April 2016 317,500 102,500 5.73 01 Jan 20 - 28 Apr 25 0.786 June 2017 410,000 240,000 7. 0 0 01 Jan 21 - 29 Jun 24 0.928 April 2018 460,000 427,500 10.21 01 Jan 22 - 24 Apr 25 1.572 June 2019 500,000 465,000 7.90 01 Jan 23 - 27 Jun 26 1.181 March 2020 512,000 477,500 6.70 01 Jan 24 - 27 Jun 27 1.466 May 2021 475,000 475,000 12.44 01 Jan 25 - 11 May 28 2.290 Total 2,674,500 2,187,500 All subscription rights have a vesting period of 3 years. Beneficiaries can lose the right to exercise their subscription rights in case of voluntary leave or dismissal for misconduct. The expense recognised for the year for the share-based payments amounts to EUR 1.1 million (2020: EUR 0.6 million). The plan of May 2021 still needs to be approved by the Board of Directors and will be formalised by a notarial deed. Recticel annual report 2021 171 A more general overview showing the trend during 2021 is given below: in units in units 2021 2020 Total number of subscription rights outstanding per 31 December 2,187,500 1,933,000 Weighted average exercise price (in EUR) 8.87 7.70 Weighted average remaining contractual life (in years) 3.54 4.84 Movements in number of subscription rights Subscription rights outstanding at the beginning of the period 1,933,000 1,833,480 New subscription rights granted during the period 475,000 512,000 Subscription rights forfeited and expired during the period 0 (66,999) Subscription rights exercised during the period (220,500) (345,481) Subscription rights outstanding at the end of the period 2,187,500 1,933,000 Status of subscription rights outstanding Closing share price at end of period (in EUR) 17.52 10.72 Total number of subscription rights exercisable at the end of the period 342,500 185,500 Total number of subscription rights that are 'in-the-money' at the end of the period * 2,187,500 1,933,000 Total number of subscription rights that are exercisable and 'in-the-money' at the end of the period * 342,500 185,500 * in comparison with the average daily closing price over the period The table below gives the overview of all subscription rights exercised during the period: in EUR in units 2021 2020 Total number of subscription rights exercised 220,500 345,481 Weighted average exercise price 5.61 5.20 Period during which these subscription rights were exercised 31/3 - 23/12 28/5 - 23/12 Average closing price of period during which these subscription rights were exercised 14.85 8.84 Average daily closing price for full year 14.23 8.09 To date, the Group has not issued share appreciation rights to any of its managers or employees, nor has it implemented any share purchase plan. The theoretical value of the subscription rights at issuance is calculated by applying the Black & Scholes formula and taking into account certain assumptions regarding dividend payment (last dividend compared to share price - dividend yield: 1.83%), interest rate (Euribor 5 years: 0.00%) and volatility (stock market data on the Recticel share: 26.5%). For the issue of May 2021, the fair value amounted to EUR 2.29 per subscription right. Overview of the outstanding subscription rights held by the members of the current Management Committee: (per 31 December 2021) in thousand EUR Issue a Number of subscription rights held by the members of the current Management Committee April 2016 95,000 June 2017 210,000 April 2018 280,000 June 2019 335,000 March 2020 335,000 May 2021 360,000 Total 1,615,000 a the conditions of the various issues are reﬂected in the global overview table herabove Members of the Management Committee received the following subscription rights for the 2021 series: in EUR Name Total number of subscription rights Total theoretical value of subscription rights at issuance() Olivier Chapelle 120,000 274,800 Ralf Becker 30,000 68,700 Betty Bogaert 30,000 68,700 François Desné 30,000 68,700 Jean-Pierre De Kesel 30,000 68,700 Jean-Pierre Mellen 30,000 68,700 Rob Nijskens 30,000 68,700 François Petit 30,000 68,700 Dirk Verbruggen 30,000 68,700 Total 360,000 824,400 (*) The theoretical value is calculated by using a Black & Scholes formula, and taken into account certain assumptions regarding dividend yield, interest rate and volatility. Recticel annual report 2021 172 2.4.2.6.3 Events after the reporting date Baltisse On 02 March 2022, Recticel received a transparency notification dated 02 March 2022, informing that Baltisse NV, as a result of the acquisition of shares on 28 February 2022, owns 12,647,732 (22.6%) voting rights of the company. Baltisse thus crossed upwards the 20% shareholding threshold. Acquisition Trimo On 22 March 2022, Recticel announced that it has entered into final agreements with Central European private equity fund Innova Capital to acquire 100% of Trimo d.o.o. in cash for an enterprise value of EUR 164.3 million. This represents a 9.5x 2021A normalized EBITDA multiple. The transaction is subject to customary conditions precedent, including regulatory approvals. Trimo is specialized in the production of sustainable premium insulated panels for the construction industry. Predominantly geared towards the industrial and commercial building segments, it perfectly complements the current insulation boards activities of Recticel. This acquisition will allow Recticel to: • expand its insulation product portfolio into the adjacent and growing insulated panel market; • accelerate its geographic expansion into the Central and South-Eastern European markets; • increase its profit margin, as of the first full year of consolidation. Financing is secured by the existing credit facilities, and ultimately by the proceeds from the disposals of the Bedding and Engineered Foams business lines, expected to close respectively at the end of 1Q2022 and around mid-2022. Proseat On 14 April 2022, Recticel exercised its put option under the agreement signed with Sekisui in February 2019. As a result, Sekisui will acquire the remaining 25% in Proseat till then held by Recticel and Recticel will no longer hold any shares in Proseat Group. The put option is exercised on the basis of a pre- agreed price calculation formula. As Proseat has been deeply impacted since 2020 by reduced demand following the COVID- crisis and the automotive semiconductor shortage on one hand, and substantial raw material price inﬂation on the other hand, the transfer of these remaining shares will have no material impact on Recticel’s financials. Disposal of Bedding activities On 31 March 2022 Recticel successfully sold its Bedding activities to the Portuguese privately owned Aquinos Group (cfr 2.4.2.4.7 Discontinued operations). Russia-Ukraine crisis Reference is made to note 2.4.2.1.8. Recticel annual report 2021 173 2.4.2.6.4 Related party transactions Transactions between Recticel NV/SA and its subsidiaries, which are related parties, have been eliminated in the consolidation and are not disclosed in this note. Transactions with other related parties are disclosed below, and concern primarily commercial transactions done at prevailing market conditions. The tables below include only transactions considered to be material, i.e. exceeding a total of EUR 1 million. Transactions with joint ventures and associates: 2021 in thousand EUR Group Recticel Non-current receivables Trade receivables Other current receivables Trade payables Other payables Revenues Cost of sales Total Orsafoam companies 0 24 0 0 0 47 0 Total Proseat companies 0 3,434 0 25 (0) 49,457 (88) Total TEMDA2 companies 10,207 711 437 202 863 9,218 (1,297) TOTAL 10,208 4,169 437 227 863 58,722 (1,385) Transactions with joint ventures and associates: 2020 in thousand EUR Group Recticel Non-current receivables Trade receivables Other current receivables Trade payables Other payables Revenues Cost of sales Total Orsafoam companies 0 53 0 192 5 153 (21) Total Proseat companies 0 4,027 1 18 0 34,784 (119) Total TEMDA2 companies 10,207 3,284 4,015 309 14,340 6,380 (639) TOTAL 10,207 7,364 4,016 519 14,345 41,316 (779) Following the partial divestment from the Proseat group in 2019 and from Automotive Interiors in 2020, revenues from respectively Proseat companies and TEMDA2 companies relate to the sale of chemical raw materials at cost. Recticel annual report 2021 174 2.4.2.6.5 Remuneration of the Board of Directors and of the Management Committee The remuneration of the members of the Board of Directors and of the Management Committee is included in this note. For more information, reference is made to the remuneration report in the section ‘Corporate Governance’ of this annual report. Total gross remuneration for the members of the Board of Directors in EUR Group Recticel 2021 2020 Director fees 150,000 142,500 Attendance fees Board of Directors 212,500 197,500 Attendance fees Audit Committee 50,000 42,000 Attendance fees Remuneration and Nomination Committee 25,000 43,750 Attendance fees Strategy Committee 105,000 0 TOTAL 542,500 425,750 In light of the COVID-19 crisis, and in line with the voluntary remuneration reductions implemented by the top management, the Board of Directors of 29 April 2020 decided to reduce the director fees for the second quarter by 30%, as a sign of solidarity with the management and the employees of the company. Total gross remuneration for the members of the Management Committee in EUR Group Recticel 2021 2020 Fixed remuneration 2,882,656 2,851,266 Variable remuneration 2,743,928 2,049,670 Pensions 217,540 336,427 Other benefits 185,766 0 Extraordinary items 0 139,686 TOTAL 6,029,890 5,377,049 Recticel annual report 2021 175 2.4.2.6.6 Exchange rates in EUR Group Recticel Closing rate Average rate 2021 2020 2021 2020 Swiss Franc CHF 0.9680 0.9258 0.9249 0.9341 Yuan Renminbi CNY 0.1390 0.1246 0.1311 0.1270 Czech Crown CZK 0.0402 0.0381 0.0390 0.0378 Euro EUR 1.0000 1.0000 1.0000 1.0000 Pound Sterling GBP 1.1901 1.1123 1.1633 1.1240 Indian Rupee INR 0.0119 0.0112 0.0114 0.0118 Moroccan Dirham MAD 0.0951 0.0914 0.0940 0.0922 Norwegian Krone NOK 0.1001 0.0955 0.0984 0.0933 Polish Zloty PLN 0.2175 0.2193 0.2190 0.2251 Romanian Leu RON 0.2021 0.2054 0.2032 0.2067 Swedish Krona SEK 0.0976 0.0997 0.0986 0.0954 Singapore Dollar SGD 0.6545 0.6166 0.6293 0.6352 Turkish Lira TRY 0.0656 0.1097 0.0951 0.1242 US Dollar USD 0.8829 0.8149 0.8455 0.8755 2.4.2.6.7 Sta in units Group Recticel 31 Dec 2021 31 Dec 2020 Management Committee 9 10 Employees 1,632 2,427 Workers 2,115 2,725 Average number of people employed (full time equivalent) on a consolidated basis (i.e. excluding joint ventures) 3,756 5,162 Remuneration and social charges(in thousand EUR) 212,458 221,907 Average number of people employed in Belgium 934 1,001 The decrease of the average number of people employed, as well as of the cost for remuneration and social charges, is to a large extent explained by the change of scope following the ongoing divestment of the Bedding activities (1,589 employees) (cfr 2.4.2.4.7.). 