Befesa S.A.

Annual Report (ESEF) • Sep 16, 2022

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Contents 02 Befesa at a glance 05 To Befesa’s shareholders 06 Letter from the CEO 10 Befesa in the capital markets 17 Management report 18 About the Company 20 Business model 26 Market environment 32 Strategy 36 Results of operations 38 Financial position & liquidity 40 Segment information 44 Sustainability 46 Environmental 50 Social, health & safety 58 R&D and innovation 62 Risks & opportunities 70 Subsequentevents&outlook 72 Corporate governance 88 Compliance 97 Consolidatedfinancialstatements 98 Consolidatedstatementoffinancialposition 100 Consolidated income statement 101 Consolidated statement of comprehensive income 102 Consolidated statement of changes in equity 103 Consolidatedstatementofcashflows 104 Notestotheconsolidatedfinancialstatements 172 Responsibility statement 173 Independent auditor’s report 181 Statutoryfinancialstatements 182 Balance sheet 186 Profitandlossaccount 188 Notestothestatutoryfinancialstatements 198 Responsibility statement 199 Independent auditor’s report 205 Additional information 206 Glossary 208 Financial calendar 209 Disclaimer 1Befesa Annual Report 2021 Additional information Statutory  financialstatements Consolidated  financialstatements Management report To Befesa’s shareholders USA SWEDEN GERMANY FRANCE SPAIN For more than three decades, Befesahasbeenpartofthe circulareconomyandhas continuously demonstrated strong commitment to recycling. Befesa at a glance Befesa is the global leader providing regulated critical environmental recycling services to the steel and aluminium industries in key European, Asian and North American markets. Befesa is a vital part of the circular economy, providing sustainablesolutionstoourcustomers. 1.4m TONNES OF RECOVERED NEW MATERIALS IN 2021 REINTRODUCED INTO THEMARKET 1.6m TONNES OF RESIDUES RECYCLEDIN 2021 Steel Dust Aluminium Salt Slags Both 2 Befesa Annual Report 2021 Befesa at a glance TURKEY CHINA SOUTH KOREA 1 Total annually installed capacity to recycle 1,839,300 tonnes of EAFD (crude and stainless steel), including c. 620,000 tonnes from the acquired US recycling plants and 220,000tonnesfromthefirsttwoChineseplants.  2 Totalannuallyinstalledcapacitytorecycle450,000tonnesofsaltslagsandSPL,excluding80,000tonnesfromtheUK plant,whichwaspermanentlyclosedinQ42020.  3 Totalannuallyinstalledcapacityof205,000tonnesisbasedonsecondaryaluminiumalloysproduced.  4 Revenue of the AluminiumSaltSlagssegmentisafter€38.8mofintersegmenteliminations.  5 €127.5m 2021 reported total EBIT + €62.2m depreciation and amortisation = €189.6 2021 reportedtotalEBITDA+€14.0one-timeAZRacquisitioncosts–€6.0mHanoverplantfireimpact=€197.62021adjustedtotalEBITDA.  6 Includes 39 employees in Corporate. 23 RECYCLING PLANTS 1,550 EMPLOYEES 6 €822m REVENUE IN 2021 €198m ADJUSTED EBITDA IN 20215 2,494,300 tonnes TOTAL ANNUALLY INSTALLED CAPACITY TO RECYCLEEAF STEEL DUST (CRUDE AND STAINLESS), SALT SLAGS & SPL AND SECONDARY ALUMINIUM Steel dust (crude and stainless) from electric arc furnaces (EAF) Aluminium salt slags & spent pot linings (SPL) Secondary aluminiumalloys 17 6 1,839,300 TONNES 1 450,000 TONNES 2 €148M€456M €368M41,054 457 Close proximity to major customers Befesa’s recycling plants are positioned in attractive markets that are strategically locatedacrossEurope,AsiaandtheUS. €49M 205,000 TONNES 3 3Befesa Annual Report 2021 Additional information Statutory  financialstatements Consolidated  financialstatements Management report To Befesa’s shareholders Reduce The consumption of natural resources prevents more than 1.6 million tonnes of residue from reaching landfills each year. Befesa Annual Report 2021 4 To Befesa’s shareholders 06 Letter from the CEO 10 Befesa in the capital markets 5Befesa Annual Report 2021 Additional information Statutory  financialstatements  Consolidated  financialstatements Management report To Befesa’s shareholders DEAR SHAREHOLDERS, The year 2021 has certainly been an extraordinary year for Befesa. We have delivered the strongest results in the history ofBefesaandachievedgreatprogressintheexecutionofour growthstrategy,whichpositionsustogrowourearningsata double-digit rate in the coming years. It is even more remarkable considering the challenging circumstancestheentireworldhasfacedduring2021,caused bytheglobalCOVID-19pandemic,whichhasimposedsevere restrictionsaroundtheworld. Iwouldliketoexpressmygratitude,onceagain,totheentire teamofBefesaforalltheireffortsandcommitmenttopursuing andfulfillingtheambitiousobjectivesthatwesetatthe beginning of the year. In2021,weachievedrevenuesof€822millionandanadjusted EBITDAof€198million,whichrepresentsanincreaseof56% overthelastyear.Themaindriversofthisgrowthhavebeen acombinationofastrongincreaseinvolumesandpositivemetal price developments through the year. The volume of steel dust recycled increased in 2021 by nearly 30%.Thiswasdrivenmainlybythevolumefromtheacquisition of American Zinc Recycling (AZR) in August, supported by a recovery in the plant utilisation in the rest of the business. Theaveragezincpricefortheyearwas€2,544pertonne,which representsanincreaseof29%comparedtothepreviousyear. Letter from the CEO 24.0% ADJUSTED EBITDA MARGIN IN 2021 (21.0% IN 2020) €99.7m NET PROFIT IN 2021 (€47.6M IN 2020) 01 To Befesa’s shareholders 6 Befesa Annual Report 2021 Similarly, the average aluminium price in2021was€2,112pertonne,whichis 48%higherthantheprioryear.Also, thesignificantlylowerzinctreatment charge (TC) in 2021 contributed positivelytotheearningsgrowthlast year ($300 per tonne in 2020 against $159 per tonne in 2021). During2021andQ12022,wehave taken advantage of the strong zinc price to extend our hedging book up to January 2025 at increased prices andtodayweenjoyaroundthree yearsofhedginggoingforward. Thisprovideshighvisibilityand predictability for our shareholders. From the market environment point ofview,themainindustriesand marketswhereweoperatehaveseen a gradual recovery in their levels of activity during 2021. As a result, the production of steel in Europe in 2021 increasedby15%comparedto2020, withastrongproductionlevelfrom EAF steelmakers. Steel production in theUSincreasedby18%,whereasit decreasedby3%inChinain2021. The automotive industry in Europe, meanwhile,ended2021witha smalldecreaseof2%oncarsales compared to the previous year. ThiscompareswithChina,wherecar salesincreasedby7%in2021;and withtheUS,witha3%increase. In the second part of the year, energypricesinEuropeincreased significantly,especiallynaturalgas and electricity. This had a negative impact, especially on our aluminium business,whichusesnaturalgas andelectricityasthemainenergy sources.Thisimpactin2021was verylimitedandwasoffsetbyhigher metal prices. From the strategy execution pointofview,2021hasbeenan extraordinary year. We entered one of the most important markets of electric arc furnace steel dust (EAFD)recyclingintheworld,like theNorthAmericanmarket,andwe nowcoverapproximately50%of themarket. Alsoin2021,wehavebeenable tocompleteandstartoperations atourfirstplantinChina,inthe province of Jiangsu, in addition tomakinggreatprogressatour second plant in the province of Henan. Our achievements in the US andChinawillsetthefoundationfor double-digitearningsgrowthinthe comingyears. From the capital markets point of view,2021hasalsobeenavery positive year. We successfully carried out a sizeable capital increaseinJunetofundthe acquisitionofAZR,whichwas greatly w elcomed b y o ur i nvestors.  Themarketcapincreasefollowing thetransactionaswellastheshare price increase itself enabled Befesa to enter the important German stock index MDAX in September. The generation of cash during 2021 has been very strong, enabling us to finishtheyearwithmorethan€220 million of cash on hand and a net leveragebelowx2.2. Lookingahead,in2021wesetthe foundationforfuturegrowthinthe yearstocomeand2022willclearly beayearofstronggrowthfor Befesa.Thiswillbedrivenmainlyby strongvolumegrowthinourSteel Dust recycling business and supported by strong metal prices. For2022,weexpectdouble-digit EBITDAgrowth.Fromthevolume pointofview,wewilldeliverstrong growthinourSteelDustrecycling business, driven by the contribution ofthetwoplantsinChinaaswellas the full year of operations in the US. In China, the largest steel producing countryintheworld,2022will markthefirstyearofcommercial operations for Befesa. In Jiangsu, after the successful commissioning andramp-upoftheplant,weexpect 12monthsofproductionatalmost full capacity utilisation. In Henan, weexpecttocompletethe commissioning and the ramp-up oftheplantduringH12022andto start commercial operations duringH22022. In the US, the integration of AZR into Befesaisprogressingwell.Weare workingverycloselyacrossall differentaspectsofthebusiness, fromtheoperationaltothe The year 2021 has truly been an inflection point for Befesa, delivering the strongest results in our history: Although we continued operating at all-time highs, we made significant strategic progress, especially in Asia and the US, which will enable us to grow our earnings at a double-digit rate again in2022. 7Befesa Annual Report 2021 Additional information Statutory  financialstatements  Consolidated  financialstatements Management report To Befesa’s shareholders commercial side. The team at AZR isworkingwellwiththerestofthe organisation,andwecanconfirm thatweexpecttocapturethe announced synergies of approximately $20 million over 2022 and 2023. In2022,wewillbenefitfromthefull yearofoperationsintheUS,which willrepresentasignificantEBITDA growth,drivenbybetterhedging prices and the contribution of synergies.Thiswillbepartially offsetbyslightlylowervolumesof steel dust compared to the previous year,whichwewillrecoveroverthe next years. From the metal prices point of view,wealsoexpectapositive contribution in 2022. The hedging price for 2022 is around €2,275 per tonne,whichis€125pertonne higher compared to 2021. In addition,sofarintheyear,weare enjoyingzincpriceshigherthanin 2021. It seems that these have the potential to stay high for the rest of2022. We are living in times of volatility and very high energy prices in Europe, whichhaveanimpactonour European operations and especially on our aluminium business. Our SteelDustbusinessiswell diversifiedfromageographicpoint ofviewandthemainenergycostis coke,withmostofthecontracts havingalimitedimpact.However, ouraluminiumbusinessisaffected by the high energy prices, especiallygasprices,which representaroundtwo-thirdsofthe total energy cost in the Aluminium Salt Slags Recycling business. InChina,wehaveaheadofusa greatgrowthopportunityandwe areveryconfidentandpositive abouthowmattersaredeveloping inthecountry.Theenvironmental authorities are committed to enforcingandfulfillingthe environmentalregulations,with steelmakers seeing recycling as a real solution. We are starting to see realpossibilitiesofnewadditional plantsinChina.Wewillannounce our next steps in China later in 2022. AtBefesa,weareveryproudtohave actively contributed to the circular economy for more than three decades by recycling more hazardous residues for our customers year after year. This producesmorevaluablenew materials and prevents the extractionofvirginresources,even aswekeepdeliveringattractive returnsforourshareholders. InthenextESGReport,whichwe willpublishduringQ22022,wewill include a detailed chapter about climatechangeandhowBefesais committed to doing our part to combatit.BefesaclearlyavoidsCO₂ emissions, preferring an alternative tominingfiniteresourcesfromthe earth.Nevertheless,wearegoing furtherbydefiningaplantoreduce ourCO₂emissionsby20%by2030, withtheambitionofachievingnet zero by 2050. Unfortunately,theworldislivinga very dark period caused by the invasion of Ukraine by Russia. This is causing a terrible humanitarian catastrophe of gigantic dimensions whichisnotyetpossibletoquantify. Beyond the humanitarian crisis, whichisthemostimportantissue, thissadconflictiscreatinggreat instability in the global economy. Although Befesa as a company, our operations and our clients are not beingdirectlyaffected,the developments there concern us very muchandwehopethatthisconflict ends very soon. Yours sincerely, Javier Molina CEO Letter from the CEO continued Following the successful completion of the acquisition of AZR in August 2021, we are driving progress on the integration of our US operations, which are delivering as expected. 01 To Befesa’s shareholders 8 Befesa Annual Report 2021 To Befesa’s shareholders Additional information Statutory  financialstatements  Consolidated  financialstatements  Management  report To Befesa’s shareholders 9Befesa Annual Report 2021 Befesa in the capital markets Befesa share development vs DAX and MDAX in 2021 Share data Ticker symbol BFSA ISIN LU1704650164 Germansecuritiescode(WKN) A2H5Z1 Bloomberg code BFSA:GR Reuters code BFSA.DE Stock exchange Frankfurt Stock Exchange, XETRA Market segment Prime Standard Index MDAX Number of shares 39,999,998 In € 2021 2020 Free-float(endofyear) 100.0% 100.0% Closing price 67.40 51.70 Highest price 72.50 51.70 Lowestprice 49.75 23.25 Dividends 1.251 1.17 Dividend yield (based on closing price) 1.9%1 2.3% Market capitalisation (end of year) 2,695,999,865 1,761,248,649 1 Proposal–subjecttoAGMresolution Data source: Bloomberg XETRA closing prices 90 100 110 120 130 140 150 DAX MDAX Befesa Closing price €67.40 market capitalisation (end of year): €2,696m DEC 2020 DEC 2021 01 To Befesa’s shareholders 10 Befesa Annual Report 2021 To Befesa’s shareholders The Befesa share started 2021 at a price of €49.75 on 4 January 2021. Until the beginning of March, the Befesasharewasableto outperform both the DAX and the MDAX indices. This happened despite increasing COVID-19 infectionsandcontinuedlockdowns in many countries. Shortly after the preliminaryfigureswerereleasedat the end of February 2021, the share priceshowedacorrection,butwas able to outperform the indices again afterwards.Momentumcontinued and softened later in the spring. In mid-May,onemajorshareholder announced they had sold their entirepositionbelowthecurrent share price. This resulted in a decrease of the Befesa share price, butwaspartlycompensatedwithin afewdays. The most important event for Befesa and for the market in 2021 wastheannouncementofthe acquisition of American Zinc Recycling (AZR) on 16 June, followedbyacapitalincrease. Atotalof5,933,293newBefesa shareswereissuedandincreased the number of total shares to 39,999,998. The message about thewell-pricedacquisitionandthe potentialgrowthresultedinarally whichbroughtaboutnewall-time highsinJuly.Therallystoppedwhen theH1figureswerepublished,butit continuedinAugustfollowedbya break. The all-time high of €72.50 wasreachedon7September2021, shortly after the inclusion of Befesa intheMDAXwasannounced.Since theacquisitioninmid-June,Befesa wasabletooutperformtheindices. In September a correction started, paused by another increase at the endofOctober,whichendedwith thereportingoftheQ3figures. Befesa’sconsolidationwas latersupportedbydecreasing indicesinNovember.Although indices recovered slightly inDecember,theBefesashare wasagainabletoconsiderably outperform the indices. In summary, over the course of the year 2021, Befesa’s share price increasedby30.4%aftertheBefesa sharehadalreadygained36.1%in 2020. In addition, shareholders received a dividend of €1.17 per sharewhichwaspaidinJuly.Befesa wasabletoshowaperformance twiceashighastheDAXandMDAX. TheDAXindexgrewin2021by 15.8%andtheMDAXclosed14.1% higher. Befesa’s daily average volume traded on XETRA increased significantlyto62,124shares(2020: 48,332Befesasharesweretraded daily).Thiswasduetothehigher numberoftotalsharesaswellasthe MDAX inclusion in September 2021. Basedonadditionalfigures,Befesa estimates that the XETRA trading volumesrepresentslessthan50% of the real daily trades of Befesa shares. Alternative trading platforms wereagainimportanttradingplaces in 2021, as already in 2020. The market capitalisation of Befesa increasedby53.1%to€2,696million (end of 2020: €1,761 million). Share performance in 2021 Befesa DAX MDAX 30 December 2020 51.70 13,718.78 30,796.26 30 December 2021 67.40 15,884.86 35,123.25 Change 30.4% 15.8% 14.1% 11Befesa Annual Report 2021 Additional information Statutory  financialstatements  Consolidated  financialstatements Management report To Befesa’s shareholders SHAREHOLDER STRUCTURE Befesa’ssharesareownedbyalarge number of international investors and by retail shareholders. After Befesa’sformermajorshareholder solditsremainingstake,100%of shares in Befesa S.A. have been free-floatingsince6June2019. According to voting rights notificationsreceived,asof 31December2021,thefollowing shareholdersheld(orwere attributedto)5%ormoreof thetotalvotingrightsattached toBefesashares: Name of shareholder (direct or indirect) % of voting rights in the share capital of Befesa Date on which the threshold was crossed or reached Alba Europe S.à r.l., Lux- embourg, Grand Duchy of Luxem- bourg 5.10% attached toshares 21 June 2021 Global Portfolio Investments, S.L., Madrid, Spain 5.41% attached toshares 17 June 2021 Allianz Global Investors GmbH, Frankfurt, Germany 10.07% attached toshares 18 March 2020 Basedonvotingrightsnotifications, other publicly available data sources (especiallypublicfilings)andown research, German investors account for the largest share of institutional investors(27%),followedby investorsfromtheUK(16%)and Spain(16%).Additionalimportant shareholders are based in the US (13%)andFrance(8%).The10 largestinvestorsownalmost42% andthe25largestinvestorsown approximately62%ofBefesa. DIVIDEND Within its dividend policy, Befesa balances primarily four aspects: 1  Distributeasadividend40% to50%ofnetreportedprofit 2 Target dividend stability overtheyears 3  Ensurethatallkeygrowth initiatives are funded 4 Manage leverage at amoderatelevel Reviewingtheseaspects,theBoard ofDirectorsofBefesawillpropose to the Annual General Meeting (AGM) of 2022 to distribute a total dividend of €50 million or €1.25 per share(2021:€1.17).Thiswouldresult inadividendpayoutratioof50.1%of the2021reportednetprofit.Based on the 2021 closing price, the proposeddividendpaymentwould resultinadividendyieldof1.9%. On 16 June 2022, the Befesa shareholderswilldecideonthe dividend proposal as part of the AGM agenda. INDICES BefesawaslistedintheSDAX as of September 2018. In September 2021, theBefesasharejoinedtheMDAX, one of Germany’s leading and most closelywatchedstockindices.The MDAX index comprises the 50 largestcompaniesbelowGermany’s DAX,which,asofSeptember2021, contains the 40 largest stocks in termsofmarketcapitalisation. The composition of these indices ofDeutscheBörseisbasedonthe free-floatmarketcapitalisationand some additional conditions Befesa hasfullymet(e.g.free-floatofat least10%andtheexistenceofan audit committee). According to the definitionsofDeutscheBörse,the index-relevantfree-floatforBefesa is89.48%. IntheDeutscheBörserankinglist withallcorporationslistedin Frankfurt in Prime and General Standardfulfillingtherules,Befesa improved its ranking in December 2021 to rank #73 in terms of market capitalisation.Thisisasignificant improvement compared to rank #88 in December 2020. Since May 2019, Befesa has been included in the MSCI Europe Small Cap Index and in the MSCI Germany Small Cap Index. These inclusions increased the demand for the Befesa share because index trackers (ETFs) have to include theindexmembers. Befesawaspromotedintothe Global Challenges Index (GCX) inSeptember2020.TheGCX comprises a total of 50 international shares selected according to strictcriteriafromatotalnumber ofaround6,000companies worldwide.In2021,theinclusion ofBefesawasconfirmed. TheGCXwasinitiatedbyBoersen AG,theparentcompanyofthe Hamburg and Hannover stock exchanges,anditwasdevelopedin 2007incooperationwithtoday’s ISS ESG. The GCX only includes shares of companies that make pioneering contributions to the seven global challenges of climate change, the supply of clean drinking water,deforestation,biodiversity, population development, poverty, Befesa in the capital markets continued 01 To Befesa’s shareholders 12 Befesa Annual Report 2021 To Befesa’s shareholders and global governance. The decision to include Befesa wasbasedontheCompany’s current performance in the ISS ESG Sustainability Rating (Prime Status) and, in particular, on its contribution to the achievement of sustainable developmentobjectives,as reflectedintheSustainable Development Goals Assessment (SDGA). The GCX advisory board includes representatives from the Federal Association of German Foundations, the Protestant and Catholic Churches and the World Wide Fund for Nature (WWF). Befesawashonouredforthe contribution made to increasing theoverallefficiencyofrawmaterial use in the metals industry and the development of recycling solutions that promote the transition to a more sustainable recycling economy. At the same time, the safety measures taken to adequately manage social and environmental risks have been recognised. In September 2021, the Zero Plastic Indexwascreatedandincludes eight European companies. Befesa ispartofthisindexwithaweight ofaround13%. ANALYSTS’ COVERAGE In 2021, nine equity analysts published regular reports and recommendations on the Befesa shares (2020: eight). Asoftheendof2021,67%ofthe analysts recommended buying the Befesashareand33%hadahold (neutral)viewonBefesa.Noneofthe analysts recommended selling the Befesa share. The median of thepricetargetswas€74.00 (2020:€48.60)pershare. ESG RATINGS Since 2019, four of the most important international environmental, social and governance (ESG) rating agencies have been publishing research on Befesa. This underlines the importanceofESG,forwhichBefesa iswellsuited.Thisisinparticular becauseofitsvitalpositioninthe circular economy value chain and its core business focus on hazardous wastemanagementandrecycling. ESGtopicsarenowmainstream, driven by discussion around climate action and the introduction of the EU taxonomy. Befesa, as part of thecirculareconomy,canfulfilthe needs of investors and is also qualifying for impact investing. ESG ratings are very important, buttheirapproachdiffersgreatly, andinvestorshavetodecidehow todealwiththedatatheyreceive fromtheproviders.Befesaanswered to the high information needs of ratingagenciesandinvestorswith theESGProgressUpdate2020. ThedialoguewiththeESGrating Analysts’ recommendations Institution Analyst Recommendation Target price (€) Bank of America KevinKerdoudi Buy 73.00 Berenberg BenjaminPfannes-Varrow Buy 79.00 Citi Paul L. Bradley Neutral 70.00 Commerzbank Ingo-Martin Schachel Buy 75.00 Goldman Sachs Jack O’Brien Buy 85.00 JP Morgan Sylvia P. Barker Neutral 67.00 KeplerCheuvreux Olivier Calvet Hold 77.00 Santander Jaime Escribano Buy 73.70 Stifel MichaelE.Hoffman Buy 74.00 As of 31 December 2021 13Befesa Annual Report 2021 Additional information Statutory  financialstatements  Consolidated  financialstatements Management report To Befesa’s shareholders agencies continued and helped to explain the business model and Befesa'srolefortheenvironment. Intotal,theESGviewonBefesais very positive and the ESG rating results are encouraging, even resulting in the Company being placed in the Top 3 or Top 5 of the industry sectors globally. Updated information on ESG at BefesawillbeprovidedintheBefesa ESGReport2021,whichwillbe issuedinQ22022andwillbemade available on Befesa’s updated website(www.befesa.com). INVESTOR RELATIONS ACTIVITIES Befesa's investor relations provides comprehensive information for the capitalmarkets.Fixeddateswith regular reporting forms the basis for capitalmarketcommunication,with Befesa’s quarterly and annual results. This includes conference calls for analysts and investors, and investornewswiththerelevant information about Befesa. Acalendarwiththeupcoming reporting dates, investor conferences and current presentations is available onBefesa’swebsite(www.befesa. com),whichwasrelaunchedin December 2021. Befesa has continued the direct andintensivedialoguewithexisting shareholders, potential investors andanalysts.Thecircumstancesin 2021werestillchallengingowingto the COVID-19 pandemic, and roadshowsandconferences continuedvirtually.Afterthis significantandrapidchangein2020, investors have become used to virtual meetings and see advantages such as the possibility of holding more meetings at the same time since travel time and costs can be avoided. Thisalsohelpedtosignificantly reduce the carbon footprint of the investor relations activities. During 2021, Befesa attended 24investorconferencesand completedsixroadshows.Intotal, 430 institutional investors from therelevantfinancialmarketsin EuropeandNorthAmericawere met(2020:420).Thishighleveland the fact that it even increased again in2021showsthelargeinterestin the Befesa share, also driven by the acquisitionofAZRintheUS. Retail investors can obtain relevant information on request, by being added to the distribution list or from Befesa’swebsite.Theyareonepillar of Befesa’s shareholder base. Also in2021,severalfinancialmagazines forretailinvestorscontinuedto followtheBefesashareand publishedbuyrecommendations. According to a shareholder identification,in2021the numberofretailinvestorswho arenewshareholdersinBefesa increased strongly. Befesa is committed to the principles of open and continuous communication,whichisexpressed in the Company‘s support andmembershipintheGerman InvestorRelationsAssociation(DIRK – Deutscher Investor Relations Verband e.V., Frankfurt). Befesa in the capital markets continued Asof31December2021,ESGratingagenciesfollowingBefesa andtheirrespectiveESGratingsassignedtoBefesawere: Metals Processing & Production Prime Status Top 3 of 69 Business Support Services 60/100 points: Advanced Rank #7 of 103 Commercial Services, Facilities Maintenance Rank #5 of 63 Commercial Services & Supplies Rating: BBB 01 To Befesa’s shareholders 14 Befesa Annual Report 2021 To Befesa’s shareholders 15 Additional information Statutory  financialstatements  Consolidated  financialstatements  Management  report To Befesa’s shareholders Befesa Annual Report 2021 Recycle Hazardous residues from secondary steeland aluminiumproducers 16 Befesa Annual Report 2021 Management report 18 About the Company 20 Business model 26 Market environment 32 Strategy 36 Results of operations 38 Financial position & liquidity 40 Segment information 44 Sustainability 46 Environmental 50 Social, health & safety 58 R&D and innovation 62 Risks & opportunities 70 Subsequentevents&outlook 72 Corporate governance 88 Compliance 17Befesa Annual Report 2021 Additional information Statutory  financialstatements  Consolidated  financialstatements Management report  ToBefesa’s  shareholders GENERAL INFORMATION Befesa S.A. is a public limited company (société anonyme) incorporated in Luxembourg and governed by Luxembourg law.Theregisteredofficeislocatedat68-70,Boulevard delaPétrusse,L-2320,Luxembourg,GrandDuchyof Luxembourg. Befesa S.A. is the Parent Company of the BefesaGroup.Befesa’sfinancialyearstartson1January andendson31December. ORGANISATION OF BEFESA Befesaorganisesitsactivitiesintotwobusinesssegments: Steel Dust Recycling Services and Aluminium Salt Slags Recycling Services. Befesahasacorporatestructurewithselectedfunctions tocoordinateandsupportbothbusinesssegmentswhile promoting a common management philosophy and mission. In 2021, the Steel Dust Recycling Services segment represented75%ofBefesa’stotaladjustedEBITDA. Theremaining25%wascontributedbytheAluminium SaltSlagsRecyclingServicessegment. About the Company Corporate functions Steel Dust Recycling Services Aluminium SaltSlags Recycling Services 02 Management report 18 Befesa Annual Report 2021 BEFESA’S VISION Befesa aims to be the global leader in the management and recycling of hazardous residues for the steel and aluminium industries by continuing to playagrowingroleinamoresustainableworldandthecirculareconomy. BEFESA’S STRATEGY Befesa focuses on achieving its goals by developing improvements in existing technologies, optimising operations and product quality, and increasingefficiencywhileinvestinginorganicgrowthandscalingupits provenbusinessmodelintonewandemergingmarkets. BEFESA’S BUSINESS Befesa’s business is to provide sustainable solutions to the steel and aluminium industries through servicing and recycling hazardous residues generated in the value chains of secondary steel and aluminium producers. Befesafocusesitscoreeffortsonrecyclinghazardousresidues:crudesteel dust, salt slags and SPL. Befesa has been a part of the circular economy for more than three decades. BEFESA’S PRINCIPLES Befesa places a strong emphasis on its social responsibility and helps to createasustainableworld. Befesafocusesonthefollowingprinciples: Health & safety Operational excellence Environmental protection Client focus Compliance Integrity & transparency Highlyqualified employees 19Befesa Annual Report 2021 Additional information Statutory  financialstatements Consolidated  financialstatements Management report To Befesa’s shareholders Business model In addition, a small portion of revenue is generated by tolling fees. These fees consist of a service fee charged for collecting and treating stainless- steel residues and a fee for returning the metals – mainly nickel, chromium and molybdenum recovered in the recycling process – to stainless- steel dust customers. In the Salt Slags operations of the Aluminium Salt Slags Recycling Services segment, Befesa recycles salt slags that are collected from customers for a service fee. Further salt slags are generated during the production of secondary aluminium at Befesa’s plants. In addition, Befesa recycles SPL, a hazardous residue generated by primary aluminium producers. During the recycling process, melting salt, aluminium concentrates and aluminium oxides are recovered. Revenues from the Salt Slags operations are mainly derived from the sale of aluminium concentrates and melting salt obtained from recyclingsaltslagsandSPLaswell as fees charged for recycling these materials. A large amount of the recovered aluminium concentrates issoldandusedwithinBefesato produce aluminium alloys. The services cover the timely and efficientcollectionandtreatmentof hazardous residues – mainly steel dust and salt slags – from customers’ facilities. This enables the management of the environmental and regulatory obligations that Befesa’s customers have: to recycle the hazardous residues generated in their operations. In the Steel Dust Recycling Services segment, Befesa collects and recycles steel dust and other steel residues generated in the production of crude, stainless and galvanised steel in EAF. Themajorityoftherevenuegenerated in the Steel Dust Recycling Services segment comes from selling Waelz oxide (WOX). This is produced from the recycling of crude steel dust to zinc smelters, and the service fees charged for the collection and especially the treatment of crude steel dust. Befesa’s business model isbased on a full-service approach to offering residue management solutions to its customers in the steel and aluminium industries. In the Secondary Aluminium operations of the Aluminium Salt Slags Recycling Services segment, Befesa collects and recycles aluminium scrap and other aluminium residues such as aluminium drosses, shavings andcuttingsandaluminium concentrates from, among others, aluminium foundries, scrap dealers and collectors, and primary aluminium producers. Befesa also generates aluminium concentrates itselfduringthesaltslagsrecycling operations and produces secondary aluminium alloys from these aluminium residues. These are mainly sold to customers in the automotive and construction industries. Revenues from the Secondary Aluminium operations are mainly derived from the sale of secondary aluminium alloys. 02 Management report 20 Befesa Annual Report 2021 InputsOutputs Activities Activities Befesa has been a part of the circular economy for more than three decades and contributes byreintroducingvaluablematerialsintotheproductionprocess. Clients: steel industry Clients: aluminium industry Steel Dust Recycling Services Aluminium Salt Slags Recycling Services Collection of steel dust Collection of salt slags and SPL Steel dust recycling services Salt slags and SPL recycling services WOX sold to zinc smelters Use of aluminium concentrates and payment for salt Clients: consumers ofzinc concentrates (smelters) Clients: secondary aluminium producers Financial rigour Befesa’s focus is on securing volumes in itsplantsandmaintainingresilientand solidmarginlevelswhilefocusingon strongcash-flowgeneration.Thisisachievedby managingcapitalexpenditures,workingcapital and operating earnings to continue to fund its growthinitiativesandtodistributedividends toitsshareholders. Leading technology &innovation Befesa’s R&D strategy is designed to create value by developing sustainable improvements intheexistingtechnologies,optimising operations and product quality, and developing newprocesses.Thisachievesgreaterrecycling efficiency,reducedcostsandimproved environmental conditions, such as environmental regulations and higher residue generation. Macro trends Befesacontinuestoexecuteitsorganicgrowth projectpipelineandfocusesongrowingits coreenvironmentalserviceactivities,which arebenefitingfromthepositiveunderlying macrotrends. Highly qualified employees In striving to be the leading global recycling service provider, Befesa relies on a large team of highlyqualifiedemployeesworldwide. Shareholder value Befesa aims to create value for shareholders owingtomanagement'sabilitytoincrease revenues,earningsandfreecashflows,which leads to an increase in dividends and capital gains for shareholders. Customer satisfaction Improvements in sustainable technology optimiseoperationsandproductquality, contributingtosustainabledevelopmentand enhanced customer service. Benefits to the environment Befesaiscontinuouslylookingfornew processes and services to help its customers make their businesses more sustainable. Befesa preventsthelandfillingofmorethan1.6million tonnes of residues each year, reducing the extraction of natural resources from the earth. Employee satisfaction Although the Company faces a competitive labourmarket,Befesamanagesalowturnover ofstaff. 21Befesa Annual Report 2021 Additional information Statutory  financialstatements Consolidated  financialstatements Management report To Befesa’s shareholders Business model / Value chain Critical services for steel and aluminium producers Reduce Recycle EAF steelmakers (mini-mills, scrap recyclers) Aluminium recyclers Service fee to Befesa Service fee to Befesa Mill Storage Steel Dust Dissolution process WaterHazardous components Slag Silos Material delivery and preparation LimeDust Coke Mixer Waelz kiln Pyrometallurgical treatment in the Waelz kiln Salts Create environmental liabilitywithlegal obligation to recycle hazardous residue Salt slags 02 Management report 22 Befesa Annual Report 2021 Recover Reintroduce Aluminium recyclers e.g auto parts Zinc smelters Galvanisation of steel Sale of zinc contained in WOX Sale of aluminium concentrate & melting salt WOX Spent absorbants Stack WOX Catalytic process Filter Salt Evaporation Aluminium concentrate Melting salt Aluminium oxide Condensates Cooler Filter 23Befesa Annual Report 2021 Additional information Statutory  financialstatements  Consolidated  financialstatements Management report  ToBefesa’s  shareholders  Crude steel dust recycling  Stainless-steel dust recycling  Oxide  WOXwashing 3 4 12 10 2 9 1 11 13 14 19 18 15 16 22 21 20 23 Business model Steel dust recyclingplants Installed capacity by plant 1 Duisburg Germany Crude steel dust 87 kt 2 Freiberg Germany Crude steel dust 194 kt 3 Asúa – Erandio Spain Crude steel dust 160 kt 4 Fouquières-lès-Lens¹ France Crude steel dust 55 kt 5 Iskenderun2 Turkey Crude steel dust 110 k t 6 Gyeongju SouthKorea Crude steel dust 220 kt 7 Changzhou3 China Crude steel dust 110 kt 8 Xuchang4 China Crude steel dust 110 kt 9 Barnwell,SC US Crude steel dust 165 kt 10 Rockwood,TN US Crude steel dust 147 kt 11 Calumet, IL US Crude steel dust 142 kt 12 Palmerton, PA US Crude steel dust 163 kt 13 Gravelines France Stainless-steel dust 110 k t 14 Landskrona Sweden Stainless-steel dust 64 kt 15 Sondika/Amorebieta Spain Oxide 16 kt 16 Gravelines France WOXwashing 100 kt 17 Pohang  SouthKorea WOXwashing 60 kt 1 50/50jointventurewithRecylex;55ktofthetotal110ktinstalledcapacitycorrespondstoBefesa 2 Befesaowns,eitherdirectlyorindirectly,53.60%oftheTurkishoperations;therefore,110ktinstalled capacity is fully consolidated 3 Plant started commercial production in December 2021 4 PlantconstructioncompletedinDecember2021;commissioningstartedandramp-upisexpectedin Q22022,withcommercialoutputinH22022 5 TotalannuallyinstalledcapacitydoesnotincludethecapacityoftheoxideandWOXwashingplants 1,839 kt ANNUALLY INSTALLED CAPACITY TORECYCLE STEEL DUST (CRUDEAND STAINLESS)5  Markets & sites 02 Management report 24 Befesa Annual Report 2021 To Befesa’s shareholders  Salt slags & SPL recycling  Secondary aluminium production 617 5 7 8 Aluminium salt slags recycling plants Installed capacity by plant 18 Lünen Germany Salt slags & SPL 170 kt 19 Hanover Germany Salt slags & SPL 130 kt 20 Valladolid Spain Salt slags & SPL 150 kt 21 Erandio Spain Secondary aluminium 64 kt 22 Les Franqueses del Vallès Spain Secondary aluminium 66 kt 23 Bernburg Germany Secondary aluminium 75 kt 450 kt ANNUALLY INSTALLED CAPACITY TORECYCLE SALT SLAGS AND SPL 205 kt ANNUALLY INSTALLED CAPACITY TOPRODUCE SECONDARY ALUMINIUM 25Befesa Annual Report 2021 Additional information Statutory  financialstatements  Consolidated  financialstatements Management report  ToBefesa’s  shareholders FAVOURABLE GLOBAL MACRO TRENDS Thekeymegatrendsinfluencingthesecondarysteeland aluminium markets are expected to continue developing favourably in the long-term. First, an increasing population, a growingmiddleclassmoreenvironmentallyconscious,and advancing industrialisation are all expected to drive economic growth,leadingtoincreasedsteelandaluminiumproduction. Second, greenhouse gas (GHG) emission controls are becoming stricter,andchallengingCO₂-reductiontargetsareurgingsteel and aluminium producers to further innovate their processes withlow-carbontechnologydeploymentandresource efficiency.Consequently,thesetrendsareexpectedtodrivethe need for further recycling and, therefore, Befesa’s services. The global population is expected to increase at an annual growthrateof1%between2021and2050.Furthermore,the urbanpopulationisenvisionedtogrowfrom57%oftheglobal populationin2021to69%by2050. Moreover, the environmentally conscious middle class is expectedtogrowfromabout51%ofthetotalpopulationin 2021toaround62%by2030(3%CAGR).Atotalof85%ofthe peoplewhoaremovingintothemiddleclassthrough2030are expected to be from Asia. The middle-class segment is likely to become a driver of demand for products requiring steel and aluminium – such as vehicles – ultimately driving the demand for recycling services. Increased industrialisation also supports the increased use of higher quality steel and galvanised materials carrying a higher zinc content to protect against corrosion,amongothers.Thispotentiallyallowsrecyclersto Market environment The recycling markets for steel dust, salt slags and SPL are particularly influenced by the industrial markets for steel and aluminium production. 02 Management report 26 Befesa Annual Report 2021 To Befesa’s shareholders competewithlandfillsinmarkets whereregulationisunenforcedor does not yet exist. CRUDE STEEL PRODUCTION &DEMAND Global crude steel production amounted to 1.91 billion tonnes in2021,up4%YOY(2020: 1.83billiontonnes). China’s crude steel production in 2021wasmutedbecauseofpower curtailments and the COVID-19 pandemic resurgence in certain areas,whichdraggeddowndemand. However,Chinacontinuedtoleadthe crudesteelproductiongloballywitha 53%shareoftheglobalsteeloutput, consolidating its one billion tonnes levelofannualoutput(–3%YOY). The2021year-endsawaYOY rebounding trend. All the remaining steel markets currently served by Befesa – the EU, Turkey,SouthKoreaandtheUS– rebounded strongly in 2021 and mostly delivered double-digit YOY growthincrudesteelproduction. Theyear2022islikelytoseeaslow recoveryversus2021,whichsawa rapid recovery from the COVID-19 pandemic. The global demand for crude steel is expected to be solid andgrowbyaround2%over2021. As a result, the global steel output producedin2021wouldnotbe sufficienttosatisfytheincreasing steel demand expected for 2022, drivinggrowthinglobalcrudesteel production and EAFD generation in 2022.Thiswouldthereforecontinue to support the demand for Befesa’s steel dust recycling services in the markets it serves. In China, the government is set to continue to control crude steel productiontoreduceCO₂ emissions, and steel exports from Chinaareexpectedtoremainlow during 2022. Chinese demand for crude steel in 2022 is expected to remainflatYOYonthebackof moderate measures to stimulate the economy. The volume of Chinese crude steel production is also expectedtoholdflattishYOYat around1–1.1milliontonnesof outputin2022.Thiswould consolidate the one-billion tonnes markreachedforthefirsttimein 2020, keeping supply and demand largely in balance. The positive trend of crude steel global output favours the steel dust recycling operations of Befesa. The increased galvanisation of steel to protect against corrosion is expected to lead to a higher zinc demand and higher zinc content in scrap material. Thiswillresultinahigherzinccontent in the steel dust collected in the future.ThiswillenableBefesato continue to utilise its plants more efficientlyinthemedium-term. Over the long-term, some structural changesareexpectedtoaffectthe global steel markets as part of the decarbonisationtrendwhichwill favour the steel production throughEAF: ■ An increase in global EAF capacity as the global steel industrydecarbonises,with higher EAF penetration in China, the largest steel-producing country globally, over the next decade,fromc.10%in2021to min.15%by2025;and ■ Higher demand from green capex and infrastructure: the International Energy Agency’s (IEA) Iron Ore and Steel Technology Roadmap for the industryforecastsac.40% increase in global steel production from 2019 to 2050. Thiswouldbedrivenbyan increase in infrastructure, buildings and machinery, and green capex. Theestimatedgrowingtrendin global steel production, and particularly through EAF, is likely to lead to an increase in the generation of EAFD, and therefore to a higher demand for Befesa’s recycling The estimated growing trend in global steel production, and particularly through EAF, is likely to lead to an increase in the generation of EAFD, and therefore to a higher demand for Befesa’s recycling services. 27Befesa Annual Report 2021 Additional information Statutory  financialstatements  Consolidated  financialstatements Management report  ToBefesa’s  shareholders services. The impact of the Russian waragainstUkrainemayresultin macroeconomic consequences, whichcannotbeadequately forecastedatthetimeoffinalising this Annual Report. SECONDARY ALUMINIUM PRODUCTION & DEMAND The trend in secondary aluminium production–whichisdrivenprimarily by vehicle manufacture – improved inwesternEurope.Automotive production rebounded in 2021 after theseveredecreasewitnessedin 2020 because of the COVID-19 pandemic.Thereboundunderway sinceQ32020hasledtosharp quarter-on-quarter rises in output, butstillaroundhistoricallylowlevels. The global auto sector’s road to recoverywasextendedin2021 duetopandemic-relatedsupply disruptions, most prominently the semiconductor shortage. This in turnledtoasignificantinventory destocking as demand rebounded. The ongoing disruptions in the supply chain are expected to persist up to H1 2022 or even longer. In addition, the global energy crisis thatstartedinChinainQ32021and spreadtoEuropeduringthewinter of 2021 has scarred metals supply, withEuropeansmeltercutsin aluminiumandzincduringQ42021. This is expected to restart progressivelythroughQ22022 before returning to full capacity frommid-2022. For 2022, a reversal in the automotive trend and the related metalsdemandisexpected,with double-digitproductiongrowthin majorautomarkets(Europe:19%; US:20%;Japan:12%;India:23%). This is on the back of accelerating EV demand, inventory restocking and normalising semiconductor production. The impact of the RussianwaragainstUkraine mayresultinmacroeconomic consequences,whichcannotbe adequately forecasted at the time offinalisingthisAnnualReport. In the mid-term, the demand and production of secondary aluminium in the EU is expected to further recoverandgrowonthebackof thepoliticalcommitmentatEU leveltowardsthefulladoptionofEV by 2035. In addition, the expanded production of light passenger vehicles in the European automotiveindustryisexpected, inanefforttomeetlegislative requirements for improved vehicle emissionsandfuelefficiency. This estimate is also based on the assumption that the aluminium content per passenger vehicle willgrowbyaround70%,fromthe current 180 kg of aluminium per passenger vehicle to about 250 kg by 2030. In the Aluminium Salt Slags Recycling business, the positive trend of using higher quantities of aluminium in the construction of light vehicles is also expected to continue into the future. This is expected to result in a higher demand for aluminium and increase the availability of scrap in the long run. Theestimatedgrowingtrendin secondary aluminium production in Europe is likely to lead to an increase in the generation of salt slags, and therefore to a higher demand for Befesa’s recycling services. TREND TOWARDS RECYCLING & REGULATION TO PROTECT THE ENVIRONMENT In the EU and North America, crude steel dust is categorised as a hazardous residue by the regulatory bodies. In addition, in the EU, salt slags are also categorised as a hazardous residue. As a result, these regions have strict rules and procedures for the handling, transportation and treatment of these residues. This level of regulation and its enforcement across geographical locations supports the need for Befesa’s recycling services. Driven by these regulations, landfilledresiduesinOECD countries have decreased over the past decade. These countries have also seen increases in recycled residues, especially hazardous residues containing valuable metals,supportedmainlyby favourable and strictly enforced environmental regulations. IncontrasttoregionsliketheEUor North America, the regulation of steel dust is currently less pronounced in emerging markets. Nonetheless,regulationinthese markets is expected to converge towardsaregulatoryframework similar to the ones seen in the EU and North America, as those markets become more industrialised and environmentally conscious. Recent examples of these favourableenvironmentalregulation developments are Turkey, South KoreaandChina.InTurkey,the environmental regulation for hazardousresidueswaschangedin 2010,inSouthKoreain2012and Market environment continued 02 Management report 28 Befesa Annual Report 2021 To Befesa’s shareholders more recently in China during 2016 and2017.InTurkeyandSouthKorea, BefesahasbeenofferingitsEAFD recycling services since 2010 and 2013, respectively. In China, supported by the regulations, Befesa startedofferingitsEAFDrecycling services at the end of 2021. Further information on Befesa’s projectsinChinaisavailableinthe “Strategy” section of this Annual Report (pages 32 to 35). In summary, in the mid- to long- term, favourable macro- andmegatrends,andpositive sustainability and recycling trends, combinedwithfavourableand strictly enforced environmental regulations, are expected to further enhance the global demand for steel and aluminium production andsubsequentresiduerecycling. Establishing a circular economy is anewandrelevanttrendacrossthe world,butmetalrecyclingisoneof theprocesseswherethecircular economy has already been present for many years. Befesa has, for more than three decades, continuously demonstrated itsstrongcommitmenttothiscircular economy and has based its sustainable business model on this. By recycling metals from residues and other sources and reintroducing the recovered materials into the market, Befesa uses less energy than extractingthemetalsminedasraw materials and limited natural resources from the earth. For example, in the case of aluminium, energysavingscanreachupto95%. Aluminium alloy FMB prices (€ per tonne) Aluminium alloy FMB average prices € per tonne 2021 2020 Change Change Q1 €1,982 €1,435 €547 38% Q2 €1,947 €1,283 €664 52% Q3 €2,012 €1,317 €695 53% Q4 €2,506 €1,661 €845 51% Full year €2,112 €1,424 €688 48% Source: Free Metal Bulletin (FMB), weeklyaverage prices €2,500 €1,500 €2,000 €1,000 €500 31 Dec 2020: €1,985 per tonne 2020 average: €1,424 per tonne 2021 average: €2,112 per tonne Jan-20 Apr-20 Jul-20 Oct-20 Jan-21 Apr-21 Jul-21 Oct-21 Jan-22 31 Dec 2021: €2,325 per tonne 29Befesa Annual Report 2021 Additional information Statutory  financialstatements  Consolidated  financialstatements Management report  ToBefesa’s  shareholders Market environment continued Zinc LME prices (US$ per tonne) Zinc LME prices (€ per tonne) Source: London Metal Exchange (LME), daily cash seller and settlement prices Source: London Metal Exchange (LME), daily cash seller and settlement prices Zinc LME average prices US$ per tonne € per tonne 2021 2020 Change 2021 2020 Change Q1 $2,748 $2,128 $620 29% €2,279 €1,930 €349 18% Q2 $2,916 $1,959 $957 49% €2,418 €1,780 €638 36% Q3 $2,991 $2,340 $651 28% €2,538 €2,000 €538 27% Q4 $3,365 $2,631 $734 28% €2,942 €2,205 €737 33% Full year $3,005 $2,265 $740 33% €2,544 €1,979 €566 29% $4,000 $3,250 $2,500 $1,750 $1,000 31 Dec 2020: US$2,724 per tonne 2020 average: US$2,265 per tonne 2021 average: US$3,005 per tonne Jan-20 Apr-20 Jul-20 Oct-20 Jan-21 Apr-21 Jul-21 Oct-21 Jan-22 31 Dec 2021: US$3,630 per tonne €3,500 €2,500 €3,000 €2,000 €1,500 31 Dec 2020: €2,219 per tonne 31 Dec 2021: €3,205 per tonne 2020 average: €1,979 per tonne 2021 average: €2,544 per tonne Jan-20 Apr-20 Jul-20 Oct-20 Jan-21 Apr-21 Jul-21 Oct-21 Jan-22 02 Management report 30 Befesa Annual Report 2021 To Befesa’s shareholders respective periods, the average daily pricein2021was€2,544pertonne ofzinc,representinga29%or€566 per tonne increase YOY (2020 average: €1,979 per tonne). Befesa’s hedging strategy is aimed at managing and reducing the variabilityofthefinancialresults arising from changes in the zinc price. Further information on the hedging strategy is available in the “Strategy” section of this Annual Report (pages 32 to 35). The aluminium alloy prices referenced by the Free Metal Bulletin (FMB) – an average independent quotation based on prices provided by the majorsecondaryaluminiumplayers intheEuropeanmarket–traded sidewaysataround€2,000pertonne duringthefirstthreequartersof2021. In October, prices surged to a 15-year high of €2,900 per tonne on the back ofthedeepeningglobalpowercrisis, moderately reducing throughout the lasttwomonthsoftheyear. Prices closed at €2,325 per tonneofaluminiumalloyasof 31December2021,€340pertonne or17%abovethepriceof€1,985 per tonne of aluminium alloy as of 31December2020. Theaverageweeklypricepertonne of aluminium alloy FMB for 2021 was€2,112pertonne,representinga 48%or€688pertonneincreaseYOY (2020 average: €1,424 per tonne). DEVELOPMENT OF COMMODITY PRICES The products and services offeredbyBefesa’ssteeldust recyclingandaluminiumsaltslags recycling businesses are partially influencedbythedevelopmentof the supply and demand dynamics ofcertaincommodities. Zinc market prices peaked in mid-October 2021 alongside other base metals as some of the metals andminingglobalmajorplayers reduced run rates at their European smelters,onthebackofhigherpower prices. Since then, zinc market prices loweredbutstillremainedathigh levels versus H1 2021, as inventoriesdrewandfurther disruptions came through. Zinc market prices ended the year at US$3,630 per tonne of zinc as of 31 December 2021, US$906 per tonne or33%abovethepriceofUS$2,724 per tonne of zinc as of 31 December 2020. Applying the US dollar/euro exchange rates for the respective dates, zinc market prices closed at €3,205 per tonne as of 31 December 2021,€986pertonneor44%above the price of €2,219 per tonne of zinc as of 31 December 2020. The average cash seller daily price per tonne quoted on the LME for 2021wasUS$3,005pertonneof zinc,representinga33%or$740per tonne increase YOY (2020 average: US$2,265 per tonne). Applying the US dollar/euro exchange rates for the DEVELOPMENT OF ZINC TREATMENT CHARGES The zinc treatment charge (TC) represents or can be seen as the fees that miners pay smelters to refinezincconcentrateintozinc metal. The benchmark TC is negotiatedannuallybetween majorzincconcentrateproducers andsmelters,withtheagreed benchmark TC usually published around March/April. The benchmark TC is linked to the LME price for zinc through the so-called escalators/ de-escalators. As a result, the higher the zinc LME price is over the base reference price, the larger the TCdeductedwillbe,andviceversa. Befesa’s zinc smelter customers deduct the TC from the amount ofzinccontainedinWOX(typically 85%ofthezincLMEprice),which ispayabletoBefesa. For 2021, the benchmark TC wassettledat$159pertonne, $141pertonnelowerYOY(2020: $300pertonne).Thisrepresentsthe second-lowestleveloverthelast decade.Asaresult,thesignificantly lowerTCof$159pertonnedrove around35%ofthe€71millionYOY higheradjustedEBITDAin2021. As of the date of this Annual Report, the benchmark TC for 2022 has notyetbeenpublishedinthezinc industry.Onceavailable,Befesawill provide detailed earnings guidance for the full 2022 year – most likely withtheQ12022earningsrelease on 26 April 2022. 31Befesa Annual Report 2021 Additional information Statutory  financialstatements  Consolidated  financialstatements Management report  ToBefesa’s  shareholders Strategy Befesa has the ambition of being the global leader in the circular economy, providing steel dust and aluminium salt slags recycling services to steel and aluminium recyclers. Befesa is the recycler of the steel and aluminium recyclers. IN ORDER TO ACHIEVE THIS, BEFESA BASES ITS BUSINESS STRATEGY ON THREE MAIN PILLARS: Maintain the leadership position inthemarketswhereBefesa currently operates. Befesa’s strategy focusesontwo mainobjectives: Expand Befesa’s position in Steel Dust and Salt Slags recycling services by replicating its business modelinnewmarketsthatpresent attractivedynamics,witha combination of environmental regulation and hazardous residue generation (crude steel dust, aluminium salt slags and SPL). 1. 2. Hedging strategy Organic growth Greenfieldin new geographies 02 Management report 32 Befesa Annual Report 2021 To Befesa’s shareholders Themajorityofthezinchedgesare denominatedineuroterms,which also provides a hedging on the FX fluctuation,asthezincpriceonthe LME is quoted in US dollars. In2021,Befesa’shedgeswere “outthemoney”andlockedin at€2,151pertonneonaverage (2020:€2,239pertonne).Thispartly offsetthezincLMEpriceincrease andnegativelyaffectedBefesa’s totalearningsbyabout€8million. Combined,theeffectivezincaverage price(monthlyblendedratebetween hedged volume and non-hedged volume) resulted in €2,275 per tonne in2021,up€139pertonneor6.5% YOY(2020:€2,136pertonne). The acquired AZR operations came withsomefixedpriceforward contractsclosed,withonepartner for part of the zinc payable output. Thesecontractswereandarein placeuptoandincludingQ12023, atfixedpricesofaround$2,500per tonne for 2021 and around $2,750 per tonne for the full year 2022 and Q12023. Followingtheclosingofthe acquisition in August 2021, and under Befesa’s more competitive hedging programme, the Company extended the hedge book for the US operations to be fully synchronised withthatofthenon-USoperations, up to and including October 2024. This locked in 15,000 tonnes of zinc equivalent output per quarter at $2,925pertonneforQ22023, $2,950pertonneforQ3andQ4 2023, and $2,975 per tonne for the firstthreequartersof2024. In2021,Befesamadesignificant progress in the execution of its business strategy across all the dimensions, setting a solid foundationforfuturegrowthgoing forward.Befesatransformedfroma purely European leader to the global leaderinsteeldustrecyclingwitha presence in the three main markets intheworld:Europe,NorthAmerica and Asia. This global transformation willprovideBefesawithmarket diversificationandexposureto differentmarkettrends,accelerated volumeandearningsgrowth. As a result, 2021 represents an inflectionpointinthehistoryof Befesawiththeentryintothetwo majormarkets:ChinaandtheUS. HEDGING STRATEGY Befesa’s hedging strategy has proven to be a key element of its business model to manage zinc price volatility and increase the visibility of its earnings and the stability of cash flowsgoingforward.Hedginghas been part of Befesa’s business model for the last 20 years. The main goal of the hedging is not togrowBefesa’searningsbutto stabilise them over time versus zinc pricefluctuations.Thisimproves Befesa’svisibilityonearningsand cashflows,enablingtheCompany tofunditsorganicgrowth. Befesa’sstrategyistohedge60% to75%oftheexpectedvolumeof zinc contained in the WOX and paid for by zinc smelters for a period of onetothreeyearsgoingforward. After having completely synchronised the hedge book of the USoperationswiththatofthe non-USoperations,Befesa’snew target volume is to hedge 38,100 tonnes of zinc output per quarter or 152,400tonnesperyear.DuringQ1 2022, Befesa partially hedged 5,250 tonnes of zinc output of the 38,100 tonnesnewtargethedgedvolume forQ42024(Novemberand December 2024 and January 2025) at attractive price levels. The combined global hedge book inplaceasofthedateofthis AnnualReportprovidesBefesa withimprovedpricingvisibilityupto January 2025, therefore for the followingc.threeyears. Period Average hedged price (€/tonne) Zinc content in WOX hedged (tonnes) 2021 €2,151 120,013 2022 c. €2,2751 155,818 2023 c. €2,3751 150,955 2024 c. €2,4251 119,550 2 1 FXUSdollar/euroforwardratesassumedare1.15 for 2022 and 2023, and 1.16 for 2024 2 As of 31 December 2021, 84,300 tonnes of zinc equivalentoutputwerehedgedfor2024atc. €2,425pertonneonaverage;subsequently,inQ1 2022, additional 35,250 tonnes of zinc equivalent outputwerehedgedtofullyhedgeQ2andQ32024, andpartiallyhedgeQ42024uptoJanuary2025at c. €2,425 per tonne on average. 