Befesa S.A.

Annual Report (ESEF) • Apr 21, 2023

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To Befesa’s shareholders To Befesa’s shareholders Contents 2 Befesa at a glance 5 To Befesa’s shareholders 6 Letter from the Executive Chair 10 Letter from the CEO 12 Befesa in the capital markets 19 Management report 20 About the Company 22 Business model 26 Markets & sites 28 Market environment 34 Strategy 40 Results of operations 42 Financial position & liquidity 44 Segment information 48 Sustainability 50 Environmental 54 Social, health & safety 66 R&D and innovation 70 Risks & opportunities 78 Subsequentevents&outlook 80 Corporate governance 96 Compliance 105 Consolidatedfinancialstatements 106 Consolidatedstatementoffinancialposition 108 Consolidated income statement 109 Consolidated statement of comprehensive income 110 Consolidated statement of changes in equity 111 Consolidatedstatementofcashflows 112 Notestotheconsolidatedfinancialstatements 181 Responsibility statement 182 Independent auditor’s report 189 Statutoryfinancialstatements 190 Balance sheet 194 Profitandlossaccount 196 Notestothestatutoryfinancialstatements 205 Responsibility statement 206 Independent auditor’s report 211 Additional information 212 Glossary 214 Financial calendar 215 Disclaimer 1Befesa Annual Report 2022 Statutory  financialstatements  Consolidated  financialstatements  Management report  ToBefesa’s  shareholders  Additional  information 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 a 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. 1.5m TONNES OF RECOVERED NEW MATERIALS IN 2022 REINTRODUCED INTO THEMARKET 1.8m TONNES OF RESIDUES RECYCLEDIN 2022 Steel Dust Aluminium Salt Slags Both 2 Befesa Annual Report 2022 To Befesa’s shareholders TURKEY CHINA SOUTH KOREA 1 Total annually installed capacity to recycle 1,839,300 tonnes of EAF steel dust (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of205,000tonnesisbasedonsecondaryaluminiumalloysproduced  3 Revenue of theAluminiumSaltSlagssegmentisafter€46.3mofintersegmenteliminations  4 €164.8m reported total EBIT + €70.1m D&A = €234.9m reported total EBITDA – €20.3m adjustments,mainlydrivenbyzinc-refiningacquisitionimpacts=€214.6madjustedtotalEBITDA 5 Includes 39 employees in Corporate 24 RECYCLING PLANTS 1,847 EMPLOYEES5 €1,13 6 m REVENUE IN 2022 €215m ADJUSTED EBITDA IN 20224 2,514,300 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 18 6 1,839,300 TONNES 1 470,000 TONNES €169M€730M €407M3 1,333 475 Close proximity to major customers Befesa’s recycling plants are positioned in attractive markets that are strategically locatedacrossEurope,AsiaandtheUS. €46M 205,000 TONNES 2 3Befesa Annual Report 2022 Statutory  financialstatements  Consolidated  financialstatements  Management report  ToBefesa’s  shareholders  Additional  information Reduce the consumption of natural resources to prevent around 1.8million tonnes of residue from reaching landfills each year. 4 Befesa Annual Report 2022 To Befesa’s shareholders 4 Befesa Annual Report 2022 To Befesa’s shareholders 6 Letter from the Executive Chair 10 Letter from the CEO 12 Befesa in the capital markets 5Befesa Annual Report 2022 Statutory  financialstatements  Consolidated  financialstatements  Management report  Additional  information To Befesa’s shareholders Javier Molina Executive Chair DEAR SHAREHOLDERS, In2022,weachievedrecordfinancialresults,mainlydrivenby thepositivecontributionoftheUSoperationsaswellas highermetalprices,whichhavebeenpartiallycompensated byhigherinflation. Despite these record results, 2022 has been a very challenging yearforBefesa,affectedbyhighenergyprices,aweak economicenvironmentandadifficultCOVIDsituationinChina. Fromthemacroeconomicpointofview,2022hasbeen characterisedbythewarinUkraine,whichstartedinFebruary 2022withtheinvasionofUkrainebyRussia.Thisiscausinga terriblehumanitariancatastrophe,theendofwhichisstill difficulttoforesee.Theconflictiscreatinggreatinstabilityin the global economy and especially in the energy market in Europe,whichhadenjoyedstabilityovermanyyears.The situation has created uncertainty in the supply of energy, especially natural gas, and a strong increase in the price of gas andelectricity.Atthesametime,generalinflationhasalso increasedsignificantly.Allthesefactorshavecreatedavery challenging economic environment. The main industries that have an impact on the business of Befesa – the steel industry and the automotive industry – have also experienced a challenging 2022 year, caused by a global economicslowdownanduncertaintyintheeconomicoutlook, whichinfluencesthedemandforsteelandcars. Thetotalworldproductionofcrudesteeldecreasedby4% compared to 2021. In Europe, steel production decreased by 11%,whereasintheUS,thedecreasewas6%.Chinacontinued tobethelargestproducerofsteelworldwide,withmorethan 55%ofthetotalglobalproductionin2022,despitea decreaseof2%in2022. In2022,theEuropeanpassengercarmarketcontractedby5%, thelowestlevelsince1993,mainlycausedbytheimpactof Letter from the Executive Chair €1,136m REVENUE IN 2022 (€822M IN 2021) €215m ADJUSTED EBITDA IN 2022 (€198M IN 2021) 6 Befesa Annual Report 2022 To Befesa’s shareholders componentshortagesinthefirsthalf of the year. In the European largest markets, only Germany managed to showgrowthin2022of1%. As explained at the Capital Markets Day,ourSustainableGlobalGrowth Plan(SGGP)isafive-yeargrowth planthatisalreadyunderway.The zincsmelterplantintheUSwas alreadyacquiredin2022andweare workingontherefurbishmentofthe US plant in Palmerton, Pennsylvania, aswellasontheexpansionofour geographical footprint into a third province in China, in Guangdong. Decarbonisation is one of the most pressing issues of our time and clearly brings great opportunities for Befesa. Most of the companies aroundtheworldaremaking strongcommitmentstoreducing theirCO₂footprint.Asthesteel industry looks to decarbonise its operations, it needs to move to production technologies that are lessCO₂-intensive.EAFproduces seventimeslessCO₂pertonneof steel compared to basic oxygen furnace (BOF). DecarbonisationwilldriveEAF steelgrowthglobally.Overthenext 10years,EAFpenetrationis expectedtoincreasefrom29%to 37%globally.Thiswillrepresent tangiblegrowthopportunitiesfor Befesa in all its markets: Europe, the US and Asia. Similarly, the decarbonisation trend is driving the transition to electric vehicles(EVs),whichrequirehigher aluminium content per car to achievelight-weighttargets.This willdrivehigheraluminiumdemand in Europe and increase the need for salt slags recycling capacity. Wehaveastronggrowthplanto investbetween€400and€450 millionoverthenextfiveyearsto achievehigh-rateearningsgrowth. This is a similar scale to our investmentoverthepastfiveyears. Withthiscapexplan,weare targeting +€125-€155 million of incremental EBITDA from 2022 baselineoverthenextfiveyears. Theplanisgloballywell-balanced, withinvestmentsplitin approximatelyequalthirdsbetween Asia/China, US and Europe. Ourtargetistofund100%oftheplan organicallywithourownresources, withnocapitalincreaserequired.At thesametime,wewillkeepthe leverageatorbelow2.5x,aswellas maintaining our dividend policy of distributing40%–50%ofnetprofit peryear.Thegrowthplanisfully modular,anditis100%inourcontrol. Wewillcontinueourprudent approach and adjust timing as required, as per the market environment. In the capital markets space, the year2022wasahistoricallypoor year, not only for equities in general but also for bonds, driven by the uncertainty and instability in the global economy. In 2022, the Befesa share decreased by33%(in2021,theBefesashare increasedby30%),underperforming theMDAXindex,whichlost29% in2022. As a vital part of the circular economy,weareverycommitted tomakingastrongcontributionto creatingamoresustainableworld. Our business strategy is fully aligned withourESGstrategyandisrootedin an increased contribution to the circulareconomyaswedeployour businessmodelinnewmarkets andgeographies. The secondary materials created by Befesa’s recycling processes are a substitute for more carbon- intensive processes used to mine andprocessvirginrawmaterials. Furthermore,atBefesaweare committed to supporting climate goalsthatarebasedonwidelyagreed In 2022, Befesa achieved record levels of revenue, EBITDA, net profit and operating cash flow, mainly driven by the positive contribution of the US operations and higher metal prices, which were partially offset by higher inflation. 7Befesa Annual Report 2022 Statutory  financialstatements  Consolidated  financialstatements  Management report  Additional  information To Befesa’s shareholders climate science and embedding sustainability further into our strategy. Asaresult,wearecommittingtoa 20%GHGemissionsintensity reduction by 2030, supported by arealisticroadmaptoachieve thistarget.Notably,thisplan revolves around green energy sourcing,electricityefficiency, processoptimisationandraw material substitution. Also, Befesa is targeting net zero emissions by 2050. This goal is contingent on certain technologies currently under development becoming technically viable and economically feasible by investing todayinnewtechnologies, partneringwithrelevant stakeholders and reinforcing the sustainability ecosystem (e.g. biocoke, hydrogen, carbon capture). Finally, the Board of Befesa has made sustainability governance a top priority. A Sustainability Committee has been established todiscusssustainabilityplansand progresswithinBefesaona quarterly basis, comprising directorsofBefesawithstrong experience in ESG, technology andtheenergytransition. Yours sincerely, Javier Molina Executive Chair Letter from the Executive Chair continued 8 Befesa Annual Report 2022 To Befesa’s shareholders 9Befesa Annual Report 2022 Statutory  financialstatements  Consolidated  financialstatements  Management report  Additional  information To Befesa’s shareholders 9Befesa Annual Report 2022 Asier Zarraonandia ChiefExecutiveOfficer DEAR SHAREHOLDERS, ItisapleasuretoaddressmyfirstlettertoyouastheCEO ofBefesa. In2022,weachievedrecordlevelsofrevenue,EBITDA,netprofit andoperatingcashflow.Totalrevenuereached€1.1billion,up 38%comparedto2021.AdjustedEBITDAamountedto €215million,up9%comparedto2021.Wehadanetprofitof €106million,up6%andequaltoa€2.66EPS. TheresultsareaffectedbythepositivecontributionoftheUS operationsandhighermetalprices,whichhavebeenpartially compensatedbymuchhigherinflation–especiallyenergyprices andinparticularthecokeprice-,aweakeconomicenvironment andadifficultCOVIDsituationinChina.Wecansaythat2022has beenaverychallengingyearforBefesaendedwitharemarkable leveloffinancialresults. Generally,untilthethirdquarter,Befesawasabletocompensatefor alltheinflationandenergypriceincreasesthroughtheincreasein themetalprices.However,thelastquarteroftheyearwasmore challengingthanwhatwasoriginallyexpected.Asaresult,Befesa closedtheyearwithanadjustedEBITDAof€215million. Therewerethreemainreasonsforthis.Thefirstwashighenergy pricesinQ4,especiallycoke,whichaccountedforabout50%of Befesa’stotalenergycost.Thesecondwasalowerzincprice, andthethirdwasweaksteelproductioninthemarketswherewe operate. As a reference, steel production decreased in Q4 by 18%inEurope,24%inTurkey,12%inKoreaand11%intheUSon a year-on-year basis. Inthefullyear2022,totalEAFsteeldustthroughputwasupby 35%reaching1,194thousandtonnes.Thiswasdrivenbythe contribution of the recycling plants in the US. Fromthepricepointofview,blendedzincprice-considering theweightedaverageofLMEandhedging-increasedon average15%year-on-year.However,thesepositivevolume andpriceeffectswerepartiallyoffsetbyhigherinflation acrossthebusiness,mainlyinenergypricesandmore specificallycoke. Letter from the CEO €106m NET PROFIT IN 2022 (€100M IN 2021) €2.66 EPS IN 2022 (€2.68 IN 2021) 10 Befesa Annual Report 2022 To Befesa’s shareholders As a result, total EBITDA in the Steel Dust recycling business segment amountedto€169millioninthefull year,up14%comparedtothe previous year. In the US, the integration of AZR into Befesa is developing successfully acrossallfronts.Theteamisworking well,deliveringtheexpectedresults. Therefiningfacilitythatwasacquired in September is also being integrated into Befesa. The plant is still in ramp-up mode and a positive EBITDA contribution is expected in 2023. In addition,weareworkingonvarious efficiencyprojectsintheUSthat willdrivesynergiestobecapturedin 2023. At the same time, the Palmerton plant is being prepared for refurbishment to free up capacity and capturefuturemarketgrowth.The zinc-refiningbusinessprovides Befesawithastrategicvertical integration opportunity in the US, addressing the shortage of smelting capacity in the North American market.Furthermore,therefining facilityistheonlyoneofitskindinthe world,producinggreenzincfrom 100%recycledrawmaterials. In China, the government has changed itsCOVIDstrategy.Nevertheless,Q4 2022sufferedfromthevery challenging operating environment createdbythezeroCOVIDpolicy.Asa consequence,Befesawasnotableto operatetheplantinJiangsuproperly asthezeroCOVIDpolicycaused theChineseeconomytoslowdown, influencingsteelproductionandits utilisation rate. Befesa’s second plant in the province ofHenaniscompleted,and commissioningoftheplantwas finishedinDecember. ThetwoChineseplantsintheprovinces ofJiangsuandHenanarefullyreadyto operate in 2023. In addition, Befesa is workingintheprovinceofGuangdong to build a third plant in China as part of ourfive-yeargrowthplan. In the traditional business areas ofBefesa,goodvolumeshave beenachieved. Befesa’s Aluminium Salt Slags recycling business segment performedwellanddespitethehigh energyprices,itwasabletotransfer the cost increases to the market. As such, this business segment delivered a strong year in this challenging environment. In 2022, 322 thousand tonnes of salt slagswererecycled,representingan 18%decreasecomparedtothe previous year, driven by the temporaryshutdownoftheplantin Hanover,whichhasbeenunderrepair afterthefirein2021.Normalisingfor thisone-offoperatingeffect,the volumeofsaltslagswouldbe7%up year-on-year. The production of secondary aluminumalloysin2022was 161thousandtonnes,a14% decrease year-on-year, having also beenaffectedbytheshutdownofthe Hanoverplant.Theplanthasbeen fullyrefurbishedandwearenowinthe process of ramping up operations. Fromthepricepointofview,the aluminium price increased on average15%intheyear. Thehighenergyinflationhadatotal impact of more than €26 million in the year,themajorityofwhichwas possible to pass on to customers via increases in prices, collections fees and margins. As a result, in the Aluminium Salt Slags recycling business segment, a totalEBITDAof€46millionhasbeen achieved,down6%comparedtothe prior year. For the total Befesa, the operating cashflowamountedto€137millionin 2022 and cash on hand ended at €162millionatyearend,which represents a strong liquidity of above €230 million. Net debt amounted to €549 million, resulting in a leverage of x2.56 at year-end closing. Our hedging strategy remains unchangedwithourzinchedgebook uptoandincludingJuly2025at increasing average prices over the next three years of around €2,450/t in 2023, around €2,550/t in 2024 and around€2,650/tforthefirsthalfof 2025.Thisstronghedgingbookwill provideearningsgrowthandvisibility over the next three years. In summary, Befesa demonstrated a strong performance in 2022, achieving record levels of EBITDA in an extremely challenging year that wasaffectedbymarketconditions andadifficultenvironment. Yours sincerely, Asier Zarraonandia ChiefExecutiveOfficer 11Befesa Annual Report 2022 Statutory  financialstatements  Consolidated  financialstatements  Management report  Additional  information To Befesa’s shareholders Befesa share development vs DAX and MDAX in 2022 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 € 2022 2021 2020 Free-float(endofyear) 100.0% 100.0% 100.0% Closing price 45.06 67.40 51.70 Highestprice 72.60 72.50 51.70 Lowestprice 30.18 49.75 23.25 Dividends 1.251 1.25 1.17 Dividend yield (based on closing price) 2.8%1 1.9% 2.3% Market capitalisation (end of year) 1,802,399,910 2,695,999,865 1,761,248,649 1 Proposal – subject to AGM resolution Data source: Bloomberg XETRA closing prices 40 50 60 70 80 90 100 110 120 DAX MDAX Befesa Closing price €45.06 market capitalisation (end of year): €1,802m DEC 2021 DEC 2022 Befesa in the capital markets 12 Befesa Annual Report 2022 To Befesa’s shareholders Theyear2022wasahistorically weakyearatthecapitalmarkets. The Befesa share started the year 2022 at a price of €67.40. Over the courseofthefirstweeks,the developmentwasslightlynegative, inlinewiththeindices.However, Russia’s invasion of Ukraine on 24February2022markedan inflectionpoint.Theenergymarket inEurope,whichhadenjoyedgreat stability over many years, started a challenging period characterised by uncertainty of the supply of energy, especially natural gas, and a strong increase in the price of gas and electricity. At the same time, general inflationalsoincreasedsignificantly. All these factors created a very challenging environment for the capitalmarkets,withdefenceandoil and gas companies seemingly the onlyonesabletoperformwell. During this time, Befesa could outperformtheindicesandwasable togainsignificantlyagainstthe indices. The Befesa share even reached an all-time high of €72.60 on 28 March 2022. After reporting Q1 2022 and announcing the guidance for the full year 2022, the Befesa share came back and lost its outperformance and remained in linewiththeMDAX.The development in the second half of 2022showedacontinuous underperformance of the Befesa share.Forthefirsttime,ESGfunds werefacedwithcashoutflowsand hadtosellshares,whichhadan impact on Befesa. In autumn, the Befesa share experienced a negativemomentum,whichended atalowof€30.18on27September 2022. In October, the Befesa share started an intensive, clear and sustainablereversaltrend.Thefirst Befesa Capital Markets Day on 8November2022fuelledthe positive development and drove the significantrecoveryuntiltheendof the year. This compensated some losses that occurred in August and September, gaining clearly especially against the MDAX. In summary, over the course of the year 2022, Befesa’s share price decreasedby33.1%afterthe Befesasharegained30.4%in2021. Befesa underperformed compared totheDAX(-12.3%)andMDAX (-28.5%).Also,Befesashareholders received a dividend of €1.25 per share,whichwasdistributedinJuly 2022. Befesa’s daily average volume traded on XETRA increased significantlyto75,502shares (2021:62,124Befesashareswere traded daily). Basedonadditionalfigures,Befesa estimates that the XETRA trading volumesrepresentaround55%of the real daily trades of Befesa shares. Alternative trading platforms wereagainimportanttradingplaces for Befesa shares. According to the figuresfromXETRA,aswellasother trading places and platforms, the average daily volume of Befesa shares traded amounted to around 135,000 shares. The market capitalisation of Befesadecreasedin2022by 33.1%to€1,802million(endof 2021:€2,696million). SHAREHOLDER STRUCTURE Befesa’ssharesareownedby international investors and by many retailshareholders.Since6June 2019,100%ofsharesinBefesaS.A. havebeenfree-floating. According to the voting rights notificationsreceived,asof 31December2022,thefollowing shareholdersheld(orwere attributedto)fivepercent(5%)or more of the total voting rights attached to Befesa shares (see tablebelow). Basedonvotingrightsnotifications, other publicly available data sources (especiallypublicfilings)andown research, institutional shareholders infivecountriesownintotal74.4% Share performance in 2022 Befesa DAX MDAX 30 December 2021 67.40 15,884.86 35,123.25 30 December 2022 45.06 13,923.59 25,117.57 Change -33.1% -12.3% -28.5% 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., Luxembourg, Grand Duchy of Luxembourg 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 10.02% attachedtoshares 15 December 2022 13Befesa Annual Report 2022 Statutory  financialstatements  Consolidated  financialstatements  Management report  Additional  information To Befesa’s shareholders of Befesa. The biggest country is Germany,withastakeof24.6%in Befesa,followedbySpain(15.6%), theUK(14.8%),theUS(11.7%)and France(7.7%).The10largest investorsownalmost43%andthe 25 largest investors have a stake of morethan61%inBefesa. DIVIDEND Befesa‘sdividendpolicy,whichhas been consistent since the IPO, is a payoutratioof40%to50%ofEPS, among others. The Board of Directors of Befesa willproposetotheAnnualGeneral Meeting (AGM) of 2023 to distributeatotaldividendof €50million,or€1.25pershare (2022:€1.25). Thiswouldresultinadividend payoutratioof47.1%ofthe2022 reportednetprofit.Basedonthe 2022 closing price, the proposed dividendpaymentwouldresultina dividendyieldof2.8%.On15June 2023,theBefesashareholderswill decide on the dividend proposal as part of the AGM agenda. INDICES Since Befesa is listed in the Prime Standard of the Frankfurt Stock Exchange, the indices of Deutsche Börse are very relevant for Befesa. Starting in September 2018, BefesawaslistedintheSDAX. 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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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 declined from rank #73 as of the end of December 2021 to #79 as of the end of December 2022 in terms of market capitalisation. Despite this deterioration, the membership of Befesa in the MDAX is considered likely. 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) must include the index members. Befesa is a member of the Global Challenges Index (GCX) since September 2020. The GCX comprises shares of in total Befesa in the capital markets continued 14 Befesa Annual Report 2022 To Befesa’s shareholders 50internationalcompaniesselected according to very strict criteria from a total number of around 6,000 corporations. In 2022, the inclusion ofBefesawasagainconfirmed. TheGCXwasinitiatedbyBoersen AG, the parent company of the HamburgandHanover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; 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 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 14%attheendof2022. ANALYSTS’ COVERAGE In 2022, a total of 11 equity analysts published regular reports and recommendations on Befesa. Thismeansthattwonewbrokers have started coverage during 2022. Thisshowstheincreasinginterestin the Befesa share. Asoftheendof2022,73%ofthe analysts recommended buying the Befesashare(2021:67%),18%to hold(2021:33%)and9%selling (2021:0%).Themedianoftheprice targetswas€54.00(2021:€74.00) pershareandfollowedtheshare price development of Befesa in 2022. ESG RATINGS Since 2019, several important international environmental, social and governance (ESG) rating agencies have published research on Befesa. The number increased in 2022tosixratings.Thishighlights 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 discussions about 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must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Report2021. ThedialoguewiththeESGrating agencies continued and helped to Analysts’ recommendations Institution Analyst Recommendation Target price (€) Bank of America Cameron Needham Buy 63,00 Berenberg Lasse Stueben Buy 55,00 Citi Paul L Bradley Neutral 39,00 Exane BNP Paribas Ingo-Martin Schachel Reduce 30,00 Goldman Sachs Moomal Irfan Buy 45,00 JPMorgan Sylvia P Barker Neutral 44,00 KeplerCheuvreux JuanRodríguez Buy 60,00 Morgan Stanley Sandeep Peety Buy 50,00 Oddo Anis Zgaya Buy 61,00 Santander JaimeEscribano Buy 56,00 Stifel MichaelEHoffman Buy 54,00 As of 31 December 2022 15Befesa Annual Report 2022 Statutory  financialstatements  Consolidated  financialstatements  Management report  Additional  information To Befesa’s shareholders 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 Befesa 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Update2022,whichwillbe issued in Q2 2023. EU TAXONOMY The Befesa ESG Report 2021 included an assessment using the EU taxonomy for the preliminary eligibility under all six environmental objectives. The results of applying a systemicapproachimplythat100% of revenue, capex and opex of Befesa’soperationsin2021would be EU Taxonomy-eligible. Befesawilldisclosetheeligibilityand alignment reporting requirements for itsactivities,inaccordancewiththe EU Taxonomy Regulation, in the Befesa ESG Update 2022. 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. INVESTOR RELATIONS ACTIVITIES Befesa’s investor relations provides comprehensive information for the capital markets. Fixed dates in the financialcalendar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whichcanbe followedontheBefesawebsite,and investornewswiththerelevant information about the Company. Acalendarwiththeupcoming reporting dates, investor conferences and current presentations is available on Befesa’swebsite(www.befesa.com). Asof31December2022,sixESGratingagenciesfollowing BefesaandtheirrespectiveESGratingsassignedtoBefesawere: Top 3 of 69 Metals processing & production #7 of 103 Business services Top5% Industrail services #181 of 430 Commercial services BBB Commercial services & supplies Top15% Befesa in the capital markets continued Eligibility of Befesa 100% REVENUE 100% CAPEX 100% OPEX 16 Befesa Annual Report 2022 To Befesa’s shareholders Befesa has continued the direct and intensivedialoguewithexisting shareholders, potential investors and analysts. The circumstances in 2022werelesschallengingowingto theCOVID-19pandemic,andsome roadshowsandconferencestook place virtually, hybrid and again in person. Investors have become used to virtual meetings and see the advantages, such as the possibility of holding more meetings at the same time since travel time, costs and the negative carbon footprint can be avoided. During 2022, Befesa attended 29investorconferencesand roadshows.Intotal,415institutional investorsfromtherelevantfinancial markets in Europe and North Americaweremet(2021:430). TheinterestintheBefesashare continued, also driven by the fact thatBefesafitsintoESGandaffects fund portfolios, and is a pioneer of the circular economy. FortheveryfirsttimesincetheIPO, Befesa hosted a Capital Markets Day. It took place in London on 8November2022.Thepurposewas topresentthenewSustainable GlobalGrowthPlan(SGGP)for2022 to 2027, highlighting the next five-yeargrowththroughthecycle. Almost50participantswere informed in person about the details and that despite the current volatile and challenging environment, Befesa has proven resilience and a growthtrackrecordthroughthe cycles, driven by its leadership position in environmental services. Theentireeventwaswebcastlive and is accessible on the Befesa website,includingtheQ&Asession. All shareholders and also potential shareholdersarewelcometoobtain the relevant information on request by being added to the distribution list,orfromBefesa’swebsite.Retail investors are also important for Befesa and are one pillar of Befesa’s shareholder base. The number of Befesa shareholders increased significantly,but,basedona shareholderidentification,the totalstakeofretailshareholders inBefesaislessthan5%.Also,in 2022,severalfinancialmagazinesfor retailinvestorscontinuedtofollow theBefesashareandrecommended to buy Befesa shares. Befesa is committed to the principles of open and continuous communication,whichisalso expressed by the support and membership of the German Investor RelationsAssociation(DIRK– Deutscher Investor Relations Verbande.V.,Frankfurt). 17Befesa Annual Report 2022 Statutory  financialstatements  Consolidated  financialstatements  Management report  Additional  information To Befesa’s shareholders Recycle hazardous residues from secondary steeland aluminiumproducers 18 Befesa Annual Report 2022 To Befesa’s shareholders 18 Befesa Annual Report 2022 Management report 20 About the Company 22 Business model 26 Markets & sites 28 Market environment 34 Strategy 40 Results of operations 42 Financial position & liquidity 44 Segment information 48 Sustainability 50 Environmental 54 Social, health & safety 66 R&D and innovation 70 Risks & opportunities 78 Subsequentevents&outlook 80 Corporate governance 96 Compliance 19Befesa Annual Report 2022 Statutory  financialstatements  Consolidated  financialstatements  ToBefesa’s  shareholders  Additional  information Management report 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 2022, the Steel Dust Recycling Services segment represented79%ofBefesa’stotaladjustedEBITDA. Theremaining21%wascontributedbytheAluminium SaltSlagsRecyclingServicessegment. Corporate functions Steel Dust Recycling Services Aluminium SaltSlags Recycling Services 20 Befesa Annual Report 2022 To Befesa’s shareholders About the Company 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 serving its customers and 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 vital 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 Customer focus Compliance Integrity & transparency Highlyqualified employees 21Befesa Annual Report 2022 Statutory  financialstatements  Consolidated  financialstatements  ToBefesa’s  shareholders  Additional  information Management report 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. 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. The introduction of more stringent environmental regulations,alongwithanincreasing focus on sustainability and circularity, have been the main growthdriversforBefesasince 1987. Befesa has been able to capture the opportunities these market/operational conditions createwithabusinessmodelthat hasprovenbeneficialforthe protection of the environment, at thesametimedeliveringprofitable growth.Thesefactorswillcontinue tosupportBefesa’sgrowthasnew geographies adopt tighter environmental regulations and Befesa’s services become ever- more critical to operators in the steel and aluminium industries. 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) to zinc smelters. Furthermore, a portion of the revenue generated comes from the service fees chargedforthecollectionand especially the treatment of crude steel dust. In the US, Befesa additionally generates revenues from thesaleofspecialhigh-grade(SHG) zinc produced from the recycling of WOX sourced from Befesa’s EAF steel dust recycling plants in the US. 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 spent pot linings (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. 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. 22 Befesa Annual Report 2022 To Befesa’s shareholders Business model InputsOutputs Activities Activities Befesa has been a part of the circular economy for more than three decades and contributes by reintroducing valuable materials back 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animproved environmental footprint. 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,suchasdecarbonisationandthe transitiontoelectricvehicles(EVs). 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 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around1.8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 to maintain a lowturnoverofstaff. 23Befesa Annual Report 2022 Statutory  financialstatements  Consolidated  financialstatements  ToBefesa’s  shareholders  Additional  information Management report Critical services for steel and aluminium producers Reduce Recycle EAF steelmakers (mini-mills, scrap recyclers) Aluminium recyclers Aluminium recyclers e.g auto parts Service fee to Befesa Service fee to Befesa Mill Storage Steel Dust Zinc smelters Galvanisation of steel Sale of zinc contained in WOX Sale of aluminium concentrate & melting salt WOX Spent absorbants Stack WOX Dissolution process Water Catalytic process Filter Salt Evaporation Aluminium concentrate Melting salt Aluminium oxide Condensates Hazardous components Slag Silos Material delivery and preparation LimeDust Cooler Filter Coke Mixer Waelz kiln Pyrometallurgical treatment in the Waelz kiln Salts Create environmental liabilitywithlegal obligation to recycle hazardous residue Salt slags Business model / Value chain 24 Befesa Annual Report 2022 To Befesa’s shareholders Recover Reintroduce EAF steelmakers (mini-mills, scrap recyclers) Aluminium recyclers Aluminium recyclers e.g auto parts Service fee to Befesa Service fee to Befesa Mill Storage Steel Dust Zinc smelters Galvanisation of steel Sale of zinc contained in WOX Sale of aluminium concentrate & melting salt WOX Spent absorbants Stack WOX Dissolution process Water Catalytic process Filter Salt Evaporation Aluminium concentrate Melting salt Aluminium oxide Condensates Hazardous components Slag Silos Material delivery and preparation LimeDust Cooler Filter Coke Mixer Waelz kiln Pyrometallurgical treatment in the Waelz kiln Salts Create environmental liabilitywithlegal obligation to recycle hazardous residue Salt slags 25Befesa Annual Report 2022 Statutory  financialstatements  Consolidated  financialstatements  ToBefesa’s  shareholders  Additional  information Management report  Crude steel dust recycling  Stainless-steel dust recycling  Oxide  WOXwashing 3 4 12 10 2 9 1 11 13 14 20 19 15 16 18 23 24 21 22 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 Changzhou China Crude steel dust 110 k t 8 Xuchang China Crude steel dust 110 k t 9 Barnwell,SC US Crude steel dust 163 kt 10 Rockwood,TN US Crude steel dust 145 kt 11 Calumet, IL US Crude steel dust 135 kt 12 Palmerton, PA US Crude steel dust 177 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 18 Rutherford County, NC US Zincrefining 141 kt 1 50/50jointventurewithRecylex;55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 Totalannuallyinstalledcapacitydoesnotincludethecapacityoftheoxide,WOXwashingand zinc-refiningplants 1,839 kt ANNUALLY INSTALLED CAPACITY TORECYCLE STEEL DUST (CRUDEAND STAINLESS)3  Markets & sites 26 Befesa Annual Report 2022 To Befesa’s shareholders  Salt slags & SPL recycling  Secondary aluminium production 617 5 7 8 Aluminium salt slags recycling plants Installed capacity by plant 19 Lünen Germany Salt slags & SPL 170 kt 20 Hanover Germany Salt slags & SPL 130 kt 21 Valladolid Spain Salt slags & SPL 170 kt 22 Bernburg Germany Secondary aluminium 75 kt 23 Les Franqueses delVallès Spain Secondary aluminium 66 kt 24 Erandio Spain Secondary aluminium 64 kt 470 kt ANNUALLY INSTALLED CAPACITY TORECYCLE SALT SLAGS AND SPL 205 kt ANNUALLY INSTALLED CAPACITY TOPRODUCE SECONDARY ALUMINIUM 27Befesa Annual Report 2022 Statutory  financialstatements  Consolidated  financialstatements  ToBefesa’s  shareholders  Additional  information Management report FAVOURABLE MEGATRENDS Decarbonisation 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. Regarding the steel business, as the industry looks to decarbonise its operations, steelmakers are committing to move to production technologies thatarelessCO₂intensive.Electricarcfurnaces(EAF)–orthesecondarysteel productionroute–consumeseventimeslessCO₂pertonneofsteelcompared to blast oxygen furnaces (BOF) – or the primary steel production route. ThedecarbonisationtrendisfavouringanddrivingEAFsteelgrowthglobally. The global penetration of the EAF steel production route is expected to increasefromthecurrentapproximately29%toabout37%oftheglobal crudesteelproductionby2030.Thiswillrepresentgrowthopportunitiesfor Befesa in the US, Europe and Asia. IntheUS,around70%ofsteelisproducedthroughEAF.Theapproved $1.2trillioninfrastructureplan,togetherwiththe“MadeinAmerica”approach, are, on the one hand, driving more steel demand in the US and therefore requiring additional steel-making capacity. On the other hand, the majority of theadditionalsteel-makingcapacitywillbethroughnewEAFprojects, expected to start operations in 2025/26, to meet the decarbonisation commitments made by US steelmakers. In Europe, the main steelmakers have announced investments to put in place newEAFsteel-makingcapacity–mainlyreplacingexistingBOFcapacity– tomeettheirrespectivedecarbonisationtargets. Market environment The recycling markets for steel dust, salt slags and SPL are particularly influenced by the industrial markets for steel and aluminium production. 28 Befesa Annual Report 2022 To Befesa’s shareholders In China – the largest steel-producing country globally – the government is executing its masterplan to reduce CO₂emissionsandensurethe increasing steel scrap volumes are recycled. The ratio of EAF steel output istargetedtoincreaseto15%–20%of totalcrudesteeloutputby2025/30. China’s government is encouraging steelmakers that are currently using BOF to increase their use of EAF, and issupportingtheminestablishing large-scalescraprecycling, processing and distribution centres. In the aluminium business, the decarbonisationtrendisdriving thetransitiontoelectricvehicles (EVs),whichrequireshigher aluminium content per car to achievelight-weighttargets.This willdrivehigheraluminiumdemand in Europe and requires higher salt slagsrecyclingcapacity. The decarbonisation megatrend is clearlybenefitingBefesaasmore EAF steel and secondary aluminium willbeproducedasthesteelmakers and aluminium producers decarbonise their operations. Electric vehicles InEurope,newlyregisteredcarswill be required to have zero emissions from2035on.Thiswilldrivethe transition from traditional combustionenginecarstoEVs. ThesaleofEVsinEuropeisexpected toincreasebyfivetimesby2030, fromcurrenttwomillionunitsto around 11 million units in 2030. CombustionenginecarsandEVs needlight-weightsolutionsinorder toloweremissionsandtoincrease the reach of one battery charge, respectively.Toachievethatlight- weightgoal,aluminiumisakey element.Aluminiumweightis around one-third compared to steel. Consequently, the average aluminium content per car increased from around 120 kg per vehicle in 2006 to the current c. 190 kg per vehicle. This is expected to accelerate even more to around 250kgpervehicleby2030. TheEVmegatrendwillsignificantly drive aluminium demand in Europe, whichisexpectedtoincreaseby around60%fromthecurrentlevels ofthreemilliontonnestofivemillion tonnesby2030.Thiswillrequire morerecycledaluminiumaswellas more salt slags recycling capacity in Europe,wherethemarketis expectedtogrowfromaround onemilliontonnesofsaltslags today to about 1.6 million tonnes by2030. Befesa’sSustainableGlobalGrowth Plan (SGGP) over the next approximatelyfive-yearperiod,from 2022 to around 2027, is based on thedecarbonisationandEV megatrends,whichareexpectedto drive the need for further recycling and, therefore, Befesa’s services. CRUDE STEEL PRODUCTION &DEMAND Global crude steel production amounted to 1.83 billion tonnes in2022,–4%YOY(2021: 1.91billiontonnes). China’s crude steel production in 2022wasmuted,mainlybecause ofCOVID-relatedrestrictions andaslowerpropertymarket, decreasingdemand.However,China continued to lead the crude steel productiongloballywithover50% share of the global steel output, consolidating its one billion tonnes levelofannualoutput(–2%YOY). The2022year-endsawaYOYslight rebounding trend driven by the lift oftheCOVID-relatedrestrictions inDecember. All the remaining steel markets currently served by Befesa – the EU, Turkey,SouthKoreaandtheUS– alsoshowedadecliningproduction trend in 2022 and entered 2023 at aslowerpace,drivenbya deceleration of economic activity. Looking into the year 2023, from a global perspective, crude steel production is expected to remain in linewith2022levels.Astodemand, thecontractioninhousingwilllikely slowdown–afterconsiderable decreases in 2021 and 2022 – whereasinfrastructureshouldpick up further. Overall, the global demand for crude steel is expected tobeflattishYOY. In China, the government has shifted focusfromzeroCOVIDtothe stabilisationofgrowth.Chinese demand for crude steel in 2023 is expected to improve YOY, driven by a rebound of China’s economy on the gradualrecoveryfromCOVID,along withthestabilisationofthehousing market and accelerated infrastructure project approval. 29Befesa Annual Report 2022 Statutory  financialstatements  Consolidated  financialstatements  ToBefesa’s  shareholders  Additional  information Management report In 2023, China is expected to consolidate the one billion tonnes of crude steel output reached for the firsttimein2020,keepingsupplyand demand largely in balance. The positive trend of crude steel production globally 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andallow Befesa to continue to utilise its plantsmoreefficientlyinthe medium-term. Thegrowingtrendinglobalsteel production, particularly throughEAF-favouredanddriven bythedecarbonisationtrend,is likely to lead to an increase in the generation of EAF steel dust, and therefore to a higher demand for Befesa’s recycling services. SECONDARY ALUMINIUM PRODUCTION & DEMAND In 2022, the trend in secondary aluminiumproductionwasunder pressure globally and particularly inwesternEurope,asaresultof rising energy prices. For 2023, the secondary aluminium productiontrendshouldshowa rebound YOY on the back of a moderation in energy prices and thecontinuationoftherecoveryof the automotive industry. In the mid-term, a reversal in the automotive trend and the related aluminium demand is also expected, onthebackofacceleratingEV demand, favoured by the decarbonisation megatrend, inventory restocking and normalised semiconductor production. ParticularlyintheEU,anewlawwas approvedin2022toeffectivelyban thesaleofnewcombustion-engine cars by 2035. The latter embraces the shift to zero-emission mobility, whichwillspeeduptheswitchto EVsandthereforewilldrivethe growthofthedemandand production of secondary aluminium in the EU. Theestimatedgrowth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, so too are salt slags. 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 more recently in China during 2016 and2017.InTurkeyandSouthKorea, BefesahasbeenofferingitsEAFsteel dust recycling services since 2010 and 2013, respectively. In China, supported by the regulations, Befesa startedofferingitsEAFsteeldust 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 34 to 39). In summary, in the mid- to long- term, favourable megatrends, and positive sustainability and recycling trends,combinedwithfavourable and strictly enforced environmental regulations, are expected to further enhance the global demand for especially secondary steel and aluminium production and subsequentresiduerecycling. Establishing a circular economy is a relevant and increasing trend across theworld,withmetalrecyclingbeing one of the most established processes Market environment continued 30 Befesa Annual Report 2022 To Befesa’s shareholders 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 extracting metals from residues and other sources, and reintroducing the recovered materials into the market, Befesa prevents the extractionoffinitevirginresources and positively contributes to the protection of the environment. DEVELOPMENT OF ZINC TREATMENT CHARGES The benchmark zinc treatment charge (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 customers, the zinc smelters, deduct the TC from the amount of zinc contained in WOX (typically 85%ofthezincLMEprice),which ispayabletoBefesa. For2022,thebenchmarkTCwas settled at $230 per tonne, $89 pertonnehigherYOY(2021:$141 pertonne,thesecond-lowestlevel over the last decade). This resulted in around €16 million YOYlowerEBITDAin2022. Aluminium alloy FMB prices (€ per tonne) Aluminium alloy FMB average prices € per tonne 2022 2021 Change Change Q1 €2,627 €1,982 €645 33% Q2 €2,488 €1,947 €541 28% Q3 €2,327 €2,012 €315 16% Q4 €2,312 €2,506 -€194 -8% Full year €2,438 €2,112 €327 15% Source: Free Metal Bulletin (FMB), weeklyaverage prices €4,000 €3,000 €2,000 €1,000 31 Dec 2021: €2,325 per tonne 2021 average: €2,112 per tonne 2022 average: €2,438 per tonne Jan-21 Apr-21 Jul-21 Oct-21 Jan-22 Apr-22 Jul-22 Oct-22 Dec-22 31 Dec 2022: €2,370 per tonne 31Befesa Annual Report 2022 Statutory  financialstatements  Consolidated  financialstatements  ToBefesa’s  shareholders  Additional  information Management report Market environment continued Zinc LME prices (US$ 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 2022 2021 Change 2022 2021 Change Q1 $3,743 $2,748 $995 36% €3,337 €2,279 €1,058 46% Q2 $3,925 $2,916 $1,009 35% €3,683 €2,418 €1,265 52% Q3 $3,269 $2,991 $278 9% €3,245 €2,538 €707 28% Q4 $3,004 $3,365 -$361 -11% €2,944 €2,942 €2 0% Full year $3,485 $3,005 $480 16% €3,302 €2,544 €758 30% $5,000 $4,000 $3,000 $2,000 $1,000 31 Dec 2021: US$3,630 per tonne 2021 average: US$3,005 per tonne 2022 average: US$3,485 per tonne Jan-21 Apr-21 Jul-21 Oct-21 Jan-22 Apr-22 Jul-22 Oct-22 Dec-22 31 Dec 2022: US$3,025 per tonne €5,000 €4,000 €3,000 €2,000 €1,000 31 Dec 2021: €3,205 per tonne 31 Dec 2022: €2,834 per tonne 2021 average: €2,544 per tonne 2022 average: €3,302 per tonne Jan-21 Apr-21 Jul-21 Oct-21 Jan-22 Apr-22 Jul-22 Oct-22 Dec-22 32 Befesa Annual Report 2022 To Befesa’s shareholders As of the date of publication of this Annual Report, the benchmark TC for 2023 has not yet been published in the zinc industry. Once available, Befesawillprovidedetailedearnings guidance for the full 2023 year – most likelywiththeQ12023earnings releaseon4May2023. DEVELOPMENT OF ENERGYPRICES Zinc and aluminium market prices havebeenstronglycorrelatedwith electricity and gas prices over the last >20 years. This strong correlation discontinued starting from Q4 2021, continued and emphasised during 2022 in the wakeoftheEuropeanenergycrisis. In 2022, the volatility and high levels of gas and electricity prices escalatedwiththestartofthewarin Ukraine in late February, and it reached peak levels in Q3. In Q4 2022, gas and electricity prices in Europesignificantlyreducedfrom therecord-highlevelsinAugust. As of the date of publication of this Annual Report, the volatility of the energy market remains high and there is still considerable uncertainty over energy prices in 2023. DEVELOPMENT OF BASE METAL PRICES TheprofitabilityofBefesa’ssteeldust recycling and aluminium salt slags recycling operations are partially influencedbythedevelopmentofthe supply and demand dynamics of certain base metals. Zincmarketpricesin2022wereless affectedbytheweakerChinese demand for zinc – largely a result of the struggling property sector – but rather by the simultaneous supply tightnessintherestoftheworld.The supplyofzincfell,reflectingan unprecedented year of smelter issues, particularly in Europe, as smelters faced margin challenges owingtohighenergyprices,withpeak levelsreachedinQ32022.Thelow level of stocks of zinc and the supply curtailments and uncertainty over Europe’s smelter sector led to zinc prices peaking in April 2022 to around $4,500 per tonne. After reaching its peak, zinc market prices decreased and trailed between$2,900and$3,500per tonne. Zinc market prices ended theyearatUS$3,025pertonneof zinc,asof31December2022, US$605pertonneor17%belowthe price of US$3,630 per tonne of zinc asof31December2021.Applying the US dollar/euro exchange rates for the respective dates, zinc market prices closed at €2,834 per tonne asof31December2022,€371 pertonneor12%belowtheprice of€3,205pertonneofzincasof 31December2021. The average cash seller daily price per tonne quoted on the LME for 2022 wasUS$3,485pertonneofzinc, representinga16%or$480pertonne increase YOY (2021 average: US$3,005 per tonne). Applying the US dollar/euro exchange rates for the respective periods, the average daily pricein2022was€3,302pertonneof zinc,representinga30%or€758per tonne increase YOY (2021 average: €2,544 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 34 to 39). 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 – rallied in March 2022 to a 15-year high of around €3,000 per tonne on the back of the deepening global energy crisis.Notwithstandingsignificant production losses in Europe and China, aluminium market prices declined later in the year to around €2,300–€2,500 per tonne levels as thefocusincreasinglyshiftedtowards demand–whichfacednumerous headwinds–andinventories. Prices closed at €2,370 per tonne ofaluminiumalloyFMBasof 31December2022,€45pertonne or2%abovethepriceof €2,325pertonneofaluminium alloyasof31December2021. Theaverageweeklypricepertonneof aluminiumalloyFMBfor2022was €2,438pertonne,representinga15% or €327 per tonne increase YOY (2021 average: €2,112 per tonne). 