2.4.2.6.8 Audit and non-audit services provided by the statutory auditor The total fees in relation to services provided by the statutory auditor PwC Bedrijfsrevisoren BV (in 2020: Deloitte Bedrijfsrevisoren) and by companies related to the auditor to Recticel NV/SA and its subsidiaries, are as follows: in thousand EUR Group Recticel 31 Dec 2021 31 Dec 2020 Audit fees 1,037 757 Other audit services and legal missions 147 68 Tax services 75 5 Consulting services 7 0 Total fees 1,266 830 Audit fees for Recticel NV/SA and its subsidiaries are determined by the shareholders meeting after review and approval by the company’s Audit Committee and Board of Directors. All non-audit fees have been pre-approved by the company’s Audit Committee. Recticel annual report 2021 176 2.4.2.6.9 Contingent assets and liabilities a Tertre (Belgium) 1. Carbochimique, which was progressively integrated into the Recticel Group in the 1980s and early 1990s, owned an industrial site in Tertre (Belgium), where various carbochemical activities had been carried on since 1928. These activities were gradually spun off and sold to other industrial companies, including Yara and Prince Erachem (Eramet group). Finapal, a Recticel subsidiary, retained ownership of some plots on the site, chieﬂy old dumping sites and settling ponds that have been drained. In 1986, Recticel sold its "fertilizer" division, in particular the activities of the Tertre site, to Kemira, now acquired by Yara. As part of this agreement, Recticel undertook to set an old basin ("Valcke Basin"), in line with environmental regulations. This requirement was not yet performed because of the mutual dependence of the environmental conditions within the industrial site in Tertre. Yara sued Recticel for precautionary reasons pursuant to this obligation in July 2003. Both parties negotiated and signed a settlement agreement in the course of 2011, which ended the dispute. Under the settlement agreement Yara and Recticel committed to prepare together a recovery plan for four contaminated areas of the industrial area in Tertre, including the Valcke Bassin and a dump site of Finapal, and agreed on the cost split thereof. This plan was approved in December 2013 by Ministerial Order of the Walloon Government, and the specification book was likewise prepared by both parties and approved by the authorities. End December 2015 Ecoterres was appointed as contractor. The works were started in 2016 and have been completed by the end of 2021. Further monitoring may be required over the coming years. 2. Following the sale of the entity Sadacem to the French group Comilog, now part of the group Eramet, Recticel committed itself to sanitise, on a shared cost basis, an old industrial waste site on the grounds of Prince Erachem. The start of the execution of this commitment was studied in consultation with the entity Prince Erachem and has been provisioned in the accounts of the Recticel Group. A proposal was submitted to the Office Wallon des Déchets in April 2009 and since been approved. The implementation of the restructuring plan started in 2013 and has been completed as planned. The clean-up works were completed in 2018 but are still subject to a monitoring phase during 3 years, which was prolonged by one year. b Wetteren (Belgium) In the production plant of Wetteren (Belgium) asbestos was found. In 2020 a provision for the costs linked to the removal was made for EUR 1.2 million. After further investigation and finetuning, the provision has been reduced to EUR 0.8 million at the end of 2021. c Litigations The Group has been the subject of an antitrust investigation at European level. Recticel announced on 29 January 2014 that a settlement was reached with the European Commission in the polyurethane foam investigation. The case was closed after payment of the last instalment of the effective overall fine in April 2016. Various claims have been issued by one or more customers, in which these entities allege harm with regard to the conduct covered by the European Commission’s cartel decision. Some procedures have been ended or concluded in the course of 2016-2018, with only one court procedure still on-going in Germany linked to Eurofoam. No additional new claims are to be expected as these have now all become time-barred. Recticel carefully reviews and evaluates the merits for each case with its legal advisors to determine the appropriate defensive strategy and recognises, where appropriate, provisions to cover any legal costs in this regard. Regarding the on-going litigation no considered judgment can at this stage be formed on the outcome of this procedure or on the amount of any potential loss for the company. One of our Group entities in the United Kingdom is the subject of a HSE investigation following the accidental death of one of its employees. The HSE has concluded the fact-finding phase of its investigation and has made certain allegations against Recticel Ltd for breach of HSE regulations. Recticel has replied to these allegations. In October 2020, the HSE has confirmed that it has taken an enforcement decision, which hence may lead to prosecution, legal costs and fines. There has been no further development to date. A provision has been established. One of the Group’s entities in France is implicated in a labour law case following the closure of a production site, whereby the former employees have launched a claim to obtain additional compensations, on the basis that the economic reasons for the closure were invalid. The court proceedings have so far confirmed the position of the employees, but Recticel SAS has launched an appeal procedure. The final outcome remains uncertain. Following the fire incident in Most (Czech Republic), the involved Group entity has been temporarily unable to supply the contractually agreed quantities of products, leading to production interruptions at the direct customers and the car manufacturers. While the Group entity involved have claimed Force Majeure in this respect, this has been put in question or even contested by a number of customers, with indication that further claims could be raised to obtain damage compensation. While the Group is insured in this regard in line with industrial standards, it cannot be excluded that such claims could lead to financial losses for the companies involved. One customer has launched a legal proceeding in France in the course of the first semester of 2019. Recticel annual report 2021 177 In the framework of the finalization of the closing accounts per 30 June 2020 linked to the Automotive Interiors divestment, a dispute has arisen with the purchaser with regard to certain amounts to be taken into consideration for deduction from the purchase price, as well as a claimed breach of the agreement. This dispute has been settled in the meantime. On 18 February 2021, Proseat Europe GmbH sent a claim notice for the maximum amount of EUR 865,000 to Recticel SA/NV with regard to the absence of dilapidation provisions linked to certain production sites leased by Proseat entities. Recticel contested the claim and it was finally discontinued. Recticel signed a preliminary purchase agreement with the Gor- Stal shareholders to acquire Gor-Stal’s insulation board business located in Bochnia, Poland, for an enterprise value of EUR 30 million. The sale required a prior carve-out of these activities into a new legal entity. Both parties cooperated well to finalise the due diligence and to realise this carve-out by July 2021, but then, the sellers came back to request a price adjustment, citing changed market conditions. Recticel requested more information before considering such a request, which was contrary to the agreement. The sellers did not provide such information and in October 2021, they informed Recticel that they did no longer want to continue the transaction. Recticel notified the sellers at the end of the year that they breached their obligations under the agreement and that Recticel would launch legal proceedings to enforce the preliminary agreement. These legal proceedings are launched in 2022. As of 31 December 2021, total overall provisions and accruals for other litigations, environmental risk and other risks on Recticel Group level amounted to EUR 13.5 million in the consolidated financial statements. With reference to the prejudicial exemption in IAS 37 §92, the Group will not disclose any further information about the assumptions for the provision, including any details about current and the expected number of lawsuits and claims. The disclosure of such information is believed to be detrimental to the Group in connection with the ongoing confidential negotiations and could inﬂict financial losses on Recticel and its shareholders. 2.4.2.6.10 Reconciliation table of Alternative Performance Measures The Group uses and publishes several Alternative Performance Measures (“APM”) to provide additional valuable insight to financial analysts and investors. APMs are related to the standards used by management to monitor and measure financial performance. The overview tables below summarise the reconciliation of these APMs in respectively the income statement and the statement of financial position of the continuing operations. in thousand EUR Group Recticel 2021 2020 restated Income statement Sales 1,032,795 616,883 Gross profit 187,390 106,660 EBITDA 89,734 38,290 Operating profit (loss) 46,532 9,106 Operating profit (loss) 46,532 9,106 Amortisation intangible assets 4,790 1,543 Depreciation tangible assets 38,385 26,273 Amortisation deferred charges long term 0 0 Impairments on goodwill, intangible and tangible fixed assets 27 1,367 EBITDA 89,734 38,290 EBITDA 89,734 38,290 Restructuring charges 2,816 1,040 Other ¹ 16,695 5,104 Adjusted EBITDA 109,245 44,434 ¹ see note 2.4.2.3.1. Operating profit (loss) 46,532 9,106 Restructuring charges 2,816 1,040 Other 16,695 5,104 Impairments 27 1,367 Adjusted Operating Profit (Loss) 66,070 16,617 Total net financial debt 31 Dec 2021 31 Dec 2020 (as published) Non-current financial liabilities 208,505 70,427 Current financial liabilities 59,064 14,403 Cash (118,367) (79,255) Other financial assets ¹ (1,380) (1,000) Net financial debt on statement of financial position 147,822 4,575 Factoring programs 25,162 0 Total net financial debt 172,984 4,575 1 Hedging instruments and interest advances Gearing ratio (Net financial debt / Total equity) Total equity 391,306 334,780 Net financial debt on statement of financial position / Total equity 37.8% 1.4% Total net financial debt / Total equity 44.2% 1.4% Leverage ratio (Net financial debt / EBITDA) Net financial debt on statement of financial position / EBITDA 1.6 0.1 Total net financial debt / EBITDA 1.9 0.1 Net working capital Inventories and contracts in progress 112,897 90,833 Trade receivables 141,596 102,726 Other receivables 15,869 57,929 Income tax receivables 4,660 1,452 Trade payables (120,247) (88,923) Current contract liabilities (9,081) (15,183) Income tax payables (4,466) (1,045) Other amounts payable (66,885) (88,878) Net working capital 74,343 58,911 Current ratio (= Current assets / Current liabilities) Current assets 534,855 333,665 Current liabilities 359,814 210,030 Current ratio (factor) 1.5 1.6 Recticel annual report 2021 178 2.4.3 Recticel NV/SA - General information Recticel NV/SA Address Bourgetlaan - avenue du Bourget, 42 1130 Brussels Belgium Established: on 19 June 1896 for thirty years, later extended for an unlimited duration. Object: (article 3 of the Coordinated Articles) The object of the company is the development, production, conversion, trading, buying, selling and transportation, on its own account or on behalf of third parties, of all plastics, polymers, polyurethanes and other synthetic components, of natural substances, metal products, chemical