Annual Report 2022

Message from the Chair

Looking back at our first year following the Azelis IPO, we can be proud of the achievements and performance of the group. Azelis has demonstrated remarkable growth in all regions despite the continuously challenging macroeconomic and geopolitical environment.

At the level of the Board of Directors, Mr. Tom Hallam joined Azelis as an independent and non-executive director and new chair of the Audit and Risk Committee, succeeding Mr. Jürgen Buchsteiner. On behalf of all Board members, I want to express our sincere appreciation to Jürgen for his valuable contribution over the past years; we are now looking forward to working with Tom on further developing the risk and control function within Azelis.

Mr. Sertaç Sürür took on the role of CEO & President of Asia-Pacific and, with that appointment, also became a member of the Executive Committee. We are confident that Sertaç will lead Azelis into the next growth phase in this region.

In 2022 we increased our ESG efforts with a particular focus on the strategic pillars “People,” “Products & Innovation,” “Governance” and “Environment” in line with our Action 2025 sustainability strategy. Our employees remain at the heart of Azelis’ operations. I am therefore utterly proud to report that – based on our most recent Employee Satisfaction Survey – the level of engagement amongst our workforce, measured by satisfaction & motivation and loyalty rates, has once again improved. Azelis offers a safe, inspiring, diverse, and rewarding working environment where people can thrive and grow as an integral part of Azelis’ ambitious growth plan.

Regarding HR systems, we realized the migration to one single payroll provider in 33 countries and kicked off its integration with our central HCM system in 2022.

In support of our strategy to be an innovative solution provider for our commercial partners, we established several innovation centers across all regions. As in previous years, we won several industry awards thanks to our innovation capabilities. Investments in product stewardship expertise ensure compliance with the various “green” legislative initiatives, including the continuous strengthening of our global SHEQ support center.

As part of our overall enterprise risk management, Azelis fortified its capabilities in internal audit, SHEQ (including sustainability), IT security and legal & compliance. We increased internal resources and responsibilities in these areas, but equally invested in market-leading systems and tools to improve our efficiency and professionalize our operational standards. That will allow us to appropriately manage the challenges related to external threats such as cyber security, fraud, corruption, export control, and a rapidly changing regulatory environment.

The main focus within the environmental pillar of our sustainability strategy has been to invest in several measures to reduce the carbon footprint within our operations, which led to the achievement of our carbon intensity target for 2022. Also noteworthy is that Azelis, for the first time, approved a dedicated budget related to carbon emission mitigating technologies.

Azelis’ continuous ESG efforts earned us a Platinum rating from EcoVadis® and an ESG Industry Top Rated Sustainalytics score, which places us in the top percentile of companies in our industry.

In summary, Azelis again made significant steps forward in strengthening its capabilities and core competencies within the different layers of its organization, and we are now even better positioned to support our successful growth trajectory.

Yours sincerely,

Antonio Trius,
Chair of the Board of Directors

Letter from the CEO

I am pleased to report another strong set of results for 2022, illustrating the attractiveness of our business model and industry. More importantly, our results reflect our colleagues' hard work and dedication worldwide, and the benefits of our growing scale and footprint.

At the beginning of the year, we set out to further build upon our achievements in previous years despite the global threat posed by the war in Ukraine, which exacerbated the protracted supply chain disruptions affecting most industries worldwide since the pandemic. Despite these headwinds, we achieved multiple operating milestones, accelerated our growth strategy and outperformed market expectations.

We delivered €4.1 billion of revenue, generated more business from our existing operations, completed 12 acquisitions and made significant progress on strengthening our laboratory network. We achieved €456.9 million of adjusted EBITA, a 164 bps margin expansion over the prior year, reflecting the benefits of our growing scale. We generated free cash flow of €438.0 million, implying a cash flow conversion rate of 94.8%, demonstrating the cash-generative nature of our business.

The revenue we achieved represents year-on-year growth of 45.3%, of which 20.1% was organic, this was driven by the benefits of our deep lateral value chain and growing footprint, allowing us to win market share and secure more mandates from principals. The new mandates reflect our principals’ growing trust in our ability to leverage our scale and our industry-leading digital platforms to develop the market for their products. Likewise, our market share expansion with new and existing customers demonstrates our customers’ trust in the group’s ability to address their needs by expanding the market reach of their portfolio.

We made further progress in strengthening our footprint with the acquisition of 12 companies across our three regions, representing combined total annual revenue of over €620 million. Seven of these acquisitions reinforce our presence in EMEA, specifically accelerating our growth in the Middle East and Africa, with the acquisition of Umongo and Chemical Partners in South Africa and Lebanon respectively. We completed four acquisitions in Asia Pacific, including Ashapura Aromas in India, creating a global flavors and fragrance platform following the 2021 acquisitions of Vigon and Quimdis in the US and France respectively. In July, we entered South America with the acquisition of Rocsa, one of Colombia's leading specialty chemicals and ingredients distributors. These acquisitions significantly expand our market reach and lateral value chain, further reinforcing our ability to innovate for our principals and customers.

During the year, we inaugurated our new regional innovation center (RIC) in Singapore, which serves as a hub for our technical innovations for the food & nutrition market in Asia Pacific. The Americas RIC that opened in Mexico City in 2021 became fully operational in 2022, supporting our growing business in North and South America. In EMEA, we opened a one-of-a-kind competence center for meat and meat alternatives in Poland. These specialized application laboratories allow us to stay at the forefront of innovation for our customers and principals.

We achieved a significant milestone in our digital journey during the year, with the successful cloud migration to Microsoft Dynamics 365. A cloud-based ERP system further enables us to increase our operational efficiency and ensures that we can scale our back-office activities as we grow. Furthermore, the cloud-based ERP system is a secure foundation for our digital initiatives that drive and support our long-term growth.

At the end of 2022, we completed 14 e-Labs and had over 100 customer portals across several end markets that we serve, in line with our objective of having the most advanced digital platform for our customers. Likewise, we continued to progress in rolling out principal portals to some of our largest suppliers, providing them with unparalleled transparency and valuable market insights.

Last but by no means least, our commitment to contribute to a better world and greener environment continues to translate into our actions. Consistent with how seriously we take our sustainability agenda, we have engaged an independent auditor to help us enhance the substance and integrity of our sustainability reporting by providing limited assurance on a number of our KPIs. Our consistent progress toward achieving our ambitious sustainability objectives was recognized in 2022, earning Azelis an industry leading Sustainalytics rating with the lowest risk assessment rating in the industry of 12.4.

Before closing out my letter, I would like to express our support for all those affected by the recent earthquake in Turkey and Syria. The magnitude of the devastation means that although all 158 of our colleagues in Turkey are safe and accounted for, many have suffered loss directly or indirectly, and we have put a relief program in place to support them.We at Azelis stand ready to contribute to the rebuilding efforts as soon as affected communities emerge from the tragedy. There remains considerable uncertainty in the global economy, the dedication of all our Azelis colleagues keeps me optimistic that we will continue to deliver on our objectives and create value for all our stakeholders. I am grateful to work alongside such dedicated professionals and proud to lead the Azelis group toward our shared vision of becoming the reference innovation solutions provider for the specialty chemical distribution industry.

Yours sincerely,
Dr. Hans Joachim Müller, Chief Executive Officer

About Azelis

Key figures 2022

Revenue
Gross profit margin
Adjusted EBITA
Free cash flow
Leverage ratio
Employees

Strategic review

Operational achievements

Consolidating the industry, widening our reach

In 2022, we completed 12 acquisitions across three regions. We reinforced our footprint in EMEA with seven acquisitions across the region, including Umongo in South Africa and Chemical Partners in Lebanon, strengthening our position as the leading specialty chemicals distributor in the Middle East and Africa. We continued to expand in Asia Pacific with four acquisitions including Ashapura in India, creating a global platform for flavors & fragrance. During the year, we entered South America with the acquisition of Rocsa, one of Colombia's leading specialty chemical distributors, with a rapidly growing presence in Peru and Central America.

Building a network of innovation incubators

We continue to make progress on our strategy of building a network of laboratories as well as regional innovation centers (RIC) to drive innovative formulations that benefit both our customers and principals. We opened a RIC in Singapore to serve the food & nutrition markets in APAC. We also opened our one-of-a-kind Regional Competence Center for Meat & Meat Alternatives in Poland, which will support the rapidly evolving trends in the meat industry driven by consumer needs and the shift toward sustainability. Our RIC in Mexico became operational in 2022, and houses five laboratories for Food & Nutrition, Pharmaceuticals & Healthcare, Personal Care, CASE, and Advanced Materials & Additives. The Mexico RIC will serve as the innovation hub for North and South America.

Innovating for our customers

Our focus on providing the most innovative formulations continues to be recognized by relevant industry bodies. In 2022, we won two Ringier Technology Innovation Awards for food & beverage and personal care. We also received bronze at the Sensory Bar awards at in-cosmetics Global 2022.

Transforming the industry, one portal at a time

We continue to lead the market in digitalization, with more than 100 customer portals live as of the end of the year. These market-specific portals provide our customers access to our technical capabilities, industry and product resources as well as highly curated insights into market trends. We have launched 14 e-Labs, which provide a gateway for product development for our customers. We are also rolling out principal portals, which provide our suppliers with unparalleled market intelligence on their products.

Performing for our principals

Completed the fifth edition of our principal satisfaction survey, which showed the overall satisfaction of our principals improving steadily to 4.26 (out of a maximum score of 5.0), from 3.60 when we launched the survey in 2014. The survey, conducted every two years, measures how our principals view our performance based on several metrics ranging from quality of contact with our technical sales to stock policy and forecasting. Importantly, the latest survey showed a significant improvement in the net promoter score (more than double), indicating the likelihood of our principals recommending Azelis as a distributor of choice.

All set for a digital future

Successfully migrated the majority of our entities to Microsoft D365. Having a cloud-native ERP (enterprise resource planning) system raises efficiency in our operating processes and sets us up for future growth.

On-time compliance

A robust, centralised masterdata tool and management system ensures that we are able to respond to business and industry needs quickly and efficiently. The group accommodated over 30,000 newly compliant safety data sheets to meet the EU REACH Regulation (EU) 2020/878 deadline without business disruptions.

Contributing to a better, more sustainable world

In 2022, we obtained the top ESG industry ranking from Sustainalytics, among a peer list of 178 international traders and distributors.

Financial achievements

Revenue by business segment

Revenue by geography

Gross profit by geography

Adjusted EBITA by geography

Global footprint

Who we are

We innovate through formulation

Azelis is a leading global innovation service provider in the specialty chemicals and food ingredients industry. We innovate through formulation to create value for our principals and customers, allowing them to benefit from the breadth of our technical expertise, the strength of our lateral value chain, and the depth of our strategic alliances. We provide innovative and sustainable formulations to over 59,000 customers, and market insights and channels to grow the market for products of around 2,700 principals. Our activities are supported by industry-leading digital capabilities powered by a robust IT infrastructure. Our mission is guided by our commitment to sustainability and contributing to a better world.

Innovation through formulation - our unique proposition

Driving innovation together

We have more than 60 application laboratories worldwide, delivering a wide range of very relevant services for customers, including developing new formulations or enhancing existing ones, as well as benchmarking product performance. Our lateral value chain and broader network capabilities provide customers with constant innovative formulations, while our digital platforms (customer portals, e-Lab) provide them access to our network capabilities in real-time, reducing time to market. Our innovative tools and formulations expand the market for our principals’ products and empower them with valuable insights on emerging market trends that inform their R&D and contribute to shaping products for the future.

Digital service platforms

Building connections together

With digitalization as one of the top strategic pillars at Azelis, we aim to deliver engaging and personalized digital experiences to both our customers and principals. For our principals, we have developed seamless API (application programming interface) connectivity that automates the real-time flow of information, reducing the complexity of ensuring that all relevant technical, commercial, and regulatory information about their products is up to date and accessible. For our customers, we have created end-to-end digital services that include customer portals and the e-Lab. The customer portals offer our customers easy access to the latest trends, high-quality information on products and formulations, regulatory documentation and easy access to relevant Azelis teams. The Azelis e-Lab is a digital platform that allows customers to create, enhance or fix formulations at their convenience. The e-lab provides all the necessary tools to create a detailed briefing of the customer’s project, with immediate formulation and product recommendations. The platform gives instant access to our global network of technical experts, offering a faster and easier path toward innovative formulation, and with this, reducing time to market for their products. Through our principal portals, we provide transparency, key statistics, and relevant market insights to our principals. In addition to a real-time view of sales performance and opportunities, we give our principals concrete insights into the application of their products, as well as emerging market trends that can help steer their R&D programs towards market needs.

Taking action together

Sustainability is a critical part of our value proposition, our identity, and our business model. In 2021, Azelis launched Action 2025, the group’s sustainability strategy. Action 2025 reinforces our commitment to becoming the world’s leading provider of sustainable solutions and services for the specialty chemicals and food ingredients distribution industry. At Azelis, we play a significant role in helping our suppliers and customers achieve their sustainability objectives. Selecting from the broad portfolio of products we distribute, we identify sustainable products and develop formulations that enable our customers to launch more environmentally friendly products. We will continue to assess the sustainability protocols of our suppliers and help them develop their own sustainability practices, improve sustainability standards across the value chain, and enhance the reputation of the chemical industry.

Our values

Our purpose inspires us. Our growth drivers power us forward. But it is our values that define who we are and what we stand for. On our journey toward a more sustainable and innovative future, our values are embedded into everything we do and each step we take.

We are entrepreneurial. Embracing a culture of ambition and innovation that empowers our people, ensuring they can explore different ways of thinking for our customers and principals.
We are respectful. Balancing hunger with humility as we strive to become a benchmark for innovation, sustainability and digital offerings, dedicating our professional lives to the future of our customers, our principals, and our planet.
We are focused. We deliver unrivaled service and build trusted partnerships by providing uniquely tailored solutions in response to deep local knowledge and emerging market trends.
We are knowledgeable.# Collaborating with principals, colleagues, and customers to blend ideas and expertise that deliver market-leading solutions that will improve people’s lives globally.

At a glance

Azelis is a leading global innovation service provider for the specialty chemicals and food ingredients industry. We go beyond connecting producers of specialty chemicals and food ingredients (our principals), and the manufacturers of consumer products for the Life Sciences and Industrial Chemicals end markets (our customers). We create value by expanding the market reach for our principals’ products through our technical expertise, which allows us to combine products from different principals and develop innovative formulations. Our customers appreciate the one-stop-shop opportunities and these innovative formulations that support their businesses' continued growth. Our value creation proposition is powered by our continually expanding lateral value chain, a comprehensive library of chemistries required to develop formulations within a specific end market, exclusively sourced from a vast list of principal partners, and formulation expertise for a wide range of applications across market segments and geographies. Our focus on innovation is supported by a growing network of laboratories, each specialized in a market segment to serve a region. We take innovation even further with an industry-leading digital platform that connects our stakeholders to the Azelis ecosystem of chemistry, formulations, market insights, regulatory documentation, and other services. Our strategy of ‘Innovation through formulation’ has created value for our stakeholders over the years, delivering average annual revenue growth of 18.9%¹ and generating 62.8%² return on investments per year on average.

At Azelis, our single greatest asset is our people. We have a shared value system that is reflected in our commitment to sustainability. We are EcoVadis® Platinum-rated and our Action 2025 sustainability strategy details our objective to become the industry reference distributor of sustainable solutions and services.

2017-2022 Revenue CAGR

2017-2022 Average return on tangible invested capital (ROTIC)

Our people

We care for our employees

Our people are our single most important asset and the force behind our success. Across the 77 nationalities who work at Azelis, all of our 3,800 employees share the same values of being respectful, focused, knowledgeable, and entrepreneurial. We aspire to foster an environment where talent is developed, ownership of responsibility is encouraged, autonomy is supported, and entrepreneurship is enabled. We believe this environment is conducive to developing talent and fulfilling an individual’s potential. To ensure that we keep up with the pace of talent development, we continuously invest in tools that allow us to track performance, employees’ development, and overall satisfaction. In 2022 we deployed the Learning module which completes the full roll-out of Workday®, Azelis’ Human Capital Management system. These complete and integrate the annual performance and talent review process, allowing us to systematically track and manage performance and focus on career planning and development of our people. We also actively encourage mobility within the group; this promotes collaboration and encourages our colleagues to learn about different aspects of our business in other countries and grow into well-rounded leaders.

How we develop talent and expertise

At Azelis, we position ourselves toward potential candidates and current employees by offering competitive and externally benchmarked remuneration and benefits, excellent working conditions, and rewarding development and career opportunities. Our continued focus on improving working conditions and increasing investments in training and development attract and retain talent. At the same time, our rapid growth enables us to offer a significant number of attractive career opportunities, prioritizing existing internal talent to fill open positions. At Azelis, we foster and develop a robust talent pipeline and have a straightforward system to identify high potentials and assign them to the appropriate talent pools. The performance and talent review process and talent pools are seamlessly linked with succession planning, providing a process to fill management roles across the whole group with internal candidates.

Culture, accountability and development of colleagues

Azelis’ yearly performance and talent review process works to improve employee performance, professional skills, functional competencies, and ensure the development of all employees. The culture of performance is enhanced across the organization. We track performance expectations, monitor accountability and have introduced multiple calibration steps to review and validate the performance ratings.

High awareness and compliance with health and safety rules

A healthy and safe work environment is of utmost priority. With the implementation of sound SHEQ policies and processes (incl. quality control and audit plans) and a safety culture that protects human health and prevents safety hazards, accidents, quality complaints, business disruption, reputational damage, and higher costs, we’ve put every step into place to ensure the well-being of employees.

Surveying our employees’ satisfaction

The engagement and well-being of our employees are fundamental to the success of Azelis. Since 2014, we have collaborated with an independent provider to run a company-wide Employee Satisfaction Survey (ESS) every two years. This survey allows us to assess the engagement, loyalty, and motivation of our employees while guaranteeing employee confidentiality and anonymity. The ultimate purpose of this survey is to put employee-driven improvement initiatives in place in all local Azelis companies and to measure the progress we are making toward our targets. We want to ensure that all our employees are motivated and consider Azelis to be the best place to work to realize their long-term professional ambitions.

An adapted, extensive training program

As a knowledge-based company, developing an inclusive learning culture is a prime success factor for Azelis. We are committed to training and developing employees to their full potential. We encourage and empower our employees to take ownership of their development, and we ensure that there are appropriate procedures to plan, deliver, and evaluate our training and development activities.

Equity, diversity, and inclusion

The diversity of our employees creates significant value and additional competitive advantage for our business. Diversity does not only apply to gender, it is also relevant to culture, age, sexual orientation, physical impairments, work experience, and more. We are convinced that diverse companies are better at attracting talent, have better customer orientation, higher employee satisfaction, and enhanced decision-making processes. Ultimately, a diverse company will also perform better financially, something which has also been shown in studies¹. As of the end of 2022, Azelis had 31.8% of women in senior management positions, outperforming its objective of 30% which is currently being reviewed as part of the Action 2025 sustainability strategy.

How diversity, equity, and inclusion (DE&I) matter | McKinsey

What we do

Innovation and technical services at the core

As a global innovation service provider, Azelis provides solutions to a wide range of customers. We connect producers of specialty chemicals and food ingredients (our principals), and the manufacturers of consumer products for the Life Sciences and Industrial Chemicals end markets (our customers). We create value by expanding the market for our principals’ products through our expertise in sales, marketing, distribution, and formulation, generally widening the application for their products, while providing customers with a one-stop-shop for products from different principals as well as the most innovative formulations for the Life Sciences and Industrial Chemicals end markets. We create value for our customers and principals by leveraging our lateral value chain, a comprehensive library of chemistries required to develop formulations within a specific end market, exclusively sourced from our vast list of principal partners, supported by a growing network of laboratories, each specialized in a market segment. We continue to invest in industry-leading digital platforms that connect our stakeholders to the Azelis ecosystem of chemistry, formulations, market insights, regulatory documentation, and other services. As sustainability champions in our industry, we are deeply committed to continuously raising the bar within Azelis. Equally important, we help advance the sustainability agenda of both our customers and our principals by systematically proposing sustainable alternatives within formulations.

Markets we serve

Improving every aspect of life, every day

Specialty chemicals and food ingredients distribution market

The market for third-party chemicals distribution was estimated at €289 billion as of the end of 2021. Roughly 43% of this market (ca. €124 billion) is in specialty chemicals, which grew 3% in the prior five years¹. This market is split across multiple sectors and market segments, addressed predominantly by small, local distributors, with only a handful of regional and global players. Ever-increasing consumer demand raises the need for innovation to drive increased performance of existing products or create alternative ones, which in turn drives demand for our formulations and the products in our portfolio. The megatrends driving the end markets (increased food production, shift to green or sustainable alternatives, increasing focus on wellness) also raise the complexity of serving customers as regulations tighten and supply chains widen.# Azelis Annual Report 2022

Azelis reduces this complexity by leveraging our lateral value chain, our technical expertise, and our global network of laboratories to provide innovative formulations that use multiple products and ingredients from different principals to address a customer’s need, thereby expanding the market for our principals’ products. Our intermediation gives us ring-side seats to emerging consumer market trends, as well as the product development pipeline of principals. The value we bring as intermediary lies in our ability to generate the most innovative formulations that address our customers’ needs and generate a market pull for our principals’ products. Our innovation capabilities are centered around our lateral value chain, supported by our technically trained sales organization, a network of application laboratories, industry-leading digital platforms, and guided by best-in-class sustainability agenda. In response to the rising market complexity, principals are increasingly seeking new capabilities that have the scale and the ability to serve customers with innovation capabilities, invest in digital tools and platforms, and address the increasing regulatory burden. Principals with ambitious sustainability commitments also look for partners who share their values and have demonstrated willingness and ability to advance their sustainability agenda.

Our business segments

We serve a diverse customer base that produces for millions of consumers or businesses across multiple sectors. Our formulations are used for different applications, from food production to car manufacturing. We have organized our business along with the end market segments we address, described in the tables below.

https://www.chemanager-online.com/en/news/rewriting-rules-chemical-distribution

Life Sciences Market Categories

Market characteristics	Food & Nutrition	Personal Care	Agricultural & Environmental Solutions	Pharmaceuticals & Healthcare	Home Care & Industrial Cleaning
Bakery	Hair care	Crop protection	Pharmaceutical excipients	Air care	Monogastric
Dairy and dairy alternatives	Skin care	Crop nutrition/fertilizers	APIs	Automotive Fragrances	Ruminant
Nutritional ingredients	Oral care	Forestry	Medical devices	Cleaning	Aqua
Pet food	Bath and shower	Vegetation mgmt.	Nutraceutical actives and excipients	Disinfection	Equine
Confectionary	Sun care	Aqua culture	Veterinary medicine	Laundry	Feed hygiene
Flavors, spices, seasonings	Decorative cosmetics	Weed control	Wound care	Animal care	Feed preservation
Beverages (powdered/liquid, carbonated soft drinks (CSD), non-CSD, juices)	Fragrance and ingredients	Seed treatment	Biologicals and process aids	Surface maintenance	Biosecurity
Savory (ready meals, soups, sauces and snacks)		Vector control
Meat and meat alternatives		Fertilizers and biostimulants

Market characteristics continued	Food & Nutrition	Personal Care	Agricultural & Environmental Solutions	Pharmaceuticals & Healthcare	Home Care & Industrial Cleaning	Animal Nutrition
		Fertilizer efficacy enhancers
		Biopesticides

Combined revenues of IMCD, Azelis and the specialty divisions of Brenntag and Univar

Lateral value chain

Powering Azelis’ value proposition is our lateral value chain. We leverage our lateral value chain by combining multiple products from different principals to create innovative and sustainable formulations for our customers and build new markets for our principals. The combination of our lateral value chain, our technical expertise, and a vast catalog of formulations developed over the years allows us to bundle products and develop innovative formulations, enabling an unrivaled one-stop-shop experience for our customers. A robust lateral value chain is also beneficial for our principals as we can create more applications for their products, creating a broader market and delivering higher growth. This expertise in combining products from the lateral value chain in a formulation creates customer and principal intimacy.

Lateral value chain Innovation

Innovation through formulation is not just our tagline; it is engrained in everything we do. Our innovation expertise has been recognized globally in the industry, as evidenced by the multiple industry innovation awards our teams have won over the years¹. Azelis runs the industry’s largest network of laboratories with more than 60 application labs worldwide. In these application laboratories, we develop new formulations, enhance existing ones, and benchmark product performance. Complementing our physical laboratory network, our online tools - customer portals and e-Lab - enable customers to explore innovations in a virtual environment. Moreover, seamless API connectivity through our principal portals reduces the administrative burden for our suppliers and provides them with real-time insights into the application of their products. In line with our sustainability strategy, Action 2025, we aim to become the world-leading distributor of sustainable solutions and services within our industry. Our innovation capabilities serve not only our customers’ needs and expand the market for our principals’ products; they are also advancing our sustainability agenda and that of our stakeholders. We leverage our lateral value chain and the breadth of our technical expertise to develop new or alternative sustainable formulations for customers, systematically pushing sustainable materials into the supply chain. At Azelis, we believe in innovating for a better world.

¹ For the list of the group’s awards, please consult our website

Digitalization

Azelis empowers customers and principals to innovate and develop sustainable products and formulations. With digital being the new way to connect and engage, we have developed powerful tools and platforms to create deep, meaningful, personalized engagement via these platforms for customers (customer portal and e-Lab) and principals (principal portal). We have invested in strong, future-proof digital foundations, which enable us to deliver customer- and principal-facing digital engagement at scale. In addition to an integrated ERP, a product information management (PIM), customer relationship management (CRM), and global master data and analytics hub, Azelis has invested in differentiating capabilities such as automated data extraction tools. Azelis pioneers the use of artificial intelligence (AI) to understand technical data sheets (TDS) and safety data sheets (SDS), extracting data automatically while learning from every document processed. The tool significantly increases the efficiency of handling a catalog of over 100,000 base products, delivering twice as much information in half the time and improving the quality of data extracted. The power of our digital backbone allows the group to respond and comply efficiently with the ever-changing regulatory landscape in markets where we operate, creating value for all of our stakeholders. This was most recently demonstrated when Azelis seamlessly accommodated over 30,000 newly compliant safety data sheets for products from our suppliers on time, and without business disruption. With the foundations complete, we have shifted to the next phase of scaling up our platform rollouts and digitizing our core business. We have built end-to-end services, rather than siloed apps and websites, and continuously work to improve them. As an innovation solutions provider with advanced digital capabilities, Azelis can collect and connect a vast amount of data points from multiple sources. This delivers a flywheel effect where our customers benefit from high-quality technical information and personalized digital engagement, and principals benefit from enhanced market intelligence. We place as much focus on the security of our systems as we do on developing our digital infrastructure. As part of our information security management system, we have obtained the ISO 27001 information security certification.

Sustainability Strategy

Our sustainability strategy, Action 2025, sets out our commitment to become the world’s leading provider of sustainable solutions and services in the specialty chemicals and food ingredients distribution industry. Action 2025 was developed on insights gained from in-depth interviews with our principals and customers, the results of our EcoVadis® assessment, input from Azelis business representatives, and the materiality assessment that we carried out in 2019 for our first Sustainability Report. 2022 has been the year where we have consolidated Action 2025 and ensured that sustainability is an integral part of all our business processes and a pillar of our corporate strategy.

The four pillars of Action 2025

Our sustainability strategy is structured around four pillars: People, Products and Innovation, Governance, and Environment. Action 2025 commits Azelis to achieving a series of ambitious targets by 2025 across all these areas.

People

We will be recognized as an attractive global employer in our industry. This pillar of our sustainability strategy includes the targets and KPIs for employee attraction, development and retention, diversity and inclusion, and working conditions.

Governance

We will be fair in our business practices and have a robust compliance framework in place in order to ensure compliance with all laws and regulations, embedding trust and ethics in the foundation of our organization. With our strategy to establish strong crisis management and business continuity planning at all our sites, Azelis incorporates sound governance and fair business practices into the heart of its daily operations.

Products and Innovation

We will be the leader in distributing sustainable, innovative specialty chemicals and food ingredients, that minimize or eliminate the use and generation of hazardous substances. Azelis offers products that help reduce the environmental impact of our customers’ businesses. Furthermore, through our membership in Together for Sustainability®, we have strong due diligence procedures in place. These procedures allow us to assess the corporate social responsibility (CSR) policies of our suppliers and their level of implementation.

Environment

We will continually reduce the environmental impact of our operations. Under the environmental pillar of our sustainability strategy, we have committed to reducing our Scope 1 and Scope 2 carbon intensity and working with our supply chain to reduce Scope 3 emissions. We are also committed to improving our waste management system, decreasing the waste we generate, and reducing pollution. We will develop closer partnerships with our principals and external service providers to achieve our objectives.

For each of the four pillars of our strategy (People, Products and Innovation, Governance and Environment), we have prioritized the UN SDGs (United Nations Sustainable Development Goals) to which we can best contribute through Action 2025.

In 2021, Azelis obtained an EcoVadis® Platinum rating. We are the first global specialty chemicals and food ingredients distributor and innovation service provider to achieve this milestone, putting us in the top 1% of the 75,000+ companies assessed by EcoVadis®. This achievement inspires us to do even more to contribute to a safer, healthier, more sustainable future.

Azelis obtained #1 ESG industry ranking from Sustainalytics in 2022, among a peer list of 178 international traders and distributors, with a score of 12.4 (lowest risk). This places Azelis in the top 5th percentile of more than 14,500 companies rated by the firm worldwide. Sustainalytics ESG ratings evaluate a company's exposure to material industry specific ESG risks and how well a company manages those risks and considers the group to be at low risk of experiencing material financial impact from ESG factors.

Pillar Targets	SDGs
People
Employee attraction, development and retention: 75 points score for ‘engagement’ and ‘loyalty’ in ESS (Employee Satisfaction Survey).
>10% of employees in the company’s ‘talent pools’.
Diversity and inclusion: 100% of line managers will be trained in diversity and inclusive leadership.
30% of senior management positions will be held by women.
Good working conditions: 72 points score for ‘working conditions’ in ESS.
0 workplace accidents with lost time.
Products and Innovations
Sustainable products: In 2021 we identified our sustainable product baseline. In 2022, we continued to accelerate the development of sustainable solutions. We will establish targets for sustainable formulations from 2022 onwards, based on information we receive from our principals.
Sustainable sourcing: 80% of our revenue will come from ESG assessed or audited suppliers, thanks to our membership of Together for Sustainability®.
Governance
Compliance: No material breaches of laws and regulations in any country in which we operate.

Report of the Board of Directors

Management review

Operational review

Headline results (in millions of €)

	2022	2021	F/X Translation	M&A Growth	Contribution	Organic Growth
EMEA	1,811.6	1,232.3	-1.3%	21.3%	27.0%	47.0%
Americas	1,549.9	1,164.2	11.5%	10.7%	11.0%	33.1%
Asia Pacific	747.5	430.8	5.1%	43.2%	25.3%	73.5%
Group Revenue	4,109.1	2,827.3	4.9%	20.3%	20.1%	45.3%
EMEA	432.9	292.8	-1.4%	17.5%	31.7%	47.8%
Americas	385.2	270.9	11.4%	14.6%	16.2%	42.2%
Asia Pacific	142.6	86.2	4.8%	32.1%	28.5%	65.4%
Group Gross Profit	960.7	650.1	4.8%	18.2%	24.8%	47.8%
EMEA	215.4	125.3	-2.4%	22.4%	51.9%	71.9%
Americas	211.9	137.6	11.2%	18.8%	23.8%	53.9%
Asia Pacific	58.1	29.6	4.2%	42.0%	49.9%	96.1%
Adjusted EBITA1	456.9	267.9	5.1%	24.7%	40.7%	70.5%

Total Adjusted EBITA includes Holding companies

Azelis achieved revenue of €4.1 billion, an increase of 45.3% compared to the prior year (+40.4% in constant currency), supported by positive industry trends as well as the benefits from the group’s growing footprint and increased scale. Both Life Sciences and Industrial Chemicals delivered strong results driven by volume growth and positive pricing trends. Revenue from Life Sciences increased by 40.7% to €2.5 billion, representing 60% of total group revenue, while Industrial Chemicals delivered revenue of €1.6 billion, an increase of 53.0% versus the prior year. The 20.1% organic growth generated for the year reflects robust demand across most of the business. Revenue growth contribution from acquisitions was 20.3%, while FX represented a 4.9% revenue tailwind.

EMEA (in millions of €)

	Q4 2022	Q4 2021	Reported Change	2022	2021	Reported Change	Constant Currency
Revenue	440.6	338.0	30.4%	1,811.6	1,232.3	47.0%	48.3%
Gross Profit	102.2	79.41	28.7%	432.9	292.8	47.8%	49.2%
Gross Profit Margin	23.2%	23.5%1	-29 bp	23.9%	23.8%	13 bp	15 bp
Adjusted EBITDA	48.0	32.9	45.9%	226.8	134.1	69.1%	71.5%
Adjusted EBITDA Margin	10.9%	9.7%	116 bp	12.5%	10.9%	163 bp	176 bp
Adjusted EBITA	44.4	30.6	45.3%	215.4	125.3	71.9%	74.3%
Adjusted EBITA Margin	10.1%	9.0%	104 bp	11.9%	10.2%	172 bp	184 bp
Conversion Margin	43.5%	38.5%1	496 bp	49.8%	42.8%	696 bp	742 bp

1 Q4 2021 of EMEA includes reclassification in Azelis’ income statement 2021 since the publication (in March 2022) of Azelis’ Annual Report 2021, with no impact on previously reported Adjusted EBITDA and Adjusted EBITA.
2 Q4 2021 previously reported Gross Profit, Gross Profit Margin and Conversion Margin were EUR 82.3m, 24.3% and 37.2%, respectively. Refer to p. 120 of the 2021 Annual Report and p. 24 of the H1 2022 Interim Financial Report.

Revenue in EMEA rose 30.4% to €440.6 million in the fourth quarter, bringing full year 2022 revenue to €1,811.6 million, representing a year-on-year increase of 47.0%, of which 27.0% was organic. Revenue growth contribution from acquisitions was €262.9 million, representing 21.3% of revenue growth for the full year, while FX headwinds reduced reported revenues by 1.3%. Our Life Sciences business benefitted from positive momentum, notably in Food & Nutrition and in Personal Care. The recovery in the Pharma business, as well as the uplift in Agricultural & Environmental Solutions also supported the business in the second half of the year. The group’s Industrial Chemicals activities in the region benefitted from positive pricing momentum and our increased footprint. In the first half of 2022, Azelis completed the acquisition of Umongo, a leading specialty distributor active in L&MWF (Lubricants & Metalworking Fluids) in South Africa; Whitchem, a specialty distributor in CASE and AM&A (Advanced Materials & Additives) in the UK; and Tunçkaya, a leading distributor of specialty food ingredients and additives in Turkey. In the second half of the year, Azelis further accelerated its growth strategy in the region with four more acquisitions. In October, we completed the acquisition of Chemical Partners, a specialty chemicals distributor active in the CASE and AM&A markets in Africa and the Middle East. We also closed the acquisition of the specialty lubricant distribution assets of Ak-taş in Turkey, and Eurotrading, a leading distributors of specialty chemicals to the personal care market in Italy. Finally, in November, Azelis completed the acquisition of Dagalti,  a specialty chemicals distributor active in the Turkish AM&A market. These companies generated combined annual revenue of over €330 million for the full year 2022. Gross profit grew 28.7% to €102.2 million in the fourth quarter, bringing the full year 2022 gross profit to €432.9 million, representing a year-on-year increase of 47.8%, of which 31.7% was organic, reflecting continued efficiency improvements in our pricing strategy as we leverage our growing scale. Adjusted EBITA grew 71.9% to €215.4 million, driving a 172 bp margin expansion to 11.9%. The margin expansion during the year implies a 696 bp increase in conversion margin, supported by the benefits of continuous efficiency programs.

Americas (in millions of €)

	Q4 2022	Q4 2021	Reported Change	2022	2021	Reported Change	Constant Currency
Revenue	351.0	308.7	13.7%	1,549.9	1,164.2	33.1%	21.7%
Gross Profit	84.5	76.51	10.5%	385.2	270.9	42.2%	30.8%
Gross Profit Margin	24.1%	24.8%1	-70 bp	24.9%	23.3%	158 bp	159 bp
Adjusted EBITDA	46.0	38.7	18.7%	221.1	143.7	53.8%	42.6%
Adjusted EBITDA Margin	13.1%	12.5%	55 bp	14.3%	12.3%	192 bp	247 bp
Adjusted EBITA	43.4	37.0	17.3%	211.9	137.6	53.9%	42.7%
Adjusted EBITA Margin	12.4%	12.0%	38 bp	13.7%	11.8%	185 bp	187 bp
Conversion Margin	51.3%	48.4%1	298 bp	55.0%	50.8%	420 bp	428 bp

1 Q4 2021 of Americas includes reclassification in Azelis’ income statement 2021 since the publication (in March 2022) of Azelis’ Annual Report 2021, with no impact on previously reported Adjusted EBITDA and Adjusted EBITA.
2 Q4 2021 previously reported Gross Profit, Gross Profit Margin and Conversion Margin were EUR 79.5m, 25.8% and 46.5%, respectively. Refer to p. 120 of the 2021 Annual Report and p. 24 of the H1 2022 Interim Financial Report.

Revenue in the Americas increased 13.7% to €351.0 million in Q4, bringing revenue in FY 2022 to €1,549.9 million, representing year-on-year growth of 33.1%. The group’s activities in the Americas generated 11.0% organic growth, as continued pricing strength offset some of the impact of the destocking in the flavors & fragrance business. Revenue growth contribution from acquisitions was €124.2 million, contributing 10.7% of revenue growth, and F/X translation represented an 11.5% tailwind in 2022. During the year, Azelis entered South America with the acquisition of Rocsa, a specialty chemical distributor active in both life sciences and industrial chemicals markets in Colombia, providing Azelis the platform to accelerate its footprint expansion in the region. Rocsa generated annual revenue of over €120 million for the full year 2022. Gross profit increased by 10.5% in the fourth quarter, driving full year 2022 gross profit to €385.2 million, a step-up of 42.2% from the prior year, out of which 16.2% was organic. The gross profit expansion in the region was driven by the positive pricing trends, which offset some of the mix effect from new activities in South America and the temporary impact of destocking in flavors & fragrances in the US. Adjusted EBITA grew 53.9% to €211.9 million, resulting in a conversion margin expansion of 420bp to 55.0% largely due to continuing efficiency gains.

Asia Pacific (in millions of €)

	Q4 2022	Q4 2021	Reported Change	2022	2021	Reported Change	Constant Currency
Revenue	209.7	144.4	45.2%	747.5	430.8	73.5%	68.4%
Gross Profit	38.0	27.41	38.9%	142.6	86.2	65.4%	60.6%
Gross Profit Margin	18.1%	18.9%1	-83 bp	19.1%	20.0%	-94 bp	-88 bp
Adjusted EBITDA	16.8	9.4	79.4%	64.5	33.7	91.3%	87.0%
Adjusted EBITDA Margin	8.0%	6.5%	153 bp	8.6%	7.8%	80 bp	86 bp
Adjusted EBITA	15.1	8.1	86.2%	58.1	29.6	96.1%	91.9%
Adjusted EBITA Margin	7.2%	5.6%	159 bp	7.8%	6.9%	90 bp	96 bp
Conversion Margin	39.8%	29.7%1	1012 bp	40.8%	34.4%	638 bp	658 bp

1 Q4 2021 of Asia Pacific includes reclassification in Azelis’ income statement 2021 since the publication (in March 2022) of Azelis’ Annual Report 2021, with no impact on previously reported Adjusted EBITDA and Adjusted EBITA.
2 Q4 2021 previously reported Gross Profit, Gross Profit Margin and Conversion Margin were EUR 29.9m, 20.7% and 27.1%, respectively. Refer to p. 120 of the 2021 Annual Report and p. 24 of the H1 2022 Interim Financial Report.

In APAC, revenue grew 45.2% to €209.7 million in the fourth quarter, resulting in full year 2022 revenue of €747.5 million, representing year-on-year growth of 73.5%, of which 25.3% was organic. Demand held strong across most of the region, mitigating the slower growth in China during the year.# In 2022, revenue growth contribution from acquisitions was €185.9 million, representing 43.2% of growth, while F/X provided a 5.1% growth uplift. During the year, the group completed four acquisitions in Asia Pacific. In February, Azelis closed the acquisition of Catalite in Thailand, and in May, Azelis completed the acquisition of Chemo India. The acquisition of ChemSol in Malaysia was closed in September, and Azelis created a global platform for flavors and fragrances with the acquisition of Ashapura Aromas in India. These companies generated total combined annual revenue of €170 million in 2022. Gross profit in Asia Pacific increased 38.9% to €38.0 million in the fourth quarter, and full year gross profit to €142.6 million, representing year-on-year growth of 65.4%, of which 28.5% was organic. The 94 bp gross profit margin contraction was due to the mix effect from the first-time time inclusion of acquisitions, as well as the slower activities in China during the year. Despite this, adjusted EBITA grew 96.1% year-on-year to €58.1 million, representing a 90 bp EBITA margin expansion, and conversion margin of 40.8%, translating to a 638 bp conversion margin step-up in 2022.

Holding companies

	Q4 2022	Q4 2021	Reported Change	2022	2021	Reported Change	Constant Currency
Adjusted EBITA (in millions of €)	-6.1	-8.3	-26.3%	-28.5	-24.7	15.5%	15.5%
As % of Group Revenues	-0.6%	-1.1%	47 bp	-0.7%	-0.9%	18 bp	14 bp

Operating costs at the group’s holding companies, which relate to the group’s non-operating entities and the headquarters in Belgium, were €28.5 million in 2022, compared to €24.7 million in the previous year. Relative to total group revenue, operating costs at the group’s holding companies were reduced from 0.9% to 0.7%.