33Befesa Annual Report 2022 Statutory  financialstatements  Consolidated  financialstatements  ToBefesa’s  shareholders  Additional  information Management report 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 TWO MAIN PILLARS: Maintain the leadership position inthemarketswhereBefesa currently operates. Befesa’s strategy focuses on growing in the core business of the company – steel dust and salt slags recycling and secondary aluminium – in markets that present attractive growth opportunities. Befesa has 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 Sustainable Global Growth Plan (SGGP) 34 Befesa Annual Report 2022 To Befesa’s shareholders In2022,Befesamadesignificant progressinthedefinitionofits business strategy across all the dimensions, setting a solid foundationforfuturegrowth.Befesa has transformed from a purely European leader to the global leader in the steel dust recycling business, withastrong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overthecomingyears. SUSTAINABLE GLOBAL GROWTHPLAN(SGGP) ThefirstpillarofBefesa’sstrategy isthenewSustainableGlobal GrowthPlan,whichisaroadmap forthenextfiveyears. Most of the companies around theworldaremakingstrong commitments to reduce their carbon footprint and this decarbonisation megatrend clearly brings great opportunities for Befesa. As the steel industry looks to decarboniseitsoperations,itneeds to move to production technologies thatarelessCO₂-intensive. Primary steel coming from blast furnaces(BOF)useironoreasaraw material and coking coal as a reducingagent.Thiscompareswith electricarcfurnaces(EAF),which usesteelscrapasarawmaterial andelectricityasanenergysource. EAF steel-making produces seven timeslessCO₂pertonneofsteel compared to BOF, based on today’s electricity energy mix. If the EAF isfedwithrenewableelectricity, thisCO₂advantagebecomes significantlylarger. Befesa recycles steel dust coming from EAF steel producers that containszinc,whichisrecoveredby Befesa.Decarbonisationwilldrive EAFsteelgrowthgloballyandover the next 10 years EAF penetration is expectedtoincreasefrom29%to 37%globally.Thiswillrepresent tangibleandsizeablegrowth opportunities for Befesa in Europe, the US and Asia. Similarly, the decarbonisation trend drives a transition in the automotive industry from combustion engines toelectricvehicles(EVs)to decarbonise the industry and move awayfromtheuseoffossilfuels. EVswillrequireahigheramountof aluminium content per car to achievelight-weighttargetswhich atthesametimewillincreasethe efficiencyoftheelectricmotors. Thismegatrendwilldrivehigher aluminium demand in Europe and increase the need for salt slags recycling capacity. In Europe, the decarbonisation investments that all the steel producersaremakingwillsupport EAFshare,growingtomorethan 50%by2030.Thisrepresentsan increaseinthemarketwhere Befesaoperatesofmorethan 350thousandtonnes (approximately). In China – the largest producer of steelintheworld–therapid transition from BOF to EAF representsastronggrowth opportunity for Befesa. More than 60milliontonnesofnewEAF capacity has been announced, whichrepresentsapproximately onemilliontonnesofincremental steeldustgeneration. EAF EAFD 417 c.7 564 c.10 764 c.13 2016 BOF EAF Total crude 2021 2030e +2.7% -0.5% +6.2% +4.2% +3.6%2,0641,9511,633 26% +1.0% CAGR 2016/21 CAGR 2022/30e 37%29% Primary steel (BOF) consumes c. 7x more CO₂ per tonne vs secondary steel (EAF) % EAF growing, outpacing & replacing BOF... ... driven by & driving decarbonisation Global crude steel production 2016–2030e (million tonnes) 35Befesa Annual Report 2022 Statutory  financialstatements  Consolidated  financialstatements  ToBefesa’s  shareholders  Additional  information Management report Based on this decarbonisation megatrend, Befesa has announcedanambitiousgrowth plan to invest c. €410–€450 million overthenextfiveyearstogrow earnings at a high rate. With this capex plan, Befesa is targeting €125–€155 million of incremental EBITDA from the 2022 baseline,whichwouldrepresenta growthinEBITDAofbetween8% and10%onanannualbasisoverthe nextfiveyears. Theplanisgloballywell-balanced across the three main markets of Befesa,witharoundone-thirdinthe US, Europe and Asia/China. Befesaaimstofundthegrowthplan organicallywithBefesa’sown resources,whilekeepingtheleverage atorbelowx2.5,aswellasmaintaining the dividend policy of distributing 40%–50%ofnetprofitperyear.The growthplanismodular,andthe execution is in control of Befesa, continuing a prudent approach and adjusting timing as required as per the market environment. North America Befesa entered the North AmericanmarketinAugust2021 withtheacquisitionofAmerican Zinc Recycling (AZR). The US is a very attractive market for steel dust recycling. Although it hasalreadyahighEAFshare penetrationofaround70%,thisis expected to increase even further, drivenbytwomaintrends. First, the US government has agreed to spend $1.2 trillion on infrastructureprojects,whichwill drivehighersteeldemand.Thiswill require additional steel production, and some of the largest steelmakers have already announced investments to increase steel production capacity. The second trend is the decarbonisation, as most of this newsteelwillbeproducedusing EAF technology. Based on thesetrends,thesteelproduction from EAF is estimated to increase by20%by2030,generating around300thousandtonnesof newsteeldusttoberecycledin theUSannually. In this market environment – in whichBefesaalreadyhasc.40%– 50%ofthemarketshare–theSGGP includestwoinvestments. Thefirstonealreadyhappenedin September2022whenBefesa acquiredtheremaining93%stakein theUSzinc-refiningasset.Befesa alreadyowned7%oftheasset,as part of the acquisition of the AZR deal closed in 2021. The environment, dominated by highinflationandenergyprices, providedBefesawiththe opportunity to favourably renegotiate the terms and conditionsoftheagreement, reducing the acquisition price by65%to$47million. Strategy continued 2022 PF Post SGGP (runrate) ▪ New EAFD plant ▪ WOX washing expansion ▪ New Salt Slags plant ▪ Secondary Aluminium expansion China I & II China III ( LOI) ▪ China IV ▪ China V Zinc refining Capacity utilisation & efficiences Steel +€30�€35 Aluminium +€15-€20 Steel +€45�€55Steel + €35�€45 c. €340�€370m c. 8-10% CAGR €215m +€35�€45m +€45�€55m +€45�€55m Well-definedgrowthroadmapdriving€125–€155mincrementalEBITDA 8%–10%CAGR,globallybalanced,c.1/3US/EU/Asia 36 Befesa Annual Report 2022 To Befesa’s shareholders Thezinc-refiningbusinessprovides Befesawithastrategicvertical integration opportunity in the US, addressing the shortage of smelting capacity in the North American market. Furthermore, the zinc- refiningfacilityistheonlyoneofits kindintheworld,producinggreen zincfrom100%recycledraw materials.Thesizeoftherefining plantissufficienttoprocessallthe WOXcomingfromBefesa’sfour recycling plants in the US at full capacity, to produce pure zinc. The second project in the US is the debottlenecking of the capacity that Befesa acquired in August 2021, by whichBefesaexpectstoincreasethe volume by around 200 thousand tonnes of EAF steel dust throughput. TheUSisagrowingmarket,andfor Befesatocapturethatgrowth,itis needed to invest to refurbish the plant in Palmerton, PA. Theexistinginstalledcapacityin Palmerton is underutilised and, in order to prepare the asset for further growth,Befesaplanstoinvest duringtheyears2023and2024. Theinvestmentwillfreeupcapacity andimprovetheefficiencyofthe plantsignificantly. ThetotalinvestmentintheUSwillbe €110–€120 million and is expected to drive incremental EBITDA of €35–€45 millionperyear.Thetimingofthe debottlenecking and refurbishment of thePalmertonsitewilloccurbetween 2023and2024,andBefesawillbe readytocapturethenewmarket volumefrom2024onwards. Europe InEurope,thesituationisdifferentto that in the US. In Europe today, the penetrationofEAFisaround45%. The steel industry is under pressuretodecarbonisetheir operations in order to meet the CO₂reductiontargettheyhave committed to. The reliable and fast waytodecarbonisethesteel industry is by transitioning from BOF toEAF,whichproducesseventimes lessCO₂pertonneofsteel. More than 10 projects have been announced by steelmakers in Europe to increase the EAF steel production capacity over the comingyears,whichwillrepresent atotalofaround€15billionoftotal investment carried out by Befesa’s existing customers to increase steel production using EAF technology. Consequently,therewillbearound 350 thousand tonnes of EAF steel dust annually available in Europe to be recycled. Itisthefirsttimeinthelast20years thatBefesaseesasizeablegrowth opportunity in Europe and Befesa isreadytocaptureit.Theshareof EAF steel production in Europe is expectedtogrowfromaround44% todaytoover50%by2030,which represents an increase of more than20%.Befesaexpectstocarry out a capacity increase of 140–160 thousand tonnes of EAF steel dustrecyclingcapacityandthe corresponding expansion of the WOXwashingcapacity,byinvesting €105–€115 million. These investmentsareexpectedto deliver€30–€35millionof incremental EBITDA per year. Theserepresentahighreturnwith limited risk investments, given the fact that Europe is a market that Befesaknowsverywellandwhere Befesa has been operating for over 30 years. Befesa can accommodate the speed of the capex to the speed ofthegrowthofthemarketatany time,havingfullflexibilityinthe investment programme. China Befesa has been present in China since2008.However,itwasonly fouryearsagowhenBefesastarted the investment process in this country after the Chinese government launched strict environmental rules and regulation. China is very rapidly transitioning from BOF to EAF steel-making in order to reduce their carbon emissions.This,togetherwiththe fact that there is a proper environmental regulation in place, makesitaveryattractivegrowth opportunity for Befesa. Befesa is alreadypresentintwoChinese provinces:JiangsuandHenan. China today is already by far the biggest steel dust recycling marketintheworldwitharoundtwo million tonnes of steel dust generation every year. China producesover50%ofthecrude steelintheworld.Today,only11%of the crude steel produced in China is throughEAFtechnology.However, the EAF share is expected to increasetoaround20%by2030, drivenbydecarbonisation,CO₂ reduction and the targets that the Ministry of Environment has set. Today, there are over 40 projects announced to increase the EAF steel-making capacity by over 60milliontonnesinChina.Thiswill translate into over 200 million tonnes of EAF steel generation in Chinaby2030. 37Befesa Annual Report 2022 Statutory  financialstatements  Consolidated  financialstatements  ToBefesa’s  shareholders  Additional  information Management report Strategy continued Over the next years, the market of Befesawillgrowtoaround3.5million tonnes of EAF steel dust per year, whichwillneedtoberecycled.Toput things into context, the addressable market size in China is around three times that in the US or Europe. Befesa expects to capture part of thatmarketgrowthtohavea marketshareof15%–20%ofthe total addressable market. Befesa expects to do so by a combination of scaling up of existing plants and goingintoanewprovince. Befesa aims to add around 330thousandtonnesofnewEAF steel dust recycling capacity in China.Thiswillrequireatotal investment of €115–€125 million, whichisexpectedtodeliver incremental EBITDA of €30–€35 million per year. Like in the US and Europe, Befesa can accelerate or slowdownthespeedofthe investmentdependingonhowthe situation is evolving in China. As in the US and Europe, Befesa can accelerateorslowdownthespeed oftheinvestmentdependingonhow the situation is evolving in China. Befesa’s existing plants in the provincesofJiangsuandHenanare verywelllocated,closetolocal steelmakers.Beyondthetwoexisting plants, in February 2023 Befesa signed an investment agreement withlocalauthoritiestobuildathird plant at the city of Yunfu, in the province of Guangdong (located in the southern part of the country). Aluminium In the aluminium business, the decarbonisationandEVmegatrends willsignificantlydrivealuminium demand in Europe. In the automotive industry, the decarbonisation and the ban to manufacture combustion enginesby2030willdrivethe transition from traditional combustionenginecarstoEVs.The saleofEVsinEuropeisexpectedto increasebyfivetimesby2030to around 11 million units from the currenttwomillionunits. Electricvehiclesneedlight-weight solutions in order to increase the efficiencyofthecartoprolong thelifeofthebatteries,whichisa keyelementinthenewEVcars. Toachievethislight-weightgoal, aluminium is the solution as aluminiumweightisaround one-third less compared to that ofsteel. The average aluminium content per carhasbeenincreasing,from121kg per car in 2006 to 193 kg per car today;thisisexpectedtoaccelerate evenmoretoaround250kgpercar by 2030. Consequently, aluminium demand in Europe is expected to increase by 60%toaroundfivemilliontonnes by2030,fromaroundthreemillion tonnestoday.Thiswillrequiremore recycled aluminium and more salt slags recycling capacity in Europe, wherethemarketisexpectedto growfromaroundonemilliontonnes of salt slags today to 1.6 million tonnes by 2030. Befesa is today the market leader inaluminiumsaltslagsrecycling inEurope,witharound50%ofthe market.Inthismarketenvironment, Befesaplanstocarryouttwo majorinvestments. First, Befesa aims to expand its secondary aluminium production capacity by around 90 thousand tonnes in the existing plant of Bernburg, Germany. This is in line withtheexpectedvolumegrowthin the European market. Second, Befesa plans to invest in a newstate-of-the-artsaltslags recycling plant of 120 thousand tonnes annual capacity, in line withtheincrementalsecondary aluminium capacity and corresponding salt slags generation. Altogether, Befesa plans to spend atotalof€80–€90million capex,whichisexpectedtodeliver €15–€20 million of total incremental EBITDA per year. 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 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. The majority of the zinc hedges are denominatedineuroterms,which 38 Befesa Annual Report 2022 To Befesa’s shareholders Zinc LME prices vs Befesa’s hedging & blended average prices (€ per tonne) €1,000 €3,000 €4,000 €5,000 €2,000 Jan-21 2016 BOF EAF Total crude 2021 2030e +2.7% Feb-21 Mar-21 Apr-21 Jun-21 May-21 Jul-21 Aug-21 Sep-21 Oct-21 Nov-21 Dec-21 Jan-22 Feb-22 Mar-22 Apr-22 May-22 Jun-22 Jul-22 Aug-22 Sep-22 Oct-22 Nov-22 Dec-22 Befesa’s zinc blended average price Zinc LME Befesa’s zinc hedging average price €2,627 €2,379 €2,151 €2,275 also provides a hedging on the FX fluctuation,asthezincpriceonthe LME is quoted in US dollars. In2022,Befesa’shedgeswere locked in at €2,379 per tonne on average.Thispartlyoffsetthe increase of the zinc LME price, whichaveragedat€3,302pertonne intheyear.However,Befesa’s hedgingpriceswere€228pertonne or11%higherYOY(2021:2,151per tonneonaverage).Combined,the effectivezincaverageprice (monthlyblendedratebetween hedged volume and non-hedged volume) resulted in €2,627 per tonne in2022,up€352pertonneor15.5% YOY(2021:€2,275pertonne). The combined global hedge book in place, as of the date of publication of this Annual Report, provides Befesawithimprovedpricing visibilityuptoJuly2025,therefore forthefollowingc.2.5years. Period Average hedged price (€ per tonne) Zinc content in WOX hedged (thousand tonnes) 2022 €2,379 163 2023 c. €2,450 1 156 2024 c. €2,550 1 152 2025 c. €2,650 1 58 1 FXUSdollar/euroforwardrateassumedof1.08for2023and2024,and1.10for2025 39Befesa Annual Report 2022 Statutory  financialstatements  Consolidated  financialstatements  ToBefesa’s  shareholders  Additional  information Management report Befesa successfully closed the acquisitionoftheremaining93% stakeintheUSzinc-refiningasseton 30September2022.Formerlyknown as American Zinc Products, LLC. (AZP), Befesa renamed it Befesa Zinc Metal (BZM). Befesa consolidates financialsofBZMinaccordancewith the requirements of the International Financial Reporting Standards (IFRS) as adopted by EU from 30 September2022onwards.More detailed information on the consolidatedfinancialstatementsis available on pages 105 to 187 of this Annual Report. REVENUE Total revenue increased in 2022 by 38.3%YOYto€1,136.0million(2021: €821.6million).Theincreasewas primarilydrivenbyvolumegrowthin Steel Dust Recycling Services, including the contribution from the US zinc operations during the full yearforthefirsttimein2022,the stronger zinc and aluminium alloy market prices and the higher zinc hedging prices. These positive effectswerepartiallyoffsetbythe unfavourable higher zinc treatment charge (TC), referenced at $230 pertonnein2022(2021:$159per tonne),andthelowervolumes treated in Aluminium Salt Slags. Revenue (€million): 2021 2022 821.6 1,136.0 €314.4m or 38.3% EBITDA & EBIT Total adjusted EBITDA increased in 2022by8.6%YOYto€214.6million (2021:€197.6million).Thiswas despite a very challenging environment that included factors suchastheCOVIDpandemicand ChinaenforcingazeroCOVID policy,thewarinUkraineandthe energy crisis. The €17.0 million adjusted EBITDA improvementYOYwasdrivenmainly by the US zinc operations contributing during the full year for thefirsttimein2022.Downward pressurewasbecauseof unfavourable zinc TC and energy inflation,whichpartiallyoffsetthe benefitsoftheYOYhigherbase metal prices. The main components oftheYOY€17.0millionadjusted EBITDAimprovementwere,inmore detail,thefollowing: ■ Volumes(€23million):higherin Steel Dust (€28 million) from the higher EAF steel dust throughput, including the US zinc operations contributingforthefullyear; lowerinAluminiumSaltSlags, mainlydrivenbytheloweractivity of the European automotive and aluminiumindustries(–€5million); ■ Base metal prices (€39 million): higher zinc LME prices (€23million);higherzinchedging prices(€5million);unfavourable higherzincTC(–€16million); higher aluminium FMB prices and aluminium metal margins (€27million);and ■ Higherinflation,mainlyenergy cost,whichoffsettheYOYhigher base metal prices (–€45 million). Adjusted EBITDA & margin (€million,%marginofrevenue): 2021² 2022¹ €17.0m or 8.6% 24.0% 18.9% 197.6 214.6 1 €234.9m total reported EBITDA 2022 – €20.3m adjustments,mainlydrivenbyzinc-refining acquisition impacts = €214.6m total adjusted EBITDA 2022 2 €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 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. 40 Befesa Annual Report 2022 To Befesa’s shareholders Total adjusted EBIT came in slightlyupYOYat€150.3million in2022(2021:€149.3million), mainlyfollowingthesame driversexplained,referringto theEBITDAdevelopment. Adjusted EBIT & margin (€million,%marginofrevenue): 2021⁴ 2022³ €1.1m or 0.7% 18.2% 13.2% 149.3 150.3 3 €164.8m total reported EBIT 2022 – €14.4m adjustments,mainlydrivenbyzinc-refining acquisition impacts = €150.3m total adjusted EBIT2022 4 €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 Total EBITDA and EBITwere adjusted for –€20.3 million and €5.9millionin2022,respectively, largely attributable to impacts from the acquisition of the US zinc- refiningassetandtheinsurance recoveryattheHanoverplant. Total reported EBITDA amounted to €234.9millionin2022(+23.9%YOY). Total reported EBIT amounted to €164.8millionin2022(+29.3%YOY). Further information regarding these adjustments is available in Note 2.6 ofthe“Consolidatedfinancial statements” section of this AnnualReport. €214.6m ADJUSTED EBITDA IN 2022 (€197.6M IN 2021) €106.2m NET PROFIT IN 2022 (€99.7M IN 2021) €2.66 EARNINGS PER SHARE IN 2022 (€2.68 IN 2021) The reconciliation of EBITDA to IFRSoperatingresults(EBIT)is available in the “Consolidated financialstatements”sectionon pages 117 and 118. FINANCIAL RESULT &NETPROFIT Total netfinancialresult in 2022 came inat–€34.4million(2021:–€15.6 million). The YOY development is mainlydueto€10.5millionnon- recurring positive net exchange differencein2021relatedtothe$460 million AZR acquisition and the €6.4 millionfinancecostofrecognisingthe prior6.9%investmentonAmerican Zinc Recycling Corp. at fair value in 2022 (Notes 6 and 23 of the “Consolidatedfinancialstatements”). Total netprofit attributable to the shareholders in 2022 increased by 6.5%YOYto€106.2million(2021: €99.7million),alsoanewrecord. Thisimprovementwasprimarily because of the positive drivers affectingEBITDAandEBITandthe gain on bargain purchase in relation withthepurchaseofAmerican ZincRecyclingCorp(Notes6,22.3 and 23 of the “Consolidated financialstatements”). Correspondingly, earnings per share (EPS) in 2022 decreased slightly by 0.7%YOYto€2.66(2021:€2.68). 41Befesa Annual Report 2022 Statutory  financialstatements  Consolidated  financialstatements  ToBefesa’s  shareholders  Additional  information Management report NET DEBT & NET LEVERAGE Gross debt increased by €16.0 million to €710.8 million at year-end 2022 (year-end 2021: €694.7 million), explained primarily by local loans in China tofundtheHenanplant. Net debt increased to €549.0 million at year-end 2022 (year-end 2021: €470.6million).The€549.0millionnetdebtwiththe€214.6millionadjusted EBITDA resulted in a x2.56 net leverage at year-end closing (year-end 2021:x2.38),afterself-fundingtheUSzinc-refiningacquisition.Befesa continuestobecompliantwithalldebtcovenants. Net debt (€million) 31 December 2022 31 December 2021 Non-currentfinancialindebtedness 677.4 669.3  +Currentfinancialindebtedness 33.3 25.4 Financial indebtedness 710.8 694.7  –Cashandcashequivalents -161.8 -224.1  –Othercurrentfinancialassets1 -0.1 -0.1 Net debt 549.0 470.6 Adjusted EBITDA   214.6 197.6 Net leverage ratio x2.56 x2.38 1 Othercurrentfinancialassetsadjustedbyhedgingvaluationandrestricteddeposits CREDIT RATINGS During2022,Moody’sandStandard&Poor’sreviewedtheircorporate creditratingsassignedtoBefesa.InJune2022,Moody’sreaffirmedits‘Ba2’ rating, and improved its outlook on Befesa from stable to positive. Standard &Poor’sreaffirmedits‘BB+,outlookstable’rating. OPERATING CASH FLOW Operatingcashflowin2022amountedto€137.3million,16.5%higherYOY (2021:€117.9million).Thisimprovementwasdrivenmainlybytheearnings increase explained on the page opposite. Financial position & liquidity 42 Befesa Annual Report 2022 To Befesa’s shareholders Thechangeinworkingcapital andothersamountedto€34million YOY;thehigherworkingcapital consumptionwasverymuchto fundgrowth,includingadjusted itemsrelatedtotheUSzinc-refining acquisition. In addition, after collecting the majority of the Hanoverinsurancecoverage, thereisapproximately€10million expected to be collected during thefirsthalfof2023. Interests paid in 2022 increased by 25.8%YOYto€21.2million(2021: €16.9 million), mainly as a result of the higher gross debt (€100 million Term Loan B (TLB) add-on to partially fund the AZR acquisition, and Chinese local loans), and because TLB interest payments are made quarterly in 2022 versus biannually in 2021. €161.8m CASH ON HAND AT YEAR-END 2022 (€224.1M AT YEAR-END 2021) €549.0m NET DEBT AT YEAR-END 2022 (€470.6M AT YEAR-END 2021) x2.56 NET LEVERAGE AT YEAR-END 2022 (x2.38 AT YEAR-END 2021) Credit ratings for Befesa S.A. Year-end 2022 Year-end 2021 Moody’s Ba2 (outlook positive) Ba2 (outlook stable) Standard & Poor’s BB+ (outlook stable) BB+ (outlook stable) Net leverage ratio evolution (Net debt/adjusted EBITDA) x2.36 x2.61 x2.14 x3.10 x2.56 2017 2018 2019 2020 2022 2021 x2.38 In 2022, Befesa invested €151.4 million(2021:€77.7million)tofund regular maintenance capex, the recoveryoftheHanoverplantand USoperationalexcellence/ synergies,andgrowthinvestments. The latter are mainly related to the $47millioncashpaidtoacquirethe remaining93%stakeintheUS zinc-refiningasset,aswellascapex related to the second Chinese plant inHenan,partiallyfundedthrougha local loan. Dividends of €50 million (€1.25 per share)weredistributedinJuly2022, equalto50%ofthe2021netprofit. Totalcashflowgeneratedin2022 amounted to –€62.3 million and cash on hand stood at €161.8million.Normalisingfor over€50milliontoself-fundtheUS zinc-refiningacquisitionandrelated costs, and about €10 million Hanoverin-processinsurance recovery, Befesa ended the year withabalancedcashflow. The €161.8 million cash balance, togetherwiththe€75.0millionRCF, entirelyundrawn,providesBefesa withmorethan€230millionliquidity. 43Befesa Annual Report 2022 Statutory  financialstatements  Consolidated  financialstatements  ToBefesa’s  shareholders  Additional  information Management report STEEL DUST RECYCLING SERVICES VolumesofEAF steel dust increasedin2022by34.8%YOYto 1,193,793 tonnes (2021: 885,724 tonnes). With these volumes, Befesa’s EAF steel dust recycling plants ran at an average load factor of77%oftheinstalledannual recycling capacity of c. 1,555,300 tonnes, including c. 620,000 tonnes from the US recycling sites and 110,000tonnesfromthefirst ChineseplantatJiangsu. The volume of Waelz oxide (WOX) soldincreasedin2022by40.0% YOY to 407,445 tonnes (2021: 290,975 tonnes). EAF steel dust throughput & loadfactor (Thousandtonnes,%ofannualcapacity) 2021¹ 885.7 83.3% 76.8%2022 1,193.8 308.1 kt or 34.8% 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) 2021 291.0 2022 407.4 116.5 kt or 40.0% Revenue in the Steel Dust business increasedin2022by60.2%YOYto €730.3 million (2021: €455.8 million). Revenue – Steel Dust Recycling Services (€million) 730.3 €274.5m or 60.2% 2021 2022 455.8 Blended zinc average price (€/tonne) 2021 2,275 2022 2,627 €352 per tonne or 15.5% Segment information Befesa organises its activities into two business segments: Steel Dust Recycling Services and Aluminium Salt Slags Recycling Services. 44 Befesa Annual Report 2022 To Befesa’s shareholders Adjusted EBITDA increased in 2022 by13.7%YOYto€168.6million (2021:€148.3million),primarily explained by the positive contribution from the US operations. Thehigherzincmarketpricesoffset thehigherinflation,mainlyenergy cost, and the unfavourable zinc TC. In 2022,zincLMEpriceswerestronger YOY and averaged at €3,302 per tonne,up29.8%YOY(2021:€2,544 pertonne).ZincTCwasreferencedat $230 per tonne for the full year 2022 (2021: $159 per tonne). Combined, thenetpriceeffect(zincLMEandTC) wasupin2022bymorethan25% YOY. Zinc hedging average prices in 2022werealsohigher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 €2,627pertonnein2022,up15.5% YOY (2021: €2,275 per tonne). Adjusted EBITDA & margin – SteelDust Recycling Services (€million,%marginofrevenue) 20213 148.3 20222 168.6 €20.3m or 13.7% 32.5% 23.1% 2 €178.8m Steel Dust reported EBITDA 2022 – €10.2madjustments,mainlydrivenbyzinc-refining acquisition impacts = €168.6m Steel Dust adjusted EBITDA 2022 3 €134.6m Steel Dust reported EBITDA 2021 + €13.7m one-time AZR acquisition costs = €148.3m Steel Dust adjusted EBITDA 2021 Adjusted EBIT came in at €121.1millionin2022,up2.1%YOY (2021:€118.6million),following similar drivers explained, referring to the EBITDA development. In 2022, EBITDA and EBIT in Steel DustRecyclingServiceswere adjusted for –€10.2 million and €5.5million,respectively,mainly driven by impacts from the acquisitionoftheUSzinc-refining asset. Reported EBITDA amounted to€178.8million(+32.8%YOY),and reported EBIT amounted to €125.8million(+29.7%YOY). Adjusted EBIT & margin – SteelDust Recycling Services (€million,%marginofrevenue) 20215 118.6 20224 121.1 €2.5m or 2.1% 26.0% 16.6% 4 €125.8m Steel Dust reported EBIT 2022 – €4.7m adjustments,mainlydrivenbyzinc-refining acquisition impacts = €121.1m Steel Dust adjusted EBIT 2022 5 €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 45Befesa Annual Report 2022 Statutory  financialstatements  Consolidated  financialstatements  ToBefesa’s  shareholders  Additional  information Management report ALUMINIUM SALT SLAGS RECYCLING SERVICES Salt Slags subsegment Salt slags and SPL recycled volumes in 2022 amounted to 322,088tonnes,down18.5%YOY (2021: 395,025 tonnes). This developmentwasprimarily explainedbytheHanoverplant shutdownin2022torepairthe damagefromthefirein2021.On average, Salt Slags recycling plants operatedat69%ofthelatest installed annual recycling capacity of 470,000 tonnes. Normalising for Hanover,utilisationrateswouldhave averagedataround95%. Salt slags & SPL volumes & load factor (Thousandtonnesrecycled,%of annualcapacity) 84.0% 94.7% 84.0% 2021 395.0 20226 322.1 -72.9 kt or -18.5% 6 LoadfactornormalisedfortheHanoverplant shutdownin2022 Revenue in the Salt Slags subsegmentcameinflatYOY at€77.3millionin2022 (2021:€77.3million). Revenue – Salt Slags subsegment (€million) 2021 77.3 2022 77.3 €0m or 0% Adjusted EBITDA in the Salt Slags subsegment increased in 2022 by 31.6%YOYto€27.0million (2021:€20.5million).TheYOY EBITDAimprovementwasprimarily driven by the higher aluminium alloy FMBprices,whichaveragedat €2,438pertonnein2022,up15.5% YOY (2021: €2,112 per tonne). The positiveeffectsfromYOYhigher aluminiummarketpriceswere partiallyoffsetbythehigher inflation,mainlyenergycost,and thelowervolume. Adjusted EBIT increased in 2022 by60.4%YOYto€18.2million (2021:€11.3million),followingsimilar drivers explained, referring to the EBITDA development. In 2022, EBITDA and EBIT in the Salt Slagssubsegmentwereadjusted for –€11.6 million and €0.4 million, respectively, driven mainly by impactsrelatedtotheHanover plant recovery. Reported EBITDA amounted to €38.6 million (+45.5%YOY),andreportedEBIT amounted to €29.4 million (up €18.1millionYOY). Adjusted EBITDA & margin – SaltSlags subsegment (€million,%marginofrevenue) 20218 20.5 20227 27.0 €6.5m or 31.6% 26.5% 34.9% 7 €38.6m Salt Slags reported EBITDA 2022 – €11.6m HanoverSaltSlagsplantrecoveryimpacts= €27.0m Salt Slags adjusted EBITDA 2022 8 €26.5m Salt Slags reported EBITDA 2021 – €6.0m HanoverSaltSlagsplantfireimpact=€20.5mSalt Slags adjusted EBITDA 2021 Adjusted EBIT & margin – Salt Slags subsegment (€ million,%marginofrevenue) 2021 12.5 20229 18.2 €6.9m or 60.4% 14.7% 23.5% 11.3 9 €29.4m Salt Slags reported EBIT 2022 – €11.2m HanoverSaltSlagsplantrecoveryimpacts= €18.2m Salt Slags adjusted EBIT 2022 Segment information continued 46 Befesa Annual Report 2022 To Befesa’s shareholders Secondary Aluminium subsegment Aluminium alloy production volumes in 2022 amounted to 160,637tonnes,13.5%lowerYOY (2021: 185,777 tonnes). This developmentwasprimarilydriven bythecurrentchallenging Europeanautomotiveandaluminium industry environment. Nevertheless, even under the current volatile market environment, Secondary Aluminium production plants overall operated on average at a utilisation rateofaround78%. Secondary aluminium alloy volumes & load factor (Thousand tonnes produced, %ofannualcapacity) 2021 185.8 2022 160.6 -25.1kt or -13.5% 90.6% 78.4% Aluminium alloy average marketprice (€/tonne) 2021 2,112 2022 2,438 €326 per tonne or 15.5% Revenue in the Secondary Aluminium subsegment amounted to€375.9millionin2022,up13.9% YOY (2021: €329.9 million). The favourable aluminium alloy FMB pricesweremostlyoffsetbythe lowervolumes. Revenue – Secondary Aluminium subsegment (€ million) 2021 329.9 2022 375.9 €46.0m or 13.9% EBITDA came in at €19.0 million in 2022,32.7%lowerYOY(2021:€28.3 million). The YOY EBITDA developmentwasmainlyexplained bythelowerproductionof aluminium alloys, driven by the currentlowerEuropeanautomotive and aluminium industry environment.Theinflationary pressure,withparticularlyhighgas prices in Europe during most of the year2022,wasoffsetbythehigher aluminiummarketpricesaswellas improved metal margins. EBIT came in at €11.5 million in 2022,down40.7%YOY(2021: €19.3million),followingsimilar driversthatinfluencedthe EBITDAdevelopment. EBITDA & margin – Secondary Aluminium subsegment (€million,%marginofrevenue) 2021 28.3 2022 19.0 -€9.3m or -32.7% 8.6% 5.1% EBIT & margin – Secondary Aluminium subsegment (€million,%marginofrevenue) 2021 19.3 11.52022 -€7.9m or -40.7% 5.9% 3.0% 47Befesa Annual Report 2022 Statutory  financialstatements  Consolidated  financialstatements  ToBefesa’s  shareholders  Additional  information Management report 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of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80to95)and“Compliance”(pages96to102).Furtherinformation aboutsustainabilitywillbeavailableintheBefesaESGUpdate2022,which willbepublishedinQ22023. Befesawilldisclosetheeligibilityandalignmentreportingrequirementsfor itsactivities,inaccordancewiththeEUtaxonomyregulationintheBefesa ESG Update 2022. 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. 48 Befesa Annual Report 2022 To Befesa’s shareholders 49Befesa Annual Report 2022 Statutory  financialstatements  Consolidated  financialstatements  ToBefesa’s  shareholders  Additional  information Management report 49Befesa Annual Report 2022 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 2022, Befesa managed and recycled over 1.8 million tonnes of residues andproducedabout1.5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.This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. In addition, in the Aluminium Salt Slags Recycling Services segment, Befesa contributesbyrecyclingandreintroducingcloseto100%ofthealuminium 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 that can be used many times. 50 Befesa Annual Report 2022 To Befesa’s shareholders 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 66 to 68) of this Annual Report. Befesa’s contribution to the environment: ■ Reducing the consumption of natural resources and preventing around 1.8 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 Best Available Technology (BAT) to minimise the environmental impacts. CO₂EMISSIONREDUCTION In2022,Befesadefinedaplanto reduceby20%itsCO₂emission intensityrateby2030,withthe ambition of achieving net zero by 2050.Thedetailedplanwaspartof the Befesa ESG Report 2021. Befesa isexecutingthisplanandwillprovide the latest progress as part of the Befesa ESG Update 2022, scheduled for Q2 2023. KEY PERFORMANCE INDICATORS 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 need 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 2022, Befesa spent €8 million on environment-related investments (2021: €27 million). 51Befesa Annual Report 2022 Statutory  financialstatements  Consolidated  financialstatements  ToBefesa’s  shareholders  Additional  information Management report Thiswaswiththeaimofrenewing equipmentthatincreasesefficiency and reduces energy consumption and emissions. The most relevant investments carriedoutduring2022were thefollowing: ■ Filter replacements and optimisationtoreduceemissions; ■ Many improvements in reducingandcapturingfugitive emissions such as building insulations, equipment enclosure, baghouse replacement and replacing open belt conveyors withclosedchainconveyors; ■ Engineering controls (e.g. sensors in baghouses linked to interlocked equipment) to preventincidentalemissions; ■ Continuous improvements in plants’energyefficiencysuchas the optimisation of the shutdowns,replacementof lightingwithLEDtechnology andmaterialrecovery optimisation to reduce the consumptionofresources; ■ Differentprojectstoimprovethe waterreuseintheprocess; ■ Replacementofchemicalswith more environmentally friendly products; ■ Improvements in emission monitoring systems to enhance theexistingcontrols; ■ Improvements in secondary containments to prevent ground contamination; ■ Improvements at gas treatment plants; ■ Repair of roads to prevent soil andgroundwatercontamination; ■ Noise-reductionprojects;and ■ TreeplantingforCO₂emissions compensation. 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 emissions 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 2022 across the Befesa sites to reduce energy consumption and to 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. 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. GREENHOUSE GAS EMISSIONS Steel production and metal recycling generates emissions of Environmental continued 52 Befesa Annual Report 2022 To Befesa’s shareholders directgreenhousegases(GHGs), 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 annually on a Company- widebasis.Inaddition,Kyoto Protocol Scope 1 and Scope 2 emissions are reported. In 2022, Scope 3 emissions started to be calculated. The actual nomenclature for Scope 1, 2 and 3 is direct emissions (previously Scope 1) and indirect emissions (previously Scope 2 and Scope 3). EHS CERTIFICATIONS As of 31 December 2022, all the Befesa sites except for the US zinc-refiningandChineseplantsare ISO14001certified;65%ofthe BefesasitesareISO50001certified, 70%areISO14064certifiedand 70%arealsocertifiedaccordingto ISO 45001. Through these management systems and other internal protocols, Befesa monitors carbon emissions and reports annuallyonaCompany-wide basisInaddition,KyotoProtocol Scope 1 and Scope 2 emissions are reported. In 2022, Befesa started reporting Scope 3 emissions. 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 are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2022, allcertificationsweremaintained, and audits did not result in any major nonconformity. In the case of minor nonconformism and observations, thesewereanalysedtoidentifythe rootcausesandtodefinethe necessary improvements. Furtherinformationwillbeshownin theBefesaESGUpdate2022,which willbepublishedinQ22023. ENVIRONMENTAL INITIATIVE CONTEST In 2022, Befesa launched its second Environmental Initiative Contest to promote the engagement and commitment of the Company’s employeestowardsenvironmental improvement opportunities. Many excellent environmental initiatives werepresentedinthecontest. Thewinninginitiativewasthe “Hataymountaingazelle”project, presented by a group of employees from the Iskenderun plant in Turkey. Thisinitiativewasawarded€15,000, whichwillsupporttheHatayTabiatı KorumaDerneği(HatayNature Conservation Association) to improvethehabitatsoftheHatay mountain gazelle. Befesa’s contribution to theenvironment: Reduce the consumption of natural resources and prevent around 1.8 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 Best Available Technology (BAT)tominimisethe environmental impacts. 53Befesa Annual Report 2022 Statutory  financialstatements  Consolidated  financialstatements  ToBefesa’s  shareholders  Additional  information Management report The progress that Befesa has made and employees’ collective commitment to Befesa’s strategies (going above and beyond) give confidencethatBefesacanmanage through the challenges and uncertainties that may come. At the end of 2022, Befesa held its Management Summit in Madrid, Spain.Afterthreeyearswithouta face-to-face meeting, the top executives met to celebrate the accomplishments so far. They also discussedthelong-termgrowthplan andhowitwillbecommunicatedto the rest of the Company. As of 31 December 2022, Befesa increased the number of employeesby19%to1,847people across eight countries (1,550 as of31December2021).This increasewasdrivenmainlybyChina and the US. Befesa’s headcount in Chinaincreasedby47%to115 people, explained by the plant locatedintheprovinceofHenan.In the US, Befesa’s headcount increasedby65%to574people, followingtheacquisitionofthe zinc-refiningasset.Befesaisproudto welcomeitsnewcolleaguesfromthe zinc-refiningplantlocatedin Mooresboro,NC,whichhasbecome Befesa’s largest site. Outofthe1,847employees,77% workinoperationsand maintenance,whichdemonstrates Befesa’s productive nature. In 2022,Befesacontinuedtohave above86%ofemployeeswith open-ended contracts. Befesa’s employee turnover rate is driven mainly by voluntary resignations,whichamountedto 2.17%oftheglobalaverage headcountin2022(2.40%in2021). The professional development of Befesa’s employees is a fundamentalpillartorunthe operations on a more productive, efficientandeffectivemanner,as wellastocontinuegrowingthe businesssuccessfully.Thatiswhy training has such crucial importance at the Company. Befesacollaborateswithdifferent training entities, including universities and business schools. FollowingthesuccessoftheYoung Professionals Programme in 2021, Befesa launched it again in 2022. Theprogrammehastwomain goals:developingintercultural communication and networkingskills,andproviding Company insights. The programme includes a virtual meetingwithBefesa’sexecutives (Executive Chair, CEO, CFO, businessVPs),avirtualmeeting withBefesa’scorporatedirectors, and more than seven hours of activities on intercultural communication. 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, 43 employees participated in this initiative (38 in 2022). Social, health & safety Befesa’s employees have delivered great results in 2022 in a very challenging macro environment. The Company not only managed the ongoing impact of the COVID-19 pandemic – affecting especially China – butwas also able to accomplish the full acquisition of the US zinc-refiningasset. People 54 Befesa Annual Report 2022 To Befesa’s shareholders During 2022, 37 apprentices and students participated in traineeships orinternshipswithBefesa(2021:38). In 2022, training hours more than doubled YOY to 49,751 (2021: 23,512), mainly explained by the increase in trainings related to health and safety, whichamountedto29,657hours (2021:11,284).Thisrepresents60% of the total training hours in 2022 (2021:48%oftotaltraining).This showsthatthisfieldcontinuestobe a key priority at Befesa and its commitment to the safety of its operations and employees. General training hours increased by 85%to12,955(6,995in2021)and languagetrainingby37%to7,098 (5,164in2021).Theobjectivewith the trainings is to enhance employees’ performance, productivity and satisfaction. Further information on employees is available on page 172 of this Annual Report and in the Befesa ESG Update 2022,whichwillbepublishedinQ2 2023. 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,equityandinclusion (DE&I) policy in 2020, Befesa continuestoworkforabetterand equal society. By celebrating the United Nations Zero Discrimination Day on 1 March 2022, Befesa has reinforced its commitment to supporting the solidarity movement to end all forms of discrimination, promoting inclusion and a movement for change. This is done not only throughtheDE&Ipolicy,butalso throughothertoolsinplacesuchas thecodeofconduct,theHRpolicy andthewhistle-blowingchannel. Befesa believes that cultural diversity is a driving force of development, and it is proud of its multiculturalworkforce.Inthis sense, in 2022 Befesa developed an interculturalcalendarwithreligious and/or cultural bank holidays of each country, state, province and municipalitywhereBefesahas plantsoroffices.Thiscalendaris available to all employees on the Befesa intranet. Followingthetopicofcultural diversity, Befesa promoted a training on communication in a culturally diverseworkenvironment. Employees from China, Spain, 55Befesa Annual Report 2022 Statutory  financialstatements  Consolidated  financialstatements  ToBefesa’s  shareholders  Additional  information Management report France, Turkey and Germany participated–28intotal–whowere able to develop communication andlisteningtechniquesto communicate in a diverse and inclusive environment. Furthermore, on 3 December 2022,togivemorevisibilityto differentlyabledpeopleinour communities, Befesa shared a videotocelebratetheInternational DayofPeoplewithDisabilities. Thevideo,availableinallBefesa languages,focusesonhowto avoidstereotypingwhenworking withpeoplewithdisabilities. Befesa is proud to help establish and to be sponsor of the Autism Chair at the University of Sevilla, Spain. During2022,severalprojectswere developed focusing on the integrationandsupportofautistic peopleintheuniversity.Therewere several activities such as the creationofonlinecontentto disseminate and help people on thespectrum;participationin international conventions, conferencesandstudents’hall; training lectures for secondary schoolteachers;andatrainingcourse on easy reading and accessible environments, among others. The Autism Chair also aims to promote research and training in thefieldofautismamongstudents and faculty of the university. One of the outstanding projects in 2022 wasthecreationofanawardfor graduationpapersthatdealwith thetopicofautism. One of the activities that takes place every year at Befesa is the Greeting Card Contest. This activity involves children and/or relatives of Befesa employees under 13 years of age whoareinvitedtocreateanartwork to celebrate the spirit of the end-of- the-year festivities. In 2022, all participants received a gift containing 24 coloured pencils called “Colours of the World”, representing the skin tone of people from around theworld.ThisreinforcesBefesa’s commitmentandraisesawareness of diversity among the children of Befesa’s employees. Befesa continues to assess and ensureadiverseworkforceby trackingdifferentKPIs,oneof whichistheheadcountbyage.The age chart (page 58) gives a clear pictureofhowthegenerational handoverfollowsanaturalrhythm. Befesa’s human capital is experienced – as of 31 December 2022, the average employee age was43.8years,with10.5yearsof experience at Befesa. Regarding the gender diversity of Befesa’s top management, the BoardofDirectorshasonenew female member compared to 2021. In total, it has nine directors, consistingoftwowomenandseven 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, sexual orientation and others. 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. Further information about Befesa’s code of conduct for suppliers is available in the“Compliance”section(pages96 to 102) of this Annual Report. Intheworkaspectofhumanrights, the labour rights, 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. Befesa evaluates various factors to ensure that employees feel Social, health & safety continued 56 Befesa Annual Report 2022 To Befesa’s shareholders equitably and competitively rewardedfortheirwork.Thatiswhy the remuneration package evaluates various factors that can includeannualinflationrates(asa wayofmeasuringthecountries’ livingcosts);meetingfinancialand non-financialtargets;internalequity comparisons;andindividualand company performance. These ensure that employees are receiving the necessary compensation alignedwiththemarketaverage. Befesa periodically monitors the alignment of salaries by position andsenioritylevel,andbenchmarks thesalarieswithinitsownsector toensureacompetitive compensation scheme. 57Befesa Annual Report 2022 Statutory  financialstatements  Consolidated  financialstatements  ToBefesa’s  shareholders  Additional  information Management report 57Befesa Annual Report 2022 Social, health & safety continued Headcount by country Headcount by age group Headcount by segment Headcount by function and gender QHS/Technology/R&D 2021 2022 Over 6050-5940-4930-39Up to 29 239 135 506 414 441 383 441 395 220 223 3941 CorporateAluminium Salt SlagsSteel Dust 456 475 1,333 1,053 South KoreaSwedenTurkeyFranceChinaGermanySpainUS 408406 411 385 574 348 101 99 93 90 79 72 70 68 115 78 2022 2021 1,150 1,387 103 129 41 42 46 45 20 20 1,360 1,623 16 37 37 53 84 78 32 37 21 19 190 224 Manufacturing Administrative Selling Corporate TOTAL 2021 2022 2021 2022 58 Befesa Annual Report 2022 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 that learnings areobtainedandspreadacross theorganisation.In2022,atotalof 213incidentswerereportedand investigated (2021: 155). All incidentswereinvestigated andactionplansputinplaceto avoid recurrence. Accidents causing lost time are communicated to the manager of the plantwheretheaccidentoccurred. They in turn inform Befesa’s Executive Chair, 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 2022, 96 learning lessons from Lost Time Accidents (LTAs), Non- Lost Time Accidents (NLTAs) and incidentsweredistributedata corporate level (2021: 92 learning lessons), reaching all management andtheshopfloorlevel.This represents100%oftheLTAs,100% oftheNLTAsandmorethan13%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 managers to address safety issues. Managers at all levels in Befesa are trained to detect unsafe acts and to provide constructive feedback on worksafetypracticestooperators and contractors. In 2022, more than 16,300 observationswerecompleted(2021: more than 1,350). This involves correcting unsafe acts andconditionsandgenerating appropriate actions and reports. LIFE-SAVINGRULES Preventing serious injuries and fatalities is one of the top priorities of the health and safety programme and requires a 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, 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. Health & safety 59Befesa Annual Report 2022 Statutory  financialstatements  Consolidated  financialstatements  ToBefesa’s  shareholders  Additional  information Management report FATAL & SERIOUS INJURIESPREVENTION In2022,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 employee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2022,46FSIriskswereidentified across Befesa’s locations (2021: 39), ofwhich72%weresatisfactorily managedandclosed(2021:50%). SomeoftheFSIrisksidentifiedin 2022werediscoveredattheendof theyear.Fortheremaining28%of theFSIrisksidentifiedin2022, 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 seven years, Befesa has reduced its Lost TimeInjuryRate(LTIR)by90%.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wasreducedby100% compared to the 2015 baseline as wellascomparedto2021.In2022, Befesa had no contractor’s lost timeinjuries. 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, near misses and unsafeconditions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2022,thefollowingsafety standardswereimplemented: ■ Electrical safety ■ Lockout Tagout (LOTO) ■ Confinedspaces ■ Machine guarding As of 31 December 2022, Befesa had a total of 14 safety standards in place. 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). In2022,thefollowinghasbeendone: ■ Training: Additional training has been delivered to the engineering department. ■ Assessment: A process hazard analysis has been done in Henan,priortothehot commissioning of the location. ■ Started the design of the “Management of Change” procedure. Lost Time Injury Rate (LTIR): 2015 2016 2017 2018 2019 2020 2021 2022 % vs 2015 % vs 2021 Own employees 5.30 3.57 2.88 2.67 2.16 1.34 1.03 0.73 -86% -29% Contractors 8.06 0.98 3.88 5.47 1.60 0.66 0.43 0 -100% -100% Total 5.71 3.11 3.08 3.22 1.98 1.26 0.81 0.55 -90% -32% Severity Rate (SR): 2015 2016 2017 2018 2019 2020 2021 2022 % vs 2015 % vs 2021 Total 0.77 0.77 0.31 0.44 0.41 0.48 0.16 0.12 -84% -25% Social, health & safety continued 60 Befesa Annual Report 2022 To Befesa’s shareholders THE FIVE LEADERSHIP PERSUASIVE BEHAVIOURS During 2022, 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 2022, Befesa invested a total of 426 training hours (2021: 709) in educating and preparing local management teams on: ■ Fatal and serious injuries prevention; ■ ProcessSafetyManagement; ■ Trafficsafety; ■ LockoutTagout(LOTO); ■ Contractorsafetymanagement; ■ ISO14064,Scope3calculations; and ■ Task observations. SAFETY INVESTMENTS In2022,over€3.1millionwas invested across Befesa locations on safety projects such as: ■ Fireprevention; ■ Fall protection such as lifelines installation,platformsandgrids; ■ Trafficsafetyimprovementsinall theBefesasites; ■ Weldingfumesextractions; ■ Automation and lift aids to reduceergonomicrisks; ■ Conveyor belts and other machine guarding improvements; ■ PPEimprovements;and ■ The reduction of employee exposure to harmful substances. SAFETY EXCELLENCE AWARD In2022,Befesalauncheditsfirst SafetyExcellenceAward,which recognises outstanding safety achievements resulting in a significantimprovementtohealth, safety,orwell-being,contributingto Befesa’s vision of zero harm. Onitsfirstedition,thelocations submitted numerous applications and many fantastic projects to improve the safety of Befesa’s employees. In2022,thewinningprojectswere: 1. Pre-startupsafetyreview(PSSR) execution before hot commissioning, presented by theEHSandproductionteamat theHenanplant,China; 2. TrafficSafetyimprovements, presentedbytheEHSteamat theLesFranquesesdelVallès plant,Spain;and 3. Off-gasproductionbagfilter outlet valve rod lock, presented by a production and maintenance team of the Iskenderun plant, Turkey. Inaddition,Befesaawardedtwoof its sites: ■ Barnwellplant,US,recognised withthebestsafetyrecord award,foroversixyearswithout alosttimeinjury;and ■ Gravelines plant, France, recognisedwiththebest improvedsafetyaward,fora substantial improvement on its LTIR,whichwasreducedtozero in 2022. 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. 61Befesa Annual Report 2022 Statutory  financialstatements  Consolidated  financialstatements  ToBefesa’s  shareholders  Additional  information Management report Bearingthisinmind,Befesahasdevelopedseveralprojectsindifferentfields such as environment, sports, culture and the social economy, promoting and assisting people at risk of exclusion for physical, social or cultural reasons. 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,in2022Befesacelebratedthefifth   editionofBefesa’sCharity ProjectContest.Thecharitycontestofferstheopportunityforemployees tonominateNGOinitiatives,withtwoprojectsbeingselectedtoreceive financialsupport.Since2018,Befesahasdonated€96,000to13NGO projects referred by Befesa’s employees. In May 2022, Befesa’s employees once again joined runners from all over the worldintheWingsforLifeWorldRunevent.Atotalof140runners,including onlineandofflinerunners,andfamilymembersofBefesa’semployees, participated in the 2022 edition. Befesa raised more than €3,500 and ran morethan798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2022,withafocus on food donation, taking into consideration the global scenario of poverty, warandimmigration.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. Social, health & safety continued Corporate citizenship Befesa is committed to advancing theSustainable Development Goals(SDGs) by improving local communities and societies. Befesa considers that theirneeds and interests as well as the consequencesof Befesa’s actions on the social systemis an essential part of its work. 62 Befesa Annual Report 2022 To Befesa’s shareholders ■ Reforestation initiative in Iskenderun, Turkey ■ Sponsorship of the Cycling Educational book in Duisburg, Germany ■ Donation of food to Ukrainian refugees in Ratingen, Germany ■ Sponsorship of the Open Wheelchair Padel Tennis in Sevilla, Spain ■ Sponsorship of the Rhythmic Gymnastics Tournament in Getxo, Spain Selected local initiatives carried out in 2022 were: ■ Sponsorship of the Figure Skating Tournament in Barakaldo, Spain ■ Sponsorship of the Txuma Cycling Race in Erandio, Spain ■ Sponsorship of one room in the RonaldMcDonaldHousein Sevilla, Spain ■ Donation of school supply drive in Madrid, Spain ■ Donation to Asociación IN, whichpromotesadaptedsports forpeoplewithdisabilitiesin Sevilla, Spain ■ Donation to the Palmerton Community Festival in Palmerton, PA, US ■ Collection of food across differentBefesalocations duringwintertime Figures on donations and sponsorships carried out in 2022 willbeavailableintheBefesaESG Update2022,whichwillbe published in Q2 2023. BEFESA’SCHARITYPROJECTCONTESTWINNERSIN2022WERE: 1. Spreading Hope for Wish Kids of Make-A- Wish Central and Western North Carolina, US. The goal of the project is granting life-changing wishesforchildrenwithcriticalillnessesacross thestateofNorthCarolina.Thisway,theyare creating the greatest joy possible for a child whentheyneeditmost,whichhasthepower ofstrengtheningtheemotionalwell-beingof children,theirfamilyandmedicalproviders. 2.  Thesecondawardwassharedbytwo organisations,withthefollowingprojects: Helping to build roads for the Mei Village project of Change Charity Association in China.Thisprojectaimstorebuildtheroads ofMeiVillage,whichareunpaved,makinglife forthepeopleinthecommunityhardonrainy andsnowydays.Thiswillalsohelptomake thelivingenvironmentofthevillagerscleaner and healthier. Manzanal Point (El Punto del Manzanal) project of Fundación Intras in Spain. This project hastwoobjectives:intheenvironmentalfield, the recovery of an abandoned space, taking careofthe500treespresentinthefarm;and supportingthedevelopmentofpeoplewith disabilitiesowingtomentalillness,preparing themforajobrelatedtotheagriculturalfield. 63Befesa Annual Report 2022 Statutory  financialstatements  Consolidated  financialstatements  ToBefesa’s  shareholders  Additional  information Management report Gazelle ConservationProject 17 JUNE The winning project of the Befesa Environmental Initiative 2022 Award World Day for Cultural Diversity for Dialogue andDevelopment 21 MAY Social, health & safety continued Wings for Life 2022 8 MAY Reforestation initiative inIskenderun,Turkey 12 FEBRUARY Zero Discrimination Day 1 MARCH World Day of Safety &HealthatWork 28 APRIL JAN FEB MAR APR MAY JUN BEFESA’S CORPORATE CITIZENSHIP CALENDAR 2022 2 APRIL World Autism AwarenessDay 64 Befesa Annual Report 2022 To Befesa’s shareholders 3 DECEMBER International Day of People with disabilities 5 SEPTEMBER International Charity Day Sevilla Ronald McDonaldHouse 13 JULY Greeting Card Contest 6 DECEMBER Safety Excellence Awards NOVEMBER 1st: Pre-start up safety review (PSSR) execution before the hot commissioning project (China) 2nd: Traffic safety improvements project (Spain) 3rd: Off-gas production bag filter outletvalve rod lock project (Turkey) Winter initiatives DECEMBER JUL AUG SEP OCT NOV DEC 27 OCTOBER Charity Project Contest 65Befesa Annual Report 2022 Statutory  financialstatements  Consolidated  financialstatements  ToBefesa’s  shareholders  Additional  information Management report 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2022,atotalof16employeeswere dedicatedtoR&Dactivities(2021:14).Ofthese,11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2022increasedby20%to€3.2million (2021: €2.7 million). In the Steel Dust Recycling Services segment, expenses on R&D activities in 2022reducedby8%to€1.3million(2021:€1.4million). In the Aluminium Salt Slags Recycling Services segment, expenses on R&D activitiesin2022increasedby50%to€1.9million(2021:€1.3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. 