or other products used by private individuals or by industry, commerce and transport, especially for furniture, bedding, insulation, the construction industry, the automotive sector, chemicals, petrochemicals, as well as products belonging to or necessary for their production or which may result or be derived from this process. It may achieve its object in whole or in part, directly or indirectly, via subsidiaries, joint ventures, participations in other companies, partnerships or associations. In order to achieve this object, it can carry out all actions in the industrial, property, financial or commercial field which are associated with its object directly or indirectly, in whole or in part, or which would be of a nature to promote, develop or facilitate its operation or its trade or that of the companies, partnerships or associations in which it has a participation or an interest; it can in particular develop, transfer, acquire, rent, hire out and exploit all movable and immovable goods and all intellectual property. Legal form: naamloze vennootschap / société anonyme (limited company) Recorded in the Brussels register of legal entities Company number: 0405 666 668 Subscribed capital: EUR 139,908,550 (per 31 December 2021) Type and number of shares: at 31 December 2021 there was only one type of shares, namely ordinary shares; total number of shares outstanding: 55,963,420 Portion of the subscribed capital still to be paid up: 0 shares/EUR 0. Nature of the shares not fully paid up: none. Percentage fully paid up: 100%. The shares are all fully paid up. The accounts were prepared in accordance with requirements specified by the Royal Decree of 30 January 2001. These annual accounts comprise the balance sheet, the income statement and the notes prescribed by law. They are presented hereafter in condensed form. In accordance with Belgian law, the management report, the annual accounts of Recticel NV/SA and the report of the Statutory Auditor will be filed with the Belgian National Bank. They are available on request from: Recticel NV/SA - Corporate Communications Address Bourgetlaan - Avenue du Bourget, 42 B-1130 Brussels Tel.: +32 (0)2 775 18 11 Fax: +32 (0)2 775 19 90 E-mail: [email protected] The notes to the annual accounts are related to the financial situation of the company as shown in the statement of financial position. The results are also commented on in the preceding annual report. The Statutory Auditor has delivered an unqualified opinion on the statutory annual accounts of Recticel NV/SA The statutory annual accounts of Recticel NV/SA, as well as the statutory report by the Board of Directors, are freely available on the company’s web site https://www.recticel.com/investors/ annual-half-year-reports.html. Recticel annual report 2021 179 2.4.4 Recticel NV/SA - Condensed statutory accounts The statutory statement of financial position and the statutory income statement for the period ended 31 December 2021 of Recticel NV/SA are given below in a condensed form. The accounting principles used for the Statutory Financial Statements of Recticel NV/SA differ from the accounting principles used for the Consolidated Financial Statements: the Statutory Financial Statements follow the Belgian legal requirements, while the Consolidated Financial Statements follow the International Financial Reporting Standards. in thousand EUR Group Recticel 31 Dec 2021 31 Dec 2020 ASSETS FIXED ASSETS 525,729 383,259 I. Formation expenses 0 0 II. Intangible assets 20,148 27,068 III. Tangible assets 52,711 59,910 IV. Financial assets 452,871 296,281 CURRENT ASSETS 80,883 95,127 V. Amounts receivable after one year 4,414 6,221 VI. Inventories and contracts in progress 24,731 25,869 VII. Amounts receivable within one year 49,365 59,952 VIII. Cash investments 1,398 1,398 IX. Cash 6 5 X. Deferred charges and accrued income 968 1,682 TOTAL ASSETS 606,613 478,386 LIABILITIES I. Capital 139,909 139,357 II. Share premium account 132,087 131,267 III. Revaluation surplus 2,551 2,551 IV. Reserves 17,578 15,046 V. Profits (losses) brought forward 99,659 52,133 VI. Investment grants 0 0 VII. A. Provisions for liabilities and charges 4,645 6,518  B. Deferred taxes 0 0 VIII. Amounts payable after one year 50,579 8,838 IX. Amounts payable within one year 153,130 115,344 X. Accrued charges and deferred income 6,474 7,332 TOTAL EQUITY AND LIABILITIES 606,613 478,386 in thousand EUR Group Recticel 31 Dec 2021 31 Dec 2020 PROFIT AND LOSS ACCOUNT I. Operating revenues 392,326 323,804 II. Operating charges (354,866) (318,913) III. Operating profit (loss) 37,460 4,892 IV. Financial income 53,817 5,591 V. Financial charges (24,215) (14,723) VI. Profit (loss) for the year before taxes 67,062 (4,240) VII. Income taxes (774) (177) VIII. Profit (loss) for the year after taxes 66,289 (4,417) IX. Transfer to untaxed reserves 0 0 X. Profit (loss) for the period available for appropriation 66,289 (4,417) The management report of the Board to the Annual General Meeting of Shareholders and the Statutory Financial Statements of Recticel NV/SA, as well as the auditor’s report, will be filed with the National Bank of Belgium within the statutory periods. These documents are available onwww.recticel.comand can be requested free of charge. The statutory auditor’s report is unqualified and certifies that the non-Consolidated Financial Statements of Recticel NV/SA for the year ended 31 December 2021 gives a true and fair view on the financial position and results of the company in accordance with all legal and regulatory dispositions. The statutory annual accounts of Recticel NV/SA as well as the statutory report by the Board of Directors, is freely available on the company’s web site www.recticel.com. Recticel annual report 2021 180 Profit appropriation policy The General Shareholders Meeting decides on the appropriation of the profit available for the distribution of a dividend based upon a proposal by the Board of Directors. The Board of Directors intends to propose to pay out a stable or gradually increasing annual dividend, considering the following elements: • proper compensation for the shareholders • retention of adequate self-financing capacity to enable investment in value creation opportunities. The Board of Directors decided to present the following appropriation of the results to the General Meeting: in EUR Group Recticel Profit/(Loss) for the financial year 66,288,524.25 Profit/(Loss) brought forward from previous year + 52,132,613.10 Profit/(Loss) to be added to legal reserves - 2,532,517.81 Profit/(Loss) to be added to other reserves - 0.00 Result to be appropriated = 115,888,619.54 Gross dividend¹ - 16,229,391.80 Profit to be carried forward = 99,659,227.74 1 Gross dividend per share of EUR 0.29, resulting in a net dividend after tax of EUR 0.203 per ordinary share. Recticel annual report 2021 181 2.4.5 Risk factors and risk management Assisted in its work by the Audit Committee, the Board of Directors determines the Group's risk management policy, taking the significance of the general corporate risks that it is prepared to accept into account. Business and management imply dealing with external and internal uncertainties. These uncertainties imply that decisions intrinsically involving potential risks are constantly being taken at all levels. For this reason, and also because a company must be able to achieve its objectives, it is important to outline, assess, quantify and grade corporate risks as precisely as possible. An appropriate, adapted risk management system that can also draw on efficient monitoring mechanisms and best practices must avoid any adverse effects of potential risks on the company and its value or at least control or minimise those effects. RISK FACTORS The items dealt with below are the most relevant risk factors for the Recticel Group, as defined during the assessment process described above. 1. The Group’s investment programs are subject to the risk of delays, cost overruns and other complications, and may not achieve the expected returns The Group’s businesses are, and will continue to be, capital-intensive. A number of its plants have operated for many years, and a large part of the Group’s capital expenditures relate to the repair, maintenance and improvement of these existing facilities. The Group’s investments programs in the field of repair, maintenance and improvements of its existing equipment and facilities are subject to the risk of incorrect or inadequate evaluation. As a result, these investment programs may suffer from delays or other complications and may not achieve the return projected at the beginning of such programs. Furthermore, the Group’s actual expenditures may ultimately reveal to be higher than budgeted for various reasons beyond its control. Such cost increases may be material and may have a material adverse effect on its business, financial condition, operating results and cash ﬂows. 2. Price volatility of major chemicals As a producer and converter of polyurethane foam and other products, the Group is sensitive to ﬂuctuations in the prices of chemical raw materials, in particular those chemical raw materials used for the production of polyurethane. The main chemical raw materials used by the Group are polyols and isocyanates (TDI and MDI). Although these base materials are petroleum derivatives, and hence follow the evolution of the oil price, their price evolution may differ from that of petroleum products on the global market. Excess volatility of raw materials prices or their scarcity or shortage may have a negative effect on Recticel's results and financial situation. Chemical raw materials represent, on average, nearly 55% of the cost of sales of the Group’s finished products (continuing operations and discontinued activities). For certain ﬂexible foam and insulation applications, this share is even higher. These raw materials are purchased on the open market. The Group has to date not hedged its commodity risk. The purchase of chemical raw materials is centralised, and the relevant central department negotiates the supply contracts. The centralised approach allows better negotiation power and continuous optimisation. Although the Group monitors raw material price developments and tries to reﬂect price increases in its sales prices when appropriate, ultimately the extent to which such increased chemical raw material prices can be charged to customers depends on the commercial negotiations with customers and competition on the market. There may be periods of time in which the Group is not able to timely or fully recover increases in the cost of chemical raw materials due to weakness in demand for its products or the actions of its competitors. On the other hand, during periods in which market prices of Group’s chemical raw materials fall, the Group may face demands from its customers to reduce its prices or experience falls in demand for its products while customers delay orders in anticipation of price reductions. 