FACC AG

Annual Report (ESEF) • Mar 29, 2023

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INDUSTRY ENVIRONMENT The aviation industry continued to recover from the effects of the COVID-19 pandemic in 2022, as forecast. The reason for this positive development was the lifting of traffic restrictions, which had been imposed by virtually all countries worldwide to contain the spread of the pandemic. The regained freedom to travel was exercised intensively on all continents, with the exception of China, where restrictions were not lifted until the beginning of 2023. This trend is expected to continue into 2023 and beyond. Even the war in Ukraine and the resulting geopolitical and economic upheavals have not dampened this development. Against the backdrop of a strong increase in the number of flights, global air traffic, measured in passenger kilometers, thus grew by 64.4 percent in 2022 according to the International Air Transport Association (IATA). While the first quarter was still impacted by COVID-19 restrictions, demand in Europe and North America improved noticeably from spring onwards. Looking at 2022 as a whole, air traffic volumes had reached 68.5 percent of their pre-pandemic level. By December 2022, this figure had risen to 76.9 percent. International air traffic saw particularly strong growth, increasing by 152.7 percent relative to 2021 and thus reaching 62.2 percent of its pre-crisis level. Here, too, this figure stood at 75.1 percent in December 2022, thus well above the annual average. By contrast, domestic flights increased by only 10.9 percent worldwide, but returned to just under 80 percent of their pre-pandemic level. Substantial economic slowdown, high inflation The global economy is facing a number of disruptions and challenges: inflation is the highest it has been in decades, and Russia’s invasion of Ukraine and the energy supply situation are weighing heavily on the outlook. The future recovery of the global economy will depend crucially on the successful calibration of monetary policy by central banks, the unfolding of the war in Ukraine and the stabilization of global supply chains. According to a forecast by the International Monetary Fund, global growth is expected to fall from 6.0 percent in 2021 to 3.2 percent in 2022 and 2.7 percent in 2023. According to the EU’s winter forecast (January 2023), GDP growth in Austria is expected to be 4.8 percent in 2022, compared to 3.5 percent in the eurozone. A significant decline in economic performance is expected for 2023: experts currently predict growth rates of just 0.5 percent for Austria and 0.9 percent for the eurozone. Global air freight traffic, which had largely returned to normal in 2021 after increasing by nearly 7 percent after two sluggish years, decreased by approximately 8 percent in 2022. According to current estimates, the average global inflation rate in 2022 stood at 8.75 percent, the highest level since 1996. Experts also expect further price increases in the coming years: an average global inflation rate of 6.52 percent is forecast for 2023, and 4.13 percent for 2024. In 2025 and 2026, however, global inflation is expected to fall below 4 percent again. This means that the change in strategy implemented by the major central banks in 2022 is likely to have a positive impact on inflation in the medium term. Continued high demand for aircraft, … Notwithstanding the currently subdued economic environment, the growth trend in the aviation industry is unbroken, as it is in the aircraft industry. In 2022, Airbus delivered a total of 663 aircraft, including two aircraft for Aeroflot, which are subject to the ongoing sanctions against Russia. This represents an increase of 52 aircraft, or 8.5 percent, on the previous year (2021: 611). Meanwhile, Boeing recorded an increase of 120 aircraft, or an impressive 35 percent, with 480 aircraft delivered in 2022 (2021: 340). New orders in 2022 were even higher: Airbus received 820 orders for new aircraft, and Boeing 774, which in total represents an increase of around 50 percent compared to 2021. This also confirms the positive long-term forecasts of the two manufacturers and the ongoing trend among airlines to increase their capacities and replace older aircraft with more modern and efficient models. Both Airbus and Boeing expect a steady upward trend in air traffic volumes, particularly in the Asian markets, thus underpinning the need for new aircraft. Boeing and Airbus forecast an average annual increase in passenger kilometers of 3.8 percent up to 2041, while fleets are likely to expand by 2.8 percent annually over the same period. This means that a total of 41,170 new aircraft will be delivered by 2041. Airbus forecasts a somewhat lower, but similarly impressive figure of around 39,500 new aircraft. The reason for these different figures is that Boeing’s forecast also includes regional jets, i.e. aircraft with a capacity of less than 100 passengers, while Airbus does not include this aircraft market in its analyses. North America, Europe and China will be the biggest customers, followed by Southeast Asia, the Middle East, South Asia and Latin America. In terms of aircraft types, Boeing expects to deliver 30,880 single-aisle aircraft, 7,230 wide-body aircraft, 2,120 regional jets and 940 transport aircraft by 2041. … drones and space vehicles The demand for drones will also increase significantly, driven not least by the “Drone Strategy 2.0” presented by the EU Commission on 29 November 2022. The strategy contains a list of 19 legal, technical and financial measures with which the European Union intends to make drones part of the everyday lives of its citizens by 2030. The EU Commission estimates that the market for drone services in the EU could reach a volume of EUR 14.5 billion by that time, with annual growth of 12.3 percent. The German Aviation Association (BDL) shares a similar view, forecasting an average annual growth rate of 14.5 percent for the German drone market up to 2025. The space sector also offers considerable potential: while the global space industry generated sales of USD 424 billion in 2020 (an increase of 70 percent relative to 2010), forecasters predict that this figure will more than double to USD 1 trillion by 2030, with a 95 percent drop in start-up costs. This could create many more opportunities for technological expansion and innovation and enable more services from orbit, such as satellite broadband services. Aviation and sustainability Air travel is often unjustly portrayed as a form of transport with an enormous environmental impact. In fact, air travel accounts for only around 2.7 percent of global CO2 emissions. At the same time, the aviation industry is implementing a wide range of measures to increase sustainability. The declared goal of the industry is to implement carbon-neutral flights by 2050; in December 2021, the International Air Transport Association (IATA) presented a concrete roadmap toward net-zero emissions by 2050. This is to be achieved through a combination of synthetic aircraft fuel, alternative propulsion methods, the increased use of lightweight construction methods, a continuous materials cycle and direct point-to-point flights. As a result of these initiatives, the volume of sustainable aircraft fuel consumed increased from 8 million liters in 2016 to over 100 million liters in 2021. FACC has also set ambitious climate protection targets as part of its Strategy 2030, and aims to implement carbon-neutral production by 2040. 2. GENERAL INFORMATION 2.1. Information pursuant to Section 243 of the Austrian Commercial Code (UGB) The FACC Group based in Ried im Innkreis is an Austrian group of companies specializing in the development, production and maintenance of components for the aerospace industry. Its product range includes structural components (components for fuselages and tail units, fan cowls and composite components for engines, wing parts and winglets) as well as systems for aircraft interiors (complete aircraft cabin systems for passenger aircraft, overhead stowage compartments, cabin linings, service units, interior solutions for business jets, cabin retrofit solutions, etc.). In addition, the FACC Strategy 2030 was presented in the 2020 financial year. The company’s core business will thus be expanded to include drones and autonomous flight mobility as well as lightweight construction systems for space travel. FACC AG is already actively involved in both areas. The first space contract, which was secured in 2021, represents a particularly gratifying achievement. Due to different applications of the products, three operative segments were created. • Aerostructures is responsible for the development, production, distribution and repair of structural components. • Engines & Nacelles covers the production, distribution and repair of engine components. • Cabin Interiors focuses on the development, production, distribution and repair of interior solutions. • The product portfolio has been expanded to include after-market services, which are of relevance to all three divisions. After customer contracts have been concluded and the orders processed, the individual orders are then manufactured in the Group’s six plants. In addition to the three operative segments, the Group also comprises the central services Strategy, Marketing & Corporate Communications, Human Resources, Innovation & Research, Purchasing, Quality, Logistics, Facility Management, Environment, Health & Safety, Finance, Controlling, Taxes, Treasury, IT, Legal, Investor Relations, Internal Auditing and Risk Management. The central services support the operating segments in the fulfillment of their tasks within the framework of a matrix organization. • 3. DEVELOPMENT OF THE FACC GROUP 2020 2021 2022 Revenues 526.9 497.6 607.0 of which product revenues 497.7 455.8 545.4 of which revenues from development services 29.2 41.8 61.5 EBIT (reported) –74.4 –25.1 5.5 one-time effects –47.6 29.4 0.0 EBIT (operating) –26.8 4.3 5.5 EBIT margin (operating) –5.1 % 0.9 % 0.9 % Earnings per share in EUR –1.68 –0.52 –0.02 In the financial year 2022, the FACC Group generated revenues of EUR 607.0 million, representing an increase of EUR 109.4 million compared to the previous year. Besides a higher demand for product deliveries, this year-on-year increase in revenues of approximately 20 percent was driven by the offsetting of non-recurring development costs in connection with projects. In the Aerostructures and Cabin Interiors divisions in particular, the Airbus A320 family is a major revenue driver. In Engines & Nacelles, significant revenues are generated with products for wide-body aircraft, a market segment which, as expected, is recovering more slowly from the effects of the COVID-19 crisis. Revenues in this division remained stable compared to the previous year. Reported earnings before interest and taxes (EBIT) amounted to EUR 5.5 million in the financial year 2022 (2021: EUR –25.1 million). EBIT for the financial year 2022 was impacted by further challenges along the supply chain, increased logistics costs for shipping products to customers, rising material and energy costs in connection with the geopolitical situation, and product start-up costs for various new projects. The optimization program launched at the beginning of the financial year 2020 to optimize the group-wide cost structure began to take effect in 2021, and continued to produce the required positive results in 2022. However, these were largely offset by further challenges along the supply chain, rising material and energy costs in connection with the geopolitical situation, and the sharp rise in inflation. Due to the very high cost increases due to inflation, these measures remain an essential instrument for securing a sustainable improvement in earnings in view of the anticipated future increases in revenues. 3.1. Financial position The main objective of FACC’s financial management is to ensure that the Group has access to adequate liquidity at all times, to avoid financial risks and to guarantee financial flexibility. In order to secure the company’s liquidity and reduce risks, FACC makes use of various internal and external funding sources with differing maturities. Long-term liquidity forecasts are based on the Group’s operational planning. The cash flow from operating activities in the operating segments constitutes the Group’s main source of liquidity. This reduces external borrowing requirements and the associated interest expenses. FACC also makes use of a variety of funding instruments, such as bonds, promissory note loans, loan agreements, leasing models and factoring programs to assure its liquidity. Financing instruments The banking policy, procedures for the approval of banking relationships and financing agreements, liquidity and financial asset management, and the management of currency and interest rate risks are set down in FACC’s treasury principles. In accordance with the Group’s policy, credit lines are managed throughout the Group by the Treasury department. For information on the company’s capacity to raise funds through authorized and conditional capital and on its funding sources, please refer to Note 38 of the Consolidated Financial Statements. FACC has thus created the essential prerequisites for sustainable and stable financing. On 17 February 2023, FACC Operations GmbH undersigned an extension of the syndicated loan in the amount of EUR 225.4 million with five participating banks. FACC AG and FACC Solutions Croatia d.o.o. are serving as guarantors. The syndicated loan has a term of three years plus a two-year prolongation option. The contract stipulates five facilities with various intended uses. With the exception of the framework credit of the Austrian Kontrollbank (OEKB), which is also part of the syndicated loan agreement, all other facilities are unsecured. The facility of EUR 60 million (KRR COVID-19 framework credit of OEKB), which was additionally subscribed during the COVID-19 pandemic on 26 June 2020, was repaid as of 10 March 2023. In turn, an amount of EUR 36 million was drawn from the equity financing program of OEKB, and EUR 33.5 million from Exportinvest. The following financial covenants have been defined: 31.12.2022 31.12.2023 31.12.2024 31.12.2025 Net financial debt/EBITDA 4,50 4,50 4,25 3,75 Equity ratio 25 % 25 % 25 % 25 % The financial covenants applicable at the end of the respective year also apply as of 30 June of the same year (e.g. a ratio of 4.25 applies on 30 June 2024 and on 31 December 2024) and are tested every six months. Creditors have a right of termination in the event that the ratios are exceeded. For all relevant reporting dates after 31 December 2025, a net financial debt/EBITDA ratio of 3.5 as well as an equity ratio of at least 25 percent are required. All other material provisions of the original syndicated loan agreement and the subsequent amendment agreements were largely carried over to the extension of the syndicated loan. On 31 July 2019, promissory note loans in a total amount of EUR 70.0 million were issued. The individual tranches have both fixed and variable interest rates and are due for repayment after five, seven and ten years. The financing agreements contain an interest rate increase clause of 50 basis points if net financial debt/EBITDA exceeds a value of 3.75. This interest rate increase clause is based on the net financial debt/EBITDA ratio and has been applied since fiscal year 2020. The ratio is tested annually. 3.1.1. Liquidity analysis 2020 in EUR mill. 2021 in EUR. Mill. 2022 in EUR mill. Cash flow from operating activities 13.8 82.3 5.5 Cash flow from investing activities –15.2 –11.7 –8.6 Free cash flow –1.4 70.6 –3.1 Cash flow from financing activities 20.7 –45.2 –13.4 Net change in cash and cash equivalents 18.2 25.3 –16.5 Effects from foreign exchange rates –1.5 –2.9 4.2 Cash and cash equivalents at the beginning of the period 75.8 92.5 115.0 Cash and cash equivalents at the end of the period 92.5 115.0 102.7 One of FACC’s key performance indicators is free cash flow, which the company determines by combining its cash flow from operating activities with its cash flow from investing activities. Cash flow from operating activities At EUR 5.5 million, cash flow from operating activities in the reporting year 2022 was EUR 76.7 million lower than the previous year’s figure of EUR 82.3 million. The change is mainly due to the increase in working capital for inventories, as well as receivables due to the higher operating performance. Cash flow from investing activities Cash flow from investing activities amounted to EUR –8.6 million in the reporting year 2022, compared with EUR –11.7 million in the previous year. Cash flow from financing activities In the reporting year 2022, cash flow from financing activities amounted to EUR –13.4 million (2021: EUR –45.2 million). Compared to the previous year, no new financing was concluded in fiscal year 2022. 3.1.2. Net debt Net debt amounted to EUR 188.6 million on 31 December 2022 (2021: EUR 177.8 million). As of the balance sheet date, cash and cash equivalents of the FACC Group totaled EUR 102.7 million (2021: EUR 115.0 million). 31.12.2020 in EUR million 31.12.2021 in EUR million 31.12.2022 in EUR million Promissory note loans 70.0 70.0 70.0 Other financial liabilities 254.6 222.8 221.3 Gross financial liabilities 324.6 292.8 291.3 Less Cash and cash equivalents 92.5 115.0 102.7 Financial assets 92.5 115.0 102.7 Net debt 232.1 177.8 188.6 Net financial debt/EBITDA, a key indicator for Group financing, developed as follows: 31.12.2020 in EUR million 31.12.2021 in EUR million 31.12.2022 in EUR million Earnings before interest and taxes (EBIT) –74.4 –25.1 5.5 Plus/minus Depreciation, amortization and impairment 50.1 22.8 22.8 Amortization of contract performance costs 11.8 13.91) 16.12) Impairment of contract performance costs 2.9 0.0 0.0 Negative effects from the London arbitration court ruling 0.0 25.5 0.0 EBITDA 54.1 37.1 44.4 Net financial debt/EBITDA N/A 4.79 4.25 1) 31.12.2021: Amortization of contract performance costs of EUR 21.9 million minus one-off payments of EUR 8.1 million in December 2021 2) 31.12.2022: Amortization of contract performance costs of EUR 26.1 million minus one-off payments of EUR 10.0 million in December 2022 3.2. Asset position 31.12.2020 in EUR million 31.12.2021 in EUR million 31.12.2022 in. EUR million Non-current assets 326.9 323.7 298.9 Current assets 322.7 320.8 355.1 Assets 649.5 644.5 654.0 Equity 243.2 206.0 203.5 Non-current liabilities 179.6 172.6 159.1 Current liabilities 226.7 265.9 291.4 Debt 406.4 438.5 450.5 Equity and liabilities 649.5 644.5 654.0 Equity ratio 37.4 % 32.0 % 31.1 % 3.2.1. Assets As of the balance sheet date 31 December 2022, the non-current assets of the FACC Group decreased by EUR 24.8 million to EUR 298.9 million relative to the previous year. Current assets increased by EUR 34.3 million compared to the same period of the previous year. Cash and cash equivalents decreased by EUR 12.3 million to EUR 102.7 million. Inventories increased from EUR 90.8 million in the financial year 2021 to EUR 116.3 million in the reporting period 2022. Trade receivables increased in the financial year 2022 by EUR 8.0 million to EUR 61 million. 3.2.2. Equity Equity of the FACC Group stood at EUR 203.5 million at the end of the reporting year. This corresponds to an equity ratio of 31.1 percent as of 31 December 2022 (2021: 32.0 percent). 3.2.3. Debt Within non-current liabilities, other financial liabilities decreased from EUR 9.6 million in the financial year 2021 to EUR 5.0 million in the financial year 2022. Within current liabilities, trade payables increased by EUR 13.4 million to EUR 66.7 million relative to the previous year as a result of active working capital management. Other financial liabilities were subject to only minor fluctuations in the financial year 2022. Compared to the previous year, no new financing agreements were concluded in the year under review. 4. DEVELOPMENT OF THE SEGMENTS Segment reporting follows internal management and reporting of the FACC Group. The operating result before interest and taxes (EBIT) is the key performance indicator used to steer the business segments, and is reported to the corporate body responsible (Management Board of FACC AG). Due to different applications of the products, three operative segments were created: • Aerostructures: development, production, distribution and repair of structural components • Engines & Nacelles: development, production, distribution and repair of engine components • Cabin Interiors: development, production, distribution and repair of interiors • 4.1. Aerostructures segment 2020 in EUR million 2021 in EUR million 2022 in EUR million Revenues 184.7 167.5 235.1 EBIT (reported) –26.7 –28.5 3.9 EBIT margin (reported) –14.5 % –17.0 % 1.7 % One-time effects –22.2 27.8 0.0 EBIT (before one-time effects) –4.5 –0.8 3.9 EBIT margin (before one-time effects) –2.5 % –0.4 % 1.7 % Revenues in the Aerostructures segment amounted to EUR 235.1 million in the financial year 2022 (2021: EUR 167.5 million). In terms of revenue distribution at the Group level, this segment is the second-largest division after Cabin Interiors, accounting for 38.7 percent of total revenues. Apart from the Airbus A320 family, FACC is also benefiting from the ramp-up of the Airbus A220 platform. Deliveries of business jet products have also increased. In the Aerostructures segment, reported earnings before interest and taxes (EBIT) amounted to EUR 3.9 million in the 2022 financial year (2021: EUR –28.5 million). 4.2. Engines & Nacelles segment 2020 in EUR million 2021 in EUR million 2022 in EUR million Revenues 115.3 103.7 97.3 EBIT (reported) –22.9 8.7 0.5 EBIT margin (reported) –19.9 % 8.4 % 0.5 % One-time effects –11.9 0.9 0.0 EBIT (before one-time effects) –11.0 9.6 0.5 EBIT margin (before one-time effects) –9.6 % 9.3 % 0.5 % Revenues in the Engines & Nacelles segment amounted to EUR 97.3 million in the financial year 2022 (2021: EUR 103.7 million). In this segment, revenues were particularly impacted by the low construction rates for the Boeing 787 program. Engine products in the business jet segment contributed positively to earnings. In the Engines & Nacelles segment, reported earnings before interest and taxes (EBIT) amounted to EUR 0.5 million in the financial year 2022 (2021: EUR 8.7 million). 4.3. Cabin Interiors segment 2020 in EUR million 2021 in EUR million 2022 in EUR million Revenues 226.9 226.4 274.6 EBIT (reported) –24.7 –5.2 1.0 EBIT margin (reported) –10.9 % –2.3 % 0.4 % One-time effects –13.5 0.7 0.0 EBIT (before one-time effects) –11.2 –4.5 1.0 EBIT margin (before one-time effects) –4.9 % –2.0 % 0.4 % Revenues in the Cabin Interiors segment amounted to EUR 274.6 million in the financial year 2022 (2021: EUR 226.4 million). In addition to the Airbus A320 family, particularly projects on the business jet platforms were able to generate revenue growth in the Cabin Interiors segment. The two programs of our Chinese customer COMAC also developed positively. In the fall, the C919 medium-haul aircraft received type certification from the Chinese civil aviation authority. Following this important program milestone, deliveries of the COMAC C919 to airline customers can now begin. FACC expects to see a steady increase in customer demand for FACC aerostructures and cabin components from 2023 onwards. Reported earnings before interest and taxes (EBIT) in the Cabin Interiors segment amounted to EUR 1.0 million in the 2022 financial year (2021: EUR –5.2 million). 5. RISK REPORT In the course of its business activities, the FACC Group is exposed to a number of risks that are inseparably linked to its business operations. FACC is committed to identifying, evaluating and actively managing risks in the business environment at an early stage. The corporate risk strategy and hedging measures are implemented centrally for the entire Group. The respective risk owner bears direct responsibility for risk management. The Vice President Controlling/Investor Relations/Enterprise Risk Management is responsible for the risk management system, the aggregation of corporate risks and the internal control system, and reports directly to the Management Board, which assumes overall responsibility for risk management and the internal control system. As part of the risk management process, both risks that have occurred and potential future risks are continuously monitored and evaluated by the operative units and reported to the Management Board twice a year in the course of the Management Reviews. In addition, the top-15 risks that could affect the Group are reviewed in detail every quarter. Exceptional events are reported immediately to the Vice President Controlling/Investor Relations/Enterprise Risk Management, who decides whether the Management Board is to be notified straight away. The latter, in turn, informs the Supervisory Board at its meetings. This ensures that the control process is adhered to, and that significant risks are identified at an early stage and measures can be taken to counteract or limit risks. According to an assessment of the Management Board, risks within the aviation sector are intensifying, but potential risks currently identified are deemed manageable and, therefore, do not jeopardize the company’s ability to continue as a going concern. The following key risk areas have been identified: 5.1. Management risks Based on market observations and analyses, a five-year business plan is prepared, which supplements the FACC Strategy 2030 with economic components and is reviewed by the Supervisory Board. The specific business objectives for each financial year are derived from this plan, which is updated on an annual basis. Short-term changes in the market constitute the greatest risk. In addition, successful implementation must be continuously questioned and reassessed due to external factors, which often can scarcely be influenced. In this context, FACC adopts a resilient approach to be able to react flexibly to changes and new conditions. FACC’s management is responsible for monitoring the consistent implementation while promptly responding to short-term changes in line with the defined strategy. In doing so, it must be ensured that the strategic direction of the company as well as the planned revenue and earnings targets continue to be observed. 5.2. Sales risks The FACC Group operates in a global and highly competitive environment. FACC’s business activities are cyclical and sensitive to the profit situation of commercial airlines and their orders for aircraft placed with manufacturers. The business performance of commercial airlines, in turn, is influenced by the global economic situation and the geopolitical environment. The industry-specific risks to which the Group is exposed lie in changes to aircraft delivery schedules between manufacturers and final customers. The risk of a change in future aircraft deliveries directly affects the Group’s future revenues as the supply volumes of components manufactured by the Group change accordingly. This risk can take the shape of a reduction or a postponement of aircraft deliveries. One of the consequences is that development costs cannot be recovered within the calculation period. FACC responds to this risk by achieving diversification within the industry: on the one hand, by maintaining supply contracts with the two dominant suppliers of commercial aircraft and, on the other hand, by entering into supply contracts in both the wide-body passenger aircraft and business jet segments. In order to remain competitive, FACC also plans to tap into the space and drone markets. With this measure, FACC is strengthening its market position to ensure the long-term success of the company. Furthermore, FACC is geographically diversified as it maintains supply contracts with customers in the American, European and Asian markets. FACC also acts as a development partner for the enhancement of existing aircraft types, thus laying the foundation for additional contracts for the retrofitting of the existing aircraft fleet. 