33Befesa Annual Report 2021 Additional information Statutory  financialstatements  Consolidated  financialstatements Management report  ToBefesa’s  shareholders Strategy continued ORGANIC GROWTH The second pillar of Befesa's strategy is focused on organic growthopportunitiesinmarkets whereBefesaisalreadypresent. Thisincludestheexpansionof existing plants, debottlenecking or significantoperationalimprovements associatedwithrelevantcapital investments. This enables Befesa toconsolidateitsmarketposition. During 2021, Befesa completed theramp-upoftheoperationsin thetwomaingrowthinvestments carried out in the Steel Dust Recycling business in Turkey and SouthKoreaduringtheprevious years.Theseorganicgrowth projectsconsistingofthe enlargement of the recycling capacity in Iskenderun (Turkey), from 65 to 110 thousand tonnes, andtheWOXwashingplantin Pohang(SouthKorea),which strengthened Befesa’s position inthesetwomarkets. In addition, in the Secondary Aluminium subsegment, the plantsinSpain(ErandioandLes FranquesesdelVallès)were successfully upgraded. This resultedinhigherefficiencies,which werecapturedin2020and2021. Befesa is constantly evaluating organicgrowthopportunitiesacross allitsbusinessthatwilldelivergrowth andprofitabilityimprovements. GREENFIELD IN NEW GEOGRAPHIES The third element of Befesa’s strategy is to replicate its business model in those geographies that showattractivemarketdynamics. Befesa’s core environmental service activities in the recycling of steel dust and aluminium salt slags benefitfromtwopositiveunderlying macrotrends, among others. On the one hand, recycling regulations are increasing globally, drivenbyagrowingconcernabout environmental protection. Across theworld,regulatoryframework trendsaremovingtowards stricterregulationstoprotectthe environment.Ontheotherhand, Zinc LME prices vs Befesa’s hedging prices (€ per tonne) Befesa’s hedges Zinc LME Average blended €2,275 €2,151 €2,239 €2,136 €1,500 €2,500 €3,000 €3,500 €2,000 Jan-20 Feb-20 Mar-20 Apr-20 Jun-20 May-20 Jul-20 Aug-20 Sep-20 Oct-20 Nov-20 Dec-20 Jan-21 Feb-21 Mar-21 Apr-21 May-21 Jun-21 Jul-21 Aug-21 Sep-21 Oct-21 Nov-21 Dec-21 02 Management report 34 Befesa Annual Report 2021 To Befesa’s shareholders there is a higher generation of industrialresidues,specifically crude steel dust, aluminium salt slagsandSPL,drivenbymoresteel and aluminium scrap being recycled globally.Thesetwomacrotrendswill drive future needs for Befesa’s environmental services. Further information on macrotrends is available in the “Market environment” section of this Annual Report (pages 26 to 31). Despite the challenging conditions that the global COVID-19 pandemic represented, during 2021, Befesa continuedtomakesignificant progress in the expansion of the Steel Dust Recycling Services operations in China in both provinces – Jiangsu and Henan. China is the largest steel producer intheworld,withanannualoutputof morethanonebilliontonnesofcrude steel. This represents more than 50%ofglobalproduction.By2030, Chinaisexpectedtoproducemore than 200 million tonnes of EAF steel. In addition, environmental protection has become a key priority for China's government,andsteeldustwas officiallyclassifiedasahazardous wastematerialin2016.Befesais lookingforwardtosupportingthe steel industry in China by providing state-of-the-art sustainable solutions for recycling hazardous waste,whichcontributesto environmental protection in China. In April 2019, Befesa started building itsfirstEAFDrecyclingplantinthe Chinese city of Changzhou, Jiangsu province. The construction of the plant,withthecommissioning includingtheramp-upphase,was successfullycompletedinQ42021. This marked the start of commercial operationsforthefirsttimeinChina at the end of 2021. Also, in November 2019, Befesa startedtheconstructionworkof itssecondEAFDrecyclingplantin China, at Xuchang, Henan province. Thisplantwassuccessfully constructed at the end of 2021, withcommissioningandramp-up taking place in H1 2022. Commercialoperationsare expected to begin in H2 2022. Withtheconstructionofthesefirst twoplants,Befesareaffirmsits commitment to China by deploying its Best Available Technology (BAT) and providing solutions for a more sustainableworld. ThetwoplantsinJiangsuandHenan aredesignedtoeachrecycle110 thousand tonnes of EAFD per year and represent Befesa’s 11 th and 12 th EAFD recycling sites globally, along withexistingsitesinEurope,Turkey, SouthKoreaandtheUS. Finally, in addition to the organic growthandgreenfieldsgrowth drivers,Befesaalwaysmonitors themarketforstrategicM&A opportunities to accelerate growthandgeneratevaluefor Befesa’s shareholders. Consequently, in 2021 Befesa acquired100%ofAZR,themarket leader in EAFD recycling in the US. Ithasaninstalledcapacityof620 thousandtonnesacrossfourplants located in the eastern part of the US. With this acquisition, Befesa becomes the global leader in EAFDrecycling,witharound 1.7milliontonnesoftotalEAFD recycling capacity. But, more importantly, this achieves a geographicallydiversifiedand balanced footprint across the threemainsteel-dustrecycling marketsintheworld(Europe,Asia andNorthAmerica),with12EAFD recycling facilities. The clear near-term synergies and the increase in capacity utilisation willdrivefutureearningsgrowthin North America in the coming years. Despite the challenging conditions that the global COVID-19 pandemic represented, during 2021, Befesacontinued to make remarkable progress in the expansion of the Steel Dust Recycling Services operations in China in both provinces – Jiangsu and Henan. 35Befesa Annual Report 2021 Additional information Statutory  financialstatements  Consolidated  financialstatements Management report  ToBefesa’s  shareholders Befesa successfully closed the acquisition of AZR and consolidated financialsinaccordancewiththe requirements of the International Financial Reporting Standards (IFRS) since17August2021. AZRwasrebrandedtoBefesaZinc USandMrRodrigoDaudwas appointed as CEO/President. Financial year 2021 EBITDA and EBIThavebeenadjustedforthe non-recurring acquisition costs of €14.0 million. More detailed information on the consolidatedfinancialstatementsis available on pages 98 to 171 of this Annual Report. REVENUE Total revenueincreasedby36.0% YOY to €821.6 million in 2021 (2020: €604.3 million). The improvement wasprimarilydrivenbythestronger zinc and aluminium alloy market prices,thesignificantlylowerzinc TC reference, the higher volumes inSteelDustandSecondary Aluminium, and the contribution from the acquired US operations. Thesepositiveeffectswerepartially offsetbythelowervolumesofsalt slagsandSPLthatweretreated. Also, the unfavourable zinc hedgingpricespartiallyoffsetthe positiveeffectofthezincLMEprice increase YOY. Revenue (€million): 2020 2021 604.3 821.6 €217.3m or 36.0% EBITDA & EBIT Total 2021 EBITDA increased by 53.5%YOYto€189.6million(2020: €123.5 million). The €66.1 million EBITDAimprovementYOYwasdriven mainly by strong base metal prices and good volume performance, the maincomponentsbeingthefollowing: ■ Favourable metal prices: Zinc TC (€24million);aluminiumalloyFMB andmetalmargins(€25million); ■ Zinc blended prices: Zinc LME price increase (€25 million), partiallyoffsetbylowerzinc hedgingprices(–€8million); ■ Higher volumes: EAFD throughput and contribution fromtheacquiredUSoperations (€14million),andhigher aluminiumalloyspartiallyoffset bylowersaltslagsandSPL volumes(€0.5million); ■ Higherinflationincludingenergy and China expansion costs, partiallyoffsetbyoperational excellence(–€8million);and ■ Once-offEBITDAimpacts: Non-recurring AZR acquisition costs(–€14million);impactfrom thefireoccurredattheHanover plantinNovember2021(€6 million). Total 2021 adjusted EBITDA increasedby55.6%YOYto€197.6 million (2020: €127.0 million). EBITDA wasadjustedforthenon-recurring AZR acquisition costs (€14.0 million) andforthefireimpactattheHanover plant (–€6.0 million). Total 2021 adjustedEBITDAmarginimproved YOYto24.0%(2020:21.0%). Similarly, total 2021 EBIT increased by87.6%YOYto€127.5million (2020:€67.9million),followingthe same drivers explained, referring to theEBITDAdevelopment.EBITwas adjustedforthenon-recurringAZR acquisition costs (€14.0 million) and thewrite-offofthe“other receivables” related to the insurance litigation at the Scandust plant, Results of operations This section includes consolidated financial information of Befesa S.A. from its existing operations, Steel Dust Recycling Services and Aluminium Salt Slags Recycling Services. 02 Management report 36 Befesa Annual Report 2021 To Befesa’s shareholders Sweden(€7.8million).Total2021 adjustedEBITincreasedby66.8% to €149.3 million (2020: €89.5 million). Further information regardingtheseadjustmentsis availableinnotes6and21ofthe “Consolidatedfinancial statements”sectionofthisAnnual Report. The reconciliation of EBITDA to IFRSoperatingresults(EBIT)is available in the “Consolidated financialstatements”sectionon pages 109 to 110. Adjusted EBITDA & margin (€million,%marginofrevenue): 2020² 2021¹ €70.6m or 55.6% 21.0% 24.0% 127.0 197.6 1 €189.6m total reported EBITDA 2021 + €14.0m one-time AZR acquisition costs – €6.0m Hanover SaltSlagsplantfireimpact=€197.6mtotaladjusted EBITDA 2021 2 €123.5mtotalreportedEBITDA2020+€3.5mUK SaltSlagsplantclosure=€127.0mtotaladjusted EBITDA 2020 Adjusted EBIT & margin (€million,%marginofrevenue): 2020³ 2021⁴ €59.8m or 66.8% 14.8% 18.2% 89.5 149.3 3 €127.5m total reported EBIT 2021 + €14.0m one-time AZRacquisitioncosts+€7.8mwrite-offofthe“other receivables” related to the insurance litigation at Scandust=€149.3mtotaladjustedEBIT2021 4 €67.9mtotalreportedEBIT2020+€13.4mUKSalt Slagsassetwrite-offduetoplantclosure+€4.7m Scandustassetimpairment+€3.5mUKSaltSlags plant closure EBITDA impact = €89.5m total adjustedEBIT2020 24.0% ADJUSTED EBITDA MARGIN IN 2021 (21.0% IN 2020) €99.7m NET PROFIT IN 2021 (€47.6M IN 2020) €2.68 EARNINGS PER SHARE IN 2021 (€1.40 IN 2020) FINANCIAL RESULT &NETPROFIT Total netfinancialresult in 2021 came in at –€15.6 million (2020: –€9.3million).Theyear2021was mainlydrivenbythe€10.5million positive impact from the contingent foreign exchange hedging in relation to the $460 million AZR acquisition inAugust2021.Theyear2020was primarily driven by the €15.5 million one-time positive impact from the Term Loan B (TLB) repricing in February 2020. Total netprofit attributable to the shareholders in 2021 more than doubled YOY to €99.7 million (2020: €47.6million).Thiswasprimarilydue to the positive drivers that had an impact on EBITDA and EBIT. Correspondingly, earnings per share (EPS) in 2021 also improved YOY to €2.68 (2020: €1.40) despite the fact that the number of shares increased by17.4%to39,999,998. 37Befesa Annual Report 2021 Additional information Statutory  financialstatements  Consolidated  financialstatements Management report  ToBefesa’s  shareholders Net debt increased to €470.6 million at year-end 2021 (€393.6 million at year-end 2020), mainly due to the €100 million add-on raised to partly fund the AZR acquisition. Net leverage improved to x2.16 at yearend2021 (vs x3.10 at year-end 2020), because ofthe underlying higher LTM adjusted EBITDA of €217.8 million, which incorporates a full-12 rolling months ofthe US operations. Befesa continuesto becompliant with all debt covenants. Financial position & liquidity Net debt (€million) 31 December 2021 31 December 2020 Non-currentfinancialindebtedness 669.3 531.5  +Currentfinancialindebtedness 25.4 16.8 Financial indebtedness 694.7 548.2  –Cashandcashequivalents -224.1 -154.6  –Othercurrentfinancialassets1 -0.1 -0.1 Net debt 470.6 393.6 LTMadjustedEBITDA 2 217.8 127.0 Net leverage ratio x2.16 x3.10 1 Othercurrentfinancialassetsadjustedbyhedgingvaluation 2 LTMadjustedEBITDAof€217.8millionincorporatesafull-12rollingmonthsofUSoperations During2021,Moody’sandStandard&Poor’sreviewedtheircorporatecredit ratingsassignedtoBefesa.InQ22021,Standard&Poor’supgradedBefesa’s creditratingto‘BB+,outlookstable’(from‘BB,outlookstable’),whileMoody’s reaffirmedits‘Ba2’rating,butimproveditsoutlookonBefesafromnegative to stable. 02 Management report 38 Befesa Annual Report 2021 To Befesa’s shareholders OPERATING CASH FLOW In2021,theoperatingcashflow increasedby27.4%to€117.9million (2020: €92.5 million). This improvementwasdrivenmainlyby the earnings increase explained. Workingcapitalwasupby –€43millionYOY,verymuchdriven by the one-time impact of the AZR acquisition: €14 million non- recurring AZR acquisition costs, and about€34millionworkingcapitalfor the acquired AZR operations. Interests and taxes paid in 2021 amounted to €16.9 million and €15.2million,respectively. € 224.1m CASH ON HAND AT YEAR-END 2021 (€154.6M AT YEAR-END 2020) €470.6m NET DEBT AT YEAR-END 2021 (€393.6M AT YEAR-END 2020) x 2.16 NET LEVERAGE AT YEAR-END 2021 (X3.10 AT YEAR-END 2020) Credit ratings for Befesa S.A. Year-end 2021 Year-end 2020 Moody’s Ba2 (outlook stable) Ba2 (outlook negative) Standard & Poor’s BB+ (outlook stable) BB (outlook stable) Net leverage ratio evolution (Netdeb/LTMadjustedEBITDA) x2.36 x2.61 x2.14 x3.10 x2.16 2017 2018 2019 2020 2021 In 2021, Befesa invested €77.7million(2020:€54.8million) tofundgrowthinvestments– mainlyrelatedtothefirsttwoplants in China partly funded through €27millionlocalloans–aswellas tofundregularmaintenancecapex. Followingthe€46.8milliondividend distributed in July 2021 (2020: €24.9million),thefundingofthe China expansion and the AZR acquisition,totalcashflow generated in 2021 amounted to €69.5 million ,closingtheyearwitha newhighandrecordcashposition of€224.1million(€154.6millionat year-end 2020). The €224.1 million cash balance togetherwiththe€75.0million Revolving Credit Facility (RCF), entirelyundrawn,securesBefesa witharound€300millionliquidity. 39Befesa Annual Report 2021 Additional information Statutory  financialstatements  Consolidated  financialstatements Management report  ToBefesa’s  shareholders STEEL DUST RECYCLING SERVICES The EAFD volumes recycled in 2021 amounted to 885,724 tonnes, a 28.9%increaseYOY(2020:686,981 tonnes). The volume improvement wasdrivenprimarilybythe contribution from the acquired US recycling plants but also by the better utilisation of existing operations YOY. On average, Befesa’s EAFDrecyclingplantsranat83% load factor of the latest installed annual recycling capacity of c. 1,555,300 tonnes, including c. 620,000 tonnes from the acquired US recycling plants and 110,000 tonnes from the Chinese plant at Jiangsu. The 2021 average load factorof83%isflatYOY,andit considers the proportional installed capacity of the Chinese and US sites based on the actual days these sites wereoperationalin2021.Thevolume of WOX sold in 2021 increased by 21.7%to290,975tonnes(2020: 239,173 tonnes). EAFD throughput & load factor (Thousandtonnes,%ofannualcapacity) 2020 687.0 83.2% 83.3%2021¹ 885.7 198.7 kt or 28.9% 1 2021 load factor considers the proportional installed capacity of the Chinese and US sites basedontheactualdaysthesesiteswere operational in 2021 Waelz oxide (WOX) sold (Thousand tonnes) 2020 239.2 2021 291.0 51.8 kt or 21.7%  Revenues in Steel Dust Recycling Servicesincreasedby31.8%in 2021 to €455.8 million (2020: €345.8 million). Segment information Befesa organises its activities into two business segments: Steel Dust Recycling Services and Aluminium Salt Slags Recycling Services. 02 Management report 40 Befesa Annual Report 2021 To Befesa’s shareholders Revenue – Steel Dust Recycling Services (€million) 455.8 €110.1m or 31.8% 2020 2021 345.8 Blended zinc average price (€/tonne) 2020 2,136 2021 2,275 €139 per tonne or 6.5%  EBITDA in Steel Dust Recycling Servicesincreasedby37.8%in 2021 to €134.6 million (2020: €97.7million),drivenprimarilybythe higher market prices and the significantlylowerzincTC.In2021, zincLMEpriceswerestrongerYOY and averaged at €2,544 per tonne, up28.6%YOY(2020:€1,979per tonne).ZincTCwasreferencedat $159 per tonne for the full year 2021 (2020: $300 per tonne). Combined, thenetpriceeffect(zincLMEand TC)wasup51%YOYin2021.Zinc hedging average prices in 2021 werealsolowerYOYwhen compared to spot average prices in the year. Combined, the zinc effectiveaverageprices(blended ratebetweenhedgedvolumeand non-hedged volume) amounted to €2,275pertonnein2021,up6.5% YOY(2020:€2,136pertonne).In addition, the YOY EBITDA increase wasalsodrivenbyhigherEAFD throughput and the positive contribution from the acquired USoperations. Similarly,EBITincreasedby32.0% in2021to€97.0million(2020: €73.5million)followingthesame drivers explained (referring to the EBITDA development). In 2021, EBITDA and EBIT in Steel DustRecyclingServiceswere adjustedforthe€14.0million non-recurring AZR acquisition costs.Inaddition,EBITwasadjusted for€7.8millionduetothewrite-off of the “other receivables” related to the insurance litigation at the Scandustplant,Sweden.Asaresult, adjusted EBITDA increased by 51.8%in2021to€148.3million (2020:€97.7million),andadjusted EBITincreasedby51.6%to€118.6 million (2020: €78.2 million). Adjusted EBITDA & margin – Steel Dust Recycling Services (€million,%marginofrevenue) 2020 97.7 2021² 148.3 €50.6m or 51.8% 28.3% 32.5% 2 €134.6m Steel Dust reported EBITDA 2021 + €13.7m one-time AZR acquisition costs = €148.3m SteelDustadjustedEBITDA2021 Adjusted EBIT & margin – Steel Dust Recycling Services (€million,%marginofrevenue) 78.2 118.6 €40.4m or 51.6% 22.6% 26.0% 2020⁴ 2021³ 3 €97.0m Steel Dust reported EBIT 2021 + €13.7m one-timeAZRacquisitioncosts+€7.8mwrite-off of the “other receivables” related to the insurance litigation at Scandust = €118.6m Steel Dust adjustedEBIT2021 4 €73.5m Steel Dust reported EBIT 2020 + €4.7m Scandust asset impairment = €78.2m Steel Dust adjustedEBIT2020 Adjusted EBITDA in Steel Dust Recycling Services increased in 2021 by 51.8% to €148.3million, representing a 32.5% marginof revenues. 41Befesa Annual Report 2021 Additional information Statutory  financialstatements  Consolidated  financialstatements Management report  ToBefesa’s  shareholders ALUMINIUM SALT SLAGS RECYCLING SERVICES Salt Slags subsegment Salt slags and SPL recycled volumes decreasedby11.2%in 2021 to 395,025 tonnes (2020: 444,607 tonnes). The YOY volume decreasewasprimarilydueto theplantintheUK,whichwas permanently closed at year-end 2020. Overall, Salt Slags recycling plantsoperatedat88%loadfactor in2021(2020:84%)ofthelatest installed annual recycling capacity of 450,000 tonnes, back at solid pre-pandemic levels. Salt slags & SPL volumes & load factor (Thousandtonnesrecycled,%of annualcapacity) 83.9% 87.8% 2020 444.6 2021⁵ 395.0 -49.6 kt or -11.2% 5 2021 load factor based on the latest installed annual recycling capacity of 450,000 tonnes  Revenues in the Salt Slags subsegmentincreasedby15.5% in2021to€77.3million(2020: €67.0million).Thisimprovement wasprimarilydrivenbythe higheraluminiumalloyFMBprices, whichaveragedat€2,112per tonnein2021,up48.3%YOY (2020:€1,424pertonne).Thiswas partiallyoffsetbythevolume decrease driven by the closure of theUKplant. Revenue – Salt Slags subsegment (€million) 2020 67.0 2021 77.3 €10.4m or 15.5%  EBITDA in the Salt Slags subsegment approximately doubled in 2021 to €26.5 million (2020: €13.3million).In2021,EBITDAin theSaltSlagssubsegmentwas adjustedforthe–€6.0millionimpact fromthefirethatoccurredatthe Hanover plant in November 2021. Asaresult,adjustedEBITDA increasedby22.5%in2021to €20.5million(2020:€16.7million, adjustedforthe€3.5millionimpact fromtheUKplant'spermanent closure at year-end 2020). EBIT in 2021reversedfromthelowlevel in2020,to€11.3million(2020: –€9.4million).EarningsintheSalt Slagssubsegmentwereinfluenced by the same drivers that explain the YOY revenue improvement. Adjusted EBITDA & margin – SaltSlags subsegment (€million,%marginofrevenue) 2020⁷ 16.7 2021⁶ 20.5 €3.8m or 22.5% 25.0% 26.5% 6 €26.5m Salt Slags reported EBITDA 2021 – €6.0m HanoverSaltSlagsplantfireimpact=€20.5mSalt SlagsadjustedEBITDA2021 7 €13.3m Salt Slags reported EBITDA 2020 + €3.5m UKSaltSlagsplantclosure=€16.7mSaltSlags adjustedEBITDA2020 Adjusted EBIT & margin – Salt Slags subsegment (€million,%marginofrevenue) 2020⁸ 12.5 2021 11.3 €3.9m or 53.4% 11.0% 14.7% 7.4 8 –€9.4mSaltSlagsreportedEBIT2020+€13.4mUK SaltSlagsassetwrite-offduetoplantclosure+ €3.5mUKSaltSlagsplantclosureEBITDAimpact= €7.4mSaltSlagsadjustedEBIT2020 Secondary Aluminium subsegment Aluminium alloy production volumesincreasedby6.6%in2021 to 185,777 tonnes (2020: 174,334 tonnes),whichrepresentsan all-time-high level. Overall, Secondary Aluminium production plantsoperatedat91%loadfactor in2021(2020:85%),demonstrating a recovery to pre-pandemic levels. Segment information continued 02 Management report 42 Befesa Annual Report 2021 To Befesa’s shareholders Secondary aluminium alloy volumes & load factor (Thousand tonnes produced, %ofannualcapacity) 2020 174.3 2021 185.8 11.4kt or 6.6% 85.0% 90.6% Aluminium alloy average marketprice (€/tonne) 2020 1,424 2021 2,112 €688 per tonne or 48.3% Revenue – Secondary Aluminium subsegment (€ million) 2020 223.9 2021 329.9 €106.0m or 47.3% Revenues in the Secondary Aluminium subsegment increased by47.3%in2021to€329.9million (2020: €223.9 million), mainly due tothevolumeimprovement andthefavourablealuminiumalloy FMB prices. EBITDAintheSecondaryAluminium subsegment more than doubled in 2021to€28.3million(2020: €12.1million).Thispositive developmentisprimarilybecause oftheimprovementinvolumes, thestrongmarketpricesand aluminium metal margins. EBITimprovedfivefoldin2021to €19.3million(2020:€3.8million), followingthesamedriversthat affectedtheEBITDAdevelopment. EBITDA & margin – Secondary Aluminium subsegment (€million,%marginofrevenue) 2020 12.1 2021 28.3 €16.2m or 134.2% 5.4% 8.6% EBIT & margin – Secondary Aluminium subsegment (€million,%marginofrevenue) 2020 3.8 19.32021 €15.5m or 409.0% 1.7% 5.9% Adjusted EBITDA in Aluminium Salt Slags Recycling Services increased in 2021 by 69.4%to €48.8 million. 43Befesa Annual Report 2021 Additional information Statutory  financialstatements  Consolidated  financialstatements Management report  ToBefesa’s  shareholders Sustainability Sustainability is about acting today and thinking in terms of years and decades by building a business model that reduces one's carbon footprint and does not compromise the biosphere and the future of generations to come. Sustainability is part of Befesa’s DNA. Economic, environmental and social standards are considered in all business decisions. This is key to being successful in the long-term. Befesa’s business model is predicated on sustainability and a circular economy approach. Befesa uses sophisticated recycling technology tomanagehazardousresidues,helpingcustomerstocomplywith environmental regulations. Contributing to the creation of a more sustainableworldisatthecoreofBefesa’sbusiness. ForBefesa,environmentalprotectionisnotnewandhasbeenthebackbone of the business since Befesa began its operations. This philosophy has been themaindriverforgrowthformorethanthreedecades. Inthefollowingsections,topicsrelatedtosustainability,suchasthe environment, employees, diversity, inclusion, human rights, health and safety, and corporate citizenship, are described to provide a general overviewofhowthesesubjectsaremanagedatBefesa.Thegovernance part is presented separately, in the sections “Corporate governance” (pages 72 to 86) and “Compliance” (pages 88 to 94). Further information about sustainabilitywillbeavailableintheBefesaESGReport2021,whichwillbe publishedinQ22022. Befesawilldisclosetheeligibilityreportingrequirementsforitsactivities, inaccordancewiththeEUTaxonomyRegulationintheBefesaESGReport 2021. Befesa’s activities are a vital part of the circular economy, and the Companyisawaitingthepublicationofthetechnicalcriteriaforthe “Transition to Circular Economy” goal by the EU authorities. 02 Management report 44 Befesa Annual Report 2021 To Befesa’s shareholders Additional information Statutory  financialstatements  Consolidated  financialstatements Management report  ToBefesa’s  shareholders 45Befesa Annual Report 2021 Forthisreason,atBefesa,theword“residue”isusedinsteadof“waste”, meaning that Befesa believes in and strives to give second and multiple livestoproductsandmaterialsthathavebeenused. In 2021, Befesa managed and recycled over 1.6 million tonnes of residues andproducedabout1.4milliontonnesofnewmaterials.Asavitalplayerin thecirculareconomyformorethanthreedecades,Befesareintroducesthese newmaterialsintothemarket,reducingtheconsumptionofnaturalresources. The circular economy looks beyond the traditional “take-make-dispose” extractiveindustrialmodelandaimstoredefinegrowth,focusingonpositive, society-widebenefits.Itentailsgraduallydecouplingeconomicactivityfrom theconsumptionoffiniteresourcesandreusingwasteoutofthesystem. Metalrecyclingisoneofthemostsignificantprocessesinthecircular economy. It enables multiple lives for materials and reduces the consumption of natural resources. Through the recycling of materials anditsreintroductionintothemarket,thelong-termvalueaddedto residuematerialishighandsustainable. Befesacontributessignificantlytothecirculareconomywithamodelthat closelyresembleswhatthevisionariesandauthoritiesdescribewhenthey speak about the concept of a “circular economy”. In the Steel Dust Recycling Services segment, Befesa takes residues containing zinc from EAF steel-manufacturing plants and recovers from them zinc oxides that can be reused to manufacture pure zinc. This zinc is then reintroduced into the market for galvanisation and other processes andcanbereusedalmostendlessly.Similarprocessesallowtherecoveryof nickel,chromiumandothermetalsfromtherecyclingofstainless-steeldust. Environmental In most cases, today’s waste is not waste buta resource that, with the right technology and business model, can be reprocessed to generate new products which can be used many times. 02 Management report 46 Befesa Annual Report 2021 To Befesa’s shareholders In addition, in the Aluminium Salt Slags Recycling Services segment, Befesa contributes by recycling and reintroducingcloseto100%ofthe aluminium smelting residues (salt slags), bringing it back into the production chain in the form of aluminium concentrates, aluminium oxides and melting salt. Without the actions undertaken byBefesa,amuchhigheramount ofenergy,carbondioxideemissions and negative environmental impacts wouldhavetobeincurredto produce the same amount of zinc, aluminium and melting salts. And whatisworse,thealternativewould be limited since the resources oneartharefinite. As in the Steel Dust Recycling Services segment, through the processes and services provided byBefesa,theAluminiumSaltSlags Recycling Services segment also makesasignificantcontributionto the circular economy for society. Sustainability is at the heart of Befesa’s business model. The Company's research, development and innovation is continuously focusedonlookingfornewprocesses andservicesthatcanhelpcustomers to make their businesses more sustainable. Detailed information on R&D and innovation is available in the “R&D and innovation” section (pages 58to60)ofthisAnnualReport. Befesa’s contribution to the environment: ■ Reducing the consumption of natural resources and preventing over 1.6 million tonnes of residue fromreachinglandfillseachyear; ■ Recycling hazardous residues from secondary steel and aluminiumproducers; ■ Recovering zinc oxides, metal alloys, steel slags, aluminium concentrates and oxides (secondary minerals commercially marketed as Paval®orSerox®,whichhavea high content of alumina) and meltingsalts; ■ Reintroducing the recovered materialsintothemarket;and ■ Using BAT to minimise theenvironmentalimpacts. CO₂emissionreduction Befesaisdefiningaplantoreduceits CO₂emissionsby20%by2030,with the ambition of achieving net zero by 2050.Thedetailedplanwillbe provided as part of the Befesa ESG Report2021scheduledforQ22022. KEY PERFORMANCE INDICATORS(KPIs) Over the last six years, Befesa hasdevelopedkeyperformance indicators(KPIs)thatmeasure environmental performance. These KPIsarecollectedonaquarterly basis and reported internally. These indicators cover various aspects of environmental management, sustainability, health and safety, and social aspects. Indicators and their evolution are analysed at the environmental, health and safety (EHS) managers’ quarterly conferences and by thecorporateEHSCommittee. Theanalysisincludesthenecessary actions to improve these parameters and achieve Befesa’s goals. INVESTMENTS Befesa analyses the needs for the improvementofitsplantstofulfil incoming legislation or to attain efficiencyimprovementsand includes these investments in itscapexbudget.Alistofcapex projectsisdeveloped,prioritised and approved by the Board of Directors of Befesa, according toapprovalprocedures. In 2021, Befesa spent €27 million in environment-related investments (2020:€23million).Thiswaswiththe aimofrenewingequipmentthat increasesefficiencyandreduces energy consumption and emissions. 47Befesa Annual Report 2021 Additional information Statutory  financialstatements  Consolidated  financialstatements Management report  ToBefesa’s  shareholders The most relevant investments carriedoutduring2021were thefollowing: ■ Filter replacements and optimisationtoreduceemissions; ■ Newfilterpresstoreducenatural gas consumption and reduce CO₂emissions; ■ Improvements in reducing and capturing fugitive emissions such as building isolations, equipment enclosure and baghousereplacement; ■ Improvements at gas treatment plants; ■ Theuseofrainwatertoreduce theindustrialwater consumptionandtoimprove stormwatermanagement; ■ The replacement of chemicals withmoreenvironmentally friendlyproducts; ■ Repair of roads to prevent soil andgroundwatercontamination; ■ The replacement of several equipmentwithmoreenergy efficientones; ■ Noise-reductionprojectsat manyBefesasites;and ■ Many energy-reduction initiatives such as the optimisationoftheshutdowns, elimination of compressed air leakages, replacement of lighting withLEDtechnology,thermal insulation, material recovery optimisation to reduce the consumption of resources and coolingtowerimprovements. AIR PROTECTION Air emissions generated from metal recycling could have an impact on human health and the environment andmaybesubjecttoregulations and permissions. Befesaregularlyengageswith industrybodiestoremainaware offorthcomingregulationsand environmental legislation. During thepastfewyears,detailedwork has been done to ensure compliance withtheregulationsoftheIndustrial Emissions Directive (IED). In addition, the implementation of ISO 14001 and the EU Eco-Management Auditing Scheme (EMAS) ensure that Befesa proactivelyreviewsregulationsthat may be applicable to each site. Befesahasupdateditsplantswith equipment according to BAT for operations and emission control to minimisethenegativeeffectsonthe airandtoensurecompliancewith current and forthcoming legislation. SOIL PROTECTION The processing of metal residues has the potential to cause soil damage and contamination if not managedwiththerightinstallations and procedures. Befesa’s installations are designed andmaintainedwithsolid protections through concrete and pavedoperatingsurfaces,rainwater collection systems and other engineering solutions to protect the soil. Adequate soil and underground-watermonitoringis providedwhererequiredand according to local legislation. ENERGY SAVING As mentioned, many environmental investmentswerecarriedoutin 2021 across the Befesa sites to reduce energy consumption and increaseenergyefficiency. WATER CONSUMPTION &EFFLUENTS The processing of metal residues can require substantial quantities ofwater,whichcanrepresenta potential risk to production and to the local environment, particularly in regionsofwaterscarcity.Befesa monitorsitswaterconsumptionasa KPI.Eachsitesubmitsreportsthat are consolidated at a Group level. Trends are analysed and good practices shared to promote individualprojectsinaneffortto reducewaterconsumption. In 2021, certain locations, such as Duisburg (Germany), Gravelines (France) and Palmerton, PA (US), improvedtheirstormwater retentiontoreduceindustrialwater consumption and potential storm watercontamination. WASTE-REDUCTIONEFFORTS Befesa’s inherent business of recycling and reusing hazardous residues from metal processing prevents those residues from reachinglandfills.Befesa’sprocess for treating aluminium foundry salt slagsoffersanexampleofleading technology in recovering all components of the slags and converting them into reusable materials. The high recovery level results in minimal potential risk of contamination and environmental degradation through the disposal or landfillingoftheseslags. TheKPIsrelatedtoresidue generation, including both hazardous and non-hazardous residues (disposed of or recycled) are reported by site periodically (atleastonaquarterlybasis)and consolidated at a Group level. Environmental continued 02 Management report 48 Befesa Annual Report 2021 To Befesa’s shareholders GREENHOUSE GAS EMISSIONS Steel production and metal recycling generates emissions of direct greenhouse gases (GHG), primarily carbon dioxide and methane fromtheproductionprocesses, smeltingactivitiesandon-sitefuel combustion. These emissions contribute to climate change and create risks for companies as regulations are developed and implemented on a regional and global scale. Befesa’s primary business is to recycle hazardous residues from themetalsindustryandtoextract orrecyclethevaluablecontentof those hazardous residues. Befesa contributes to the overall reduction of GHG emissions by applying BAT on industry practices for operationsandemissioncontrols tominimisetheseemissionsinthe recycling process. Through EHS management systems and other internal protocols, Befesa monitors carbon emissions and reportsonaCompany-widebasis annually.Inaddition,KyotoScope1 and Scope 2 emissions are reported. EHS CERTIFICATIONS As of 31 December 2021, all Befesa’s sitesareISO14001certified,an internationally recognised environmental management system. Also,76%ofBefesa'ssitesareISO 50001certified,whichdevelopsan energy management system. A total of81%areISO14064certifiedforthe management of GHG emissions, and 81%arealsocertifiedaccordingtothe ISO 45001 occupational health and safety norm. Almost50%ofBefesa'splants located in the EU are registered according to EMAS, one of the mostdemandingenvironmental management systems. This includes the need for public communication, transparency and recognition by environmental authorities. ThestaffatBefesa’snewfacilities isworkingtowardstheirpending certifications. EHS AUDITING Internal and third-party external auditing processes are conducted as part of the ISO 14001, 50001, 14064and45001certification processes, ensuring they comply withISOrequirements. During2021,allcertificationswere maintained, and audits did not result inanymajornonconformity.Inthe case of minor nonconformance and observations,thesewereanalysed to identify the root causes and the necessaryimprovementsdefined. Further information about environmental issues at Befesa willbeshownintheBefesaESG Report2021,whichwillbepublished inQ22022onBefesa’swebsite (www.befesa.com). ENVIRONMENTAL AWARD In2021,Befesalauncheditsfirst EnvironmentalInitiativeAwardto promote the engagement and commitment of the Company’s employeestowardsenvironmental issues. Many very good environmentalinitiativeswere presented in the contest. The awardedinitiativewastheproject “BefesaForest”,whichisdedicated to the recovery of a local forest and the improvement of biodiversity in Urdaibai(Spain),whichqualifiedasa UNESCO biosphere reserve. The awardedfoundationwillplantover 1,400treesontwohectaresof forestwhichwillcompensatefor 466tonnesofCO₂over40years. Befesa’s contribution to theenvironment: Reduce the consumption of natural resources and prevent morethan1.6million tonnesofresiduefrom reachinglandfillseachyear. Recycle hazardous residues from secondary steel and aluminium producers. Recover zinc oxides, metal alloys, steel slags, aluminium concentrates and oxides (secondary minerals commercially marketed as Paval® or Serox® whichhaveahigh content of alumina) and melting salts. Reintroduce the recovered materials into the market. Using BAT to minimise the environmental impacts. 49Befesa Annual Report 2021 Additional information Statutory  financialstatements  Consolidated  financialstatements Management report  ToBefesa’s  shareholders Social, health & safety The year 2021 has once again been an extraordinary year for Befesa’s employees, as the entire world hasfaced a very volatile and dynamic period. The COVID-19 pandemic continues to have worldwide andunforeseeable impacts on economies, society, business practices and financial markets. People Through all the challenges, Befesa’s employees have gone above and beyond, rising to every challenge and showingtheircommitmenttothe Befesa Strategic Business Plan and goals.Befesahasbeenworkingon measurestoensurecompliancewith local rules and regulations to protect all employees. These measures include, among many others, ensuring social distancing by physical and organisational means, increasing the frequency of cleaning and disinfecting, and providing personalprotectiveequipment(PPE). Befesaknowsthatbasicsafety protocolswork;thatiswhythe Company has been able to continue its activity during this period and waspreparedtorespondtothe current situation. Followingthegrowthplan,Befesais proudtowelcomeournewcolleagues inChinaandtheUS.InChina,Befesa tripleditsheadcountbytheendof 2021. In the US, because of the successful acquisition of AZR (today BefesaZincUS),Befesawelcomed 345 employees distributed across the four recycling plants located in the eastern part of the US. As of 31 December 2021, Befesa increased the number of employees by26.7%from1,137to1,550 peopleacrosseightcountries. Around75%oftheseemployees workinoperationsandmaintenance, afigurethatdemonstratesBefesa’s productivenature.In2021,Befesa continuedtohaveabove85%of employeeswithopen- endedcontracts. Befesa fully commits to its employees’ right to freedom of association and collective bargaining in all its operations. This is not only inaccordancewiththelawsand regulations of the countries in whichBefesaoperates,butalsoin accordancewiththeplentifulwork agreements of each Befesa location, whichnoticeablyimprovesthe minimum legal conditions. Therefore, Befesa’s turnover rate is driven mainly by voluntary resignations, whichamountedto2.40%ofthe global average headcount in 2021 (2.13%in2020). For Befesa, training has crucial importance for the professional development of its employees. Accordingly, Befesa collaborates withdifferenttrainingentities, including universities and business schools. During 2021, 38 apprentices and students participated in traineeships orinternshipswithBefesa(2020:38). Befesa also launched the Young Professionals Programme 2021, focusing on employees under 35 years of age. The programme aims to develop intercultural communication andnetworkingskills,andprovide Company insights. The programme wasdividedintothreesections:a virtualmeetingwithBefesa’s executives (CEO, CFO, business VPs), avirtualmeetingwiththecorporate directors, and more than seven hours of activities on intercultural communication. The communication course consisted of four 90-minute livemeetingsandsixwebinars.The livemeetingsweredesignedas stand-alone training units on designatedtopics,whichallowedthe participants to schedule their participationinaflexiblemanner.In eachsession,participantswereable toseedifferentgroupsettingsand gettoknowothercolleaguesfromthe Befesacommunity,whetherthey wereinSpain,Germany,France, Turkey,ChinaorSouthKorea.In total,38employeesparticipatedin this initiative. Followingthetraininginitiatives,as Befesagrowsaroundtheworld,one focusin2021waslanguagecourses, 02 Management report 50 Befesa Annual Report 2021 To Befesa’s shareholders whereBefesadoubledthenumberof hours compared to 2020. It is crucial thatBefesagrowscohesivelyand together, and for this, communication is a key factor. Beingabletoconnectpeopleand exchange experiences, best practicesandknowledgeiswhat makes Befesa strong. As a result, Befesapartneredwiththelanguage platformBusuu,whichprovides languagelearninginaveryflexible andinteractiveway. Despite the pandemic, training in 2021increasedby25.7%to 23,512traininghours(2020:17,473). Evenunderthecircumstances andrestrictivemeasures,Befesa hasstrivedtooffertrainingsin alllocations. Trainings in health and safety amounted to 11,284 hours. This represents48%ofthetotaltraining hours in 2021 (2020: 10,234 training hoursor59%ofthetotaltraining). Thisshowsthatthisfieldcontinuesto be a key priority at Befesa. Further information on employees is available on pages 162 and 163 of thisAnnualReportandintheBefesa ESGReport2021,whichwillbe availableinQ22022onBefesa’s website(www.befesa.com). DIVERSITY & INCLUSION Diversity and inclusion are at the heart of Befesa. With employees from various ethnic backgrounds, whoarespreadaroundtheworld,the Companyalwaysseekstoensure thateveryoneistreatedwithrespect. Followingthecreationofthe Diversity, equality and inclusion (DE&I) policy in 2020, in 2021 Befesa continuedtoworkforabetterand equal society. In this sense, Befesa launched a video for its employees aboutstereotypes,whichexplains positive and negative stereotypes andhowthebrainprocessesthe information it receives. By paying attention to the stereotypes that people themselves create, everyone canactinamoreobjectiveway withoutlettingprejudiceaffecttheir workandsociallifeand,more importantly,withoutaffecting decisionsthatcanoffendothers. Furthermore, in celebrating important dates such as the World Day for Cultural Diversity for dialogue and development on 21 May 2021, Befesa’semployeescreatedarecipe book,wheretheysharedtheirfavourite local and/or family recipes. To reach everyone,thebookwastranslated into eight languages: Chinese, English,French,German,Korean, Spanish,SwedishandTurkish.Itis available to all employees on the Befesa intranet. Furthermore, on 3 December 2021, Befesa celebrated the International DayofPeoplewithDisabilities. Befesa’s human resources community from all locations participated in a virtual escape room withautisticpeople. Befesaisalsolookingfordifferent KPIstoensureadiverseworkforce, oneofwhichiscompositionbyage. The age chart (page 52) gives a clear pictureofhowthegenerational handoverfollowsanaturalrhythm. Befesa’s human capital is experienced – as of 31 December 2021theaverageemployeeagewas 44.5yearsoldwith11.6yearsof experience at Befesa. Regarding Befesa’s top management gender diversity, the Board of Directors has nine directors, consistingofonewomanand eightmen.Also,theSecretaryto theBoardofDirectors–theGroup’s General Counsel – is female. HUMAN RIGHTS Befesa respects the rights of all employees and those associated withBefesa,includingcustomers, suppliers and their employees. Befesa complieswithuniversalprinciples regarding human rights and labour practices, including the United Nations’ Universal Declaration of Human Rights. Befesa’s code of conductappliestoallstaffmembers, whoarerequiredtoacceptand accommodatedifferentvalues; respect the character and personality ofothers;observetherighttoprivacy andhumanrights;andavoidany violation of human rights based on race, religion, sex, national origin, disability, age or sexual orientation. In addition, Befesa prohibits physical abuse,sexualharassment,power harassment or the violation of the human rights of others. Befesa promotes and expects business integrity,compliancewithapplicable lawsandadherencetointernationally recognised environmental, social and corporate governance standards.Thisisnotonlywithin theorganisation,butalsoamong Befesa’s business partners. For this reason, Befesa has introduced a code of conduct for suppliers that must be accepted and signed by all suppliers. Further information about Befesa’s code of conduct for suppliers is available in the “Compliance” section (pages 88 to 94) of this Annual Report. 51Befesa Annual Report 2021 Additional information Statutory  financialstatements  Consolidated  financialstatements Management report  ToBefesa’s  shareholders Social, health & safety continued Headcount by country Headcount by age group Headcount by segment Headcount by function and gender Manufacturing QHS/ Technology/R&D Administrative Selling Corporate TOTAL 2020 2020 2020 2021 2021 2021 Over 6050-5940-4930-39Up to 29 135 115 414 312 383 310 395 293 223 107 CorporateAluminium Salt Slags Steel Dust 1,053 648 456 454 41 35 UKChinaSouth KoreaSwedenTurkeyFranceUSSpainGermany 406 388 385 380 348 — 101 102 72 72 90 92 70 72 78 26 5 — TotalCorporateSellingAdministrativeQHS/Technology/R&DManufacturing 820 1,150 71 103 34 41 34 46 18 20 977 1,360 12 16 39 37 71 84 21 32 17 21 160 190 2021 2020 02 Management report 52 Befesa Annual Report 2021 To Befesa’s shareholders Health and safety is an integral part of Befesa’s business. Befesa is committed to the continuous improvement of its health and safety performance and is convinced that this focus contributes to achieving operational excellence. Befesa is strongly committed to keeping all its employees safe and lookingaftertheirwell-being.Befesa believes that safety is not only about reducingthenumberofaccidents; itisalsoaboutincreasingemployees’ satisfactionatwork,their engagement and their productivity. There are many other tangible and intangiblebenefitstoasafeworking environment. These add value to the businessandbenefitallstakeholders, including employees, the community, customers and shareholders. Befesa’s goal is to lead by example in terms of safety, health, environment and quality. SHARING LEARNING LESSONS Every incident or near miss is reported and investigated by management in a team approach. This involves operators, among others, to ensure learnings are obtained and spread across the organisation.In2021,atotalof155 incidentswerereportedand investigated, almost halved YOY (2020:302).Allincidentswere investigated and action plans to avoid reoccurrenceswereinplace. Accidents causing lost time are communicated to the manager of the plantwheretheaccidentoccurred. They in turn inform Befesa’s CEO andthevicepresidentofthe corresponding business segment, inadditiontotheHRDirectorand theEHSDirectorofBefesa,within 24hours.Thisservestoensurefull awarenesswithintheorganisation and drives prompt investigation andpreventiveactionplans. For the most relevant incidents andaccidentswherelessons canbedrawn,andfortherestof theorganisationtopreventsimilar occurrences, a single-page documentisgeneratedwith keylearnings. In 2021, 92 learning lessons from Lost Time Accidents (LTAs), Non- Lost Time Accidents (NLTAs) and incidentsweredistributedata corporate level (2020: 84 learning lessons), reaching all management andtheshopfloorlevel.This represents100%oftheLTAs,100% oftheNLTAsandmorethan12%of theincidents.ThisshowsBefesa's levelofworkanddedicationtolearn from accidents and incidents and to implement improvements coming from investigations. PREVENTIVE SAFETY OBSERVATIONS Preventive safety observations isaBefesasafetyprogramme intended to detect and correct unsafe acts and conditions beforetheyresultinaccidents andincidents.Thisprogramme aimstoenhanceacultureofsafety, theawarenessofemployeesand commitmentthroughthefield presence of line management to address safety issues. Managers atalllevelsinBefesaaretrainedto detect unsafe acts and to provide constructive feedback to operatorsandcontractors aboutworksafetypractices. In 2021, more than 1,350 observationswerecompleted(2020: more than 1,300). This involves correcting unsafe acts and conditions, and generating appropriate actions and reports. In2021,thesafetyprogrammewas extended: by the end of the year, taskobservationswereaddedto theexistingpreventivesafety observations. The task observations aim to analyse not only the behaviour, but also the consistency ofBefesa’swrittenrulesand employees'compliancewiththese writtendocuments(including standards,safeworkinstructions and permits). LIFE-SAVINGRULES Preventingseriousinjuriesand fatalities is one of the top priorities of the health and safety programme and requires special focus. The responsible Befesa team analysed and prioritised this list of the most frequent causes of fatalities and generated the Befesa Life-Saving Rules to prevent them. Thisinitialstepwasreinforcedin 2020withthelaunchofaspecific programme on fatal and serious injuries.Thisprogrammefocuseson theidentification,timelycontrol, Health & safety 53Befesa Annual Report 2021 Additional information Statutory  financialstatements  Consolidated  financialstatements Management report  ToBefesa’s  shareholders measurement of the controls' effectivenessandthefollow-upby managementofalltheriskswith thepotentialtocausefatalor seriousinjuries. Many activities like audits, training and safety contacts have been conducted in these areas to reduce theriskofaccidentswiththese typesofwork. FATAL & SERIOUS INJURIESPREVENTION In2021,Befesacontinuedwiththe implementation and improvement of thefatalandseriousinjuries(FSI) prevention programme, aiming to: ■ increase the focus on the higher safetyrisks; ■ extend the scope of risk identification,includingnon- routine tasks, places and operations(e.g.shutdown, starttasks); ■ give visibility to those risks at all levels of the organisation, from theexecutivetotheshopfloor employeeslevel; ■ allocate the appropriate time and resourcestoriskidentification andcontrol;and ■ ensure that robust controls are in place, and that those controls areperiodicallyverified. In2021,39FSIriskswereidentified across Befesa’s locations (2020: 37), ofwhich50%weresatisfactorily managedandclosed(2020:81%). SomeoftheFSIrisksidentifiedin 2021werediscoveredattheendof theyear.Fortheremaining50% oftheFSIrisksidentifiedin2021, interimcontrolswereputinplace, whilethefinalsolutionwasbeing studied and implemented. HEALTH & SAFETY PERFORMANCE Taking as a reference 2015 – the yearwhenBefesalaunchedthe“Be Safe”project–overthecourseofsix years, Befesa has reduced its Lost TimeInjuryRate(LTIR)by81%. ThisisaccordingtoOHSAS’s classification,measuredasthe number of accidents causing lost timedividedbyworkhoursand multiplied by 200,000. The LTIR related to contractors' accidentshasbeenreducedby95% compared to the 2015 baseline. Afterlaunchingthe“BeSafe”project in2015,from2016onwardsthere have been no fatal accidents. In addition to the previous lagging indicators, various leading indicatorsaremeasuredto continuously monitor Befesa’s health and safety performance. These include the number of incidents reported and the total number of preventive safety observations. EHS STANDARDS & INITIATIVES Befesa continues to enhance its management systems by implementingnewcorporate safetystandards,andstandardising and strengthening the safety requirements across all the locations. In2021,thefollowingsafety standardswereimplemented: ■ Molten metal safety ■ Trafficsafety ■ Confinedspacesentrysafety ■ Work permits ■ Internal audits In 2021, a total of 12 safety standardswereimplemented across Befesa locations. Another goal of Befesa locations istoensurethesafetyofthe processes, by identifying processhazardsandincreasing therobustnessofthecontrols. Todoso,Befesastartedthe implementation of the Process Safety Management (PSM). Lost Time Injury Rate (LTIR): 2015 2016 2017 2018 2019 2020 2021 % vs 2015 % vs 2020 Own employees 5.30 3.57 2.88 2.67 2.16 1.34 1.03 -81% -23% Contractors 8.06 0.98 3.88 5.47 1.60 0.66 0.43 -95% -35% Total 5.71 3.11 3.08 3.22 1.98 1.26 0.81 -86% -36% Severity Rate (SR): 2015 2016 2017 2018 2019 2020 2021 % vs 2015 % vs 2020 Total 0.77 0.77 0.31 0.44 0.41 0.48 0.16 -79% -67% Social, health & safety continued 02 Management report 54 Befesa Annual Report 2021 To Befesa’s shareholders In2021,thefirststepsonthis pathwere: ■ Training: All the technical and managementstaffwereformally trainedonPSM; ■ Assessment: The status of thePSMimplementation acrossBefesalocations hasbeencompleted;and ■ Awareness:Severalawareness initiatives on PSM have beendeployed. THE FIVE LEADERSHIP PERSUASIVE BEHAVIOURS During 2021, all Befesa’s line managers continued developing leadership-by-example skills by implementing policies and programmesinlinewithBefesa’s“Five Leadership Persuasive Behaviours”. These behaviours have been part oftheMiddleManagersSafety DevelopmentPlanthatwas implemented across all Befesa units,withthepurposeofmaking them an intrinsic part of Befesa’s safety culture. TRAINING In 2021, Befesa invested a total of 709 training hours (2020: 260) in educating and preparing local management teams on: ■ Fatalandseriousinjuries prevention ■ Process Safety Management ■ TrafficSafetyEHSsoftware (“Cority”) reporting ■ Accident and incident investigations SAFETY INVESTMENTS In 2021, Befesa further enhanced itsEHSsoftware–”Cority”–by including the environmental module thatallowsBefesato: 1. centralise the EHS strategic data inoneplace; 2. simplify the EHS reporting, and reportbuildingforthelocations; 3. give quick and visual access of the EHS information to the managementteams,andallow asimplevisualfollow-upofthe locations’KPIsandaction plans;and 4. free up time for the safety personnel to spend on the shopfloor. Inaddition,over€2.5millionwas invested across Befesa locations on safetyprojectssuchas: ■ Theupgradeofcranes; ■ Fall protection such as lifelines installation, platforms and grids inmanyBefesasites; ■ Trafficsafetyimprovementsinall theBefesasites; ■ Conveyor belts and other machine guarding in almost all theBefesasites;and ■ The reduction of employee exposure to harmful substances. FIVE LEADERSHIP PERSUASIVE BEHAVIOURS 1. When an unsafe act happens, we always stop andcorrect it. 2. We invest time every day in the plant for safety. 3. We speak and listen frequently to employees about safety concerns. 4. We integrate safety performance in suppliers andcontractors. 5. We train all contractors in Befesa's rules before commencing work. 55Befesa Annual Report 2021 Additional information Statutory  financialstatements  Consolidated  financialstatements Management report  ToBefesa’s  shareholders Befesa truly contributes to improving local communities andsocieties,consideringtheir needsandinterestsaswellasthe consequences of Befesa’s actions on the social system as an essential business obligation. Bearing this in mind, Befesa has developed several projectsinthefieldsofenvironment, sports and culture. Befesa takes great pride in its employees and the possibility ofgettingclosertothemby supporting NGOs that they themselves support. In this regard, the fourth   edition of Befesa’sCharityProjectContest has been a success once again in 2021.TheCharityContestoffers theopportunityforemployeesto nominateNGOinitiatives,withtwo projectsbeingselectedtoreceive financialsupport. In2021,thewinningprojectswere: 1. The Solar Power for Education projectoftheAmity Foundation located in China. This organisation supports people in need by promoting education, public health,socialwelfare,community development, environmental protection and other philanthropic topics.Theprojectaimstosupport childrenwholiveinremoteand mountainousregionsandwhomust studybycandlelightorwithoillamps duetoalackofelectricity.Thegoal oftheprojectistoprovidea photovoltaic lighting system to improve their situation and give them an equal opportunity for education to other children. The solar system provided by the organisation has a high energy conversion rate, and is safe and pollution-free. 2. Thesecondwinningproject wassharedbytwo organisations: The Breakfast Bag projectofthe ImmersattKinder-undJugendtisch e.V.organisationinGermany supports children and teenagers livinginpoverty,assistingthemwith education, food, and cultural and social living standards. Many childrengotoschoolwithanempty stomachandarethereforenotable to focus on their lessons. The projectaimstoprovidethemwitha healthy breakfast including a sandwichandadrink. TheprojectCare and Promotion ofChildreninSituationsofSocial Vulnerability of the Caritas Diocesana of Bilbao (Spain) supports children from families in situations of socialexclusionindifferent development areas such as school support, educational leisure, and socialvaluesandskills. In May 2021, Befesa’s employees joinedrunnersfromalloverthe worldintheWingsforLifeWorldRun event. Befesa raised more than €3,000 and ran more than 470 kilometres to help fund a cure for spinalcordinjury. Furthermore, Befesa organised several volunteer activities and donations that took place during theautumnandwinterof2021.In these activities, the spirit of solidarityofeachoneofBefesa’s employeeswasdemonstrated, contributing to the support of thosewhoaremostimpoverished, eveninachallengingyear. Figures on donations and sponsorships carried out in 2021 willbeavailableintheBefesaESG Report2021,whichwillbepublished inQ22022. Social, health & safety continued Corporate citizenship 02 Management report 56 Befesa Annual Report 2021 Befesa's corporate citizenship calendar 2021 1 Mar   Zero Discrimination Day 28 Apr   World Day of Safety & Health at Work 22 Feb   Befesa’s recipe booklaunched 5 Jun   World Environmental Day “BefesaForest”wasthe winningprojectofthe BefesaEnvironmental Initiative2021award. 22 Sep   DE&I initiative about stereotypes 3 Aug International Charity ProjectContest 3 Dec   International Day ofPeoplewith Disabilities Winter charity initiatives Every year Befesa mobilises its employees to carry out differentwintercharity initiatives to help and support those in need. 8 May   Wings for Life World Run2022 21 May   World Day for Cultural Diversity for Dialogue &Development Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 57Befesa Annual Report 2021 Management report Additional information Statutory  financialstatements Consolidated  financialstatements To Befesa’s shareholders STRATEGIC FOCUS & APPROACH Befesa’s R&D strategic plan aims to be a technologically competitive reference in providing sustainable environmental services that recycle hazardousresiduesfromthesteelandaluminiumindustries,withacore focus on steel dust, salt slags and SPL. TheR&Dactivitiesareorganisedintotwoteamsinordertodevelopnew technological and sustainable environmental service solutions that are adapted to the technological processes of each of the businesses. These twoteamsmeetonaregularbasistoexchangetheachievements,findings, knowledgeanddevelopmentsoftheirrespectiveprojects. EMPLOYEES IN R&D Befesa’sR&Dstrengthisbasedontheteams’experienceandqualifications acrossvariousspecialisations.In2021,atotalof14employeeswere dedicatedtoR&Dactivities(2020:14).Ofthese,ninewerepartoftheSteel DustRecyclingServicessegmentandfivewerepartoftheAluminiumSalt Slags Recycling Services segment. EXPENSES ON R&D TheexpensesonR&Dactivitiesin2021decreasedby15%to€2.7million (2020: €3.2 million). In the Steel Dust Recycling Services segment, expenses on R&D activities in 2021remainedflatat€1.4million. In the Aluminium Salt Slags Recycling Services segment, expenses on R&Dactivitiesin2021decreasedby28%to€1.3million(2020:€1.8million). R&D and innovation Befesa’s research and development (R&D) strategy isdesigned to create value by developing sustainable improvements to existing technologies, optimising operations and product quality, developing new processes to achieve higher recycling efficiency, reducing costs and improving environmental conditions. All of this contributes to sustainable development and enhanced customer service. 