Outlook

Azelis' strategy of driving growth is underpinned by a consistently strengthening lateral value chain, supported by continuous investments in innovation capabilities and digitalization, as well as a commitment to sustainability to create long-term value. In line with this, the management is positive that it should be able to deliver 8-10% of revenue growth and 10-15 bps adjusted EBITA margin expansion per year over the medium-term.

Financial review

Revenue (in millions of €)

	2022	2021	F/X Translation	M&A Growth Contribution	Organic Growth	Total Growth
Revenue	4,109.1	2,827.3	4.9%	20.3%	20.1%	45.3%
Gross Profit	960.7	650.1	4.8%	18.2%	24.8%	47.8%
Adjusted EBITA	456.9	267.9	5.1%	24.7%	40.7%	70.5%

(in millions of €)	Q4 2022	Q4 2021	Reported Change	2022	2021	Reported Change	Constant Currency
Life Sciences	613.8	498.6	23.1%	2,474.6	1,758.9	40.7%	36.3%
Industrial Chemicals	387.5	291.0	33.2%	1,634.5	1,068.4	53.0%	47.2%
Revenue	1,001.4	789.6	26.8%	4,109.1	2,827.3	45.3%	40.4%
Gross Profit	224.7	183.2	22.7%	960.7	650.1	47.8%	43.0%
Gross Profit Margin	22.4%	23.2%	-76 bp	23.4%	23.0%	39 bp	42 bp
Adjusted EBITDA	105.0	73.0	43.8%	484.7	287.8	68.4%	63.4%
Adjusted EBITDA Margin	10.5%	9.2%	124 bp	11.8%	10.2%	162 bp	161 bp
Adjusted EBITA	96.8	67.4	43.7%	456.9	267.9	70.5%	65.5%
Adjusted EBITA Margin	9.7%	8.5%	113 bp	11.1%	9.5%	164 bp	163 bp
Conversion Margin	43.1%	36.8%	630 bp	47.6%	41.2%	635 bp	623 bp
Net Profit	8.2	20.3	-59.3%	218.9	70.2	211.7%	205.4%
Adjusted Net Profit				218.9	98.2	122.9%	116.6%

Revenue increased 26.8% in the fourth quarter to €1.0 billion, driving full year 2022 revenue to €4.1 billion, a year-on-year increase of 45.3%, of which 20.1% was organic. The organic growth deceleration in the final quarter was in-line with the historical trend in the business as economic activities generally unwind for the holiday season. Revenue growth contribution from acquisitions was €573 million, representing a topline growth contribution of 20.3%, while FX resulted in a 4.9% currency tailwind for the full year. Revenue in Life Sciences increased by 40.7% to €2.5 billion for the full year, supported by positive trends and market share gains in most end markets, as well as revenue growth contribution from acquisitions. Demand in Food & Nutrition and Personal Care remained solid throughout the year, especially in EMEA and Asia Pacific. In North America, revenue growth deceleration in the second half of the year was driven by destocking in flavors & fragrances. In Industrial Chemicals, revenue increased 53.0% to €1.6 billion for the full year, driven by the group’s expanding footprint in the segment through recent acquisitions and a positive pricing environment. Across our geographic markets, organic growth remained strong, with EMEA, Americas and APAC delivering 27.0%, 11.0% and 25.3% organic growth respectively.

Profitability

In the fourth quarter, gross profit increased by 22.7%, bringing the full year 2022 gross profit to €960.7 million, representing a year-on-year increase of 47.8%, of which 24.8% was organic. Gross profit margin expanded by 39 bp to 23.4% driven largely by the mix effect from the group’s growing footprint and from continued price optimization initiatives. Adjusted EBITA increased by 70.5% to €456.9 million, implying a 164 bp margin expansion. Strong topline growth and increasing scale efficiencies offset the impact of supply chain pressures and the mix effect from recent acquisitions. The group’s ability to leverage its scale is reflected in the 635 bp expansion in conversion margin during the year. Net financial expense for the year was €73.8 million, a 15.7% reduction from the prior year. The €6.0 million financial income relates to the adjusted fair value of certain financial instruments. Financial expense was reduced by 9.6% to €79.8 million, as the 25.9% reduction in interest expense was partially offset by higher financial costs driven by an increase in the fair value of put options from previous acquisitions, as well as the impact of hyperinflation notably in Turkey. Tax expense in 2022 was €95.8 million, implying an effective tax rate (ETR) of 30.4%, versus 41.6% in the previous year. The high ETR was largely due to the costs related to the fair value adjustment of acquisition-related instruments and hyperinflation accounting, which are not tax-deductible. Net profit for 2022 was €218.9 million, an increase of 122.9% compared to the adjusted net profit for 2021. Reported earnings per share for the period is €0.91, while cash earnings per share was €1.18, representing a year-on-year increase of 151.5% compared to 2021.

(in millions of €)	2022	2021
Operating Profit	388.4	207.8
Net Financial Expense	-73.8	-87.5
Financial Income	6.0	0.7
Financial Expense	-79.8	-88.3
Interest Expense on Bank Loans and Overdrafts	-34.8	-46.9
Interest Lease Commitments	-3.4	-3.0
Accelerated Amortization of Transaction Costs due to IPO	0.0	-19.6
Other Financial Cost	-41.6	-18.8
Share of associates' result	0.1	-0.1
Profit Before Tax	314.7	120.2
Tax Expense	-95.8	-50.0
Net Profit	218.9	70.2
One-off Cash and Non-cash Charges due to IPO:
IPO Cost	0.0	8.4
Accelerated Amortization of Transaction Costs due to IPO	0.0	19.6
Adjusted Net Profit	218.9	98.2
Earnings per share	0.91	0.29
Adjusted earnings per share	0.91	0.41
Cash earnings per share	1.18	0.47

Cash flow and financing

(in millions of €)	2022	2021
Operating Cash Flow	458.9	205.5
Free Cash Flow	438.0	181.6
FCF Conversion	94.8%	67.1%
Net Working Capital / Revenue normalized for acquisitions	13.8%	15.3%
Net Indebtedness	1,161.9	870.7
Net Leverage	2.2	2.7

Net working capital to revenue normalized for acquisitions was 13.8% at the end of 2022, compared to 15.3% at the end of December 2021, driven by significant improvements in working capital management, as reflected in the reduction in working capital from 56 days to 50 days of revenue. The improvement in working capital also reflects the progress Azelis is making in integrating acquired companies, as financial policies align with the group. The working capital intensity of recent acquisitions also show modest improvement, although still well above group level. Operating cash flow more than doubled to €458.9 million in 2022, supported by the significant improvement in working capital efficiency. Capital expenditure was €18.4 million, broadly stable compared to the prior year, as Azelis continues to invest in digital and IT infrastructure, and a laboratory network to support long-term growth. Free cash flow in 2022 was €438.0 million, representing a free cash flow conversion ratio of 94.8%, versus 67.1% in 2021, which was impacted by higher investment in working capital to prepare for the unprecedented growth in the first quarter of 2022. The expansion in free cash flow conversion reflects our profit growth and the significant working capital improvement during the year, bringing the group closer to historical trends. At the end of December 2022, net debt was €1.2 billion and the leverage ratio stood at 2.2x, versus 2.3x at the end of June 2022 and 2.7x at the end of December 2021. At the end of the period, the group had liquidity of €647.2 million in cash and unused credit facilities.

Non-financial performance review

In line with our Action 2025 sustainability strategy, we are committed to achieving a series of ambitious targets by 2025. We measure our progress on all four pillars of this strategy by using KPIs and other metrics that are based on the GRI, the Global Reporting Initiative. Additionally, we keep the Action 2025 targets and KPIs under ongoing review as our ambitions continue to grow.

Toward integrated reporting

In November 2022 the EU CSRD (Corporate Social Reporting Directive) was adopted by the European Parliament and the Council of the EU. Like the EU NFRD, the EU CSRD sets out environmental, social and governance (ESG) reporting requirements for companies and it has expanded the reporting requirements from the previous EU NFRD. The EU CSRD introduces a certification requirement for sustainability reporting as well as improved accessibility of information, by requiring its publication in a dedicated section of company management reports.# EU CSRD and Integrated Reporting

The EU CSRD will apply in 2025 on the financial year 2024 to companies already subject to the EU NFRD. Ahead of this deadline, Azelis has established a roadmap to secure compliance against the EU CSRD which includes adaptation of the reporting processes toward integrated reporting, external certification by auditors, updating our materiality assessment to incorporate the concept of “double materiality” i.e., financial and impact materiality, adoption of the mandatory European Sustainability Reporting Standards (ESRS) and realizing an impact assessment of climate change risks and disclosures.

To monitor our progress toward the ambitions of Action 2025 and the forthcoming regulatory requirements, we have implemented integrated reporting across the organization. Monthly and quarterly reporting on KPIs related to People, Products & Innovation, Governance and Environment provide us with actionable insights about the areas where we are improving as well as those where we need to do better. Our Chief Financial Officer sponsors the implementation of integrated reporting. We allocate all the resources necessary to ensure that a robust framework is in place to deliver timely, reliable and accurate data.

In 2022 we onboarded three Regional Sustainability Coordinators (one per region) that support the implementation and monitoring of the regional ESG reporting. At group level, we onboarded a group Sustainability Coordinator, that in collaboration with the regional teams, ensures data accuracy and consistency prior to data consolidation at group level. We have defined two roles for this process: contributors and validators. Contributors are in charge of reporting the data while validators are responsible for verifying it. When the data is validated at local level, it goes to regional SHEQ and is then consolidated at group level. These three layers of control help ensure the accuracy of all reported data.

The data generated by our integrated reporting provides stakeholders such as ESG investors with a clear oversight about the rollout of Action 2025. To enhance the credibility of our sustainability reporting, and ahead of the requirements of the EU CSRD, in 2022 (FY 2021) for two KPIs of our sustainability strategy relating to diversity and carbon intensity, we obtained limited assurance from our independent auditor PwC (refer to Azelis Sustainability Report 2021 – Auditor’s report, page 104). In 2022 we have increased the number of audited KPIs and will be disclosed in our next Sustainability report 2022. As a process and results-driven organization, we apply the same rigorous, transparent approach to measuring our sustainability performance as we do in measuring our financial performance. Having sustainability KPIs audited by an external body sets us up well for a robust integrated reporting process.

In our most recent Sustainability Report, published in July 2022, we communicated the results of the KPI measurements for year 2021 – as seen in the KPI table below. The KPIs for the year 2022 will be published in more detail in our next Sustainability Report 2022, in which we will thoroughly describe the progress made compared to year 2021 in the four pillars: People, Products & Innovation, Governance, and Environment.

EU Taxonomy

The EU Taxonomy is a classification system that establishes a list of environmentally sustainable economic activities.

Eligibility

To be eligible, an economic activity should substantially contribute to at least one of the six environmental objectives of Taxonomy. However, only activities that contribute to the first two environmental objectives (Climate Change Mitigation and Adaptation) have been formally adopted so far.

Alignment

An eligible activity becomes taxonomy-aligned when it meets all the following three criteria:

Substantially contribute to one of the six economic activities in line with the Technical Screening Criteria (TSC).
Do-no-significant-harm (DNSH) in relation to the other environmental objectives.
Comply with Minimum social safeguards (MSS) as described in the Taxonomy Regulation.

Based on our activities as a global chemical distribution group, we have examined all Taxonomy-eligible economic activities that are listed in the Climate Delegated Act of the EU. The Climate Delegated Act focuses on those economic activities and sectors that have the greatest potential to achieve the objective of climate change mitigation, i.e. the need to reduce the greenhouse gas emissions or to increase greenhouse gas removals and long-term carbon storage. After a thorough review involving all relevant divisions and functions, we concluded that our core economic activities are not covered by the Climate Delegated Act and consequently are Taxonomy-non-eligible, therefore not Taxonomy-aligned.

Therefore, the share of Taxonomy-eligible economic activities in our total turnover is 0% and consequently the related capital and operating expenditure are also 0%. The capital and operating expenditure to be reported should also include those that are related to the purchase of output from Taxonomy-aligned economic activities and certain individual measures enabling the target activities to become low-carbon or to lead to greenhouse gas reductions. As these expenditures are limited given the asset-light business model of Azelis, the proportion of Taxonomy-eligible capital expenditure equals 0%, and the proportion of Taxonomy-eligible operating expenditure equals 0%.

Please refer to the Annexes to this Annual Report for the disclosure on KPIs of non-financial undertakings as required by Annexes I and II of Commission Delegated Regulation (EU) 2021/2178. Also refer to the Annex to this Annual Report for disclosure on the methodology applied to determine the Azelis KPIs.

Key performance indicators

	2022	2021	2020	Target 2025
People
1. Engagement score (Employee Satisfaction Survey)¹	75	74	74	75
2. Loyalty score (Employee Satisfaction Survey)¹	83	82	82	75
3. % of employees in the talent pools	9.0%	11.4%	7.1%	>10.0%
4. % line managers trained in diversity and inclusive leadership	99.3%	98.9%	Not reported	100.0%
5. % senior management positions held by women	31.8% (β)²	23.5%	21.9%	30.0%
6. Working conditions Score (Employee Satisfaction Survey)¹	75	74	74	72
7. Workplace accidents with lost time	6	6	2	0
Products & Innovation
8. Baseline of Sustainable products i.e. # Sustainable products in portfolio	Ongoing	Ongoing	Not measured	To be agreed in 2023
9. % of revenue covered with ESG assessed³ suppliers	74.8%	55.8%	52.0%	80.0%
Governance
10. # Material breaches in laws and regulations	0	0	0	0
11. % Employees trained in ethical and fair business practices	98.6%	98.9%	99.4%	100.0%
12. # Material breaches of ethical and fair business practices policies	5	0	1	0
13. % sites with a crisis management and business continuity plans in place	To be reported in the Sustainability report 2023	Not reported	Not reported	100.0%
Environment
14. Carbon intensity emissions, scope 1 &2 tCO2e/mn€ sales	3.48 LB / 3.36 MB4 (β)²	3.58	3.75	3.57
15. Waste generated in operations (tons)
Total hazardous + non-hazardous (tons)	3,350.8	2,289.0	2,721.2	To be agreed in 2023
Hazardous (tons)	799.0	730.3	955.0	To be agreed in 2023
Non-hazardous (tons)	2,551.8	1,558.7	1,766.2	To be agreed in 2023
16. # Environmental accidents	2	0	0	0

The Employment Satisfaction Survey is executed every 2 years. Consequently, the 2020 and 2021 values for Engagement Score, Loyalty Score and Working Conditions Score are equal.
(β) relates to KPIs on which PWC has provided ISAE 3000 limited assurance
EcoVadis® assessments and TfS audits
Updated methodology and emission factors have resulted in separate MB and LB reporting for 2022. For comparison sake, we have calculated the 2022 figure following the methodology of 2021 (MB emissions are calculated when available, otherwise location-based emission factors are used (IEA, ADEME, DEFRA) to calculate the respective emissions.), this amounts to 3.42. For more information, refer to the disclosure on methodology on Azelis KPIs in the Annexes to this Annual Report.

The percentage of senior management positions held by women is one of the key sustainability KPI's of the "People" pillar of our sustainability strategy. At the end of 2021, the total number of senior management positions was 68, of which 16 were held by women. At the end of 2022, the total number of senior management positions was 85, of which 27 were held by women. Hence this KPI has recorded an increase from 23.5% at the end of 2021 to 31.8% at the end of 2022 (+8.3%). This increase is mainly due to internal promotions and changes to the organizational structure following acquisitions (e.g. new organizational structure Americas effective January 2022); five new roles, of which four held by women, were flagged as strategically significant by the Executive Committee and the role holders were included in the senior management group. Reviewing the criteria defining which roles are identified as senior management roles contributed to an increase of 1% vs. 2021: please refer to the methodology section in the Annexes to this Annual Report for details.

On a biennial basis we roll out an employee satisfaction survey. The scores of the survey held in June 2022 regarding loyalty and working conditions have once again exceeded the 2025 target, whereas the engagement score has equaled the 2025 target. For this reason, we have decided to raise the Action 2025 targets and we will disclose the new targets in the Sustainability Report 2022. Line managers are trained on diversity and inclusion within the framework of the annual knowledge review on ethical and fair business practices. We will define a dedicated training program for line managers.# Sustainability

Since 2022, we have kept track of the number and percentage of line managers who participate in the knowledge review and are therefore able to provide separate participation figures for employees with and without people management responsibilities. The number of accidents with lost time in 2022 has not decreased compared to 2021. While this can still be linked to the employees' increased post-pandemic on-site presence, this is unacceptable to Azelis. Our objective is to have zero workplace accidents. In 2022, we introduced a new group Safety, Health and Environment (SHE) policy which sets out basic principles to be respected in all entities. We will continue and intensify our awareness and training initiatives to achieve our objective.

Products & Innovation

Regarding the “Products & Innovation” pillar, during 2022 we continued cooperating with our principals and identifying the sustainable products in our portfolio. A product is marked as sustainable in our systems when a certificate (RSPO, Cosmos, Bio, Organic, etc.), a company statement (natural ingredients, etc.) or any other company document that substanting the claim, is shared with us by our business partners. Our Group SHEQ support center then carried out a due diligence documentation check.

Furthermore, we are closely monitoring regulatory developments at the EU level, particularly the discussions around the concept of safe and sustainable design for chemicals, materials and products. This is part of the Chemical Sustainability Strategy of the European Commission. We are preparing our processes and systems for future criteria, and in 2022 we did an impact assessment.

In 2022, we continued assessing our suppliers on their sustainability policies and practices through our “Together for Sustainability” membership and EcoVadis® assessments. The assessed and audited suppliers covered 74.8% of our total annual revenue.

Governance

On the “Governance” pillar, 98.6% of our employees were trained in ethical and fair business practices. There were five material breaches reported in ethical and fair business practices, and nil material breaches of laws and regulations.

Environment

Regarding “Environment” and the second key sustainability KPI, carbon intensity emissions (scope 1 and scope 2), our 2025 target has been achieved (see KPIs table above) in 2022. The target realization has been impacted following improved calculation of the carbon intensity emissions since 2021 onwards, in addition to a slower increase in carbon emissions compared to the increase of revenues in comparison with 2021. Besides, specific carbon mitigation measures have been taken in 2022 such as installation of solar panels, sourcing renewable energy whenever possible and implementing mobility budgets amongst other actions. Additional information on our actions to reduce carbon emissions will be explained in our next Sustainability report.

We have four layers of control concerning our environmental reporting process, before data is consolidated at group level: local contributor, local validator, regional coordinator and regional SHEQ. Environmental data, such as energy consumption (Scope 1 & Scope 2) and waste management data is collected monthly and quarterly. In addition, the quality of data is continuously improving, with fewer estimates and more actual data available. The reporting scope is global, the only exclusion is M&A activity where new entities are integrated in the reporting 12 months after acquisition. Please see the methodology section in the Annexes to this Annual Report for additional information.

Calculations relating to carbon emissions intensity have been updated and adjusted since the publication of the Azelis Sustainability Report 2020, based on continued quality reviews. Our targets remain the same. The value of this KPI was adjusted due to internal review and validation: the value reported in the Sustainability Report 2021 (3.58 tCO2e) differs slightly from the value previously reported in the Annual Report (3.32 tCO2e) of March 2022. As a consequence, our 2025 carbon intensity (tCO2e) target was almost achieved in 2021 (3.58 actual vs 3.57 target) and we can confirm that the target has been achieved in 2022 with a measured carbon intensity of 3.48 LB/3.36 MB vs the target of 3.57 to be achieved by 2025 (baseline year 20191, 4.76 tCO2e). To continuously improve on this important KPI (carbon intensity) and keep on challenging ourselves, the Azelis Sustainability Steering Committee agreed to review the target and approach. Further information on the new approach will be disclosed in our next Sustainability Report.

Waste management data is also reported at monthly, quarterly and annual frequency. Final consolidated data, as well as the actions taken to reduce waste generation, will be disclosed in our next Sustainability Report 2022; in the meantime, we have measured the following indicators:


Total waste (t):	3,350.8
Total hazardous (t):	799.0
Total non-hazardous (t):	2,551.8

In 2022, two incidents took place in two different facilities of Azelis, one in Denmark and one in the US. In the smoke ingredients facility in Denmark, a leak was found in a waste line traveling from the blending facility to the waste tank due to a broken pipe gasket. Relevant authorities were notified, visited the site, and determined that there was no impact to the environment and no clean-up obligation. In the US, there was a spill of non-hazardous product in the storage. The facility responded to the spill immediately and contacted the appropriate authority to report the incident. The Department of Public Works confirmed that the drain is a city drain and is not connected to any county water system. The spill resulted in no environmental impact and a clean-up was conducted. More details around both incidents will be available in the Azelis Sustainability Report.

More information on our sustainability progress made during year 2022, will be published in our next Sustainability Report 2022. The company’s Sustainability Report constitutes Azelis’ report based on the requirements of the Belgian law regarding the disclosure of non-financial information (transposition of the European Non-Financial Reporting Directive (NFRD) 2014/95/EU).

Following the introduction of new, more frequent reporting processes and internal validation in 2021, calculations relating to carbon emissions intensity have been updated and adjusted since the publication of the Azelis Sustainability Report 2020. The baseline KPI of 2019 was adjusted in the Sustainability report 2021, following an internal validation. Our targets remain the same.

Diversity and Inclusion

The diversity of our employees creates significant value and additional competitive advantage for our business. Diversity does not only mean gender diversity; it also includes differences in culture, age, sexual orientation, physical impairments, work experience and many other forms of variety. We are convinced that diverse companies are better at attracting talent, have better customer orientation, higher employee satisfaction and enhanced decision-making processes. Ultimately, a diverse company will also perform better financially. Azelis operates across five continents and 63 countries, with a global workforce including 77 different nationalities at the end of 2022.

Overall, out of the eight members of the Board of Directors, two were female and six male on December 31, 2022. This ratio has not changed over the past twelve months. Our senior management team included 85 men and women from many different cultures, ethnic origins and ages and of 30 different nationalities on December 31, 2022. 31.8% of the members of the group senior management team - including our Executive Committee – were women. Senior managers are defined as all employees who belong to the group’s General Management Team (“GMT”) because of their position / role. The eligible roles in 2022 were:

Members of the Executive Committee
Regional COO and CFO
Regional Director / (S)VP of: Operations (Americas) / Business Development / Commercial Excellence / Innovation / HR / Legal / SHEQ / Marketing
All roles holding country / country cluster P&L responsibility (e.g. Managing Director, General Manager, Country Manager, etc.) if country / country cluster sales exceed €30 Mio.
Corporate Functional Heads.
Market Segment Directors APAC / EMEA if market segment sales exceed €50 Mio.
Group Principal Managers: only roles holding global principal responsibility.
Other strategically significant roles upon invitation of the Executive Committee.

Women represented 53.4% of our global workforce on December 31, 2022 (over 52% at the end of 2021). This percentage has consistently been above 50% in the past five years. This ratio is exceeded when it comes to people development. Over 54% of our internal promotions in 2022 resulted in the appointment of women to the vacant positions. The percentage of women promoted since we started measuring this KPI in 2020 has consistently been above 50%.

Diversity is not only related to gender and nationalities, but also to age. Azelis invests in young talents: 14.3% of the employees are younger than 30 years. At the same time, we also value expertise and experience: 28% of our employees are aged 50 and above, and close to 8% are over 60.

Diversity and inclusion play a major role in the new sustainability strategy - Action 2025 - which Azelis launched in 2021. Action 2025 addresses the 21 major sustainability aspects impacting our operations and commits Azelis to achieving a series of ambitious targets by 2025. All these aspects have been included in the four pillars of the new sustainability strategy: People is one of these pillars, and 33% of the targets of this pillar are related to Diversity and Inclusion.

	2022	2021	2020	2019
1.

To the Board of Directors of Azelis Group NV

This report has been prepared in accordance with the terms of our contract dated 13 October 2022 and addendum dated 22 February 2023 (the “Agreement”), whereby we have been engaged to issue an independent limited assurance report in connection with selected sustainability performance indicators, marked with a Greek small letter beta (ß), in the Annual Report as of and for the year ended 31 December 2022 of Azelis Group NV and its subsidiaries (the “Report”).

The Directors’ Responsibility

The Directors of Azelis Group NV (“the Company”) are responsible for the preparation and presentation of the information and data in the selected sustainability performance indicators, marked with a Greek small letter beta (ß) in the Report (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. 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 2022 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 selection of sustainability KPIs for the year 2022, marked with a Greek small letter beta (ß) in the Report. 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.

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 Subject Matter Information within your Report as of and for the year ended 31 December 2022 has not been prepared, in all material respects, in accordance with the Criteria.

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, in connection with their Report as of and for the year ended 31 December 2022 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, 1 March 2023

PwC Bedrijfsrevisoren BV/Reviseurs d’Entreprises SRL
represented by Marc Daelman
Registered auditor

Marc Daelman BV, Director, represented by its permanent representative Marc Daelman

Corporate Governance Statement

Azelis Group NV (the "Company") – headquartered in Antwerp, Belgium – is committed to maintaining high Belgian governance principles and seeks to continuously strengthen its corporate governance practices and disclosures, emphasizing transparency and promoting a culture of sustainable long-term value creation. This Corporate Governance Statement summarizes the rules and principles by which the Company's corporate governance is organized in accordance with the Belgian Code of Companies and Associations (the "BCCA"), the 2020 Belgian Code of Corporate Governance (the "Corporate Governance Code"), the articles of association of the Company (the "Articles of Association") and the Company's Corporate Governance Charter (the "Charter").

Gender	31.8%	23.5%	21.9%	20.6%
Percentage of senior management positions held by female employees (headcount) on 31st December
Percentage of senior management positions held by male employees (headcount) on 31st December	68.2%	76.5%	78.1%	79.4%
Percentage of female employees (FTE) on total number of employees (FTE) on 31st December	53.4%	52.2%	53.2%	53.3%
Percentage of male employees (FTE) on total number of employees (FTE) on 31st December	46.4%	47.6%	46.8%	46.7%
Percentage of employees (FTE) on total number of employees (FTE) on 31st December - gender self-identification not available	0.2%	0.2%	N/A	N/A

Age	14.3%	13.6%	11.4%	12.8%
Percentage of employees (FTE) between 20 and 29 years of age on 31st December
Percentage of employees (FTE) between 30 and 39 years of age on 31st December	30.5%	29.7%	27.7%	26.8%
Percentage of employees (FTE) between 40 and 49 years of age on 31st December	27.2%	28.0%	28.2%	27.1%
Percentage of employees (FTE) between 50 and 59 years of age on 31st December	20.2%	21.1%	24.0%	24.0%
Percentage of employees (FTE) 60 years of age and above on 31st December	7.8%	7.7%	8.8%	9.4%

Origin	30	26	35	31
Number of nationalities of senior management on 31st December
Number of nationalities of total workforce on 31st December	77	71	65	44

Hiring and internal promotion

Hiring

	40.2%	49.2%	Not measured in 2020	Not measured in 2019
Percentage of male employees (headcount) on total number of employees (headcount) hired during the reporting period
Percentage of female employees (headcount) on total number of employees (headcount) hired during the reporting period	59.6%	50.1%	Not measured in 2020	Not measured in 2019
Percentage of employees (headcount) on total number of employees (headcount) hired during the reporting period - gender self-identification not available	0.2%	0.7%	Not measured in 2020	Not measured in 2019

Internal promotion

	54.3%	64.8%	53.2%	Not measured in 2019
Percentage of female employees (headcount) promoted during the reporting period
Percentage of male employees (headcount) promoted during the reporting period	45.7%	35.2%	46.8%	Not measured in 2019

Pursuant to the BCCA, the Company relies on the Corporate Governance Code as a reference code, which is available on the website of the Corporate Governance Committee. The Articles of Association were last amended by the Shareholders' Meeting on September 10, 2021, with effect on September 21, 2021. In addition, the Board of Directors adopted the Charter on September 4, 2021, with effect on September 21, 2021, in accordance with the Corporate Governance Code, and will review the Charter at regular intervals in order to adopt any changes deemed necessary and appropriate. The Articles of Association and the Charter were not modified in 2022. The Articles of Association and the Charter are available on the Company's website. The Corporate Governance Code is based on a "comply or explain" approach. Under the BCCA, Belgian-listed companies are required to justify any deviations from the Corporate Governance Code in the annual corporate governance statement, which is included in their annual report. Except for the principles set out in article 7.6 of the Corporate Governance Code (please refer to section Remuneration of the report of the Board of Directors), the Company and this Corporate Governance Statement comply fully with all the recommendations of the Corporate Governance Code.

Shares and shareholder information

Share capital and shares

Changes to the capital and share structure

The share capital of the Company on December 31, 2022, amounted to €5,679,999,978, represented by 233,846,153 shares. No changes were made to the Company's capital in 2022. Azelis (AZE) is listed on Euronext Brussels and is included in the Euronext Brussels Compartment A, Euronext Chemicals. During 2022, the average share price at end of day close was €22.37. Azelis' closing share price on December 31, 2022 was €26.52, which represents -5.3% compared to the end of 2021.

Form and transferability of shares

All shares issued by the Company belong to the same class and are in registered or dematerialized form. The Board of Directors keeps a register in which the names and addresses of all holders of registered shares and any other mentions required by law are recorded. Shareholders may elect, at any time, to have their registered shares converted into dematerialized shares, and vice versa, at their own expense, subject to certain contractual (lock-up) restrictions for shares held by Azelis’ management. Under the BCCA and the Articles of Association, the shares issued by the Company are freely transferable, subject to any contractual (lock-up) restrictions.

Rights attached to the shares

Each share entitles its holder to one vote at the Shareholders' Meeting, equally shares in the profit and, unless otherwise decided by the Shareholders' Meeting or the Board of Directors pursuant to the authorized capital, gives its holder a preferential subscription right to subscribe to new shares, convertible bonds or warrants of the Company. The Articles of Association do not contain any restriction on voting rights. The Company is not aware of shareholders' agreements that may give rise to restrictions on the exercise of voting rights. As far as the Company is aware, there are no holders of securities with special control rights in the Company, other than the nomination rights set out in the section "Nomination right" of this Corporate Governance Statement.

Authorized capital

Under article 9 of the Articles of Association, pursuant to an authorization granted by the Shareholders' Meeting on September 10, 2021, with effect on September 21, 2021, the Board of Directors may increase the share capital of the Company once or several times by a cumulative amount of maximum €5,679,999,978. The Board of Directors can determine the modalities of any such capital increase, such as the cancellation of preferential subscription rights, in accordance with the BCCA. This authorization includes the restriction or cancellation of preferential subscription rights for the benefit of one or more specific persons (whether or not employees of the Company or its subsidiaries) and in connection with capital increases in the event of a public takeover bid (please refer to the section “Authorized Capital” below). The capital increase can be organized by means of a contribution in cash or in kind or through conversion of reserves. The Board of Directors can also use this authorization for the issuance of convertible bonds, warrants or other securities. The authorization is valid until September 30, 2026, except for capital increases in the event of a public takeover bid, in respect of which the authorization is only valid until September 21, 2024. In the course of 2022, the Board of Directors did not make use of its authorization to increase the Company's capital.

Acquisition of own shares

According to article 15 of the Articles of Association, the Board of Directors may, within the limits set by this provision and by the BCCA, itself or through a direct subsidiary, acquire, on or outside a regulated market, up to 20% of the Company's own shares at a price which complies with legal requirements, but which is in any case not more than 10% below the lowest closing price in the last thirty trading days preceding the transaction and not more than 10% above the highest closing price in the last thirty trading days preceding the transaction. This authorization is valid until September 30, 2026. The Board of Directors is furthermore authorized, subject to compliance with the applicable provisions of the BCCA, to acquire own shares for account of the Company if such acquisition is necessary to avoid serious and imminent harm to the Company. This authorization is valid until September 30, 2024. Finally, the Board of Directors is authorized to divest, at any time and at a price it determines, all or part of the Company's shares acquired by it, within the conditions set out in the Articles of Association and the BCCA. Since implementing of the share buy-back program on March 17, 2022, Azelis has bought back 133,400 shares for a total amount of €2,998,901.07. This corresponds to 0.057 % of the total shares outstanding and a par value of €3,240,216. Azelis has not disposed of any own shares during 2022. The purpose of this program is to cover obligations for share awards under Azelis' long-term incentive plan (“LTIP”).

Dividend policy

The Company's dividend policy is that, subject to the availability of distributable reserves and approval by the Shareholders' Meeting and barring exceptional circumstances, it intends to declare and distribute an annual non-cumulative dividend based on a target pay-out ratio of 25-35% of the group's reported net profit. However, the amount of any dividend and the determination of whether to pay the dividend in any year may be affected by a number of factors, including the Company's business prospects, cash requirements and any material growth opportunities. The proposed dividend for the year ending December 31, 2022, equals an aggregate amount of €67.8 million, representing €0.29 per share, based on the number of eligible shares outstanding on December 31, 2022.

Liquidity of the Company's shares

In order to maintain a sufficiently active market for its shares traded on Euronext Brussels, Azelis has entered into a liquidity provider agreement with KBC Securities. This liquidity provider agreement entered into force on May 16, 2022, and was still in effect as of December 31, 2022.

Shareholders

Major shareholders

The chart below represents the shareholder structure, based on the transparency notifications made by shareholders up to December 31, 2022. The transparency notifications are required by Belgian law and/or pursuant to the Articles of Association, when the shareholding crosses the thresholds of 3%, 5%, or any multiple of 5%. All the transparency notifications received by the Company are available on its website, under the section Regulated information.

Agreements between shareholders of the Company

The Company is not aware of any shareholders' agreements that may give rise to restrictions on the exercise of voting rights.

Relevant information in the event of a takeover bid

Article 34 of the Royal Decree of November 14, 2007, on the obligations of issuers of securities which have been admitted to trading on a regulated market, requires that listed companies disclose certain items that may have an impact in the event of a takeover bid.

Capital structure

A comprehensive overview of the Company's capital structure as of December 31, 2022, can be found in the section "Share capital and shares" of this Corporate Governance Statement.

Restrictions on transfers of securities

Under the BCCA and the Articles of Association, the shares issued by the Company are freely transferable, subject to any contractual (lock-up) restrictions.

Holders of securities with special control rights

As far as the Company is aware, there are no holders of securities with special control rights, other than the nomination rights set out in the section "Nomination right" of this Corporate Governance Statement.

Employee share schemes

The members of the Board of Directors, the members of the Executive Committee and certain other key employees (including certain managers of newly acquired businesses) have had the opportunity to invest in the group via a management participation plan. With effect immediately prior to the closing of the IPO, the securities held by the participants in the management participation plan have been replaced by shares in the Company. These shares, to the extent not sold as part of the IPO, are subject to certain contractual (lock-up) restrictions for periods ranging between one year and three years following the IPO. As of December 31, 2022, most of these shares continue to be held by the Partnerships (i.e., Akita Management Participation 1 SCSP and Akita Management Participation 2 SCSP) on behalf of the participants in the management participation plan.On September 4, 2021, the Board of Directors approved the proposal for a Long Term Incentive Plan ("LTIP"), which was approved by the Shareholders' Meeting on June 9, 2022, with effect on January 1, 2022. The LTIP involves the grant of an award of a specified number of shares in the Company. The LTIP does not provide for any control mechanism over the voting rights attached to the shares. Awards may vest at the end of a three-year vesting period, i.e., the shares will only be delivered if performance targets are met which are measured over a three-year performance period. Although a target number of shares is awarded at grant, at the end of the three-year performance period the target number of shares to be delivered may be adjusted up or down depending on the actual level of performance achieved. Upon vesting, the ownership of the shares (including the rights attached to such shares) shall be transferred to the participants. In 2022 a total of 138,546 share awards were granted under the LTIP.

Restriction on voting rights

The Articles of Association of the Company do not contain any restrictions on the exercise of voting rights by the shareholders, provided that the shareholders concerned comply with all formalities to be admitted to the Shareholders' Meeting and have complied with the relevant rules on disclosure of major shareholdings.

Shareholder agreements

The Company is not aware of any shareholder agreement which includes or could lead to a restriction on the transfer of its shares or exercise of voting rights related to its shares.

Appointment of members of the Board of Directors

The rules applicable to the appointment and replacement of members of the Board of Directors are set out in the section "Appointment" of this Corporate Governance Statement.

Amendment of the Articles of Association

Amendments to the Articles of Association must be submitted as a resolution to the Shareholders' Meeting. In order to be approved, the resolution requires at least 50% of the share capital to be present or represented and the affirmative vote of the holders of at least 75% of the votes cast. If the quorum is not reached, a second meeting may be convened at which no presence quorum shall apply. The aforesaid special majority voting requirement, however, remains applicable.

Authorized capital

In principle, the authorization of the Board of Directors to increase the share capital of the Company as described in the section "Authorized capital" of this Corporate Governance Statement, is suspended upon the notification to the Company by the FSMA of a public takeover bid for the securities of the Company. The Shareholders' Meeting can, however, under certain conditions, expressly authorize the Board of Directors to increase the capital of the Company in such a case by issuing shares in an amount of not more than 10% of the existing shares at the time of such public takeover bid, in accordance with the additional terms and conditions set out in article 7:202 of the BCCA. Such authorization was granted to the Board of Directors for a three-year period ending on September 21, 2024.

Acquisition of own shares

The ability of the Board of Directors to acquire shares of the Company on account of the Company is explained in the section "Acquisition of own shares" of this Corporate Governance Statement.

Change of control clauses

The following significant agreements to which the Company or certain of its subsidiaries are a party contain change of control provisions:

Facilities Agreement

On September 6, 2021, Azelis Finance NV entered into a Multicurrency Term and Revolving Facilities Agreement with certain financial institutions for the amounts as mentioned in Note 22.1, as amended in 2022 (the "Facilities Agreement"), with the purpose of refinancing of the group in the context of the IPO. The Company acts as guarantor under this Facilities Agreement. If a change of control as defined in the Facilities Agreement occurs in respect of the Company (i.e., a party or parties other than the current reference shareholders Akita and PSP obtaining control), the lenders under the Facilities Agreement are no longer obliged to fund further utilizations thereof, and lenders individually have the right to require Azelis Finance NV to prepay the outstanding utilizations made by such lender.

LTIP

An accelerated vesting of the awards granted under the LTIP applies, under certain conditions (such as regulatory compliance and satisfaction of certain tax and social security liabilities), upon a public takeover of the Company. In addition, in the event of a public takeover of the Company, the Board of Directors may decide that an award shall be automatically exchanged for an equivalent award over shares in the acquiring company or some other company. The terms and conditions of the LTIP were ratified and approved in accordance with article 7:151 of the BCCA at the Shareholders' Meeting of June 9, 2022.

Schuldschein Loan Agreements

On December 15, 2022, Azelis Finance NV entered into 7 Schuldschein loan agreements as Borrower with certain financial institutions, to further finance the group, for a total amount of €150.5 million. The Company acts as guarantor under these Schuldschein loan agreements. If a change of control as defined in the Schuldschein agreements occurs in respect of the Company (i.e., a party or parties other than the current reference shareholders Akita and PSP obtaining control), the lenders under Schuldschein loan agreements individually have the right to require Azelis Finance NV to immediately repay their respective Schuldschein loan agreement together with accrued interest.

Severance pay

The Company has not concluded any agreement with members of the Board of Directors, service providers or employees which would result in the payment of specific severance pay if, pursuant to a takeover bid, the members of the Board of Directors, service providers or employees are dismissed or their service or employment agreements are terminated.

Measures regarding market abuse

The Company implemented measures to comply with the provisions of the Belgian financial supervision law of August 2, 2002, and of the Market Abuse Regulation (EU 596/2014) of the European Parliament and of the Council of April 16, 2014, in order to prevent market abuse such as insider trading, tipping and market manipulation. In addition, the Company maintains rules regarding reporting of transactions on the Company's shares. The Company adopted a dealing code (the "Dealing Code") as part of the Charter on September 4, 2021, with effect on September 21, 2021, which is available on its website as part of the Charter. The Dealing Code describes the obligations related to notification and conduct which apply to directors, members of the Executive Committee, certain other senior employees and other persons with respect to transactions in shares and other financial instruments of the Company. The Dealing Code sets limits on carrying out transactions in shares and other financial instruments of the Company and allows dealing by the above-mentioned persons only during certain windows. The Dealing Code will be kept up to date to reflect legislative developments. The Group General Counsel & Chief Compliance Officer is in charge of compliance with regulatory requirements regarding disclosures and filings to be made to the FSMA and any other relevant stock exchange or supervisory authority.

Governance and leadership

Board of Directors

Composition

The Company has a "one-tier" governance structure whereby the Board of Directors is the ultimate decision-making body, with overall responsibility for the management and control of the Company.

Size and composition

Pursuant to the Articles of Association, the Board of Directors must comprise a minimum of five and a maximum of eleven directors. On December 31, 2022, the Board of Directors was composed of eight directors, six of whom are non-executive directors and two of whom are executive directors (the Chief Executive Officer and the Chief Financial Officer). On December 31, 2022, the Board of Directors was composed as follows:

Name	Age	Position	Director since	Mandate expires
Antonio Trius	67	Independent Non-Executive Director (Chair)	2021	2025
Alexandra Brand	51	Independent Non-Executive Director	2021	2025
Tom Hallam	56	Independent Non-Executive Director	2022	2025
Ipek Özsüer	45	Independent Non-Executive Director	2021	2025
Bert Janssens	46	Non-Executive Director	2021	2025
Kristiaan Nieuwenburg	52	Non-Executive Director	2021	2025
Hans Joachim Müller	63	Executive Director	2021	2025
Thijs Bakker¹	48	Executive Director	2021	2025

¹ Mr. Thijs Bakker acts as permanent representative of Cloudworks BV.