66 Befesa Annual Report 2022 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. In 2022, Befesa became a member of European Aluminium, a Belgium- based industry association that represents the entire aluminium valuechaininEurope:fromrefiners and smelters to manufacturers of semi-finishedproducts,recyclers and national aluminium associations. Befesa has developed projects in collaborationwithinstitutionssuchas Hydro,NipponGases,GHI,Sidenor, CIE Automotive, Fagor Edertek 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 2022 In the Steel Dust Recycling Services segment, focus areas included: ■ The successful implementation of thefirstproduction-scaletestsof partial substitution of fossil carbonbybiochar; ■ Positive results of zinc recycling by hydrogen in several trials in a kinetic study has led to a comprehensive data set for further process development steps; ■ Lab scale testing of treatment of Waelzslagbyhydrogen; ■ The successful implementation of an online monitoring system for the continuous monitoring of Waelzprocessfeedcomposition; ■ A pre-study on carbon capture technologies for potential use in theWaelzprocess; ■ Theevaluationofwasteenergy sourcesforpotentialwaste heatrecoveryonBefesa’s recyclingprocesses; ■ A pilot-scale test for the transformation of the chemical/ physical behaviours of Waelz slag forindustrialuses;and ■ The successful test of the treatmentofwastematerialsat stainless-steel dust recycling sites for internal recycling and/or transfer into valuable by-products for set-up detailed investigation for further project steps. 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; ■ 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; ■ The study and development of an alternative treatment for SPL, torecover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,H2and CH4,fromthecomplex-rich hydrogenwastestreamforsalt slagvalorisation;and ■ The evaluation of the impact of the quality of recovered salts from the salt slags recycling process in the aluminium residue melting process. 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; ■ The study and improvement of 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; 67Befesa Annual Report 2022 Statutory  financialstatements  Consolidated  financialstatements  ToBefesa’s  shareholders  Additional  information Management report ■ The demonstration of the use of secondarywastes,aluminium drosses and scrap to produce high-pure silicon and master aluminium alloys by aluminothermicreduction;and ■ The decarbonisation of Befesa’s meltingprocess,liningupH₂ economy, using as alternative fuel to natural gas and evaluating the impact of the product, exhausted gases and process parameters. PROJECTS IN THE RESEARCHPIPELINE In the Steel Dust Recycling Services segment, projects in 2023 are the continuation of projects launched in previous years and additionalnewprojects: ■ Furthertestingofdifferent sources of biochar and potentialoptimisationforan increase of ratio of substitution of fossil carbon by biochar in the Waelzprocess; ■ The extension of small-scale test set-up for further metallurgicaltrialswithhydrogen forzincrecyclingandfirst process-technological investigation; ■ Additional testing of Waelz slag treatment by hydrogen for the generation of a comprehensive data set for potential further processingsteps; ■ The thermodynamic evaluation ofdifferentresiduesofstainless industry for the optimisation of metallurgicalprocesses;and ■ Further detailed investigation on alargescalewithresiduesfrom stainless-steel dust recycling for detailed mass balances and economical evaluation. 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; ■ Alujoint: A light modulated chassis developed by means of integrating the structural components using advanced technology of manufacture and aluminiumjoint; ■ Puraled: The use of high-pure secondary aluminium oxide to manufacture LEDs and electronic components; ■ Deskar30: The decarbonisation of the melting process in parallel withthedevelopmentofnew secondaryaluminiumalloyswith alowfootprint; ■ RESPLA: An alternative SPL recycling process, focused on thevalorisationofitsproducts; ■ HyInheat:Thedemonstrationof H₂/O₂combustioninaluminium remeltingprocess;and ■ Hydrogas:Therecoveryofmain gases,H₂andCH₄,fromthe residue stream of salt slags valorisation, to be used as an alternative fuel. R&D and innovation continued 68 Befesa Annual Report 2022 To Befesa’s shareholders 69Befesa Annual Report 2022 Statutory  financialstatements  Consolidated  financialstatements  ToBefesa’s  shareholders  Additional  information Management report 69Befesa Annual Report 2021 70 Befesa Annual Report 2022 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ariskmanagement system(RMS)inplacewhichallowsmanagementtoanalyse,evaluateand managetherisksofthedifferentaspectsofBefesa’soperations. ThepurposeofBefesa’sRMSistheidentificationandassessmentofthe majorrisksthataffectormayaffecttheCompany.Thesystemalso providesBefesawithasupportingtoolindecision-makingthroughthe provision of strategies aimed at risk management and control. The RMS approachimpliesthefollowing: ■ 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these 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. 71Befesa Annual Report 2022 Statutory  financialstatements  Consolidated  financialstatements  ToBefesa’s  shareholders  Additional  information Management report 2. Risk assessment process: After compiling the risk catalogue, the next step is the risk assessment. This assessment is carried out by people from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 likelihood 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 on the risk map. Therisklevelsare:verylow,low, medium, high or very high, depending on the assessment. iv. Risk monitoring Befesa’s RMS 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Company. To guarantee proper monitoring of the risks, Befesa has an Internal Risk Committee (IRC). The IRC is the bodywithintheCompanythatisin chargeofthemonitoringandreview of the risks included in the risk map. The IRC is composed of the Executive Chair, the CEO, the CFO, thevicepresidentsofthe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 72 Befesa Annual Report 2022 To Befesa’s shareholders 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 combined global hedge book in place as of the date of this Annual ReportprovidesBefesawith improved pricing visibility up to July2025,thereforeforthe following2.5yearsapproximately. In2022,Befesa’szincforward hedging price amounted to €2,379 per tonne on average, €228 per tonne higher YOY (2021: €2,151 per tonne).However,Befesa’shedging pricein2022wasonaveragelower compared to the zinc LME price, whichaveragedat€3,302pertonne in the year. Combined, the zinc effectiveprice(blendedratebetween hedged volume and non-hedged volume) averaged at €2,627 per tonnein2022,up15.5%YOY (2021:€2,275pertonne). As of the date of publication of this AnnualReport,Befesa’szincforward hedgingaveragepriceswillamount to around €2,450 or US$2,650 per tonne for 2023, around €2,550 or US$2,750 per tonne for 2024, and around €2,650 or US$2,900 per tonneforH12025.Theseforward hedging prices assume US dollar/ euro exchange rates of 1.08 for 2023 and2024,and1.10forH12025. Befesa does not provide any collateral for the contracted hedges and conducts its hedging programmewithreputablehedging partnerssuchasJPMorgan, Goldman Sachs, Citibank, Morgan Stanley, BNP Paribas and Macquarie. 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 2022, Befesa had hedged 163,131 tonnes of zinc payable output, 43,118 tonnes more YOY (2021: 120,013 tonnes), mainly as a result of the impact of the US operations acquired in August 2021. Thisrepresents72%(2021:73%)of the zinc payable output sold by Befesa in 2022. Of the 163,131 tonneshedgedfor2022,46%were ineuro-denominatedzincforward hedges,43%wereinUSdollarand theremaining11%inKoreanwon. Further information on the hedging strategy is available in the “Strategy” section of this Annual Report (pages 34 to 39). 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 2022, the margin applicable to theTLBincreasedby25bps,from Euribor+175 bps at the beginning oftheyeartoEuribor+200bpsat year-end. This margin increase wasexplainedbythehighernet leverage ratio driven by the higher net debt. The Euribor+200 bps interest rate could be reduced alongside certain leverage ratchets downtoamarginofEuribor+125bps fornet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 €526millionTLBnotional.Thiswas to minimise the risk of a rapid increase in the interest rate of the threemonthsEuribor“0”floor. Risks & opportunities continued 73Befesa Annual Report 2022 Statutory  financialstatements  Consolidated  financialstatements  ToBefesa’s  shareholders  Additional  information Management report 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 in relation to the AZR acquisition. As a result, the extended TLB notional amounts to €626 million, maturing in July2026. As of 31 December 2022, 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 continued to befullyundrawnatyear-end2022 as Befesa had €161.8 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. 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 systems.Themainriskswitha potentialmaterialinfluenceare further detailed in Note 4 of the “Consolidatedfinancialstatements” sectionofthisAnnualReport. 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, 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orinrecessionarycycles,the industrial recycling industry is affected,resultinginareductionin the demand for Befesa’s services and products. One important initiative to address global economic headwinds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). 74 Befesa Annual Report 2022 To Befesa’s shareholders Nevertheless, the global economy maybeaffectedbymacroeconomic events, such as the ongoing COVID-19pandemic,theglobal chipshortageorthewarofRussia against Ukraine. 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 as a result of 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,groundwater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waste, 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, 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 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 to 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. Operational areas are establishedwithconcreteand paved surfaces for material transfer and other areas of high use.Inaddition,rainwater collection, 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. Risks & opportunities continued 75Befesa Annual Report 2022 Statutory  financialstatements  Consolidated  financialstatements  ToBefesa’s  shareholders  Additional  information Management report 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. Most of 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 into 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to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 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 2022, all the Befesa sites except for the US zinc-refiningandChineseplants areISO14001certified,65%of the Befesa sites are ISO 50001 certified.Atotalof70%areISO 14064certifiedand70%arealso certifiedaccordingtoISO45001. Through these management systemsandotherinternal protocols, Befesa monitors carbonemissionsandreports annuallyonaCompany-wide basis.Inaddition,Kyoto ProtocolScope1andScope2 emissions are reported. In 2022, Befesa started reporting Scope3emissions. To minimise carbon emissions, Befesa applies BAT and looks for 76 Befesa Annual Report 2022 To Befesa’s shareholders 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.  In2022,Befesadefinedaplanto reduce its carbon footprint, committingtoa20%reductionin CO₂emissionintensityby2030, withtheambitionofachievingnet zero by 2050. The detailed plan, disclosed as part of the Befesa ESG Report 2021, is currently beingexecutedfollowingthe definedroadmaptoachievethe targets Befesa has committed to. 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asaresultof 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 these risks, 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enterprises nowadays,Befesaisexposedto cybercrime, hackers and cyber- activism.Theglobalgrowing dependency on information technologies by society and enterprises increases the risks of outages and loss of activity as a resultoftargetedoruntargeted attempts to exploit the vulnerabilities of the systems and networksinuse.Cyber-criminals andcyber-activistsarecontinuously developingnewtechniquesand forms of attack that they use to jeopardise the operations of the targeted enterprises. The IT risk management strategy of an enterprisemustdriveefficientand effectivemeasurestomitigatethe risk, by enabling the IT organisationtodetectapotential adverse incident early, contain its progressandcorrecttheaffected systems to their normal operation as soon as possible. Befesa applies a robust set of policies, guidelines and procedures alignedwithindustrybest practicesforcybersecurity management. Best-in-class cybersecurity technologies, constant and up-to-date employee cybersecurity training, internal and external cybersecurity audits and third-party break-in tests, are, among other activities, part of the cybersecurity strategy. Cybersecurity risks are periodically assessed and adequately managed by the information security team andincoordinationwiththe management team. Risks & opportunities continued 77Befesa Annual Report 2022 Statutory  financialstatements  Consolidated  financialstatements  ToBefesa’s  shareholders  Additional  information Management report 77Befesa Annual Report 2021 78 Befesa Annual Report 2022 To Befesa’s shareholders Subsequent events &outlook SUBSEQUENT EVENTS Therearenoeventsbetweenthefinancialstatementdate(31December 2022) and the date of the formulation of the accounts (22 March 2023) that wouldmateriallyaffecttheGroup’sassetsortheGroup’sfinancialand/or earnings position. OUTLOOK Theyear2022wasaverychallengingone,inwhichBefesamanagedto achievesolidEBITDAgrowthof9%YOY.Forthecomingyears,thegrowthplan announcedattheCMDisastrongplanandBefesaisveryconfidentaboutthe execution and the delivery of the announced results. Regarding2023,guidancewillbeprovidedoncethezincTChasbeensettled around April. That said, Befesa expects 2023 to be another challenging and volatileyear;however,asolidfloorisseenintheresultsachievedin2022. Zinchedgingpriceswillhaveapositiveimpactin2023asthehedginglevelfor the year is higher than the 2022 level. A positive contribution of €10-€15 million is expected from hedging. Thetreatmentchargeforzinc,meanwhile,islikelytorisefromthecurrent$230 per tonne level up to around US$280–$290 per tonne. As a reminder, every US$10 per tonne of change in the zinc TC has an impact of around €2–€3 million on EBITDA. Zinc TC is expected to have a negative impact in 2023. IntheUS,therecentlyacquiredzinc-refiningplantwillcontributepositivelyto earningsgrowth.Inaddition,therearesynergiescomingfromtheAZR acquisition,whichwillpartiallymaterialisein2023. InChina,althoughthemoodisoptimistic,itisstilluncertainhowthecountry willopenafterthestrictlockdowns.TheChinesegovernmenthasrecently changeditsstrategy,movingfromzero-COVIDtoopening.In2022,COVID restrictions made a very challenging environment, and the plants could not operateproperly.AftertheChineseNewYear,agradualrecoveryandmore visibilityshouldbeexpected.However,itisdifficulttoknowexactlywhatis goingtohappeninChina.VolatilityisexpectedinQ12023,buthopefullysteel dustdeliveriesshouldincreaseinQ22023.Befesahastwoplantscompleted and fully ready to operate as soon as the market recovers. Overall, a positive 79Befesa Annual Report 2022 Statutory  financialstatements  Consolidated  financialstatements  ToBefesa’s  shareholders  Additional  information Management report contribution from China is expected intherangeofhighsingletolow double-digit EBITDA. In Aluminium Salt Slags Recycling – a purely European business – despite the automotive industry continuing to face a challenging situation in Europe, in 2022 Befesa managed to achieve a strong result and pass through the energy pressure cost increases to its customers. For 2023, the volume of salt slags is expected to increase, driven by the restart of operationsinHanoveraftertherepair of the plant. Secondary aluminium volumes are expected to be similar to those in 2022. Regarding commodity prices for metalsandenergy,thesewillbea question mark in 2023. Volatilityinthepricesofbase metalsisexpectedtocontinue, driven by instability at the macro level and uncertainties in the overall economy.Thehedgingpolicy,with around70%ofthevolumeofzinc hedgedatanattractiveprices,will help Befesa to navigate this period of high volatility. The average zinc pricein2022wasaround€3,300 pertonne,up30%comparedto thepreviousyear.Thispriceisvery high, and it remains to be seen whetherthesehighlevelswill continue in 2023. Energy prices are also expected to remain volatile and at this moment itisaquestionmarkwhetheritwill have a positive or negative impact in2023. Finally,onfuturegrowth–as explained at the CMD – despite theshort-termchallenging situation,Befesahasastrong growthplantoinvestaround €400–€450 million over the next fiveyearstogrowearningsatahigh rate.Thisgrowthplanisbasedon global megatrends, like decarbonisation and a transition toEVs,whicharenotgoingtogo awayandwilldrivemarketgrowth whereBefesaoperatesthroughits core businesses. This translates into a tangible plan consisting of seven projects across the three mainmarketsinwhichBefesa operates – Europe, the US and China –andwillbefundedorganicallywith ourownresources. Thefirstoftheseprojectswasthe acquisitionofthezinc-refining assetintheUS,whichwasalready executed in September 2022. The nexttwoprojectsBefesais alreadyworkingonarethe refurbishment of the plant in Palmerton in the US and the expansion into the third Chinese province: Guangdong. In the US, the refurbishment of thePalmertonplanthasalready started. The engineering and designareinprocessandthe request for quotes from suppliers hasstarted.Theplant refurbishmentwillbecarriedout in2023and2024. In China, in February 2023, the investmentagreementwas signedwiththelocalauthoritiesin Guangdong. The land lot to build thenewplantwasassigned,the basicengineeringworksarein processandnegotiationswith thelocalsteelmakersareunderway. Insummary,eventhough2022was a challenging year, Befesa achieved a record EBITDA. The year 2023 is expectedtoremainchallenging; however,the2022earningslevel representsasolidfloor.Befesawill navigatethroughthisinflationary period successfully, like it has done inthepast.Thegrowthplanisbeing wellexecuted,whichwillgenerate highgrowthinthecomingyears. The dividend policy of distributing between40%to50%ofthenet incomewillbekept.Befesa continues to execute its ESG strategytoreduceitsCO₂ emissions by 2030 and 2050. 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 deemed 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, a Nomination and RemunerationCommitteeandaSustainabilityCommitteetodealwith specifictasks.ThesecommitteesadvisetheBoardofDirectorsandmake recommendations to the Board and/or, as the case may be, to the General Meeting(asdefinedoverleaf). Corporate governance 3 6 2 5 4 10 1 9 8 7 80 Befesa Annual Report 2022 To Befesa’s shareholders 1. Javier Molina Montes Executive Director, ExecutiveChair Mr Molina has been the Executive Chair of BefesasinceJuly2022.He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. Asier Zarraonandia Ayo Executive Director, Chief Executive Officer Mr Zarraonandia has been the Chief Executive OfficerofBefesasinceJuly2022.Hewas previouslytheVicePresidentofBefesa’sSteel Dust Recycling Services business unit, as of 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. 3. 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.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). 4. Romeo Kreinberg Independent Director, Lead Independent Director 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 US, 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AG, 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directorofAXIT.capital,a company that supports start-ups in the area ofdigitalisation.SheiscurrentlyChairwoman of the Council of Technology of the Federal StateofRhinelandPalatinateaswellasa member of the Supervisory Board of ERMEWA Group SA. She holds a diploma in logistics and business administration (Diplom- Betriebswirtin)fromtheCooperativeState University, Mannheim, Germany. 6. 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. After his retirement from EY in 2016 he has been serving in supervisors boards or as non-executive director in various companiesormajornon-profitorganisations. 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. 7. 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VoestAlpineIndustrieanlagenbau. Heis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. 8. Natalia Latorre Arranz Independent Director Mrs Latorre is General Manager for Energy TransitionofEnagás,S.A.Previously,shewas ChairwomanoftheBoardofDirectorsofShell EspañaS.A.,whereshewasresponsibleforthe Shell business in Spain, including gas and power,renewablegenerationand environmental products. Mrs Latorre developed mostofhercareeratShell,wheresheworked for more than 20 years, including executive rolesattheEuropeanlevel.Shehasstrong experienceintheESGfield,includingenergy transition and the transformation of companies pursuingopportunitiesinthisfield.MrsLatorre also currently serves as Board Member at BG EnergyIberianHoldingS.L.U.andasAdvisory Board Member at Marsi Bionics S.L. In addition, sheisamemberoftheStrategyAdvisoryBoard ofProgramaMujereIngeniería.MrsLatorre holdsadegreeinindustrialengineeringfrom Universidad Politécnica de Madrid, Spain. In2021,ForbesincludedMrsLatorreinthelist of“35BestFemaleCEOsinSpain”. 9. José Domínguez Abascal Independent Director DrDomínguezisChairmanofEnvision GroupSpainandStructuralMechanics professor at Universidad de Sevilla, Spain. In 2018,DrDomínguezwasappointedSecretary of State for Energy in the Government of Spain (2018–2020).HeservedasBoardmemberof OMEL (2010–2015), OMIP (2010–2015) and SEPI (2018–2020).Beforethat,DrDomínguezwas ChiefTechnologyOfficerofAbengoa (2008–2015),wherehewasinchargeofthe technology development of the company. DrDomínguezhasextensivetechnological research experience in the international renewableenergyfield,whereheledinnovative industrialprojectsthataresuccessfullyworking today.DrDomínguezholdsaPhDinindustrial engineering from Universidad de Sevilla, Spain. HewasalsoaResearchAssociateatthe Massachusetts Institute of Technology (MIT), withapostdoctoralFulbrightgrant.Heisthe author of more than 200 research papers in leadingscientificjournalsandtwobooks publishedbyinternationalpublishers.Heisa FellowoftheAmericanSocietyofCivil Engineers and Member of the Real Academia de IngenieríaofSpain.Healsoreceivedthe NationalEngineeringResearchAward(Spain)in 2004 and is Doctor Honoris Causa by the Universidad de Granada (Spain) in 2018. 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,US.Shehas successfully completed the programme formanagementdevelopmentatESADE Business School, Spain. 81Befesa Annual Report 2022 Statutory  financialstatements  Consolidated  financialstatements  ToBefesa’s  shareholders  Additional  information Management report 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 Corporate governance continued Executive Directors Name Position Nationality Year of birth First appointment Renewal End of term MrJavierMolina Montes Executive Chair Spanish 1959 18/10/2017 16/06/2022 AGM to be held in 2026 approving the annual accountsforthefinancial year ending on 31/12/2025 Mr Asier Zarraonandia Ayo CEO Spanish 1967 24/07/2019 (co-optation) 16/06/2022 MrWolfUwe Lehmann CFO German 1971 18/10/2017 16/06/2022 Independent Directors Name Position Nationality Year of birth First appointment Renewal End of term Mr Romeo Kreinberg Lead Independent Director, Chair of theNominationand Remuneration Committee American 1950 18/10/2017 16/06/2022 AGM to be held in 2026 approving the annual accountsforthefinancial year ending on 31/12/2025 Mrs Frauke Heistermann Independent Director German 1971 18/10/2017 16/06/2022 Mr Georg Graf Waldersee Independent Director, Chair of the AuditCommittee German 1955 18/10/2017 16/06/2022 MrHelmutWieser Independent Director Austrian 1953 24/07/2019 (co-optation) 16/06/2022 Mrs Natalia Latorre Arranz Independent Director Spanish 1975 16/06/2022 N/A DrJosé Domínguez Abascal Independent Director, Chair of the Sustainability Committee Spanish 1953 16/06/2022 N/A 82 Befesa Annual Report 2022 To Befesa’s shareholders 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. 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 thefollowing: 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 2022. 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 exercising 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. COMPOSITION Befesa’s Board of Directors has the size and structure necessary to promoteefficientfunctioningandto maximise participation, in accordance withBefesa’ssharecapitalstructure. Befesa also emphasises the importance of corporate governance, Befesa’s Board of Directors is formed with a majority of six independent directors out of atotal of nine directors. 83Befesa Annual Report 2022 Statutory  financialstatements  Consolidated  financialstatements  ToBefesa’s  shareholders  Additional  information Management report 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, is eligible for reappointment and may be removed atanytime,withorwithoutcause,by a resolution of the General Meeting. In the event of a vacancy on the Board of Directors, the remaining directors may elect by co-optation a newdirectortofillthe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. The Board of Directors shall appoint from among its members a chairperson (the “Chair”). In the event thatanExecutiveDirectoriselected as Chair, the Chair shall have the statusofExecutiveChairofthe Company.Therefore,therewillbea Lead Independent Director of the Company as long as the Chair of theBoardofDirectorsisnotan Independent Director. The Independent Directors shall choosefromamongtheIndependent DirectorstheLead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 Executive Chair or the Chair of the Board of Directors shall have no casting vote in case of a voting tie. The Board of Directors met on 10 occasionsin2022,withanattendance recordof100%. COMMITTEES To strengthen Befesa’s corporate governance,theBoardofDirectors hassetupthefollowingthree committees, each responsible for the examination and monitoring of areas of particular importance: ■ Audit Committee ■ Nomination & Remuneration Committee ■ Sustainability Committee The committees shall have at least threememberseachandwillmeetas oftenasnecessary,butatleasttwice a year. During 2022, the Audit Committeemetonfiveoccasions, whereastheNominationand Remuneration met on four occasions. Corporate governance continued Experience, skills & focus Mr Javier Molina Montes Mr Asier Zarraonan- dia Ayo Mr Wolf Uwe Lehmann Mr Romeo Kreinberg Mrs Frauke Heistermann Mr Georg Graf Waldersee Mr Helmut Wieser Mrs Natalia Latorre Arranz Dr José Domínguez Abascal Position Executive Chair CEO CFO Lead Independent Director, Chair of theNomination &Remuneration Committee Independent Director Chair oftheAudit Committee Independent Director Independent Director Chair of the Sustainability Committee Nationality Year of birth 1959 1967 1971 1950 1971 1955 1953 1975 1953 Industrial operations Risk management, finance, audit Environmental, health & safety Business strategy Ethics & governance 84 Befesa Annual Report 2022 To Befesa’s shareholders Both committees had an attendance recordof100%.TheSustainability Committeewascreatedinthesecond part of 2022, but did not meet at the expensesdeterminingitsspecific functions and roles. The Sustainability Committeehasconveneditsfirst meetinginthefirstquarterof2023. i. Audit Committee The Audit Committee consists of MrGeorgGrafWaldersee(chair), MrsFraukeHeistermannandMrs Natalia Latorre Arranz. All members are independent. This committee is responsible for the following: ■ 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(chair), MrHelmutWieserandDrJosé DomínguezAbascal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. iii. Sustainability Committee The Sustainability Committee is comprised exclusively of independentmembers:DrJosé DomínguezAbascal(chair),Mrs FraukeHeistermann,MrsNatalia LatorreArranzandMrHelmutWieser. The Sustainability Committee is responsible for overseeing all matters of the Company and its subsidiaries related to environmental sustainability,withapriorityon emissions reduction and energy- saving targets and plans, together withrelatedrecommendationsto bemadetotheBoard.The Sustainability Committee is responsibleforthefollowing: ■ Reviewingandmonitoringthe Company’s environmental sustainability strategy and its realisationaswellasthe Company’s environmental sustainability policies, standards andguidelines; ■ Reviewingandmonitoringthe Company’s environmental sustainability achievements in accordancewiththetargets andguidelinesoftheCompany; and ■ Supporting and providing guidance to the Board of Directors in developing and updating the Company’s policiesandprocedures relatingtoenvironmental sustainability. Overview of the member participation of the Board of Directors and committee meetings during 2022 Board of Directors Presence 100% MrJavierMolinaMontes 10 / 10 Mr Asier Zarraonandia Ayo 10 / 10 MrWolfUweLehmann 10 / 10 MrRomeoKreinberg 10 / 10 MrsFraukeHeistermann 10 / 10 Mr Georg Graf Waldersee 10 / 10 MrHelmutWieser 10 / 10 Mrs Natalia Latorre Arranz 7 /7 DrJoséDomínguezAbascal 7 /7 Mr Manuel Soto 3 / 3 Mr Santiago Zaldumbide 3 / 3 Audit Committee Presence 100% Mr Georg Graf Waldersee 5 / 5 MrsFraukeHeistermann 5 / 5 Mrs Natalia Latorre Arranz 3 / 3 Mr Manuel Soto 2 / 2 Nomination & Remuneration Committee Presence 100% MrRomeoKreinberg 4 / 4 MrHelmutWieser 4 / 4 DrJoséDominguezAbascal 1 / 1 Mr Santiago Zaldumbide 3 / 3 85Befesa Annual Report 2022 Statutory  financialstatements  Consolidated  financialstatements  ToBefesa’s  shareholders  Additional  information Management report 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 Sociétés 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 to 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 according to the shares held by the shareholder at the end of the 14th day prior to the General Meeting. Shareholders 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 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 22nd 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 resolution to be considered at a General Meeting, thequorummustbeatleastfiftyper 86 Befesa Annual Report 2022 To Befesa’s shareholders cent(50%)ofBefesa’sissuedshare capital. For their approval, at least two-thirdsofthevotesvalidlycast must approve such a resolution. Abstentions are not considered as“votes”. 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. 87Befesa Annual Report 2022 Statutory  financialstatements  Consolidated  financialstatements  ToBefesa’s  shareholders  Additional  information Management report 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 96 to 102). 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.Thisis explained in detail in the “Risks & opportunities” section of this Annual Report (pages 70 to 76). 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16June2022 approvedtheappointmentofKPMG Audit S. à r.l. as the approved statutory auditor (réviseur d’entreprises agréé)forthefinancial year ending 31 December 2022. KPMGAuditS.àr.l.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 four years). 88 Befesa Annual Report 2022 To Befesa’s shareholders 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. Befesareviewstheappropriateness of the remuneration of the members of the Board of Directors in comparisonwithcompaniessimilar to Befesa in terms of size, complexity and economic situation, e.g. companies of market indices such as the MDAX or industry peer groups. This analysis is performed regularly withthesupportofanindependent executive compensation advisor, whoprovidescompensationstudies andbenchmarksbasedonpeer groups, determined as mentioned above. Befesa’s remuneration structure and levels are aligned withthismarketbenchmarkand Befesa’s remuneration policy. Detailed and individualised information on the amount and structure of the various components oftheremunerationoftheExecutive Directors(EDs)aswellasthe Non-ExecutiveDirectors(NEDs)of theBoardwillbedisclosedinthe RemunerationReport2022,which willbepublishedinQ22023. I. Fixed remuneration Base salaryisthefixedgross compensationperfiscalyear. In2022,thebasesalaryofthe EDsincreasedby3%compared to2021. Fees for participation in the administrative, management or Board bodies of Befesa are not paid 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2022, awardedfortheperformance achieved in the year 2021. Remuneration 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 2 Base salary Fees Fringe benefits One-year variable Multi- year variable MrJavierMolina Montes, Executive Chair € 527,848 n/a € 17,189 € 868,410 € 1,875,896 € 1,053,835 € 12,766 € 4,355,944 17%/83% Mr Asier Zarraonandia Ayo, CEO1 € 373,226 n/a € 11,814 € 579,768 € 1,250,597 € 746,473 € 12,766 € 2,974,643 18%/82% MrWolfUwe Lehmann, CFO € 426,544 n/a € 7,733 € 578,940 € 1,328,770 € 746,473 € 14,518 € 3,102,978 19%/81% Total remuneration € 1,327,618 n/a € 36,736 € 2,027,118 € 4,455,263 € 2,546,781 € 40,050 € 10,433,565 18% / 82% 1 FollowinghisnominationasCEOinJuly2022,theBoardofDirectorsapprovedtoincreasetheremunerationofMrZarraonandiaretroactivelyasofhisnominationdate buteffectivelypaid-outin2023.FurtherdetailswillbedisclosedintheRemunerationReport2022,whichwillbepublishedinQ22023. 2 Proportionoffixedandvariablecomputedasoftotalremunerationexcludingextraordinaryitems REMUNERATION OF EXECUTIVE DIRECTORS ThefollowingtableprovidesanoverviewoftheremunerationofthethreeExecutiveDirectors(EDs) of the Board of Directors for the year ended 31 December 2022. 89Befesa Annual Report 2022 Statutory  financialstatements  Consolidated  financialstatements  ToBefesa’s  shareholders  Additional  information Management report The predetermined performance targets cover four performance criteria and predetermined weighting.InApril2022,theweightof the “ESG: Environmental, health & safety,compliance”criterionwas increasedfrom20%to25%,whereas that of the “Execution of strategic initiativesandreturnongrowth projects”wasreducedfrom30%to 25%.Thisre-balanceofthe weightingisalignedwiththehigher importance of ESG ratings and sustainability improvements. Overall, the50/50balancebetweenfinancial andnon-financialperformance criteria remains unchanged. This changewasreviewedandproposed by the Nomination and Remuneration Committee and subsequently approved by the Board of Directors of Befesa S.A. Goingforward,theweightingofthe performancecriteriaisasfollows: Performance criteria Weighting ESG: Environmental, health & safety, corporate governance 25% Execution of strategic initiatives and return on growthprojects 25% EBIT and EBITDA 35% Netdebtandcashflow 15% The performance level for each performance criterion ranges from 0%to200%.Theoverallone-year variable payout is capped at 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 2021, the performance level reached,blendedandweighted across the four performance criteria was140%,onwhichtheannualbonus paidoutinMarch2022wasbased (payoutin2021for2020:135%). Details for 2021 target achievement areshownabove. Multi-year variable remuneration received by the EDs is in the form of ashare-basedPerformance StockPlan(PSP).Thisplanwas launchedin2017andisawardedin annualtrancheswithaperformance periodofthreeyearsforeachtranche. Theperformancetargetswillbe determined and measured over a three-year performance period, andcoverthefollowingthree performance criteria and predeterminedweighting: Performance criteria Weighting Cumulative EBIT and EBITDA 25% Cumulativecashflow 25% ESG: Environmental, health &safety,compliance; return on strategic projects 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 Tranche II (2019–2021) The tranche II of the PSP vested over the years 2019, 2020 and 2021, and waspaidoutinApril2022. The performance level reached, blendedandweightedacross thethreeperformancecriteria Corporate governance continued Performance criteria Weighting1 Performance Weighting x performance ESG: Environmental, health & safety, corporate governance 20% 120% 24% Execution of strategic initiatives and returnongrowthprojects 30% 200% 60% EBIT and EBITDA 35% 103% 36% Netdebtandcashflow 15% 130% 20% Total 100% 140% 1 2022one-yearvariableremunerationwaspaidoutinMarch2022,beforethechangesintheweightingofthe performancecriteriaapprovedinApril2022.Therefore,thepreviousweightingwasapplied 90 Befesa Annual Report 2022 To Befesa’s shareholders was127%.Targetachievementdetails fortrancheIIareasshownabove. The Settlement Price amounted to€68.82perPerformanceStock. Thisresultsfromtheaverageof theclosingpricesoftheBefesa stock on the Xetra trading market oftheFrankfurtStockExchangeover aperiodof10tradingdaysof2021, i.e.€65.60,combinedwiththe applicabledividendsoverthevesting periodof€3.22pershare. Neithertheperformancecapof160% nor the share price appreciation cap of300%weretriggered. Theresultingpayoutwassettledin cash as per the Company’s choice in April 2022, and the individual amountswereasshownbelow. Details of the development of the PSP(tranchesItoIV,2018–2023) andthenewStockIncentive Plan,SIP(tranchesVtoVIII,2022– 2027)willbedisclosedinthe RemunerationReport2022,which willbepublishedinQ22023. III. Extraordinary items In April 2021, the Board of Directors of BefesaS.A.decided,inlinewiththe remuneration policy, to introduce the TransformationalGrowthIncentive Plan (TGIP). The target of the TGIP is toincentivisethesuccessofa transformational acquisition opportunity.TheTGIPwasawardedin the form of Phantom Stocks, vesting in three tranches. Theoperationalintegrationfollowing thetransactionaswellasthe retention of the EDs are critical for the success of this opportunity. After vesting,thevalueofthePhantom Stocks is paid out in cash. The settlement phantom share price is based on the average closing price oftheBefesaS.A.sharesonthe Frankfurt Stock Exchange, determined over a period of 10 trading days prior and including the vesting date. The Phantom Stocks bear the rights of dividend payouts. The payout of the value of the Phantom Stocks is subject to a cap ofthreetimesthestockpriceatthe awarddate. With the closing of the AZR acquisition on17August2021,thefirstthirdofthe TGIPvestedandwaspaidout. The second tranche vested on 17August2022.Thesettlement phantom share price amounted to €49.18, i.e. average closing price over the 10 trading days prior to andincludingthevestingdateof €47.93, plus the €1.25 dividend per share paid out in 2022. The share price cap of three times the stock price at theawarddate,i.e.3x€70.40on 17August2021equalto€211.20,was nottriggered.Theindividualnumber of vested Phantom Stocks and payoutsin2022wereasshownon thenextpage. Theremainingthirdtranchewillvest on 17 August 2023. Based on the analysis of the current market practice, the Board of Directors decided to discontinue the remuneration of extraordinary items totheEDsgoingforward.Thiswillbe presented for voting at the AGM on 15 June2023. 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 Performance criteria Weighting  Performance Weighting x performance Cumulative EBIT and EBITDA 25% 89% 22% Cumulativecashflow 25% 100% 25% ESG: Environmental, health & safety, compliance;returnonstrategic projects 50% 160% 80% Total 100% 127% Number of awarded Performance Stocks Target achievement Number of vested Performance Stocks Settlement Price Payout in € MrJavierMolinaMontes,ExecutiveChair 21,429 127% 27,258 €68.82 €1,875,896 Mr Asier Zarraonandia Ayo, CEO 14,286 18,172 €1,250,597 MrWolfUweLehmann,CFO 15,179 19,308 €1,328,770 Total 50,894 64,738 €4,455,263 91Befesa Annual Report 2022 Statutory  financialstatements  Consolidated  financialstatements  ToBefesa’s  shareholders  Additional  information Management report not provide additional pension benefitstoitsEDs. 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.). Percentage remuneration of sub-total base salary, one- and multi-year variable remuneration (showncombinedforthethreeEDs) d   Basesalary    One-year variable   Multi-year variable 26% 57% 17% REMUNERATION OF NON-EXECUTIVEDIRECTORS The annual fixedremuneration of anordinaryNEDcoversattendance to Board and committee meetings and memberships in committees. Each NED participates at least in one committee. Befesa prefers to include the participation in committees in the annualfixremunerationinstead ofthroughseparatefees,assuming asimilarinvolvementoftheNED andreducingthecomplexityofthe NED remuneration. Starting16June2022,eachordinary NEDreceivesanannualfixed remuneration of €90 thousand (prorated for the remainder of the year 2022).Equally,theannualfixed remuneration of the Chair of the Board of Directors or Lead Independent Directorwasincreasedto€220 thousandeffectiveasof16June2022, whileaChairofaBoardCommittee (excluding the Chair of the Board of Directors or Lead Independent Director)receivesanadditionalfixed remuneration of €30 thousand. For the three-year period from 2019 to2021,thesixNEDswereawarded a one-time multi-year variable compensation (Phantom Stocks). Theperformancetargetswere determined and measured over thethree-yearperformanceperiod, between1January2019to 31December2021,andcovered three performance criteria, weightedasfollows: Performance criteria Weighting Cumulative EBIT and EBITDA 25% Cumulativecashflow 25% ESG: Environmental, health &safety,compliance; Return on strategic projects 50% The overall degree of target achievement across the three performancecriteriawas127%. Theone-timeawardconsistedof 9,975 Phantom Stocks in total, whichvestedoverthefiscalyears 2019, 2020 and 2021. The Settlement Price amounted to €60.67 per Phantom Stock. This resulted from the average of the closing prices of the Befesa stock on the Xetra trading market of the Frankfurt Stock Exchange over a periodoftwentytradingdays beforethesettlement,i.e. €58.77,combinedwiththe applicable dividends payable duringthefiscalyears2020and 2021, i.e. €1.90 per share. The multi-year variable compensation scheme to the NEDs oftheBoardofBefesawasaone- timeawardandwasdiscontinued. 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 Corporate governance continued Number of Phantom Stocks vested in 2022 Settlement phantom share price in 2022 2022 payout in € MrJavierMolinaMontes, ExecutiveChair 21,429 €49.18 €1,053,835 Mr Asier Zarraonandia Ayo, CEO 15,179 €746,473 MrWolfUweLehmann,CFO 15,179 €746,473 Total 51,787 €2,546,781 92 Befesa Annual Report 2022 To Befesa’s shareholders 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2022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 2022,thefollowingshareholders hold(ortowhomwereattributed) fivepercent(5%)ormoreof Name Position Status 2022 fixed remuneration in € MrRomeoKreinberg1 Lead Independent Director, Chair of the Nomination and Remuneration Committee Served from 01.01.2022 to 31.12.2022 €187,917 MrsFraukeHeistermann Independent Director Served from 01.01.2022 to 31.12.2022 €76,250 Mr Georg Graf Waldersee Independent Director, Chair of the AuditCommittee Served from 01.01.2022 to 31.12.2022 €101,667 MrHelmutWieser Independent Director Served from 01.01.2022 to 31.12.2022 €76,250 Mr Manuel Soto Independent Director Served from 01.01.2022 to 15.06.2022 €27,500 Mr Santiago Zaldumbide Independent Director Served from 01.01.2022 to 15.06.2022 €27,500 Mrs Natalia Latorre Arranz Independent Director Served from 16.06.2022 to 31.12.2022 €48,750 DrJoséDomínguezAbascal Independent Director, Chair of the SustainabilityCommittee Served from 16.06.2022 to 31.12.2022 €48,750 1 MrKreinbergservedfrom01.01.2022to12.07.2022asChairoftheBoardofDirectors,andfrom12.07.2022to31.12.2022asLeadIndependentDirector. Name Number of awarded Phantom Stocks Target achievement Number of vested Phantom Stocks Settlement Price 2022 payout in €2 MrRomeoKreinberg 3,183 127% 4,049 € 60.67 € 245,292 MrsFraukeHeistermann 1,273 1,619 € 98,117 Mr Georg Graf Waldersee 1,698 2,160 € 130,823 MrHelmutWieser 1,273 1,619 € 98,117 Mr Manuel Soto 1,273 1,619 € 98 ,117 Mr Santiago Zaldumbide 1,273 1,619 € 98,117 Total 9,975 12,688 € 768,583 2 Themulti-yearvariablecompensationschemetotheNEDsoftheBoardofBefesawasaone-timeawardandwasdiscontinued. The following two tables provide an overview of the remuneration awarded to the NEDs of the Board of Directors in 2022: 93Befesa Annual Report 2022 Statutory  financialstatements  Consolidated  financialstatements  ToBefesa’s  shareholders  Additional  information Management report totalvotingrightsattachedto BefesaS.A.shares(shownbelow). 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 14th day preceding the date oftherelevantGeneralMeeting oftheshareholders(the “RecordDate”). Only shareholders holding shares onthe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 depository 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 the 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 a 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. Corporate governance continued 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., Luxembourg, Grand Duchy of Luxembourg 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 10.02% attachedtoshares 15 December 2022 94 Befesa Annual Report 2022 To Befesa’s shareholders ■ 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 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theacquisition;(ii) as a result of 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. 95Befesa Annual Report 2022 Statutory  financialstatements  Consolidated  financialstatements  ToBefesa’s  shareholders  Additional  information Management report 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. 96 Befesa Annual Report 2022 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,45001,50001 ■ Insurances:coverageofdetectedrisk ■ General data-protection regulations ■ Code of conduct for suppliers Befesa CMS 97Befesa Annual Report 2022 Statutory  financialstatements  Consolidated  financialstatements  ToBefesa’s  shareholders  Additional  information Management report 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 from 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 Compliance continued Code of conduct 98 Befesa Annual Report 2022 To Befesa’s shareholders their operations. Non-compliance willbetakenveryseriouslyby Befesa'smanagementandwill leadtopersonalconsequences fortherelevantemployee(s). 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 recruitment, 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. 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 99Befesa Annual Report 2022 Statutory  financialstatements  Consolidated  financialstatements  ToBefesa’s  shareholders  Additional  information Management report 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 email 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 employees,includingpart-timers;the training courses and training tests are updatedonanannualbasiswiththe latest compliance-related contents. During2022,twospecific compliancetrainingcourseswere launched to all employees: Compliance Management System and Code of Conduct. Both training courseswereincludedinaspecific online training tool, supported by live interactions and questionnaires. 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. In addition, Befesa carried out specificcybersecuritytrainingforall employees, covering several topics related to this issue, e.g. Public Wi-Fi, passwordtrivia,ransomware, cloud,badlinksandpretexting. Thiscybersecuritytrainingwillbe inplaceforthecomingyearsas cyber-attacks 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; these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 70 to 76). 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. 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 Compliance continued 100 Befesa Annual Report 2022 To Befesa’s shareholders 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athttps://www.befesa.com/ sustainability/governance/ #compliance. The internal audit teamreviewsandanalysesthe implementationofthecode. v. Criminal compliance certificationUNE19601 The Spanish criminal code establishes that legal persons mayhavecriminalresponsibility.To avoidthisfromhappeningatBefesa, a criminal compliance programme (Criminal Risks Management System) was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 Q1 2021, anditwasrenewedinQ12022. 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 by Befesa’s internal audit departmentfollowinganannual audit plan approved by Befesa’s Audit Committee. Befesa’s internal audit department conducts audits ofallsignificantoperationsevery yearandatleastonceeverytwo yearsofallotheroperations. Integrated audits conducted by Befesa’s internal audit team provide Befesa’s investors and stakeholders withadditionalconfidenceregarding thefinancialandnon-financial information published every quarter. These audits cover: ■ Befesa'sconsolidatedand subsidiaries'standalonefinancial statements; ■ Companyprocessesandpolicies; and ■ Compliance, ESG policies and ethical standards. In 2022, a total of 22 integrated audits (2021:31audits)werecarriedout followingthisinternalcontrolmatrix, whichincludesmorethan600 controls, many of them directly designed to cover ethical standards. Amongothers,theseinclude: ■ Thedefinitionofpropercriminal compliance policies of Spanish entities(UNE19601); ■ Training for employees on compliance policies, the code of conductandITsecurity; ■ Internalapprovalsforkeyactions; ■ Anti-money laundering, payments and collections, and cashdestinationsandorigins; ■ Powersofattorneyand compliancewiththe“four-eyes” principle; ■ Negotiationswithsuppliers, customers and other business partners, in addition to existing contracts; ■ CompliancewithBefesa’s suppliercodeofconduct; ■ The recruitment and hiring ofstaff; ■ Training and compensation ofemployees; ■ Donationsandsponsorships;and ■ Healthandsafety. 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 every quarter. Audits carried out by the internal audit team in 2022 Germany Spain Sweden France US China S. Korea Turkey Criminal Compliance (UNE 19601) Compliance training &communications Payment approvals Purchase approvals Suppliers’ benchmark Supplier code of conduct Recruitment & hiring Remuneration & compensation Donations & sponsorships Health&safety 101Befesa Annual Report 2022 Statutory  financialstatements  Consolidated  financialstatements  ToBefesa’s  shareholders  Additional  information Management report  European/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. This platform is available in eight languages: English, German, Spanish, French, Swedish, Turkish, Korean and Chinese. The channel, provided by Business Keeper(BKMS),isthefirst complianceplatformcertifiedin accordancewiththedataprotection lawatEuropeanlevel(GDPR). In addition, it meets the very highest data security standards: double securitycertificationinaccordance withISO27001,state-of-the-art encryption algorithms, high- security data centres and manual penetration testing. This ensures thatwhistle-blowersareprovided withprotectionfromretaliation. Compliance continued 102 Befesa Annual Report 2022 To Befesa’s shareholders 103Befesa Annual Report 2022 Statutory  financialstatements  Consolidated  financialstatements  ToBefesa’s  shareholders  Additional  information Management report 103Befesa Annual Report 2022 Recover valuable materials from previously used products using the best available technology. 