02 Management report 58 Befesa Annual Report 2021 To Befesa’s shareholders COLLABORATIONS NETWORK One of the pillars of Befesa’s R&D strategy is external collaboration. This is primarily executed via research groups and institutions, public research centres, universities and other industrial enterprises withwhomBefesafrequently collaboratesonR&Dprojects. Befesa is a founding partner of the BasqueInnovationAgency,which seeks to coordinate and promote innovation in the Basque Country. Befesa is also a member of the Labein Tecnalia Foundation. This is aprivatetechnologycentrewith significantbusinessinvolvement thatcreatespartnershipswithin their markets to develop innovative capacity using technology as a tool to increase competitiveness. Befesahasdevelopedprojectsin collaborationwithinstitutionssuch as Hydro, Nippon Gases, GHI, Sidenor, CIE Automotive and CSIC (in Spain), IAB and Ibutec (in Germany)andNTNU(inNorway). Befesaisalsoundertakingprojects incollaborationwithuniversities such as the University of the Basque Country, the University of Valladolid and the University of Oviedo (in Spain),andwiththeUniversityof Leoben(inAustria),whereBefesais contributingtotheprojectfunding ofthecompetencenetworkforthe assessment of metal-bearing by-products (COMMBY). MAIN ACHIEVEMENTS & PROJECTS IN 2021 In the Steel Dust Recycling Services segment, focus areas included: ■ The development of quality control standards for charcoal for its use in Waelz kiln processes for future reduction of the carbon footprint and market study on available European charcoalsources; ■ Conductingfirststepsonbasic research on hydrogen for use in zincrecycling; ■ The optimisation of pilot equipmentforthemonitoring ofonlineprocesschemical analysis to improve the Waelz processefficiency; ■ The transformation of the chemical/physical behaviours ofWaelzslagforindustrial usages;and ■ Thetreatmenttestingofwaste materials at stainless-steel dustrecyclingsitesforinternal recycling and/or transfer into valuable by-products. In the Salt Slags subsegment of the Aluminium Salt Slags Recycling Services segment, the main research activities focused on: ■ Thedevelopmentoftherefined secondary aluminium oxide to producenewrawmaterialas analternativetomineralbauxite (to be used in the refractory industry) at pre-industrial scale (620tonnesperyear); ■ Thedevelopmentofnew polymeric materials using secondary oxides to achieve fireproofpropertiesfornew advanced systems in electric vehiclesandrailway components; ■ The obtention of high-pure alumina(4Ngrade)fromlow qualityaluminiumoxides,which canbeusedasrawmaterialin themanufacturingofLEDs; ■ Studying and developing an alternative treatment for SPL, recoveringhighvalueproducts; ■ The design and progress of brine cleaning treatment for recovering aluminium hydroxides,tobeusedasnew rawmaterialsinthechemical industry; ■ The development of a roadmap torecovermaingasesfromthe complexrichhydrogenwaste streamforsaltslagvalorisation; ■ The evaluation of the impact of the quality of recovered salts from the salt slags recycling processinthealuminiumwastes meltingprocess;and ■ The construction of a pilot crystallisation plant to produce “ad hoc” recovered salts. 59Befesa Annual Report 2021 Additional information Statutory  financialstatements  Consolidated  financialstatements Management report  ToBefesa’s  shareholders In the Secondary Aluminium subsegment of the Aluminium Salt Slags Recycling Services segment, the main research focus included: ■ The optimisation of the aluminium alloy production process in order to introduce improvements and technologies toincreaseenergyefficiency; ■ Studying and improving recovered salts from the salt slags recycling process to increasetheefficiencyofthe aluminiumrecyclingprocess; ■ The development of secondaryalloyswith improvedpropertiesformodular chassiscomponents; ■ The demonstration of the use of secondarywastes,aluminium drosses and scraps to produce high-pure silicon and master aluminium alloys by aluminothermicreduction;and ■ The production of high-pure alumina using secondary aluminium oxide, involving hydrometallurgical treatments. PROJECTS IN THE RESEARCH PIPELINE In the Steel Dust Recycling Services segment,projectsin2022 arethecontinuationofprojects launched in 2021 and additional newprojects: ■ Tests of feeding carbon dioxide- neutral carbon sources into the Waelzprocess; ■ Research on hydrogen use forzincrecyclingprocesses; ■ The evaluation of potential carbon capture technology for theWaelzprocess; ■ The evaluation of the use of hydrogenforWaelzslagtreatment; ■ The optimisation of the efficiencyoftheWaelzprocess by monitoring the installed pilot inlineprocess; ■ Pilot-scale test to transfer Waelz slag into by-products to improve circularity;and ■ Large-scale trials for reducing wastestreamsatstainless-steel dust recycling sites for transfer into valuable by-product. In the Aluminium Salt Slags Recycling Services segment, themajorR&Dprojectsare: ■ Bauxal II: The valorisation of aluminium by-products fromthesaltslagsrecycling process to produce refractory materials as an alternative to calcinedbauxite; ■ SisAl: An innovative pilot for siliconproductionwithalow environmental impact, using secondary aluminium and siliconrawmaterials; ■ Alusalt: Studying and improving the quality of melting salt that isrecoveredinthesaltslags valorisationprocess; ■ FISSAC: Fostering industrial symbiosis for a sustainable, resource-intensive industry across the extended constructionvaluechain; ■ Radius: Recycling automotive brake discs by upgrading metallicscraps; ■ Alfused:Newcorundum-based abrasive materials from secondary bauxite of the aluminiumrecyclingprocess; ■ Alumelt:Anewqualityof secondary aluminium through theimprovementofthe recycledsalts; ■ MatEV:Newpolymericmaterials withadvancedproperties,which canbeusedtoproducenew- generation components and systemsinelectricvehicles; ■ Alujoint:Alightmodulated chassis developed by means of integrating the structural components using advanced technology of manufacture and aluminiumjoint;and ■ HPP: Using high-pure secondaryaluminiumoxideto manufacture LEDs and electronic components. R&D and innovation continued 02 Management report 60 Befesa Annual Report 2021 61Befesa Annual Report 2021 Additional information Statutory  financialstatements Consolidated  financialstatements Management report To Befesa’s shareholders Risks & opportunities Risk management at Befesa is a vital component of the overall management and control system. BEFESA’S RISK MANAGEMENT SYSTEM i. Introduction Befesa considers the management of risk to be one of the key topics the organisationmustdealwith.Apropercompliancesystemmustbebased onadetailedriskanalysis.Forthisreason,Befesahasinplacearisk managementsystem(RMS)whichallowsmanagementtoanalyse,evaluate andmanagetherisksofthedifferentaspectsofBefesa’soperations. Thepurposeofthisriskmanagementsystemistheidentificationand assessmentofthemajorrisksthataffectormayaffectBefesa.Thesystem alsoprovidestheorganisationwithasupportingtoolindecision-making through the provision of strategies aimed at risk management and control. The risk management system approach implies: ■ theelaborationofariskmap; ■ adefinitionofthecurrentcontrols; ■ theimplementationanddevelopmentofa“riskmindset”; ■ theimplementationofactionplans;and ■ regularfuturereviewsandanalyses. ii. Risk methodology BefesafollowstheISO31000RiskManagementStandardforcarryingout ariskanalysis.TherationaleisthatBefesaistheowneroftherisks,sothe risksmustbeidentified,evaluatedandcontrolledbyBefesaitself. Theprocessfollowedisdividedintotwophases: 1.Riskidentificationprocess:Thefirststepistheidentificationofthekey personnelwhoneedtobeinvolvedintheriskanalysis.Allthebusiness segmentsareincorporatedintotheproject,includingtopmanagement, thedirectorsofbusinesssegments,finance,legal,H&S,HR,IT,investor relations, internal audit, compliance and the industrial plants. After interviews,workshopsandadocumentationanalysis,ariskcatalogue isidentifiedeachyear. 02 Management report 62 Befesa Annual Report 2021 To Befesa’s shareholders 2. Risk assessment process: After compiling the risk catalogue, the next step is the risk assessment. This assessment is carried out by peoplefromthedifferentareas oftheorganisationincludedin thescope.Theyareprovided withandtrainedontherisk assessment methodology andnecessaryindications. For the assessment of the risks, it is necessary to establish scales that allowallriskstobeassessedina homogeneous manner. The risk score “R” is computed as the Cartesian product of I (impact) x P(probability),asshowninthetable. The probability (P) describes the probability of occurrence or degree of verisimilitude of the risk (based on past experiences). Impact (I): ■ Financial impact ■ Operational impact ■ Legal impact ■ Reputational impact Globalimpact=maximum(financial, operational, legal, reputational) iii. Risk map Thefinaloutputoftheriskanalysis isariskmap,whereallthefinancial andnon-financialrisksare incorporated. It is important tohighlightthefactthatallthe individual risks are mitigated bycontrolmeasureswhichare individually listed in the risk map. Therisklevelsare:verylow, low,medium,highorveryhigh, depending on the assessment. iv. Risk monitoring Befesa’s risk management system is asystematicmodeofidentification, assessment and treatment of risks. Therefore, it must not be understood tobeaprojectcarriedoutina specificmomentintimebutas anexerciseaimedatcontinuous improvement that requires updating on a regular basis. The risk analysis and risk map are updatedannuallytoincludenew risks (or to modify current ones) and newcontrolstomitigaterisks. In this sense, the risk map must asfaraspossiblereflectthereality of Befesa, and must help to adapt tochangesthatmayinfluence theorganisation. To guarantee proper monitoring oftherisks,BefesahasanInternal Risk Committee (IRC). The IRC is thebodywithintheorganisation that is in charge of the monitoring andreviewoftherisksincludedin the risk map. The IRC is composed of the CEO, the CFO, the vice presidents ofthetwobusinesssegmentsand the corporate directors. The committee must ensure that: ■ the actions and strategies proposed for the mitigation of risksareeffectiveandefficient, bothindesignandexecution; ■ sufficientinformationisavailable to improve the assessment ofexistingrisks,aswellas toidentify,analyseandassess newrisksthatshouldbe considered;and ■ theidentificationofnewrisksnot previously detected has been carried out. The risk analysis, risk map and mitigation actions are presented totheAuditCommitteeandBoard of Directors of Befesa on an annual basisfortheirreview. Befesa’sriskmapincludesfinancial andnon-financialrisks,themost relevantofwhicharedescribedon thepagesthatfollow. Impact Very high 3 4 4 5 5 Probability High 3 3 4 4 5 Medium 2 3 3 3 4 Low 2 2 2 3 4 Verylow 1 1 2 2 3 Verylow Low Medium High Very high 63Befesa Annual Report 2021 Additional information Statutory  financialstatements  Consolidated  financialstatements Management report  ToBefesa’s  shareholders Risks & opportunities continued FINANCIAL RISKS i. Commodity prices Befesa has appropriate risk and reviewroutinesandcontrolsin place. An integral part of Befesa’s riskmanagementframeworkisto monitor and manage its risk that is related to commodity price fluctuations.Befesamaynotbe successful in obtaining long-term hedges for all volumes desired, anditisgenerallymoredifficultto successfully hedge larger volumes of zinc over longer periods of time. Consequently, Befesa’s main risk management tool is its zinc hedging programme,whichtargetshedging onetothreeyearsforwardata volumelevelof60%to75%of Befesa’s annual tonnage of zinc payable output. The acquired US operations came withsomefixedpriceforward contractsclosedwithonepartner for part of the zinc payable output. Thesecontractswereandarein placeuptoandincludingQ12023, atfixedpricesofaround$2,500per tonne for 2021 and around $2,750 per tonne for the full year 2022 and Q12023.Followingtheclosingof the acquisition in August 2021, and under Befesa’s more competitive hedging programme, Befesa extended the hedge book for the US operations to be fully synchronised withthatofthenon-USoperations, up to and including October 2024. This locked in 15,000 tonnes of zinc equivalent output per quarter at $2,925pertonneforQ22023, $2,950pertonneforQ3andQ4 2023, and $2,975 per tonne for the firstthreequartersof2024. After having completely synchronised the hedge book of the USoperationswiththatofthe non-USoperations,Befesa’snew target volume is to hedge 38,100 tonnes of zinc output per quarter or 152,400tonnesperyear.DuringQ1 2022, Befesa partially hedged 5,250 tonnes of zinc output of the 38,100 tonnesnewtargethedgedvolume forQ42024(Novemberand December 2024 and January 2025) at attractive price levels. The combined global hedge book in place as of the date of this Annual ReportprovidesBefesawith improved pricing visibility up to January 2025, therefore for the followingc.threeyears. Befesa’saveragezincforward hedgedpricewas€2,151pertonne in 2021 (2020: €2,239 per tonne), anditwillbearound€2,275per tonne,€2,375pertonneand €2,425pertonnefor2022,2023and 2024, respectively. Befesa does not provide any collateral for the contracted hedges, and conducts itshedgingprogrammewith reputable hedging partners such asJ.P.Morgan,Citibank,Morgan Stanley or Goldman Sachs. ii. Foreign exchange Befesa’s functional currency is theeuro.However,Befesahas subsidiaries and operations in anumberofjurisdictions,including Sweden,Turkey,SouthKorea,China andtheUS,whereBefesagenerates revenues in currencies other than theeuro.Inlightofitsgrowthplans, Befesa may operate in additional jurisdictionswithcurrenciesother than the euro. Befesahasadequatereviewand riskmanagementprocessesinplace regarding the risk of foreign exchange rates. One of several tools Befesa uses is the hedging of zinc pricesforwardandtransactingthose hedges, primarily euro-based versus the LME prices being quoted in US dollars. For 2021, Befesa had hedged 120,013 tonnes of zinc payable output, 27,613 tonnes more YOY (2020: 92,400 tonnes). This represents73%(2020:67%)ofthe zinc payable output sold by Befesa in 2021. Of the 120,013 tonnes hedged for2021,62%wereineuro- denominatedzincforwardhedges, 23%wereintheUSdollarandthe remaining15%inKoreanwon. iii. Capital structure Befesa’sdebtwasrefinancedon 9July2019.Thiswasprimarilyto extenditsmaturitytoJuly2026 atattractiverates.Itwasalsoto accommodate the planned expansion into, for example, China, through increasing the basket space of the so-called general andlocalloanbaskets. Subsequently, on 17 February 2020, Befesa repriced its TLB covenant lite,loweringthereference interestratefromEuribor+250bps to Euribor+200 bps. In August 2021, themarginapplicabletoTLBwas reduced by 25 bps to Euribor+175 bps driven by the net leverage ratio improvement. The Euribor+175 bps interest rate could be reduced further alongside certain leverage ratchetsdowntoamarginof Euribor+125 bps for leverage equal toorlowerthanx1.50. Theperiodofthevariabletofix interestrateswapswasextended in2020uptotheendoftheTLB maturity,July2026,on60%ofthe 02 Management report 64 Befesa Annual Report 2021 To Befesa’s shareholders €526 million notional TLB. This wastominimisetheriskofarapid increase in the interest rate of the threemonthsEuribor“0”floor. Nevertheless, Befesa could face potential liquidity risks if the demandforitsservicesand productsdecreasessignificantly, asthiswouldreducethecash inoperatingactivitiesand coulddepletecurrentcash resources. This could lead to insufficientfundstomeetfuture cash needs. In 2021, Befesa raised €100 million through an extension of its TLB. The proceedswereused,alongsidethe €329 million proceeds raised through an accelerated equity offering,tofinancetheacquisitionof AZR’s recycling assets, general corporate purposes and to pay transaction fees and expenses. The €100millionTLBadd-onwas reflectedinBefesa’sbalancesheet atQ32021closing;thematurityand the rest of documentation terms of the incremental TLB remain in line withtheexistingTLB. As of 31 December 2021, based onthe€626millionextendedTLB notional,theportionswappedfrom variabletofixinterestratesforward up to the end of the TLB maturity amountsto50%. A €75.0 million RCF is part of the capitalstructureandwasundrawn at year-end 2021 as Befesa had €224.1 million cash on hand. Ageneraleconomicdownturnor crisiscouldalsoaffectBefesa’s suppliers and customers. This could adversely tighten or lengthen the paymenttermsinplacewithBefesa. Befesa has established adequate short-, medium- and long-term liquidity processes that form part oftheriskmanagementframework. Regularreviews,adequatecash reserves and the above-described capital structure, including credit lines, are in place to address the riskrelatedtoBefesa’scapital structure and liquidity. Befesa compliedwithitsdebtcovenants in2021and,basedonthefinancial planning,foreseesthatitwillbe fullycompliantagainin2022. iv. Interest rates Any increase in interest rates wouldincreaseBefesa’sfinance costs relating to its variable rate indebtedness and increase the costsofrefinancingitsexisting indebtednessandissuingnewdebt. Befesareviewstheinterestraterisk onaregularbasis.With50%ofthe €626 million extended TLB notional swappedfromvariabletofixinterest ratesforwarduptotheendofthe TLB maturity, there is no material interestrateriskthatcouldaffect Befesa’s business until the end of the TLB maturity, July 2026. v. Financial controls & reporting Befesa’s internal control system, financialreviewsandreporting arekeycomponentsoftherisk managementframework. The purpose of the internal control and accounting system is to ensure that all transactions are adequately accountedforandthatthefinancial reportspresentBefesa’sfinancial status fairly. The internal control systemensurescompliancewith legal regulations and that accounting followsstatutorystandardsand IFRS.Adefinedcalendarensures thatfinancialreportsandstatements are produced in a timely manner. RegularreviewsatboththeGroup level and segment level ensure that potential errors are detected and promptly corrected. ThereviewsoftheBoardofDirectors and the Audit Committee occur regularly and form part of the controlframework.Theaccounting team monitors changes to the accounting standards, and advisors from external, specialised parties notifyBefesaofchangesand complex accounting matters toavoidmisstatements. Befesa’s consolidated and selected subsegments and single entities’ financialsaresubjecttoexternal audits. These audits form a key part oftheriskmanagementframework asanindependentreviewof Befesa’s internal control system, financialcontrolsandreporting. Befesa strives to continuously improve its risk management and internal control system. The main riskswithapotentialmaterial influencearefurtherdetailedin note4ofthe“Consolidated financialstatements”sectionofthis Annual Report. 65Befesa Annual Report 2021 Additional information Statutory  financialstatements  Consolidated  financialstatements Management report  ToBefesa’s  shareholders NON-FINANCIALRISKS i. Industry & business risks Befesa is exposed to risks and opportunities related to the level ofactivityoftheglobaleconomy– inparticular,tothelevelof economicactivityinthe jurisdictionsofthemarketsBefesa servesinEurope,AsiaandtheUS. The business is dependent on the availabilityofthematerialstowhich theservicesrelateandwhich Befesa recycles – in particular, steeldustintheSteelDust Recycling Services segment, andsaltslagsandaluminium residues in the Aluminium Salt SlagsRecyclingServicessegment. Inperiodsofslowingeconomic growth,theindustrialrecycling industryisaffected,resultingin areductioninthedemandfor Befesa’s services and products. One important initiative to address slowereconomicgrowthhas beentoexpandBefesa’s operationsinemergingmarkets suchasSouthKorea,SouthEast Asia, Turkey and, most recently, China,aswellasincertainmature anddevelopedmarketswhere Befesawasnotpresent(e.g.theUS). Nevertheless, the global economy maybeaffectedby macroeconomicevents,suchas theongoingCOVID-19pandemic, theglobalchipshortageorthe Russo–Ukrainianconflict. Zincsmeltersaresignificant consumers of the WOX that Befesa produces in the Steel Dust Recycling Services segment. These smelters typically experience a variation in demandfortheirproductsduetoa changeinthelevelofactivity,among others,intheautomotiveand construction industries. For the Aluminium Salt Slags Recycling Services segment, most of the salt slags and aluminium residues are received from companies operating in the automotive and construction industries in Europe. Becauseofthis,thedemandfor andpricingofBefesa’sservices andproductsistoadegree dependent on the developments intheautomotiveand constructionindustries. ii. Environmental risks Owingtoitsbusinessactivity, Befesamustcomplywith governmental regulations. These include but are not limited to increasingly stringent environmental lawsandregulationsinmost jurisdictionswhereBefesaoperates. Theselawsandregulationsrequire permits and authorisations to be obtained as they relate to Befesa’s business. Certain procedures need tobefollowed,suchasthe completion and delivery of manifests for the shipment of hazardouswastesandother materials.Thisissothatthe movement and management of hazardous residues are properly documented in terms of the locationofgenerationand finaldisposition. Generally, Befesa could be held liable for the mismanagement of hazardous residues from the moment Befesa becomes contractually responsible for its management from customers' facilities. Liability can extend to the point of departure from customers' facilities, depending on Befesa’s contractual obligations. In addition, the contravention of environmentallawsandregulations couldresultinfinesandpenaltieson account of anyone found to be responsible for the release of hazardous substances into the environment (entering the soil, surfacewater,groundwaterorthe atmosphere).Thisliabilitymaybe assigned by government agencies toentitiesowningthehazardous wasteandothersresponsibleforits management. In addition to regulations dealing withthemanagementofhazardous residues, Befesa is also required to complywithregulationsdealingwith airemissions,waterdischargeand the management of hazardous materials. A summary of potential environmental impacts related to Befesa’s operations and process monitoring and control measures implemented by the Company are describedbelow. a. Air emissions Befesa closely monitors the air emissions from its operations, and the performance of controls established to meet regulatory thresholds. Industry practices employingBATforoperations and emission controls are implemented to ensure that process emissions remain at acceptable levels.  Duringthelastfewyears,Befesa has implemented measures to ensure that operations at its Risks & opportunities continued 02 Management report 66 Befesa Annual Report 2021 To Befesa’s shareholders facilitiescomplywiththe regulations of the Industrial Emissions Directive (IED). As part of this initiative, Befesa has developed a management systemthatiscertifiedunder theISO14001standardsand EMAS, to ensure compliance withapplicableregulationsand renewBefesa’scommitment tocontinuousimprovementin itsoperations. b. Soil, storm water and groundwater protection Befesa’s plants are designed to ensure materials are kept from placement on the land surface. Operation areas are establishedwithconcreteand paved surfaces for material transfer and other areas of high use.Inaddition,rainwater collection and control systems and other engineered facilities and practices are in place to protect hazardous process materials from potentially beingtransportedand depositedonthesoilsurface andenteringstormwater. Groundwatermonitoringis providedwhererequired according to regulations. c. Water conservation By reference, the most sustainable approaches and technologies demonstrating the stewardshipofwater consumption and the processing ofeffluentdischargeareusedat Befesa's facilities, including Steel Dust Recycling Services and Salt Slags Recycling Services facilities. These facilities operate under a zero-discharge policy. Befesa’s plants have been designedwiththecapabilityof recycling100%oftheeffluent waterthatisproduced.Effluent waterisusedintherecycling process.Thisisdoneinaneffort toreducewaterconsumption whileminimisingthepotentialfor the discharge of entrained metals tooff-sitesurfacewaters. In addition to minimising the useofthisvaluableresource, Befesa’swaterconservation effortsaimtoprovideeconomic dividends resulting from reducedoperatingcostsfor purchasedwaterresources, eliminatingtheneedforwater treatment prior to discharge. In addition, entrained metal values are recovered for valuable use, as opposed to being discharged in the environment.  Befesauseswaterconsumption asaKPItohighlightenterprise conservationefforts.Eachsite contributesinformationforKPI tracking. Trends are monitored and analysed, and practices aligned to minimise consumptionvalues. d. Residue reduction Befesa is an environmental recycling services provider that plays a critical role in the circular economy. This it does by conserving valuable mineral resources and reducing potentialenvironmentalimpacts and risks for the steel and aluminium industries. Befesa’s inherent business of recycling hazardous residues from metal-processing businesses prevents the disposal ofvaluablemineralsinlandfills, whileallowingthereuseofthe valuablematerialsreclaimed.   KPIsaremaintainedfortracking hazardous and non-hazardous residues produced from Befesa’soperations,andthe volumes that are disposed or recycled. Each site contributes informationforKPItracking. Trends are monitored and analysed, and practices aligned to minimise residues generated and disposed. e. Carbon emissions Befesa’s business is to reclaim valuable metals from hazardous residues produced by the metals industry and provide valuable feedstocks to bulk metal production businesses. Carbon emissions are generated by the processes used by Befesa in metal recycling operations. This occurs from the use of carbon reductant sources, including coke and coal, and fossil fuels. Regulations are rapidly being promulgated on a regional and global scale to limit carbon emissions,whichcausesriskin business operations going forward.Opportunitiesto improveoperationalefficiency and reduce carbon emissions are currently being evaluated. Certain measures have already been implemented to minimise carbon emissions and to shrink Befesa’s overall carbon footprint inacost-effectivemanner. Indirect services and utilities supplied to Befesa’s operating 67Befesa Annual Report 2021 Additional information Statutory  financialstatements  Consolidated  financialstatements Management report  ToBefesa’s  shareholders sites are tracked and recorded, including the source of electricity and its production from fossil fuelsorrenewableresources. Sources of energy supply and its productionwillindirectlyaffect Befesa’scarbonfootprint,while potentiallyaffectingtheoverall cost of operations and Befesa’s overallprofitability.   Asof31December2021,allthe Befesa sites are ISO 14001 certified,76%oftheBefesasites areISO50001certified,81%are ISO14064certifiedand81%are alsocertifiedaccordingtoISO 45001. Through these management systems andotherinternalprotocols, Befesa monitors carbon emissions and reports on a Company-widebasisannually. Inaddition,KyotoScope1and Scope 2 emissions are reported. To minimise the carbon emissions, Befesa applies BAT and looks for improvement opportunities as part of its operational excellence programme. Through this programme,specific opportunitiesareidentified andevaluatedforfuture implementation to reduce carbon emissions and energy consumption.Certainprojects have already been implemented toachievetheseobjectives, namely the replacement of aluminiummeltingfurnaceswith unitsthathaveloweremissions. Carbon emissions are monitoredandcompiledusing the ISO 14064 management system. This is reported to stakeholders after being validated by an independent third-party organisation.  Befesaisdefiningaplanto reduceitsCO₂emissionsby 20%by2030,withtheambition of achieving net zero by 2050. Thedetailedplanwillbe provided as part of the Befesa ESG Report 2021 scheduled for Q22022. iii. Health & safety risks Daily operations at Befesa’s plants byemployeesmaycausedamages to employees and/or contractors, particularly from the potential occurrence of events or circumstances. These could include beingexposedtochemicalagents; becomingtrappedbetweenobjects/ inmovingparts;theriskofbeingrun overinaplant(byavehicle);incidents withsubcontractedcompanies/ personnel;exposuretohigh temperatures;damagedueto thermalinjury;exposuretoexcessive noise;enteringconfinedspaces;the threatofexplosion;electricalinjury; and operators becoming trapped because of machinery overturning. To manage this risk, Befesa has a widevarietyofcontrolsinplace, followingtheapprovedH&Spolicy andplan,whichisthemostrelevant. Controls include the “Be Safe at Befesa” programme, ISO 45001 and theLife-SavingRules;anannual budgetwithinvestmentsto implementsafetymeasures; inspections, audits and safety observations;internaltrainingand communication (H&S monthly safetyreports);accident investigations/learninglessons; corporate safety standards, plant levelsafetystandardsandwork instructions;riskevaluationsofall worksincludingperiodicalrevision; procedures and communications withcontractors;permanent attentionfrommanagement;andlife and accident insurance. iv. IT risks Aswithalmostallcompaniesin today’sworld,Befesaisexposedto cybercrime.Overthelastfewyears, the frequency of cyberattacks has increasedsignificantly. Cybercriminals are constantly developingnewtoolsand techniques to maximise the effectivenessoftheirattacks, jeopardisingtheoperationsofthe targeted business. The attacks andfraudattemptsthatrelyon individualstobecomeeffectiveare themostusedtechniques; phishingandmalwareattacksare proved to have results. Befesafollowsarobust cybersecurity approach, combining thecollaborationwithbest-in-class vendors for cybersecurity services, aCompany-widetraining programme to improve employees' awarenessofthecorrectbehaviour regarding cybersecurity, and well-definedcybersecurity response procedures. Cybersecurity risks are periodically assessed and adequately managed by the information security team andincoordinationwiththe management team. Risks & opportunities continued 02 Management report 68 Befesa Annual Report 2021 To Befesa’s shareholders Additional information Statutory  financialstatements  Consolidated  financialstatements Management report  ToBefesa’s  shareholders 69Befesa Annual Report 2021 Subsequent events &outlook SUBSEQUENT EVENTS Therearenoeventsbetweenthefinancialstatementdate(31December 2021) and the date of the formulation of the accounts (29 March 2022) that wouldmateriallyaffecttheGroup’sassetsortheGroup’sfinancialand/or earnings position. With regards to the invasion of Ukraine by Russia, Befesa has no direct customers, suppliers, employees nor production sites in Russia nor Ukraine, referring to our main activities, environmental services to the steel and aluminiumindustries.Therefore,Befesaisnotbeingdirectlyaffectedbythis event.ThelatterisaffectingtheglobaleconomyandindirectlyBefesa,most notably for Befesa resulting in higher volatility in the prices of commodities, suchasenergyinflationandhigherbasemetalprices.Befesaisclosely monitoringtheevolutionofenergypricesaswellasofbasemetalprices, especiallyzincandaluminium.Befesahas60%to75%ofitszincpayable annual output hedged at attractive price levels up to January 2025, approximatelythreeyearsforward.Furthermore,variousindustriesobserve supplychaindisruptions.However,Befesa’sbusinessmodelisregionally focused and as a result the impact is not direct but again rather indirect. Also,Befesa’sgeographicfootprintisgloballywelldiversifiedandbalanced acrossEurope,AsiaandNorthAmerica.Themostrelevantfuturegrowth initiatives are outside of Europe, rather in Asia and in the US, therefore these are not directly impacted. As of the date of this Annual Report, Befesa has not been materially impacted. Befesa closely monitors potential indirect impactsbutthosecannotbeproperlyquantifiedatthisstageandare depending highly on the duration of the invasion of Ukraine by Russia. Most importantly, Befesa hopes the invasion to end very soon. OUTLOOK ThisoutlookisbasedontheassumptionthattheRussianwaragainst Ukrainewillnothaveamaterialimpactontheglobaleconomy. Theyear2022willclearlybeoneofcontinuedstronggrowthforBefesa, drivenmainlybystrongvolumegrowthintheSteelDustrecyclingbusiness and supported by strong metal prices. Befesaexpectsyearoveryeardouble-digitEBITDAgrowthin2022,based onthe2021adjustedEBITDAof€197.6million. 02 Management report 70 Befesa Annual Report 2021 To Befesa’s shareholders Fromthevolumepointofview, Befesawilldeliverstronggrowthin the Steel Dust recycling business, drivenbythecontributionofthetwo plantsinChinaaswellasafullyear of operations in the US. Theyear2022marksthefirstyearof commercial operations of Befesa in China,whichisthebiggeststeel marketintheworld.InJiangsu,after the successful commissioning and ramp-up of the plant, Befesa expects 12monthsoffullproduction,withan average capacity utilisation of around 90%.Upuntilthispointin2022, Befesa has been operating as plannedforthefirsttwomonthsof the year and has secured more than 100thousandtonsofsteeldustfor the full year. In Henan, Befesa expects to complete the commissioning and the ramp-up of the plant in H1 2022 and start commercial operations in H22022.InHenan,Befesaisworking on securing the volume and expects to also run the plant at a high capacityutilisation. As a result, Befesa expects a positive EBITDA contribution from Chinain2022. In the US, the integration of the recently acquired AZR into Befesa is progressingwell,workingacrossall differentaspectsofthebusiness, from the operational to the commercial side. Befesa is very confidentofachievingthe announced synergies of approximately $20 million over 2022and2023. In 2021, Befesa consolidated around4.5monthsofoperations fromtheUS,whichrepresentedan EBITDAofaround€10million.In 2022,Befesawillbenefitfromfull consolidation of the US operations, whichwillresultinasignificant EBITDAgrowth,drivenbyabetter zinc hedge and market prices and the contribution of synergies. This willbepartiallyoffsetbyaslightly lowervolumeofsteeldustcompared tothepreviousyear,whichBefesa expects to recover over the course ofthenextfewyears. Beyond China and the US, in the establishedmarketswhereBefesa operates, strong steel dust, secondary aluminium and salt slags capacity utilisation and volume is expected.Thiswillbesupportedby strong performance of the underlying industries, mainly steel production, especially using the less CO₂-intensiveEAFproduction facilities, and a higher level of activity in the auto industry (based on an expected improvement of thesemiconductorchipshortage andfinallyacontinuedrecoveryof the general industry from the COVID-19 pandemic). Fromthepointofviewofmetalprices, Befesa expects a positive contribution in 2022. The hedge price for 2022 of c. €2,275 per tonne is €125 per tonne higher than in 2021. In addition, so far in 2022, the zinc market price has been higher than in 2021. It may stay at an elevated price level for the rest of the year, driven by strong demand and constrained supply. ZincTCwillbesettledinspring, whichcouldhaveanimpact onearnings.In2021,theTCwas $159pertonne(2020:$300 pertonne).Anyincreaseof$10per tonnewillhaveanimpactofaround –$2.5 million on the EBITDA level. Energy prices in Europe have been sufferinghighlevelsofvolatility sinceQ22021.Thisishavingan impact on Befesa’s European operations and especially on Befesa’s aluminium business, in whichnaturalgasrepresentsaround two-thirdsofthetotalenergycost. This is partially compensated by higher average aluminium prices compared to last year. Befesaisveryconfidentand positiveabouthowmattersare developing in China. Environmental authorities are committed to enforcing the environmental regulation and steelmakers are seeingrecyclingasarealsolution anddifferentiator.Befesawill announce its next steps in China later in 2022. Befesawillcontinuetocarefully manage dividend stability and dividendyield,cashflow,net leverage and the funding of the expansionprojectsincludingChina. Befesa maintains its dividend policy todistributebetween40%and50% ofitsnetprofit. Fromanetleveragepointofview, Befesa expects to end the year at levelsatorbelowx2EBITDA. BefesawillpublishitsESGReport inQ22022,whichwillincludea detailed chapter on climate change. Befesaisdefiningaplantoreduce itsCO₂emissionsby20%by2030, withtheambitionofachievingnet zero by 2050. 71Befesa Annual Report 2021 Additional information Statutory  financialstatements  Consolidated  financialstatements Management report  ToBefesa’s  shareholders 1 6 2 7 3 8 4 9 5 10 Corporate governance The Board of Directors isthe corporate body incharge of the management of Befesa S.A., supervising and controlling the activity ofthe Company and focusing on its strategicdirection. The Board of Directors acts in the corporate interests of the Company andservesthecommoninterestsofalltheshareholders,ensuringthe implementation of its strategy. The Board of Directors also ensures the monitoringofthebusinessactivitiesofitsaffiliates.TheBoardofDirectors isvestedwiththebroadestpowerstoactinthenameofBefesaS.A.andto take any action necessary or useful to accomplish its corporate purpose, withtheexceptionofthepowersreservedtotheGeneralMeetingbythe Luxembourglawoncommercialcompaniesof10August1915,asamended (the“LuxembourgCompaniesLaw”)andtheArticlesofAssociation. The Board of Directors has appointed an Audit Committee and a NominationandRemunerationCommitteeinordertodealwithspecific tasks. These committees advise the Board of Directors and make recommendationstotheBoardofDirectorsand/or,asthecasemaybe, totheGeneralMeeting(asdefinedoverleaf). 02 Management report 72 Befesa Annual Report 2021 To Befesa’s shareholders 1. Javier Molina Montes Executive Director, ChiefExecutiveOfficer Mr Molina has managed Befesa since 2000, whenhewasappointedChairmanandChief ExecutiveOfficerofBefesaMedioAmbiente. MrMolinajoinedAbengoain1994andlater becameChiefExecutiveOfficerofAbengoa Servicios Urbanos (Abensur). From 1989 to 1993,hewasgeneraldirectorofTecsaand priortothat,from1983to1988,wasan investment banker at Banco de Progreso. MrMolinaholdsamaster’sdegreeinlawand management and business (ICADE, E3) from UniversidadPontificiaComillas,Madrid,Spain. 2. Wolf Uwe Lehmann Executive Director, ChiefFinancialOfficer MrLehmannwasappointedChiefFinancial OfficerofBefesauponjoiningin2014. Inadditiontofinance,hehasresponsibility foroperationalexcellence,costsavingsand informationtechnologies.Priortojoining Befesa,MrLehmannwasChiefFinancial OfficeratWilsonartInternational,Austin, Texas. He started his professional career as financetrainee(FMP)andtravellingcorporate auditor (CAS) at General Electric (GE) in various international locations (1996–2002). HewasmanageroffinanceatPropulsion andSpecialtyServicesatGETransportation, Erie, Pennsylvania (2002–2005) and later becameChiefFinancialOfficeratMomentive Performance Materials (previously GE Silicones) in various locations and responsibilities, including US/Global, China/ AsiaPacificandGermany/EMEAI(2005–2013). Mr Lehmann holds a double degree in businessandengineeringfromtheUniversity of Hamburg, Germany (Diplom- Wirtschaftsingenieur). 3. Asier Zarraonandia Ayo Executive Director, Vice President Steel Dust Recycling Services Mr Zarraonandia has been the Vice President of Befesa’s Steel Dust Recycling Services business unit since 2006. Mr Zarraonandia joinedBefesain2001andwastheChief FinancialOfficeroftheAluminiumSaltSlags Recycling Services business unit from 2001 to 2004 and the Financial Controller of the Abengoa Group from 2004 to 2006. Before joiningBefesa,hewasaseniorauditmanager andconsultantforArthurAndersen,where heworkedfor10years,specialisingin mergers and acquisitions in the industrial sector. He holds a bachelor’s degree in economics from the University of the Basque Country, Bilbao, Spain. He currently serves asaboardmemberoftheCanadiancompany Global Atomic Corporation. 4. Romeo Kreinberg Independent Director, Chairmanofthe Board of Directors MrKreinberghasover40yearsofexperience in the executive management of public and private companies in the chemical industry, including various executive positions at DowChemical(1977–2007).Throughout thecourseofhiscareer,MrKreinberghas served as a director of companies in the United States, Europe, Latin America and Asia, andisfluentinsixlanguages.MrKreinberg holds a degree from the Faculty of Architecture and Urban Planning from the University of Buenos Aires, Argentina. 5. Frauke Heistermann Independent Director In 1999, Mrs Heistermann founded AXIT, a digital service platform managing global supplychains,whichwassoldtoSiemensin 2015. Mrs Heistermann served as Chief DigitalisationOfficeratSiemensPostal,Parcel & Airport Logistics GmbH in 2017. Prior to her management career, Mrs Heistermann workedasaconsultantandproductmanager. She serves as managing director of AXIT. She iscurrentlyChairwomanoftheCouncilof Technology of the Federal State of Rhineland- PalatinateaswellasmemberoftheAdvisory Board of Vahle GmbH. She holds a diploma in logistics and business administration (Diplom-Betriebswirtin)fromtheCooperative State University, Mannheim, Germany. 6. Manuel Soto Independent Director Mr Soto started his professional career at ArthurAndersen,wherehebecamepartner in1970.Hewascountrymanagingpartner forSpain(1970–1989),areamanagingpartner for EMEA (1980–1998) and chairman of the worldwideboardofpartners(1970–1988). HeretiredfromArthurAndersenin1998 andjoinedBancoSantanderS.A.where hewasamemberoftheBoardofDirectors (1999–2013). Mr Soto holds degrees in accounting and business administration fromtheUniversityofMadrid,Spain. 7. Georg Graf Waldersee Independent Director MrWalderseeisaGerman-certified accountant (Wirtschaftsprüfer). For more than25years,hewasapartneratArthur AndersenandErnst&Young(EY)wherehe served in senior management positions in the EMEIA – and global – management teams of both organisations. Until his retirement from EYin2016,hewasthemanagingpartnerof EYinGermany,SwitzerlandandAustria. HeiscurrentlytheChairmanofthe Supervisory Board of EY, Wirtschaftsprüfungsgesellschaft, Germany. Mr Waldersee studied economics at the University of Bonn and holds a degree inbusinessadministrationfromtheUniversity of Hamburg, Germany. 8. Helmut Wieser Independent Director MrWieserwasChiefExecutiveOfficer atAMAGAustriaMetallAG.Previouslyhe served as Group President for Global Rolling atAlcoaInc.andmemberoftheExecutive Board at AMAG Austria Metall AG, and held several management positions at Voest- Alpine Industrieanlagenbau. He is a member oftheStrategicPlanningCommitteeofOJSC NovolipetskSteel,aswellasamemberofthe SupervisoryBoardsofHöldmayrInternational AG and Benteler AG. He is also a member of theAdvisoryCouncilofTTTechIndustrial Automation AG. Mr Wieser graduated as Dipl.-Ing. in mechanical engineering andeconomicsfromGrazUniversity ofTechnology,Austria. 9. Santiago Zaldumbide Independent Director MrZaldumbidewasseniorconsultantto Glencore-Xstrata plc. from May 2013 to February2015,laterworkingasChairmanand CEO of Asturiana de Zinc, S.A. and executive directorofXstrataplc.,amajorzincproducer (1998–2013). Mr Zaldumbide started his professional career at Unión Explosivos Rio Tinto,wherehewasCEOinseveraldivisions (1970–1984).HeworkedatBancodeBilbao (1984–1986), as CEO of Petróleos del Norte, S.A. (1986–1994) and in Corporación Industrial y Financiera de Banesto, S.A. (1994–1998).Hecurrentlyservesasamember oftheBoardofDirectorsofMadridTown Inversiones,S.L.Heholdsadegreeinlaw fromtheUniversityofMadrid,Spain;a degreeineconomicsfromtheUniversityof Deusto,Bilbao,Spain;andanMBAdegree from the University of California, Berkeley, United States. 10. Birke Fuchs Board Secretary Mrs Fuchs is the Board Secretary and Group’s GeneralCounsel.ShejoinedBefesain2007. SheisaGerman-qualifiedlawyerandholdsa degreeinlawfromtheUniversityofTrier, Germanyandamasteroflawsdegreefrom TulaneLawSchool,UnitedStates,andhas successfully completed the programme for management development at ESADE Business School, Spain. 73Befesa Annual Report 2021 Additional information Statutory  financialstatements  Consolidated  financialstatements Management report  ToBefesa’s  shareholders Corporate governance continued Executive Directors Name Position Nationality Year of birth First appointment Renewal End of term Mr Javier Molina Montes CEO Spanish 1959 18/10/2017 26/04/2018 AGM to be held in 2022 approving the annual accounts for the financialyearendingon31/12/2021 MrWolfUwe Lehmann CFO German 1971 18/10/2017 26/04/2018 AGM to be held in 2022 approving the annual accounts for the financialyearendingon31/12/2021 Mr Asier Zarraonandia Ayo Vice President Steel Dust Recycling Services Spanish 1967 24/07/2019 (co-optation) N/A AGM to be held in 2022 approving the annual accounts for the financialyearendingon31/12/2021 Independent Directors Name Position Nationality Year of birth First appointment Renewal End of term MrRomeoKreinberg Chairman of the Board of Directors American 1950 18/10/2017 26/04/2018 AGM to be held in 2022 approving the annual accounts for the financialyearendingon31/12/2021 Mrs Frauke Heistermann Independent Director German 1971 18/10/2017 26/04/2018 AGM to be held in 2022 approving the annual accounts for the financialyearendingon31/12/2021 Mr Manuel Soto Independent Director Spanish 1940 18/10/2017 26/04/2018 AGM to be held in 2022 approving the annual accounts for the financialyearendingon31/12/2021 Mr Georg Graf Waldersee Independent Director, Chairman of the Audit Committee German 1955 18/10/2017 26/04/2018 AGM to be held in 2022 approving the annual accounts for the financialyearendingon31/12/2021 Mr Helmut Wieser Independent Director Austrian 1953 24/07/2019 N/A AGM to be held in 2022 approving the annual accounts for the financialyearendingon31/12/2021 Mr Santiago Zaldumbide Independent Director Spanish 1942 18/10/2017 26/04/2018 AGM to be held in 2022 approving the annual accounts for the financialyearendingon31/12/2021 TheBoardofDirectorsofBefesaS.A.isfirmlycommittedtotheprinciplesof transparent, responsible and value-based management and supervision. The standards of good corporate governance have a high priority at Befesa and is something that forms the basis of all its activities. As a Luxembourg société anonyme–whosesharesareexclusivelylistedonaregulatedmarketinGermany– BefesaS.A.isnotrequiredtoadheretotheTenPrinciplesofCorporateGovernanceoftheLuxembourgStock Exchange (the “LuxSE”). This is applicable to companies that are listed and admitted to trading on the regulated market of the LuxSE, or to the German corporate governance regime that is applicable to stock corporations organisedunderGermanlaw.Inlightoftheaforementionedlegalframework,Befesahasdevelopeditsown corporategovernancerulesbasedontherecommendationsoftheGermanCorporateGovernanceCodebutwith thenecessarymodificationsrequiredbytheone-tierBoardstructure,theArticlesofAssociationofBefesaS.A. 02 Management report 74 Befesa Annual Report 2021 To Befesa’s shareholders andLuxembourgCompaniesLaw. Befesa’s corporate governance systemiscontinuouslyreviewedby the Board of Directors and updated toincorporatenewbestpracticesin corporate governance. Befesa places a strong emphasis on: i. a skilled and balanced composition of the Board of Directorswithamajorityof independentdirectors; ii. acting in the best interests of all oftheCompany’sshareholders, includingminorityshareholders; iii. internal control and reporting, withemphasisoneffective riskmanagement; iv. a compliance management system that ensures strict compliancewithapplicablelaws andregulations,enhancing businessintegrity; v. the promotion of social responsibility and ethical values inallofBefesa’sareasofactivity; and vi. commitment to sustainability and corporate social responsibility. Befesa is committed to adhering togoodcorporategovernance practices that provide for the necessary decision-making processes and controls to balance the interests of all stakeholders, whichultimatelyensuresthe long-term success of Befesa. The main corporate bodies are the Board of Directors and the General Meeting of shareholders. Befesacurrentlyhasamajorityof independent directors on the Board ofDirectors.Allthemembersofthe Audit Committee and the Nomination and Remuneration Committee are independent. Toenhancetransparencyregarding executive compensation, Befesa provides the compensation of all themembersoftheBoardof Directors on an individual basis withrespecttothecompensation received in 2021. Befesa ensures that its shareholders can exercise their rights before or during the General Meeting, as provided by LuxembourgCompaniesLawand Befesa’s Articles of Association, thereby exercise their voting rights. Details of the above-mentioned itemscanbefoundbelow. REQUIRED SKILLS, EXPERIENCE & BACKGROUND All proposals for the members of theBoardofDirectorsofBefesaS.A. are made on individual merit. All directors need to have the required balanceofskills,qualifications, background, experience, diversity – including gender – and the ability to adequately perform the duties of the Board of Directors. The selection and nomination process ofnewdirectorsgenerallytakesinto accountthefollowingcriteria: ■ Thealignmentofskillswith Befesa’sstrategicdirection; ■ Value added to the current compositionoftheBoard; ■ TheculturalfitwiththeBoard ofDirectors; ■ Thetimeitwilltaketobecome aneffectivecontributor;and ■ Succession planning. Befesaislookingalwaysfor professional experienced persons whohaverelevantindustry experience, strategic and problem- solving skills, and strong interpersonal and negotiation skills. In addition, the representation of amixofculturalandeducational backgroundsoffersawidevariety ofperspectivesonCompanyissues. Naturally,womenaswellasmen canbemembersoftheBoard ofDirectors. Part of diversity for Befesa is tocombinedifferentgenders, experiences, nationalities and backgrounds in the Board of Directors. This approach is explicitlystatedinBefesa’sHR andequalitypolicy. Differentskillsareafoundationto createaneffectiveandappreciated Board of Directors. Befesa makes surethatthemembersofeach Board committee have the relevant skills based on their experience, whichisalsoshownintheir curriculumvitae. Befesa’s Board of Directors is formed with a majority of six independent directors out of atotal of nine directors. 75Befesa Annual Report 2021 Additional information Statutory  financialstatements  Consolidated  financialstatements Management report  ToBefesa’s  shareholders Corporate governance continued Experience, skills & focus Experience, skills and focus Nationality Year of birth Industrial operations Risk management, finance,audit Environmental, health & safety Business strategy Ethics & governance Mr Javier Molina Montes, CEO Spanish 1959 MrWolfUweLehmann,CFO German 1971 Mr Asier Zarraonandia Ayo, VicePresidentSteelDust RecyclingServices Spanish 1967 MrRomeoKreinberg,Chairman oftheBoardofDirectors American 1950 Mrs Frauke Heistermann, IndependentDirector German 1971 Mr Manuel Soto, Independent Director Spanish 1940 Mr Georg Graf Waldersee, ChairmanoftheAuditCommittee German 1955 Mr Helmut Wieser, Independent Director Austrian 1953 Mr Santiago Zaldumbide, IndependentDirector Spanish 1942 COMPOSITION Befesa’s Board of Directors has thesizeandstructurenecessary topromoteefficientfunctioning andmaximiseparticipation,in accordancewithBefesa’sshare capital structure. Befesa also emphasises the importance of corporategovernance,withahigh standard of transparency executed by the Board of Directors. According to the Articles of Association, the Board of Befesa S.A.musthaveaminimumoffive directors and the duration of their mandate may not exceed six years. Each director is appointed by the GeneralMeetingandwillbeeligible for reappointment. In the event of avacancyontheBoardofDirectors, the remaining directors may elect byco-optationanewdirectorto fillsuchvacancyuntilthenext GeneralMeeting,whichshallratify suchco-optationorelectanew director instead. The Board of Directors of Befesa S.A.iscurrentlycomposedofnine members: three executive directorsandsixnon-executive independent directors. Therefore, Befesa’s Board of Directors is formed withamajorityofsixindependent directors out of a total of nine directors. It has elected a chairman fromamongitsmemberswhoisan independentdirector.Asmentioned, all directors have been selected based on the criteria of complementarity, balance, diversity ofknowledge,professional experience and nationality. MEETINGS The Board of Directors holds meetings in person or by tele/ videoconference and can take decisionsbywrittencirculation. Thequorumforavalidmeetingof the Board of Directors shall be the presence or the representation of at least half of the directors. For the purposes of approval of resolutions, abstentionandnilvoteswillnotbe considered. The Chairman of the Board of Directors shall have no casting vote in case of a voting tie. The Board of Directors met on 13 occasionsin2021with anattendancerecordof100%. COMMITTEES In order to strengthen Befesa’s corporate governance, the Board of Directorshassetupthefollowing twocommittees,eachresponsible for the examination and monitoring ofareasofparticularimportance: ■ Audit Committee ■ Nomination and Remuneration Committee 02 Management report 76 Befesa Annual Report 2021 To Befesa’s shareholders The committees shall have at least threememberseachandwillmeet as often as necessary, but at least twiceayear.During2021,theAudit Committeemetonfiveoccasions, whereastheNominationand Remunerationmetontwooccasions. Both committees had an attendance recordof100%. i. Audit Committee The Audit Committee consists ofMrGeorgGrafWaldersee (chairman), Mrs Frauke Heistermann and Mr Manuel Soto. All members are independent. This committee is responsible for: ■ evaluating and monitoring all material questions concerning thefinancialstatements, accounting processes and policies of Befesa and itssubsidiaries; ■ overseeing Befesa’s internal control and internal audit system;and ■ supervising the risk management system and the compliance management system. ii. Nomination and Remuneration Committee MrRomeoKreinberg(chairman), MrHelmutWieserandMrSantiago Zaldumbide are the members ofthiscommittee,allofwhom areindependent. The Nomination and Remuneration Committee ensures that the directors have the necessary knowledge,experience,abilitiesand professional background to assume their responsibilities. This enables theBoardofDirectorsasawholeto have an appropriate balance in its compositionandsuitableknowledge of Befesa and its environment, activities, strategy and risks, contributing to a better performance of its functions. In addition, the committee is responsible for: ■ implementing HR-related policies; ■ making recommendations to the Board of Directors on the terms of appointment and the long- andshort-termbenefitsof executivedirectors;and ■ making recommendations on bonus payments to be paid toemployees. These include the implementation of policies, appointments and releases of the daily managers of Befesa S.A., and proposing to the General Meeting of shareholders suitable candidates for their recommendation to be appointed as membersoftheBoardofDirectors. Overview of the member participation of the Board of Directors and committee meetings during 2021 Board of Directors Presence 100% Mr Javier Molina Montes 13/13 MrWolfUweLehmann 13/13 Mr Asier Zarraonandia Ayo 13/13 MrRomeoKreinberg 13/13 Mrs Frauke Heistermann 13/13 Mr Manuel Soto 13/13 Mr Georg Graf Waldersee 13/13 Mr Helmut Wieser 13/13 Mr Santiago Zaldumbide 13/13 Audit Committee Presence 100% Mr Georg Graf Waldersee 5/5 Mrs Frauke Heistermann 5/5 Mr Manuel Soto 5/5 Nomination and Remuneration Committee Presence 100% MrRomeoKreinberg 2/2 Mr Helmut Wieser 2/2 Mr Santiago Zaldumbide 2/2 77Befesa Annual Report 2021 Additional information Statutory  financialstatements  Consolidated  financialstatements Management report  ToBefesa’s  shareholders Corporate governance continued GENERAL MEETINGS All General Meetings of shareholders (the “General Meeting”) are held in the Grand Duchy of Luxembourg at the addressoftheregisteredofficeof Befesa S.A. or at such other place intheGrandDuchyofLuxembourg specifiedintheconveningnotice ofthemeeting.Itmaybeheld abroad,if,inthejudgementofthe Board of Directors, circumstances force majeure so require. The convening notice (including the agenda) to the General Meeting, the reports and any other documents required for the meeting are published in the subsection “General Meeting”, included under the investors section of Befesa’s website,intheRecueil Electronique des Société et Associations and in a Luxembourgnewspaperatleast30 days before the day of the meeting, inaccordancewiththeArticlesof AssociationandLuxembourglaw. The Annual General Meeting (“AGM”) isheldonceayearwithinsixmonths oftheendoftheprecedingfinancial year,inaccordancewiththeArticles ofAssociationandLuxembourglaw. The Board of Directors of Befesa S.A. is responsible for presenting theconsolidatedfinancial statements and the annual accounts at the AGM. The approval oftheconsolidatedannualfinancial statements and of the individual accounts of Befesa S.A., the allocation of results, the determination of the dividend, the appointment of the independent auditor and the discharge of the members of the Board of Directors are, among others, some of the resolutions adopted at the AGM. The Board of Directors may convene General Meetings (in addition to theAGM)anditmustdosoif shareholders representing at least tenpercent(10%)oftheshare capital of Befesa S.A. so require, in accordancewiththeArticlesof AssociationandLuxembourglaw. The shareholders of Befesa S.A. exercise their voting rights at theAGM(oratanyotherGeneral Meeting validly convened). Each share entitles the holder to attend all General Meetings, either in person or by proxy, to address the General Meeting and to exercise their voting rights. Each share entitlestheholdertoonevote. Befesa S.A. ensures equal treatment of all shareholders. There is no minimum shareholding required tobeabletoattendorvoteata General Meeting. In addition, therightofanyshareholderto participate in any General Meeting and to exercise the voting rights attached to their shares is determined accordingly to the shares held by the shareholder at theendofthe14 th day prior to the General Meeting. Shareholders holding – individually orcollectively–atleastfivepercent (5%)oftheissuedsharecapitalof Befesa S.A. have the right to (i) put items on the agenda of the General Shareholders Meeting,and(ii)presentdrafted resolutions for items included or items to be added to the agenda of the General Meeting. A relevant request must be received by Befesa S.A. by the 22 nd day prior to the General Meeting. ORDINARY & EXTRAORDINARY RESOLUTIONS Luxembourglawdistinguishes betweenordinaryresolutions andextraordinaryresolutions. Extraordinary resolutions relate to proposed amendments to the Articles of Association and certain other limited matters. All other resolutions are, as a general rule, ordinary resolutions. Extraordinary resolutions are generally required for any of the followingmatters,amongothers: ■ An increase or decrease of the authorisedorissuedcapital; ■ A limitation or exclusion of pre-emptiverights; ■ The approval of a statutory merger or demerger (scission) orcertainotherrestructurings; ■ ThedissolutionofBefesa;and ■ An amendment to the Articles ofAssociation. For any extraordinary resolutions to be considered at a General Meeting,thequorummustbeat least50%ofBefesa’sissuedshare capital. For their approval, at least two-thirdsofthevotesvalidlycast must approve such resolution. Abstentions are not considered as“votes”. 