Appointment

Directors are appointed, renewed or dismissed by the Shareholders' Meeting upon the proposal of the Board of Directors, after having sought the prior advice of the Remuneration and Nomination Committee. If the mandate of a director becomes vacant due to his or her death or voluntary resignation, the remaining directors have the right to appoint a new director on a temporary basis in order to fill the vacancy until the first Shareholders' Meeting after the mandate became vacant. The new director will complete the term of the Director who died or resigned. Following the resignation of Mr. Jürgen Buchsteiner as a non-executive and independent director on August 2, 2022, the Board of Directors has – on the recommendation of the Remuneration and Nomination Committee – appointed Mr. Tom Hallam by means of co-optation in accordance with article 17, §1 of the Articles of Association as a non-executive and independent director on the same date. Mr. Hallam is filling the vacancy until the next annual general meeting of the Company for confirmation by the shareholders.# Directors and Management

Nomination right

The Articles of Association entitle the founder of the Company, Akita, to nominate candidates for the appointment of at least one director for each 10% of the shares held, directly or indirectly, by Akita and/or one or more companies affiliated therewith, acting alone or together, and this up to a shareholding of 50%. On December 31, 2022, Akita held more than 50% of the total number of shares issued by the Company, meaning that Akita is entitled to nominate candidates for the appointment of maximum five directors. There are currently 2 directors representing Akita in the Board of Directors: Mr. Bert Janssens and Mr. Kristiaan Nieuwenburg.

Independent directors

Pursuant to the Corporate Governance Code, a majority of the directors should be non-executive and at least three directors should be independent in accordance with the independence criteria set out in the BCCA and the Corporate Governance Code. There are currently four independent directors in the Board of Directors: Ms. Alexandra Brand, Mr. Tom Hallam, Ms. Ipek Özsüer and Mr. Antonio Trius.

Observers

The Articles of Association provide the Board of Directors the right to appoint (and dismiss) one or more observer(s) to the Board. In 2022, the Board of Directors appointed Ms. Magdalena Siembab as observer to the Board of Directors and released Mr. Pieter-Jan Van Haute, Mr. Salim Brigui, Ms. Audinga Besusparyte and Mr. Pedram Shayegan from their role as observer to the Board of Directors. As of December 31, 2022, there were 3 observers in the Board of Directors: Mr. Floris van Halder, Mr. Will Boardman and Ms. Magdalena Siembab. The observers are invited to each meeting of the Board of Directors and have the right to receive the same information as a director (including any information to which the directors are legally entitled pursuant to the BCCA). They are subject to the same fiduciary and confidentiality duties as the directors and are therefore bound by the Company's policies and procedures as applicable to the directors (including the Code of Conduct). They do not participate in the deliberation nor in the voting process.

Company secretary

The Board of Directors appointed Mr. Gerrit De Vos, Group General Counsel & Chief Compliance Officer, as Company Secretary.

Term of office

Although the term of office of directors under the BCCA is limited to six years (renewable), the Corporate Governance Code recommends that it be limited to four years. The Articles of Association limit the term of office of Directors to a maximum (renewable) period of four years. Pursuant to the group's policy on age of serving directors, the age limit for membership of the Board of Directors is the ordinary Shareholders' Meeting following the (proposed) member's 70th birthday.

Curricula vitae

The following description provides summaries of the curricula vitae of the members of the Board of Directors and indicates their principal activities outside of Azelis to the extent those activities are significant with respect to Azelis.

Antonio Trius is the chair of the Board of Directors, having joined as a non-executive director of Azelis in 2014, and also serves as chair of the Remuneration and Nomination Committee. Dr. Trius is currently a non-executive director of several companies, including Arxada AG in the chemical industry, and Cuantum Medical & Cosmetics S.L. in a different industry. Prior to joining Azelis, he was the chief executive officer of Cognis, a specialty chemicals supplier. Dr. Trius holds a Ph.D. in Chemistry from the Universitat Autònoma de Barcelona and completed an executive development program (Programa de Desarrollo Directivo (PDD)) in Business Administration from IESE Business School.

Alexandra Brand joined Azelis as a non-executive director in 2019. Dr. Brand is the regional director for the Europe, Africa and Middle East region of Syngenta, an agricultural science and technology group, and previously held the role of chief sustainability officer at Syngenta. Prior to working at Syngenta, Dr. Brand held various management and executive roles and was involved in global research at BASF in Germany and in Mumbai, India. In addition, she currently serves as a non-executive director at Siegfried, a Swiss-based global manufacturer of pharmaceutical products. Dr. Brand holds a Ph.D. in Chemistry from the Technische Universität Darmstadt.

Ipek Özsüer joined Azelis as a non-executive director in 2021. Ms. Özsüer has more than 20 years of significant international business experience in technology and digital roles. She has held numerous high-profile roles, including senior leadership roles in digital transformation at Bayer and currently serves as DSM’s Chief Digital and Information Officer. She previously held positions focusing on business services, outsourcing, data and analytics for over twelve years at Hewlett Packard, started her career at Procter & Gamble in 1999. Ms. Özsüer holds a bachelor's degree in computer engineering from Boğaziçi University in Istanbul.

Bert Janssens joined Azelis as a non-executive director in 2018, having led EQT's investment in Azelis. Mr. Janssens is a partner at EQT, where he is the head of Western Europe equity, and a member of the private equity investment committee and management group. He joined EQT Group in 2015. Through his roles as a private equity principal, he holds or has held non-executive director roles at various companies, including idealista in Spain and Sitecore in Denmark. Mr. Janssens holds an MBA from Harvard Business School, and a B.Sc. and M.Sc. in mechanical engineering from KU Leuven.

Kristiaan Nieuwenburg joined Azelis as a non-executive Director in 2018. Mr. Nieuwenburg has been a partner at EQT since 2013 and has led its expansion into the Western European region. He further served as chair of EQT Partners Inc. and head of private capital North America. Mr. Nieuwenburg serves as member of EQTs private equity investment committee and is chair of the EQT foundation investment committee. Through his roles as a private equity principal, he holds or has held non-executive director and chairman roles at various companies, including activated carbon technology provider, Desotec, private company data provider, Bureau van Dijk, and abrasive and impact applications solution provider, Magotteaux, in Belgium. Mr. Nieuwenburg holds an MBA from Harvard Business School and an M.Sc. in Chemical Engineering from Delft University of Technology.

Hans Joachim Müller joined Azelis as Chief Executive Officer in 2012. Prior to joining Azelis, Dr. Müller was a member of the Managing Board at Clariant and Chief Operating Officer and member of the managing Board at Süd-Chemie. Dr. Müller started his career at BASF, where he became director of technology and catalysts for Asia, based in Hong Kong, and then global director of specialty chemicals. Dr. Müller holds a Ph.D. in Chemistry from Ludwig-Maximilians-Universität in Munich. He also obtained a research fellowship at the University of California, Los Angeles.

Thijs Bakker joined Azelis as Chief Financial Officer in 2016. Mr. Bakker has over 20 years' international experience in finance and the chemical industry, having worked in various finance roles in the Netherlands, the United States and across the Asia Pacific region for a leading global paints and coatings company and a major producer of specialty chemicals. Prior to joining Azelis, Mr. Bakker worked at Nuplex Resins, a specialty chemicals manufacturing company, and was finance director marine and protective coatings at Akzo Nobel N.V. Mr. Bakker holds a master's degree in business administration and economics from the Erasmus University of Rotterdam in the Netherlands as well as a Post Graduate Master of Finance and Control (RC) from the Rotterdam School of Management.

Tom Hallam joined Azelis as non-executive and independent director in 2022 and also serves as chair of the Audit and Risk Committee. Mr. Hallam’s career spans over 30 years of experience in finance leadership roles. He is currently Chief Financial Officer at Givaudan, a global leader in Fragrance & Beauty and Taste & Wellbeing. He joined Givaudan in 2008 as Group Controller, with responsibility for financial reporting and compliance, strategic planning and management of Givaudan’s business development process. He was appointed Chief Financial Officer effective January 1, 2017. Mr. Hallam began his career in the UK working in various industries and positions. He moved to Switzerland in 1996 to join Serono in Geneva, where he held a number of positions of increasing responsibility including Financial Director for Manufacturing Operations, and in 2001 he was appointed Vice President, Corporate Finance. A UK and Swiss national, Mr. Hallam holds a degree in Accounting and Finance from the University of Manchester and is a member of the Chartered Institute of Management Accountants (CIMA).

Functioning

In principle, the Board of Directors meets at least five times a year. Additional meetings may be called with appropriate notice at any time to address the specific needs of the business. Non-executive Directors meet at least once a year in the absence of the Chief Executive Officer and the other executive Directors. Such meeting took place on January 24, 2023, at the occasion of which the general performance of the executive directors in relation to 2022 was discussed. The functioning of the Board of Directors is governed by the Articles of Association and the Charter, both available on the investor website. The Board of Directors met six times during the year 2022. In addition, the Board of Directors resolved on certain matters by way of written resolutions.# Major matters reviewed and discussed by the Board of Directors in 2022 were: Strategic business plan 2021-2025; Financial, overall performance and strategy of the group and its regions Americas, EMEA and Asia Pacific more specifically; Financial budget of the group related to financial year 2023; M&A projects; Corporate governance and remuneration matters; and Launch of the LTIP (including determination of list of participants and target setting thereto) and related LTIP share buy-back program.

Evaluation

With a view to improve its own effectiveness, the Board of Directors, under the direction of the chair of the Board of Directors and the chair of the Remuneration and Nomination Committee, will evaluate at least every two to three years its composition, its functioning, its information and interactions with management and the composition and functioning of the committees created by it. On October 11, 2022, the Board of Directors resolved to launch the board evaluation process by means of an online questionnaire. In its meeting of January 24, 2023, the Board of Directors collectively discussed the results of the board evaluation process. The Board of Directors concluded that its composition is in line with the required competencies and strategy of the group, and it is functioning well in terms of information sharing and interactions with management. The same applies to its committees. Enterprise risk assessment and human resources management, in particular, succession planning, talent development and retention were identified as increased focus areas for 2023.

Application of rules regarding conflicts of interest

Articles 7:96 and 7:97 of the BCCA regarding conflicts of interest were applied in the following situations:

At the meeting of March 8, 2022, the Board of Directors had to approve the target setting approach under the LTIP as well as the payment of the variable compensation under the Company's variable compensation scheme 2021, whereby the Group CEO and the Group CFO (as permanent representative of Cloudworks BV) have each declared to have a direct or indirect interest of a financial nature that may conflict with the decision of the board of directors and with the interest of the Company in accordance with article 7:96 of the BCCA. The minutes of the meeting mention the following in this respect:

“It is noted that the remuneration and nomination committee recommends to the board of directors to approve the target setting approach under the long-term management incentive plan (the “LTIP”), whereby the Group CEO and the Group CFO (as permanent representative of Cloudworks BV) have each declared to have a direct or indirect interest of a financial nature that may conflict with the decision of the board of directors and with the interest of the Company in accordance with article 7:96 of the Code of Companies and Associations. The Group CEO and the Group CFO (as permanent representative of Cloudworks BV) (the "Conflicted Directors") are included on the list of participants to the LTIP as previously approved by the board of directors in its meeting of 25 November 2021, whereby their and the Company's interests may not be entirely aligned. The financial consequences of the approval of the LTIP target setting approach for the Conflicted Directors consist of the obligation for the Company to pay to these Conflicted Directors the associated amount of awards provided under the LTIP in the event the aforesaid LTIP targets are satisfied. In addition, it is noted that the remuneration and nomination committee recommends to the board of directors to approve the payment of the variable compensation under the Variable Compensation System 2021 (the “VCS 2021”), whereby the Conflicted Directors have each declared to have a direct or indirect interest of a financial nature that may conflict with the decision of the board of directors and with the interest of the Company in accordance with article 7:96 of the Code of Companies and Associations. The financial consequences of the approval of the pay-out of the variable compensation under the VCS 2021 for the Conflicted Directors consist of the obligation for the Company to pay these Conflicted Directors their variable compensation under the VCS 2021, which they are eligible to receive in relation to their performance in 2021. However, the participation of Conflicted Directors to the LTIP in accordance with its rules (including the LTIP target setting approach) and the payment of their variable compensation under the VCS 2021 is important to the strategic and financial management as well as the further development of the Company and the wider Azelis group. The terms of the LTIP (including the target-setting approach) and the VCS 2021 are at arm’s length. For these reasons, the board of directors believes that the proposed approval of the LTIP target-setting approach as well as the payment of the variable compensation under the VCS 2021 is in the interest of the Company and is therefore justified.”

At the meeting of May 3, 2022, the Board of Directors discussed, amongst other items, the salary/compensation increases of the Executive Committee, whereby the Group CEO and Group CFO (as permanent representative of Cloudworks BV) have each declared to have a direct or indirect interest of a financial nature that may conflict with the decision of the Board of Directors and with the interest of the Company in accordance with article 7:96 of the BCCA. The minutes of the meeting mention the following in this respect:

“It is noted that the remuneration and nomination committee – as discussed in its meeting of 7 March 2022 - recommends to the board of directors to approve the salary/compensation increases of the Executive Committee, whereby the Group CEO and the Group CFO (as permanent representative of Cloudworks BV) have each declared to have a direct or indirect interest of a financial nature that may conflict with the decision of the board of directors and with the interest of the Company in accordance with article 7:96 of the Code of Companies and Associations. The Group CEO and the Group CFO (as permanent representative of Cloudworks BV) (the "Conflicted Directors") are both eligible to receive a salary/compensation increase, whereby their and the Company's interests may not be entirely aligned. The financial consequences of the approval of the salary/compensation increase for the Conflicted Directors consist of the obligation for the Company to pay to these Conflicted Directors an increased salary/compensation. However, the salary/compensation increase for the Conflicted Directors is important to the strategic and financial management as well as the further development of the Company and the wider Azelis group. The terms of the salary/compensation increases are at arm’s length. For these reasons, the board of directors believes that the proposed approval of salary/compensation increases are in the interest of the Company and is therefore justified.”

At the meeting of August 2, 2022, the Board of Directors had to approve an additional remuneration of the chair of both the Remuneration and Nomination Committee as well as the Audit and Risk Committee, whereby Mr. Antonio Trius and Mr. Jürgen Buchsteiner have each declared to have a direct or indirect interest of a financial nature that may conflict with the decision of the Board of Directors and with the interest of the Company, in accordance with article 7:96 of the BCCA. The minutes of the meeting mention the following in this respect:

It is noted that the remuneration and nomination committee – as discussed in its meeting of 2 August 2022 - recommends to the board of directors to approve an additional remuneration of the chair of both the remuneration and nomination committee as well as the audit and risk committee, whereby the Chair and Mr. Jürgen Buchsteiner have each declared to have a direct or indirect interest of a financial nature that may conflict with the decision of the board of directors and with the interest of the Company in accordance with article 7:96 of the Code of Companies and Associations. The Chair and Mr. Jürgen Buchsteiner (the "Conflicted Directors") are both eligible to receive such compensation increase in their respective capacity of chair of the remuneration and nomination committee and the audit and risk committee, whereby their and the Company's interests may not be entirely aligned. The financial consequences of the approval of the compensation increase for the Conflicted Directors consist of the obligation for the Company to pay to these Conflicted Directors an increased compensation. However, the compensation increase for the Conflicted Directors is important for the retention of professional capabilities to steer the committees within the board of directors and to ensure a strong corporate governance of the Company. The compensation increase is at arm’s length. For these reasons, the board of directors believes that the proposed approval of the above compensation increase is in the interest of the Company and is therefore justified."

At the meeting of October 11, 2022, the Board of Directors discussed, amongst other items, an inflation-driven salary increase, whereby the Group CEO and Group CFO (as permanent representative of Cloudworks BV) have each declared to have a direct or indirect interest of a financial nature that may conflict with the decision of the Board of Directors and with the interest of the Company in accordance with article 7:96 of the BCCA.# Corporate Governance Report

Board of Directors

The minutes of the meeting mention the following in this respect: “It is noted that the remuneration and nomination committee – as discussed in its meeting of 10 October 2022 - recommends to the board of directors to approve a group-wide inflation driven salary increase, whereby the Group CEO and Group CFO have declared to have a direct or indirect interest of a financial nature that may conflict with the decision of the board of directors and with the interest of the Company in accordance with article 7:96 of the Code of Companies and Associations. The Group CEO and Group CFO (as permanent representative of Cloudworks BV) (the "Conflicted Directors") are eligible to receive such salary compensation increase in their capacity of employee of Azelis Deutschland GmbH and consultant of the Company respectively, whereby their and the Company's interests may not be entirely aligned. The financial consequences of the approval of the group-wide inflation salary increase relative to the Conflicted Directors consist of the obligation for Azelis Deutschland GmbH (an indirect subsidiary of the Company) and the Company to pay to the Conflicted Directors an increased compensation. However, the compensation increase for the Conflicted Directors is important for the retention of professional capabilities as well as the strategic management of the Company and the wider Azelis group. The compensation increases are at arm’s length. For these reasons, the board of directors believes that the proposed approval of the abovementioned compensation increases is in the interest of the Company and is therefore justified.” Minutes still subject to approval by the Board of Directors.

Attendance

The attendance of the directors to the meetings of the Board of Directors during the year 2022 was as follows:

Name	Jan 21	Mar 8	May 3	June 13	Aug 2	Oct 11
Antonio Trius	Y	Y	Y	Y	Y	Y
Alexandra Brand	Y	Y	Y	Y	Y	Y
Jürgen Buchsteiner¹	Y	Y	N	Y	Y	N/A
Tom Hallam²	N/A	N/A	N/A	N/A	N/A	Y
Ipek Özsüer	Y	Y	Y	Y	Y	Y
Bert Janssens	Y	Y	Y	Y	Y	Y
Kristiaan Nieuwenburg	Y	Y	Y	Y	Y	Y
Hans Joachim Müller	Y	Y	Y	Y	Y	Y
Thijs Bakker³	Y	Y	Y	Y	Y	Y

¹ Mr. Jürgen Buchsteiner resigned on August 2, 2022.
² Mr. Tom Hallam was appointed by means of cooptation on August 2, 2022.
³ Mr. Thijs Bakker acts as permanent representative of Cloudworks BV.

In addition, the directors adopted unanimous written resolutions on 15 March 2022 and 14 November 2022 respectively.

Diversity

The Company strives for diversity within the Board of Directors, creating a mix of executive, non-executive and independent directors. In line with the Corporate Governance Code and the Charter, the composition of the Board of Directors has therefore been determined to gather a wide range of competencies and expertise in the Company's areas of activity and ensures sufficient diversity of skills, background, nationality, age and gender. In particular, Azelis pursues a specific gender diversity policy with regard to the Executive Committee and senior management. Since 2021, Azelis has implemented its "Action 2025" sustainability strategy, which is aimed at generating long-term sustainable value for its stakeholders and ensuring that its operations have a positive impact on the environment and communities around the world. The sustainability strategy is based on four pillars: People, Products and Innovation, Governance and Environment. The specific competences and expertise that Azelis looks for in its directors include industry experience (specialty chemicals and food ingredients) combined with industry-relevant higher education degrees (e.g., university degree in Chemistry, Chemical Engineering, Food Technology, etc,) or outstanding functional expertise in the areas of strategic importance for the company (e.g. digital or sustainability).

Overall, out of the eleven members of the combined Board of Directors and Executive Committee on December 31, 2022, eight had relevant industry experience prior to joining Azelis as a member of the Executive Committee or the Board of Directors, having worked at such companies as Akzo Nobel, BASF, Bayer, Clariant, Givaudan, Cognis, Syngenta and Sued-Chemie. Three hold a Ph.D. in Chemistry and four have an MBA. Furthermore, from January 1, 2027, the BCCA requires that at least one-third of the directors are of the opposite gender of the gender of the majority of the directors. As of December 31, 2022, the Board of Directors included two female members: Ms. Alexandra Brand and Ms. Ipek Özsüer. The necessary attention is being paid to meet the gender composition requirement in the future. With regard to the diversity policy followed by the Azelis group, please refer to the section “Diversity and inclusion”.

Committees of the Board of Directors

The Board of Directors established two advisory committees responsible for assisting the Board of Directors and making recommendations in specific fields: the Audit and Risk Committee and the Remuneration and Nomination Committee. The terms of reference of these committees are primarily set out in the Charter.

The Audit and Risk Committee

Role and mission

In accordance with article 7:99 BCCA, the Audit and Risk Committee assists the Board of Directors in carrying out accounting, audit and internal control matters and exercising general supervision in a broad sense. The Audit and Risk Committee also reports regularly to the Board of Directors on the exercise of its duties identifying any matters where it considers that action or improvement is needed and making recommendations as regards the steps to be taken.

Composition

The Audit and Risk Committee consists of at least three directors, all of them being non-executive directors and one of them being an independent director. The members of the Audit and Risk Committee have a collective competence in the business activities of the Company.

On December 31, 2022, the Audit and Risk Committee was composed as follows:

Name	Age	Position	Member since	Mandate expires
Tom Hallam	56	Chair	2022	2025
Antonio Trius	67	Member	2021	2025
Bert Janssens	46	Member	2021	2025

On August 2, 2022, Mr. Tom Hallam was appointed as a member of the Audit and Risk Committee and the resignation of Mr. Jürgen Buchsteiner as a member of the Audit and Risk Committee was acknowledged. Mr. Tom Hallam has also replaced Mr. Buchsteiner as chair of the Audit and Risk Committee. Based on various previous financial positions held by Mr. Tom Hallam as financial director, group controller and chief financial officer, the Company considers that Mr. Tom Hallam has the necessary competence in accounting and auditing as required by the BCCA.

Functioning

In principle, the Audit and Risk Committee meets at least four times a year and whenever it deems necessary in order to carry out its duties. In 2022, the Audit and Risk Committee met four times. Major matters reviewed and discussed by the Audit and Risk Committee in 2022 were: Accounting and financial reporting; Audit plan, activities and findings; Internal audit; Enterprise risk management; IT security; and Legal & compliance.

The Remuneration and Nomination Committee

Role and mission

The Remuneration and Nomination Committee has an advisory role and prepares the decisions of the Board of Directors regarding remuneration and the appointment of Directors and members of the Executive Committee. The Remuneration and Nomination Committee also reports regularly to the Board of Directors on the exercise of its duties.

In accordance with Article 7:89/1 of the BCCA and the Corporate Governance Code, Azelis Group NV has established a remuneration policy applicable to the remuneration of Board members (executive and non-executive directors) and members of the Executive Committee. Azelis' remuneration policy has been applicable since the financial year starting on January 1, 2022. It was approved by its Remuneration and Nomination Committee on March 7, 2022, and its Board of Directors on March 8, 2022, and subsequently approved and ratified by the general shareholders’ meeting on June 9, 2022. The policy is intended to be applicable for four years from the date on which approved by the Board of Directors, unless the Remuneration Committee seeks approval for material changes before then.

Composition

The Remuneration and Nomination Committee consists of at least three directors, all of them being non-executive directors and two of them being independent directors. The members of the Remuneration and Nomination Committee have the necessary expertise in terms of remuneration policy.

On December 31, 2022, the Remuneration and Nomination Committee was composed as follows:

Name	Age	Position	Member since	Mandate expires
Antonio Trius	67	Chair	2021	2025
Alexandra Brand	51	Member	2021	2025
Bert Janssens	46	Member	2021	2025

Functioning

In principle, the Remuneration and Nomination Committee meets at least twice a year and whenever it deems necessary in order to carry out its duties. The Remuneration and Nomination Committee met five times in 2022. Major matters reviewed and discussed by the Remuneration and Nomination Committee in 2022 were: Remuneration Policy and Report; Compensation General Management Team; LTIP; Short-term variable compensation scheme; Appointments, internal moves and retirements (including Board of Directors, Executive Committee and GMT); Succession planning; and Employee attrition rate.

Executive Committee

General

The Executive Committee was established by decision of the Board of Directors on September 4, 2021, with effect on September 21, 2021. It is an informal executive committee within the meaning of Article 3:6, §3, last sentence of the BCCA. It does not constitute a management board within the meaning of Article 7:104 of the BCCA (directieraad / conseil de direction).# Executive Committee

The Executive Committee exercises the duties delegated to it by the Board of Directors and the members of the Executive Committee have the specific duties assigned to them by the Chief Executive Officer, under the ultimate supervision of the Board of Directors. On September 4, 2021, the Board of Directors resolved to delegate certain powers to the Executive Committee with effect on September 21, 2021.

Composition

The Executive Committee is composed of the Chief Executive Officer, who chairs the Executive Committee, and the other members of the Executive Committee. The Chief Executive Officer is appointed and removed by the Board of Directors, upon the advice of the Remuneration and Nomination Committee, and reports directly to the Board of Directors. The other members of the Executive Committee are appointed and removed by the Board of Directors, upon the advice of the Chief Executive Officer and the Remuneration and Nomination Committee.

On December 31, 2022, the Executive Committee consisted of the following members:

Name	Age	Position
Hans Joachim Müller	63	Chief Executive Officer
Thijs Bakker1	48	Chief Financial Officer
Frank Bergonzi	61	CEO & President, Americas
Anna Bertona2	55	CEO & President, EMEA
Sertac Sürür	52	CEO & President, Asia-Pacific

Mr. Thijs Bakker acts as permanent representative of Cloudworks BV. Anna Bertona provides services through AU-R-ORA BV.

The initial members of the Executive Committee have been appointed by the Board of Directors on September 4, 2021, with effect on September 21, 2021, for a period of four years. The CEO & President Asia Pacific, Laurent Nataf, resigned on September 2, 2022, and ceased to be a member of the Executive Committee effective November 21, 2022. In August 2022, in consideration of the recommendation of the Remuneration and Nomination Committee, Mr. Sertac Sürür – as successor of Mr. Laurent Nataf as CEO & President, Asia-Pacific – was appointed as a member of the Executive Committee with effect as from September 1, 2022 until September 20, 2025. Ms. Ilse Van den Brandt serves as secretary to the Executive Committee.

Chief Executive Officer

The Chief Executive Officer is responsible for the day-to-day management of the Company. He/she may be granted additional well-defined powers by the Board of Directors. They have direct operational responsibility for the Company and oversee the organization and day-to-day management of the Company's subsidiaries, affiliates and joint ventures. The Chief Executive Officer is responsible for the execution and management of the outcome of all of the Board of Directors' decisions.

On December 31, 2022, the Chief Executive Officer of the Company was Mr. Hans Joachim Müller. The Board of Directors also entrusted Mr. Müller with the powers of daily management of the Company in accordance with article 7:121 of the BCCA, with effect on September 21, 2021 and for the duration of his mandate as a member of the Executive Committee.

Curricula vitae

The following contains summaries of the curricula vitae of the members of the Executive Committee. For the curricula vitae of Thijs Bakker and Hans Joachim Müller, please see the section "Board of Directors" of this Corporate Governance Statement.

Frank Bergonzi

Frank Bergonzi joined Azelis in 2015. He was the President & CEO of KODA Distribution Group from 2012 and in 2015, following the acquisition of KDG Holdings, Inc. by Azelis, Mr. Bergonzi was appointed CEO & President Azelis Americas. Prior to that, Mr. Bergonzi was the Director of Corporate Distribution North America Chemicals and Plastics at BASF. Mr. Bergonzi served on the board of the National Association of Chemical Distributors and as chairman of the supplier advisory panel, in addition to his role as a board trustee of the Chemical Education Fund. He is also an active member in the Chemical Club of New England, the Society of Cosmetic Chemists, the American Coatings Association and the Drug, Chemical and Associated Trade. Mr. Bergonzi holds a BS in chemical engineering from the University of Connecticut.

Anna Bertona

Anna Bertona joined Azelis in 2013 as Group VP Strategic Planning & Implementation and was appointed Chief Strategy & Principal Officer in 2014. In 2016 she was appointed CEO & President Azelis EMEA. Prior to joining Azelis, Ms. Bertona worked in strategy consultancy, most recently as a partner within A.T. Kearney. Ms. Bertona holds a Master of Science in Industrial Design Engineering from the Delft University of Technology (the Netherlands), as well as an MBA from the Rotterdam School of Management.

Sertac Sürür

Sertac Sürür joined Azelis Turkey in 2015 as Managing Director. Reporting to CEO EMEA, he was appointed to generate turnaround in the company. From 2017 to 2019, based in Istanbul he worked for Azelis as Market Segment Director, Rubber &Plastics Additives. He has more than 24 years of experience in sales and management roles in the chemical industry within global companies like Azelis, DSM, Brenntag and Ravago. He was appointed in 2022 to the CEO APAC role. Mr. Sürür holds a Bachelor Degree in Chemical Engineering from the Istanbul Technical University as well as an MBA from the National University in San Diego.

Remuneration report

Remuneration policy

In accordance with Article 7:89/1 of the Belgian Code of Companies and Associations and the 2020 edition of the Belgian Code of Corporate Governance, Azelis Group NV has established a remuneration policy applicable to the remuneration of Board members (executive and non-executive directors) and members of the Executive Committee.

Azelis' remuneration policy has been applicable since the financial year starting on January 1, 2022, and has been approved by its Remuneration and Nomination Committee on March 7, 2022, and its Board of Directors on March 8, 2022. The Azelis Board of Directors submitted Azelis' remuneration policy for approval to the annual general shareholders' meeting on June 9, 2022, and the remuneration policy was approved. The policy is intended to be applicable for four years from the approval date by the Board of Directors, unless the Remuneration and Nomination Committee seeks approval for material changes before then. The remuneration policy shall be made public on Azelis' website and shall remain accessible at least during the period in which the remuneration policy is applicable.

The objectives of the remuneration policy are to:

Support the achievement of the Azelis business strategy by enabling the recruitment, retention and motivation of Directors and Executive Committee members of the necessary caliber to execute strategy for the benefit of all stakeholders.
Balance the need to create long-term sustainable growth in company value while keeping a strong focus on short-term financial results to drive appropriate behaviors.
Provide competitive remuneration levels relative to companies similar in size, sector and complexity and that also reflect the level of responsibility and competency of the individual.
Provide for higher remuneration levels only if stretching group, divisional and personal performance targets are achieved that have a clear link to strategy, and sustainable value creation.
Align the interests of Directors and Executive Committee members with shareholders by partly rewarding Executive Committee members in shares and requiring both Directors and Executive Committee members to build up and maintain a shareholding.
Support the achievement of environmental, societal, and governance-related objectives by linking remuneration policy and remuneration levels to stakeholder interests.
Align with best practices and market practices while providing an appropriate level of flexibility to ensure the Remuneration and Nomination Committee can respond to business needs as they arise.

Remuneration of the Board of Directors

Azelis Group NV's directors are remunerated in line with the Remuneration Policy of Azelis Group NV. The remuneration of the non-executive directors takes account of their role as a board member or chair of the board and their associated responsibilities and time commitment. Each independent non-executive director receives a fixed annual fee wholly in cash with expenses reasonably associated with attending board meetings reimbursed by the company. There is no automatic adjustment of the fixed fee level. Independent non-executive directors do not receive any variable remuneration linked to results or other performance criteria.

The remuneration of the independent non-executive directors was last reviewed by the Shareholders' Meeting dated September 10, 2021 and defined as follows:

Director fee: annual fee of €70,000 gross; and
Additional fee applicable to the chair of the Board of Directors: annual fee of €30,000 gross.

In addition to these fees, in a meeting dated August 2, 2022, the Board of Directors of Azelis Group NV – upon recommendation of the Remuneration and Nomination Committee - decided to grant an additional annual fee equal to €20,000 gross to the chairs of the Remuneration and Nomination Committee and Audit and Risk Committee. This additional annual fee took effect from August 2022 and was calculated on a pro rata basis in 2022. This decision was taken to align the remuneration of the independent non-executive directors with best practices and market practices and is in accordance with Section 4 (Governance - Deviations from the Remuneration policy) of the Remuneration Policy of Azelis Group NV. The Remuneration Policy of Azelis Group NV will be updated to include this additional fee applicable to the chairs of the Remuneration and Nomination Committee and Audit and Risk Committee and it is envisaged that Azelis' Board of Directors will submit the amended policy to the annual general shareholders' meeting to be held on June 8, 2023 for approval. The additional fees applicable to the chair of the Board of Directors and the chairs of the Remuneration and Nomination Committee and Audit and Risk Committee can be cumulated. There is no additional fee for committee membership.# Remuneration Report

The non-executive directors do not receive any part of their remuneration in the form of shares. This is a deviation from the recommendations set out in article 7.6 of the Corporate Governance Code. The interests of the non-executive members of the Board of Directors are currently considered to be sufficiently oriented to the creation of long-term value for the Company even if they do not receive any part of their remuneration in the form of shares. However, independent non-executive directors are required to build up and maintain a shareholding equal to the value of their fixed annual fee within a period of five years. This requirement is effective January 1st, 2022, and must be reached within five years. Non-independent non-executive directors are not remunerated for their director role. Executive directors (CEO and CFO) are not remunerated for their director role.

Remuneration of the members of the Board of Directors of Azelis Group NV in 2022

Name	Position	Remuneration (in €)
Antonio Trius	Independent Non-Executive Director (Chair)	108,331
Jürgen Buchsteiner¹	Independent Non-Executive Director	40,831
Alexandra Brand	Independent Non-Executive Director	70,000
Ipek Özsüer	Independent Non-Executive Director	70,000
Thomas Hallam²	Independent Non-Executive Director	37,500
Bert Janssens	Non-Executive Director	-
Kristiaan Nieuwenburg	Non-Executive Director	-
Hans Joachim Müller	Executive Director (CEO)	-
Thijs Bakker	Executive Director (CFO)	-
Total remuneration³		326,662

¹ Mr. Jürgen Buchsteiner resigned on August 2, 2022
² Mr. Thomas Hallam was appointed on August 2, 2022
³ Only Independent Non-Executive Directors are remunerated

Remuneration of the Executive Committee

Remuneration structure

The Board of Directors, upon recommendation of the Remuneration and Nomination Committee, determines the level and structure of the remuneration of the CEO, CFO and other Executive Committee members. Levels of remuneration are reviewed regularly to assess their competitiveness compared to companies similar in size, sector and complexity along with the pay and conditions of Azelis employees. There is no automatic adjustment of remuneration levels and the remuneration policy seeks to closely align the interests of the CEO, CFO and other Executive Committee members with shareholders by rewarding partly in company shares.

The total remuneration packages for CEO, CFO and other Executive Committee members consist of the following key elements:

Base pay

Base pay is set at a level to attract and retain qualified and competent individuals considering levels of pay for similar roles in similar companies, the responsibilities of the role, the experience of the individual, and their performance in the role. The Remuneration and Nomination Committee may propose an increase in base pay and a reason for the proposal annually or otherwise to the Board of Directors. Any increase shall ordinarily be in line with increases for employees in the country where the executive is based, although it may be higher to reflect, for example, a change in role, responsibilities or individual performance.

Benefits

Azelis provides benefits consistent with local market practices that are necessary to recruit and retain qualified and competent individuals. Executive Committee members, apart from those operating via a Management Company or on a self-employed basis, are eligible for various benefits. Benefits offered may include, but are not limited to, the following:

Company car with fuel card or car allowance
Health or hospitalization insurance
Pension insurance

Variable remuneration: Short-term variable pay

Short-term variable pay supports key annual priorities in line with the overall company strategy, with a strong focus on short-term financial performance and rewarding behavior that supports long-term sustainable value creation. Short-term variable remuneration is contingent on collective performance targets (at group and regional levels for positions with a regional scope) and individual performance targets. Group and regional targets are all quantitative and financially oriented. Actual short-term variable remuneration is determined based on achievement against performance targets set at the beginning of each financial year.

CEO and CFO receive short-term incentives in cash with a target opportunity of 100% of the annual base salary (CEO) and 85% of the base pay (CFO), capped at 150% of the target. The other Executive Committee members receive short-term incentives in cash with a target opportunity ranging from 50% to 100% of the annual base salary, capped at 150% of the target. This cap applies as from the short-term incentive (STI) plan 2022. This cash bonus depends upon the achievement of Group EBITA (with a focus on organic growth), cash flow and individual performance. Wherever relevant, regional EBITA and working capital will also be taken into account. The pay-out is zero if threshold performance is not met.

The STI plan consists of the following performance components:

Group Performance is measured in terms of group EBITA and net debt, actual vs. budget. The group performance has a dual role: it determines the total amount of short-term variable remuneration to be paid out and distributed among all participants, it is one of the three STI components whose payout percentage is the baseline for the calculation of all STI plan components.
Organizational Performance Region (Americas, EMEA, or Asia Pacific) is measured in terms of regional EBITA and working capital, actual vs. budget.
Individual Performance is measured against non-financial, quantitative objectives according to three levels of target achievement (target not achieved, partially achieved, or fully achieved).

Eligible STI plan participants	Group performance - weight	Regional performance - weight¹	Individual performance - weight
CEO, CFO	80%	20%	-
Other Executive Committee members	40%	30%	20%
	20%	10%	10%

¹ GWC: Regions: EMEA, Americas and Asia Pacific.
² GWC: gross working capital.

The Board of Directors is responsible for approving performance targets and reviewing performance against them, considering any feedback from the Remuneration and Nomination Committee and in the case of the CFO and each other member of the Executive Committee, the views and recommendations of the CEO. Short-term variable remuneration is payable wholly in cash before the end of the second quarter of the financial year following the performance year, once audited results are available and subject to final approval of the Remuneration and Nomination Committee. There is no deferral of payment.

Variable remuneration: Long-term variable pay

Long-term variable pay supports the policy objective of creating long-term sustainable growth in value by rewarding for the achievement of long-term performance goals and aligning the interests of the CEO, CFO and other Executive Committee members with those of shareholders by rewarding in Azelis shares.

Until December 31, 2021, Azelis did not operate a long-term incentive plan (“LTIP”). The current and former non-executive directors and members of the Executive Committee, together with certain other employees or consultants of the group, held shares of Akita Topco S.à r.l. and became shareholders of Azelis Group NV immediately prior to the closing of the initial public offering in September 2021. On September 10, 2021, an extraordinary Shareholders' Meeting of the Company approved the proposal to set up a long-term incentive plan for employees, directors, members of the Executive Committee or self-employed managers of a group member.

Effective January 1, 2022, the CEO, CFO, and other Executive Committee members are eligible to participate in the new LTIP which involves the grant of an award of a specified number of Azelis shares. The awards will be subject to a vesting period of at least three years, i.e., the shares will only be delivered if performance targets are met measured over a three-year performance period. The Board determines the targets and assessment of performance against them on recommendation by the Remuneration Committee. Although a target number of performance shares is awarded at grant (target award), at the end of the three-year performance period the target number of performance shares to be delivered may be adjusted up or down depending on the actual level of performance achieved.

The target award for the CEO, CFO, and other Executive Committee members is calculated by reference to a percentage of their base pay, whereas the maximum award opportunity is capped at 150% of the target award. The target awards for the CEO, CFO, and other Executive Committee members are set out in the table “Amount of equity-based remuneration granted to the CEO, CFO and other Members of the Executive Committee in 2022”.

Performance will be measured against objectively measurable key performance indicators (both financial and non-financial) that reflect the performance of Azelis as a whole. Three metrics are operated in the LTIP 2022 (performance period: 01/01/2022 - 31/12/2024):

Total Shareholder Return (TSR) relative to a peer group consisting of 20 companies, Azelis not included – 50% weighting. The peer group consists of direct competitors of Azelis (companies active in the distribution of specialty chemicals and food ingredients) and other distribution companies, including companies operating in more than one sector, across several geographies to reflect the international footprint of Azelis.
Organic EBITA growth – 35% weighting
ESG Metric; Scope 1 and Scope 2 CO2 reduction – 15% weighting

At the end of the three-year performance period, outcomes are evaluated and assessed against the targets. Targets are communicated at the time of awards and will broadly vest as follows:

Below threshold: The number of shares vesting shall be zero for below-threshold performance.## Amount of compensation paid and other benefits granted directly or indirectly to the Chief Executive Officer, the Chief Financial Officer and the other Members of the Executive Committee in 2022

Name, position	Single year	Multiple years	Pension	Other benefits1	Total direct compensation	Extraordinary items	Benefits	Total remuneration	Proportion of fixed and variable remuneration
Dr. Hans Joachim Müller, CEO	589,528	884,293	NA	1,473,821	435,5564	83,639	1,993,015	F 33.8% V 66.2%
Thijs Bakker, CFO5	510,000	650,250	NA	1,160,250	1,160,250	F 44.0% V 56.0%
Other Members of the Executive Committee6	1,396,013	1,923,349	NA	3,319,362	879,1767	22,934	596,281	4,817,753	F 41.8% V 58.2%
Total	2,495,541	3,457,892	-	5,953,433	1,314,731	22,934	679,920	7,971,019
Total of which fixed remuneration									3,198,396 40.1%
Total of which variable remuneration									4,772,623 59.9%

1 Long-term benefits (e.g. death-in-service, disability insurance, medical benefits, private health insurance, etc.) & benefits in kind (e.g. company vehicle, meal vouchers, other vouchers, tax assistance, tuition / school fees, club / association fees, etc.)
2 STI based on 2022 results paid in 2023.
3 Effective 1 January 2022 the CEO, CFO and other Executive Committee members are eligible to participate in a long-term incentive plan ("LTIP") which involves the grant of an award, i.e. the grant of a specified number of Azelis performance shares calculated by reference to a percentage of the base pay ("target award"). The performance shares granted in 2022 are subject to a vesting period of three years, i.e. the shares will only be delivered if the defined performance targets are met which are measured over a three-year performance period. The maximum award opportunity upon vesting is capped at 150% of the target award. No performance shares vested in 2022.
4 In the course of 2022, 3i made the residual payment of the management incentive plan (MIP) bonus in relation to the sale of Azelis to Apax in 2015 (the "3i MIP bonus"). This payment was the residual award resulting from the settlement of two litigations, which allowed the liquidator to distribute the available funds to management and the shareholders of Atlas Holding SA. Among the beneficiaries of the 3i MIP bonus was the CEO, Dr. Hans Joachim Müller.
5 Mr. Thijs Bakker is self-employed and operates via his management company.
6 a. The CEO & President Asia Pacific, Laurent Nataf, resigned on September 2, 2022 and was placed on garden leave effective November 21, 2022 until the termination date of his employment with Azelis on February 28, 2023 upon continued payment of his salary and other fixed allowances. In addition to (a) the lump sum compensation granted to him for waiver and release, (b) the post-termination non-compete compensation and (c) the 3i MIP bonus - referenced under points (7.a), (7.b) and (7.c) of this table - Mr. Nataf is considered as an eligible scheme participant under the Short-Term Incentive plan for the entire performance year 2022. The Board of Directors of Azelis Group NV has considered Mr. Nataf to be a good leaver under rule 10.2(a)(v) of the LTI plan, and the 14,158 conditional shares awarded to him in the calendar year 2022 for the performance period 2022 to 2024 shall vest in accordance with the rules of the LTI Plan.
b. Ms. Bertona is self-employed and operates via her management company.
c. Mr. Sertaç Sürür served as Managing Director Turkey until 31 August 2022 before being promoted and appointed to the role of CEO & President Asia Pacific and member of the Executive Committee effective 1 September 2022 in consideration of the recommendation of the Remuneration and Nomination committee. The amount of compensation set out in this table is related to the period 1 September 2022 to 31 December 2022. The compensation paid to Mr. Sürür in the period 1 January 2022 to 31 August 2022 in his capacity of Managing Director Turkey is not reported in this table.
7 a. Following his resignation, the CEO & President Asia Pacific, Laurent Nataf, was granted a lump sum compensation for waiver and release equal to SGD 300,000 gross, payable in March 2023.
b. Furthermore, Mr. Nataf is bound by a post-termination non-compete clause that has a term of twelve months after the effective termination of the employment agreement on February 28, 2023. Azelis shall not waive these post-termination non-compete provisions and will pay to Mr. Nataf a total compensation of SGD 500,953.13 gross in 12 equal monthly instalments of SGD 41,746.09 gross in the period March 2023 to February 2024.
c. Mr. Nataf's moving costs (EUR 29,691) following his resignation from Azelis were borne by the company.
d. In the course of 2022, 3i made the residual payment of the management incentive plan (MIP) bonus in relation to the sale of Azelis to Apax in 2015 (the "3i MIP bonus"). This payment was the residual award resulting from the settlement of two litigations, which allowed the liquidator to distribute the available funds to management and the shareholders of Atlas Holding SA. Among the beneficiaries of the 3i MIP bonus were the CEO & President EMEA, Anna Bertona, and the CEO & President Asia Pacific, Laurent Nataf. Ms. Bertona's 3i MIP bonus shall be paid in February 2023.
e. Within the framework of his appointment to the role of CEO & President Asia Pacific, Mr. Sürür received a one-off relocation lump sum equal to SGD 25,000 gross.
f. The CEO & President Americas, Frank Bergonzi, received a long service award of USD 1,321.87 gross in September 2022 for 10 years of service.