5.3. Procurement and supplier risks Procurement at FACC regularly carries out risk assessments of the company’s suppliers in order to identify potential threats and risks at an early stage. The aim is to be able to set priorities for the planning and implementation of audits and support the decision-making process when awarding new contracts. The Procurement Quality Assurance (PQA) department is involved in the selection of new suppliers. It ensures that the necessary qualifications and approvals have been obtained. At the start of new projects and in the event of major changes, suppliers are subjected to a mandatory first sample test to minimize product risk. The ongoing quality-compliant and timely delivery of materials and of semi-finished and finished products is evaluated via SAP on a regular basis. This evaluation is also an integral part of the overall risk assessment. Deviations from the targeted component quality and delivery performance are systematically tracked, analyzed, evaluated and benchmarked against defined goals. Noticeable variations are reported to the Management Board in the course of the Management Reviews. 5.4. Business interruption risks The company’s manufacturing sites and plants are constantly maintained and serviced, thus keeping the risk of breakdowns or of lengthy production downtimes to a minimum. Moreover, business interruption risk is covered by business interruption insurance with an indemnity period of 24 months. 5.5. Project management Project management at FACC is responsible for implementing the objectives defined by management by way of concrete projects. In this regard, projects are differentiated according to whether FACC is to assume development responsibility or not. Feasibility is assessed for each contract, and the risks associated with the project are identified, evaluated as well as closely monitored and analyzed during the course of the project in order to initiate and implement appropriate measures, if deemed necessary. The major risks concern external factors, which the project team may encounter via the company’s interfaces or via third parties. 5.6. Product liability and quality risks The products designed and manufactured by the company are intended for installation in aircraft or engines. Defects or malfunctions of the manufactured products may, directly or indirectly, jeopardize the property, health or life of third parties. Long-term safety is therefore a top priority. The company is not in a position to reduce or exclude its liability towards customers, consumers or third parties by way of sales agreements. Each product developed and/or manufactured in-house, which is supposed to leave the company, is therefore subject to qualified quality and functionality checks. Projects for which FACC bears development responsibility are subject to greater risks due to the possibility of construction errors. These risks can, however, be effectively minimized through systematic quality management methods. Regular controls at all stages of development as well as targeted fault probability analyses and influence analyses help to identify and reduce risks at an early stage. Moreover, FACC operates an archive system for quality records, which are either contractually stipulated or go beyond contractual obligations in individual cases. This is to demonstrate that services were rendered and products manufactured according to specifications defined and approved by both customers and the aviation authorities. Although product liability risks are adequately insured, quality problems may negatively affect the company’s net asset, financial and profit position. 5.7. Financial risks In addition to financing risks, FACC’s operating activities are also exposed to interest rate and currency risks. The Group’s risk management focuses on the unpredictability of developments on the financial markets and aims to minimize potentially negative effects on the Group’s financial position. In order to hedge against specific risks, the Group makes use of derivative financial instruments. FACC uses derivative financial instruments exclusively for the purpose of hedging underlying transactions; speculative transactions are strictly prohibited. The Group’s Accounting & Treasury department identifies, evaluates and hedges financial risks in close cooperation with the Group’s operative units. 5.7.1. Currency risks While the vast majority of sales of the FACC Group are transacted in USD, significant parts of the costs are incurred in currencies other than USD, notably in EUR. FACC makes use of forward exchange transactions to hedge against adverse changes in the EUR-USD exchange rate. Such transactions are concluded using appropriate hedging strategies, with the aim of managing and reducing the impact of exchange rate fluctuations. The hedging strategies are adopted as part of an internal policy and their validity regularly reviewed. They are approved by the Management Board and periodically reported to the Supervisory Board. The risk management of Accounting & Treasury is focused on hedging expected net cash flows in USD (revenues less purchases of raw materials) for the next 12 months (on a rolling monthly basis). The hedge ratio, which indicates the percentage of coverage, is expected to be 80 percent on average. If market levels are favorable, hedging periods can be extended to up to 36 months. FACC conducts sensitivity analyses showing the effects of hypothetical changes in exchange rates on the Consolidated Profit and Loss Statement and on equity. According to IFRS 7, currency risks result from financial instruments of a monetary nature that are not denominated in the reporting company’s functional currency. As a consequence, receivables, liabilities, means of payment and foreign currency derivatives serve as the basis for calculating the sensitivity of the Consolidated Profit and Loss Statement. The sensitivity of equity also reflects the valuation effects of the cash flow hedges for foreign currency risks recorded in other comprehensive income. Translation differences from the translation of financial statements drawn up in a currency other than the Group currency were not included in the calculation. A change in the EUR-USD exchange rate of +5% would have resulted in a change in equity in the amount of kEUR 9,566 in the financial year 2022 (2021: kEUR 6,924). A change in the EUR-USD exchange rate of -5% would have resulted in a change in equity in the amount of kEUR –10,572 in the financial year 2022 (2021: kEUR –7,653). 5.7.2. Interest rate risks Interest rate risks depend on the average financing term and the type of interest. Fixed interest rates are subject to the risk of falling interest rates, whereas variable interest rates carry the risk of rising interest rates. An increase in interest rates by 50 basis points in the financial year 2022 would have resulted in a reduction in earnings after taxes and in equity of kEUR 837 (2021: kEUR 616). A reduction in interest rates by 50 basis points would have resulted in an increase in earnings after taxes and in equity in the amount of kEUR 532 (2021: kEUR 621). The calculation is based on variable interest-bearing assets and liabilities. In the course of the financial year, all core banks of FACC in the euro area started to charge negative interest on balances exceeding defined thresholds. The resulting interest costs amounted to kEUR 10 (2021: kEUR 23) and are recorded in the financial result. 5.8. Risks related to administrative and production systems Within the scope of its business processes, FACC is also exposed to IT and system risks which, in extreme cases, can lead to the impairment of administrative and production facilities. Risk factors falling under this category include, for instance, standard cyber-crime risks (cyber-crime attacks such as hacking, phishing, ransomware, etc.) as well as typical fraud scenarios (social engineering) and the risk of unauthorized persons physically entering sensitive production or company areas. FACC has taken appropriate systemic security precautions for IT-related areas. Within the scope of fraud prevention, FACC relies on the continuous training of its employees working in sensitive areas as well as on information campaigns within the company. Physical plant security is ensured by measures such as access controls. 5.9. Risks related to information security Information security risks are on the rise, while cyber threats are constantly evolving. FACC is also exposed to these risks due to its increasing vulnerability to attacks as a result of ongoing digitalization and the growing number of work activities performed from home. Incidents resulting in the loss, corruption or encryption of critical or sensitive data can lead to reputational damage and financial losses. FACC counteracts these risks through raising awareness among its staff and regular training sessions, and by implementing systemic measures. 5.10. Risks related to intellectual property Intellectual property from research and development activities is a key success factor for securing FACC’s competitiveness in the long run. Protecting intellectual property against misuse and theft is therefore a key concern of the company. To this end, FACC makes use of instruments such as confidentiality agreements and patents. However, this does not completely exclude misuse or potential negative consequences resulting from patent disputes. FACC operates in a high-tech and constantly growing environment with a very large patent landscape. In order to avoid unintentional patent infringements as far as possible, FACC conducts extensive patent research; nevertheless, a residual risk always remains. 5.11. Risks resulting from legal disputes FACC is occasionally involved in various civil lawsuits. For some of these proceedings, provisions are created to cover potential liabilities, in line with the assessment of the legal advisors involved. However, no provisions are created for cases where a negative outcome of proceedings is highly unlikely, or where the outcome can currently not be quantified. Negative developments in legal proceedings may, under certain circumstances, damage the reputation of FACC. 5.12. Special risks in connection with the COVID-19 pandemic The COVID-19 pandemic resulted in a massive drop in revenues and earnings throughout the entire aircraft industry. Against this backdrop, FACC implemented an extensive set of adjustment measures (e.g. efficiency enhancement programs, adjustment of its headcount, vertical integration of components/component groups, application for government support programs, and reduction of fixed costs). In spite of these adjustment measures, the global impact of the pandemic on virtually all areas of civil aviation and the resulting effects on FACC’s liquidity and earnings directly reduced the Group’s risk-bearing capacity. Risk management processes at FACC therefore take into account the risks resulting from the COVID-19 pandemic as follows: There was no significant increase in corporate insolvencies after the end of direct government aid programs, but the financial situation in the supply chain is still strained and may lead to potential defaults. FACC is countering this with the COMPETE initiative, and is strengthening its key partners along the supply chain. With regard to sales, uncertainties are also emerging due to the effects of the COVID-19 pandemic. Differences in the planned sales figures may lead to negative deviations in the planned development of sales and earnings. A resulting decline in cash flows or earnings increases the risk of breaching the adjustment provision of the financial covenant (net financial debt/EBITDA) in the syndicated loan agreed with FACC’s core banks. This could theoretically give rise to a right of termination on the part of the syndicate banks. These specific risks are monitored and evaluated as part of the risk management process and mitigated by appropriate countermeasures (e.g. intensification of risk assessments in the supplier and customer areas, increased personnel marketing activities, stringent cost and investment controlling, rigorous collection of receivables). 6. RESEARCH, DEVELOPMENT AND INNOVATION FACC continuously invests in research and development in order to strengthen business relationships with its customers and develop new fields of business. Here, the main focus lies on proprietary in-house development in order to be able to use the expertise acquired for the benefit of all current and future customers of the company. Moreover, FACC forms strategic alliances with customers and research institutions to further optimize its products. In the 2022 financial year, FACC spent EUR 43.5 million, i.e. just under 7 percent of its revenues, on business-related and customer-specific research and development activities. FACC considers being active, and responding promptly, in the field of research and innovation to be a fundamental guarantee of the future success of the company, and will therefore continue to regard this as the main approach to distinguish itself from its competitors on the market. FACC is working intensively on the efficient production of fiber composite components and their carbon impact in order to support the achievement of the stipulated climate targets. The core objective of FACC’s Research and Innovation department is to explore new manufacturing technologies that allow for high-rate and climate-friendly production of lightweight components. At a general level, FACC is constantly working on new product solutions and manufacturing technologies. The company is currently focusing its research on the following major topics: • Urban Air Mobility (UAM) and space • Thermoplastic manufacturing processes and rate increases in FACC’s core business • Sustainable and fast-curing materials Patents and awards The company filed nine patents in 2022 and was granted 26 patents. As of the end of December 2022, FACC thus holds 466 valid patents. In 2022, FACC was among the finalists of the Crystal Cabin Award, and was presented with the AIRBUS “Best Quality Mindset Supplier Award” and the BOMBARDIER “Diamond Award”. In addition, FACC was able to consolidate its status as a “Class Leading Supplier” with both Collins and Rolls-Royce. Moreover, FACC was awarded the research prize of the Christian Doppler Research Association in 2022. UAM and space Urban Air Mobility (UAM) offers the possibility of industry-specific product diversification. FACC views the application of aviation know-how and the relevant production standards, also in this growth market, as an opportunity and a mission. In the financial year 2022, large-scale development work was undertaken with three renowned UAM customers, which will continue in 2023. It is expected that technological achievements resulting from these UAM projects will also generate innovative impulses for FACC’s primary business, aerospace. In the space segment, FACC continued to advance the Ariane Kick Stage project in 2022, and is currently discussing potential projects with a number of private space providers. Development of new materials and processes to increase rate capability and a materials cycle system In 2022, FACC continued on the development path of fiber-reinforced thermoplastic components, which had been initiated in previous years. Thermoplastic components are considered promising candidates for a cost-effective combination of high rate capability, low weight and a circular economy. In the middle of the year, a research project was launched in collaboration with an FACC customer. This project completes our strategy to replace all current components in the area of wing control surfaces with technologically new products. With this research project we enable a direct benchmark between currently used technologies and possible new technologies. Performance, manufacturing costs and product maintenance costs will be evaluated up to a direct comparison of LCA (life cycle assessment) analyses. Sustainable and fast-curing materials Implementing a circular economy and meeting EU climate targets are challenges that can be supported by an intelligent choice of materials and manufacturing processes. FACC is working on material systems based on renewable resources and fast-curing material systems in order to reduce process times and energy consumption in manufacturing. In order to evaluate the CO2 reduction targets, FACC is part of the Airbus LCA Supplier Council, and is also involved in the collection of data for the subsequent life cycle assessment. Lightweight construction as a key technology Creating components with the lowest possible weight is considered a key technology for FACC’s business. Reduced weight translates into less energy required to move the product, which directly affects operating emissions on a large scale. Moreover, to be viable as a product, lower weight is imperative for the eVTOL and space markets. Research and innovation activities in this area are therefore focusing intensively on how FACC solutions can be made even lighter without undermining their competitiveness and rate capability. 7. EMPLOYEES As of 31 December 2022, the total headcount of the FACC Group amounted to 2,919 full-time equivalents (2021: 2,538 FTE). In Austria, 2,443 FTE were employed as of 31 December 2022. This corresponds to approximately 83.7 percent of the Group’s total workforce. Blue-collar White-collar Total Central Services 243 413 655 Aerostructures 576 164 739 Engines & Nacelles 179 103 282 Cabin Interiors 523 154 677 Subsidiaries 253 271 524 FACC AG 0 42 42 Total 1,773 1,146 2,919 The international nature of FACC is also reflected in its personnel structure. Employees from 45 different countries and from all continents are currently working at the Austrian locations. 52 percent of the workforce have Austrian citizenship, and 15 percent are German nationals. For a technology company, FACC’s share of women in the total workforce remains high, increasing by 6 percent over the previous year to 33 percent. The fact that 49 percent of FACC’s apprentices are women is also particularly pleasing. 7.1. Motivation and health: FACC as a pioneer of employee satisfaction The last few years in particular have shown how important a motivated and committed workforce is in challenging times. FACC recognized this early on, and has been offering a wide range of measures to maintain and promote employee health, motivation and satisfaction as part of its “Healthy and Happy” campaign for several years. FACC offers an in-house health program with a wide range of activities to promote both physical and mental health. In the company canteen, staff can enjoy freshly cooked meals at reduced prices each day. Meals are subsidized by 50 percent, which means that lunches range from EUR 2.90 to EUR 3.25, depending on the choice of menu. In addition, a large number of employees took advantage of the opportunity to get vaccinated against TBE and influenza on the company premises. The distribution of isotonic beverages in production during the summer months and a blood drive in the fall of 2022 are further contributions that FACC has made to the health of its employees and the preservation of social responsibility for the region. These and other measures are implemented within the scope of the “Healthy and Happy” campaign, for which FACC was awarded the seal of approval for workplace health promotion (BGF) by the Upper Austrian Regional Health Insurance Fund in 2017. Recertification until 2022 was successfully completed in 2019. In Austria, the BGF seal of approval is regarded as a visible sign and recognized standard for high-quality workplace health promotion. FACC company bike campaign The company bike campaign was rolled out in spring 2022. With this campaign, FACC wishes to encourage its employees to integrate regular physical exercise into their everyday working lives. Since June 2022, FACC employees have been offered the opportunity to lease a bike or electric bike. They can select the model of their choice at the bicycle dealer, with a choice of several leasing and insurance options. One great advantage for employees is that the lease payments are deducted from their payroll tax by FACC’s personnel accounting department. Working time models Diverse working time models are becoming increasingly important. FACC recognized very early on that highly flexible models are attractive for the workforce and potential new crew members. Therefore, in addition to a very adaptable flexitime system for salaried employees and the integration of bridge days, FACC offers up to 10 flexitime days, or even up to 15 flexitime Fridays. Moreover, FACC has a particularly flexible home office policy: this is solely a matter of agreement between the employee and their manager, and is not otherwise subject to any limitations. In the financial year 2022, FACC employees worked a total of 29,119 days from home. Childcare When it comes to flexibility, FACC wishes to enable its employees to strike the right balance between their professional and family lives. The FACC Kids Clubs offer childcare throughout the year and during the summer vacation. In order to offer even more employees high-quality daycare for their children, FACC Kids Clubs are located in both Ried and St. Martin. 7.2. Personnel development and promotion Academy Continuous investment in the human capital of its entire workforce is a key factor contributing to the corporate success of FACC. The Group is committed to lifelong learning and, for this purpose, offers its employees a wide range of extra-occupational education and further training opportunities. The FACC Academy, which serves as the central hub for all training activities, organized 363 internal training sessions with a total of 3,328 participants in the 2022 financial year. In addition, 28 external training sessions attended by 204 employees were held. In order to make responsible use of its employees’ time resources, FACC has been offering selected training courses via e-learning for a long time. E-learning content is also created by internal developers, thus specifically tailoring the offering to the requirements of the workforce and the company. In addition to e-learning in the areas of “SAP Basic”, “SAP Advanced” and “System Management”, web-based training courses are also available on topics such as “Export Control Advanced”, “Known Consignor”, “Counterfeit & Suspected Unapproved Parts”, “Construction Deviation”, “Material Flow”, “Foreign Object Damage” (FOD; refers to the damage to aircraft or aircraft components caused by foreign bodies or substances), “Emergency Preparedness & Response”, “Waste Separation and Wrong Objections”, “Fire Protection”, “General Documentation”, “Safety Briefing General CoLT“, “Internal Auditor” and “Health & Safety for White-Collar”. The learning units can be completed directly at the workplace via FACC’s SAP system. Moreover, to ensure that employees meet all job requirements, FACC has completely revised the training matrix for both its Austrian and international locations. The so-called “LSO Learner” in SAP provides each manager and employee with an overview in real time of the qualifications they have obtained, or still need to acquire, for their respective job. Internal training sessions can be booked directly, and additional training needs can be registered at any time with the FACC Academy. The ongoing expansion of the training portfolio includes new, targeted training courses for foremen, executives and employees working in project management. Development paths Ensuring that the know-how and talents of each crew member can be contributed and applied as effectively as possible is important for the personal and professional development of employees as well as the success of the company. The different qualifications and strengths of employees are bundled in three development paths: Management career: Key criteria are leadership skills, proactive strategic thinking, a broad scope of action and impact on the operational success of the company. Expert career: Employees in this area are characterized by a high level of expertise, specialist knowledge, experience, independence and responsibility in their respective field. Project career: Here, the significance and scope of the project as well as the role assumed within the project are equally as important as organizational talent and flexibility. The implementation of the development paths and the allocation of employees to the individual levels was started in mid-2022. By the end of the year, approximately 70 percent had been implemented, with the remainder to follow in the first half of 2023. Employer branding In the area of employer branding, the focus in 2022 was on further expanding the employer brand. New projects in the fields of UAM and space required, and continue to require, new talents, which FACC seeks to attract with a variety of short and long-term measures. Active sourcing, approaching candidates on a wide variety of platforms and the implementation of social media campaigns were successfully pushed forward. The focus here was on addressing blue collar/production employees. With the FACC Future Crew, the company is placing a long-term focus on young talents. In order to succeed in this highly competitive market, new incentives were introduced, such as seven weeks of vacation for apprentices and free lunches. The new bachelor’s program enables master students to gain practical experience in the aerospace industry and establish close ties with FACC by offering very flexible working hours. The local reach was further strengthened by hosting an open house event in May, which attracted around 500 visitors. Guided tours of production facilities, getting to know various jobs and the presentation of new projects formed the highlights from an employer branding perspective. The presentation of the upcoming smart mobility initiative, which in future will provide employees with an electric vehicle fleet, was enthusiastically received at the annual Christmas party. 7.3. Global family As an international corporation with employees from 45 countries, FACC attaches great importance to cross-cultural dialogue. In order to ensure good cooperation between staff, a large number of our employees attend language and intercultural training courses. Traditional company-wide events such as anniversary celebrations and the annual Christmas party were finally able to take place again after a pause of two years. In addition, employees and their families and friends were invited to attend the FACC summer party in July. Corporate formats such as the quarterly “Flight Club” were held on the company premises again as of the summer. The numerous cooperative partnerships with authorities, foundations, schools and research-related institutions were continued to bring the right employees and the right know-how on board. 7.4. In-house development of young talents FACC also gives high priority to the training of its apprentices. At the end of the 2022 financial year, a total of 33 apprentices were enrolled in six different apprentice training programs at FACC. As a visible recognition of the quality of its apprentice training, the company was awarded the “State-Honored Training Company” prize by the Federal Ministry of Education, Science and Research. FACC offers aspiring young apprentices highly specialized training programs in design engineering, milling, cutting and machining techniques, plastics engineering, process engineering, information technology and application development. At FACC, apprentices have access to the latest technologies and equipment in the company as soon as they start their training. This gives them the opportunity to apply their innovative spirit and commitment to develop into the experts of the future. 7.5. FACC grant The FACC grant with a total value of approximately EUR 100,000 was awarded for the first time in the 2019 financial year in the study course “Lightweight Design and Composite Materials” at the University of Applied Sciences in Wels. In 2022, four new students were admitted to this study program. Students receive monthly financial support. In addition, FACC covers their tuition fees, offers internships in its plants, provides guidance and assistance through competent FACC employees and allows students to take part in training courses, among numerous other perks. 