02 Management report 78 Befesa Annual Report 2021 To Befesa’s shareholders DIVIDEND RIGHTS InaccordancewiththeLuxembourg CompaniesLawandtheArticles ofAssociation,BefesaS.A.must allocateatleastfivepercent(5%) ofanynetprofittoalegalreserve account. Such a contribution ceases to be compulsory as soon as and as long as the legal reserve reaches ten percent(10%)ofBefesaS.A.’s subscribedcapital.However,itshall againbecompulsoryifthelegal reservefallsbelowthetenpercent (10%)threshold. TheGeneralMeetingwillresolve howtheremainderoftheannual netprofits,afterallocationtothe aforementionedlegalreserve,will bedisposedof.Thisitwilldoby allocatingthewholeorpartofthe remainder to a reserve or to a provisionbycarryingitforward tothefollowingfinancialyearor bydistributingit,togetherwith carried-forwardprofits, distributablereservesorshare premium to the shareholder(s), eachshareentitlingtothesame proportion in such distributions. Subjecttotheprovisionsofthe lawsandincompliancewiththe provisions set forth herein, the Board of Directors may resolve thatBefesapaysoutaninterim dividend to shareholders. The Board ofDirectorsshallsettheamount andthedateofpaymentofthe interim dividend. LIQUIDATION RIGHTS The Company may be dissolved by a resolution of the General Meeting adoptedincompliancewiththe quorumandmajorityrulessetfor any amendment of the Articles of Association. Should the Company bedissolved,theliquidationwillbe carried out by the Board of Directors or other person(s) appointed by the General Meeting. The General Meeting shall also determinethepowersandthe compensation (if any) of those other person(s). After settlement of all the debts and liabilities of the Company, including the expenses of liquidation, the net liquidation proceeds shall bedistributedtotheshareholder(s) incompliancewiththesame preference as set out for dividenddistributions. 79Befesa Annual Report 2021 Additional information Statutory  financialstatements  Consolidated  financialstatements Management report  ToBefesa’s  shareholders Corporate governance continued COMPLIANCE MANAGEMENT SYSTEM The compliance management system (CMS) is an integral part of Befesa’s corporate governance system,whichensurescompliance withnationalandinternationallaws, regulations and policies, and social responsibility and ethical values. The core of the ethics and compliance programme at Befesa is the code of conduct. Befesa’s code of conduct provides the legal and ethicalframeworkfortheconductof alldirectors,officersandemployees ofBefesa.Thecodedefinesthe basicbehaviouralstandardswithin Befesaitselfandinconnectionwith other parties. In addition, Befesa has implementedawhistle-blowing channel and complementary- specificcompliancepoliciessuch as a Group security dealing code. This provides continuous training incompliancematters.More information on Befesa’s CMS can befoundinthe“Compliance” section of this Annual Report (pages88to94). RISK MANAGEMENT SYSTEM Befesa has established internal procedures that are described in more detail in the “Compliance” section of this Annual Report and whichformanintegralpartof Befesa’s risk management system (RMS). This is explained in detail in the “Risks & opportunities” sectionofthisAnnualReport(pages 62 to 68). INDEPENDENT AUDITORS InaccordancewiththeLuxembourg lawoncommercialcompanies,the Other corporate governance practices annualconsolidatedfinancial statements and the annual individual accounts of Befesa S.A.arecertifiedbyanapproved statutory auditor (réviseur d’entreprises agréé) appointed by the shareholders at the AGM. TheAGMheldon30June2021 approvedtheappointmentofKPMG LuxembourgSociétéAnonymeas the approved statutory auditor (réviseur d’entreprises agréé) forthefinancialyearending 31December2021.KPMG LuxembourgSociétéAnonymehas audited the annual consolidated financialstatementsandtheannual individual accounts of Befesa S.A. sincethefinancialyearending 31December2019(i.e.foraperiod of three years). 02 Management report 80 Befesa Annual Report 2021 To Befesa’s shareholders 80 Befesa Annual Report 2021 For Befesa S.A. to maintain and apply transparent and detailed reporting on the compensation of the Board of Directors is an element of good corporate governance. The compensation disclosed in this Annual Report covers the remuneration of the members of the Board of Directors and is governed by Befesa’s remuneration policy. AspartofpreparingfortheIPO, Befesaconducted–withthehelpof one of the “big four” independent auditing and advisory service providers – a compensation study and benchmark of the listed companies in the German stock indices SDAX and MDAX, covering the positions of the three executivedirectors. Befesa’s remuneration structure and levelsarealignedwiththismarket benchmark and Befesa’s remuneration policy. In 2019, Befesaexpandedthisstudywiththe help of the external advisor to also cover the non-executive directors. To align the total compensation of thenon-executivedirectorswiththe performed benchmark, Befesa’s non-executivedirectorswere granted a one-time, long-term incentive plan, vesting over 2019 to2021.Nofurthervariable compensationwasgranted. NOTES TO THE REMUNERATION OF EXECUTIVE DIRECTORS: I. Fixed remuneration Base salaryisthefixedgross compensationperfiscalyear.In 2021,thebasesalaryofthe executive directors remained unchanged compared to 2020.  Fees for participation in the administrative,managementorBoard bodiesofBefesaarenotremunerated andarethereforenotapplicable. Under the so-called fringebenefits, Befesa covers mainly the provision ofacompanycar,whichcanalsobe used for private purposes. II. Variable remuneration One-year variable remuneration represents the value of the annual bonuspaidoutin2021,awarded fortheperformanceachievedin theyear2020.Thepredetermined performance targets cover the followingfourperformance criteria and predetermined weighting: Performance criteria Weighting ESG: Environmental, health & safety, corporate governance 20% EBIT and EBITDA 35% Netdebtandcashflow 15% Execution of strategic initiatives and return on growthprojects 30% The performance level for each performance criterion ranges from 0%to200%.Theoverallone-year variable payout is capped at Compensation Remuneration of executive directors ThefollowingtableprovidesanoverviewoftheremunerationofthethreeexecutivedirectorsoftheBoardof Directors for the year ended 31 December 2021. Name of executive director, position I. Fixed remuneration II. Variable remuneration III. Extra- ordinary items IV. Social security/ pension expense V. Total remunera- tion VI. Proportion offixedand variable remunera- tion 1 Base salary Fees Fringe benefits One-year variable Multi- year variable Mr Javier Molina Montes, CEO €512,474 n/a €17,189 €838,593 €1,474,744 €1,491,673 €12,552 € 4,347,224 19%/81% MrWolfUwe Lehmann, CFO €414,120 n/a €8,724 €559,062 €1,044,619 €1,056,610 €14,118 €3,097,254 21%/79% Mr Asier Zarraonandia Ayo, Vice President Steel €362,355 n/a €11,814 €559,062 €983,163 €1,056,610 €12,552 €2,985,555 20%/80% Total remuneration €1,288,949 n/a €37,727 €1,956,717 €3,502,525 €3,604,893 €39,223 €10,430,033 20% / 80% 1 Proportionoffixedandvariablecomputedasoftotalremuneration,excludingextraordinaryitems 81Befesa Annual Report 2021 Additional information Statutory  financialstatements  Consolidated  financialstatements Management report  ToBefesa’s  shareholders maximum200%.Theperformance level for each performance criterion aswellastheoverallweighted performancelevelissubjecttoreview and recommendation of the Nomination and Remuneration Committee. It is subsequently presentedforthereviewandapproval of the Board of Directors. In 2020, the performance level reached, blended andweightedacrossthefour performancecriteriawas135%, basedonwhichtheannualbonuswas paid out in 2021 (payout in 2020 for 2019:100%). Multi-year variable remuneration is showninthetableusingan illustrative valuation method to conceptually approximate the potential market value of the multi-year variable programme. The method uses one-third of the number of performance shares granted in tranche II (vesting over 2019 to 2021), one-third of the number of performance shares granted in tranche III (vesting over 2020 to 2022) and one-third of the number of performance shares granted in tranche IV (vesting over 2021 to 2023). For illustrative valuation purposes, an average share price over the last 10 trading days of 2021of€65.60,combinedwiththe applicable dividends over the vesting period of €3.22, amounting to €68.82 perperformanceshare,was assumed for remunerating the mentioned performance shares granted for tranches II, III and IV. The number of performance shares granted for each of these tranches are: 21,429 shares for Mr Javier Molina,CEO;15,179sharesforMr WolfUweLehmann,CFO;and14,286 shares for Mr Asier Zarraonandia, Vice President of Steel Dust RecyclingServices.Thefinal remunerationforeachtranchewill depend on the share price at the respective year of vesting and the performance level cumulative over the three-year vesting period of the respectivetranches.Thefinal remunerationwillalsoincludethe corresponding dividend payable to the granted performance shares during the vesting period. Theperformancetargetswillbe determined and measured over a three-year performance period (e.g.trancheII:1January2019to 31December2021). The predetermined performance targetscoverthefollowingthree performance criteria and predetermined weighting: Performance criteria Weighting Cumulative EBIT and EBITDA 25% Cumulativecashflow 25% Returnonstrategicprojects, ESG: environmental, health & safety, corporate governance 50% For each performance criterion, the determinationofvaluesbetween 80%and160%oftarget achievement is required. The performance scale has a hurdle at 80%targetachievementanda maximum target achievement of 160%,inbetweenonastraight-line basis. The share price appreciation betweenthegrantingandvestingof eachtrancheiscappedat300%. The cap of the performance target ofmaximum160%andthecapof the share price appreciation of maximum300%providesthe maximum overall cap for the multi-year variable remuneration. Once a performance period has ended,thedefinitivenumberof performance shares is derived by multiplying the number of performance shares granted by the total target achieved, rounded to the nearest integer. Thetwooptionsforthesettlement, at Befesa’s discretion, are: a. The transfer of Befesa S.A. shares b. A cash payout of the value of the Befesa S.A. shares Followingisafurtherexplanationof tranche I, vested over the years 2018, 2019 and 2020. The performance level reached, blended andweightedacrossthethree performancecriteriawas95%.The average share price over the last 10 tradingdaysof2020was€49.03, combinedwiththeapplicable Corporate governance continued Percentage remuneration of sub-total base salary, one- and multi-year variable remuneration (showncombinedforthethreeexecutive directors) d   Base salary   One-year variable   Multi-year variable 29% 52% 19% 02 Management report 82 Befesa Annual Report 2021 To Befesa’s shareholders dividends over the vesting period of €2.78, amounting to €51.81 per performance share. The number of performance shares granted per tranche to the three executive directors, as explained above, is in total 50,894 performance shares. Neither the performance cap of 160%northeshareprice appreciationcapof300%were triggered. The equivalent of 50,894 x 95%x€51.81=€2,504,977was settled in cash as per the Company’s choice in April 2021. III. Extraordinary items On 26 April 2021, the Board of DirectorsofBefesaS.A.,inlinewith the remuneration policy, granted a TransformationalGrowthIncentive Plan (TGIP), incentivising a transformational acquisition opportunity.Torewardforthe extraordinary circumstances of successfully closing the transformational acquisition opportunity and retention for the subsequent 1 + 1 year after closing, the executive directors of Befesa have been granted phantom shares as part of the TGIP. After vesting, the value of the phantom stock rights is paid out in cash. The settlement phantom share price is based on the closing price of the Befesa S.A. share on the Frankfurt Stock Exchange, determined over a period of 10 trading days prior and including the vesting date. The followingtotalsofphantomstock rights have been granted: 3 x 21,429 phantom stock rights for Mr Javier Molina,CEO;3x15,179phantom stockrightsforMrWolfUwe Lehmann,CFO;and3x15,179 phantom stock rights for Mr Asier Zarraonandia, Vice President of Steel Dust Recycling Services. The settlement of the phantom stock rightsissubjecttoasharepricecap of three times the value of one ordinary share at the grant date, whichistheclosingdate. TheacquisitionofAZRwas successfully closed on 17 August 2021. With the closing of the transaction,thefirst51,787(21,429 + 15,179 + 15,179) phantom shares vested. The average of the closing share price over the last 10 trading days prior to and including 17 August2021was€69.61,andno dividendswereapplicable.Asa result, 51,787 x €69.61 = €3,604,893 waspaidoutincashinAugust2021. The share price cap of three times the value of one ordinary share at thegrantdate,whichistheclosing date, or 3 x €70.40 on 17 August 2021equalto€211.20,wasnot triggered.Theremainingtwo vesting milestones are on 17August2022andon17August 2023, respectively. IV. Social security/ pensionexpense In terms of the social security/ pension expense, Befesa providesthemandatoryorstatutory social security and pension coverage as per the respective jurisdiction.Befesadidnotprovide additionalpensionbenefitstoits executive directors. V. Total remuneration Total remuneration is computed as the addition of I, II, III and IV remuneration components. VI.Proportionoffixed&variable remuneration Thefixedproportioniscomputedas the summation of the “Fixed remuneration” (I.) and “Social security/pension expense” (IV.) components as a percentage of the “Total remuneration” (V.), excluding “Extraordinary items” (III.). The variable proportion is computed as the “Variable remuneration” (II.) component as a percentage of the “Total remuneration” (V.), excluding “Extraordinary items” (III.). REMUNERATION OF NON-EXECUTIVEDIRECTORS Thefollowingisanexplanationofthe one-time granted tranche, vested over the years 2019, 2020 and 2021, whichwillbepaidoutincashin2022 after the AGM. The number of phantom stocks granted are: 1,061 phantom stocks for Mr Romeo Kreinberg,ChairmanoftheBoardof Directors;566phantomstocksforMr Georg Graf Waldersee, Chairman of theAuditCommittee;and424 phantom stocks each for Mrs Frauke Heistermann, Mr Manuel Soto, MrHelmutWieserandMrSantiago Zaldumbide. A total of 3,325 phantom stocks per year, or 9,975 phantom stocksoverthevestingperiod,were granted to the six non-executive directors. The performance level reached, blended and weightedacrossthethree performance criteria is assumed illustrativelyat100%,iscapped at 160%,andwillbedeterminedbased ontheauditedfinancialresults includingthefinancialyear2021.For the details of the multi-year variable programme (e.g. performance criteria,targets,weightingand settlement mechanism), refer to the multi-year variable remuneration note for executive directors (page 82), as this is valid also for the non-executive directors. The average share price 83Befesa Annual Report 2021 Additional information Statutory  financialstatements  Consolidated  financialstatements Management report  ToBefesa’s  shareholders over the last 20 trading days of 2021 was€63.84,combinedwiththe €1.90applicabledividendsentitled over the vesting period, amounting to €65.74perphantomshare.Thecap of300%oftheshareprice appreciationwasnottriggered.The total number of phantom stocks granted to the six non-executive directorsof3,325peryearx100% performance (for illustrative purposes) x €65.74 per phantom stock=€218,575,asshowninthe belowtable,whichrepresentsone year of the one-time granted tranche. Settlementwillbemadeincashin 2022 after the AGM, and based on the average share closing price of the20tradingdaysbeforecash payout, plus the dividend entitlements of the years 2020 and 2021. This variable compensation to thenon-executivedirectorswas granted one-time and no further variablecompensationwasgranted to the non-executive directors. OTHERS Befesa provides a Group insurance policyforalldirectorsandofficers ofBefesa,includingthemembers oftheBoardofDirectors.The policyistakenoutforoneyearata timeorrenewedannually.Itcovers the personal liability of the insured incasesoffinancialloss associatedwiththeiractivitieson behalf of Befesa. Further information about the remuneration of the members of Befesa’s Board of Directors can be found in the remuneration policy available in the Investor relations/ General Meeting section of Befesa’s website(www.befesa.com/ investors/general-meeting/) after the publication of the invitation to the 2022 AGM. LUXEMBOURG LAW ON TAKEOVER BIDS Thefollowingdisclosuresaremade inaccordancewitharticle11ofthe Luxembourglawontakeoverbidsof 19 May 2006. a. Sharecapitalstructure Befesa S.A. has issued one class of shares that is admitted to trading on the Frankfurt Stock Exchange. No other voting securities or securities convertible into shares have been issued. The issued share capital as of 31 December 2021 amounts to €111,047,595.14, represented by 39,999,998 ordinary shares, each fully paid up. b. Transferrestrictions As of the date of this Annual Report, all Befesa S.A.’s shares are freely transferable. c. Majorshareholding Basedonthevariousmajorholding notificationsreceivedbyBefesaS.A. as of 31 December 2021, the followingshareholdershold(orto whomwereattributed)5%ormore of total voting rights attached to Befesa S.A. shares: Name of shareholder (direct or indirect) % of voting rights in the share capital of Befesa Date on which the threshold was crossed or reached Alba Europe S.à r.l. 5.10% attached toshares 21 June 2021 Global Portfolio Investments, S.L. 5.41% attached toshares 17 June 2021 Allianz Global Investors GmbH 10.07% attached toshares 18 March 2020 Corporate governance continued Remuneration of non-executive directors Thetablebelowshowstheremunerationofthenon-executivedirectorsoftheBoardofDirectorsfortheyearended 31 December 2021. Name of non-executive director Base salary Multi-year variable Total compensation Status MrRomeoKreinberg €150,000 €69,758 €219,758 Served from 01.01.2021 to 31.12.2021 Mrs Frauke Heistermann €60,000 €27,903 € 87,903 Served from 01.01.2021 to 31.12.2021 Mr Manuel Soto €60,000 €27,903 € 87,903 Served from 01.01.2021 to 31.12.2021 Mr Georg Graf Waldersee €80,000 €37,204 €117,204 Served from 01.01.2021 to 31.12.2021 Mr Helmut Wieser €60,000 €27,903 € 87,903 Served from 01.01.2021 to 31.12.2021 Mr Santiago Zaldumbide €60,000 €27,903 €87,903 Served from 01.01.2021 to 31.12.2021 Total €470,000 €218,575 €688,575 Note:Non-executivedirectorswereremuneratedin2021bytheabovespecifiedbasesalaryandwerenotremuneratedthroughfurtherfixedcompensationsuchasfees, fringebenefitsorpensioncontribution.Themulti-yearvariableremunerationisbasedontheone-timegrantedtrancheIIvestingoveryears2019,2020and2021,andwill be paid out in cash in 2022 after the AGM. 02 Management report 84 Befesa Annual Report 2021 To Befesa’s shareholders d. Specialcontrolrights All the issued and outstanding shares have equal voting rights. Befesa S.A. has not issued any securities granting any special control rights to its holders. e. Controlsysteminemployees’ share scheme This is not applicable. Befesa S.A.’s BoardofDirectorsisnotawareof any issue regarding section e) of article11oftheLuxembourglawon takeover bids of 19 May 2006. f. Votingrights Each issued share of Befesa S.A. entitles the holder to one vote at the General Meeting of the shareholders. The Articles of Association of Befesa S.A. do not contain any restriction on voting rights.Inaccordancewiththe Articles of Association, a record date for admission to a General Meetingofshareholdersisset;that is, at 24:00 hours Luxembourg time on the 14 th day preceding the date of the relevant General Meeting of the shareholders (the “Record Date”). Only shareholders holding shares onsuchRecordDatewillbeableto participate at the relevant General Meeting. In addition, a shareholder willingtoparticipateinanyGeneral Meeting shall notify Befesa of their intention to participate by a declarationinwritingtobe submitted to Befesa and/or its designated depositary agent by no later than the Record Date, together withanysupportingdocumentsthat may be required to evidence title to the shares. g. Shareholders’agreements with transfer restrictions or voting rights Befesa’s Board of Directors has no information about any agreements betweenshareholdersthatmay result in restrictions on the transfers of Befesa S.A.’s shares. The shares issued by Befesa S.A. are freely transferableinaccordancewiththe legal requirements for shares in dematerialised form. The Board of Directors also has no information about any shareholders’ agreements that may result in restrictions on voting rights. h. AppointmentofBoard members; amendments of the Articles of Association Rules governing the appointment and the replacement of members of the Board of Directors and changes to the Articles of Association are contained in articles 11 and 32 of the Articles of Association of Befesa S.A. This document is available at https://www.befesa.com/investors/ corporate-governance/ Inparticular,thefollowingapplies: ■ The members of the Board of Directors are appointed by the General Meeting of shareholders for a period not exceeding six years. They may be removed withorwithoutcauseand/orbe replaced at any time by a resolution adopted by the General Meeting of shareholders of Befesa S.A. ■ Resolutions to amend the Articles of Association may be adoptedbyamajorityoftwo- thirds of the votes validly cast, if the quorum of half of the share capital is met. If the quorum requirement of half of the share capital of Befesa S.A. is not met atthefirstmeeting,thenthe shareholders may be reconvened to a second meeting. No quorum is required in respect of such second meeting and the resolutions are adoptedbytwo-thirdsofthe votes validly cast. i. PowersoftheBoardof Directors ThepowersoftheBoardof Directors are regulated in articles 6, 12 and 13 of the Articles of Association of Befesa S.A. The Articles of Association are availableathttps://www.befesa. com/investors/corporate- governance/ Inparticular,thefollowingapplies: ■ Befesa S.A. is managed by its Board of Directors. ■ The Board of Directors is vestedwiththebroadestpowers to perform all acts necessary orusefultoaccomplish Befesa’sobjectives. ■ The Board of Directors may delegate the daily management of Befesa and the representationofBefesafor thisdailymanagementtoone ormorepersonsor committees,specifyingthe limitsofsuchdelegatedpowers andthemannerinwhichthey should be exercised. ■ The Board of Directors may appoint an Audit Committee, a Nomination and Remuneration Committee, an Operations Committee and/or any other committees it may deem necessaryinordertodealwith 85Befesa Annual Report 2021 Additional information Statutory  financialstatements  Consolidated  financialstatements Management report  ToBefesa’s  shareholders specifictasks. ■ The Board of Directors is authorised, up to the maximum amount of the authorised capital, to (i) increase the issued share capital in one or several tranches withorwithoutsharepremium, against payment in cash or in kind, by conversion of claims on the Company or in any other manner;(ii)issuesubscription and/or conversion rights in relationtonewsharesor instrumentswithinthelimitsof the authorised capital under the terms and conditions of warrants,convertiblebonds, notesorsimilarinstruments;(iii) determine the place and date of the issue or successive issues, the issue price, the terms and conditions of the subscription of, andpayingupon,thenew sharesandinstruments;and(iv) remove or limit the statutory preferential subscription right of the shareholders. The above authorisation is valid for a period endingfiveyearsafterthedate of the General Meeting creating the authorised capital. The relevantauthorisationwas granted by the General Meeting of the shareholders held on 5October2021. ■ The Board of Directors is authorised to acquire itself or throughapersonactinginitsown name but on Befesa’s behalf, its ownshares,subjecttothe followingconditions:(i)the maximum number of shares to be acquired may not exceed ten per cent(10%)ofthetotalnumberof shares composing the issued share capital at the time of this resolutionor,iflower,atthetime of t he a cquisition; ( ii) a s ar esult o f those acquisitions, Befesa S.A.’s holdingofitsownsharesmaynot exceed at any time ten per cent (10%)ofthetotalnumberof shares composing the issued sharecapitalofBefesaS.A.;(iii) the acquisition price per share shallnotbelowerthanits accounting par value or higher thantenpercent(10%)abovethe volumeweightedaveragelisting price per share in the XETRA trading system (or a comparable successor system) during the calendar month preceding the resolution of the Board of Directorsonthebuy-back;(iv)the acquisitionsofitsownsharesby BefesaS.A.,aswellasshares acquired by a person acting in theirownnamebutonbehalfof Befesa S.A., may not have the effectofreducingthenetassets ofBefesaS.A.belowthe aggregate amount of the subscribed capital and the reserves,whichmaynotbe distributedunderthelaworthe Articles of Association of Befesa S.A. Only fully paid-up shares mayberepurchased;(v)the authorisationwillbevalidfora periodoffive(5)yearsafterthe date of the General Meeting creating the share buy-back. The relevantauthorisationwas granted by the AGM of shareholders held on 18 June 2020;and(vi)thepurchaseshall beeffectedeitherthroughthe stock exchange or on the basis of apublicpurchaseoffertoall shareholders. Befesa may use, in wholeorinpart,ownshares acquired pursuant to this authorisation for any legally permissible purpose. j. Significantagreements With exception of the senior facility agreement signed on 14 February 2020,therearenosignificant agreements that Befesa S.A. is partytoandwhichtakeeffect,alter or terminate upon a change of controlofBefesaS.A.followinga takeover bid. k. Agreementswithdirectors& employees The service agreements signed by theexecutivedirectorswiththe relevant Group companies establish the right of an exit payment amounting to the total sum of €3.3millionforallthreeexecutive directors in case of the termination oftheirserviceagreementswithout cause by the relevant Groupcompanies. Corporate governance continued 02 Management report 86 Befesa Annual Report 2021 To Befesa’s shareholders 87Befesa Annual Report 2021 Additional information Statutory  financialstatements  Consolidated  financialstatements Management report  ToBefesa’s  shareholders 87Befesa Annual Report 2021 Compliance BEFESA’S COMPLIANCE MANAGEMENT SYSTEM i.Definition&content Befesa is committed to achieving successandsustainable,profitable growth.Befesabelievesthatthis can only be achieved if everyone is focused on integrity, high moral values and respect for environmental, social and governance practices so that Befesa can be recognised as a reliable business partner. Befesa must, at all times, fully respect all applicablelaws,regulationsandthe environmentinwhichitoperates. The management of Befesa is fully determined to execute the organisation’s compliance management system (CMS) and continuously seeks opportunities to furtherstrengthenthisframework. Befesa’s CMS includes, but is not limited to, internal guidelines and policies such as the code of conduct and guidelines that address competitionlawrequirements, anti-corruption, anti-money laundering, IT services, environmental, health and safety issues,conflictsofinterestand international sanctions. These measures,inadditiontothewhistle- blowingchannel,guidemembersin ensuringthatBefesacomplieswith alllaws,regulationsandvalues. ii. Befesa’s general compliancepolicy Befesa believes that compliance riskmustbeidentified,managed and reported by management andtheBoardofDirectors.The general compliance policy providesguidancetoBefesaand itssubsidiariesonhowto establish,maintainandreportan effectiveCMS. Thisdocumentbrieflydescribes concepts and guidelines that are developedlaterinspecificpolicies, tools and procedures. It covers several topics such as commitment of management, code of conduct, complianceofficerfigure, identificationandassessmentof risks,specificcompliancepolicies, training and the existence of a whistle-blowingchannel. Befesa’s general compliance policy establishes the foundation for the implementationofaneffective complianceframeworkand introduces the basic principles that willbethecontentofthecomplete compliance system. It is supported by monthly compliance committees, and by communication and training for the entire organisation. 02 Management report 88 Befesa Annual Report 2021 To Befesa’s shareholders Befesa’s compliance management system (CMS) 1 Compliance management system ■ Group’s compliance policy ■ Riskidentificationandriskmanagementwithasoftware-based integratedriskmapandcontinuousriskmonitoring 2 Code of conduct ■ Cornerstone of Befesa’s CMS ■ Eight languages available 3 Internal procedures ■ Internal communication and authorisation system that representstheinternalrulesofBefesa 4 Complementary-specificcompliancepolicies ■ Anti-corruption and anti- bribery ■ Anti-money laundering ■ Anti-trust ■ Conflictsofinterest ■ Environmental, health and safety,andquality ■ Group security dealings code ■ International sanctions ■ IT ■ Diversity, equality and inclusion (DE&I) policy ■ Confidentiality,andindustrial and intellectual property 5 Monthlymessages&training ■ Monthly messages to employeescoveringdiverse compliancetopics ■ Online platform for compliancetraining ■ Brochures on conduct guidelines available ■ Specificcybersecurity training 6 Whistle-blowing channel ■ Web platform and voice intake ■ Eight languages available 7 Other ■ Internal controls ■ Criminal compliance (Spain) ■ Certifications:ISO(9001,14001,14064,50001),ISO45001 ■ Insurances:coverageofdetectedrisk ■ General data-protection regulations ■ Code of conduct for suppliers Befesa CMS 89Befesa Annual Report 2021 Additional information Statutory  financialstatements  Consolidated  financialstatements Management report  ToBefesa’s  shareholders Additional information Statutory  financialstatements Consolidated  financialstatements To Befesa’s shareholders DEFINITION & MAIN ASPECTS COVERED Befesa has established a code of conduct that is binding for all employeesandwhichisthe cornerstone of its CMS. It is available to all employees and third parties in the Sustainability/Governance/ Compliance section of Befesa’s websitehttps://www.befesa.com/ sustainability/governance /#compliance The code provides the legal and ethicalframeworkfortheconduct ofBefesa’sdirectors,executives, managers and employees. It definesbasicbehavioural standardswithinBefesaitselfand inconnectionwithotherparties. The document is available in the eight languages spoken in the countrieswhereBefesaoperates. Some of the key aspects include thefollowing: ■ Strictlycomplywiththelawsand regulationsofeachjurisdiction. ■ Do not compromise your integrity. Do not use your position at Befesa to obtain benefitsforyourself,yourfamily or your friends. ■ Donotofferoracceptgiftsand invitations that could create theimpressionofinfluencing thecommercialjudgementof the recipient. ■ Do not deliberately mislead anyone. Never attempt to falsify any record. ■ Treatyourcolleagueswith fairness and respect. Any form of discrimination based on race, colour, religion, gender, age, marital status, sexual orientation or disability is unacceptable. ■ Respect Befesa’s commercial relationships. Treat Befesa’s clients and suppliers fairly and withrespectatalltimes.Bea good neighbour. ■ Look out for the safety of others. Health and safety standards and procedures are intended to protect you, your colleagues and allothers.Complywiththemat all times. ■ Respect and protect the environment. ■ Incaseofdoubt,alwaysask. Anyviolationoflawsandregulations or the infringement of the code of conduct by any employee at any level oftheorganisationwillbesubjectto disciplinary consequences. COMPLEMENTARY-SPECIFIC COMPLIANCE POLICIES Based on the results of the riskidentificationandassessment, Befesa develops and updates compliance-relevant documents coveringthefollowingareas: i. Anti-corruption & anti-bribery One of Befesa’s core principles is tostrictlycomplywithallthe anti-corruption and anti-bribery lawsandregulationswherethe Company operates. Befesa’s principle is to compete by making deals and providing services to its customers based on the quality and priceofitsproductsandofferings, instead of providing undue advantagesorbenefitstoothers. ii. Anti-money laundering Befesa is committed to carrying out itsactivitieswithaccreditedclients andwithothertradingpartnerswho perform their activities legally and whosefundscomefromlegitimate sources. Accordingly, all employees ofBefesamuststrictlycomplywith the pertinent money-laundering legislationandwithBefesa’sinternal procedures,whicharedesignedto detect and prevent suspicious payment methods. All Befesa employees are obliged to report any suspicious behaviour by clients ortradingpartners,eithertothe complianceofficerorbyusingthe whistle-blowingchannel.All employeesmustcomplywithall therulesandguidelinesregarding accountingandfinancialinformation applicable to cash and other forms of payment in relation to the transactions that have to be made. iii. Anti-trust It is the unconditional policy of Befesa tofullycomplywithallapplicable anti-trustlawsworldwideandto enforce compliance throughout the organisation. In this policy, a guideline summarises the basic rules of the anti-trustlawsprevailinginthemain jurisdictionswhereBefesaisactive. Allemployeesmustbefamiliarwith and strictly observe the basic rules andspecificanti-trustregulations oftherelevantjurisdictioninwhich theyoperateorwhichisaffectedby their operations. Non-compliance willbetakenveryseriouslyby Befesa’smanagementandwill leadtopersonalconsequences fortherelevantemployee(s). Compliance continued Code of conductCode of conduct 02 Management report 90 Befesa Annual Report 2021 To Befesa’s shareholders iv.Conflictsofinterest The purpose of this policy is to identify and prevent situations in whichanemployee’sactivities conflictorappeartoconflictwith theinterestsofBefesaandits subsidiaries. Every employee must offerundividedcommercialloyalty to Befesa and make business decisions only in the best interests of the Company, not based on their potential personal interests. All employees must avoid any relationship or activity that could affecttheirindependentjudgement in the conduct of Befesa’s business, conflictswiththeCompany’s interests or could reasonably give theappearanceofconflictingwith Befesa’s interests. v. Group security dealings code This code applies to all employees, managers and directors of Befesa and its fully consolidated subsidiariesandjointventures. These rules are designed to ensure that employees do not misuse, or place themselves under suspicion of misusing, information about Befesa that they have access to andwhichisnotavailabletoother investors. This code also includes aclosedperiodcalendartobe followedbytheaffectedpersons. vi. International sanctions International sanctions or restrictivemeasurestakethe formofeconomicinstrumentsthat seek to modify policies or activities in other countries that breach internationallaworhumanrights. The implemented measures are obligatoryandaffectallthe countries that form part of the organisation that adopts them. In the case of the EU, they are obligatory for all its member states. Befesa believes that all its employeesmustcomplywiththese restrictive measures, insofar as they affecttheiractivities.The aforementioned CMS of Befesa includesaspecificsectionon policies, systems and controls in relation to international sanctions. vii. Diversity, equality and inclusion policy Befesa is committed to encouraging diversity, equality and inclusion amongitsworkforce,andseeks toeliminatediscrimination.The policy’s purpose is to provide equality, fairness and respect for alltheemployeesofBefesa,and toopposeandavoidallformsof discrimination by ensuring that recruiting, remuneration and promotion at Befesa is based on qualificationsandperformance. viii.Confidentiality,and industrial & intellectual property Befesaisawareofthevalueofits assets, in particular the industrial and intellectual property rights inherent in theinnovativeknowledgegenerated during the progress of its activities. The Company strives to protect this by adopting appropriate measures forinteractionswithitsemployees andwiththirdparties.Thispolicy establishes the operational rules andstandardstobeappliedatBefesa, aswellasforthirdparties.This ensurestheeffectiveprotectionof the industrial and intellectual property ofBefesa,guaranteeingahighlevel ofsecurityandcompliancewith current legislation. INTERNAL PROCEDURES i. Concept The internal procedures of Befesa take the form of a suitable internal control system that represents the internal rules of the Company. It worksthroughaninternalsystemof communication and authorisation. The main goal is to have a common method of operating, assessing andmitigatingthebusinessrisks inherent in Befesa’s activities. 91Befesa Annual Report 2021 Additional information Statutory  financialstatements  Consolidated  financialstatements Management report  ToBefesa’s  shareholders Thisimpliesthefollowing: ■ Consistency of actions ■ Reinforcement of corporate identity ■ Risk control and -reduction ■ Optimisation of management ■ Creation of value for stakeholders ■ Profitability ii. Covered areas The internal procedures cover differentareasconsideredaskey forBefesa.Twenty-oneprocedures are in place and include controls forthefollowingareas: ■ Finance,projectsandcapex ■ Legal matters and insurance management ■ Human resources ■ IT management ■ General expenses ■ Corporate identity, communication and corporate social responsibility ■ R&Dprojectmanagement COMMUNICATION TO EMPLOYEES & ENGAGEMENT A compliance system cannot beeffectivewithoutproper communicationwithallparties involved, especially employees. Forthisreason,Befesahas implemented three tools to guarantee that everyone in the organisation has access to the latest compliance initiatives: monthly messages, training and conduct guidelines. i. Monthly messages Everymonthonespecificcompliance topicissharedwithallBefesa’s employees. These topics are agreed uponwithmanagementandare circulated via e-mail throughout the organisation in three languages: English, German and Spanish. ii. Training The continuous training of Befesa’s employees is key for the future and development of the organisation. Compliance is an important aspect for the Company. Befesa has therefore developed annual training forcertainemployees;thetraining courses and training tests are updatedonanannualbasiswiththe latest compliance-related contents. Alltrainingcoursesarereviewed bythecompliancedepartmentto make sure that every employee hasaccomplishedthetraining requirements,andafinalsummary issharedwithmanagement. During 2021, Befesa carried out specificcybersecuritytrainingforall employees, covering several topics related to this issue (e.g. phishing attacks, microphone and cameras, securepasswords,cloudservices, safesurfingandsocialmedia).This cybersecuritytrainingwillbein place for the coming years as cyberattacks continue to increase allovertheworld. iii. Brochures on conduct guidelines Printed brochures on the conduct guidelines are in place and have been sent to all Befesa’s employees. These brochures are available in the eight languages of the Group. It covers the main aspects of Befesa’s code of conduct and CMS in a visual format that can be easily checked by all personnel. OTHER ASPECTS COVERED BY BEFESA’S CMS In addition to the above aspects, as part of Befesa’s CMS there are other relevant areas in the system, such as internal controls, risk analyses, insurance coverages and data- protection regulations. i. Internal controls In addition to the compliance policies mentioned, Befesa has in place an internal control matrix that contains more than 500 controls, whichcoverthemostsignificant areas of the Company: ■ Purchases ■ Fixed assets ■ Stocks ■ Sales ■ Treasury ■ Human resources ■ Taxes ■ Hedging ■ Equity ■ Closing & reporting ■ Legal & ethics ii. Risk analysis & insurance coverage Befesa has a risk management system (RMS) in place, whichisexplainedindetailin the“Risks&opportunities”section (pages 62 to 68). iii. Data-protection regulations FollowingtheGeneralData Protection Regulation (GDPR) thatcameintoforceinMay2018, Befesahascarriedoutananalysisof the Company’s data-protection standardswiththemaingoalof adapting those standards to the newGDPRrequirements. Compliance continued 02 Management report 92 Befesa Annual Report 2021 To Befesa’s shareholders iv. Supplier code of conduct Befesa promotes and expects business integrity, compliance withapplicablelawsandadherence to internationally recognised environmental, social and corporate governancestandardswithinthe organisation and among its business partners. For these reasons, during 2020, Befesa implemented a code of conduct for suppliers that must be accepted and signed by all suppliers. Befesa expects its suppliers to implement the principles set out inthiscodeofconductthroughout theirorganisationsworldwideandto complywiththeseprinciples. Befesaalsoexpectssupplierstouse theirbesteffortstoimplementthese standardswiththeirsuppliersand subcontractors and to take these principlesintoaccountwhen selecting them. The supplier code ofconductcoversdifferentareas, including environmental protection andenergyefficiency;humanrights, employment practices, and health andsafety;andbusinessintegrity and corporate governance standards. The supplier code of conduct is available on Befesa’s websitehttps://www.befesa.com/ sustainability/governance /#compliance.Theinternalaudit teamreviewsandanalysesthe implementation of the code in the subsidiaries. v. Criminal compliance certificationUNE19601 The Spanish criminal code establishes that legal persons may have criminal responsibility. In order to avoid this from happening at Befesa,acriminalcompliance programme (Criminal Risks Management System) has been implemented. This programme comprisesasetofpreventivetools withtheaimofpreventingthe breachofrulesofacriminalnature and of avoiding possible sanctions that could generate responsibility for the Company. Furthermore, thereisacertifiablestandardUNE 19601 concerning criminal compliancethatBefesaMedio Ambiente S.L.U. has satisfactorily achievedinthefirstquarterof2021. INTERNAL AUDIT ON FINANCIAL INFORMATION & ETHICAL STANDARDS Internal controls and processes included in Befesa’s internal controlmatrixcoverfinancial andnon-financialinformation.Its compliance is audited each year by Befesa’s internal audit department acrossallsignificantsubsidiaries. In2021,atotalof31auditswere carriedoutfollowingthese processes (2020: 34 audits). ThefinancialstatementsofBefesa and its subsidiaries are internally audited on an annual basis, providing Befesa’sinvestorswithadditional confidenceregardingthefinancial information published every quarter. In addition, Befesa’s internal audit teamreviewscompliancewith ethical standards and ESG policies regularly. These include: ■ Anti-money laundering, payments and collections, and cashdestinationsandorigins; ■ Powersofattorneyand compliancewiththe“foureyes” principle; ■ Internalapprovalsforkeyactions; ■ Negotiationswithsuppliers, customers and other business partners, in addition to existingcontracts; ■ CompliancewithBefesa’s suppliercodeofconduct; ■ Thedefinitionofproper criminalcompliancepoliciesof Spanishentities; ■ Training for employees on compliance policies, the code ofconductandITsecurity; ■ The hiring and remuneration ofemployees; ■ Donationsandsponsorships; and ■ Taxes. Befesa’s internal audit team is also involved in investigations concerning complaints received throughtheCompany’swhistle- blowingchannel. The results and progress on internal auditworksarereportedtoBefesa’s Audit Committee periodically. 93Befesa Annual Report 2021 Additional information Statutory  financialstatements  Consolidated  financialstatements Management report  ToBefesa’s  shareholders Europe/Globalprivacylaws Phonelinewithlocalgreeting Webpagewithlocallanguage Report/Case management Reports in local languages and English 24/7, 365 days a year REC Whistle-blower Telephone call Voice intake BKMSsystem Internal examiner Web report Web platform Whistle-blowing channel Befesa has a whistle-blowing channel in place on its website, which is available to all employees and external third parties 24/7. Complaints can be made via telephone or the web platform. The platform is available in eight languages: English, German, Spanish, French, Swedish, Turkish, Korean and Chinese. Compliance continued 02 Management report 94 Befesa Annual Report 2021 To Befesa’s shareholders 95Befesa Annual Report 2021 Additional information Statutory  financialstatements  Consolidated  financialstatements Management report  ToBefesa’s  shareholders 95Befesa Annual Report 2021 Recover Valuable materials from previously used products using the best available technology. 96 Befesa Annual Report 2021 96 Befesa Annual Report 2021 Consolidated financial statements 98 Consolidatedstatementoffinancialposition 100 Consolidated income statement 101 Consolidated statement of comprehensive income 102 Consolidated statement of changes in equity 103 Consolidatedstatementofcashflows 104 Notestotheconsolidatedfinancialstatements 172 Responsibility statement 173 Independent auditor’s report 97Befesa Annual Report 2021 Additional information Statutory  financialstatements Consolidated  financialstatements Management report  ToBefesa’s  shareholders Assets Note(s) 2021 2020 Non-current assets: Intangible assets Goodwill 7 5 7 3 ,15 1 335, 564 Other intangible assets 8 10 4 , 418 87 ,458 6 7 7, 5 6 9 42 3 ,0 2 2 Right-of-use assets 11 3 0,335 20 , 4 01 Property, plant and equipment 9 50 9, 0 75 295,3 08 Non-currentfinancialassets Investments in Group companies and associates 46 11 8 Othernon-currentfinancialassets 10 15 , 9 5 3 2,546 1 5,999 2,664 Deferred tax assets 19 1 25,462 81, 3 6 9 Total non-current assets 1, 3 5 8 , 4 4 0 8 2 2 ,76 4 Current assets: Inventories 12 6 7, 47 7 39,35 0 Trade and other receivables 13 113 , 2 2 9 54, 222 Trade receivables from related companies 13–25 917 1, 0 0 3 Accounts receivable from public authorities 13–20 10 , 6 71 9 ,6 21 Other receivables 13 20 ,5 61 18 , 8 17 Othercurrentfinancialassets 10 825 64 Cash and cash equivalents 4 224, 0 89 1 54,558 Total current assets 4 3 7, 7 6 9 2 7 7, 6 3 5 Total assets 1,7 9 6 , 2 0 9 1 , 1 00,399 TheaccompanyingNotes1to29andtheAppendixareanintegralpartoftheconsolidatedfinancialstatements. Consolidated statement of financial position as at 31 December 2021 (Thousands of euros) 03 Consolidated financial statements 98 Befesa Annual Report 2021 To Befesa’s shareholders Equity and liabilities Note(s) 2021 2020 Equity: Parent Company 14 Share capital 111, 0 4 8 9 4 , 5 76 Share premium 532, 8 67 2 63,875 Hedging reserves (96,830) (9, 509) Other reserves (1 9,91 5) (54,306) Translationdifferences (4, 08 0) (15 , 0 7 7) Netprofit/(loss)fortheyear 9 9 , 74 5 47, 6 0 8 Interim dividend – (9,880) Equity attributable to the owners of the Company 622, 835 3 17, 2 8 7 Non-controlling interests 14 8 ,7 12 10,294 Total equity 63 1 ,547 327,581 Non-current liabilities: Long-term provisions 18 22, 267 9,96 8 Loans and borrowings 15 653,57 1 520 ,6 02 Lease liabilities 11–15 15 ,7 5 6 10 , 8 6 0 Othernon-currentfinancialliabilities 17 5 6 ,7 0 0 4 , 6 14 Other non-current liabilities 16 4 , 6 21 4,905 Deferred tax liabilities 19 91, 9 4 6 68, 293 Total non-current liabilities 844,8 61 619 , 2 4 2 Current liabilities: Loans and borrowings 15 1 7, 7 9 1 1 3,629 Lease liabilities 11–15 7 ,61 2 3 ,1 2 4 Othercurrentfinancialliabilities 17 75 , 6 50 8 , 8 42 Trade payables to related companies 25 1, 4 3 6 613 Trade and other payables 151, 414 9 8 , 0 91 Other payables Accounts payable to public administrations 16–20 17, 8 5 5 11, 4 3 2 Other current liabilities 16 48 ,043 17, 8 4 5 65,89 8 29,277 Total current liabilities 319 , 8 01 15 3 , 5 7 6 Total equity and liabilities 1,79 6 , 2 0 9 1 , 1 00,399 TheaccompanyingNotes1to29andtheAppendixareanintegralpartoftheconsolidatedfinancialstatements. Consolidated statement of financial position asat31 December 2021 (Thousands of euros) continued 99Befesa Annual Report 2021 Additional information Statutory  financialstatements Consolidated  financialstatements Management report  ToBefesa’s  shareholders Note(s) 2021 2020 Revenue 5, 22.1 8 2 1 , 6 13 60 4,330 Changesininventoriesoffinishedgoodsandworkinprogress 10 , 7 13 (5 , 5 41) Procurements 22.2 (37 0,697) (2 4 9 , 713) Other operating income 22.3 14 , 9 8 9 5, 823 Personnel expenses 22.4 (9 8 , 8 19) (82, 989) Other operating expenses 22.5 (18 8 ,18 7) (14 8 , 4 2 2) Amortisation/depreciation, impairment and provisions 22.6 (62, 1 55) (55, 567) Operatingprofit/(loss) 12 7, 4 57 6 7, 92 1 Finance income 15 344 16 , 0 0 5 Finance costs 23 (24 , 5 8 3) (22,295) Netexchangedifferences 8 ,63 4 (2, 997) Netfinanceincome/(loss) (1 5,605) (9,287) Profit/(loss)beforetax 111, 8 5 2 58 ,634 Corporate income tax 19 (9, 50 0) (11, 74 9) Profit/(loss)fortheyear 1 02,35 2 46, 885 Attributable to: ParentCompany’sowners 9 9 , 74 5 47, 6 0 8 Non-controlling interests 2,6 07 (723) Earnings/(losses) per share attributable to owners of the Parent Company (expressed in euros per share) 28 2.68 1. 4 0 TheaccompanyingNotes1to29andtheAppendixareanintegralpartoftheconsolidatedfinancialstatements. Consolidated income statement for the year ended 31 December 2021 (Thousands of euros) 03 Consolidated financial statements 100 Befesa Annual Report 2021 To Befesa’s shareholders Note(s) 2021 2020 Consolidatedprofit/(loss)fortheyear 1 02,35 2 46, 885 Itemsthatmaysubsequentlybereclassifiedto income statement: Income and expense recognised directly in equity (112 , 2 3 9) (34,583) –Cashflowhedges 17 (16 7, 3 2 6) (30, 1 9 1) –Translationdifferences 6,808 (13 , 4 4 9) –Taxeffect 19 48 , 2 79 9 ,0 57 Transfers to the income statement 31,7 26 (15 , 3 2 6) –Cashflowhedges 17 4 3 , 5 01 (21, 2 0 9) –Taxeffect 19 (11 , 7 7 5) 5,8 83 Other comprehensive income/(loss) for the year, net of tax (8 0 , 513) (49 ,9 0 9) Total comprehensive income/(loss) for the year 21, 8 3 9 (3 , 024) Attributable to: ParentCompany’sowners 2 3 , 42 1 467 Non-controlling interests (1, 5 8 2) (3 , 4 91) TheaccompanyingNotes1to29andtheAppendixareanintegralpartoftheconsolidatedfinancialstatements. Consolidated statement of comprehensive income for the year ended 31 December 2021 (Thousands of euros) 101Befesa Annual Report 2021 Additional information Statutory  financialstatements Consolidated  financialstatements Management report  ToBefesa’s  shareholders Attributable to the owners of the Parent Share capital (Note14) Share premium (Note14) Hedging reserves (Note14) Other reserves (Note14) Interim dividend (Note14) Translation differences (Note14) Net profit/ (loss) for the year (Note 14) Non- controlling interests (Note14) Total equity Balances at 31December2019 94,57 6 26 3 , 8 75 2 6 , 9 51 (117, 2 8 6) – (4,396) 8 2 ,7 13 13 , 7 8 5 3 6 0 , 218 Total comprehensive income for the year – – (36,460) – – (1 0 , 6 8 1) 47, 6 0 8 (3 , 4 9 1) (3 , 0 24) Distributionofprofit for the year Reserves – – – 6 7, 7 2 4 – – (6 7, 7 2 4) – – Dividends (Note14) – – – – (9,880) – (14 , 9 8 9) – (24 , 8 6 9) Other movements – – – (4 , 74 4) – – – – (4 ,74 4) Balances at 31December2020 94,5 7 6 2 6 3 , 8 75 (9,50 9) (54,306) (9, 88 0) (1 5,077) 4 7, 6 0 8 1 0,294 327,581 Total comprehensive income for the year – – (8 7, 3 21) – – 10 , 9 9 7 9 9 ,74 5 (1, 5 8 2) 21, 8 3 9 Increase of equity (Note14) 16, 472 3 15 , 7 9 2 – (3,64 8) – – – – 3 2 8 , 6 16 Distributionofprofit for the year Reserves – – – 4 7, 6 0 8 – – (4 7, 6 0 8) – – Dividends (Note14) – (4 6,800) – (9,880) 9,880 – – – (4 6,800) Other movements – – – 3 11 – – – – 3 11 Balances at 31December2021 111, 0 4 8 532 ,8 67 (96, 830) (19, 915) – (4,0 8 0) 9 9 , 74 5 8 ,7 12 63 1 ,54 7 TheaccompanyingNotes1to29andtheAppendixareanintegralpartoftheconsolidatedfinancialstatements. Consolidated statement of changes in equity for the year ended 31 December 2021 (Thousands of euros) 03 Consolidated financial statements 102 Befesa Annual Report 2021 To Befesa’s shareholders Consolidated statement of cash flows for the year ended 31 December 2021 (Thousands of euros) 2021 2020 Cashflowsfromoperatingactivities: Profit/(Loss)fortheyearbeforetax 111, 8 5 2 5 8 , 63 4 Adjustments for: Depreciationandamortisation(Note22.6) 5 3 , 2 51 3 7, 4 6 0 Impairmentlosses(Note9,22.6) 8,904 1 8 ,1 0 7 Changes in provisions 3 ,75 3 1, 2 0 9 Interest income (34 4) (16 , 0 0 3) Finance costs 24 , 5 8 3 22,295 Otherprofit/(loss) (75 0) (1, 0 3 0) Exchangedifferences (8 ,63 4) 2 , 997 Changes in working capital: Trade receivables and other current assets (66,7 66) (11, 5 2 9) Inventories (21, 2 5 5) 12, 4 0 3 Trade payables 4 5 , 414 1, 6 4 5 Othercashflowsfromoperatingactivities: Interest paid (16 , 8 7 2) (1 7 , 01 1) Taxes paid (15,235) (16,634) Netcashflowsfrom/(usedin)operatingactivities 117, 9 0 1 92,543 Cashflowsfrominvestingactivities: Investmentsinintangibleassets(Note8) (2, 1 56) (2 , 278) Investmentsinproperty,plantandequipment(Note9) (75 , 528) (52 , 5 42) Collectionfromfinancialassets 2, 0 31 906 (Acquisition)/Disposalofnewsubsidiaries(Note6) (373,6 94) – Collections from sale of property, plant and equipment – 10 2 Investments/(Divestments)inothercurrentfinancialassets (12 3) (73) Netcashflowsfrom/(usedin)investingactivities (4 49 , 47 0) (53 , 8 8 5) Cashflowsfromfinancingactivities: Equityissuance(Notes6and14) 3 2 8 , 6 15 – Cashinflowsfrombankborrowingsandotherliabilities(Note15) 1 30,37 0 20, 237 Cashoutflowsfrombankborrowingsandotherliabilities(Note15) (1 0,41 4) (4, 532) Dividendspaidtoshareholders(Note14) (4 6,800) (24 , 8 6 9) Netcashflowsfrom/(usedin)financingactivities 4 01, 77 1 (9 ,1 6 4) Effectofforeignexchangeratechangesoncashandcashequivalents (6 7 1) (396) Net increase/(decrease) in cash and cash equivalents 69 , 5 31 2 9, 0 9 8 Cash and cash equivalents at the beginning of year 15 4 , 5 5 8 12 5 , 4 6 0 Cash and cash equivalents at the year end 2 24 , 0 8 9 15 4 , 5 5 8 TheaccompanyingNotes1to29andtheAppendixareanintegralpartoftheconsolidatedfinancialstatements. 103Befesa Annual Report 2021 Additional information Statutory  financialstatements Consolidated  financialstatements Management report  ToBefesa’s  shareholders 1. General information Befesa,S, S.A.(formerlyBilbaoMidco,S.àr.l)(hereinafterthe“ParentCompany”orthe“Company”)wasincorporatedin Luxembourgon31May2013asa“sociétéàresponsabilitélimitée”subjecttoLuxembourglawforanunlimitedperiod oftime.On18October2017,theshareholdersress resolvedtocod to converttt theChe Companyfy fromirom intoa“nto a “sociétéaté anonyme”without creatinganewlegalentityoraffectingthelegalexistenceorpersonalityoftheCompanyinanymanner,andtochange thenameoftheCompanyintoBefesaS.A.TheregisteredofficeoftheCompanywas46,BoulevardGrande-Duchesse Charlotte,L-1330,Lu Luxembourg,andon1January2022itwastransferredto68-70,B0, Boulevarddeld de laPéta Pétrusse, L-2320L20 Luxembourg. The Company’s statutory activity is the acquisition, holding and disposal of interests in Luxembourg and/or in foreign companiesandundertakings,aswellastheadministration,developmentandmanagementofsuchinterests. TheCompanymayprovideloansandfinancinginanyotherkindorformorgrantguaranteesorsecurityinany otherkindorform,forthebenefitofthecompaniesandundertakingsformingpartoftheGroupofwhichthe Company is a member. The Company may also invest in real estate, in intellectual property rights or any other movable or immovable assets in any kind or form. TheCompanymayborrowinanykindorformandissuebonds,notesoranyotherdebtinstrumentsaswellas warrantsorothersharesubscriptionrights. Ingeneral,theCompanymaycarryoutanycommercial,industrialorfinancialoperation,whichitmaydeemusefulin accomplishing and conducting its statutory activity. TheCompany’sfinancialyearstartson1Januaryandendson31December. TheCompany’sShareholdersattheirGeneralMeetingheldon18October2017,agreedtoconverttheCompany from a private limited liability company to a public limited company. Onthesamedate,itwasalsoagreedattheCompany’sGeneralShareholders’Meetingtochangethenameofthe Company from Bilbao Midco, S.