3. The Group may be subject to the risk of not identifying an M&A opportunity or not being able to afford it Making acquisitions are an integral part of the Group’s growth strategy. There can be no assurance that any of these transactions will be realised or, if realised, will be beneficial to the Group. The Group continues to explore additional opportunities to implement its strategy which may require substantial investment and subsequent capital expenditures. To date, the Group has been able to fund its capital investment projects through cash generated from its internal operations and debt financing. If the Group’s cash ﬂows were reduced or if it were to make further acquisitions, the Group would need to seek to fund its cash requirements through additional debt and equity financing or through asset divestitures. 4. If the Group fails to identify, develop and introduce new products successfully it may lose key customers or product orders and its business could be harmed In 2021 the Group has been further developing products, such as Thermoﬂex ® in its Business Line Engineered Foams and Lambda 19 Eurowall ® Xentro ® and Euroﬂoor Xentro ® in its Business Line Insulation. The Group competes in industries that are changing and becoming more complex. The Group’s ability to achieve a successful evolution development of its existing products to new offerings and differentiation of its products requires that accurate predictions of the product development schedule as well as market demand are made. The process of developing new products is complex and often uncertain due to the frequent introduction of new products by competitors. The Group may anticipate demand and market acceptance that differs from the product’s realisable customer demand and revenue stream. Furthermore, in the face of intense industry competition, any unanticipated delay in implementing certain product strategies or in the development, production or marketing of a new product could adversely affect the Group’s revenues. The Group invests constantly in the development of new products. These investments are subject to a number of Recticel annual report 2021 182 risks, including: difficulties and delays in the development, production, testing and marketing of products; customer acceptance of products; resources to be devoted to the development of new technology; and the ability to differentiate the Group’s products and compete with other companies which are active in the same markets. The Group’s ability to generate future revenue and operating income depends upon, among other factors, its ability to timely develop products that are suitable for manufacturing in a cost-effective manner and that meet defined product design, technical and performance specifications. All these factors could have a material adverse impact on the Group’s business, operations and financial results. 5. The Group may be subject to misconduct by its employees and managers or third-party contractors The Group may be subject to misconduct by its employees and managers or third-party contractors, such as theft, bribery, sabotage, violation of laws or other illegal actions and may be exposed to the risk of stoppages by third parties, such as transport companies. Any such misconduct may lead to fines or other penalties, slow-downs in production, increased costs, lost revenues, increased liabilities to third parties, impairment of assets or harmed reputation, any of which may have a material adverse effect on the Group’s operations, business and financial results. The Group has developed various internal initiatives to limit the risk of misconduct of its own employees and managers. These initiatives include the reinforcement of the internal audit function, the setting up of a Compliance Committee whose role is to investigate matters reported to it, as well as the organisation, on a regular basis, of various internal training sessions for employees aimed at increasing awareness on compliance. However, there can be no assurance that such initiatives will result in effectively preventing any misconduct by its employees and managers. Furthermore, such initiatives are not aimed at third party contractors, as a result of which the Group relies on the third-party contractors’ capacity to prevent misconduct by their own employees and managers. 6. Evaluation of projects and investments The Group may be subject to the risk that an innovation project fails and that the innovation investments do not achieve the target to contribute to a sustainable revenue growth or cost effectiveness, including the risk of not having the right human resources to achieve the incremental changes needed to achieve the innovation strategy. 7. Failure to obtain the needed chemical raw materials The Group has negotiated yearly or multi- year supply agreements with important suppliers to secure more than half of its yearly supplies of isocyanates. The supply of polyols is for a minority share secured under yearly supply agreements. The Group sources its remaining chemical raw materials essentially from suppliers with whom it has a long-term relationship, but with monthly or quarterly price and volume negotiations. Notwithstanding the existence of long-term supply agreements for certain chemical raw materials, the risk of a delivery disruption of chemical raw materials cannot be excluded. Such delivery disruptions may result from, amongst others, a major accident or incident in a supplier’s processing plant, transportation problems or any other fact or circumstance that can give rise to a force majeure situation. In such case, there can be no assurance that the Group can source alternative supplies of chemical raw materials on a timely basis and at acceptable conditions or at all, which could have a material adverse impact on the Group’s business, operations and financial results. Neither can it be excluded that a decrease in volumes of raw material procurement (i.e. due to market trends) could have an impact on raw material prices or that it could incite suppliers to end their supplies to the Group, the latter scenario forcing the Group to search for other suppliers, which may not be available on a timely basis or at an acceptable conditions or at all. This could have a material adverse impact on the Group’s business, operations and financial results. 8. Safety, health and the environment - new regulations and its impacts Due to the nature of its activities, the Recticel Group is exposed to environmental risks. The Group uses potentially hazardous products (chemicals and the like) as part of its development activities and manufacturing processes. Pollution can never be ruled out. The Group prevents pollution by adopting appropriate industrial policies. Scenarios precisely outlining the modus operandi for tackling this type of crisis and managing the consequences thereof have been circulated throughout the organisation. It goes without saying that the handling of these same products constitutes a health risk for staff, customers and any other visitor, particularly in the event of failure to comply with the safety rules issued by Recticel. Due to new regulations, the Group may face the risk that these new regulations may have a significant negative business impact. Failure to comply with the various laws and regulations governing the Group's activities is likely to have a negative impact on these activities and invoke its liability. These activities are particularly subject to various environmental laws and regulations that are likely to expose the Group to major compliance costs or legal proceedings. The Group further operates in some countries in old industrial sites, already operational at a time when no or insufficient environmental legislation was in place, potentially leading to historic pollution, for which the Group may be held liable leading to important compliance or clean-up costs. Furthermore, the Group may incur other major costs following the non-fulfilment of its contractual obligations or also in cases where the negotiated contractual provisions in place prove to be insufficient, or even inadequate. 9. The risk that the importance of certain stakeholders is underestimated when making strategic decisions The Group is exposed to the risk that the importance of certain stakeholders is underestimated when making important strategic decisions for the Group. This could lead to resistance and put at risk the implementation of the strategy. Recticel annual report 2021 183 10. Risks relating to not fully analysing the investment decisions The Group may face difficulties if investment decisions have not been fully analysed and as such lead to unsuccessful investments not reaching the initial objectives, as well as the risk that investment capacity is absorbed by one business unit, not leaving sufficient investment fund for more profitable investments in other business segments. 11. Risks relating to sub-optimal execution of transactions The Group is subject to the risk of a suboptimal execution of transactions due to the lack of preparation, communication and/ or project management. Although the Group has developed M&A guidelines, there is no assurance that these risks will not materialise, and if so, this might have a material adverse effect on the Group’s operations, business and financial results. 12. The Group’s results may be substantially affected by general macroeconomic trends and the level of activity in its industries The Group is exposed to the risks related to an economic recession. Economic factors outside of the Group’s control (including slowing economic growth, particularly in Europe where the Group realises approximately 88% of its consolidated turnover, inﬂation or deﬂation or ﬂuctuations in interest and foreign currency exchange rates) could affect the Group’s financial results and prospects. There is a risk that certain markets in which the Group is active will experience economic decline or a prolonged period of negligible growth in the future. The current uncertainty about economic recovery and the pace of growth may negatively affect the level of demand from existing and prospective customers. Additional factors which may inﬂuence customer demand include access to credit, budgetary constraints, unemployment rates and consumer confidence. 13. Product liability The Group produces and sells both semi- finished and finished consumer durable goods. In both cases, the Group is exposed to any complaints relating to product liability. Recticel tries to offset or limit these risks by means of product guarantees provided for in the conditions of sale and through the application of a strict quality control system. To protect itself from the adverse effects of product liability, the Group has put in place general and product-specific insurance policies. 14.The implementation of the Group’s business strategy is dependent on its ability to attract and retain qualified personnel The Group’s ability to maintain its competitive position and to implement its business strategy will largely depend on its ability to attract and retain skilled personnel and management. The loss or diminution in the services of skilled employees and management, or difficulties in recruiting or retaining them, could have a material adverse effect on the Group’s operations, business and financial results. Competition for personnel with relevant expertise is intense due to the relatively small number of qualified individuals, and the Group may have difficulties in obtaining or enforcing non-compete obligations from its skilled personnel and management, all of which may seriously affect the Group’s ability to retain existing skilled employees and management and attract additional qualified personnel. If the Group were to experience difficulties in recruiting or retaining qualified personnel, this could have a material adverse effect on the Group’s operations, business and financial results. 