8. SUSTAINABILITY MANAGEMENT The sustainability management of the FACC Group is an integral part of the corporate strategy and directly reports to the Management Board. Its aim is to take due consideration of the environmental and societal impacts of each business process, and to reconcile the company’s economic imperatives with socio-ecological considerations. Sustainability management and the operative units cooperate closely with each other. The Sustainability Report of the FACC Group is prepared in accordance with the GRI standards (standards of the Global Reporting Initiative) and the requirements of the Austrian NaDiVeG (Sustainability and Diversity Improvement Act), and is published as a separate non-financial report in accordance with Section 267a of the Austrian Commercial Code (UGB). 9. REPORT ON BRANCH OFFICES FACC AG does not operate any branch offices. 10. DISCLOSURES PURSUANT TO SECTION 243A OF THE AUSTRIAN COMMERCIAL CODE (UGB) 10.1. Reporting on the key features of the internal control and risk management system with regard to accounting procedures Pursuant to Section 243a para 2 of the Austrian Commercial Code (UGB), FACC is required to give an account of the key features of its internal control and risk management system with regard to the accounting process. In accordance with Section 82 of the Austrian Stock Corporation Act (AktG), the Management Board of FACC has to ensure that an accounting and internal control system is in place, which complies with the company’s requirements. Thus, the Management Board bears full responsibility for the implementation of an adequate internal control and risk management system with regard to the accounting process. The key features of risk management and the internal control system are laid down in FACC’s risk management and finance manuals. Among other things, these manuals describe and identify key finance and controlling processes and their associated risks. The accounting-related internal control system is designed to guarantee timely, uniform and correct recording of all business processes and transactions, while ensuring that well-founded statements about the company’s current business situation can be made at all times. The measures and rules include, amongst others, the separation of functions, the dual control principle, rules governing authorized signatories, only joint signatory powers for authorizing payments, which are restricted to a small number of persons, as well as system-supported checks by SAP, the IT software in use. FACC has been using this software in almost all areas across the company for more than ten years. The regularities of the SAP systems have been implemented in all relevant business processes. In the course of monthly reporting to the Management Board and second-level management, especially comparisons between actual and budgeted figures are made. During its quarterly meetings, the Supervisory Board of FACC AG is informed about current business performance and forecasts regarding the Group’s further course of business. In its meetings, the Audit Committee of the Supervisory Board dealt, amongst others, with topics such as the internal control system, risk management and measures to mitigate internal control risks. Within the framework of the budgeting process, budget costs are planned for each individual cost center. Every cost center manager is responsible for not exceeding budgeted costs and keeping in line with planned investments. All investment projects are subject to prior approval by the Management Board. Investments running over budget must also be approved by the Supervisory Board. 10.2. Disclosures on capital, share, voting and control rights and associated obligations The FACC Group’s share capital amounted to EUR 45,790,000 as of 31 December 2022 and is divided into 45,790,000 no-par value bearer shares. All shares have been admitted to trading in the Prime Market segment of the Vienna Stock Exchange. Each share corresponds to one vote at the Annual General Meeting. As of 31 December 2022, AVIC Cabin Systems Co. Limited (formerly FACC International Company Limited) held, either directly or indirectly, 55.5 percent of the shares of FACC. As of the balance sheet date of 31 December 2022, no other share-holders were known to hold more than 10 percent of the share capital. The free float of FACC shares amounted to 44.5 percent or 20,397,364 shares on 31 December 2022. There are no shares conferring special control rights. FACC does not have an employee stock option plan in place under which employees do not directly exercise their voting rights for their shares in the company. 10.3. Authorized capital At the Extraordinary General Meeting on 9 July 2019, authorized capital was approved. Accordingly, the Management Board is authorized, subject to the approval by the Supervisory Board and within at most five years from the date on which the authorized capital was entered in the commercial register, to increase the company’s share capital by up to a nominal figure of EUR 9,000,000 by issuing up to 9,000,000 new shares against cash or non-cash contributions. New shares can also be issued under the exclusion of shareholders’ subscription rights. The authorized capital was entered in the commercial register on 29 November 2019. 10.4. Conditional capital At the Extraordinary Annual General Meeting on 9 July 2019, a resolution was passed approving the creation of conditional capital. The Management Board is thus entitled, subject to the approval of the Supervisory Board, to increase the share capital by a nominal amount of up to EUR 3,000,000 by issuing up to 3,000,000 new shares against cash or non-cash contributions within at most five years from the registration of the authorized conditional capital in the commercial register. This authorized conditional capital serves the purpose of granting stock options to employees, senior executives and members of the Management Board of the company or one of its affiliated companies as part of a company stock option plan. The capital increase is earmarked and may only be carried out to the extent that option holders exercise their options under a stock option plan of the company. 10.5. Provisions for the appointment of the Management Board and Supervisory Board As long as AVIC Cabin Systems Co. Limited (formerly FACC International Company Limited) is a shareholder of FACC with a stake of at least 25 percent of the current share capital, AVIC Cabin Systems Co. Limited has the right to appoint up to one third of all members of the Supervisory Board in accordance with Article 11 of FACC’s Articles of Association. There are no other provisions in the Articles of Association that go beyond the statutory provisions governing the appointment of the Management Board and Supervisory Board and the amendments to the Articles of Association. 10.6. Other disclosures As of 31 December 2022, FACC AG held no treasury shares. FACC is unaware of any restrictions regarding the voting rights of FACC shares and any transfer thereof, including any restrictions resulting from agreements between shareholders. No compensation agreements exist between FACC and the members of its Management and Supervisory Boards in the event of a public takeover bid. Agreements regarding the promissory note loan of 2019 and the syndicated loan financing of 2018 include change-of-control clauses. Lenders shall be entitled to exercise their right of termination if • a person or a group of persons acting in concert acquires (direct or indirect) control over the guarantor (FACC AG), or • the guarantor (FACC AG) no longer directly or indirectly holds or controls at least 75 percent of the capital shares or voting rights of the borrower (FACC Operations GmbH). 11. OUTLOOK 11.1. The civil aviation market Development of air traffic volumes As mentioned at the beginning of this Group Management Report, aviation has continued to recover from the impacts of the COVID-19 pandemic thanks to the gradual lifting of traffic restrictions. According to IATA, air traffic measured in revenue passenger kilometers (RPK) increased by 64.4 percent in 2022. This is very encouraging, considering that far-reaching restrictions were still in place at the beginning of the year and air traffic in December 2022 had returned to 76.9 percent of its pre-pandemic level. 2022 saw very strong growth in international air travel (+152.7 percent compared to 2021), which had come to an almost complete halt at the onset of the COVID-19 pandemic. With the lifting of travel restrictions in China at the beginning of 2023, this market is also set to make a significant recovery, leading to a further increase in air travel. Demand for aircraft The growth trend in the aircraft industry will continue to develop positively in line with the increase in air traffic, measured in passenger kilometers, and notwithstanding the high inflationary environment. The demand from airlines for new and thus more efficient aircraft partly exceeds the currently available production capacities of the aircraft industry. Deliveries of Airbus aircraft increased by 8.5 percent (+52 aircraft), and deliveries of Boeing aircraft by an impressive 35 percent (+120 aircraft) relative to the previous year. The book-to-bill ratios of the two manufacturers were particularly pleasing. Airbus was thus able to secure 820 new orders and Boeing 774, corresponding to a ratio of 1.24 and 1.61 respectively. This means that more aircraft were sold than delivered in 2022, which in turn resulted in an increase in the order backlog. Moreover, this confirms the long-term forecasts of both manufacturers, with Boeing predicting 41,170 new aircraft and Airbus 39,500 by 2041. The industry expects an annual increase in passenger kilometers of 3.8 percent, resulting in an annual fleet growth of approximately 2.8 percent (taking into account current aircraft utilization and the number of available aircraft). Development of individual market segments (short and long-haul aircraft, business jets) Key aviation markets gradually stabilized over the course of 2022, thus confirming the planned increase in customer call-offs. Demand for short and medium-haul aircraft in particular was especially high. The demand for new aircraft called for an immense ramp-up of production rates for these models, resulting in difficulties along the supply chain and an adjustment of production rates in the fourth quarter of 2022. In line with demand, which is nevertheless increasing, and in order to facilitate planning of requirements for the coming periods, the OEMs have drawn up and communicated a transparent new plan for the rate ramp-up, taking into account the critical supply chain. Especially short and medium-haul aircraft as well as the development of the business jet market are of particular relevance to FACC as products for these aircraft generate approximately 60 percent of annual revenues. The demand for wide-body and long-haul aircraft continues to develop at a slower pace than before the onset of the COVID-19 pandemic. The market for long-haul aircraft is recovering more slowly, as was expected, but has been gaining momentum in recent periods, which in turn indicates an increase in aircraft construction rates in the long-haul aircraft segment. Over the next 24 months, the production rates of long-haul aircraft of key importance to FACC, such as the Airbus A350 and the Boeing B787, are set to increase by more than 20 percent due to market conditions. The business jet segment developed very positively in 2022; this trend will continue in 2023. This is of great importance for FACC as approximately 18 percent of its product sales are generated in this segment. 11.2. The FACC Group Key projects in the financial year 2023 The overarching goal of FACC remains to strengthen its profitability. By increasing manufacturing rates and new orders, the company is setting the stage for stable growth in 2023. In particular, management is focusing on the following measures for 2023: • One important cornerstone is the optimization of working capital. To this end, a dedicated organizational unit has been established in the CFO area, with the aim of optimizing the cash conversion cycle. As a result of the optimized capital commitment and improved liquidity, net debt is reduced while increasing FACC’s financial strength. • Following the scheduled start-up of production in 2022 at our new location in Croatia, planning of the plant expansion was begun, and the tripling of the plant’s area will be tackled in the course of 2023. The goal is to expand the workforce of the plant to approximately 600 employees by 2025. • Activities in the new UAM and space segments will be further intensified in 2023. Based on current market and customer information, the development projects in the UAM segment in particular are expected to generate significant revenue growth from the financial year 2024 onwards. • The major aim is to recover the unusually high inflation-related costs for energy, materials, logistics and human resources. • The stabilization of the ramp-up projects initiated in 2022 will be continued in 2023, with the aim of cutting costs and increasing profitability. The industry as a whole, including FACC, is currently facing a number of challenges. Inflation in western markets is higher than it has been for decades, and a tightening of financial conditions calls for consistent cost control and management. Aviation was on an upward trend in 2022, and this is forecast to continue in 2023 and the following years. Management believes that the planned growth will largely translate into increased profitability and thus higher EBIT. The above forecast is based on the assumption that the general economic situation will not deteriorate further and that no unexpected adverse developments will occur in 2023. With regard to the Ukrainian-Russian conflict, FACC is not in a position to assess general risks (e.g. gas price development, sanctions etc.) or the general economic development. As currently no customer or supplier relationships exist in these countries, the direct risk for FACC is considered to be low. Ried im Innkreis, 29 March 2023 Robert Machtlinger m.p. Chairman of the Management Board Andreas Ockel m.p. Member of the Management Board Aleš Stárek m.p. Member of the Management Board Zhen Pang m.p. Member of the Management Board Consolidated Profit and Loss Statement for the period from 1 January 2022 to 31 December 2022 2021 2022 Note EUR'000 EUR'000 Revenues 9 497,554 606,977 COGS – Cost of Goods sold 10 –462,836 –558,467 Gross profit 34,718 48,509 Research and development expenses 11 –1,457 –1,444 Selling expenses 12 –6,056 –9,075 Administration expenses 13 –41,226 –46,348 Other operating income 14 18,309 14,841 Other operating expenses 15 –29,353 –1,015 Earnings before interest and taxes (EBIT) –25,066 5,469 Financing expenses 18 –7,067 –10,547 Other financial result 18 1,655 1,934 Financial result –5,412 –8,614 Earnings before taxes (EBT) –30,478 –3,144 Income taxes 19 6,885 2,160 Earnings after taxes –23,594 –984 Diluted (=undiluted) earnings per share in EUR 20 –0.52 –0.02 Issued shares (in shares) 45,790,000 45,790,000 Consolidated Statement of Comprehensive Income for the period from 1 January 2022 to 31 December 2022 2021 2022 Note EUR'000 EUR'000 Earnings after taxes –23,594 –984 Currency translation differences from consolidation 33 399 22 Cash flow hedges 33 –18,727 –1,855 Tax effect 19 4,682 284 Items subsequently reclassified to profit and loss –13,647 –1,549 Revaluation effects of termination benefits 35 193 191 Fair value measurement of securities (fair value through other comprehensive income) 33 –3 –76 Tax effect 19 –47 –102 Items not subsequently reclassified to profit and loss 142 13 Other comprehensive income after taxes –13,505 –1,536 Total comprehensive income –37,098 –2,520 Consolidated Statement of Financial Position as of 31 December 2022 ASSETS 31.12.2021 31.12.2022 Note EUR'000 EUR'000 Intangible assets 21 5,354 5,030 Property, plant and equipment 22 166,830 156,034 Receivables from customer-related engineering 23 27,742 27,427 Contract assets 24 2,576 3,318 Contract costs 25 88,306 71,248 Other financial assets 26 497 422 Receivables from related companies 27, 48 5,638 3,071 Derivative financial instruments 45 0 2,987 Other receivables 28 9,987 10,236 Deferred taxes 19 16,762 19,113 Non-current assets 323,694 298,885 Inventories 29 90,775 116,325 Customer-related engineering 30 6,170 11,488 Trade receivables 31 53,023 61,065 Receivables from related companies 48 18,749 20,155 Current tax income receivables 197 158 Other receivables and deferred items 31 36,892 43,259 Cash and cash equivalents 32 114,966 102,691 Current assets 320,772 355,140 Balance sheet total 644,465 654,025 EQUITY AND LIABILITIES 31.12.2021 31.12.2022 Note EUR'000 EUR'000 Share capital 33 45,790 45,790 Capital reserve 33 221,459 221,459 Currency translation reserve 33 –555 –533 Other reserves 33 –8,352 –9,910 Balance sheet loss 33 –52,340 –53,324 Equity 206,002 203,481 Promissory note loans 38 70,000 70,000 Lease liabilities 38 72,853 65,288 Other financial liabilities 38 9,580 5,034 Derivative financial instruments 45 1,737 0 Investment grants 34 8,405 7,266 Employee benefit obligations 35 9,600 9,280 Other liabilities 0 1,970 Deferred tax liabilities 19 377 281 Non-current liabilities 172,553 159,120 Lease liabilities 38 6,726 7,450 Other financial liabilities 38 133,610 143,522 Derivative financial instruments 45 6,448 16,536 Contract liabilities from customer-related engineering 36 12,714 19,350 Trade payables 53,305 66,655 Liabilities towards related companies 48 10,237 12,016 Investment grants 34 1,124 1,009 Income tax liabilities 290 252 Other provisions 37 30,691 11,421 Other liabilities and deferred items 39 10,766 13,212 Current liabilities 265,911 291,424 Balance sheet total 644,465 654,025 Consolidated Statement of Changes in Equity for the period from 1 January 2022 to 31 December 2022 Attributable to shareholders of the parent company Note Share capital EUR'000 Capital reserves EUR'000 Currency translation reserve EUR'000 As of 1 January 2021 45,790 221,459 –954 Derecognition of non-controlling interests 33 0 0 0 Earnings after taxes 0 0 0 Other comprehensive income after taxes 33 0 0 399 Total comprehensive income 0 0 399 As of 31 December 2021 45,790 221,459 –555 As of 1 January 2022 45,790 221,459 –555 Earnings after taxes 0 0 0 Other comprehensive income after taxes 33 0 0 22 Total comprehensive income 0 0 22 As of 31 December 2022 45,790 221,459 –533 Attributable to shareholders of the parent company Other reserves Securities – fair value through other comprehensive income EUR'000 Cash flow hedges EUR'000 Reserves IAS 19 EUR'000 Balance sheet loss EUR'000 Total EUR'000 Non-controlling interests EUR'000 Total equity EUR'000 10 8,699 –3,159 –28,757 243,089 68 243,157 0 0 0 11 11 –68 –57 0 0 0 –23,594 –23,594 0 –23,594 –2 –14,045 145 0 –13,505 0 –13,505 –2 –14,045 145 –23,583 –37,087 –68 –37,155 8 –5,346 –3,014 –52,340 206,002 0 206,002 8 –5,346 –3,014 –52,340 206,002 0 206,002 0 0 0 –984 –984 0 –984 –58 –1,571 71 0 –1,536 0 –1,536 –58 –1,571 71 –984 –2,520 0 –2,520 –50 –6,917 –2,943 –53,324 203,481 0 203,481 Consolidated Statement of Cash Flows for the period from 1 January 2022 to 31 December 2022 2021 2022 Note EUR'000 EUR'000 Earnings before taxes (EBT) –30,478 –3,144 Plus financial result 18 5,412 8,614 Earnings before interest and taxes (EBIT) –25,066 5,469 Plus/minus Depreciation, amortization and impairment 17 22,826 22,818 Amortization contract costs 25 21,930 26,075 Additions contract costs –11,624 –9,017 Income from the reversal of investment grants 34 –453 –317 Change in employee benefit obligations 35 134 –129 Other non-cash expenses/income 40 2,087 –738 Gross cash flow 9,834 44,161 Change in working capital Change in inventory and customer-related engineering 29, 30 15,316 –30,812 Change in trade receivables and other receivables, receivables from customer-related engineering and contract assets 28, 31 10,899 –9,410 Change in trade payables and other liabilities 39 17,726 20,672 Change in current provisions 37 28,509 –19,270 Cash flow from ongoing activities 82,285 5,341 Interest received 41 35 183 Taxes paid 19 –68 –44 Cash flow from operating activities 82,253 5,480 Payments for the acquisition of non-current assets 21, 22, 42 –11,822 –8,604 Proceeds from the disposal of non-current assets 21, 22, 42 110 17 Cash flow from investing activities –11,712 –8,586 Proceeds from interest-bearing liabilities 38 163 10,565 Repayments of interest-bearing liabilities 38 –29,400 –5,200 Outflows from leasing agreements 38 –8,302 –8,520 Interest paid 41 –7,677 –10,212 Cash flow from financing activities –45,216 –13,367 Net changes in cash and cash equivalents 25,325 –16,474 Cash and cash equivalents at the beginning of the period 92,548 114,966 Effects from foreign exchange rates –2,907 4,198 Cash and cash equivalents at the end of the period 114,966 102,691 Notes to the Consolidated Financial Statements General information 1. General information The FACC Group (hereinafter referred to as FACC) with headquarters in Ried im Innkreis, Austria, is an enterprise involved in the development, production and maintenance of aircraft components. Its primary fields of activity include the production of structural components such as parts of engine cowlings, wing claddings or control surfaces and the production of interiors fittings in the modern commercial aircraft such as overhead stowage compartments, cabin linings and service units. The majority of the components are manufactured from composite materials. FACC also integrates metallic components made of titanium, high-alloyed steels and other metals into these composite components and delivers the ready-to-install components to the manufacturers’ assembly lines. FACC AG has been listed on the Vienna Stock Exchange in the prime market exchange segment (commercial trade) since 25 June 2014. FACC AG is part of the consolidation scope of AVIC Cabin Systems Co., Limited (ACS) with headquarters in Hong Kong (Room 2201, 22/F, Fairmont House, 8 Cotton Tree Drive, Admiralty, Hong Kong), company number 1394811. 2. Basis of preparation of the Consolidated Financial Statements The Consolidated Financial Statements of FACC AG as of 31 December 2022 were prepared in accordance with the International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB) and the interpretations of the IFRS Interpretations Committee (IFRSIC) as adopted by the European Union (EU). According to section 245a of the Austrian Company Code (UGB), these Consolidated Financial Statements are subject to exception under Austrian law. All additional requirements of section 245a (1) of the Austrian Company Code (UGB) have been fulfilled. The Consolidated Financial Statements are prepared as of the balance sheet date of the parent company, FACC AG. The financial year begins on 1 January and ends on 31 December 2022. The annual financial statements of the individual domestic and foreign companies included in the Consolidated Financial Statements are prepared as of the reporting date of the Consolidated Financial Statements. Accounting and valuation within the Group are carried out according to uniform criteria. The Consolidated Financial Statements were prepared on a going concern basis. For the sake of clarity, the “Consolidated Profit and Loss Statement”, the “Statement of Comprehensive Income”, the “Consolidated Statement of Financial Position”, the “Consolidated Statement of Changes in Equity” and the “Consolidated Statement of Cash Flows” have been summarized and are explained separately in the Notes according to the materiality principle. The Consolidated Profit and Loss Statement has been prepared under the cost-of-sales method. The Consolidated Statement of Financial Position is classified by maturity in accordance with IAS 1. Assets and liabilities are classified as current if they are expected to be realized or settled within twelve months of the balance sheet date. The Consolidated Financial Statements are presented in euros. Unless otherwise stated, all amounts have been rounded to the nearest thousand (EUR’000). Due to rounding, slight differences may occur. The accounting and valuation principles of the previous year, which form the basis for the present Consolidated Financial Statements, were applied unchanged and supplemented by new IFRS standards to be applied from this financial year onwards (see Note 50 – Effects of new and amended standards). A description of the accounting and valuation principles is given in Note 49 – Accounting and valuation policies. With regard to the Ukrainian-Russian conflict, FACC is not in a position to assess general risks (e.g. gas price development, sanctions etc.) or the general economic development. As currently no customer or supplier relationships exist in these countries, the direct risk for FACC is considered to be low. Further information on the economic impact of the Ukraine-Russia conflict on the FACC Group can be found in the Group Management Report. Environmental issues are firmly anchored in the corporate strategy of FACC Group. It reports directly to the Management Board. The aim of sustainability management is to take into account the impact on the environment and society in all business processes and to reconcile the company's economic and ecological-social values. Sustainability management and the operating units work closely together on this. Key objectives in this area are the reduction of fuel consumption through weight reduction, recycling management and the use of ecologically recyclable materials. These are long-term topics on which the FACC Group is continuously working in coordination with its largest customers. From a current perspective, these objectives do not yet have a direct impact on the consolidated financial statements. In general, the aviation industry is expected to continue to grow. Both Airbus and Boeing expect a steady upward trend in air traffic, especially in the Asian markets, underpinning the need for new aircraft. Boeing and Airbus, for example, expect average annual growth in passenger kilometers of 3.8% through 2041, with fleets expected to expand by 2.8% annually over the same period. In a letter dated 15 February 2023, FACC AG was informed that the Austrian Financial Market Authority (FMA) had initiated an audit of the financial reporting pursuant to Section 1 paragraph 1 in connection with Section 2 paragraph 1 line 1 of the Accounting Control Act with regard to the consoledated financial statements of FACC AG as of 31 December 2021 and the half-year financial reports as of 30 June 2021 and as of 30 June 2022. Due to the initial stage of the audit, no results are available yet. 3. Consolidated companies The Consolidated Financial Statements of FACC AG include all companies controlled by FACC AG. According to IFRS 10, an investor has power over an investee if it has the ability to direct activities which significantly affect the investee’s return, has exposure or rights to variable returns from its involvement with the investee and has the ability to use its power over the investee to affect the amount of its returns. The group of consolidated companies of FACC as of 31 December 2022 remained unchanged compared to 31 December 2021. The group comprises nine companies, including FACC AG. FACC AG comprised the following subsidiaries on 31 December 2022 or 31 December 2021: Company Headquaters Issued and fully paid nominal capital Currency Direct share Primary activities FACC Operations GmbH Ried im Innkreis, Austria 127,000,000 EUR 100% Development & production of aircraft components; customer service & repair FACC Solutions (Canada) Inc. Montreal, Canada 10,000 CAD 100% Production; customer service & repair FACC Solutions Croatia d.o.o. Zagreb, Croatia 20,000 HRK 100% Production FACC Solutions Inc. Wichita, Kansas, USA 10,000 USD 100% Customer service & repair FACC Solutions s.r.o. Bratislava, Slovakia 6,639 EUR 100% Design & engineering FACC (Shanghai) Co., Ltd Shanghai, China 2,000,000 RMB 100% Design & engineering FACC Solutions Private Limited Pune, India 20,420,530 INR 100% Design & engineering CoLT Prüf und Test GmbH St. Martin, Austria 35,000 EUR 100% Design & engineering 4. Consolidation methods The capital consolidation of fully consolidated affiliates is performed according to the acquisition method, which involves comparing the consideration paid with the revalued net assets (equity) of the acquired entity at the time of acquisition. Under IFRS 3, assets, liabilities and contingent liabilities, to the extent that they can be identified, are recognized at fair value on initial consolidation; any remaining positive difference between the procurement costs and the revalued equity share is capitalized as goodwill in the respective segment in the respective national currency. A negative difference is recognized in the Profit and Loss Statement under other operating income. Revenues, earnings and expenses as well as receivable and liability settlements between consolidated companies are eliminated. Interim results of non-current and current assets resulting from intra-group transactions are eliminated. 