104 Befesa Annual Report 2022 To Befesa’s shareholders 104 Befesa Annual Report 2022 Consolidated financial statements 106 Consolidatedstatementoffinancialposition 108 Consolidated income statement 109 Consolidated statement of comprehensive income 110 Consolidated statement of changes in equity 111 Consolidatedstatementofcashflows 112 Notestotheconsolidatedfinancialstatements 181 Responsibility statement 182 Independent auditor’s report 105Befesa Annual Report 2022 Statutory  financialstatements  Management report  ToBefesa’s  shareholders  Additional  information Consolidated  financialstatements Assets Note(s) 2022 2021 Non-current assets: Intangible assets Goodwill 7 587,853 5 7 3 ,15 1 Other intangible assets 8 1 0 6 , 114 10 4 , 418 693,967 6 7 7, 5 6 9 Right-of-use assets 11 30 ,895 30, 335 Property, plant and equipment 9 682,809 5 09 ,0 75 Non-currentfinancialassets Investments in Group companies and associates 45 46 Othernon-currentfinancialassets 10 4 4, 521 15 , 9 5 3 44, 566 15,999 Deferred tax assets 19 10 3 ,6 47 1 25,462 Total non-current assets 1 ,555 ,88 4 1, 35 8 , 4 4 0 Current assets: Inventories 12 10 2, 5 3 9 6 7, 4 7 7 Trade and other receivables 13 10 7, 5 9 1 113 , 2 2 9 Trade receivables from related companies 13-25 1,039 9 17 Accounts receivable from public authorities 13-20 1 9,566 10 ,6 71 Other receivables 13 26 ,8 98 2 0, 561 Othercurrentfinancialassets 10 1, 3 42 825 Cash and cash equivalents 4 16 1,751 224,0 89 Total current assets 42 0,7 26 4 3 7, 7 6 9 Total assets 1, 976 , 610 1,79 6 ,2 0 9 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 2022 (Thousands of euros) 106 Befesa Annual Report 2022 To Befesa’s shareholders Equity and liabilities Note(s) 2022 2021 Equity: Parent Company 14 Share capital 111 , 0 4 8 111 , 0 4 8 Share premium 532, 86 7 532, 867 Hedgingreserves (2,573) (96,830) Other reserves 3 7, 3 4 0 (1 9,91 5) Translationdifferences 2 0 ,1 9 7 (4, 08 0) Netprofit/(loss)fortheyear 10 6 , 2 2 0 9 9 , 74 5 Equity attributable to the owners of the Company 805,099 622 ,835 Non-controlling interests 14 1 4 ,1 5 3 8 , 712 Total equity 819 , 25 2 63 1 ,54 7 Non-current liabilities: Long-term provisions 18 18 , 518 22 ,267 Loans and borrowings 15 663,448 653,571 Lease liabilities 11-15 1 3,988 15 , 75 6 Othernon-currentfinancialliabilities 17 12 , 8 75 5 6 ,70 0 Other non-current liabilities 16 7, 8 3 1 4 ,621 Deferred tax liabilities 19 1 0 7, 6 3 3 91, 94 6 Total non-current liabilities 824, 293 844,86 1 Current liabilities: Loans and borrowings 15 23,0 38 1 7,7 9 1 Lease liabilities 11-15 10 , 29 8 7 ,612 Othercurrentfinancialliabilities 17 38 ,223 75 ,6 50 Trade payables to related companies 25 1, 573 1, 4 36 Trade and other payables 19 8 , 87 0 151, 414 Other payables Accounts payable to public administrations 16-20 14 , 2 2 0 17, 8 5 5 Other current liabilities 16 46 ,843 48 ,043 61, 0 63 65,8 98 Total current liabilities 333,065 319 , 8 01 Total equity and liabilities 1, 976 , 610 1,79 6 ,2 0 9 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 2022 (Thousands of euros) continued 107Befesa Annual Report 2022 Statutory  financialstatements  Management report  ToBefesa’s  shareholders  Additional  information Consolidated  financialstatements Note(s) 2022 2021 Continuing operations: Revenue 5, 22.1 1,1 3 6 , 0 3 3 8 2 1, 6 13 Changesininventoriesoffinishedgoodsandworkinprogress (4 ,7 76) 1 0 ,7 13 Procurements 22.2 (563,40 1) (37 0,697) Other operating income 22.3 92, 299 14 , 9 8 9 Personnel expenses 22.4 (12 8 , 3 8 4) (9 8 , 8 19) Other operating expenses 22.5 (296, 867) (18 8 ,18 7) Amortisation/depreciation, impairment and provisions 22.6 (7 0 ,1 4 5) (62, 1 55) Operatingprofit 16 4 ,75 9 12 7, 4 5 7 Finance income 23 4,20 5 344 Finance costs 23 (3 1 ,91 3) (24, 5 8 3) Netexchangedifferences 3.18 (6 , 7 11) 8 ,634 Netfinanceincome/(loss) (34,419) (1 5,605) Profit/(Loss)beforetax 13 0 , 3 4 0 111 , 8 5 2 Corporate income tax 19 (23, 838) (9, 500) Profit/(Loss)fortheyear 1 06,502 1 02,35 2 Profit/(Loss)fortheyear 1 06,502 1 02,35 2 Attributable to: ParentCompany’sowners 10 6 , 22 0 9 9 , 74 5 Non-controlling interests 282 2, 607 Earnings/(Losses) per share attributable to owners of the Parent (expressed in euros per share) Basic earnings per share: 28 2.66 2.68 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 2022 (Thousands of euros) 108 Befesa Annual Report 2022 To Befesa’s shareholders Note(s) 2022 2021 Consolidatedprofit/(loss)fortheyear 1 06,502 1 02,35 2 Itemsthatmaysubsequentlybereclassifiedto income statement: Income and expense recognised directly in equity 49,999 (112 , 2 3 9) –Cashflowhedges 17 2 2 , 310 (16 7, 3 2 6) –Translationdifferences 29,436 6,808 –Taxeffect 19 (1 , 747) 4 8 ,279 Transfers to the income statement 73, 694 31,7 26 –Cashflowhedges 17 10 1, 3 51 4 3, 501 –Taxeffect 19 (2 7, 6 5 7) (11 , 7 7 5) Other comprehensive income/(loss) for the year, net of tax 12 3 , 6 9 3 (8 0 , 513) Total comprehensive income/(loss) for the year 2 3 0 ,1 9 5 2 1,8 3 9 Attributable to: ParentCompany’sowners 2 24,7 54 23 , 421 Non-controlling interests 5 , 4 41 (1, 5 8 2) 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 2022 (Thousands of euros) 109Befesa Annual Report 2022 Statutory  financialstatements  Management report  ToBefesa’s  shareholders  Additional  information Consolidated  financialstatements 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2020 94,57 6 26 3 ,8 75 (9, 509) (54,306) (9,8 80) (1 5,077) 4 7, 6 0 8 10,294 327 ,5 8 1 Total comprehensive income for the year – – (8 7, 3 2 1) – – 10 , 9 97 9 9 , 74 5 (1, 5 82) 2 1, 8 3 9 Increase of equity (Note 14) 16, 472 315 , 79 2 – (3 ,648) – – – – 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) – (46,800) – (9,880) 9,880 – – – (46,800) Other movements – – – 3 11 – – – – 3 11 Balances at 31December2021 111 , 0 4 8 532 ,867 (96, 830) (19 ,915) – (4 ,08 0) 9 9 , 74 5 8 , 712 631 ,547 Total comprehensive income for the year – – 9 4,25 7 – – 24, 2 7 7 10 6 , 22 0 5 , 4 41 230, 1 95 Distributionofprofitfor the year Reserves – – – 9 9 , 74 5 – – (9 9, 7 45) – – Dividends (Note 14) – – – (50 ,000) – – – – (5 0, 000) Other movements (Note 3.18) – – – 7, 5 10 – – – – 7, 5 10 Balances at 31December2022 111 , 0 4 8 532 ,867 (2,573) 3 7, 3 4 0 – 2 0 ,1 9 7 10 6 , 22 0 14 ,15 3 819 , 2 52 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 2022 (Thousands of euros) 110 Befesa Annual Report 2022 To Befesa’s shareholders Consolidated statement of cash flows for the year ended 31 December 2022 (Thousands of euros) 2022 2021 Cashflowsfromoperatingactivities: Profit/(Loss)fortheyearbeforetax 13 0 , 3 4 0 111 , 8 5 2 Adjustments for: Depreciation and amortisation (Note 22.6) 7 0 ,1 4 5 5 3 , 2 51 Impairment losses (Notes 9, 22.6) – 8,904 Changes in provisions (4, 829) 3 ,753 Interest income (4, 205) (344) Finance costs 31 , 913 24 , 58 3 Otherprofitandloss(Notes2.6.2and6) (4 7, 7 7 0) (75 0) Exchangedifferences 6 , 7 11 (8 ,634) Changes in working capital: Trade receivables and other current assets (11 , 6 3 6) (66,7 66) Inventories (62) (2 1, 25 5) Trade payables 9, 827 4 5 , 414 Othercashflowsfromoperatingactivities: Interest paid (21, 24 3) (16 , 8 72) Taxes paid (21, 8 6 2) (15,235) Netcashflowsfrom/(usedin)operatingactivities 1 3 7, 3 2 9 117, 9 0 1 Cashflowsfrominvestingactivities: Investments in intangible assets (Note 8) (2 , 4 61) (2, 1 56) Investments in property, plant and equipment (Note 9) (10 4 ,18 7) (75 , 528) Collectionfromfinancialassets – 2, 0 31 (Acquisition)/Disposalofnewsubsidiaries(Note6) (4 4, 965) (373, 694) Collections from sale of property, plant and equipment 209 – Investments/(Divestments)inothercurrentfinancialassets – (12 3) Netcashflowsfrom/(usedin)investingactivities (15 1, 4 0 4) (4 49, 470) Cashflowsfromfinancingactivities: Equity issuance (Note 14) – 3 2 8 , 6 15 Cashinflowsfrombankborrowingsandotherliabilities(Note15) 24 , 20 1 1 30,37 0 Cashoutflowsfrombankborrowingsandotherliabilities(Note15) (21, 0 8 7) (10, 414) Dividends paid to shareholders (Note 14) (50, 000) (46,800) Netcashflowsfrom/(usedin)financingactivities (46,886) 4 01,7 71 Effectofforeignexchangeratechangesoncashandcashequivalents (1, 37 7) (6 71) Net increase/(decrease) in cash and cash equivalents (6 2,338) 69 ,5 31 Cash and cash equivalents at the beginning of year 2 24, 0 8 9 15 4 , 5 5 8 Cash and cash equivalents at the year end 161 ,7 51 224 , 0 8 9 TheaccompanyingNotes1to29andtheAppendixareanintegralpartoftheconsolidatedfinancialstatements. 111Befesa Annual Report 2022 Statutory  financialstatements  Management report  ToBefesa’s  shareholders  Additional  information Consolidated  financialstatements 1. General information Befesa,S., S.A.(fo (formerlyBiy BilbaoMido Midco,S.co, S.àrà r.l.(hl. (hereinafterther the“Pae “ParentComt Company”o” orthe“r the “Company”)wa) wasincs incorporatedinted in Luxembourgon3 on 31M1 May20ay 2013a3 asa“socis a “sociétéàresété à responsabilitéliité limitée”sutée” subjecttoLuct to Luxembourglawfog law foranunr an unlimitedperd period oftof time.On1. On 18O8 October201er 2017,t, theshe shareholdersresors resolvedtocond to converttht theCome Companyintoany into a sociétéanoté anonymewi withoutout creatinganeng a newlegw legaleal entityoraffe or affectingthng thelege legalexal existenceonce orperr personalityofthy of theCome Companyinany in anymany manner.T. Thereghe registeredred officeofthe of theCome Companywas4y was 46,Bou6, BoulevardGard Grande-DuchesseCesse Charlotte,Lte, L-1330,330, Luxembourga andon1Jnd on 1 January2022iy 2022 itt wastrs transferredtored to 68-70Bou70 Boulevarddelrd de laPétra Pétrusse,Lse, L-2320L2320 Luxembourg. The Company’s statutory activity is the acquisition, holding and disposal of interests in Luxembourg and/or in foreign companiesandus and undertakings,aswe, as wellastll as theahe administration,don, development,an, andmand managementofsunt of suchinch interests. TheCome Companymaypny may providelode loansaans andfind financinginang in anyothy otherkier kindond orformor form orgrar grantgnt guaranteesorses or securityiy inanyotn any otherr kindoind orformr form,fort, for thebehe benefitoftht of thecome companiesaies andunnd undertakingsforgs formingpang partoftheGt of the Groupofwhp of whichtich theCohe Companyisny is amea 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Come Companymaybny may borrowinanw in anykiy kindorfond or formanrm andissd issueboue bonds,note, notes,oras, or anyotny otherdher debtiebt instrumentsaswts as wellaell ass warrantsorots or othersher shareshare subscriptionrion rights. IngIn general,thl, theCome Companymaycy may carryoutay out anycony commercial,il, industrial,orfil, or financialopal operation,wn, whichihich itmaydt may deemusefm usefuliul inn accomplishing and conducting its statutory activity. TheCome Company’sfiny’s financialyeal yearstr startsots on1Jann 1 Januaryandey and endsonds on3n 31De1 December. TheCome Company’ssny’s shareholdersattrs at theirGer GeneralMeal Meetingheng heldon18Octold on 18 October201ber 2017,ag, agreedtocreed to converttrt theChe Companyany from a private limited liability company to a public limited company. OntOn theshe samedame date,iate, itwat wasalss alsoagreo agreedatted at theCohe Company’sGs GeneralSral Shareholders’Mrs’ Meetingtocing to changetge thenahe nameoftme of thehe Company from Bilbao Midco, S.à r.l. to Befesa, S.A.. The principal place of business of the Group is located in Asua – Erandio, Bizkaia (Spain). The Company and its subsidiaries (“Befesa” or the “Group”) is an international industrial group (see Appendix) that engages mainly in the management and treatment of industrial residues (see Note 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 2022 and 2021 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ad, as andwnd whenahen appropriate,inth, in therele relatednoated notestothtes to thecone consolidatedfinted financialstal statements. Since3Nnce 3 November201ber 2017,, Befesa,S., S.A.ha. hasbees beenlisn listedontted on theFrhe FrankfurtStoct StockExck Exchange(Gge (Germany)(No) (Note1te 14)(IS4) (ISININ code LU1704650164 ). 2..  Basisofpres of presentationoftion of thecohe consolidatedfiated financialstl statementsans andbasd basisofcois of consolidation Thecone consolidatedfinted financialstal statementshavebs have beenpeen preparedontred on thebhe basisoftheas of the accountingreing recordsofBefs of Befesa,S., S.A.. anditd itsconss consolidatedsubd subsidiariesandjs and jointaoint arrangements.Ts. Theconhe consolidatedfited financialstl statementsfor2022has for 2022 haveve beenpreen preparedinared in accordancewice withIth InternationalFnal FinancialReal ReportingStng Standardsasads as adoptedbythd by theEuroe EuropeanUnin Unionon (IFRS-EU)aEU) andotnd otheraher applicableprove provisionsoftons of theahe applicablefible financialrepal reportingfrng framework,tk, togivo giveatrue a trueane andfaid fairvir viewew oftof theconhe consolidatedeqted equityaty andcond consolidatedfiated financialposal positionofBion of Befesa,Sa, S.A.a. andsund subsidiariesat31Decees at 31 December2022r 2022 ,, Notes to the consolidated financial statements as at 31 December 2022 (Thousands of euros) 112 Befesa Annual Report 2022 To Befesa’s shareholders andthd theconse consolidatedresud resultsofopes of operations,cos, consolidatedcated cashflash flowsaows andchnd changesiges inconn consolidatedequd equityfoy fortheyer the yearar theneen ended. Details of the Group’s accounting policies are included in Note 3. TheDire Directorsofths of theParee Parentcont considertder thatthat thecohe consolidatedfiated financialstal statementsfortts for theyehe yearenar ended31Decded 31 Decemberber 2022,au2022, authorisedfosed forissr issueon22Mue on 22 March2023,wih 2023, willbeall be approvedwied withnth nochao changesbyths by theshae shareholdersaers atthet theirAir Annualal GeneralMral Meetingtobing to behele heldon1d on 15J5 June2023une 2023. 2.1 Fair presentation Thecone consolidatedstted statementoffinat of financialpoal position,con, consolidatedinted incomeste statement,con, consolidatedstted statementoft of comprehensiveincve income,con, consolidatedstted statementoent ofchaf changesineqs in equity,cony, consolidatedstted statementofcast of cashflowh flowsandts and thehe notesthes theretofoereto forthefir the financialyeaal year2022inr 2022 includecode comparativefiive figuresfortes for theprhe prioryeior year,w, whichformh formedpaed partoftht of the202e 20211 consolidatedfiated financialstl statementsapps approvedbytroved by theshe shareholdersoftrs of theParehe Parentattnt at theirAnir AnnualGeal GeneralMral Meetinghing heldeld on1on 16Ju6 June2022.ne 2022. TheCome Company’scny’s consolidatedfinad financialstal statementsfor2022wts for 2022 wereforere formallyprepy prepared: ■ InaIn accordancewice withIth InternationalFial FinancialRepal ReportingStng Standardsasads as adoptedbythd by theEurope EuropeanUean Union(IFon (IFRS-EU),iEU), inn conformitywy withtheRh the Regulation(ion (EC)ofthEC) of theEuroe EuropeanParn Parliamentandot and oftheCf the Council,inc, includingIing Internationall 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anes andmed measurementbant basesases appliediied inprepn preparingting theahe accompanyingconng consolidatedfited financialstl statementsares are summarised in Note 3 . ■ Consideringaing allthll themae mandatoryacy accountingpong policiesanies andrud rulesales andmend measurementbent baseswases withamath a materialeffal effectonect on thecone consolidatedfinted financialstal statements,asws, as wellaell astheas the alternativeperve permittedbythted by therele relevantstt standardsinths in thisis connection,won, whicharesch are specifiedified inNote3n Note 3. ■ SothSo thattat theyprhey presentfait fairlyGroy Group’sconup’s consolidatedeqted equityaty andcond consolidatedfiated financialposal positionat31Decion at 31 December2022ber 2022 andthd theconse consolidatedresud resultsofitsos of its operations,ch, changesinces in consolidatedequd equityany andcond consolidatedcaed cashflosh flowsforws for the year then ended. ■ OntOn thebahe basistsis thatthat theahe accountingreing recordskeptbyts kept by thePahe Parentarent andbytnd by theothe otherGher Groupcroup companies,whi, whichinch includede thejoie jointarnt arrangementsits inwhin whichthch theyhaey hadinted interestsat31Deces at 31 December2022.Hoer 2022. However,sinwever, sincethce theacce accountingpolg policiess andmead measurementbant basesuses usedinpsed in preparingBng Befesa,S.a, S.A.co. consolidatedfiated financialstal statements(Is (IFRS-EU)dEU) differfromr from thoseuose usedbytsed by theGhe Groupcroup companies(les (localstl standards),ths), thereque requiredadjd adjustmentsants andrecnd reclassificationsweres weremad madee oncon consolidationtouion to unifyty thepohe policiesaies andmend methodsusds usedaned andtomad to maketheke themcomm compliantwant withIFRSh IFRS-EU. ■ Theprepe preparationofconn of consolidatedfinted financialstal statementsincos in conformitywy withIFRSreh IFRS requirestres theushe useofcere of certaincrin criticalal accounting estimates. It also requires management to exercise its judgement in the process of applying the Group’sacoup’s accountingpong policies.Thea. The areasinvos involvingahing a higherdeer degreeofjud of judgementoent orcomr complexity,orarey, or areaswas wherehere assumptionsaons andesnd estimatesaresis are significanttotant to thecohe consolidatedfiated financialstl statements,as, aredisre disclosedinNed in Note2.4.ote 2.4. ■ Thecone consolidatedfind financialsial statementshnts havebeave beenpreen preparedinared in accordancewice withLth Luxembourg’slerg’s legalandl and regulatoryfy frameworkank andonthd on thegoie goingcong concernarn assumption. 2.2 Adoption of new standards and interpretations issued 2.2.1 First-time application of standards Thefolle followingnng newanew andamed amendmentstosts to standardsans andinted interpretationswhns whichaich areapre applicablefortle for thefihe firsttrst timein2022,e in 2022, areeare eithernher notrelot relevantordont or do nothavot haveamatee a materialiml impactontht on thecone consolidatedfinted financialsial statementsonts oftheGf the Group: ––  AmendmentstoIAS37Os to IAS 37 OnerousCous Contracts–Costos – Cost ofFulfif FulfillingaCong a Contrac t 113Befesa Annual Report 2022 Statutory  financialstatements  Management report  ToBefesa’s  shareholders  Additional  information Consolidated  financialstatements 2.2 Adoption of new standards and interpretations issued continued – Amendments to IAS 16 Property, Plant and Equipment: Proceeds before Intended Use ––  Referencestotces to thecohe conceptualfral frameworkofIFRk of IFRSinIFRS in IFRS3S 3 2.2.2 Standards, amendments and interpretations issued but not yet effective AtthAt thedate datethee theseconse consolidatedfinted financialstl statementswereas were authorisedforisd for issue,sta, standards,am, amendmentsants andnd interpretationsions issuedbued butnotyet not yeteffectt effective,and, andwhi whichthch theGroe Groupexup expectstoados to adoptforapt for annualpual periodsbods beginningong onorn or after1Janr 1 January2023,areay 2023, are asfolls follows: – Amendments to IAS 1 and IFRS Practice Statement 2: Disclosure of Accounting Policies ––  AmendmentstoIAS8s to IAS 8:Defin: DefinitionofAcion of AccountingEsng Estimate – Amendments to IAS 12: Income TAX Deferred Tax – IFRS 17: Insurance Contracts InlIn lightoftht of theGroue Group’sactp’s activities,thee, the effectofaffect of applyingtng thenehe newstaw standards,am, amendmentsonts orinter interpretationstothns to thee consolidatedfiated financialstl statementswhs whenthen theyareaey are appliedfoied forthr thefirse firsttit timeisnme is notdeeot deemedtotmed to tohaveaso have a significantant impact. 2.2.3 Standards, amendments and interpretations to existing standards that have not been adopted by the European Union AtthAt thedate datethee theseconse consolidatedfinted financialstl statementswereas were authorisedforisd for issue,theI, the IASBaASB andthnd theIFRe IFRSInteS Interpretationss Committeehatee hadpubd publishedthed thefohe followingstg standards,ams, amendmentsants andinnd interpretations,wh, whichaich arepenre pendingadng adoptionbyon by the European Union: ––  AmendmenttoIent to IAS1AS 1:Cl: Classificationoflion of liabilitiesasces as currentorent ornonr non-current – Amendments to IFRS 16: Lease Liability in a Sale and Leaseback ––  AmendmentstoIAS1s to IAS 1:No: Non-currentLiat Liabilitieswies withCovenh Covenants ––  AmendmentstoIFRS10andIs to IFRS 10 and IAS28:SAS 28: Saleoale orContr Contributionoion ofAssf Assetsbeets betweenaween anInvn Investoraestor andind itsAsts Associateoiate orr JointVentint Venture InlIn lightoftht of theGroue Group’sactp’s activities,thee, the effectofaffect of applyingtng thenehe newstaw standards,am, amendmentsonts orinter interpretationstothns to thee consolidatedfiated financialstl statementswhs whenthen theyareaey are appliedfoied forthr thefirse firsttit timeisnme is notdeeot deemedtobmed to berelee relevantfortt for theGrohe Group. 2.3 Functional currency Thesecese consolidatedfiated financialstal statementsarepts are presentedinted inthn thousandsofeus of euros,sros, sincetheee the euroiuro isthecs the currencyusediy used inn themae mainecin economicaic areainwrea in whichthch theGroue Groupopep operates.Foes. Foreignopen operationsareres are recognisedinaed in accordancewice withtth thehe policieseses establishedinNotd in Note3.The 3. Themaie maincurn currenciesothes otherthr thantan theeuhe euroinwro in whichtheGh the Groupcarp carriesoues outitst its transactionsareUns are USdolS dollar,Kore, Koreanwonan won,Swe, Swedishkroh krona,Tna, Turkishlirh lira,ana, andChid Chineseyue yuan . 2.4 Use of estimates and judgements Theinfoe informationinton in thesecone consolidatedfinted financialsial statementsints isths therespe responsibilityofty of theBohe BoardofDard of Directorsofttors of thehe Parent Company. Thepree preparationofton of theconhe consolidatedfinted financialstal statementsinacs in accordancewie withIFRth IFRS-EUrequEU requirestheas the applicationofn of relevant accounting estimates and the making of judgments, estimates and assumptions in the process of applying the Group’s accounting policies. In this sense, a detail of the aspects that have involved a greater degree of Notes to the consolidated financial statements as at 31 December 2022 (thousands of euros) continued 114 Befesa Annual Report 2022 To Befesa’s shareholders judgement,cnt, complexityoriy or inwhin whichtch thehyhe hypothesesandes and estimatesaresis are significantfoant forthr theprepe preparationofthn of thee consolidatedaated annualaal accountsants aresure summarisedbesed below. a) Relevant Accounting estimates and assumptions Thoseeose estimatesrelas relatetothte to thefolle following: Impairmentlost lossesongses on goodwillall andcend certainasn assets(sets (seeNsee Notes7otes 7,8,9a, 8, 9 and1nd 11) TheGroe Groupverup verifiesanes annuallywhy whetherter thereihere isanims an impairmentlent lossioss inrespn respectofgect of goodwillanll andothed otherasr assets,in, in accordancewie withthth theacce accountingpolg policydicy describedinNd in Note3.ote 3. Whencen calculatingthg thevale valueinuue in useoftse of theprhe principalitel itemsofgoms of goodwillandll and licenseswits withinh indefiniteunite usefulliul life,tfe, thehe assumptionsuons usedwesed wereasfore as follows: ■ Projectionsofthecs of the cashflowh flowsofthecs of the cashgenh generatingunng unit(CGit (CGU)orgU) or grouporoup ofCGUsif CGUs inquen questionaron aremade madefore for periodsoffids of fiveyeave years(wrs (whenbasen basedonpad on pastexst experienceitice it isposs possibletoprele to predictcat cashflowsh flowsaccs accuratelyoverapey over a periodod longerthr thanfian fiveyearve years),cas), calculatingaresig a residualvall valuebue basedoased onflowfon flow forthelr the lastyearpt year projected,prov, providedthd thatthat thisis flowisrepw is representativeofanorve of a normalisedflowted flow torefleco reflectmat marginargin andcnd cashflash flowexpow experienceintce in thosebhose businesses,aswe, as wellll asfas futureexure expectations.Ts. Theprohe projectionsarebns are basedonthd on thebude budgetsfornexs for nextyet yearinar increasedised inaccn accordancewnce withthh thee assumptions estimated by the management. ■ Thegrose grossmars marginsuses usedinthd in thecae calculationaion areinlire in linewne withtheph the profitexrofit expectedtobeoted to be obtained,bd, basedoased onpasn pastt experienceofproce of profitsofits ofeachof each ofthesf the segmentsandos and onnewcn new contractsexts existingiing ineacn eachcash case. ■ Todio discounttnt theflowhe flows,ads, a discountrunt rateisuate is usedbsed basedonthd on theweie weightedaverd averagecage costofcost of capitalforasl for assetsofths of thistis type,e, adjusted,whe, wherenere necessary,onty, on thebahe basisoftsis of theadhe additionalrnal riskthak thatcout couldbecld be contributedbycerd by certaintain typesopes ofactf activity. ■ InaIn anycany case,fse, furtherseer sensitivityana analysesarecses are conducted,pd, particularlywly withreith regardtothedrd to the discountrateut rate usedased andthnd thee residualgal growthrth rate,toeate, to ensurethre thatthat theeffece effectofposst of possiblechle changesinees in estimatesofths of theserese ratesdoates doesnothes not haveaave ann impactontht on therecoe recoverabilityofty of thereche recognisedgoodd goodwillanll andlicd licenseswies withith indefiniteusete usefullifel life. Recoverability of deferred taxes (Notes 3.19 and 19) Deferredtad taxasx assetsasets arerecore recognisedfosed foralldr all deductibletempe temporarydiy differencesances andund unuseddeed deductionsforwns for whichitich it iss probabletle thatthat thecohe companiesofths of theGroue Groupwip willhall havefuve futuretture taxpax profitsags againstwhst whichtich theychey canban beutie utilised.Ted. Todo determinene thedefee deferredtad taxassx assetseets eligibleforrece for recognition,the, theirair amount,tnt, thedhe datesoates onwhin whichthch thefue futuretae taxprofitx profitsareexs are expectedcted tobeoto be obtainedandtd and therevhe reversalpeal periodofthod of theteme temporarydiy differencesareess are estimated. Fair value of derivatives Thefae fairvair valueoffilue of financialinal instrumentsths thatarenat are notquot quotedinaoted in anactn activemive market(e.gket (e.g.OT. OTCdeC derivatives)isdes) is determinedbyed by using valuation techniques. The Group uses judgement to select a series of methods and makes assumptions that are mainly based on the market conditions existing at each balance sheet date. Estimates made in the context of share-based payments (Note 24) Tocao calculatetlate thelhe liabilityforty for theobhe obligationdeon derivedfrved fromshom share-basedcsed compensationplon planswits withceh certainemn employees,aes, att 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. 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ions inacqn acquisitionsrequs requiressires significantjudt judgmentsbymas by management. Althoughthh theseesese estimateswerems were madeoade onthebn the basisofths of thebese bestinfot informationavan availableable at3t 31D1 December2022ontr 2022 on theevehe events analysed,eved, eventstnts thatthat takepake placeinte in thefuhe futuremigre mightmaht makeitneke it necessarytochay to changetnge theseestse estimates(uates (upwardsordrds or downwards)rds) incin comingyeng years.Ch. Changesies inaccon accountingestg estimateswoates wouldbeapd be appliedproed prospectivelyinay in accordancewnce withthh thereque requirementsts ofIAof IAS8,reS 8, recognisingting theeffehe effectsoftcts of theche changeinege in estimatesinttes in therelhe relatedconsd consolidatedincd incomesome statement . 115Befesa Annual Report 2022 Statutory  financialstatements  Management report  ToBefesa’s  shareholders  Additional  information Consolidated  financialstatements 2.5 Changes in the scope of consolidation Followingisadesg is a descriptionofton of themahe mainchin changesintes in theshe scopeofccope of consolidationiion in2022and2n 2022 and 2021: 2022 InSIn September2022,theGr 2022, the Groupcomp completedthted theacqe acquisitionof93ion of 93.1%o% ofthesf the sharesofAmes of AmericanZin ZincProdnc Products,LLCs, LLC (“AZP”) (currently, Befesa Zinc Metal, LLC) (Note 6). 2021 InAIn August2021st 2021,t, theGrhe Groupcooup completedtleted theahe acquisitionof1n of 100%oft0% of theshe sharesofAms of AmericanZinn ZincRecycc RecyclingCorg Corp.(“AZp. (“AZR”)) (currently, Befesa Zinc US, Inc.) (Note 6). In2021In 2021,asp, as partoftt of theaghe agreementsdess describedibed inNote6,Bn Note 6, Befesaacqa acquiredamired a minoritysty stakeof6ake of 6.9%o.9% oftheef the equityy interestsits inAmen AmericanZcan ZincPinc Products,LLC(“, LLC (“AZP”),AZ), AZR’szR’s zincreinc refiningsung subsidiary.T. Thisihis investmentwant wasrecos recordedarded asas a financialinvel investmentaent atfait fairvalr valuetue throughprogh profitorlfit or loss(oss (Note6).Note 6). 2.6 Alternative performance measures TheCome Companyreguny regularlyrepoy reportsalts alternativepive performancemnce measures(ures (APMs)notds) not definedbyIFRed by IFRSthS thatmaat managementnt believes are relevant indicators of the performance of the Group. Alternativepive performancemnce measuresareuss are usedtoproved to providereade readerswers withaddh additionalfinal financialinfol informationthon thatisreat is regularlyly reviewedbymaed by managementaent andusnd usedtomaed to makedecke decisionsaons aboutopet operatingming matters.Ts. Thesemeae measuresareas are alsouslso usedfored for definingseng seniormanr management’svar’s variablerele remuneration.Tn. Theyahey areusere usefuliful intern termsofrems of relatingtoding to discussionswits withthh thee investment analyst’s community. However,thewever, theseAPMse APMsarens are notuniot uniformlydisy disclosedbyaled by allcoml companies,in, includingthog thoseintse in theGhe Group’sinroup’s industry.y. Accordingly,itm, it maynoay notbecomt be comparablewile withsth similarlytrly titledmled measuresandds and disclosuresbyotres by othercher companies.. Additionally,ce, certaininfn informationpreon presentedisdted is derivedfived fromarom amountscnts calculatediated inaccon accordancewnce withIFRSbh IFRS butisnut is notot itselfanexf an expresslypery permittedGAd GAAPmeaP measure.Suc. Suchmeah measuresshos shouldnuld notbevot be viewedinisd in isolationorasan or as analtn alternativetoive to the equivalent IFRS measure. Definitionsusns usedaned andrecod reconciliationstothns to thecloe closestIsest IFRSmFRS measuresaures arepresre presentedbeld below. 2.6.1 Net debt Netdebtit debt isdefis definedaned ascurs currentandnt and non-currentfinnt financialdial debtpebt plusclus currentarent andnond non-currentleat leaselise liabilitieslies lesscess cashandh and casheqsh equivalentsans andlesd lessothes othercur currentfinat financialaal assetsads adjustedbynoted by non-cashitesh items.Th. TheGroue Groupbelp believesths thatnetdat net debtebt is relevant to investors, since it gives an indication of the absolute level of non-equity funding of the business. Thiscis canbecan be comparedtotared to theihe incomeanme andcasd cashflowh flowsgens generatedbytated by thebuhe business,an, andavad availableuble undrawnfacn facilities. Thefolle followingtng tablerecoe reconcilesnles netdeet debttothbt to therelee relevantsvant statementoffint of financialposil positionlion lineitene items:ms: 2022 2021 Non-currentfinnt financialdel debt(Nobt (Note1te 15)5) 663,448 653,571 Non-current lease liability (Notes 11 and 15) 13,988 15,756 Currentfinnt financialdel debt(Nbt (Note1ote 15) 23,038 17,791 Current lease liability (Notes 11 and 15) 10,298 7,612 Cash and cash equivalents (Note 4) (161,751) (224,089) Othercur currentfinnt financialasl assetsasets adjustedbyned by non-cashiash items(Nos (Note1te 10)) (60) (61) Net debt 548,961 470,580 Notes to the consolidated financial statements as at 31 December 2022 (thousands of euros) continued 116 Befesa Annual Report 2022 To Befesa’s shareholders 2.6.2 EBITDA, Adjusted EBITDA and EBITDA margin EBITDAisdITDA is definedasoed as operatingping profitforofit forthepr the periodbeod beforethfore theime impactopact ofamof amortisation,don, depreciation,ion, impairmentt andand provisions. AdjustedEBted EBITDAisdITDA is definedasEed as EBITDAadjDA adjustedbyanynd by any non-recurrentcrent costs/incomes. EBITDAmITDA marginisdn is definedasEBed as EBITDAdiA dividedbded byreveny revenue.Tue. TheCohe Companybeny believesthves thatEBat EBITDAaITDA andEBnd EBITDAmITDA marginaren are useful supplemental indicators that may be used to assist in evaluating the Group’s operating performance. Thefolle followingtng tablerecoe reconcilesEBles EBITDAtotA to thecohe consolidatediated incomestme statementlent lineiteme itemsfros fromwhim whichitich it isders derived: 2022 2021 Revenue (Note 5) 1,136,033 821,613 Income/expenses from operations (except revenue, depreciation and amortisation/ depreciation charge and provisions) (Note 22) (901,129) (632,001) Amortisation/depreciation, impairment and provisions (a) (Note 22) (70,145) (62,155) EBIT(OIT (Operatingping profit/(loss))(b)) (b) 164,759 127,457 EBITDA(OpeDA (Operatingprog profit/(loss)befs) beforeamore amortisation/depreciationann andprovd provisions)s) (a+b) 234,904 189,612 Non-recurrent costs/incomes (Notes 6, 9 and 21) () (20,304) 7,958 Adjusted EBITDA 214,600 197,570 ())  Thisais amountmnt mainlyincy includestdes theehe effectsoftts of theahe acquisitionoion ofAmef AmericanZin ZincRenc RecyclingCorg Corp.(p. (Note6),ie 6), incomefme fromdrom damagescas causedattd at thephe plantant andcoved coveredbyd by insuranceince inreln relationtion totho thefireae fire attheHt the Hanoverplr plantiant in2021(n 2021 (Note21),aNote 21), andtnd theeshe estimatedamed amount(€nt (€4,373th373 thousand)od) oftheif the impactoact ofhyf hyperinflationontn on theGrhe Group’sp’s EBITDA (Note 3.18). Thefolle followingting tableprove providesarecos a reconciliationofEBIn of EBITDAmaTDA marginandAdn and AdjustedEBsted EBITDAmA margin: 2022 2021 Revenue (a) 1,136,033 821,613 EBITDA (b) 234,904 189,612 Non-recurrent costs/incomes (20,304) 7,958 Adjusted EBITDA (c) 214,600 197,570 EBITDA margin (%) (b/a) 21% 23% Adjusted EBITDA margin (%) (c/a) 19% 24% 2.6.3 EBIT, Adjusted EBIT and EBIT margin EBITisdIT is definedasoed as operatingprong profitfortfit for theyehe year.Th. TheCome Companyuseny usesEBIs EBITtomonT to monitoriitor itsfits financialretul returnarn afterbotr bothh operating expenses and a charge representing the cost of usage of both its property, plant and equipment and finite-lifeintangible intangibleass assets. AdjustedEBted EBITisdIT is definedasEBed as EBITaIT adjustedbsted byanynoy any non-recurrentcosnt costs/incomes. EBITmaIT marginandAdn and AdjustedEBsted EBITmIT marginaredin are definedasEed as EBITaBIT andAdnd AdjustedEBted EBITasapIT as a percentageofreage of revenue,e, respectively. The Company believes that these ratios are useful measures to demonstrate the proportion of revenue thathat hasbeeas beenrean realisedasEBed as EBITaIT andAdjnd AdjustedEBIed EBIT,an, andthed thereforeinde indicatorsofptors of profitability . 117Befesa Annual Report 2022 Statutory  financialstatements  Management report  ToBefesa’s  shareholders  Additional  information Consolidated  financialstatements 2.6 Alternative performance measures continued Thefolle followingting tablerecoe reconcilesEBles EBITaIT andAdnd AdjustedEBted EBITtothIT to theince incomesome statementlint lineitne itemsfems fromwrom whichitisdh it is derived: 2022 2021 Revenue (Note 5) 1,136,033 821,613 Income/expenses from operations (except revenue, depreciation and amortisation/ depreciation charge and provisions) (Note 22) (901,129) (632,001) Amortisation/depreciation, impairment and provisions (Note 22) (70,145) (62,155) EBIT(OIT (Operatingping profit/(loss)) 164,759 127,457 Non-recurrent costs/incomes EBIT (Notes 9 and 21) 5,867 13,848 Non-recurrent costs/incomes EBITDA (Notes 6, 9 and 21) (20,304) 7,958 Adjusted EBIT 150,322 149,263 Thefolle followingting tableprove providesarecos a reconciliationofEBIn of EBITmaT marginargin andAdnd AdjustedEBted EBITmaIT margin: 2022 2021 Revenue (a) 1,136,033 821,613 EBIT (b) 164,759 127,457 Non-recurrent costs/incomes EBIT (Notes 9 and 21) 5,867 13,848 Non-recurrent costs/incomes EBITDA (Notes 6, 9 and 21) (20,304) 7,958 Adjusted EBIT (c) 150,322 149,263 EBIT margin (%) (b/a) 15% 16% Adjusted EBIT margin (%) (c/a) 13% 18% 2.6.4 Net debt/Adjusted EBITDA (Adjusted leverage ratio) Netdebtt debt/AdjustedEBId EBITDAraTDA ratioitio isdefis definedaned asnetds net debtdiebt dividedbded byAdjuy AdjustedEsted EBITDA.TDA. TheGhe Groupbroup believesteves thatthat thisrats ratioio isauis a usefulmeul measuretoshre to showitow itsabis abilitytogy to generatetrate theihe incomeneme neededtobeabd to be abletosetle to settleitle itsloas loansans andbond borrowingsass as they fall due. Thefolle followingtng tablerecoe reconcilestles thenehe netdebt debt/AdjustedEBsted EBITDAraA ratiotontio to netdeet debtanbt andAdjud AdjustedEBITd EBITDA: 2022 2021 Net debt (Note 4) 548,961 470,580 Adjusted EBITDA 214,600 197,570 Net debt/Adjusted EBITDA 2.6 2.4 2 . 6 . 5 C a p e x Capexisdpex is definedasted as theche cashpash paymentsmas madedude duringthng thepere periodfiod forinvor investmentsinits in intangibleasse assets,prop, property,pl, plantant and equipment and right-of-use assets. TheCome Companybelny believesths thatthat thismeis measureisusre is usefultounl to understandtand theeffohe effortmadt madebythe by theCome Companyeacy eachyeartoh year to acquire, upgrade and maintain physical assets such as property, industrial buildings or equipment. Thefolle followingtng tablerecoe reconcilesCles Capextotapex to theche cashflash flowstow statementlint lineiteme itemsfros fromwhim whichitich it isdes derived: 2022 2021 Cashflsh flowsfows fromirom investingacng activities: Investments in intangible assets (Note 8) 2,461 2,156 Investments in property, plant and equipment (Note 9) 104,187 75,528 Capex 106,648 77,684 Notes to the consolidated financial statements as at 31 December 2022 (thousands of euros) continued 118 Befesa Annual Report 2022 To Befesa’s shareholders 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acqe acquisitiondion dateistate is thedhe dateonwate on whichtheGh the Groupobtp obtainscons controlofttrol of theahe 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fnt on futureeveure eventsonts orcomr compliancewie withceth certainconin conditionsinexcns in exchangefonge forcontr controloftrol of theache acquiree. The consideration transferred excludes any payment that does not form part of the exchange for the acquired business.Acq. Acquisitioncoon costsasts arerecore recognisedased asanexs an expensewhse wheninen incurred. The Group recognises the assets acquired and liabilities assumed at their acquisition-date fair value. Liabilities assumedined includeade anyconny contingentlint liabilitiesties thatrhat representpsent presentobnt obligationsaons arisingfrompg from pasteast eventsforws for whichtheh the fairvair valuecanbe can berelie reliablymely measured.TheG. The Groupalsp alsorecoo recognisesises indemnificationason assetstsets transferredbythd by thesele sellerattler at thehe sametme timeaime andfolnd followingthesg the samemeae measurementcrt criteriaaia astheis the itemttem thatihat issubs subjecttject toindo indemnificationfion fromtrom thehe acquiree,tree, takingintocog into consideration,whe, whereapre applicable,tle, theihe insolvencyrcy riskaisk andannd anyconty contractuallial limitationsonths on thee indemnifiedamount.indemnified amount. Thesecese criteriaarena are notappot applicabletolole to long-termdefim definedbened benefitobt obligations,sha, share-basedpsed paymenttent transactions,or, or deferred tax assets and liabilities. Theexcese excessbets betweenten theconhe considerationgin given,plu, plusthes theval valueasue assignedtonned to non-controllinging interests,an, andthevd the valueofe of netasset assetsacts acquiredared andlind liabilitiesaies assumed,isred, is recognisedasged as goodwill.Wl. Whereappe applicable,te, thedefhe defect,af, afterater assessingng theame amountoount ofconf considerationdeln delivered,tred, thevhe valuealle allocatedtonoted to non-controllinginng interestsants andthd theidee identificationanon andd valuation of the net assets acquired, is recognised in a separate item in the consolidated income statement. Thebuse businesscoess combinationhason has onlybeend been determinedpned provisionally,sothly, so theidee identifiablenble netaset assetshsets haveiave initiallybly beeneen recognised at their provisional values and adjustments made during the measurement period have been recognised as iftif theyhhey hadbead beenken knownatthn at theacqe acquisitiondion date.Cate. Comparativefiguve figuresfores forthepr the previousyeous yearaar arerestre restatedwhed whereapre applicable. InaIn anyeveny event,ant, adjustmentstopts to provisionalaal amountsonts onlyreflecy reflectinfot informationobton obtainedaned aboutfact factsants andcircd circumstancess thatexat existedatthd at theacqe acquisitiondion dateanate and,id, ifknof known,wwn, wouldhavead have affectedthd themeae measurementofthnt of theamoe amountsrecos recognisedsed at that date. For business combinations achieved in stages, the excess of the consideration given, plus the value assigned to non-controlling interests and the fair value of the previously held interest in the acquiree, over the net value of the assetsacqs acquiredandld and liabilitiesases assumed,ied, isrecos recognisedased asgoos goodwill.Anys. Any shortfall,af, afterater assessingthg thecone considerationn given, the value assigned to non-controlling interests and to the previously held interest, and after identifying and measuringthng thenetae net assetsacqs acquired,ired, isrecos recognisedised inprofin profitorlost or loss. TheGroe Grouprecup recognisestheds the differencebete betweenthen thefaie fairvar valueoftlue of thephe previouslyhely heldild interestintst in theache acquireearee andthnd thee carryingamog amountiunt inconn consolidatedprofied profitorlot or lossoriss or inothn othercoer comprehensiveinve income . 119Befesa Annual Report 2022 Statutory  financialstatements  Management report  ToBefesa’s  shareholders  Additional  information Consolidated  financialstatements 3.2 Subsidiaries Subsidiariesarees are entities,is, includingstng structuredenred entities,overw, over whichthch theGroe Group,eiup, eitherdir directlyorily or indirectly,exe, exerciseses control.Tl. TheComhe Companyconny controlsasus a subsidiarywhey whenitin it isexpos exposed,orha, or hasrigs rights,tova, to variableretue returnsfrns fromirom itsints involvementnt withtth thesuhe subsidiaryany andhastd has theahe abilitytoaffey to affectthct thoseretose returnsthns throughitgh itspowes powerovertr over theshe subsidiary.TheCy. The Companyany haspowes poweroverasr over a subsidiarywy whenihen ithat hasexiss existingsung substantiverive rightsthts thatghat giveiive ittht theabie abilitytody to directthert the relevantant activities.Th. TheCome Companyisexy is exposed,orhd, or hasras rights,tovts, to variableretle returnsfrons fromitsim its involvementwent withthh thesube subsidiarywy whenn its returns from its involvement have the potential to vary as a result of the subsidiary’s performance. Theince income,exp, expensesanes andcasd cashflowh flowsofsubs of subsidiariesareins are includedided inthn theconse consolidatedfind financialsial statementsfnts fromtrom thehe dateofacqte of acquisition,wh, whichiich istheds the dateonwate on whichthch theGroue Groupobtp obtainseffens effectiveconve controlofthes of the subsidiaries.Sub. Subsidiariesies are no longer consolidated once control ceases. Transactionsandbs and balanceswis withGth Groupsroup subsidiariesaies andunnd unrealisedgaid gainsons orlossr losseshaes havebeeve beenelin eliminatedoncond 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cone consolidatedfinted financialstal statementsorfins or financialsial statementsoftnts of theshe subsidiariesuses usedinted in thecohe consolidationproon processs have been prepared as of the same date and for the same period as those of the Company. 3.3 Joint arrangements Jointaint arrangementsants arethre thoseinwose in whichthch thereisacere is a contractualagal agreementtosent to sharethecre the controloverol overanecr an economicmic activity,insuy, in suchawach a waythay thatdect decisionsaons abouttheret the relevantaant activitiesreqes requiretuire theuhe unanimouscous consentoftnt of theGrohe Groupanup andd thereme remainingving venturersorops or operators.Th. Theexie existenceofjoce of jointcint controlisarol is assessedcssed consideringthng thedefie definitionofcontn of controlrol over subsidiaries. The Group has applied IFRS 11 to all joint arrangements. Investments in joint arrangements under IFRS 11 are classifiedasjod as jointoint operationsoons orjoir jointvennt ventures,des, dependingontng on thecohe contractualrigl rightsahts andobnd obligationsoions ofeacf eachinvesh investor. The Group has assessed the nature of its joint arrangements and has determined that they are joint operations in allcal cases. Jointoint operationsaons arisewhee wheninvn investorshars haverigve rightsthts totheao the assetsans andobld obligationswins withreth respecttothct to theliae liabilitiesofaies of ann arrangement. The Group recognises the assets, including its share of any assets held jointly, the liabilities, including itsshs shareofanare of anyliay liabilitiesiies incurredjrred jointlywiy withthth theothe otheroper operators,th, therevene revenuefue fromthrom thesae saleofitle of itsshs shareoftare of theouhe outputt arising from the joint operation, its share of the revenue from the sale of the output by the joint operation and the expenses,inc, includingiing itsshts shareofaare of anyexny expensesises incurredjrred jointly,i, inthecn the consolidatedfinad financialsal statements. TheGroe Group’sacqup’s acquisitionofaion of aninn initialaal andsund subsequentshnt shareinajare in a jointopet operationwion whichconh constitutesabutes a businessiess iss recognisedfolld followingthng thesae samecrme criteriauria usedfosed forbusr businesscoss combinations,atts, at thephe percentageofowge of ownershipofeip of eachach individualassl assetanet andliad liability.Howevy. However,i, insun subsequentacqt acquisitionsofadds of additionalshal sharesiares inajoin a jointopnt operation,tn, theprehe previousus share in each asset and liability is not subject to revaluation, to the extent that the Group retains joint control. InpIn purchasesbyths by theGroue Groupfrop fromajoim a jointopent operation,th, theresue resultingging gainsans andlossd lossesareoes are onlyrecoy recognisedwsed whenihen itreset resellslls theacqe acquiredasred assetstsets toathio a thirdpard party.Howy. However,wheever, whensucn suchtrh transactionsprovs provideeide evidenceofaredce of a reductioniion innetn 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fiated financialstl statementsmeas meanstns thatahat assets,ls, liabilities,ies, incomeanme andexpd expensesat31Decees at 31 December2022arer 2022 are increased by approximately €23,635 thousand, €4,240 thousand, €29,369 thousand and €17,234 thousand, respectively (approximately €22,118 thousand, €5,510 thousand, €24,669 thousand and €14,944 thousand, respectively,at31Deceely, at 31 December2021r 2021),bef), beforeconore consolidationadn adjustmentsants andend eliminations . Notes to the consolidated financial statements as at 31 December 2022 (thousands of euros) continued 120 Befesa Annual Report 2022 To Befesa’s shareholders 3.4 Non-controlling interests Non-controllinginteg interestsinsts in subsidiariesacies acquiredared asof1Jans of 1 January200y 2004arerec4 are recognisedonthd on theacqe acquisitiondion dateatate at thepere percentagepare participationiion inthn thefaie fairvalr valueofidue of identifiablenetae net assets.Nts. Non-controllinging interestsists insubn subsidiariess acquiredprred priortior totheto the transitiondatewn date wererecere recognisedatthd at theperce percentagepare participationiion inthen theireqir equityonthy on thedateoe date off firstconsfirst consolidation. Non-controlling interests are disclosed in consolidated equity separately from equity attributable to shareholders of theParee Parent.Non. Non-controllingiing interestsincos in consolidatedproated profitsffits forthor theyeae year(andir (and inconn consolidatedcomted comprehensiveincve incomeome for the year) are also presented separately in the consolidated statement of comprehensive income. 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wie withthth thepere percentageowne ownershipatyeap at yearendr end,wi, withoutcout consideringthg theposse possibleexercie exerciseorcse or conversionofon of potentialvotal votingrigg rightsahts andafnd afterdisr discountingtng theeffehe effectofdict of dividends,ads, agreedorned or not,oncot, on cumulativeprefeve preferenceshae sharesres classifiedineqd in equityaty accounts.Hs. However,G, Grouparoup andnond non-controllinginng interestsarects are calculatedtated takingiing intoacnto accountthnt thee possibleexeble exerciseorcise ofpotenf potentialvotil votingrng rightsants andothd otherdeer derivativefiive financialinal instrumentswhs which,insu, in substance,cuce, currentlyy giveacve accesstcess tothereo the returnsans associatedwid withthth theinte interestshets heldintld in theshe subsidiaries. The results and each component of other comprehensive income are allocated to equity attributable to the shareholders of the Parent and to non-controlling interests in proportion to their investment, although this implies a balance receivable from non-controlling interests. 3.5 Goodwill Thisheis headingiing inthecn the consolidatedfinad financialsal statementreflent reflectstcts thedhe differencebete betweenthn theprie pricepace paidtoacid to acquirecerre certainn 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excesy excessofths of theGroue Group’sintep’s interestirest inthn thenetfe net fairvair valueofthe of theidee identifiableable assets,ls, liabilitiesanes andcontd contingentliat liabilitiesofes of the company acquired over the acquisition cost of the investment is allocated to income on the date of acquisition. Goodwillisrecl is recognisedaised asanas an assetasset andattnd at theenhe endofead of eachrepch reportingpeng perioditised it is estimatedwhed whetheraner anyimpy impairmentnt hasreds reducediuced itsvts valuetoanae to an amountlownt lowerther thanian itscats carryingamog amount.Ifso,i. If so, impairmentlosnt lossesases arerecore recognisedfosed forther the goodwill,whl, whichmich mustnust notberevot be reversedinased in a subsequentpeent period. Goodwillisall is allocatedtoCated to CGUsfortGUs for thephe purposeofipose of impairmenttestt testing.Th. Thegooe goodwilliill isalls allocatedtotted to theCGUhe CGUsths thatareat are expectedtobend to benefitfefit fromtrom thebuhe businesscess combinationinwon in whichthegh the goodwillarll arises. OndOn disposalofasul of a subsidiaryorasy or associate,tate, theathe attributableamle amountofgoodt of goodwillill isincls includedinted in thedehe determinationofton of thehe 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resre on researchacth activitiesiies isrecogs recognisedasased as anexpn expenseinthe in theyeae yearinwr in whichihich itisit is incurred.Inc. In conformitywity withh IFRS,thS, theGroe Groupclup classifiesasins as internallygly generatedintd intangibleasle assetsthees the expensesincs incurredintd in thedehe developmentofnt of projectsthts thatmeat meetthet thefolle followingcong conditions: ■ Theexpee expenditureisspre is specificallyidey identifiedandcd and controlledbyproed by project,ant, anditd itsdiss distributionovertn over timeisclee is clearlydly defined. ■ TheDiree Directorshavews have well-foundedread reasonsfosons forbelr believingthag thatthet therearenre are nodouo doubtsabts astothets to the technicalsual successortss or thehe economic and commercial viability of the projects, on the basis of their level of completion and order book. ■ TheGroue Grouphap hasthens the necessarytecy technical,fin, financialaial andotnd otherreher resourcestocrces to completetlete thedehe developmentwornt work . 