15. Brexit The turnover of the Group in the UK represents 18% of total consolidated sales. The products the Group sells in the UK are mainly produced locally. The direct impact of Brexit concerns (i) the import of chemical raw materials necessary for local production, as these raw materials are not available in the UK, and (ii) a currency exchange rate risk. The Brexit treaty concluded in 2020 between the European Union and the United Kingdom has led to the elimination of possible risks with regard to the supply of raw materials. 16.COVID-19 (Corona virus) In the preparation of the consolidated financial statements for the year ended 31 December 2021, management considered the current economic environment and the impact of COVID-19. Despite the negative impact on the performance and cash ﬂows during 1H2021 on the Bedding division, Recticel maintains a solid financial and liquidity position and meets its financial covenants. As such, management concluded the company is able to continue as a going concern with no long-term impact from COVID-19 17. Climate change The Group’s operations are generally speaking not energy intensive. Consequently, Recticel’s activities and products have a limited negative impact on the emission of greenhouse gases. Moreover, this is overcompensated by Recticel’s Insulation activities, that produce high-performance thermal insulation boards which over their product lifetime substantially overcompensate any negative impact on climate change from the Group’s operations. Going forward, Recticel will become an even more “green company” as its insulation products will reduce the impact of heating buildings; hence it positively mitigates impact on climate change. 18. Russia-Ukraine conﬂict Currently Recticel has no local operations in Russia and Ukraine. Neither does Recticel export to Russia and Ukraine. Consequently, there is no direct impact observed nor to be expected. However, it is not excluded that future operations and business are affected indirectly by the conﬂict. These indirect impacts may come from supply issues, an inﬂationary macro-economic environment, credit risks on customers and increasing financing costs. It is expected that these eventual impacts on operations and financial position should remain limited for the Group. RISK MONITORING Operational and industrial risks are usually covered by centrally managed insurance contracts. The conditions governing these contracts are reviewed on a regular basis. Recticel owns a reinsurance subsidiary, whose principal task consists of reinsuring the Group's own risk associated with the excesses that are payable by the Group under external insurance policies. The risks and uncertainties for which provisions have been raised in accordance with IFRS rules are explained under the heading 2.4.2.5.14. of the financial section of the annual report. More precisely, these are provisions for litigation, product guarantees, environmental risks and reorganisation charges. Recticel's Internal Audit Department is involved in implementing control procedures in the broadest sense and ensures that they are complied with. It also plays a major role in the permanent monitoring of corporate risks and contributes to the basic considerations regarding these risks in the Group. Recticel annual report 2021 184 2.4.6 Declaration by the responsible ocers We hereby certify that, to the best of our knowledge, the Consolidated Financial Statements as of 31 December 2021, prepared in accordance with the International Financial Reporting Standards (IFRS) as adopted by the European Union, and with legal requirements applicable in Belgium, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Group and the undertakings included in the consolidation taken as a whole, and that the management report includes a fair review of the development and performance of the business and the position of the Group and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.  Mr Johnny Thijs (Chairman of the Board of Directors) Mr Olivier Chapelle (Chief Executive Officer) Mr Dirk Verbruggen (Chief Financial Officer) 2.4.7 Auditor’s report on the consolidated financial statements for the year ending 31 December 2021 Recticel NV/SA Statutory auditor's report to the shareholders’ meeting on the consolidated financial statements for the year ended 31 December 2021 Recticel annual report 2021 185 PwC Bedrijfsrevisoren BV - PwC Reviseurs d'Entreprises SRL - Financial Assurance Services Maatschappelijke zetel/Siège social: Culliganlaan 5, B-1831 Diegem Vestigingseenheid/Unité d'établissement: Sluisweg 1 bus 8, B-9000 Gent T: +32 (0)9 268 82 11, F: +32 (0)9 268 82 99, www.pwc.com BTW/TVA BE 0429.501.944 / RPR Brussel - RPM Bruxelles / ING BE43 3101 3811 9501 - BIC BBRUBEBB / BELFIUS BE92 0689 0408 8123 - BIC GKCC BEBB STATUTORY AUDITOR'S REPORT TO THE GENERAL SHAREHOLDERS’ MEETING OF RECTICEL NV ON THE CONSOLIDATED ACCOUNTS FOR THE YEAR ENDED 31 DECEMBER 2021 We present to you our statutory auditor’s report in the context of our statutory audit of the consolidated accounts of Recticel NV (the “Company”) and its subsidiaries (jointly “the Group”). This report includes our report on the consolidated accounts, as well as the other legal and regulatory requirements. This forms part of an integrated whole and is indivisible. We have been appointed as statutory auditor by the general meeting d.d. 25 May 2021, following the proposal formulated by the board of directors and following the recommendation by the audit committee and the proposal formulated by the works’ council. Our mandate will expire on the date of the general meeting which will deliberate on the annual accounts for the year ended 31 December 2023. We have performed the statutory audit of the Company’s consolidated accounts for 1 year. Report on the consolidated accounts Unqualified opinion We have performed the statutory audit of the Group’s consolidated accounts, which comprise the consolidated statement of financial position as at 31 December 2021, the consolidated income statement, the consolidated statement of comprehensive income, the statement of changes in shareholders’ equity and the consolidated cash flow statement for the year then ended, and notes to the consolidated accounts, including a summary of significant accounting policies and other explanatory information, and which is characterised by a consolidated statement of financial position total of EUR ‘000 1,055,739 and a result of the period after taxes – continuing and discontinued operations (share of the Group) of EUR ‘000 53,522. In our opinion, the consolidated accounts give a true and fair view of the Group’s net equity and consolidated financial position as at 31 December 2021, and of its consolidated financial performance and its consolidated cash flows for the year then ended, in accordance with International Financial Reporting Standards as adopted by the European Union and with the legal and regulatory requirements applicable in Belgium. Basis for unqualified opinion We conducted our audit in accordance with International Standards on Auditing (ISAs) as applicable in Belgium. Furthermore, we have applied the International Standards on Auditing as approved by the IAASB which are applicable to the year-end and which are not yet approved at the national level. Our responsibilities under those standards are further described in the “Statutory auditor’s responsibilities for the audit of the consolidated accounts” section of our report. We have fulfilled our ethical responsibilities in accordance with the ethical requirements that are relevant to our audit of the consolidated accounts in Belgium, including the requirements related to independence. We have obtained from the board of directors and Company officials the explanations and information necessary for performing our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. 2 of 6 Key audit matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the consolidated accounts of the current period. These matters were addressed in the context of our audit of the consolidated accounts as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Discontinued operations Bedding activities - Note 2.4.2.4.7 Description of key audit matter On 18 November 2021 Recticel entered into a binding agreement with Aquinos Group for the sale of its Bedding Activities. At the special shareholders meeting on 24 December 2021 all proposed resolutions regarding the sale of the Bedding business line to Acquinos were approved. The Sales and Purchase Agreement (“SPA”) was signed on 28 December 2021. The business generated sales of EUR 208,6 million for the year ending 31 December 2021 and represents disposed net assets of EUR 65,1 million as of 31 December 2021. The transaction was expected to be closed during the first quarter of 2022. Based on these considerations, management determined the criteria of IFRS 5 were met and the activities should be presented as discontinued operations at 31 December 2021. We considered the accounting treatment in the financial statements of this event as a key audit matter taking into account: • the size and complexity of the transaction including management’s judgement applied to identify the discontinued assets, liabilities and operations partly carved out from legal companies active in other continuing activities at Recticel; • the appropriate application of IFRS 5, in particular the classification in accordance with the requirements of IFRS and the measurement of the assets and liabilities at the lower of fair value less costs to sell or their carrying amounts. The discontinued assets and liabilities, the consolidated income statement and the consolidated cash flows from discontinued operations are disclosed in Note 2.4.2.4.7 Discontinued operations of the consolidated accounts. How our audit addressed the key audit matter We read and reviewed the executed agreements, minutes of boards of directors and shareholders to evaluate and determine the appropriate treatment of the transaction in accordance with the requirements of IFRS 5. Moreover, we held meetings and performed inquiries with management to obtain an understanding of the disposal process as well as of the executed agreements. We performed procedures to verify completeness and accuracy of the assets, liabilities and results presented as discontinued operations, including measurement in accordance with IFRS 5. Our procedures include but are not restricted to: • reconciling the reclassified assets, liabilities and results to the business unit reporting available in the entity’s financial reporting system; • validating of assumptions taken on carved out assets, liabilities and net results as part of the discontinued operations from legal companies also active in other continuing activities at Recticel based on audit evidence obtained; • reviewing and challenging management’s estimate of the disposal gain; • evaluating the adequacy of the disclosure (Note 2.4.2.4.7) of this disposal in the consolidated accounts. Recticel annual report 2021 186 3 of 6 Our findings We