5. Currency conversion The Consolidated Financial Statements are prepared in euros, the functional currency of FACC AG. The annual financial statements of foreign subsidiaries are converted into euros in accordance with the functional currency concept of IAS 21. The currency of all subsidiaries is the respective local currency since they conduct their business independently from a financial, economic and organizational point of view. Monetary assets and liabilities denominated in a foreign currency are translated into the functional currency using the closing conversion rate at each balance sheet date. All exchange rate differences are recorded to profit or loss. Non-monetary items measured at historical cost in a foreign currency are translated at the exchange rate on the date of the transaction. Non-monetary items measured at fair value in a foreign currency are translated at the rate that existed when the fair value was determined. Goodwill arising on the acquisition of foreign subsidiaries is allocated to the acquired entities and converted at the exchange rate on the balance sheet date. The items in the profit and loss statements of foreign consolidated companies are converted at average period rates. Currency conversion differences between the closing conversion rate or historical rates on the balance sheet and the average rate on the Profit and Loss Statement are recorded as part of the other comprehensive income in equity. Exchange rate differences arising from the conversion of transactions and monetary balance sheet items in foreign currencies are recorded to profit or loss at the exchange rates applicable at the time of the transaction or valuation. The following exchange rates were used for currency conversions: Closing rate Average rate Currency Abbrev. 31.12.2021 31.12.2022 2021 2022 Canadian dollar CAD 1.4393 1.4440 1.4826 1.3695 Indian rupee INR 84.2292 88.1710 87.4392 82.6864 Croatian kuna HRK 7.5156 7.5365 7.5284 7.5349 Chinese renminbi yuan CNY 7.1947 7.3582 7.6282 7.0788 US dollar USD 1.1326 1.0666 1.1827 1.0530 6. Effects of COVID-19 In the financial year 2021, estimates and margins of discretion were affected in the following areas in particular: • In the case of receivables from customer-related engineering, changes in estimates occurred with regard to postponed deliveries of parts and increased interest rates (see Note 23 – Receivables from customer-related engineering). • Hedge accounting can be applied to cash flow hedges if the occurrence of the hedged item is highly probable. For existing hedging relationships, this assessment is evaluated regularly. With regard to hedge accounting, assessments of the occurrence of expected transactions were updated. As of 31 December 2021, these are still assumed to be highly probable and therefore did not result in any changes (see Note 45 – Derivative financial instruments, hedge accounting and fair value hedge). • The COVID-19 crisis led to sharp fluctuations of the credit risk of contractual partners, which was taken into account in the calculation models for expected credit losses (see Note 31 – Receivables). • Furthermore, the capitalization of deferred tax assets resulting from temporary differences and loss carryforwards was assessed with regard to the probability of future taxable income. Due to the prevailing uncertainties, deferred tax assets could not be recognized for all tax loss carryforwards in financial year 2021 (see Note 19 – Income taxes and deferred tax assets). Depending on the development of the COVID-19 crisis, there may also be implications for the 2023 financial year in the areas mentioned. There was only a minor impact in financial year 2022. These changes in estimates as well as significant accounting and valuation effects are presented in the following table: Effects on EBIT Explanation Balance sheet effects 2021 EUR'000 Balance sheet effects 2022 EUR'000 Development projects (IFRS 15) Changes in estimates of receivables from customer-related engineering See Note 23 – Receivables from customer-related engineering –1,582 0 Personnel costs (IAS 19/IAS 20) Claims from short-time work recognized in profit or loss See Note 16 – Personnel costs 3,293 0 Personnel costs (IAS 19/IAS 20) Costs from personnel reductions See Note 16 – Personnel costs –2,312 –24 Other operating income Loss compensation See Note 14 – Other operating income 7,000 5,000 Expected credit loss on financial instruments (IFRS 9) Value adjustments of trade receivables and receivables from customer-related engineering See Note 31 – Receivables and Note 23 – Receivables from customer-related engineering 1,053 0 7,451 4,945 EBIT-neutral effects Explanation Deferred taxes (IAS 12) Due to the negative business development in the 2021 financial year as well as the changed planning assumptions, deferred tax assets could not be recognized for all tax loss carryforwards. See Note 19 – Income taxes and deferred tax assets Financial liabilities (IFRS 9) In the context of the corona pandemic, a new credit facility in the amount of kEUR 60,000 (KRR COVID-19 framework credit for large enterprises of the Austrian Kontrollbank) was concluded on 26 June 2020 and integrated into the base contract See Note 38 – Financial liabilities 7. Use of assumptions and estimates The preparation of the Consolidated Financial Statements requires management to make use of certain estimates and assumptions which have an impact on the amounts of the reported assets and liabilities as well as contingent liabilities, on other liabilities on the balance sheet date and the disclosure of earnings and expenses during the reporting period. The actual amounts may differ from the estimates given. The intrinsic value of goodwill, of assets with indefinite useful lives as well as contract costs, which have not yet been completed, are assessed by calculating the value in use with the discounted cash flow method. The recoverable amount depends to a large extent on expected cash flow surpluses and the applied cost of capital. With respect to these parameters, management calculates estimates and makes assumptions relating to FACC’s future surplus payments and capital costs expected in the planning periods as well as the individual cash-generating units. Estimates are made to the best of our knowledge and belief subject to the going concern assumption, build on our experience and take remaining uncertainty into account in an appropriate manner. A sensitivity analysis was performed to illustrate the effects of changing parameters in the planning calculation on the Consolidated Profit and Loss Statement. The planning assumptions made for the impairment test and the sensitivity analysis are explained in more detail in Note 22 – Property, plant and equipment. Contract costs were tested for impairment in the course of the 2022 financial year to the extent that there were indications of impairment, such as expected losses within the framework of multi-year planning. The intrinsic value was assessed by calculating the value in use of the development projects using the discounted cash flow method. The recoverable amount depends to a large extent on expected cash inflows from the respective projects and the applied cost of capital. With respect to these parameters, management calculates estimates and makes assumptions relating to FACC’s future surplus payments and capital costs expected in the planning periods as well as the individual cash-generating units. Estimates are made to the best of our knowledge and belief subject to the going concern assumption, build on our experience and take remaining uncertainty into account in an appropriate manner. Impairment requirements are assessed at the level of individual projects or projects to be considered jointly, provided that these generate independent cash flows (Cash generating Units – CGUs). Under certain conditions, development projects pertaining to the same type of aircraft are grouped together for purposes of impairment testing. The useful life of property, plant and equipment is derived from estimates based on the operation of comparable assets. The useful lives thus determined are constantly checked for their continued validity and, if necessary, adjusted. The average useful lives are specified in Note 49 – Accounting and valuation policies. The FACC Group determines the lease term as the non-cancellable term of the lease, together with any periods covered by an option to extend the lease if it is reasonably certain to be exercised, or any periods covered by an option to terminate the lease, if it is reasonably certain not to be exercised. The FACC Group has one lease contract that includes extension and termination options. The Group applies judgement in evaluating whether it is reasonably certain that the option to renew or terminate the lease will be exercised or not. That is, it considers all relevant factors that create an economic incentive for it to exercise either the renewal or termination. After the commencement date, the Group reassesses the lease term if there is a significant event or change in circumstances that is within its control and affects its ability to exercise or not to exercise the option to renew or to terminate (e.g., construction of significant leasehold improvements or significant customization to the leased asset). The FACC Group cannot readily determine the interest rate implicit in the lease; therefore, it uses its incremental borrowing rate to measure lease liabilities. The incremental borrowing rate is the rate of interest that the FACC Group would have to pay to borrow over a similar term, and with a similar security, the funds necessary to obtain an asset of a similar value to the right-of-use asset in a similar economic environment. The incremental borrowing rate therefore reflects what FACC ‘would have to pay’, which requires estimation when no observable rates are available or when they need to be adjusted to reflect the terms and conditions of the lease. The FACC Group estimates the incremental borrowing rate using observable inputs (such as market interest rates) when available and is required to make certain entity-specific estimates. Receivables from customer-related engineering are recognized at the present value of future incoming payments for development costs incurred, whereby the estimates for determining this value are based on the budget approved by the Supervisory Board for the coming financial year and medium-term planning for the next five years. The estimates, moreover, may not exceed the rates published by IATA, customer forecasts and the estimates of management based on these. In addition, the forward-looking model of expected loan defaults set out in IFRS 9 is used. Determining the extent to which expected loan defaults will be influenced by changes in economic factors requires the exercise of considerable discretion and is made on the basis of weighted probabilities. The impairment of trade receivables, receivables from customer-related engineering and contract assets is determined on the basis of empirical values regarding overdue payments as well as the estimated probability of incoming payments. “Slow-moving” inventory items, which are classified according to product groups, are subject to specific write-downs. The system identifies materials with a storage period of more than 24 months as slow-moving inventory items. Employee benefit obligations are determined on the basis of actuarial calculations made by actuaries. Actuarial valuations are based on assumptions about discount rates, future wage and salary increases and mortality rates. When determining the appropriate discount rate, management bases its calculations on long-term market interest rates. The applied mortality rate is derived from publicly available mortality tables in the respective country. Future wage and salary increases are calculated on the basis of expected future inflation rates for the respective country. All assumptions are reviewed and evaluated at each balance sheet date. Further details on the assumptions made and sensitivities are given in Note 35 – Employee benefit obligations. The calculation of deferred tax assets requires assumptions to be made regarding future taxable earnings and the timing of the realization of deferred tax assets. However, as future business performance is uncertain and cannot be fully influenced by FACC, the valuation of deferred taxes is subject to uncertainties. Provisions for warranties are determined according to a standardized process. These risks are calculated by the division heads at each balance sheet date and are then assessed by management. Where a risk has to be taken into account, the respective area of responsibility must make the best possible estimate of the provision to be recognized on the basis of empirical values and individual assessments. Provisions are regularly adjusted to incorporate new findings. Pending losses are immediately recorded as expenses if the total contract costs are expected to exceed the contract revenues. In order to determine the contract costs, management must make a substantial number of estimates regarding the fulfillment of certain performance requirements as well as the development of productivity improvements and warranty expenses. In addition, it is also necessary to assess whether individual agreements with customers are to be considered contracts. This depends, in particular, on whether delivery obligations were negotiated jointly and involve the same products. Within the framework of customer and supplier contracts, estimates must also be made with regard to the outcome of disputes regarding additional claims on the part of FACC and counterclaims of the customer and supplier. These are partially dependent on the outcome of legal disputes. Subsequent claims are only recognized in exceptional cases if an external legal opinion exists that confirms the enforceability of the amount and reason for the subsequent claim with a very high probability. Provisions are also recognized on the basis of the legal opinions obtained to assess the risks from counterclaims of a significant amount, taking into account all opportunities and risks. Current macroeconomic developments may have an impact on accounting. This may have an impact in particular on assumptions in connection with impairment, assessment of triggering events, calculation of provisions and assessment of deferred taxes. EBIT for financial year 2022 will be impacted by tightening of the supply chain, increased logistics costs for shipping products to customers, rising material and energy costs in connection with the geopolitical situation, and product start-up costs for various new projects. The optimization program launched at the beginning of financial year 2020 to streamline the Group-wide cost structure already began to take effect in financial year 2021 and also brought further necessary positive effects in 2022. These effects were countered by tightening in the supply chain, rising material and energy costs in connection with the geopolitical situation, and the sharp rise in inflation. The corresponding analyses were carried out: There were no resulting indications of asset impairment both during the year and at 31 December 2022. The effects of inflation and interest rate increases were taken into account in the measurement of personnel-related provisions and the interest rates used to discount future cash flows as part of the measurement of non-current assets. Please refer to the explanations in the respective notes. FACC was not involved in any passive lawsuits or exposed to threats of lawsuits in the financial year 2022. The arbitration proceedings and passive lawsuits concluded in the previous year have been concluded. However, there are out-of-court negotiations with customers and suppliers, the outcome of which is subject to management estimates. These estimates are based on external legal letters and the assessment of the internal legal department. 8. Business segments Segment reporting follows the internal management and reporting of FACC AG (according to IFRS). The earnings before interest and taxes (EBIT) are the key performance indicator used to steer the business segments and are reported to the responsible corporate body (Management Board of FACC AG). Due to different applications of the products, three operating segments were created: • Aerostructures: development, production, distribution and repair of structural components • Engines & Nacelles: development, production, distribution and repair of engine components • Cabin Interiors: development, production, distribution and repair of interior furnishing In addition to the three operating segments, the Group also comprises the central services Finance and Controlling, Human Resources, Legal, Quality Assurance, Research & Development, Communication & Marketing, Purchasing and IT (including Engineering Services). The central services support the operating segments in fulfilling their duties within the framework of a matrix organization. Their earnings and outlays are allocated to the three segments using a specific method. Aerostructures Engines & Nacelles Cabin Interiors Total EUR'000 EUR'000 EUR'000 EUR'000 Financial year 2021 Revenues 167,543 103,661 226,350 497,554 Earnings before interest and taxes (EBIT) –28,549 8,699 –5,216 –25,066 Investments 5,703 672 5,447 11,822 Depreciation, amortization and impairment –10,875 –5,215 –6,736 –22,826 Assets on 31 December 2021 269,810 122,962 251,693 644,465 Of which non-current assets 31 December 2021 138,418 46,228 106,164 290,809 Aerostructures Engines & Nacelles Cabin Interiors Total EUR'000 EUR'000 EUR'000 EUR'000 Financial year 2022 Revenues 235,123 97,295 274,558 606,977 Earnings before interest and taxes (EBIT) 3,945 532 992 5,469 Investments 3,439 1,651 3,513 8,604 Depreciation, amortization and impairment –10,229 –4,757 –7,832 –22,818 Assets on 31 December 2022 271,556 114,211 268,258 654,025 Of which non-current assets 31 December 2022 127,191 39,312 96,554 263,057 Total segment revenues represent external revenues generated from external parties. Revenues broken down by geographical area are presented according to the location of the customer in Note 9 – Revenues. For the financial year ending 31 December 2022, the Group generated revenues of kEUR 322,202 (previous year: kEUR 245,286) with one external customer, of which exceeded 10% of total revenues. Sales revenues were generated from these customers in all three segments. The non-current assets (intangible assets, property, plant and equipment, receivables from customer-related engineering, contract assets and contract costs) are located mainly in Austria, as in the previous year. NOTES TO THE CONSOLIDATED PROFIT AND LOSS STATEMENT 9. Revenues Revenues from contracts with customers are generated through the production of aircraft components, engineering services and other services in connection with the production of aircraft components. Revenues by type, segment and geographical area are presented below: 2021 2022 2021 2022 2021 2022 2021 2022 Aero- structures EUR'000 Aero- structures EUR'000 Engines & Nacelles EUR'000 Engines & Nacelles EUR'000 Cabin Interiors EUR'000 Cabin Interiors EUR'000 Total EUR'000 Total EUR'000 Production 153,549 208,588 94,197 92,167 208,018 244,687 455,764 545,443 Engineering and services 13,993 26,535 9,464 5,128 18,333 29,871 41,790 61,534 167,543 235,123 103,661 97,295 226,350 274,558 497,554 606,977 2021 2022 EUR'000 EUR'000 Germany 189,610 238,622 Canada 86,879 102,099 Great Britain 57,652 81,024 USA 80,871 67,066 China 30,700 34,068 Other countries 51,842 84,098 497,554 606,977 The FACC Group recognizes revenue from the sale of products as well as from development and other services almost exclusively for a specific point in time. While trade receivables usually have payment periods of up to 90 days, some receivables from customer-related engineering as well as contract assets are subject to payment schedules including milestone payments. Expected future sales for performance obligations not fulfilled (or partially not fulfilled) in the reporting period under existing contracts amount to kEUR 0 (previous year: kEUR 0). These performance obligations refer to fixed orders of shipsets still to be delivered or services still to be provided. 10. Cost of goods sold 2021 2022 EUR'000 EUR'000 Material expenses –307,209 –383,158 Personnel costs –126,088 –148,265 Depreciation and amortization –17,880 –17,643 General administration expenses –11,658 –9,401 –462,836 –558,467 11. Research and development expenses 2021 2022 EUR'000 EUR'000 Material expenses –221 –248 Personnel costs –807 –800 Depreciation and amortization –240 –226 General administration expenses –189 –170 –1,457 –1,444 12. Selling expenses 2021 2022 EUR'000 EUR'000 Material expenses –398 –730 Personnel costs –4,225 –5,501 Depreciation and amortization –93 –102 General administration expenses –1,340 –2,742 –6,056 –9,075 13. Administration expenses 2021 2022 EUR'000 EUR'000 Material expenses –695 –1,970 Personnel costs –18,573 –22,663 Depreciation and amortization –4,613 –4,848 Effects from foreign exchange rates 1,765 –2,124 General administration expenses –19,110 –14,743 –41,226 –46,348 14. Other operating income 2021 2022 EUR'000 EUR'000 Income from public funding and tax-free grants 14,329 11,949 Other 3,980 2,892 18,309 14,841 Income from public funding and tax-free grants mainly relates to loss compensation, the research premium and the energy tax rebate. The item “Other” mainly includes income from compensation for damages. 15. Other operating expenses and impairment 2021 2022 EUR'000 EUR'000 Legal disputes –25,505 0 Other –3,849 –1,015 –29,353 –1,015 The item “Other” mainly includes expenses from prior periods. Due to the decision of a London arbitration court in connection with a supplier, an amount of EUR 25.5 million was recognized as an expense in business year 2021. 16. Personnel costs Expenses for termination benefits and benefits to corporate employee pension funds included payments to corporate employee pension funds of kEUR 1,651 (previous year: kEUR 1,453). 2021 2022 EUR'000 EUR'000 Wages and salaries –119,224 –138,627 Expenses for statutory, compulsory social security contributions and benefits –28,693 –30,625 Expenses for termination benefits and benefits to corporate employee pension funds –1,888 –2,330 Pensions –698 –1,119 Other social expenses 810 –4,527 –149,693 –177,228 The total amount of short-time work subsidies from the Austrian Public Employment Service (AMS) recognized was kEUR 0 (previous year: kEUR 3,293), of which kEUR 0 (previous year: kEUR 5,259) had already been paid out as of the balance sheet date. Total costs incurred for personnel reductions amounted to kEUR 24 (previous year: kEUR 2,312) and had been paid out in full as of the balance sheet dates. The positive amount in the position "Other social expenses" in financial year 2021 results from changes in other personnel-related provisions. The number of full-time equivalent employees on the balance sheet date was as follows: 31.12.2021 31.12.2022 Number Number Blue collar 1,460 1,773 White collar 1,078 1,146 2,538 2,920 Of which in Austria 2,202 2,444 Of which abroad 336 476 17. Depreciation 2021 2022 EUR'000 EUR'000 Intangible assets –1,089 –1,307 Property, plant and equipment –21,737 –21,511 –22,826 –22,818 Please refer to Note 21 – Intangible assets and Note 22 – Property, plant and equipment for information on the development of depreciation and amortization. 18. Financial result 2021 2022 EUR'000 EUR'000 Interest from bank deposits –21 160 Valuation of financial assets 7 6 Other financial income 48 17 Accumulation 1,620 1,751 Other financial result 1,655 1,934 Interest expenses of bank loans –2,825 –4,418 Interest expenses of lease liabilities –1,923 –1,774 Other interest and similar expenses –2,319 –4,356 Financing expenses –7,067 –10,547 Financial result –5,412 –8,614 The financial result is broken down according to the categories of IFRS 9 as follows: 31 December 2021 Operating result Financial result Valuation allowance Currency translation Valuation of derivative financial instruments Interest Result from fair value measurement Net financial result EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 Financial assets at amortized costs –88 17,029 0 610 0 17,551 Financial liabilities at amortized costs 0 –3,638 0 –2,825 0 –6,463 Fair value through profit and loss 0 0 –5,929 0 0 –5,929 Fair value through other comprehensive income 0 0 0 7 0 7 31 December 2022 Operating result Financial result Valuation allowance Currency translation Valuation of derivative financial instruments Interest Result from fair value measurement Net financial result EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 Financial assets at amortized costs –1,291 –62,135 0 –335 0 –63,761 Financial liabilities at amortized costs 0 37,194 0 –4,418 0 32,776 Fair value through profit and loss 0 0 –3,509 0 0 –3,509 Fair value through other comprehensive income 0 0 6 0 6 19. Income taxes and deferred tax assets Recorded income taxes include both taxes on income paid or owed by the individual companies as well as deferred taxes. 