Short-term incentive granted for performance year 2022 to the Chief Executive Officer, the Chief Financial Officer and the other Members of the Executive Committee

Name, position	Target STI percentage 2022 (% of gross base pay)	Performance metrics & target weights	Payout by performance metric and total payout (currency: €)
		Weight group performance metric 80%	Group performance metric - payout 707,434
Dr. Hans Joachim Müller, CEO	100%	Weight individual performance metric 20%	Individual performance metric - payout 176,859
		Total payout	884,293
		STI payout - actual vs target	150%
Thijs Bakker, CFO	85%	Weight group performance metric 80%	Group performance metric - payout 520,200
		Weight individual performance metric 20%	Individual performance metric - payout 130,050
		Total payout	650,250
		STI payout - actual vs target	150%
Other members of the Executive Committee1	90.5%2	Weight group performance metric 40%	Group performance metric - payout 769,340
		Weight regional performance metric EBITA 30% GWC 10%	Regional performance metric - payout (EBITA and GWC combined) 769,340
		Weight individual performance metric 20%	Individual performance metric - payout 384,670
		Total payout	1,923,349
		STI payout - actual vs target	150%

1 As stipulated in the Termination Agreement dated 3 October 2022, clause 4.3(b), and in the letter dated 21 November 2022 ('Garden Leave'), points 4(a) and 4(b), the outgoing CEO & President Asia Pacific (Laurent Nataf) is considered as an eligible scheme participant under the Short-Term Incentive Plan for the entire performance year 2022, notwithstanding that he was placed on garden leave effective 21 November 2022 and that he will not be employed by Azelis at the time of the STI payout.
2 CEO & President Americas:100%, CEO & President EMEA:85%, CEO & President APAC (Laurent Nataf):100%, CEO & President APAC (Sertaç Sürür):4 months at 50%.

Amount of equity-based remuneration granted to the CEO, CFO and other Members of the Executive Committee in 2022

In 2022, 97,642 performance shares equal to a market value of €2,043,167 at grant were awarded to the Chief Executive Officer, Chief Financial Officer, and other members of the Executive Committee. No performance shares vested in 2022, hence no share-based payment was made to the Chief Executive Officer, Chief Financial Officer and other members of the Executive Committee.

Name, Position	Characteristics of the share-based plan	Information re.
	Between threshold and target: The number of shares vesting shall increase on a pro-rata basis from zero to the number of shares granted.	At-target performance: The number of shares awarded at the date of the grant will fully vest.
	Above-target performance: The number of shares awarded at the date of grant that vest will increase on a pro-rata basis and in accordance with realized performance, with a maximum of 150% in case of maximum performance.	Should long-term variable remuneration be payable, vesting date for the awards is expected to be before the end of the financial year's second quarter following the performance period's end once audited results are available and subject to final approval of the Board, on recommendation by the Remuneration and Nomination Committee.
	During the performance period, participants have no right to receive dividends in respect of the performance shares.	However, should the relevant performance targets be achieved, then the Board, on recommendation from the Remuneration and Nomination Committee may determine that the number of shares due to the participant is increased by an amount equivalent to the dividends the performance shares would have received during the performance period.
	This may also be made as a cash payment.	Pension Azelis provides market-competitive pension plans in line with local market practice and those available to employees.
	Executive Committee members, apart from those operating via a Management Company or on a self-employed basis, are entitled to receive pension benefits.
---	---	---

Dr. Hans Joachim Müller, CEO	Performance shares	LTIP 2022
Thijs Bakker, CFO	Performance shares	LTIP 2022
Frank Bergonzi, CEO & President Americas	Performance shares	LTIP 2022
Anna Bertona, CEO & President EMEA	Performance shares	LTIP 2022
Laurent Nataf, CEO & President APAC	Performance shares	LTIP 2022
Sertaç Sürür, CEO & President APAC1	Performance shares	LTIP 2022
Total

The target award, i.e. the value of the performance shares granted to the CEO & President APAC, Sertaç Sürür, is equal to 25% of his base pay. This target award is related to his participation to the LTIP 2022 (performance period: 01/01/2022 - 31/12/2024) in the role of Managing Director Turkey. Mr. Sürür's target award for the LTIP 2023 (performance period: 01/01/2023 - 31/12/2025) will be 100% of his base pay.

Other quantitative information

Comparative information on the evolution of compensation and company performance 2018-2022

The remuneration of the independent non-executive directors (‘Remuneration of the Board’) does not include travel and other expenses reimbursed by Azelis Group NV for meetings related to their Board and Board Committee mandates. The ratio between the highest remuneration of a member of the Executive Committee (CEO) and the lowest remuneration of an employee of Azelis Group NV in 2022 is 38.6 (in full-time equivalent) (2021: 28.7). The lowest remuneration of an employee of Azelis Group NV is calculated in the same manner and according to the same criteria used to calculate the remuneration of the CEO.

in €	2018	2019	2020	2021	2022
Remuneration of the Board	203,617¹	257,500²	240,000³	280,800⁴	326,662⁵
Remuneration of the CEO, Dr. Hans Joachim Müller	1,309,271	1,093,272	1,415,687	1,734,501	1,993,015
Remuneration of the CFO, Thijs Bakker	680,675	646,606	882,314	1,236,224	1,160,250
Remuneration of other Members of the Executive Committee⁶	2,898,281	2,527,990	3,147,825	4,179,438	4,817,753⁷
Total remuneration	5,091,844	4,525,368	5,685,826	7,430,962	8,297,681

Azelis performance (in thousands of €, unless stated otherwise)	2018	2019	2020	2021	2022
Adjusted EBITDA⁸	137,326	178,475	207,175	287,824	484,717
Adjusted EBITA⁸	133,493	163,340	189,553	267,922	456,872
Net profit	-	21,551	47,978	71,012	70,225
Group Target Achievement: degree of target achievement⁹	106.3%	99.6%	106.2%	110.8%	112.2¹⁰
Working capital actual vs. budget: degree of target achievement¹¹
EMEA	105.5%	101.1%	101.3%	99.4%	100.0%
Americas	105.2%	105.8%	91.6%	94.7%	109.3%
Asia-Pacific	96.8%	87.2%	92.1%	103.6%	93.7%

Independent non-executive Directors 2018: Antonio Trius (12 m.), Mario Preissler (10 m.), Michael Roney (10.3 m.), Kees Verhaar (2 m.), Jürgen Buchsteiner (2 m.).
Independent non-executive Directors 2019:Antonio Trius (12 m.), Kees Verhaar (6 m.), Jürgen Buchsteiner (12 m.), Alexandra Brand (9 m.).
Independent non-executive Directors 2020:Antonio Trius (12 m.), Jürgen Buchsteiner (12 m.), Alexandra Brand (12 m.).
Independent non-executive Directors 2021:Antonio Trius (12 m.), Jürgen Buchsteiner (12 m.), Alexandra Brand (12 m.), Ipek Özsüer (6 m.: the relevant Director fee of EUR 40,800 was invoiced at the end of December 2021 and not included in the Annual Report 2021)
Independent non-executive Directors 2022: Antonio Trius (12 m.), Jürgen Buchsteiner (7 m.), Alexandra Brand (12 m.), Ipek Ozsuer (12 m.), Thomas Hallam (5 m.).
Other Members of the Executive Committee 2018 - 2021: F. Bergonzi (CEO & President Americas), A. Bertona (CEO & President EMEA), L. Nataf (CEO & President APAC).
Other Members of the Executive Committee 2022:F. Bergonzi (CEO & President Americas), A. Bertona (CEO & President EMEA), L. Nataf (CEO & President APAC), S. Sürür (CEO & President APAC).
In 2018 and 2019 the STI bonus was based on Adjusted EBITDA performance. As from 2020, driven by the application of IFRS 16, Adjusted EBITA is the main performance measure for the STI bonus.
KPI of the short-term incentive (STI) plan for senior management.
Metric definition 2018 - 2021: Actual Group EBITA (w/o variable comp.) + ((budget net debt minus actual net debt)/11) vs. budget EBITA, adjusted for year end restatement (previous year), (w/o variable comp.)
KPI of the short-term incentive (STI) plan for senior management.
Metric definition 2022:Actual Group EBITA (w/o variable comp.) + ((budget net debt minus actual net debt)/4.75) vs. budget EBITA, adjusted for year end restatement (previous year), (w/o variable comp.)
KPI of the short-term incentive (STI) plan for senior management

Other information

Minimum number of shares to be held

In line with provision 7.9 of the 2020 Belgian Code on Corporate Governance, the Board has set a minimum threshold of shares to be held by the CEO, CFO, and each other member of the Executive Committee as follows:

The CEO is required to build and maintain a holding of shares equal in value to 200% of base pay;
Each other member of the Executive Committee is required to build and maintain a holding of shares equal in value to 100% of base pay.

This requirement is effective as of January 1, 2022, and must be reached over a period of five years. It will apply to all current and future appointments to the Executive Committee.

Severance pay

All agreements with the CEO, CFO, and other Executive Committee members are for an indefinite period. On termination of the employment of the CEO, CFO, or another member of the Executive Committee, the termination terms are determined as follows:

The service agreement of the Chief Executive Officer may be terminated by either party observing a notice period of twelve months to the end of a calendar month. In addition, in case of termination by Azelis, the Chief Executive Officer is entitled to receive a redundancy payment in the amount of one month's gross base pay per each completed year of service upon the effective termination of the service agreement, provided Azelis has not terminated the agreement by cause. The side agreement to the service agreement of the Chief Executive Officer, pursuant to which the Chief Executive Officer is also providing services at the premises of Azelis Corporate Services NV in Belgium, can be terminated by Azelis at the end of a month with a notice period of one month. Termination of the service agreement of the Chief Executive Officer does not automatically result in the termination of the side agreement.

The CEO & President Americas, a member of the Executive Committee, is an at-will employee who, in case of termination by Azelis without "cause" or by the employee for "good reason," subject to the execution of a release of claims in favor of Azelis, will be entitled to receive accrued and vested benefits under Azelis' employee benefit plans, continued pay for a period of 24 months following termination, payable in accordance with the Azelis' payroll practices, and a pro rata annual bonus for the year of termination based on actual results for such year.

The CEO & President Asia Pacific, Laurent Nataf, resigned on September 2, 2022 and ceased to be a member of the Executive Committee effective November 21, 2022. Effective the same date he left on garden leave until the termination date of his employment with Azelis on February 28, 2023. In case of termination by Azelis without "cause," he would have been entitled to a notice period of six months and severance pay equal to the annual gross base salary, and to an amount equal to the indemnité légale de licenciement as calculated in accordance with applicable French law.

The employment agreement of Sertaç Sürür who was appointed CEO & President Asia Pacific and member of the Executive Committee replacing Laurent Nataf, may be terminated by either party observing a notice period of six months. In case notice of termination is given by Azelis for reasons other than “cause,” Azelis is entitled to terminate the employment of the CEO & President Asia Pacific immediately without prior notice by paying him an indemnity equal to the severance indemnity as calculated in accordance with the applicable laws of Singapore.

The other members of the Executive Committee (i.e., the Chief Financial Officer and the CEO & President EMEA) are subject to a management agreement that may be terminated by either party observing a notice period of six months. In case of termination by Azelis with immediate effect, they are entitled to receive a lump sum termination fee equal to six months of the fixed fee paid pursuant to their management agreement.

Restrictive covenants

The members of the Executive Committee are each bound by post-termination non-compete clauses.The Chief Executive Officer of the group is bound by a post-termination non-compete clause that has a term of twelve months after effective termination of the service agreement for all countries where Azelis carries out its business. During this twelve-month period, the Chief Executive Officer is entitled to compensation in the amount of one-twelfth of 50% of his annual base gross salary per month, unless the application of the non-compete clause is waived by Azelis giving six months' notice at any point during the employment agreement, in which case the obligation to pay compensation would end six months after the declaration of the waiver.

The outgoing CEO & President Asia Pacific, Laurent Nataf, who resigned on September 2, 2022, is bound by a post-termination non-compete clause that has a term of twelve months after effective termination of the employment agreement on February 28, 2023, for all countries where Azelis carries out its business in the Asia Pacific region. During this twelve-month period, the CEO & President Asia Pacific is entitled to compensation in the amount of one-twelfth of 50% of his annual base gross salary and selected allowances for each month of the duration of the non-compete period. Azelis communicated to Laurent Nataf its intention not to waive the post-termination non-compete clause.

The new CEO & President Asia Pacific, Sertaç Sürür, is bound by a post-termination non-compete clause that has a term of twelve months after effective termination of the employment agreement for all countries where Azelis carries out its business in the Asia Pacific region. During this twelve-month period, the CEO & President Asia Pacific is entitled to compensation in the amount of one-twelfth of 60% of his last annual base gross salary for each month of the duration of the non-compete period, unless the application of the non-compete clause is waived by Azelis, which waiver would take immediate effect, at any point during the term of the employment agreement and for fifteen days following the notice of termination of the employment agreement.

The term of the post-termination non-compete period for the CEO & President Americas is 24 months after effective termination of his service agreement, while The Chief Financial Officer and the CEO & President EMEA are each bound by post-termination non-compete clauses that have a term of twelve months after effective termination of their management agreement.

In respect to variable pay, to receive short-term variable pay, participants must provide services to the group and not be serving notice. Good and bad leaver vesting provisions consistent with market practice are in place for the LTI plan.

Possibility to reclaim variable remuneration

The Company has the right to claim, during a period of three years from the date of the payment, the reimbursement of undue amounts paid on the basis of erroneous results that were subsequently adjusted or corrected.

Info on any deviation from the remuneration policy

By law, certain restrictions apply to the remuneration of the Chief Executive Officer and the members of the Executive Committee. Variable remuneration can only be paid to the Chief Executive Officer and the members of the Executive Committee if the performance criteria explicitly mentioned in the contractual or other provisions governing the relationship were met in the relevant period.

If the variable remuneration constitutes more than 25% of the total annual remuneration package, at least 25% of the variable remuneration must relate to pre-determined and objectively measurable performance criteria deferred over a minimum period of two years, and at least another 25% must relate to such criteria deferred over a minimum period of three years (except where the Articles of Association provide otherwise or the Shareholders' Meeting expressly approves an exception) (refer to article 7:91 of the BCCA). The Articles of Association authorize the Company to deviate from the rule, as allowed under the BCCA.

Pursuant to the Corporate Governance Charter recommendation, short-term variable remuneration is subject to a cap.

Auditor

The external audit of Azelis Group NV's statutory and consolidated annual accounts has been entrusted to PwC Bedrijfsrevisoren BV / Reviseurs d'Entreprises SRL, Culliganlaan 5, B-1831 Diegem, Belgium, represented by Peter Van den Eynde BV, with permanent representative, Peter Van den Eynde.

The statutory auditor is appointed by the Shareholders' Meeting for renewable terms of three years. The current mandate of PwC Bedrijfsrevisoren BV / Reviseurs d’Entreprises SRL is to act as the statutory auditor of the Company for the three years ending on the date of the Shareholders' Meeting convened to deliberate on the annual accounts as of and for the year ending December 31, 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.

Base fees for auditing the annual financial statements of Azelis Group NV and its subsidiaries are determined by the Shareholders' Meeting after review and approval by the company’s Audit and Risk Committee and Board of Directors. For details on the audit and non-audit fees paid to the auditor in the year ended 31 December, 2022, we refer to note External services and other expenses to the consolidated financial statements of the Company.

Risk management

Management of risks and opportunities

The Azelis group faces various risks that may affect among others, turnover, earnings and receivables, the simultaneous loss of key suppliers, and the breach of safety, health, environmental and quality (SHEQ) regulations. Azelis is managing these strategic risks via an integrated Control & Risk Management Framework. Risk management is a fundamental feature of the Azelis business model that strengthens our performance. Our Enterprise Risk Management (ERM) framework includes a global risk management approach, fully integrated with our strategy and operations. This risk-based approach offers a comprehensive view on effectively aligning the interests of our business with those of our investors and society.

Risks analysis methodology

Risk governance

The Azelis Board of Directors assesses the risks facing the business and determines our risk appetite. This process is conducted with the active participation and input of the Azelis Executive Committee. Once identified, risks are assessed, and mitigation measures are implemented for risks which are considered a priority. The Executive Committee considers the adequacy of measures in place to mitigate and manage risks and assigns responsibility to designated managers (‘risk owners’) for implementation of these measures. Internal Audit tests the effectiveness of risk mitigation measures and findings are reported to the Audit Committee so that progress and identified risks can be monitored objectively and independently from management. Internal audit interacts with external audit on a periodic basis to discuss and share audit plans and audit results. Quarterly meetings with integrated reporting on our compliance and risk programs are held between our Group CEO, Group CFO and Chief Compliance Officer. The Chair of our Audit and Risk Committee and our Group CFO act as sponsors for all matters relating to audit, data security and compliance.

Risk management framework

The Azelis risk management framework is a five-step cycle, focusing on timely risk identification, systematic assessments, and adequate response in line with the company’s risk appetite. Azelis integrates a broad array of risk factors directly into the ERM process, resulting in a robust and comprehensive risk management approach. This approach to risk management increases our effectiveness and efficiency and ensures the sustainable growth of our business. The Azelis risk assessment process follows the COSO ERM framework which defines essential risk components, discusses key principles, and concepts, and provides clear direction and guidance for ERM. Its purpose is to focus management’s attention on the most important threats and opportunities, to lay the groundwork for risk response and to make sure that risk levels are managed within defined tolerance thresholds without being subject to excessive controls which could result in Azelis missing out on opportunities.

Risk oversight

To further support our ERM framework, we use a customized governance risk and compliance (GRC) platform which consists of audit management software designed for risk management, from planning, risk assessments and fieldwork to analytics, issue management and reporting. GRC enables the reporting and mitigation of risks using two approaches:

Control self-assessment (CSA) process: at a local entity level, taking a bottom-up approach, potential risks and action plan mitigations are put in place should risks materialize at a local level.
ERM process: at group level, we use ERM processes to apply a top-down approach to identifying and assessing any future global risks to the company that could potentially be overlooked in the bottom-up evaluation.

2022 Risk assessment process

Management across all our regions were asked to score 41 priority risks in the latest Azelis risk register. Risks were scored based on impact and likelihood. Each available “impact” score, from major to minor, was quantified under financial, reputation, legal/regulatory and customer/principal impact. Each available “likelihood” score, from high to low, was quantified as potential number of occurrences or percentage likelihood of the risk materializing. Each risk was categorized under one of four categories: financial, strategic, operational and legal/compliance.# Internal control over financial reporting

Azelis internal control over financial reporting (ICFR) forms an integral part of operations, which also includes risk assessments, policies, procedures, and compliance. At group level, Group Controlling manages the reporting process to ensure completeness and accuracy of financial reporting and compliance with IFRS requirements. Financial reporting and variance analysis to budget is prepared monthly at a local entity level and reviewed at each level of responsibility, from regional Finance and Accounting Directors to Group Controlling, to Group CFO levels. Monthly reporting is prepared in our local ERP systems and consolidated in our group reporting platform. In addition to monthly financial reporting, local controllers perform cash flow analysis, balance sheet reconciliations, business trend analyses, update forecasts, and have monthly update calls with Group Controlling to discuss variance analysis. Continuously striving to promote operational excellence throughout the group, in 2022 Azelis introduced a new version of its ERP platform to further promote harmonization in procedures and operating models. The foundation for Azelis ICFR is defined by the Azelis Finance Manual, policies and procedures and enforced by the organizational structure with clear lines of responsibility and authority. Azelis systems for information and communication aim to provide the market with relevant, reliable, and correct information concerning the development of the group and its financial position. Financial information is issued regularly in the form of: Full-year reports and interim reports published as press releases. The Annual Report. Press releases on all matters which could have a significant effect on the share price. Presentations and telephone conferences for financial analysts, investors, and media representatives on the day of publication of full-year and quarterly results.

Financial risks

Risk	Risk Description	Risk Mitigation
Working capital	Risk of Azelis' working capital needs increasing due to inefficient inventory management or increased credit risk, resulting in being unable to finance its working capital in the current conditions.	Azelis continually manages its working capital performance through standardized processes such as punctual invoicing, regular reviews of customer credit limits, maintaining an asset light business model and demand driven inventory management which is particularly important given recent supply chain disruptions.
Fluctuations in exchange rates¹	Azelis is exposed to risks associated with fluctuations in currency exchange rates and with its currency hedging, which could result in increases to Azelis' costs.	Interest on borrowings is denominated in the currency of the borrowing. Generally, borrowings are denominated in currencies that match the cash flows generated by the underlying operations, providing a natural hedge. In respect of other monetary assets and liabilities denominated in foreign currencies, the company ensures that its net exposure is kept to an acceptable level by buying or selling foreign currencies at spot rates, or performing forward transactions, when necessary to address short-term imbalances.
Interest rate risk¹	Azelis faces risks in relation to the financing of its future capital needs, including interest rate risks.	The interest rate risk of syndicated external debt is covered through two CAP agreements that will expire in March 2025, and protect the Company against an increase of interest rates above defined levels. The Company monitors the evolution of interest rates and the outstanding debt to have adequate protection, adapting if necessary, the current interest hedging strategy. Also refer to Note 4 to the consolidated financial statements for quantitative insight

Strategic risks

Given ongoing political events in Russia and Ukraine there are a number of risk considerations given immediate priority, as part of our ‘macroeconomic environment’ risk mitigations. Firstly, we are supporting our employees throughout the affected regions with a focus on employee safety. As this situation unfolds further, we will continue to closely monitor potential impacts and implications such as supply chain disruption, commodity prices, cyber threat exposure and impact of sanctions. We have contingencies in place for these scenarios. In 2022, together Russia and Ukraine accounted for around 1% of our total revenue.

Risk	Risk Description	Risk Mitigation
Macro-economic environment	Change to economic or political context with negative impact, due to trade tensions, global liquidity crunch, or regime change.	Updated contingency plans for 2022. Continued focus on operational costs and complexity reduction. Geo-political assessment as part of investment decisions. Identify M&A targets which further strengthen our geographical and segment diversification.
Market risk	Loss of relationship with principals and customers and market share due to accelerated consolidation among suppliers and distributors.	Expanding and maintaining close relationships with principals and customers. Focus on creating long term relationships. Bi-annual principal satisfaction survey to measure satisfaction of top global principals.
Mergers and acquisitions	Failure to achieve synergies. Inability to streamline integration efforts with the pace of M&A activity.	Focus on value creating acquisitions, with alignment on our strategic mandates and organizational culture. All acquisitions are subject to Board approval. Detailed post-merger integration process in place.

Operational risks

Risk	Risk Description	Risk Mitigation
Information security	Cybersecurity attacks and other threats to IT infrastructure resulting in IT systems failure and business interruption.	In 2022 Azelis retained the international ISO27001 ‘information security management’ certificate. Continued consolidation of ERP system to increase standardization of digital landscape. Embedding a cybersecurity culture (mandatory training, awareness creation). Centralized infrastructure and security team and improved cyber resilience through Open Systems roll out. Continually adding to incoming email preventative checks.
Human resources	Reliance on a single source of competence for key positions. Plus failure to attract and retain high potential employees and talent.	Azelis provides a collaborative and entrepreneurial working environment and international career opportunities. Talent review, talent pools and succession planning processes configured and ‘live’ in our Human Capital Management System. Focus on training to facilitate knowledge pooling and transfer. Defined minimum training standards plus training catalogues developed for the main job functions.
Business continuity	Inadequate crisis management plan leading to lack of coordination of actions and mitigation plans in the event of a crisis (major safety incidents, office shutdown, ERP interruption, pandemic, ...).	Crisis management communication policy in place. Continuous monitoring of pandemic including updating of forecasts. Per Action 2025, target is to have crisis management and business continuity plans in place for 100% of Azelis sites.

Legal and compliance risks

Risk	Risk Description	Risk Mitigation
Business and trade regulations	Failure to (timely) comply with specific product related standards within highly regulated businesses and industries (e.g. quality standards linked to pharma/food regulations).	Azelis has developed product stewardship policies and has a network of SHEQ managers who ensure compliance with the various regulations to which the group is subject. Azelis has invested heavily in IT systems backed up by robust procedures to ensure the efficient extraction, recording and maintenance of information required to meet the complex regulatory framework in which it trades.
Governance	Inability to appropriately and timely address and respond to a rapidly increasing regulatory framework and initiatives in multiple jurisdictions.	In addition to the Board of Directors, the governance model includes formal remuneration and audit committees. Each of those committees consist of non-executive members of the Board. Internal auditor reports directly and independently to the Audit Committee. All employees have agreed to Azelis Code of Conduct and that agreement is verified annually.

Statement of Board of Directors

To the best of their knowledge the Board of Directors of Azelis Group NV declares, on behalf and for the account of the Company, that:

The consolidated financial statements, prepared in accordance with the "International Financial Reporting Standards" (IFRS) as adopted by the European Union give a true and fair view of the assets, liabilities, financial position and profit or loss of the company and the entities included in the consolidation scope; and
The report of the Board of Directors related to the consolidated financial statements gives a true and fair view of the development and performance of the business and the position of the company and the entities included in the consolidation scope, together with a description of the main risks and uncertainties they face.

Belgium, Antwerp, 1 March 2023

For the Board of Directors,

Auditor's report

Statutory Auditor's report

Report to the general shareholders' meeting of Azelis Group NV on the consolidated accounts for the year ended 31 December 2022

We present to you our statutory auditor’s report in the context of our statutory audit of the consolidated accounts of Azelis Group NV (the “Company”) and its subsidiaries (jointly “the Group”).# Report of the Statutory Auditor on the Consolidated Accounts

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. 10 June 2021, following the proposal formulated by the board of directors. 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 2 consecutive years.

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 2022, the consolidated income statement, the consolidated statement of other comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, and notes to the consolidated financial statements, 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 4,976,725 thousand and a profit for the year of EUR 218,879 thousand.

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 2022, 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.

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.

| KEY AUDIT MATTER

Impairment test of Goodwill and Intangible assets (Refer to note 2.5 and 15 in the Group financial statements)

Azelis grows its business organically and through acquisitions. The Group has recorded on its balance sheet as at 31 December 2022 goodwill of EUR 2.174 million and intangible assets for an amount EUR 1.170 million, of which EUR 827 million is related to distribution rights and EUR 317 million is related to the Azelis brand name.

In 2022, goodwill and intangible assets increased with EUR 537 million, mainly due to several acquisitions which were made in the course of 2022.

Goodwill is allocated to the three Cash Generating Units (‘CGU’) identified by the Group as described in note 15.1. The Group is required to perform an annual impairment assessment on goodwill and intangible assets with indefinite useful lives. The definite lived intangible assets are reviewed for any impairment triggers at each reporting period.

The carrying value of these assets are contingent on future cash flows and there is a risk that the assets will be impaired if these cash flows do not meet the Group’s expectations. The impairment reviews performed by the Group contain a number of significant judgements and estimates, including the pre-tax Weighted Average Cost of Capital, terminal growth rate and Adjusted EBITA margin.

This is an area of focus for our audit due to the significant value of these assets on the balance sheet and the inherent judgement by the Directors and management about the future results of the business in assessing these assets for impairment.

Our audit procedures included the following:

We assessed the appropriateness of the CGU’s identified in view of management structure and internal reporting to CODM.
We reconciled goodwill and intangible assets balances to the consolidated financial statements, and reconciled the goodwill of each new acquisition made throughout the period to the related purchase price allocation. We verified that these were allocated to the correct CGU.
We obtained the Group’s impairment analysis and assessed the adequacy of the valuation methodology;
We checked the mathematical accuracy of management’s model and supporting calculations;
We reconciled input data to supporting evidence, such as the business plan being approved by the Board of Directors’, and considered the reasonableness of these budgets by comparing them to prior year’s assumptions;
We performed a sensitivity analysis and identified the most significant management estimates as being the pre-tax Weighted Average Cost of Capital, terminal growth rate and Adjusted EBITA margin.
As part of our sensitivity analysis, we performed our independent calculations to quantify the downside to management’s models required to result in impairment.
We considered the reasonableness of management’s key assumptions based on (i) the current and past performance of each cash-generating unit (ii) the consistency with external market and industry data, (iii) whether these assumptions were consistent with evidence obtained in other areas of the audit and (iv) analysis of sensitivities in the Company’s discounted cash flow model.
We involved our own valuation experts to support our procedures.
We obtained management’s review for impairment triggers of the distribution rights.
We considered the appropriateness and sufficiency of related disclosures in the consolidated financial statements.

Based on the evidence obtained from our audit, we consider the valuation method and the underlying assumptions to be an appropriate basis for the impairment testing of goodwill and of intangible assets.

| KEY AUDIT MATTER | HOW OUR AUDIT ADDRESSED THE KEY AUDIT MATTER # 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 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 judgement 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. 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 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 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 and the other information included in the annual 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 Global Reporting Initiative framework. 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 framework 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.

European Uniform Electronic Format (ESEF)

We have also verified, in accordance with the draft standard on the verification of the compliance of the financial statements with the European Uniform Electronic Format (hereinafter “ESEF”), the compliance of the ESEF format 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 “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. 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 Azelis Group NV per 31 December 2022 comply 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.# Consolidated financial statements

Consolidated income statement (in thousands of €)

	Note	2022	2021
Revenue	8	4,109,102	2,827,295
Other operating income	9	15,795	8,470
Total income		4,124,897	2,835,765
Costs for goods and consumables	10	-3,164,155	-2,185,622
Gross profit		960,742	650,143
Employee benefits expenses	11	-284,952	-232,215
External services and other expenses	12	-202,632	-150,731
Depreciation of property, plant and equipment	16	-27,845	-19,901
Amortization of intangible assets	15	-56,887	-39,483
Operating profit / loss (-)		388,426	207,813
Financial income	13	6,008	731
Financial expenses	13	-79,823	-88,278
Net financial expense		-73,815	-87,547
Share of result of associates	17	59	-68
Profit / loss (-) before tax		314,670	120,198
Income tax income / expense (-)	14	-95,791	-49,973
Net profit / loss (-) for the period from continuing operations		218,879	70,225
Attributable to:
Equity holders of the parent		213,193	67,756
Non-controlling interests		5,686	2,469
Net profit / loss (-) for the period		218,879	70,225

in € in €

	Note	2022	2021
Basic earnings per share	21.1	0.91	0.29
Diluted earnings per share	21.1	0.91	0.29

The notes are an integral part of these consolidated financial statements

Consolidated statement of other comprehensive income (in thousands of €)

	Note	2022	2021
Net profit / loss (-) for the period		218,879	70,225
Items that may be reclassified subsequently to profit or loss
Exchange differences on translation of foreign operations	21.5	-5,951	91,496
Items that will not be reclassified subsequently to profit or loss
Actuarial gains / losses (-) on employee benefits	11	570	1,113
Income tax relating to these items		-71	-259
Total other comprehensive income		-5,452	92,350
Total comprehensive income for the period		213,427	162,575
Attributable to:
Equity holders of the parent		209,149	159,356
Non-controlling interests	26.4	4,278	3,219
Total comprehensive income for the period		213,427	162,575

The notes are an integral part of these consolidated financial statements.

Consolidated statement of financial position

The notes are an integral part of these consolidated financial statements.

(in thousands of €)

	Note	2022	2021
Assets
Goodwill	15	2,174,256	1,803,266
Intangible assets	15	1,170,486	1,004,258
Property, plant and equipment	16.1	57,884	53,008
Right of Use assets	16.2	96,982	65,582
Investments in associates	17	235	180
Other financial assets	22	11,758	1,355
Deferred tax assets	14	20,605	10,482
Total non-current assets		3,532,206	2,938,131
Inventories	18	627,735	467,473
Trade and other receivables	19	538,381	428,950
Income tax receivables	14	9,963	4,432
Other financial assets		280	1,522
Cash and cash equivalents	20	268,160	141,293
Total current assets		1,444,519	1,043,670
Total assets		4,976,725	3,981,801
Equity and liabilities
Share capital	21	5,680,000	5,680,000
Reserves		-3,701,231	-3,617,020
Retained earnings		192,570	96,817
Unappropriated result		213,193	67,756
Issued capital and reserves attributable to owners of the parent		2,384,532	2,227,553
Non-controlling interests		55,145	23,792
Total equity		2,439,677	2,251,345
Loans and borrowings	22	1,178,394	840,030
Lease obligations	22.1.2	81,168	54,078
Employee benefit obligations	11	8,525	8,822
Provisions	23	4,597	4,127
Other non-current liabilities	24	98,264	9,655
Deferred tax liabilities	14	190,755	135,315
Total non-current liabilities		1,561,703	1,052,027
Bank overdrafts	20	30,412	40,524
Loans and borrowings	22	125,323	62,604
Lease obligations	22.1.2	20,390	15,200
Provisions	23	3,544	1,981
Income tax payables	14	23,989	17,046
Trade and other payables	24	771,687	541,074
Total current liabilities		975,345	678,429
Total liabilities		2,537,048	1,730,456
Total equity and liabilities		4,976,725	3,981,801

Consolidated statement of cash flows (in thousands of €)

	Note	2022	2021
Cash flows from operating activities
Net profit / loss (-) for the period		218,879	70,225
Adjustments for:
Depreciation, amortization and impairment expenses	15/16	84,733	59,384
Net financial expense	13	73,815	87,547
Cost of share-based payment		839	-
Expenses related to IPO included in Net profit / loss for the period		-	8,360
Income tax income / expense	14	95,791	49,973
Share of result of associates	17	-59	68
Change in inventories	18	-65,751	-101,373
Change in trade and other receivables and other investments	19	27,194	-47,901
Change in trade and other payables	24	22,340	80,395
Change in provisions	23	1,140	-1,226
Cash flow from operating activities		458,921	205,452
Income tax paid		-90,327	-43,540
Net cash flow from operating activities		368,594	161,912
Cash flow from investing activities
Acquisition of property, plant and equipment and intangible assets	15/16	-18,443	-18,288
Acquisition of subsidiaries, net of cash acquired	7	-553,665	-633,883
Net cash flow from investing activities		-572,108	-652,171
Cash flows from financing activities
Payments of lease obligation	22.1.2	-22,795	-17,263
Proceeds from shareholders for issue of equity	21	-	930,000
Dividend payment to shareholders of the group	21	-7,012	-
Purchase of treasury shares	21	-2,999	-
Expenses related to capital increase (part through equity)		-	-50,525
Expenses related to capital increase (part of operating income)		-	-8,360
Interest paid		-41,175	-72,016
Proceeds from loans and borrowings	22	640,621	909,653
Repayments of loans and borrowings	22	-217,377	-1,231,342
Transaction costs related to loans and borrowings	22	-2,193	-8,338
Other cash flows from financing activities		-6,031	-
Net cash flow from financing activities		341,039	451,809
Net (decrease) increase in cash and cash equivalents		137,525	-38,450
Effect of exchange rate fluctuations on cash held		-546	-477
Cash and cash equivalents minus Bank overdraft at beginning of the period	20	100,769	139,696
Cash and cash equivalents minus Bank overdraft at December 31	20	237,748	100,769

The notes are an integral part of these consolidated financial statements.

Consolidated statement of changes in equity (in thousands of €)

	Share capital	Share premium	Other reserves	Reserves available for distribution	Translation reserve	Retained earnings	Un-appropriated result	Total equity holders of the parent	Non-controlling interests	Total equity
Balance as of December 31, 2020	11,752	1,189,405	-	-	-80,958	24,669	70,962	1,215,829	2,072	1,217,901
Appropriation of result prior year	-	-	-	-	-	-70,962	70,962	-	-	-
Capital increase	50,000	50,000	-	-	-	-	-	50,000	-	50,000
Written put options on non-controlling interests	-	-	-	-	-	-27,107	-	-27,107	-27,107	-27,107
Net profit / loss (-) for the period	-	-	-	-	-	67,756	67,756	67,756	2,469	70,225
Other comprehensive income	-	-	-	-	90,746	854	-	91,600	750	92,350
Other movements	-	-332	332	-	-	-	-	-	18,501	18,501
Total other transactions	50,000	49,668	332	-	90,746	41,663	138,728	182,249	21,720	203,969
Incorporation of founders' share	62	-	-	-	-	-	-	62	-	62
Contribution in kind of Akita Topco S.à r.l.	5,200,000	-	-	-	-	-	-	5,200,000	-	5,200,000
Transfer of share capital to reserves available for distribution	-400,000	400,000	-	-	-	-	-	-	-	-
Cancellation of founders' share	-62	-	-	-	-	-	-	-62	-	-62
Contribution of net proceeds from the Primary Tranche of the IPO	-	880,000	-	-	-	-	-	880,000	-	880,000
IPO expenses attributed to the Primary Tranche of the IPO	-	-50,525	-	-	-	-	-	-50,525	-	-50,525
Capital reorganisation under common control	-11,752	-1,239,405	-3,948,843	-	-	-	-	-5,200,000	-	-5,200,000
Total transactions with the owners	5,668,248	-259,405	-3,948,843	-	-	-	-	829,475	-	829,475
Balance as of December 31, 2021	5,680,000	-	-4,026,807	400,000	9,788	96,817	67,756	2,227,553	23,792	2,251,345
Appropriation of result prior year	-	-	-	-	-	-67,756	67,756	-	-	-
Written put options on non-controlling interests	-	-	-	-	-	-70,496	-	-70,496	-70,496	-70,496
Share-based payment	-	-	-	-	-	839	-	839	-	839
Treasury shares	-	-	-	-	-	-2,999	-	-2,999	-	-2,999
Dividend attributed to shareholders of the group	-	-	-	-	-	-7,012	-	-7,012	-	-7,012
Adjustments hyperinflation	-	-	-	-	-	27,498	-	27,498	-	27,498
Net profit / loss (-) for the period	-	-	-	-	-	213,193	213,193	213,193	5,686	218,879
Other comprehensive income	-	-	-	-	-4,543	499	-	-4,044	-1,408	-5,452
Other movements	-	-	27,075	-	-	-	-	27,075	-	27,075
Balance as of December 31, 2022	5,680,000	-	-4,099,463	392,988	5,245	192,570	213,193	2,384,532	55,145	2,439,677

The notes are an integral part of these consolidated financial statements.