agree with management’s position that the IFRS 5 criteria were met as of 31 December 2021. We found the methodologies and the assumptions applied in respect of the reclassified assets, liabilities and results of the discontinued operations and the preliminary estimate of the disposal gain to be in line with our expectations and the SPA. We consider the disclosure on the discontinued operations as appropriate. The acquisition of FoamPartner - Note 2.4.2.4.8 Description of key audit matter The acquisition of FoamPartner Group was of most significance to our audit due to the size and significant judgments and assumptions involved in the purchase price allocation of CHF 270 million (EUR 250,3 million), mainly in relation to step ups on the valuation of property, plant, equipment and the recognition of intangible assets such as customer list, contracts and technology related intangible assets. As disclosed in Note 2.4.2.4.8 ‘Business Combinations’ no goodwill or badwill was recognised. How our audit addressed the key audit matter With respect to the accounting for the FoamPartner’s acquisition, we have, amongst others, • read the share purchase agreement, confirming the correct accounting treatment has been applied and appropriate disclosure has been made; • assessed the valuation and accounting for the consideration payable and traced payments to bank statements; • tested the identification and valuation of the assets and liabilities Recticel acquired, including any GAAP and fair value adjustments; • assessed and challenged the valuation assumptions used in the calculations such as discount rates amongst others based on external evidence. In doing so we have utilized valuation specialists to assist with the audit of the identification and valuation of the assets and liabilities acquired; • we also assessed the adequacy of the disclosures in Note 2.4.2.4.8. Our findings We found the methodologies and the assumptions applied to be in line with our expectations, and the acquisition accounting and related disclosure in line with the share purchase agreement. Responsibilities of the board of directors for the preparation of the consolidated accounts The board of directors is responsible for the preparation of consolidated accounts that give a true and fair view in accordance with International Financial Reporting Standards as adopted by the European Union and with the legal and regulatory requirements applicable in Belgium, and for such internal control as the board of directors determines is necessary to enable the preparation of consolidated accounts that are free from material misstatement, whether due to fraud or error. In preparing the consolidated accounts, the board of directors is responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the board of directors either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so. Statutory auditor’s responsibilities for the audit of the consolidated accounts Our objectives are to obtain reasonable assurance about whether the consolidated accounts as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s 4 of 6 report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated accounts. In performing our audit, we comply with the legal, regulatory and normative framework applicable to the audit of the consolidated accounts in Belgium. A statutory audit does not provide any assurance as to the Group’s future viability nor as to the efficiency or effectiveness of the board of directors’ current or future business management at Group level. Our responsibilities in respect of the use of the going concern basis of accounting by the board of directors are described below. As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also: • Identify and assess the risks of material misstatement of the consolidated accounts, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control; • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control; • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the board of directors; • Conclude on the appropriateness of the board of directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our statutory auditor’s report to the related disclosures in the consolidated accounts 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 statutory auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern; • Evaluate the overall presentation, structure and content of the consolidated accounts, including the disclosures, and whether the consolidated accounts represent the underlying transactions and events in a manner that achieves fair presentation; • Obtain sufficient and appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the Group audit. We remain solely responsible for our audit opinion. We communicate with the audit committee 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 the audit committee with a statement that we have complied with relevant 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 applicable, related safeguards. Recticel annual report 2021 187 5 of 6 From the matters communicated with the audit committee, we determine those matters that were of most significance in the audit of the consolidated accounts 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. Other legal and regulatory requirements Responsibilities of the board of directors The board of directors is responsible for the preparation and the content of the directors’ report on the consolidated accounts, the separate report on non-financial information and the other information included in the annual report on the consolidated accounts. Statutory auditor’s responsibilities In the context of our engagement and in accordance with the Belgian standard which is complementary to the International Standards on Auditing (ISAs) as applicable in Belgium, our responsibility is to verify, in all material respects, the directors’ report on the consolidated accounts, the separate report on non-financial information and the other information included in the annual report on the consolidated accounts and to report on these matters. Aspects related to the directors’ report on the consolidated accounts and to the other information included in the annual report on the consolidated accounts In our opinion, after having performed specific procedures in relation to the directors’ report on the consolidated accounts, this directors’ report is consistent with the consolidated accounts for the year under audit and is prepared in accordance with article 3:32 of the Companies' and Associations' Code. In the context of our audit of the consolidated accounts, we are also responsible for considering, in particular based on the knowledge acquired resulting from the audit, whether the directors’ report on the consolidated accounts is materially misstated or contains information which is inadequately disclosed or otherwise misleading. In light of the procedures we have performed, there are no material misstatements we have to report to you. The non-financial information required by virtue of article 3:32, §2 of the Companies' and Associations' Code is included in the directors’ report on the consolidated accounts. The Company has prepared the non-financial information, based on the reference framework Global Reporting Initiative (GRI) Standards. However, in accordance with article 3:80, §1, 5° of the Companies' and Associations' Code, we do not express an opinion as to whether the non-financial information has been prepared in accordance with the Global Reporting Initiative (GRI) Standards as disclosed in the directors’ report on the consolidated accounts. Statement related to independence ● Our registered audit firm and our network did not provide services which are incompatible with the statutory audit of the consolidated accounts, and our registered audit firm remained independent of the Group in the course of our mandate. ● The fees for additional services which are compatible with the statutory audit of the consolidated accounts referred to in article 3:65 of the Companies' and Associations' Code are correctly disclosed and itemized in the notes to the consolidated accounts. 6 of 6 European Uniform Electronic Format (“ESEF”) In accordance with the standard on the draft verification of the compliance of the financial statements with the European Uniform Electronic Format (hereinafter “ESEF”), we must verify whether the ESEF format is in accordance with the regulatory technical standards established by the European Delegate Regulation No. 2019/815 of 17 December 2018 (hereinafter: “Delegated Regulation”). The board of directors is responsible for the preparation, in accordance with ESEF requirements, of the consolidated financial statements in the form of an electronic file in ESEF format (hereinafter “digital consolidated financial statements”) included in the annual financial report. Our responsibility is to obtain sufficient appropriate evidence to conclude that the format and marking language of the digital consolidated financial statements comply in all material respects with the ESEF requirements under the Delegated Regulation. The digital consolidated financial statements have not yet been submitted to us at the date of this report. If, in our audit of the digital consolidated financial statements, we determine that there is a material misstatement, we will be required to report the matter to the board of directors and request the latter to make any necessary changes. If this does not happen, we will be forced to adjust this report due to the fact that the format of and the marking of information in the digital consolidated financial statements included in the annual financial statements report of Recticel NV conform in all material respects with the ESEF requirements under the Delegated Regulation. Other statements This report is consistent with the additional report to the audit committee referred to in article 11 of the Regulation (EU) N° 537/2014. Diegem, 28 April 2022 The statutory auditor PwC Reviseurs d'Entreprises SRL / PwC Bedrijfsrevisoren BV Represented by Marc Daelman Réviseur d’Entreprises / Bedrijfsrevisor Recticel annual report 2021 188 3. Glossary Recticel annual report 2021 189 General concepts Isocyanate: Highly reactive substance that easily combines with other substances (such as alcohols). The structure of these alcohols determines the hardness of the PU-foam Lambda: Expression of the thermal conductivity of thermal insulation MDI: Methylene diphenyl diisocyanate PIR: Abbreviation for polyisocyanurate Polyisocyanurate: Is an improved version of polyurethane. PIR-foam has an improved dimensional stability, excellent mechanical properties such as compressive strain and is a much stronger fire retardant. PIR is mainly used as thermal insulation Polyol: Synonym for PU polyalcohol, which is acquired from propylene oxide Polyurethane: Represents an important group of products within the large family of polymers or plastics. Polyurethane is a generic term for a wide range of foam types PU or PUR: Polyurethane SID: Is short for Sustainable Innovation Department, the department for international research and development of the Recticel Group TDI: Toluene diphenyl diisocyanate Recticel annual report 2021 190 Financial concepts Income from associates: income from associates considered as being part of the Group’s core business are integrated in