121Befesa Annual Report 2022 Statutory  financialstatements  Management report  ToBefesa’s  shareholders  Additional  information Consolidated  financialstatements 3.6 Other intangible assets continued ■ Thedevee developmentcostot cost oftheaf the asset,w, whichincl includes,wes, whereappre appropriate,the, thepere personnelexnel expensesoftnses of theGhe Group’ss personnelworl workingontng on theprohe projects,cts, canban bemeae measuredrelid reliably. Internally generated intangible assets are amortised on a straight-line basis over the period that they are expected to generateiate income,we, whichisgeh is generallyfivy fiveyeare years.Ts. Theteche technical,ecl, economicamic andfinnd financialpotenl potentialofeal of eachproch projectiject iss reviewedateaed at eachyech year-end.Ifapro. If a projectisprot is progressingnegg negativelyoriy or ifthef therearenre are nofinao financingpng planstoasss to assureeffure 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tse in theyeahe yearinwr in whichitisih it is incurred. TheGroe Grouphaup hasrecos recognisedtsed thewohe workperk performedomed onitsin its intangibleasse assetsiets inrelan relationtothn to thedevee developmentofnewt of new technologiesfoies forwhr whichtich thereihere isahigs a highprobh probabilityoftechy of technicalaal andecond economicsuic successasadss as a decreaseiase inthein the incomeme statementheat headingswgs whichreflech reflecttht thecare carryingamng amountofcant of capitalisedexped expensesforanas for an amountof€1nt of €1,016t6 thousandnd (31Dece(31 December202r 2021:€1: €1,039th039 thousand).Td). Theamhe amountscts capitaliseddud duringthg theyearme year mainlyrenly relatetoproje to projectsaims aimedated 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tof theGrohe Groupaup arerecogre recognisedwsed withacith a chargeto“Oge to “Otheriner intangibleable assets”ints” in thecohe consolidatedfiated financialstal statement.. Computersyter systemmaim maintenancecosce costsarts arerecoge recognisedwsed withacith a chargetotrge to theconhe consolidatedinted incomeste statementfoent forther the yearinwr in whichtheh theyareiny are incurred. Computersoter softwareisaare is amortisedonastd on a straight-linebase basisoveis overtheur the usefulliul lifeofthfe of theasse assets(fiets (fiveyeve years). Concessions, patents, licences and similar items IngIn general,thl, theamoe amountsrecos recognisedbised bytheGy the Groupinconp in connectionwin withcoth concessions,pate, patents,li, licencesances andsid similaritear itemsms relatetotate to thecoshe costint incurredinared in acquiringting them,wh, whichiich isamos amortisedonased on a straight-linebase basisoveis overtheer the estimatedused usefullful lifeife 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usefe usefullul life.Life. Licenceswits withinh indefiniteunite usefulliul lifearetefe are testedfsted forimor impairmentatlent at leastant annually(Note8y (Note 8).Th). Theusefe usefulul life,inafe, in accordancewnce withIith IAS38AS 38,isco, is consideredinred indefinitednite duetotue to thefahe facttct thatthat thoselhose licencesrepres representtheat the amounttnt thathat anyprody producerwilr willingtoenng to enterthter themae marketarket atanymt any momentwount wouldhald havetopayive to pay inorden ordertoobtr to obtainthenn the neededed 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impd impairmentlosnt losses.How. However,p, priortothedr to the dateoftate of transitiontoIFRSn to IFRS,theG, the Grouprevap revaluedcerd certainitemn itemsofs of property,play, plantannt andequd equipmentaspet as permittedbytted by theaphe applicablelble legislation.Inan. In accordancewce withIith IFRS,tFRS, theGhe Grouproup considered the amount of the restatements as part of the cost of the assets. Costsofexts of expansion,mon, modernisationorimn or improvements,lts, leadingtoincg to increasedproed productivity,cay, capacityoreffiy or efficiencyortncy or toao a lengthening of the useful lives of the assets are capitalised. Repairs that do not lead to a lengthening of the useful life oftof theashe assetsasets andmnd maintenanceence expensesarechs are chargedtothed to thecone consolidatedinted incomestae statementfoent fortheyer the yeariar inwhin whichch they are incurred. In-housewore workonnok on non-currentarent assetsisrets is recognisedataced at accumulatedcoated cost(exst (externalcostl costsplus plusins in-housecouse costs,s, determinedonted on thebahe basisofisis of in-housewase warehousematee materialscals consumptionaion andmnd manufacturingcosg costsalts allocateduated usingg hourlyably absorptionraton rates,ses, similartotlar to thoseusese usedforind for inventoryvaly valuation).In2022,€1n). In 2022, €1,255th,255 thousandwasred was recognisedined in Notes to the consolidated financial statements as at 31 December 2022 (thousands of euros) continued 122 Befesa Annual Report 2022 To Befesa’s shareholders thisreis regard(20gard (2021:€: €3,467t3,467 thousand)(nd) (Note22.Note 22.3).At33). At 31De1 December2022,tber 2022, thewohe workprk performedbytmed by theGhe Grouporoup onitn itss property, plant and equipment is recognised under “Other operating income” in the consolidated income statement. Thisais amountmant mainlyrely relatestowates to workscas carriedoued outinXut in Xuchang,Chin China,ia, inthecn the constructionoftion of thenhe newplew plantofBant of Befesaa ZincEnnc EnvironmentalProteal ProtectionTon Technology(Hey (Henan)Co,Ltdn) Co, Ltd.(202. (2021:w: workscas carriedouied outinCht in Chinaincoa in connectionwion withtth thehe constructionofthon of thenewpe new plantsits inChan Changzhou(Jhou (Jiangsuprovu province)andXue) and Xuchang(Hng (Henanprovan province)ance) andintd in thesuhe subsidiaryy BefesaSfesa SalzschlackeGmcke GmbHincbH in connectionwion withthh theclose closingofsing of storage)(ge) (Note9).Note 9). The Group depreciates property, plant and equipment using the straight-line method (land is not subject to depreciation),dis, distributingthng thecostoe cost oftheaf the assetsoverts overthefo the followingyeag yearsofesrs of estimatedusefd usefullul life: Average years of estimated useful life Buildings 16 – 50 Plant and machinery 10 – 35 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stal statementinnt includestdes thephe provisionsras raisedfised forsucor suchcosh costs(Nts (Note1ote 18). Assets’resis’ residualvaal valuesandus and usefulliul livesaves arerevire reviewed,and, andadjd adjustedasated as appropriate,aiate, ateact eachconh consolidatedfined financialial statement date. Gainsandls and lossesondis on disposalsareds are determinedbycoed by comparingtng theprohe proceedswis withtth thecahe carryingamog amountoftunt of theihe itemsstems sold. Anasse asset’sct’s carryingamg amountiswrt is writtendten downiown immediatelytoity to itsrecovs recoverableable amountiftnt if theahe asset’sca’s carryingamog amountiunt iss greater than its estimated recoverable amount (Note 9). 3.8 Leases (i))  Identificationofaleaon of a lease AtinAt inceptionofacontn of a contract,tct, theGhe Grouparoup assesseswhes whetheritcor it containsaleas a lease.Acse. A contractiract isorcos or containsaleas a leaseifise if itt conveystnveys therhe righttocont to controlttrol theuhe useofanise of an identifiedased assetfoset foraperr a periodoftiod of timeinexche in exchangeforacoe for a consideration.. Thepere periodoiod oftimf timedue duringwhg whichtich theGrohe Groupuup usesanases an assetinct includescoes consecutiveaive andnond non-consecutivepeve periodsoftids 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od as an operatinglng leaseaease applyingIing IAS1AS 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datet date.Th. TheGroue Groupdip discountstnts thelhe leasepease paymentsusts usingting theahe appropriateinate incrementalbal borrowingratng rate,e, unless the interest rate implicit in the lease can be reliably determined. In this regard, for initial measurement of the leaselase liability,t, theihe incrementalborl borrowingrang ratehasbte has beenueen used,wh, whichreich representsthers the rateofiate of interestthst thataleat a lesseewoule wouldd havetopaytobve to pay to borrowoverasw over a similartelar term,an, andwitd withasih a similarsear security,t, thefuhe fundsnnds necessarytoobty to obtainanasn an assetofaset of a similarvar valuetothere to the right-of-useasse assetinasiet in a similarelar economicenvc environment(2%–5%)nt (2% – 5%) . 123Befesa Annual Report 2022 Statutory  financialstatements  Management report  ToBefesa’s  shareholders  Additional  information Consolidated  financialstatements 3.8 Leases continued Pendingleag leasepase paymentscomps comprisefixese fixedpayd payments,les, lessanyles any leaseiase incentivesreves receivable,var, variablelele leasepase paymentss 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 purchase option if the lessee is reasonably certain to exercise that option, and payments of penalties for terminating the lease, if the leasetease termreflrm reflectsths thelese lesseeexesee exercisingang anoptin optiontoteon to terminatethele 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tIf thelehe leasetase transfersowrs ownershipoftip of theunhe underlyingassg assettothet to theGroue Groupbythp by theene endoftheld of the leasetere termorthm or therie right-of-useuse assetiset includestheps the priceofthe of thepurce purchaseoptie option,thel, the lesseeshee shalldall depreciatethte therige right-of-useasse assetfolet followingting thehe depreciation criteria for property, plant and equipment from the commencement date of the lease to the end of the usefullifeol life oftheuf the underlyingasng asset.Ot. Otherwise,th, thelese lesseeshsee shalldepl depreciatethate therie right-of-useause assetfsset fromtrom thehe 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Groe Groupmeup measurestres thelehe leaselase liabilitybyincy by increasingting theche carryingamng amounttoreflet to reflectintct interestontht on theleae leaselise liability,y, reducingtng thecahe carryingaing amounttoreflnt to reflecttect thelhe leasepease paymentsmats madeande andremd remeasuringtng thecahe carryingamog amounttoreunt to reflectanyt any reassessmentoent orlear leasemose modificationsortorefls or to reflectreect revisedined in-substancefice fixedlexed leasepaase payments. The Group recognises remeasurements of the lease liability as an adjustment to the right-of-use asset, until this is reducedtozeroad to zero andthnd thenien inprofin profitorlost 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glue guaranteeoractee or a changeige inaninn an indexorardex or a rateusate usedtodeed to determinethoe thosepayse payments,inc, includingachag a changetorenge to reflectt changesinmes in marketrenket rentalratel ratesfolls followingamang a marketrerket rentrevnt review. 3.99  Non-financialassl assetimet impairment AteaAt eachrepch reportingdang date,tte, theGrohe Grouprevup reviewsnos non-currentarent assetstodets to determinewhee whetherthr thereisaere is anyinny indicationtion thatthat theyhey 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flosh flowstws thatahat areindre independentfent fromotrom otheraher assets,ts, theGhe Grouperoup estimatesths therecovee recoverableale amountofthnt of thecae cash- generatinguing unittownit to whichthch theasse assetbelet belongs. InaIn addition,aon, ateachbt each balancefinae financialstal statementdatet date,th, theposse possibleime impairmentofgnt of goodwillandol and ofanyif any intangiblee assetsthas thathavent have notyetcoot yet comeinme intoopeto operationoion orwhr whichhich haveaniave an indefiniteusete usefullful lifeiife isanas analysed. Therecoe recoverableable amountistnt is thehhe higheroffer of fairvair value,lee, lesscosss coststosets to sellall andvand valueilue inusen use,whi, whichistch is takentobethn to be thepree present valueolue oftheef the estimatedfued futurecase cashflowh flows.Inos. In ordertocar to calculatevate valueinuse in use,the, theasse assumptionsusns usedined includedide discountrunt rates,, growthrath ratesantes andforecd forecastchat changesinses in sellingprng pricesandcs and costs.Ts. TheDihe Directorsesrs estimatepoate post-taxdisx discountrant rates,wtes, whichch reflecttect thetihe timevme valueofmone of moneyaney andtherd the risksspks specifictothfic to theCGU.Te CGU. Theghe growthrth ratesaates andthnd thechae changesinses in sellingprng pricess 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,wit, withachh a chargeto“ to “Amortisation/depreciation,imp, impairmentannt andprovd provisions”ions” inthn thecone consolidatedind incomecome statement.Imt. Impairmentlent lossesreces recognisedfoised foranar an assetisset inprn prioryeior yearsaars arerevere reversed,wi, withacrth a credittotheat to the aforementionedned headingwng whenthen thereisachre is a changeinte in theesthe estimatescates concerningting therehe recoverableamle amountoftheat of the asset,it, increasingthng the  Notes to the consolidated financial statements as at 31 December 2022 (thousands of euros) continued 124 Befesa Annual Report 2022 To Befesa’s shareholders carrying amount of the asset, but so that the increased carrying amount does not exceed the carrying amount that wouldhld havebeave beendeten determinedhad hadnoimd no impairmentlent lossbeoss beenreen recognised,exced, exceptintpt in theche caseoftase of theimhe impairmentofent of goodwill,whl, whichcich cannotberenot be reversed. 3.10 Financial instruments (i))  Recognitionaion andclnd classificationoffinan of financialinal instruments Financialinl instrumentsarecls are classifiedonind on initialreial recognitionasafinn as a financialaial asset,afit, a financiallial liabilityoray or aneqn equityy instrumentient inaccn accordancewnce withthh theecoe economicsuic substanceofthe of theconte contractualaral arrangementandtt and thedhe definitionsoons ofaf a financialassel asset,afit, a financiallil liabilityay andanend an equityinsy instrumentient inIAS32“n IAS 32 “FinancialIial Instruments:Pnts: Presentation”. FormFor measurementpurt purposes,tes, theGhe Groupcroup classifiesfines financialinsl instrumentsints inthn thefolle followingcang categoriesoffines of financialaial assetsts andfind financiallial liabilitiesacces accordingtotng to thebuhe businessmess modelandtl and theche characteristicsoftcs of theconhe contractualcal cashflash flows. ■ Amortisedcosed cost:Ass: Assetstets thatahat arehelre heldforcod for collectionofcoon of contractualcual cashflowh flows,ws, wherethere thosecase cashflowh flowsrepres representt solelypayy paymentsofpnts of principalaal andinnd interest,at, aremeare measuredatamed at amortisedcsed cost.Inte. Interestirest incomefme fromthrom thesefiese financiall assetsisins is includedided infinan financeince incomeusme usingtheeg the effectiveiive interestrast ratemette method.An. Anygaiy gainorlon or lossarss arisingonng on derecognitionisreon is recogniseddird directlyintly in theihe incomestme statementaent andpnd presentedited inothen othergar gains/(losses)togets) togetherwir withth 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valr valuethue throughotgh othercher comprehensiveinve income(Fe (FVOCI):AVOCI): Assetstts thatahat arehelre heldforcod for collectionofcoon of contractualcual cashh flowsanws andforsed for sellingthng thefine financialaial assets,wts, wheretheare the assets’cts’ cashflash flowsreows representsoent solelypay paymentsonts ofprif principalapal andnd interest,at, aremeare measuredatFred at FVOCI.Move. Movementsintts in theche carryingamng amountarett are takentaken throughOugh OCI,excCI, exceptfoept forther the recognitionofion of impairmentgait gainsorlns or losses,ies, interestinst incomeandfoe and foreignexchn exchangegae gainsains andlond losseswsses whicharech are recognisedinthd in theince incomesome statement.Whe Whenthn thefinae financialasal assetiset isderes derecognised,ted, thecuhe cumulativegive gainoain orlosr losss previouslyrecy recognisediised inOCIin OCI isrecls reclassifiedfromed from equitytothy to theince incomesome statementannt andrecod recognisedised inothen othergar gains/ (losses).Intes). Interestinct incomefome fromtrom thesefihese financialasal assetsisets isins includedided infinan financeince incomeusme usingting theeffhe effectiveiive interestst method. Foreign exchange gains and losses are presented in other gains/(losses) and impairment expenses are presentedasaseted as a separatelrate lineiine itemitem inthecn the consolidatedincd incomesome statement.Tnt. Thiscates categorycy correspondswnds withthh thee hedging derivatives. ■ Fairvalr valuethue throughprogh profitorlfit or loss(oss (FVPL):APL): Assetsths thatdonat do notmeeot meetthect the criteriaforaa for amortisedcised costoost orFVOCr FVOCIareI are measuredatFred at FVPL.AgPL. A gainoain orlosr lossonades on a debtinvebt investmenttent thatissut is subsequentlymey measuredatFred at FVPLiVPL isrecos recognisedised inn theine incomescome statementannt andpresd presentednetwd net withinothin othergair gains/(losses)ises) inthn thepere periodiiod inwhin whichitach it arises.Thi. Thiscas categoryy includes the factoring and equity instruments. Thebuse businessmess modeliodel isdetes determinedbykeyGd by key Groupproup personnelanel andonond on onelevee levelreflel reflectstcts themahe mannerinwer in whichthch theyjoiey jointlyly managegroge groupsoffiups of financialasal assetstoreacs to reachaspeh a specificbcific businessobjss objective.TheG. The Group’sbusp’s businessmoss modelredel representss themae mannerinwr in whichitmah it managesiges itsfints financialassel assetstogts to generatecrate cashflash flows. TheGroe Groupinup initiallydly designatesafines a financiallial liabilityatFy at FVPLiVPL ifdoif doingsoeng so eliminatesorstes or significantlyreduy reducesaces ann inconsistencyinthy in themee measurementorrent or recognitiontion thatwoult wouldothd otherwisearise arise,ifme, if measurementoent oftheaf the assetsofs of liabilitiesorrecos or recognitionofton of thereshe resultsthes thereofwreof weremaere madeondde on differentbrent bases,oris, or ifagrof a groupoffinup of financiallial liabilitiesories or financialassel assetsants andfind financiallial liabilitiesismes is managed,and, andthed theirretir returnisevn is evaluated,bas, basedonfed on fairvair value,iue, inaccon accordancence withath aninven investmentstr strategyordoy or documentedrid riskmask managementsent strategy,antegy, andinfod informationonton on thisghis groupiroup isprovs providedd internally on the same basis to the Group‘s key management personnel. 125Befesa Annual Report 2022 Statutory  financialstatements  Management report  ToBefesa’s  shareholders  Additional  information Consolidated  financialstatements 3.10 Financial instruments continued TheGroe Groupclup classifiesths theremae remainingfing financiallial liabilities,excep, exceptfinat financialgual guaranteecone contracts,com, commitmentstoents to extendnd below-marketratelt rate loansandfis and financiallial liabilitiesresus resultingfng fromatrrom a transferoffisfer of financialasal assetstsets thatdonotqt do not qualifyfoy forr derecognitionoraon or arerecore recognisedused usingthecg the continuedined involvementapnt approach,asfin, as financiallial liabilitiesataes at amortisedcostd cost. (ii) Measurement AtinAt initialreial recognition,th, theGroue Groupmep measuresafinres a financialassel assetatitt at itsfais fairvar valueplue plus,int, in thecahe caseofafise of a financialassl assetnotatet not at FVPL,tr, transactioncion coststhas thataredt are directlyatly attributabletotle to theache acquisitionoion ofthefif the financialasal asset.T. Transactioncostn costsofs of financialassel assetscts carriedatFVd at FVPLareexPL are expensedinthd in thecone consolidatedstted statementofcomt of comprehensiveiive income.Fme. Financialal assetswits withemh embeddeddded derivativesarecves are consideredintred in theirenir entiretywhey whendeten determiningwng whetherther theircair cashflosh flowsarews 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cae cashflosh flowchaw characteristicsoftics of theashe asset. (iii) Impairment TheGroe Grouprecup recognisesanims an impairmentlent lossfooss forexper expectedccted creditlost lossesonses onfina financialasal assetsatams at amortisedcosed cost,FVOC, FVOCI,I, leasefiase financerecce receivables,cont, contractualasal assets,los, loancoan commitmentsandfis and financialgual guarantees. FortFor traderecde receivables,theG, the Groupappp appliesthess the simplifiedafied approachpach permitteduted underIFRr IFRS9whiS 9 whichreqch requiresthres thatat expected lifetime losses be recognised since the initial recognition of the receivable. (iv)v)  Derecognition,mod, modificationanon andextd extinguishmentoffinnt of financialaial assets Financialassl assetsaets aredere derecognisedwsed whenthen thecohe contractualrual rightstothts to theche cashflash flowsfows fromtrom thefinhe financialaial assetexpit expireorre or havebeeve beentrn transferredanred andtheGd the Grouphastp has transferredsubd substantiallyaly allthll therie risksasks andrewnd rewardsoards ofownf ownership. (v)(v)  Derecognitionaion andmodnd modificationsoffions of financiallial liabilities TheGroe Groupdeup derecognisesases allorpll or partofafint of a financiallial liabilitywy whenihen iteitt eitherdisr dischargestrges thelhe liabilitybypayy by payingting theche creditortor orior islegs legallyrely releasedfroed fromprm primaryrespy responsibilityfoy forthr theliae liability,ei, eitherbyaproer by a processoflawos of law orbythr by thecrede creditor. Theexche exchangeofdebe of debtinst instrumentsbnts betweentheGn the Groupandtp and theche counterpartyorsy or substantialmoal modificationsofins of initiallyly recognisedliad liabilitiesares areaccoe accountedforasad for as anexn extinguishmentoftht of theorie originalfial financiallial liabilityay andthnd therecoe recognitionofan of a newfinaw financiallal liability,p, providingtheig the instrumentshnts havesuave substantiallydiffey differenttermt terms. TheGroe Groupcoup considersths theterme termstobesus to be substantiallydiffy differentiftt if thedihe discountedpnted presentvant valueolue ofthecf the cashflash flowsuows underther thee newterw terms,ims, includingang anyfeespny fees paidnaid netofanet of anyfeesrey fees receivedaved anddind discountedusid usingthng theore originalenal effectiveiive interestrast rate,isate, is att least10%diast 10% differentfrnt fromthom thedise discountedpnted presentvalt valueoftue of therehe remainingcag cashflowsh flowsofths of theorie originalfinal financiallial liability. IftIf theexchhe exchangeisage is accountedfnted forasaor as anextn extinguishmentoent oftheof the originalfinal financiallial liability,an, anycosty costsorfes or feesines incurredarred aree recognised as part of the gain or loss on the extinguishment. If the exchange is not accounted for as an extinguishment,tnt, themhe modifiedflfied flowsaows aredisre discountedattnted at theohe originaleffecl effectiveinteve interestrate,at rate, andand anydiny differenceince inthen the previous carrying amount is recognised in the income statement. Any costs or fees incurred adjust the carrying amountoftht of thefinae financiallial liabilitiesandas and areamre amortisedused usingtheag the amortisedcostmd cost methodoveod overtherer the remainingteng termoftrm of thehe modifiedmodified liability. TheGroe Grouphaup hascons contractedrected reverseface factoringfng facilitieswies withvarh variousfins financialiial institutionstomons to managepage paymentstos to suppliers.Ts. TheGhe Grouparoup appliesties theabhe abovecrove criteriatodia to determinewhe whetheritser it shoulddeld derecognisethse theorie originaltnal tradepaye payablee andrecod recogniseanese a newliaw liabilitywiy withtth thefihe financialinsl institutions.Ts. Tradepade payablessets settleduned undertder themhe managementoffinat of financialal institutions are recognised under trade and other payables only if the Group has transferred management of the paymenttotnt to thefinhe financialiial institutionsbutres but retainspns primaryrey responsibilityforsey for settlingthng thedee debtwitbt withthh thetre tradecade 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 2022 (thousands of euros) continued 126 Befesa Annual Report 2022 To Befesa’s shareholders Factoring receivables Befesadfesa derecognisestras traderede receivablesfoles forthear the amounttunt transferredtofirred to financialinal institutions,prov, providingthng theface factortor assumesales allthl therise riskofink of insolvencyanddy and default(ult (non-recoursefrse factoring).At31Deceg). At 31 December2022anr 2022 and202d 2021,b, balanceses receivablenotdle not due,wue, whichwereech were extinguishedasaresd as a resultoftult of theafohe aforementionednoed non-recourseface factoringopng operations,, amounted to €58,407 thousand and €54,064 thousand, respectively. Unlike the above, Befesa does not derecognise amountsrects receivabletrle transferredtofired to financialinl institutionsforwns for whichitreth it retainssuns substantiallytheay the associatedrid risks. 3.11 Hedge accounting Derivativefiive financialinl instrumentsareins are initiallyrely recognisedusid usingtng thesahe samecrme criteriaasforfia as for financialasl assetsasets andfind financiall liabilities.Des. Derivativefiive financialinl instrumentsths thatdonoat do notquat qualifyforhey for hedgeadge accountingaing areclare classifiedafied andmnd measuredaured ass financialassel assetsants andfind financiallial liabilitiesatfes at fairvair valuethe throughprofih profitorlot or loss.Dss. Derivativefinave financialial instrumentswts whichhich qualify for hedge accounting are initially measured at fair value, plus any transaction costs that are directly attributabletothe to theacqe acquisition,oon, orlesr lessanyts any transactioncoson costsdts directlyatly attributabletotble to theishe issueosue ofthefif the financiall instruments.Ns. Nonetheless,ts, transactioncosn costsarests are subsequentlyrely recognisedinped in profitarofit andlosnd loss,is, inasmuchastch as theydohey do notfonot formprm partoftt of thechhe changesintes in theeffehe effectivevave valueolue ofthehf the hedge. At the inception of the hedge, the Group formally designates and documents the hedging relationships and the objectiveaive andsnd strategyforuny for undertakingting thehhe hedges.Tes. Thisdocus documentationincn includesides identificationoftion of thehhe hedginging instrument,th, thehede hedgeditemd item,th, thenate natureofture of therihe riskbesk beinghing hedgedaed andhowtnd how theGhe Groupmroup measuresheds hedgeeffege effectiveness. Hedgeadge accountingoing onlyappy applieswhes whenthn thereisaere is anecon economicrelic relationshipbetp betweenthn thehede hedgediged itematem andthnd thehede hedgingng instrument,th, theeffece effectofcredt of creditrit riskdisk doesdoes dominatetnate thevhe valuechae changesths thatresuat resultflt fromthrom thatecat economicremic relationship,ip, and the hedge ratio of the hedging relationship is the same as that resulting from the quantity of the hedged item thattat theGrohe Groupacup actuallyusey usestoheds to hedgethge thatqat quantityofhy of hedgedied item.Howev. However,t, thatdest designationshon shallnall notrefleot reflectanct an imbalancebetce betweenteen thewehe weightingsoftgs of thehehe hedgedited itemandtm and thehehe hedginging instrumentthat thatwout wouldcreld createheate hedgedge ineffectiveness,iss, irrespectiveofwve of whetherreher recognisedornod or not,tt, thatcohat couldresud resultinalt in anaccn accountingoutcg outcometome thatwhat wouldbed be inconsistentwtent withtheph the purposeofhpose of hedgeaccge accounting. ForcFor cashflowheh flow hedgesofforees of forecasttrt transactionsoracos or a componentthet thereof,threof, theGroe Groupasup assesseswses whetherther thesee transactionsarehns are highlyphly probableandie and ifthef theypresy presentaent anexpon exposuretovsure to variationsincas in cashflsh flowstows thatcohat couldultd ultimatelyy affectprofict profitorlt or lossfooss fortheyer the year. AtthAt theine inceptionoftion of thehhe hedgingreing relationship,anip, andonanod on an ongoingbing basis,ts, theGrohe Groupevup evaluateswates whethertherr the relationshipip meetstets theeffehe effectivenessqess qualifyingcrig criteriaproia prospectively.Th. TheGroe Groupasup assessestses theeffehe effectivenessateess at eachaach accountinging closeorwose or whenthen therearesre are significantcant changesaffects affectingtheeg the effectivenessreqs requirements. TheGroe Grouppeup performsaqus a qualitativeassve assessmentofeffect of effectiveness,pss, providingthg thatthat thefue fundamentalconl conditionsofths of thee instrument and the hedged item are the same. When the fundamental conditions are not exactly the same, the Groupuoup usesahyses a hypotheticaldel derivativewve withfith fundamentalcal conditionseions equivalenttotht to thehede hedgediged itemtoatem to assessans andd measuremeasure efficiency. The Group records changes in the time value of the options, hedging an item related to a transaction in other comprehensiveincve income.Ift. If thehehe hedgeditemred item resultsits intheren the recognitionofanonn of a non-financialassl assetorliet or liability,thty, theGroe Groupup includestdes theache accumulatedaated amountinotnt in othercomr comprehensiveiive incomewime withath anadjn adjustmenttothnt to thenone non-financialasl assetorset or liability.Fortty. For therehe remainingheng hedgingrelng relationships,tps, theamhe amountdefent deferredinotd in othercher comprehensiveinve incomeisrece is reclassifiedfied toproto profitorlfit or lossioss inthesn the samepere periodoiod orperr periodsinws in whichtheexh the expectedheted hedgedcad cashflowsh flowsaffes affectprofict profitorlot or loss.. Nonetheless,ift, if theGrohe Groupexup expectsthts thatpaat partoftht of theamoe amountwunt willnotberel not be recoveredinoed in oneormone or morefure futureperre periods,ts, thisihis iss immediatelyreely recognisedinped in profitorofit orlosr loss. However,ifthwever, if thehede hedgeige isintes interrupted,thd, theamoe amountdunt deferredired inothn othercoer comprehensiveincve incomeiome isrecls reclassifiedimed immediatelyly toproto profitorlfit or loss . 127Befesa Annual Report 2022 Statutory  financialstatements  Management report  ToBefesa’s  shareholders  Additional  information Consolidated  financialstatements 3.11 Hedge accounting continued Cashflosh flowhedgw 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aed to be aneffecn effectivehede hedgeinotge in othercomr comprehensiveiive income.Tme. Theihe ineffectiveporve portionaion andtnd thesphe specificfic componentofthegt of the gainorlosn or lossorcs or cashflash flowsoows onthehn the hedgingiing instrument,ent, excludingthemg the measurementoftht of thehede hedgege effectiveness,arere, are recognisedundd underfier financeince incomeorcoe or costs. Thesepe separatecomte componentofoent of othercomr comprehensiveisive incomeame associatedwitd withthh thehede hedgediged itemitem isadjs adjustedtothed to thelese lesserser of the cumulative gain or loss on the hedging instrument from inception of the hedge and the cumulative change in fairvair valueorpree or presentvsent valueofthe of theexpe expectedfutd futurecure cashflash flowsoows onthehn the hedgedied itemfrotem fromincm inceptionoftion of thehhe hedge.e. However,ifthwever, if theGroe Groupexup expectsths thatalat allorapol or a portionofalosn of a lossrecogs recognisedinosed in othercomr comprehensiveincoe incomewme willnill notbeot be recoveredinond in oneormoe or morefure futurepture periods,itre, it reclassifiesifies intofinnto financeince incomeocome orfinr financeexpee expensestheas the amounttnt thatihat iss not expected to be recovered. IfahIf a hedgeofaforee of a forecasttrt transactionsion subsequentlyrely resultsintts in therehe recognitionofafiion of a financialasal assetorafiset or a financiallial liability,y, thease associatedgated gainsorlos or lossesthas thatwereret were recognisedinoted in othercomr comprehensiveiive incomearereme are reclassifiedtfied toprofitoo profit orlosr losss intin theshe samepame periodorpiod or periodsdiods duringwing whichthch theasse assetacqet acquiredorlred or liabilityassy assumedaffecd affectsprots profitorlfit or lossaoss andunnd underther the same caption of the consolidated income statement . 3.12 Cash and cash equivalents Thisiis itemintem includescdes cashonhah on hand,cnd, currentbrent bankaank accountsands and,wh, whereapere applicable,dep, depositsants andreverd reverserepse repurchasehase agreementsths thatmeat meetalet allofthefl of the followingreqng requirements: ■ They may be converted into cash. ■ They have a maturity of three months or less on the date of acquisition. ■ Theyareney are notsubot subjecttoasigt to a significantrint riskofchsk of changesinves in value. ■ They form part of the Company’s usual cash management policy. Bankovnk overdraftsats arerecore recognisedised inthecn the consolidatedfinad financialsal statementascut as currentbont borrowings. 3.13 Inventories “Inventories”inth” in thecone consolidatedfinted financialsial statementinnt includestdes theahe assetsths thatthat theGroue Group: ■ holdsfods forsalr saleinte in theordhe ordinarycouy courseorse ofitsbf its business; ■ hasinths in theproce processofpess of production,con, constructionoion ordever developmentforsut for suchsach sale;orle; or ■ expects to consume in the production process or in the provision of services. Rawmatew materialsaals andgond goodshods heldfoeld forresar resaleale aremeare measuredatthd at thelowe lowerofFIer of FIFOcostaFO cost andmnd market.Aket. Ancillaryproy products,ts, consumablesales andsnd spareppare partsats aremere measuredattred at thelohe loweroftwer of theprhe pricepice perter thelahe lastinst invoiceandme and marketvaket value,whi, whichch doesnotdes not differsigr significantlyfroy fromFIFOcm FIFO cost. Work-in-progressandfis and finishedgoodd goodsarems are measuredaured atthelt the lowerofmarr of marketvket valueandae and averageproge productioncosn cost.t. Averagepage productioncoon costiscst is calculatedastted as theshe specificcofic costofthst of thesue suppliesaies andsend servicesples plusthus theape applicablepole portionofn of thedie directarect andinnd indirectcosct costoflat of labourandgr and generalmanl manufacturingexng expenses.Ot. Otherwher warehousemase materialsaremes are measuredred attat thelohe lowerofavwer of averageacge acquisitioncion costaost andmand marketvrket value. Obsolete,deete, defectiveoive orslowr slow-movingmang materialshavebs have beenreeen reducedtotced to theirnetrer net realisablevble value . Notes to the consolidated financial statements as at 31 December 2022 (thousands of euros) continued 128 Befesa Annual Report 2022 To Befesa’s shareholders 3.14 Share capital Ordinaryshy sharesarecls are classifiedaseqd as equity. Incrementalcal costsdires directlyaty attributabletotheie to the issueofnewse of new sharesorores or optionsans arepresere presentedineqd in equityay asadeds 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thd therelae relatedinted incometae taxeffecx effects,its, isincs includedied inequn equityaty attributabletotheCe to the Company’seq’s equityoy owners. 3.15 Provisions, contingent liabilities and contingent assets IntIn thephe preparationoftion of thecohe consolidatedfiated financialstal statements,tts, thePahe Parent’sDi’s Directorsdrs drewadirew a distinctionbion between: ■ Provisions:cons: creditbat balancescces coveringping presentoblnt obligationsattons at theche consolidatedfiated financialstal statementdateat date arisingfromg from pastevest eventstnts thatchat couldgid giverive risetoalosse to a lossforts for thecohe companies,ws, whichareceh are certainastotn as to theirnatr naturebure butunut uncertainasn as to their amount and/or timing. ■ Contingentlint liabilities:poss: possibleoble obligationsaons arisingfing fromprom pastevast events,ts, theexihe existenceofwce of whichwilh willbecol be confirmedonld onlyy bytby theocche occurrenceornoe or non-occurrenceofonce of oneormne or morefore futureevere eventsnnts notwhoot whollywiy withinthn theconte controloftrol of thehe consolidatedcoated companiesanes andwhid whichdonch do notmeot meetthet thereque requirementsforres for recognitionaion asprovs provisions. ■ Contingentasnt assets:poss: possiblease assetstsets thatahat arisefrose frompasm pastevent events,tts, theexhe existenceofwhe of whichwich willbill beconfie confirmedoned onlybyly by theocce occurrenceornone or non-occurrenceofonce of oneormne or morefore futureevenre eventsnots notwhot whollywity withinthecn the controloftrol of theenhe entities. TheGroe Grouprecup recognisesprovis provisionsfortns for theehe estimatedamod amountrunt requiredtosired to suitablymly meetieet itslits liability,why, whetheritber it belege legaloral or constructive,prove, probableoble orcerr certain,ar, arisingfrong fromconm contingencies,ls, litigationiion inprocn processoess oroblr obligations,whi, whicharch ariseaise asaresus a resultlt ofpaof pastevest events,forw, for whichitismh it is morepore probabletble thannotthn not thatanoat an outflowofresow of resourceswurces willbereql be required,ped, providedtded thatihat itist is possibletomble to makeareaake a reasonableestle estimateoftate of theamhe amountinqut in question.Prov. Provisionsaons arerecore recognisedwsed whentheln the liabilityory or obligationaron ariseswis withachth a chargetothere to the relevanthant headinginthg in thecone consolidatedinted incomestae statement,bas, basedonted on thenahe natureofe of theoble obligation,foon, forthepr the presentvant valueolue ofthepf the provisionwhen whenthn theeffectoe effect ofdisf discountingthng theoble obligationismn is material. Provisions for pensions and similar obligations SeveralGroul Groupcomp companieshavecs have certaindein definedbend benefitoefit obligationswis withtth theirempr employeestosues to supplementsont sociall securityrety retirementpent pensions.Ts. Theseoble obligationshans hadbeed beenexn externalisedaised at3t 31D1 December2022anr 2022 and202d 2021.Su. Subsidiaries’s’ obligations as pension plan promoters are established in the contribution of a percentage of employees’ pensionablesble salaries.The. Thesecomse commitmentsarenotss are not significantonaGrot on a Groupscup scale. Dismantling, restoration and similar provisions InaIn additiontothon to theabove above,“Le, “Long-termprovm provisions”inth” in theacce accompanyingconsg consolidatedfind financialsial statementalnt alsoinso include,de, whereaere applicable,the, theeste estimatedated amountsrents requiredtoclred to closeceose certainfain facilities(Nies (Note1ote 18),andt), and theehe estimatedamd amountss requiredtosetred to settleanle anyliay liabilitythy thatmiat mightaght arisefrose fromongm ongoinglitg litigationanon andothed othersigr significantobnt obligations,wh, whenien itist is consideredmorepd more probabletble thannottn not thatthat theseoble obligationswins willhll havetobemave to be met,wet, whileanle anyconty contingentliat liabilitieses (possibleoble obligationstns thatahat arisefrompe from pasteast eventswhs whoseexose existencewnce willbill becone confirmedomed onlybnly bytheoy the occurrenceorce or non-occurrenceonce ofoneof one ormorefr more futureevere eventsnnts notwhot whollywiy withinthn theconte controlofBrol of Befesa)arena) are notrecoot recognisedised inthen the consolidatedfiated financialstl statements,bus, butrat ratheraredr are disclosed,asre, as requiredbyIred by IAS37(seeNAS 37 (see Note22).ote 22). Share-based payments Thefae fairvair valueofolue of optionsgons grantedunted undershar share-basedcosed compensationplon plansians isrecos recognisedased asanems an employeebeyee benefitsts expensewise withtth thecohe correspondingincg increaseinloe in long-termliam liabilities . 129Befesa Annual Report 2022 Statutory  financialstatements  Management report  ToBefesa’s  shareholders  Additional  information Consolidated  financialstatements 3.15 Provisions, contingent liabilities and contingent assets continued 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aty attheet the endofend of eachreach reportingping period,wod, withanych any changesiges infan fairvair valuerelue recognisedinted in thecohe consolidatediated incomeme 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wie withthth thevese vestingcong conditionsofths of thefaie fairvalr valueoftue of thepahe paymentoent onthegn the grantdatet date,an, andthered the residualaual amountunt accruedisreed is recognisedasfied as financeince incomeorexe or expense. 3.16 Revenue recognition a) Sale of goods SalesofWOXles of WOX,gre, greenzien zinc(Snc (SpecialHal HighGigh Grade,ale, alsokso knownasSHGn as SHG)ands) and secondaryaluy aluminiumarerem are recognisedwhd whenen controlofthl of theprode productsistrs is transferredtotred to thecuhe customers,ma, mainlymay manufacturingcing companies,whe, whenthn thecuse customerhasr has fulldll discretionovertn over theprohe productsants andthd thereisnere is nounfo unfulfilledobed obligationton thatcohat couldauld affecttffect theclhe client’sacs acceptanceoftce of thehe products.Del. Deliveryoccy occursdurs dependingoing onthesn the specificaific agreementswnts withcusth customers(irs (incoterm),ther), the risksofks of obsolescence and loss have been transferred to the customers, and the Group has evidence that all criteria for acceptancehavce havebeee beensatn satisfied. Revenueisrecoe is recognisedwised whenthegn the goodsaredes are deliveredasthd as thisistis is thepohe pointiint intin timethme thattat theconhe considerationison 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cth customersdonos do notcontt containasign a significantfinnt financingcing componentannt andGroud Groupsap saleshles havenovave no variablecole component. NocNo criticaljual judgementsints inrecon recognisingreveng revenueaue areidere identified. In relation to the revenue recognition of sales, the Group considers that under IFRS 15 there is only one kind of contractwact withcush customers.Thea. The assessmentient issups supportedbythefd by the facttact thatthemt the mainsain salesofthes of theGroe Group’sproup’s productshats haveve onlyoly onepene performanceoble obligation:den: deliveryofWOX,gy of WOX, greenzinn zinc“Sc “SHG”oHG” ordelr deliveryofsecy of secondaryaly 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pere performanceoble obligationsfortns for thists typeofsype of salereflee reflectthct thedele deliveryofdiy of distinctgnct goodsdoods definedineed in eachcach contractandt 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ten thetrhe transferosfer ofcontf controlofacurol of a customersmer serviceocce occurs.Cos. Controltrl transfercfer canoccan occuratasur at a specifictific timeoroverte or over time. Thepere performanceoble obligationsfortns for thists typeofsype of salecore correspondtotond to thecohe collectionofwaon of waste,tste, thecohe collectionofton of thesahe saltlt slagsaags andSPLnd SPLsans andthedd the deliveryofthedy of the definedproed productineat in eachtecch technologycony contract.TheC. The Companycany considerstrs thathat thepere performanceoble obligationreln relatedtotated to thisthis typeofsepe of serviceissce is satisfiedataspd at a specificpoific pointintnt in timeexceptfe except fortechor technologyy contractsact salesths thatthat thepere performanceonce obligationissan is satisfiedovefied overtir time. The price of each service is established in each separate contract. Each contract has a unique performance obligationwon whichmhich meansthns thattat theprhe priceiice isests estimatedonated on aninn individualcual contractbast basis. AcoA contractiact isnotcos not consideredtocond to containasign a significantfinnt financingcomg componentwnt whenthen thepehe periodbetod betweenwen whenthen thehe customer’scom’s committedserd serviceiice istras transferredaned andwhed whenthn thecuse customerpayr paysforths for thatseat serviceisone is oneyeae yearorler or less. There are no incremental costs for any of this type of rendering of services to secure the contract . Notes to the consolidated financial statements as at 31 December 2022 (thousands of euros) continued 130 Befesa Annual Report 2022 To Befesa’s shareholders 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die differenttnt typeofsere of servicesprovs providedbyBefed by Befesaarsa 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, returns 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tis typeofsape of salecole correspondtothd to thecole collectionoion ofwasf wasteasdete as definedinead in eachcoch contractaact andthnd thepre priceoftice of thesehe serviceisce 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metd metalstotals to theshe stainless-steelproel producers.Mos. Mostoftht of thesere servicesofths of thistis typearewe are withrith returnofrecrn of recoveredd metals. If there are no returns, the service is the same as in the previous point (collecting). The performance obligationsfoons forthr thistis typeofsae of salecorle correspondtowasd to wastecolte collection.Tn. TheComhe Companyinvny invoicescuss customersatolrs 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iich itrecet receivesfroms fromcust customersforasrs for a servicefeeoce fee orger generatesdates duringing itsowts ownprodn productionofsion of secondaryaluy aluminium.Im. Inn 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.Trope. Theshe secondaryaluy aluminiumprodm productionmion marketprodket producessas saltsllt slags,wh, whichaich arecatere categorisedasahd as a hazardousus wasteinEste in Europeandote and othermar markets. Thepere performanceoble obligationsfortns for thists typeofsype of salereflee reflectthct thecole collectionoion ofthesf the saltslat slagsangs andSPLsad SPLs andtnd thetrhe treatmentt pricepice pertoner tonneine isafixedps a fixed priceinde indicatediated ineacn eachconth contract,bt, basedonthd on thetonne tonnesreces receivedduved duringthng theyeae year. Technology division TheSece SecondaryAy Aluminiumsum subsegmenthnt hasasmas a smallTall Technologydigy divisionwhn whichdich designs,con, constructs,as, assemblesanes andd starts up the facilities so they are ready for use in the aluminium, zinc and lead cast houses. Thepere performanceoble obligationfortn for thisthis typeofspe of salereale reflectsths thedele deliveryofthy of thedefie definedpned productinect in eachcoach contract,w, withith eachcoch contractcoact containingaping a purchaseoase orderwitr withalh allofthesl of the specificationsoftheps of the projectanct andafixedpd a fixed priceforice for it. Note1Note 13tot3 to thefinhe financialstal statementsfnts for2022reflor 2022 reflectsabreas a breakdownof“Con of “Contractaact assets”at31Deces” at 31 December2022aner 2022 andd 2021,w, whichamoh amountsto€6s to €6,984tho4 thousand(2021nd (2021:€: €2,492t2 thousand). c) Interest income Interestinct incomeiome isaccs accruedonatd on a time-proportionbasn basis,byris, by referencetotnce to theprhe principaloual outstandingang andtheed the effectiveive interestrateat rate applicable,whe, whichiich isths theratete rate thatexhat exactlydly discountsests estimatedfated futurecure cashreash receiptstpts throughtgh theexphe expectedd lifeofthfe of thefine financialaial assettotsset to thatasst asset’scet’s carryingamng amount. d) Income from dividends Incomefromde from dividendsisrecs is recognisedwised whenthen thesha shareholder’srs righttorecet to receivepive paymentient isests established . 131Befesa Annual Report 2022 Statutory  financialstatements  Management report  ToBefesa’s  shareholders  Additional  information Consolidated  financialstatements 3.17 Borrowing costs Borrowingcostg costsdis directlyatly attributabletothe to theacqe acquisition,con, constructionoion orprodr productionofaion of assets,its, inaccn accordancewnce withIASh 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inct incomeeome earnedoned ontheten the temporaryinvey investmentofsent of specificbific borrowings,pen, pendingthg theirexeir expenditureone on qualifyingang assets,is, isdeds deductedfromtd from thebohe borrowingcostg costsels eligiblefoble forcar capitalisation. Allothl otherber borrowingcosng costsats arerecore recognisedised inthn thecone consolidatedited incomestme statementintt in theyeahe yearinwr in whichthch theyareiey are incurred. 3.18 Foreign currency (i))  Foreigncurn currencytrency transactions,ba, balances,andc, and cashflash 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re rate rulingaing atthefit the financialstal statementdatet date,whi, whilenle non-monetaryasy assetsandls and liabilitiesvaes valuedathid at historicall 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vair valuehavebe have beenteen translatediated intoeunto eurosattros at theexchhe exchangerateae rate atthedt the datetate thatthat thefhe fairvair valuewasde was determined. Exchange gains and losses arising on the settlement of foreign currency transactions and the translation into euros ofmoof monetaryay assetsans andliad liabilitiesdeies denominatediated inforein foreigncugn currenciesarerees are recognisedinped in profitorofit orlossr loss. (ii) Translation of foreign operations Foreignopen operationswhos whosefuse functionalcual currencyincy isnotths not thecure currencyofahycy of a hyperinflationaryecy economyhamy havebeeve beenn translatedinted intoeuroto eurosasfols as follows: ■ Assetsasets andlind liabilities,ins, includinggoog goodwillaill andnetand net assetasset adjustmentsdets derivedfved fromthrom theacqe acquisitionofthon of theopee operations,s, 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resul resultingexcng exchangedige differencesarerecs are recognisedastrd as translationdiffen differencesices inothen othercomr comprehensiveincve income. Translationdion differencesrecoes recognisedised inothn othercoer comprehensiveinve incomeacome areaccre accountedforited for inprofin profitorlot or lossasass as ann adjustment to the gain or loss on the sale using the same criteria as for subsidiaries. (iii)ii)  Foreignopgn operationsinhypes in hyperinflationaryecony economies Thefine financialsial statementsofGnts of Groupcomp companieswies whosefune functionalcul currencyistcy is thecuhe currencyofahncy of a hyperinflationaryy economy are restated in terms of the measuring unit at the reporting date. IftIf therehe reportingding dateoftate of theconhe consolidatedcoted companies’fins’ financialsial statementsints isdis differenttothnt to thethe thatofthat of theCome Company,t, thehe former is adjusted to the measuring unit at the Company’s reporting date. Theresue resultsandfis and financialposal positionofton of theGrhe Group’sforoup’s foreignopen operationswhos whosefuse functionalcual currencyincy isthecs the currencyofay of a hyperinflationaryecy economyaretmy are translatediated intoeunto eurosasforos as follows: ■ Assetsasets andlind liabilities,ins, includinggoog goodwillaill andnetand net assetasset adjustmentsdets derivedfrved fromthom theacqe acquisitionofthon of theopee operations,s, assetsandls and liabilities,ies, incomeanme andexpd expenses,aes, andcand cashflosh flowsarws aretrae translatedaated atthect the closingring rateattate at themohe mostrecst recentent reporting date . Notes to the consolidated financial statements as at 31 December 2022 (thousands of euros) continued 132 Befesa Annual Report 2022 To Befesa’s shareholders ■ Comparativeaive amountsants arethre thosethose thatweat wereincre includedied inthepn the prioryear yearconr consolidatedand annualaccl accountsants andarend are notot adjustedfoted forsubr subsequentcent changesinths in thepre priceleice levelorivel or inexchn exchangeratee rates.Ts. Theeffehe effectofthct of theadje adjustmentontnt on theprhe priorior year’sbas balancesisrecos is recognisedaised asarevas a revaluationresen reserveinotve in othercomr comprehensiveiive income/translationdion differencesines in other comprehensive income/reserves under equity. Giventven theehe economicsmic situationiion inTn Turkey,anrkey, andinacd in accordancewie withthth thedefie definitionofahypn of a hyperinflationaryecoy economyy establishedinIAd in IAS29,thecS 29, the countryiy isconss consideredhyred hyperinflationarysy since1Jane 1 January2022.TheBy 2022. The BefesaGroa Grouphoup holdslds investments in Turkey through the subsidiaries Befesa Silvermet Iskenderun Celik Tozu Geri Donusumu, A.S. and Befesa Silvermet DisTicaret, A.S. ApplicationofIAS29fon of IAS 29 forthr thefirse firsttit timeinTme in Turkeyirkey inthn theGroue Group’s2022conp’s 2022 consolidatedfinted financialsial statementswnts wascas carriedd outinact in accordancewice withtth thefolhe followingcing criteria: ■ Thecome comparativefigve figuresfures for2021werenoor 2021 were notsubt subjecttomject to modification. ■ Hyperinflationaryacy accountingwang wasaps appliedtoaled to allassl assetsaets andlind liabilitiesoies ofsubf subsidiariesbies beforecefore conversion. ■ Thehise historicalcostol cost ofnonf non-monetaryay assetsans andliad liabilitiesaies andthnd thedie differentequt equityiy itemsofttems of thosecome companieswies wasas adjustedfted fromthrom thedate dateofacqe of acquisitionorion or incorporationiion intotnto theconhe consolidatedstted statementoffint of financialpial positionunt untilil theene endoftheyd of the yeartoreear to reflectthect the changesiges inthn thepurce purchasingping poweroower ofthecf the currencyrrency resultingfng frominrom inflation. ■ Theinie initialeqal equitypy presentedinted inthesn the stablecble currencyisaffey is affectedbytcted by thecuhe cumulativeeffive effectofreect of restatementfont forinflr inflationon ofnoof non-monetaryitey itemsfms fromthrom thedatete date theywhey werereere recognisedfortd for thefirhe firsttist timeame andthnd theeffece effectofconvt of convertingtng thesehese balances at the closing rate at the beginning of the year. Theeffece effectofhyt of hyperinflationinton in theThe Turkishsish subsidiariesoies onthecn the consolidatedequd equityofBey of BefesaGfesa Groupis€6p is €6.5m.5 millionaion andnd the“gaie “gainsons onthenn the netmonet monetaryposy position”aion” amountstnts to€2.5mo €2.5 million,reco, recognisedused undernetexcr net exchangedge differencesintes in thehe consolidatediated incomeste statementfoent forthr theyearee year ended3ed 31De1 December2022.ber 2022. 