General notes to the consolidated financial statements

1 General

Azelis Group NV (the “Company”), formerly named Akita Midco 1 NV, was incorporated on 10th of June 2021 and is domiciled in Belgium. The address of the Company is Posthofbrug 12 box 6, 2600 Antwerp, Belgium. The Company's principal place of business is Belgium. The Company is registered in Belgium under the number 0769.555.240. The main shareholder of Azelis Group NV is Akita I S.à r.l., 26A Boulevard Royal, 2449 Luxembourg (hereinafter referred to as “EQT”). Based on the most recent transparency declaration filed by EQT, the ultimate controlling party of Akita I S.à.r.l. is EQT VIII Collect SCSp which is not controlled by any of its shareholders but is managed by EQT VIII (GP) SCS. The consolidated financial statements of the Company for the period ended December 31, 2022 comprise the Company and its subsidiaries (together referred to as the “group” or as “Azelis” being the trade name of the group) and the group’s interest in associates. The group is primarily involved in the distribution of speciality chemical products used in the Life Sciences (Personal Care, Home Care & Industrial Cleaning, Pharmaceuticals & Healthcare, Food & Nutrition, Animal Nutrition, Agricultural & Environmental Solutions) and Industrial Chemicals industry (CASE, Advanced Materials & Additives, Lubricants & Metalworking Fluids, Electronics, Essentials and Fine Chemicals, Textiles Leather & Paper). Azelis is well positioned to face challenges across the globe, on the basis of its diversified specialty chemicals portfolio, but also based on its asset-light business model. Azelis' cost base, other than payroll and some other predominantly fixed costs, is mostly variable.Azelis has multiple cost levers that can be activated to mitigate the impact of downturns, which enables it to react rapidly to downturns or economic crises and furthers the group's resilience. Recent challenges that Azelis has faced successfully include for example the impact of the Covid-19 pandemic, but also the currently ongoing uncertain economic and geopolitical circumstances. With its laboratories, the Company is well positioned to support its customers with many new formulations that are necessitated as a result of changing conditions. Azelis is helping its customers and its principals to respond to climate-changes, and to achieve their sustainability goals by, for example, promoting sustainable products and product development, encouraging sustainable formulation creation in its laboratories, and assessing its principals and implementing corporate social responsibility due diligence procedures when selecting and onboarding principals. Alongside sustainability, innovation and digitalization form the pillars of Azelis’ strategy for creating value. Investments in innovation centers, application laboratories, e-Labs, principal portals, and customer portals are helping to accelerate the supply of sustainable products.

2 Summary of significant accounting policies

The consolidated financial statements for the period ended December 31, 2022, were authorized for issue by the Board of Directors on 1 March 2023 and will be submitted for approval to the Shareholders' Meeting to be held on 8 June 2023.

New accounting policies

The consolidated financial statements have been prepared in accordance with the International Financial Reporting Standards as adopted in the European Union (IFRS). The group has consistently applied the accounting policies as set out below to all periods presented in these consolidated financial statements. Changes to the accounting policies in the current year are limited to the changes in IFRS below and are applied starting as per 1st January 2022.

Endorsement status of the new standards as of December 31, 2022

The following amendments to standards are mandatory for the first time for the financial year beginning 1 January 2022 and have been endorsed by the European Union. They have been implemented by the group without significant impact on the financial statements:

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 (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.

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 authorized for issue at the date the amendment is issued).

The following new standard and amendments have been issued, are not mandatory for the first time for the financial year beginning 1 January 2022 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.

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 (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 amendments have been issued, but are not mandatory for the first time for the financial year beginning 1 January 2022 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 01/01/2024), 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;
- Clarify how conditions with which an entity must comply within 12 months after the reporting period, such as covenants, affect the corresponding liability’s classification.# Amendments to IFRS 16 Leases: Lease Liability in a Sale and Leaseback (effective 1 January 2024)

The amendments explain how an entity accounts for a sale and leaseback after the date of the transaction, specifically where some or all the lease payments are variable lease payments that do not depend on an index or rate. They state that, in subsequently measuring the lease liability, the seller-lessee determines ‘lease payments’ and ‘revised lease payments’ in a way that does not result in the seller-lessee recognizing any amount of the gain or loss that relates to the right of use it retains. Any gains and losses relating to the full or partial termination of a lease continue to be recognised when they occur as these relate to the right of use terminated and not the right of use retained.

European Single Electronic Format ("ESEF")

This annual report is required to be published in the European Single Electronic Format, as determined by and according to the requirements set out in the Commission Delegated Regulation (EU) 2019/815 of December 17, 2018, supplementing Directive 2004/109/EC. The PDF version of the annual report is not ESEF compliant and has been solely prepared for ease of use of readers. The group's official reporting package in ESEF can be found on the group's website.

Capital reorganization under common control

In anticipation of the group's Initial Public Offering on Euronext Brussels, effective 21 September 2021, the Company has undergone a capital reorganization under common control, in relation to its IPO and the related share transactions amongst the group's shareholders and entities. Under the capital reorganization under common control, the predecessor value method has been applied. As a consequence, comparative information presented in the Azelis Group NV consolidated financial statements partly represents the information of Azelis Holding S.à r.l. for prior periods, as the legal life of Azelis Group NV as a company has started on 10 June 2021. As such, prior period profit and loss, cash flows and equity represent those of Azelis Holding S.à r.l. for the periods before 10 June 2021.

Initial Public Offering and listing on Euronext Brussels

The Company and its shareholders have proceeded to an IPO (Primary Tranche) and Listing (Secondary Tranche) on Euronext Brussels, effective 21 September 2021. During the IPO a total of 59,242,577 shares was sold, of which 33,846,153 were new shares and 25,396,424 existing shares, at an offer price of €26 per share, totaling proceeds of €1,540 million. On 1 October 2021, the over-allotment option was settled and an additional tranche of 8,886,386 shares was sold by the existing shareholders, increasing total shares sold to 68,128,963 and total proceeds to €1,771 million. The total gross proceeds for Azelis Group NV resulting from the new shares sold were approximately €880 million, recognized as a capital increase in equity. The Company has incurred a total of €58.9 million transaction expenses, of which €50.5 million are incremental costs related to the issuance of new shares and deducted from equity (other reserves), and of which €8.4 million are related to the listing procedure and recognized as an expense.

Turkey hyperinflation

As of 2022, Turkey is categorized as a country with a three-year cumulative inflation rate greater than 100%, which is an indicator for hyperinflation. Also considering qualitative indicators, the Turkish economy is considered to be hyper-inflationary. As a consequence, as of 30 June 2022, IAS 29 Financial Reporting in Hyperinflationary Economies is applied for those entities whose functional currency is the Turkish Lira, retrospectively starting January 1, 2022. The application of IAS 29 has led to an increase in Azelis' equity of approx. €27.5 million, and a related increase that is mainly reflected in goodwill and intangible assets. As the majority of Azelis' operational activities in Turkey are settled in hard currencies (USD and EUR mainly), no material impact is observed in Azelis' income statement. The relevant price index used for the restatement of the financial statements of Azelis' Turkish subsidiaries is the consumer price index ("CPI") based on data of the Turkish Statistical Institute. Since end of 2020, the consumer price index has moved as follows:

Year (31st December)	Turkey CPI	Change (%)	EUR/TRL exchange rate
2020	5.0481	N/A	9.0079
2021	6.8695	36.08%	14.6823
2022	11.2845	64.27%	19.9349

Equity-settled share-based payment & treasury shares

In 2022, Azelis has launched a long-term incentive plan ("LTIP"), granting share awards to certain directors, employees and self-employed managers of the group. In accordance with IFRS 2, the LTIP qualifies as an equity-settled share-based payment transaction. To cover future obligations under the LTIP, Azelis has purchased treasury shares on Euronext Brussels for a total amount of €3.0 million.

Reclassifications

In 2022, Azelis has changed the presentation of its cash flow statement, solely moving the interests paid cash flows from the operating activities to the financing activities. Accordingly, the same change in presentation was executed for the comparative figures. Accordingly, interest paid of €41.2 million (2021: €72.0 million) is now presented in the financing activities. This change in presentation does not affect the consolidated statement of financial position, consolidated statement of profit or loss and other comprehensive income, consolidated statement of changes in equity and the notes to the consolidated financial statements. Azelis has executed this change in presentation because it considers interests paid to be costs of obtaining financial resources.

2.1 Financial period

The financial period is the calendar year starting as of January 1, 2022 and ending as of December 31, 2022 (further mentioned as 2022). The comparative period is reflecting the financial performance of the group starting January 1, 2021 and ending as of December 31, 2021.

2.2 Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and all entities controlled by the Company made up to December 31, 2022. All intra-group transactions, balances, income and expenses are eliminated on consolidation.

2.2.1 Subsidiaries

Subsidiaries are entities controlled by the Company. Control is achieved when the Company is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Specifically, the Company controls an investee if, and only if, the Company has:
* Power over the investee (i.e., existing rights to direct relevant activities);
* Exposure, or rights, to variable returns from its involvement in the investee; and
* The ability to use its power to affect the investee’s returns.

Generally, there is a presumption that having a majority of voting rights results in control. To support this presumption and when the group has less than a majority of the voting or similar rights of an investee, the group considers all relevant facts and circumstances in assessing whether it has power over an investee.

2.2.2 Non-controlling interests

Non-controlling interests in subsidiaries are identified separately from the group’s equity therein. The interests of non-controlling shareholders may be initially measured at fair value or at the non-controlling interests’ proportionate share of the fair value of the acquiree’s identifiable net assets. A choice of measurement is made on an acquisition-by-acquisition basis. For its current non-controlling interests in subsidiaries, the group has opted to measure at the proportionate share of the acquiree's identifiable net assets. Subsequent to acquisition, the carrying amount of non-controlling interests is the amount of those interests at initial recognition plus the non-controlling interests’ share of subsequent changes in equity. Total comprehensive income is attributed to non-controlling interests even if this results in the non-controlling interests having a deficit balance. A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction between shareholders.

2.2.3 Business combinations

Acquisitions of subsidiaries and businesses are accounted for using the acquisition method. The consideration transferred 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. Where applicable, the consideration for the acquisition includes any asset or liability resulting from a contingent consideration arrangement, measured at its acquisition-date fair value. Subsequent changes in such fair values are adjusted against the cost of acquisition where they qualify as measurement period adjustments. The acquiree’s identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition at the balance sheet are recognized at their fair value at the acquisition date, except for deferred tax assets or liabilities and liabilities and assets related to employee benefit arrangements. The difference between the fair value of the consideration transferred and the fair value of the identified assets, liabilities and contingent consideration is recorded as goodwill. If the fair value of the net assets acquired exceeds the aggregate consideration transferred, this purchase bargain is included in the profit or loss, after the group has re-assessed whether it has correctly identified all of the assets acquired and all of the liabilities assumed. Acquisition-related costs are recognized in profit or loss as incurred.# Notes to the Consolidated Financial Statements

2.2.3 Business Combinations

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, or additional assets or liabilities are recognized, to reflect new information obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the amounts recognized as of that date. The measurement period to finalize the valuations is subject to a maximum of one year after acquisition date.

2.2.4 Associates

Associates are entities over which the group has significant influence, but no control. Significant influence is the power to participate in the financial and operating policy decisions of the investee. Associates are accounted for under the equity method and are recognized initially at cost as adjusted for post-acquisition changes in the group’s share of the net assets of the associate. The group’s investment includes goodwill on acquisition, net of any accumulated impairment losses. The consolidated financial statements include the group’s share of the income and expense and the equity movements of the investments accounted within equity, after the alignment of the accounting policies to those of the group, from the day significant influence commences until the day significant influence ceases. When the group’s share of losses exceeds its interest in an equity accounted investee, the carrying amount of that interest (including any long-term investments) is reduced to zero and no further losses are recognized except for losses arising from the group’s obligation or payments on behalf of the investee.

2.3 Foreign currency

2.3.1 Functional and presentation currency

The consolidated financial statements are presented in Euro, which is the group’s presentation currency. The group companies determine their functional currency based on the primary economic environment in which they operate. The main indicators to determine the functional currency is the currency of the sales, expenses and financing activities.

2.3.2 Transactions and balances

The group operates in different currency environments, but mainly in Euro and USD. Transactions in foreign currencies are translated to the respective functional currencies of the group entities at exchange rates at the date of the transaction. Monetary assets and liabilities denominated in foreign currency at the reporting date are translated to the functional currency of the entity at the exchange rate at that date. Non-monetary assets and liabilities denominated in foreign currency and measured at fair value are translated to the functional currency of the entity at the exchange rate at the date that the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated. Foreign currency differences arising from this operational translation are recognized in the income statement.

2.3.3 Foreign operations

The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising from acquisition, are translated to Euro at exchange rates at the reporting date. The income and expenses of foreign operations are translated to Euro at average exchange rates. Foreign currency differences are recognized in other comprehensive income and accumulated in equity. These differences have been recognized in the foreign currency translation reserve (FCTR). When the group loses control over a foreign operation the accumulated foreign translation amount of the subsidiary is transferred from equity to the profit or loss. Foreign exchange gains and losses, arising from a monetary item to be received from or paid to a foreign operation for which the settlement is neither planned nor likely to occur in the foreseeable future, are included in the value of net investment in a foreign operation and recognized directly in equity in FCTR.

2.3.4 Hyperinflation

Non-monetary assets and liabilities, equity, and the income statement of subsidiaries operating in hyperinflationary economies are restated for changes in the general purchasing power of the local currency applying a general price index. These re-measured amounts are used for conversion into the group reporting currency at the period closing exchange rate. As a result, the balance sheet and net results of subsidiaries operating in hyper economies are stated in terms of the measuring unit current at the end of the reporting period. In accordance with IAS 21 The Effects of Changes in Foreign Exchange Rates, multinational companies that have subsidiaries with the hyperinflationary currency as their functional currency are not required to restate comparative amounts as those were presented previously in a stable currency.

2.4 Impairment of non-financial assets

The carrying amounts of the group’s non-current non-financial assets are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, the group performs an impairment test. For goodwill and intangible assets with indefinite lives an impairment test is performed every year. The recoverable amount of an asset or cash-generating unit is the higher of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future pre-tax 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 the purpose of impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets (the “cash-generating unit”). The goodwill acquired in a business combination, for the purpose of impairment testing, is allocated to (groups of) cash-generating units that are expected to benefit from the synergies of the combination. Corporate assets are assets that do not generate cash inflows independently, and their carrying amounts need to be allocated to the cash-generating units on a reasonable and consistent basis. If a corporate asset cannot be allocated to cash-generating units on a reasonable and consistent basis, the group performs the goodwill impairment test in two stages: first on the level of the cash-generating units, and secondly on the level of the smallest group of cash-generating units to which the corporate asset can be allocated on a reasonable and consistent basis. An impairment loss is recognized if the carrying amount of an asset or its cash-generating unit exceeds its estimated recoverable amount. Impairment losses are recognized in the income statement. Impairment losses recognized in respect of cash-generating units are allocated first to reduce the carrying amount of goodwill allocated to the units and then to reduce the carrying amount of the other assets in the unit (group of units) on a pro rata basis. An impairment loss in respect of goodwill will not be reversed afterwards. In respect of other assets, impairment losses recognized in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized.

2.5 Intangible assets

Goodwill

Goodwill is initially measured at cost, the excess of the aggregate of the consideration transferred and the amount recognized for the assets acquired and liabilities assumed in a business combination. After initial recognition, goodwill is measured at cost less any accumulated impairment losses. In the event of disposal of a cash-generating unit, the attributable amount of goodwill is included in the determination of the profit or loss on disposal.

Research and development

Research activity expenses, undertaken with the prospect of gaining new scientific or technical knowledge and understanding, are recognized in the income statement when incurred. Development expenses for which the group has the technical feasibility, intention and means to complete the intangible assets and the economic future benefits of the assets will flow to the group are capitalized at cost.

Other intangible assets

Other intangible assets with finite useful lives, are measured at cost less accumulated amortization and accumulated impairment losses. Amortization is recognized in the income statement on a straight-line basis over the estimated useful lives of intangible assets, other than goodwill, from the date when the asset is ready for use. The estimated useful lives of intangible assets and their residual value (if applicable) are reviewed every year. The estimated useful lives for the current and comparative period are as follows:

Intangible assets	Economic lifetime
Trademarks	Indefinite
Customer lists	5 to 10 years
Distribution rights	20 years
Other intangible assets	3 to 7 years

2.6 Property, plant and equipment

Items of property, plant and equipment are measured at cost less accumulated depreciation and accumulated impairment losses. Cost includes expenditure that is directly attributable to the acquisition of the asset. Components of property, plant and equipment with separate useful lives are accounted for as separate items (major components) of property, plant and equipment.# 2.6 Property, plant and equipment

Gains and losses on disposal of an item of property, plant and equipment are determined by comparing the net proceeds from disposal with the carrying amount of property, plant and equipment and are recognized in other income or other expenses in the income statement.

2.6.1 Depreciation

Depreciation is recognized in the income statement on a straight-line basis over the estimated useful lives of each component of property, plant and equipment to their residual values. Leasehold improvements are depreciated over the shorter of the lease term and their useful lives. Land is not depreciated. The estimated useful lives for the current and comparative period are as follows:

Property, plant and equipment	Economic lifetime
Buildings	20 to 33 years
Plant and equipment	5 to 10 years
Other property, plant and equipment	5 to 10 years

Depreciation methods, useful lives and residual values are reviewed at each reporting date.

2.6.2 Leased assets

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, less any lease incentives receivable variable lease payment that are based on an index or a rate, initially measured using the index or rate as of the commencement date. amounts expected to be payable by the group under residual value guarantees. the exercise price of a purchase option if the group is reasonably certain to exercise that option, and payments of penalties for terminating the lease, if the term reflects the group exercising that option. Lease payments to be made under reasonably certain extension options are also included in the measurement of the liability. The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily determined, which is generally the case for leases in the group, the lessee's incremental borrowing rate is used, being the rate that the individual lessee would have to pay to borrow the funds necessary to obtain an asset of similar value to the right-of-use asset in a similar economic environment with similar terms, security and conditions.

The group is exposed to potential future increases in variable lease payments based on an index or rate, which are not included in the lease liability until they take effect. When adjustments to lease payments based on an index or rate take effect, the lease liability is reassessed and adjusted against the right-of-use asset. Lease payments are allocated between principal and finance cost. The finance cost is charged to profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period.

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 less any lease incentives received any initial direct costs, and restoration costs.

Payments associated with short-term leases of equipment and vehicles and all leases of low-value assets are recognized 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 IT equipment and small items of office furniture.

The group remeasures the lease liability (and makes a corresponding adjustment to the related right-of-use asset) whenever:

The lease term has changed or there is a significant event or change in circumstances resulting in a change in the assessment of exercising a purchase option, in which case the lease liability is remeasured by discounting the revised lease payments using a revised discount rate.
The lease payments change due to changes in an index or rate or a change in expected payment under a guaranteed residual value, in which cases the lease liability is remeasured by discounting the revised lease payments using an unchanged discount rate.
A lease contract is modified and the lease modification is not accounted for as a separate lease, in which case the lease liability is remeasured based on the lease term of the modified lease by discounting the revised lease payments using a revised discount rate at the effective date of the modification.

2.7 Financial instruments

2.7.1 Classification, recognition and initial measurement

Financial assets and liabilities are classified into three categories: Measured at amortized cost, at fair value through other comprehensive income (FVTOCI) and at fair value through Profit and Loss (FVTPL). Currently, Azelis has no financial assets or liaibilities measured at FVTOCI.

The group recognizes financial instruments when it enters into a contract. Financial instruments are derecognized when the contractual rights to the cash flows of the asset expire, or it transfers the rights to receive the contractual cash flows on the financial asset in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred. With regard to its trade receivables, the group engages in non-recourse factoring programs. Receivables are derecognized when the factor pays the group, which also triggers a fee to be paid for the credit risk assumed by the factor. Factoring fees are recognized in the group's financial expenses.

Initially, financial instruments are recognized at their fair value. Transaction costs directly attributable to the acquisition or issue of financial instruments are recognized at the initial measurement date, except for financial instruments measured at FVTPL. Transaction costs related to FVTPL financial instruments are recorded in the profit or loss at initial recognition.

Financial assets

The classification of financial assets is based on two criteria: the objective of the company's business model for managing the assets, and whether the instruments' contractual cash flows represent "solely payments of principal and interest" on the principal amount outstanding (known as the 'SPPI-test'). Trade receivables are recognized initially at the amount of consideration that is unconditional, unless they contain significant financing components, when they are recognized at fair value. The group holds trade receivables with the objective of collecting the contractual cash flows and therefore measures them subsequently at amortized cost using the effective interest method. Other receivables are initially measured at fair value and subsequently measured at amortized cost.

Financial liabilities

Trade and other payables are recognized initially at their fair value and subsequently measured at amortized cost using the effective interest method. Loans and borrowings are initially recognized at fair value, net of transaction costs incurred. Loans and borrowings are subsequently measured at amortized cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognized in profit or loss over the period of the borrowings using the effective interest method.

An exchange between an existing borrower and lender of financial liabilities with substantially different terms is accounted for as an extinguishment of the original financial liability and the recognition of a new financial liability. Similarly, a substantial modification of the terms of an existing financial liability or a part of it (whether or not attributable to the financial difficulty of the debtor) is accounted for as an extinguishment of the original financial liability and the recognition of a new financial liability. The terms are substantially different if the discounted present value of the cash flows under the new terms, including any fees paid net of any fees received and discounted using the original effective interest rate, is at least 10 percent different from the discounted present value of the remaining cash flows of the original financial liability. If an exchange of debt instruments or modification of terms is accounted for as an extinguishment, any costs or fees incurred are recognized as part of the gain or loss on the extinguishment. However, costs or fees that are incremental and directly related to the issue of the new debt instrument are treated as transaction costs of the new liability, and hence are spread forward by adjusting the effective interest rate.

Derivatives

The group uses derivative financial instruments such as forward exchange contracts, interest rate swaps to hedge its foreign currency risk and interest rate risk and interest rate cap, to hedge its interest rate risks associated with floating-rate borrowings under the group’s credit facilities. Derivatives are initially recognized as other financial assets at fair value on the date a derivative contract is entered into, and they are subsequently remeasured to their fair value through profit and loss at the end of each reporting period. The derivative is only used for economic hedging purposes and not as a speculative investment. The group does not apply hedge accounting. Therefore, changes in the fair value of the group’s derivative financial instrument are recognized immediately in the consolidated statement of profit or loss and are included in finance costs.

Put options on non-controlling interests

The group has granted put options for remaining non-controlling interests in acquired companies, giving the holders the right to sell to the group their investments in these subsidiaries. These financial liabilities do not bear interest. In accordance with IAS 32, the group recognizes a redemption liability corresponding to the present value of the estimated exercise price of the option. The redemption liability is included in other current and non-current liabilities and the counterpart is a reduction from the group's equity. At the end of each reporting period, the liability is adjusted to reflect changes in the estimated exercise price.These subsequent changes are accounted for in the income statement. If the group has also obtained a call option on the same remaining non-controlling interests of the acquired companies, this option is taken into account for the control assessment in respect of the business combination.

2.7.2 Impairment of financial assets

The group recognizes an allowance for expected credit losses (ECL) for all financial assets that are not held at FVTPL. ECLs are based on the difference between the contractual cash flows due in accordance with the contract and all the cash flows that the group expects to receive, discounted at an approximation of the original effective interest rate. The impairment methodology applied depends on whether there has been a significant increase in credit risk: if so, the loss allowance is measured as the lifetime expected credit loss. If not, the allowance is measured as the 12-month expected credit loss. For Trade receivables, the group applies the simplified approach permitted by IFRS 9, which requires lifetime expected losses to be recognized from initial recognition of the receivables (see note 4.1 for further details). While cash and cash equivalents and other loan receivables are also subject to the impairment requirements of IFRS 9, no impairment loss was identified as these assets are considered as low-credit risk. Individually significant financial assets are tested for impairment on an individual basis. The remaining financial assets are assessed collectively in groups that share similar credit risk characteristics. Impairment losses of financial assets are recognized in the income statement. An impairment loss is reversed if the reversal can be related objectively to an event occurring after the impairment loss was recognized.

2.7.3 Netting

Financial assets and liabilities are offset, and the net amount presented in the statement of financial position when, and only when, the group has a legal right to offset the amounts and intends either to settle on a net basis or to realize the asset and settle the liability simultaneously.

2.7.4 Cash & cash equivalents

Cash and cash equivalents comprise cash balances and call deposits. Bank overdrafts that are repayable on demand and form an integral part of the group’s cash management are included as a component of cash and cash equivalents for the purpose of the statement of cash flows.

2.8 Income tax

Income tax expense comprises current and deferred taxes. Income tax expense is recognized in the income statement except to the extent that it relates to items recognized in other comprehensive income, in which case it is recognized in other comprehensive income. Current tax is the expected tax payable (receivable) on the taxable income (loss) for the period, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years. Deferred income tax is provided, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, deferred tax liabilities are not recognized if they arise from the initial recognition of goodwill. Deferred income tax is also not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the end of the reporting period and are expected to apply when the related deferred income tax asset is realized or the deferred income tax liability is settled. A deferred tax asset is recognized to the extent that it is probable that future taxable profits will be available against which the temporary difference can be utilized. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized.

2.9 Inventories

Inventories are measured at the lower of cost and net realizable value. The inventories are measured at their weighted average costs increased with cost comprising direct materials, direct labor and an appropriate proportion of variable and fixed overhead expenditure, the latter being allocated on the basis of normal operating capacity. Net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses. Impairments of inventories to net realizable value are recognized in the profit or loss as part of ‘Cost for goods and consumables’. In case the value of impaired inventories increases the impairment will be reversed to the lowest of the increased net realizable value and the original weighted average cost.

2.10 Equity

2.10.1 Ordinary shares

Ordinary shares are classified as equity. Incremental costs directly attributable to the issuance of ordinary shares and share options are recognized in equity net of tax.

2.10.2 Share premium

The share premium consists of additional paid-in capital exceeding the par value of outstanding shares.

2.10.3 Treasury shares

Treasury share purchases are recognized as a deduction from equity (section other reserves). No gain or loss is recognized on the purchase, sale, issue or cancellation of treasury shares. Consideration paid or received is recognized directly in equity.

2.11 Employee benefits

2.11.1 Pensions, other post-employment benefits and termination benefits

The group operates several defined benefit pension plans. The liability or asset recognized in the balance sheet of defined benefit pension plans is the present value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets. The defined benefit obligation is calculated annually by independent qualified actuaries using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of high-quality corporate bonds that are denominated in the currency in which the benefits will be paid, and that have terms approximating to the terms of the related obligation. The net interest cost is calculated by applying the discount rate to the net balance of the defined benefit obligation and the fair value of plan assets. This cost is included in finance expense in the income statement. Changes in the present value of the defined benefit obligation resulting from plan amendments or curtailments are recognized immediately in the income statement as past service costs. Remeasurement gains and losses arising from experience adjustments and changes in actuarial assumptions are recognized in the period in which they occur, directly in other comprehensive income. They are included in retained earnings in the statement of changes in equity and in the balance sheet. For defined contribution plans, the group pays contributions to publicly or privately administered pension insurance plans on a mandatory, contractual or voluntary basis. The group has no further payment obligations once the contributions have been paid. The contributions are recognized as employee benefit expense when they are due.

2.11.2 Short-term and long-term employee benefits

The cost of all short-term employee benefits, such as salaries, employee entitlements to leave pay, bonuses, medical aid and other contributions, are recognized during the period in which the employee renders the related service. The group recognizes those costs only when it has a present legal or constructive obligation to make such payment and a reliable estimate of the liability can be made. The group’s net obligation in respect of long-term employee benefits is the amount of future benefit that employees have earned in return for their service in the current and prior periods. That benefit is discounted to determine its present value. The calculation of the other long-term employee benefits is performed using the projected unit credit method. Any actuarial gains and losses are recognized in profit or loss in the period in which they arise.

2.11.3 Share-based payment

The group has a performance share plan for key management, qualifying as an equity-settled share-based payment plan. Equity-settled share-based payment transactions are transactions in which the entity receives goods or services in exchange for its own equity instruments (e.g. shares, options). Goods or services received in equity-settled share-based payment transactions are measured at their fair value, unless they cannot be estimated reliably, in which case it is determined in accordance with the fair value of the equity instruments granted. The fair value is determined at grant date and the value incorporates market conditions using a Monte Carlo calculation. This value remains unchanged over the vesting period. Service conditions and non-market conditions do not affect the fair value of the instruments granted, but are taken into account by adjusting the number of equity instruments included in the measurement of the transaction, an estimate which is revised at each reporting date until the vesting period has lapsed. Azelis accounts for the equity-settled share-based payment transaction in the other reserves section of the equity, and its initial recognition and subsequent changes are accounted for in employee expenses.

2.12 Provisions

A provision is recognized if, as a result of a past event, the group has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability.2.13 Revenue

2.13.1 Goods sold (sales)
Revenue from product sales is recognized at point in time when the performance obligation is satisfied. For the group, this is usually upon delivery of the goods to the client. Revenue is measured at the fair value of the consideration received, net of returns, trade discounts and volume rebates. Revenue is only recognized to the extent that it is highly probable that a significant reversal will not occur.

2.13.2 Commissions
When the outcome of a commission transaction can be estimated reliably, revenue associated with the transaction shall be recognized by reference to the stage of completion of the transaction at the end of the reporting period. When the group acts in the capacity of an agent rather than as principal in a transaction, the revenue recognized is the net amount of commission made by the group. The group acts as an agent when it does not take title and is not exposed to risks of the goods, when the risks are born by the supplier and when the selling prices are set by the suppliers.

2.14 Segment reporting
An operating segment is a component of the group that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the group’s other components. The segmentation used by the group is based on geography, organization and management structure and commercial interdependencies. Segment results that are reported to the CEO include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly head office expenses and income tax assets and liabilities, and are presented in a separate reporting unit ‘group holding & other’. The reporting segments used are defined as follows:
EMEA: all operating companies in Europe, Middle East and Africa
Americas: all operating companies in the United States of America, Canada, Mexico and South America (mainly Colombia).
Asia-Pacific: all operating companies in Asia, South-East Asia and the Pacific region.
group holding & other: all non-operating companies, including the corporate service center and headquarter in Belgium.

2.15 Government grants
Government grants are recognized in profit or loss on a systematic basis over the periods in which the entity recognizes as expenses the related expenses for which the grants are intended to compensate. Government grants are not recognized until there is reasonable assurance that the group will comply with the conditions attaching to them and that the grants will be received.

2.16 Consolidated statements of cash flows
The consolidated statement of cash flows is prepared using the indirect method. Cash is defined as cash and cash equivalents less bank overdrafts. Cash flows are presented separately in the statement of cash flows as cash flows from operating activities, investing activities and financing activities.

2.17 Determination of fair values
A number of the group’s accounting policies and disclosures require the determination of fair value, for both financial and non-financial assets and liabilities. Fair values have been determined for measurement or disclosure purposes based on the following methods. When applicable, further information about the assumptions made in determining fair values is disclosed in the notes specific to that asset or liability.

Property, plant and equipment
The fair value of property, plant and equipment recognized as a result of a business combination is based on market values. The market value of property is the estimated amount for which a property could be exchanged on the date of valuation between a willing buyer and a willing seller in an arm’s length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion.

Intangible assets
The fair value of trademarks and distribution rights acquired in business combinations are measured using the income approach (relief from royalty and multi-period excess earning method, respectively). The fair value of other intangible assets is mainly based on the cost approach.

Inventories
The fair value of inventories is determined based on its estimated selling price in the ordinary course of business less the estimated costs of completion and sale.

Investments in equity and debt securities
The fair value of financial assets at FVTPL and FVTOCI financial assets is determined by reference to their quoted bid price at the reporting date. In case no market prices are available the instruments are measured using the present value of the expected future cash flows, discounted at the market rate of interest at measurement date.

Trade and other receivables
The fair value of trade and other receivables is determined as the present value of future cash flows, discounted at the market rate of interest at measurement date.

Derivatives
The fair value of forward exchange contracts is based on their listed market price, if available. If a listed market price is not available, then fair value is estimated by discounting the difference between the contractual forward price and the current forward price for the residual maturity of the contract using a risk-free interest rate increased by an appropriate additional spread related to the credit risk of the group and the risk of the counterparty.

Non-derivative financial liabilities
Fair value is calculated based on the present value of future principal and interest cash flows, discounted at the market rate of interest at measurement date, including the group’s credit risk. The fair value of contingent consideration qualifying as earnout, recognized in relation to business combinations, is calculated based on a forecast of the underlying performance measure and is discounted at the market rate of interest at measurement date. The fair value of contingent consideration constituting a mere fixed deferred payment is determined as the present value of future cash flows and discounted at the market rate of interest at measurement date. The redemption value of put options on non-controlling interests, recognised in relation to business combinations, is calculated based on specific contractual specifications consisting mostly of a combination of a multiple on a future performance measure and the balance of certain net working capital items upon exercise of the option.

Fair value hierarchy
Assets and liabilities for which fair value is measured or disclosed in the consolidated financial statements are categorized within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:
Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities;
Level 2: valuation techniques for which all inputs which have a significant effect on the recorded fair value are observable for the asset or liability, either directly or indirectly;
Level 3: valuation techniques for which all inputs which have a significant effect on the recorded fair value are not based on observable market data.

3 Significant estimates and judgements
In the process of applying accounting policies and preparing the consolidated financial statements, the group has made certain judgements (other than those involving estimates) that affect the reported amounts of assets and liabilities, income and expenses. In addition, the group is required to make certain estimates and assumptions that affect the measurement and presentation of reported figures. Estimates are based on past experience and on additional knowledge obtained on transactions to be reported, and are reviewed on an ongoing basis. Actual amounts may differ from these estimates. The most critical accounting judgements and estimates related to uncertainties with significant risk of causing material adjustment and applied in the consolidated financial statements are described below:

Use of judgements
Intangible assets
The group has judged that the Azelis trademark has an indefinite useful life. As a consequence, the trademark is not amortized. At each reporting date, the group reviews this judgement and assesses whether the circumstances continue to support the indefinite useful life. The trademark is part of the yearly impairment test. (See note 15).

Deferred taxes
In assessing the realization of deferred tax assets, management considers the extent to which it is probable that the deferred tax asset will be realized (note 14). The ultimate realization of deferred tax assets is dependent upon the generation of future taxable profit during the periods in which those temporary differences and tax loss carry forwards are available. Management considers the expected reversal of deferred tax liabilities and projected future taxable income in making this assessment. (See note 14.2)

Right of Use assets
In determining the lease term, management considers all facts and circumstances that create an economic incentive to exercise an extension option. Extension options are only included in the lease term if the lease is reasonably certain to be extended. (See note 16.2)

Use of estimates
Business combinations
In a business combination the acquired assets and liabilities are measured at fair value. The group uses assumptions and non-observable information to prepare fair value of the assessed, where no observable information is available. Afterwards the actual market performance can differ from the assumptions. The most important assumptions are disclosed in the note for business combinations. (See note 7).

Goodwill & Intangible assets - Impairment assessment
The group tests whether goodwill has suffered any impairment on an annual basis. The recoverable amount of a cash generating unit (CGU) is determined based on value-in-use calculations which require the use of assumptions.The calculations use cash flow projections based on financial budgets approved by management covering a five-year period, incorporating estimates for sales growth and margin growth. Cash flows beyond the five-year period are extrapolated using the estimated growth rates. These growth rates are consistent with forecasts included in industry reports specific to the industry in which each CGU operates. (See note 15.2).

4 Financial risk management

Azelis is exposed to several financial and other risks, amongst which:
* Credit risk
* Liquidity risk
* Market risks
* Operational risks

Azelis has a risk management framework in place to mitigate those risks. The Board of Directors oversees how management monitors compliance with the group’s risk management policies and procedures and reviews the adequacy of the risk management framework in relation to the risks faced by the group.

4.1 Credit risk

Credit risk is the risk of financial loss to the group if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the group’s receivables from customers. As of December 31, the main credit risk can be summarized as follows:

(in thousands of €)

	31-12-2022	31-12-2021
Trade and other receivables	538,381	428,950
Cash and cash equivalents	268,160	141,293
Other financial assets	12,038	2,877
Total	818,578	573,121

4.1.1 Trade and other receivables

The group applies the IFRS 9 simplified approach (refer to Note 2.7.2). The group's exposure to credit risk is influenced mainly by the individual characteristics of each customer. The demographics of the group’s customer base, including the default risk of the industry and country in which customers operate, has less of an influence on credit risk. The group has no significant concentration of credit risk. The group has a credit policy under which each new customer is analyzed individually for creditworthiness before the group’s standard payment and delivery terms and conditions are offered. The group’s review includes external ratings, when available, and in some cases bank references. Purchase limits are established for each customer. Customers that fail to meet the group’s benchmark creditworthiness may transact with the group only on a prepayment basis. The group’s credit policy includes suspension of further deliveries, if customers fail to pay their debts on time. Moreover, the group engages in non-recourse factoring for the majority of its revenue in the EMEA region, which is used as an efficiency program in its credit collection processes. No other credit insurance programs are deemed to be necessary. A significant portion of the group’s customers have been transacting with the group companies for many years and losses have occurred infrequently. The group does not require collateral in respect of trade and other receivables. The group establishes an allowance for impairment that represents its estimate of expected losses in respect of trade receivables. The main components of this allowance are a specific loss component that relates to individually significant exposures and a collective loss component established for groups of similar assets in respect of losses that have been incurred but not yet identified. The collective loss allowance is determined based on historical data of payment statistics for similar financial assets, adjusted for forward-looking information through an assessment of both the current and projected direction of economic conditions at the reporting date.

At year-end the aging of the trade receivables is constituted as follows:

31-12-2022 (in thousands of €)

	Gross	% of total	Impairment	% Impaired
Not due	334,132	69.3%	2,590	0.8%
Between 0 and 2 months	98,192	20.4%	10,725	10.9%
Between 2 and 12 months	38,990	8.1%	14,713	37.7%
More than 12 months	10,885	2.3%	10,885	100.0%
Total	482,200	100.0%	38,912	8.1%

31-12-2021 (in thousands of €)

	Gross	% of total	Impairment	% Impaired
Not due	302,458	76.1%	1,549	0.5%
Between 0 and 2 months	74,397	18.7%	4,593	6.2%
Between 2 and 12 months	11,852	3.0%	6,973	58.8%
More than 12 months	8,668	2.2%	8,668	100.0%
Total	397,375	100.0%	21,783	5.5%

The loss allowances for trade receivables as of December 31 reconcile to the opening loss allowances as follows:

(in thousands of €)

	31-12-2022	31-12-2021
Balance at 1 January	21,783	15,763
Business combination	12,235	4,190
Provisions made in the year	6,513	2,451
Decrease on impairment losses	-579	-838
Exchange rate differences	-1,040	217
Balance at December 31	38,912	21,783

4.1.2 Cash

The group’s exposure to credit risk is insignificant as the group deals with highly rated banks for its cash deposits.

4.1.3 Guarantees

The group’s policy is to provide financial guarantees only in favor of wholly owned subsidiaries. At balance sheet date, no other material guarantees were outstanding.

4.2 Liquidity risk

Liquidity risk is the risk that the group will not be able to meet its financial obligations as they fall due. The group’s approach to managing liquidity is to ensure that it will have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses. The group ensures that it has sufficient cash on hand and unused credit facilities to meet expected operational expenses for the respective planning horizon, including the servicing of financial obligations.

Maturities of financial liabilities

The following are the contractual maturities of financial liabilities, including estimated interest payments and excluding the impact of any netting agreements at year-end:

31-12-2022 (in thousands of €)

	Carrying amount	Undiscounted contractual Cash flows	Less than 1 Year	1 to 5 Years	More than 5 Years
Loans and borrowings	1,303,717	1,465,226	260,431	1,204,795	0
Lease obligation (IFRS16)	101,558	102,806	20,639	52,412	29,755
Derivatives	377	377	377	0	0
Trade and other payables	869,574	869,574	869,574	0	0
Bank Overdrafts	30,412	30,412	30,412	0	0
Total	2,305,637	2,468,394	1,181,432	1,257,207	29,755

Loans and borrowings are primarily to be repaid in 2026.

31-12-2021 (in thousands of €)

	Carrying amount	Undiscounted contractual Cash flows	Less than 1 Year	1 to 5 Years	More than 5 Years
Loans and borrowings	902,634	996,252	116,317	879,935	0
Lease obligation (IFRS16)	69,278	69,278	15,200	37,831	16,247
Derivatives	155	155	155	0	0
Trade and other payables	550,576	550,576	550,576	0	0
Bank Overdrafts	40,524	40,524	40,524	0	0
Total	1,563,167	1,656,785	722,772	917,766	16,247

4.3 Market risk

Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the group’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimizing the return. The group buys and sells derivatives in order to manage its market risks.

4.3.1 Currency risk

The group is exposed to currency risk on sales, purchases and borrowings that are denominated in various currencies. The main currencies are Euro (€), Pound Sterling (GBP), US Dollars (USD) and Canadian Dollars (CAD). At any point in time, the group hedges a significant part of its foreign currency exposure in respect of sales and purchases orders via natural hedges within its operational portfolio. The group uses mainly forward exchange contracts to hedge its remaining currency risk, all with a maturity of less than one year from the reporting date. When necessary, forward exchange contracts are rolled over at maturity. The group has not applied hedge accounting. Interest on borrowings is denominated in currencies that predominantly match the cash flows generated by the underlying operations of the group, primarily Euro (€), US Dollars (USD), Pound Sterling (GBP) and Canadian Dollar (CAD). This provides an economic hedge without derivatives being entered into and therefore the group has not applied hedge accounting. The group’s investments in foreign non-euro subsidiaries are considered to be long-term operations of the group and are therefore not hedged. Currency translation differences on these long-term operations are reported in the translation reserve in equity.

Exposure to currency risk

The exposure to foreign currency risk in current assets and current liabilities is mainly related to balances denominated in USD, GBP and CAD, for which the notional amounts (stated in €) amount to:

(in thousands of €)

	31-12-2022 (USD)	31-12-2022 (GBP)	31-12-2022 (CAD)	31-12-2021 (USD)	31-12-2021 (GBP)	31-12-2021 (CAD)
Trade receivables	197,296	927	10,955	138,345	1,759	49,139
Cash and cash equivalents	65,637	4,270	-33	16,722	2,296	7,120
Trade payables	-152,045	-2,721	-5,497	-68,068	-4,418	-31,346
Gross balance sheet exposure	110,888	2,476	5,426	86,999	-363	24,913

Sensitivity analysis of currency risk

A 10% strengthening of the Euro against the USD, GBP and CAD at year-end would have increased (decreased) equity and the income statement by the amounts shown below. This analysis assumes that all other variables, in particular interest rates, remain constant.