à r.l to Befesa, S.A. The principal place of business of the Group is located in Asúa – Erandio, Bizkaia (Spain). The Company and its subsidiaries (“Befesa” or the “Group”) is an international industrial group (see Appendix) that engagesmes mainlyiy intn themhe managementant andtnd treatmentofint of industrialresl residues(ses (seeNee Note5)ote 5). Themajorityofthesystems,equipmentandfacilitiesincludedintheGroup’sproperty,plantandequipmentshould be deemed to be assigned to the management and treatment of industrial residues and, in general, to the protection and improvement of the environment, either because of the business activities carried out by the Group or because of their nature (industrial residues). Most of the expenses and revenues for 2021 and 2020 should be understood to accrue in the normal course of the aforementioned activities. Any information on possible provisions for contingencies and charges and on possible contingencies, liability and grants, if any, arising from the normal performance of the activities constituting the Group’s statutory activity, and other environmental measures are described,asandwhenappropriate,intherelatednotestotheconsolidatedfinancialstatements. Since3November2017,Befesa,S., S.A.hasbeenlistedontheFrankfurtStockExchange(Germany)(Note14)(ISIN code LU1704650164). Notes to the consolidated financial statements as at 31 December 2021 (Thousands of euros) 03 Consolidated financial statements 104 Befesa Annual Report 2021 To Befesa’s shareholders 2. Basisofpresentationoftheconsolidatedfinancialstatementsandbasisofconsolidation TheconsolidatedfinancialstatementshavebeenpreparedonthebasisoftheaccountingrecordsofBefesa,S.A. anditsconsolidatedsubsidiariesandjointarrangements.Theconsolidatedfinancialstatementsfor2021havebeen preparedinaccordancewithInternationalFinancialReportingStandardsasadoptedbytheEuropeanUnion (IFRS-EU)andotherapplicableprovisionsoftheapplicablefinancialreportingframework,togiveatrueandfairview oftheconsolidatedequityandconsolidatedfinancialpositionofBefesa,Sa, S.A.andsubsidiariesat31December2021, andtheconsolidatedresultsofoperations,consolidatedcashflowsandchangesinconsolidatedequityfortheyear then ended. DetailsoftheGroup’saccountingpoliciesareincludedinNote3. TheDirectorsoftheParentCompanyconsiderthattheconsolidatedfinancialstatementsfortheyearended 31December2021,authorisedforissueon29March2022,willbeapprovedwithnochangesbytheshareholdersat theirAnnualGeneralMeetingtobeheldon16June2022. 2.1 Fair presentation Theconsolidatedstatementoffinancialposition,consolidatedincomestatement,consolidatedstatementof comprehensiveincome,consolidatedstatementofchangesinequity,consolidatedstatementofcashflowsandthe notestheretoforthefinancialyear2021includecomparativefiguresfortheprioryear,whichformedpartofthe2020 consolidatedfinancialstatementsapprovedbytheshareholdersoftheParentCompanyattheirAnnualGeneral Meetingheldon30June2021. TheCompany’sconsolidatedfinancialstatementsfor2021wereformallyprepared: ■ InaccordancewithInternationalFinancialReportingStandardsasadoptedbytheEuropeanUnion(IFRS-EU),in conformitywiththeRegulation(EC)oftheEuropeanParliamentandoftheCouncil,includingInternational Accounting Standards (IAS) and the interpretations issued by the International Financial Reporting Interpretations Committee (IFRIC) and by the Standing Interpretations Committee (SIC). The principal accounting policiesandmeasurementbasesappliedinpreparingtheaccompanyingconsolidatedfinancialstatementsare summarisedinNote3. ■ Consideringallthemandatoryaccountingpoliciesandrulesandmeasurementbaseswithamaterialeffecton theconsolidatedfinancialstatements,aswellasthealternativepermittedbytherelevantstandardsinthis connection,whicharespecifiedinNote3. ■ SothattheypresentfairlyGroup’sconsolidatedequityandconsolidatedfinancialpositionat31December2021 andtheconsolidatedresultsofitsoperations,changesinconsolidatedequityandconsolidatedcashflowsfor the year then ended. ■ OnthebasisthattheaccountingrecordskeptbytheParentCompanyandbytheotherGroupcompanies,which includethejointarrangementsinwhichtheyhadinterestsat31December2021.However,sincetheaccounting policiesandmeasurementbasesusedinpreparingBefesa,S.A.consolidatedfinancialstatements(IFRS-EU) differfromthoseusedbytheGroupcompanies(localstandards),therequiredadjustmentsandreclassifications weremadeonconsolidationtounifythepoliciesandmethodsusedandtomakethemcompliantwithIFRS-EU. ■ ThepreparationofconsolidatedfinancialstatementsinconformitywithIFRSrequirestheuseofcertaincritical accountingestimates.Italsorequiresmanagementtoexerciseitsjudgementintheprocessofapplyingthe Group’saccountingpolicies.Theareasinvolvingahigherdegreeofjudgementorcomplexity,orareaswhere assumptionsandestimatesaresignificanttotheconsolidatedfinancialstatements,aredisclosedinNote2.4. ■ TheconsolidatedfinancialstatementshavebeenpreparedinaccordancewithLuxembourg’slegaland regulatoryframeworkandonthegoingconcernassumption. 105Befesa Annual Report 2021 Additional information Statutory  financialstatements Consolidated  financialstatements Management report  ToBefesa’s  shareholders 2. Basisofpresentationoftheconsolidatedfinancialstatementsandbasisofconsolidationcontinued 2.2 Adoption of new standards and interpretations issued. 2.2.1 First-time application of standards Thefollowingnewandamendmentstostandardsandinterpretationswhichareapplicableforthefirsttimein2021, areeithernotrelevantordonothaveamaterialimpactontheconsolidatedfinancialstatementsoftheGroup: – Amendment to IFRS 16: COVID-19-Related Rent Concessions – Amendments to IFRS 9, IAS 39, IFRS 4, IFRS 17 and IFRS 16: Interest Rate Benchmark Reform – Phase 2 2.2.2 Standards, amendments and interpretations issued but not yet effective Atthedatetheseconsolidatedfinancialstatementswereauthorisedforissue,standards,amendmentsand interpretationsissuedbutnotyeteffective,andwhichtheGroupexpectstoadoptforannualperiodsbeginningonor after1January2022,areasfollows: – Amendments to IAS 1 Presentation of Financial Statements – AmendmentstoIES8AccountingPolicies,ChangesinAccountingEstimatesandErrors:Definitionof Accounting Estimates – Amendments to IAS 37 Provisions, contingent liabilities and contingent assets: Provisions for onerous contracts. – ReferencestotheconceptualframeworkofIFRSinIFRS3 InlightoftheGroup’sactivities,theeffectofapplyingthenewstandards,amendmentsorinterpretationstothe consolidatedfinancialstatementswhentheyareappliedforthefirsttimeisnotdeemedtoberelevantfortheGroup. 2.2.3 Standards, amendments and interpretations to existing standards that have not been adopted by the European Union Atthedatetheseconsolidatedfinancialstatementswereauthorisedforissue,theIASBandtheIFRSInterpretations Committeehadpublishedthefollowingstandards,amendmentsandinterpretations,whicharependingadoptionby the European Union: – AmendmenttoIAS1:Classificationofliabilitiesascurrentornon-current – Amendments to IAS 1 and IFRS Practice Statement 2: Disclosure of Accounting Policies – AmendmentstoIAS8:DefinitionofAccountingEstimate – AmendmentstoIFRS10andIAS28:SaleorContributionofAssetsbetweenanInvestoranditsAssociateor Joint Venture InlightoftheGroup’sactivities,theeffectofapplyingthenewstandards,amendmentsorinterpretationstothe consolidatedfinancialstatementswhentheyareappliedforthefirsttimeisnotdeemedtoberelevantfortheGroup. 2.3 Functional currency Theseconsolidatedfinancialstatementsarepresentedinthousandsofeuros,sincetheeuroisthecurrencyusedin themaineconomicareainwhichtheGroupoperates.Foreignoperationsarerecognisedinaccordancewiththe policiesestablishedinNote3.ThemaincurrenciesotherthantheeuroinwhichtheGroupcarriesoutits transactionsareUSdollar,Koreanwon,Swedishkrona,TurkishliraandChineseyuan. 2.4 Use of estimates and judgements TheinformationintheseconsolidatedfinancialstatementsistheresponsibilityoftheBoardofDirectorsofthe Parent Company. Notes to the consolidated financial statements as at 31 December 2021 (thousands of euros) continued 03 Consolidated financial statements 106 Befesa Annual Report 2021 To Befesa’s shareholders IntheGroup’sconsolidatedfinancialstatementsfortheyearended31December2021estimatesareoccasionally madebyseniormanagementoftheParentCompanyandoftheconsolidatedcompanies,andlaterratifiedbythe Directors, in order to qualify certain assets, liabilities, income, expenses and obligations reported herein. a) Relevant Accounting estimates and assumptions Thoseestimatesrelatetothefollowing: Impairmentlossesongoodwillandcertainassets(seeNotes7,8,9and11) TheGroupverifiesannuallywhetherthereisanimpairmentlossinrespectofgoodwillandotherassets,in accordancewiththeaccountingpolicydescribedinNote3. Whencalculatingthevalueinuseoftheprincipalitemsofgoodwillandlicenseswithindefiniteusefullife,the assumptionsusedwereasfollows: ■ Projectionsofthecashflowsofthecashgeneratingunit(CGU)orgroupofCGUsinquestionaremadefor periodsoffiveyears(whenbasedonpastexperienceitispossibletopredictcashflowsaccuratelyoveraperiod longerthanfiveyears),calculatingaresidualvaluebasedonflowforthelastyearprojected,providedthatthis flowisrepresentativeofanormalisedflowtoreflectmarginandcashflowexperienceinthosebusinesses,aswell asfutureexpectations.Theprojectionsarebasedonthebudgetsfornextyearincreasedinaccordancewiththe assumptions estimated by the management. ■ Thegrossmarginsusedinthecalculationareinlinewiththeprofitexpectedtobeobtained,basedonpast experienceofprofitsofeachofthesegmentsandonnewcontractsexistingineachcase. ■ Todiscounttheflows,adiscountrateisusedbasedontheweightedaveragecostofcapitalforassetsofthistype, adjusted,wherenecessary,onthebasisoftheadditionalriskthatcouldbecontributedbycertaintypesofactivity. ■ Inanycase,furthersensitivityanalysesareconducted,particularlywithregardtothediscountrateusedandthe residualgrowthrate,toensurethattheeffectofpossiblechangesinestimatesoftheseratesdoesnothavean impactontherecoverabilityoftherecognisedgoodwillandlicenseswithindefiniteusefullife. Recoverabilityofdeferredtaxes(Notes3.19and19) Deferredtaxassetsarerecognisedforalldeductibletemporarydifferencesandunuseddeductionsforwhichitis probablethatthecompaniesoftheGroupwillhavefuturetaxprofitsagainstwhichtheycanbeutilised.Todetermine thedeferredtaxassetseligibleforrecognition,theiramount,thedatesonwhichthefuturetaxprofitsareexpected tobeobtainedandthereversalperiodofthetemporarydifferencesareestimated. Estimatesmadeinthecontextofshare-basedpayments(Note24) Tocalculatetheliabilityfortheobligationderivedfromshare-basedcompensationplanswithcertainemployees,at year end the Group estimates the fair values of the liabilities based on Befesa, S.A.’s share price, and the degree of target achievement. Althoughtheseestimatesweremadeonthebasisofthebestinformationavailableat31December2021ontheevents analysed,eventsthattakeplaceinthefuturemightmakeitnecessarytochangetheseestimates(upwardsor downwards)incomingyears.Changesinaccountingestimateswouldbeappliedprospectivelyinaccordancewiththe requirementsofIAS8,recognisingtheeffectsofthechangeinestimatesintherelatedconsolidatedincomestatement. EstimatesmadeinthecontextofthePurchasePriceAllocation(Notes3.1and6) Estimating the fair value of assets acquired and liabilities assumed in business combinations and purchase price allocationsinacquisitionsrequiressignificantjudgmentsbymanagement. 107Befesa Annual Report 2021 Additional information Statutory  financialstatements Consolidated  financialstatements Management report  ToBefesa’s  shareholders 2. Basisofpresentationoftheconsolidatedfinancialstatementsandbasisofconsolidationcontinued b) Relevant judgments in the application of accounting policies On17August2021,theGroup,throughBefesaHoldingUS,Inc.,acquireda100%interestinAmericanZincRecycling Corp.(currentlyBefesaZincUS,Inc.)(Note6). Aspartoftheseagreements,Befesahasalsoacquiredaminoritystakeof6.9%oftheequityinterestsinAmerican ZincProductsLLC(“AZP”),AZR’szincrefiningsubsidiary.Asaconsequence,theCompanydoesnothavesignificant influenceoverAZPasithasnopowertointerveneinthefinancialandoperatingpolicydecisionsoftheentityandit only has one member out of ten on AZP’s Board of Directors. Therefore, this investment has been recorded as a financialinvestmentatfairvaluethroughprofitorloss. 2.5 Changes in the scope of consolidation Followingisadescriptionofthemainchangesinthescopeofconsolidationin2021and2020: 2021 InAugust2021,theGroupcompletedtheacquisitionof100%ofthesharesofAmericanZincRecyclingCorp.(“AZR”) (currentlyBefesaZincUS,Inc.)(Note6). 2020 Therewasnochangeinthescopeofconsolidationin2020. 2.6 Alternative performance measures TheCompanyregularlyreportsalternativeperformancemeasures(APMs)notdefinedbyIFRSthatmanagement believes are relevant indicators of the performance of the Group. Alternativeperformancemeasuresareusedtoprovidereaderswithadditionalfinancialinformationthatisregularly reviewedbymanagementandusedtomakedecisionsaboutoperatingmatters.Thesemeasuresarealsousedfor definingseniormanagement’svariableremuneration.Theyareusefulintermsofrelatingtodiscussionswiththe investment analyst’s community. However,theseAPMsarenotuniformlydisclosedbyallcompanies,includingthoseintheGroup’sindustry.Accordingly, itmaynotbecomparablewithsimilarlytitledmeasuresanddisclosuresbyothercompanies.Additionally,certain informationpresentedisderivedfromamountscalculatedinaccordancewithIFRSbutisnotitselfanexpresslypermitted GAAPmeasure.SuchmeasuresshouldnotbeviewedinisolationorasanalternativetotheequivalentIFRSmeasure. DefinitionsuseandreconciliationstotheclosestIFRSmeasuresarepresentedbelow. 2.6.1 Net debt Netdebtisdefinedascurrentandnon-currentfinancialdebtpluscurrentandnon-currentleaseliabilitieslesscash andcashequivalentsandlessothercurrentfinancialassetsnetofderivativefinancialinstruments.TheGroup believes that net debt is relevant to investors, since it gives an indication of the absolute level of non-equity funding of the business. Thiscanbecomparedtotheincomeandcashflowsgeneratedbythebusiness,andavailableundrawnfacilities. Notes to the consolidated financial statements as at 31 December 2021 (thousands of euros) continued 03 Consolidated financial statements 108 Befesa Annual Report 2021 To Befesa’s shareholders Thefollowingtablereconcilesnetdebttotherelevantstatementoffinancialpositionlineitems: 2021 2020 Non-currentfinancialdebt(Note15) 653,571 520,602 Non-currentleaseliability(Notes11and15) 15,756 10,860 Currentfinancialdebt(Note15) 17,791 13,629 Currentleaseliability(Notes11and15) 7,612 3,124 Cashandcashequivalents(Note4) (224,089) (154,558) Othercurrentfinancialassetsnetofderivativefinancialinstruments(Note10) (61) (64) Net debt 470,580 393,593 2.6.2 EBITDA, Adjusted EBITDA and EBITDA margin EBITDAisdefinedasoperatingprofitfortheperiodbeforetheimpactofamortisation,depreciation,impairment andprovisions. AdjustedEBITDAisdefinedasEBITDAadjustedbyanyone-timeprojects/non-currentchargesorincome. EBITDAmarginisdefinedasEBITDAdividedbyrevenue.TheCompanybelievesthatEBITDAandEBITDAmarginare useful supplemental indicators that may be used to assist in evaluating the Group’s operating performance. ThefollowingtablereconcilesEBITDAtotheconsolidatedincomestatementlineitemsfromwhichitisderived: 2021 2020 Revenue(Note5) 821,613 604,330 Income/expenses from operations (except revenue, depreciation and amortisation/ depreciationchargeandprovisions)(Note22) (632,001) (480,842) Amortisation/depreciation,impairmentandprovisions(a)(Note22) (62,155) (55,567) EBIT(Operatingprofit/(loss))(b) 127,457 67,921 EBITDA(Operatingprofit/(loss)beforeamortisation/depreciation and provisions) (b-a) 189,612 123,488 One-timeprojects(Notes6and21) 7,958 – Non-recurrentcharges/income(Note9) – 3,460 Adjusted EBITDA 197,570 126,948 ThefollowingtableprovidesareconciliationofEBITDAmarginandAdjustedEBITDAmargin: 2021 2020 Revenue (a) 821,613 604,330 EBITDA (b) 189,612 123,488 One-timeprojects 7,958 – Non-recurrent charges/income – 3,460 Adjusted EBITDA (c) 197,570 126,948 EBITDA margin (%) (b/a) 23% 20% Adjusted EBITDA margin (%) (c/a) 24% 21% 109Befesa Annual Report 2021 Additional information Statutory  financialstatements Consolidated  financialstatements Management report  ToBefesa’s  shareholders 2. Basisofpresentationoftheconsolidatedfinancialstatementsandbasisofconsolidationcontinued 2.6.3 EBIT, Adjusted EBIT and EBIT margin EBITisdefinedasoperatingprofitfortheyear.TheCompanyusesEBITtomonitoritsfinancialreturnafterboth operating expenses and a charge representing the cost of usage of both its property, plant and equipment and finite-lifeintangibleassets. AdjustedEBITisdefinedasEBITadjustedbyanyone-timeprojects/non-recurrentchargesorincomes. EBITmarginandAdjustedEBITmarginaredefinedasEBITandAdjustedEBITasapercentageofrevenue,respectively. The Company believes that these ratios are useful measures to demonstrate the proportion of revenue that has been realisedasEBITandAdjustedEBIT,andthereforeindicatorsofprofitability. ThefollowingtablereconcilesEBITandAdjustedEBITtotheincomestatementlineitemsfromwhichitisderived: 2021 2020 Revenue(Note5) 821,613 604,330 Income/expenses from operations (except revenue, depreciation and amortisation/ depreciationchargeandprovisions)(Note22) (632,001) (480,842) Amortisation/depreciation,impairmentandprovisions(Note22) (62,155) (55,567) EBIT(Operatingprofit/(loss)) 127,457 67,921 One-offimpairments/provisions(Notes9and21) 13,848 18,107 EBITDAadjustments(Notes6,9and21) 7,958 3,460 Adjusted EBIT 149,263 89,488 ThefollowingtableprovidesareconciliationofEBITmarginandAdjustedEBITmargin: 2021 2020 Revenue (a) 821,613 604,330 EBIT (b) 127,457 67,921 One-offimpairments/provisions(Notes9andNote21) 13,848 18,107 EBITDAadjustments(Notes6,9and21) 7,958 3,460 Adjusted EBIT (c) 149,263 89,488 EBIT margin (%) (b/a) 16% 11% Adjusted EBIT margin (%) (c/a) 18% 15% 2.6.4 Net debt/Adjusted EBITDA (Adjusted leverage ratio) Netdebt/AdjustedEBITDAratioisdefinedasnetdebtdividedbyAdjustedEBITDA.TheGroupbelievesthatthisratio isausefulmeasuretoshowitsabilitytogeneratetheincomeneededtobeabletosettleitsloansandborrowingsas they fall due. Thefollowingtablereconcilesthenetdebt/EBITDAratiotonetdebtandEBITDA: 2021 2020 Netdebt(Note4) 470,580 393,593 AdjustedEBITDA 197,570 126,948 Net debt/Adjusted EBITDA 2.4 3.1 2.6.5 Capex Capexisdefinedasthecashpaymentsmadeduringtheperiodforinvestmentsinintangibleassets,property,plant and equipment and right-of-use assets. Notes to the consolidated financial statements as at 31 December 2021 (thousands of euros) continued 03 Consolidated financial statements 110 Befesa Annual Report 2021 To Befesa’s shareholders TheCompanybelievesthatthismeasureisusefultounderstandtheeffortmadebytheCompanyeachyearto acquire, upgrade and maintain physical assets such as property, industrial buildings or equipment. ThefollowingtablereconcilesCapextothecashflowstatementlineitemsfromwhichitisderived: 2021 2020 Cashflowsfrominvestingactivities: Investmentsinintangibleassets(Note8) 2,156 2,278 Investmentsinproperty,plantandequipment(Note9) 75,528 52,542 Capex 77,684 54,820 3. Accounting principles and policies and measurement methods applied All accounting principles and policies are consistently applied by the Group. 3.1 Business combination The Group applies the acquisition method for business combinations. TheacquisitiondateisthedateonwhichtheGroupobtainscontroloftheacquiree. The consideration transferred in a business combination is calculated as the sum of the acquisition-date fair values of the assets transferred, the liabilities incurred or assumed, the equity instruments issued and any consideration contingentonfutureeventsorcompliancewithcertainconditionsinexchangeforcontroloftheacquiree. The consideration transferred excludes any payment that does not form part of the exchange for the acquired business.Acquisitioncostsarerecognisedasanexpensewhenincurred. The Group recognises the assets acquired and liabilities assumed at their acquisition-date fair value. Liabilities assumedincludeanycontingentliabilitiesthatrepresentpresentobligationsarisingfrompasteventsforwhichthe fairvaluecanbereliablymeasured.TheGroupalsorecognisesindemnificationassetstransferredbytheselleratthe sametimeandfollowingthesamemeasurementcriteriaastheitemthatissubjecttoindemnificationfromthe acquiree,takingintoconsideration,whereapplicable,theinsolvencyriskandanycontractuallimitationsonthe indemnifiedamount. Thesecriteriaarenotapplicabletolong-termdefinedbenefitobligations,share-basedpaymenttransactions,or deferred tax assets and liabilities. Theexcessbetweentheconsiderationgiven,plusthevalueassignedtonon-controllinginterests,andthevalueof netassetsacquiredandliabilitiesassumed,isrecognisedasgoodwill. 3.2 Subsidiaries Subsidiariesareentities,includingstructuredentities,overwhichtheGroup,eitherdirectlyorindirectly,exercises control.TheCompanycontrolsasubsidiarywhenitisexposed,orhasrights,tovariablereturnsfromitsinvolvement withthesubsidiaryandhastheabilitytoaffectthosereturnsthroughitspoweroverthesubsidiary.TheCompany haspoweroverasubsidiarywhenithasexistingsubstantiverightsthatgiveittheabilitytodirecttherelevant activities.TheCompanyisexposed,orhasrights,tovariablereturnsfromitsinvolvementwiththesubsidiarywhen its returns from its involvement have the potential to vary as a result of the subsidiary’s performance. Theincome,expensesandcashflowsofsubsidiariesareincludedintheconsolidatedfinancialstatementsfromthe dateofacquisition,whichisthedateonwhichtheGroupobtainseffectivecontrolofthesubsidiaries.Subsidiaries are no longer consolidated once control ceases. 111Befesa Annual Report 2021 Additional information Statutory  financialstatements Consolidated  financialstatements Management report  ToBefesa’s  shareholders TransactionsandbalanceswithGroupsubsidiariesandunrealisedgainsorlosseshavebeeneliminatedon consolidation. Nevertheless, unrealised losses have been considered as an indicator of impairment of the assetstransferred. The accounting policies of subsidiaries have been adapted to Group accounting policies for transactions and events in similar circumstances. Theconsolidatedfinancialstatementsorfinancialstatementsofthesubsidiariesusedintheconsolidationprocess have been prepared as of the same date and for the same period as those of the Company. 3.3 Joint arrangements Jointarrangementsarethoseinwhichthereisacontractualagreementtosharethecontroloveraneconomic activity,insuchawaythatdecisionsabouttherelevantactivitiesrequiretheunanimousconsentoftheGroupand theremainingventurersoroperators.Theexistenceofjointcontrolisassessedconsideringthedefinitionofcontrol over subsidiaries. TheGrouphasappliedIFRS11toalljointarrangements.InvestmentsinjointarrangementsunderIFRS11are classifiedasjointoperationsorjointventures,dependingonthecontractualrightsandobligationsofeachinvestor. TheGrouphasassessedthenatureofitsjointarrangementsandhasdeterminedthattheyarejointoperationsin allcases. Jointoperationsarisewheninvestorshaverightstotheassetsandobligationswithrespecttotheliabilitiesofan arrangement.TheGrouprecognisestheassets,includingitsshareofanyassetsheldjointly,theliabilities,including itsshareofanyliabilitiesincurredjointlywiththeotheroperators,therevenuefromthesaleofitsshareoftheoutput arisingfromthejointoperation,itsshareoftherevenuefromthesaleoftheoutputbythejointoperationandthe expenses,includingitsshareofanyexpensesincurredjointly,intheconsolidatedfinancialstatements. TheGroup’sacquisitionofaninitialandsubsequentshareinajointoperationwhichconstitutesabusinessis recognisedfollowingthesamecriteriausedforbusinesscombinations,atthepercentageofownershipofeach individualassetandliability.However,insubsequentacquisitionsofadditionalsharesinajointoperation,theprevious shareineachassetandliabilityisnotsubjecttorevaluation,totheextentthattheGroupretainsjointcontrol. InpurchasesbytheGroupfromajointoperation,theresultinggainsandlossesareonlyrecognisedwhenitresells theacquiredassetstoathirdparty.However,whensuchtransactionsprovideevidenceofareductioninnet realisable value or an impairment loss of the assets, the Group recognises its entire share of such losses. Theintegrationof“jointoperations”,(RecytechS.A.S.,partoftheSteelDustRecyclingServicessegment),inthe consolidatedfinancialstatementsmeansthatassets,liabilities,incomeandexpensesat31December2021are increased by approximately €22,118 thousand, €5,510 thousand, €24,669 thousand and €14,944 thousand, respectively (approximately €12,239 thousand, €2,606 thousand, €14,648 thousand and €11,750 thousand, respectively,at31December2020),beforeconsolidationadjustmentsandeliminations. 3.4 Non-controlling interests Non-controllinginterestsinsubsidiariesacquiredasof1January2004arerecognisedontheacquisitiondateatthe percentageparticipationinthefairvalueofidentifiablenetassets.Non-controllinginterestsinsubsidiariesacquiredprior tothetransitiondatewererecognisedatthepercentageparticipationintheirequityonthedateoffirstconsolidation. Non-controlling interests are disclosed in consolidated equity separately from equity attributable to shareholders of theParentCompany.Non-controllinginterestsinconsolidatedprofitsfortheyear(andinconsolidated comprehensive income for the year) are also presented separately in the consolidated statement of comprehensive income. Notes to the consolidated financial statements as at 31 December 2021 (thousands of euros) continued 03 Consolidated financial statements 112 Befesa Annual Report 2021 To Befesa’s shareholders The consolidated total comprehensive income for the year and changes in equity of the subsidiaries attributable to theGroupandnon-controllinginterestsafterconsolidationadjustmentsandeliminations,isdeterminedin accordancewiththepercentageownershipatyearend,withoutconsideringthepossibleexerciseorconversionof potentialvotingrightsandafterdiscountingtheeffectofdividends,agreedornot,oncumulativepreferenceshares classifiedinequityaccounts.However,Groupandnon-controllinginterestsarecalculatedtakingintoaccountthe possibleexerciseofpotentialvotingrightsandotherderivativefinancialinstrumentswhich,insubstance,currently giveaccesstothereturnsassociatedwiththeinterestsheldinthesubsidiaries. The results and each component of other comprehensive income are allocated to equity attributable to the shareholders of the Parent Company and to non-controlling interests in proportion to their investment, although this implies a balance receivable from non-controlling interests. 3.5 Goodwill Thisheadingintheconsolidatedfinancialstatementreflectsthedifferencebetweenthepricepaidtoacquirecertain consolidated subsidiaries and the Group’s interest in the fair value of the net assets (assets, liabilities and contingent liabilities) of those companies at the date of acquisition. AnyexcessoftheGroup’sinterestinthenetfairvalueoftheidentifiableassets,liabilitiesandcontingentliabilitiesof the company acquired over the acquisition cost of the investment is allocated to income on the date of acquisition. Goodwillisrecognisedasanassetandattheendofeachreportingperioditisestimatedwhetheranyimpairment hasreduceditsvaluetoanamountlowerthanitscarryingamount.Ifso,impairmentlossesarerecognisedforthe goodwill,whichmustnotbereversedinasubsequentperiod. GoodwillisallocatedtoCGUsforthepurposeofimpairmenttesting.ThegoodwillisallocatedtotheCGUsthatare expectedtobenefitfromthebusinesscombinationinwhichthegoodwillarises. Ondisposalofasubsidiaryorassociate,theattributableamountofgoodwillisincludedinthedeterminationofthe gain or loss on disposal. 3.6 Other intangible assets Intangible assets are recognised initially at acquisition or production cost and are subsequently measured at cost less any accumulated amortisation and any accumulated impairment losses. Internally generated intangible assets – research and development expenditure Expenditureonresearchactivitiesisrecognisedasanexpenseintheyearinwhichitisincurred.Inconformitywith IFRS,theGroupclassifiesasinternallygeneratedintangibleassetstheexpensesincurredinthedevelopmentof projectsthatmeetthefollowingconditions: ■ Theexpenditureisspecificallyidentifiedandcontrolledbyproject,anditsdistributionovertimeisclearlydefined. ■ TheDirectorshavewell-foundedreasonsforbelievingthattherearenodoubtsastothetechnicalsuccessorthe economicandcommercialviabilityoftheprojects,onthebasisoftheirlevelofcompletionandorderbook. ■ TheGrouphasthenecessarytechnical,financialandotherresourcestocompletethedevelopmentwork. ■ Thedevelopmentcostoftheasset,whichincludes,whereappropriate,thepersonnelexpensesoftheGroup’s personnelworkingontheprojects,canbemeasuredreliably. 113Befesa Annual Report 2021 Additional information Statutory  financialstatements Consolidated  financialstatements Management report  ToBefesa’s  shareholders Internally generated intangible assets are amortised on a straight-line basis over the period that they are expected to generateincome,whichisgenerallyfiveyears.Thetechnical,economicandfinancialpotentialofeachprojectis reviewedateachyear-end.Ifaprojectisprogressingnegativelyoriftherearenofinancingplanstoassureeffective completion, the related amount is charged to income in full. Where no internally generated intangible asset can be recognised, development expenditure is accounted for as an expenseintheyearinwhichitisincurred. TheGrouphasrecognisedtheworkperformedonitsintangibleassetsinrelationtothedevelopmentofnew technologiesforwhichthereisahighprobabilityoftechnicalandeconomicsuccessasadecreaseintheincome statementheadingswhichreflectthecarryingamountofcapitalisedexpensesforanamountof€1,039thousand (31December2020:€953thousand).Theamountscapitalisedduringtheyearmainlyrelatetoprojectsaimedat improving aluminium scrap treatment processes developed by the subsidiary Befesa Aluminio, S.L. Computer software The acquisition and development costs incurred in relation to the basic computer systems used in the management oftheGrouparerecognisedwithachargeto“Otherintangibleassets”intheconsolidatedfinancialstatement. Computersystemmaintenancecostsarerecognisedwithachargetotheconsolidatedincomestatementforthe yearinwhichtheyareincurred. Computersoftwareisamortisedonastraight-linebasisovertheusefullifeoftheassets(fiveyears). Concessions, patents, licences and similar items Ingeneral,theamountsrecognisedbytheGroupinconnectionwithconcessions,patents,licencesandsimilaritems relatetothecostincurredinacquiringthem,whichisamortisedonastraight-linebasisovertheestimatedusefullife based on the concession arrangement. The capitalised concessions have a maximum estimated useful life of 25 years. Licences acquired in a business combination are recognised at fair value at the acquisition date and have an indefiniteusefullife.Licenceswithindefiniteusefullifearetestedforimpairmentatleastannually(Note8).Theuseful life,inaccordancewithIAS38,isconsideredindefiniteduetothefactthatthoselicencesrepresenttheamountthat anyproducerwillingtoenterthemarketatanymomentwouldhavetopayinordertoobtaintheneeded environmental authorisation to start the activity and have no maturity. 3.7 Property, plant and equipment Property, plant and equipment are recognised at acquisition cost less any accumulated depreciation and any recognisedimpairmentlosses.However,priortothedateoftransitiontoIFRS,theGrouprevaluedcertainitemsof property,plantandequipmentaspermittedbytheapplicablelegislation.InaccordancewithIFRS,theGroup considered the amount of the restatements as part of the cost of the assets. Costsofexpansion,modernisationorimprovements,leadingtoincreasedproductivity,capacityorefficiencyortoa lengthening of the useful lives of the assets are capitalised. Repairs that do not lead to a lengthening of the useful life oftheassetsandmaintenanceexpensesarechargedtotheconsolidatedincomestatementfortheyearinwhich they are incurred. In-houseworkonnon-currentassetsisrecognisedataccumulatedcost(externalcostsplusin-housecosts, determinedonthebasisofin-housewarehousematerialsconsumptionandmanufacturingcostsallocatedusing hourlyabsorptionrates,similartothoseusedforinventoryvaluation).In2021,€3,467thousandwasrecognisedin thisregard(2020:€1,506thousand)(Note22.3).At31December2021,theworkperformedbytheGrouponits property, plant and equipment is recognised under “Other operating income” in the consolidated income statement. ThisamountmainlyrelatestoworkscarriedoutinChinainconnectionwiththeconstructionofthenewplantsin Changzhou (Jiangsu province) and Xuchang (Henan province), and in the subsidiary Befesa Salzschlacke GmbH in Notes to the consolidated financial statements as at 31 December 2021 (thousands of euros) continued 03 Consolidated financial statements 114 Befesa Annual Report 2021 To Befesa’s shareholders connectionwiththeclosingofstorage(2020:workcarriedoutinChinainconnectionwiththeconstructionofthe newplantsinChangzhou(Jiangsuprovince)andXuchang(Henanprovince))(Note9). TheGroupdepreciatesproperty,plantandequipmentusingthestraight-linemethod(landisnotsubjectto depreciation),distributingthecostoftheassetsoverthefollowingyearsofestimatedusefullife: Average years of estimated useful life Buildings 16 – 50 Plant and machinery 10 – 25 Other property, plant and equipment 4 – 10 Since the Group has to meet certain costs in relation to the closure of its facilities, the accompanying consolidated financialstatementincludestheprovisionsraisedforsuchcosts(Note18). Assets’residualvaluesandusefullivesarereviewed,andadjustedasappropriate,ateachconsolidatedfinancial statement date. Gainsandlossesondisposalsaredeterminedbycomparingtheproceedswiththecarryingamountofthe itemssold. Anasset’scarryingamountiswrittendownimmediatelytoitsrecoverableamountiftheasset’scarryingamountis greaterthanitsestimatedrecoverableamount(Note9). 3.8 Leases (i) Identificationofalease Atinceptionofacontract,theGroupassesseswhetheritcontainsalease.Acontractisorcontainsaleaseif itconveystherighttocontroltheuseofanidentifiedassetforaperiodoftimeinexchangefora consideration.TheperiodoftimeduringwhichtheGroupusesanassetincludesconsecutiveand non-consecutive periods of time. The Group reassesses the conditions if the contract is changed. (ii) Lessee accounting For contracts that contain one or more lease components and non-lease components, the Group considers all the components as a single lease component. At the date of initial application, the Group recognises a right-of-use asset and a lease liability for leases previouslyclassifiedasanoperatingleaseapplyingIAS17. The right-of-use asset comprises the amount of the lease liability, any lease payments made at or before the commencement date, less any lease incentives received, any initial direct costs incurred and an estimate of dismantling and restoration costs to be incurred, as described in the accounting policy for provisions. The Group measures the lease liability at the present value of the lease payments that are not made at the commencementdate.TheGroupdiscountstheleasepaymentsusingtheappropriateincrementalborrowing rate, unless the interest rate implicit in the lease can be reliably determined. In this regard, for initial measurement oftheleaseliability,theincrementalborrowingratehasbeenused,whichrepresentstherateofinterestthata lesseewouldhavetopaytoborrowoverasimilarterm,andwithasimilarsecurity,thefundsnecessarytoobtain anassetofasimilarvaluetotheright-of-useassetinasimilareconomicenvironment(2%–2.75%). Pendingleasepaymentscomprisefixedpayments,lessanyleaseincentivesreceivable,variablelease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement date, amounts expected to be payable by the lessee under residual value guarantees, the exercise price of the 115Befesa Annual Report 2021 Additional information Statutory  financialstatements Consolidated  financialstatements Management report  ToBefesa’s  shareholders purchase option if the lessee is reasonably certain to exercise that option, and payments of penalties for terminatingthelease,iftheleasetermreflectsthelesseeexercisinganoptiontoterminatethelease. The Group measures the right-of-use asset at cost, less any accumulated depreciation and any accumulated impairmentlosses,adjustedforanyremeasurementoftheleaseliability. IftheleasetransfersownershipoftheunderlyingassettotheGroupbytheendoftheleasetermorthe right-of-use asset includes the price of the purchase option, the lessee shall depreciate the right-of-use asset followingthedepreciationcriteriaforproperty,plantandequipmentfromthecommencementdateofthe leasetotheendoftheusefullifeoftheunderlyingasset.Otherwise,thelesseeshalldepreciatethe right-of-use asset from the commencement date to the earlier of the end of the useful life of the right-of-use asset and the end of the lease term. TheGroupmeasurestheleaseliabilitybyincreasingthecarryingamounttoreflectinterestontheleaseliability, reducingthecarryingamounttoreflecttheleasepaymentsmadeandremeasuringthecarryingamountto reflectanyreassessmentorleasemodificationsortoreflectrevisedin-substancefixedleasepayments. TheGrouprecognisesremeasurementsoftheleaseliabilityasanadjustmenttotheright-of-useasset,until thisisreducedtozeroandtheninprofitorloss. A lessee shall remeasure the lease liability by discounting the revised lease payments using a revised discount rate if there is a change in the lease term or a change in the assessment of an option to purchase the underlying asset. The Group remeasures the lease liability if there is a change in the amounts expected to be payable under a residual value guarantee or a change in an index or a rate used to determine those payments, including a changetoreflectchangesinmarketrentalratesfollowingamarketrentreview. 3.9 Non-financialassetimpairment Ateachreportingdate,theGroupreviewsnon-currentassetstodeterminewhetherthereisanyindicationthatthey might have undergone an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where the asset itself does not generate cashflowsthatareindependentfromotherassets,theGroupestimatestherecoverableamountofthe cash-generatingunittowhichtheassetbelongs. Inaddition,ateachbalancefinancialstatementdate,thepossibleimpairmentofgoodwillandofanyintangible assetsthathavenotyetcomeintooperationorwhichhaveanindefiniteusefullifeisanalysed. Therecoverableamountisthehigheroffairvalue,lesscoststosellandvalueinuse,whichistakentobethepresent valueoftheestimatedfuturecashflows.Inordertocalculatevalueinuse,theassumptionsusedincludediscountrates, growthratesandforecastchangesinsellingpricesandcosts.TheDirectorsestimatepost-taxdiscountrates,which reflectthetimevalueofmoneyandtherisksspecifictotheCGU.Thegrowthratesandthechangesinsellingprices and costs are based on in-house and industry forecasts, and experience and future expectations, respectively. Iftherecoverableamountofanassetislessthanitscarryingamount,animpairmentlossisrecognisedforthedifference, withachargeto“Amortisation/depreciation,impairmentandprovisions”intheconsolidatedincomestatement. Impairmentlossesrecognisedforanassetinprioryearsarereversed,withacredittotheaforementionedheadingwhen there is a change in the estimates concerning the recoverable amount of the asset, increasing the carrying amount of the asset,butsothattheincreasedcarryingamountdoesnotexceedthecarryingamountthatwouldhavebeendetermined hadnoimpairmentlossbeenrecognised,exceptinthecaseoftheimpairmentofgoodwill,whichcannotbereversed. Notes to the consolidated financial statements as at 31 December 2021 (thousands of euros) continued 03 Consolidated financial statements 116 Befesa Annual Report 2021 To Befesa’s shareholders 3.10 Financial instruments (i) Recognitionandclassificationoffinancialinstruments Financialinstrumentsareclassifiedoninitialrecognitionasafinancialasset,afinancialliabilityoranequity instrumentinaccordancewiththeeconomicsubstanceofthecontractualarrangementandthedefinitionsofa financialasset,afinancialliabilityandanequityinstrumentinIAS32“FinancialInstruments:Presentation”. Formeasurementpurposes,theGroupclassifiesfinancialinstrumentsinthefollowingcategoriesoffinancialassets andfinancialliabilitiesaccordingtothebusinessmodelandthecharacteristicsofthecontractualcashflows. ■ Amortisedcost:Assetsthatareheldforcollectionofcontractualcashflows,wherethosecashflowsrepresent solelypaymentsofprincipalandinterest,aremeasuredatamortisedcost.Interestincomefromthesefinancial assetsisincludedinfinanceincomeusingtheeffectiveinterestratemethod.Anygainorlossarisingon derecognitionisrecogniseddirectlyintheincomestatementandpresentedinothergains/(losses)togetherwith foreign exchange gains and losses. Impairment losses are presented as a separate line item in the consolidated income statement. This category includes the loans, trade and other receivables, and security deposits. ■ Fair value through other comprehensive income (FVOCI): Assets that are held for collection of contractual cash flowsandforsellingthefinancialassets,wheretheassets’cashflowsrepresentsolelypaymentsofprincipaland interest, are measured at FVOCI. Movements in the carrying amount are taken through OCI, except for the recognitionofimpairmentgainsorlosses,interestincomeandforeignexchangegainsandlosseswhichare recognisedintheincomestatement.Whenthefinancialassetisderecognised,thecumulativegainorloss previouslyrecognisedinOCIisreclassifiedfromequitytotheincomestatementandrecognisedinothergains/ (losses).Interestincomefromthesefinancialassetsisincludedinfinanceincomeusingtheeffectiveinterest method. Foreign exchange gains and losses are presented in other gains/(losses) and impairment expenses are presentedasaseparatelineitemintheconsolidatedincomestatement.Thiscategorycorrespondswiththe hedging derivatives. ■ Fairvaluethroughprofitorloss(FVPL):AssetsthatdonotmeetthecriteriaforamortisedcostorFVOCIare measured at FVPL. A gain or loss on a debt investment that is subsequently measured at FVPL is recognised in theincomestatementandpresentednetwithinothergains/(losses)intheperiodinwhichitarises.Thiscategory includes the factoring and Equity instruments. ThebusinessmodelisdeterminedbykeyGrouppersonnelandononelevelreflectsthemannerinwhichtheyjointly managegroupsoffinancialassetstoreachaspecificbusinessobjective.TheGroup’sbusinessmodelrepresents themannerinwhichitmanagesitsfinancialassetstogeneratecashflows. TheGroupinitiallydesignatesafinancialliabilityatFVPLifdoingsoeliminatesorsignificantlyreducesan inconsistencyinthemeasurementorrecognitionthatwouldotherwisearise,ifmeasurementoftheassetsof liabilitiesorrecognitionoftheresultsthereofweremadeondifferentbases,orifagroupoffinancialliabilitiesor financialassetsandfinancialliabilitiesismanaged,andtheirreturnisevaluated,basedonfairvalue,inaccordance withaninvestmentstrategyordocumentedriskmanagementstrategy,andinformationonthisgroupisprovided internally on the same basis to the Group‘s key management personnel. TheGroupclassifiestheremainingfinancialliabilities,exceptfinancialguaranteecontracts,commitmentstoextend below-marketrateloansandfinancialliabilitiesresultingfromatransferoffinancialassetsthatdonotqualifyfor derecognitionorarerecognisedusingthecontinuedinvolvementapproach,asfinancialliabilitiesatamortisedcost. 117Befesa Annual Report 2021 Additional information Statutory  financialstatements Consolidated  financialstatements Management report  ToBefesa’s  shareholders 3. Accounting principles and policies and measurement methods applied continued (ii) Measurement Atinitialrecognition,theGroupmeasuresafinancialassetatitsfairvalueplus,inthecaseofafinancialassetnotat FVPL,transactioncoststhataredirectlyattributabletotheacquisitionofthefinancialasset.Transactioncostsof financialassetscarriedatFVPLareexpensedintheconsolidatedstatementofcomprehensiveincome.Financial assetswithembeddedderivativesareconsideredintheirentiretywhendeterminingwhethertheircashflowsare solely payment of principal and interest. Subsequent measurement of debt instruments depends on the Group’s business model for managing the asset and thecashflowcharacteristicsoftheasset. (iii) Impairment TheGrouprecognisesanimpairmentlossforexpectedcreditlossesonfinancialassetsatamortisedcost,FVOCI, leasefinancereceivables,contractualassets,loancommitmentsandfinancialguarantees. Fortradereceivables,theGroupappliesthesimplifiedapproachpermittedunderIFRS9whichrequiresthat expected lifetime losses be recognised since the initial recognition of the receivable. (iv) Derecognition,modificationandextinguishmentoffinancialassets Financialassetsarederecognisedwhenthecontractualrightstothecashflowsfromthefinancialassetexpireor havebeentransferredandtheGrouphastransferredsubstantiallyalltherisksandrewardsofownership. (v) Derecognitionandmodificationsoffinancialliabilities TheGroupderecognisesallorpartofafinancialliabilitywheniteitherdischargestheliabilitybypayingthecreditor orislegallyreleasedfromprimaryresponsibilityfortheliability,eitherbyaprocessoflaworbythecreditor. TheexchangeofdebtinstrumentsbetweentheGroupandthecounterpartyorsubstantialmodificationsofinitially recognisedliabilitiesareaccountedforasanextinguishmentoftheoriginalfinancialliabilityandtherecognitionofa newfinancialliability,providingtheinstrumentshavesubstantiallydifferentterms. TheGroupconsidersthetermstobe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%differentfromthediscountedpresentvalueoftheremainingcashflowsoftheoriginal financialliability. Iftheexchangeisaccountedforasanextinguishmentoftheoriginalfinancialliability,anycostsorfeesincurredare recognised as part of the gain or loss on the extinguishment. If the exchange is not accounted for as an extinguishment,themodifiedflowsarediscountedattheoriginaleffectiveinterestrate,andanydifferenceinthe previouscarryingamountisrecognisedintheincomestatement.Anycostsorfeesincurredadjustthecarrying amountofthefinancialliabilitiesandareamortisedusingtheamortisedcostmethodovertheremainingtermofthe modifiedliability. TheGrouphascontractedreversefactoringfacilitieswithvariousfinancialinstitutionstomanagepaymentsto suppliers.TheGroupappliestheabovecriteriatodeterminewhetheritshouldderecognisetheoriginaltradepayable andrecogniseanewliabilitywiththefinancialinstitutions.Tradepayablessettledunderthemanagementoffinancial institutions are recognised under trade and other payables only if the Group has transferred management of the paymenttothefinancialinstitutionsbutretainsprimaryresponsibilityforsettlingthedebtwiththetradecreditors. The Company does not identify any type of material liquidity risk related to these reverse factoring agreements. Despite this, the Company only uses entities that have been given high independent credit rating and had proven solvency on the market. Notes to the consolidated financial statements as at 31 December 2021 (thousands of euros) continued 03 Consolidated financial statements 118 Befesa Annual Report 2021 To Befesa’s shareholders Factoring receivables Befesaderecognisestradereceivablesfortheamounttransferredtofinancialinstitutions,providingthefactor assumesalltheriskofinsolvencyanddefault(non-recoursefactoring).At31December2021and2020,balances receivablenotdue,whichwereextinguishedasaresultoftheaforementionednon-recoursefactoringoperations, amounted to €54,064 thousand and €36,181 thousand, respectively. Unlike the above, Befesa does not derecognise amountsreceivabletransferredtofinancialinstitutionsforwhichitretainssubstantiallytheassociatedrisks. 3.11 Hedge accounting Derivativefinancialinstrumentsareinitiallyrecognisedusingthesamecriteriaasforfinancialassetsandfinancial liabilities.Derivativefinancialinstrumentsthatdonotqualifyforhedgeaccountingareclassifiedandmeasuredas financialassetsandfinancialliabilitiesatfairvaluethroughprofitorloss.Derivativefinancialinstrumentswhich qualify for hedge accounting are initially measured at fair value, plus any transaction costs that are directly attributabletotheacquisition,orlessanytransactioncostsdirectlyattributabletotheissueofthefinancial instruments.Nonetheless,transactioncostsaresubsequentlyrecognisedinprofitandloss,inasmuchastheydo notformpartofthechangesintheeffectivevalueofthehedge. At the inception of the hedge, the Group formally designates and documents the hedging relationships and the objectiveandstrategyforundertakingthehedges.Thisdocumentationincludesidentificationofthehedging instrument,thehedgeditem,thenatureoftheriskbeinghedgedandhowtheGroupmeasureshedgeeffectiveness. Hedgeaccountingonlyapplieswhenthereisaneconomicrelationshipbetweenthehedgeditemandthehedging instrument,theeffectofcreditriskdoesdominatethevaluechangesthatresultfromthateconomicrelationship, and the hedge ratio of the hedging relationship is the same as that resulting from the quantity of the hedged item thattheGroupactuallyusestohedgethatquantityofhedgeditem.However,thatdesignationshallnotreflectan imbalancebetweentheweightingsofthehedgeditemandthehedginginstrumentthatwouldcreatehedge ineffectiveness,irrespectiveofwhetherrecognisedornot,thatcouldresultinanaccountingoutcomethatwouldbe inconsistentwiththepurposeofhedgeaccounting. Forcashflowhedgesofforecasttransactionsoracomponentthereof,theGroupassesseswhetherthese transactionsarehighlyprobableandiftheypresentanexposuretovariationsincashflowsthatcouldultimately affectprofitorlossfortheyear. Attheinceptionofthehedgingrelationship,andonanongoingbasis,theGroupevaluateswhethertherelationship meetstheeffectivenessqualifyingcriteriaprospectively.TheGroupassessestheeffectivenessateachaccounting closeorwhentherearesignificantchangesaffectingtheeffectivenessrequirements. TheGroupperformsaqualitativeassessmentofeffectiveness,providingthatthefundamentalconditionsofthe instrument and the hedged item are the same. When the fundamental conditions are not exactly the same, the Group usesahypotheticalderivativewithfundamentalconditionsequivalenttothehedgeditemtoassessand measureefficiency. The Group records changes in the time value of the options, hedging an item related to a transaction in other comprehensiveincome.Ifthehedgeditemresultsintherecognitionofanon-financialassetorliability,theGroup includestheaccumulatedamountinothercomprehensiveincomewithanadjustmenttothenon-financialassetor liability.Fortheremaininghedgingrelationships,theamountdeferredinothercomprehensiveincomeisreclassified toprofitorlossinthesameperiodorperiodsinwhichtheexpectedhedgedcashflowsaffectprofitorloss. Nonetheless,iftheGroupexpectsthatpartoftheamountwillnotberecoveredinoneormorefutureperiods,thisis immediatelyrecognisedinprofitorloss. However,ifthehedgeisinterrupted,theamountdeferredinothercomprehensiveincomeisreclassifiedimmediately toprofitorloss. 119Befesa Annual Report 2021 Additional information Statutory  financialstatements Consolidated  financialstatements Management report  ToBefesa’s  shareholders 3. Accounting principles and policies and measurement methods applied continued Cashflowhedges The Group recognises the portion of the gain or loss on the fair value measurement of a hedging instrument that is determinedtobeaneffectivehedgeinothercomprehensiveincome.Theineffectiveportionandthespecific componentofthegainorlossorcashflowsonthehedginginstrument,excludingthemeasurementofthehedge effectiveness,arerecognisedunderfinanceincomeorcosts. Theseparatecomponentofothercomprehensiveincomeassociatedwiththehedgeditemisadjustedtothelesser of the cumulative gain or loss on the hedging instrument from inception of the hedge and the cumulative change in fairvalueorpresentvalueoftheexpectedfuturecashflowsonthehedgeditemfrominceptionofthehedge. However,iftheGroupexpectsthatalloraportionofalossrecognisedinothercomprehensiveincomewillnotbe recoveredinoneormorefutureperiods,itreclassifiesintofinanceincomeorfinanceexpensestheamountthatis not expected to be recovered. Ifahedgeofaforecasttransactionsubsequentlyresultsintherecognitionofafinancialassetorafinancialliability, theassociatedgainsorlossesthatwererecognisedinothercomprehensiveincomearereclassifiedtoprofitorloss inthesameperiodorperiodsduringwhichtheassetacquiredorliabilityassumedaffectsprofitorlossandunderthe same caption of the consolidated income statement. 3.12 Cash and cash equivalents Thisitemincludescashonhand,currentbankaccountsand,whereapplicable,depositsandreverserepurchase agreementsthatmeetallofthefollowingrequirements: ■ They may be converted into cash. ■ They have a maturity of three months or less on the date of acquisition. ■ Theyarenotsubjecttoasignificantriskofchangesinvalue. ■ They form part of the Company’s usual cash management policy. Bankoverdraftsarerecognisedintheconsolidatedfinancialstatementascurrentborrowings. 3.13 Inventories “Inventories”intheconsolidatedfinancialstatementincludestheassetsthattheGroup: ■ holdsforsaleintheordinarycourseofitsbusiness; ■ hasintheprocessofproduction,constructionordevelopmentforsuchsale;or ■ expects to consume in the production process or in the provision of services. RawmaterialsandgoodsheldforresalearemeasuredatthelowerofFIFOcostandmarket.Ancillaryproducts, consumablesandsparepartsaremeasuredatthelowerofthepriceperthelastinvoiceandmarketvalue,which doesnotdiffersignificantlyfromFIFOcost. Work-in-progressandfinishedgoodsaremeasuredatthelowerofmarketvalueandaverageproductioncost. Averageproductioncostiscalculatedasthespecificcostofthesuppliesandservicesplustheapplicableportionof thedirectandindirectcostoflabourandgeneralmanufacturingexpenses.Otherwarehousematerialsaremeasured atthelowerofaverageacquisitioncostandmarketvalue. Obsolete,defectiveorslow-movingmaterialshavebeenreducedtotheirnetrealisablevalue. Notes to the consolidated financial statements as at 31 December 2021 (thousands of euros) continued 03 Consolidated financial statements 120 Befesa Annual Report 2021 To Befesa’s shareholders 3.14 Share capital Ordinarysharesareclassifiedasequity. Incrementalcostsdirectlyattributabletotheissueofnewsharesoroptionsarepresentedinequityasadeduction, net of taxes, from resources obtained. Where any Group company purchases the Company’s share capital (treasury shares), the consideration paid, including any directly attributable incremental costs (net of income taxes), is deducted from equity attributable to equity holders of the Company until the shares are cancelled, reissued or sold. Where such shares are subsequently disposed of or reissued, any consideration received, net of any directly attributable incremental transaction costs andtherelatedincometaxeffects,isincludedinequityattributabletotheCompany’sequityowners. 3.15 Provisions, contingent liabilities and contingent assets Inthepreparationoftheconsolidatedfinancialstatements,theParent’sDirectorsdrewadistinctionbetween: ■ Provisions:creditbalancescoveringpresentobligationsattheconsolidatedfinancialstatementdatearisingfrom pasteventsthatcouldgiverisetoalossforthecompanies,whicharecertainastotheirnaturebutuncertainas to their amount and/or timing. ■ Contingentliabilities:possibleobligationsarisingfrompastevents,theexistenceofwhichwillbeconfirmedonly bytheoccurrenceornon-occurrenceofoneormorefutureeventsnotwhollywithinthecontrolofthe consolidatedcompaniesandwhichdonotmeettherequirementsforrecognitionasprovisions. ■ Contingentassets:possibleassetsthatarisefrompastevents,theexistenceofwhichwillbeconfirmedonlyby theoccurrenceornon-occurrenceofoneormorefutureeventsnotwhollywithinthecontroloftheentities. TheGrouprecognisesprovisionsfortheestimatedamountrequiredtosuitablymeetitsliability,whetheritbelegalor constructive,probableorcertain,arisingfromcontingencies,litigationinprocessorobligations,whichariseasaresult ofpastevents,forwhichitismoreprobablethannotthatanoutflowofresourceswillberequired,providedthatitis possibletomakeareasonableestimateoftheamountinquestion.Provisionsarerecognisedwhentheliabilityor obligationariseswithachargetotherelevantheadingintheconsolidatedincomestatement,basedonthenatureof theobligation,forthepresentvalueoftheprovisionwhentheeffectofdiscountingtheobligationismaterial. Provisions for pensions and similar obligations SeveralGroupcompanieshavecertaindefinedbenefitobligationswiththeiremployeestosupplementsocial securityretirementpensions.Theseobligationshadbeenexternalisedat31December2021and2020.Subsidiaries’ obligations as pension plan promoters are established in the contribution of a percentage of employees’ pensionablesalaries.ThesecommitmentsarenotsignificantonaGroupscale. Dismantling, restoration and similar provisions Inadditiontotheabove,“Long-termprovisions”intheaccompanyingconsolidatedfinancialstatementalsoinclude, whereapplicable,theestimatedamountsrequiredtoclosecertainfacilities(Note18),andtheestimatedamounts requiredtosettleanyliabilitythatmightarisefromongoinglitigationandothersignificantobligations,whenitis consideredmoreprobablethannotthattheseobligationswillhavetobemet,whileanycontingentliabilities (possibleobligationsthatarisefrompasteventswhoseexistencewillbeconfirmedonlybytheoccurrenceor non-occurrenceofoneormorefutureeventsnotwhollywithinthecontrolofBefesa)arenotrecognisedinthe consolidatedfinancialstatements,butratheraredisclosed,asrequiredbyIAS37(seeNote22). 121Befesa Annual Report 2021 Additional information Statutory  financialstatements Consolidated  financialstatements Management report  ToBefesa’s  shareholders 3. Accounting principles and policies and measurement methods applied continued Share‑based payments Thefairvalueofoptionsgrantedundershare-basedcompensationplansisrecognisedasanemployeebenefits expensewiththecorrespondingincreaseinlong-termliabilities. For cash-settled share-based payment transactions, the Group measures the goods or services acquired and the liability incurred at the fair value of the liability. Until the liability is settled, the Group remeasures the fair value of the liabilityattheendofeachreportingperiod,withanychangesinfairvaluerecognisedintheconsolidatedincome statement. Services received or goods acquired, and the liability payable are recognised over the vesting period or immediately if vesting is immediate. The Group only recognises as personnel expenses the amount accrued in accordancewiththevestingconditionsofthefairvalueofthepaymentonthegrantdate,andtheresidualamount accruedisrecognisedasfinanceincomeorexpense. 