2021 2022 EUR'000 EUR'000 Current taxes ongoing –62 –105 Deferred taxes 6,946 2,266 6,885 2,160 In financial year 2022, a reduction in the corporate income tax rate was resolved as part of the Austrian eco-social tax reform. The reduction in the corporate income tax rate will take place in two stages. Starting in 2023, the corporate income tax rate will be reduced from 25% to 24%. From 2024, the corporate income tax rate will be 23%. The reasons for the difference between the Austrian corporate tax rate of 25% (previous year: 25%) valid in the 2022 financial year and the recorded group taxation rate are as follows: 2021 2022 EUR'000 EUR'000 Income before taxes –30,478 –3,144 Calculated income taxes 25% 7,620 786 Deviating foreign tax rates –210 349 Effect from change in tax rate 0 –1,405 Tax losses for which no deferred taxes were capitalized –775 236 Tax-free income 1,277 2,189 Expenses that cannot be deducted for tax purposes –1,080 –131 Minimum corporate tax and withholding taxes 0 –38 Tax effect from previous years 0 –51 Change permanent difference 0 260 Other effects 54 –34 Reported income tax expense 6,885 2,160 Effective tax rate in % 22.6% 68.7% Deferred taxes are calculated on the basis of the tax rates that are in force or announced in the individual countries according to the current legal situation. In Austria, a corporate tax rate of 23% applies. For foreign companies, deferred taxes are calculated on the basis of the corresponding country-specific tax rates. In the 2022 financial year, these ranged from 10% to 28% (previous year: 16% to 27%). The taxes recorded in the other comprehensive income are as follows: 2021 2022 Gross EUR'000 Tax EUR'000 Net EUR'000 Gross EUR'000 Tax EUR'000 Net EUR'000 Fair value measurement of securities –3 1 –2 –76 18 –58 Cash flow hedges –18,727 4,682 –14,045 –1,855 284 –1,571 Revaluation effects of termination benefits 193 –48 145 191 –120 71 –18,538 4,634 –13,903 –1,740 182 –1,558 Deferred taxes developed as follows: As of 31 December 2021 As of 01.01.2021 EUR'000 Change in profit and loss EUR'000 Change in other comprehensive income EUR'000 Net EUR'000 Deferred tax assets EUR'000 Deferred tax liabilities EUR'000 Intangible assets –420 322 0 –98 0 –98 Property, plant and equipment –14,230 48 0 –14,182 0 –14,182 Receivables from customer-related engineering –1,214 –716 0 –1,930 0 –1,930 Contract assets –637 –7 0 –644 0 –644 Contract costs –23,972 1,895 0 –22,077 0 –22,077 Other financial assets –15 0 1 –15 0 –15 Trade receivables –530 530 0 0 0 0 Inventories 1,299 –952 0 347 347 0 Other receivables and deferred items –1,533 1,392 0 –141 0 –141 Employee benefit obligations 1,120 –36 –48 1,036 1,036 0 Provisions –69 54 0 –15 0 –15 Trade payables 30 203 0 233 233 0 Financial liabilities 20,665 –1,127 0 19,538 19,538 0 Derivative financial instruments 0 –2,636 4,682 2,046 2,046 0 Other assets (incl. cash and cash equivalents) –407 –436 0 –843 0 –843 Other liabilities 0 92 0 92 92 0 Tax loss carry forwards 24,717 8,320 0 33,037 33,037 0 Tax assets (liabilities) before netting 4,803 6,946 4,634 16,384 56,328 –39,944 Netting of taxes –39,567 39,567 Net tax assets (liabilities) 4,803 6,946 4,634 16,384 16,761 –377 As of 31 December 2022 As of 01.01.2022 EUR'000 Change in profit and loss EUR'000 Change in other comprehensive income EUR'000 Net EUR'000 Deferred tax assets EUR'000 Deferred tax liabilities EUR'000 Intangible assets –98 –31 0 –129 0 –129 Property, plant and equipment –14,182 1,482 0 –12,700 0 –12,700 Receivables from customer-related engineering –1,930 –1,480 0 –3,410 0 –3,410 Contract assets –644 –120 0 –763 0 –763 Contract costs –22,077 5,690 0 –16,387 0 –16,387 Other financial assets –15 331 18 334 334 0 Trade receivables 0 0 0 0 0 0 Inventories 347 1,521 0 1,869 1,869 0 Other receivables and deferred items –141 –955 0 –1,096 0 –1,096 Employee benefit obligations 1,036 –490 –120 425 425 0 Provisions –15 15 0 0 0 0 Trade payables 233 529 0 762 762 0 Financial liabilities 19,538 –3,177 0 16,361 16,361 0 Derivative financial instruments 2,046 786 284 3,116 3,116 0 Other assets (incl. cash and cash equivalents) –843 543 0 –300 0 –300 Other liabilities 92 –151 0 –59 0 –59 Tax loss carry forwards 33,037 –2,228 0 30,809 30,809 0 Tax assets (liabilities) before netting 16,384 2,266 182 18,831 53,676 –34,845 Netting of taxes –34,563 34,563 Net tax assets (liabilities) 16,384 2,266 182 18,831 19,113 –281 The capitalized loss carryforwards originate exclusively from FACC Operations GmbH amounting to kEUR 133,954 as of 31 December 2022 (previous year: kEUR 132,149). On the basis of tax planning calculations, no deferred tax assets were recognized in the current 2022 financial year for loss carryforwards amounting to kEUR 37,151 (previous year: kEUR 45,021). This includes losses in connection with the Fake President Incident which have not yet been assessed for tax. The realization of the capitalized loss carryforwards can be considered sufficiently certain on the basis of medium-term planning. As of 31 December 2022, there were temporary differences in connection with shares in subsidiaries (“outside basis differences”) amounting to kEUR 2,429 (previous year: kEUR 2,279), for which no deferred tax liabilities were recognized in accordance with IAS 12.39. This is because FACC AG is in a position to control the development over time, and because these temporary differences will not be eliminated in the near future. Deferred tax liabilities result from the financial statements of foreign subsidiaries and are owed to foreign tax authorities. 20. Earnings per share The number of shares issued as of the balance sheet date was 45,790,000, like in the previous year. Since no dilutive potential ordinary shares were outstanding or treasury shares were held in the past financial year, the diluted earnings per share correspond to the undiluted earnings per share. Earnings per share of EUR –0.02 (previous year: EUR –0.52) were calculated by dividing the result by the weighted number of shares attributable to the shareholders of the parent company. NOTES TO THE CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME In the Consolidated Statement of Comprehensive Income, income after taxes is reconciled with comprehensive income in accordance with IAS 1. This includes, in particular, differences from currency conversion, actuarial gains and losses from the measurement of performance-related long-term employee compensation, changes in the hedging reserve and the valuation result of securities available for sale at “fair value through other comprehensive income (FVOCI)”. The comprehensive income components are recorded after taxes. NOTES TO THE CONSOLIDATED STATEMENT OF FINANCIAL POSITION 21. Intangible assets Intangible assets developed as follows: Software Rights Research and development costs Advance payment on intangible assets Total EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 Historical costs As of 1 January 2021 23,194 2,762 2,289 216 28,461 Changes in foreign exchange rates 44 0 0 0 44 Additions 854 9 523 13 1,399 Transfers 794 0 0 –229 564 As of 31 December 2021 24,885 2,772 2,812 0 30,468 Changes in foreign exchange rates –22 0 0 0 –22 Additions 574 400 11 0 985 Transfers 0 0 0 0 0 As of 31 December 2022 25,437 3,172 2,823 0 31,431 Accumulated amortization and impairment As of 1 January 2021 21,817 2,176 0 0 23,993 Changes in foreign exchange rates 32 0 0 0 32 Amortization 1,012 77 0 0 1,089 As of 31 December 2021 22,861 2,252 0 0 25,113 Changes in foreign exchange rates –20 0 0 0 –20 Amortization 988 81 238 0 1,307 As of 31 December 2022 23,829 2,334 238 0 26,401 Carrying amount on 31 December 2021 2,024 519 2,812 0 5,355 Carrying amount on 31 December 2022 1,607 838 2,585 0 5,030 Research and development expenses (which include company and customer-related development services) amounted to kEUR 43,491 in the 2022 financial year (previous year: kEUR 43,862). 22. Property, plant and equipment Properties and buildings Technical facilities Operating and office equipment Facilities under construction Right of Use Total EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 Historical costs As of 1 January 2021 80,445 117,179 39,781 8,663 98,947 345,015 Changes in foreign exchange rates 119 2 264 7 113 505 Additions 363 1,853 1,387 11,847 5,603 21,053 Disposals 0 –2,833 –344 0 0 –3,177 Transfers 11,735 4,777 612 –17,689 0 –564 As of 31 December 2021 92,662 120,978 41,701 2,828 104,664 362,832 Changes in foreign exchange rates 51 –4 141 0 99 287 Additions 1,733 3,276 1,882 2,040 3,140 12,070 Disposals 0 –32 –480 0 –2,536 –3,048 Transfers 33 451 296 –780 0 0 As of 31 December 2022 94,478 124,669 43,540 4,087 105,366 372,141 Accumulated amortization and impairment As of 1 January 2021 35,928 94,901 27,093 0 19,202 177,125 Changes in foreign exchange rates 0 0 165 0 41 206 Amortization 2,428 7,011 3,539 0 8,760 21,737 Disposals 0 –2,783 –285 0 0 –3,067 As of 31 December 2021 38,356 99,129 30,513 0 28,003 196,002 Changes in foreign exchange rates 0 0 77 0 36 112 Amortization 2,742 6,317 3,490 0 8,963 21,511 Disposals 0 –32 –480 0 –1,006 –1,518 As of 31 December 2022 41,098 105,415 33,599 0 35,996 216,107 Carrying amount on 31 December 2021 54,305 21,848 11,188 2,828 76,661 166,830 Carrying amount on 31 December 2022 53,380 19,254 9,941 4,087 69,370 156,033 Property and buildings as well as rights of use include land values of properties in the amount of kEUR 7,399 (previous year: kEUR 7,666). Certain properties and buildings serve as collaterals for liabilities to financial institutions (see Note 38 – Financial liabilities). The obligations to purchase property, plant and equipment amounted to kEUR 3,345 (previous year: kEUR 1,057) on the reporting date. In addition, there were internally approved acquisitions in the amount of kEUR 10,692 (previous year: kEUR 8,977) which have not yet given rise to contractual obligations. The carrying amounts of the rights of use developed as follows in the 2022 financial year: Properties and buildings EUR'000 Technical facilities and vehicles EUR'000 IT EUR'000 Total EUR'000 As of 1 January 2021 68,414 8,743 2,588 79,745 Changes in foreign exchange rates 72 0 0 72 Additions 916 3,080 1,608 5,603 Disposals 0 0 0 0 Depreciation and amortization –4,900 –2,343 –1,517 –8,760 As of 31 December 2021 64,502 9,480 2,678 76,661 Changes in foreign exchange rates 63 0 0 63 Additions 615 896 1,629 3,140 Disposals –1,530 0 0 –1,530 Depreciation and amortization –4,894 –2,395 –1,673 –8,963 As of 31 December 2022 58,756 7,981 2,634 69,370 As of 31 December 2022, the indications according to IAS 36 were reviewed with regards to the implementation of an impairment test. On the one hand, due to the recovery of the aviation industry and, on the other hand, due to increased costs in connection with the geopolitical situation, there was a requirement to perform an impairment test as of 31 December 2022. The key valuation parameters for determining the value in use are as follows: 31.12.2022 Detailed planning period (five years) Revenue growth (average) 10.20% EBIT margin (average) 5.89% EUR-USD exchange rate 1.14 Growth rate after detailed planning period for all CGUs 1.00% Discount rate for all CGUs (WACC before tax) 12.92% The sensitivity analysis shows that the following impairments would have arisen depending on the development of the key valuation parameters: Balance sheet date 31 December 2022 Aerostructures EUR'000 Engines & Nacelles EUR'000 Cabin Interiors EUR'000 Increase of discount rate by 50 basis points 0 0 0 Increase in USD exchange rate per EUR 1 by 0.05 0 0 20,445 Reduction of the EBIT by 10% 0 0 0 23. Receivables from customer-related engineering The development of receivables from customer-related engineering is as follows: 31.12.2021 31.12.2022 EUR'000 EUR'000 As of 1 January 32,968 27,742 Changes in estimates –1,582 –1,531 Partial settlements –7,391 –1,031 Valuation allowance 450 3 Interest 847 720 Currency translation 2,450 1,522 27,742 27,427 The impairment of receivables from customer-related engineering developed as follows: 31.12.2021 31.12.2022 EUR'000 EUR'000 As of 1 January 475 25 Additions 18 20 Reversal/use –468 –24 25 22 24. Contract assets Contract assets can be broken down as follows: 31.12.2021 31.12.2022 EUR'000 EUR'000 Development projects (period-related) 146 920 Payment to customers 2,429 2,398 2,576 3,318 The development of contract assets can be broken down as follows: 31.12.2021 31.12.2022 EUR'000 EUR'000 As of 1 January 3,021 2,576 Additions and Partial profit 2,560 774 Partial settlements –389 –164 Reclassification –2,725 0 Currency translation 109 133 2,576 3,318 25. Contract costs Contract costs can be broken down as follows: 31.12.2021 31.12.2022 EUR'000 EUR'000 As of 1 January 95,887 88,306 Additions 11,624 9,017 Reclassification 2,725 0 Amortization contract costs –21,930 –26,075 88,306 71,248 The item “Amortization contract costs” includes an amount of kEUR 9,952 (previous year: kEUR 8,060) resulting from the receipt of one-time payments in December 2022. In the 2022 financial year, development projects capitalized as contract costs were subjected to an impairment test. The recoverable amount was determined on the basis of the value in use by applying the discounted cash flow method. The potential cash flows resulting from the respective development projects were determined on the basis of the budget approved by the Supervisory Board for the coming financial year and the medium-term planning for the next five years (detailed planning period). For the duration of specific development projects going beyond the detailed planning period, the planning assumptions of the last planning year were applied, limited by the rates published by IATA, customer forecasts and the estimates of management based on these. The maximum term is 20 years. 26. Other non-current financial assets 31.12.2021 31.12.2022 EUR'000 EUR'000 Securities measured at fair value 426 350 Shares 71 71 497 422 These shares refer to the 3.01% stake in Techno-Z Ried Technologiezentrum GmbH, Ried im Innkreis and the 18.0% stake in AIRlabs Austria GmbH, Graz. 27. Non-current receivables from related companies 31.12.2021 31.12.2022 EUR'000 EUR'000 Non-current receivables in which the parent undertaking are involved 5,638 3,071 28. Other receivables The other receivables item consists of advance payments and deposits amounting to kEUR 10,236 (previous year: kEUR 9,987). 29. Inventories 31.12.2021 31.12.2022 EUR'000 EUR'000 Raw, auxiliary and operating materials 56,061 73,543 Unfinished products 27,555 33,922 Finished products 6,970 8,525 Advance payments made 189 335 90,775 116,325 Gross inventories 98,953 124,447 Valuation allowance 8,177 8,121 Net inventories 90,775 116,325 Inventories recorded as material expenses in the reporting period amount to kEUR 346,793 (previous year: kEUR 241,398). It is expected that inventories with a carrying amount of kEUR 0 (previous year: kEUR 0) will only be realized after a period of twelve months. As in the previous year, no inventories were assigned or pledged as collateral to secure financial instruments. 30. Customer-related engineering 31.12.2021 31.12.2022 EUR'000 EUR'000 As of 1 January 5,566 6,170 Additions 6,379 9,026 Disposals –5,776 –3,708 6,170 11,487 Customer-related engineering recorded as material expenses in the reporting period amounted to kEUR 5,403 (previous year: kEUR 3,618). It is expected that customer-related engineering with a carrying amount of kEUR 0 (previous year: kEUR 0) will only be realized after a period of twelve months. No customer-related engineering was assigned or pledged as collateral to secure financial instruments. 31. Receivables 31.12.2021 31.12.2022 EUR'000 EUR'000 Gross trade receivables 58,784 67,343 Less valuation allowance –5,762 –6,278 Net trade receivables 53,023 61,065 Of which current 51,365 61,065 Of which non-current 1,658 0 FACC maintains a non-recourse assignment agreement with two financial institutions in connection with receivables from several customers. The sold receivables (factoring) are derecognized in accordance with IFRS 9. Trade receivables were sold to third parties in the amount of kEUR 35,065 (previous year: kEUR 38,192) as of the reporting date. The impairment of trade receivables developed as follows: 31.12.2021 31.12.2022 EUR'000 EUR'000 As of 1 January 5,544 5,611 Additions 1,140 1,259 Reversal/use –1,074 –778 5,611 6,092 In addition, a standardized value adjustment was made on the basis of the future probability of credit default required by IFRS 9, which had developed as follows: 31.12.2021 31.12.2022 EUR'000 EUR'000 As of 1 January 753 150 Additions 0 235 Reversal/use –603 –200 150 185 The value adjustment mainly concerns trade receivables and receivables from customer-related engineering: Specific bad-debt allowance Standardized bad-debt allowance 31.12.2021 31.12.2022 31.12.2021 31.12.2022 EUR'000 EUR'000 EUR'000 EUR'000 Receivables from customer-related engineering 0 0 25 22 Contract assets 0 0 0 0 Trade receivables 5,611 6,092 150 185 Receivables from related companies 0 0 0 0 Other financial assets 0 0 0 0 The gross carrying amounts of trade receivables, receivables from customer-related engineering, contract assets and other financial receivables were assessed as follows: Gross amount Valuation allowance 31.12.2021 31.12.2022 31.12.2021 31.12.2022 EUR'000 EUR'000 EUR'000 EUR'000 Receivables from customer-related engineering 27,768 27,449 25 22 Contract assets 2,576 3,318 0 0 Trade receivables 58,784 67,343 5,762 6,278 Receivables from related companies (current and non-current) 24,387 23,225 0 0 Other financial liabilities (current and non-current) 21,580 21,817 0 0 The age structure of trade receivables is as follows: 31.12.2021 31.12.2022 EUR'000 EUR'000 Trade receivables 53,023 61,065 Of which not overdue and not impaired 40,867 42,718 Of which overdue and not impaired 7,980 15,086 1 to 60 days 3,108 10,935 61 to 150 days 204 923 151 to 365 days 2,994 1,485 More than 365 days 1,674 1,744 Of which impaired 4,175 3,261 The carrying amount of impaired trade receivables developed as follows: 31.12.2021 31.12.2022 EUR'000 EUR'000 Carrying amount prior to impairment 9,787 9,353 Less valuation allowance –5,611 –6,092 Carrying amount after impairment 4,175 3,261 The overdue and unimpaired receivables relate to a number of independent customers who have not defaulted on payments in the recent past. Nothing suggests that the debtors will not be able to honour their payment obligations on the reporting date. While trade receivables usually have payment periods of up to 90 days, some receivables from customer-related engineering as well as contract assets are subject to payment schedules including milestone payments. Other receivables and deferred items include: 31.12.2021 31.12.2022 EUR'000 EUR'000 Other current financial assets Receivables from the Fake President Incident 10,860 10,860 Other 733 721 11,593 11,581 Other current non-financial assets Other tax receivables (particularly VAT) 20,651 25,731 Deferred items 2,608 4,230 Other 2,040 1,718 25,300 31,678 36,892 43,259 In the 2015/16 reporting period, the Group had lost kEUR 52,847 in cash and cash equivalents as a result of an externally controlled case of fraud (Fake President Incident). As a result of directly initiated measures, the Company was able to block kEUR 10,860 to receiver accounts in China. Subsequently, the funds attributable to FACC Operations GmbH were retransferred to an account of the Republic of Austria in May 2019. As there is a legal claim to these funds according to the legal opinions obtained and an external expert opinion by a criminal law expert, the management of FACC Operations GmbH assumes that a transfer of the funds from the Republic Austria to FACC Operations GmbH can be expected within the next twelve months. The amount of kEUR 10,860 was therefore reported unchanged as a current other receivable as of the balance sheet date of 31 December 2022. Other receivables do not include any significant amounts of overdue receivables. Furthermore, no significant valuation allowances were recognized on these receivables. 32. Cash and cash equivalents 31.12.2021 31.12.2022 EUR'000 EUR'000 Bank deposits 114,958 102,685 Cash balance 8 5 114,966 102,691 33. Equity The development of the Group’s equity in the financial year 2021 and 2022 is shown in the Consolidated Statement of Changes in Equity. The share capital of FACC AG amounted to kEUR 45,790 on the balance sheet date 31 December 2022, is unchanged from the balance sheet date 31 December 2021, and is fully paid. It is divided into 45,790,000 shares with a par value of EUR 1 each. The capital reserve, which remains unchanged from the previous balance sheet date, amounts to kEUR 221,459. Other reserves comprise the following items, all of which are recorded in other comprehensive income. • Currency translation reserve: differences from currency conversion after taxes • Revaluation reserve at “fair value through other comprehensive income”: change in value of other financial assets recognized at fair value • Actuarial profits/losses: revaluation effects in accounting for defined benefit obligations towards employees in accordance with IAS 19 • Hedging reserve: changes in value of hedging transactions; these hedging transactions are transactions in foreign currencies (cash flow hedges). The hedging reserve (after taxes) developed as follows: 31.12.2021 31.12.2022 EUR'000 EUR'000 As of 1 January 8,699 –5,346 Changes in unrealized profits (+)/losses (–) –4,772 18,020 Realized profits (+)/losses (–) subsequently reclassified to profit or loss – recognized in earnings before interest and taxes –9,274 –19,591 –5,346 –6,917 The non-controlling interests refered to CoLT Prüf und Test GmbH, St. Martin, Austria, with a quota of 9%. These non-controlling interests were purchased in the financial year 2021. The balance sheet total and earnings before taxes amounted to less than 1% of the Group values, which was why the presentation of aggregated financial information on subsidiaries with non-controlling interests has been dispensed with. Capital management The objective of capital management of FACC Group is to maintain a strong capital base in order to address specific corporate risks (growth and development risks) with a balanced capital structure. For management, only book equity under IFRS is considered capital. The objective is to achieve an equity ratio of at least 40%. 31.12.2021 31.12.2022 EUR'000 EUR'000 Equity 206,002 203,481 Balance sheet total 644,465 654,025 Equity ratio 32.0% 31.1% An earlier loan agreement of the Group contains a financial covenant governing the equity ratio in the Group, non-compliance with which would trigger an early repayment of financial liabilities. All relevant capital requirements were met in the year under review, like in previous year (see also Note 38 – Financial liabilities). Dividend per share Total EUR'000 Number of shares Dividend per share Dividend proposed for the financial year 2021 (Annual General Meeting of 31 May 2022) 0 45,790,000 0.00 Dividend proposed for the financial year 2022 (Annual General Meeting of 8 May 2023) 0 45,790,000 0.00 A dividend of EUR 0.00 will be proposed at the Annual General Meeting for financial year 2022 on 8 May 2023. 34. Investment grants 31.12.2021 31.12.2022 EUR'000 EUR'000 Investment grants, current 1,124 1,009 Investment grants, non-current 8,405 7,266 9,530 8,275 Investment grants are usually subject to conditions, which must be met over a certain period of time. These essentially involve a minimum number of employees and the obligation to ensure that the subsidized assets remain at the project location and are not disposed of. 35. Employee benefit obligations 31.12.2021 31.12.2022 EUR'000 EUR'000 Termination benefits 7,130 7,144 Anniversary bonuses 2,470 2,136 9,600 9,280 In the 2023 financial year, the expected payments from termination benefit and anniversary bonus obligations towards employees will amount to kEUR 0 and kEUR 62, respectively. Termination benefits The net liabilities under defined benefit plans for termination benefits developed as follows: 31.12.2021 31.12.2022 EUR'000 EUR'000 As of 1 January 6,972 7,130 Service cost 256 241 Interest expenses 62 76 Termination benefit payments –190 –258 Revaluation effects in the period –193 –191 Other effects 223 146 7,130 7,144 Duration in years 13.98 13.11 The revaluation effects are composed of the following factors: 31.12.2021 31.12.2022 EUR'000 EUR'000 Changes in expected values 3 284 Changes in underlying demographic assumptions 3 309 Changes in underlying financial assumptions –199 –784 –193 –191 All legal transitional regulations relating to retirement age have been taken into account. All expenses in connection with termination benefits are recorded under “Cost of goods sold”, “Research and development expenses”, as well as “Selling expenses” and “Administration expenses”. The valuation is based on the following assumptions: 31.12.2021 31.12.2022 Discounting interest rate 1.23% 3.68% Salary increases 2.00% 3.50% Fluctuations of salaried staff/employees 2.41%/6.92% 0%/0% Retirement age for women/men 65/individually 65/individually Life expectancy AVÖ 2018-P AVÖ 2018-P An increase or decrease in the discount rate of 0.5 percentage points (previous year: 0.25 percentage points) would change the obligation as follows: Decrease by 0.25 percentage points EUR'000 Increase by 0.25 percentage points EUR'000 Change in obligations as of 31 December 2021 288 –276 Decrease by 0.5 percentage points EUR'000 Increase by 0.5 percentage points EUR'000 Change in obligations as of 31 December 2022 504 –465 Anniversary bonuses 31.12.2021 31.12.2022 EUR'000 EUR'000 As of 1 January 2,686 2,470 Service cost 329 265 Interest expenses 22 30 Termination benefit payments –24 –70 Revaluation effects in the period –542 –559 2,470 2,136 All expenses in connection with anniversary bonuses are recorded under “Cost of goods sold”, “Research and development expenses”, as well as “Selling expenses” and “Administration expenses”. In the 2022 financial year, kEUR 2,440 (previous year: kEUR 1,821) were paid into defined contribution plans (pension fund and employee pension fund in Austria). 36. Contract liabilities from customer-related engineering 31.12.2021 31.12.2022 EUR'000 EUR'000 As of 1 January 6,026 12,714 Increase 11,727 14,128 Reduction –5,038 –7,492 12,714 19,350 Contract liabilities consist of advance payments received and relate to tool and development activities. The amount of kEUR 12,714 (previous year: kEUR 6,026) reported under contract liabilities at the beginning of the period was recognized as sales revenue of kEUR 7,492 (previous year: kEUR 5,038) in the 2022 financial year. 37. Other provisions Term As of 01.01.2021 EUR'000 Additions EUR'000 Use EUR'000 Disposal EUR'000 As of 31.12.2021 EUR'000 Less than 1 year EUR'000 More than 1 year EUR'000 Provision for warranty claims 835 793 –770 –65 793 793 0 Provisions for legal and other disputes 305 28,929 0 –220 29,014 29,014 0 Other 1,042 835 –742 –251 884 884 0 2,182 30,558 –1,513 –536 30,691 30,691 0 Term As of 01.01.2022 EUR'000 Additions EUR'000 Use EUR'000 Disposal EUR'000 As of 31.12.2022 EUR'000 Less than 1 year EUR'000 More than 1 year EUR'000 Provision for warranty claims 793 330 –525 –128 470 470 0 Provisions for legal and other disputes 29,014 233 –12,989 –6,047 10,212 10,212 0 Other 884 643 –612 –176 739 739 0 30,691 1,206 –14,126 –6,351 11,421 11,421 0 Accruals in connection with warranty claims are recognized exclusively for specific obligations. The provision for legal and other disputes includes the expected cash outflows resulting from the decision of a London arbitration court, with the reduction in this provision in financial year 2022 mainly attributable to initial payments in connection with this matter. For other legal disputes, provisions in the amount of the expected cash outflows have been recognized based on the external legal opinions obtained in conjunction with internal estimates. 