(in thousands of €)

	31-12-2022 (Profit or loss)	31-12-2022 (Equity)	31-12-2021 (Profit or loss)	31-12-2021 (Equity)
USD	-10,081	-10,081	-7,909	-7,909
CAD	-493	-493	-2,265	-2,265
GBP	-225	-225	33	33

A 10% weakening of the Euro against the USD, GBP and CAD at year-end would have had the equal but opposite effect in Euro to the amounts shown above, on the basis that all other variables remain constant.

4.3.2 Interest rate risk

The group adopts a policy of carefully managing its interest rate risk. On a regular basis, the Board of Directors assesses the group's interest rates versus external benchmarks, ensuring that management will affect financial transactions resulting in fixed borrowing interest rates in case limits are exceeded. As of the reporting date, the external bank borrowings are on a floating interest rate basis.# 4.3 Financial Risk Management (Continued)

The group’s main interest rate risk arises from a long-term borrowing with a variable rates (EURIBOR and SONIA), which exposes the group to cash flow interest rate risk. The cash flow risk is mitigated through the usage of an interest rate cap.

Interest profile

At the reporting date the interest rate profile of the group’s interest-bearing financial instruments expressed in their carrying amounts was:

(in thousands of €)	31-12-2022	31-12-2021
Variable rate instruments
Financial assets	268,160	141,293
Financial liabilities	-1,435,687	-1,012,436
	-1,167,526	-871,143

Cash flow sensitivity analysis for variable rate instruments

An increase (decrease) of 100 basis points in interest rates at the reporting date would have decreased (increased) equity and the income statement (not considering income tax impact) by the annual amounts shown below. This analysis assumes that all other variables, in particular foreign currency rates and the potential mitigating effect of the interest rate cap, remain constant.

(in thousands of €)	Profit or loss - 2022	Equity - 2022	Profit or loss - 2021	Equity - 2021
	100 bp Increase	100 bp Decrease	100 bp Increase	100 bp Decrease
Variable rate instruments	-14,357	14,357	-14,357	14,357
Cash flow sensitivity (net)	-14,357	14,357	-14,357	14,357

4.4 Operational risks

Operational risk is the risk of direct or indirect loss arising from a wide variety of causes associated with the group's processes, personnel, technology and infrastructure and from external factors other than credit, market and liquidity risks such as those arising from legal and regulatory requirements and generally accepted standards of corporate behavior. Operational risks arise from all of the group's operations. The group's objective is to manage operational risks so as to balance the avoidance of financial losses and damage to the group's reputation with overall cost effectiveness and to avoid control procedures that restrict initiative and creativity.

4.5 Financial instruments: fair value and hierarchy

On a selective basis, the group has outstanding foreign exchange swap contracts to manage the exposure to foreign currency risk on outstanding foreign currency receivables/payables, as well as an interest rate swap relating to its variable rate interest risk.

Interest rate cap

In May 2022, the group entered into an interest rate cap agreement (“interest rate cap”) to limit its interest rate risk exposure (see note 22.1.1). The interest rate cap modifies the Company’s exposure to interest rate risk by converting a portion of the Company’s floating-rate debt to a fixed-rate basis, thereby reducing the impact of interest rate changes on interest expense. The upfront fee paid for the interest rate cap for an amount of €4.6 million was recorded under other financial assets. Subsequently, in the consolidated statement of profit or loss for the year ended December 31, 2022, the group recognized the change in fair value of the interest rate cap within financial income and expenses. During the year ended December 31, 2022, the group recognized a fair value gain of €5.0 million in the consolidated statement of profit or loss, within financial income.

Acquisition-related liabilities

In connection with business combinations, the group has outstanding liabilities for contingent consideration and for put options on non-controlling interests.

The group’s financial instruments per category are shown below including the fair value and hierarchy information.

Fair value hierarchy

The interest rate cap qualifies for the level 2 category in the fair value hierarchy due to the fact that it is not traded in an active market and the fair value is determined using valuation techniques (option pricing model) which maximize the use of observable market data. Since all significant inputs required to fair value the instrument are observable, the instrument is classified as level 2. All derivatives related to forward exchange contracts are classified as Level 2. Contingent consideration qualifying as earnout and put options on non-controlling interests are classified as Level 3. For the calculation basis of fair values, see also note 2.17 – Determination of fair values. The carrying amount of the other financial assets and liabilities approximates their fair value.

2022

(in thousands of €)	Note	Fair value through P&L	Amortized cost	Total book value	Level 1	Level 2	Level 3	TOTAL
Assets
Non current assets
Other Financial receivables	4		832	832	832			832
Derivatives	4	9,556		9,556	9,556			9,556
Other investments	4		809	809		809		809
Current assets
Trade receivables	19		443,288	443,288	443,288			443,288
Other receivables	19		95,093	95,093	95,093			95,093
Other financial receivables			81	81	81			81
Derivatives	4	199		199	199			199
Cash & Cash equivalents	20		268,160	268,160	268,160			268,160
Total financial assets		10,453	808,263	818,716	0	818,716	0	818,716
Liabilities
Non Current Liabilities
Interest bearing	22		1,259,562	1,259,562	1,259,562			1,259,562
Other Financial liabilities		73,420	24,844	98,264		73,420	24,844	98,264
Current liabilities
Interest bearing	22		145,713	145,713	145,713			145,713
Bank overdraft	20		30,412	30,412	30,412			30,412
Trade payables	24		462,728	462,728	462,728			462,728
Other current liabilities excl derivatives	24	50,657	257,924	308,582		50,657	257,924	308,582
Derivatives	24	377		377	377			377
Total financial liabilities		124,454	2,181,183	2,305,637	0	2,181,560	124,077	2,305,637

2021

(in thousands of €)	Note	Fair value through P&L	Amortized cost	Total book value	Level 1	Level 2	Level 3	TOTAL
Assets
Non current assets
Other Financial receivables	4		1,113	1,113	1,113			1,113
Other investments	4		422	422	422			422
Current assets
Trade receivables	19		375,591	375,591	375,591			375,591
Other receivables	19		53,359	53,359	53,359			53,359
Other financial receivables			1,479	1,479	1,479			1,479
Derivatives	4	44		44	44			44
Cash & Cash equivalents	20		141,293	141,293	141,293			141,293
Total financial assets		44	573,257	573,301	0	573,301	0	573,301
Liabilities
Non Current Liabilities
Interest bearing	22		894,108	894,108	894,108			894,108
Other Financial liabilities		1,371	8,284	9,655		1,371	8,284	9,655
Current liabilities
Interest bearing	22		77,804	77,804	77,804			77,804
Bank overdraft	20		40,524	40,524	40,524			40,524
Trade payables	24		368,657	368,657	368,657			368,657
Other current liabilities excl derivatives	24	37,286	134,976	172,262		37,286	134,976	172,262
Derivatives	24	155		155	155			155
Total financial liabilities		38,813	1,524,352	1,563,165	0	1,524,507	38,658	1,563,165

5 Capital management

The Board of Directors’ policy is to maintain a good capital base so as to maintain investor, creditor and market confidence and to sustain future profitable development of the business. The Board monitors the return on capital, and seeks to maintain a balance between the returns on equity versus the levels of borrowings as well as the advantages and security afforded by a sound capital position. The group defines its capital as its equity and its net interest borrowing loans:

(in thousands of €)	31-12-2022	31-12-2021
Equity	2,439,675	2,251,345
Other interest-bearing loans	1,435,687	1,012,436
Less: Cash & Cash equivalents	-268,160	-141,293
Total Capital	3,607,201	3,122,488

The group is not exposed to external capital requirements other than covenant requirements from the syndicated external debt (refer to note 22).

6 Operating segments

The group’s reportable segments are based on the regions in which it operates: EMEA, Americas and Asia-Pacific. This reflects the organization of the group, providing its specialty chemicals distribution services in all these regions. Operating expenses of non-operating companies are reported in the segment group Holding. Adjusted EBITA of group Holding represents costs related to corporate activities and central support services, mainly at the group’s service center and the headquarter in Belgium. Transactions between companies within an operating segment have been eliminated. Revenue therefore represents external sales. Transactions between operating segments are based on arm’s length principle. The performance of the operating segments is assessed based on a measure of "Adjusted EBITA". The group currently uses Adjusted EBITA in its business operations to, among others, develop budgets, measure its performance against those budgets and evaluate the performance of its operations. Gross profit is defined as income less cost of goods and consumables (as disclosed in Note 10), before outbound distribution cost. Total assets per segment are not being measured and/or reported to the key decision makers on a regular basis, whereas Net Working Capital is used as a major performance indicator of the operating segments1. Results of the operating segments are reflected in the below table:

2022

(in thousands of €)	EMEA	Americas	Asia-Pacific	Group holding & other	Total
Revenue	1,811,643	1,549,913	747,546	0	4,109,102
Gross profit	432,907	385,200	142,601	34	960,742
Adjusted EBITA	215,376	211,867	58,112	-28,477	456,878
Operating profit	388,426
Net Working Capital	182,205	237,811	194,516	-6,247	608,285

2021

(in thousands of €)	EMEA	Americas	Asia-Pacific	Group holding & other	Total
Revenue	1,232,253	1,164,233	430,809	0	2,827,295
Gross profit	292,820	270,947	86,220	154	650,143
Adjusted EBITA	125,298	137,643	29,633	-24,652	267,922
Operating profit	207,814
Net Working Capital	146,945	188,487	142,754	-3,779	474,407

'Group holding & other' mainly includes the operating expenses for the group holding activities and limited gross profit that remain unallocated to EMEA, Americas or Asia-Pacific. The group does not have material intercompany revenue across its segments. The group has a diverse customer base in all of its reportable segments and has no individual material customers.The group's non-financial non-current assets are broken down over its country of domicile and regions as follows: (in thousands of €)

	31-12-2022		31-12-2021
Belgium	18,610	0.5%	19,851	0.7%
Rest of EMEA	1,433,660	41.0%	1,197,514	40.9%
EMEA	1,452,270	41.5%	1,217,364	41.6%
Americas	1,536,305	43.9%	1,302,878	44.5%
Asia Pacific	511,267	14.6%	406,048	13.9%
	3,499,842	100.0%	2,926,291	100.0%

For definition and reconciliation of Alternative performance measures (non-GAAP) such as Adjusted EBITA and Net Working Capital included in this report, refer to the section Alternative Performance Measures.

7 Business combinations

The group completed the below acquisitions during the financial year 2022:

On 31 January 2022, Azelis acquired 90% of the shares of Umongo, a market-leading lubricants and metalworking fluids distributor active in South Africa, providing technical support and innovative solutions through its application laboratory. The transaction reinforces Azelis’ lateral value chain by expanding its product offering for the lubricants and metalworking fluid end markets and strengthens the group’s foothold in industrial specialty chemicals in South Africa and the rest of the region. As Azelis gained control, Umongo is consolidated for 100%, and the minority interest has been recognized separately in the financial statements.

On 28 February 2022, Azelis acquired 51% of the shares of Catalite Co., Ltd. (“Catalite”), a well-established distributor of specialty chemicals in the Personal Care and Home Care market segments, as well as industrial formulators, intermediates and coatings, in Thailand. With an attractive portfolio of products from several key principals, Catalite serves a large, growing customer base from its site in Bangkok, providing the group a solid platform to accelerate its growth in the domestic market, and the wider Asia Pacific region. As Azelis gained control, Catalite is consolidated for 100%, and the minority interest has been recognized separately in the financial statements.

On 12 March 2022, Azelis acquired 100% of the shares of Whitfield Chemical Group Limited, the ultimate parent company of WhitChem, a well-regarded distributor focused on CASE (coatings, adhesives, sealants and elastomers) and AM&A (advanced materials & additives) in the UK. WhitChem’s long-standing relationships with blue-chip principals and product portfolio strengthen Azelis’ lateral value chain in the UK, whilst their wide customer base and strong local technical sales team further expands the group’s product offering and customer reach.

On 16 May 2022, Azelis acquired 100% of the shares of Tunçkaya, a prominent distributor of food ingredients and additives in Turkey, as well as a range of blended products for various segments of the food market, supported by longstanding relationships with principals. Tunçkaya’s portfolio of products complements the group’s lateral value chain for the domestic market, thereby further expanding its expertise and product offering to customers.

On 31 May 2022, Azelis acquired the distribution assets of the Indian companies Chemo India and Unipharm Laboratories. Both companies are renowned local distributors of specialty chemicals and ingredients for the CASE (coatings, adhesives, sealants, elastomers), L&MWF (lubricants & metalworking fluids) and pharmaceutical market segments in India. The acquisition strengthens the group’s industrial chemicals portfolio and its footprint in the pharmaceutical market, further reinforcing Azelis’ lateral value chain for these market segments. The transaction represents a solid fit with the group’s growth ambitions in India, as well as its wider strategic vision for the Asia Pacific region.

On 1 July 2022, Azelis completed the acquisition of 63% of the shares of ROCSA Colombia S.A. ("ROCSA"), one of the leading specialty chemical distributors in Colombia, with a rapidly growing presence in Peru and Central America. It is active in the life sciences market, primarily in Food & Nutrition, Personal Care, and Home Care & Industrial Cleaning, as well as in industrial chemicals, with a strong presence in CASE (coatings, adhesives, sealants, elastomers) and Plastic Additives. The agreements made in the Shareholders Agreement combined with a call option make it virtually certain that the 37% will be purchased by Azelis, hence no non-controlling interest was recognized. A financial liability has been accrued for the purchase of the remaining 37% of the shares.

On 5 September 2022, Azelis acquired 100% of the shares of Chemical Solutions Sdn Bhd (“ChemSol”), one of the leading distributors of raw materials in the Personal Care, Cosmetics and Household markets in Malaysia. The acquisition strengthens Azelis’ presence in the domestic market, further reinforcing the group’s in-depth coverage of the Asia Pacific region. The addition of ChemSol’s extensive and well-known product portfolio, specifically in actives and functional ingredients, significantly expands Azelis’ lateral value chain for the local Personal Care market. With this acquisition, Azelis is ideally placed to benefit from the growing Personal Care market in Malaysia, especially in the attractive Halal cosmetic industry.

On 7 September 2022, Azelis completed the acquisition of 70% shares of Ashapura Aromas Private Limited (“Ashapura”), a leading distributor of ingredients in the flavors & fragrances market in India. This acquisition provides Azelis with a strong F&F platform in Asia Pacific, creating a global F&F network, following its 2021 acquisitions of Vigon in the US and Quimdis in France, serving the Americas and EMEA regions respectively. Ashapura’s extensive product portfolio strategically complements the group’s lateral value chain (LVC) in the fast-growing F&F market segment, strengthening the offering and technical expertise Azelis provides to customers. As Azelis gained control, Ashapura is consolidated for 100%, and the minority interest has been recognized separately in the financial statements.

On 3 October 2022, Azelis acquired the specialty lubricant (L&MWF) distribution assets of Ak-taş in Turkey. The transaction includes the oil additive business of Ak-taş as well as the base oil distribution business of Whitechem, a subsidiary of Ak-taş. Ak-taş and WhiteChem partner with blue-chip principals and have long-standing relationships with customers in Turkey and the surrounding region. The acquisition further strengthens Azelis’ lateral value chain (LVC) in the L&MWF market segment, following the acquisition of Umongo in South-Africa earlier this year. It is a further reflection of Azelis’ commitment to sustainability, expanding key relationships with principals with a strong agenda in renewable and sustainable base oils. With an application laboratory dedicated to L&MWF, Azelis’ technical specialists aim to consistently drive innovation and sustainability within the segment, as well as the wider market.

On 14 October 2022, Azelis acquired 100% of the shares of Chemical Partners and Chempart Polymers’ entities in Lebanon and Belgium. The company is an independent distributor of specialty chemicals with a strong foothold in the industrial chemicals market, particularly in CASE and R&PA, in Africa and the Middle East. Chemical Partners represents a strategic acquisition to strengthen Azelis’ lateral value chain in industrial chemicals following the acquisition of Umongo earlier this year, providing the group with a strong portfolio of products and expertise spanning the key end markets in industrial chemicals in the region (CASE, R&PA and L&MWF). This would also complement Azelis’ existing lateral value chain in life sciences in the region, optimizing the group’s portfolio to reach more customers and principals and serve them more efficiently. In addition, the acquisition expands Azelis’ geographical footprint, with Chemical Partners present in over 30 countries across the Middle East and Africa, including the Levant and Sub-Saharan Africa, providing further opportunity for growth.

On 27 October 2022, Azelis acquired 100% of the shares of Eurotrading S.p.A (“Eurotrading”), one of the leading distributors of specialty chemicals to the personal care market in Italy. The acquisition reinforces Azelis’ leading footprint in the thriving Italian market for personal care, as well as in the broader life sciences segment. Eurotrading’s extensive product portfolio in actives, emollients and emulsifiers further enhances the group’s lateral value chain and solidifies its market leadership in the local personal care industry.

On 10 November 2022, Azelis acquired 50.0005% of the shares of Dağaltı Kauçuk San. ("Dağaltı"), a specialty chemicals distributor active in the Turkish rubber and plastics additives (R&PA) market. The acquisition of Dağaltı strengthens Azelis’ R&PA footprint in Turkey. Dağaltı’s extensive product portfolio strategically complements the group’s lateral value chain in industrial chemicals, enhancing the offerings and technical expertise Azelis provides to customers. The agreements made in the Shareholders Agreement combined with a call option make it virtually certain that the 49.9995% will be purchased by Azelis, hence no non-controlling interest was recognized. A financial liability has been accrued for the purchase of the remaining 49.9995% of the shares.

These aforementioned acquisitions together generate over €620 million of revenues on an annual basis. In 2022, these acquisitions together have added €341.1 million of revenue and a positive €25.0 million of net profit to the group's net result.(in thousands of €)
| Assets acquired and liabilities assumed | 2022 | 2021 |
| :------------------------------------ | :------- | :------- |
| Distribution rights | 195,252 | 175,571 |
| Other intangible assets | 2,179 | 3,384 |
| Property, plant and equipment | 4,863 | 18,665 |
| Right-of-use assets | 11,340 | 9,253 |
| Deferred tax assets | 7,082 | 3,598 |
| Other long-term receivables | 16,562 | 466 |
| Other non-current financial assets | 814 | - |
| Inventories | 99,543 | 85,052 |
| Trade and other receivables | 143,176 | 116,726 |
| Cash and cash equivalents | 39,583 | 42,006 |
| Other current financial assets | 3,775 | - |
| Loans and borrowings non current | -19,481 | -7,306 |
| Lease liabilities non current | -9,340 | -7,356 |
| Deferred tax liabilities | -42,542 | -22,291 |
| Other non-current payables | - | -409 |
| Trade and other payables | -95,131 | -70,267 |
| Bank overdrafts | -32 | - |
| Loans and borrowings current | -48,286 | -71,301 |
| Lease liabilities current | -2,000 | -1,897 |
| Provisions | -136 | -1,282 |
| Employee benefit obligations | -1,253 | -2,213 |
| Total fair value identified assets acquired and liabilities assumed | 305,970 | 270,422 |
| Non-controlling interests | -29,404 | -18,307 |
| Estimated earnout liabilities | 5,732 | 1,329 |
| Deferred payments | 114,892 | 34,972 |
| Consideration paid in cash | 512,845 | 597,282 |
| Total consideration | 633,469 | 633,584 |
| Goodwill | 356,903 | 381,469 |

The fair values of the acquired identifiable assets and liabilities and the value of the consideration paid are accounted for on a provisional basis. Based on currently available information, Azelis does not foresee significant adjustments to these provisional amounts. The purchase price allocations will be finalized at a later stage and may result in adjustments to provisional values as a result of completing the initial accounting from the acquisition date. The fair values of the acquired net assets, based on a provisional assessment, are summarized in the table above. No indemnification assets or contingent liabilities had to be recognized in the business combinations. The acquisitions of distribution assets, without acquiring any shares, qualify as business combinations in conformity with IFRS 3, as the acquired assets constitute a business. The considerations are primarily paid for in cash and, depending on the acquisition, also consist of deferred payments and/or accruals for estimated earnout. For 2022 acquisitions, deferred payments and initial earnout liabilities, recognized as part of the consideration paid, total €120.6 million (2021: €36.3 million). Earnout payments are all contingent on the profitability of the acquired company at a future point in time, and have been estimated based on the business plan of the acquired company. In connection with the acquisitions in 2022 of Umongo in South Africa, Catalite in Thailand and Ashapura in India, put options were granted for the remaining 10%, 49%, and 30% respectively. Their fair value is calculated based on specific contractual specifications consisting mostly of a combination of a multiple on a performance measure and the balance of certain net working capital items upon exercise of the option. Put options are not part of the consideration paid and are accounted for separately of the business combination. Total goodwill of Azelis has increased by €371.0 million in 2022, of which €356.9 million is attributable to the abovementioned acquisitions in 2022. The remainder is mainly attributable to currency translation and reflected in other comprehensive income, and adjustments for hyperinflation. Acquisitions are accounted for using the acquisition method. Goodwill represents the excess of acquisition cost over the fair values of identified acquired assets and liabilities, and mainly represents the business knowledge and the qualified staff. Goodwill is not deductible for tax purposes. The trademark and the distribution rights have been valued based upon the expected return being generated through strategic mandates. The trade and other receivables include an amount of €11.3 million for expected credit loss provisions. Certain transactions relating to key employees’ compensation plans are considered as separate transactions and are not included in the business combination accounting in accordance with IFRS 3. If the above acquisitions would have occurred at the start of 2022, management estimates that, for 2022, the consolidated revenue would have been €4,402.4 million and the consolidated net result for the year would have been €249.8 million. During 2022, the group incurred acquisition-related expenses of €6.9 million (2021: €8.9 million) in total, in connection with the costs of external advisors, due diligence and fees paid to the institutions involved. These expenses are recognized in the consolidated income statement as part of external services, and are considered as part of adjustments to determine Adjusted EBITA of the period.

Notes to the consolidated income statement

8 Revenue

(in thousands of €)
| | 2022 | 2021 |
| :------------------ | :-------- | :-------- |
| Revenue from sales, net of discounts | 4,098,131 | 2,819,606 |
| Revenue from commercial services | 1,106 | 355 |
| | 4,099,237 | 2,819,961 |
| Commissions received | 9,866 | 7,335 |
| | 4,109,102 | 2,827,295 |

The group's revenues are broken down over product group as follows:

(in thousands of €)
| | 2022 | % | 2021 | % |
| :------------------- | :------------ | :---- | :------------ | :---- |
| Life Sciences | 2,474,632 | 60.2% | 1,758,913 | 62.2% |
| Industrial Chemicals | 1,634,470 | 39.8% | 1,068,382 | 37.8% |
| | 4,109,102 | 100.0% | 2,827,295 | 100.0% |

The group's revenues are broken down over its country of domicile and regions as follows:

(in thousands of €)
| | 2022 | % | 2021 | % |
| :----------- | :------------ | :---- | :------------ | :---- |
| Belgium | 83,717 | 2.0% | 58,202 | 2.1% |
| Rest of EMEA | 1,727,926 | 42.1% | 1,174,051 | 41.5% |
| EMEA Total | 1,811,643 | 44.1% | 1,232,253 | 43.6% |
| Americas | 1,549,913 | 37.7% | 1,164,233 | 41.2% |
| Asia Pacific | 747,546 | 18.2% | 430,809 | 15.2% |
| | 4,109,102 | 100.0% | 2,827,295 | 100.0% |

9 Other operating income

(in thousands of €)
| | 2022 | 2021 |
| :------------------------ | :----- | :---- |
| Recharge of expenses to customers | 8,681 | 5,105 |
| Other income | 7,114 | 3,366 |
| | 15,795 | 8,470 |

10 Costs for goods and consumables

(in thousands of €)
| | 2022 | 2021 |
| :----------------------------- | :-------- | :-------- |
| Purchase of goods including change in inventory | 3,092,704 | 2,138,140 |
| Freight and additional charges on purchases | 71,451 | 47,483 |
| | 3,164,155 | 2,185,622 |

11 Employee benefits

11.1 Expenses

Wages and salaries include managers’ fees and current service costs from employee benefits.

(in thousands of €)
| | 2022 | 2021 |
| :------------------------------------------- | :------ | :------ |
| Wages and salaries and other personnel related expenses | 254,897 | 208,488 |
| Social charges | 30,055 | 23,727 |
| | 284,952 | 232,215 |

The average number of employees (FTE) located in the regions is set out below:

	31-12-2022	31-12-2021
EMEA	1,735	1,486
Americas	966	805
Asia Pacific	969	744
Holdings	155	142
	3,825	3,177

The number of employees reported for EMEA includes the holding employees.

11.2 Defined obligation benefit schemes

The group is subject to the following defined benefit obligations:

(in thousands of €)
| | 2022 | 2021 |
| :------------------------------------ | :---- | :---- |
| German companies | 639 | 743 |
| Belgian companies | 1,572 | 6,190 |
| French companies | 1,971 | 2,045 |
| Italian companies | 5,046 | 1,823 |
| Other companies | 1,077 | 155 |
| Total present value of unfunded obligations | 10,305 | 10,956 |
| Present value of funded obligations (Azelis UK) | 5,398 | 9,560 |
| Total present value of obligations | 15,703 | 20,516 |
| Fair value of plan assets | -12,625 | -14,347 |
| Amounts not recognized as asset due to asset ceiling | 2,496 | 0 |
| Recognized liability for defined benefit obligations | 5,574 | 6,169 |
| Liability for long-service leave and other employees' benefits | 2,951 | 2,653 |
| Total employee benefits recognised in the balance sheet | 8,525 | 8,822 |

The group recognized net obligation is based on the difference between the present values of the defined benefit obligations and the plan assets. Both defined benefit plans and defined contribution plans are in place. Charges for defined contribution schemes amount to €3.3 million (2021: €2.5 million). Expenses for all plans are included in 'Wages, salaries and other personnel related expenses'.

Belgium pension plans
There are four pension plans in place in Belgium which are all legally structured as defined contribution plans. Because of the Belgian legislation applicable to 2nd pillar pension plans (so-called "Law Vandenbroucke"), all Belgian defined contribution plans have to be considered under IFRS as defined benefit plans. In the context of defined contribution plans, Law Vandenbroucke states the following:
The employer must continue to guarantee a minimum return of 3.75% on employee contributions and 3.25% on employer contributions made until December 31, 2015;
As from 2016 the employer must guarantee a minimum return ranging between 1.75% and 3.75% for all contributions, depending on the development of the average interest on OLO 10 years over a period of 24 months. The current guaranteed minimum return is 1.75%. Because of this minimum guaranteed return for defined contribution plans in Belgium, the employer is exposed to a financial risk (there is a legal obligation to pay further contributions if the fund does not hold sufficient assets to pay all employee benefits relating to employee service in the current and prior periods). These plans should therefore be classified and accounted for as defined benefit plans under IAS 19. Actuarial calculations have been made as of December 31, 2022 and these were recognized in the balance sheet. For information, some key figures related to the plans are given below:
Employer’s contributions in the financial year: €0.6 million (2021: €0.7 million)
Amount of the plan assets as of December 31, 2022: €5.6 million (2021: €5.8 million)

United Kingdom
In the UK, the defined benefit pension plan is financed through the accumulation of plan assets held separately from those of the group in an independently administered fund. Actuarial calculations have been made per 31st December 2022 and these were recognized in the balance sheet. The duration of Scheme obligations at 31 December 2022 is 20 years; plan assets are primarily invested in equity instruments. For information, some key figures related to the plans are given below:
Employer’s contributions in the financial year: €0.6 million (2021: €0.6 million)
Amount of the plan assets as of December 31, 2021: €7.7 million (2021: €8.6 million).Actuarial assumptions

The actuarial calculations of the present value of defined benefit obligations were based on the following main assumptions:

	2022	2021
Discount rate	2.82%	7.26%
Inflation	3.1%	3.1%
Future pension increases	0% - 6%	2.5% - 3.0%
Future salary increases	0% - 6%	0%- 2.5%

In the event that the discount rate was to be raised or lowered by 0.5% in the context of a sensitivity analysis, the obligation ensuring from the defined benefit plan would amount to €1.2 million or €1.3 million, respectively.

The benefits paid are mainly related to Belgium, France, Italy and UK. The 2023 benefits to be paid are expected to be in line with the 2022 benefits.

The following table shows the changes in the present value of the defined benefit obligations:

(in thousands of €)

	2022	2021
Liability for defined benefit obligations at the beginning of period	20,516	19,653
Current service costs and interest	1,039	971
Benefits paid	-1,811	-1,035
Remeasurement arising from changes in demographic assumptions	-91	-1
Remeasurement arising from changes in financial assumptions	-5,447	-754
Remeasurement arising from experience	310	-167
Business combination	979	1,208
Exchange rate differences	-374	640
Liability for defined benefit obligations at 31 December	15,122	20,516

The following table shows the changes in the plan assets.

(in thousands of €)

	2022	2021
Fair value of plan assets at the beginning of the period	14,347	12,839
Contributions paid into the plan	1,252	1,341
Benefits paid by the plan	-1,062	-745
Expected return on plan assets	54	436
Return on assets excluding amounts in net interests	-2,174	22
Exchange rate differences	-374	454
Fair value of plan assets at 31 December	12,044	14,347

At year-end, the plan assets consisted mainly of equity instruments.

The net periodic cost for defined benefit obligations recognized in the income statement is shown in the following table:

(in thousands of €)

	2022	2021
Current service costs	-883	-854
Interest on obligation	-191	-155
Interest on assets	-674	436
	-1,748	-573

The changes in actuarial gains and losses from defined benefit obligations and plan assets recognized in other comprehensive income are shown in the following table:

(in thousands of €)

	2022	2021
Return on assets, excluding amounts in net interests	-2,202	412
Actuarial gains and losses on benefit obligations	5,390	701
Effect of changes in asset ceiling	-2,596	0
Exchange rate differences	-22	0
	570	1,113

11.3 Share-based payment

In 2022, Azelis has launched a long-term incentive plan for certain directors, employees and self-employed managers of the group. Under this LTIP, Azelis has granted share awards to certain directors, employees and self-employed managers of the group. The grant of share awards is subject to a three-year performance period (starting January 1st) and takes into account the following metrics and weightings: 50% relative total shareholders' return (market condition), 35% Adjusted EBITA (non-market condition) and 15% sustainability-linked criteria (non-market condition). The awards are subject to a vesting period of three years starting from the grant date and are dependent on the Remuneration and Nomination Committee determining whether performance targets have been met. Based on performance delivered, the number of performance shares awarded will vest and become unconditionally owned by the participant.

The movement in number of performance shares outstanding and the related weighted average fair value per share are as follows:

	2022
	Number of shares
Outstanding as of 1 January	0
Granted during the year	138,546
Forfeited during the year	6,062
Outstanding as of 31 December	132,484

The fair value of the performance shares was measured on the basis of Azelis' share price at grant date, and has been discounted with the sum of the expected dividend yield for the performance period. The expected dividend yield has been determined based on target pay-out ratio and consensus figures for net profit, divided by market capitalization. The market condition of total shareholders return was embedded in the fair value based on a Monte Carlo simulation incorporating a number of assumptions (volatility, expected dividend yield and the correlation coefficients between the share price returns of the peer companies).

In 2022, the vesting of performance shares resulted in an expense of €0.8 million which is recognized in the consolidated income statement as part of employee benefits expenses.

12 External services and other expenses

(in thousands of €)

	2022	2021
Distribution	87,797	62,486
Utilities, communication, insurance and administrative expenses	40,984	26,570
Commercial expenses	10,093	4,269
Professional service fees	29,975	28,265
Lease expenses	1,954	2,785
Other expenses	31,828	26,356
	202,631	150,731

The professional services & other expenses of 2022 include adjustments of €9.0 million (2021: €19.0 million) mainly regarding M&A activities (2021: €10.6 million). The professional services & other expenses in 2021 also include expenses with regard to the Company's IPO on Euronext Brussels (€8.4 million).

Audit fees included under professional service fees in the above table:

(in thousands of €)

	2022	2021
Audit fees
Total fees for the audit of the annual accounts	1,930	1,373
Total fees for audit by non-PWC companies	559	336
Non-audit fees paid to group auditor network
Total fees for other attestation	82	2,399
Total fees for other non-audit services (incl. tax)	7	34
	2,578	4,143

The fees for other attestation in 2021 are primarily related to the Company's IPO.

13 Net financial expenses

(in thousands of €)

	2022	2021
Financial income
Interest income	621	618
Gains on changes in fair value of derivatives	5,132	0
Other financial income	256	113
	6,008	731
Financial expenses
Interest expense on bank loans and overdrafts	-34,795	-46,948
Interest lease commitments	-3,423	-2,951
Fair value adjustment on financial liabilities	-17,585	-7,282
Transaction costs for bank loans	-1,444	-3,336
Accelerated amortization of transaction costs due to IPO	0	-19,616
Losses on changes in FV of derivative instruments	-754	0
Monetary loss on hyperinflation	-6,957	0
Foreign exchange losses	-2,093	-1,238
Other financial expenses	-12,771	-6,907
	-79,823	-88,278

The (non-cash) gain on changes in fair value of derivatives primarily relates to the interest rate cap that was entered into in May 2022. The fair value of the interest rate cap increased since then, driven by increasing market interest rates during 2022. The fair value adjustment on financial liabilities relates to acquisition-related earnout liabilities and put options on non-controlling interests. Transaction costs for bank loans of €1.4 million (2021: €3.3 million) includes the (non-cash) impact of expensing capitalized transaction costs (see note 22). At date of IPO in September 2021, the Company restructured its debt, whereas the remaining capitalized costs of €19.6 million that related to the previous and repaid financial liabilities were amortized entirely in 2021 (for the majority non-cash). The monetary loss on hyperinflation relates to the translation of foreign exchange impact regarding Azelis' subsidiaries in Turkey. The majority of the loss (€6.5 million) relates to translation of its balance sheets, funded by equity mainly, with low exposure to cash and debt in local currencies. The translation-impact on the income statement is limited (€0.5 million) as operational activities are merely settled in hard currencies (USD, EUR). The foreign exchange losses include unrealized translation of intercompany loans, mainly relating to non-EUR nominated loans to subsidiaries. Other financial expenses primarily relate to factoring fees and other bank fees.

14 Income taxes

14.1 Income tax expense

Income tax expenses in consolidated income statement

The income tax expenses consist of:

(in thousands of €)

	2022	2021
Current period tax expense (-) / income	-86,264	-51,963
Adjustments to prior years income tax expense (-) / income	-868	225
Provisions for tax risks	-203	-314
	-87,335	-52,052
Deferred tax income / loss (-)	-8,456	2,079
Total income tax income / expense (-)	-95,791	-49,973

Income tax expense consists primarily of income taxes for the current period and prior period of group companies.

The differences between the taxable income related to the Belgian tax rate and the effective tax rate are reconciled as follows:

(in thousands of €)

	2022	2021
Profit/loss (-) before tax	314,670	120,199
Income tax using the domestic corporation tax rate	-82,356	-30,050
Impact of tax in different jurisdictions with difference to domestic rate	-221	5,590
Tax effect of expenses not deductible for tax purposes	-14,659	-2,629
Tax effect of income not subject to tax	5,062	403
Recognition of previously unrecognized tax losses	1,366	-1,264
Tax losses for which no deferred income tax asset was recognized	-3,608	-18,340
Adjustments on applicable tax rate	666	593
Deferred tax asset on stand-alone carry forward losses	-13	-639
Adjustments to prior year income tax expense (income)	-1,656	0
Other	-372	-3,636
Total income tax income / expense (-) in income statement	-95,791	-49,973

The effective tax rate 2022 has been affected negatively by the following: Fair value adjustment on financial liabilities of €17.6 million (2021: €7.3 million) regarding acquisition-related earnout liabilities and put options on non-controlling interest. Per Azelis' accounting policies (Note 2.7.1), subsequent changes are accounted for in the income statement. On the basis of the further improved performance of the related acquisitions, a fair value adjustment of €17.6 million is included in the consolidated income statement, for which no tax benefit can and may be recognized.As of 30 June 2022, hyperinflationary accounting for Turkey has been applied, for which a monetary loss of €7.0 million is included in the net financial expenses, which is not tax deductible. The tax expense 2021 included a non-cash and one-off amount of €18.3 million, almost only due to the impact of moving the group's holding-location (including the funding) from Luxembourg to Belgium in view of the IPO, for which no deferred income tax asset could be recognized due to the partial unwinding of the previous Luxembourg holding-structure, refer to Note 14.3.

Income tax expenses in Consolidated Statement of Other Comprehensive Income

The tax included in other comprehensive income is related to:
(in thousands of €) | 2022 | 2021
------- | -------- | --------
Relating to actuarial gains and losses on pensions obligations | -71 | -259
| -71 | -259

14.2 Deferred taxes

Deferred tax assets and liabilities are attributable to the following:

2022 (in thousands of €)	1 January	Business combinations	Income statement	OCI	Other	Translation differences	December 31
Property, plant and equipment	-3,470	50	750	0	146	-115	-2,640
Intangible assets	-144,330	-39,421	-6,466	0	691	-671	-190,198
Inventories	5,725	2,938	537	0	360	28	9,589
Trade receivables	2,076	937	789	0	22	10	3,835
Loans and borrowings	114	0	-166	0	1,868	-24	1,792
Employee benefits	3,252	-13	293	-187	-1,954	102	1,492
Provisions, derivatives and other items	109	-268	1,172	0	-304	4	714
Untaxed reserves	10,812	0	-2,475	0	-691	698	8,344
Tax value of loss carry-forwards	877	-962	-2,891	0	-249	146	-3,078
	-124,834	-36,740	-8,456	-187	-111	178	-170,150
Deferred Tax liability							-135,315
Deferred Tax assets							10,482
	-124,834	-170,150

Based upon the level of historical taxable income and projections for future taxable income over the periods in which the deferred tax assets are deductible for the group companies, management believes it is probable that the group will realize the benefits of these deductible differences.

2021 (in thousands of €)	1 January	Business combinations	Income statement	OCI	Other	Translation differences	December 31
Property, plant and equipment	216	-1,611	-2,096	0	69	-47	-3,470
Intangible assets	-115,711	-18,115	-909	0	-4,093	-5,502	-144,330
Inventories	2,809	2,642	320	0	-261	216	5,725
Trade receivables	1,095	424	707	0	-208	58	2,076
Loans and borrowings	-1	0	1	0	113	2	114
Employee benefits	1,512	43	1,726	-258	157	72	3,252
Provisions, derivatives and other items	650	-2,264	1,286	0	489	-53	109
Untaxed reserves	4,348	0	1,508	0	4,206	749	10,812
Tax value of loss carry-forwards	1,508	170	-463	0	-343	6	877
	-103,574	-18,711	2,079	-258	129	-4,499	-124,834
Deferred Tax liability							-109,993
Deferred Tax assets							6,419
	-103,574	-124,834

Deferred tax assets and liabilities are expected to be recovered or settled over time as follows:
(in thousands of €) | Deferred tax assets | Deferred tax liabilities
------- | -------- | --------
To be recovered after more than 12 months | 9,938 | 176,320
To be recovered within 12 months | 10,667 | 14,434
| 20,605 | 190,755

14.3 Unrecognized deferred income tax assets

The following deferred tax assets related to compensable losses of group companies acquired have not been recognized:
(in thousands of €) | 2022 | 2021
------- | -------- | --------
| Gross | Tax | Gross | Tax
Tax losses | 156,017 | 39,004 | 289,102 | 72,275

Unrecognized carry forward losses of €140.2 million (2021: €171.2 million) can be used unlimited in time and €15.8 million (2021: €117.8 million for period 2022-2037) need to be used during the period 2023-2037. No deferred tax assets have been recognized on these carry forward losses, due to the fact that they do not meet the recognition criteria to recognize a deferred tax asset. The group may have unrecognized tax liabilities in respect of taxable temporary differences relating to non-distributed reserves of one of its subsidiaries that would be taxed when distributed. No deferred tax liability has been recognized because the group controls whether the liability will be incurred and management is satisfied that the liability will not be incurred in the foreseeable future.

Notes to the consolidated statement of financial position

15 Intangible assets

	Goodwill	Trade- marks	Distribution rights	Concessions and licenses	Develop-ment cost	Customer lists	Other	Intangibles in progress	Total
As of December 31, 2020
Cost	1,345,937	317,378	546,136	6,194	6,195	3,971	6,630	3,250	2,235,691
Accumulated amortization and impairment	-	-	-	-58,539	-3,781	-211	-489	-2,269	-3,106
	1,345,937	317,378	487,597	2,413	5,984	3,482	4,361	144	2,167,296
Changes in 2021
Business combination	381,469	-	175,571	3,048	-	-	336	-	560,424
Additions	-	-	1,140	72	1,833	436	7,240	649	11,370
Amortization	-	-	-33,949	-355	-1,698	-472	-3,007	-	-39,480
Disposals	-3	-	-3	18	-	-	-6	-	6
Reclassifications	-56	-	131	-1,824	-2,578	3	4,543	1,307	1,527
Translation differences	75,919	-	29,822	164	0	239	200	38	106,382
Changes in the Period	457,330	-	172,712	1,122	-2,443	206	9,307	1,994	640,228
As of December 31, 2021
Cost	1,803,267	317,378	752,800	7,654	5,450	4,648	18,949	5,245	2,915,394
Accumulated amortization and impairment	-	-	-92,491	-4,118	-1,909	-961	-5,282	-3,106	-107,870
	1,803,267	317,378	660,309	3,535	3,541	3,688	13,668	2,139	2,807,524
Changes in 2022
Business combination	360,276	-	201,794	316	345	-	1,519	-	564,250
Additions	-	-	1,644	56	2,044	1,028	4,604	1,690	11,067
Amortization	-0	-	-45,061	-584	-1,995	-703	-8,507	-	-56,850
Disposals	-3	-	-160	7	-0	-	-261	-16	-433
Reclassifications	-5	-	253	-35	-100	13	1,635	-1,571	191
Hyperinflation	15,208	-	4,734	6	-	-	8	-	19,956
Translation differences	-4,487	-	3,450	155	-0	-20	-83	23	-962
Changes in the Period	370,989	-	166,655	-79	293	319	-1,085	126	537,218
As of December 31, 2022
Cost	2,174,256	317,378	964,516	8,159	7,738	5,670	26,372	5,371	3,509,462
Accumulated amortization and impairment	-0	-	-137,552	-4,702	-3,904	-1,663	-13,789	-3,106	-164,720
	2,174,256	317,378	826,964	3,456	3,834	4,007	12,583	2,265	3,344,742

The trademark relates to the Azelis name. Azelis uses its name globally, and its trade name is considered to be a key asset of its distribution activities given its status of major distributor in the specialty chemicals sector. The name both supports the group to onboard principals and customers, and for acquisition targets that want to become part of the group as they know that their business will grow being part of it. The Azelis trademark is estimated to have an indefinite economic life for amortization purposes; therefore, effectively no amortization expenses are being booked through Azelis' income statement. The total value of €317.4 million as of December 31, 2022 originates entirely from the EQT/PSP acquisition in November 2018 and remained unchanged since that date. The translation differences of €1.0 million loss (2021: €106.4 million gain) are recognized in other comprehensive income and accumulated in the translation reserve within equity. Reference is made to note 21.5.