3.16 Revenue recognition a) Sale of goods SalesofWOXandsecondaryaluminiumarerecognisedwhencontroloftheproductsistransferredtothe customers,mainlymanufacturingcompanies,whenthecustomerhasfulldiscretionovertheproductsandthereis nounfulfilledobligationthatcouldaffecttheclient’sacceptanceoftheproducts.Deliveryoccursdependingonthe specificagreementswithcustomers(incoterm),therisksofobsolescenceandlosshavebeentransferredtothe customers,andtheGrouphasevidencethatallcriteriaforacceptancehavebeensatisfied. Revenueisrecognisedwhenthegoodsaredeliveredasthisisthepointintimethattheconsiderationis unconditional because only the passage of time is required before the payment is due. The Group acts as the principal in all sales transactions. Additionally, the Group has determined that its contracts withcustomersdonotcontainasignificantfinancingcomponentandGroupsaleshavenovariablecomponent. Nocriticaljudgementsinrecognisingrevenueareidentified. In relation to the revenue recognition of sales, the Group considers that under IFRS 15 there is only one kind of contractwithcustomers.TheassessmentissupportedbythefactthatthemainsalesoftheGroup’sproductshave only one performance obligation: delivery of WOX or delivery of secondary aluminium. Furthermore, the products are not dependent on or connected to other products or services. Consequently, as there are no delayed performance obligations, the revenue is recognised fully after passing of control to the customer. Theperformanceobligationsforthistypeofsalereflectthedeliveryofdistinctgoodsdefinedineachcontractand the price of each delivery is established in each separate contract, having been indexed to various market variables on the payment dates. b) Sale of services Revenue from customer contracts is recognised based on the amount expected to be received from the customer whenthetransferofcontrolofacustomerserviceoccurs.Controltransfercanoccurataspecifictimeorovertime. Theperformanceobligationsforthistypeofsalecorrespondtothecollectionofwaste,thecollectionofthesalt slagsandSPLsandthedeliveryofthedefinedproductineachtechnologycontract.TheCompanyconsidersthat theperformanceobligationrelatedtothistypeofserviceissatisfiedataspecificpointintimeexceptfortechnology contractsalesthattheperformanceobligationissatisfiedovertime. The price of each service is established in each separate contract. Each contract has a unique performance obligationwhichmeansthatthepriceisestimatedonanindividualcontractbasis. Acontractisnotconsideredtocontainasignificantfinancingcomponentwhentheperiodbetweenwhenthe customer’scommittedserviceistransferredandwhenthecustomerpaysforthatserviceisoneyearorless. Notes to the consolidated financial statements as at 31 December 2021 (thousands of euros) continued 03 Consolidated financial statements 122 Befesa Annual Report 2021 To Befesa’s shareholders There are no incremental costs for any of this type of rendering of services to secure the contract. Consequently, as there are no delayed performance obligations, the revenue is recognised fully after passing of control to the customer. Basedonthis,theGroupdisclosesrevenuebyreportingsegmentandgeographicalarea(Note5). ThedifferenttypeofservicesprovidedbyBefesaare: Steel Business Services In the Steel Dust Recycling Services segment, the Group collects and recycles crude steel dust and other steel residues generated in the production of crude, stainless and galvanised steel through EAF steel production. The Group sells the WOX produced in the recycling of crude steel dust to zinc smelters and, to a lesser extent, return metals, mainly nickel, chromium and molybdenum, recovered in the recycling of stainless-steel residues, to stainless steel producers for a tolling fee or sells such recovered metals on the market. In this segment, additionally to the Group revenues from sales of WOX, the other revenue sources are: (i) the service fees the Group charges for collecting and recycling crude steel dust. The performance obligations for thistypeofsalecorrespondtothecollectionofwasteasdefinedineachcontractandthepriceoftheserviceis established in each separate contract. (ii) the tolling fees the Group charges for collecting and recycling stainless steel residues and for returning the recoveredmetalstothestainless-steelproducers.Mostoftheservicesofthistypearewithreturnofrecovered metals. If there are no returns, the service is the same as in the previous point (collecting). The performance obligationsforthistypeofsalecorrespondtowastecollection.TheCompanyinvoicescustomersatolling/ conversion fee per tonne of dust treated. The plant receives stainless-steel dust from its customers, treats this dust and returns to the customers the alloys contained in this dust. Collection of salt slags and SPLs In the Salt Slags operations of the Aluminium Salt Slags Recycling Services segment, the Group recycles salt slags, whichitreceivesfromcustomersforaservicefeeorgeneratesduringitsownproductionofsecondaryaluminium.In addition, the Group recycles SPLs generated by primary aluminium producers. The basis for the Aluminium Salt Slags Recycling Services segment is the secondary aluminium production market in Europe.Thesecondaryaluminiumproductionmarketproducessaltslags,whicharecategorisedasahazardous wasteinEuropeandothermarkets. TheperformanceobligationsforthistypeofsalereflectthecollectionofthesaltslagsandSPLsandthetreatment pricepertonneisafixedpriceindicatedineachcontract,basedonthetonnesreceivedduringtheyear. Technology division TheSecondaryAluminiumsubsegmenthasasmallTechnologydivisionwhichdesigns,constructs,assemblesand starts up the facilities so they are ready for use in the aluminium, zinc and lead cast houses. Theperformanceobligationforthistypeofsalereflectsthedeliveryofthedefinedproductineachcontract,with eachcontractcontainingapurchaseorderwithallofthespecificationsoftheprojectandafixedpriceforit. Note13tothefinancialstatementsfor2021reflectsabreakdownof“Contractassets”at31December2021and 2020,whichamountto€2,492thousand(2020:€2,691thousand). 123Befesa Annual Report 2021 Additional information Statutory  financialstatements Consolidated  financialstatements Management report  ToBefesa’s  shareholders 3. Accounting principles and policies and measurement methods applied continued c) Interest income Interestincomeisaccruedonatime-proportionbasis,byreferencetotheprincipaloutstandingandtheeffective interestrateapplicable,whichistheratethatexactlydiscountsestimatedfuturecashreceiptsthroughtheexpected lifeofthefinancialassettothatasset’scarryingamount. d) Income from dividends Incomefromdividendsisrecognisedwhentheshareholder’srighttoreceivepaymentisestablished. 3.17 Borrowing costs Borrowingcostsdirectlyattributabletotheacquisition,constructionorproductionofassets,inaccordancewith IAS23forassetsthatnecessarilytakeasubstantialperiodoftimetobepreparedfortheirintendeduseorsale,are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. Investmentincomeearnedonthetemporaryinvestmentofspecificborrowings,pendingtheirexpenditureon qualifyingassets,isdeductedfromtheborrowingcostseligibleforcapitalisation. Allotherborrowingcostsarerecognisedintheconsolidatedincomestatementintheyearinwhichtheyareincurred. 3.18 Foreign currency (i) Foreigncurrencytransactions,balancesandcashflows Foreign currency transactions are translated into the functional currency using the exchange rate prevailing at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies have been translated into euros at the foreign exchangeraterulingatthefinancialstatementdate,whilenon-monetaryassetsandliabilitiesvaluedathistorical cost are translated at the rates prevailing at the transaction date. For these purposes, advances to suppliers and customers are deemed non-monetary items and are translated at the exchange rate on the date the payment or collection took place. Subsequent recognition of the receipt of the inventories or the advance on the income from sales is translated at the original exchange rate and not at the transaction date. Non-monetary assets measured at fairvaluehavebeentranslatedintoEurosattheexchangerateatthedatethatthefairvaluewasdetermined. Exchange gains and losses arising on the settlement of foreign currency transactions and the translation into euros ofmonetaryassetsandliabilitiesdenominatedinforeigncurrenciesarerecognisedinprofitorloss. (ii) Translation of foreign operations Foreignoperationswhosefunctionalcurrencyisnotthecurrencyofahyperinflationaryeconomyhavebeen translatedintoeurosasfollows: ■ Assetsandliabilities,includinggoodwillandnetassetadjustmentsderivedfromtheacquisitionoftheoperations, including comparative amounts, are translated at the closing rate at the reporting date. ■ Income and expenses, including comparative amounts, are translated at the exchange rates prevailing at each transaction date. ■ Allresultingexchangedifferencesarerecognisedastranslationdifferencesinothercomprehensiveincome. Translationdifferencesrecognisedinothercomprehensiveincomeareaccountedforinprofitorlossasan adjustmenttothegainorlossonthesaleusingthesamecriteriaasforsubsidiaries. Notes to the consolidated financial statements as at 31 December 2021 (thousands of euros) continued 03 Consolidated financial statements 124 Befesa Annual Report 2021 To Befesa’s shareholders 3.19 Income tax, deferred tax assets and deferred tax liabilities Expense for income tax and other similar taxes applicable to the foreign consolidated entities is recognised in the consolidatedincomestatement,exceptwhenitresultsfromatransactiontheresultofwhichisrecogniseddirectly inequity,inwhichcasetherelatedtaxisalsorecognisedinequity. Current income tax expense is calculated by aggregating the current tax arising from the application of the tax rate tothetaxableprofit(taxloss)fortheyear,afterdeductingallowabletaxcredits,plusthechangeindeferredtax assetsandliabilities,andanytaxlossandtaxcreditcarry-forwardsanddeductions. Deferredtaxassetsandliabilitiesincludetemporarydifferencesmeasuredattheamountexpectedtobepayableor recoverableondifferencesbetweenthecarryingamountsofassetsandliabilitiesandtheirtaxbases,andtaxloss andtaxcreditcarry-forwards.Theseamountsaremeasuredatthetaxratesthatareexpectedtoapplyintheperiod whentheassetisrealisedortheliabilityissettled. Deferredtaxliabilitiesarerecognisedforalltaxabletemporarydifferences,unless,ingeneral,thetemporary differencearisesfromtheinitialrecognitionofgoodwill.Inaddition,deferredtaxassetsrecognisedfortaxlossand taxcreditcarry-forwardsandtemporarydifferencesareonlyrecognisedifitisconsideredprobablethatthe consolidatedcompanieswillhavesufficientfuturetaxableprofitsagainstwhichtheycanbeutilised. Deferredtaxassetsandliabilitiesrecognisedarereassessedateachfinancialstatementdateinordertoascertain whethertheystillexist,andtheappropriateadjustmentsaremadebasedonthefindingsoftheanalysesperformed (seeNotes19and20). TheGrouprecognisestaxlosscarry-forwardsanddeductionsprovidingtheirrealisationorfutureapplicationis probablewithinareasonableperiod.DirectorshavealsotakenintoaccounttheGroup’sabilitytousetaxbenefitsin differentfiscalyearsdependingontheirneeds. InviewoftheGroup’sinternationalnature,thereareseveraltaxratesdependingontheapplicablelegislation,ranging mainlyfrom19%to33%. 3.20 Environmental matters The Group carries out actions mainly aimed at preventing, reducing or repairing any damage its activities may cause to the environment. The Group recognises environmental investments at acquisition or production cost, net of the related accumulated depreciation/amortisation,andclassifiesthembynatureintheappropriatenon-currentassetaccounts. Expensesincurredinordertocomplywiththeapplicableenvironmentallegislationareclassifiedbynatureunder “Other Operating Expenses” in the accompanying consolidated income statement. 3.21 Related-party transactions TheGroupperformsallitstransactionswithrelatedpartiesatarm’slength.Inaddition,transferpricesareadequately supported and, therefore, the Parent’s Directors consider that there are no material risks in this regard that might giverisetosignificantliabilitiesinthefuture. 3.22 Dividend distribution The distribution of dividends to the Parent Company’s shareholders is recognised as a liability in the Group’s financialstatementsintheperiodinwhichthedividendsareapprovedbytheParentCompany’sshareholders. 125Befesa Annual Report 2021 Additional information Statutory  financialstatements Consolidated  financialstatements Management report  ToBefesa’s  shareholders 3. Accounting principles and policies and measurement methods applied continued 3.23 Segment reporting Theoperatingsegmentsarepresentedconsistentlywiththemanagementapproach,inaccordancewiththe information used internally at the highest decision-making level. The maximum authority for decision-making is responsible for assigning resources to operating segments and evaluating the segments’ performance. Segment reportingisdisclosedinNote5. 3.24 Consolidatedstatementofcashflows Thefollowingtermsareusedintheconsolidatedstatementofcashflows,whichwaspreparedusingtheindirect method,withthemeaningsspecified: ■ Cashflows.Inflowsandoutflowsofcashandcashequivalents,whichareshort-term,liquidinvestmentsthatare subjecttoaninsignificantriskofchangesinvalue. ■ Operating activities. The principal revenue-producing activities of the Group companies and other activities that arenotinvestingorfinancingactivities. ■ Investing activities. Acquisition and disposal of long-term assets and other investments not included in cash and cash equivalents. ■ Financingactivities.Activitiesthatresultinchangesinthesizeandcompositionoftheequityandborrowingsthat are not operating activities. 3.25 Earnings per share a) Basic earnings per share Basic earnings per share is calculated by dividing: ■ TheprofitattributabletoownersoftheCompany,excludinganycostsofservicingequityotherthan ordinaryshares. ■ Theweightedaveragenumberofordinarysharesoutstandingduringthefinancialyear,adjustedforbonus elements in ordinary shares issued during the year and excluding treasury shares. b) Diluted earnings per share Dilutedearningspershareadjuststhefiguresusedinthedeterminationofbasicearningspersharetotakeintoaccount: ■ Thepostincometaxeffectofinterestandotherfinancingcostsassociatedwithdilutivepotentialordinaryshares;and ■ Theweightedaveragenumberofadditionalordinarysharesthatwouldhavebeenoutstanding,assumingthe conversion of all dilutive potential ordinary shares. 4. Financial risk management policy TheactivitiescarriedoutbytheGroupthroughitsbusinesssegmentsareexposedtoseveralfinancialrisks:market risk(includingforeigncurrencyrisk,fairvalueinterestrateriskandpricerisk),creditrisk,liquidityriskandcashflow interestraterisk.TheRiskManagementModelusedbytheGroupfocusesontheuncertaintyinfinancialmarkets andattemptstominimisethepotentialadverseeffectsontheGroup’searnings. RiskmanagementiscarriedoutbytheCorporateFinancialDepartmentinaccordancewithinternalmanagementrules. Thisdepartmentidentifies,assessesandhedgesfinancialrisksinclosecooperationwiththedifferentoperatingunits. Theinternalmanagementrulesprovidewrittenpoliciesforglobalriskmanagement,aswellasforspecificareassuch as foreign currency risk, interest rate risk, liquidity risk, the use of derivative and non-derivative instruments, and investmentofcashsurpluses.Therewerenochangesinriskmanagementpoliciesbetween2021and2020. Notes to the consolidated financial statements as at 31 December 2021 (thousands of euros) continued 03 Consolidated financial statements 126 Befesa Annual Report 2021 To Befesa’s shareholders 4.1 Financial risk factors a) Market risk i) Foreign currency risk The Group companies operate internationally and are therefore exposed to foreign currency risks in foreign currency transactions (especially US dollar). To control the foreign currency risk that arises from future commercial transactions and recognised assets and liabilities,Groupcompaniesusederivativecontracts.Foreigncurrencyriskariseswhenfuturecommercialtransactions and recognised assets and liabilities are denominated in a currency that it is not the Group’s functional currency. Forfinancialreportingpurposes,eachsubsidiarydesignateshedgeswiththeCorporateFinancialDepartmentasfair valuehedgesorascashflowhedges,asappropriate.Inaddition,atthecorporatelevel,externalforeigncurrency hedges are designated as foreign currency risk hedges on certain assets, liabilities or future transactions. TheGroup’smainexposurestocurrencyriskat31December2021and2020areshownbelow.Thetablereflects thecarryingamountoftheGroup’sfinancialinstrumentsorclassesoffinancialinstrumentsdenominatedin foreigncurrency: 2021 2020 Currency Trade and other receivables Treasury Short-term loans and borrowings Trade and other payables Trade and other receivables Treasury Short-term loans and borrowings Trade and other payables USD 33,142 20,623 6,645 6,155 4,657 19,312 6,578 1,125 EUR 4,206 65 – 1,129 9,057 89 – 987 WON 116 – – – 260 – – – Other 21 3 – 20 11 2 – 139 Total 37,485 20,691 6,645 7,304 13,985 19,403 6,578 2,251 If the average exchange rate of the euro in 2021 and 2020 had depreciated/appreciated by 50 basis points on all functionalcurrenciesotherthantheeuro,withothervariablesremainingconstant,equityandresultsfortheyear wouldnothavechangedsignificantly. ii) Cashflowandfairvalueinterestraterisk TheGroup’sinterestrateriskmainlyarisesfromvariableinterestfinancialdebt. Tomanageinterestraterisk,incertainsituations,theGroupusesfloating-to-fixedinterestrateswaps,eitherforthe total amount or a portion of the loan and either for the full term or a portion thereof. In2021and2020,hadtheaverageinterestratesonthefinancialdebtdenominatedineurosincreased/decreasedby 50basispoints,withallothervariablesremainingconstant,theprofitaftertaxfortheyearwouldnothavebeen significantlyaffectedasaresultofthehedgingpoliciesinplace. TheexposureoftheGroup’sfinancialdebttovariationsininterestratesissetoutbelow: 2021 2020 Totalexternalfinancialdebt(Note15) 694,730 548,215 Effectofinterestrateswaps(Note17) (316,000) (316,000) Financial debt subject to variable interest 378,730 232,215 127Befesa Annual Report 2021 Additional information Statutory  financialstatements Consolidated  financialstatements Management report  ToBefesa’s  shareholders 4. Financial risk management policy continued iii) Price risk Earnings in the Steel Dust, Salt Slags and Secondary Aluminium segments are exposed to the movement of recycled metalprices(zincandaluminium).TheGroupmanagespriceriskthroughtheacquisitionofcommodityswaps. Befesa’stargetintheSteelDustRecyclingServicessegmentistohedgebetween60%and75%ofthesale transactions,whicharesubjecttotheriskofchangesinsellingprices. TheobjectiveoftheGroupistosecureacertainlevelofrevenuesthatwillensureareasonablereturn,giventherisk ofdeclinethattheserevenuesmayfaceintheeventofafallinzincprices,whichaccountsfor85%ofthepriceofthe product sold (WOX). TheGroupuseszincfuturescontractsattheLondonMetalExchangehedgingbetween60%and75%ofthe estimatedsales,sothelikelihoodofthehedgedtransactionbeingexecutedisalmost100%,giventhat,duetothe nature of the business, the sale of the entire production is assured. Establishing this limit protects the business againstreductionsinproductionduetoone-offevents,suchasbreakdowns,technicalshutdownsorother similarcircumstances. Thesefinancialinstrumentsareinitiallyanalysedtoassesswhethertheycanbetreatedashedginginstrumentsand, ifso,theaccountingrulesspecifictotheseinstrumentsmaybeapplied. Note17containsabreakdownofderivativefinancialinstrumentsarrangedonthesellingpricesofthesemetals. b) Credit risk Creditriskarisesfromcashandcashequivalents,contractualcashflowsofdebtinvestmentscarriedatamortised cost,atFVOCIandatFVPL,favourablederivativefinancialinstrumentsanddepositswithbanksandfinancial institutions,aswellascreditexposurestowholesaleandretailcustomers,includingoutstandingreceivables. Regarding cash and cash equivalents, the Group’s credit policy is to use only entities that have been given high independent credit ratings. Most of the balances are held in credit institutions located in the eurozone, mainly in SpainandGermany,withtheircreditriskratedatleastBBBorabove. Mostreceivablesandworkinprogressrelatetoseveralcustomersinvariousindustriesandcountries.Inmostcases, the contracts provide for progress billings, billings at the beginning of the provision of service or billings upon delivery of the product. ItisstandardpracticefortheGrouptoreservetherighttocancelprojectsintheeventofanymaterialbreachand,in particular, of default on payment. Inaddition,undermostcontractstheGrouphasafirmcommitmentfromseveralbanksfortheacquisition,without recourse, of receivables. Under these agreements, the Group pays a fee to the banks for assuming its credit risk, plus interestandaspreadonthefinancingreceived.Inallcases,theGroupassumesliabilityforthevalidityof thereceivables. Inthisregard,factoredreceivablesarerecognisedoffthefinancialstatement,providedthatalltheconditions establishedinIFRS9aremetfortheirderecognitionfromtheconsolidatedfinancialstatement.Ananalysisis performedtodeterminewhethertherisksandrewardsinherenttoownershipoftherelatedfinancialassetshave beentransferred,comparingtheCompany’sexposuretochangesintheamountsandtimingofnetcashflowsfrom the transferred asset before and after the transfer. Once the exposure of the company factoring the receivables to thesechangeshasbeeneliminatedorsubstantiallyreduced,thenthefinancialassetinquestionisdeemedtohave been transferred. Notes to the consolidated financial statements as at 31 December 2021 (thousands of euros) continued 03 Consolidated financial statements 128 Befesa Annual Report 2021 To Befesa’s shareholders Inaddition,someGroupcompaniesworkwithinsurancecompaniesthatestablishthecreditguaranteed,normally insuringaround95%oftheriskhedgedincaseofinsolvency.TheFinanceDepartmentcontinuallyseekstoadjust thelimitsgrantedtobusinessneeds.TheGroupallowsforanacceptablelevelofcommercialrisk,whichis establishedbasedoneachspecificcustomer,marketandcircumstance(e.g.historyofnon-payment,solvency, among others). Consequently,asregardsthebalanceoftradeandotherreceivables,thepotentialeffectoftradereceivables,for whichtherearefactoringagreements,wouldhavetobeexcluded,aswellastheeffectofothertradereceivablesthat canbefactoredbutwhichhavenotyetbeensenttothefactorattheyear-endandassetsthatarecoveredbycredit insuranceandthatarereflectedinthisbalance.Throughthispolicy,theGroupminimisesitscreditriskexposurein relation to these assets. Tradeandotherreceivables,otherreceivables,currentfinancialassetsandcasharetheGroup’smainfinancial assets and represent its maximum exposure to credit risk, in the event that the counterparty does not meet itsobligations. c) Liquidity risk Theprudentmanagementofliquidityriskentailsthemaintenanceofsufficientcashandmarketablesecurities,the availabilityoffinancingthroughasufficientlevelofcommittedcreditfacilitiesandthecapacitytosettlemarket positions.Giventhedynamicnatureofthecorebusinesses,theGroup’sTreasuryDepartmenthastheobjectiveof maintainingflexiblefinancingthroughtheavailabilityofcommittedcreditlines. ManagementmonitorstheGroup’sliquidityreserveprojectionsandchangesinnetborrowings,calculatedasfollows at31December2021and2020: 2021 2020 Cash and cash equivalents 224,089 154,558 Othercurrentfinancialassets(Note10) 61 64 Undrawncreditfacilitiesandunusedfinancing(Note15) 75,000 75,000 Liquidity reserve 299,150 229,622 Financialdebt(Note15) 671,362 534,231 Financeleasepayables(Note15) 23,368 13,984 Cash and cash equivalents (224,089) (154,558) Othercurrentfinancialassets(Note10) (61) (64) Netdebt(Note2.6) 470,580 393,593 Lessnon-currentborrowings(Note15) (669,327) (531,462) Currentnetfinancialsurplus (198,747) (137,869) OneoftheGroup’sstrategicobjectivesistheoptimisationandmostefficientpossibleuseofitsassetsand resourcesassignedtothebusiness.Therefore,theGrouppaysspecialattentiontothenetoperatingworkingcapital investedinit.Inthisrespect,asinpreviousyears,during2021and2020,theGroupmadesignificanteffortsto controlandreducecollectionperiodswithcustomersandotherdebtorsandtooptimisepaymentterms,thereby unifying policies and conditions across the Group. 129Befesa Annual Report 2021 Additional information Statutory  financialstatements Consolidated  financialstatements Management report  ToBefesa’s  shareholders 4. Financial risk management policy continued Thetablebelowpresentsananalysisofthefinancialliabilitiesthatwillbesettled,whicharegroupedtoreflectthe termremainingfromthefinancialstatementsdatetocontractualmaturity.Thisbreakdowndoesnotinclude long-termprovisions(Note18). Within one year Between 1 and 2 years Between 2 and 5 years More than 5 years At31December2021 Bankborrowingsandleaseliabilities(Note15) 25,403 15,087 644,458 9,782 Otherfinancialliabilities(Derivatives) 75,650 46,296 10,404 – Trade and other payables () 218,748 104 475 – Unaccrued interest payable 14,620 14,687 34,206 764 At31December2020 Bankborrowingsandleaseliabilities(Note15) 16,753 4,857 9,184 517,421 Otherfinancialliabilities(Derivatives) 8,842 3,330 – 1,284 Trade and other payables () 127,981 125 89 – Unaccrued interest payable 14,322 14,193 39,592 6,994 () Long-termpayablesdonotincludecapitalgrantsamountingto€4.0millionand€4.7millionin2021and2020,respectively. d) Capital risk The Group manages its equity investments to ensure that its subsidiaries have a guarantee of continuity in terms of theirassetsandfinancialposition,maximisingshareholderreturnbyoptimisingthestructureofequityandliabilities ontheliabilitiessideofthesubsidiaries’financialstatements. CapitalmanagementistheresponsibilityoftheGroup’sManagementCommittee,whoseapproachfocuseson increasingthevalueofthebusinessinthelong-termforshareholdersandinvestorsaswellasforemployeesand customers.Theobjectiveistoachieveconstant,sustainedresultsthroughorganicand,wherenecessary,inorganic growth.Forthispurpose,abalanceinthebusinessesisrequired,withcontroloffinancialrisks,combinedwiththe necessaryfinancialflexibilitytoachievesuchobjectives. TheGroup’scapitalmanagementpolicyfocusesonachievingafinancialstructurethatoptimisesthecostofcapital whilemaintainingasolidfinancialposition.Thispolicymakesthecreationofvaluefortheshareholderscompatible, withaccesstofinancialmarketsatacompetitivecostinordertocoverbothdebtrefinancingrequirementsandthe investmentplanfinancingneedsnotcoveredbythefundsgeneratedbythebusiness. Detailsofthedebt/equityratios(excludingbalanceswithGroupcompanies)at31December2021and2020are asfollows: 2021 2020 Totalbankborrowings(Note15) 694,730 548,215 Less: Cash and cash equivalents (224,089) (154,558) Othercurrentfinancialassets(Note10) (61) (64) Net debt 470,580 393,593 Total equity 631,547 327,581 Total capital invested 1,102,127 721,174 Borrowing ratio 42.7% 54.6% Foradetaileddefinitionofnetdebt,pleaserefertoNote2.6. Notes to the consolidated financial statements as at 31 December 2021 (thousands of euros) continued 03 Consolidated financial statements 130 Befesa Annual Report 2021 To Befesa’s shareholders 4.2 Fair value estimation IFRS13establishesasfairvaluethepricethatwouldbereceivedtosellanassetorpaidtotransferaliabilityinan orderlytransactionbetweenmarketparticipantsatthemeasurementdate,whetheritisobservableorhasbeen estimatedusingavaluationtechnique.Forthispurpose,consistentdatawithfeaturesthatmarketparticipantswould consider in the transaction are selected. IFRS13maintainstheprinciplesoftheotherstandardswhilesettingthefullframeworkforfairvaluemeasurement whenitismandatoryunderotherIFRSsandestablishestheadditionalinformationtobedisclosedaboutfair valuemeasurements. TherequirementsofIFRS13aremetbytheGroupinthefairvaluemeasurementofassetsandliabilitieswhenfair value is required by other IFRSs. Forfinancialassetsandliabilitiesnotvaluedatfairvalue,theGroupbreaksdownthepossibleimpactsbetweenthe fairvalueandtheamortisedcostiftheimpactissignificant(Note10). BasedonthecontentofIFRS13andinaccordancewithIFRS7onfinancialinstrumentsmeasuredatfairvalue,the Groupreportsonestimatingthefairvaluehierarchylevelsasfollows: ■ Quotedprices(unadjusted)inactivemarketsforidenticalassetsorliabilities(Level1). ■ Inputs other than quoted prices included in Level 1 that are observable either directly (i.e. reference prices) or indirectly (i.e. derived from prices) (Level 2). ■ Inputs for the asset or liability that are not based on observable market data (unobservable market data) (Level 3). ThetablebelowshowstheGroup’sassetsandliabilitiesthatweremeasuredatfairvalueat31December2021 and2020: 2021 Level 2 Level 3 2021 Assets – Equity Instruments (Note 10) – 8,829 8,829 –Derivatives(Note17) 1,200 – 1,200 Total assets at fair value 1,200 8,829 10,029 Liabilities –Derivatives(Note17) 132,350 – 132,350 Total liabilities at fair value 132,350 – 132,350 2020 Level 2 Level 3 2020 Assets –Derivatives(Note17) 249 – 249 Total assets at fair value 249 – 249 Liabilities –Derivatives(Note17) 13,456 – 13,456 Total liabilities at fair value 13,456 – 13,456 131Befesa Annual Report 2021 Additional information Statutory  financialstatements Consolidated  financialstatements Management report  ToBefesa’s  shareholders 4. Financial risk management policy continued a) Financial instruments Level 2 Thefairvalueoffinancialinstrumentsnottradedinanactivemarketisdeterminedusingvaluationtechniques.The Groupemploysavarietyofmethodssuchasestimateddiscountedcashflowsandusesassumptionsbasedonthe marketconditionsateachfinancialstatementdate.Ifallsignificantdatarequiredtocalculatethefairvalueofan instrument are observable, the instrument is included in Level 2. Specifictechniquesformeasuringfinancialinstrumentsinclude: ■ Thefairvalueofinterestrateswapsiscalculatedasthepresentvalueoffutureestimatedcashflows. ■ Thefairvalueofcurrencyforwardsisdeterminedusingforwardexchangeratesquotedinthemarketatthe financialstatementdate. ■ It is assumed that the book value of trade payables and receivables approximates their fair value. ■ Thefairvalueoffinancialliabilitiesforfinancialreportingpurposesisestimatedbydiscountingfuturecontractual cashflowsatthecurrentmarketinterestratethatisavailabletotheGroupforsimilarfinancialinstruments. TheinstrumentsincludedinLevel2relatetoderivativefinancialinstruments(Note17). b) Financial instruments Level 3 TheGrouprecordsunderthisleveloffinancialinstrumentstheinvestmentacquiredin2021inthecompany AmericanZincProductsLLC(AZP)(Note10)sinceitsfairvalueincludesunobservablevariables. 5. Segment reporting The Board of Directors is ultimately responsible for making the Group’s operational decisions, as the Board functions astheChiefOperatingDecisionMaker(CODM).TheBoardofDirectorsreviewstheGroup’sinternalfinancial information in order to assess its performance and allocate resources to the segments. TheBoardofDirectorsanalysesthebusinessbasedonthesegmentsindicatedbelow: ■ Steel Dust Recycling Services (“Steel Dust”) ■ Aluminium Salt Slags Recycling Services – Salt Slags Recycling (“Salt Slags”) – Secondary Aluminium production (“Secondary Aluminium”) ThesesegmentscorrespondtotheGroup’sprincipalactivities(productsandservices),thesalesofwhich(feefor theservicesand/orsaleoftherecycledwaste)determinetheGroup’srevenue. The Board of Directors assesses the performance of the operating segments, based mainly on operating income before interest and taxes (EBIT), depreciation/amortisation and provisions (EBITDA). ThefinancialinformationreceivedbytheBoardofDirectorsincludefinanceincomeandcoststaxaspects,cashflow andnetdebtonlyasaconsolidatedbasisbecausethisisthewaytheCompanymanagesthem. ForadetaileddefinitionofEBITandEBITDA,pleaserefertoNote2.6. The accounting policies and measurement bases applied to the information furnished to the Board of Directors are consistentwiththoseappliedintheconsolidatedfinancialstatements. Notes to the consolidated financial statements as at 31 December 2021 (thousands of euros) continued 03 Consolidated financial statements 132 Befesa Annual Report 2021 To Befesa’s shareholders a) Segment reporting SetoutbelowisthedistributionbysegmentofEBITandAdjustedEBITfortheyearended31December2021andfor theyearended31December2020(thousandsofeuros). 2021 Steel Dust Salt Slags Secondary Aluminium Corporate, other minor and eliminations Total Revenue 455,836 77,349 329,860 (41,432) 821,613 Income/expenses from operations (except revenue, depreciation and amortisation/ depreciation charge and provisions) (321,243) (50,824) (301,561) 41,627 (632,001) Amortisation/depreciation, impairment and provisions (37,594) (15,183) (8,967) (411) (62,155) EBIT(Operatingprofit/(loss)) 96,999 11,342 19,332 (216) 127,457 One-offimpairments/provisions(Notes9 and 21) 7,830 6,018 – – 13,848 EBITDAadjustments(Notes6,9and21) 13,736 (6,018) – 240 7,958 AdjustedEBIT(Operatingprofit/(loss)) 118,565 11,342 19,332 24 149,263 2020 Steel Dust Salt Slags Secondary Aluminium Corporate, other minor and eliminations Total Revenue 345,762 66,977 223,900 (32,309) 604,330 Income/expenses from operations (except revenue, depreciation and amortisation/ depreciation charge and provisions) (248,074) (53,702) (211,817) 32,751 (480,842) Amortisation/depreciation, impairment and provisions (24,216) (22,711) (8,285) (355) (55,567) EBIT(Operatingprofit/(loss)) 73,472 (9,436) 3,798 87 67,921 One-offimpairments/provisions(Note9) 4,739 13,368 – – 18,107 EBITDAadjustments(Note9) – 3,460 – – 3,460 AdjustedEBIT(Operatingprofit/(loss)) 78,211 7,392 3,798 87 89,488 133Befesa Annual Report 2021 Additional information Statutory  financialstatements Consolidated  financialstatements Management report  ToBefesa’s  shareholders 5. Segment reporting continued ThereconciliationofAdjustedEBITtoresultsattributabletotheParentCompanyisasfollows: 2021 2020 Adjusted EBIT 149,263 89,488 –One-offimpairments/provisions(Notes9and21) (13,848) (18,107) –EBITDAadjustments(Notes6,9and21) ( 7,958) (3,460) EBIT(Operatingprofit/(loss)) 127,457 67,921 Finance income/(cost) (15,605) (9,287) Corporate income tax (9,500) (11,749) Profit/(loss)attributable 102,352 46,885 Non-controlling interests (2,607) 723 Profit/(loss)attributedtotheParentCompany 99,745 47,608 SetoutbelowisthedistributionbysegmentofEBITDAandAdjustedEBITDAfortheyearsended31December2021 and 2020 (thousands of euros): 2021 Steel Dust Salt Slags Secondary Aluminium Corporate, other minor and eliminations Total Revenue 455,836 77,349 329,860 (41,432) 821,613 Income/expenses from operations (except revenue, depreciation and amortisation/ depreciation charge and provisions) (321,243) (50,824) (301,561) 41,627 (632,001) Amortisation/depreciation, impairment and provisions (a) (37,594) (15,183) (8,967) (411) (62,155) EBIT(Operatingprofit/(loss))(b) 96,999 11,342 19,332 (216) 127,457 EBITDA(Operatingprofit/(loss) before amortisation/depreciation and provisions) (b-a) 134,593 26,525 28,299 195 189,612 Nonrecurrentcosts/incomes(Notes6, 9 and 21) 13,736 (6,018) – 240 7,958 Adjusted EBITDA 148,329 20,507 28,299 435 197,570 Notes to the consolidated financial statements as at 31 December 2021 (thousands of euros) continued 03 Consolidated financial statements 134 Befesa Annual Report 2021 To Befesa’s shareholders 2020 Steel Dust Salt Slags Secondary Aluminium Corporate, other minor and eliminations Total Revenue 345,762 66,977 223,900 (32,309) 604,330 Income/expenses from operations (except revenue, depreciation and amortisation/ depreciation charge and provisions) (248,074) (53,702) (211,817) 32,751 (480,842) Amortisation/depreciation, impairment and provisions (a) (24,216) (22,711) (8,285) (355) (55,567) EBIT(Operatingprofit/(loss))(b) 73,472 (9,436) 3,798 87 67,921 EBITDA(Operatingprofit/(loss) before amortisation/depreciation and provisions) (b-a) 97,688 13,275 12,083 442 123,488 Nonrecurrentcosts/incomes(Note9) – 3,460 – – 3,460 Adjusted EBITDA 97,688 16,735 12,083 442 126,948 ThereconciliationofAdjustedEBITDAtoresultsattributabletotheParentCompanyisasfollows: 2021 2020 Adjusted EBITDA 197,570 126,948 – Non-recurrent costs/incomes (7,958) (3,460) Amortisation/depreciation, impairment and provisions (62,155) (55,567) Operatingprofit/(loss) 127,457 67,921 Finance income/(cost) (15,605) (9,287) Corporate income tax (9,500) (11,749) Profit/(loss) 102,352 46,885 Non-controlling interests (2,607) 723 Profit/(loss)attributedtotheParentCompany 99,745 47,608 135Befesa Annual Report 2021 Additional information Statutory  financialstatements Consolidated  financialstatements Management report  ToBefesa’s  shareholders 5. Segment reporting continued Othersegmentitemsincludedintheconsolidatedincomestatementareasfollows: 2021 2020 Steel Dust Salt Slags Secondary Aluminium Corporate, other minor and eliminations Total Steel Dust Salt Slags Secondary Aluminium Corporate, other minor and eliminations Total Depreciation/ amortisation charge: – Property, plant and equipment (Notes9and22) (26,061) (12,830) (6,641) (106) (45,638) (17,370) (7,070) (6,904) (85) (31,429) – Intangible assets (Notes8and22) (360) (737) (622) (72) (1,791) (339) (603) (625) (71) (1,638) -Right-of-use assets (Notes11and22) (3,399) (1,362) (828) (233) (5,822) (1,692) (1,670) (812) (200) (4,374) – Reversal/ (recognition) of impairment losses andother(Note22) (7,774) (254) (876) – (8,904) (4,815) (13,368) 56 1 (18,126) Total (37,594) (15,183) (8,967) (411) (62,155) (24,216) (22,711) (8,285) (355) (55,567) Detailsofsegmentassetsandliabilitiesareasfollows: 2021 2020 Steel Dust Salt Slags Secondary Aluminium Corporate, other minor and eliminations Tota l Steel Dust Salt Slags Secondary Aluminium Corporate, other minor and eliminations Tota l Assets Intangible assets 612,342 51,858 13,184 185 677,569 357,661 51,925 13,180 256 423,022 Property, plant and equipment 397,0 04 49,802 61,654 615 509,075 177,372 50,424 66,842 670 295,308 Right-of-use assets 22,787 5,972 1,080 496 30,335 13,088 5,861 707 745 20,401 Non-current financialassetsand deferred tax assets 83,808 1,014 58,214 (1,575) 141,461 46,466 41 60,340 (22,814) 84,033 Current assets 236,296 20,388 91,646 89,439 437,769 164,771 14,133 49,548 49,183 277,635 Total assets 1,352,237 129,034 225,778 89,160 1,796,209 759,358 122,384 190,617 28,040 1,100,399 Equity and liabilities Net assets 196,114 28,508 50,251 356,674 631,547 218,250 34,074 29,828 45,429 327,581 Non-current liabilities 910,276 84,887 87,764 (238,066) 844,861 435,288 75,968 101,258 6,728 619,242 Current liabilities 245,847 15,639 87,763 (29,448) 319,801 105,820 12,342 59,531 (24,117) 153,576 Total equity and liabilities 1,352,237 129,034 225,778 89,160 1,796,209 759,358 122,384 190,617 28,040 1,100,399 Notes to the consolidated financial statements as at 31 December 2021 (thousands of euros) continued 03 Consolidated financial statements 136 Befesa Annual Report 2021 To Befesa’s shareholders Investmentsinthecorrespondingyearwereasfollows(excludingtheeffectoftranslationdifferences): 2021 2020 Steel Dust Salt Slags Secondary Aluminium Corporate and eliminations Total Steel Dust Salt Slags Secondary Aluminium Corporate and eliminations Tota l Additions to non-current assets (Notes8and9) 68,176 12,626 2,260 52 83,114 38,252 5,620 5,411 132 49,415 Disposals of non-current assets (Notes8and9) (3,638) (3,706) (11,276) (1) (18,621) (5,366) (41) (366) (8,333) (14,106) Net investments in the year (Notes8and9) 64,538 8,920 (9,016) 51 64,493 32,886 5,579 5,045 (8,201) 35,309 Investmentsinnon-currentassetsincludeadditionstoproperty,plantandequipment(seeNote9)andintangible assets(seeNote8). Inter-segment transfers and transactions (if any) are arranged under the same usual commercial terms and conditions as those that should also be available to unrelated third parties. Details of sales by geographical segment fortheyearsended31December2021and2020areasfollows: Geographical area 2021 % 2020 % Spain 190,605 23% 146,917 24% Germany 112,293 14% 90,737 15% Belgium 53,261 7% 40,104 7% Finland 46,883 6% 35,597 6% Netherlands 44,845 6% 43,266 7% Italy 33,424 4% 18,208 3% Norway 26,628 3% 27,065 4% France 20,706 3% 19,483 3% Sweden 14,210 2% 18,573 3% Portugal 13,133 2% 9,513 2% Rest of Europe 27,273 3% 38,320 6% Japan 77,533 9% 39,743 7% USA 56,359 7% 5 0% SouthKorea 28,335 3% 22,660 4% Australia 20,481 2% 13,652 2% China 18,283 2% 10,297 2% Brazil 17,740 2% 7,289 1% Restoftheworld 19,621 2% 22,901 4% 821,613 100% 604,330 100% 137Befesa Annual Report 2021 Additional information Statutory  financialstatements Consolidated  financialstatements Management report  ToBefesa’s  shareholders 5. Segment reporting continued Thedistributionofproperty,plantandequipment,intangibleassets(excludinggoodwillandlicences)and right-of-useassetsisasfollows(Notes8,9and11): 2021 2020 Germany 92,804 94,062 Spain 85,065 84,904 France 29,642 31,525 UnitedKingdom 83 109 Rest of Europe 13,255 13,154 United States of America 189,181 – China 86,125 33,990 Turkey 9,399 17,279 SouthKorea 40,708 47,144 546,262 322,167 b) Information on customers At31December2021twocustomerseachrepresentedover10%oftheGroup’stotalrevenues,bothofthemfrom theSteelDustsegment.Thefirst-largestcustomerrepresentsapproximately16%oftheGroup’stotalrevenues (15%in2020)andthesecond-largestcustomerrepresentsapproximately13%oftheGroup’stotalrevenues(12% in2020). 6. Business combination On17August2021,theGroup,throughBefesaHoldingUS,Inc.,acquireda100%interestinAmericanZincRecycling Corp.(AZR,currentlyBefesaZincUS,Inc.).BefesaZincUS,Inc.hasitsregisteredofficeinPittsburgh,Pennsylvania and its principal activity is providing electric arc furnace steel dust (EAFD) recycling services. The main reason for the business combination is to enter into the US market and become a global leader in steel dust recycling. Onthesamedate,anagreementwasreachedtorepaythelong-termfinancingthementionedcompanyhadforan amount of €266,287 thousand. Theacquiredbusinesshasgeneratedrevenueandaconsolidatedprofit/(loss)of€56,357thousandand€(2,770) thousand,respectively,fortheGroupbetweentheacquisitiondateandtheendofthereportingperiod.BefesaZinc US,Inc.sellsthemajorityofthetonnesitproducestoAZP(Note10). Iftheacquisitionwouldhavetakenplaceat1January2021,theGroup’srevenueandconsolidatedadjustedEBITDA fortheyearended31December2021wouldhaveamountedto€927,856thousandand€217,797 thousand,respectively. Detailsoftheconsiderationgiven,thefairvalueofthenetassetsacquiredandgoodwillareasfollows: Thousands of Euros Consideration given Cash paid 130,563 Total consideration given 130,563 Fair value of net assets acquired (98,111) Goodwill(excessofnetassetsacquiredovercostofacquisition) 228,674 Notes to the consolidated financial statements as at 31 December 2021 (thousands of euros) continued 03 Consolidated financial statements 138 Befesa Annual Report 2021 To Befesa’s shareholders Theacquisitionandthecancellationoflongdebttermdebthavebeenfinancedthroughacapitalincreaseanda pre-approvedTermLoanB(TLB)add-onof€100million.Forthispurpose,on16June2021,theBoardofDirectorsof BefesaS.A.resolvedonacapitalincreasebyissuingupto5,933,293newordinaryshareswithparvalueof€2.78 (€16,472 thousand) and share premium of €53.22 (€315,792 thousand). The Company has recognised €3,648 thousand of issuance costs as a reduction in equity instruments issued. Themostsignificantfactorresultingfromrecognitionofgoodwillisthefutureprofitabilityoftheacquiredbusiness thatisexpectedtobeobtainedfollowingtheacquisitionbytheGroupandoncetheGroup’smanagementmodelhas been adapted. Thecostsassociatedwiththisoperationamountedto€13,976thousandandcorrespondmainlywithadvisory,legal, valuation and other professional fees. Theamountsrecognisedbysignificantclassatthedateofacquisitionoftheassets,liabilitiesandcontingent liabilitiesareasfollows: Thousands of Euros Property,plantandequipment(Note9) 172,843 Intangibleassets(Note8) 15,945 Right-of-useassets(Note11) 8,097 Otherinvestments(Note10) 8,498 Otherfinancialassets 5,616 Cash and cash equivalents 19,312 Other current assets 10,541 Total assets 240,852 Provisions(Note18) 9,524 Long-term debt 274,010 Leaseleabilities(Note11) 8,094 Deferredincometaxliabilities(Note19) 16,263 Current liabilities 31,072 Total liabilities and contingent liabilities 338,963 Total net assets (98,111) Total net assets acquired (98,111) Cash paid (130,563) Cash and cash equivalents of the acquired company 19,312 Cashoutflowfortheacquisition (111,251) 139Befesa Annual Report 2021 Additional information Statutory  financialstatements Consolidated  financialstatements Management report  ToBefesa’s  shareholders 6. Business combination continued The criteria for calculating the main assets and liabilities existing at the date of taking over the operations of AZR are thefollowing: – Licences:ThevaluationmethodappliedtotheidentifiedIntangibleAssethasbeentheMultiExcessEarnings Method(MEEM)(“IncomeApproach”).Accordingtothisapproach,thevalueoftheintangibleassetwillbe calculatedasthepresentvalueofcashflowsstreamsgeneratedbytheasset.Astheassetgenerallygenerates cashflowstreamsinconjunctionwithothertangibleandintangibleassets,suchasproperty,plantand equipment,workingcapital,andworkforce,itisestimatedthattheContributoryAssetsCharges(CACs)mustbe subtractedfromthecashflowsgeneratedbytheintangibleassetbeingvalued. – Property, plant and equipment: The fair value of tangible assets is based on valuation reports prepared by an externalindependentexpertthatappliedthecostapproachtogetherwiththeincomeapproachby consideringwhethertheprojectedfuturecashflowsofthebusinesswouldsupporttheestimatedfairvalueof thesubjectassets. – Deferred tax assets: measured based on the accounting policies identify in note 3.19. – Provisions:measuredbasedonfairvaluewhenitispossiblethatanoutflowofresourceswillberequiredtosettle the obligation. – Long-termdebt:thevalueofthedebtrecognisedonthedateofthebusinesscombinationwassimilartoitsfair value and, therefore, its repayment in 2021 has had no impact on the consolidated annual accounts. 7. Goodwill Detailsofgoodwillontheconsolidatedstatementoffinancialpositionasat31December2021and2020areas follows: CGU Balance at 31/12/20 Business Combination (Note 6) Translation differences Balance at 31/12/21 Befesa Zinc US, Inc. – 228,674 8,913 237,587 Steel Dust 290,778 – – 290,778 Salt Slags 35,829 – – 35,829 Secondary Aluminium 8,957 – – 8,957 335,564 228,674 8,913 573,151 Theincreaseingoodwillisaresultofthebusinesscombinationdescribedinnote6. Impairment analysis TheGrouphasimplementedaprocedurewherebyateachyear-endanyimpairmentofgoodwillandlicenceswith indefiniteusefullife(Note8)isanalysed. Therecoverableamountisthehigheroffairvaluelesscoststosellandvalueinuse,whichistakentobethepresent valueofestimatedfuturecashflows. ThemeasurementmethodsindicatedinNote2.4ledtodiscountratesusedtoperformtheimpairmenttestina rangeforeachCGUasfollow:SteelDust6.20%-15.32%(2020:6.73%-15.32%),SaltSlags6.73%-7.30%(2020: 6.73%-7.30%)andSecondaryAluminium6.73%-7.25%(2020:6.73%-7.25%).Thediscountratesusedarenetof taxesandreflecttherisksspecifictothesignificantCGUsegments.TheDirectorsconsiderthatachangeinthe discountrateused(approximately50basispoints)wouldnothaveasignificantimpactontheseconsolidated financialstatements. Notes to the consolidated financial statements as at 31 December 2021 (thousands of euros) continued 03 Consolidated financial statements 140 Befesa Annual Report 2021 To Befesa’s shareholders ThecashflowbudgetisdeterminedbyGroup’smanagementintheirstrategicplans,consideringasimilaractivity structure as the present one and based on previous years’ experience. Attheendof2021and2020,estimatesweremadeoftherecoverableamountsoftheCGUstowhichgoodwilland/or licenceswithindefiniteusefullifehadbeenallocatedinaccordancewithNote3.5and3.6andthemethods described above. No impairment has been recognised in 2021 and 2020. TheGroup’smanagementcarriedoutasensitivityanalysisoftherecoverableamountofgoodwillandlicences (Note8)intheeventofvariationsof±5%inkeyassumptions,andnosignsofimpairmentwereidentified. 8. Other intangible assets Movementsin“Otherintangibleassets”intheconsolidatedstatementoffinancialpositionasat31December2021 and2020areasfollows: Development expenditure Licences Computer software Administrative concessions and others Total Cost: Balance at 31/12/20 12,314 81,000 8,403 1,821 103,538 Additions 1,291 – 174 691 2,156 Businesscombination(Note6) – 15,945 – – 15,945 Disposals – – (47) – (47) Transfers – – 44 (18) 26 Translationdifferences – 621 11 – 632 Balance at 31/12/21 13,605 97,566 8,585 2,494 122,250 Accumulated amortisation Balance at 31/12/20 (7,523) – (6,736) (1,821) (16,080) Additions(Note22.6) (1,345) – (445) (1) (1,791) Transfers – – 48 9 57 Translationdifferences – – (8) (10) (18) Balance at 31/12/21 (8,868) – (7,141) (1,823) (17, 832) Other intangible assets, net at 31/12/20 4,791 81,000 1,667 – 87,458 Other intangible assets, net at 31/12/21 4,737 97,566 1,444 671 104,418 141Befesa Annual Report 2021 Additional information Statutory  financialstatements Consolidated  financialstatements Management report  ToBefesa’s  shareholders 8. Other intangible assets continued Development expenditure Licences Computer software Administrative concessions and others Total Cost: Balance at 31/12/19 10,480 81,000 16,203 1,966 109,649 Additions 1,805 – 201 – 2,006 Disposals – – (8,308) – (8,308) Transfers 29 – 281 (145) 165 Translationdifferences – – 26 – 26 Balance at 31/12/20 12,314 81,000 8,403 1,821 103,538 Accumulated amortisation Balance at 31/12/19 (6,278) – (14,580) (1,879) (22,737) Additions(Note22.6) (1,216) – (420) (2) (1,638) Disposals – – 8,308 – 8,308 Transfers (29) – (31) 60 – Translationdifferences – – (13) – (13) Balance at 31/12/20 (7.523) – (6,736) (1,821) (16,080) Other intangible assets, net at 31/12/19 4,202 81,000 1,623 87 86,912 Other intangible assets, net at 31/12/20 4,791 81,000 1,667 – 87,458 Licencesareintangibleassetswithanindefiniteusefullife.Therecoverabilityoftheselicenceshasbeenevaluated bytheGroup’smanagementbasedonimpairmenttestsdisclosureinNote7. 2021 Themostsignificantadditionsfortheyearrelatetodevelopmentexpensescapitalisedinthe“SecondaryAluminium” segment amounting to €1,291 thousand and to ERP implementation in the “Steel Dust” segment, €174 thousand. The additions of €691 thousand are related to the recognition of emission rights. 2020 Themostsignificantadditionsfortheyearrelatetodevelopmentexpensescapitalisedinthe“SecondaryAluminium” segment amounting to €1,805 thousand and to ERP implementation in the “Steel Dust” segment, €191 thousand. ThemostsignificantdisposalfortheyearrelatestothedisposaloftheSAP(priorERP)fullyamortisedamountingto €7,101 thousand in the subsidiary Befesa Medioambiente, S.L.U. Investment commitments At31December2021and2020,theGrouphadnosignificantinvestmentcommitments. Notes to the consolidated financial statements as at 31 December 2021 (thousands of euros) continued 03 Consolidated financial statements 142 Befesa Annual Report 2021 To Befesa’s shareholders 9. Property, plant and equipment Movementsinthisconsolidatedstatementoffinancialpositionasat31December2021and2020areasfollows: 2021 Land Buildings Plant and machinery Other property, plant and equipment Fixed assets in progress Total Cost: Balance at 31/12/20 38,788 136,012 489,536 31,968 34,987 731,291 Additions 941 505 3,654 1,315 75,484 81,899 Businesscombination(Note6) 4,454 9,926 132,331 653 25,479 172,843 Disposals (18) (287) (17,555) (711) (3) (18,574) Transfers 11 16,453 17,151 36,639 (70,280) (26) Translationdifferences 103 (142) 1,749 (55) 6,872 8,527 Balance at 31/12/21 44,279 162,467 626,866 69,809 72,539 975,960 Accumulated depreciation and provisions: Balance at 31/12/20 – (68,572) (318,842) (20,391) – (407,805) Additions(Note22.6) – (5,090) (33,741) (6,807) – (45,638) Disposals – 264 17,484 707 – 18,455 Translationdifferences – (220) (2,613) (12) – (2,845) Balance at 31/12/21 – (73,618) (337,712) (26,503) – (437,833) Impairment losses at 31/12/20 – – (28,151) (27) – (28,178) Additions(Note22.6) (874) – – – – (874) Impairment losses at 31/12/21 (874) – (28,151) (27) – (29,052) Carrying amount at 31/12/20 38,788 67,440 142,543 11,550 34,987 295,308 Carrying amount at 31/12/21 43,405 88,849 261,003 43,279 72,539 509,075 143Befesa Annual Report 2021 Additional information Statutory  financialstatements Consolidated  financialstatements Management report  ToBefesa’s  shareholders 9. Property, plant and equipment continued 2020 Land Buildings Plant and machinery Other property, plant and equipment Fixed assets in progress Total Cost: Balance at 31/12/19 39,006 123,705 464,109 30,272 45,235 702,327 Additions – 702 8,875 1,533 36,299 47,409 Disposals – (91) (1,832) (234) (3,641) (5,798) Transfers 9 11,988 26,869 440 (41,769) (2,463) Translationdifferences(net) (227) (292) (8,485) (43) (1,137) (10,184) Balance at 31/12/20 38,788 136,012 489,536 31,968 34,987 731,291 Accumulated depreciation and provisions: Balance at 31/12/19 – (64,308) (296,775) (19,061) – (38 0,144) Additions(Note22.6) – (4,334) (25,505) (1,590) – (31,429) Disposals – 83 1,790 245 – 2,118 Translationdifferences(net) – (13) 1,648 15 – 1,650 Balance at 31/12/20 – (68,572) (318,842) (20,391) – (407,805) Impairment losses at 31/12/19 – – (12,616) – (975) (13,591) Additions(Note22.6) – – (15,535) (27) (2,545) (18,107) Disposals – – – – 3,520 3,520 Impairment losses at 31/12/20 – – (28,151) (27) – (28 ,178) Carrying amount at 31/12/19 39,006 59,397 154,718 11,211 44,260 308,592 Carrying amount at 31/12/20 38,788 67,440 142,543 11,550 34,987 295,308 2021 ThemainadditionsfortheyeararerelatedtotheconstructionofthetwonewplantsinChina(€45.0million),the investmentsmadebythenewcompanyBefesaHoldingUS,Inc.(€9.0million),andtheannualrecurrent environmental and maintenance investments made at each plant. Asat31December2021,themain“fixedassetsinprogress”arerelatedtotheconstructionofoneoftheChina plants (Henan) and the construction of one kiln in Calumet by Befesa Holdings US, Inc. 2020 ThemainadditionsfortheyeararerelatedtotheconstructionofthetwonewplantsinChina(€20.0million)andthe annual recurrent environmental and maintenance investments made at each plant. Impairment losses Asat31December2021,theCompanyhasimpairedalandby€0.8million. Asat31December2020,theCompany,duetothelowercustomerdemandinlightofBrexit,theautomotive slowdown,theimpactofCOVID-19,aswellasotherindustrytrends,decidedtoclosetheplantlocatedintheUK (BefesaSaltSlags,Ltd.).TheCompanyregisteredanimpairmentof€13.3millionandpresentedanadjustmenttothe EBITDAof€3.5millionas“non-recurrentcharges”relatedtothisclosure(costsrelatedtotheclosureoftheplant). Notes to the consolidated financial statements as at 31 December 2021 (thousands of euros) continued 03 Consolidated financial statements 144 Befesa Annual Report 2021 To Befesa’s shareholders Inaddition,theCompany,asaresultofthe“impairmentreviewprocess”,registeredanimpairmentlossof€4.7million intheplantlocatedinSweden(BefesaScandustAB)afterestimatingthefuturecashflowsgeneratedbythe subsidiarywouldbeinsufficienttorecoverthecarryingamountoftheplant. Insurance TheGrouptakesoutinsurancepoliciestocoverpossibleriskstowhichitsproperty,plantandequipmentare subject.Thecoverageisconsideredtobesufficient. Capitalisation of borrowing costs Therearenosignificantborrowingcostscapitalisedin2021and2020. Mortgaged property, plant and equipment At31December2021and2020,therearenosignificantfixedassetspledgedtosecureloans. Investment commitments At31December2021,theGrouphadinvestmentcommitmentsamountingto€33.7million(2020:€61.5million) mainlyduetotheexpansionprojectinChina. 10. Financial assets by category and class Theclassificationoffinancialassetsbycategoryandclassisasfollows: 2021 2020 Current Non-current Current Non-current Financialassetsmeasuredatfairvaluethroughprofitorloss Equity instruments (Note 6) – 8,829 – – Financial assets at amortised cost Loans Variable rate – 4,724 – 3,410 Impairment – – – (1,537) Trade and other receivables (Note 13) 145,378 – 83,663 – Security deposits 825 1,200 64 424 Financial assets measured at fair value Hedgingderivatives(Note17) – 1,200 – 249 Totalfinancialassets 146,203 15,953 83,727 2,546 Thefairvalueoffinancialassetsdoesnotdiffersignificantlyfromtheircarryingamount. Aspartoftheagreementsexplaininnote6,Befesahasalsoacquiredaminoritystakeof6.9%oftheequityinterests inAmericanZincProductsLLC(AZP),AZR’szincrefiningsubsidiary,for€8.5million(USD10million). 145Befesa Annual Report 2021 Additional information Statutory  financialstatements Consolidated  financialstatements Management report  ToBefesa’s  shareholders 10. Financial assets by category and class continued This agreement includes put options held by the shareholders of AZP and call options held by the Befesa Group. The put and call options depend on the certain achievement of the capacity utilisation, and operating costs of the plant. Themaincharacteristicsoftheseputandcalloptions,whichcanbeexerciseduntil31December2023,areas follows: ■ Firstputoption:Theshareholderswillhavetheoptiontoselltheirsharesuptoatotalof27.6%foratotalpriceof USD40million ■ First call option: if any seller has not exercised its put option indicated in the previous point, the Group may exercise its call option at the same price. ■ Secondputoption:Theshareholderswillhavetheoptiontoselltheirsharesuptoatotalof65.5%foratotalprice ofUSD95million. ■ Second call option: if any seller has not exercised its put option indicated in the previous point, the purchaser may exercise its call option at the same price. Each seller may choose to receive the amount of the sale in cash or in Befesa shares, dividing the total price by the value of the Befesa share stipulated at USD 71.11. Thesefinancialinstrumentshavenotbeenvaluedat31December2021sincethepriceatwhichtheyareexercised isthesameasthatpaidbytheGroupforthestakeitcurrentlyholds,andsincetherehavebeennosignificant changes in the business, the directors continue to consider this to be market value. Furthermore, the share price of theParentCompanyisinlinewithUSD71.11. Notes to the consolidated financial statements as at 31 December 2021 (thousands of euros) continued 03 Consolidated financial statements 146 Befesa Annual Report 2021 To Befesa’s shareholders 11. Right-of-use assets and lease liabilities Detailsofandmovementinclassesofright-of-useassetsduring2021and2020areasfollows: Land Buildings Plant and machinery Other property, plant and equipment Total Cost: Balance at 01/01/20 11,729 3,225 5,001 1,451 21,406 Additions 495 764 2,055 383 3,697 Disposals – (123) – (32) (155) Transfers 3,754 – – – 3,754 Balance at 31/12/20 15,978 3,866 7,056 1,802 28,702 Additions 474 1,234 3,038 1,964 6,710 Businesscombination(Note6) 356 1,031 638 6,072 8,097 Disposals (338) (73) (1,420) (892) (2,723) Translationdifferences 980 186 27 453 1,646 Balance at 31/12/21 17,450 6,244 9,339 9,399 42,432 Accumulated amortisation Balance at 01/01/20 (717) (807) (1,991) (482) (3,997) Additions(Note22.6) (673) (852) (2,338) (510) (4,373) Disposals – 55 – 14 69 Balance at 31/12/20 (1,390) (1,604) (4,329) (978) (8,301) Additions(Note22.6) (783) (994) 2,304 (1,741) (5,822) Disposals 338 20 1,423 892 2,673 Translationdifferences (314) (36) 12 (309) (647) Balance at 31/12/21 (2,149) (2,614) (5,198) (2,136) (12,097) Right-of-use assets net at 31/12/2020 14,588 2,262 2,727 824 20,401 Right-of-use assets net at 31/12/2021 15,301 3,630 4,141 7,263 30,335 Theshort-termleaseexpensefor2021amountsto€1,268thousand(2020:€359thousand). 