38. Financial liabilities Remaining term Carrying amount 31.12.2021 EUR'000 Less than 1 year 31.12.2021 EUR'000 1 to 2 years 31.12.2021 EUR'000 3 to 5 years 31.12.2021 EUR'000 More than 5 years 31.12.2021 EUR'000 Nominal interest in % Promissory note loans Fixed interest rate (nominal capital: kEUR 29,500) 29,500 0 0 27,000 2,500 1.60 to 2.148 Variable interest rate (nominal capital: kEUR 40,500) 40,500 0 0 40,500 0 6M Euribor + 1.10 to 1.80 Liabilities towards credit institutions Fixed interest rate 14,583 4,167 4,167 6,250 0 320.70% Variable interest rate 111,033 111,033 0 0 0 OeKB interest rate, 3M Euribor + 1.00 to 1.75 Lease liabilities Fixed interest rate 62,695 7,010 7,315 16,711 31,659 1.40 to 4.83 Variable interest rate 16,884 553 562 1,740 14,029 6M Euribor + 1.95 Other interest-bearing liabilities 17,574 17,574 0 0 0 1.00 to 1.507 292,769 140,336 12,044 92,201 48,188 Remaining term Carrying amount 31.12.2022 EUR'000 Less than 1 year 31.12.2022 EUR'000 1 to 2 years 31.12.2022 EUR'000 3 to 5 years 31.12.2022 EUR'000 More than 5 years 31.12.2022 EUR'000 Nominal interest in % Promissory note loans Fixed interest rate (nominal capital: kEUR 29,500) 29,500 0 16,500 10,500 2,500 1.60 to 2.148 Variable interest rate (nominal capital: kEUR 40,500) 40,500 0 8,000 32,500 0 6M Euribor + 1.10 to 1.80 Liabilities towards credit institutions Fixed interest rate 9,201 4,167 4,186 849 0 3.207 Variable interest rate 110,000 110,000 0 0 0 OeKB interest rate + 1.20 to 1.9 Lease liabilities Fixed interest rate 56,407 6,888 7,242 15,938 26,339 3.015 to 4.83 Variable interest rate 16,331 562 571 1,769 13,430 6M Euribor + 1.95 Other interest-bearing liabilities 29,355 29,355 0 0 0 1.00 to 1.507 291,294 150,972 36,498 61,555 42,269 Accrued interest expenses are included in current financial liabilities. Certain liabilities to financial institutions are secured by mortgages on company real estate, guarantees provided by AWS, state guarantees for loans and chattel mortgages on machinery. The export credit under the Kontrollbank scheme is secured by export receivables in the amount of 120% of the framework provided. In order to benefit from beneficial interest rates for research promotion loans, certain conditions must be met. The guarantee for certain liabilities to financial institutions in connection with land and buildings amounted to kEUR 15,966 (previous year: kEUR 15,966). On 17 February 2023, FACC Operations GmbH subscribed to an extension of syndicated loan in the amount of KEUR 225,443 with five participating banks. FACC AG and FACC Solutions Croatia d.o.o. are serving as guarantors. The syndicated loan has a term of three years plus a two-year prolongation option. The contract stipulates five facilities with various intended uses. With the exception of the framework refinancing credit of the Austrian Kontrollbank (OEKB), which is also part of the syndicated loan agreement, all other facilities are unsecured. The facility of kEUR 60,000 (KRR COVID-19 framework credit of OEKB), which was additionally subscribed in the context of the corona pandemic on 26 June 2020, will be repaid as of 10 March 2023. In turn, an amount of kEUR 36,000 will be drawn from the equity financing program of OEKB, and kEUR 33,526 from Exportinvest. The following adjustments were made to the financial covenant: 31.12.2022 31.12.2023 31.12.2024 31.12.2025 Net Financial Debt/EBITDA 4.50 4.50 4.25 3.75 Equity ratio 25% 25% 25% 25% The financial covenants of the respective year shall also apply as of 30 June of the respective year (e.g. the value of 4.25 applies on 30 June 2024 and on 31 December 2024), and will be tested every six months. The creditors have a right of termination in the event that the financial ratios are exceeded. For all relevant reporting dates after 31 December 2025, a net financial debt/EBITDA ratio of 3.5 and an equity ratio of at least 25% are required. The financial covenants were complied with both in the previous year and as of 31 December 2022. All other material provisions of the original syndicated loan agreement and subsequent amendment agreements have been included in the extension of syndicated loan agreement. On 31 July 2019, promissory note loans totaling kEUR 70,000 were issued. The individual tranches are subject to both fixed and variable interest rates and are due for repayment after five, seven and ten years. The financing agreements contain a clause stipulating an interest rate increase of 50 basis points in the event that the net debt/EBITDA ratio exceeds 3.75. This interest rate increase clause has been in force since the 2020 financial year. The ratio is tested annually. The present value of the minimum lease payments is as follows: 31.12.2021 31.12.2022 EUR'000 EUR'000 Up to one year 10,051 9,970 Two to five years 32,515 29,075 More than five years 51,352 46,125 93,917 85,170 Less future financing expenses –14,338 –12,431 Present value of lease obligation 79,579 72,738 In the 2022 financial year, the following amounts relating to leases were recognized in profit or loss: 31.12.2021 31.12.2022 EUR'000 EUR'000 Depreciation expense of right-of-use assets –8,760 –8,963 Interest expense on lease liabilities –1,923 –1,774 Expense relating to short-term leases (included in cost of sales) –1,076 –1,231 Expense relating leases of low-value assets –19 –62 Total amount recognized in profit or loss –11,778 –12,030 The total cash outflows for leases amounted to kEUR 9,814 in the 2022 financial year (previous year: kEUR 9,397). 39. Other current liabilities 31.12.2021 31.12.2022 EUR'000 EUR'000 Other current financial liabilities Liabilities to employees/salaried staff 6,083 7,786 Other 35 13 6,118 7,798 Other current non-financial liabilities Liabilities from social security 2,937 3,582 Liabilities to tax authorities 273 352 Deferred items 1,065 1,010 Other 373 470 4,648 5,414 10,766 13,212 NOTES TO THE CONSOLIDATED STATEMENT OF CASH FLOWS The Consolidated Statement of Cash Flows of FACC illustrates how cash and cash equivalents have changed in the course of the reporting year through cash inflows and outflows. Cash and cash equivalents (fund of cash and cash equivalents) include cash balances, checks received and bank balances available at all times. 40. Other non-cash expenses/income In the Consolidated Statement of Cash Flows changes in the presented balance sheet items cannot be derived directly from the balance sheet as non-cash effects from currency translation and other non-cash business transactions are neutralized. Non-cash expenses and income essentially comprise: 2021 2022 EUR'000 EUR'000 Effects from foreign exchange rates –3,280 –6,080 Measurement of derivatives in earnings before interest and tax (hedging) 5,929 3,509 Recognition of deferred tax assets/liabilities 25 –99 Impairment on inventories –1,124 –56 Valuation allowance of receibables –986 531 Changes in estimates of receivables from customer-related engineering 1,582 1,447 Remaining other non-cash expenses/income –60 10 2,087 –738 Cash change Non-cash changes Carrying amount 01.01.2021 EUR'000 Change EUR'000 Lease liabilities EUR'000 Transaction costs EUR'000 Other EUR'000 Carrying amount 31.12.2021 EUR'000 Promissory note loans (current and non-current) 70,000 0 0 0 0 70,000 Other financial liabilities (current and non-current) 172,428 –29,238 0 0 0 143,190 Lease liabilities (current and non-current) 82,203 –8,302 5,603 0 75 79,579 324,631 –37,539 5,603 0 75 292,769 Cash change Non-cash changes Carrying amount 01.01.2022 EUR'000 Change EUR'000 Lease liabilities EUR'000 Transaction costs EUR'000 Other EUR'000 Carrying amount 31.12.2022 EUR'000 Promissory note loans (current and non-current) 70,000 0 0 0 0 70,000 Other financial liabilities (current and non-current) 143,190 5,365 0 0 0 148,556 Lease liabilities (current and non-current) 79,579 –8,520 1,609 0 70 72,738 292,769 –3,155 1,609 0 70 291,294 41. Interest received and interest paid In the 2022 financial year, all interest received was recognized under other financial result. In the 2022 financial year, all interest paid was recorded to profit or loss under financing expenses. 42. Non-cash payments for the acquisition of non-current assets In the course of the 2022 financial year, the FACC Group acquired assets that were not yet included in the cash flow as they had not been (fully) paid as of the balance sheet date. At the same time, liabilities from capital investments that had already been acquired in the previous year and are therefore included in the cash flow of this financial year were repaid. This resulted in a decrease in the cash flow from investments of kEUR 99 in the 2022 financial year (previous year: decrease of kEUR 5,026). NOTES TO FINANCIAL INSTRUMENTS 43. Determination of fair value The fair value of financial instruments is determined in three steps, which reflect the degree of certainty of measurement. FACC employs the following hierarchy levels to assign a valuation method to financial instruments measured at fair value: Level 1: valuation based on market prices for a specific financial instrument Level 2: valuation by means of market prices for similar instruments or valuation models based exclusively on valuation parameters observable on the market Level 3: valuation based on models with significant valuation parameters that are not observable on the market The following tables show the valuation techniques used in determining fair values as well as the most significant unobservable input factors used: Type Valuation method Significant non-observable input factors Connection between significant non-observable input factors and fair value measurement Financial instruments measured at fair value Securities (quoted) Current stock market price on the balance sheet date Not-applicable Not-applicable Forward exchange transactions The fair value is determined using quoted forward rates on the reporting date and net present value calculations based on yield curves with high credit ratings in corresponding currencies. Not-applicable Not-applicable Trade receivables (within factoring) Carrying amounts as a best estimate of fair values Not-applicable Not-applicable Financial instruments not measured at fair value Other interest-bearing liabilities Discounting of cash flows Risk premium for own credit risk Not-applicable No shifts occurred between the individual valuation levels in the financial year. 44. Classifications and fair values The following table shows the carrying amounts and fair values of financial assets and financial liabilities by class and measurement category in accordance with IFRS 9, including their positions in the fair value hierarchy. Information on the fair value of financial assets and financial liabilities, which have not been measured at fair value is omitted if the carrying amount constitutes a reasonable approximation of the fair value. Fair value Carrying amount 31.12.2021 EUR'000 Total 31.12.2021 EUR'000 Level 1 31.12.2021 EUR'000 Level 2 31.12.2021 EUR'000 Level 3 31.12.2021 EUR'000 Valuation at amortized cost Other financial assets – securities (unquoted) 71 0 0 0 0 Receivables from related companies, non-current 5,638 0 0 0 0 Other receivables 9,987 0 0 0 0 Trade receivables 53,023 0 0 0 0 Receivables from related companies, current 18,749 0 0 0 0 Other receivables and assets 11,593 0 0 0 0 Cash and cash equivalents 114,966 0 0 0 0 214,027 0 0 0 0 Fair value through other comprehensive income Trade receivables (within factoring) 0 0 0 0 0 Other financial assets – securities (quoted) 426 426 426 0 0 426 426 426 0 0 Fair value through profit and loss Derivative financial instruments 0 0 0 0 0 0 0 0 0 0 Valuation at amortized cost Financial liabilities 213,190 213,190 0 0 213,190 Trade payables 53,305 0 0 0 0 Liabilities towards related companies 10,237 0 0 0 0 Other financial liabilities 6,118 0 0 0 0 282,849 213,190 0 0 213,190 Fair value through profit and loss Derivative financial instruments 8,185 8,185 0 8,185 0 8,185 8,185 0 8,185 0 Fair value Carrying amount 31.12.2022 EUR'000 Total 31.12.2022 EUR'000 Level 1 31.12.2022 EUR'000 Level 2 31.12.2022 EUR'000 Level 3 31.12.2022 EUR'000 Valuation at amortized cost Other financial assets – securities (unquoted) 71 0 0 0 0 Receivables from related companies, non-current 3,071 0 0 0 0 Other receivables 10,236 0 0 0 0 Trade receivables 61,065 0 0 0 0 Receivables from related companies, current 20,155 0 0 0 0 Other receivables and assets 11,581 0 0 0 0 Cash and cash equivalents 102,691 0 0 0 0 208,869 0 0 0 0 Fair value through other comprehensive income Trade receivables (within factoring) 0 0 0 0 0 Other financial assets – securities (quoted) 350 350 350 0 0 350 350 350 0 0 Fair value through profit and loss Derivative financial instruments 2,987 2,987 0 2,987 0 2,987 2,987 0 2,987 0 Valuation at amortized cost Financial liabilities 218,556 218,556 0 0 218,556 Trade payables 66,655 0 0 0 0 Liabilities towards related companies 12,016 0 0 0 0 Other financial liabilities 7,798 0 0 0 0 305,025 218,556 0 0 218,556 Fair value through profit and loss Derivative financial instruments 16,536 16,536 0 16,536 0 16,536 16,536 0 16,536 0 45. 46. Derivative financial instruments, hedge accounting and fair value hedge The hedging strategies employed by the Group’s treasury department are designed to control and minimize the impact of exchange rate fluctuations. The Management Board approves the strategies and reports regularly to the Supervisory Board. The risk management conducted by the Group’s treasury department pursues the objective of hedging at least 80% of expected net cash flows in USD (from revenues and purchases of raw materials) for the next twelve months (on a rolling monthly basis) (hedge ratio). If market levels are favorable, hedging periods can be extended to up to 36 months. The Group generally does not use derivative financial instruments for speculative purposes. Derivative financial instruments are used to hedge net cash flows in USD. Forward exchange transactions qualifying as hedges are recorded as cash flow hedges according to IFRS 9. Forward exchange transactions which are not recorded as cash flow hedges are recorded as free-standing derivatives of the category “at fair value through profit or loss”. Forward exchange transactions (cash flow hedges) are recognized in other comprehensive income until the future proceeds arising from the hedged item, for which they have been designated, are recognized in the balance sheet. Forward exchange transactions are recognized in revenues at their fair values upon initial recognition to profit or loss. Subsequent measurement is recorded under other operating income/expenses. Once the forward exchange transactions have been redeemed, they are then subsequently derecognized, usually within a maximum period of 36 months from the balance sheet date. Under hedge accounting, future cash receipts in the amount of the Net-Exposure in USD from particular orders already contracted or future transactions, which are expected to occur with a high probability, are designated as hedged items together with the related forward exchange transactions, which are designated as hedging instruments. The economic relationship between the hedged item and the hedging instrument is determined by comparing the various risk factors with an impact on their respective values. If the critical terms of the hedged item and the hedging instrument are completely or nearly identical, the underlying economic relationship can be demonstrated using the critical terms match method. In all other cases, depending on the extent to which the critical terms differ, either sensitivity analyses or variations of the dollar-offset methods are used to demonstrate the effectiveness of the hedging relationship. Deviations between the critical terms of the hedged item and the hedging instrument can give rise to inefficiencies. With foreign currency hedging, a mismatch between the time of receipt of the cash flows from the hedged item and the settlement of the forward exchange transactions designated as hedging instruments is an example of such inefficiency. Beyond that, no other sources of inefficiency exist. Since the underlying values of the hedged item and the hedging instrument are always the same, the hedge ratio reported in the balance sheet is always 1:1, i.e. the designated quantity or volume of the hedging instrument corresponds to the designated quantity or volume of the hedged item. Adjustments are made to the balance sheet hedge ratio if the hedge ratio is unbalanced, which could give rise to inefficiencies leading to accounting consequences inconsistent with the purpose of hedge accounting. Furthermore, forward exchange contracts in US dollars (volume: kUSD 30,000; previous year: kUSD 35,000) were concluded for the purpose of hedging the exchange rate of receivables from customer-related engineering. These transactions, however, were reversed by the end of the balance sheet date. Derivative financial instruments with a positive market value Remaining term Carrying amount 31.12.2021 EUR'000 Less than 1 year 31.12.2021 EUR'000 More than 1 year 31.12.2021 EUR'000 Forward exchange transactions with positive fair value 0 0 0 Remaining term Carrying amount 31.12.2022 EUR'000 Less than 1 year 31.12.2022 EUR'000 More than 1 year 31.12.2022 EUR'000 Forward exchange transactions with positive fair value 2,987 0 2,987 Derivative financial instruments with a negative market value Remaining term Carrying amount 31.12.2021 EUR'000 Less than 1 year 31.12.2021 EUR'000 More than 1 year 31.12.2021 EUR'000 Forward exchange transactions with negative fair value 8,185 6,448 1,737 Remaining term Carrying amount 31.12.2022 EUR'000 Less than 1 year 31.12.2022 EUR'000 More than 1 year 31.12.2022 EUR'000 Forward exchange transactions with negative fair value 16,536 16,536 0 The contract volume of foreign currency derivatives is broken down by maturity as follows: Remaining term Currency Volume in thousands Less than 1 year in thousands 1 to 2 years in thousands 3 to 5 years in thousands As of 31 December 2021: Foreign currency derivatives USD 335,000 215,000 120,000 0 As of 31 December 2022: Foreign currency derivatives USD 394,480 324,480 70,000 0 The following tables provide information on the forward exchange transactions designated as hedging instruments at the end of the reporting period as well as on the associated hedged items Cash flow hedges (OCI) 31 December 2021 Instrument Average exchange rate Notional value in foreign currency Notional value in local currency Change in fair value used for calculating hedge ineffectiveness Fair value USD'000 EUR'000 EUR'000 EUR'000 Sell USD, buy EUR FX Forward 1.1783 275,000 233,396 –7,128 –7,128 Cash flow hedges (OCI) 31 December 2022 Instrument Average exchange rate Notional value in foreign currency Notional value in local currency Change in fair value used for calculating hedge ineffectiveness Fair value USD'000 EUR'000 EUR'000 EUR'000 Sell USD, buy EUR FX Forward 1.0662 313,360 293,904 –8,984 –8,984 Change in value used for calculating hedge ineffectiveness Carrying amount cash flow hedge reserve 31.12.2021 EUR'000 31.12.2022 EUR'000 31.12.2021 EUR'000 31.12.2022 EUR'000 Sell USD, buy EUR 7,128 8,984 –5,346 –6,917 The following table shows the effectiveness of the hedging relationships, and the amounts either reclassified from the reserve for cash flow hedges and fair value hedges to profit or loss or directly recognized in profit or loss: Current period hedging gains (losses) recognized in OCI Amount reclassified to profit and loss Line item in profit and loss in which reclassification adjustment is included 31.12.2021 EUR'000 31.12.2022 EUR'000 31.12.2021 EUR'000 31.12.2022 EUR'000 Sell USD, buy EUR –7,128 –8,984 –5,929 –3,509 Revenues 47. Financial risk In addition to financing risks, FACC’s operational business is also exposed to interest rate and currency risks. The Group’s overall risk management focuses on the unpredictability of developments on the financial markets and aims to minimize potentially negative effects on the Group’s financial position. In order to hedge against specific risks, the Group makes use of derivative financial instruments. The Group’s treasury department identifies, evaluates and hedges financial risks in close collaboration with the Group’s operating units. Currency risk While the vast majority of sales by FACC Group companies are transacted in USD, a significant part of the costs is incurred in currencies other than USD, notably in EUR. The following table shows the composition of receivables and other assets as well as liabilities by currency. 31.12.2021 31.12.2022 EUR'000 EUR'000 Receivables from customer-related engineering 27,742 27,427 Contract assets 2,576 3,318 Receivables from related companies, non-current 5,638 3,071 Other receivables 9,987 10,236 Trade receivables, current 53,023 61,065 Receivables from related companies, current 18,749 20,155 Other receivables and assets 36,892 43,259 Cash and cash equivalents 114,966 102,691 269,573 271,221 US dollar 186,942 206,061 EUR 82,631 65,160 269,573 271,221 31.12.2021 31.12.2022 EUR'000 EUR'000 Financial liabilities 292,769 291,294 Trade payables 53,305 66,655 Liabilities towards related companies 10,237 12,016 Other financial liabilities 6,118 7,798 362,428 377,763 US dollar 62,048 86,339 EUR 300,380 291,425 362,428 377,763 Detrimental changes in foreign exchange rates, in particular in the USD-EUR exchange rate, would therefore produce substantial adverse effects on FACC’s business, earnings before interests and taxes and financial position. FACC makes use of derivative financial instruments, such as forward exchange transactions, to hedge against adverse changes in the USD-EUR exchange rate, which can potentially give rise to losses. Sensitivity analyses showing the effects of hypothetical changes in exchange rates on the Consolidated Profit and Loss Statement and equity were carried out for the currency risks of financial instruments. In accordance with IFRS 7, currency risks result from financial instruments of a monetary nature that are not denominated in the reporting company’s functional currency. As a consequence, receivables, liabilities, cash and cash equivalents and foreign currency derivatives serve as the basis for calculating the sensitivity of the Consolidated Profit and Loss Statement. The sensitivity of equity also reflects the valuation effects of the cash flow hedges for foreign currency risks recorded in other comprehensive income. Translation differences from the translation of financial statements prepared in a currency other than the Group currency were not included in the calculation. A 5% change in the EUR-USD exchange rate would produce the following effects: Revaluation (+)/devaluation (–) 5% devaluation 5% revaluation 31.12.2021 EUR'000 31.12.2022 EUR'000 31.12.2021 EUR'000 31.12.2022 EUR'000 Changes in Consolidated Profit and Loss Statement 3,964 4,090 –3,587 –3,700 Changes in comprehensive income/loss –11,617 –14,662 10,511 13,266 Changes to equity –7,653 –10,572 6,924 9,566 Interest rate risk Interest rate risk depends on the average financing term and the type of interest rate. Fixed interest rates are subject to the risk of falling interest rates, whereas variable interest rates carry the risk of rising interest rates. An increase in interest rates of 50 basis points would have resulted in a reduction in earnings after taxes and equity of kEUR 815 (previous year: kEUR 616). A reduction in interest rates by 50 basis points would have resulted in an increase in earnings after taxes and in equity of kEUR 518 (previous year: kEUR 621). During the 2020 financial year, all core banks of FACC in the euro area switched to charging negative interest on credit balances. Interest expenses were incurred in the amount of kEUR 10 (previous year: kEUR 23) and are recognized in the financial result. The calculation method is based on variable interest-bearing assets and liabilities. Liquidity risk A key objective of FACC’s risk management is to maintain constant financial solvency to meet current and future obligations. The key control parameters for this purpose are the maximization of free cash flow through cost reductions, active working capital management and the reduction of capital expenditure. Liquidity risks arise in particular when proceeds from revenues fall short of expectations due to a decline in demand, and when measures to reduce working capital and payment-relevant fixed costs are implemented insufficiently or with a delay. In order to secure short- and medium-term liquidity, a reserve in the form of bank deposits and unused credit lines with banks is maintained. If necessary, excess cash and cash equivalents are invested in non-speculative, highly liquid financial instruments, mainly money market certificates, daily allowances, securities and other money market instruments, which generally mature in less than three months. On the balance sheet date 31 December 2022, FACC had unused credit lines amounting to kEUR 100,000 (previous year: kEUR 100,000) at its disposal. The contractually agreed (undiscounted) cash flows (interest and principal payments) as well as the remaining terms of the financial liabilities are composed as follows: Payment obligations Carrying amount 31.12.2021 EUR'000 Total 31.12.2021 EUR'000 Less than 1 year 31.12.2021 EUR'000 1 to 5 years 31.12.2021 EUR'000 More than 5 years 31.12.2021 EUR'000 Valuation at amortized cost Promissory note loans 70,000 75,526 1,228 71,637 2,661 Liabilities towards credit institutions 125,616 127,738 116,567 11,171 0 Lease liabilities 79,579 88,260 9,006 29,546 49,708 Other interest-bearing liabilities 17,574 17,574 17,574 0 0 Financial liabilities 292,769 309,098 144,375 112,354 52,369 Trade payables 53,305 53,305 53,305 0 0 Liabilities towards related companies 10,237 10,237 10,237 0 0 Other financial liabilities 6,118 6,118 6,118 0 0 362,428 378,757 214,034 112,354 52,369 Fair value through profit and loss Derivative financial instruments 8,185 8,185 6,448 1,737 0 Carrying amounts/contractual cash flows 370,613 386,942 220,482 114,092 52,369 Payment obligations Carrying amount 31.12.2022 EUR'000 Total 31.12.2022 EUR'000 Less than 1 year 31.12.2022 EUR'000 1 to 5 years 31.12.2022 EUR'000 More than 5 years 31.12.2022 EUR'000 Valuation at amortized cost Promissory note loans 70,000 75,234 1,494 71,133 2,607 Liabilities towards credit institutions 119,201 121,906 115,427 6,478 0 Lease liabilities 72,738 79,033 8,783 26,080 44,170 Other interest-bearing liabilities 29,355 29,355 29,355 0 0 Financial liabilities 291,294 305,528 155,059 103,691 46,778 Trade payables 66,655 66,655 66,655 0 0 Liabilities towards related companies 12,016 12,016 12,016 0 0 Other financial liabilities 7,798 7,798 7,798 0 0 377,763 391,997 241,528 103,691 46,778 Fair value through profit and loss Derivative financial instruments 16,536 16,536 16,536 0 0 Carrying amounts/contractual cash flows 394,300 395,576 258,065 103,691 46,778 The interest payments on variable rate loans in the table above reflect the market conditions for forward interest rates at the end of the financial year. These may change as market interest rates change. Future cash flows from derivative instruments may differ from the amounts shown in the table above as interest rates and exchange rates or the relevant conditions are subject to change. Target figures for future new liabilities are not included in the presentation. Financial liabilities repayable at any time are always assigned to the earliest maturity. Credit risks The Group is active in the aircraft industry and has two main customers. It is therefore exposed to a concentrated credit risk due to the limited number of aircraft manufacturers. The Group is exposed to credit risks with respect to non-performance by contractual partners and has therefore introduced guidelines to limit these risks. Products and services are exclusively sold to customers with appropriate credit ratings by taking the financial situation, past experiences and other factors into account. New customers’ default risks are evaluated by means of credit assessments, and the creditworthiness of existing customers is also regularly monitored. Customer receivables above a specified amount are insured against default. Credit risks can also arise from cash and cash equivalents, derivative financial instruments and deposits with banks and other financial institutions. Such transactions are only carried out with banks and financial institutions with high credit ratings. The maximum credit risk corresponds to the carrying amount of each financial asset in the balance sheet. OTHER INFORMATION 48. Board member remuneration The remuneration of the members of the Management Board of FACC AG and the Supervisory Board of FACC AG, who perform the same duties for FACC Operations GmbH, as of 31 December 2021 and as of 31 December 2022 was as follows: Name Non-success-related 2021 EUR'000 Success-related 2021 EUR'000 Termination benefit 2021 EUR'000 Employer contribution to pension fund 2021 EUR'000 Total 2021 EUR'000 Robert Machtlinger 418 0 26 170 613 Andreas Ockel 377 0 52 100 529 Aleš Stárek 327 0 45 60 432 Yongsheng Wang 312 0 1001) 0 412 1,432 0 223 330 1,985 1) Contains rollups from previous years Name Non-success-related 2022 EUR'000 Success-related 2022 EUR'000 Termination benefit 2022 EUR'000 Employer contribution to pension fund 2022 EUR'000 Total 2022 EUR'000 Robert Machtlinger 418 0 0 170 588 Andreas Ockel 402 0 71 100 572 Aleš Stárek 327 0 34 60 420 Yongsheng Wang (till 30 September 2022) 209 0 32 0 240 Zhen Pang (from 1 October 2022) 70 0 10 0 80 1,424 0 146 330 1,900 The expenses for Supervisory Board members recorded in the Annual Financial Statements amounted to kEUR 349 (previous year: kEUR 175). There were no advance payments or loans to members of the Supervisory Board of FACC AG on the balance sheet