15.1 Allocation of assets for impairment testing

A cash-generating unit (CGU) is the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets. For the purpose of impairment testing, goodwill is allocated to the following groups of CGUs:
(in thousands of €) | 31-12-2022 | 31-12-2021
------- | -------- | --------
EMEA | 733,032 | 616,570
AMERICAS | 1,119,304 | 919,385
ASIA PACIFIC | 321,919 | 267,311
Total Goodwill | 2,174,256 | 1,803,266

All goodwill acquired in the business combinations has been allocated to a regional CGU at the end of the reporting period. The goodwill is allocated on regional level as it is the group's regions that are expected to benefit of the business combinations, and as goodwill is also monitored internally on the regional level. The group's expectation is that synergies will be realized in the region of acquisition. Trademarks with a book value of €317.4 million (2021: €317.4 million) have an indefinite life. These do not generate cash inflows independently and qualify as corporate assets. As their carrying amount cannot be allocated to the regional CGUs on a reasonable and consistent basis, the corporate assets are allocated to the group as a whole and the impairment test is performed in two stages.

15.2 Impairment assessment

The impairment tests have been performed by discounting future pre-tax cash flows from continuing operations of the unit. The recoverable amounts of the regional CGU's as of December 31, 2022 have been determined based on a value in use calculation using cash flow projections from a five year detailed business plan which is approved by senior management and serves as a basis to determine the future free cash flows and the Adjusted EBITA’s. The business plan is based on the market growth assumptions and on some general economic indicators (inflation, GDP, etc.). It also properly reflects the future strategy of the regional CGU's. For cash flows beyond the business plan period, an extrapolation was made based on steady terminal growth rates. The key assumptions used in the impairment tests are the pre-tax WACC, terminal growth rate and Adjusted EBITA margin. The pre-tax WACC is estimated per regional CGU, is consistent with external sources of information, and varies mainly due to differences in risk free rates that increased during 2022. The risk-free rates per regional CGU are based on the weighted average of the rate of return on local sovereign bonds. The terminal growth rates are based on industry benchmarks by region and are consistent with the group's past experience and based on external sources of information. Adjusted EBITA margin reflects the group's past experience and future expectation of regional business development. The key assumptions used for the second stage impairment test, on the level of the group as a whole including corporate asset, are identical to those used for the regional CGU impairment tests.The values attributed to pre-tax WACC and the growth rates are as follows:

Cash Generating Unit	2022-2023 assumptions	Pre-tax WACC	Growth rate for terminal value	EBITA%
EMEA	2023-2027	14.55%	3.2%	11.6%
AMERICAS		12.99%	2.6%	13.7%
ASIA PACIFIC		12.81%	5.2%	8.2%

Cash Generating Unit	2021-2022 assumptions	Pre-tax WACC	Growth rate for terminal value	EBITA%
EMEA	2022-2026	10.67%	3.0%	10.4%
AMERICAS		8.56%	2.5%	12.4%
ASIA PACIFIC		11.08%	5.0%	7.7%

The increase versus 2021 of the pre-tax WACC is primarily driven by increased market risk-free rates, that have been increasing during 2022 across the globe. The impairment tests on the recoverable amount of regional CGU's show sufficient headroom on the carrying amount of the Goodwill. In the second stage impairment test, the recoverable amount of the regional CGU's considered as a whole exceeds the carrying amount of the regional CGU's including the carrying amount of the corporate assets.

Sensitivity to changes in assumptions

In order to test the resilience of the headroom against changes in key assumptions, Azelis has selected reasonably expectable changes in the assumptions as follows:

A WACC increase by 2%
A decrease of the growth rate in the terminal value by 2%
A decrease of Adjusted EBITA margin by 0.5%

Versus previous years, also a sensitivity test of Adjusted EBITA has been added, as Adjusted EBITA (rather than Sales) is the major indicator for the outcome of Azelis' impairment test. Azelis' cost base is predominantly variable in nature, enabling to react rapidly on (downward) exposure of revenue, limiting the possible impact on Adjusted EBITA. A sensitivity of 0.5% in Adjusted EBITA margin would result in a decrease of almost 5% in Adjusted EBITA (in EUR). In each of the above independent scenario's and for each regional CGU, the sensitivity test shows sufficient headroom on the carrying amount of the Goodwill.

16 Tangible assets

16.1 Property, plant and equipment

As of December 31, 2020	Land and buildings	Plant and equipment	Other	Total
Cost	19,612	7,787	12,963	40,362
Accumulated depreciation and impairment	-1,767	-2,089	-4,201	-8,057
	17,845	5,698	8,762	32,304

Changes in 2021	Land and buildings	Plant and equipment	Other	Total
Business combination	11,412	6,276	974	18,661
Additions	192	1,379	5,751	7,321
Depreciation	-839	-1,003	-2,849	-4,692
Disposals	-29	-115	-306	-450
Reclassifications	-45	-3,413	2,254	-1,204
Translation differences	430	390	248	1,067
Changes in the Period	11,121	3,513	6,070	20,704

As of December 31, 2021	Land and buildings	Plant and equipment	Other	Total
Cost	31,572	12,303	21,883	65,757
Accumulated depreciation and impairment	-2,606	-3,092	-7,050	-12,750
	28,966	9,211	14,832	53,008

Changes in 2022	Land and buildings	Plant and equipment	Other	Total
Business combination	2,060	480	2,420	4,961
Additions	394	1,930	7,350	9,674
Depreciation	-1,538	-1,784	-4,131	-7,453
Disposals	-1,508	-22	-334	-1,865
Reclassifications	-107	387	-1,225	-946
Hyperinflation	-	8	186	195
Translation differences	80	108	122	310
Changes in the Period	-619	1,105	4,389	4,876

As of December 31, 2022	Land and buildings	Plant and equipment	Other	Total
Cost	32,491	15,193	30,403	78,086
Accumulated depreciation and impairment	-4,144	-4,877	-11,182	-20,203
	28,347	10,316	19,221	57,884

The reclassifications relate mainly to internal project costs which are recognized at year-end as intangibles. The category 'Other' mainly relates to leasehold improvements, comprising also an insignificant amount of assets under construction.

Security
At 31st December 2022, the group has not pledged any land and buildings, plant and equipment as security for the bank loans (2021: zero). Other restrictions are mainly related to leasehold improvements and leased machinery.

16.2 Right of use assets

The Right of Use assets are included since 1 January 2019, following the implementation of IFRS 16 as per that date, and relate to rental agreements for offices, warehouses and cars.

	Land and buildings	Other	Total
At 31 December 2020
Cost	63,227	17,956	81,183
Accumulated depreciation and impairment	-17,175	-8,351	-25,526
	46,052	9,605	55,657

Changes in 2021	Land and buildings	Other	Total
Business combination	9,097	155	9,252
Additions	8,814	3,105	11,920
Depreciation	-10,424	-4,785	-15,208
Disposals	-32	-46	-78
Remeasurements	1,358	586	1,944
Translation differences	2,117	-20	2,097
Changes in the Period	10,930	-1,005	9,925

At 31 December 2021	Land and buildings	Other	Total
Cost	84,580	21,736	106,316
Accumulated depreciation and impairment	-27,599	-13,136	-40,734
	56,981	8,600	65,582

Changes in 2022	Land and buildings	Other	Total
Business combination	10,916	432	11,348
Additions	23,862	4,055	27,917
Depreciation	-15,230	-5,080	-20,310
Disposals	-824	-103	-927
Remeasurements	11,605	1,006	12,611
Hyperinflation	190	608	798
Translation differences	56	-92	-36
Changes in the Period	30,574	826	31,400

At 31 December 2022	Land and buildings	Other	Total
Cost	130,385	27,642	158,027
Accumulated depreciation and impairment	-42,829	-18,215	-61,045
	87,555	9,426	96,982

Remeasurements mainly relate to the prolongation of the lease period of existing contracts. The group has lease contracts that have not yet commenced as of December 31, 2022, with the future lease payments of around €27.0 million.

17 Investments in associates

Azelis holds a 50% investment in Chemlog S.A.S. (refer to note 26.4). Chemlog's aggregated figures are presented as follows:

(in thousands of €)	31 December 2022	31 December 2021
Assets	863	863
Liabilities	393	393
Equity	470	470
Revenue	1,738	1,617
Net result for the period	131	131

18 Inventories

(in thousands of €)	31-12-2022	31-12-2021
Inventories	687,540	506,379
Valuation allowance/write downs	-59,804	-38,906
Net carrying amount of inventories	627,735	467,473

Azelis' inventories mainly consist of finished goods. Usage of inventories is recorded in the "costs for goods and consumables" in the consolidated income statement. In 2022 an impairment on inventory of €17.2 million (2021: €9.6 million) is included in the "costs for goods and consumables".

19 Trade and other receivables

(in thousands of €)	31-12-2022	31-12-2021
Trade receivables	443,288	375,591
Other receivables	95,093	53,359
	538,381	428,950

See note 4.1.1 for ageing and allowance of these receivables. Other receivables relate mainly to prepayments.

20 Cash and cash equivalents and bank overdrafts

(in thousands of €)	31-12-2022	31-12-2021
Bank balances and cash on hand	268,160	141,293
Bank overdrafts (-)	-30,412	-40,524
Cash and cash equivalents (net) in the cash flow statement	237,749	100,769

Interest rates payable for bank overdrafts used have a variable interest rate based on Euribor plus a margin. The cash and cash equivalents are at free disposal of the group.

21 Capital and reserves

As per Belgian regulations and articles of incorporation of the Company, Azelis has to allocate to legal reserve a minimum of 5% of the standalone net profit, if any and until such reserve reaches 10% of the share capital, distribution of the legal reserve is restricted. As of December 31, 2022, the legal reserve amounts to zero (2021: zero).

21.1 Earnings per share

Given the limited legal life of Azelis Group NV in 2021, and taking into account the capital reorganization under common control during that year, the comparative earnings per share are presented based on the total number of shares of Azelis Group NV as if the shares issued for the contribution in kind of Akita Topco S.à r.l. and the IPO were outstanding for the full year 2021. The basic earnings per share and diluted earnings per share are calculated as:

	31-12-2022	31-12-2021
Net group profit/loss (-) attributable to shareholders (in thousands of €)	213,193	67,756
Average number of shares (in thousand shares)	233,750	233,846
Basic earnings per share	0.91	0.29
Dilution adjusted average number of shares (in thousand shares)	233,915	233,846
Diluted earnings per share	0.91	0.29

The average number of shares are calculated as:

(in thousands)	31-12-2022	31-12-2021
Ordinary shares issued (entitled to dividend)	233,846	233,846
Weighted effect of treasury shares	-96	0
Weighted effect of new ordinary shares issued	0	0
Average number of shares for basic EPS	233,750	233,846
Weighted effect of share-based payment	166	0
Average number of shares for diluted EPS	233,915	233,846

21.2 Share capital

There were no changes in the share capital during 2022. During 2021, the following share transactions have occurred:

On 10th June, Azelis Group NV was established by issuance of 61,500 shares, for a share capital of €61,500;
On 21st September the 61,500 shares, created on 10th June, were cancelled by a capital decrease and the share capital of €61,500 was repaid to the founding shareholder;
On 21st September, all preference and ordinary shares in Akita Topco S.à r.l. were contributed to Azelis Group NV in exchange for 195,539,251 shares issued by Azelis Group NV, each at a fractional value of €26, resulting in a capital increase by €5,084,020,526;
On 21st September, shares in Azelis Finance NV were contributed in exchange for the issuance of 4,460,749 shares by Azelis Group NV, each at a fractional value of €26, resulting in a capital increase by €115,979,474;
On 21st September, in connection with the group's IPO and listing on Euronext Brussels, 33,846,153 shares were issued, each at a fractional value of €26, resulting in a capital increase by €879,999,978 million
On 21st September, the capital of Azelis Group NV was reduced by €400 million, without destruction or repayment of shares, for the purpose of creating distributable reserves

The subscribed share capital has been fully paid. As of December 31, 2022, a total of 233,846,153 shares (2021: 233,846,153 shares) has been issued without nominal value, representing a total share capital of €5.68 billion.

21.3 Share premium

Share premium reflects the additional paid-in capital exceeding the par value of the issued shares. Subject to the group's capital reorganization under common control and the IPO on Euronext Brussels in September 2021, the shares issued in the capital increases (contribution in kind of Akita Topco S.à r.l. and IPO) were all issued at fractional value of €26 per share. As a result, the group currently has zero share premium.## 21.4 Other reserves

Other reserves is part of the Reserves in the consolidated statement of financial position. It includes the equity effect of the capital reorganization under common control in 2021, mainly due to the cancellation of the share capital and share premium of Azelis Holding S.à r.l., written put options on non-controlling interests, transactions with treasury shares and other adjustments to equity. During 2022, the group has recognized put options related to the minority stakes in Catalite, Umongo and Ashapura for a total amount of €70.5 million. In 2022, the group has purchased 133,400 treasury shares on Euronext Brussels for a total amount of €3.0 million to fund its long-term incentive plan.

21.5 Translation reserve

Translation reserve is part of the Reserves in the consolidated statement of financial position. Exchange differences arising on translation of the foreign controlled entities are recognized in other comprehensive income and accumulated in the translation reserve within equity. The cumulative amount is reclassified to profit or loss when the net investment is disposed of. The majority of the intangible assets on Azelis' statement of financial position relate to the EQT/PSP Acquisition in November 2018. The respective amounts have been allocated to Azelis' three operating segments, and per IFRS also on the basis of the underlying foreign currencies in Azelis' respective jurisdictions (of which a major part relates to Azelis' activities in the United States). Exchange differences arising on translation of the intangible assets are recognized in other comprehensive income and accumulated in the translation reserve within equity.

21.6 Retained earnings

Retained earnings includes the unappropriated result of previous years.

21.7 Reserves available for distribution

Reserves available for distribution is part of the Reserves in the consolidated statement of financial position. In September 2021, and in connection with Azelis' IPO, the group reduced its share capital by €400 million against reserves available for distribution, in order to create funds for distribution to the shareholders. No capital contributions were repaid to the shareholders in the context of this capital reduction. On March 1, 2023, a dividend of €67.8 million, implying €0.29 dividend per share1, was proposed by the Board of Directors. The dividend will be paid out to the shareholders upon approval by the shareholder's meeting on June 8, 2023. The dividend relating to 2021 of €0.03 per share or €7.0 million was calculated pro rata such that dividend would only be paid in respect to the portion of the financial year for which the group's shares are listed on Euronext Brussels. This dividend was approved by the shareholder's meeting on 9 June 2022 and paid in full during the year 2022. Based on 2022 net profit attributable to equity shareholders of €213.2 million and 233.8 million shares outstanding as of December 31, 2022.

21.8 Non-controlling interests

Non-controlling interests reflects the share of equity ownership in the group's subsidiaries that is not owned by the group, even though those subsidiaries are consolidated in the group's consolidated financial statements. Ashapura Aromas Private Limited, MKVN Chemicals Co. Ltd, Asia Primera Kimika Inc., Phil-Asiatic Supply & Services Inc. and Catalite Co. Ltd are the main contributors for the non-controlling interests, refer also to note 26.4.

22 Loans and borrowings

The group’s debt finance consists mainly of the following financial instruments:

2022 (in thousands of €)

Interest rate (base)	Interest rate (margin)	Duration	Notional amount	Carrying amount
€ 1.74%	1.75%	2021-2026	900,000	894,667
GBP 1.60%	2.00%	2021-2026	145,209	144,349
1.10%	1.50%	2021-2027	100,000	100,000
2.63%	1.9%-2.1%	2025-2027	21,500	21,409
2,69%	- 10,73%	2018-2026	131,668	131,668
				11,624
			1,310,001	1,303,717
				1,184,678
				125,323
			1,310,001	1,303,717

2021 (in thousands of €)

Interest rate (base)	Interest rate (margin)	Duration	Notional amount	Carrying amount
0.00%	2.25%	2021-2026	640,000	635,533
0.17%	2.50%	2021-2026	153,270	152,201
0.00%	2.00%	2021-2026	40,000	40,000
0,58%	- 5,62%	2018-2026	69,249	69,249
				5,652
			908,171	902,634
				845,567
				62,604
			908,171	902,634

22.1 Changes in loans and borrowings

22.1.1 Loans and borrowings (in thousands of €)

	2022	2021
As of January 1	902,634	1,210,817
Cash flows from loans and borrowings	343,846	-400,295
Transaction costs paid	-2,191	-8,338
Changes arising from business combinations	66,054	78,607
Accelerated amortization of transaction costs due to IPO	-	19,616
Capitalized transactions cost amortized	1,444	3,358
Changes in interest accruals	5,972	-19,100
Currency translation differences	-14,043	17,971
As of December 31	1,303,717	902,634

A total of €6.3 million (net book value) of transaction costs have been capitalized and are amortized over the lending period. Incremental Facility & RCF extension Within the context of the IPO on Euronext Brussels, and partly with the proceeds of the IPO, the group has repaid its existing bank borrowings in September 2021. At the same time the group has attracted new bank borrowings from a new lender's syndicate in the form of a Term Loan Facility (€640 million and GBP 128.8 million) and a Revolving Credit Facility (€260 million). In April 2022, the group has drawn an Incremental Facility of €260 million on its € Term Loan Facility by converting €260 million drawn on the RCF to the Term Loan, totaling to €900 million. At the same time, the Revolving Credit Facility was extended from €260 million to €350 million with simultaneous extension of length until 2027. Floating interest rates are based on EURIBOR for borrowings drawn in € and SONIA for borrowings drawn in GBP (both capped at a floor of 0%), and a margin based on the group's total Net Leverage. The margin is capped at 2.25% and 2% for the € Term Loan Facility, 2.50% for the GBP Term Loan Facility and 2.00% for the Revolving Credit Facility. In addition, the applicable margins going forward will be subject to +/-10 basis point adjustment depending on the satisfaction of certain ESG criteria. Interest rate cap In accordance with its policy on managing the risk related to interest rates (refer to the Risk management section in the Annual Report 2021) and taking into account the global interest rate developments in the first half year of 2022, Azelis has entered into two interest rate cap agreements for a total loan amount of €700 million, providing the group with an interest rate cap of 3% on EURIBOR. Schuldscheindarlehen In December 2022 the group obtained a bond type semi-private financing of €150.5 million, a so-called Schuldscheindarlehen. The maturity dates range from 2024 until 2029. Interest charges are partly fixed (4.74% plus margin 2.1%) and partly floating (6m Euribor plus margin 1.9%-2.5%). The financial covenants and related leverage ratio of the Schuldschein are aligned with Azelis' Multicurrency Term and Revolving Facilities Agreement that was entered into during September 2021. The Schuldschein can be repaid in advance under certain conditions. At the reporting date the amount of €129 million was unused.

22.1.2 Lease liabilities (in thousands of €)

	2022	2021
As of January 1	69,278	58,058
New contracts	39,331	21,507
Remeasurements	12,610	2,352
Cash out	-22,795	-14,846
Currency translation differences	3,134	2,207
As of December 31	101,558	69,278

For disclosure on the group's right-of-use assets, refer to note 16.2 Right of use assets.

22.2 Other facilities

In addition to cash balances, as of December 31, 2022, the group maintained the following lines of credit: €180.4 million (2021: €95.3 million) uncommitted local credit facility, that concerns local credit lines given by local banks and can be revoked as any standard bank credit line. Interest would be payable at the maximum rate of EURIBOR plus 5.00%. As of December 31, 2022, €162.0 million (2021: €69.3 million) was utilized. €350 million Revolving Credit Facility, of which €100 million has been utilized (2021: €260 million facility of which €40 million utilized). Therefore, as of December 31, 2022, €250 million (2021: €220 million) committed facility was unused. Interest would be payable at the maximum rate of EURIBOR plus 2.00%.

22.3 Covenants

The financing arrangements since September 2021 of Azelis Group NV and its subsidiaries contain a financial maintenance covenant, being the total Net Leverage Ratio, which needs to be less than 4.75 : 1.00 (decreasing to 4.50 : 1.00 in 2024) and is tested twice annually. As of December 31, 2022, the total Net Leverage Ratio is 2.2 : 1.0 (2021: 2.7 : 1.0), therefore the group complied with the financial covenants. The group monitors the compliance with the covenants on the basis of the monthly reporting process and the continuous cash flow forecasts.# 23 Provisions (in thousands of €)

Tax Claims	Other provisions	Total
As of January 1 2021	2,745	2,115
Business combination	446	836
Provisions made	253	1,246
Provisions used	-13	-109
Provisions released	-962	-574
Translation differences	113	11
As of December 31, 2021	2,582	3,525
Non-current	1,982	2,145
Current	601	1,380
Total	2,583	3,525
2022
Business combination	0	136
Provisions made during the period	1,140	3,190
Provisions used during the period	0	-355
Provisions released during the period	-671	-1,299
Reclassification	0	0
Translation differences	-55	-53
As of December 31, 2022	2,996	5,144
Non-current	2,433	2,163
Current	563	2,981
Total	2,996	5,144

The provisions relate to tax risks, administrative fines, labor and commercial matters including claims and litigations, concerning the past and current activities of the group companies.

24 Trade and other payables and other non-current liabilities (in thousands of €)

	31-12-2022	31-12-2021
Trade payables	462,728	368,657
Other taxes	11,805	6,618
Employee and social security payables	87,505	71,227
Derivatives	377	155
Other payables	209,272	94,417
Total current payables	771,686	541,074
Other payables	98,264	9,655
Other non-current liabilities	98,264	9,655

The other current and non-current payables mainly consist of put options over non-controlling interests totaling €115.1 million (2021: €31.2 million), and earnouts and deferred payments in connection with acquisitions.

Other notes to the consolidated financial statements

25 Capital commitments and contingencies

As of December 31, 2022, the group has issued unsecured corporate guarantees toward third parties for a total aggregate amount of €77.3 million (2021: €26.5 million).

The group has been constantly gearing up its structure for future growth. In order to support this growth, the structure of the group has been regularly improved by means of integrating acquired businesses, restructuring of legal entities and the continuous process of adapting the legal structure to economic reality, creation of a shared service center and creation of headquarters. These continued structural improvements were made to the best efforts and considering to the maximum extent possible all legal and local tax matters.

There are no tax and other contingencies as of December 31, 2022 (for 2021: none). The group monitors closely the possible risks and potential implications.

26 Related parties

26.1 Identity of related parties

The group has a related party relationship with certain of its subsidiaries, shareholders, managers, executive officers and associates. The group has one minor investment in associates, see Note 17.

26.2 Loans to or from related parties

As of December 31, 2022, there are no significant outstanding loans to or from related parties.

26.3 Key personnel remuneration (in thousands of €)

	31-12-2022	31-12-2021
Board members (non-executive)	327	281
Other members of key management personnel
Fixed remuneration	3,198	2,894
Variable remuneration	2,804	4,256
	6,329	7,431

Post-employment benefits: Details of the transactions between the group and its pension plans are disclosed in Note 11.

26.4 Group entities

The following table lists the group’s subsidiaries:

Name	Country of incorporation	Type	% of interest 2022	% of interest 2021
Consolidated companies
Azelis Group NV (formerly Akita Midco 1 NV)	Belgium	Non-operating Parent company	Parent company	Parent company
Direct Investments
Azelis Finance NV (formerly Akita Midco 2 NV)	Belgium	Non-operating	100	100
Indirect Investments
Orkila Algérie spa	Algeria	Operating	100	100
Azelis Australia Pty Ltd	Australia	Operating	100	100
Chemcolour Industries Australia Pty Ltd	Australia	Operating	100	100
TimTechChem Australia Pty Ltd	Australia	Operating	100	100
EB1 Pty Limited	Australia	Operating	100	100
CW Pacific Specialties Pty Limited	Australia	Operating	100	100
Elle Bee Exports Pty Limited	Australia	Operating	100	100
CW Pacific Pty Ltd	Australia	Operating	100	100
Azelis Austria GmbH	Austria	Operating	100	100
Azelis Benelux N.V.	Belgium	Operating	100	100
Azelis Corporate Services N.V.	Belgium	Non-operating	100	100
Azelis EMEA Hub NV	Belgium	Operating	100	100
Chemical Partners Europe NV	Belgium	Operating	100	0
Chemical Partners Africa NV	Belgium	Operating	100	0
Azelis Bulgaria EAD	Bulgaria	Operating	100	100
Azelis Canada Inc.	Canada	Operating	100	100
Azelis China Ltd	China	Operating	100	100
Azelis (Shanghai) Co. Ltd.	China	Operating	100	100
Azelis (Shanghai) International Trading Co., Ltd	China	Operating	100	100
Azelis Hong Kong Ltd	China	Operating	100	100
Beijing CosBond Trading Co. Ltd	China	Operating	100	100
CosBond China Ltd	China	Operating	100	100
CosBond (Shanghai) International Trading Co. Ltd	China	Operating	100	100
Ingredients Plus (Hong Kong) Limited.	China	Operating	100	100
Ingredients Plus (Shanghai) Co., Ltd.	China	Operating	100	100
Ingredients Plus (Guangzhou) Co., Limited	China	Operating	100	100
WWRC (China) Holdings Ltd	China	Operating	100	100
WWRC Hong Kong Co. Ltd	China	Operating	100	100
WWRC Guangdong Co. Ltd	China	Operating	100	100
WWRC Tianjin Co. Ltd	China	Operating	100	100
WWRC Chengdu Co. Ltd	China	Operating	100	100
WWRC Shanghai Co. Ltd	China	Operating	100	100
Friendship Chemical company Ltd	China	Operating	100	100
Rocsa Colombia S.A.	Colombia	Operating	63	0
CI Inproquim Exports SAS	Colombia	Operating	63	0
Rocsa DCR SA	Costa Rica	Operating	63	0
Azelis Croatia D.O.O.	Croatia	Operating	100	100
Azelis Czech Republic S.R.O.	Czech Republic	Operating	100	100
Azelis Denmark A/S	Denmark	Operating	100	100
Rocsa RD SA	Dominican Republic	Operating	63	0
Orkila Egypt Chemicals SAE	Egypt	Operating	99	99
Orchem for Import and Export LLC	Egypt	Operating	49	49
Azelis Finland OY	Finland	Operating	100	100
Azelis France S.A.S	France	Operating	100	100
Azelis France Holding S.A.S	France	Operating	100	100
Quimdis SAS	France	Operating	100
Naturchim SARL	France	Operating Dissolved	100
Jerafrance SAS	France	Operating Dissolved	100
Azelis Deutschland GmbH	Germany	Operating	100	100
Azelis Deutschland Holding GmbH	Germany	Operating	100	100
Azelis Deutschland Immobilien GmbH	Germany	Operating	100	100
Azelis Deutschland Kosmetik GmbH	Germany	Operating	90	90
Quimdis GmbH	Germany	In liquidation	100
Azelis Chemicals Ghana Ltd	Ghana	Operating	100	100
Azelis Greece Single Member SA	Greece	Operating	100	100
Rocsa GT SA	Guatemala	Operating	63	0
Azelis Hungary Kft.	Hungary	Operating	100	100
Azelis India Private Ltd	India	Operating	100	100
Ashapura Aromas Private Limited	India	Operating	70	0
PT Azelis Indonesia Distribusi	Indonesia	Operating	100	67
Azelis Ireland Ltd	Ireland	Operating	100	100
Azelis Israel Distribution Ltd	Israel	Operating	100	100
Azelis Italia Logistica S.r.L	Italy	Operating	100	100
Azelis Italia S.r.L	Italy	Operating	100	100
Deafarma S.r.l.	Italy	Operating	100	100
Came Chemical Mineral and Engineering S.r.l.	Italy	Operating	100	100
Eurotrading SpA	Italy	Operating	100	0
Azelis Côte d'Ivoire S.A.	Ivory Coast	Operating	100	100
Azelis Japan K.K.	Japan	Operating	100	100
Orkila Jordan LLC	Jordan	Operating	50	50
Azelis Kenya Ltd	Kenya	Operating	100	100
Azelis Korea Co. Ltd	Korea	Operating	100	100
Coseal Co., Ltd.	Korea	Operating	100	100
Orkila Holding SAL	Lebanon	Operating	100	100
Azelis Lebanon SAL	Lebanon	Operating	100	100
Azelis International (Offshore) SAL	Lebanon	Operating	100	100
Chempart Polymers SAL Offshore	Lebanon	Operating	100	0
Chemical Partners Middle East SAL	Lebanon	Operating	100	0
Akita Topco S.à r.l.	Luxembourg	Non-operating	100	100
Azelis S.A.	Luxembourg	Non-operating	100	100
Azelis Malaysia Sdn Bhd	Malaysia	Operating	100	100
Chemical Solutions Sdn Bhd	Malaysia	Operating	100	0
Azelis Mexico SA de CV	Mexico	Operating	100	100
Azelis Morocco Sarl	Morocco	Operating	100	100
Orkila Invest SA	Morocco	Operating	100	100
Azelis Nigeria Specialty Chemicals Ltd	Nigeria	Operating	100	100
Azelis Norway AS	Norway	Operating	100	100
Azelis New Zealand Ltd	New Zealand	Operating	100	100
Element Trading SAC	Peru	Operating	63	0
Asia Primera Kimika Inc.	Philippines	Operating	51	51
Phil-Asiatic Supply & Services Inc.	Philippines	Operating	51	51
Azelis Poland SP Z.o.o	Poland	Operating	100	100
Azelis Romania SRL	Romania	Operating	100	100
Azelis Rus LLC	Russia	Operating	100	100
Azelis Senegal SA	Senegal	Operating	100	100
Azelis d.o.o Beograd	Serbia	Operating	100	100
Azelis Singapore Pte. Ltd	Singapore	Operating	100	100
Bellekimia Singapore Pte. Ltd.	Singapore	Non-operating	51	51
Azelis Slovakia S.R.O.	Slovakia	Operating	100	100
Orkila South Africa (Pty) Ltd	South Africa	Operating	100	100
Umongo Petroleum (Pty) Ltd	South Africa	Operating	90	0
Orbichem Petrochemicals (Pty) Ltd	South Africa	Operating	90	0
Azelis España S.A.	Spain	Operating	100	100
Azelis Iberia Holding SL.	Spain	Operating	100	100
Azelis Espana Holding SL	Spain	Operating	100	100
Azelis Sweden AB	Sweden	Operating	100	100
Azelis Switzerland AG	Switzerland	Operating	100	100
Azelis Thailand Ltd	Thailand	Operating	100	100
Catalite Co. Ltd	Thailand	Operating	51	0
Azelis Netherlands B.V.	The Netherlands	Operating	100	100
Azelis Tunisie Sarl	Tunesia	Operating	100	100
Azelis TR Kimya End. Ur.Ith.Ihr.Tic ve San A.S.	Turkey	Operating	100	100
Tunçkaya Kimyevi Ticaret Ve Sanayi Anonim Şirketi	Turkey	Operating	100	0
Dağaltı Kauçuk ve Kİmyevİ Maddeler Sanayİ Tİcaret Anonİm Şİrketİ	Turkey	Operating	100	0
Azelis Ukraine LLC	Ukraine	Operating	100	100
Orkila FZE	United Arabic Emirates	Operating	100	100
Azelis UK Holdings Ltd.	United Kingdom	Operating	100	100
Azelis UK Life Sciences Ltd.	United Kingdom	Operating	100	100
Azelis UK Ltd.	United Kingdom	Operating	100	100

Part of the growth trajectory of Azelis is expansion through strategic acquisitions, complementary to the corporate strategy of organic growth. As of December 31, 2022, the following transactions were not closed, but are closed (or are expected to close) in 2023. In January 2023, Azelis signed an agreement to acquire 100% of the shares of Lidorr Elements ("Lidorr"), one of Israel's leading specialty chemical distributors in crop-protection, industrial materials, and care & nutrition. The acquisition expands Azelis’ footprint in Israel, further building on its growing network in the region following the acquisition of Orokia in 2020. Lidorr’s wide portfolio of hundreds of products significantly strengthens Azelis’ lateral value chain in the Agricultural & Environmental Solutions as well as in Advanced Materials & Additives market segments.

On January 10, 2023, Azelis acquired 100% of the shares of the shares of Smoky Light B.V. ("Smoky Light"), a well-established distributor in the Benelux smoke ingredients market. The acquisition reinforces Azelis’ position in the Benelux market and expands its footprint in the smoke ingredient market in EMEA. Smoky Light’s portfolio of products strategically complements the group’s lateral value chain for the food & nutrition market, thereby further expanding its expertise and product offering to customers.

On January 31, 2023, Azelis acquired 100% of the shares of Chemiplas Agencies Ltd (“Chemiplas”), one of the leading distributors of specialty chemicals, plastic raw materials and ingredients in Australia, New Zealand and the Pacific Islands. The acquisition significantly expands Azelis’ footprint and accelerates its growth in Asia Pacific. The addition of Chemiplas’ attractive portfolio of products from key principals strategically complements the group’s lateral value chain, strengthening market coverage and formulation expertise. This allows the group to provide even more innovative solutions to customers, thereby reinforcing its position in Australia and New Zealand.

These acquisitions are expected to be funded from the group’s current existing liquidity, as well as an amount of €129 million under Schuldschein credit facility that was unused as of December 31, 2022. No material subsequent events after December 31, 2022 have been identified that may have had a material or significant effect on the 2022 consolidated financial statements.

Statutory financial statements

The following information is extracted from the separate Belgian GAAP financial statements of Azelis Group NV. These separate financial statements, together with the management report of the Board of Directors to the general assembly of shareholders as well as the auditor’s report, will be filed with the National Bank of Belgium within the legally foreseen time limits. These documents are also available on request from: Posthofbrug 12 box 6, 2600 Antwerp, Belgium.

It should be noted that only the consolidated financial statements as set forth above present a true and fair view of the financial position and performance of the Group, and these separate financial statements present no more than a limited view of the financial position of Azelis Group NV, being a holding company which recognizes its investments at cost in its non-consolidated financial statements. For this reason, the Board of Directors deemed it appropriate to publish only an abbreviated version of the non-consolidated statement of financial position for the year ended 31 December 2022 and the income statement for the year then ended (2021: the income statement for the period 10 June 2021 to 31 December 2021) prepared in accordance with Belgian GAAP. The abbreviated non-consolidated statement of financial position for the year ended 31 December 2022 and the income statement for the year then ended (2021: the income statement for the period 10 June 2021 to 31 December 2021) of Azelis Group NV prepared in accordance with Belgian GAAP are consistent, in all material respects, with the accounts from which they have been derived.

Abbreviated non-consolidated statement of financial position

(in thousands of €)	2022	2021
Intangible assets	304	-
Financial assets	6,023,100	6,023,000
Non-current assets	6,023,404	6,023,000
Current assets	36,960	13,836
Total assets	6,060,364	6,036,836
Share capital	5,680,000	5,680,000
Reserves not available for distribution	2,999	-
Reserve available for distribution	322,209	392,985
Unappropriated result	-56,495	-57,006
Equity	5,948,713	6,015,979
Non-current liabilities	3,853	-
Current liabilities	107,798	20,857
Total liabilities	111,651	20,857
Total equity and liabilities	6,060,364	6,036,836

Abbreviated non-consolidated income statement

(in thousands of €)	2022	2021
Operating income	46,391	4,636
Operating expenses	-52,788	-61,648
Operating result	-6,397	-57,012
Net financial result	6,908	5
Result for the year available for profit appropriation	511	-57,007

Alternative performance measures

Definitions

Throughout its Annual Report and in other financial communication (website, press releases, presentations, etc.), Azelis presents certain financial measures and adjustments that are not in accordance with IFRS, or any other internationally accepted accounting principles. Certain of these measures are termed "alternative performance measures" because they exclude amounts that are included in, or include amounts that are excluded from, the most directly comparable measure calculated and presented in accordance with IFRS, or are calculated using financial measures that are not calculated in accordance with IFRS. The group presents the APMs as (i) they are used by its management to measure operating performance, including profitability and liquidity, in presentations to its board members, and as a basis for strategic planning and forecasting, and (ii) they represent similar measures that are widely used by certain investors, securities analysts and other parties as supplemental measures of performance. These measures enhance management's and investors' understanding of the group's financial performance, for example, by excluding items that are outside of ongoing operations such as income taxes, costs of capital and non-cash expenses.

The group has defined the following APMs as set out below:

APM	Definition	Use
Gross profit margin	Gross profit divided by revenue	The group considers Gross Profit Margin to be a useful metric for evaluating how efficiently the Group generates revenue by accounting for the direct costs of producing its products
EBITA	Operating profit before amortization and impairment of intangible assets	The group considers EBITA, Adjusted EBITA and Adjusted EBITDA to be useful metrics for evaluating the Group's performance as they facilitate comparisons of the Group's core operating results from period to period by removing the impact of, among other things, its capital structure, asset base, tax consequences and other specified adjustments. The Group uses Adjusted EBITA for the purposes of calculating its Adjusted EBITA Margin and its Conversion Margin, and uses Adjusted EBITDA for the purposes of calculating its Adjusted EBITDA Margin
Adjusted EBITA	Operating profit or loss before amortization and impairment of intangible assets and excluding Adjustments. The group historically referred to "Adjusted EBITA" as "Operating EBITA"
Adjustments	Income and expense items that are not directly related to the daily performance of the Group, such as expenses relating to corporate restructurings and reorganizations, costs with regard to acquisitions and mergers, financing and capital restructuring and gains or losses on sale of fixed assets. The group historically referred to "Adjustments" as "One-Off Items"
Adjusted EBITA margin	Adjusted EBITA divided by revenue. The group historically referred to "Adjusted EBITA Margin" as "Operating EBITA Margin"
Adjusted EBITDA	Adjusted EBITA before depreciation of property, plant and equipment.

Key Performance Indicators

The specification of the KPIs is determined in accordance with Annex I of the Art. 8 Delegated Act.

Adjusted EBITDA

EBITDA further adjusted to account for (i) the earnings (before interest, taxation, depreciation and amortization) of businesses acquired by the group during the relevant period from the first day of the relevant period to the relevant acquisition date and (ii) anticipated cost savings, expense reductions and synergies expected to be realized within a set period following the calculation date. The group presents Financing EBITDA as a measure that is used by the Group's management and the lenders under its debt facilities to assess its earnings for a period, including: (i) the earnings (before interest, taxation, depreciation and amortization) of businesses acquired by the Group during the relevant period from the first day of the relevant period to the relevant acquisition date; and (ii) anticipated cost savings, expense reductions and synergies expected to be realized within a set period following the calculation date. Financing EBITDA is determined according to the definition agreed with the lenders under the Group's debt facilities. The Group calculates Financing EBITDA for purposes of determining its Net Leverage.

Adjusted EBITDA margin

Adjusted EBITDA divided by revenue.

Conversion margin

Adjusted EBITA as a percentage of gross profit.

Organic growth

Increase or decrease for the period, excluding the impact of acquisitions until the first anniversary of their consolidation, and excluding the impact of foreign currency translation. The Group presents organic growth and growth from acquisitions because it is actively acquiring businesses, making these metrics important elements of its strategy that management measures and investors use to evaluate the group's results from one period to the next, including and excluding the impact of the contributions of businesses that the Group acquires during the relevant periods.

Growth from acquisitions

Growth attributable to acquired businesses in the first twelve months following their date of acquisition. Growth from acquisitions is calculated as the sum of (i) amounts attributable to acquired businesses in the year of acquisition, from the date of acquisition to December 31 of the year of acquisition, and (ii) amounts attributable to businesses that were acquired in the prior year, from January 1 in the subsequent year to the first anniversary of their acquisition.

Free cash flow

Adjusted EBITDA less lease payments, plus changes in Net Working Capital, plus changes in other assets, liabilities and provisions, less net capital expenditures. The group presents Free Cash Flow and Free Cash Flow Conversion because it believes that these metrics are useful to investors to highlight its asset-light business model and to understand the funds that the group has available to meet its financial obligations.

Free cash flow conversion

(i) Free Cash Flow divided by (ii) Adjusted EBITDA less lease payments.

Net working capital

Inventories plus trade receivables, less trade payables. The group's daily operations are driven by its investment in Net Working Capital. The group closely monitors its levels of Net Working Capital not only to support its daily operations and its continued expansion, but also to minimize costs for working capital (including warehouse costs and funding costs). The group closely monitors its Net Working Capital as percentage of revenue throughout the year.