Operating profit (loss); i.e. Orsafoam Income from other associates: income from associates not considered as being part of the Group’s core business are not integrated in Operating profit (loss); i.e. Proseat and Ascorium (formerly Automotive Interiors) Leverage: Net financial debt / EBITDA (last 12 months) Net free cash-ﬂow: the sum of the (i) Net cash ﬂow after tax from operating activities, (ii) the Net cash ﬂow from investing activities, (iii) the Interest paid on financial liabilities and (iv) reimbursement of lease liabilities; as shown in the consolidated cash ﬂow statement. Net financial debt: Interest bearing financial liabilities and lease liabilities at more than one year + interest bearing financial liabilities and lease liabilities within maximum one year + accrued interests – cash and cash equivalents + Net marked-to-market value position of hedging derivative instruments. The interest-bearing borrowings do not include the drawn amounts under non- recourse factoring/forfeiting programs Net working capital: Inventories and contracts in progress + Trade receivables + Other receivables + Income tax receivables – Trade payables – Income tax payables – Other amounts payable Operating profit (loss):Profit before income from other associates, fair value adjustments of option structures, earnings of discontinued activities, interests and taxes. Operating profit (loss) comprises income from associates of continuing activities. Total net financial debt: Net financial debt + the drawn amounts under off-balance sheet non- recourse factoring programs • IFRS measures Consolidated (data): financial data following the application of IFRS 11, whereby joint ventures and associates are integrated on the basis of the equity method. • Alternative Performance Measures In addition, the Group uses alternative performance measures (Alternative Performance Measures or "APM") to express its underlying performance and to help the reader to better understand the results. APM are not defined performance indicators by IFRS. The Group does not present APM as an alternative to financial measures determined in accordance with IFRS and does not give more emphasis to APM than the defined IFRS financial measures. Adjusted EBITDA: EBITDA before Adjustments (to Operating Profit) Adjusted operating profit (loss): Operating profit (loss) + adjustments to operating profit (loss) Adjustments to Operating profit (loss): include operating revenues, expenses and provisions that pertain to restructuring programmes (redundancy payments, closure & clean-up costs, relocation costs,...), reorganisation charges and onerous contracts, impairments on assets ((in) tangible assets and goodwill), revaluation gains or losses on investment property, gains or losses on divestments of non-operational investment property, and on the liquidation of investments in affiliated companies, revenues or charges due to important (inter)national legal issues and costs of advisory fees incurred in relation to acquisitions or business combination projects, costs of advisory fees incurred in relation to acquisitions, divestments or business combination projects, including fees incurred in connection with their financing and reversals of inventory step up values resulting from purchase price allocations under IFRS 3 Business Combinations. Current ratio: Current assets / Current liabilities EBITDA: Operating profit (loss) + depreciation, amortisation and impairment on assets; all of continuing activities Gearing: Net financial debt / Total equity Recticel annual report 2021 191 4. Key Figures 2013-2021 Recticel annual report 2021 192 in thousand EUR Group Recticel 31 Dec 2021 31 Dec 2020 31 Dec 2019 31 Dec 2018 31 Dec 2017 31 Dec 2016 31 Dec 2015 31 Dec 2014 31 Dec 2013 ASSETS Intangible assets 34,945 14,806 14,306 12,045 12,323 12,104 13,411 12,384 11,954 Goodwill 13,721 24,139 24,412 23,354 24,169 25,073 25,888 24,949 24,610 Property, plant & equipment 313,406 173,000 227,617 232,541 226,783 216,207 209,681 202,733 204,614 Right-of-use assets 62,603 75,377 105,110 0 0 0 0 0 0 Investment property 7,564 3,331 3,331 3,289 3,331 3,331 3,331 3,306 3,330 Investments in joint ventures and associates 12,709 12,351 65,465 68,631 76,241 82,389 73,196 73,644 72,507 Financial investments 10,361 11,030 580 63 64 71 30 160 161 Available for sale investments 0 0 0 728 603 410 1,015 771 275 Non-current contract assets 0 0 11,138 15,655 0 0 0 0 0 Non-current receivables 18,730 25,760 25,802 15,326 14,804 13,860 13,595 13,373 10,973 Deferred tax 46,845 25,298 24,108 20,468 26,241 37,820 43,272 46,834 48,929 Non-current assets 520,884 365,092 501,869 392,099 384,559 391,265 383,419 378,154 377,353 Inventories and contracts in progress 112,897 90,833 101,797 103,789 99,408 91,900 93,169 96,634 94,027 Trade receivables 141,596 102,726 99,117 107,680 110,935 101,506 83,407 78,109 64,516 Current contract assets 0 0 11,300 13,782 0 0 0 0 0 Other receivables and other financial assets 15,869 57,929 32,667 55,227 73,373 69,561 55,327 49,597 46,358 Income tax receivables 4,660 1,452 1,448 5,587 1,350 1,441 2,061 504 3,851 Available for sale investments 0 170 154 138 123 107 91 75 60 Cash and cash equivalents 118,367 79,255 48,479 37,733 57,844 37,174 55,967 26,163 26,237 Discontinued assets 141,466 1,300 5,638 19,201 2,570 0 3,209 8,569 0 Current assets 534,855 333,665 300,600 343,137 345,603 301,689 293,231 259,651 235,049 Total assets 1,055,739 698,757 802,469 735,236 730,162 692,954 676,650 637,805 612,402 Key figures 2013 - 2021 Recticel annual report 2021 193 in thousand EUR Group Recticel 31 Dec 2021 31 Dec 2020 31 Dec 2019 31 Dec 2018 31 Dec 2017 31 Dec 2016 31 Dec 2015 31 Dec 2014 31 Dec 2013 LIABILITIES Capital 139,909 139,357 138,494 138,068 136,941 135,156 134,329 74,161 72,368 Share premium 132,087 131,267 130,334 129,941 127,982 126,071 125,688 108,568 107,042 Share capital 271,996 270,624 268,828 268,009 264,923 261,227 260,017 182,729 179,410 Treasury shares (1,450) (1,450) (1,450) (1,450) (1,450) (1,450) (1,450) (1,735) (1,735) Retained earnings 116,139 76,273 25,606 20,422 18,235 7,425 2,582 1,768 27,364 Hedging and translation reserves (4,270) (11,372) (18,288) (22,003) (19,922) (15,997) (12,189) (16,599) (18,279) Elements of comprehensive income of discontinued operations 7,367 0 0 0 0 0 0 0 0 Equity before non-controlling interests 389,782 334,075 274,696 264,978 261,786 251,205 248,960 166,163 186,760 Non-controlling interests 1,524 705 701 0 0 0 0 0 0 Total equity 391,306 334,780 275,397 264,978 261,786 251,205 248,960 166,163 186,760 Employee benefit liabilities 39,135 52,342 57,860 48,055 54,295 50,979 49,581 54,548 44,557 Provisions 21,993 18,979 6,905 13,775 14,266 13,208 11,505 7,301 8,149 Deferred tax 36,229 12,173 10,023 9,650 9,113 10,116 9,505 8,907 8,203 Non-current financial liabilities 208,505 70,426 100,334 34,706 96,080 97,049 40,363 142,135 98,834 Other amounts payable 25 26 43 202 230 183 226 6,810 444 Non-current contract liabilities 0 0 20,339 24,096 0 0 0 0 0 Non-current liabilities 305,887 153,946 195,504 130,484 173,984 171,535 111,180 219,701 160,187 Employee benefit liabilities 0 0 0 4,720 3,978 4,168 2,370 2,205 1,809 Provisions 3,386 1,598 5,759 3,116 1,155 1,780 4,566 4,687 6,732 Current financial liabilities 59,064 14,403 117,415 88,200 48,988 50,147 114,675 52,798 66,181 Trade payables 120,247 88,923 93,008 90,756 126,584 102,929 94,276 96,373 81,720 Current contract liabilities 9,081 15,183 32,832 44,964 0 0 0 0 0 Income tax payables 4,466 1,045 1,229 3,061 2,411 2,291 2,463 414 3,086 Deferred payables for share investments 18,749 0 0 0 0 0 0 0 0 Other amounts payable 66,885 88,879 81,325 104,957 111,276 108,899 98,160 95,464 105,927 Discontinued liabilities 76,668 0 0 0 0 0 0 0 0 Current liabilities 358,546 210,031 331,568 339,774 294,392 270,214 316,510 251,941 265,455 Total liabilities 1,055,739 698,757 802,469 735,236 730,162 692,954 676,650 637,805 612,402 Recticel annual report 2021 194 in thousand EUR Group Recticel 2021 2020 2019 2018 2017 2016 2015 2014 2013 INCOME STATEMENT (as published) Sales 1,032,795 828,792 1,038,517 1,117,652 1,135,353 1,048,323 1,033,762 983,367 976,763 Cost of sales (845,405) (671,762) (847,460) (916,029) (951,818) (847,215) (839,321) (811,160) (809,850) Gross profit 187,390 157,030 191,057 201,623 183,535 201,108 194,441 172,207 166,913 General and administrative expenses (66,733) (57,949) (73,561) (70,562) (78,426) (79,395) (76,723) (72,299) (74,397) Sales and marketing expenses (44,892) (60,624) (72,743) (72,593) (69,537) (72,031) (77,123) (73,257) (64,532) Research and development expenses (9,186) (9,281) (11,599) (11,042) (13,724) (12,890) (12,537) (13,277) (14,177) Impairments (27) (2,440) (1,821) (5,819) (7,009) (1,672) (983) (688) (3,365) Other operating result (20,391) (13,589) (3,456) (8,830) 27,632 (12,828) (10,714) (12,869) (31,766) Income from joint ventures and associates 371 703 9,271 10,170 2,390 16,927 6,874 8,966 439 Operating profit (loss) 46,532 13,850 37,148 42,947 44,861 39,219 23,235 8,783 (20,885) Interest income and expenses (5,773) (3,420) (6,986) (3,272) (6,460) (8,095) (9,554) (10,031) (9,405) Other financial income and expenses 1,235 (1,724) (1,241) (614) 1,718 (3,633) (2,968) (2,799) (1,940) Financial result (4,538) (5,144) (8,227) (3,886) (4,742) (11,728) (12,522) (12,830) (11,345) Results of other associates (6,864) (10,212) 0 0 0 0 0 0 0 Result of the period before taxes 35,130 (1,506) 28,921 39,061 40,119 27,491 10,713 (4,047) (32,230) Income taxes 14,335 (4,025) (4,203) (10,212) (16,206) (11,161) (6,170) (5,702) (3,908) Result of the period after taxes - continuing operations 49,465 (5,531) 24,718 28,849 23,913 16,330 4,543 (9,749) (36,138) Result of the period after taxes - discontinued operations 4,876 68,686 0 0 0 0 0 0 0 Result of the period after taxes - continuing and discontinued operations 54,341 63,155 24,718 28,849 23,913 16,330 4,543 (9,749) (36,138) of which share of minority interests 819 4 (44) 0 0 0 0 0 0 of which share of the Group 53,522 63,151 24,762 28,849 23,913 16,330 4,543 (9,749) (36,138) Recticel annual report 2021 195 Colofon Recticel NV/SA Bourgetlaan 42 Avenue du Bourget B-1130 Brussels www.recticel.com This report is available in English and Dutch. Dit verslag is beschikbaar in het Nederlands en het Engels. In case of textual contradictions between the English and the Dutch version the first shall prevail. Recticel annual report 2021 196 PwC Bedrijfsrevisoren BV - PwC Reviseurs d'Entreprises SRL - Financial Assurance Services Maatschappelijke zetel/Siège social: Culliganlaan 5, B-1831 Diegem T: +32 (0)2 710 4211, F: +32 (0)2 710 4299, www.pwc.com BTW/TVA BE 0429.501.944 / RPR Brussel - RPM Bruxelles / ING BE43 3101 3811 9501 - BIC BBRUBEBB / BELFIUS BE92 0689 0408 8123 - BIC GKCC BEBB STATUTORY AUDITOR’S REPORT TO THE GENERAL SHAREHOLDERS’ MEETING, IN ACCORDANCE WITH ARTICLE 4 OF THE TRANSPARENCY DIRECTIVE, REGARDING THE COMPLIANCE OF THE CONSOLIDATED FINANCIAL STATEMENTS IN THE FORM OF AN ELECTRONIC FILE OF RECTICEL NV AS AT 31 DECEMBER 2021 WITH THE ESEF REQUIREMENTS AND TAXONOMY UNDER THE DELEGATED REGULATION (EU) 2019/815 _______________ Mission In accordance with Article 4 of the Transparency Directive, the statutory auditors’ mission is to report on the compliance of the form and the XBRL marking language of