147Befesa Annual Report 2021 Additional information Statutory  financialstatements Consolidated  financialstatements Management report  ToBefesa’s  shareholders 11. Right-of-use assets and lease liabilities continued Details of lease payments and liabilities Ananalysisofthecontractualmaturityofleaseliabilities,includingfutureinterestpayable,isasfollows: 2021 2020 Within 1 year 7,612 3,124 Between1and2years 5,587 2,151 Between2and3years 2,817 1,668 More than 3 years 7,352 7,041 23,368 13,984 Thechangesinthisliabilityfrom1Januaryto31Decemberareasfollows: 2021 2020 Balanceasat1January 13,984 14,585 Increase 6,877 3,653 Businesscombination(Note6) 8,097 – Lease payments (6,417) (4,672) Interest 563 418 Disposal (50) – Translationdifferences 314 – 23,368 13,984 12. Inventories Detailsofinventoriesintheaccompanyingconsolidatedstatementoffinancialpositionasat31December2021and 2020areasfollows: 2021 2020 Finished goods 28,858 15,225 Goodsinprogressandsemi-finishedgoods 1,238 1,749 Rawmaterials 20,014 9,376 Other 17,367 13,000 Total 67,477 39,350 “Other”at31December2021and2020mainlyincludessparepartsfortheGroup’sfacilities. The Group has taken out insurance policies to cover risks relating to inventories. The coverage provided by these policiesisconsideredtobesufficient. Notes to the consolidated financial statements as at 31 December 2021 (thousands of euros) continued 03 Consolidated financial statements 148 Befesa Annual Report 2021 To Befesa’s shareholders 13. Accounts receivable Thebreakdownofaccountsreceivableintheaccompanyingconsolidatedstatementoffinancialpositionasat 31December2021and2020isasfollows: 2021 2020 Contract assets 2,492 2,691 Trade and other receivables 112,412 53,069 Tradereceivablesfromrelatedcompanies(Note25) 917 1,003 Otherreceivables(Note21) 12,791 16,285 Publicauthorities(Note20) 10,671 9,621 Advances to suppliers 7,770 2,532 Loss-allowancefordoubtfuldebts (1,675) (1,538) Total 145,378 83,663 Nosignificantimpactoftheapplicabilityoftheexpectedcreditlossmodelhasbeenidentifiedontradereceivables. ChangesintheallowancesfordoubtfuldebtsrelatingtotheGroup’stradeandotherreceivablesfor2021and2020 areasfollows: 2021 2020 Opening balance (1,538) (1,594) Write-offuncollectibleaccountsreceivableandothertransfers – 56 Businesscombination(Note6) (137) – Closing balance (1,675) (1,538) Thecreditqualityoftradereceivablesthathavenotbecomeimpairedcanbeclassifiedashighlysatisfactory, sinceinsubstantiallyallofthecasestherisksareacceptedandcoveredbycreditriskinsurersand/orbanksand financialinstitutions. Themaximumexposuretocreditriskatthedateofpresentationofthefinancialinformationisthefairvalueofeach of the accounts receivable disclosed above and, in all cases, taking into consideration the aforementioned credit insurance coverage. 14. Equity a) Share capital Thenumberofsharesasat31December2021is39,999,998withaparvalueof€2.78each.(2020:34,066,705,with a par value of €2.78 each). All the shares are listed in the Frankfurt Stock Exchange and have the same rights. The authorised capital of the Company (including, for the avoidance of doubt, the Company’s issued share capital) is set at 39,999,998 shares. On16June2021,theCompanyissued5,933,293newshareseachwithparvalueof€2.78(€16,472thousand)and sharepremiumof€53.22(€315,792thousand)(Note6).Thenewshareswereincludedintheexistinglistingof Befesa’s shares in the Frankfurt Stock Exchange. The Company has recognised €3,648 thousand of issuance costs as a reduction in equity instruments issued. 149Befesa Annual Report 2021 Additional information Statutory  financialstatements Consolidated  financialstatements Management report  ToBefesa’s  shareholders 14. Equity continued Theshareholderstructureasat31December2021and2020isasfollows: Percentage of ownership 2021 2020 Free-float(includingmanagement) 100% 100% Total 100% 100% b) Share premium and other reserves Detailsintheconsolidatedfinancialstatementareasfollows: 2021 2020 Share premium 532,867 263,875 Hedging reserves (96,830) (9,509) Other reserves (19,915) (54,306) Total 416,122 200,060 Share premium The share premium may be used to provide for the payment of any shares that the Parent Company may repurchase fromitsshareholders,tooffsetanynetrealisedlosses,tomakedistributionstoitsshareholders,intheformofa dividend, or to allocate funds to the legal reserve. On14July2021,Befesadistributedtoitsshareholdersadividendof€1.17pershare(repaymentoftheshare premium),amountingto€46.8million,asapprovedbytheAGMheldon30June2021. Other reserves TheParentCompanyisrequiredtotransferaminimumof5%ofitsnetstatutoryprofitforeachfinancialyeartoa legalreserve.Thisrequirementceasestobenecessaryoncethebalanceofthelegalreservereaches10%ofthe issuedsharecapital.Ifthelegalreservelaterfallsbelowthe10%threshold,atleast5%ofnetstatutoryprofitsmust beallocatedagaintowardthereserve.Thelegalreserveisnotavailablefordistributiontotheshareholders. In June 2020, the shareholders at their AGM resolved to approve the distribution of a dividend of €14,989 thousand fromthenetprofitoftheyear2019. InNovember2020,theBoardofDirectorsresolvedtoapproveaninterimdividendof€9,880thousand.On14July 2021, the AGM approved the interim dividend of €9,880 thousand approved by the Board of Directors in November 2020. Notes to the consolidated financial statements as at 31 December 2021 (thousands of euros) continued 03 Consolidated financial statements 150 Befesa Annual Report 2021 To Befesa’s shareholders c) Translation differences Thebreakdown,bycompany,of“Translationdifferences”at31December2021and2020isasfollows: Company or group of companies 2021 2020 BefesaZincKorea,Ltd. 1,489 2,012 Befesa Salt Slags, Ltd. (1,541) (1,255) Befesa Scandust, AB (1,757) (1,330) Befesa Silvermet Iskenderum Celik Tozu Geri Donusumu, A.S. (18,828) (12,355) Befesa Silvermet Dis Ticaret A.S. (1,813) (845) Befesa Zinc Environmental Protection Technology (Jiangsu) Co. Ltd. 1,685 (652) Befesa Zinc Environmental Protection Technology (Henan) Co. Ltd. 1,209 (327) Befesa Holding US, Inc. 15,556 – Other (80) (325) Total (4,080) (15,077) d) Non-controlling interests Detailsofequity–non-controllinginterestsareasfollows: 2021 2020 Steel Dust: Befesa Silvermet Turkey, S.L. and subsidiaries 8,712 10,294 Total 8,712 10,294 Summary information on subsidiaries with non‑controlling material shareholdings BelowarethemainfiguresofBefesaSilvermetTurkey,S.L.anditssubsidiaries,expressedinthousandsofeuros. Befesa Silvermet Turkey, S.L. and its subsidiaries 2021 2020 Non-current assets 22,418 34,030 Current assets 14,888 11,418 Non-current liabilities 688 11,640 Current liabilities 17,819 11,595 Equity 18,799 22,213 Sales 29,348 22,053 Profitbeforetaxes 7,624 (1,970) Profitaftertaxes 5,625 (1,561) At31December2021and2020,thepercentagesofnon-controllinginterestsofBefesaSilvermetTurkey,S.L. amountedto46.4%. 151Befesa Annual Report 2021 Additional information Statutory  financialstatements Consolidated  financialstatements Management report  ToBefesa’s  shareholders 14. Equity continued e) Capital management TheGroup’scapitalmanagementfocusesonachievingafinancialstructurethatoptimisesthecostofcapitalwhile maintainingasolidfinancialposition.Thispolicyreconcilesthecreationofvaluefortheshareholderswithaccessto financialmarketsatacompetitivecostinordertocoverbothdebtrefinancingrequirementsandinvestmentplan financingneedsnotcoveredbythefundsgeneratedbythebusiness(Note4.1.d.). TheGroup’smanagementconsidersthattheleverageratio(Note2.6)isagoodindicatorofthedegreetowhichthe objectivessetarebeingachieved.At31December2021and2020,mostofthedebtsarerelatedtobusiness acquisitions made in prior years. 15. Financial debt Detailsoftherelatedlineitemsintheaccompanyingconsolidatedstatementoffinancialpositionasat31December 2021and2020areasfollows: 2021 2020 Current maturity Non-current maturity Current maturity Non-current maturity Bank loans and credit facilities 12,010 653,571 7,818 520,602 Unmatured accrued interest 5,781 – 5,811 – Finance lease payables 7,612 15,756 3,124 10,860 Total 25,403 669,327 16,753 531,462 Thefairvaluesofborrowingsarenotmateriallydifferentfromtheircarryingamountssincetheinterestpayableis close to current market rates. Themaintermsandconditionsofborrowingsareasfollows: 2021 2020 Type Limit in nominal currency (thousands of currency) Interest rate Maturity date Current maturity Non- current maturity Current maturity Non- current maturity Facilities Agreement €736,000 Euribo r+1.75% 2026 5,691 608,901 5,798 506,350 Jiangsu CNY 220,000 LPR(NBIC)+25pbt 2026 3,513 22,058 1,246 1,739 Henan CNY 260,000 LPR(NBIC)+25pbt 2027 1,591 18,610 – 12,465 Other 14,608 19,758 9,709 10,908 25,403 669,327 16,753 531,462 On19October2017,inordertostandardisethefinancialstructureoftheGroup,theCompanyasParentandcertain subsidiariesasborrowersandguarantorsenteredintoa€636,000thousandFacilitiesAgreement.Thispost-IPO agreementisintendedtoraisefinancingfortheentireGroupandcanceltheGroup’spreviouscurrentand non-currentborrowingsinconnectionwiththe€300.0millionZincNotes,€150.0millionPIKNotesandthe €167.5millionSyndicatedLoan. UponcompletionoftheIPOon3November2017(Note1),theFacilitiesAgreementtookeffecton7December2017. On9July2019,therefinancingoftheexistingcapitalstructurewassuccessfullycompletedinaleverage-neutral transactionthata)extendsBefesa’sdebtmaturityuptoJuly2026withaseven-yeartenorofthecovenant-liteTLBat attractiveinterestrates,andb)increasesloanbasketstoaccommodateBefesa’sgrowthroadmapincludingChina. Notes to the consolidated financial statements as at 31 December 2021 (thousands of euros) continued 03 Consolidated financial statements 152 Befesa Annual Report 2021 To Befesa’s shareholders The Facility Agreement has been signed by the Parent of the Group (Befesa, S.A.) and has been designed to meet the financingneedsofallGroupcompanies. The Facilities Agreement comprises: – TermLoanB(TLB)FacilityCommitmentinanamountof€526million,whichisabulletwithamaturityofsevenyears. – RevolvingCreditFacility(RCF)inanamountof€75millionwithamaturityofsixyears. – AGuaranteeFacilityCommitmentinanamountof€35millionwithamaturityofsixyears. InterestontheinitialTLBfacilitywasEuriborplusaspreadof2.75%,and2.50%inthecaseoftheRCF.These spreadscouldbeadjusteddependingontheratioofnetfinancialdebt/EBITDA. AftertherefinancinginJuly2019,themarginwassetto250bpsforthefollowingninemonths. On17February2020,BefesarepriceditsTLBreducingitsinterestrateby50bpstoEuriborplus200bpswitha floorof0%.Thefacility’slong-termJuly2026maturitydateandallotherdocumentationtermsremainwithout further amendment. TheGroupanalysedin2020whethertherewasasubstantialmodificationoftheconditions,havingconcludedthat therewasnocancellationoftheoriginalliabilitiesbecausetheonlychangecorrespondstothereductioninthe nominalinterestrate(repricing)and,thediscountedpresentvalueofthecashflowsunderthenewtermsisa3% fromthediscountedpresentvalueoftheremainingcashflowsoftheoriginalfinancialliability.However,this modificationentailedrecognisingfinanceincomeof€15millionasthenewfuturecashflowswerediscountedatthe originaleffectiverateof2.7%. On2July2021,withthepurposeofFinancingtheAcquisitionofAZR(includingbutnotlimitedtoanycostsand expensesrelatingtotheAcquisitionandanyrefinancingofFinancialIndebtednessofthetargetgroup),andgeneral corporatepurposes,togetherwiththeacceleratedequityoffering(AEO)BefesasignedanIncrementalTermFacility foranaddittional€100millionAdd-OnTLB(Note6).Thematurityandrestofdocumentationtermsremaininlinewith existing TLB. InAugust2021,themarginapplicabletoTLBwasreducedby25bpstoEuriborplus175bpsduetothedecreaseon the leverage ratio. TheFacilitiesAgreementprovidesafinancialcovenantbasedonthenetleveragewhichshallnotexceedtheratio 4.5:1foranyrelevantperiod.ThecovenantonlyappliesifthetotalamountofalldrawingsundertheRCFexceeds 40%ofthecommitmentsundertheRCF.At31December2021and2020,theRCFhasnotyetbeendrawnandno financialcovenantapplies. TheFacilitiesAgreementlimitsdividenddistributionifanyGroupcompanyincursaneventofdefaultasdefinedin the agreement. In2020,BefesaclosedthefinancingstructureforbothplantsunderconstructioninChina(JiangsuandHenan).The notionalandtherestoftheconditionssignedareshowninthetableabove.AtDecember2021,thereispendingdebt whichwillbedrawnduring2022asconstructionsprogress. At31December2021,“Other”mainlyincludesshort-termfinancingofBefesaSilvermetIskenderun,debtrelatedto thefinancialleasesandincorporationofBefesaZincUStotheconsolidationperimeter(2020includesshort-term payablesforleasesandtheshort-termfinancingofBefesaSilvermetIskenderuninconnectionwiththe revampingproject). 153Befesa Annual Report 2021 Additional information Statutory  financialstatements Consolidated  financialstatements Management report  ToBefesa’s  shareholders 15. Financial debt continued At31December2021and2020,anamountof€75millionwasundrawnfromthesyndicatedfinancingarrangement (Note4.c). Theevolutionofnetfinancialdebtduringthe2021and2020isasfollows: Cash and cash equivalents (Note4) Other current financial assets (Note10) Financial debt (Note15) Total Netfinancialdebtasat31December2019 (125,460) (61) 542,416 416,895 Cashflows (28,702) (3) 15,705 (13,000) Exchangerateadjustments (396) – – (396) Other non-monetary movements () – – (9,906) (9,906) Netfinancialdebtasat31December2020 (154,558) (64) 548,215 393,593 Cashflows (49,548) 3 119,956 70,411 Exchangerateadjustments (671) – 4,509 3,838 Other non-monetary movements () (19.312) – 22,050 2,738 Netfinancialdebtasat31December2021 (224,089) (61) 694,730 470,580 (*) MainlyduetotheimpactoftherepricingandthenewcontractsunderIFRS16. () MainlyduetotheimpactofthenewcontractsunderIFRS16andtheincorporationofBefesaHoldingUStotheconsolidationperimeter(Note6) 16. Other current and non-current payables 2021 2020 Current maturity Non-current maturity Current maturity Non-current maturity Payable to asset suppliers 10,017 – 3,806 – Accountspayabletopublicauthorities(Note20) 17,855 – 11,432 – Remunerationpayable(Note18) 21,561 – 13,333 – Other 16,465 4,621 706 4,905 Total 65,898 4,621 29,277 4,905 “Other”mainlyincludesthecurrentfinancialliabilitiesrelatedtothelastderivativesettlementsoftheyearamounting to€14.3million(2020:€0.5million)andthecapitalgrantsnotyetreleasedtoincomeanddebtswithofficialbodies amountingtoapproximately€4.2million(2020:€5.1million). Notes to the consolidated financial statements as at 31 December 2021 (thousands of euros) continued 03 Consolidated financial statements 154 Befesa Annual Report 2021 To Befesa’s shareholders 17. Financial derivatives TheGroupusesderivativefinancialinstrumentstohedgetheriskstowhichitsactivities,operationsandfuturecash flowsareexposed,whicharemainlyrisksarisingfromchangesinexchangerates,interestratesandthemarketprice ofcertainmetals,mainlyzinc.Detailsofthebalancesthatreflectthemeasurementofderivativesinthe accompanyingconsolidatedstatementoffinancialpositionasat31December2021and2020areasfollows: 2021 2020 Cashflowhedgesnon-currentassets(Note10) SWAP contracts for zinc – 249 Interest rate SWAP 1,200 – Total assets 1,200 249 Cashflowhedgesnon-currentliabilities: SWAP contracts for zinc 56,700 1,025 Interest rate SWAP – 3,589 56,700 4,614 Cashflowhedgescurrentliabilities: SWAP contracts for zinc 75,573 8,775 Foreign currency SWAP 77 67 75,650 8,842 Total liabilities 132,350 13,456 ■ Zinc derivative contracts Detailsofthetonneshedgedandofthematurityoftherelatedcontractsat31December2020and2019are asfollows: Tonnes 31December 2021 31December 2020 2022 2023 and subsequent years 2021 2022 and subsequent years Hedge (in tonnes) Swapcontractforzinc 92,405 221,700 92,400 123,005 92,405 221,700 92,400 123,005 During 2021, Befesa has extended its zinc hedges until and including September 2024 (2020: July 2023). Derivativesaredesignatedtohedgehighlyprobableforecasttransactions(sales)andthefulleffectofthehedgeis recognisedinequity,netofthetaxeffect,consideringitsassessmentashighlyeffectivehedginginstruments.The portiontransferredtoprofit/(loss)eachyearisrecognisedunder“Revenue”intheincomestatementateach settlement date. 155Befesa Annual Report 2021 Additional information Statutory  financialstatements Consolidated  financialstatements Management report  ToBefesa’s  shareholders 17. Financial derivatives continued ■ Interestrateswaps(floatingtofixed) TheCompanyarrangedaninterestrateswapduring2017.ThenotionalamountsoftheIRSsoutstandingat 31December2021and31December2020totalled€316,000thousand(Note4.1),whichwereclassifiedashighly effectivehedginginstruments.Thefixedinterestrateis0.3580%andthemainbenchmarkfloatingratewasEuribor. This derivative matures in 2022. OnMarch2020,Befesaarrangedanotherinterestrateswapinordertofixtheinterestfortheextensionperiodofthe refinancingsignedon9July2019(Note15).ThenotionalamountoftheIRSsoutstandingat31December2021 totalled€316,000thousand(Note4.1),whichwasclassifiedasahighlyeffectivehedginginstrument.Thefixinterest rateis0.236%,andthemainbenchmarkfloatingratewasEuribor.ThisderivativematuresinJuly2026. ■ Foreigncurrencycashflowhedges At31December2021,currencypurchasecontracts(swapsorforwards)amountedto: – US dollar sales: USD 57,401 thousand. – AED sales: AED 164 thousand. – US dollar purchases: USD 20,636 thousand. At31December2020,currencypurchasecontracts(swapsorforwards)amountedto: – US dollar sales: USD 25,913 thousand. – US dollar purchases: USD 9,450 thousand. Highly probable future hedged transactions denominated in foreign currency are expected to take place on various dateswithinthenext12months.Thegainsandlossesrecognisedinthehedgingreserveinequityinconnectionwith forwardforeigncurrencycontractsat31December2021and2020arerecognisedinprofitorlossintheyearin whichthehedgedtransactionsaffecttheincomestatement.Gainsandlossesinequityinrespectofcurrency forwardsat31December2021willbetransferredtotheincomestatementoverthenext12months. 18. Long-term provisions Detailsoflong-termprovisionsontheliabilitysideoftheaccompanyingconsolidatedfinancialstatementsandof movementsin2021and2020areasfollows: Provisions for litigation, pensions and similar obligations Other provisions for contingencies and charges Total long-term provisions Balanceat31December2019 6,585 2,174 8,759 Profitandlossimpact 8,961 – 8,961 Payment(Note24) (3,014) – (3,014) Transfers(Note16) (4,616) (122) (4,738) Balanceat31December2020 7,916 2,052 9,968 Businesscombination(Note6) 3,642 5,882 9,524 Profitandlossimpact 9,961 139 10,100 Transfers(Note16) (7,702) – ( 7,702) Conversiondifferences 119 258 377 Balanceat31December2021 13,936 8,331 22,267 Notes to the consolidated financial statements as at 31 December 2021 (thousands of euros) continued 03 Consolidated financial statements 156 Befesa Annual Report 2021 To Befesa’s shareholders Provisions for litigation, pensions and similar obligations At31December2021,theGrouprecognisedaprovisionof€7.5million(2020:€5.2million)relatedtothe compensationplansdescribedinNote24.“Transfer”in2021and2020correspondstotheliabilitypayablein2022 and2021,whichhasbeenrecognisedas“Remunerationpayable”at31December2021and2020. In2021and2020,theprofitandlossimpactsarealsomainlyrelatedtothecompensationsplansdescribedinNote24. Other provisions for contingencies and charges TheGroupcompanyBefesaValera,S.A.S.recognisedaprovisionofapproximately€1.9millionat31December2021 and 2020 for the present value of the estimated costs of dismantling the concession for the performance of their activitiesatthePortofDunkirk(France)followingitstermination. In addition, the Group recognised other provisions under “Other provisions for contingencies and charges” to meet liabilities,whetherlegalorimplicit,probableorcertain,duetocontingencies,ongoinglitigationsandtaxobligations, whichariseastheresultofpasteventsandaremorelikelythannottorequireanoutflowofresourcesembodying economicbenefitsfromtheGrouptosettletheobligation,providedthatareliableestimatecanbemadeofthe amount of the obligation. BefesaZincUS,Inc.recognisedassetretirementobligationslinkedtoitsdifferentfacilitiesintheUSof€5.6millionat December 2021 for the present value of estimated costs. The main asset retirement obligation relates to the ultimate closure of the former Monaca facility. 19. Income tax TheGroup’sParentCompany,Befesa,S.A.,issubjecttoLuxembourgLaw(Note1). BefesaMedioAmbiente,S.L.U.headsthefiscalgroupofcompaniessubjecttoBiscaytaxregulation.Thattaxgroup comprises Befesa Medio Ambiente, S.L.U., MRH Residuos Metálicos, S.L.U., Befesa Aluminio, S.L.U., Befesa Aluminio Comercializadora, S.L.U., Befesa Zinc, S.A.U., Befesa Zinc Comercial, S.A.U., Befesa Zinc Óxido, S.A.U., Befesa Zinc Aser, S.A.U., Befesa Steel R&D, S.L.U., Befesa Zinc Sur, S.L.U. and Befesa Stainless Recycling, S.L.U.. The German companies Befesa Zinc Germany GmbH, Befesa Steel Services GmbH, Befesa Zinc Freiberg GmbH and BefesaZincDuisburgGmbHfileconsolidatedtaxreturnsunderthetaxlegislationapplicabletotheminGermany; BefesaZincGravelines,S.A.S.andBefesaValeraS.A.S.fileconsolidatedtaxreturnsunderthetaxlegislation applicabletotheminFrance;theGermancompaniesBefesaSalzschlackeGmbHandBefesaAluminiumGermany GmbHfileconsolidatedtaxreturnsunderthetaxlegislationapplicabletotheminGermany;intheUS,thecompanies BefesaHoldingUS,Inc.,BefesaZincUS,Inc.,andChesnutRidgeRailroadCorp.fileconsolidatetaxreturnsunderthe tax legislation applicable to them in the US. TheremainingGroupcompaniesfileindividualincometaxreturnsinaccordancewiththetaxlegislationapplicable tothem. GroupcompaniessubjecttoBiscaytaxlegislation,includingthosewhichformpartofthetaxgroup,generallyhavethe yearsthathavenotbecomestatute-barred,2016onwards,openforreviewbythetaxauthoritiesforincometaxandthe lastfouryearsfortheothermaintaxesandtaxobligationsapplicabletothem,inaccordancewithcurrentlegislation. On16January2020,BefesaMedioAmbiente,S.L.,assuccessortotherepresentativeoftheBasquetaxgroup(i.e. BefesaMedioambienteHoldco,S.L.),wasnotifiedbytheBizkaia’sregionaltaxationauthoritiesofthe commencement of inspection proceedings for corporate income tax for the years 2015, 2016, 2017 and 2018. The scope of the proceedings has been partial and mainly focus on the adaptation of the structure of the acquisition of the Befesa Group by Befesa Medioambiente Holdco, S.L. in 2013 and subsequent reverse merger in 2018, assessmentofmanagementsupportservicesprovidedbetweenrelatedpartiesandverificationoftheoriginofthe tax credits pending application of the Group. 157Befesa Annual Report 2021 Additional information Statutory  financialstatements Consolidated  financialstatements Management report  ToBefesa’s  shareholders 19. Income tax continued On 21 September 2021, minutes have been signed in accordance, ending the aforementioned proceedings. Tax creditsamountingto€53millionhavebeeneliminatedandduetoprovisionskeptbytheCompanyregardingthetax credits regularised and non-recorded tax credits, the impact in results and cash has been nil. In addition, certain criteriahavebeensetwithregardtotheapplicabilityoftaxcredits.Inthisregard,theGrouphascapitalisedalltax creditsgeneratedintheBasqueTaxGroupat31December2021amountingto€21.7million. Fully consolidated foreign subsidiaries calculate income tax expense and tax charges for the taxes applicable to theminconformitywiththelegislationof,andatthetaxratesinforcein,theirrespectivecountries(Note3.19). Thereconciliationofaccountingprofit/(loss)fortheyeartoincometaxexpensefortheyearisasfollows: 2021 2020 Profit/(loss)beforetax 111,852 58,634 Totalaccountingprofit/(loss)beforetax 111,852 58,634 Tax charge at the tax rate in force in each territory (30,632) (17,501) Tax credits generated/(used) in the year and not capitalised 336 (287) Off-balancetaxcreditsrecognition 21,683 – Non-deductible expenses and non-computable income (528) (92) Tax deductions generated/(used) in the year 618 2,100 Others (977) 4,031 Income tax expense (9,500) (11,749) At31December2021,uncapitalisedtaxcreditsamountto€106million,ofwhich€77millioncorrespondtoBefesa ZincUS,Inc.(€105.4millionin2020,ofwhich€80.5millioncorrespondedtotheBasquetaxgroup).Themajorityof thesetaxcredits(€97.4million)expirein2043(2020:€77.2million). The Directors of the Group companies and of the Parent Company consider that the tax assets recognised in all the circumstancesdescribedabovewillbeoffsetintheincometaxreturnsoftheGroupcompaniestakenindividuallyor ofthecompaniesformingtheconsolidatedtaxgroup,asappropriate,withintheapplicabledeadlinesandlimits. Regarding the tax credits corresponding to Befesa Zinc US, Inc., the directors consider that there is no convincing evidencethatfuturetaxableprofitswillbeavailable,giventhatthiscompany(Note6)andthecompanytowhichit belongedwasmakinglosses. Deferredtaxassetsandliabilitiesareoffsetifthereisalegallyenforceablerighttosetoffcurrenttaxassetsagainst current tax liabilities and the deferred tax assets and deferred tax liabilities relate to the income taxes levied by the sametaxauthority.At31December2021and2020,therewasnomaterialoffsetofdeferredtaxassetsandliabilities. TheGrouprecognisesdeferredtaxassets,taxlosscarry-forwardsandunusedtaxcreditsandtaxrelieftotheextent thattheirfuturerealisationorutilisationissufficientlyassured. Notes to the consolidated financial statements as at 31 December 2021 (thousands of euros) continued 03 Consolidated financial statements 158 Befesa Annual Report 2021 To Befesa’s shareholders Detailsofdeferredtaxassetsanddeferredtaxliabilitiesintheaccompanyingconsolidatedfinancialstatementsfor 2021and2020areasfollows: 2021 2020 Deferred tax assets arising from: Taxlosscarry-forwardsandtaxcreditsandtaxrelief 69,357 59,320 Revaluationofderivativefinancialinstruments 34,000 3,472 Other deferred tax assets 22,105 18,577 Total deferred tax assets 125,462 81,369 Deferred tax liabilities arising from: Asset revaluation 46,554 30,532 Revaluationofderivativefinancialinstruments 270 – Deferredtaxliabilityarisingfromthetaxdeductibilityofgoodwill 39,362 32,079 Other deferred tax liabilities 5,760 5,682 Total deferred tax liabilities 91,946 68,293 Amountscorrespondingtodeferredtaxassetsareasfollows: 2021 2020 Deferred tax assets Deferred tax assets recoverable in more than 12 months 121,704 73,118 Deferredtaxassetsrecoverablewithin12months 3,758 8,251 Total deferred tax assets 125,462 81,369 Movements in deferred tax assets and liabilities in 2021 and 2020 relate to: 2021 Recognised in Balance at 31/12/20 Income statement Equity Business combination (Note6) Balance at 31/12/21 Deferred tax assets Taxlosscarry-forwardsanddeductions 59,320 13,307 (3,270) – 69,357 Derivatives 3,472 (18,021) 48,549 – 34,000 Other 18,577 3,566 (38) – 22,105 Total deferred tax assets 81,369 (1,148) 45,241 – 125,462 Deferred tax liabilities Revaluations 30,532 (861) 619 16,264 46,554 Derivatives – – 270 – 270 Goodwill 32,079 7,283 – – 39,362 Other(temporarydifferences) 5,682 82 (4) – 5,760 Total deferred tax liabilities 68,293 6,504 885 16,264 91,946 159Befesa Annual Report 2021 Additional information Statutory  financialstatements Consolidated  financialstatements Management report  ToBefesa’s  shareholders 19. Income tax continued 2020 Recognised in Balance at 31/12/19 Income statement Equity Balance at 31/12/20 Deferred tax assets Taxlosscarry-forwardsanddeductions 59,699 2,992 (3,371) 59,320 Derivatives 762 – 2,710 3,472 Other 10,452 8,083 42 18,577 Total deferred tax assets 70,913 11,075 (619) 81,369 Deferred tax liabilities Revaluations 31,080 (548) – 30,532 Derivatives 10,752 (4,405) (6,347) – Goodwill 24,743 7,336 – 32,079 Other(temporarydifferences) 1,478 4,209 (5) 5,682 Total deferred tax liabilities 68,053 6,592 (6,352) 68,293 Themainamountsandchangesindeferredtaxassetsandliabilitiesin2021and2020,wereasfollows: 2021 ■ Movementsrecognisedinequityrelatemainlytothetaxeffectofthemeasurementofderivativeshedgingzinc prices(Note17),andtotheimpactofconversiondifferencefromdeductionsinTurkey(€3.3million)inAssets,and fromRevaluationsofBefesaZincUS,Inc.assests(€0.6million)inLiabilities. ■ Themovementintheincomestatementintaxlosscarry-forwardsanddeductionsismainlyrelatedtothe recognitionoftaxcreditsfromtaxlosscarry-forwardsintheBiscaytaxgroupforanamountof€21millionand theapplicationoftaxcreditsof€7million. ■ ThetaxdepreciationofthegoodwillbyBefesaZinchasgeneratedanincreaseindeferredtaxliabilities amountingto€7.3million. ■ ThemovementinBusinesscombinationscomesfromtheacquisitionofBefesaZincUS,Inc.(Note6). 2020 ■ ThetaxdepreciationofthegoodwillbyBefesaZinchasgeneratedanincreaseindeferredtaxliabilities amountingto€7.3million. ■ Movementsrecognisedinequityrelatemainlytothetaxeffectofthemeasurementofderivativeshedgingzinc prices(Note17)andtotheimpactofconversiondifferencefromdeductionsrecordedin2019inTurkey (€3.3million). ■ The increase of “Others” deferred tax assets comes principally from the impairment of intragroup receivable accountofBefesaSaltSlags,Ltd.inBefesaAluminioS.L.U.(€5.0million). ■ Movementin“Others”deferredtaxliabilitiesisrelatedmainlytotherepricingoftheGroup’sTLBon17February 2020amounting€3.3million(Note15). Notes to the consolidated financial statements as at 31 December 2021 (thousands of euros) continued 03 Consolidated financial statements 160 Befesa Annual Report 2021 To Befesa’s shareholders 20. Public administrations Details of tax receivables and tax payables on the asset and liability sides, respectively, of the accompanying consolidatedstatementoffinancialpositionasat31December2021and2020areasfollows: 2021 2020 Receivable (Note13) Payable (Note16) Receivable (Note13) Payable (Note16) VAT 8,093 6,187 6,522 3,091 Withholdings and interim payments 148 1,031 – 1,072 Corporate income tax 1,502 8,333 1,778 5,326 Social security 9 1,736 10 1,855 Other 919 568 1,311 88 Total 10,671 17,855 9,621 11,432 “Accountspayabletopublicauthorities”ontheliabilitysideoftheaccompanyingconsolidatedfinancialstatements includestheliabilityrelatingtoapplicabletaxes,mainlypersonalincometaxwithholdings,VATandprojectedincome taxrelatingtotheprofitforeachyear,mainlynetoftaxwithholdingsandpre-paymentsmadeeachyear. 21. Guarantee commitments to third parties and contingencies At31December2021and2020,anumberofGroupcompanieshadprovidedguaranteesforanoverallamountof approximately€50.7million(31December2020:€34.8million)toguaranteetheiroperationsvis-à-viscustomers, banks, government agencies and other third parties. TheGrouphascontingentliabilitiesforlitigationarisingintheordinarycourseofbusinessfromwhichnosignificant liabilitiesareexpectedtoariseotherthanthoseforwhichprovisionshavealreadybeenrecognised. InDecember2016,therewasatemporarystoppageattheScandustplant(Sweden)asaresultofactionrelatedto the update of the activity licence, initiated by the local country council. The Group’s management commissioned severaladvisorstoassesstheenvironmentalriskandpotentialeconomiceffectofthecorrectivemeasuresand invested in measures required to reopen the plant. As a consequence, the plant reopened in May 2017. The Group hasaninsurancepolicywhichwasexpectedtomitigatetherelevantexpensesincurredandat31December2020 recognised€7.9millionunder“Otherreceivables”(Note13)asthebestestimateoftheexpectedoutcomeonthe ongoing litigation. On27January2022,theGroupreceivednotificationfromBilbaoCourtofFirstInstanceNo.7thattheclaimfiledby theGroupwasdismissedinitsentirety.Inaccordancewiththisjudgment,theCompanyregistereda€7.9million write-offunder“Amortisation/depreciation,impairmentandprovisions”(Note22.6). InNovember2021,afirebrokeoutatourplantinHanover(Germany),whichbelongstothesubsidiaryBefesa SalzschalckeGmbH.Becauseofthisfiresomepartsoftheplantwereseriouslydamagedandconsequentlybeen amortised,amountingto€6,018thousand(Note22.6).Theinsurancepolicyinplacefullycoversthedamage suffered,sothesameamountwasrecordedunder“Otheroperatingincome”(Note22.3). 161Befesa Annual Report 2021 Additional information Statutory  financialstatements Consolidated  financialstatements Management report  ToBefesa’s  shareholders 22. Income and expenses 22.1 Revenues Detailsofrevenuesbycategoryfor2021and2020areasfollows: 2021 % 2020 % Steel Dust 455,836 56% 345,762 57% – Sale of WOX and other metals 385,701 47% 284,477 47% – Service fees 70,135 9% 61,285 10% Salt Slags 77,349 10% 66,977 11% – Sale of aluminium concentrates and melting salt 47,239 6% 37,969 6% – Fees for recycling salt slag and SPL 30,110 4% 29,008 5% Secondary Aluminium 329,860 40% 223,900 37% – Sale of secondary aluminium alloys 313,245 38% 212,670 35% – Technology division & Others 16,615 2% 11,230 2% Corporate, other minor eliminations (41,432) (32,309) Total 821,613 604,330 TheGroupdisclosesrevenuebyreportingsegmentandgeographicalareainNote5. 22.2 Raw materials and consumables Detailsofprocurementsintheconsolidatedincomestatementsfor2021and2020areasfollows: 2021 2020 Costofrawmaterialsandothersuppliesused 386,048 250,745 Changesingoodsheldforresale,rawmaterialsandotherinventories (15,351) (1,032) Total 370,697 249,713 22.3 Other operating income Detailsofotheroperatingincomeintheconsolidatedincomestatementsfor2021and2020areasfollows: 2021 2020 In-houseworkonnon-currentassets(Note3.7) 3,467 1,506 Income from income-related grants 2,242 2,305 Servicesandotheroperatingincome(Note21) 9,280 2,012 Total 14,989 5,823 22.4 Personnel expenses Detailsofpersonnelexpensesintheconsolidatedincomestatementfor2021and2020areasfollows: 2021 2020 Wages and salaries 82,778 68,118 Employer’s social security contributions 13,260 12,347 Otherwelfarecosts 2,781 2,524 Total 98,819 82,989 Notes to the consolidated financial statements as at 31 December 2021 (thousands of euros) continued 03 Consolidated financial statements 162 Befesa Annual Report 2021 To Befesa’s shareholders Of the Group’s average headcount in 2021, 165 employees had temporary employment contracts (2020:103employees). In2021,theaveragenumberofemployeesofthejointoperationsamountedto47(2020:47employees). Thenumberofemployeesatthe2021and2020year-end,bygender,wasasfollows: 2021 2020 Male Female Male Female Management 36 7 32 6 Experts 168 48 107 38 Professionals 220 91 172 65 Operators and assistants 936 44 666 51 Total 1,360 190 977 160 22.5 Other operating expenses 2021 2020 External services 178,799 140,814 Taxes other than income tax 2,408 1,975 Other current operating expenses 6,980 5,633 Total 188,187 148,422 22.6 Amortisation/depreciation, impairment and provisions 2021 2020 Amortisationofintangibleassets(Note8) 1,791 1,638 Depreciationofproperty,plantandequipment(Note9) 45,638 31,429 Amortisationofright-of-useassets(Note11) 5,822 4,373 Impairmentoffixedassets(Note9) 874 18,107 Other(Note21) 8,030 20 Total 62,155 55,567 23. Finance costs Thebreakdownofthisbalanceinthe2021and2020consolidatedincomestatementsisasfollows: 2021 2020 Interest expense 15,362 15,251 Otherfinancecosts 9,221 7,044 Total 24,583 22,295 Interestexpenseincludesswapsettlementexpensesamountingto€1,147thousand(2020:€1,150thousand). In2021,Otherfinancialcostsincludes€5,288thousandoffinancecostrelatedtothefinanceimpactof compensationplansdescribedinNote24(2020:€3,946thousand). 163Befesa Annual Report 2021 Additional information Statutory  financialstatements Consolidated  financialstatements Management report  ToBefesa’s  shareholders 24. Remuneration of the Board of Directors Directors’ remuneration and other benefits In 2021, the members of the Parent’s Board of Directors (including Executive Director members of the Board of Directors) earned approximately €11,131 thousand for salaries and attendance fees for discharging their duties in Group companies (2020: €6,914 thousand). Also,asat31December2021and2020andduringtheyearthenended,theParentCompanyhadnotgrantedany loans,advancesorotherbenefitstoitsformerorcurrentDirectors. Inaddition,theParentCompanydidnothaveanypensionorguaranteeobligationswithanycurrentmembersofthe Board of Directors. Incentives to executives and other matters In2021and2020,therewerenotransactionswithseniorexecutivesoutsidethenormalcourseofbusiness. InJanuary2018,theParentCompanyapprovedtwodifferentcompensationplansforcertainmembersofGroup management: – A compensation plan linked to the evolution of the share price consisting of 79,018 shares that can be executed asofthreeyearsfromthesigningoftheagreement(November2017).Thisagreedremunerationwaspaidin2020 foranamountof€3million. – A compensation plan linked to the evolution of certain key indicators determined in the agreement (cumulative EBITandEBITDA,cumulativecashflows,returnonstrategicprojects,ESG:environmental,healthandsafety, corporate governance). The plan consists of four tranches of three years each and considers 89,107 shares per tranche.Theagreedremunerationplanisconditionedtothecontinuationofthebeneficiariesassenior managementandmanagersoftheGroup.Theagreedremunerationrelatedtothefirsttranchewaspaidin2021 foranamountof€4.3million. The main assumptions correspond to the estimation of the degree of achievement of the key indicators and the fair value of the shares. In this regard, the Group’s Directors estimate a degree of achievement of these indicators of 100%andtakeasreferencethemarketvalueofBefesa,S.A.sharesat31December2021. On26April2021,theBoardofDirectorsoftheCompanygrantedaTransformationalGrowthIncentivePlan(TGIP) incentivisingatransformationalacquisitionopportunity(Note6).ThisTGIPislinkedtotheevolutionoftheshare price consisting of 187,500 shares that can be executed one-third in 2021, one-third in 2022 and the remaining one-thirdin2023.Thefirstone-thirdwaspaidin2021foranamountof€4.4million. Inaddition,in2020theNon-ExecutiveDirectors(NEDs)weregrantedaone-time,long-termincentiveplanvesting over 2019, 2020 and 2021. This plan consists of 9,975 shares and is linked to the same indicators of the four tranchesdescribedbefore. Notes to the consolidated financial statements as at 31 December 2021 (thousands of euros) continued 03 Consolidated financial statements 164 Befesa Annual Report 2021 To Befesa’s shareholders 25. Balances and transactions with related parties Allsignificantbalancesatperiodendbetweentheconsolidatedcompaniesandtheeffectofthetransactions betweenthemwereeliminatedonconsolidation. DetailsofbalancesandtransactionswithshareholdersandGroupandrelatedcompaniesat31December2021and 2020areasfollows: 2021 Accounts receivable and other current financial assets (Note13) Long-term loans Accounts payable Sales and other income Purchases and other expenses Recytech, S.A. 258 – 1,436 1,758 11,831 Befesa Zinc (Thailand) Ltd. 659 – – – – Other – – – – 50 Total 917 – 1,436 1,758 11,881 2020 Accounts receivable and other current financial assets (Note13) Long-term loans Accounts payable Sales and other income Purchases and other expenses Recytech, S.A. 344 – 613 1,506 6,475 Befesa Zinc (Thailand) Ltd. 659 – – – – Other – 65 – – – Total 1,003 65 613 1,506 6,475 The balances and transactions of Group companies relate to sale and purchase transactions and other commercial operations are done on an arm’s length basis. Alltransactionsarecommercialanddonotaccrueinterest,exceptforloansandtheabovecreditfacilitieswiththe Group,carriedoutonanarm’slengthbasis,thematuritiesofwhichareordinaryforthesetypesoftransactions. Astransactionswithrelatedpartiesarecarriedoutonanarm’slengthbasis,theParentCompany’sDirectorsdonot considerthatthiscouldgiverisetosignificantliabilitiesinthefuture. 26. Information on the environment TheParentCompanyanditssubsidiariesmaintaintheirproductionfacilitiesinsuchawayastomeetthestandards establishedbytheenvironmentallegislationofthecountriesinwhichthefacilitiesarelocated. Property, plant and equipment include investments made in assets intended to minimise the environmental impact andprotectandimprovetheenvironment(Note1). 165Befesa Annual Report 2021 Additional information Statutory  financialstatements Consolidated  financialstatements Management report  ToBefesa’s  shareholders 27. Auditors’ fees Feesforservicesrenderedbytheauditfirm(KPMG)fortheauditoftheGroup’sfinancialstatementsfortheyears ended31December2021and2020,irrespectiveofthedateofinvoice,areasfollows: Thousands of euros 2021 2020 Audit services 502 426 Other assurance services 9 21 Tax advisory services and others 36 119 547 566 OtherauditorshaveinvoicedtheGroupnetfeesforprofessionalservicesduringtheyearsended31December 2021and2020,asfollows: Thousands of euros 2021 2020 Audit services 373 107 Other assurance services 773 94 Tax advisory services 198 334 1,344 535 28. Earnings per share a) Basic earnings/(losses) per share (€ per share) 2021 2020 From continuing operations attributable to the ordinary equity holders of the Company 2.68 1.40 From discontinued operations – – Total basic earnings/(losses) per share attributable to the ordinary equity holders of the Company 2.68 1.40 b) Diluted earnings/(losses) per share (€ per share) Asat31December2021and2020,therearenodifferencesbetweenbasicanddilutedearnings/(losses)pershare. c) Reconciliation of earnings used in calculating earnings per share Thousands of euros 2021 2020 Profit/(loss)fortheyear 102,352 46,885 Less non-controlling interests (2,607) 723 Profit/(loss)fromcontinuingoperationsattributabletotheordinaryequityholdersofthe Company 99,745 47,608 Profit/(loss)attributabletotheordinaryequityholdersoftheCompany used in calculating basic and diluted earnings per share 99,745 47,608 Notes to the consolidated financial statements as at 31 December 2021 (thousands of euros) continued 03 Consolidated financial statements 166 Befesa Annual Report 2021 To Befesa’s shareholders d) Weighted average number of shares used as the denominator Number in thousand 2021 2020 Weighted average number of ordinary shares used as the denominator incalculatingbasicearningspershare(Note14) 37,285 34,067 Asat31December2021therearenofinancialinstrumentsorothercontractsthatmighthaveasignificantdilutive effectonthecalculationofearningspershare. 29. Subsequent events Therearenoeventsbetweenthefinancialstatementdate(31December2021)andthedateofthepresentationof theaccounts(29March2022)thatwouldmateriallyaffecttheGroup’sassetsortheGroup’sfinancialand/or earningsposition. With regards to the invasion of Ukraine by Russia, Befesa has no direct customers, suppliers, employees nor production sites in Russia nor Ukraine, referring to our main activities, environmental services to the steel and aluminiumindustries.Therefore,Befesaisnotbeingdirectlyaffectedbythisevent.Thelatterisaffectingtheglobal economy and indirectly Befesa, most notably for Befesa resulting in higher volatility in the prices of commodities, suchasenergyinflationandhigherbasemetalprices.Befesaiscloselymonitoringtheevolutionofenergypricesas wellasofbasemetalprices,especiallyzincandaluminium.Befesahas60%to75%ofitszincpayableannualoutput hedgedatattractivepricelevelsuptoJanuary2025,approximatelythreeyearsforward.Furthermore,various industriesobservesupplychaindisruptions.However,Befesa’sbusinessmodelisregionallyfocusedandasaresult theimpactisnotdirectbutagainratherindirect.Also,Befesa’sgeographicfootprintisgloballywelldiversifiedand balancedacrossEurope,AsiaandNorthAmerica.ThemostrelevantfuturegrowthinitiativesareoutsideofEurope, rather in Asia and in the US, therefore these are not directly impacted. As of the date of this Annual Report, Befesa has not been materially impacted. Befesa closely monitors potential indirect impacts but those can not be properly quantifiedatthisstageandaredependinghighlyonthedurationoftheinvasionofUkrainebyRussia.Most importantly, Befesa hopes the invasion to end very soon. 167Befesa Annual Report 2021 Additional information Statutory  financialstatements Consolidated  financialstatements Management report  ToBefesa’s  shareholders Appendix   Subsidiaries and joint operations 2021 Thousands of euros (31/12/2021) Entity Country Activity % Interest Auditor Capital Reserves Translation differences Results Interim dividend Subsidiaries Befesa Management Services GmbH Germany Holding 100% KPMG 25 1,594 – 344 – Befesa Medio Ambiente, S.L.U. Spain Holding 100% KPMG 150,003 788,140 – 25,107 – MRH Residuos Metálicos S.L.U. Spain Holding 100% (1) 15,600 10,931 – 5.665 – – Befesa Salzschlacke GmbH Germany Aluminiumwaste treatment 100% KPMG 25 1,953 – 5,544 (5,288) – Befesa Aluminium Germany GmbH Germany Aluminiumwaste treatment 100% KPMG 25 303 – 328 – – Befesa Aluminio, S.L.U. Spain Recovery of metals 100% KPMG 4,767 61,335 1,558 12,258 – Befesa Aluminio Comercializadora, S.L. Spain Marketing company 100% (1) 90 21 – – – Befesa Salt Slags, Ltd UK Recovery of metals 100% CURO 27,108 (50,436) (3,390) (1,174) – Befesa Zinc, S.A.U. Spain Holding 100% KPMG 25,010 53,005 – 85,910 – – Befesa Zinc Comercial, S.A., (Sociedad Unipersonal) Spain Saleofrecycledwaste 100% KPMG 60 11,352 – 1,026 – – Befesa Zinc Aser, S.A. (Sociedad Unipersonal) Spain Recovery of metals 100% KPMG 4,260 (18 ,113) – 41,468 (37,000) – Befesa Zinc Sur, S.L., (Sociedad Unipersonal) Spain Recovery of metals 100% (1) 605 240 – (24) – – Befesa Zinc Óxido, S.A. (Sociedad Unipersonal) Spain Recovery of metals 100% KPMG 1,102 4,810 – 703 – – Befesa Steel R&D, S.L., (Sociedad Unipersonal) Spain Development of projectsandtechnology innovation 100% (1) 3 2,603 – (2,007) – – Befesa Stainless Recycling, S.L. Spain Holding 100% (1) 3 12,579 – (4) – Befesa Valera, S.A.S. France Recovery of metals 100% PwC 4,000 (1,231) – 18,673 (14,956) Befesa ScanDust AB Sweden Recovery of metals 100% KPMG 5,309 1,000 (327) (11,509) – Notes to the consolidated financial statements as at 31 December 2021 (thousands of euros) continued 03 Consolidated financial statements 168 Befesa Annual Report 2021 To Befesa’s shareholders Thousands of euros (31/12/2021) Entity Country Activity % Interest Auditor Capital Reserves Translation differences Results Interim dividend – Befesa Silvermet Turkey, S.L. Spain Holding 53.60% (1) 9,175 (363) – (1,860) – Befesa Silvermet Iskenderun Celik Tozu Geri Donusumu, A.S. Turkey Recovery of metals 100% PwC 2,672 22,112 (17, 813) 4,660 – Befesa Silvermet DisTicaret, A.S. Turkey Recovery of metals 100% (1) 1,198 2,561 (3,378) 2,824 – – Befesa Zinc Germany GmbH Germany Holding 100% KPMG 25 1,951 – 21,179 (16,000) Befesa Steel Services GmbH Germany Sales and logistics 100% KPMG 2,045 67,842 – 24 – Befesa Zinc Duisburg GmbH Germany Recovery of metals 100% KPMG 5,113 2,915 – 32 – BefesaZincKoreaLtd SouthKorea Recovery of metals 100% KPMG 17,015 21,512 1,489 5,768 – Befesa Pohang Co. Ltd SouthKorea Recovery of metals 100% KPMG 1,770 4,929 (296) (1,532) – Befesa Zinc Freiberg GmbH&Co,KG Germany Recovery of metals 100% KPMG 1,000 (9,724) – 49 – Befesa Zinc Environmental Protection Technology (Jiangsu) Co. Ltd China Recovery of metals 100% PAF 21,407 (188) 1,685 (486) – Befesa (China) Investment Co. Ltd China Holding 100% PAF 17,390 (595) 249 229 – Befesa Zinc Environmental Protection Technology (Henan) Co. Ltd China Recovery of metals 100% PAF 14,761 (311) 1,209 (166) – Befesa Zinc Gravelines S,A,S, France Waelz oxide treatment 100% PwC 8,000 1,100 – 534 – Befesa Holding US, Inc (Consolidated) United States Waelz oxide treatment 100% Grant Thornton LLP 134,152 (6,397) 4,816 (2,770) – Joint operations – Recytech, S.A. France Recovery of metals 50% Deloitte 6,240 7,526 – 19,450 – (1) Companiesnotsubjecttostatutoryaudit 169Befesa Annual Report 2021 Additional information Statutory  financialstatements Consolidated  financialstatements Management report  ToBefesa’s  shareholders Appendix continued Subsidiaries and joint operations 2020 Thousands of euros (31/12/2020) Entity Country Activity % Interest Auditor Capital Reserves Translation differences Results Interim dividend Subsidiaries Befesa Management Services GmbH Germany Holding 100% KPMG 25 1,331 – 263 – Befesa Medio Ambiente, S.L.U. Spain Holding 100% KPMG 150,003 453,978 – 31,139 – MRH Residuos Metálicos S.L.U. Spain Holding 100% (1) 15,600 11,666 – (735) – – Befesa Salzschlacke GmbH Germany Aluminiumwaste treatment 100% KPMG 25 3,429 – 1,236 – – Befesa Aluminium Germany GmbH Germany Aluminiumwaste treatment 100% KPMG 25 303 – – – – Befesa Aluminio, S.L.U. Spain Recovery of metals 100% KPMG 4,767 74,870 – (11,969) – Befesa Aluminio Comercializadora, S.L. Spain Marketing company 100% (1) 90 21 – – – Befesa Salt Slags, Ltd UK Recovery of metals 100% CURO 27,108 (30,512) (1,619) (19,924) – Befesa Zinc, S.A.U. Spain Holding 100% KPMG 25,010 48,098 – 19,907 (15,000) – Befesa Zinc Comercial, S.A., (Sociedad Unipersonal) Spain Saleofrecycledwaste 100% KPMG 60 10,118 – 1,234 – – Befesa Zinc Aser, S.A. (Sociedad Unipersonal) Spain Recovery of metals 100% KPMG 4,260 11,503 – 32,803 (30,000) – Befesa Zinc Sur, S.L., (Sociedad Unipersonal) Spain Recovery of metals 100% (1) 605 242 – (2) – – Befesa Zinc Óxido, S.A. (Sociedad Unipersonal) Spain Recovery of metals 100% KPMG 1,102 5,818 – (1,008) – – Befesa Steel R&D, S.L., (Sociedad Unipersonal) Spain Development of projectsandtechnology innovation 100% (1) 3 2,266 – 271 – – Befesa Valera, S.A.S. France Recovery of metals 100% PwC 4,000 3,641 – (2,322) – Befesa Zinc Gravelines S,A,S, France Waelz oxide treatment 100% PwC 8,000 4,519 – 581 – Befesa ScanDust AB Sweden Recovery of metals 100% KPMG 5,309 3,053 (358) (5,503) – Notes to the consolidated financial statements as at 31 December 2021 (thousands of euros) continued 03 Consolidated financial statements 170 Befesa Annual Report 2021 To Befesa’s shareholders Thousands of euros (31/12/2020) Entity Country Activity % Interest Auditor Capital Reserves Translation differences Results Interim dividend – Befesa Silvermet Turkey, S.L. Spain Holding 53.60% (1) 9,175 1,102 – (1,465) – Befesa Silvermet Iskenderun Celik Tozu Geri Donusumu, A.S. Turkey Recovery of metals 100% PwC 2,672 23,540 (10,842) (1,164) – Befesa Silvermet DisTicaret, A.S. Turkey Recovery of metals 100% (1) 1,198 1,492 (1,574) 1,068 – – Befesa Zinc Germany GmbH Germany Holding 100% KPMG 25 6,569 – 26,382 – Befesa Steel Services GmbH Germany Sales and logistics 100% KPMG 2,045 67, 819 – 23 – Befesa Zinc Duisburg GmbH Germany Recovery of metals 100% KPMG 5,113 14,922 – 50 – BefesaZincKoreaLtd SouthKorea Recovery of metals 100% KPMG 17,015 40,796 2,012 555 – Befesa Pohang Co. Ltd SouthKorea Recovery of metals 100% KPMG 1,770 7,023 (238) (2,099) – Befesa Zinc Freiberg GmbH &Co,KG Germany Recovery of metals 100% KPMG 1,000 14,518 – (164) – Befesa Zinc Environmental Protection Technology (Jiangsu) Co. Ltd China Recovery of metals 100% PAF 21,407 101 (652) (319) – Befesa (China) Investment Co. Ltd China Holding 100% PAF 17,390 (321) (70) (273) – Befesa Zinc Environmental Protection Technology (Henan) Co. Ltd China Recovery of metals 100% PAF 13,319 (102) (327) (213) – Joint operations – Recytech, S.A. France Recovery of metals 50% Deloitte 6,240 7,230 – 5,796 – (1) Companiesnotsubjecttostatutoryaudit 171Befesa Annual Report 2021 Additional information Statutory  financialstatements Consolidated  financialstatements Management report  ToBefesa’s  shareholders Responsibility statement Consolidated financial statement We, Javier Molina Montes and Wolf Uwe Lehmann, respectively Chief Executive Officer and Chief Financial Officer, confirm, to the best of ourknowledge, that: ■ the2021consolidatedfinancial statements of Befesa S.A. presented in this Annual Report, whichhavebeenpreparedin accordancewiththeInternational Financial Reporting Standards as adopted by the European Union, giveatrueandfairviewofthe assets,liabilities,financialposition andprofitorlossofBefesaS.A.and the undertakings included in the consolidationtakenasawhole;and ■ the management report includes a fairreviewofthedevelopmentand performance of the business and the position of Befesa S.A. and the undertakings included in the consolidationtakenasawhole, togetherwithadescriptionofthe principal risks and uncertainties thattheyface. Luxembourg, 29 March 2022 Javier Molina CEO Wolf Uwe Lehmann CFO 03 Consolidated financial statements 172 Befesa Annual Report 2021 To Befesa’s shareholders Independent auditor’s report KPMG Luxembourg, Société anonyme 39, Avenue John F. Kennedy L-1855 Luxembourg Tel.: +352 22 51 51 1 Fax: +352 22 51 71 E-mail: info@kpmg.lu Internet: www.kpmg.lu © 2022 KPMG Luxembourg, Société anonyme, with registered office at 39, Avenue John F. Kennedy, L-1855 Luxembourg, registered with RCS Luxembourg under number B149133, and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. To the Shareholders of Befesa S.A. 68-70, Boulevard de la Pétrusse L-2320 Luxembourg Luxembourg REPORT OF THE REVISEUR D’ENTREPRISES AGREE Report on the audit of the consolidated financial statements Opinion We have audited the consolidated financial statements of Befesa S.A. and its subsidiaries (the "Group"), which comprise the consolidated statement of financial position as at 31 December 2021, and the consolidated income statement, consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies. In our opinion, the accompanying consolidated financial statements give a true and fair view of the consolidated financial position of the Group as at 31 December 2021 and of its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union. Basis for opinion We conducted our audit in accordance with the EU Regulation N° 537/2014, the Law of 23 July 2016 on the audit profession (“Law of 23 July 2016”) and with International Standards on Auditing (“ISAs”) as adopted for Luxembourg by the Commission de Surveillance du Secteur Financier (“CSSF”). Our responsibilities under the EU Regulation N° 537/2014, the Law of 23 July 2016 and ISAs as adopted for Luxembourg by the CSSF are further described in the « Responsibilities of the “réviseur d'entreprises agréé” for the audit of the consolidated financial statements » section of our report. We are also independent of the Group in accordance with the International Code of Ethics for Professional Accountants, including International Independence Standards, issued by the International Ethics Standards Board for Accountants (“IESBA Code”) as adopted for Luxembourg by the CSSF together with the ethical requirements that are relevant to our audit of the consolidated financial statements, and have fulfilled our other ethical responsibilities under those ethical requirements. 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 judgment, were of most significance in our audit of the consolidated financial statements of the current period. These matters were addressed in the context of the audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. 173Befesa Annual Report 2021 Additional information Statutory  financialstatements Consolidated  financialstatements Management report  ToBefesa’s  shareholders Independent auditor’s report continued Acquisition of American Zinc Recycling Corp. (AZR) a. Why the matter was considered to be one of the most significant in our audit of the consolidated financial statements of the current period On 17 August 2021 the Group acquired from an unrelated third party a 100% interest in American Zinc Recycling Corp. (AZR), currently Befesa Zinc US, Inc. The purchase price amounted to EUR 130,563 thousand. The transaction is considered a business combination and is accounted for according to IFRS 3. The assets, liabilities and contingent liabilities acquired were stated at their fair values which were determined in the course of the purchase price allocation performed by management. This resulted in preliminary net assets measured at fair value in the amount of EUR (98,111) thousand and goodwill in the amount of EUR 228,674 thousand. The purchase price allocation performed requires the management to make discretionary decisions, estimates and assumptions. Changes in these assumptions may have a material impact on the fair values. We identified the acquisition of American Zinc Recycling Corp. (AZR) and in particular the purchase price allocation as a key audit matter because of its significance to the consolidated financial statements and because of the significant judgement of the management and estimation required in performing the purchase price allocation which could be subject to error or potential management bias. b. How the matter was addressed in our audit Our audit procedures concerning the acquisition of American Zinc Recycling Corp. (AZR) and the purchase price allocation included, but were not limited to, the following: � Obtaining an understanding of management’s process related to the purchase price allocation. � Assessing the appropriateness of the accounting treatment applied to the acquisition. � With the involvement of our valuation specialist: • Evaluating the methodology applied by management for the valuation of assets, liabilities and contingent liabilities acquired; • Testing the mathematical accuracy of the models used for the valuation; • Assessing the key valuation assumptions; • Validating key inputs and data used in the valuation model. � Assessing whether the Group’s disclosures in the consolidated financial statements reflect the business combination with reference to the requirements of the prevailing accounting standards. Recoverability of deferred tax assets a. Why the matter was considered to be one of the most significant in our audit of the consolidated financial statements of the current period The consolidated statement of financial position of the Group includes deferred tax assets amounting to EUR 125,462 thousand as at 31 December 2021. This amount includes EUR 69,357 thousand relating to tax loss carryforwards and tax credits and tax relief. Deferred tax assets may be recognised based on a number of factors, including whether the Group will have sufficient tax profits in future periods against which tax loss carryforwards and tax credits and tax relief can be utilised. 