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iated incomeste statement,exce, exceptwhpt whenitreen it resultsfts fromatrom a transactionthern the resultofwlt of whichihich isrecos recogniseddsed directlyy inein equity,i, inwhn whichcich casetase therehe relatedtad taxisalx is alsorecso recognisediised ineqn equity. Current income tax expense is calculated by aggregating the current tax arising from the application of the tax rate totto thetahe taxablepble profit(trofit (taxloss)fx loss) forthor theyear,afe year, afterdter deductingalng allowabletae taxcredx credits,pls, plustus thechhe changeindee in deferredtred taxax assetsandls and liabilities,aes, andannd anytay taxlosx lossandts and taxcax creditcat carry-forwardsards anddend deductions. Deferredtad taxasx assetsasets andlind liabilitiesincs includeteme temporarydiy differencesmeas measuredatthd at theamoe amounteunt expectedtobcted to bepayae payableore or recoverableondie on differencesbets betweenthn thecae carryingaing amountsofants of assetsants andliad liabilitiesaies andthnd theirtar taxbasex bases,as, andtand taxlox lossss andtad taxcredx creditcit carry-forwards.Ts. Theseahese amountsants aremere measuredattred at thethe taxrax ratestates thatahat areexpre expectedtected toappo applyintly in thephe periodod whenten theashe assetiset isreals realisedorthd or theliae liabilityissy is settled. Deferredtad taxlix liabilitiesaies arerecore recognisedfosed foralltr all taxabletemle temporarydy differences,us, unless,iss, ingen general,tal, thetehe temporaryy differenceance arisesfrses fromthom theinie initialrecal recognitionofgoon of goodwill.Inal. In addition,don, deferredtred taxaax assetsrecs recognisedfoised fortar taxlosx lossans andd taxcreax creditcdit carry-forwardsans andtempd temporarydiy differencesances areonre onlyrecly recognisedifitid if it iscons consideredpered probablethae thatthet the consolidatedcoated companieswies willhall havesuve sufficientfnt futuretare taxablepble profitsagas againstwht whichtich theychey canbeuan be utilised. Deferredtad taxasx assetsasets andlind liabilitiesrecos recognisedased arereasre reassessedatesed at eachfiach financialstal statementdatei date inorden ordertoascr to ascertainain whetherter theyshey stillexil exist,ast, andtnd theaphe appropriateadate adjustmentsaremas are madebde basedoased onthn thefinde findingsofths of theanae analysespeses performedmed (see Notes 19 and 20) . 133Befesa Annual Report 2022 Statutory  financialstatements  Management report  ToBefesa’s  shareholders  Additional  information Consolidated  financialstatements 3.19 Income tax, deferred tax assets and deferred tax liabilities continued TheGroe Grouprecup recognisestas taxlosscx loss carry-forwardsands anddedd deductionsprovs providingtng theirrealr realisationorfn or futureapre applicationiion iss probablewle withinarein a reasonablepele period.Did. Directorshrs havealave alsotaso takeniken intoaccnto accounttheGt the Group’sabip’s abilitytouy to usetase taxbex benefitsints in differentfisnt fiscalycal yearsdeps dependingonthg on theirneir needs. InvIn viewoiew oftheGf the Group’sis internationalnal nature,thre, thereaere aresevere severaltral taxrax ratesdates dependingontng on theahe applicablelegie legislation,ron, ranginging mainlyfrly from1om 19%t9% to33%o 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c, and classifiestes thembynhem by natureintre in theaphe appropriatenoate non-currentasst assetaccet accounts. Expensesincs incurredinored in ordertrder tocomo complywply withtheah the applicableenve environmentalleal legislationaion areclare classifiedbfied bynaty natureunure underr “Other Operating Expenses” in the accompanying consolidated income statement . 3.21 Related-party transactions TheGroe Grouppeup performsals allitstl its transactionswons withrelh relatedpaated partiesatares at arm’slem’s length.Ih. Inaddn addition,tr, transferprfer pricesareas are adequatelyly supported and, therefore, the Parent’s Directors consider that there are no material risks in this regard that might giverive risetosise to significantlant liabilitiesintes in thefuhe 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stal statementsinths in thepere periodiiod inwhn whichtich thedihe dividendsads areappre approvedbytroved by thePahe ParentCrent Company’ssh’s shareholders. 3.23 Segment reporting Theopee operatingsegmg segmentsareps are presentedconted consistentlywiy withtth themahe managementaent approach,inac, in accordancewice withtth thehe 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24  Consolidatedstd statementoment ofcasf cashflowh flows Thefolle followingteing termsareuss are usedinted in thecohe consolidatedsated statementofcant of cashflosh flows,wws, whichwach waspreps preparedusid usingthng theinde indirectct method,wd, withtith themhe meaningsspes specified: ■ Cashflowsh flows.Is. Inflowsans andoutd outflowsofcws of cashaash andcnd casheash equivalents,wts, whicharesch are short-term,lm, liquidinid investmentstnts thatahat arere subjecttoanict to an insignificantrant riskofcisk of changesinvas in value. ■ Operating activities. The principal revenue-producing activities of the Group companies and other activities that arenare notinvot investingoing orfinar financingacng activities. ■ Investing activities. Acquisition and disposal of long-term assets and other investments not included in cash and cash equivalents. ■ Financingactg activities.Aes. Activitiesths thatresuat resultilt inchan changesinths in thesize sizeandce and compositionoion oftheef the equityandby and borrowingstngs thathat are not operating activities . Notes to the consolidated financial statements as at 31 December 2022 (thousands of euros) continued 134 Befesa Annual Report 2022 To Befesa’s shareholders 3.25 Earnings per share a) Basic earnings per share Basic earnings per share is calculated by dividing: ■ Theprofie profitatt attributabletoowble to ownersoftrs of theCohe Company,excl, excludingang anycosny costsofsets of servicingequg equityothy otherter thanohan ordinaryy shares. ■ Theweige weightedaverd averagenage numberofoer of ordinarysy sharesouts outstandingdurg duringthefig the financialyeal year,a, adjustedfosted forbonr bonusus elements in ordinary shares issued during the year and excluding treasury shares. b) Diluted earnings per share Dilutedeaed earningsperss per shareahare adjuststhefis the figuresusres usedinted in thedehe determinationofbaon of basicesic earningspegs pershr sharetotare to takeake intointo account: ■ Thepostie post incometme taxeffeax effectofinct of interestanst andothed otherfinr financingcing costsasss associatedwited withdth dilutivepoteve potentialoal ordinaryy shares;s; and ■ Theweige weightedaverd averagenage numberofaer of additionalordil ordinarysha sharesthres thatwoat wouldhuld havebeave beenouen outstanding,ag, assumingthg thee conversion of all dilutive potential ordinary shares . 4. Financial risk management policy Theacte activitiescies carriedoutbytd out by theGhe Groupthrop throughiugh itsbts businesssegs segmentsareexts are exposedtoseved to severalfinal financialral risks:mas: marketrket risk(sk (includingfoing foreigncurn currencyricy risk,fa, fairvair valueilue interestrast raterite riskansk andprid pricerice risk),cre), creditrdit risk,li, liquidityrisy riskandck and cashflowh flow interestratert rate risk.Tk. TheRihe RiskMask ManagementMent Modelusel usedbytheGd by the Groupfocup focusesontses on theuhe uncertaintyinfiy in financialmaal marketss andatd attemptstompts to minimisethepe the potentialadl adverseeffece effectsontts on theGhe Group’searoup’s earnings. Riskmask managementient iscars carriedoued outbytht by theCore CorporateFiate FinancialDepl Departmentinact in accordancewie withinth internalmnal managementt rules.Th. Thisdis departmentidnt identifies,aes, assesses,an, andhedd hedgesfiges financialril risksisks inclosn closecoope cooperationwin withtth thedihe differentnt operatingunig units.Th. Theintee internalmaal managementrent rulesprovs providewide writtenpoten policiesforges for globalral riskmisk management,at, aswels wellasforl as for specificarefic areassuas suchasfoch as foreigncurn currencyricy risk,int, interestratert rate risk,li, liquidityrty risk,tk, theushe useofdee of derivativeanve andnond non-derivativeve instruments,as, andinnd investmentofcant of cashsush surpluses.Tes. Therewerenre were nochao changesinris in riskmsk managementpent policiesbets between2022n 2022 and 2021. 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,Grs, Groupcooup companiesusees useder derivativeconve contracts.Fore. Foreigncurn currencyrisy riskark ariseswhes whenfun futurecture commercialtal transactionsons and recognised assets and liabilities are denominated in a currency that it is not the Group’s functional currency. ForfiFor financialrepal reportingpung purposes,eac, eachsubh subsidiarydy designatesheates hedgeswis withtth theCohe CorporateFirate FinancialDeal Departmentasfnt as fairair valuehlue hedgesoraes or ascas cashflowhsh flow hedges,asap, as appropriate.Iate. Inaddn addition,aon, attht thecore corporateleveate level,exl, externalforeil foreigncugn currencyncy hedges are designated as foreign currency risk hedges on certain assets, liabilities, or future transaction s . 135Befesa Annual Report 2022 Statutory  financialstatements  Management report  ToBefesa’s  shareholders  Additional  information Consolidated  financialstatements 4.1 Financial risk factors continued TheGroe Group’smaup’s mainexin exposurestocures to currencyrncy riskaisk at3t 31D1 December2022anr 2022 and202d 2021ares1 are shownbeln below.Thow. Thetae tablereble reflectsths thee carryingamog amountoftunt of theGhe Group’sfiroup’s financialinl instrumentsorcls or classesoffines of financialiial instrumentsdnts denominatediated inforen foreigncign currency: 2022 2021 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 15,333 14,421 7,773 1,874 33,142 20,623 6,645 6,155 EUR 1,963 420 – 2,684 4,206 65 – 1,129 Other 7 5 – 72 21 3 – 20 Total 17,303 14,846 7,773 4,630 37,369 20,691 6,645 7,304 If the average exchange rate of the euro in 2022 and 2021 had depreciated/appreciated by 50 basis points on all functionalcal currenciesotes otherther thantheen the euro,wuro, withotheh othervar variablesrems remainingcing constant,ent, equityany andresud resultsfolts forthr theyeare year wouldnld nothavecot have changedsged significantly. ii))  Cashflowsh flowandfa and fairvair valueilue interestraterst rate risk TheGroe Group’sinup’s interestratert rate riskmisk mainlyariy arisesfses fromvarom variableintee interestfirest financialdeal debt. Tomao manageinte interestratert rate risk,inc, in certainsain situations,th, theGroe Groupusup usesfloaes floating-to-fixedixed interestrast rateswate swaps,eps, eitherfoher forthr thee total amount or a portion of the loan and either for the full term or a portion thereof. In2022aIn 2022 and2021nd 2021,h, hadthad theavee averageintee interestrrest ratesoates onthefin the financialdeal debtdebt denominatedineted in eurosiuros increased/decreasedbysed by 50b50 basispoins points,wit, withalh allothel othervar variablesrems remainingcing constant,tnt, thephe profitafrofit aftertar taxfortx for theyeahe yearwour wouldnold nothavebt have beeneen significantlyaffly affectedaected asaresus a resultoftlt of thehehe hedgingping policiesiies inplan place. Theexpe exposureoftheGre of the Group’sfinap’s financialdeal debttovabt to variationsions ininten interestrrest ratesiates issetous set outbelt below: 2022 2021 Totalexal externalfial financialdel debt(Nbt (Note1ote 15) 710,772 694,730 Effectofict of interestrest rateswate swaps(Nots (Note1e 17) (316,000) (316,000) Financial debt subject to variable interest 394,772 378,730 iii) Price risk Earnings in the Steel Dust, Salt Slags and Secondary Aluminium segments are exposed to the movement of recycled metalptal prices(ces (zincandac and aluminium).TheG). The Groupmanp managespres pricerice risktisk throughtugh theache acquisitionofcomn of commodityswy swaps.. Befesa’sts targetintt in theSteehe SteelDusl DustRecyt RecyclingSerg Servicesseges segmentistohet is to hedgebdge between60n 60%and75%ofth% and 75% of thesale salee transactions,wns, whicharesch are subjecttotect to therhe riskofcisk of changesiges inseln sellingprg prices. Theobje objectiveoftive of theGhe Groupiroup istosecs to secureaceure a certainlevin levelofreveel of revenuesths thatwiat willenll ensurearease a reasonablereble return,gn, giventhern the riskk ofdeof declinetne thatthat theserevene revenuesmues mayfaay faceintce in theevehe eventofafant of a fallill inzinn zincprc prices,wh, whichaich accountsfor85%ofths for 85% of thepre priceoftice of thehe product sold (WOX). TheGroe Groupusup useszies zincfnc futurescores contractsatths at theLonde LondonMeon MetalExcl Exchangehege hedgingbeng between6ween 60%a0% and7nd 75%oft5% of thehe estimatedsated sales,ses, sothelo the likelihoodoftood of thehehe hedgedtrad transactionbion beingexecug executedisated is almost1st 100%,giv, giventhen that,duetot, due to thehe nature of the business, the sale of the entire production is assured. Establishing this limit protects the business againstrest reductionsinpns in productionduon duetoonee to one-offevenoff events,suc, suchasbreh as breakdowns,tec, technicalscal shutdowns,oroth, or othersier similarlar circumstances. Thesefiese financialinl instrumentsareins are initiallyaly analysedtoased to assesswhes whetherthr theycaey canbetren be treatedaated asheds hedginginng instrumentsands and,, ifsif so,theao, the accountingring rulesspes specifictothfic to theseiese instrumentsmats maybeapy be applied. Note1Note 17co7 containsabreas a breakdownofden of derivativefiive financialinsl instrumentsarrs arrangedonted on theshe sellingping pricesofthes of thesemese metals . Notes to the consolidated financial statements as at 31 December 2022 (thousands of euros) continued 136 Befesa Annual Report 2022 To Befesa’s shareholders b) Credit risk Creditrdit riskaisk arisesfses fromcarom cashash andcand casheqsh equivalents,cos, contractualcasl cashflowh flowsofdebs of debtinvet investmentscas carriedataied at amortisedd cost,at, atFVOCt FVOCIandaI and atFVt FVPL,fPL, favourabledele derivativefiive financialinal instrumentsans anddepd depositswis withbth banksandfis and financialal institutions,aswel, as wellascrel as creditexpot exposurestowhs to wholesaleandree and retailcusil customers,inc, includingoutg outstandingreing 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aain andGend Germany,wiany, withtth theircredr creditrit riskrisk ratedatlated at leastBBt BBBorabB or above. Mostrecest receivablesanes andword workinprok in progressrels relatetoseveate to severalcusl customersinvrs in variousiious industriesanes andcound countries.Inmo. In mostcast 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aIn addition,uon, undermosr mostcontt contractstcts theGhe Grouphroup hasafiras a firmcom commitmentfent fromseverom severalbanl banksfortks for theahe acquisition,wn, withoutt recourse, of receivables. Under these agreements, the Group pays a fee to the banks for assuming its credit risk, plusinus interestanst andaspred a spreadontad on thefihe financingreceg received.Inad. In allcll cases,th, theGroue Groupasp assumeslies liabilityfoy forthr thevale validityofy of therthe receivables. IntIn thisregas regard,frd, factoredrecred receivablesarees arerecog recognisedofftsed off thecohe consolidatedfiated financialstl statement,prov, providedthed thatalat allthl thee conditionsesns establishedinIFd in IFRS9aremRS 9 are metfortet for theirderer derecognitionfion fromtrom thecohe consolidatedfiated financialstl statement.An. An analysisispes is performedtoded to determinewhe whetherther therie risksasks andrewnd rewardsinhs inherenttoownt to ownershipofthp of therelae relatedfinted financiall assets have been transferred, comparing the Company’s exposure to changes in the amounts and timing of net cash flowsfrows fromthm thetrae transferredassd assetbefoet beforeanre andafd aftertter thetrhe transfer.Oncsfer. Oncetheee the exposureoftsure of thecohe companyfany factoringtheg the receivablestotles to thesechae changeshasbs has beeneeen eliminatedorsated or substantiallyredly reduced,td, thenthen thefihe financialassl assetinqet in questionisn is deemed to have been transferred. InaIn addition,soon, someGme Groupcroup companieswoes workwrk withiith insuranceconce companiesthes thatesat establishthsh thecrede creditgit guaranteed,nor, normally insuringaroug around95%ofthnd 95% of therie riskhesk hedgedincad in caseofise of insolvency.TheFcy. The FinanceDnce Departmentcoent continuallyseey seekstoadks to adjustthst thee limitsgrs grantedtobusd to businessness needs.Th. TheGroe Groupalup allowsforanas for an acceptablelble levelofcevel of commercialral risk,wh, whichiich isests established basedosed oneachsn each specificcific customer,ma, market,at, andcirnd circumstance(nce (historyofny of non-payment,sol, solvency,a, amongothg others). Consequently,asre, as regardsthrds thebale balanceoftrce of tradeandote and otherreceir receivables,ts, thepotehe potentialeffal effectoftect of traderecee receivables,foes, forr whichtich therearefre are factoringagreg agreements,wous, wouldhld havetobeexclave to be excluded,aed, aswels wellasthl as theeffece effectofotht of otherter traderecee receivablesths thatat canbefn be factoredbued butwhit whichhach havenotyetbve not yet beenseen senttotent to thefhe factoraactor attht theyear-e year -endandad and assetsthts thatarat arecoveree coveredbycredd by creditit insuranceance andthad thatarereflt are reflectedintd in thisbhis balance.Th. Throughthih thispols policy,thicy, theGroue Groupminp minimisesiises itscts creditrist riskexpk exposureinre in relation to these assets. Tradeade andothnd otherrecer receivables,oth, otherrecer receivables,cur, currentfirent financialasal assets,ans, andcad casharetsh are theGhe Group’smroup’s mainfiain financialasal assets and represent its maximum exposure to credit risk, in the event that the counterparty does not meet its obligations. c) Liquidity risk Thepre prudentmant managementoflent of liquidityriy riskensk entailstils themahe maintenanceofsnce of sufficientcast cashanh andmard marketablesecue securities,ts, thehe availabilityoffiy of financingthng throughasuh a sufficientleent levelofcovel of committedcreted creditfact facilitiesandts and theche capacitytosy to settlemtle marketket positions. Given the dynamic nature of the core businesses, the Group’s Treasury Department has the objective of maintainingflexg flexiblefinae financingtng throughtgh theavahe availabilityofcy of committedcted creditlint lines . 137Befesa Annual Report 2022 Statutory  financialstatements  Management report  ToBefesa’s  shareholders  Additional  information Consolidated  financialstatements 4.1 Financial risk factors continued Managementment monitorsttors theGhe Group’slis liquidityrty reserveproje projectionsaions andchnd changesiges innetbon net borrowings,cgs, calculatedaated asfolls followsows at31Decat 31 December2022aner 2022 and202d 2021: 2022 2021 Cash and cash equivalents 161,751 224,089 Othercur currentfinnt financialasl assetsasets adjustedbyned by non-cashiash items(Nos (Note1te 10) 60 61 Undrawncawn creditfit facilitiesandus and unusedfised financing(Nng (Note1ote 15) 75,000 75,000 Liquidity reserve 236,811 299,150 Financial debt (Note 15) 686,486 671,362 Finance lease payables (Note 15) 24,286 23,368 Cash and cash equivalents (161,751) (224,089) Othercur currentfinnt financialasl assetsasets adjustedbyned by non-cashiash items(Nos (Note1te 10)) (60) (61) Net debt (Note 2.6) 548,961 470,580 Lessnoss non-currentbont borrowings(gs (Note1Note 15) (677,436) (669,327) Currentnent netfint financialdebl debt (128,475) (198,747) Oneofthe of theGroue Group’sstp’s strategicobic objectivesistves is theophe optimisationann andmosted most efficientpoent possibleuble useofitse of itsass assetsasets andnd resourcesases assignedtotned to thebuhe business.Th. Therefore,tre, theGrohe Grouppaup paysspys specialatal attentiontothn to thenetope net operatingworng workingcng capitall investedinitd in it.Int. In thisresps respect,asinp, as in previousyous years,ds, during2022ang 2022 and2021theGnd 2021 the Groupmadp madesige significanteffont effortstocos to controll andredud reducecoce collectionpeon periodswids withcth customersans andothed otherder debtorsabtors andtoond to optimisepise paymenttent terms,ts, therebyunby unifyinging policies and conditions across the Group. Thetae tablebble belowpresew presentsanans an analysisofthefis of the financiallial liabilitiesthas thatwit willbesell be settled,wh, whichaich aregrore groupedtorefled to reflectthct thee termremm remainingfromtg from thefihe financialstl statementsdatets date toconto contractualmaal maturity.Thy. Thisbreis breakdowndown doesnoties not includelude long- term provisions (Note 18). Within one year Between 1 and 2 years Between 2 and 5 years More than 5 years At31DeAt 31 December2ber 2022 Bankbank borrowingsandls and leaselise liabilities(Ns (Note1ote 15) 33,336 15,831 657,654 3,951 OtherOther financialliabilitie liabilitiess (Derivatives) 38,223 12,283 592 – Trade and other payables () 261,506 1,299 3,235 – Unaccrued interest payable 25,305 24,896 38,284 961 At31DeAt 31 December2ber 2021 Bankbank borrowingsandls and leaselise liabilities(Ns (Note1ote 15) 25,403 15,087 644,458 9,782 OtherOther financialliabilitie liabilitiess (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 () Long-term payables do not include capital grants amounting to €3.3 million and €4.0 million in 2022 and 2021, respectively. d) Capital risk The Group manages its equity investments to ensure that its subsidiaries have a guarantee of continuity in terms of theirasser assetsants andfind financialpial position,man, maximisingsing shareholderretur returnbyorn by optimisingting theshe structureofeqre of equityay andlind liabilitiess onton thelihe liabilitiessids sideofthe of thesube subsidiaries’fina’ financialstal statements. Notes to the consolidated financial statements as at 31 December 2022 (thousands of euros) continued 138 Befesa Annual Report 2022 To Befesa’s shareholders Capitalmal managementistht is therespe responsibilityoty oftheGf the Group’sMs ManagementCent Committee,who, whoseapse approachfocch focusesouses onn increasingthg thevale valueoftue of thebuhe businessiess intheln the long-termforsrm for shareholdersars andinnd investorsaswrs as wellaell asforems for employeesayees andnd customers.Th. Theobje objectiveiive istoachs to achievecoieve constant,st, sustainedrened resultsthts throughorggh organicanic and,wd, wherenhere necessary,in, inorganicc growth.Forth. For thispuis purpose,abose, a balanceince inthn thebuse businessesisreqs is required,wd, withconth controloffirol of financialril risks,com, combinedwed withtith thehe necessaryfiy financialflexal flexibilitytoachy to achievesuieve suchobch objectives. TheGroe Group’scaup’s capitalmal managementpolt policyfocicy focusesonachs on achievingafinag a financialstal structurethre thatoptat optimisestises thecohe costofcst of capitall whilemaie maintainingasing a solidfiolid financialpoal position.Th. Thispolis policymicy makestakes theche creationofvion of valueforte for theshhe shareholderscoms compatible,e, withath accesstofins to financialmial marketsakets atacomt a competitivecosve costinort in ordertocder to coverbotover bothdeh debtrefibt refinancingrequg requirementsants andthd thee investmentplnt planfinan financingning needsnotcos not coveredbytvered by thefhe fundsges generatedbytated by thebhe business. Detailsoftls of thedehe debt/equityraty ratios(exclios (excludingbing balanceswis withGroth Groupcoup companies)at31Decees) at 31 December2022aner 2022 and202d 2021ar1 aree asfoas follows: 2022 2021 Totalbal bankbork borrowings(Ns (Note1ote 15) 710,772 694,730 Less: Cash and cash equivalents (161,751) (224,089)   Othercurr currentfint financialass assetsaets adjustedbynod by non-cashish items(tems (Note1e 10) (60) (61) Net debt 548,961 470,580 Total equity 819,252 631,547 Total capital invested 1,368,213 1,102,127 Borrowing ratio 40.1% 42.7% ForadFor a detaileddeed definitionofnetdn of net debt,ple, pleaserease refertoNofer to Note2.6te 2.6. 4.2 Fair value estimation IFRS1S 13est3 establishesahes asfas fairvair valuetlue theprhe pricethae thatwoult wouldbered be receivedtoseved to sellanall an assetorpat or paidtotrid to transferalsfer a liabilityinay in ann orderlytly transactionbetn betweenmaen marketpart participantsattts at themehe measurementdent date,wate, whetheritisor it is observableoble orhasbr has beeneen estimateduated usingavang a valuationtechn technique.Forth. For thispuis purpose,cose, consistentdant datawta withfeath featurestures thatmhat marketpaket participantswnts wouldd consider in the transaction are selected. IFRS1S 13ma3 maintainsthns thepre principlesofthes of theothe otherster standardswhds whilesile settingthng thefule fullfrl frameworkforfak for fairvair valuemeae measurementnt whenien itismat is mandatoryuy underothr otherIFRer IFRSsanSs andestd establishesthes theadhe additionalinal informationtobedin to be disclosedased aboutfait fairvalr valueue measurements. Thereqe requirementsofIts of IFRS1FRS 13a3 aremetbytre met by theGhe Groupiroup inthefn the fairvalr valuemeue measurementofaent of assetsans andliad liabilitieswies whenfhen fairr value is required by other IFRSs. ForfiFor financialasal assetsandls and liabilitiesnotves not valuedatfed at fairvair value,te, theGrohe Groupbrup breaksdows downthepn the possibleimpe impactsbets betweenthen thee fairvair valueandte and theamhe amortisedcsed costiost iftheif the impactissact is significant(Note10).t (Note 10). Basedosed onthecn the contentofIFnt of IFRS1RS 13an3 andinacd in accordancewice withIth IFRS7onfiFRS 7 on financialinsl instrumentsmeas measuredatfad at fairvair value,th, thee Groupreup reportsonests on estimatingtng thefahe fairvair valuehlue hierarchylevehy levelsals asfolls 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). 139Befesa Annual Report 2022 Statutory  financialstatements  Management report  ToBefesa’s  shareholders  Additional  information Consolidated  financialstatements 4.2 Fair value estimation continued Thetae tablebble belowshoww showsths theGroue Group’sassp’s assetsaets andlind liabilitiesthas thatweremt were measuredatfaid at fairvar valuealue at3t 31D1 December2022r 2022 and202d 2021: 2022 Level 2 Level 3 2022 Assets – Derivatives (Note 17) 40,947 – 40,947 Total assets at fair value 40,947 – 40,947 Liabilities – Derivatives (Note 17) 51,098 – 51,098 Total liabilities at fair value 51,098 – 51,098 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 a) Financial instruments Level 2 Thefae fairvair valueoffilue of financialinal instrumentsnotts not tradedinaed in anactn activemive marketisdket is determineduned usingvalg valuationteion techniques.. TheGroe Groupemup employsavays a varietyoty ofmetf methodssuchas such asests estimateddated discountedcaed cashflosh flowsanws andused usesasss assumptionsbans basedonsed on themae marketcrket conditionsaons ateact eachfinah financialstal statementdatet date.Ifal. If allsigl significantdnt datareata requiredtocred to calculatethte thefaie fairvalr valueofaue of ann instrument are observable, the instrument is included in Level 2. Specifictechfic techniquesformes for measuringfinng financialiial instrumentsints include: ■ Thefaie fairvalr valueofiue of interestrast rateswate swapsiscps is calculatedaated astheps the presentvant valueofflue of futureesure estimatedcasd cashflowh flows. ■ Thefaie fairvalr valueofcue of currencyfoncy forwardsisdrds is determineduned usingforg forwardexchrd exchangeratee ratesquots quotedinted in themahe marketattht at thee financialstal statementdnt date. ■ It is assumed that the book value of trade payables and receivables approximates their fair value. ■ Thefaie fairvalr valueofcue of consolidatedfiated financiallial liabilitiesforfins for financialrial reportingpurg purposesisess is estimatedbydisd by discountingng futureconre contractualcal cashflash flowsattows at thecuhe currentmnt marketintet interestrrest ratethate thatisaat is availabletotble to theGhe Groupforoup forsimr similarfinr financialial instruments. Theine instrumentsincs includedinLed in Level2reevel 2 relatetodlate to derivativefinave financialial instruments(Nts (Note1ote 17). b) Financial instruments Level 3 At31DeceAt 31 December202r 2021,t, theGrohe Grouprecup recordsunds underther thislis leveloffievel of financialinl instrumentstheis the investmentaent acquirediired in202n 2021in1 in the company American Zinc Products, LLC (AZP) (Note 10) since its fair value includes unobservable variables. In September2022,tber 2022, theGhe Groupcroup completedthead the acquisitionof93.on of 93.1%oft% of theshe sharesofAms of AmericanZinn ZincProdc Products,LLC(s, LLC (AZP)ZP) (currently, Befesa Zinc Metal, LLC) (Note 6). Theime impactopact onthn the2022cone 2022 consolidatedined incomestae statementofrent of recognisingtng theprhe prior6ior 6.9%i.9% investmentatfent at fairvalr valuegaue gaveve risetoalose to a lossof€ss of €6,406th6 thousandreand recordedued underfinar financecnce costs. Notes to the consolidated financial statements as at 31 December 2022 (thousands of euros) continued 140 Befesa Annual Report 2022 To Befesa’s shareholders 5. Segment reporting The Board of Directors is ultimately responsible for making the Group’s operational decisions, as the Board functions astas theChhe ChiefOief OperatingDeng DecisionMion Maker(Caker (CODM).TheB). The BoardofDired of Directorsrevis reviewstews theGhe Group’sins internalfinal financialal information in order to assess its performance and allocate resources to the segments. TheBoae BoardofDird of Directorsars analysesthebs the businessbas basedontsed on thesehe segmentsinds indicatedbeted below: ■ Steel Dust Recycling Services (“Steel Dust”) ■ Aluminium Salt Slags Recycling Services – Salt Slags Recycling (“Salt Slags”) – Secondary Aluminium production (“Secondary Aluminium”) Thesesese segmentscors correspondtotond to theGhe Group’sproup’s principalacal activities(pros (productsants andserd services),ths), thesae salesofwles of which(feefoh (fee forr thesere servicesanes and/orsad/or saleoftle of thereche recycledwasd waste)detete) determinetine theGhe Group’sreroup’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fine financialiial informationrecen receivedbived bytheBy the BoardofDired of Directorsincs includefine financeince incomeaome andcosnd coststts taxaax aspects,cas, cashflowh flow andnetdd net debtonebt onlyaly asacons a consolidatedbated basisbsis becausetuse thisihis isths thewayte way theCohe Companymany managestes them. ForadFor a detaileddeed definitionofEBIn of EBITandET and EBITDA,pDA, pleaserefese refertoNote2.r to Note 2.6. The accounting policies and measurement bases applied to the information furnished to the Board of Directors are consistentwitt withthh thoseaose appliediied inthecn the consolidatedfinad financialsal statements. a) Segment reporting SetoSet outbeut belowilow istheds the distributionbysegn by segmentofEBIt of EBITandAT and AdjustedEsted EBITfoBIT forthr theyearee year ended3d 31De1 December2022aber 2022 andfornd for theyeae yearendr ended31Deceed 31 December2021(thr 2021 (thousandsofeus of euros). 2022 Steel Dust Salt Slags Secondary Aluminium Corporate, other minor and eliminations Total Revenue 730,311 77,333 375,851 (47,462) 1,136,033 Income/expenses from operations (except revenue, depreciation and amortisation/depreciation charge and provisions) (551,537) (38,727) (356,813) 45,948 (901,129) Amortisation/depreciation, impairment and provisions (52,959) (9,200) ( 7,580) (406) (70,145) EBIT(OIT (Operatingping profit/(loss)) 125,815 29,406 11,458 (1,920) 164,759 Non-recurrent costs/incomes EBIT (Notes 9 and 21) 5,453 414 – – 5,867 Non-recurrent costs/incomes EBITDA (Notes 6, 9 and 21) (10,187) (11,625) – 1,508 (20,304) AdjustedEBId EBIT(OpT (Operatingprong profit/(loss)) 121,081 18,195 11,458 (412) 150,322 141Befesa Annual Report 2022 Statutory  financialstatements  Management report  ToBefesa’s  shareholders  Additional  information Consolidated  financialstatements 5. Segment reporting continued 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(OIT (Operatingping profit/(loss)) 96,999 11,342 19,332 (216) 127,457 Non-recurrent costs/incomes EBIT (Notes 9 and 21) 7,830 6,018 – – 13,848 Non-recurrent costs/incomes EBITDA (Notes 6, 9 and 21) 13,736 (6,018) – 240 7,958 AdjustedEBId EBIT(OpT (Operatingprong profit/(loss)) 118,565 11,342 19,332 24 149,263 Therecoe reconciliationofAdjn of AdjustedEBId EBITtoresuT to resultsats attributabletotble to thePahe ParentCrent Companyiany isasfols as follows: 2022 2021 Adjusted EBIT 150,322 149,263 – Non-recurrent costs/incomes EBIT (Notes 9 and 21) (5,867) (13,848) – Non-recurrent costs/incomes EBITDA (Notes 6, 9 and 21) 20,304 (7,958) EBIT(OIT (Operatingping profit/(loss)) 164,759 127,457 Finance income/(cost) (34,419) (15,605) Corporate income tax (23,838) (9,500) Profit/(loss)s) 106,502 102,352 Non-controlling interests (282) (2,607) Profit/(loss)ats) attributedtothd to theParee ParentCnt Company 106,220 99,745 Notes to the consolidated financial statements as at 31 December 2022 (thousands of euros) continued 142 Befesa Annual Report 2022 To Befesa’s shareholders 2022 Steel Dust Salt Slags Secondary Aluminium Corporate, other minor and eliminations Total Revenue 730,311 77,333 375,851 (47,462) 1,136,033 Income/expenses from operations (except revenue, depreciation and amortisation/ depreciation charge and provisions) (551,537) (38,727) (356,813) 45,948 (901,129) Amortisation/depreciation, impairment and provisions (a) ( 52,959) (9,200) (7,580) (406) (70,145) EBIT(OIT (Operatingprofig profit/(loss))(b))) (b) 125,815 29,406 11,458 (1,920) 164,759 EBITDA(OpDA (Operatingprong profit/(loss)s) before amortisation/depreciation and provisions) (a-b) 1 78,774 38,606 19,038 (1,514) 234,904 Non-recurrent costs/incomes (Notes 6, 9 and 21) ( 10,187) (11,625) – 1,508 (20,304) Adjusted EBITDA 168,587 26,981 19,038 (6) 214,600 2021 Steel Dust Salt Slags Secondary Aluminium Corporate, other minor and eliminations Tot al 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(OIT (Operatingprofig profit/(loss))(b))) (b) 96,999 11,342 19,332 (216) 127,457 EBITDA(OpDA (Operatingprong profit/(loss)s) before amortisation/depreciation and provisions) (a-b) 13 4,593 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 143Befesa Annual Report 2022 Statutory  financialstatements  Management report  ToBefesa’s  shareholders  Additional  information Consolidated  financialstatements 5. Segment reporting continued Therece reconciliationofAdon of AdjustedEBted EBITDAtoresuDA to resultsats attributabletotble to thePahe ParentComt Companyisasfy is as follows: 2022 2021 Adjusted EBITDA 214,600 197,570 – Non-recurrent costs/incomes 20,304 (7,958) Amortisation/depreciation, impairment and provisions (70,145) (62,155) Operatingg profit/(loss) 164,759 127,457 Finance income/(cost) (34,419) (15,605) Corporate income tax (23,838) (9,500) Profit/(loss)s) 106,502 102,352 Non-controlling interests (282) (2,607) Profit/(loss)ats) attributedtothd to theParee ParentCnt Company 106,220 99,745 Othersegr segmentitemt itemsins includedided inthecn the consolidatedincd incomesome statementareant are asfolls follows: 2022 2021 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) (43,394) (6,678) (6,312) (112) (56,496) (26,061) (12,830) (6,641) (106) (45,638) – Intangible assets (Notes 8 and 22) (374) (783) (577) (69) (1,803) (360) (737) (622) (72) (1,791) – Right-of-use assets (Notes 11 and 22) (7,608) (1,263) (691) (224) (9,786) (3,399) (1,362) (828) (233) (5,822) – Reversal/ (recognition) of impairment losses and other (Note 22) (1,584) (476) – – (2,060) (7,774) (254) (876) – (8,904) Total (52,960) (9,968) (6,812) (405) (70,145) (37,594) (15,183) (8,967) (411) (62,155 ) Notes to the consolidated financial statements as at 31 December 2022 (thousands of euros) continued 144 Befesa Annual Report 2022 To Befesa’s shareholders Detailsofsels of segmentasnt assetsandls and liabilitiesareaes are asfolls follows: 2022 2021 Steel Dust Salt Slags Secondary Aluminium Corporate, other minor and eliminations Total Steel Dust Salt Slags Secondary Aluminium Corporate, other minor and eliminations Total Assets Intangible assets 628,231 51,636 13,985 115 693,967 612,342 51,858 13,184 185 677,569 Property, plant and equipment 555,526 70,276 56,483 524 682,809 397,004 49,802 61,654 615 509,075 Right-of-use assets 25,157 4,851 592 295 30,895 22,787 5,972 1,080 496 30,335 Non-currentfint financialal assets and deferred tax assets 66,209 41 35,259 46,704 148,213 83,808 1,014 58,214 (1,575) 141,461 Current assets 289,757 27,405 79,055 24,509 420,726 236,296 20,388 91,646 89,439 437,769 Total assets 1,564,880 154,209 185,374 72,147 1,976,610 1,352,237 129,034 225,778 89,160 1,796,209 Equity and liabilities Net assets 321,151 69,287 35,863 392,951 819,252 196,114 28,508 50,251 356,674 631,547 Non-current liabilities 992,780 67,625 67,245 (303,357) 824,293 910,276 84,887 87,764 (238,066) 844,861 Current liabilities 250,949 17,297 82,266 (17,447) 333,065 245,847 15,639 87,763 (29,448) 319,801 Total equity and liabilities 1,564,880 154,209 185,374 72,147 1,976,610 1,352,237 129,034 225,778 89,160 1,796,209 Investmentsits inthecn the correspondingyeng yearwear wereasfolre as follows(exclus (excludingtheeg the effectoftffect of translationdion differences):s): 2022 2021 Steel Dust Salt Slags Secondary Aluminium Corporate and eliminations Total Steel Dust Salt Slags Secondary Aluminium Corporate and eliminations Total Additions to non- current assets (Notes 8 and 9) 74,092 27,505 2,731 23 104,351 68,176 12,626 2,260 52 83,114 Disposals of non- current assets (Notes 8 and 9) (11,513) (7,729) (6) (4) (19,252) (3,638) (3,706) (11,276) (1) (18,621) Net investments in the year (Notes 8 and 9) 62,579 19,776 2,725 19 85,099 64,538 8,920 (9,016) 51 64,493 Investments in non-current assets include additions to property, plant and equipment (see Note 9) and intangible assets (see Note 8 ) . 145Befesa Annual Report 2022 Statutory  financialstatements  Management report  ToBefesa’s  shareholders  Additional  information Consolidated  financialstatements 5. Segment reporting continued 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tfor theyehe yearsears ended3d 31De1 December2022aber 2022 and2021areand 2021 are asfolls follows:ows: Geographical area 2022 % 2021 % Spain 210,250 18% 190,605 23% Germany 120,344 10% 112,293 14% Belgium 57,717 5% 53,261 7% France 53,541 5% 20,706 3% Finland 52,782 5% 46,883 6% Italy 45,967 4% 33,424 4% Norway 35,470 3% 26,628 3% Netherlands 29,146 2% 44,845 6% Sweden 21,067 2% 14,210 2% Portugal 18,409 2% 13,133 2% Rest of Europe 42,501 4% 27,273 3% US 257,613 23% 56,359 7% JapanJapan 56,261 5% 77,533 9% SouthKoreah Korea 35,275 3% 28,335 3% Singapore 24,613 2% 8,212 1% Brazil 20,648 2% 17,740 2% Australia 19,959 2% 20,481 2% China 11,911 1% 18,283 2% Restoftht of thewore world 22,559 2% 11,409 1% 1,136,033 100% 821,613 100% Thedie distributionofproon of property,play, plantannt andequd equipment,it, intangibleable assets(exclts (excludinggong goodwillandll and licences)andrs) and right-of-useuse assetsisasfos is as follows: 2022 2021 US 331,843 189,181 Germany 107,558 92,804 China 101,720 86,125 Spain 84,226 85,065 France 31,143 29,642 SouthKoreah Korea 34,713 40,708 Turkey 17,880 9,399 Sweden 12,065 13,255 UnitedKingdom Kingdom 79 83 721,227 546,262 Notes to the consolidated financial statements as at 31 December 2022 (thousands of euros) continued 146 Befesa Annual Report 2022 To Befesa’s shareholders b) Information on customers At31DeceAt 31 December2022,thr 2022, threecuree customerseacs eachrepreh representedoveted over1r 10%o0% oftheGf the Group’stots totalreval revenues,aes, alloftll of themfhem fromrom theSteee SteelDusl Dustsegt segment.Tt. Thefirhe first-largestcust customerreer representsapps approximately1ly 19%ofth% of theGroue Group’stotap’s totalrevenl revenuess (13%in20213% in 2021),t), thesehe secondreprd representsapts approximately1y 15%ofth5% of theGroue Group’stotap’s totalrevenl revenues(5s (5%in2% in 2021)a) andthnd thethe thirdird representsants approximately1y 12%oft2% of theGrhe Group’stotoup’s totalreval revenues(1es (16%i6% in2022)n 2022) . 6. Business Combination a) American Zinc Products, LLC. On3On 30Septe0 September2022,thr 2022, theGroe Group,thup, throughBefgh BefesaHesa HoldingUing US,InS, Inc.,ac., acquireda93ired a 93%inte% interestirest inAmn AmericanZinn Zincc Products,Ls, LLC.(cC. (currently,Befesly, BefesaZia ZincMetnc Metal,LLC).Be, LLC). Befesaafesa alreadyoady owned7%ofthd 7% of thezine zincrefinc refiningasseg asset,at, aspars partoftt of thehe acquisitionoion ofAmef AmericanZcan ZincRinc Recyclingwing whichwach wascloss closedinAed in August2021st 2021.B. BefesaZina ZincMetc Metal,LLChasi, LLC has itsrets registeredtered officeinRue in RutherfordCford County,Noty, NorthCah Carolina,andi, and itsprts principalacal activityiy istheps the productionofzion of zincsinc solelyfly fromrecyrom recycledcled sources.Ths. Themae mainreain reasonfoson forthebr the businesscoms combinationision istoobt to obtainnain newsolew solventextt extractiontecon technologytoprocy to processess WaelzOxlz Oxide(ide (WOX)intos) into specialhial high-grade(SHde (SHG)ziG) zinc.Thez. The zincrinc refiningbing businessprovs providesBefess Befesawia withasth a strategicc vertical integration capability to support its EAF steel dust recycling operations in the US, addressing the shortage of smelting capacity in the North American market. BefesaZfesa ZincUinc USAselSA sells1ls 100%ofi0% of itsprots productiontoBefen to BefesaZisa ZincMenc Metal,LLC,wl, LLC, whichproch processesWaels Waelzoxidz oxide(e (WOX)an) andd transformsims itintoSHt into SHGziG zinc. Theacqe acquiredbured businessgess generatedrevend revenueaue andacond a consolidatedpated profit/(loss)ooss) of€34,45f €34,450tho0 thousandaand and€nd €(15,490)) thousand,resd, respectively,fo, fortheGr the Groupbetp betweenthen theacqe acquisitiondion dateanate andtheed the endoftnd of therehe reportingpeng period. IftIf theache acquisitionwouln wouldhavetd have takenpln placeat1Jace at 1 January2022,ty 2022, theGhe Group’sreves revenueandce and consolidatedadj adjustedEBId EBITDATDA fortfor theyehe yearenar ended31Decded 31 December2022wober 2022 wouldhuld haveaave amountedto€1,2nted to €1,245,788 thousand and €214,600 thousand, respectively. Details of the consideration given, the fair value of the net assets acquired and excess of net assets acquired over costofacqt of acquisitionaion areasfore as follows: Thousands of euros Consideration given Cash paid 47,805 Capitalisation of balance receivable 4,182 Total consideration given 51,987 Fair value of previous investment in the business 3,853 Fair value of net assets acquired 107,466 (Excess of net assets acquired over cost of acquisition) (Note 22.3) (51,626) The excess amount of net assets acquired over of the acquisition cost has been recognised in Other operating income of the consolidated income statement. The main reason for the recognition of income has been that the currentenvnt environment,cha, characterisedbised byhigy highinflh inflationanon andened energypriy prices,hasp, has providedBded Befesawia withtth theophe opportunitytty too renegotiate favorably the terms and conditions of the agreement (Note 10), hence reducing the acquisition price. Thecose costsasts associatedwated withthh thisopis operationamon amountedto€5,7d to €5,705t05 thousand . 147Befesa Annual Report 2022 Statutory  financialstatements  Management report  ToBefesa’s  shareholders  Additional  information Consolidated  financialstatements 6. Business Combination continued Theame amountsrecs recognisedbised bysigy significantclat classattss at thedhe dateofacate of acquisitionoion oftheaf the assets,lts, liabilitiesanes andcontd contingentt liabilitiesareasfos are as follows: Thousands of euros Property, plant and equipment (Note 9) 120,576 Right-of-use assets (Note 11) 1,969 Otherfinr financialassl assets 2,487 Cash and cash equivalents 2,840 Other current assets 81,568 Total assets 209,440 Lease liabilities (Note 11) 462 Other liabilities 6,882 Current liabilities 94,631 Total liabilities and contingent liabilities 101,975 Total net assets 107,465 Total net assets acquired 107,465 Cash paid (47,805) Cash and cash equivalents of the acquired company 2,840 Cashosh outflowfflow forthor theacqe acquisition (44,965) The criteria for calculating the main assets and liabilities existing at the date of taking over the operations of Befesa ZincMenc Metal,LLC.we, LLC. werethre thefolle following: – Property, plant and equipment: estimated the fair value of the tangible assets based on the income approach. Thekeypae key parametersuses usedintd in thevahe valuationofthn of thistis tangibleasse assetsweets wereEBre EBITDA,adi, a discountrant rateof8.7%ante of 8.7% andad a perpetualgrowl growthrath rateof2.5%e of 2.5%. b) American Zinc Recycling Corp. On1On 17Au7 August202t 2021,th, theGroe Group,thup, throughBegh BefesaHfesa HoldingUing US,InS, Inc.,ac., acquireda100ired a 100%inte% interestirest inAmn AmericanZinn ZincRecycc Recyclingg Corp.(curp. (currently,B, BefesaZina ZincUS,Ic US, Inc.).Bnc.). BefesaZia ZincUS,Inc US, Inc.hasi. has itsregts registeredoffitered officeinPce in Pittsburgh,Peh, Pennsylvania,aia, andind itsts principal activity is providing EAF steel dust recycling services. The main reason for the business combination is enter into the US market and become a global leader in steel dust recycling. OntOn theshe samedame date,aate, anagn agreementwent wasreaas reachedtorepd to repaythay thelone long-termfirm financingthg thatsaat saidcomid companyhany hadforanad for an amountnt of €266,287 thousand. Theacqe acquiredbured businessgess generatedrevend revenueaue andacond a consolidatedpated profit/(loss)ooss) of€56,f €56,357tho357 thousandaand and€nd €(2,770)770) thousand,resd, respectively,fo, fortheGr the Groupbetp betweenthen theacqe acquisitiondion dateanate andtheed the endoftnd of therehe reportingpeng period.Bod. BefesaZina Zincc US, Inc. sells the majority of the tonnes it produces to American Zinc Recycling Corp. (Note 10). IftIf theache acquisitionwouln wouldhavetd have takenpln placeat1Jace at 1 January2021y 2021,th, theGroe Group’sreveup’s revenueanue andcond consolidatedaated adjustedEsted EBITDADA fortfor theyehe yearenar ended31Decded 31 December2021wouber 2021 wouldhald haveamve amountedto€927ed to €927,856th856 thousandaand and€nd €217,797th7 thousand,d, respectively . Notes to the consolidated financial statements as at 31 December 2022 (thousands of euros) continued 148 Befesa Annual Report 2022 To Befesa’s shareholders Detailsoftls of thecohe considerationgion given,th, thefaie fairvalr valueoftue of thenehe netasset assetsacts acquired,andg, and goodwillareall are asfolls follows: Thousands of euros Consideration given Cash paid 130,563 Total consideration given 130,563 Fair value of net assets acquired (98 ,111) Goodwill(excel (excessofnss of netaset assetsacqs acquiredovered overcosr costofact of acquisition)n) 228,674 Theacqe acquisitionaion andthnd thecae cancellationoflonn of longdebg debttert termdebtwm debt werefinere financedtced throughacgh a capitalincl increaseandape and a pre- approvedterd termloam loanBaddn B add-onof€1n of €100mi0 million.Fon. Forthor thispuis purpose,ose, on1n 16Ju6 June2021ne 2021,t, theBohe BoardofDard of DirectorsofBtors of Befesaa resolvedonacd on a capitalincl increasebyisse by issuingupto5,g up to 5,933,293n933,293 newordew ordinaryshy shareswares withpah parvalr valueof€2ue of €2.78(€178 (€16,47272 thousand) and share premium of €53.22 (€315,792 thousand). The Company recognised €3,648 thousand of issuance costs as a reduction in equity instruments issued. Themose mostsigt significantfant factorrector resultingfrog fromrecogm recognitionofgoon of goodwilliill isthefs the futureprure profitabilityofty of theahe acquiredbired businesss thatiseat is expectedtobcted to beobte obtainedfoled followingting theache acquisitionbythn by theGroue Groupandop and oncetnce theGhe Group’smroup’s managementmodt modelhael hass been adapted. Thecose costsasts associatedwated withthh thisopis operationamon amountedto€1d to €13,976th6 thousandandcd and correspondmand mainlywly withaith advisory,l, legal,l, valuation and other professional fees. Theame amountsrecs recognisedbised bysigy significantclat classattss at thedhe dateofacate of acquisitionoion oftheaf the assets,lts, liabilitiesanes andcontd contingentt liabilitiesareasfos 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finr financialassl 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 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osh outflowfflow forthor theacqe acquisition (111,251) 149Befesa Annual Report 2022 Statutory  financialstatements  Management report  ToBefesa’s  shareholders  Additional  information Consolidated  financialstatements 6. Business Combination continued The criteria for calculating the main assets and liabilities existing at the date of taking over the operations of AmericanZin ZincRecync RecyclingCorng Corp.(p. (“AZR”)(c”) (currently,B, BefesaZina ZincUS,Ic US, Inc.)wnc.) weretere thefolhe following: ––  Licences:Thev: The valuationmion methodapod appliedtothed to theidee identifiedIntd IntangibleAsle Assetwaset wasths theMule MultiEti ExcessEas EarningsMets Methodhod (MEEM)(EEM) (“IncomeAme Approach”).Acco). Accordingtothng to thisapis approach,thev, the valueofthe of theinte intangibleasle assetwset willbill becale calculatedaated ass theprese presentvent valueofcae of cashflosh flowsstws streamsgems generatedbytated by theahe asset.Ast. As theahe assetgsset generallyglly generatescates cashflosh floww streamsincms in conjunctionwin withotth otherther tangibleanle andintd intangibleasle assets,sus, suchaspch as property,p, plantandet and equipment,wor, workingng capital,an, andword workforce,irce, itisest is estimatedthad thattheCACt the CACsmuss mustbesut be subtractedfromtd from theche cashflash flowsgows generatedbythd by thee intangible asset being valued. – Property, plant and equipment: estimated the fair value of the tangible assets based on the appraisals estimated byanby anind independentexnt expert.Itwa. It wasapps appliedthd thecostae cost approach.Al. Alsotso theinhe incomeapp approachwasah was appliedbyied by consideringwing wheterthter theproje projectedfud futurecture cashflowsofths of thebuse businesswoss wouldsuld supporttht theeste estimatedfated fairvir valueofthe of thee subject assets overall. – Deferred assets: measured based on the accounting policies identify in Note 3.19. ––  Provisions:mes: measuredbared basedosed onfain fairvalr valuewue whenihen itispot is possibletble thatahat anoutn outflowofresoow of resourceswis willberell be requiredtosered to settlele the obligation. ––  Long-termdebtm debt:th: thevae valueoftlue of thedhe debtrecebt recognisedonthd on thedateoe date ofthebf the businesscoms combinationwaon wassims similartoitar to itsfas fairir valuealue and,the, therefore,it, itsrepas repaymentin20nt in 2021h1 hashas hadnoiad no impactontct on thecohe consolidatedfiated financialstl statements. 7. Goodwill Detailsofgls of goodwillontll on thecohe consolidatedstd statementofent offina financialpoal positionasat31Decn as at 31 December2022aer 2022 and2021areand 2021 are asfolls follows: CGU Balance at 31/12/21 Translation differences Balance at 31/12/22 Befesa Zinc US, Inc. 237,587 14,702 252,289 Steel Dust 290,778 – 290,778 Salt Slags 35,829 – 35,829 Secondary Aluminium 8,957 – 8,957 573,151 14,702 587,853 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ine increaseingose in goodwillin2021wasarel in 2021 was a resultoftht of thebuse businesscoss combinationdion describedinNed in Note6.ote 6. Impairment analysis TheGroe Grouphaup hasims implementedaproted a procedurewure wherebyateaby at eachyeach year-endanyid any impairmentofgoot of goodwillaill andlind licenceswces withh indefiniteusefe usefullul life(Nife (Note8)isaote 8) is analysed. Therecoe recoverableable amountistnt is thehhe higheroffer of fairvair valuelese lesscosts coststoses to sellanll andvald valueinuue in use,wse, whichisth is takentobaken to bethe thepresee presentnt valueolue ofestf estimatedfuted futurecare cashflowsh flows . Notes to the consolidated financial statements as at 31 December 2022 (thousands of euros) continued 150 Befesa Annual Report 2022 To Befesa’s shareholders The measurement methods indicated in Note 2.4 led to discount rates used to perform the impairment test in a rangefnge foreacor eachCGUah CGU asfolls follow: ––  BefesaZina ZincUS,Ic US, Inc.:8.2: 8.2%, ––  SteelDuel Dust:6.49%: 6.49%-15.32%(2021.32% (2021:6: 6.20%-15.32%), ––  SaltSalt Slags:6.7s: 6.73%-7.25%(202.25% (2021:6.7: 6.73%-7.25%), ––  SecondaryAly Aluminium:6um: 6.73%-7.25%(2021% (2021:6.73%-: 6.73%-7.25%) Thedise discountrant ratesusetes usedarepd are pre-taxaax andreflnd reflecttect therhe risksspes specifictothesc to the significantCGUset CGU segments.Ths. TheDie Directorsrs considertder thatachat a changeinge inthedn the discountrateut rate used(ased (approximately50bay 50 basispsis points)wous) wouldnothld not haveasiave a significantiant impactact onton thesecone consolidatedfined financialsial statements. Thecae cashflowbsh flow budgetisdget is determinedbyGned by Group’smanp’s managementintnt in theirstr strategicpgic plans,cos, consideringasimg a similaractr activityy structure as the present one and based on previous years’ experience. AtthAt theene endof2022and20d of 2022 and 2021,est1, estimateswetes weremadre madeofthe of therecove recoverableable amountsonts oftheCf the CGUstowGUs to whichgoodh goodwillall and/ornd/or licenceswces withindh indefiniteusite usefullifl lifehadbe had beenaeen allocatedinacd in accordancewie withNotth Notes3.es 3.5and35 and 3.6an.6 andthemd the methodsods described above. No impairment has been recognised in 2022 and 2021. TheGroe Group’smaup’s managementcent carriedoutasd out a sensitivityany analysisosis oftheref the recoverableamle amountofgoot of goodwillaill andlind licences(ces (NoteNote 8)i8) intheen the eventofvvent of variationsof±5s of ±5%i% inkeyassn key assumptions,andn, and nosigo signsofimns of impairmentwent wereidere identified . 