the digital consolidated financial statements in the form of an electronic file (hereinafter “digital consolidated financial statements”) in accordance with the ESEF requirements and taxonomy (ESEF Regulatory Technical Standard, “ESEF RTS”) referred to in the European Delegated Regulation nr. 2019/815 of 17 December 2018 applicable to the digital consolidated financial statements as at 31 December 2021. The Board of Directors responsibility The board of directors is responsible for the preparation of the digital consolidated financial statements included in the annual financial report in accordance with the ESEF requirements applicable to the digital consolidated financial statements as at 31 December 2021. This responsibility includes the selection and application of the most appropriate methods to prepare the digital consolidated financial statements. In addition, the responsibility of the board of directors includes designing, implementing and maintaining systems and processes relevant to the preparation of the digital consolidated financial statements that are free from material misstatement resulting from of fraud or errors. The board of directors should verify that the digital consolidated financial statements are consistent with the user-readable consolidated financial statements. Statutory Auditor’s responsibility Our responsibility is to express a conclusion as to whether the form and the marking language XBRL of the digital consolidated financial statements of Recticel NV per 31 December 2021 complies in all material respects with the ESEF technical regulatory standards based on the work we perform. We conducted our work in accordance with International Standard on Assurance Engagements (ISAE) 3000 (Revised) “Assurance Engagements other than Audits or Reviews of Historical Financial Information”. This standard requires that we comply with ethical requirements and that we plan and perform the engagement to obtain reasonable assurance about whether nothing has come to our attention that causes us to believe that the digital consolidated financial statements are, in all materiality, in that respect would not have been prepared in accordance with the ESEF technical regulatory standards applied by the Company. 2 of 3 The selection of the procedures performed depends on our judgment and assessment of the risk of material misstatement in the digital consolidated financial statements and in the statements of the board of directors. The entirety of the work performed by us consisted of, among other things, the following procedures: ● Verify if the digital consolidated financial statements are prepared in accordance with article 3 of the Transparency Directive; ● Obtain an understanding of the processes of the Company's practice in the XBRL marking language of its digital consolidated financial statements and of the controls relevant to the certification, in order to design audit procedures that are appropriate in the circumstances but not for the purpose of expressing an opinion on the effectiveness of controls to provide reasonable assurance about whether the XBRL marking language of the digital consolidated financial statements complies in all material respects with the ESEF regulatory technical standards; ● Obtaining sufficient appropriate audit evidence about the effective operation of controls relevant to the XBRL marking language of the digital consolidated financial statements of Recticel NV per 31 December 2021; ● Reconciliation of the marked data with the audited consolidated financial statements of Recticel NV per 31 December 2021; ● Assessing the completeness and fairness of the marking language of the digital consolidated financial statements prepared by the Company; ● Assessing the appropriateness of the Company's use of the XBRL elements of the ESEF taxonomy and assessing the creation of the extension taxonomy. Our independence and quality control We have complied with the independence requirements and other ethical requirements of the legislation and regulations in force in Belgium that apply in the context of our assignment. These are founded on the fundamental principles of integrity, objectivity, professional competence and due care, confidentiality and professional behavior. Our audit firm applies International Standard on Quality Control (ISQC) n°1 and maintains a comprehensive system of quality control including documented policies and procedures regarding compliance with ethical requirements, professional standards, and applicable legal and regulatory requirements. Our Conclusion Based on the work we have performed, we believe that the format of and marking of information in the digital consolidated financial statements included in the annual financial report of Recticel NV per 31 December 2021 comply in all material respects with the ESEF requirements under the Delegated Regulation. We do not express an audit opinion, a review conclusion or any other assurance conclusion on the consolidated financial statements themselves in this report. Our audit opinion on the Group's consolidated financial statements is set out in the statutory auditor's report dated 28 April 2022. 3 of 3 Other matter The consolidated financial statements of Recticel NV (the “Company”) and its subsidiaries (jointly “the Group”) have been prepared by the board of directors of the Company on 28 April 2022 and has been subject to a statutory audit. Our statutory auditor's report (signed on 28 April 2022) includes an unqualified opinion on the true and fair view of the Group's equity and consolidated financial position as of 31 December 2021, as well as its consolidated results and its consolidated cash flows for the year then ended, in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union and with the legal and regulatory requirements applicable in Belgium. Diegem, 10 June 2022 De commissaris PwC Bedrijfsrevisoren BV/Reviseurs d’Entreprises SRL Represented by Marc Daelman Bedrijfsrevisor / Réviseur d’Entreprises Certificate Of Completion Envelope Id: A5346CF641A84627839BD3C499D00B9F Status: Completed Subject: Please DocuSign: Recticel-Report ESEF-31-12-2021-ENG.docx 1.LOS: 2.Type: 3.Other Type: 4.Bundle: 5.Comment: 6.Classification 1: 7.Classification 2: 8.Classification 3: Source Envelope: Document Pages: 3 Signatures: 1 Envelope Originator: Certificate Pages: 2 Initials: 0 Erika Balcaen AutoNav: Enabled EnvelopeId Stamping: Disabled Time Zone: (UTC+01:00) Brussels, Copenhagen, Madrid, Paris Culliganlaan 5 Diegem, Vlaams-Brabant 1831 [email protected] IP Address: 208.127.60.143 Record Tracking Status: Original 06-10-2022 | 19:22 Holder: Erika Balcaen [email protected] Location: DocuSign Signer Events Signature Timestamp Marc Daelman [email protected] Partner PwC Belgium BV Security Level: Email, Account Authentication (Optional), Digital Certificate Signature Provider Details: Signature Type: itsme - EU Qualified Signature Issuer: SigAdapter (Client ID: 889a65a9-45d4-4bbb-a46e-5d16544bb996) Signature Adoption: Uploaded Signature Image Signed by link sent to [email protected] Using IP Address: 208.127.60.144 Signature Provider Location: https://sign.prd.itsme.services/csc/v1 Sent: 06-10-2022 | 19:24 Viewed: 06-10-2022 | 19:37 Signed: 06-10-2022 | 19:38 Electronic Record and Signature Disclosure: Not Offered via DocuSign In Person Signer Events Signature Timestamp Editor Delivery Events Status Timestamp Agent Delivery Events Status Timestamp Intermediary Delivery Events Status Timestamp Certified Delivery Events Status Timestamp Carbon Copy Events Status Timestamp Witness Events Signature Timestamp Notary Events Signature Timestamp Envelope Summary Events Status Timestamps Envelope Sent Hashed/Encrypted 06-10-2022 | 19:24 Envelope Summary Events Status Timestamps Certified Delivered Security Checked 06-10-2022 | 19:37 Signing Complete Security Checked 06-10-2022 | 19:38 Completed Security Checked 06-10-2022 | 19:38 Payment Events Status Timestamps 549300R8K43AXHYP5M152021-01-012021-12-31549300R8K43AXHYP5M152020-01-012020-12-31549300R8K43AXHYP5M152021-12-31549300R8K43AXHYP5M152020-12-31549300R8K43AXHYP5M152020-12-31ifrs-full:DiscontinuedOperationsMember549300R8K43AXHYP5M152021-12-31ifrs-full:DiscontinuedOperationsMember549300R8K43AXHYP5M152019-12-31549300R8K43AXHYP5M152020-12-31ifrs-full:IssuedCapitalMember549300R8K43AXHYP5M152021-01-012021-12-31ifrs-full:IssuedCapitalMember549300R8K43AXHYP5M152021-12-31ifrs-full:IssuedCapitalMember549300R8K43AXHYP5M152020-12-31ifrs-full:SharePremiumMember549300R8K43AXHYP5M152021-01-012021-12-31ifrs-full:SharePremiumMember549300R8K43AXHYP5M152021-12-31ifrs-full:SharePremiumMember549300R8K43AXHYP5M152020-12-31ifrs-full:TreasurySharesMember549300R8K43AXHYP5M152021-01-012021-12-31ifrs-full:TreasurySharesMember549300R8K43AXHYP5M152021-12-31ifrs-full:TreasurySharesMember549300R8K43AXHYP5M152020-12-31ifrs-full:MiscellaneousOtherReservesMember549300R8K43AXHYP5M152021-01-012021-12-31ifrs-full:MiscellaneousOtherReservesMember549300R8K43AXHYP5M152021-12-31ifrs-full:MiscellaneousOtherReservesMember549300R8K43AXHYP5M152020-12-31ifrs-full:RetainedEarningsMember549300R8K43AXHYP5M152021-01-012021-12-31ifrs-full:RetainedEarningsMember549300R8K43AXHYP5M152021-12-31ifrs-full:RetainedEarningsMember549300R8K43AXHYP5M152020-12-31REC:ReserveOfExchangeDifferencesOnTranslationAndReserveOfCashFlowHedgesMember549300R8K43AXHYP5M152021-01-012021-12-31REC:ReserveOfExchangeDifferencesOnTranslationAndReserveOfCashFlowHedgesMember549300R8K43AXHYP5M152021-12-31REC:ReserveOfExchangeDifferencesOnTranslationAndReserveOfCashFlowHedgesMember549300R8K43AXHYP5M152020-12-31ifrs-full:EquityAttributableToOwnersOfParentMember549300R8K43AXHYP5M152021-01-012021-12-31ifrs-full:EquityAttributableToOwnersOfParentMember549300R8K43AXHYP5M152021-12-31ifrs-full:EquityAttributableToOwnersOfParentMember549300R8K43AXHYP5M152020-12-31ifrs-full:NoncontrollingInterestsMember549300R8K43AXHYP5M152021-01-012021-12-31ifrs-full:NoncontrollingInterestsMember549300R8K43AXHYP5M152021-12-31ifrs-full:NoncontrollingInterestsMember549300R8K43AXHYP5M152019-12-31ifrs-full:IssuedCapitalMember549300R8K43AXHYP5M152020-01-012020-12-31ifrs-full:IssuedCapitalMember549300R8K43AXHYP5M152019-12-31ifrs-full:SharePremiumMember549300R8K43AXHYP5M152020-01-012020-12-31ifrs-full:SharePremiumMember549300R8K43AXHYP5M152019-12-31ifrs-full:TreasurySharesMember549300R8K43AXHYP5M152020-01-012020-12-31ifrs-full:TreasurySharesMember549300R8K43AXHYP5M152019-12-31ifrs-full:MiscellaneousOtherReservesMember549300R8K43AXHYP5M152020-01-012020-12-31ifrs-full:MiscellaneousOtherReservesMember549300R8K43AXHYP5M152019-12-31ifrs-full:RetainedEarningsMember549300R8K43AXHYP5M152020-01-012020-12-31ifrs-full:RetainedEarningsMember549300R8K43AXHYP5M152019-12-31REC:ReserveOfExchangeDifferencesOnTranslationAndReserveOfCashFlowHedgesMember549300R8K43AXHYP5M152020-01-012020-12-31REC:ReserveOfExchangeDifferencesOnTranslationAndReserveOfCashFlowHedgesMember549300R8K43AXHYP5M152019-12-31ifrs-full:EquityAttributableToOwnersOfParentMember549300R8K43AXHYP5M152020-01-012020-12-31ifrs-full:EquityAttributableToOwnersOfParentMember549300R8K43AXHYP5M152019-12-31ifrs-full:NoncontrollingInterestsMember549300R8K43AXHYP5M152020-01-012020-12-31ifrs-full:NoncontrollingInterestsMemberiso4217:EURxbrli:sharesiso4217:EURxbrli:shares

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