03 Consolidated financial statements 174 Befesa Annual Report 2021 To Befesa’s shareholders The recognition of deferred tax assets relies on the exercise of significant judgement by the Board of Directors in respect of assessing the sufficiency of future taxable profits and the probability of such future taxable profit being generated and future reversals of existing taxable temporary differences. We identified the recognition of deferred tax assets as a key audit matter because of its significance to the consolidated financial statements and because of the significant judgement of the Board of Directors and estimation required in the forecasting future taxable profits which could be subject to error or potential management bias. b. How the matter was addressed in our audit Our audit procedures concerning the recoverability of deferred tax assets included, but were not limited to, the following:  Testing the design and implementation of the key controls on recognition and valuation of deferred tax assets.  Inspecting management’s assessment of the recoverability of the deferred tax assets by testing the assumptions supporting projected forecasts.  Challenging the reasonability of the deferred tax assets which are expected to be recovered annually, by reference to the applicable tax legislation.  Assessing whether the Group’s disclosures in the consolidated financial statements of the application of judgement in estimating recognised and unrecognised deferred tax asset balances appropriately reflect the Group’s deferred tax position with reference to the requirements of the prevailing accounting standards. Other information The Board of Directors is responsible for the other information. The other information comprises the information stated in the consolidated report including the consolidated management report and the Corporate Governance Statement but does not include the consolidated financial statements and our report of the “réviseur d'entreprises agréé” thereon. Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the consolidated financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report this fact. We have nothing to report in this regard. Responsibilities of the Board of Directors and Those Charged with Governance for the consolidated financial statements The Board of Directors is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with IFRSs as adopted by the European Union, and for such internal control as the Board of Directors determines is necessary to enable the preparation of 175Befesa Annual Report 2021 Additional information Statutory  financialstatements Consolidated  financialstatements Management report  ToBefesa’s  shareholders Independent auditor’s report continued consolidated financial statements that are free from material misstatement, whether due to fraud or error. The Board of Directors is responsible for presenting and marking up the consolidated financial statements in compliance with the requirements set out in the Delegated Regulation 2019/815 on European Single Electronic Format (“ESEF Regulation”). In preparing the consolidated financial statements, 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. Those charged with governance are responsible for overseeing the Group’s financial reporting process. Responsibilities of the réviseur d'entreprises agréé for the audit of the consolidated financial statements The objectives of our audit are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue a report of the “réviseur d'entreprises agréé” that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the EU Regulation N° 537/2014, the Law of 23 July 2016 and with ISAs as adopted for Luxembourg by the CSSF 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 financial statements. Our responsibility is to assess whether the consolidated financial statements have been prepared in all material respects with the requirements laid down in the ESEF Regulation. As part of an audit in accordance with the EU Regulation N° 537/2014, the Law of 23 July 2016 and with ISAs as adopted for Luxembourg by the CSSF, we exercise professional judgment and maintain professional skepticism throughout the audit. We also: — Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. — Obtain an understanding of internal control relevant to the audit in order to design audit 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. 03 Consolidated financial statements 176 Befesa Annual Report 2021 To Befesa’s shareholders — 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 report of the “réviseur d'entreprises agréé” to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our report of the “réviseur d'entreprises agréé”. 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 financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation. — Obtain sufficient appropriate audit evidence regarding the financial information of the entities and 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 those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide those charged with governance with a statement that we have complied with 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, actions taken to eliminate threats or safeguards. From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our report unless law or regulation precludes public disclosure about the matter. Report on other legal and regulatory requirements We have been appointed as “réviseur d'entreprises agréé” by the Shareholders on 30 June 2021 and the duration of our uninterrupted engagement, including previous renewals and reappointments, is three years. The consolidated management report is consistent with the consolidated financial statements and has been prepared in accordance with applicable legal requirements. The Corporate Governance Statement is included in the management report. The information required by Article 68ter paragraph (1) letter d) of the law of 19 December 2002 on the commercial and companies register and on the accounting records and annual accounts of undertakings, as 177Befesa Annual Report 2021 Additional information Statutory  financialstatements Consolidated  financialstatements Management report  ToBefesa’s  shareholders Independent auditor’s report continued amended, is consistent with the consolidated financial statements and has been prepared in accordance with applicable legal requirements. We confirm that the audit opinion is consistent with the additional report to the audit committee or equivalent. We confirm that the prohibited non-audit services referred to in the EU Regulation N° 537/2014 were not provided and that we remained independent of the Group in conducting the audit. We have checked the compliance of the consolidated financial statements of the Group as at 31 December 2021 with relevant statutory requirements set out in the ESEF Regulation that are applicable to consolidated financial statements. For the Group it relates to: • Consolidated financial statements prepared in a valid xHTML format; • The XBRL markup of the consolidated financial statements using the core taxonomy and the common rules on markups specified in the ESEF Regulation. In our opinion, the consolidated financial statements of Befesa S.A. as at 31 December 2021, identified as LU1704650164-JA-EQ-2021-12-31-en.ZIP, have been prepared, in all material respects, in compliance with the requirements laid down in the ESEF Regulation. Luxembourg, 29 March 2022 KPMG Luxembourg Société anonyme Cabinet de révision agréé Stephan Lego-Deiber Partner 03 Consolidated financial statements 178 Befesa Annual Report 2021 To Befesa’s shareholders 179Befesa Annual Report 2021 Additional information Statutory  financialstatements Consolidated  financialstatements Management report  ToBefesa’s  shareholders 179Befesa Annual Report 2021 Reintroduce Recovered materials intothe market. 180 Befesa Annual Report 2021 To Befesa’s shareholders Statutory financial statements 182 Balance sheet 186 Profitandlossaccount 188 Notestothestatutoryfinancialstatements 198 Responsibility statement 199 Independent auditor’s report 181Befesa Annual Report 2021 Additional information Statutory  financialstatements Consolidated  financialstatements Management report To Befesa’s shareholders Note(s) 2021 2020 Assets A. Subscribed capital unpaid – – I. Subscribed capital not called – – II. Subscribed capital called but unpaid – – B. Formation expenses 3,253,437.40 – C. Fixed assets 1,223,051,150.60 768,667,511.59 I. Intangible assets – – 1. Costs of development – – 2. Concessions, patents, licences, trade marks and similar rightsandassets,iftheywere – – a) acquired for valuable consideration and need not be shownunderC.I.3 – – b) created by the undertaking itself – –   3. Goodwill,totheextentthatitwasacquiredforvaluable consideration – – 4. Payments on account and intangible assets under development – – II. Tangible assets – – 1. Land and buildings – – 2. Plant and machinery – –   3. Otherfixturesandfittings,toolsandequipment – – 4. Payments on account and tangible assets in the course of construction – – III. Financial assets 4 1,223,051,150.60 768 ,667,511.59   1. Sharesinaffiliatedundertakings 597,051,150.60 242,667,511.59   2. Loanstoaffiliatedundertakings 626,000,000.00 526,000,000.00 3. Participating interests – –   4. Loanstoundertakingswithwhichtheundertakingis linked by virtue of participating interests – –   5. Investmentsheldasfixedassets – – 6. Other loans – – D. Current assets 6,066,419.91 21,071,518.05 I. Stocks – –   1. Rawmaterialsandconsumables – – 2. Work in progress – – 3. Finished goods and goods for resale – – 4. Payments on account – – Balance sheet for the year ended 31 December 2021 (Expressed in euros) 04 Statutory financial ststements 182 Befesa Annual Report 2021 To Befesa’s shareholders Note(s) 2021 2020 II. Debtors 5 6,006,508.47 21,051,202.22 1. Trade debtors – –    a) becomingdueandpayablewithinoneyear – – b) becoming due and payable after more than one year – –   2. Amountsowedbyaffiliatedundertakings 5,914,893.47 21,051,202.22    a) becomingdueandpayablewithinoneyear 5,219,696.51 12,189,307.60 b) becoming due and payable after more than one year 695,196.96 8,861,894.62   3. Amountsowedbyundertakingswithwhichthe undertaking is linked by virtue of participating interests – –    a) becomingdueandpayablewithinoneyear – – b) becoming due and payable after more than one year – – 4. Other debtors 91,615.00 –    a) becomingdueandpayablewithinoneyear 91,615.00 –    b) becomingdueandpayableaftermorethanoneyear – – III. Investments – –   1. Sharesinaffiliatedundertakings – –   2 .  O w n  s h a r e s – – 3. Other investments – – IV. Cash at bank and in hand 59,911.4 4 20,315.83 E. Prepayments 6 5,727,894.43 6,020,966.01 Total assets 1,238,098,902.34 795,759,995.65 Note(s) 2021 2020 Capital, reserves and liabilities A Capital and reserves 7 600,169,051.10 258,016,079.13 183Befesa Annual Report 2021 Additional information Statutory  financialstatements Consolidated  financialstatements Management report To Befesa’s shareholders Note(s) 2021 2020 I. Subscribed capital 111,047,595.14 94,575,646.35 II. Share premium account 532,868,267.82 263,875,806.27 III. Revaluation reserve – – IV. Reserves 29,556,938.60 39,436,283.05 1. Legal reserve 9,457,564.64 9,457,564/64   2. Reserveforownshares – – 3. Reserves provided for by the articles of association – – 4. Other reserves, including the fair value reserve 20,099,373.96 29,978,718.41 a) other available reserves 20,099,373.96 29,978,718.41 b) other non available reserves – –  V. Profitorlossbroughtforward -129,992,312.09 -136,538,432.30  VI. Profitorlossforthefinancialyear 56,688,561.63 6,546,120.21 VII. Interim dividends – -9,879,344.45 VIII. Capital investment subsidies – – B. Provisions 8 806,273.00 438,589.00 1. Provisions for pensions and similar obligations – – 2. Provisions for taxation – – 3. Other provisions 806,273.00 438,589.00 C. Creditors 9 631,395,683.81 531,284,361.51 1. Debenture loans – – a) Convertible loans – –    i) becomingdueandpayablewithinoneyear – – ii) becoming due and payable after more than one year – – b) Non convertible loans – –    i) becomingdueandpayablewithinoneyear – – ii) becoming due and payable after more than one year – –  2. Amountsowedtocreditinstitutions 631,219,696.51 531,189,307.60   a) becomingdueandpayablewithinoneyear 5,219,696.51 5,189,307.60 b) becoming due and payable after more than one year 626,000,000.00 526,000,000.00 Balance sheet for the year ended 31 December 2021 (expressed in euros) continued 04 Statutory financial ststements 184 Befesa Annual Report 2021 To Befesa’s shareholders Note(s) 2021 2020 3. Payments received on account of orders in so far as they are shownseparatelyasdeductionsfromstocks – –   a) becomingdueandpayablewithinoneyear – – b) becoming due and payable after more than one year – – 4. Trade creditors 13,248.85 42,402.52   a) becomingdueandpayablewithinoneyear 13,248.85 42,402.52 b) becoming due and payable after more than one year – – 5. Bills of exchange payable – –   a) becomingdueandpayablewithinoneyear – – b) becoming due and payable after more than one year – –  6. Amountsowedtoaffiliatedundertakings – –   a) becomingdueandpayablewithinoneyear – – b) becoming due and payable after more than one year – –  7. Amountsowedtoundertakingswithwhichtheundertakingis linked by virtue of participating interests – –   a) becomingdueandpayablewithinoneyear – – b) becoming due and payable after more than one year – – 8. Other creditors 162,738.45 52,651.39 a) Tax authorities 120,738.45 40,651.39 b) Social security authorities – – c) Other creditors 42,000.00 12,000.00    i) becomingdueandpayablewithinoneyear 42,000.00 12,000.00 ii) becoming due and payable after more than one year – – D. Deferred income 10 5,727,894.43 6,020,966.01 Total capital, reserves and liabilities 1,238,098,902.34 795,759,995.65 185Befesa Annual Report 2021 Additional information Statutory  financialstatements Consolidated  financialstatements Management report To Befesa’s shareholders Note(s) 2021 2020 1. Net turnover – – 2. Variationinstocksoffinishedgoodsandinwork in progress – – 3. Work performed by the undertaking for its own purposes andcapitalised – – 4. Other operating income 11 1,198,248.03 1,097,451.51 5. Raw materials and consumables and other external expenses 12 -833,638.73 -730,871.87  a) Rawmaterialsandconsumables – – b) Other external expenses -833,638.73 -730,871.87 6. Staffcosts 13 a) Wages and salaries – – b) Social security costs – – i) relating to pensions – – ii) other social security costs – –  c) Otherstaffcosts – – 7. Value adjustments -395,688.33 – a) in respect of formation expenses and of tangible and intangiblefixedassets 14 -395,688.33 – b) in respect of current assets – – 8. Other operating expenses 15 -771,50 8.12 -783,133.30 9. Income from participating interests 16 55,000,000.00 7,000,000.00  a) derivedfromaffiliatedundertakings 55,000,000.00 7,000,000.00 b) other income from participating interests – – 10. Income from other investments and loans forming part of thefixedassets 17 13,505,817.15 11,046,032.29  a) derivedfromaffiliatedundertakings 13,505,817.15 11,046,032.29 b) other income not included under a) – – 11. Other interest receivable and similar income 18 2,525,229.62 2,577,756.49  a) derivedfromaffiliatedundertakings 2,525,229.62 2,577,756.49 Profit and loss account for the year ended 31 December 2021 (Expressed in euros) 04 Statutory financial ststements 186 Befesa Annual Report 2021 To Befesa’s shareholders Note(s) 2021 2020 b) other interest and similar income – – 12. Shareofprofitorlossofundertakingsaccountedforunder the equity method – – 13. Valueadjustmentsinrespectoffinancialassetsandof investments held as current assets – – 14. Interest payable and similar expenses 19 -13,463,157.99 -13,492,759.91  a) concerningaffiliatedundertakings – – b) other interest and similar expenses -13,463,157.99 -13,492,759.91 15. Taxonprofitorloss – – 16. Profitorlossaftertaxation 56,765,301.63 6,714,475.21 17. Other taxes not shown under items 1 to 16 20 -76,740.00 -168,355.00 18. Profitorlossforthefinancialyear 56,688,561.63 6,546,120.21 187Befesa Annual Report 2021 Additional information Statutory  financialstatements Consolidated  financialstatements Management report To Befesa’s shareholders 1. General information BefesaS.A.(the“Company”)(formerlyBilbaoMidcoS.àr.l.)wasincorporatedinLuxembourgon31May2013asa “sociétéàresponsabilitélimitée”subjecttotheLuxembourglawforanunlimitedperiodoftime.On18October2017, theshareholdersresolvedtoconverttheCompanyfromitscurrentformofa“sociétéàresponsabilitélimitée”intoa “sociétéanonyme”withoutcreatinganewlegalentityoraffectingthelegalexistenceorpersonalityoftheCompany inanymanner,andtochangethenameoftheCompanyintoBefesaS.A..TheregisteredofficeoftheCompanywas establishedat46,BoulevardGrande-DuchesseCharlotte,L-1330Luxembourg,andonJanuary2022itwas transferredto68-70BoulevarddelaPétrusse,L-2320Luxembourg. TheregisteredofficeoftheCompanyisestablishedinLuxembourgandtheCompanynumberwiththeRegistrede CommerceisB177697.ThefinancialyearoftheCompanystartson1January2021andendson31December2021. TheobjectoftheCompanyistheacquisition,holdinganddisposalofinterestsinLuxembourgand/orinforeign companiesandundertakings,aswellastheadministration,developmentandmanagementofsuchinterests.The Companymayprovideloansandfinancinginanyotherkindorform,orgrantguaranteesorsecurityinanykindor form,forthebenefitofthecompaniesandundertakingsformingpartofthegroupofwhichtheCompanyisa member. The Company may also invest in real estate, in intellectual property rights or any other movable or immovableassetsinanykindorform.TheCompanymayborrowinanykindorformandissuebonds,notesorany otherdebtinstrumentsaswellaswarrantsorothersharesubscriptionrights.Inageneralfashion,theCompanymay carryoutanycommercial,industrialorfinancialoperation,whichitmaydeemusefulintheaccomplishmentand developmentofitsobject. FollowingtheInitialPublicOffer(IPO)heldon3November2017,theCompanyislistedontheFrankfurtStock Exchange (ISIN number: LU1704650164). TheCompanyalsopreparesconsolidatedfinancialstatementsinaccordancewithInternationalFinancialReporting StandardsasadoptedbytheEuropeanUnion(IFRS).Theconsolidatedfinancialstatementsandthemanagement reportareavailableattheregisteredofficeoftheCompany. 2. Summaryofsignificantaccountingpolicies 2.1 Basis of preparation TheannualaccountsoftheCompanyarepreparedinaccordancewithLuxembourglegalandregulatoryrequirements. Accountingpoliciesandvaluationrulesfollowthehistoricalcostconventionandare,besidestheoneslaiddownbythe lawofDecember19,2002asamendedonDecember18,2015,determinedandappliedbytheBoardofDirectors. The preparation of annual accounts requires the use of certain critical accounting estimates. It also requires the BoardofDirectorstoexerciseitsjudgementintheprocessofapplyingtheaccountingpolicies.Changesin assumptionsmayhaveasignificantimpactontheannualaccountsintheperiodinwhichtheassumptionschanged. The Board of Directors believes that the underlying assumptions are appropriate and that the annual accounts thereforepresentthefinancialpositionandresultsfairly. TheBoardofDirectorsmakesestimatesandassumptionsthataffectthereportedamountsofassetsandliabilitiesin thenextfinancialyear.Estimatesandjudgementsarecontinuallyevaluatedandarebasedonhistoricalexperience and other factors, including expectations of future events that are believed to be reasonable under circumstances. TheCompany’sannualaccountshavebeenpreparedonagoingconcernbasiswhichassumesthattheCompany willbeabletomeetitsliabilitiesastheyfalldue. Notes to the statutory financial statements as at 31 December 2021 (Expressed in euros) 04 Statutory financial ststements 188 Befesa Annual Report 2021 To Befesa’s shareholders 2.2 Foreign currency translation TheCompanymaintainsitsbooksandrecordsinEuro(“EUR”)andtheBalanceSheetandtheProfitandLoss account are expressed in this currency. Otherassetsandotherliabilities(exceptspecificcases)denominatedincurrenciesotherthanEURaretranslatedat theexchangeratesprevailingatthedateofthebalancesheet,unlessthiswouldleadtoanunrealisedexchangegain. Asaresult,realisedexchangegainsandlossesandunrealisedexchangelossesarerecordedintheprofitandloss account. Unrealised exchange gains are not recorded. Specificcases: Wherethereisaneconomiclinkbetweenanassetandliability,thesearevaluedintotalaccordingtothemethod describedaboveandthenetunrealisedexchangelossesarerecordedintheprofitorlossaccountswhereasthenet unrealised exchange gains are not recognised. 2.3 Formation expenses Formationexpensesarewrittenoffwithinaperiodoffiveyears. 2.4 Financial assets Sharesinaffiliatedundertakingsarevaluedatpurchasepriceincludingtheexpensesincidentalthereto. Loanstoaffiliatedundertakingsarevaluedatnominalvalueincludingtheexpensesincidentalthereto. IncaseofadurabledepreciationinvalueaccordingtotheopinionoftheBoardofDirectors,valueadjustmentsare madeinrespectoffinancialassets,sothattheyarevaluedatthelowerfiguretobeattributedtothematthebalance sheetdate.Thesevalueadjustmentsarenotcontinuedifthereasonsforwhichthevalueadjustmentsweremade have ceased to apply. 2.5 Debtors Debtorsarevaluedattheirnominalvalue.Theyaresubjecttovalueadjustmentswheretheirrecoveryis compromised.Thesevalueadjustmentsarenotcontinuedifthereasonsforwhichthevalueadjustmentsweremade have ceased to apply. 2.6 Prepayments Thisassetitemincludesexpenditureincurredbutrelatingtoasubsequentfinancialyear. 2.7 Provisions Provisionsareintendedtocoverlossesordebtsofwhichthenatureisclearlydefinedandwhich,atthedateofthe balance sheet, are either likely to be incurred or certain to be incurred but uncertain as to their amount or as to the dateonwhichtheywillarise. Provisionsmayalsobecreatedinordertocoverchargeswhichhavetheirorigininthefinancialyearunderrevieworin apreviousfinancialyear,thenatureofwhichisclearlydefinedandwhichatthedateofthebalancesheetareeither likelytobeincurredorcertaintobeincurredbutuncertainastotheiramountorastothedateonwhichtheywillarise. Provision for taxation ProvisionsfortaxationcorrespondingtothedifferencebetweenthetaxliabilityestimatedbytheCompanyandthe advancepaymentsforthefinancialyearsforwhichthetaxreturnhasnotyetbeenfiledarerecordedunderthe caption “Provisions”. 189Befesa Annual Report 2021 Additional information Statutory  financialstatements Consolidated  financialstatements Management report To Befesa’s shareholders 2. Summaryofsignificantaccountingpoliciescontinued 2.8 Creditors Creditors are recorded at their reimbursement value. When the amount repayable on account is greater than the amountreceived,thedifferenceisshownasanassetandiswrittenoffovertheperiodofthedebt. 2.9 Deferred income Thisliabilityitemincludesincomereceivedbutrelatingtoasubsequentfinancialyear. 2.10 Value adjustments Valueadjustmentsarededucteddirectlyfromtherelatedasset. 2.11 Income from dividend Incomefromdividendsisrecognisedwhentheshareholder’srighttoreceivepaymentisestablished. 2.12 Interest income and charges Interest income and interest charges are accrued on a timely basis, by reference to the principal outstanding and at the nominal interest rate applicable. 3. Formation expenses The increase in the capital and reserves of the 16 June 2021 had formation expenses of 3,649,125.73 EUR. As of 31December2021,395,688.33EURhavebeenamortisedleaving3,253,437.40EURinthebalancesheet. 4. Financial assets Financial assets held at cost less impairment – movements gross book value Gross book value – opening balance Additions Disposals Transfers Gross book value – closing balance Sharesinaffiliatedundertakings 242,667,511.59 354,383,639.01 – – 597,051,150.60 Loanstoaffiliatedundertakings 526,000,000.00 100,000,000.00 – – 626,000,000.00 Total 768,667,511.59 454,383,639.01 – – 1,223,051,150.60 Financial assets held at cost less impairment – movements net book value Net book value opening balance Additions Disposals Transfers Net book value – closing balance Sharesinaffiliatedundertakings 242,667,511.59 354,383,639.01 – – 597,051,150.60 Loanstoaffiliatedundertakings 526,000,000.00 100,000,000.00 – – 626,000,000.00 Total 768,667,511.59 454,383,639.01 – – 1,223,051,150.60 IntheopinionoftheBoardofDirectors,nodurabledepreciationinvaluehasoccurredonsharesinaffiliated undertakingsasat31December2021neitherasat31December2020,accordinglynovalueadjustment wasrecorded. InDecember2021,theCompanyusedthecapitalincreaseproceeds(Note7)tofinanceBefesaMedioAmbiente, S.L.U.throughacashcontributionof55,000,000.00EUR.Inaddition,aloanreceivablefromanagreementwith Befesa Medio Ambiente S.L.U. from 14 July 2021 in the amount of 293,483,638.47 EUR (Note 16) and a receivable fromthe“ReciprocalCreditAgreement”mentionedinNote5intheamountof5,900,000.54EURwereconvertedinto equity of Befesa Medio Ambiente, S.L.U. Notes to the statutory financial statements as at 31 December 2021 (expressed in euros) continued 04 Statutory financial ststements 190 Befesa Annual Report 2021 To Befesa’s shareholders UndertakingsinwhichtheCompanyholdsatleast20%intheirsharecapitalareasfollows: As at 31/12/2020 Name Registered Office % holding Net book value (EUR) Net equity (EUR) Net result (EUR) Befesa Management Services GmbH audited account Germany 100% 25,000.00 1,356,415.13 262,601.15 Befesa Medio Ambiente, S.L.U. audited account Spain 100% 597,026,150.60 445,746,000.00 -13,873,000.00 Loans to affiliated undertakings Counterparty Currency Amount Interest rate Maturity date Loan to Befesa Medio Ambiente S.L.U EUR 626,000,000.00 1.75% 09.07.2026 The Facility agreement granted to the Company on 7 December 2017 (Note 9) and the loan granted to Befesa Medio Ambiente, S.L.U. have the same principal economic terms. Therefinancingoftheexistingcapitalstructurewassuccessfullycompletedon9July2019inatransactionthat extendsBefesa’sdebtmaturityuptoJune2026withaseven-yearTLB. In February 2020, the Company repriced the loan granted to Befesa Medio Ambiente, S.L.U., reducing its interest rate, in order to have the same principal economic terms as the Facility agreement granted to the Company (Note 9). On 16 August 2021, the parties signed an amendment n°3 for an additional amount of EUR 100,000,000.00 (Note 9). InAugust2021,themarginapplicabletothisloanwasreducedby25bpstoEuriborplus175bps. As at 31 December 2021, the nominal amount of this loan is EUR 626,000,000.00 (2020: EUR 526,000,000.00) and accrued interest amount to EUR 5,144,277.81 (2020: EUR 5,113,889.91) (Note 5). IntheopinionoftheBoardofDirectors,nodurabledepreciationinvaluehasoccurredonloanstoaffiliated undertakingsasat31December2021neitherasat31December2020,accordinglynovalueadjustment wasrecorded. 5. Debtors Debtors by category Within one year More than one year As at 31/12/2021 As at 31/12/2020 Amountsowedbyaffiliatedundertakings 5,219,696.51 695,196.96 5,914,893.47 21,051,202.22 Other debtors 91,615.00 – 91,615.00 – Total 5, 311,311.51 695,196.96 6,006,508.47 21,051,202.22 191Befesa Annual Report 2021 Additional information Statutory  financialstatements Consolidated  financialstatements Management report To Befesa’s shareholders 5.1 Debtors – Becoming due and payable within one year Thedetailofdebtorsisthefollowing: Becoming due and payable within one year As at 31/12/2021 As at 31/12/2020 Dividend receivable from Befesa Medio Ambiente S.L.U. – 7,000,000.00 AccruedInterest–InterestRateSwapBefesaMedioAmbienteS.L.U. 75,418.70 75,418.69 Accrued Interest Loan Befesa Medio Ambiente S.L.U. 5,144,277. 81 5,113,888.91 Other debtors: Advances NWT 91,615.00 – Total 5,311,311.51 12,189,307.60 5.2 Debtors – Becoming due and payable within more than one year Becoming due and payable within more than one year As at 31/12/2021 As at 31/12/2020 Receivable from Befesa Medio Ambiente S.L.U. 695,196.96 8,861,894.62 Total 695,196.96 8,861,894.62 Asat1December2020,theCompanysigneda“ReciprocalCreditAgreement”withBefesaMedioAmbiente,S.L.U. TheinterestisEuriborplusamarginof0.50%andthematurityisindefinite. As at 31 December 2021 the “Reciprocal Credit Agreement” amounts EUR 695,196.96 (2020: EUR 8,861,894.62). In the opinion of the Board of Directors, the recovery of debtors is not compromised as at 31 December 2021, accordinglynovalueadjustmentwasrecorded. 6. Prepayments Prepayments As at 31/12/2021 As at 31/12/2020 Transaction costs 5,727,894.43 6,020,966.01 Total 5,727,894.43 6,020,966.01 TransactioncostsofEUR10,847,833.35werepaidinrelationtotheFacilityagreementgrantedtotheCompany (Note 9). These transactions costs have been recognised and are amortised all along the length of the facility. As at 31 December 2021, the accumulated prorated amortisation amounts to EUR 5,119,938.92 (2020: EUR 3,963,695.34). Notes to the statutory financial statements as at 31 December 2021 (expressed in euros) continued 04 Statutory financial ststements 192 Befesa Annual Report 2021 To Befesa’s shareholders 7. Capital and reserves Movements in capital and reserves Balance as at 31/12/2020 Increase of equity Allocation of preceding result Dividend Result of current year Balance as at 31/12/2021 Subscribed capital 94,575,646.35 16,471,948.79 – – – 111,047,595.14 Share premium 263,875,806.27 315,792,459.21 – -46,799,997.66 – 532,868,267.82 Legal reserve 9,457,564.64 – – – – 9,457,564.64 Other avalaible reserves 29,978,718.41 – – -9,879,344.45 – 20,099,373.96 Profitorloss broughtforward -136,538,432.30 – 6,546,120.21 – – -129,992,312.09 Profitorlossfor thefinancialyear 6,546,120.21 – -6,546,120.21 – 56,688,561.63 56,688,561.63 Interim dividend -9,879,344.45 – – 9,879,344.45 – – Total 258,016,079.13 332,264,408.00 – -46,799,997.66 56,688,561.63 600,169,051.10 Thenumberofsharesasat31December2021is39,999,998(34,066,705at31December2020)withaparvalueof 2,78 EUR each and fully paid up. On16June2021,theCompanyissued5,933,293newshareseachwithparvalueof2.78EUR(16,471,948.79EUR) andsharepremiumof53.22EUR(315,792,459.21EUR).Thenewshareswereincludedintheexistinglistingof Befesa’s shares in the Frankfurt Stock Exchange. On 14 July 2021, Befesa distributed to its shareholders a dividend of 1.17 EUR per share (repayment of the share premium), amounting to 46,799,997.66 EUR, as approved by the AGM held on 30 June 2021. The AGM also approved the interim dividend of 9,879,344.45 EUR approved by the Board of Directors in November 2020. On 2 July 2020, Befesa distributed to its shareholders a dividend of 0.44 EUR per share, amounting to 14,989,350.20 EUR, as approved by the AGM. In November 2020, the Board of Directors resolved to approve an interim dividend of 9,879,344.45 EUR. Legal reserve InaccordancewithLuxembourgrelevantlaw,theCompanyisrequiredtotransferaminimumof5%ofitsnetprofit foreachfinancialyeartoalegalreserve.Thisrequirementceasestobenecessaryoncethebalanceonthelegal reservereaches10%oftheissuedsharecapital.Ifthelegalreservelaterfallsbelowthe10%threshold,atleast5% ofnetprofitsmustbeallocatedagaintowardthereserve.Thelegalreserveisnotavailablefordistributionto theshareholders. 193Befesa Annual Report 2021 Additional information Statutory  financialstatements Consolidated  financialstatements Management report To Befesa’s shareholders 8. Provisions Provisions As at 31/12/2021 As at 31/12/2020 Other provisions 115,006.00 87,502.00 Long-term provision – 351,087.00 Short-term provision 691,267.00 – Total 806,273.00 438,589.00 Other provisions As at 31 December 2021 and 31 December 2020, the other provisions consist mainly of provision for other operating expenses not yet invoiced. Short-term provision As at 31 December 2021, Short-term provision relate to “Multi-Year Variable compensation (Long-Term Incentive Plan)” for the Non-Executive Directors. Long-term provision As at 31 December 2020, Long-term provision relate to “Multi-Year Variable compensation (Long-Term Incentive Plan)” for the Non-Executive Directors. 9. Creditors Creditors by category Within one year More than one year More than five years As at 31/12/2021 As at 31/12/2020 Amountsowedto credit institutions 5,219,696.51 626,000,000.00 – 631,219,696.51 531,189,307.60 Trade creditors 13,248.85 – – 13,248.85 42,402.52 Other creditors 162,738.45 – – 162,738.45 52,651.39 Total 5,395,683.81 626,000,000.00 – 631,395,683.81 531,284,361.51 Amounts owed to credit institutions On 19 October 2017, the Company entered into a Facility agreement of EUR 636,000,000.00. An amount of EUR 526,000,000.00wasdrawdownon7December2017.TheFacilitybearsinterestsat2.50%marginplusthree- months Euribor “0” Floor, and matures on 7 December 2022. Simultaneously, the Company also entered into an InterestRateSwapagreement(“IRS”),alsomaturingon7December2022.ThisIRScoversnotionalamountofEUR 316,000,000.00,andthefixedrateis0.358%,andthebenchmarkfloatingrateisEuribor.ThefairvalueofthisIRSis EUR -1,180,620.89 as at 31 December 2021 (2020: EUR -2,305,326.63). On9July2019,theGroupsuccessfullycompletedtherefinancingoftheEUR636millionFacilitiesAgreement. ThenewFacilitiesAgreementcomprises: – TermLoanB(“facility”or“TLB”)inanamountofEUR526million,whichisabulletwithamaturitydateofseven years. – RevolvingCreditFacility(RCF)inanamountofEUR75millionwithamaturityofsixyears. – AguaranteeFacilityCommitmentinanamountofEUR35millionwithamaturityofsixyears. On 17 February 2020, Befesa successfully repriced its TLB, reducing its interest rate by 50 bps to Euribor plus 200 bps. Thefacility’smaturitydateandallothertermsremaininplacewithoutfurtheramendment. Notes to the statutory financial statements as at 31 December 2021 (expressed in euros) continued 04 Statutory financial ststements 194 Befesa Annual Report 2021 To Befesa’s shareholders InMarch2020,Befesaarrangedaninterestrateswapinordertofixtheinterestfortheextensionperiodofthe refinancingsignedon9July2019.Thefixinterestrateis0.236%andthenotionalontheamounttotalledEUR 316.000.000. The fair value of this IRS is EUR 2,381,114.48 as at 31 December 2021. On 2 July 2021, the Company entered into an incremental facility notice under the facilities Agreement for an additional amount of EUR 100,000,000. As at 31 December 2021, the principal amount is EUR 626,000,000. Simultaneously, the Company increased the loan to Befesa Medio Ambiente, S.L.U. in this amount. Asat31December2021,interestontheFacilityisEuriborplusamarginof1.75%and2.00%inthecaseofRCF, thesemarginscanbeadjusteddependingontheratioofnetfinancialdebt/EBITDA. InAugust2021,themarginapplicabletoTLBwasreducedby25bpstoEuriborplus175bpsduetothedecreaseon the leverage ratio. Asat31December2021,theamountsbecomingdueandpayablewithinoneyeararecomposedofEUR 5,144,277.82 (2020: EUR 5,113,888.91) accrued interest on the facility, and of EUR 75,418.69 (2020: EUR 75,418.69) accrued interest on the IRS. 10. Deferred income Deferred income As at 31/12/2021 As at 31/12/2020 Deferred Income – Transaction costs 5,727,894.43 6,020,966.01 Total 5,727,894.43 6,020,966.01 The Facility agreement granted to the Company (Note 9) and the loan granted to Befesa Medio Ambiente, S.L.U. (Note 4) have the same principal economic terms. The transaction costs of EUR 10,847,833.75 on the Facility (Note 6) have been accounted for equally on the loan granted to Befesa Medio Ambiente, S.L.U.. 11. Other operating income The other operating income consists of the management fee for the costs the Company recharged to its subsidiary Befesa Medio Ambiente, S.L.U.. 12. Raw materials and consumables and other external expenses Other external expenses As at 31/12/2021 As at 31/12/2020 Accounting, auditing and domiciliation fees 128,243.28 86,489.00 Banking and similar services 1,063.52 768.49 Legal fees 252,015.77 198,102.84 Other commisions and professional fees 451,444.55 438,938.47 Miscellaneous 871.61 6,573.07 Total 833,638.73 730,871.87 195Befesa Annual Report 2021 Additional information Statutory  financialstatements Consolidated  financialstatements Management report To Befesa’s shareholders 13. Staffcosts Theaveragenumberofemployeesfortheyear2021wasnil(2020:nil). 14 Value adjustments As at 31/12/2021 As at 31/12/2020 Formation expenses 395,688.33 – Total 395,688.33 – 15. Other operating expenses The other operating expenses consists mainly of Directors´ fees. 16. Income from participating interests Theincomefromparticipatinginterestsderivedfromaffiliatedundertakingsconsistsofdividendreceived:EUR 55,000,000.00 from Befesa Medio Ambiente S.L.U. (2020: 7,000,000.00 from Befesa Medio Ambiente S.L.U.) 17. Incomefromotherinvestmentsandloansformingpartofthefixedassets Detailsofincomefromotherinvestmentsandloansformingpartofthefixedassetsfor2021and2020arefollows: As at 31/12/2021 As at 31/12/2020 Loanstoaffiliatedundertakings(Principal626millionEUR) 10,784,166.67 11,046,000.00 Loan agreement 14 July 2021 2,683,636.14 – Reciprocal Credit Agreement 38,014.34 32.29 Total 13,505,817.15 11,046,032.29 ThethreeloansaresignedwithBefesaMedioAmbiente,S.L.U. The“loanagreement14July2021”hasthesameinterestratethatthetheotherloanstoaffiliatedundertakings.This loanwasoffsetinDecember2021byanoncashcontributiontotheequityofBefesaMedioAmbiente,S.L.U.(Note4). 18. Other interest receivable and similar income The Other interest receivable and similar income consists of the costs the Company recharged to its subsidiary Befesa Medio Ambiente, S.L.U. As at 31/12/2021 As at 31/12/2020 Amortisation costs 1,156,243.58 1,086,046.09 Cost of IRS 1,146,992.22 1,150,134.67 Invoicesformanagementoffinancingactivitiesrechargedto affiliatedundertakings 221,993.82 341,575.73 Total 2,525,229.62 2,577,756.49 Notes to the statutory financial statements as at 31 December 2021 (expressed in euros) continued 04 Statutory financial ststements 196 Befesa Annual Report 2021 To Befesa’s shareholders 18. Other interest receivable and similar income The Other interest receivable and similar income consists of the costs the Company recharged to its subsidiary Befesa Medio Ambiente, S.L.U. 19. Interest payable and similar expenses As at 31 December 2021, the EUR 13,463,157.99 are mainly related to the interest cost of Facility Agreement of EUR 636.000.000,00(Note9),costoftheInterestRateSwap(“IRS”)agreement(Note9)andproratedamortisationcosts related to this Facility Agreement (Note 6). 20. Taxation TheCompanyissubjecttothegeneraltaxregulationapplicableinLuxembourg. 21. Off-balancesheetcommitmentsandtransactions On 19 October 2017, the Company entered into a Facility agreement of EUR 636.000.000,00 (Note 9). In this context, the Company pledged the shares of Befesa Medio Ambiente, S.L.U.. 22. Related-party transactions Therewerenodirectnorindirecttransactionswithmainshareholdersandmembersofitsadministrative, managementandsupervisorybodiesthatwouldbematerialandnotconcludedundernormalmarketconditions unless previously disclosed. 23. Advances and loans granted to the members of the managing and supervisory bodies Therearenoadvances,loansorcommitmentsgivenontheirbehalfbywayofguaranteeofanykindgrantedtothe membersofthemanagementandsupervisorybodiesduringthefinancialyear(2020:nil). 24. Subsequent events Therearenoeventsbetweenthebalancesheetdate(31December2021)andthedateofthepresentationofthe accounts(29March2022)thatwouldmateriallyimpacttheCompany’sassetsortheCompany’sfinancialand/or earnings position. With regards to the invasion of Ukraine by Russia, Befesa has no direct customers, suppliers, employees nor production sites in Russia nor Ukraine, referring to our main activities, environmental services to the steel and aluminiumindustries.Therefore,Befesaisnotbeingdirectlyaffectedbythisevent.Thelatterisaffectingtheglobal economy and indirectly Befesa, most notably for Befesa resulting in higher volatility in the prices of commodities, suchasenergyinflationandhigherbasemetalprices.Befesaiscloselymonitoringtheevolutionofenergypricesas wellasofbasemetalprices,especiallyzincandaluminium.Befesahas60%to75%ofitszincpayableannualoutput hedgedatattractivepricelevelsuptoJanuary2025,approximatelythreeyearsforward.Furthermore,various industriesobservesupplychaindisruptions.However,Befesa’sbusinessmodelisregionallyfocusedandasaresult theimpactisnotdirectbutagainratherindirect.Also,Befesa’sgeographicfootprintisgloballywelldiversifiedand balancedacrossEurope,AsiaandNorthAmerica.ThemostrelevantfuturegrowthinitiativesareoutsideofEurope, rather in Asia and in the US, therefore these are not directly impacted. As of the date of this Annual Report, Befesa has not been materially impacted. Befesa closely monitors potential indirect impacts but those can not be properly quantifiedatthisstageandaredependinghighlyonthedurationoftheinvasionofUkrainebyRussia.Most importantly, Befesa hopes the invasion to end very soon. 197Befesa Annual Report 2021 Additional information Statutory  financialstatements Consolidated  financialstatements Management report To Befesa’s shareholders Statutory financial statements We, Javier Molina Montes and Wolf Uwe Lehmann, respectively Chief Executive Officer and Chief Financial Officer, confirm, to the best of ourknowledge, that: ■ the 2021 statutory annual accounts of Befesa S.A. presented in this AnnualReport,whichhavebeen preparedinaccordancewith Luxembourg legal and regulatory requirements, give a true and fair viewoftheassets,liabilities, financialpositionandprofitorloss ofBefesaS.A.;and ■ the management report of the annual accounts included in this AnnualReport,whichhasbeen combinedwiththemanagement reportontheconsolidatedfinancial statements included in this Annual Report,givesafairreviewofthe development and performance of the business and the position of Befesa S.A., or Befesa S.A. and its consolidated subsidiaries, taken as awhole,asapplicable,togetherwith a description of the principal risks and uncertainties that they face. Luxembourg, 29 March 2022 Javier Molina CEO Wolf Uwe Lehmann CFO Responsibility statement 04 Statutory financial ststements 198 Befesa Annual Report 2021 To Befesa’s shareholders Independent auditor’s report KPMG Luxembourg, Société anonyme 39, Avenue John F. Kennedy L-1855 Luxembourg Tel.: +352 22 51 51 1 Fax: +352 22 51 71 E-mail: info@kpmg.lu Internet: www.kpmg.lu © 2022 KPMG Luxembourg, Société anonyme, with registered office at 39, Avenue John F. Kennedy, L-1855 Luxembourg, registered with RCS Luxembourg under number B149133, and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. To the Shareholders of Befesa S.A. 68-70, Boulevard de la Pétrusse L-2320 Luxembourg Luxembourg REPORT OF THE REVISEUR D’ENTREPRISES AGREE Report on the audit of the annual accounts Opinion We have audited the annual accounts of Befesa S.A. (the "Company"), which comprise the balance sheet as at 31 December 2021, and the profit and loss account for the year then ended, and notes to the annual accounts, including a summary of significant accounting policies. In our opinion, the accompanying annual accounts give a true and fair view of the financial position of the Company as at 31 December 2021 and of the results of its operations for the year then ended in accordance with Luxembourg legal and regulatory requirements relating to the preparation and presentation of the annual accounts. Basis for opinion We conducted our audit in accordance with the EU Regulation N° 537/2014, the Law of 23 July 2016 on the audit profession (“Law of 23 July 2016”) and with International Standards on Auditing (“ISAs”) as adopted for Luxembourg by the Commission de Surveillance du Secteur Financier (“CSSF”). Our responsibilities under the EU Regulation N° 537/2014, the Law of 23 July 2016 and ISAs as adopted for Luxembourg by the CSSF are further described in the « Responsibilities of the “réviseur d'entreprises agréé” for the audit of the annual accounts » section of our report. We are also independent of the Company in accordance with the International Code of Ethics for Professional Accountants, including International Independence Standards, issued by the International Ethics Standards Board for Accountants (“IESBA Code”) as adopted for Luxembourg by the CSSF together with the ethical requirements that are relevant to our audit of the annual accounts, and have fulfilled our other ethical responsibilities under those ethical requirements. 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 judgment, were of most significance in our audit of the annual accounts of the current period. These matters were addressed in the context of the audit of the annual accounts as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. We have determined that there are no key audit matters to communicate in our report. 199Befesa Annual Report 2021 Additional information Statutory  financialstatements Consolidated  financialstatements Management report To Befesa’s shareholders Independent auditor’s report continued Other information The Board of Directors is responsible for the other information. The other information comprises the information stated in the annual report including the management report and the Corporate Governance Statement but does not include the annual accounts and our report of the “réviseur d'entreprises agréé” thereon. Our opinion on the annual accounts does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the annual accounts, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the annual accounts or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report this fact. We have nothing to report in this regard. Responsibilities of the Board of Directors and Those Charged with Governance for the annual accounts The Board of Directors is responsible for the preparation and fair presentation of the annual accounts in accordance with Luxembourg legal and regulatory requirements relating to the preparation and presentation of the annual accounts, and for such internal control as the Board of Directors determines is necessary to enable the preparation of annual accounts that are free from material misstatement, whether due to fraud or error. The Board of Directors is responsible for presenting and marking up the annual accounts in compliance with the requirements set out in the Delegated Regulation 2019/815 on European Single Electronic Format (“ESEF Regulation”). In preparing the annual accounts, the Board of Directors is responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Board of Directors either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so. Those charged with governance are responsible for overseeing the Company’s financial reporting process. Responsibilities of the réviseur d'entreprises agréé for the audit of the annual accounts The objectives of our audit are to obtain reasonable assurance about whether the annual accounts as a whole are free from material misstatement, whether due to fraud or error, and to issue a report of the “réviseur d'entreprises agréé” that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the EU Regulation N° 537/2014, the Law of 23 July 2016 and with ISAs as adopted for Luxembourg by the CSSF 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 04 Statutory financial ststements 200 Befesa Annual Report 2021 To Befesa’s shareholders aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these annual accounts. Our responsibility is to assess whether the annual accounts have been prepared in all material respects with the requirements laid down in the ESEF Regulation. As part of an audit in accordance with the EU Regulation N° 537/2014, the Law of 23 July 2016 and with ISAs as adopted for Luxembourg by the CSSF, we exercise professional judgment and maintain professional skepticism throughout the audit. We also: — Identify and assess the risks of material misstatement of the annual 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 Company’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 Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our report of the “réviseur d'entreprises agréé” to the related disclosures in the annual 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 report of the “réviseur d'entreprises agréé”. However, future events or conditions may cause the Company to cease to continue as a going concern. — Evaluate the overall presentation, structure and content of the annual accounts, including the disclosures, and whether the annual accounts represent the underlying transactions and events in a manner that achieves fair presentation. We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide those charged with governance with a statement that we have complied with 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, actions taken to eliminate threats or safeguards. From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the annual accounts of the current period 201Befesa Annual Report 2021 Additional information Statutory  financialstatements Consolidated  financialstatements Management report To Befesa’s shareholders Independent auditor’s report continued and are therefore the key audit matters. We describe these matters in our report unless law or regulation precludes public disclosure about the matter. Report on other legal and regulatory requirements We have been appointed as “réviseur d'entreprises agréé” by the Shareholders on 30 June 2021 and the duration of our uninterrupted engagement, including previous renewals and reappointments, is three years. The management report is consistent with the annual accounts and has been prepared in accordance with applicable legal requirements. The Corporate Governance Statement is included in the management report. The information required by Article 68ter paragraph (1) letter d) of the law of 19 December 2002 on the commercial and companies register and on the accounting records and annual accounts of undertakings, as amended, is consistent with the annual accounts and has been prepared in accordance with applicable legal requirements. We confirm that the audit opinion is consistent with the additional report to the audit committee or equivalent. We confirm that the prohibited non-audit services referred to in the EU Regulation N° 537/2014 were not provided and that we remained independent of the Company in conducting the audit. We have checked the compliance of the annual accounts of the Group as at 31 December 2021 with relevant statutory requirements set out in the ESEF Regulation that are applicable to annual accounts. For the Company it relates to: • Annual accounts prepared in a valid xHTML format. In our opinion, the annual accounts of Befesa S.A. as at 31 December 2021, identified as LU1704650164-JA-EQ-2021-12-31-en.ZIP, have been prepared, in all material respects, in compliance with the requirements laid down in the ESEF Regulation. Luxembourg, 29 March 2022 KPMG Luxembourg So ciété anonyme Cabinet de révision agréé Stephan Lego-Deiber Partner 04 Statutory financial ststements 202 Befesa Annual Report 2021 To Befesa’s shareholders 203Befesa Annual Report 2021 Additional information Statutory  financialstatements Consolidated  financialstatements Management report To Befesa’s shareholders 204 Befesa Annual Report 2021 To Befesa’s shareholders 204 Befesa Annual Report 2021 Additional information 206 Glossary 208 Financial calendar 209 Disclaimer 205Befesa Annual Report 2021 Additional information Statutory  financialstatements  Consolidated  financialstatements  Management report  ToBefesa’s  shareholders Glossary Aluminium alloy Amixtureoftwoormoreelementsinwhichaluminiumisthepredominantmetal Aluminium concentrate Secondary aluminium residue generated during the recycling process of salt slags andSPL,whichcaneitherbelandfilledorsoldtovariousindustriesasaninput material for further production cycles Aluminium residue Aluminium scrap and other residues mainly containing aluminium, such as drosses, shavingsandcuttings,whichcanberecycled Aluminium scrap Material from various goods that have reached completion of their useful lives, whichmainlycontainaluminiumandcanberecycled Basic oxygen furnace (BOF) Atypeofmetallurgicalfurnacethatusesironoreasitsbaserawmaterialto produce steel Coke An input material used in the processes to recycle steel residues Electric arc furnace (EAF) A furnace used by mini-mills to melt scrap steel, using electric arc technology EAF steel dust (EAFD) Hazardouswasteresultingfromtheproductionofcrudesteelbymini-mills Galvanised steel Steelwithaprotectivecoatingcontainingzinc,whichprotectsagainstcorrosion Leaching A hydrometallurgical process that increases the zinc content of Waelz oxide (WOX)byremovingimpuritieslikefluoridesandchlorines Lime An input material used in the steel dust recycling process Mini-mill A steel production facility for the production of steel. This is done by melting recycledscrapsteelinEAF,asopposedtodirectlyfromironore(whichisthe primary iron resource used in traditional BOF steel factories) Rotary furnace A tube-shaped furnace that rotates around a central axis as materials are beingtreated 05 Additional information 206 Befesa Annual Report 2021 To Befesa’s shareholders Salt slags Ahazardouswastegeneratedbytheproductionofsecondaryaluminium Scrap steel Recycled steel that serves as an input material for steel manufacturers, using mini-mill facilities Spent pot linings (SPL) Spentpotliningsofaluminiumelectrolysiscellsarehazardouswastematerials generated in the production process of primary aluminium Stainless steel residue A hazardous residue resulting from the stainless steel production from scrap stainless steel Steel residue Electric arc furnace steel dust and stainless steel residue Tolling fee In the Steel Dust segment, it refers to the fee charged to stainless steel manufacturers to collect and treat stainless steel residue, returning to them metals (mainly nickel, chromium and molybdenum) recovered in the process. In the Secondary Aluminium subsegment of Aluminium Salt Slags Recycling Services, it refers to the service fee charged for collecting and treating aluminium residues and returning the recovered aluminium to customers. Valorisation Therecoveryofvaluablematerialsfromwaste Waelz kiln A kiln used for processing crude steel dust by mixing crude steel dust, coke and limeinakilncontainingarotatingfurnace,whichprimarilyvaporisesthezinc andleadcomponentscontainedinthecrudesteeldust,producingWaelz oxide(WOX) Waelz oxide (WOX) Aproductwithahighconcentrationofzincthatisgeneratedinthecrudesteel- dustrecyclingprocessandthatisusedintheproductionofzinc Zinc smelter A type of industrial plant or establishment that engages in zinc smelting, i.e.theconversionofzincoreconcentratesandWOXintozincmetal 207Befesa Annual Report 2021 Additional information Statutory  financialstatements  Consolidated  financialstatements  Management report  ToBefesa’s  shareholders Statutory  financialstatements Consolidated  financialstatements Management report To Befesa’s shareholders Financial calendar Q12022Statement&ConferenceCall Tuesday, 26 April 2022 Annual General Meeting Thursday, 16 June 2022 H1 2022 Interim Report & Conference Call Thursday, 28 July 2022 Q32022Statement&ConferenceCall Thursday, 27 October 2022 Note: Befesa cannot rule out changes of dates and recommends checking them at the Investorrelations/Investor’sagendasectionofBefesa’swebsite(www.befesa.com). IR CONTACT Rafael Pérez Director of Investor Relations & Strategy Phone +49 (0) 2102 1001 0 E-mail irbefesa@befesa.com 05 Additional information 208 Befesa Annual Report 2021 To Befesa’s shareholders Disclaimer Thisreportcontainsforward- looking statements and information relatingtoBefesaanditsaffiliates that are based on the beliefs of its management, including assumptions,opinionsandviews ofBefesaanditsaffiliatesaswell asinformationcitedfromthird-party sources.Suchstatementsreflect thecurrentviewsofBefesaandits affiliatesorofsuchthirdparties withrespecttofutureeventsand aresubjecttorisks,uncertainties and assumptions. Many factors could cause the actual results, performance or achievements of Befesa and its affiliatestobemateriallydifferent from any future results, performance or achievements that may be expressed or implied by suchforward-lookingstatements. This includes, among others, changes in general economic, political, governmental and business conditions globally and in thecountriesinwhichBefesaandits affiliatesdobusiness;changesin interestrates;changesininflation rates;changesinprices;changes tonationalandinternationallaws and policies that support industrial wasterecycling;legalchallenges toregulations,subsidiesand incentives that support industrial wasterecycling;extensive governmental regulation in a numberofdifferentjurisdictions, including stringent environmental regulation;managementof exposure to credit, interest rate, exchange rate and commodity price risks;acquisitionsorinvestmentsin jointventureswiththirdparties; inabilitytoobtainnewsitesand expandexistingones;failureto maintainsafeworkenvironments; effectsofcatastrophes,natural disasters,adverseweather conditions, unexpected geological or other physical conditions, or criminal or terrorist acts at one or moreofBefesa’splants;insufficient insurance coverage and increases ininsurancecosts;lossofsenior managementandkeypersonnel; unauthorised use of Befesa’s intellectual property and claims of infringement by Befesa of others’ intellectualproperty;Befesa’sability to generate cash to service its indebtedness changes in business strategy;andvariousotherfactors. Should one or more of these risks or uncertainties materialise, or should underlying assumptions prove incorrect, actual results may vary materially from those described herein as anticipated, believed, estimated, expected or targeted. Befesaanditsaffiliatesdonot assume any guarantee that the assumptionsunderlyingforward- looking statements are free of errors, nor do they accept any responsibility for the future accuracy of the opinions expressed herein or the actual occurrence of the forecasted developments. No representation (express or implied) is made as to, and no reliance should be placed on, any information,includingprojections, estimates, targets and opinions contained herein, and no liability whatsoeverisacceptedastoany errors, omissions or misstatements containedhereinorotherwise resulting, directly or indirectly, fromtheuseofthisdocument. Befesa and its subsidiaries do not intend, and do not assume any obligations, to update these forward-lookingstatements. This report may not, at any time, bereproduced,distributedor published(inwholeorinpart) withoutthepriorwrittenconsent ofBefesa. Published: 30 March 2022 209Befesa Annual Report 2021 Additional information Statutory  financialstatements  Consolidated  financialstatements  Management report  ToBefesa’s  shareholders Befesa S.A. 68-70,BoulevarddelaPétrusse, L-2320, Luxembourg, Grand Duchy of Luxembourg www.befesa.com