date. 49. Transactions with related companies and persons Transactions with related companies and persons outside the consolidated companies of FACC AG were concluded at arm’s length terms in the period from 1 January 2022 to 31 December 2022, as in previous year. Receivables 31.12.2021 EUR'000 Liabilities 31.12.2021 EUR'000 Revenues and other income 2021 EUR'000 Expenses 2021 EUR'000 Companies with significant influence on the Group 95 0 209 0 Joint venture in which the parent undertaking are involved 24,292 10,237 30,426 27,574 24,387 10,237 30,635 27,574 Receivables 31.12.2022 EUR'000 Liabilities 31.12.2022 EUR'000 Revenues and other income 2022 EUR'000 Expenses 2022 EUR'000 Companies with significant influence on the Group 41 0 191 0 Joint venture in which the parent undertaking are involved 23,185 12,016 35,292 14,228 23,225 12,016 35,484 14,228 In addition, a consulting agreement with Maffeo Aviation Consulting, Woodinville, USA, which is controlled by a Supervisory Board, was in place in the 2022 financial year. The consulting agreement amounted to kEUR 61 in the financial year, of which kEUR 13 had not yet been paid on the balance sheet date. The Supervisory Board member retired from the Supervisory Board as of 31 May 2022. Until this date, the business with Maffeo Aviation Consulting, Woodingville, USA, amounted to kEUR 50 thousand in financial year 2022, of which all liabilities were settled as of the balance sheet date. Transactions with related parties are subject to the general provisions for allowances. Guarantees were neither granted nor received. ACCOUNTING AND VALUATION POLICIES 50. Accounting and valuation policies Intangible assets (IAS 36, IAS 38, IFRS 3, IAS 23) Intangible assets with indefinite useful lives (IAS 38, IAS 36) Intangible assets with indefinite useful lives are measured at amortized cost. Software and rights Amortization over a period of 3 to 4 years (linear) An impairment test is conducted if an indicator of impairment is present. An impairment loss is recognized in the amount by which the carrying amount of the asset exceeds its recoverable amount. The recoverable amount of the asset is the higher of its attributed fair value less costs to sell and its value in use. If the reasons for impairment no longer apply, the impairment losses are to be reversed up to the amortized cost. Intangible assets with indefinite useful lives and intangible assets under development (IAS 38, IAS 36) Measurement is conducted at acquisition or production costs. These assets are not subject to scheduled amortization. Impairment tests are performed on an annual basis and if there are signs of impairment. An impairment loss is recognized in the amount by which the carrying amount of the asset exceeds its recoverable amount. The recoverable amount of the asset is the higher of its attributed fair value less costs to sell and its value in use. If the reasons for impairment no longer apply, the impairment losses are reversed up to the amortized cost of the asset. Property, plant and equipment (IAS 16, IAS 36, IAS 23) Property, plant and equipment are measured at amortized cost of procurement or manufacturing. The manufacturing costs of property, plant and equipment include individual costs and reasonable parts of the overhead costs as well as borrowing costs in the case of qualified assets. Linear amortization over the useful life: Buildings 10 to 50 years Investments in third-party buildings 33 to 50 years Technical plants and machinery 3 to 33 years Office equipment 5 to 14 years Vehicles 5 to 8 years Impairment tests are performed whenever there are signs of impairment. An impairment loss is recognized in the amount by which the carrying amount of the asset exceeds its recoverable amount. The recoverable amount of the asset is the higher of its attributed fair value less costs to sell and its value in use. If the reasons for impairment no longer apply, the impairment losses are reversed up to the amortized cost of the asset. Profits and losses from disposals of property, plant and equipment shall be determined as the difference between the disposal proceeds and the carrying amounts of property, plant and equipment and are recorded in the Consolidated Profit and Loss Statement under the items “Other operating income” and “Other operating expenses”. Leasing (IFRS 16): At inception of a contract, the FACC Group assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified asset, the FACC Group uses the definition of a lease in IFRS 16. IFRS 16 will replace the linear expenses for operating leases with amortization charges for right-of-use assets and interest costs for liabilities arising from the lease. The FACC Group recognizes a right-of-use asset and a lease liability at the lease commencement date. The right of use is initially recognized at present value. The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the end of the lease term. In addition, the right-of-use asset is periodically reduced by impairment losses, if any occur, and adjusted for certain remeasurements of the lease liability. The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Group’s incremental borrowing rate. Generally, the FACC Group uses its incremental borrowing rate as the discount rate. Lease payments included in the measurement of the lease liability comprise the following: fixed payments; variable lease payments that depend on an index or a rate; amounts expected to be payable under a residual value guarantee; and the exercise price under a purchase option that the Group is reasonably certain to exercise. The lease liability is measured at amortized cost using the effective interest method. It is remeasured when there is a change in future lease payments arising from a change in an index or rate, or if there is a change in the FACC Group’s estimate of the amount expected to be payable under a residual value guarantee. When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset, or is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero. The FACC Group has elected not to recognize right-of-use assets and lease liabilities for leases of low-value assets and short-term leases. The Group recognizes the lease payments associated with these leases as an expense on a straight-line basis over the lease term. Receivables from customer-related engineering und contract assets (IFRS 15) In the case of contracts with contractually enforceable claims, engineering and customer-specific tool developments are recognized at a point in time in revenues. At the time of revenue recognition, customer-related engineering is recognized as expenses, liabilities from customer-related engineering as revenues and variable compensation is recognized as present value in revenues or in receivables from customer-related engineering in accordance with IFRS IFRS 15.50 et seq. Receivables from customer-related engineering are subsequently reduced through ongoing amortization (progress billing). To the extent that engineering and customer-specific tool developments constitute separate performance obligations with claims that can be contractually enforced at any time, and revenues have already been partially recognized over a period of time, the former are reported as contract assets from the outset. If engineering and customer-specific tool developments are not remunerated separately or not at all, but are paid for by customers as a mark-up on the price of series parts, the level of revenues may be dependent on whether the expected quantities of series products are sold. In the case of contracts with contractually enforceable claims, this constitutes variable consideration pursuant to IFRS 15.50 et seq., which is recognized as receivables from customer-related engineering and reassessed on a regular basis within the scope of a prudent estimate. Payments to customers are treated as advance discounts and are recorded under contract assets. They are recognized as sales deductions according to the expected duration of the program. Impairments of receivables from customer-related engineering and contract assets are assessed according to regulations governing financial assets. Contract costs (IFRS 15) Contract costs are measured at amortized cost. If, in accordance with IFRS 15, there is no enforceable contractual entitlement to remuneration for engineering and tool development services provided, the associated expenses are capitalized as contract costs. The services provided and the subsequent series production constitute a single unit. In this case, the engineering and tool expenses are added to the price of the parts as a mark-up and are recognized as revenue upon delivery of the serial parts. The contract costs are amortized according to the number of shipsets delivered. Inventories (IAS 2) Inventories are measured at the lower value of procurement cost or manufacturing cost and net realizable value. Inventories are valued using the moving average price method. When determining the manufacturing costs, the directly attributable costs and reasonable portions of overhead costs, including amortization, are included on the assumption of normal capacity utilization. The net realizable value results from the expected sales revenues of the items less the outstanding production and distribution costs determined on the basis of empirical values. Price decreases in the replacement costs are generally taken into account when calculating the net sales price. Inventories are written down in the case of reduced net selling prices or long storage periods. So-called slow-moving inventory items, which are classified according to product groups, are subject to specific write-downs. The system identifies materials with a storage period of more than 24 months as slow-moving items. Customer-related engineering (IAS 2) Customer-related engineering and customer-specific tool developments are recorded as customer-specific development services to the extent that they constitute own performance obligations and control has not yet been transferred. They are capitalized to the amount of the associated expenses. For further information, please also refer to “Receivables from customer-related engineering”. Government grants (IAS 20) Government grants are recognized at fair value if there is reasonable assurance that the conditions attached to the grant will be met and the grant will be received. Government grants for investments in property, plant and equipment are recorded under the item “Investment grants” under non-current or current liabilities. Investment grants are dissolved to profit or loss on a linear basis over the expected useful life of the assets concerned. Employee benefit obligations (IAS 19) Defined benefit plans Defined benefit plans relate to Austrian termination benefit obligations towards employees whose employment was established on or before 31 December 2002. This provision is calculated using the projected unit credit method, which sees each period of service as giving rise to an additional unit of benefit entitlement and calculates the present value of future payments over the employees’ estimated working lives. The calculation is performed by an actuary by means of actuarial reports for the respective balance sheet date. Revaluation effects based on experience adjustments and changes in actuarial assumptions are recognized in other comprehensive income in equity for the period in which they arise. Interest expenses are recognized before earnings before interest and taxes (EBIT) in the Consolidated Profit and Loss Statement. The expected settlement amount is recognized for termination benefit obligations towards members of the Management Board of FACC AG as agreed in individual contracts. Defined contribution plans Defined contribution plans are in place in Austria for employees whose employment was established after 31 December 2002 due to statutory obligations and for individual contractual pension agreements. The Group’s sole obligation is to pay the defined contributions. These are recognized as expenses in the period for which they are paid. Other non-current employee benefit obligations Under collective bargaining agreements, the Group is obliged to pay employees an anniversary bonus of one month’s salary or one month’s wages upon reaching 25 years of service. This provision is determined by an actuary using actuarial reports in accordance with the projected unit credit method for the respective balance sheet date. Interest expenses are recognized before earnings before interest and taxes (EBIT) in the Consolidated Profit and Loss Statement. Revaluation effects based on experience adjustments and changes in actuarial assumptions are recognized to profit or loss in the period in which they arise. Contract liabilities from customer-related engineering (IFRS 15) Contract liabilities from customer-related engineering are recorded under current liabilities if control has not yet been transferred. Other provisions (IAS 37) Other provisions are recognized at the expected settlement amount. Non-current provisions are discounted provided the discounting effect is substantial and the discounting period can be reliably estimated. Income taxes (IAS 12) Deferred tax receivables and liabilities shall be balanced if they pertain to the same tax authority and if there is an enforceable legal claim to offsetting. Income tax expense (income tax credits) include actual taxes and deferred taxes. Deferred taxes are recognized for all temporary differences between the tax base of assets and liabilities and their carrying amounts in the IFRS-based financial statements (liabilities method). Deferred taxes are valued based on the tax rates applicable when the temporary differences have been reversed after the balance sheet date. Deferred tax receivables are only recognized to the extent to which it is probable that the corresponding tax benefits will be realized. Deferred tax assets for loss carryforwards are only recognized to the extent to which it is probable that they will be realized within a reasonable period of time. Changes in taxes generally lead to tax expenditures or tax credits. Taxes on items recorded in other comprehensive income are recorded in other comprehensive income. Taxes on items recorded directly in equity are also recorded directly in equity. Financial instruments (IAS 32, IFRS 7, IFRS 9, IFRS 13) IFRS 9 contains a new classification and measurement approach for financial assets that reflects the business model under which the assets are held as well as the characteristics of their respective cash flows. The standard contains three main categories of classification for financial assets: at amortized cost (AC), at fair value through profit or loss (FVTPL) and at fair value through other comprehensive income (FVOCI). For existing IAS 39 categories, the standard no longer includes “held to maturity (HtM)”, “loans and receivables (LaR)” and “available for sale (AfS)”. Under IFRS 9, derivative financial instruments embedded in financial assets are no longer accounted for separately but are classified as at fair value through profit or loss. The FACC Group also has a factoring program in place for seven selected customers. The unsold receivables from the factoring portfolio are allocated to the “hold and sell” business model in accordance with IFRS 9. The latter is measured at fair value through other comprehensive income. Financial assets are initially recognized at fair value. In the case of financial investments that are not measured at fair value through profit or loss, transaction costs directly attributable to the acquisition of the assets are also taken into account. The fair value is determined on the basis of the market information available on the balance sheet date. Given various influencing factors, the values stated here may deviate from the values realized at a later date. The fair value of financial assets and liabilities reflects the effect of the risk of non-performance on the part of the other party. When determining the fair value of a financial asset, the credit risk of banks is taken into account on the basis of their ratings. When determining the fair value of a financial liability, the Group’s own credit risk is considered on the basis of credit ratings provided by banks. Market values are available for all derivative financial instruments and listed securities; for all other financial instruments, the fair value is calculated on the basis of the discounted expected cash flows to the extent that the carrying amount does not represent an adequate approximation of the fair value. Purchases and sales of financial assets are recorded on the date of the transaction. Impairments are recognized to profit or loss for all financial instruments. If the underlying cause of the impairment no longer applies, a reversal of the impairment loss is recognized to profit or loss. Other non-current financial assets (securities) “At fair value through profit or loss” category: Subsequent measurement is recognized directly in other comprehensive income at fair value through other comprehensive income (stock market price). Receivables and other assets “At amortized cost” category: Subsequent measurement is recognized at amortized cost less any impairment losses on valuation accounts. Impairments of trade receivables due to default of payment are recognized on the basis of past experience. In addition, customers are assessed individually, taking into account past experience, their creditworthiness and any collateral security provided. Irrecoverable receivables are derecognized. Non-current receivables are additionally discounted according to the effective interest method. IFRS 9 replaces the “losses incurred” model of IAS 39 with a forward-looking model of “expected credit losses”. Determining the extent to which expected loan defaults will be influenced by changes in economic factors requires the exercise of considerable discretion and is made on the basis of weighted probabilities. The new impairment model is to be applied to financial assets measured at amortized cost or at fair value through other comprehensive income and to contract assets. Under IFRS 9, impairment losses are calculated according to one of the following: • 12-month expected credit loss: Expected loan defaults due to possible default events within twelve months of the balance sheet date. • Lifetime expected credit loss: Expected loan defaults due to all possible default events which can occur during the expected term of a financial instrument. Measurement according to the concept of lifetime expected credit loss is to be applied if the credit risk of a financial asset has increased significantly on the balance sheet date since its initial recognition; in all other cases, valuation according to 12-month expected credit loss is to be applied. Exceptions exist for trade receivables, contract assets arising under IFRS 15 and leasing receivables. For these items, all expected losses must (for trade receivables and contract assets without a significant financing component pursuant to IFRS 15) or may (for trade receivables and contract assets with a significant financing component and leasing receivables pursuant to IFRS 15) already be taken into account at the time of addition. Capital market data is available for the majority of the Group’s customers, which means that external parameters for maturity-dependent risk exposure are available. Expected losses for receivables subject to default risks are calculated using a maturity-specific default probability for each customer. If no external parameters are available for a customer, industry- or country-specific credit default swap (CDS) spreads or bond yields (on an individual security or index basis) are used to determine the probability of default. Trade receivables are written off if there is information suggesting that the debtor is facing significant financial difficulties and there is no realistic prospect of recovery, e.g. if the debtor has gone into liquidation or insolvency proceedings have been opened, or if the trade receivables are more than three years overdue, depending on what occurs earlier. Trade receivables which have been written off, are under no circumstances subject to levies of execution. The FACC Group derecognizes trade receivables when the contractual rights to the cash flows from the receivables have expired or the rights to the cash flows have been transferred in a transaction in which all significant risks and rewards of ownership of the receivables are transferred. Cash and cash equivalents Cash and cash equivalents are measured at amortized cost on the balance sheet date. The Group assumes that its cash and cash equivalents have a lower default risk based on the external ratings of banks and financial institutions. Due to the high credit rating and the short-term maturity, no value adjustments are made for expected credit losses. Liabilities Liabilities are initially recognized at fair value. Subsequent measurement is either at amortized cost or at fair value through profit or loss. Derivative financial instruments Derivative financial instruments for which the criteria of IFRS 9 for hedge accounting are not met are classified and recognized at fair value through profit or loss in accordance with IFRS 9. Cash flow hedges and fair value hedges The Group concludes forward exchange transactions to hedge the foreign currency risk in connection with particular planned foreign currency sales. The special provisions of IFRS 9 on hedge accounting are applied to offset the effects of the hedged transaction and the hedging instrument in the income statement. The fair values resulting as of the balance sheet date are recognized in other comprehensive income, taking into account deferred taxes, and reported under reserves in accordance with IFRS 9. They are reversed to profit or loss according to their future realization in the relevant financial year. In addition, the Group enters into forward exchange contracts to hedge the exchange rates of certain balance sheet items. Revenue recognition (IFRS 15) FACC generates two main streams of revenue – on the one hand through the supply of series products and, on the other hand, through the provision of development services. Development services either represent a separate performance obligation under a multi-component contract or are part of the delivery of series products. Moreover, there are also individual contracts for development projects. To the extent that development services in a multi-component contract constitute a separate performance obligation and the criteria for revenue recognition over a period of time are met, revenue is recognized either according to the stage of completion (progress is determined using the cost-to-cost method) or on the basis of the costs incurred (if no reliable estimate of the outcome of the contract is possible), depending on the degree to which the outcome of the contract can be anticipated. If engineering services provided under a multiple-element contract constitute a separate performance obligation and the criteria for recognizing revenue over a period of time are not met, but the contract gives rise to enforceable claims, revenue is recognized at the time of transfer of control to the customer. If the engineering services provided do not constitute a separate performance obligation, or if the contract does not give rise to enforceable claims, revenue is recognized at the time of delivery of the series products. In this case, the costs incurred for the development services are capitalized as contract fulfillment costs and are amortized through profit or loss depending on the deliveries of shipsets made. In the case of development services without milestone payments, payment is made according to the ongoing delivery of series products over the entire duration of the program. As performance obligations are fulfilled well in advance of payments received, there is a significant financing component that is taken into account in the measurement of receivables from customer-related engineering and contract assets. In the case of development services with milestone payments, the fulfillment of performance obligations and the receipt of payments largely coincide. As a result, no significant financing component arises. Both fixed and variable components are included in the transaction price of development services – the fixed component consists of the contractually agreed price component (separately agreed for the development service or guaranteed in the shipset price) and guaranteed minimum quantities – the variable component includes estimates with regard to the quantity component (series products to be delivered in the future) since no guaranteed minimum quantities exist in these cases, with volumes based on planned rate forecasts. Under IFRS 15, revenue is recognized either at a point in time or over a period of time as soon as a customer takes control of the goods or services. If a significant financing component is identified in the case of long-term amortization via series deliveries, sales revenues are only recognized in the amount of the present value of the agreed payments. Compounding effects are recognized as income in the financial result, which leads to payments received not being allocated in full to sales revenues. Payments to customers are treated as advance discounts and are recorded in the Consolidated Statement of Comprehensive Income as a reduction in sales over the duration of the program. In addition to the absence of an alternative use, a prerequisite for the recognition of revenue over a period of time is, in particular, the legal entitlement to receive payment at any time for services already rendered (costs plus profit share). This criterion implies that individual contracts must be recognized as revenue at a point in time in accordance with IFRS 15. Until the transfer of control, services provided at a specific point in time are recognized in the balance sheet in the amount of the associated costs. In the case of revenue recognition over a period of time, revenue is allocated according to the cost-to-cost method. IFRS 15 requires companies to disclose the costs of initiating a contract with a customer. As no such costs have been incurred by the Group, the related disclosures are not presented in these Notes. Financing components are not taken into account for contracts with a term of less than twelve months. Recognition of expenses Operating expenses are recognized upon provision of the service or at the time they are incurred. Interest is recognized using the effective interest method. Foreign currency valuation (IAS 21) Receivables, cash and cash equivalents and liabilities are translated at the spot conversion rate. Gains and losses are recorded to profit or loss. Consolidated statement of cash flows (IAS 7) The indirect method was used to present the Consolidated Statement of Cash Flows for the consolidated cash flow from operating activities. Cash and cash equivalents correspond to cash on hand and liquid funds. 