Net working capital/revenue

(i) Net Working Capital as at the end of a period divided by (ii) revenue for such period (with revenue amounts for periods of less than one year being annualized).

Net working capital/revenue normalized for acquisitions

(i) Net Working Capital as at the end of a period divided by (ii) revenue including those from acquisitions for the full period (with revenue amounts for periods of less than one year being annualized).

Net indebtedness

The notional amount of the group's non-current and current loans and borrowings (including non-current and current lease obligations, and excluding interest accruals) plus bank overdrafts, less cash and cash equivalents. The Group presents its Net Indebtedness as a measure that is used by the Group's management and the lenders under its debt facilities to assess its financial position at a specific date, including the impact of the Group's cash position compared to its indebtedness. Net Indebtedness is used by the lenders under the Azelis' debt facilities in order to determine Net Leverage.

Financing EBITDA

Adjusted EBITDA further adjusted to account for (i) the earnings (before interest, taxation, depreciation and amortization) of businesses acquired by the group during the relevant period from the first day of the relevant period to the relevant acquisition date and (ii) anticipated cost savings, expense reductions and synergies expected to be realized within a set period following the calculation date. The group presents Financing EBITDA as a measure that is used by the Group's management and the lenders under its debt facilities to assess its earnings for a period, including: (i) the earnings (before interest, taxation, depreciation and amortization) of businesses acquired by the Group during the relevant period from the first day of the relevant period to the relevant acquisition date; and (ii) anticipated cost savings, expense reductions and synergies expected to be realized within a set period following the calculation date. Financing EBITDA is determined according to the definition agreed with the lenders under the Group's debt facilities. The Group calculates Financing EBITDA for purposes of determining its Net Leverage.

Net leverage

Net Indebtedness divided by Financing EBITDA for the preceding twelve months. The group presents its Net Leverage because it believes that this measure provides an indicator of the overall strength of its statement of financial position and can be used to assess the impact of the group's earnings as compared with its indebtedness. In addition, Net Leverage is also used to determine the applicable margin under the New Debt Facilities.

ROTIC

"Return on tangible invested capital" represents (a) Adjusted EBITA for a period (with Adjusted EBITA amounts for periods of less than one year being annualized) as a percentage of (b) the group's property, plant and equipment (excluding right-of-use assets) as at the end of such period plus Net Working Capital as at the end of such period. The calculation of ROTIC excludes goodwill and intangible assets. The group presents ROTIC because it views it as meaningful metric to measure how efficiently it generates Adjusted EBITA from its main operational invested capital (i.e., Net Working Capital and, to a lesser extent, also property, plant and equipment).

Cash EPS

Result for the year before amortization and impairment of intangible assets divided by the weighted average number of outstanding shares. The group presents Cash EPS because it believes that this metric is useful to investors to highlight its asset-light business model.

Reconciliations

EBITA, Adjusted EBITA, EBITDA, Adjusted EBITDA, Free Cash Flow

(in thousands of € unless otherwise specified)

	2022	2021
Revenue	4,109,102	2,827,295
Gross profit	960,742	650,143
Gross profit margin	23.4%	23.0%
Net profit/(loss) for the period	218,879	70,225
Income tax (income)/expense	95,791	49,973
Share of result of associates	-59	68
Financial income	-6,008	-731
Financial expenses	79,823	88,278
Operating profit	388,426	207,813
Amortization and impairment of intangible assets	56,887	39,483
EBITA	445,313	247,296
Adjustments	11,560	20,626
Adjusted EBITA	456,872	267,922
Adjusted EBITA margin	11.1%	9.5%
Conversion margin	47.6%	41.2%
Depreciation of property, plant and equipment	27,845	19,901
Adjusted EBITDA	484,717	287,823
Adjusted EBITDA margin	11.8%	10.2%
Payments of lease obligations	-22,795	-17,263
Adjusted EBITDA less payments of lease obligations	461,922	270,561
Change in Net Working Capital, other assets, liabilities and provisions	-5,442	-70,683
Net capital expenditures	-18,443	-18,288
Free Cash Flow	438,037	181,590
Free Cash Flow Conversion	94.8%	67.1%

(in thousands of €)

	2022	2021
Transactions	6,866	8,863
IPO expenses	0	8,360
Employees	4,003	1,176
Property, plant and equipment	-2,675	262
Other	3,367	1,964
Adjustments	11,560	20,626

(in thousands of €)

	2022	2021
Change in inventories	-65,751	-101,373
Change in trade and other receivables and other investments	27,194	-47,901
Change in trade and other payables	22,340	80,395
Change in provisions	1,140	-1,226
Foreign currency translation	9,635	-579
Change in Net Working Capital, other assets, liabilities and provisions	-5,442	-70,683

(in thousands of €)

	2022	2021
Intangibles	10,634	11,376
Tangibles	7,810	6,912
Net capital expenditures	18,443	18,288

Net Working Capital

(in thousands of € unless otherwise specified)

	2022	2021
Current assets
Inventories	627,735	467,473
Trade receivables	443,278	375,591
Current liabilities:
Trade payables	462,728	368,657
Net working capital	608,285	474,408
Annualized Revenue	4,109,102	2,827,295
Net working capital/revenue	14.8%	16.8%
Revenue normalized for revenue of acquisitions	4,402,337	3,092,766
Net Working Capital/revenue normalized for acquisitions	13.8%	15.3%

ROTIC

(in thousands of € unless otherwise specified)

	2022	2021
Adjusted EBITA	456,872	267,922
Property, plant and equipment	57,884	53,008
Net working capital	608,285	474,408
ROTIC	68.6%	50.8%

Revenue Growth

	2022	2021
Organic growth	20.1%	15.7%
Growth from acquisitions	20.3%	12.6%
Foreign currency translation impact	4.9%	-1.2%
Reported growth	45.3%	27.2%

Net indebtedness, Financing EBITDA and Net Leverage

(in thousands of €)

	2022	2021
Non-current borrowings and loans	1,265,398	892,945
Current borrowings and loans	134,207	78,555
Total gross debt	1,399,605	971,500
Cash and cash equivalents	-268,160	-141,293
Bank overdrafts	30,412	40,524
Net indebtedness	1,161,856	870,731

(in thousands of €)

	2022	2021
Adjusted EBITDA (last 12 months)	484,717	287,823
Earnings (before interest, taxation, depreciation and amortization) of entities acquired	44,072	31,017
Anticipated cost savings, expense reductions and synergies	1,261	2,169
Financing EBITDA (last 12 months)	530,051	321,010

(in thousands of €)

	2022	2021
Net indebtedness	1,161,856	870,731
Financing EBITDA (last 12 months)	530,051	321,010
Net Leverage (multiple)	2.2	2.7

Cash EPS

(in thousands of €)

	2022	2021
Net result of the period	218,879	70,225
Amortization and impairment of intangible assets	56,887	39,483
Result of the period before amortization and impairment of intangible assets	275,766	109,708
Weighted average number of shares (thousands)	233,750	233,846
Cash Earnings Per Share	1.18	0.47

Turnover KPI

The proportion of Taxonomy-eligible economic activities in our total turnover has been calculated as the part of net turnover derived from products and services associated with Taxonomy-eligible economic activities (numerator) divided by the net turnover (denominator). The denominator of the turnover KPI is based on our consolidated net turnover in accordance with IAS 1.82(a). With regard to the numerator, we have not identified any Taxonomy-eligible activities as explained in the section Non-financial performance review in the Report of the Board of Directors in this Annual Report. The consolidated net turnover can be reconciled to the line item 'revenue' in the Azelis consolidated income statement.

Capex KPI

The Capex KPI is defined as Taxonomy-eligible Capex (numerator) divided by our total Capex (denominator). With regard to the numerator, we refer to our explanations on the numerator below. Total Capex consists of additions to tangible and intangible fixed assets during the financial year, before depreciation, amortization and any re-measurements, including those resulting from revaluations and impairments, as well as excluding changes in fair value. It includes additions to fixed assets (IAS 16), intangible assets (IAS 38) and right-of-use assets (IFRS 16). Additions resulting from business combinations are also included. Goodwill is not included in Capex as it is not defined as an intangible asset in accordance with IAS 38. Our total Capex can be reconciled to our consolidated financial statements, refer to notes 15 and 16 to the Azelis consolidated financial statements. They are the total of the movement types 'additions' and 'business combinations' for intangible assets, right-of-use assets and property, plant and equipment.

Opex KPI

The Opex KPI is defined as Taxonomy-eligible Opex (numerator) divided by our total Opex (denominator). With regard to the numerator, we refer to our explanations on the numerator below. Total Opex consists of direct non-capitalized costs that relate to research and development, building renovation measures, short-term lease, maintenance and repair, and any other direct expenditures relating to the day-to-day servicing of assets of property, plant and equipment. These costs are for the majority included in line item 'External services and other expenses' to the Azelis consolidated income statement.

Explanations on the numerator of the Capex KPI and Opex KPI

As Azelis has not identified Taxonomy-eligible economic activities, we do not record Capex/Opex related to assets or processes that are associated with Taxonomy-eligible economic activities in the numerator of the Capex KPI and the Opex. Furthermore, there are no Capex plans to upgrade a Taxonomy-eligible economic activity to become Taxonomy-aligned or to expand a Taxonomy-aligned economic activity. Only “category c” CapEx and OpEx can therefore qualify as Taxonomy-eligible, i.e. Capex/Opex related to the purchase of output from Taxonomy-eligible economic activities and individual measures enabling certain target activities (our non-eligible activities) to become low-carbon or to lead to greenhouse gas reductions (Sect. 1.1.2.2. (c) of Annex I to the Art. 8 Delegated Act). As the disclosure requirements for the 2022 financial year relate exclusively to Taxonomy-eligible Capex/Opex, we have assessed this category in terms of Taxonomy-eligibility as follows: we consider as Taxonomy-eligible, Capex/Opex related to this category when the purchased output/individual measure meets the description of its respective economic activity, e.g. The purchase of output from a Taxonomy-eligible economic activity. Azelis has identified the following activities in the Climate Delegated Act resulting in Capex/Opex which can be considered as individually Taxonomy-eligible purchased output/measures:

Description of the individually Taxonomy-eligible purchased output/measure	Respective economic activity (Annex I to Climate Delegated Act)
Maintenance and repair of the energy efficiency equipment in our existing buildings	7.3 Installation, maintenance and repair of energy efficiency equipment

Annex II - Templates for the KPIs of non-financial undertakings

Proportion of turnover from products or services associated with Taxonomy-aligned economic activities - disclosure covering 2022

Economic Activities (1)	Absolute turnover (3)	Proportion of turnover (4)	Substantial contribution criteria	DNSH criteria ('Does not significantly harm')	Minimum safeguards (17)	Taxonomy-aligned proportion of turnover, year N (18)	Taxonomy-aligned proportion of turnover, year N-1 (19)	Category (enabling activity or) (20)	Category (transitional activity (21))	Climate change mitigation (5)	Climate change adaptation (6)	Water and marine resources (7)	Circular economy (8)	Pollution (9)	Biodiversity and ecosystems (10)	Climate change mitigation (11)	Climate change adaptation (12)	Water and marine resources (13)	Circular economy (14)	Pollution (15)	Biodiversity and ecosystems (16)
	In €	%	Y/N	Y/N	Y/N	%	%	E	T	%	%	%	%	%	%	%	%	%	%	%	%
A. TAXONOMY-ELIGIBLE ACTIVITIES
Turnover of environmentally sustainable activities (Taxonomy-aligned) (A.1)	N/A	N/A
Turnover of taxonomy-eligible but not environmentally sustainable activities (not Taxonomy-aligned activities) (A.2)	N/A	N/A
Total (A.1 + A.2)	N/A	N/A
B. TAXONOMY NON-ELIGIBLE ACTIVITIES
Turnover of Taxonomy-non-eligible activities (B)	0	0%
Total (A+B)	0	0%

Proportion of CapEx from products or services associated with Taxonomy-aligned economic activities - disclosure covering 2022

Economic Activities (1)	Absolute CapEx (3)	Proportion of CapEx (4)	Substantial contribution criteria	DNSH criteria ('Does not significantly harm')	Minimum safeguards (17)	Taxonomy-aligned proportion of CapEx, year N (18)	Taxonomy-aligned proportion of CapEx, year N-1 (19)	Category (enabling activity or) (20)	Category (transitional activity (21))	Climate change mitigation (5)	Climate change adaptation (6)	Water and marine resources (7)	Circular economy (8)	Pollution (9)	Biodiversity and ecosystems (10)	Climate change mitigation (11)	Climate change adaptation (12)	Water and marine resources (13)	Circular economy (14)	Pollution (15)	Biodiversity and ecosystems (16)
	In €	%	Y/N	Y/N	Y/N	%	%	E	T	%	%	%	%	%	%	%	%	%	%	%	%
A. TAXONOMY-ELIGIBLE ACTIVITIES
CapEx of environmentally sustainable activities (Taxonomy-aligned) (A.1)	N/A	N/A
CapEx of taxonomy-eligible but not environmentally sustainable activities (not Taxonomy-aligned activities) (A.2)	N/A	N/A
Total (A.1 + A.2)	N/A	N/A
B. TAXONOMY NON-ELIGIBLE ACTIVITIES
CapEx of Taxonomy-non-eligible activities (B)	160,312	0.06%
Total (A+B)	160,312	0.06%

Proportion of OpEx from products or services associated with Taxonomy-aligned economic activities - disclosure covering 2022

Economic Activities (1)	Absolute OpEx (3)	Proportion of OpEx (4)	Substantial contribution criteria	DNSH criteria ('Does not significantly harm')	Minimum safeguards (17)	Taxonomy-aligned proportion of OpEx, year N (18)	Taxonomy-aligned proportion of OpEx, year N-1 (19)	Category (enabling activity or) (20)	Category (transitional activity (21))	Climate change mitigation (5)	Climate change adaptation (6)	Water and marine resources (7)	Circular economy (8)	Pollution (9)	Biodiversity and ecosystems (10)	Climate change mitigation (11)	Climate change adaptation (12)	Water and marine resources (13)	Circular economy (14)	Pollution (15)	Biodiversity and ecosystems (16)
	In €	%	Y/N	Y/N	Y/N	%	%	E	T	%	%	%	%	%	%	%	%	%	%	%	%
A. TAXONOMY-ELIGIBLE ACTIVITIES
OpEx of environmentally sustainable activities (Taxonomy-aligned) (A.1)	N/A	N/A
OpEx of taxonomy-eligible but not environmentally sustainable activities (not Taxonomy-aligned activities) (A.2)	N/A	N/A
Total (A.1 + A.2)	N/A	N/A
B. TAXONOMY NON-ELIGIBLE ACTIVITIES
OpEx of Taxonomy-non-eligible activities (B)	0	0%
Total (A+B)	0	0%

Annex III - Methodology

People

Employee Satisfaction Survey score

Since 2014, Azelis has systematically monitored the degree of engagement, motivation and loyalty of its employees using an anonymous Employee Satisfaction Survey rolled out biennially. An independent third-party provider manages the survey to guarantee full employee confidentiality. The engagement score is determined by the answers to 47 statements and questions, related to the eight drivers of engagement and four specific engagement statements and questions. The loyalty score is determined by the engagement results and by the answers given to four specific loyalty statements and questions. The score for working conditions comes from the responses to nine statements and questions. The scores generated by the survey are measured against an external benchmark, the “Global Employee & Leadership Index” (GELx). This index is provided by the company managing the survey. The higher the score, the better the result. All employees registered in our Human Capital Management system when the survey preparation process begins usually six to eight weeks prior to survey go-live. This also includes employees of the companies acquired by Azelis in the year the survey takes place if they are registered in our HCM Exceptions include: Employees serving notice Employees on long-term leave (voluntary, involuntary, paid, and unpaid leave) Employees hired in the two months prior to the survey go-live

Percentage of employees in the company talent pools

The number of employees is defined as all employees with a full or part-time contract, a permanent or fixed-term contract, or an apprenticeship contract at the end of the reporting period. Contingent workers and interns are not included.# Company Talents and Diversity Initiatives

Company talents have been clustered into three groups (talent pools) depending on their performance, track record and degree of readiness to grow by at least one level within the relevant organization. Short-term readiness is measured as 0 to 12 months, mid-term readiness as 12 to 24 months and long-term readiness as longer than 24 months.

Percentage of line managers trained in diversity and inclusive leadership

The number of line managers is defined as all employees having people management responsibility (i.e., at least one direct report) regardless of their level in the organization. When the training preparation process starts, all line managers registered in our Human Capital Management system participate in this mandatory training. This includes the line managers of companies acquired by Azelis in the year the survey takes place if registered in our HCM. Exceptions include:

Employees serving notice
Employees on long-term leave (voluntary, involuntary, paid, and unpaid leave)

Percentage of senior management positions held by women

Senior managers are defined as all employees who belong to the group GMT (General Management Team) because of their position / role. The eligible roles in 2022 were:

Members of the Executive Committee
Regional COO’s and CFO’s
Regional Director / (S)VP of: Operations (Americas) / Business Development / Commercial Excellence / HR / Legal / SHEQ / Marketing
All roles holding country / country cluster P&L responsibility (e.g. Managing Director, General Manager, Country Manager, etc.) if country / country cluster sales > €30 million.
Corporate Functional Heads
Market Segment Directors APAC / EMEA if MS Sales > €50 million.
Group Principal Managers: only roles holding global principal responsibility
Other strategically significant roles upon invitation of the Executive Committee

Eligible roles due to M&A (transactions closed) in the reference year are not included. Due to the rapid increase of roles potentially belonging to the GMT, generated by organic growth and acquisitions made in the last years, financial thresholds were introduced in 2021 and reviewed in 2022. These thresholds refer to the fact that as of 2021, the eligibility criteria of two categories of GMT members include a minimum turnover responsibility, defined as follows:

€15 million sales for roles holding country / country cluster P&L responsibility (e.g., Managing Director, General Manager, Country Manager, etc.). This minimum turnover responsibility was raised to €30 million sales in 2022.
€50 million sales for Market Segment Directors APAC and EMEA. This minimum turnover responsibility did not change in 2022.

These changes were necessary to streamline the number of senior managers reporting directly or indirectly to the ExCom, thus safeguarding the operational effectiveness of the senior management team. The percentage of women in the senior management team increased to 31.8% in 2022, an increase of 8.3% vs. 2021. This increase is mainly due to hirings and internal promotions, changes to the organizational structure following acquisitions, and the new roles flagged as strategically significant by the Executive Committee. The review of the financial thresholds above contributed to an increase of 1% vs. 2021. Azelis will continue to adapt the GMT eligibility criteria to maintain the size of the senior management team aligned with the evolving needs of the business.

Number of workplace accidents with lost time

An accident at work is defined as a discrete occurrence in the course of work which leads to physical or mental harm. The data is collected, for the entire workforce, for accidents at work resulting in an absence of three or more days. Accidents occurring during business trips are counted as workplace accidents and are included in this indicator, but accidents resulting from commuting to work and work-related illnesses are not.

Other indicators

For the People KPI, the number of employees is defined as...

...all employees at the end of the reporting period with a full or part-time contract, a permanent or fixed-term contract, a work/study contract or an apprenticeship contract. Contingent workers and interns are not included. These figures do not include the employees of the companies acquired in Q4 of the reporting period. All People KPI’s, including – but not limited to – the ones listed hereafter, are referred to this scope, unless otherwise stated.

Number of training hours per employee

At Azelis, training refers to the following:

Classroom training and remote training;
All types of vocational, job-related training, e.g. product and technical training, sales training, etc.;
Any other training such as IT, languages and managerial skills;
Any educational, study and exam leave paid for by the company; and
Any external training and education attended and paid for – totally or partially – by the company.

Training does not include on-the-job training delivered by company employees.

Percentage of internal promotions vs. open job positions

Internal promotions include employees taking over a position of greater responsibility within the company. This indicator is the ratio of the total number of internal promotions during the reporting period compared to the number of vacancies for jobs/ positions during the reporting period.

Number of women/men in the General Management Team (GMT)

The General Management Team is the Azelis group’s senior management team. Please refer to the definition of the People KPI “Percentage of senior management positions held by women” for details.

Products and Innovation

Revenue covered with ESG assessed suppliers

Definitions

TfS: Azelis has been a member of ‘Together for Sustainability’ (TfS) since 2020, which delivers the de facto global standard for environmental, social and governance performance of chemical supply chains. TfS provides strong and independent due diligence procedures using ESG assessments and audits in the supply chain and evaluates suppliers against CSR principles, including social issues and environmental and governance practices. It provides the necessary shared infrastructure to conduct assessments and audits, resulting in supply security, resilience, and proactive management of reputational and regulatory risks. TfS members are chemical companies representing a global annual turnover of over €600 billion (November 2022) and a global spend of more than €400 billion in the chemical industry.
ESG assessment: For an ESG assessment, a supplier must complete an online EcoVadis® questionnaire, providing supporting information on their environmental, social, ethical and supply chain practices. Since its founding in 2007, EcoVadis® has become the world’s largest and most trusted provider of business sustainability ratings, creating a global network of more than 100,000+ rated companies across several industries. The EcoVadis® assessment methodology is built on international standards including the GRI, the UN Global Compact, Responsible Care® principles and ISO26000. Evaluation criteria include policies, actions, and results. Documentary evidence is required, and third-party certifications are considered. External experts (EcoVadis) review, evaluate and supplement this with a “360° watch” and assessments are conducted entirely online, remaining valid for one year. Aside from suppliers with a valid assessment, suppliers still completing the questionnaire or under evaluation by EcoVadis® are considered to be in scope for the indicator.
ESG Audit: A TfS-approved external auditor conducts the ESG audit and can cover a single or combined business location of the selected supplier, such as a production site or warehouse. On-site employee interviews and inspections are included. Sustainability performance is verified against a defined set of audit criteria on management, environment, health & safety, labor & human rights, and governance issues. Audits are valid for three years. Accepted alternatives to a TfS audit are SQAS, SMETA or PSCI audits conducted in the last 24 months before sharing the audit report with Azelis and TfS.
ESG assessed Supplier: An ESG assessed supplier is defined as a supplier that has a valid ESG audit (see above) in the TfS audit pool or has been invited to an ESG assessment (see above) by TfS partner EcoVadis® during 2022 and by the end of 2022, the supplier is completing the questionnaire, their scorecard has been published or is under evaluation by EcoVadis®.

Revenue and KPI definition

KPI definition: The revenue generated by suppliers with a valid ESG audit in the TfS pool or ESG assessment via EcoVadis® and with a valid scorecard, including those being assessed, as a percentage of the total organic revenue generated by Azelis in the year excluding M&A contributions.

Revenue and M&A exclusions for KPI calculation

Revenue generated by 2021 share deals is integrated into the KPI from 12 months after their acquisition. If an acquisition occurred during the last five days of a month, the entity is integrated starting from the subsequent month after the first anniversary of their consolidation. Share deals of 2022 are out of scope for this reporting cycle. €573 million revenue from acquired companies in 2021 and 2022 has been excluded from the 2022 revenues for KPI calculation. Asset deals from 2022 are directly integrated into the sustainability reporting after acquisition, amounting to less than 1% of our total 2022 sales. For more information please refer to note 7 to the consolidated financial statements in this Annual Report 2022, and note 7 to the consolidated financial statements of the Annual Report 2021.

Methodology

The reporting process of the KPI ‘Revenue covered with ESG assessed suppliers’ includes the following steps for ESG assessments and audits: A list of suppliers is prepared to include in the yearly ESG assessments and audits (in addition to the suppliers added during earlier campaigns) based on risk and revenue.# Sustainability

This is the basis for the invitation and completion of ESG audits and assessments during 2022. At the end of the year (December 31), an external team from EcoVadis® independently extracts a list of suppliers included in the Azelis network together with the assessment status. A complete list of valid ESG audits in the TfS pool is provided through the TfS Office. This audit list includes audits conducted at the request of Azelis and audits of Azelis’ suppliers at the request of other TfS members. Generated global revenue is linked to every supplier in the assessment and audit lists to calculate the ‘revenue covered by ESG assessed suppliers’ indicator on an annual level, according to the indicator’s revenue scope definition (see above). Internal validation and consolidation at group level is done based on analysis and verification of the consistency and accuracy of the data. A third-party auditor audits the final consolidation of the indicator annually. Once the data is validated, Azelis discloses the indicator and KPI that are published in the Annual Report and Sustainability Report.

Sustainable products

A product is marked as sustainable in our systems when a certificate (RSPO, Cosmos, Bio, Organic, etc.), a company statement (natural ingredients, etc.) or any other company document substantiating the claim, is shared with us by our business partners. Our Group SHEQ support center then carries out a due diligence documentation check.

Governance

Number of material breaches of laws and regulations in any country in which we operate

This indicator refers to the number of reported breaches of applicable laws and regulations in any country in which Azelis operates which resulted in a total aggregate liability, damage, loss, cost or expense of €500 thousand or more.

Percentage of employees trained in ethical behavior policies (code of conduct, anti-bribery, etc.)

This indicator relates to the ratio of the number of employees who have completed the annual online knowledge review about the Code of Conduct and ethical business behavior as a proportion of the number of employees who were invited to participate in this review. The following employees are considered for calculating this KPI: all employees at the end of the reporting period with a full or part-time contract, a permanent or fixed-term contract, a work/study contract, or a training contract. Outsourced staff, agency workers and interns are excluded.

Number of material breaches of ethical behavior policies

This indicator refers to the number of breaches of policies and procedures related to Azelis’ ethics and fair business practices, which have been reported within Azelis’ “Case Management System” and resulted in disciplinary action by Azelis against the relevant director, officer, employee or consultant. For the aforesaid KPI, “disciplinary action” includes, among other things, a formal warning letter and suspension or termination of a mandate, employment, or service relationship and/or termination of mandate, employment, or service contract (for cause or otherwise). These policies include the Code of Conduct, SpeakUp! Policy, Anti-Bribery and Fraud Prevention Policy, Competition and Antitrust Policies, Export Control Policy, Data Protection Policy and the Internal Rules of Procedure.

Percentage of Azelis sites that have effective crisis management and business continuity plans in place

This indicator has been defined as part of Action 2025 and will be used from 2023. It assesses whether a crisis management and business continuity plan is in place for each site where Azelis operates.

Environment

Reporting scope for environmental KPI's (carbon emissions + waste)

The scope of our non-financial reporting covers all entities - offices and operational sites (warehouses, production sites and laboratories) that are at least 50%-operated by Azelis - in all the countries where we are present. Carbon emissions and waste reporting exclude M&A contributions (same scope definition as for revenue covered with ESG assessed suppliers). Data is collected at a local level, and fully third-party operations are not included within the reporting scope. The only exclusion for waste reporting are offices, as based on Azelis’ business activities office waste is not material compared to waste generated in operational sites. Besides waste reporting for operational sites, products disposed of as waste are also included in the waste indicator’s scope. The total waste and the subdivision in hazardous and non-hazardous waste are reported. To report the carbon intensity indicator, revenue is based on the total organic revenue generated by Azelis in the year, excluding M&A contributions, which is the same definition as for revenue covered with ESG-assessed suppliers. The reporting scope for total sales is global (€3,536 million revenue in 2022). Countries in scope for the 2022 reporting cycle can be found in note 26.4 to the consolidated financial statements in this Annual Report 2022. Colombia, Costa Rica, Dominican Republic, Guatemala and Peru are not included in the scope.

Reporting period for environmental KPI's (carbon emissions + waste)

The reporting frequency for Azelis is monthly, and external disclosure of non-financial indicators is done annually. For all the information reported, the reporting covers the period from January 1, 2022 until December 31, 2022. Entities acquired during 2021 (share deals) and 2022 (asset deals) could have a shorter reporting period, depending on the closure date (see section above).

Reporting process for environmental KPI's (carbon emissions + waste)

To collect the non-financial indicators, Azelis uses dedicated online ESG software. Azelis has defined a reporting protocol which specifies the scope of reporting, the list of indicators, the definitions of all indicators, the calculation methodology, the sources of information, and the supporting documentation needed. The protocol serves as a guideline for all the contributors to our non-financial reporting.

Methodology

The regional SHEQ team and regional Sustainability Coordinators (Americas, APAC and EMEA) coordinate the collection of data at local level and following the planning of the annual campaign by the Group SHEQ & Sustainability Director. Global coordination of the reporting campaign is performed by the Group Sustainability Coordinator. Data from Scope 1 and Scope 2 data is reported on a monthly basis. Waste data for operational sites is reported monthly, and products disposed as waste are reported quarterly. Analysis and verification of the data's consistency and accuracy leads to the data's validation by the local and regional teams from Finance, SHEQ and Sustainability. Final validation takes place on group level. Global turnover data according to the carbon intensity indicator’s definition are extracted directly from the financial system at annual level. Scope 1 and 2 emission data and waste data are used to calculate the carbon intensity and waste indicators on an annual level. After final internal validation and consolidation at group level, the carbon intensity is audited by a third-party auditor annually. Azelis discloses the indicators and KPIs published in the Annual Report and Sustainability Report.

Definitions

carbon intensity (Scope 1 and 2)

KPI definition: (Scopes 1 and 2) per € million sales. The reporting scope for carbon emissions and total sales is global (€3,536 million revenue in 2022) according to a 12-month onboarding rule; Emissions and revenue generated by 2021 share deals are integrated in the KPI as from 12 months after their acquisition. If an acquisition occurred during the last 5 days of a month, the entity is integrated starting from the subsequent month after the first anniversary of their consolidation (€260 million revenue from acquired companies in 2021 has been excluded from the 2022 revenues for KPI calculation). Emissions and revenue generated by 2022 share deals are out of scope for this reporting cycle. €313 million revenue from acquired companies in 2022 have been excluded from the 2022 revenues for KPI calculation. Emissions and revenue from 2022 asset deals are directly integrated in the sustainability reporting after acquisition. These sales in 2022 amount to less than 1% of our total 2022 sales. For more information, please refer to note 7 to the consolidated financial statements in the Annual Reports of 2021 and 2022.

In the context of carbon intensity calculation, the CO2 emissions of Azelis are categorized into two scopes: Scope 1 (direct emissions) and Scope 2 (indirect emissions). Azelis follows the recommendations of the “GHG protocol” to measure and manage GHG emissions. Scope 1 emissions are emissions from sources owned or controlled by Azelis directly. Activity data and emissions include on-site stationary combustion of fossil-fuel-burning equipment (e.g., heating boilers) or process-based emissions (e.g., back-up electricity generators) and natural gas. Emissions from company-owned or leased vehicles are also included, as Azelis is responsible for their fuel consumption. Scope 2 emissions are emissions associated with the consumption of purchased electricity. Activity data and emissions include the purchase of electric power, steam, heating and cooling from the local utility. Refrigerant emissions and other fugitive emissions (e.g., from fire extinguishers) are excluded from the scope as they are not material. Fully third-party operations (i.e., fully externally operated warehouses) are not included within the reporting scope. Actual consumption data has been used to calculate the respective emissions, where possible.Estimations have been made on the consumption amounts where data was lacking: Based on actual data of a prior reporting year, extrapolated to 2022; Based on monetary amounts, converted into estimated consumption amounts based on an average market price and/or provided invoice cost rate; Based on property value and/or surface area for offices; and Based on contractual terms (e.g., maximum leasing company car mileage per year). External databases are used to retrieve the latest available version of emission factors (IEA 2022, ADEME Base Carbone V15.1, DEFRA 2022, US EPA 2022). Because of more detailed geographic emission factors, as defined in EPA’s “Emissions & Generation Resource Integrated Database” (eGRID)1, improved Scope 2 location-based emission factors are implemented in the USA, compared to 2021 reporting. For the 2021 reporting cycle, one average location-based emission factor was used for USA. Location-based emission factors used in 2022 differ from the average emission factor used for the USA in the 2021 reporting cycle. This difference varies between -2% and +89%, depending on the eGRID subregion:

eGRID Subregion	Location Based (kgCO2e/kWh) 2022 reporting cycle	Location Based (kgCO2e/kWh) 2021 reporting cycle	2022 vs 2021
USA - AZMN	0.84661	0.522	+62%
USA - CAMX	0.513455	0.522	-2%
USA - ERCT	0.8186	0.522	+57%
USA - FRCC	0.835079	0.522	+60%
USA - NEWE	0.52823	0.522	+1%
USA - RFCW	0.984977	0.522	+89%
USA - SPSO	0.931756	0.522	+78%
USA - SRMV	0.740359	0.522	+42%
USA - SRSO	0.860179	0.522	+65%
USA - SRVC	0.62311	0.522	+9%
USA - RFCE	0.652458	0.522	+25%

For 2022, Scope 2 emissions are calculated market-based and location-based:

Definition as used in the 2021 Sustainability Report:
CO2 emission from electricity consumption (tCO2e) = renewable electricity consumption (kWh) x 0 (tCO2e/kWh) + non-renewable electricity consumption (kWh) x location based emission factor (tCO2e/kWh)

Location-based definition:
CO2 emission from electricity consumption (tCO2e) = total electricity consumption (kWh) x location based emission factor (tCO2e/kWh)

Market-based definition:
CO2 emission from electricity consumption (tCO2e) = renewable electricity consumption (kWh) x 0 (tCO2e/kWh) + non-renewable electricity consumption (kWh) x market based residual mix emission factor (tCO2e/kWh)

Scope 1 and Scope 2 data is collected using online ESG software. The emissions data reported in the 2022 Sustainability Report related to Scope 1 and Scope 2 are the results of the ESG software calculations.

Definitions Waste (tons/FTE)

KPI definition: Waste (total, hazardous, non-hazardous (tons)). Azelis follows the recommendations of the GRI to report waste management indicators. Hazardous waste possesses any of the characteristics contained in Annex III of the Basel Convention that is considered to be hazardous by national legislation. Hazardous characteristics are: explosive, flammable liquids, flammable solids, substances or wastes liable to spontaneous combustion, substances or wastes which, in contact with water emit flammable gases, oxidizing, organic peroxides, poisonous, infectious substances, corrosives, liberation of toxic gases in contact with air or water, toxic and ecotoxic. This includes both disposed and recycled hazardous waste, according to GRI306. Non-hazardous waste is all other waste, sorted or not. This could be, but is not limited to, glass, paper, plastics, and cardboard. This includes both disposed and recycled non-hazardous waste, according to GRI306. Reporting for products disposed of as waste includes products (expired, contaminated, damaged, …) that have been disposed of and written off ERP systems. Products sold to a customer with an extended shelf life or free of charge are excluded. Actual data has been used. Estimations have been made on the consumption amounts, where data was lacking: Based on the number and/or volume of containers; Based on actual data of a prior reporting year, extrapolated to 2022; Based on monetary amounts, converted into estimated waste amounts based on a provided invoice cost rate; Based on property value and/or surface area; and Based on contractual terms (e.g., renting contract).

Environmental accidents

An environmental accident is an event that may cause harm or potential harm to air, water, land, wildlife, or local habitat. For instance, air pollution, black smoke, chemical spill, oil spill, fly-tipping, waste issues, sewage leaks, fires on chemical products, etc.

eGRID is a comprehensive source of data from EPA's Clean Air Markets Division on the environmental characteristics of almost all electric power generated in the United States. The eGRID map can be found on https://egrid2020_subregion_map.png (3300×2519) (epa.gov).

List of references

Emission Factors for Greenhouse Gas Inventories (epa.gov)
egrid2020_subregion_map.png (3300×2519) (epa.gov)
Emissions & Generation Resource Integrated Database (eGRID) | US EPA
gri-306-waste-2020.pdf (globalreporting.org)
How we do it - TFS Initiative (tfs-initiative.com)
Procurement and Supply Chain Risk Management Software | EcoVadis®

Glossary of terms

Akita: Akita I S.à r.l., a private limited liability company (société à responsabilité limitée) incorporated under the laws of the Grand Duchy of Luxembourg, which is indirectly controlled by EQT VIII SCSp, a fund managed and advised by subsidiaries of EQT AB
Articles of Association: The articles of association of the Company, as last amended on September 21, 2021
Audit and Risk Committee: The Audit and Risk Committee of the Board of Directors
BCCA: The Belgian Code of Companies and Associations
Board of Directors: The Board of Directors of the Company
Charter: The corporate governance charter of the Company, available on the Company's website
Chief Executive Officer: The chief executive officer of the Company, as of December 31, 2022, Mr. Hans Joachim Müller
Chief Financial Officer: The chief financial officer of the Company, as of December 31, 2022, Mr. Thijs Bakker (acting through Cloudworks BV)
Company: Azelis Group NV
Corporate Governance Code: The 2020 Belgian Code on Corporate Governance, available on the website of the Belgian Corporate Governance Committee
CSR: Corporate Social Responsibility
Dealing Code: The dealing code of the Company set out in Appendix 5 of the Charter
e-Lab: A one-of-a-kind digital experience that supports our customers in creating and adapting formulations online
EQT: EQT AB and/or any one or more of its direct or indirect subsidiaries (excluding the EQT funds and their portfolio companies)
Executive Committee: The executive committee of the Company
FSMA: The Financial Services and Markets Authority (Autoriteit voor financiële diensten en markten / Autorité des services et marchés financiers)
GLIC: Global lab and innovation community
GMT: General management team
Group: The Company and its consolidated subsidiaries
IPO: The initial public offering of the Company on the regulated market of Euronext Brussels
LTIP: The Company's long-term management incentive plan
Partnerships: Akita Management Participation 1 SCSp and Akita Management Participation 2 SCSp
PSP Europe: PSP Investments Holding Europe Limited
Remuneration and Nomination Committee: The Remuneration and Nomination Committee of the Board of Directors
Shareholders' Meeting: The general meeting of shareholders of the Company
SDG: Sustainable Development Goal
SDS: Safety Data Sheet
TDS: Technical Data Sheet
TFS: Together for Sustainability

Financial calendar & contact

Financial Calendar

Date	Event
May 12, 2023	Q1 2023 trading update
June 8, 2023	Annual General Meeting
August 3, 2023	Half Year 2023 results
November 9, 2023	Q3 2023 trading update

Contact

Investor relations, Email: [email protected] - Tel: +32 3 613 0127

Disclaimer

This annual report may contain statements relevant to Azelis Group NV (the “Company”) and/or its affiliated companies (collectively “Azelis” or the “Azelis Group”) which are not historical facts and are hereby identified as “forward-looking statements”. Such forward-looking statements, include, without limitation, those relating to the future business prospects, revenue, working capital, liquidity, capital needs, interest costs and income, in each case relating to the Azelis Group. The forward-looking statements and estimates contained herein represent the judgement of and are based on the information available to the Board of Directors and the Company’s management as of the date of this annual report. They involve a number of known and unknown risks, uncertainties and other factors that could cause actual results, performance or achievements to differ materially from those expressed or implied by the forward looking statements. These forward-looking statements should not be considered as guarantees for future performance of the Azelis Group and should, therefore, be considered in light of various important factors that could cause actual results to differ materially from estimates or projections contained in the forward looking statements. These include without limitation economic and business cycles, the terms and conditions of the Azelis’ financing arrangements, foreign currency rate fluctuations, competition in Azelis’ key markets, acquisitions or disposals of businesses or assets and trends in Azelis’ principal industries or economies. The foregoing list of important factors is not exhaustive. When considering forward looking statements, careful consideration should be given to the foregoing factors and other uncertainties and events, as well as factors described in any other document published by the Company with the Belgian Financial Services and Markets Authority (“FSMA”) or on the Azelis website from time to time, including the prospectus related to the admission to trading of the securities of Azelis Group NV on the regulated market of Euronext Brussels dated 14 September 2021.No undue reliance should be placed on such forward looking statements which are relevant only as of the date of this announcement. Except as required by the FSMA, Euronext or otherwise in accordance with applicable law, the Company undertakes no obligation to update publicly or revise any forward looking statements, whether as a result of new information, future events or otherwise.

Certain financial information in this annual report has been rounded according to established commercial standards. As a result, this annual report may show minor rounding differences versus comparable periods as presented earlier.

Pursuant to Belgian Law, Azelis is required to prepare its Annual Report in Dutch. Azelis has also made this report available in English.

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Azelis Group NV — Annual Report (ESEF) 2022

Annual Report 2022

Message from the Chair

Message from the Chair

Letter from the CEO

Letter from the CEO

About Azelis

Key figures 2022

Strategic review

Operational achievements

Consolidating the industry, widening our reach

Building a network of innovation incubators

Innovating for our customers

Transforming the industry, one portal at a time

Performing for our principals

All set for a digital future

On-time compliance

Contributing to a better, more sustainable world

Financial achievements

Revenue by business segment

Revenue by geography

Gross profit by geography

Adjusted EBITA by geography

Global footprint

Global footprint

Who we are

We innovate through formulation

Innovation through formulation - our unique proposition

Driving innovation together

Digital service platforms

Building connections together

Taking action together

Our values

At a glance

2017-2022 Revenue CAGR

2017-2022 Average return on tangible invested capital (ROTIC)

Our people

We care for our employees

How we develop talent and expertise

Culture, accountability and development of colleagues

High awareness and compliance with health and safety rules

Surveying our employees’ satisfaction

An adapted, extensive training program

Equity, diversity, and inclusion

How diversity, equity, and inclusion (DE&I) matter | McKinsey

What we do

Innovation and technical services at the core

Markets we serve

Improving every aspect of life, every day

Specialty chemicals and food ingredients distribution market

Our business segments

Life Sciences Market Categories

Lateral value chain

Lateral value chain Innovation

Digitalization

Sustainability Strategy

The four pillars of Action 2025

People

Governance

Products and Innovation

Environment

Report of the Board of Directors

Management review

Management review

Operational review

Headline results (in millions of €)

EMEA (in millions of €)

Americas (in millions of €)

Asia Pacific (in millions of €)

Holding companies

Outlook

Financial review

Revenue (in millions of €)

Profitability

Cash flow and financing

Non-financial performance review

Toward integrated reporting

EU Taxonomy

Eligibility

Azelis Group NV Annual Report (ESEF) 2022