8. Other intangible assets Movementsints in“Otn “Otherintr intangibleasle assets”inth” in thecone consolidatedstted statementoffinat of financialpoal positionaion asat31Deces at 31 December2022r 2022 and202d 2021ar1 areasfole as follows: 2022 Development expenditure Licences Computer software Administrative concessions and others Tot al Cost: Balance at 31/12/21 13,605 97,566 8,585 2,494 122,250 Additions 1,939 – 222 299 2,460 Disposals (1,000) – (3,324) – (4,324) Transfers – – 45 – 45 Translationdin differencess – 1,025 (39) – 986 Balance at 31/12/22 14,544 98,591 5,489 2,793 121,417 Accumulated amortisation Balance at 31/12/21 (8,868) – (7,141) (1,823) (17,832) Additions (Note 22.6) (1,363) – (439) (1) (1,803) Disposals 1,000 – 3,324 – 4,324 Translationdiff differences – – 8 – 8 Balance at 31/12/22 (9,231) – (4,248) (1,824) (15,303) Other intangible assets, net at 31/12/21 4,737 97,566 1,444 671 104,418 Other intangible assets, net at 31/12/22 5,313 98,591 1,241 969 106,114 151Befesa Annual Report 2022 Statutory  financialstatements  Management report  ToBefesa’s  shareholders  Additional  information Consolidated  financialstatements 8. Other intangible assets continued 2021 Development expenditure Licences Computer software Administrative concessions and others Tot al 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din differencess – 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diff 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 Licencesaces areintre intangibleasle assetswits withanih an indefiniteusete usefullifel life.Ther. The recoverabilityofthy of theseliese licenceshces hasbeas beeneven evaluatedated by the Group’s management based on impairment tests disclosure in Note 7. 2022 Themose mostsigt significantadnt additionsforts for theyeahe yearrelr relatestodates to developmentexent expensescses capitalisedintsed in the“he “Secondaryy Aluminium” segment amounting to €1,939 thousand and to ERP implementation in the “Steel Dust” segment, €222 thousand. Themose mostsigt significantdint disposalfoal fortheyr the yearreear relatetotlate to thedhe disposalofthl of theSAP(e SAP (priorERPor ERP),fu), fullyally amortised,wd, whichh amounts to €3,324 thousand in Befesa Zinc Comercial, S.A.U., Befesa Zinc Aser, S.A.U. and Befesa Zinc Óxido, S.A.U. Moreover, Befesa Zinc Óxido S.A.U. has made a disposal of €1,000 thousand of fully amortised development expenditures. 2021 Themose mostsigt significantadnt additionsforts for theyeahe yearrelr relatetodeate to developmentexnt expensescses capitalisedintd in the“he “SecondaryAly Aluminium”um” 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. Investment commitments At31DeceAt 31 December2022anr 2022 and202d 2021,t, theGhe Grouphroup hadnad nosigo significantinvent investmentcomt commitments . Notes to the consolidated financial statements as at 31 December 2022 (thousands of euros) continued 152 Befesa Annual Report 2022 To Befesa’s shareholders 9. Property, plant and equipment Movementsints inthn thisconis consolidatedstted statementoffint of financialpial positionaion asat31Deces at 31 December2022anr 2022 and202d 2021area1 are asfols follows:: 2022 Land Buildings Plant and machinery Other property, plant and equipment Fixed assets in progress Total Cost: Balance at 31/12/21 44,279 162,467 626,866 69,809 72,539 975,960 Additions – 538 1,869 665 98,821 101,893 Business Combination (Note 6) 1,552 7,595 95,536 81 15,812 120,576 Disposals – (228) (8,736) (5,892) (72) (14,928) Transfers (75) 5,088 63,325 (31,024) (37,359) (45) Translationdin differencess 186 2 6,307 61 (1,765) 4,791 Balance at 31/12/22 45,942 175,462 785,167 33,700 147,976 1,188,247 Accumulated depreciation and provisions: Balance at 31/12/21 – (73,618) (337,712) (26,503) – (437,833) Additions (Note 22.6) – (6,804) (47,704) (1,988) – (56,496) Disposals – 188 13,110 1,475 – 14,773 Translationdin differencess – 213 (2,356) 5,313 – 3,170 Balance at 31/12/22 – (80,021) (374,662) (21,703) – (476,386) Impairment losses at 31/12/21 (874) – (28,151) (27) – (29,052) Additions (Note 22.6) – – – – – – Impairment losses at 31/12/22 (874) – (28,151) (27) – (29,052) Carrying amount at 31/12/21 43,405 88,849 261,003 43,279 75,539 509,075 Carrying amount at 31/12/22 45,068 95,441 382,354 11,970 147,976 682,809 153Befesa Annual Report 2022 Statutory  financialstatements  Management report  ToBefesa’s  shareholders  Additional  information Consolidated  financialstatements 9. Property, plant and equipment continued 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din differencess 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 31/12/19 – (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din differencess – (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 2022 Themae mainadin additionsforts for theyeahe yeararerer are relatedtothd to thecone constructionoion ofthenf the newplew plantsinChs in China(ina (€22.3m€22.3 million),the), the investmentsmnts madebytade by thenhe newcomew companiesinUS(€s in US (€39.1mi1 million),woon), worksdrks doneione inBefen BefesaSsa Salzschlacke,Gmke, GmbHmbH mainlyly relatedtotated to thephe plantofHat of Hanoverafr aftertter thefireihe fire in202n 2021(€1 (€25.0mil0 million)andtn) and theahe annualreal recurrenterent environmentalandl and maintenance investments made at each plant. 2021 Themae mainadin additionsforts for theyeahe yearwerr wererelae relatedtothted to thecone constructionofthn of thetwe twonewpo new plantsinCts in China(€45a (€45.0mi.0 million),tion), thehe investmentsmnts madebytade by thenhe newcomew companyBefeny BefesaHosa HoldingUSing US,In, Inc.(€c. (€9.0mi9.0 million),aon), andthnd theane annualrecul recurrentnt environmental and maintenance investments made at each plant. Impairment losses AsaAs at3t 31D1 December2022,thr 2022, thereweere werenoimre no impairments AsaAs at3t 31D1 December202r 2021,th, theCome Companyhany hasimps impairedalad a landby€nd by €0.8m0.8 million. Insurance TheGroe Grouptup takesoakes outinut insurancepolce policiestocovees to coverposr possiblerile riskstowsks to whichitch itsprops property,pl, plantaant andeqnd equipmentarent are subject.Tct. Thecohe coverageiscge is consideredtobesred to be sufficient. Capitalisation of borrowing costs Thereaere arenosire no significantboant borrowingcosg costscats capitalisedin2022and in 2022 and202d 2021. Notes to the consolidated financial statements as at 31 December 2022 (thousands of euros) continued 154 Befesa Annual Report 2022 To Befesa’s shareholders Mortgaged property, plant and equipment At31DeceAt 31 December2022anr 2022 and202d 2021,t, therearenre are nosigo significantfixet fixedassed assetsplts pledgedtoseed to securelcure loans. Investment commitments At31DeceAt 31 December2022,thr 2022, theGroe Grouphaup hadinved investmentcent commitmentsamts amountingto€28ng to €28.8m.8 million(202ion (2020:€30: €33.7mi7 million)on) mainly due to the expansion project in China and the US . 10. Financial assets by category and class Theclae classificationoffinon of financialassl assetsbycets by categoryany andclad classisass is asfols follows: 2022 2021 Current Non-current Current Non-current Financialasal assetsmets measuredatfad at fairvair valuetlue throughprofih profitorlt or loss Equity instruments (Note 6) – – – 8,829 Financial assets at amortised cost Loans Variableariable rate – 1,666 – 4,724 Impairment – (1,104) – – Trade and other receivables 155,094 – 145,378 – Security deposits 887 3,467 825 1,200 Financial assets measured at fair value Hedgingding derivatives(ves (Note1Note 17) 455 40,492 – 1,200 Totalfinancial financialassets assets 156,436 44,521 146,203 15,953 Thefae fairvair valueoffilue of financialasal assetsdoesns does notdiot differsiffer significantlyfly fromtrom theircarr carryingang amount. AspAs partoftt of theaghe agreementsexps explaininnn in note6,Beote 6, Befesaafesa alsoalso acquirediired in2021aminn 2021 a minoritysty stakeof6.ake of 6.9%oft9% of theeqhe equityy interestsits inAmen AmericanZcan ZincPinc Products,LLC(A, LLC (AZP),A), AZR’szZR’s zincreinc refiningsung subsidiary,for€, for €8,500tho0 thousand(and (US$10mi0 million). This agreement included put options held by the shareholders of American Zinc Products, LLC (AZP) and call options held by the Befesa Group. The put and call options depended on the certain achievement of the capacity utilisation, andoped operatingcing costsofths of theplae plant.Them. The maincain characteristicsoftics of theseputae put andcnd calloall options,whi, whichcoch couldbuld beexercie exercisedsed until31Dectil 31 December2023ber 2023,werea, were asfolls follows: ––  Firstputot put option:Thn: Theshe shareholderswers willhavetl have theophe optiontoseln to sellthel theirshir sharesuptoatots up to a totalof27al of 27.6%fo.6% foratotar a totalprl priceofice of US$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od put option:Ton: Theshhe shareholderswils willhavetl have theohe optiontoseln to sellthel theirsir sharesuptoatots up to a totalof65al of 65.5%foratot.5% for a totalpal pricee of US$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 US$71.11. Thesefiese financialinl instrumentswerens were notvalot valuedat3d at 31De1 December2021siber 2021 sincetnce theprhe priceaice atwhit whichtch theycohey couldbuld beexercie exercisedsed wasths thesame sameaste as thatphat paidbytaid by theGhe Groupforoup forthr thestae stakeitcuke it currentlyhoy holds,an, andsind sincethce therehaere hadbeed beennosin no significantant changes in the business, the directors continue to consider this to be market value. Furthermore, the share price of theParee Parentisint is inlinn linewie withUSth US$71.11 . 155Befesa Annual Report 2022 Statutory  financialstatements  Management report  ToBefesa’s  shareholders  Additional  information Consolidated  financialstatements 10. Financial assets by category and class continued In2022,tn 2022, theGhe Groupexeroup exerciseditsed itsopts optiontoaion to acquiretire theremhe remaining93%integ 93% interestirest inAmn AmericanZinn ZincProdc Products,LLC.s, LLC. (currently,B, BefesaZia ZincMetnc Metal,LLC).Asare, LLC). As a result,tt, thefihe financialinsl instrumentwent weredere derecognisedontsed on thedhe datewhate whenten thehe Groupaup acquiredtired thecohe control.Dl. Duetoadiue to a differenceince inthn thefaie fairvalr valueoftue of thefinhe financialinsl instrumentdent derecognisedalsed a lossofoss of €6,406 thousand has been booked (Notes 6 and 23) . 11. Right-of-use assets and lease liabilities Detailsofals of andmovend movementinclnt in classesofrses of right-of-useasse assetsdsets during2ing 2022and2021area022 and 2021 are asfolls follows: Land Buildings Plant and machinery Other property, plant and equipment Total Cost: 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diff differences 980 186 27 453 1,646 Balance at 31/12/21 17,450 6,244 9,339 9,399 42,432 Additions 324 426 3,844 4,177 8,771 Business Combination (Note 6) 14 278 759 918 1.969 Disposals (69) (159) (2,788) (4,377) (7,393) Translationdiff differences (125) 53 (173) 713 468 Balance at 31/12/22 17,594 6,842 10,981 10,830 46,247 Accumulated amortisation 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diff differences (314) (36) 12 (309) (647) Balance at 31/12/21 (2,149) (2,614) (5,198) (2,136) (12,097) Additions (Note 22.6) (846) (1,248) (3,179) (4,514) (9,787) Disposals 69 124 2,756 4,114 7,063 Translationdiff differences (92) (5) (40) (394) (531) Balance at 31/12/22 (3,018) (3,743) (5,661) (2,930) (15,352) Right-of-use assets net at 31/12/2021 15,301 3,630 4,141 7,263 30,335 Right-of-use assets net at 31/12/2022 14,576 3,099 5,320 7,900 30,895 Theshoe short-termlerm leaseexase expensefonse for2022amor 2022 amountsto€2,0s to €2,003t03 thousand(2021nd (2021:€1: €1,268th268 thousand). Notes to the consolidated financial statements as at 31 December 2022 (thousands of euros) continued 156 Befesa Annual Report 2022 To Befesa’s shareholders 11. Right-of-use assets and lease liabilities continued Details of lease payments and liabilities Anana analysisoftsis of thecohe contractualmual maturityofleay of leaselise liabilities,ins, includingfug futureintee interestprest payable,ible, isasfos as follows: 2022 2021 Within 1 year 10,298 7,612 Between1and2yn 1 and 2 years 4,569 5,587 Between2and3yn 2 and 3 years 2,709 2,817 More than 3 years 6,710 7,352 24,286 23,368 Thechae changesintes in thislhis liabilityfroy from1Janm 1 Januaryto3y to 31D1 Decemberarear are asfolls follows: 2022 2021 Balanceance asat1Js at 1 January 23,368 13,984 Increase 9,047 6,877 Business Combination (Note 6) 1,969 8,097 Lease payments (11,430) (6,417) Interest 1,009 563 Disposal (33) (50) Translationdiff differences 653 314 24,286 23,368 12. Inventories Detailsofils of inventoriesintes in theache accompanyingconng consolidatedstted statementoffint of financialpoal positionaion asat31Deces at 31 December2022anr 2022 andd 2021areasf2021 are as follows:ws: 2022 2021 Finished goods 28,928 28,858 Goodsiods inpron progressanss andsemd semi-finishedgoed goods 6,817 1,238 Rawmatw materialss 36,124 20,014 Other 30,670 17,367 Total 102,539 67,477 “Other”at3” at 31De1 December2022aber 2022 and2021mand 2021 mainlyiny includessdes spareppare partsfots forthr theGroue Group’sfacp’s facilities. The Group has taken out insurance policies to cover risks relating to inventories. The coverage provided by these policiesisces is consideredtobesred to be sufficient . 157Befesa Annual Report 2022 Statutory  financialstatements  Management report  ToBefesa’s  shareholders  Additional  information Consolidated  financialstatements 13. Accounts receivable Thebree breakdownofacn of accountsrents receivableile inthean the accompanyingcong consolidatedsated statementoffinnt of financialpial positionasatn as at 31De1 December2022and2021isar 2022 and 2021 is asfolls follows: 2022 2021 Contract assets 6,984 2,492 Trade and other receivables 102,498 112,412 Trade receivables from related companies (Note 25) 1,039 917 Other receivables (Note 21) 20,217 12,791 Public authorities (Note 20) 19,566 10,671 Advances to suppliers 6,681 7,770 Loss-allowancefordoe for doubtfuldul debts (1,891) (1,675) Total 155,094 145,378 NosNo significantimpt impactoftact of theahe applicabilityofty of theexphe expectedcredd creditloit lossmoss modelhdel hasbeas beeniden identifiedonted on traderecee receivables. Changesintes in theahe allowancesfordces for doubtfuldul debtsrebts relatingtothg to theGroue Group’strap’s tradeade andothnd otherreer receivablesfoles for2022and2r 2022 and 20211 areaare asfols follows: 2022 2021 Opening balance (1,675) (1,538) Write-offuncff uncollectibleacle accountsreces receivableane andothd otherter transfers (98) – Business Combination (Note 6) (127) (137) Conversionersion differences 9 – Closing balance (1,891) (1,675) Thecrede creditqit qualityofty of traderecee receivablesthes thathaat havenotbeve not becomeimpe impairedcaed canbecln be classifiedashid as highlysaly satisfactory,y, sinceince insubn substantiallyaly allofthll of thecae casestses therihe risksasks areaccre acceptedandcd and coveredbycredd by creditrit riskiisk insurersarers and/orbor banksanks andd financialfinancial institutions. Themae maximumexmum exposuretocrure to creditrist riskatthk at thedate dateofprese of presentationofton of thefinhe financialiial informationisthn is thefae fairvair valueofelue of eachach of the accounts receivable disclosed above and, in all cases, taking into consideration the aforementioned credit insurance coverage. 14. Equity a) Share capital Thenue numberofshr of sharesaares asat3s at 31De1 December2022aber 2022 and2021is39,nd 2021 is 39,999,998wit8 withapah a parvalr valueof€ue of €2.78ea78 each.Allt. All theshhe sharess are listed in the Frankfurt Stock Exchange. The authorised capital of the Company (including, for the avoidance of doubt, the Company’s issued share capital) isset at 39,999,998 shares. On1On 16J6 June2021une 2021,t, theChe Companyiany issued5,ed 5,933,293news293 new shareseares eachwich withapth a parvaar valueof€lue of €2.78(€178 (€16,472tho72 thousand)and) and sharepare premiumof€um of €53.22(€53.22 (€315,792th792 thousand)(Nd) (Note6).Thote 6). Thenewse new sharesweres wereincre includedinted in theexhe existingling listingofg of Befesa’s shares in the Frankfurt Stock Exchange. The Company recognised €3,648 thousand of issuance costs as a reduction in equity instruments issued . Notes to the consolidated financial statements as at 31 December 2022 (thousands of euros) continued 158 Befesa Annual Report 2022 To Befesa’s shareholders Theshe shareholderster structureasat31Decre as at 31 December2022aber 2022 and2021isasfond 2021 is as follows: Percentage of ownership 2022 2021 Free-floatee-float (includingmanagement) management) 100% 100% Total 100% 100% b) Share premium and other reserves Detailsintls in theche consolidatedfiated financialstal statementareasfot are as follows: 2022 2021 Share premium 532,867 532,867 Hedgingreing reserveses (2,573) (96,830) Other reserves 37,340 (19,915) Total 567,634 416,122 Share premium The share premium may be used to provide for the payment of any shares that the Parent Company may repurchase fromitm itsshas shareholders,tooffs, to offsetanynet any netreaet realisedloed losses,toma, to makediske distributionstoions to itsshts shareholders,is, inthn theformofae form of a dividend, or to allocate funds to the legal reserve. On1On 14Ju4 July2021ly 2021,B, Befesadia distributedtoited to itssts shareholdersadirs a dividendof€1d of €1.17p7 perser share(rhare (repaymentoftnt of theshhe shareare premium),aum), amountingto€ng to €46.8mi8 million,aon, asapps approvedbytroved by theAGhe AGMhelM heldon30Jud on 30 June2021ne 2021. Other reserves TheParee ParentCont Companyisreny is requiredtotred to transferaminr a minimumof5%ofitum of 5% of itsnetss net statutoryprofiy profitforeat for eachfinch financialyeial yeartoaar to a legalregal reserve.The. Thisreqis requirementcent ceasestobases to benece necessaryoy oncetnce thebahe balanceoftce of thelehe legalregal reserverve reaches1es 10%o0% ofthef the issuedshad sharecare capital.Ift. If thelehe legalregal reservelve laterfalr fallsbels belowtlow the1he 10%t0% threshold,ald, atleat least5%ofnetsst 5% of net statutoryprofiy profitsmuts mustst beabe allocatedagad againtowin towardtard thereshe reserve.Tve. Thelhe legalresel reserveisnove is notavait availablefoble fordisr distributiontothn to theshae shareholders. InJIn June2une 2022,thes022, the shareholdersattrs at theirAGMresr AGM resolvedtoaped to approvetprove thedihe distributionofadion of a dividendof€nd of €50,000t00 thousandnd fromthm thenetpre net profitoftofit of theyeahe year202r 2021. c) Translation differences Thebree breakdown,bycn, by company,of“any, of “Translationdiffen differences”aces” at3t 31D1 December2022anr 2022 and202d 2021i1 isasfos as follows: Company or group of companies 2022 2021 BefesaZina ZincKorec Korea,Ltda, Ltd. 1,590 1,489 Befesa Salt Slags, Ltd. 682 (1,541) Befesa Scandust, AB (3,105) (1,757) Befesa Silvermet Iskenderum Celik Tozu Geri Donusumu, A.S. (12,381) (18,828) Befesa Silvermet Dis Ticaret A.S. (1,824) (1,813) BefesaZina ZincEnvc EnvironmentalPal ProtectionTn Technology(Jy (Jiangsu)Co.Lu) Co. Ltd. 1,338 1,685 BefesaZina ZincEnvc EnvironmentalPal ProtectionTn Technology(Hy (Henan)Can) Co.Ltdo. Ltd. 765 1,209 BefesaHola HoldingUSng US,Inc, Inc. 42,242 15,556 Befesa Zinc Metal, LLC (9,032) – Other (78) (80) Total 20,197 (4,080) 159Befesa Annual Report 2022 Statutory  financialstatements  Management report  ToBefesa’s  shareholders  Additional  information Consolidated  financialstatements 14. Equity continued d) Non-controlling interests Detailsofeqls of equity–nony – non-controllingiing interestsareasfos are as follows: 2022 2021 Steel Dust: Befesa Silvermet Turkey, S.L. and subsidiaries 14,153 8,712 Total 14,153 8,712 Summary information on subsidiaries with non-controlling material shareholdings Belowalow arethre themaie mainfigun figuresofBres of BefesaSila SilvermetTmet Turkey,S.rkey, S.L.aL. anditnd itssus subsidiaries,exs, expressedised inthon thousandsofeurs of euros.os. Befesa Silvermet Turkey, S.L. and its subsidiaries 2022 2021 Non-current assets 29,158 22,418 Current assets 16,643 14,888 Non-current liabilities 657 688 Current liabilities 14,602 17,819 Equity 30,542 18,799 Sales 41,297 29,348 Profitbefit beforetfore taxes 2,123 7,624 Profitaffit aftertar taxes 609 5,625 At31DeceAt 31 December2022anr 2022 and202d 2021,t, thephe percentagesofnges of non-controllingiing interestsosts ofBefesf BefesaSia SilvermetTt Turkey,S.rkey, S.L.L. amountedto46ted to 46.4%. e) Capital management TheGroe Group’scaup’s capitalmal managementfocut focusesonases on achievingafinng a financialstrl structuretture thatohat optimisesthes thecose costofcapt of capitalwal whilee maintainingasolg a solidfinid financialpial position.Tn. Thisphis policyrecocy reconcilestles thecrehe creationofvaon of valueforthe for theshe shareholderswits withacch accesstoess to financialmarl marketsakets atacomt a competitivecove costinost in ordertocrder to coverbover bothdeoth debtrefibt refinancingreqg requirementsants andinvd investmentplat plann financingneedg needsnotcs not coveredbovered bythefy the fundsgeds generatedbated bytheby the business(Nots (Note4.e 4.1.d.). TheGroe Group’smaup’s managementcoent considersths thatthat thelevee leveragerate ratio(io (Note2.6)iNote 2.6) isagoos a goodindd indicatoroftator of thedehe degreetowgree to whichthch thee objectivessetas set arebeire beingacng achieved.At31Deced. At 31 December2022aer 2022 and2021nd 2021,mo, mostoftst of thedehe debtsabts arerelare relatedtobuted to businessess acquisitions made in prior years. 15. Financial debt Detailsoftls of therelhe relatedlated lineiine itemsints in theacche accompanyingcong consolidatedsted statementoffient of financialpoal positionaion asat3s at 31De1 Decemberber 2022an2022 and202d 2021a1 areasfolre as follows: 2022 2021 Current maturity Non-current maturity Current maturity Non-current maturity Bank loans and credit facilities 18,349 663,448 12,010 653,571 Unmatured accrued interest 4,689 – 5,781 – Finance lease payables 10,298 13,988 7,612 15,756 Total 33,336 677,436 25,403 669,327 Notes to the consolidated financial statements as at 31 December 2022 (thousands of euros) continued 160 Befesa Annual Report 2022 To Befesa’s shareholders Thefae fairvair valuesofbors of borrowingsarenotms are not materiallydiffy differentfromtt from theircair carryingamog amountssins sincethce theintee interestprest payableible iss close to current market rates. Themae mainterin termsams andcond conditionsofbons of borrowingsareags are asfols follows: 2022 2021 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 Euribor+2% 2026 4,604 612,519 5,691 608,901 Jiangsu CNY 220,000 LPR(NBIC)+25pbt 2026 6,832 21,065 3,513 22,058 Henan CNY 260,000 LPR(NBIC)+25pbt 2027 3,469 29,182 1,591 18,610 Other 18,431 14,670 14,608 19,758 33,336 677,436 25,403 669,327 On19OctobOn 19 October201er 2017,i, inordn ordertoster to standardisetdise thefihe financialstl structureoftheGe of the Group,theCp, the Companyaany asPares Parentannt andcerd certainn subsidiariesasboes as borrowersaers andgnd guarantorsers enteredintoa€d into a €636,000th0 thousandFand FacilitiesAgies Agreement.Th. Thispois post-IPOIPO agreementient isints intendedtoraed to raisefiise financingfortg for theenhe entireGtire Groupandcp and canceltcel theGhe Group’sprroup’s previouscuus currentannt andnond non-current borrowingsincos in connectionwion withtith the€he €300.0m0.0 millionZion ZincNinc Notes,€1, €150.0mil0 millionPIKNotn PIK Notesanes andthe€1d the €167.5m.5 million SyndicatedLoaed Loan. Uponcomon completionofthn of theIPOoe IPO on3Noven 3 November20r 2017(7 (Note1Note 1),t), theFahe FacilitiesAgres Agreementtoent tookeffeok effecton7Dect on 7 December201ber 2017. On9JOn 9 July20y 2019,t9, therehe refinancingoftng of theexihe existingcing capitalstl structurewture wassuas successfullycoy completedieted inaleven a leverage-neutralal transactionthn thata)exat a) extendsBefes Befesa’sdsa’s debtmaebt maturityuy uptoJulp to July2026wiy 2026 withaseth a seven-yeartenor tenorofthr of thecovene covenant-liteTte Termrm LoanB(n B (TLB)atat) at attractiveiive interestrest rates,andb)i, and b) increasesloas loanbasn basketstoakets to accommodateBate Befesa’sgrowa’s growthroadh roadmapp including China. TheFacie FacilitiesAgrees Agreementwasst was signedbyted by thePahe Parentoftrent of theGhe Group(roup (Befesa,S., S.A.)an.) andhasbd has beendeen designedtomeed to meetthet the financingneedg needsofals of allGroul Groupcomp companies. The Facilities Agreement comprises: ––  TermLoarm LoanB(n B (TLB)Faci) FacilityCy Commitmentinanat in an amountof€nt of €526m26 million,wh, whichiich isabuls a bulletwlet withamith a maturityofsevey of sevenn years. ––  RevolvingCredg CreditFacit Facility(RCFy (RCF)ina) in anamon amountof€unt of €75mi5 millionwion withamth a maturityofsixyey of six years. ––  AGA GuaranteeFactee FacilityComy Commitmentinat in anamon amountof€unt of €35mi35 millionwion withamth a maturityofsy of sixyeix years. Interestontt on theinhe initialTal TLBfaLB facilityway wasEurs Euriborplur plusaspres a spreadof2.7ad of 2.75%,an, and2.50d 2.50%int% in thecahe caseofthse of theRCFe RCF.T. Thesee spreadscous couldbeald be adjusteddowd downwardsto1rds to 1.75%i5% inthecn the caseofTLBae of TLB andto1nd to 1.25%int.25% in theche caseoftase of theRCFhe RCF,d, dependingong onn therate ratioofnio of netfinet financialdial debt/EBITDA. On1On 17Fe7 February2020y 2020,Befe, Befesarepsa repricediced itsTLts TLBreduB reducingitg itsintes interestrrest rateby50bate by 50 bpstoEurps to Euriborplor plus20us 200bpsw0 bps withaith a floorof0%or of 0%.T. Thefahe facility’sls long-termJum July2026maly 2026 maturitydy dateanate andallotd all otherdocr documentationtern termsremms remainwin withoutut further amendment. On2JOn 2 July202y 2021,wi, withtth thepuhe purposeofFiose of Financingthng theAcque AcquisitionofAon of AZR(iZR (includingbing butnotlut not limitedtoaited to anycosny costsats andnd expensesrelses relatingtoting to theAche Acquisitionaion andand anyrefinny refinancingofFing of FinancialIial Indebtednessofths of thetae targetgrget group),aroup), andgnd generalral corporateprate purposes,tog, togetherwier withtth theache acceleratedeqted equityoty offering(ing (AEO)BAEO) Befesasiga signedaned anInn IncrementalTal TermFacrm Facilityy forafor anaddn addittional€1l €100mi0 millionAddon Add-OnTLOn TLB(NotB (Note6).Theme 6). The maturityandrey and restofdst of documentationteion termsremas remainiin inlinn linewite withh the existing TLB . 161Befesa Annual Report 2022 Statutory  financialstatements  Management report  ToBefesa’s  shareholders  Additional  information Consolidated  financialstatements 15. Financial debt continued InAn August2021st 2021,t, themahe marginappn applicabletothle to theTLe TLBwasreB was reducedby25bpstoEed by 25 bps to Euriborpbor plus1lus 175bpsd75 bps duetothue to thedee decreasese on the leverage ratio. InDIn December2022,thr 2022, themarge marginain applicabletotheTe to the TLBwaLB wasins increasedby25bpsed by 25 bpstoEurs to Euriborplur plus200bs 200 bpsdups duetothee to the increase on the leverage ratio. TheFacie FacilitiesAgrees Agreementprovt providesafinas a financialcoal covenantbant basedosed onthenn the netleet leveragewge whichshah shallnotexcll not exceedteed therhe ratioo 4.5:1fora4.5:1 for anyrelny relevantpernt period.Th. Thecovee covenantonlt onlyapy appliesiftes if thetothe totalaal amountofalnt of alldral drawingsungs underthr theRCFexceee RCF exceedsds 40%ofth% of thecome commitmentsunts underthr theRCFe RCF.At31Dece. At 31 December2022anr 2022 and202d 2021,t, theRChe RCFhasnF has notyetbeot yet beendren drawnandnn and noo financialc covenantt applies. TheFacie FacilitiesAgrees Agreementlimt limitsdis dividenddend distributionifann if anyGrouy Groupcomp companyincny incursaneves an eventofdefnt of defaultasdlt as definedined in the agreement. In202In 2020,Befe0, Befesaclsa closedtosed thefihe financingstg structurefoture forbotr bothplah plantsunts underconer constructioninChn in China(ina (JiangsuandHu and Henan).Tan). Thehe notionalaal andthnd therestoe rest ofthecf the conditionssons signedaed areshowre shownintn in thethe tableaboe above.At3ve. At 31De1 December2ber 2022,t2, thedehe debtforbbt for bothoth plantswas wascomps completelydly drawn. At31DeceAt 31 December2022,“Or 2022, “Other”mr” mainlyincly includesshes short-termfirm financingofBefeg of BefesaSisa SilvermetIskeet Iskenderun,dn, debtreebt relatedtod to thefine financiallial leasesanes andtheid the incorporationoion ofBefesf BefesaZia ZincMetnc Metaltotal to thecohe consolidationpeion perimeter(202r (2021in1 includesdes short-termfirm financingofBefg of BefesaSesa SilvermetIset Iskenderun,dun, debtreebt relatedtothd to thefinae financialleal leasesandis and incorporationofBion of Befesaa Zinc US to the consolidation perimeter). At31DeceAt 31 December2022anr 2022 and202d 2021,a, anamn amountof€75milt of €75 millionwasun was undrawnfromtn from thesyhe syndicatedfinted financingarrg arrangementent (Note 4.c). Theevole evolutionofnion of netfinet financialdial debtdebt duringting the2022anhe 2022 and202d 2021i1 isasfols as follows: Cash and cash equivalents (Note 4) Other current financial assets (Note 10) Financial debt (Note 15) Total Netfint financialdebl debtasat31Dt as at 31 December202r 2020 (154,558) (64) 548,215 393,593 Cash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 41,362 Netfint financialdebl debtasat31Dt as at 31 December2021r 2021 (224,089) (61) 694,730 470,580 CashCash flows 66,556 – 3,114 69,670 Exchange rate adjustments (1,378) – (593) (1,971) Other non-monetary movements () (2,840) 1 13,521 10,682 Netfint financialdebl debtasat31Dt as at 31 December202r 2022 (161,751) (60) 710,772 548,961 ())  Othernor non-monetarymoy movements:Mts: Mainlyduety due totho theimpe impactoftht of thenee newconw contractsuns underIder IFRS16,aFRS 16, andtnd theihe incorporationofBon of BefesaHosa HoldingUStotg US to thecohe consolidationn perimeter in 2021 and the incorporation of Befesa Zinc Metal to the consolidation perimeter in 2022 (Note 6 ) . Notes to the consolidated financial statements as at 31 December 2022 (thousands of euros) continued 162 Befesa Annual Report 2022 To Befesa’s shareholders 16. Other current and non-current payables 2022 2021 Current maturity Non-current maturity Current maturity Non-current maturity Payable to asset suppliers 8,390 – 10,017 – Accounts payable to public authorities (Note 20) 14,220 – 17,855 – Remuneration payable (Note 18) 22,666 – 21,561 – Other 15,787 7,831 16,465 4,621 Total 61,063 7,831 65,898 4,621 “Other”mai” mainlyincy includesthes thecure currentfinat financiallal liabilitiesrels relatedtotated to thelahe lastdest derivativesive settlementsoftnts of theyehe yearamar amountingg to€1to €11.0mi1.0 million(2021on (2021:€1: €14.3mi3 million)anon) andthd thecape capitalgral grantsnotyes not yetrelet releasedtoincd to incomeaome anddend debtswbts withofficih officialboal bodiess amounting to approximately €3.4 million (2021: €4.2 million) 17. Financial derivatives TheGroe Groupusup usesdees derivativefiive financialinsl instrumentstoheds to hedgethge therie riskstowsks to whichitch itsacts activities,oes, operationsandfs and futurecare cashsh flowsareexws are exposed,wed, whicharemch are mainlyrly risksars arisingfrong fromcham changesinexces in exchangerage rates,ites, interestrrest ratesaates andthnd themae marketprket pricee ofceof certainmetin metals,ms, mainlyzly zinc.Det. Detailsofthls of thebae balancestces thatrehat reflectthemt the measurementofdert of derivativesives inthen the accompanyingcong consolidatedstted statementoffinat of financialpoal positionaion asat3s at 31De1 December2ber 2022and2021area022 and 2021 are asfolls follows: 2022 2021 Cashflsh flowheow hedgesnons non-currentast assets(Nos (Note10)te 10) Swapcoap contractsforzts for zinc 9,369 – Interestrst rateswate swap 31,123 1,200 40,492 1,200 Cashflsh flowheow hedgescurs currentast assetss Swapcoap contractsforzts for zinc 438 – Foreigncun currencysncy swap 17 – 455 – Total assets 40,947 1,200 Cashflsh flowheow hedgesnons non-currentliat liabilities: Swapcoap contractsforzts for zinc 12,875 56,700 12,875 56,700 Cashflsh flowheow hedgescurs currentlit liabilities: Swapcoap contractsforzts for zinc 38,223 75,573 Foreigncun currencysncy swap – 77 38,223 75,650 Total liabilities 51,098 132,350 163Befesa Annual Report 2022 Statutory  financialstatements  Management report  ToBefesa’s  shareholders  Additional  information Consolidated  financialstatements 17. Financial derivatives continued ■ Zinc derivative contracts Detailsoftls of thetonhe tonneshnes hedgedaned andofthd of themate maturityofthy of therele relatedcoated contractsat31Deces at 31 December2022aner 2022 and202d 2021area1 are asfols follows: Tonnes 31De31 December 2022 31De31 December 2021 2023 2024 and subsequent years 2022 2023 and subsequent years Hedge(inte (in tonnes) Swapcoap contractforzt for zinc 132,400 176,000 92,405 221,700 132,400 176,000 92,405 221,700 During 2022, Befesa has extended its zinc hedges until and including March 2025 (2021: September 2024). Derivativesaredes are designatedtohedd to hedgehige highlyproly probablefole forecasttst transactions(sns (sales)andts) and thefhe fulleull effectoftffect of thehehe hedgeidge iss recognisedineqd in equity,netofty, net of thethe taxeffax effect,con, consideringing itsasts assessmentashnt as highlyeffly effectiveheive hedgingiing instruments.The. The portiontran transferredtoprofid to profit/(loss)eass) eachyeach yearisrer is recognisedundd under“er “Revenue”inue” inthn theince incomesome statementateant at eachch settlement date. ■ Interestratest rate swaps(flos (floatingtofixeng to fixed) TheCome Companyarny arrangedaged aninten interestratest rate swapdwap during201ing 2017.Th. Thisdeis derivativemive maturesires in2022.Thenn 2022. The notionalamol amountsofs of theIRSe IRSsouts outstandingaing at3t 31D1 December202r 2021tot1 totalled€led €316,000t00 thousand(Notd (Note4.e 4.1),w), whichwerech were classifiedashed as highlyly effectiveheve hedginginng instruments.Ts. Thefihe fixedinxed interestratewt rate was0.as 0.3580%an0% andthemd the mainbenn benchmarkfloak floatingratewg rate wasas Euribor. This derivative matured in December 2022. InMIn March2arch 2020,Befe020, Befesaasa arrangedaned anotheriner interestratest rate swapiwap inordn ordertofier to fixtheix the interestfortst for theexhe extensionpern periodoiod ofthef the refinancingsigg signedoned on9Jun 9 July201ly 2019(N9 (Note1ote 15).T5). Thenothe notionalaal amountoftnt of theIRShe IRSsouts outstandingat3g at 31De1 December2022aber 2022 andnd 31De1 December202r 2021t1 totalled€31d €316,000tho0 thousand,wh, whichwich wasclas classifiedasahid as a highlyeffey effectiveheve hedginginng instrument.Th. Thee fixifix interestrrest rateis0ate is 0.236%,an, andthemd the mainbenn benchmarkfloatk floatingratewg rate wasEuas Euribor.Th. Thisdeis derivativemive maturesires inJuln July2026.y 2026. ■ Foreigncign currencycasy cashflowhh flow hedgeses At31DeceAt 31 December2022,cur 2022, currencypucy purchasecose contracts(swas (swapsorfops or forwards)amrds) amountedto:ted to: – US dollar sales: US$42,469 thousand. – US dollar purchases: US$36,107 thousand. At31DeceAt 31 December202r 2021,cu, currencypncy purchasecase contracts(sws (swapsoaps orforr forwards)ards) amountedto:nted to: – US dollar sales: US$57,401 thousand. – AED sales: AED 164 thousand. – US dollar purchases: US$20,636 thousand. Highlyproy probablefle futurehedre hedgedtged transactionsdons denominatedinfored in foreigncurn currencyareexy are expectedtotated to takeplke placeoace onvarn variouss dateswtes withintin thenexhe next1t 12mo2 months.Ts. Theghe gainsandls and lossesrecos recognisedised inthn thehede hedgingreseg reserveineqve in equityity inconn connectionwin withth forwardfoard foreigncurn currencyconcy contractsacts at3t 31D1 December2022anr 2022 and202d 2021arere1 are recognisedinped in profitorofit orlosr lossinths in theyeae yearinr in whichtich thehhe hedgedtred transactionsaffens affectthct theince incomesome statement.Gnt. Gainsanns andlosd lossesises inequn equityinrey in respectofcuct of currencyncy forwardsat3s at 31De1 December2022wber 2022 willbetrl be transferredtotred to theinhe incomestae statementoveent overthr thenexe next1t 12m2 months. Notes to the consolidated financial statements as at 31 December 2022 (thousands of euros) continued 164 Befesa Annual Report 2022 To Befesa’s shareholders 18. Long-term provisions Detailsoflols of long-termprovm provisionsoons ontheln the liabilitysiy sideofthde of theacce accompanyingconsg consolidatedfind financialsial statementsants andofnd of movementsints in2022and2n 2022 and 2021a1 areasfore as follows: Provisions for litigation, pensions and similar obligations Other provisions for contingencies and charges Total long-term provisions Balanceance at31Dect 31 December20ber 2020 7,916 2,052 9,968 Business Combination (Note 6) 3,642 5,882 9,524 Profitanfit andlosd lossims impact 9,961 139 10,100 Transfers (7,702) – (7,702) Conversionersion differences 119 258 377 Balanceance at31Dect 31 December20ber 2021 13,936 8,331 22,267 Business Combination (Note 6) 510 – 510 Profitanfit andlosd lossims impact 5,275 73 5,348 Transfers (9,267) – (9,267) Payments (834) (67) (902) Conversionersion differences 175 387 562 Balanceance at31Dect 31 December20ber 2022 9,795 8,723 18,518 Provisions for litigation, pensions, and similar obligations At31DeceAt 31 December2022,thr 2022, theGroe Grouprecup recognisedapised a provisionof€4n of €4.5mi.5 million(2021on (2021:€7: €7.5mil5 million)relan) relatedtotted to thehe compensation plans described in Note 24. "Transfers" in 2022 and 2021 corresponds to the liability payable in 2023 and2022,whd 2022, whichhich hasbeas beenrecen recognisedas“Rd as “Remunerationpaion payable”at31Decle” at 31 December2022aber 2022 and2021nd 2021. In2022aIn 2022 and2021nd 2021,t, theprohe profitanfit andlosd lossims impactsareas are alsomlso mainlyrely relatedtothd to thecome compensationsplas plansdns describedined in Note24.Note 24. Other provisions for contingencies and charges TheGroe Groupcoup companyBeny BefesaValfesa Valera,S., S.A.S.recS. recognisesaprovs a provisionofapn of approximately€1.9miely €1.9 millionat31Decon at 31 December2022er 2022 and 2021 for the present value of the estimated costs of dismantling the concession for the performance of their activitiesaies atthePot the PortofDut of Dunkirk(rk (France)folce) followingitsteg its termination. In addition, the Group recognised other provisions under “Other provisions for contingencies and charges” to meet liabilities,whs, whetherler legaloriml or implicit,pro, probableorcle or certain,duet, due toconto contingencies,on, ongoingling litigationsaons andtnd taxoax obligations,s, whichaich ariseastse as thereshe resultoult ofpasf pasteventt eventsans andaremod are morelire likelytkely thannottoreqn not to requireanoure an outflowofreflow of resourcesemrces embodyingng economicbmic benefitsfts fromtrom theGrohe Grouptoseup to settletle theobhe obligation,pon, providedtded thatarhat a reliableeste estimatecaate canbeman be madeoftde of thehe amount of the obligation. BefesaZfesa ZincUinc US,InS, Inc.recc. recognisesasss assetretiet retirementoent obligationslins linkedtoiked to itsdits differentfant facilitiesintes in theUhe USof€6.S of €6.1m1 millionaion att December 2022 (2021: €5.6 million) for the present value of estimated costs. The main asset retirement obligation relates to the ultimate closure of the former Monaca facility . 165Befesa Annual Report 2022 Statutory  financialstatements  Management report  ToBefesa’s  shareholders  Additional  information Consolidated  financialstatements 19. Income Tax TheGroe Group’sPareup’s ParentCont Company,B, Befesa,S.a, S.A.,issu, is subjecttoLut to LuxembourgLourg Law(aw (Note1Note 1). BefesaMfesa MedioAmo Ambiente,Snte, S.L.U.he.U. headstads thefihe fiscalgroul groupofcomp of companiessubs subjecttoBject to Biscaytay taxregax regulation.Ton. Thattat taxgroux groupp comprisesBefes BefesaMesa MedioAdio Ambiente,S.te, S.L.U.,MR., MRHResiH ResiduosMet Metálicos,S., S.L.U.,Befe, BefesaAlsa Aluminio,S.o, S.L.U.,Befe., BefesaAsa Aluminioio 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Gee Germancomn companiesBefes BefesaZisa ZincGenc GermanyGany GmbH,BeH, BefesaStfesa SteelSeeel ServicesGces GmbH,Bef, BefesaZesa ZincFreinc FreibergGmrg GmbH,and, and BefesaZfesa ZincDinc DuisburgGmrg GmbHfilbH filecone consolidatedtaed taxretux returnsunds underter thethe taxleax legislationaion applicabletothe to theminGem in Germany;y; BefesaZfesa ZincGinc Gravelines,S., S.A.S.an. andBefed BefesaValesa ValeraSra S.A.S.fiS. filecole consolidatedtated taxretax returnsunns underthetr the taxlax legislationn applicabletotble to theminFram in France;tnce; theGhe Germancoan companiesBefes BefesaSesa SalzschlackeGmke GmbHanbH andBefed BefesaAsa AluminiumGum Germanyy GmbHfibH fileconle consolidatedtted taxretax returnsunns underthetr the taxlax legislationappn applicabletothle to themiem inGern Germany;andi; and intheUn the US,thS, thee companiesBefes BefesaHosa HoldingUSIng US Inc.,Befe, BefesaZisa ZincUSInc US Inc.,Befe., BefesaHsa Holding,USIn, US Inc.,Bc., BefesaZina ZincUS,Ic US, Inc.,Befe., BefesaZisa Zincnc Metal,LLC,a, LLC, andChend ChesnutRidt RidgeRage Railroad,Cor, Corp.filp. fileconse consolidatetdate taxrax returnsuns underthr thetae taxlegx legislationapon applicabletotble to themm in the US. Thereme remainingGing Groupcomp companiesfiies fileinle individualincl incometome taxreax returnsins inaccon accordancewnce withtheth the taxlax legislationapon applicablele totto them. Groupcooup companiessues subjecttoBict to Biscaytscay taxlax legislation,ion, includingtng thosewhose whichforh formparm partoftt of thethe taxgax group,group, generallyhlly haveave openforreen for reviewbythw by thetae taxautx authoritiesties theyehe yearstha thathavent have notbecot becomesome statute-barred,tred, thelhe lastfoast foryearr yearsforis for incomeme taxanax andthd theforthe for themae maintain taxesaxes andtand taxobx obligationsaons applicabletothee to them,im, inaccn accordancewnce withcurh currentlegt legislation. On1On 16J6 January2020y 2020,Befes, BefesaMea MedioAdio Ambiente.S.. S.L.aL. assucs successortotor to therephe representativeofthve of theBase Basquetque taxgax group(i.p (i.e.e. BefesaMfesa MedioambienteHonte Holdco.S.co. S.L.)wasn) was notifiedbytfied by theBhe Bizkaia’sregia’s regionaltal taxationaion authoritiesofties of thecohe commencementnt of inspection proceedings for corporate income tax for the years 2015, 2016, 2017 and 2018. The scope of the proceedingswags waspars partialandml and mainlyfoly focusocus onthean the adaptationofthesn of the structureofture of theache acquisitionoion oftheBf the BefesaGroa Groupup byBeby BefesaMfesa MedioambienteHente Holdco.Sco. S.L.in201. in 2013an3 andsubd subsequentrent reversemese mergerirger in201n 2018,a8, assessmentoent ofmanf managementnt supportsert servicesprovs providedbetd betweenreln relatedpated partiesanes andverd verificationoftion of theorhe originofthn of thetae taxcredx creditspens pendingg application of the group. On21SeOn 21 September2021ber 2021,m, minuteswutes weresiere signedinacd in accordance,ene, endingthg theaforee aforementionedpned proceedings.T. Taxcax creditsts notrenot recordedaed amountingto€5ng to €53mil3 millionwereen were eliminatedanted anddud duetoprove to provisionskeons keptbythpt by theCome Companyregay regardingthng thetae taxx creditsregs regularisedansed andnond non-recordedtded taxcrax credits.Thei. The impactinrect in resultsats andcand cashwsh wasnias nil.Inal. In addition,con, certaincrin criteriaa had been set regarding the applicability of tax credits. In this regard, the Group capitalised all tax credits generated in theBae BasqueTe TaxGrox Groupat31Decup at 31 December2021amer 2021 amountingto€21g to €21.7mil.7 million. Fully consolidated foreign subsidiaries calculate income tax expense and tax charges for the taxes applicable to themiem inconfon conformitywiy withtth thelehe legislationoion of,an, andatthd at thetae taxratex ratesinforcs in forceine in,the, theirresir respectivecouve countries(ies (Note3Note 3.19 ). Notes to the consolidated financial statements as at 31 December 2022 (thousands of euros) continued 166 Befesa Annual Report 2022 To Befesa’s shareholders Therecoe reconciliationofaccn of accountingprofig profit/(loss)fortss) for theyehe yeartoinar to incometae taxexpx expenseforthe for theyeae yearisasfor is as follows: 2022 2021 Profit/(Loss)boss) beforetae taxfrox fromconm continuingopng operations 130,340 111,852 Totalaccl accountingprog profit/(loss)bes) beforetfore tax 130,340 111,852 Tax charge at the tax rate in force in each territory (35,428) (30,632) Tax credits generated/(used) in the year and not capitalised (764) 336 Off-balancetae taxcrex creditsrecs recognition – 21,683 Non-deductible expenses and non-computable income (Note 22.3) 10,761 (528) Tax deductions generated/(used) in the year 1,145 618 Others 448 (977) Income tax expense (23,838) (9,500) – From continuing operations (23,838) (9,500) Non-computableinle incomeat3e at 31De1 December2ber 2022cor022 correspondstotheis to the incomeoftme of thegahe gainorbin or bargainpain purchase(hase (NoteNote 22.3) that has not a tax impact. At31DeceAt 31 December2022,unr 2022, uncapitalisedtsed taxcax creditsats amountedto€1nted to €151.1mi1 million,ofwh, of which€1ich €122mi22 millioncoon correspondstods to BefesaZfesa ZincUinc US,InS, Inc.(€1c. (€106m06 millionin2021n in 2021,ofw, of which€77mih €77 millioncoon correspondstoBeds to BefesaZina ZincUS,Ic US, Inc.).Tnc.). Themhe majorityofy of these tax credits (€140.6 million) expire in 2043 (2021: €97.4 million). The Directors of the Group companies and of the Parent consider that the tax assets recognised in all the circumstancesdeses describedabed abovewbove willbill beoffse offsetintet in theinhe incometae taxretux returnsorns oftheGf the Groupcomp companiesties takenindn individuallyorly or oftof thecomhe companiesforms formingthecg the consolidatedtad taxgroux group,asapp, as appropriate,wate, withinthin theaphe applicabledble deadlinesanes andlind limits. Regarding the tax credits corresponding to Befesa Zinc US, Inc., the Directors consider that there is no convincing evidencetnce thatfhat futureture taxableprofie profitswits willbeall be available,gle, giventhn thatitiat it isanews a newlycly createdcomd companyin2021(Note6)ay in 2021 (Note 6) andtnd thehe companytowhny to whichiich itbelt belongedwaed wasmas makinglosng losses. Deferredtad taxasx assetsasets andlind liabilitiesareoffs are offsetiset ifthef thereisalere is a legallyelly enforceablerle righttosetoffcut to set off currenttnt taxasax assetsagas againstt current tax liabilities and the deferred tax assets and deferred tax liabilities relate to the income taxes levied by the sametme taxaax authority.At31Dec. At 31 December2022aner 2022 and202d 2021,t, therewhere wasnomas no materialoffsl offsetofdefeet of deferredtad taxassx assetsaets andlind liabilities. TheGroe Grouprecup recognisesdefes deferredtrred taxaax assets,tts, taxlax losscoss carry-forwardsans andunud unusedtsed taxcax creditsants andtad taxrelx relieftotief to theexhe extenttent thattat theirfur futurereture realisationorutn or utilisationissun is sufficientlyasly assured . 167Befesa Annual Report 2022 Statutory  financialstatements  Management report  ToBefesa’s  shareholders  Additional  information Consolidated  financialstatements 19. Income Tax continued Detailsofdls of deferredtred taxasax assetsandds and deferredtred taxlax liabilitiesintes in theache accompanyingcong consolidatedfinted financialsial statementsfnts foror 2022an2022 and202d 2021a1 areasfolre as follows: 2022 2021 Deferred tax assets arising from: Taxlosx losscas carry-forwardsandts and taxcredx creditsandts and taxrax reliefef 72,731 69,357 Revaluationofdern of derivativefiive financialial instrumentsnts 13,902 34,000 Other deferred tax assets 17,014 22,105 Total deferred tax assets 103,647 125,462 Deferred tax liabilities arising from: Asset revaluation 46,123 46,554 Revaluationofdern of derivativefiive financialial instruments 7,474 270 Deferredtred taxlax liabilityary arisingfng fromtrom thethe taxdax deductibilityofgy of goodwillill 46,644 39,362 Other deferred tax liabilities 7,392 5,760 Total deferred tax liabilities 107,633 91,946 Amountsconts correspondingtodeng to deferredtared taxasx assetsasets areasfore as follows: 2022 2021 Deferred tax assets Deferred tax assets recoverable in more than 12 months 99,673 121,704 Deferredtred taxaax assetsrects recoverablewle within1hin 12mo2 months 3,974 3,758 Total deferred tax assets 103,647 125,462 Movements in deferred tax assets and liabilities in 2022 and 2021 relate to: 2022 Recognised in Balance at 31/12/21 Income statement Equity Business Combination (Note6ote 6) Balance at 31/12/22 Deferred tax assets Taxlosx losscas carry-forwardsandds and deductions 69,357 4,099 (725) – 72,731 Derivatives 34,000 (27,657) 7,559 – 13,902 Other 22,105 (5,076) (15) – 17,014 Total deferred tax assets 125,462 (19,466) (2,349) – 103,647 Deferred tax liabilities Revaluations 46,554 (1,469) 1,038 – 46,123 Derivatives 270 – 7,204 – 7,474 Goodwill 39,362 7,282 – – 46,644 OtherOther (temporarydiff differences) 5,760 1,654 (22) – 7,392 Total deferred tax liabilities 91,946 7,467 8,220 – 107,633 Notes to the consolidated financial statements as at 31 December 2022 (thousands of euros) continued 168 Befesa Annual Report 2022 To Befesa’s shareholders 2021 Recognised in Balance at 31/12/20 Income statement Equity Business Combination (Note6ote 6) Balance at 31/12/21 Deferred tax assets Taxlosx losscas carry-forwardsandds 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 (1,14 8) 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Other (temporarydiff differences) 5,682 82 (4) – 5,760 Total deferred tax liabilities 68,293 6,504 885 16,264 91,946 Themae mainamin amountsants andchad changesindes in deferredtred taxasax assetsandls and liabilitiesin2022aes in 2022 and2021nd 2021,w, wereasfoere as follows: 2022 ■ Movementsrects recognisedineqd in equityrety relatemaie mainlytothety to the taxeax effectoftffect of themhe measurementoent ofderf derivativeshves hedgingzing zincinc prices(Note1s (Note 17),a7), andtotnd to theimhe impactofcont of conversiondion differencefroe fromdedm deductionsinTs in Turkey(€key (€-0.7m7 million)inas) in assets,, and from revaluations of Befesa Zinc US, Inc. assets (€1.0 million) in liabilities. ■ Themovee movementinint in incomestae statementintnt in taxlosscx loss carry-forwardsans anddedd deductionsismas is mainlyrelly relatedtotad to taxlosx losss carry-forwardsgards generatedinBed in BefesaMana ManagementSent ServicesGmes GmbH(€bH (€0.5m0.5 million)andJ) and Jiangsu(€1.3mgsu (€1.3 million),aion), andtnd taxax incentivesregves regardingiing investmentsints infixen fixedassd assetsiets inTn Turkey(€1.9mrkey (€1.9 million). ■ Thetae taxdepx depreciationofton of thegohe goodwillbill byBefey BefesaZisa Zinchanc hasgens generatedaated anincn increaseindee in deferredtaed taxlix liabilitiesies amounting to €7.3 million. 2021 ■ Movementsrects recognisedineqd in equityrety relatemaie mainlytothety to the taxeax effectoftffect of themhe measurementoent ofderf derivativeshves hedgingzing zincinc prices(Note1s (Note 17),a7), andtotnd to theimhe impactofcont of conversiondion differencefroe fromdedm deductionsinTs in Turkey(€key (€3.3mil3 million)inasn) in assets,ans, andd from revaluations of Befesa Zinc US, Inc. assets (€0.6 million) in liabilities. ■ Themovee movementintht in theince incomesome statementintnt in taxlax losscoss carry-forwardsandds and deductionsiions ismas mainlyrely relatedtotated to thehe recognitionofton of taxcrax creditsfrts fromtaom taxlosx losscas carry-forwardsirds intheBn the Biscaytay taxgroax groupfoup foranamr an amountof€21milt of €21 millionandn and the application of tax credits of €7 million. ■ Thetae taxdepx depreciationofton of thegohe goodwillbill byBefey BefesaZisa Zinchanc hasgens generatedaated anincn increaseindee in deferredtaed taxlix liabilitiesies amounting to €7.3 million. ■ The movement in Business Combinations comes from the acquisition of Befesa Zinc US, Inc. (Note 6) . 169Befesa Annual Report 2022 Statutory  financialstatements  Management report  ToBefesa’s  shareholders  Additional  information Consolidated  financialstatements 20. Public administrations Details of tax receivables and tax payables on the asset and liability sides, respectively, of the accompanying consolidatedsated statementoffinnt of financialpial positionasat31Decn as at 31 December2022aner 2022 and202d 2021a1 areasfolre as follows: 2022 2021 Receivable (Note13ote 13) Payable (Note16ote 16) Receivable (Note13ote 13) Payable (Note16ote 16) VAT 11,896 5,853 8,093 6,187 Withholdings and interim payments – 631 148 1,031 Corporate income tax 6,599 5,274 1,502 8,333 Social security 13 1,847 9 1,736 Other 1,058 615 919 568 Total 19,566 14,220 10,671 17,855 “Accountspnts payabletopble to publicauic authorities”ontes” on thelhe liabilitysidy sideofthe of theaccoe accompanyingcing consolidatedfiated financialstal statementsts includestdes thelhe liabilityrelay relatingtoapg to applicabletle taxes,ma, mainlypey personalinal incometame taxwix withholdings,V, VATaT andprond projectedinted incomee taxrelax relatingtoting to theprohe profitforefit for eachyeach year,m, mainlynly netoftaet of taxwix withholdingsangs andpred pre-paymentsmads madeeae eachyeach year. 21. Guarantee commitments to third parties and contingencies At31DeceAt 31 December2022anr 2022 and202d 2021,an, a numberofGber of Groupcomp companieshies hadproad providedgued guaranteesforaes for anovern overallaall amountofnt of approximately€7y €76.1mil1 million(3n (31De1 December2021ber 2021:€: €50.7mil50.7 million)togun) to guaranteethee theiropir operationsvns vis-à-viscis customers,s, banks, government agencies and other third parties. TheGroe Grouphaup hascons contingentliant liabilitiesfoies forlitr litigationaron arisingintng in theohe ordinarycy courseofbuse of businessfess fromwrom whichnosih no significantnt liabilitiesareexs are expectedtoard to ariseotise otherthar thanthn thoseforwose for whichprovch provisionshions haveaave alreadybedy beenreen recognised. InDIn December20r 2016,th, therewaere wasatems a temporarystoy stoppageattge at theSche Scandustplat plant(Swnt (Sweden)asaresn) as a resultoult ofactf actionreion relatedtothed to the update of the activity licence, initiated by the local country council. The Group’s management commissioned several advisorstoasss to assesstess theenhe environmentalral riskaisk andpotnd potentialeial economiceffecc effectofthect of the correctivemeive measuresares andinnd investedind in measures required to reopen the plant. Consequently, the plant reopened in May 2017. The Group had an insurance policywlicy whichwach wasexpes expectedtomcted to mitigatethte thereleve relevantexant expensesincs incurredand andat3d at 31De1 December2020reber 2020 recognised€7ed €7.9 million under “Other receivables” as the best estimate of the expected outcome on the ongoing litigation. On27JOn 27 January2022ty 2022 theGhe Groupreroup receivednved notificationfromBn from BilbaoCobao CourtofFit of FirstInst InstanceNonce No.7th. 7 thatthat theclae claimfilim filedbyed by theGroe Groupwaup wasdiss dismissedissed initn itsents entirety.Thy. TheGroue Groupapp appealedtotled to theProvhe ProvincialCoul Courtort ofBizf Bizkaia,bia, buttut theGrohe Groupup managementdent decidedided in202n 2021toprov1 to provision1ion 100%oft0% of thebahe balancerence receivableat31Decle at 31 December2021foller 2021 followingang a conservative criteria (Note 22.6). InNIn November2021ber 2021,afireb, a fire brokeouroke outattht at theple plantiant inHann Hanover(Gover (Germany),wny), whichbelh belongstoths to thesubse subsidiaryBy Befesaa SalzschlackeGacke GmbH.BH. Becauseoftuse of thisfiresos fire somepame partsoftts of theplhe plantwant wereseere seriouslyday damagedaned andcond consequentlybeey beenn amortised, amounting to €6,018 thousand (Note 22.6). The insurance policy in place fully covers the damage caused, sotso theGrhe Groupreoup recognisedanid an incomeof€3e of €33,672tho3,672 thousandiand in2022(€6,n 2022 (€6,018th8 thousandin2021d in 2021).Th). Thiswis wasrecas recognisedised under “Other operating income” (Note 22.3) and covers damages caused at the plant amounting to €16,737 thousand and loss of earnings of €16,935 thousand. Regarding the income booked (€39,690 thousand), at 31De1 December2022theGr 2022 the Grouphadpp had pendingtocing to collect€ect €6,954tho4 thousanduand under“Otr “Otherrecer receivables”. Notes to the consolidated financial statements as at 31 December 2022 (thousands of euros) continued 170 Befesa Annual Report 2022 To Befesa’s shareholders 22. Income and expenses 22.1 Revenues Detailsofrevls of revenuesbyces by categoryfor2022ay for 2022 and2021areasfond 2021 are as follows: 2022 % 2021 % Steel Dust 730,311 64% 455,836 55% – Sale of WOX and other metals 578,838 51% 385,701 47% – Service fees 117,022 10% 70,135 9% – Smelting: sale of metals and by-products (Note 6) 74,382 7% – – – Eliminations () (39,931) Salt Slags 77,333 7% 77,349 9% – Sale of aluminium concentrates and melting salt 50,733 4% 47,239 6% – Fees for recycling salt slag and SPL 26,600 2% 30,110 4% Secondary Aluminium 375,851 33% 329,860 40% – Sale of secondary aluminium alloys 361,905 32% 313,245 38% – Technology division and others 13,946 1% 16,615 2% Corporate, other minor eliminations (47,462) (41,432) Total 1,136,033 821,613 ())  Eliminationsions inthn theStee SteelDel Dustsust segmentcort correspondtotnd to theehe eliminationoion ofsaf salesbles betweenBen BefesaZia ZincUSnc USAandA andBefe BefesaZsa ZincMetc Metal,LLCfo, LLC followingtng theahe acquisitionofton of thehe latterier in2022(n 2022 (Note6Note 6)gi) giventven thatBeft BefesaZina ZincUSAsc USA sells100ls 100%ofit% of itspros productiontoBon to BefesaZsa ZincMetc Metal,LLC,w, LLC, whichpch processesWOXaes WOX andtnd transformsitis it intoSnto SHGziHG zinc.. The Group discloses revenue by reporting segment and geographical area in Note 5 . 22.2 Raw materials and consumables Detailsofpls of procurementsints inthecn the consolidatedincd incomesome statementsfonts for2022and2r 2022 and 2021a1 areasfore as follows: 2022 2021 Costofrst of rawmaaw materialsans andothd otherser suppliesuses used 568,741 386,048 Changesies ingoon goodsheds heldfold forresr resale,rawm, raw materialsandots and otherinvr inventories (5,340) (15,351) Total 563,401 370,697 22.3 Other operating income Detailsofotls of otheroher operatinging incomeinte in thecohe consolidatediated incomestme statementsfor2022as for 2022 and2021areasfnd 2021 are as follows: 2022 2021 In-houseworse workonnk on non-currentaent assets(Nts (Note3.7)ote 3.7) 1,255 3,467 Income from income-related grants 2,596 2,242 Gain on bargain purchase (Note 6) 51,626 – Other operating income (Note 21) 33,672 6,018 Services 3,150 3,262 Total 92,299 14,989 171Befesa Annual Report 2022 Statutory  financialstatements  Management report  ToBefesa’s  shareholders  Additional  information Consolidated  financialstatements 22.4 Personnel expenses Detailsofpels of personnelexpel expensesintes in thecohe consolidatediated incomestme statementsfor2022ats for 2022 and2021areand 2021 are asfolls follows: 2022 2021 Wages and salaries 102,136 79,853 Employer’s social security contributions 15,916 13,888 Otherwelr welfarecosre costs 10,332 5,078 Total 128,384 98,819 Of the Group’s average headcount in 2022, 233 employees had temporary employment contracts (2021: 165 employees). In 2022, the average number of employees of the joint operations amounted to 49 (2021: 47 employees). Thenue numberofemr of employeesattes at the2022anhe 2022 and202d 2021ye1 year-end,byge, by gender,w, wasasfoas as follows: 2022 2021 Male Female Male Female Management 40 7 36 7 Experts 159 44 168 48 Professionals 292 98 220 91 Operators and assistants 1,132 74 936 44 Total 1,623 224 1,360 190 22.5 Other operating expenses 2022 2021 External services 283,284 178,799 Taxes other than income tax 4,638 2,408 Other current operating expenses, 8,945 6,980 Total 296,867 188,187 22.6 Amortisation/depreciation, impairment, and provisions 2022 2021 Amortisation of intangible assets (Note 8) 1,803 1,791 Depreciation of property, plant and equipment (Note 9) 56,496 45,638 Amortisation of right-of-use assets (Note 11) 9,787 5,822 Impairmentoffixet of fixedasd assets(Nots (Note9)e 9) – 874 Other (Note 21) 2,059 8,030 Total 70,145 62,155 Notes to the consolidated financial statements as at 31 December 2022 (thousands of euros) continued 172 Befesa Annual Report 2022 To Befesa’s shareholders 23. Finance costs Thebree breakdownoftn of thisbhis balanceince inthn the2022and2021coe 2022 and 2021 consolidatediated incomeste statementsisas is asfolls follows: 2022 2021 Interest expense 21,230 15,362 Otherfinr financecose costs 4,277 3,933 Financialexal expensesoses ofprovf provisionsfores for employeeboyee benefits(Nos (Note2te 24) – 5,288 Lossesoses offaif fairvar valueolue offinaf financialaial assetsmts measuredatfad at fairvir valuethe throughgh profitofit orlosr loss(Nots (Notes4anes 4 and6)d 6) 6,406 – Total 31,913 24,583 In2022,lIn 2022, lossesoffaes of fairvair valueadje adjustmentsoffints of financialasl assetsmsets measuredatfaid at fairvar valuetlue throughpugh profitorofit orlossir loss includedthed thee impactofrecot of recognisingthg theprie prior6.or 6.9%in9% investmentonAnt on AmericanZian ZincRecnc Recycling,Cng, Corp.(curp. (currently,B, BefesaZina ZincMetc Metal,al, LLC) at fair value amounting €6,406 thousand (Notes 4 and 6). In2022,sIn 2022, swapsetp settlementaccnt accrued€786ted €786 thousandoffind of financecose cost(202t (2021:€11: €1,147th47 thousand)an) and€61d €611th1 thousandofd of financeince income(2come (2021:€0t1: €0 thousand)dd) duetothue to theevole evolutionoftion of theEuhe Euribor. In2022,cIn 2022, compensationpion plansdess describedibed inNote2n Note 24ac4 accrued€ed €2,842t2 thousandoffinnd of financeince incomewcome whilein2021le in 2021 accrued€5ed €5,288t,288 thousandoffinnd of financecosce cost. 24. Remuneration of the Board of Directors Directors’ remuneration and other benefits In 2022, the members of the Parent’s Board of Directors (including Executive Director members of the Board of Directors) earned approximately €11,798 thousand for salaries and attendance fees for discharging their duties in Group companies (2021: €11,131 thousand). Also,asaso, as at3t 31De1 December2022aber 2022 and2021anddnd 2021 and duringting theyehe yearthar theneen ended,td, theParehe Parenthnt hadnotgad not grantedanted anyloay loans,, advancesonces orothr otherbeer benefitstoits to itsforts formerorcur or currentDirt Directors. InaIn addition,ton, thePahe ParentCrent Companydany didnothid not haveaave anypenny pensionorgun or guaranteeoble obligationswns withaith anycuny currentment membersoftrs of thehe Board of Directors. Incentives to executives and other matters In2022aIn 2022 and2021nd 2021,t, therewerene were notrao transactionswits withseh seniorenior executivesoues outsidethde thenore normalcoul courseofbrse of business. InJIn January201y 2018,th, theParee ParentCont Companyapny approvedacomd a compensationpion planforcen for certainmemn membersofGrs of Groupmroup management.t. Thiscois compensationplon planwaan waslins linkedtotked to theevohe evolutionofcern of certainkeain keyindy indicatorsdetes determinedined inthn theagree agreementnt (cumulativeEBve EBITanIT andEBId EBITDA;cum; cumulativecasve cashflowh flow;ret; returnourn oninn inputsofsts of strategicpgic projectsacts andEHSend EHS environment,t, health, and safety, and governance as strategic initiatives). The plan consists of four tranches of three years each fromJanm January20y 2018toJa8 to January2021andcy 2021 and considers89,rs 89,107sh7 sharesperts per tranche.Th. Theagree agreedremed remunerationplan planisn is conditionedtotned to thecohe continuationofton of thebehe beneficiariesasses as seniormnior managementannt andmand managersoftrs of theGhe Group.Thea. The agreedd remunerationrelan relatedtotted to theseche secondaond andfirnd firsttst tranchewche waspaas paidiid in2022and2021fortn 2022 and 2021 for theahe amountsof€nts of €7.8mil8 millionandn and €4.3 million, respectively. In2022,tIn 2022, thePahe ParentCrent Companyaany approvedafifroved a fifthtrh tranche,whe, withaccrh accrual2022-l 2022-2023-2024,tha2024, thatcont considers8ers 86,584sh84 shares.. The rest of conditions for this tranche are similar than the previous tranches approved. 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%an% andtad takeasarefeke as a referencethe themare marketvaket valueolue ofBefef Befesa,Ssa, S.A.sha. sharesat31Decres at 31 December2022.er 2022.  173Befesa Annual Report 2022 Statutory  financialstatements  Management report  ToBefesa’s  shareholders  Additional  information Consolidated  financialstatements 24. Remuneration of the Board of Directors continued On26AOn 26 April2021il 2021,t, theBohe BoardofDiard of Directorsoftrs of theCohe Companygrny grantedaTed a TransformationalGrowl GrowthInh IncentivePive Plan(lan (TGIP)P) incentivising a transformational acquisition opportunity (Note 6). This TGIP is linked to the evolution of the share pricecice consistingoing of1f 187,500sh0 sharestares thatchat canban beexecue executed1ted 1/3i/3 in202n 2021,1/3in2022a, 1/3 in 2022 andthnd thelae last1st 1/3in2023.T3 in 2023. Thefihe first1rst 1/3/3 waspais paidin2021forad in 2021 for anamon amountof€unt of €4.4m4.4 million,andt, and thesehe second1d 1/3w/3 waspaas paidin2id in 2022forana022 for an amountof€nt of €3.1mi1 million. InaIn addition,ion, in2020thn 2020 theNone Non-ExecutiveDive Directors(Nrs (NEDs)weEDs) weregrre grantedalond a long-termirm incentiveplve planvesan vestingoveng over20r 2019,9, 2020 and 2021. This plan consists of 9,975 shares and is linked to the same indicators of the four tranches described before.Tore. Thisphis planwaspn was paidiaid in2022foranan 2022 for an amountof€nt of €0.8mil8 million. 25. Balances and transactions with related parties Allsigl significantbant balancesances atpert periodeiod endbend betweenteen thecohe consolidatedcated companiesanes andthd theeffece effectofthett of the transactionsons betweenteen themwhem wereelere eliminatedatcted at consolidationleion level. Detailsofbls of balancesandts and transactionswons withshah shareholdersaers andGnd Grouparoup andrend relatedcomd companiesat31Deies at 31 December2022aber 2022 andnd 2021areasf2021 are as follows: 2022 Accounts receivable and other current financial assets (Note 13) Accounts payable Sales and other income Purchases and other expenses Recytech, S.A. 442 1,573 1,926 14,249 Other 597 – – – Total 1,039 1,573 1,926 14,249 2021 Accounts receivable and other current financial assets (Note 13) Accounts payable Sales and other income Purchases and other expenses Recytech, S.A. 258 1,436 1,758 11,831 Other 659 – – 50 Total 917 1,436 1,758 11,881 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trl transactionsarecs are commercialanal anddonod do notaccrt accrueiue interest,exceptfo, except forloar loansans andthnd theaboe abovecredve creditfait facilitieswies withtith thehe Group,cup, carriedoutod out onanarn an arm’slem’s lengthbah basis,them, the maturitiesofwhes of whichaich areordre ordinaryforty for thesethese typesopes oftraf transactions . Notes to the consolidated financial statements as at 31 December 2022 (thousands of euros) continued 174 Befesa Annual Report 2022 To Befesa’s shareholders AstAs transactionswons withrelh relatedpated partiesareces are carriedoutod out onanan an arm’slerm’s lengthbath basis,th, theParee ParentComnt Company’sDis Directorsdors donoto not considertder thatthat thiscous couldgild giverive risetosise to significantlant liabilitiesints in thefuhe future. 26. Information on the environment TheParee ParentCont Companyanny anditd itssubss subsidiariesmies maintainthin theirprodr productionfion facilitiesiies insucn suchawayah a way astomeetts to meet theshe standardsrds establishedbytheed by the environmentallegl legislationofton of thecouhe countriesinws in whichthich thefhe facilitiesaies arelocre located. Property, plant and equipment include investments made in assets intended to minimise the environmental impact and protect and improve the environment (Note 1). 27. Auditors’ fees Feescors correspondingting tosero servicesrends renderedbered byKPMGAy KPMG AuditS.t S.à.r.l.al. andnetnd networkfiork firmsforths for theyeae yearsenrs ended31Decded 31 Decemberber 2022an2022 and202d 2021,ir, irrespectiveoive oftheif the invoicedace date,areate, are asfols follows: Thousands of euros 2022 2021 Audit services 1,005 502 Tax services 12 36 Other services 30 9 1,047 547 Other services in 2022 included a training on the content and the eligibility and alignment requirements of the Regulation(EUon (EU)2020/852(EUT) 2020/852 (EU Taxonomy)amy) andthnd thedie disclosuresfornos for non-financialunal undertakingsreqgs requiredund undertder thehe CommissionDeon DelegatedReated Regulation(Eion (EU)2021U) 2021/2178(Di78 (DisclosuresDels DelegatedActted Act)ren) renderedbyKPMd by KPMGAudG AuditS.it S.àrà r.l.tol. to Befesa,S., S.A.an. anditd itsconts controlledeled entitiesdus duringtheyg the yeareear ended3d 31De1 December2022.ber 2022.  28. Earnings per share a) Basic earnings/(losses) per share (EUR per share) 2022 2021 From continuing operations attributable to the ordinary equity holders of the Company 2.66 2.68 From discontinued operations – – Total basic earnings/(losses) per share attributable to the ordinary equity holders of the Company 2.66 2.68 b) Diluted earnings/(losses) per share (EUR per share) AsaAs at3t 31D1 December2022and2r 2022 and 2021,the1, therearenre are nodio differencesbces betweenbasn basicanic anddild dilutedeard earnings/(losses)psses) perser share . 175Befesa Annual Report 2022 Statutory  financialstatements  Management report  ToBefesa’s  shareholders  Additional  information Consolidated  financialstatements 28. Earnings per share continued c) Reconciliation of earnings used in calculating earnings per share Thousands of euros 2022 2021 Profit/(Loss)fooss) forthr theyeae yearfror fromconm continuingopng operations 106,502 102,352 Less non-controlling interests from continuing operations (282) (2,607) Profit/(Loss)foss) fromcrom continuingopeg operationsatns attributabletotle to theorhe ordinaryey equityhoy holdersoftrs of thehe Company 106,220 99,745 Profit/(Loss)ats) attributabletothe to theorde ordinaryequy equityhoy holdersoftrs of theChe Companyuany usedind in calculating basic and diluted earnings per share 106,220 99,745 d) Weighted average number of shares used as the denominator Thousands of euros 2022 2021 Weighted average number of ordinary shares used as the denominator in calculating basic earnings per share (Note 14) 40,000 37,285 AsaAs at3t 31D1 December2022anr 2022 and202d 2021,the1, therearenre are nofino financialial instrumentsorotts or otherconr contractstcts thatmhat mighthaveast have a significantt dilutiveeffectoe effect onthn thecale calculationofeon of earningspes pershar share . 29. Subsequent events Thereaere arenoevere no eventsbnts betweenthefin the financialstal statementdate(31Dect date (31 December2022)aer 2022) andthnd thedateoe date ofthepf the presentationofn of theacce accounts(22Mats (22 March2023)trch 2023) thatwhat wouldmated materiallyaffecy affecttheGt the Group’sassp’s assetsortets or theGhe Group’sfins financialandl and/or/or earningsposis position . Notes to the consolidated financial statements as at 31 December 2022 (thousands of euros) continued 176 Befesa Annual Report 2022 To Befesa’s shareholders Subsidiaries and joint operations 2022 Thousands of euros (31/12/2022) Entity Country Activity % Interest Auditor Capital Reserves Translation differences Results Interim dividend Subsidiaries BefesaMana ManagementSent ServicesGces GmbH Germany Holding 100% KPMG 25 1,968 (30) 223 Befesa Medio Ambiente, S.L.U. Spain Holding 100% KPMG 150,003 785,989 65,562 MRHResH ResiduosMeos MetálicosS.os S.L.U. Spain Holding 100% (1) 15,600 15,547 – (549) –Be– BefesaSala SalzschlackeGme GmbH Germany AluminiumAluminium waste treatment 100% KPMG 25 2,645 – 19,547 – –– BefesaAla AluminiumGum GermanyGmy GmbH Germany Aluminiumwaste waste treatment 100% KPMG 25 303 – – – – Befesa Aluminio, S.L.U. Spain Recovery of metals 100% KPMG 4,767 73,665 1,558 5,604 – Befesa Aluminio Comercializadora, S.L. Spain Marketing company 100% (1) 90 21 – – – Befesa Salt Slags, Ltd UKUK Recovery of metals 100% (1) 27,108 (22,864) (2,892) (3,986) – Befesa Zinc, S.A.U. Spain Holding 100% KPMG 25,010 133,802 – 65,473 (61,000) – Befesa Zinc Comercial, S.A., (Sociedad Unipersonal) Spain Saleofrele of recycledwed waste 100% KPMG 60 7,378 – (273) – – Befesa Zinc Aser, S.A. (Sociedad Unipersonal) Spain Recovery of metals 100% KPMG 4,260 79 – 35,209 (31,600) – Befesa Zinc Sur, S.L., (Sociedad Unipersonal) Spain Recovery of metals 100% (1) 605 215 – (9) – – Befesa Zinc Óxido, S.A. (Sociedad Unipersonal) Spain Recovery of metals 100% KPMG 1,102 5,513 – 600 – – Befesa Steel R&D, S.L., (Sociedad Unipersonal) Spain Development of projects and technology innovation 100% (1) 3 596 – 191 – – Befesa Stainless Recycling, S.L. Spain Holding 100% (1) 3 13,498 – (3,156) – BefesaVa Valera,Sa, S.A.S. France Recovery of metals 100% PwC 4,000 (14) – 12,797 – Befesa ScanDust AB Sweden Recovery of metals 100% KPMG 5,309 (40) (343) (4,745) – – Befesa Silvermet Turkey, S.L. Spain Holding 53.60% (1) 9,175 (2,222) 3,022 – Befesa Silvermet Iskenderun Celik Tozu Geri Donusumu, A.S. Turkey Recovery of metals 100% PwC 4,231 38,291 (20,569) 9 – 177Befesa Annual Report 2022 Statutory  financialstatements  Management report  ToBefesa’s  shareholders  Additional  information Consolidated  financialstatements Thousands of euros (31/12/2022) Entity Country Activity % Interest Auditor Capital Reserves Translation differences Results Interim dividend Befesa Silvermet DisTicaret, A,S, Turkey Recovery of metals 100% (1) 1,937 6,218 (4,138) (2,421) – –– BefesaZia ZincGenc GermanyGany GmbH Germany Holding 100% KPMG 25 2,130 – 18,014 (15,000) BefesaSteea SteelSerl ServicesGmes GmbH Germany Sales and logistics 100% KPMG 2,045 67,866 – 103 – BefesaZina ZincDuc DuisburgGurg GmbH Germany Recovery of metals 100% KPMG 5,113 10,763 – 508 – BefesaZina ZincKorec KoreaLtda Ltd SouthKoreh Korea Recovery of metals 100% KPMG 17,015 34,683 1,590 (5,965) – Befesa Pohang Co. Ltd SouthKoreah Korea Recovery of metals 100% KPMG 1,770 3,399 (284) 438 – BefesaZina ZincFreic FreibergGmrg GmbH&bH & Co,KGCo, KG Germany Recovery of metals 100% KPMG 1,000 6,114 – 325 – Befesa Zinc Environmental Protection Technology (Jiangsu)Co.Lt) Co. Ltd China Recovery of metals 100% KPMG 21,407 (674) 1,338 (3,953) – Befesa (China) Investment Co. Ltd China Holding 100% KPMG 18,825 (365) 260 (56) – Befesa Zinc Environmental ProtectionTion Technology(gy (Henan)an) Co. Ltd China Recovery of metals 100% KPMG 17,890 (476) 765 (513) – Befesa Zinc Gravelines S,A,S, France Waelz oxide treatment 100% KPMG 8,000 1,634 – 1,242 – BefesaHola HoldingUSng US,Inc, Inc United States Holding Befesa Zinc US, Inc United States Waelz oxide treatment 100% (1)/(2) 134,152 7,975 13,332 6,084 – Befesa Zinc Metal, LLC United States Zincrenc refinery 100% (1) 107,466 – (9,032) (15,490) – Joint operations – Recytech, S.A. France Recovery of metals 50% Deloitte 6,240 8,278 – 24,272 – (1) Companies not subject to statutory audit (2)(2)  AuditforGt for Grouparoup auditpuit purposebyKose by KPM G Notes to the consolidated financial statements as at 31 December 2022 (thousands of euros) continued 178 Befesa Annual Report 2022 To Befesa’s shareholders 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Mana ManagementSent ServicesGces 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ResH ResiduosMeos MetálicosS.os S.L.U. Spain Holding 100% (1) 15,600 10,931 – 5.665 –– BefesaSaa SalzschlackeGmke GmbH Germany AluminiumAluminium waste treatment 100% KPMG 25 1,953 – 5,544 (5,288) –– BefesaAla AluminiumGum GermanyGmy GmbH Germany Aluminiumwaste 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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rele of recycledwed 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Va Valera,Sa, 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) – – Befesa Silvermet Turkey, S.L. Spain Holding 53.60% (1) 9,175 (363) (1,860) – 179Befesa Annual Report 2022 Statutory  financialstatements  Management report  ToBefesa’s  shareholders  Additional  information Consolidated  financialstatements Thousands of euros (31/12/2021) Entity Country Activity % Interest Auditor Capital Reserves Translation differences Results Interim dividend Befesa Silvermet Iskenderun Celik Tozu Geri Donusumu, A.S. Turkey Recovery of metals 100% PwC 2,672 22,112 (17,813) 4,660 – Thousands of euros (31/12/2021) Entity Country Activity % Interest Auditor Capital Reserves Translation differences Results Interim dividend Befesa Silvermet DisTicaret, A,S, Turkey Recovery of metals 100% (1) 1,198 2,561 (3,378) 2,824 – –– BefesaZia ZincGenc GermanyGany GmbH Germany Holding 100% KPMG 25 1,951 – 21,179 (16,000) BefesaSteea SteelSerl ServicesGmes GmbH Germany Sales and logistics 100% KPMG 2,045 67,842 – 24 – BefesaZina ZincDuc DuisburgGurg GmbH Germany Recovery of metals 100% KPMG 5,113 2,915 – 32 – BefesaZina ZincKorec KoreaLtda Ltd SouthKoreh Korea Recovery of metals 100% KPMG 17,015 21,512 1,489 5,768 – Befesa Pohang Co. Ltd SouthKoreh Korea Recovery of metals 100% KPMG 1,770 4,929 (296) (1,532) – BefesaZina ZincFreic FreibergGmrg GmbH&bH & Co,KGCo, KG Germany Recovery of metals 100% KPMG 1,000 (9,724) – 49 – Befesa Zinc Environmental Protection Technology (Jiangsu)Co.Lt) 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Tion Technology(gy (Henan)an) 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% KPMG 8,000 1,100 – 534 – BefesaHola HoldingUSng US,Inc, Inc (Consolidated) United States Waelz oxide treatment 100% (1)/(2) 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 (2) Audit for Group audit purpose by Grant Thornton L LP Notes to the consolidated financial statements as at 31 December 2022 (thousands of euros) continued 180 Befesa Annual Report 2022 To Befesa’s shareholders Responsibility statement Consolidated financial statements We, Javier Molina Montes, Asier Zarraonandia Ayo, and Wolf Uwe Lehmann, respectively Executive Chair, Chief Executive Officer, and Chief Financial Officer, confirm,to the best of ourknowledge, that: ■ the2022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, 22 March 2023 Asier Zarraonandia Chief Executive Officer Wolf Uwe Lehmann Chief Financial Officer Javier Molina Executive Chair 181Befesa Annual Report 2022 Statutory  financialstatements  Management report  ToBefesa’s  shareholders  Additional  information Consolidated  financialstatements KPMG Audit S.à r.l. 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 © 2023 KPMG Audit S.à r.l., a Luxembourg entity 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. R.C.S Luxembourg B 149133 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 2022, 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 2022 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 “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. Acquisition of American Zinc Products LLC. (AZP) 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 30 September 2022 the Group acquired from an unrelated third party, 93% interest in American Zinc Products LLC. (AZP), currently Befesa Zinc Metal, Inc. Befesa already owned 7% of the refining asset, as a result of the acquisition of American Zinc Recycling which was closed in August 2021. The main reason for this acquisition is to obtain new solvent extraction technology to process Waelz Oxide (WOX) into special high grade zinc (SHG). The purchase price amounted to EUR 51,987 thousand and the transaction is considered as 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 103,613 thousand and a gain on bargain purchase in the amount of EUR 51,626 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 Products LLC. (AZP) 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 Products LLC. (AZP) and the purchase price allocation included, but were not limited to, the following:  Obtaining and analysing the sale purchase agreement and the Purchase Price Allocation carried out internally by the Group.  Assessing the appropriateness of the accounting treatment applied to the acquisition.  With the involvement of our valuation specialist: x Evaluating the methodology applied by management for the valuation of assets, liabilities and contingent liabilities acquired; x Testing the mathematical accuracy of the models used for the valuation; x Assessing the key valuation assumptions; x 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. 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 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. — Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made b y the Board of Directors. — Conclude on the appropriateness of the Board of Directors' use of the going concern basis o f 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 underl y in g 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 solel y 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 applied. 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 16 June 2022 and the duration of our uninterrupted engagement, including previous renewals and reappointments, is four 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) letters c) and 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 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 2022 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 2022, identified as LU1704650164-JA-EQ-2022-12-31-en, have been prepared, in all material respects, in compliance with the requirements laid down in the ESEF Regulation. Our audit report only refers to the consolidated financial statements of Befesa S.A. as at 31 December 2022, identified as LU1704650164-JA-EQ-2022-12-31-en, prepared and presented in accordance with the requirements laid down in the ESEF Regulation, which is the only authoritative version. Luxembourg, 22 March 2023 KPMG Audit S.à r.l. Cabinet de révision a g réé Stephan Lego-Deiber Partner Cabinet de révi si on agr S t ep ep ep ep ep ep ep ep ep p ep p ep p p p ep p p ep ep p p p p p p p p p p p ep ep p ep p p ep ep ep p ep p p p p p p ep ep p ep ep ep p ep p ep ep p p ep p p p p ep p ep ep p p p p p p p p p p p ep p p p p p p p p p p p p p p p p p p ha ha ha ha ha ha ha ha ha ha ha ha ha a ha ha ha a ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha a ha ha a a ha ha ha ha ha ha a a a ha ha ha ha a a a a a ha ha a a ha a a ha ha a ha a a ha ha a ha a ha h ha h h h h h h ha ha ha h h a ha a ha h h h h h h h h h h h h h h h n n n n n n n n n n n n n n n n n n n n n n n n n n n n n n n n n n n n n n Le Le Le Le Le Le L L L Le Le Le L Le Le Le L L Le Le Le L Le L L Le Le Le L L L Le L L Le L L L Le L L L L L L L Le L L L L L L L L L L L L L L L L L L L L L L L L L L L L L L L L L L L L L L L L L L L L L L L L L L L L L L L L L go - De ib er Pa Pa Pa Pa Pa P P P P Pa P P P Pa P Pa P Pa Pa P P P P P P P P P P Pa Pa P Pa P P P P P P P P P P P P P P P P P P P P P P P P P P P P P P P P P P P P P P P P P P P P P P P P P P P P P P P P P P P P rt t t t t n e r 187Befesa Annual Report 2022 Statutory  financialstatements  Management report  ToBefesa’s  shareholders  Additional  information Consolidated  financialstatements Reintroduce recovered materials intothe market. 188 Befesa Annual Report 2022 To Befesa’s shareholders 188 Befesa Annual Report 2022 Reintroduce Statutory financial statements 190 Balance sheet 194 Profitandlossaccount 196 Notestothestatutoryfinancialstatements 205 Responsibility statement 206 Independent auditor’s report 189Befesa Annual Report 2022 Consolidated  financialstatements  Management report To Befesa’s shareholders Additional  information Statutory  financialstatements Note(s) 2022 2021 Assets A. Subscribed capital unpaid I. Subscribed capital not called II. Subscribed capital called but unpaid B. Formation expenses 3 2,524,011.95 3,253,437.40 C. Fixed assets 1,223,051,150.60 1,223,051,150.60 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 1,223,051,150.60   1. Sharesinaffiliatedundertakings 597,051,150.60 597,051,150.60   2. Loanstoaffiliatedundertakings 626,000,000.00 626,000,000.00 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 4,229,153.49 6,066,419.91 I. Stocks   1. Rawmaterialsandconsumables 2. Work in progress 3. Finished goods and goods for resale 4. Payments on account II. Debtors 5 4,104,090.37 6,006,508.47 Balance sheet for the year ended 31 December 2022 (Expressed in euros) 190 Befesa Annual Report 2022 To Befesa’s shareholders Note(s) 2022 2021 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 4,104,090.37 5,914,893.47    a) becomingdueandpayablewithinoneyear 4,104,090.37 5,219,696.51 b) becoming due and payable after more than one year 695,196.96   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 125,063.12 59,911.44 E. Prepayments 6 4,461,578.69 5,727,894.43 Total assets 1,234,265,894.73 1,238,098,902.34 Capital, reserves and liabilities A Capital and reserves 7 598,973,790.37 600,169,051.10 I. Subscribed capital 111,047,595.14 111,047,595.14 II. Share premium account 532,868,267. 82 532,868,267.82 III. Revaluation reserve  I V .  R e s e r v e s 36,245,502.73 29,556,938.60 1. Legal reserve 11,104,759.51 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 25,140,743.22 20,099,373.96 a) other available reserves 25,140,743 . 22 20,099,373.96 b) other non available reserves  V. Profitorlossbroughtforward (129,992,312.09) (129,992,312.09) 191Befesa Annual Report 2022 Consolidated  financialstatements  Management report To Befesa’s shareholders Additional  information Statutory  financialstatements Balance sheet for the year ended 31 December 2022 (expressed in euros) continued Note(s) 2022 2021  VI. Profitorlossforthefinancialyear 48,804,736.77 56,688,561.63  VII. Interimdividends  VIII. Capitalinvestmentsubsidies B. Provisions 8 150,012.00 806,273.00 1. Provisions for pensions and similar obligations 150,012.00 806,273.00 2. Provisions for taxation 3. Other provisions C. Creditors 9 630,680,513.67 631,395,683.81 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 630,104,090.37 631,219,696.51   a) becomingdueandpayablewithinoneyear 4,104,090.37 5,219,696.51 b) becoming due and payable after more than one year 626,000,000.00 626,000,000.00 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 151,326.79 13,248.85   a) becomingdueandpayablewithinoneyear 151,326.79 13,248.85 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 192 Befesa Annual Report 2022 To Befesa’s shareholders Note(s) 2022 2021  6. Amountsowedtoaffiliatedundertakings 318,884.68 –   a) becomingdueandpayablewithinoneyear b) becoming due and payable after more than one year 318,884.68 –  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 106,211.83 162,738.45 a) Tax authorities 106,211.83 120,738.45 b) Social security authorities c) Other creditors 42,000.00    i) becomingdueandpayablewithinoneyear 42,000.00 ii) becoming due and payable after more than one year D. Deferred income 10 4,461,578.69 5,727,894.43 Total capital, reserves and liabilities 1,234,265,894.73 1,238,098,902.34 193Befesa Annual Report 2022 Consolidated  financialstatements  Management report To Befesa’s shareholders Additional  information Statutory  financialstatements Profit and loss account for the year ended 31 December 2022 (Expressed in euros) Note(s) 2022 2021 Profitandlossaccount 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 1,264,882.16 1,198,248.03 5. Raw materials and consumables and other external expenses 12 (1,089,842.82) (833,638.73)  a) Rawmaterialsandconsumables b) Other external expenses (1,089,842.82) (833,638.73) 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 14 (729,425.45) (395,688.33) a) in respect of formation expenses and of tangible and intangiblefixedassets (729,425.45) (395,688.33) b) in respect of current assets 8. Other operating expenses 15 (826,821.79) (771,508.12) 9. Income from participating interests 16 49,999,997.50 55,000,000.00  a) derivedfromaffiliatedundertakings 49,999,997.50 55,000,000.00 b) other income from participating interests 10. Income from other investments and loans forming part of thefixedassets 17 13,078,357.22 13,505,817.15  a) derivedfromaffiliatedundertakings 13,078,357.22 13,505,817.15 b) other income not included under a) 194 Befesa Annual Report 2022 To Befesa’s shareholders Note(s) 2022 2021 11. Other interest receivable and similar income 18 1,698,944.20 2,525,229.62  a) derivedfromaffiliatedundertakings 1,698,944.20 2,525,229.62 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 (14,586,539.25) (13,463,157.99)  a) concerningaffiliatedundertakings (686.10) – b) other interest and similar expenses (14,585,853.15) (13,463,157.99) 15. Taxonprofitorloss 16. Profitorlossaftertaxation 48,809,551.77 56,765,301.63 17. Other taxes not shown under items 1 to 16 20 (4,815.00) (76,740.00) 18. Profitorlossforthefinancialyear 48,804,736.77 56,688,561.63 195Befesa Annual Report 2022 Consolidated  financialstatements  Management report To Befesa’s shareholders Additional  information Statutory  financialstatements 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in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2022andendson31December2022. 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19December2002asamendedon18December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 for the year ended 31 December 2022 (Expressed in euros) 196 Befesa Annual Report 2022 To Befesa’s shareholders 2.2 Foreign currency translation TheCompanymaintainsitsbooksandrecordsinEuro(“€”)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Euro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”. 197Befesa Annual Report 2022 Consolidated  financialstatements  Management report To Befesa’s shareholders Additional  information Statutory  financialstatements 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recognized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2022,729,425.45EUR(2021:395,688.33EUR)havebeenamortisedleaving2,524,011.95EUR (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 597,051,150.60 – – – 597,051,150.60 Loanstoaffiliatedundertakings 626,000,000.00 – – – 626,000,000.00 Total 1,223,051,150.60 – – – 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 597,051,150.60 – – – 597,051,150.60 Loanstoaffiliatedundertakings 626,000,00 – – – 626,000,000.00 Total 1,223,051,150.60 – – – 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2022neitherasat31December2021,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17)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 for the year ended 31 December 2022 (expressed in euros) continued 198 Befesa Annual Report 2022 To Befesa’s shareholders 4. Financial assets continued UndertakingsinwhichtheCompanyholdsatleast20%intheirsharecapitalareasfollows: As at 31/12/2021 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 1,619,016.28 343,941.33 Befesa Medio Ambiente, S.L.U. audited account Spain 100% 597,026,150.60 734,897,000.00 (19,904,000.00) Loans to affiliated undertakings Counterparty Currency Amount Interest rate Maturity date Loan to Befesa Medio Ambiente S.L.U. EUR 626,000,000.00 2% + Euribor 3M 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7-yeartermloanB. 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. InDecember2022,themarginapplicabletothisloanwasincreasedby25bpstoEuriborplus200bps.Asat 31December2022,thenominalamountofthisloanisEUR626,000,000.00(2021:EUR626,000,000.00)and accrued interest amount to EUR 4,375,218.37 (2021: EUR 5,144,277.81) (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2022neitherasat31December2021,accordinglynovalueadjustmentwasrecorded. 5. Debtors Debtors by category Within one year More than one year As at 31/12/2022 As at 31/12/2021 Amountsowedbyaffiliatedundertakings 4,104,090.37 – 4,104,090.37 5,914,893.47 Other debtors – – – 91,615.00 Total 4,104,090.37 – 4,104,090.37 6,006,508.47 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 31/12/2022 Amount EUR As at 31/12/2021 Amount EUR Accrued Interest – Loan and Interest Rate SWAP Befesa Medio Ambiente, S.L.U. 4,104,090.37 5,219,696.51 Other debtors: Advances NWT – 91,615.00 Total 4,104,090.37 5,311,311.51 199Befesa Annual Report 2022 Consolidated  financialstatements  Management report To Befesa’s shareholders Additional  information Statutory  financialstatements 5.2 Debtors – Becoming due and payable within more than one year Becoming due and payable within more than one year As at 31/12/2022 Amount As at 31/12/2021 Amount Receivable from Befesa Medio Ambiente S.L.U. – 695,196.96 Total – 695,196.96 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 2022 the “Reciprocal Credit Agreement” amounts EUR -318,884.68 (2021: EUR 695,196.96). As thetotalamountisnegative,ithasbeenreclassifiedasapayableundertheaccount“Amountsowedtoaffiliated undertakings” (Note 9). In the opinion of the Board of Directors, the recovery of debtors is not compromised as at 31 December 2022, accordinglynovalueadjustmentwasrecorded. 6. Prepayments Prepayments As at 31/12/2022 As at 31/12/2021 Transaction costs 4,461,578.69 5,727,894.43 Total 4,461,578.69 5,727,894.43 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 recognized and are amortized all along the length of the facility. Asat31December2022,theaccumulatedproratedamortizationamountstoEUR6,386,254.66(2021:EUR5,119,938.92). 7. Capital and reserves Movements in capital and reserves Balance as at 31/12/2021 Allocation of preceding result Dividend Result of current year Balance as at 31/12/2022 Subscribed capital 111,047,595.14 – – – 111,047,595.14 Share premium 532,868,267.82 – – – 532,868,267.82 Legal reserve 9,457,564.64 1,647,194.87 – – 11,104,759.51 Other avalaible reserves 20,099,373.96 5,041,369.26 – – 25,140,743. 22 Profitorlossbrought forward (129,992,312.09) – – – (129,992,312.09) Profitorlossforthe financialyear 56,688,561.63 (56,688,561.63) – 48,804,736.77 48,804,736.77 Dividend – 49,999,997.50 (49,999,997.50) – – Total 600,169,051.10 – (49,999,997.50) 48,804,736.77 598,973,790.37 Thenumberofsharesasat31December2022and2021is39.999.998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andsharepremiumof 53.22EUR.ThenewshareswereincludedintheexistinglistingofBefesa’ssharesintheFranfurtStockExchange. On6July2022,Befesadistributedtoitsshareholdersadividendof1.25EURpershare,amountingto49,999,997.50 EUR,asapprovedbytheAGMheldon16June2022. Notes to the statutory financial statements for the year ended 31 December 2022 (expressed in euros) continued 200 Befesa Annual Report 2022 To Befesa’s shareholders 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. 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. Asat31Decemeber2022thelegalreservereaches10%oftheissuedsharecapital. 8. Provisions Provisions As at 31/12/2022 As at 31/12/2021 Other provisions 150,012.00 115,006.00 Short term provision – 691,267.00 Total 150,012.00 806,273.00 Other provisions As at 31 December 2022 and 31 December 2021, 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,thisplanwaspaidin2022andnonewplanwassigned. 9. Creditors Creditors by category Within one year More than one year More than five years As at 31/12/2022 As at 31/12/2021 Amountsowedto credit institutions 4,104,090.37 626,000,000.00 – 630,104,090.37 631,219,696.51 Amountsowedto affiliatedundertakings 318,884.68 – – 318,884.68 – Trade creditors 151,326.79 – – 151,326.79 13,248.85 Other creditors 106,211.83 – – 106,211.83 162,738.45 Total 4,680,513.67 626,000,000.00 – 630,680,513.67 631,395,683.81 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+3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 0.00 as at 31 December 2022 (2021:EUR -1,180,620.89). 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7years. – RevolvingCreditFacility(RCF)inanamountofEUR75millionwithamaturityof6years. 201Befesa Annual Report 2022 Consolidated  financialstatements  Management report To Befesa’s shareholders Additional  information Statutory  financialstatements 9. Creditors continued – AguaranteeFacilityCommitmentinanamountofEUR35millionwithamaturityof6years. On 17 February 2020, Befesa successfully repriced its term loan B, reducing its interest rate by 50 bps to Euribor + 200 bps. Thefacility’smaturitydateandallothertermsremaininplacewithoutfurtheramendment. 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 31,122,698.83 as at 31 December 2022 (2021:EUR 2,381,114.48). 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. by this amount. 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2022,interestontheFacilityisEuriborplusamarginof2.00%and2.25%inthecaseofRCF, thesemarginscanbeadjusteddependingontheratioofnetfinancialdebt/EBITDA. InDecember2022,themarginapplicabletothisloanwasincreasedby25bpstoEuriborplus200bpsduetothe increase on the leverage ratio. Asat31December2022and2021theamountsbecomingdueandpayablewithinoneyeararecomposedof accrued interest on the facility, and of accrued interest on the IRS. 10. Deferred income Deferred income As at 31/12/2022 As at 31/12/2021 Deferred Income – Transaction costs 4,461,578.69 5,727,894.43 Total 4,461,578.69 5,727,894.43 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 31/12/2022 As at 31/12/2021 Accounting, auditing and domiciliation fees 327,011.44 128,243.28 Banking and similar services 1,925.25 1,063.52 Legal fees 247,541.68 252,015.77 Other commisions and professional fees 498,228.75 451,444.55 Miscellaneous 15,135.70 871.61 Total 1,089,842.82 833,638.73 Notes to the statutory financial statements for the year ended 31 December 2022 (expressed in euros) continued 202 Befesa Annual Report 2022 To Befesa’s shareholders 13. Staffcosts Theaveragenumberofemployeesfortheyear2022wasnil(2021:nil). 14 Value adjustments As at 31/12/2022 As at 31/12/2021 Formation expenses 729,425.45 395,688.33 Total 729,425.45 395,688.33 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 49,999,997.50 from Befesa Medio Ambiente S.L.U. (2021: EUR 55,000,000.00 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2022and2021arefollows: As at 31/12/2022 As at 31/12/2021 Loanstoaffiliatedundertakings(LoantoBefesaMedioAmbiente,S.L.U.) 13,078,357.22 10,784,166.67 Loanagreement14July2021 – 2,683,636.14 Reciprocal Credit Agreement – 38,014.34 Total 13,078,357.22 13,505,817.15 The“loanagreement14July2021”wasoffsetinDecember2021byanoncashcontributiontotheequityofBefesa Medio Ambiente, S.L.U.. 18. Other interest receivable and similar income The interest and similar income consist of the costs the Company recharged to its subsidiary Befesa Medio Ambiente, S.L.U. As at 31/12/2022 As at 31/12/2021 Amortisation cost 1,266,315.74 1,156,243.58 Cost of IRS 175,002.56 1,146,992.22 Invoicesformanagementoffinancingactivitiesrecharged toaffiliatedundertakings 257,625.90 221,993.82 Total 1,698,944.20 2,525,229.62 19. Interest payable and similar expenses As at 31/12/2022 As at 31/12/2021 Interest cost 13,078,357.22 10,784,166.67 Cost of IRS 175,002.56 1,146,992.22 Amortisation cost 1,266,315.74 1,156,243.58 Other expenses 66,863.73 375,755.52 Total 14,586,539.25 13,463,157.99 203Befesa Annual Report 2022 Consolidated  financialstatements  Management report To Befesa’s shareholders Additional  information Statutory  financialstatements 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(2021:nil). 24. Subsequent events Therearenoeventsbetweenthebalancesheetdate(31December2022)andthedateofthepresentationofthe accounts(22March2023)whichwouldmateriallyimpacttheCompany'sassetsortheCompany'sfinancialand/or earnings position. Notes to the statutory financial statements for the year ended 31 December 2022 (expressed in euros) continued 204 Befesa Annual Report 2022 To Befesa’s shareholders Responsibility statement Statutory financial statements We, Javier Molina Montes, Asier Zarraonandia Ayo, and Wolf Uwe Lehmann, respectively Executive Chair, Chief Executive Officer, and Chief Financial Officer, confirm,to the best of ourknowledge, that: ■ the 2022 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 on 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, 22 March 2023 Asier Zarraonandia Chief Executive Officer Wolf Uwe Lehmann Chief Financial Officer Javier Molina Executive Chair 205Befesa Annual Report 2022 Consolidated  financialstatements  Management report To Befesa’s shareholders Additional  information Statutory  financialstatements KPMG Audit S.à r.l. 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 © 2023 KPMG Audit S.à r.l., a Luxembourg entity 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. R.C.S Luxembourg B 149133 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 2022, 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 2022 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 “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. 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 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 Compan y ’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 o f 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 applied. 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 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 16 June 2022 and the duration of our uninterrupted engagement, including previous renewals and reappointments, is four 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) letters c) and 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 2022 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 2022, identified as LU1704650164-JA-EQ-2022-12-31-en, have been prepared, in all material respects, in compliance with the requirements laid down in the ESEF Regulation. Our audit report only refers to the annual accounts of Befesa S.A. as at 31 December 2022, identified as LU1704650164-JA-EQ-2022-12-31-en, prepared and presented in accordance with the requirements laid down in the ESEF Regulation, which is the only authoritative version. Luxembourg, 22 March 2023 KPMG Audit S.à r.l. Cabinet de révision a g réé Stephan Lego-Deiber Partner Cabinet de révision agr S t ep ep ep ep ep ep ep p ep ep p p p ep p ep p ep p p p p p p p ep ep p ep p ep ep ep p ep ep ep ep p p ep ep ep p ep ep ep p p p ep p p p p p p p ep ep ep p ep p p p ep p p p p p p p p p p p p p p p p p p p p p p p p p ha ha ha ha ha ha ha ha ha a ha ha ha a a a ha a ha a ha ha ha ha ha ha ha ha ha a ha a ha ha a ha ha a ha ha a a ha ha ha a a ha ha a ha ha ha a ha ha a a a ha a ha a a ha ha a a a a a a ha h h ha ha a ha ha a ha h ha ha h h ha ha a h h h ha h h h h h h h h h h h h h h h h h n n n n n n n n n n n n n n n n n n n n n n n n n n n n n n n n n n n n n n n n n n n n n n n n L L L L L L L Le Le Le Le Le L L L L Le Le Le Le L Le Le L L L Le L L L L L L L L L L L L L L L Le L L L L L L L L L L L L L L L L L L L L L L L L L L L L L L L L L L L L L L L L L L L L L L L L L L L L L L L L L L L L L L L go - D e i be r Pa Pa Pa Pa Pa P P P P P Pa Pa Pa Pa Pa Pa Pa Pa P Pa Pa Pa Pa Pa P P P P P Pa P Pa Pa Pa P P P P P Pa Pa Pa Pa Pa P P P P P P P P Pa P P P P P P P P P P P P P Pa Pa P P P P P P P Pa P P P P P P P P P P P P P P P P P P P P P P P P P P P P P P P P P P P P P P rt rt rt n e r 210 Befesa Annual Report 2022 To Befesa’s shareholders 210 Befesa Annual Report 2022 Additional information 212 Glossary 214 Financial calendar 215 Disclaimer 211Befesa Annual Report 2022 Statutory  financialstatements  Consolidated  financialstatements  Management report  ToBefesa’s  shareholders Additional information 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 (EAF) 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 Glossary 212 Befesa Annual Report 2022 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 Special high-grade (SHG)zinc High-purityzincingotsproducedsolelyfromrecycledsources(WOX)usingan electrowinningandsolventextraction 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 213Befesa Annual Report 2022 Statutory  financialstatements  Consolidated  financialstatements  Management report  ToBefesa’s  shareholders Additional information Q1 2023 Statement & Conference Call Thursday, 4 May 2023 Annual General Meeting Thursday, 15 June 2023 H1 2023 Interim Report & Conference Call Thursday, 27 July 2023 Q3 2023 Statement & Conference Call Thursday, 26 October 2023 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 Financial calendar 214 Befesa Annual Report 2022 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, including, 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cost;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priorwrittenconsent ofBefesa. Published: 23 March 2023 215Befesa Annual Report 2022 Statutory  financialstatements  Consolidated  financialstatements  Management report  ToBefesa’s  shareholders Additional information 216 Befesa Annual Report 2022 Designed and produced by Invicomm www.invicomm.com Befesa S.A. 68-70, Boulevard de la Pétrusse, L-2320, Luxembourg, Grand Duchy of Luxembourg www.befesa.com