51. Effects of new and amended standards The following new and amended standards were mandatorily effective for the first time in the 2022 financial year: Standard/Interpretation Mandatory application acc. to IASB for financial years beginning with Adoption by the EU as of 31.12.2022 IFRS 3 (amended) Business Combinations 01.01.2022 Yes IAS 16 (amended) Property, plant and equipment 01.01.2022 Yes IAS 37 (amended) Provisions, Contingent Liabilities and Contingent Assets 01.01.2022 Yes Miscellaneous Annual Improvements to IFRS Standards 2018–2020 Cycle 01.01.2022 Yes The first-time application of these new or revised standards has no material impact on FACCs Consolidated Financial Statements. The International Accounting Standards Board (IASB) is currently working on a number of projects that will affect financial years beginning on or after 1 January 2023. The following new, revised or amended standards and IFRIC interpretations that have already been published by the IASB but are not yet mandatory in the EU have not been applied early by the FACC Group and are therefore not relevant to these Consolidated Financial Statements: Standard/Interpretation Published by IASB Mandatory application acc. to IASB Adoption by the EU as of 31.01.2023 Effects on the Consolidated Financial Statement IFRS 17 Insurance Contracts 18.05.2017 01.01.2023 Yes No IFRS 17 (amended) Insurance Contracts 25.06.2020 01.01.2023 Yes No IAS 8 (amended) Definition of Accounting Estimates 12.02.2021 01.01.2023 Yes No IAS 1 (amended) Disclosure of Accounting policies 12.02.2021 01.01.2023 Yes No IAS 12 (amended) Deferred Taxes related to Assets and Liabilities arising from a Single Transaction 07.05.2021 01.01.2023 Yes No IFRS 17 (amended) Initial application of IFRS 17 and 9 - Comparative information 09.12.2021 01.01.2023 Yes No IAS 1 (amended) Classification of Liabilities as Current or Non-current 23.01.2020 01.01.2024 Yes No IAS 1 (amended) Classification of Liabilities as Current or Non-Current ‑ Deferral of effective date 15.07.2020 01.01.2024 Yes No IAS 1 (amended) Non-current Liabilities with Covenants 31.10.2022 01.01.2024 Yes No IFRS 16 (amended) Leases: Lease liability in a sale and leaseback 22.09.2022 01.01.2024 Yes No 52. Fees of the Group auditor The expenses attributable to the the auditor Ernst & Young Wirtschaftsprüfungsgesellschaft m.b.H. of the Consolidated Financial Statements in financial year 2021 resp. 2022 are as follows: 2021 2022 EUR'000 EUR'000 Group and annual audit 161 178 Other consulting services 3 3 164 181 53. Events after the balance sheet date On 17 February 2023, FACC Operations GmbH concluded an extension of syndicated loan in the amount of kEUR 225,443 with five participating banks (see Note 38 – Financial liabilities). There were no other events requiring disclosure. 54. Proposed appropriation of net income In the 2022 financial year the balance sheet loss of FACC Group amounted to kEUR –53,324. The Management Board and the Supervisory Board will propose a dividend of EUR 0.00 per share to the Annual General Meeting on 8 May 2023. 55. Approval for publication These Consolidated Financial Statements were prepared by the Management Board and are scheduled to be submitted by the Management Board to the Supervisory Board for review on 28 March 2022. The Consolidated Financial Statements will then be submitted to the Annual General Meeting for approval. The Supervisory Board may arrange for amendments to be made to the Consolidated Financial Statements within the scope of its duties as assessor. 56. Management and Supervisory Boards Members of the Management Board Robert Machtlinger, CEO Andreas Ockel, COO Aleš Stárek, CFO Zhen Pang, CCO (since 1 October 2022) Yongsheng Wang, CCO (till 30 September 2022) Members of the Supervisory Board Jian Wang (Chairman) (since 31 May 2022) Zhen Pang (Chairman) (till 31 May 2022) Fusheng Chen (Vice Chairman) (since 31 May 2022) Ian Chang (since 31 May 2022) Weixi Gong (since 31 May 2022) Jing Guo (since 31 May 2022) Yu Mei (since 31 May 2022) Junqi Sheng (since 31 May 2022) Tom Williams (since 31 May 2022) Jiajia Dai (till 31. May 2022) Qinghong Liu (till 31. May 2022) George Maffeo (till 31. May 2022) Jürgen Fischer (employee representative) (since 31 May 2022) Barbara Huber (employee representative) (since 31 May 2022) Ulrike Reiter (employee representative) (since 31 May 2022) Karin Klee (employee representative) (since 31 May 2022) Ried im Innkreis, 13 March 2023 The Management Board Robert Machtlinger m. p. Chairman of the Management Board Andreas Ockel m. p. Member of the Management Board Aleš Stárek m. p. Member of the Management Board Zhen Pang m. p. Member of the Management Board Statement of all Legal Representatives According to section 82 paragraph 4 number 3 Börsegesetz (Austrian Stock Exchange Act) To the best of our knowledge, we confirm that the Consolidated Financial Statements prepared in accordance with the relevant accounting standards give a true and fair view of the net assets, financial position and results of operations of the Group. Likewise, to the best of our knowledge, we confirm that the Group Management Report presents the course of business, the results of operations and the position of the Group in such a way as to give the best possible picture of the Group’s net assets, financial position and results of operations, and that the Group Management Report describes the main risks and uncertainties to which the Group is exposed. We certify to the best of our knowledge that the Annual Financial Statements of the parent company prepared in accordance with the relevant accounting standards give a true and fair view of the net assets, financial position and results of operations of the company. Likewise, to the best of our knowledge, we confirm that the Management Report presents the course of business, the results of operations and the position of the company in such a way as to give a true and fair view of the net assets, financial position and results of operations and that the Management Report describes the significant risks and uncertainties to which the company is exposed. Ried im Innkreis, 13 March 2022 The Management Board Robert Machtlinger m. p. Chairman of the Management Board Andreas Ockel m. p. Member of the Management Board Aleš Stárek m. p. Member of the Management Board Zhen Pang m. p. Member of the Management Board Auditor’s Report1) Report on the Consolidated Financial Statements AUDIT OPINION We have audited the consolidated financial statements of FACC AG, Ried im Innkreis and of its subsidiaries (the Group) comprising the consolidated statement of financial position as of December 31, 2022, the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the financial year then ended and the notes to the consolidated financial statements. Based on our audit the accompanying consolidated financial statements were prepared in accordance with the legal regulations and present fairly, in all material respects, the assets and the financial position of the Group as of December 31, 2022 and its financial performance for the year then ended in accordance with the International Financial Reportings Standards (IFRS) as adopted by EU, and the additional requirements under Section 245a Austrian Company Code UGB. 1) This report is a translation of the original report in German, which is solely valid. Publication or sharing with third parties of the consolidated financial statements together with our auditor's opinion is only allowed if the consolidated financial statements and the management report for the Group are identical with the German audited version. This audit opinion is only applicable to the German and complete consolidated financial statements with the management report for the Group. Section 281 paragraph 2 UGB (Austrian Company Code) applies to alternated versions. Basis for Opinion We conducted our audit in accordance with the regulation (EU) no. 537/2014 (in the following "EU regulation") and in accordance with Austrian Standards on Auditing. Those standards require that we comply with International Standards on Auditing (ISA). Our responsibilities under those regulations and standards are further described in the "Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements" section of our report. We are independent of the Group in accordance with the Austrian General Accepted Accounting Principles and professional requirements and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained until the date of this auditor’s report is sufficient and appropriate to provide a basis for our opinion by this date. 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 financial year. These matters were addressed in the context of our 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. We considered the following matters as key audit matters for our audit: 1.Other receivables in connection with the Fake-President-Incident-Fraud case in fiscal year 2015/2016 2.Recoverability of non-current receivables from customer related engineering and contract cost 1. Other receivables in connection with the Fake-President-Incident-Fraud case in fiscal year 2015/2016 Description At the end of the 2015/16 fiscal year, the FACC Group was confronted with a fake-president-incident-fraud case, which led to a cash outflow of EUR 52.9 million from FACC Operations GmbH (a subsidiary of FACC AG). Of this amount, an amount of approximately EUR 10.9 million was frozen in bank accounts in China and transferred to accounts of the Republic of Austria in the 2019 business year but not yet retransferred to FACC Operations GmbH. On the basis of several legal assessment and a report by an expert in criminal law obtained from management as of December 31, 2022, the amount of EUR 10.9 million was recognized in the other current receivables in the balance sheet. The main risk is that a re-patriation of money withdrawn by fraudulent actions with support of the state is very rare and therefore a new legal territory was entered. The information on the explanations, with regard to management's assessments of the fake-president-incident-fraud Case, is of particular importance and is provided in Note 31 in the financial statements (receivables and other assets). How we have addressed the facts of the case in the course of the audit: Our audit activities included the following activities: Discussing current developments in 2022 in connection with the criminal court case at the court in Graz against one delinquent and the status of the request of FACC Operations GmbH to surrender the money with the management and the head of the legal department of FACC Operations GmbH Assessment of a legal opinion as of December 31, 2022 required by the company by an independent lawyer and of the report provided by an expert in criminal law whether the re- transfer of the money is legally possible and the company has the right to demand the repayment Assessment of the lawyer‘s letter and the additional statement as of December 31,2022 of the lawyers who represented FACC Operations GmbH as private participant in the criminal court case against one delinquent at the court in Graz Review whether the criteria to recognize an account receivable are met Review if the recoverability of the receivable is given Assessment of the adequacy of the information provided in the notes on other receivables 2. Recoverability of non-current receivables from customer related engineering and contract coons Description FACC AG discloses in the consolidated financial statements non current receivables from customer related engineering amounting to EUR 27,4 million (previous EUR 27,7 million) and non current contract cost amounting to EUR 71,3 million (previous year EUR 88,3 million). In course of the valuation of contract cost and receivables from customer related engineering and contract cost management has to make significant estimates. The recoverable amount is highly dependent on the underlying estimates for point of time and quantities of future deliveries and cash flows. The main risk is related to the estimate of future cash-flows and the discount rate used. The estimate of the cash flows includes assumptions that are impacted by future economic developments and internal learning curves. The related disclosures are imcluded in the notes under "7. Use of assumptions and estimates" and in note 23 and note 25. Our audit activities included the following activities: Assessment oft he process for valuation contract cost and receivables from customer related engineering in accordance with IFRS 15 Audit of the model used and audit of the correctness of the calculations and evaluation of the discount rate Evaluation of detailed plans and budgets and analysis of the main drivers (revenue, expenses, planned terms of the programs), to verify the the planning figures Audit of the sales and results per program as derived from the mid term plan approved by the supervisory board Evaluation of the planned terms of the programs Audit of completeness of disclosures Other Information Management is responsible for the other information. The other information comprises the information included in the annual report, but does not include the consolidated financial statements, the Group's management report and the auditor’s report thereon. The annual report is estimated to be provided to us after the date of the auditor's report. 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, as soon as it is available, and, in doing so, to consider whether - based on our knowledge obtained in the audit - the other information is materially inconsistent with the consolidated financial statements or otherwise appears to be materially misstated. RESPONSIBILITIES OF MANAGEMENT AND OF THE AUDIT COMMITTEE FOR THE CONSOLIDATED FINANCIAL STATEMENTS Management is responsible for the preparation of the consolidated financial statements in accordance with IFRS as adopted by the EU, and the additional requirements under Section 245a Austrian Company Code UGB for them to present a true and fair view of the assets, the financial position and the financial performance of the Group and for such internal controls as management determines are necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. In preparing the consolidated financial statements, management 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 management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so. The Audit Committee is responsible for overseeing the Group’s financial reporting process. AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF THE CONSOLIDATED FINANCIAL STATEMENTS Our objectives 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 an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the EU regulation and in accordance with Austrian Standards on Auditing, which require the application of ISA, 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 financial statements. As part of an audit in accordance with the EU regulation and in accordance with Austrian Standards on Auditing, which require the application of ISA, we exercise professional judgment and maintain professional scepticism 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 by management. conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the 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 auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern. evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation. obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion. We communicate with the Audit Committee regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide the Audit Committee with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. From the matters communicated with the Audit Committee, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS Comments on the Management Report for the Group Pursuant to Austrian Generally Accepted Accounting Principles, the management report for the Group is to be audited as to whether it is consistent with the consolidated financial statements and as to whether the management report for the Group was prepared in accordance with the applicable legal regulations. Management is responsible for the preparation of the management report for the Group in accordance with Austrian Generally Accepted Accounting Principles. We conducted our audit in accordance with Austrian Standards on Auditing for the audit of the management report for the Group. Opinion In our opinion, the management report for the group was prepared in accordance with the valid legal requirements, comprising the details in accordance with section 243a UGB (Austrian Company Code), and is consistent with the consolidated financial statements. Statement Based on the findings during the audit of the consolidated financial statements and due to the thus obtained understanding concerning the Group and its circumstances no material misstatements in the management report for the Group came to our attention. Additional information in accordance with article 10 EU regulation We were elected as auditor by the ordinary general meeting at May 31, 2022. We were appointed by the Supervisory Board on September 5, 2022. We are auditors without cease since financial year 2016/17. We confirm that the audit opinion in the Section "Report on the consolidated financial statements" is consistent with the additional report to the audit committee referred to in article 11 of the EU regulation. We declare that no prohibited non-audit services (article 5 par. 1 of the EU regulation) were provided by us and that we remained independent of the audited company in conducting the audit. RESPONSIBLE AUSTRIAN CERTIFIED PUBLIC ACCOUNTANT The engagement partner on the audit resulting in this independent auditor’s report is Mrs. Mag. Johanna Hobelsberger-Gruber, Certified Public Accountant. Linz, March 13, 2023 Ernst & Young Wirtschaftsprüfungsgesellschaft m.b.H. Mag. Johanna Hobelsberger-Gruber m. p. Certified Public Accountant ppa DI (FH) Hans Eduard Seidel m. p. Certified Public Accountant Glossary Technology Autoclave Gas-tight, sealable autoclave for curing fiber composites Composites A composite material is a material made from two or more constituent materials that, when combined, feature characteristics different from the individual components Fibrous composite material Material of reinforcing fibers and a pastic mix OEM Original Equipment Manufacturer - manufacturer of components, which produces these in its own factories, but does not bring them to retail himself Retrofit Modernization or expansion of existing (mostly older and no longer produced) models Shipset A delivery unit, i.e. a complete set of parts for an aircraft Spoiler Movable device on the upper side of the wings to reinforce a descent, for faster breaking after landing and partly to support the turning flight Thermoplastic Plastic that can be deformed in a certain temperature range Urban Air Mobility Extension of urban transportation systems into the airspace Winglet Parts attached to the wingtips of aircraft wings aiming to reduce the aircrafts drag Financials CAD Canadian dollar Cash flow Net amount of cash and cash equivalents being transferred into and out of a business in a specific period CGU Cash-generating unit D&O insurance Directors and officers liability insurance –liability insurance payable to the directors and officers of a company EBIT Earnings before interest and taxes EUR'000 Euro thousands Equity ratio in % Equity/balance sheet total in % FTE Full-time equivalents of employees GBP Great Britain pound HRK Croatian kuna IAS International Accounting Standards IFRS International Financial Reporting Standards, including International Accounting Standards INR Indian rupee Investments Additions to intangible assets, property, plant and equipment ISIN International Securities Identification Number for shares kEUR Euro thousands RMB Ranminbi/Yuan - Chinese currency SFY Short financial year USD United States dollar ContactMichael Steirer m.steirer@facc.com Phone +43 59 616 1468 www.facc.com NoteThis report was prepared and the data contained therein verified with the utmost care. However, rounding and typesetting errors as well as misprints cannot be entirely ruled out. Where rounded amounts and percentages are aggregated, rounding differences may occur due to the use of automated calculation aids. This Annual Report contains forward-looking assessments and statements, which were compiled on the basis of information available to the Group at the time the report was prepared. Such forward-looking statements are usually introduced with terms such as “expect”, “plan”, “anticipate”, “estimate” etc. We would draw your attention to the fact that various factors could cause actual conditions and results to deviate from the expectations outlined in this report. This report is also available in German. In cases of doubt, the German version shall prevail. Editorial deadline: 13 March 2023 ImprintMedia owner and editor: FACC AG, Fischerstrasse 9, 4910 Ried im Innkreis, Austria Project manager: Michael Steirer Project team: Tanja Maisenberger, Elisabeth Murauer, Andrea Schachinger, Jakob Reichsöllner, Robert Briewasser, Peter Glaser, Rene Christian Adam Layout, graphic, concept: Heidlmair Kommunikation, Linz (image part); remaining parts inhouse produced with www.firesys.de Editing & project management: Male Huber Friends GmbH, Vienna Pictures: Airbus, Boeing, Rolls Royce, Dassault Falcon, ArianeGroup, ARCHER AVIATION, Andreas Maringer, FACC AG, Bombardier, Michael Liebert, Robert Gortana, Werner Bartsch, Markus Rambossek, Christoph Scherhammer, Industriemagazin, eHang, Georg Tiefenthaler 4.AUDITOR’S REPORT ) Report on the Financial Statements Audit Opinion We have audited the financial statements of FACC AG, Ried im Innkreis, These financial statements comprise the balance sheet as of December 31, 2022, the income statement for the financial year then ended and the notes. Based on our audit the accompanying financial statements were prepared in accordance with the legal regulations and present fairly, in all material respects, the assets and the financial position of the Company as of December 31, 2022 and its financial performance for the financial year then ended in accordance with Austrian Generally Accepted Accounting Principles. Basis for Opinion We conducted our audit in accordance with the regulation (EU) no. 537/2014 (in the following "EU regulation") and in accordance with Austrian Standards on Auditing. Those standards require that we comply with International Standards on Auditing (ISA). Our responsibilities under those regulations and standards are further described in the "Auditor’s Responsibilities for the Audit of the Financial Statements" section of our report. We are independent of the Company in accordance with the Austrian General Accepted Accounting Principles and professional requirements and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained until the date of this auditor’s report is sufficient and appropriate to provide a basis for our opinion by this date. Key Audit Matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the financial year. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. We considered the following matters as key audit matters for our audit: 1. Valuation of investments in group companies and recoverability of receivables against group companies Description FACC AG discloses in the financial statements as of December 31, 2022 investments in group companies (267.8 Mio. €) and accounts receivables against group companies (25.9 Mio. €). For the valuation of investments in group companies and accounts receivables against group companies management have to make significant accounting estimates whether an impairment exists at yearend and to quantify the impairment. The main risk is the estimation of future cash flows of the group company, which are the basis for the valuation of these balance sheet items. These estimates on cash flows include assumptions that are impacted by future market and economy developments. The disclosures for the investments in group companies and accounts receivables against group companies are in the notes in the accounting and valuation policies for investments and receivables and other assets and in the development of longterm assets as December 31, 2022. How our audit addressed the matter To address the risk we have critically challenged the assumptions and estimates of management and among others performed the following audit procedures: Audit of the model used and audit of the correctness of the calculations and evaluation of the discount rate Evaluation if there are any indications for impairment Evaluation of detailed plans and budgets and analysis of the main drivers (revenue, expenses, capex, change in working capital) under consideration of the development since the COVID-19 crisis and the started recovery of the aircraft industry to verify the adequateness of the planning figures Audit of completeness of disclosures Other Information Management is responsible for the other information. The other information comprises the information included in the annual financial report, but does not include the financial statements, the management report and the auditor’s report thereon, whereby the consolidated corporate governance report was made available to us before the date of the auditor's report. The separate consolidated non-financial report was submitted to us in draft. The full annual financial report and the final non-financial report are expected to be made available to us after the date of the audit opinion. Our opinion on the 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 financial statements, our responsibility is to read the other information, as soon as it is available, and, in doing so, to consider whether - based on our knowledge obtained in the audit - the other information is materially inconsistent with the financial statements or otherwise appears to be materially misstated. We have nothing to report regarding the other information already available. Responsibilities of Management and of the Audit Committee for the Financial Statements Management is responsible for the preparation of the financial statements in accordance with Austrian Generally Accepted Accounting Principles, for them to present a true and fair view of the assets, the financial position and the financial performance of the Company and for such internal controls as management determines are necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, management is responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so. The Audit Committee is responsible for overseeing the Company's financial reporting process. Auditor’s Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the EU regulation and in accordance with Austrian Standards on Auditing, which require the application of ISA, 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 financial statements. As part of an audit in accordance with the EU regulation and in accordance with Austrian Standards on Auditing, which require the application of ISA, we exercise professional judgment and maintain professional scepticism throughout the audit. We also: identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company to cease to continue as a going concern. evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. We communicate with the Audit Committee regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide the Audit Committee with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. From the matters communicated with the Audit Committee, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. Report on Other Legal and Regulatory Requirements Comments on the Management Report Pursuant to Austrian Generally Accepted Accounting Principles, the management report is to be audited as to whether it is consistent with the financial statements and as to whether the management report was prepared in accordance with the applicable legal regulations. Management is responsible for the preparation of the management report in accordance with Austrian Generally Accepted Accounting Principles. We conducted our audit in accordance with Austrian Standards on Auditing for the audit of the management report. Opinion In our opinion, the management report for the Company was prepared in accordance with the valid legal requirements, comprising the details in accordance with Section 243a Austrian Company Code UGB, and is consistent with the financial statements. Statement Based on the findings during the audit of the financial statements and due to the thus obtained understanding concerning the Company and its circumstances no material misstatements in the management report came to our attention. Additional information in accordance with Article 10 EU regulation We were elected as auditor by the ordinary general meeting at May 31st, 2022. We were appointed by the Supervisory Board on September 5th, 2022. We are auditors without cease since fiscal year 2016/2017. We confirm that the audit opinion in the Section "Report on the financial statements" is consistent with the additional report to the audit committee referred to in Article 11 of the EU regulation. We declare that no prohibited non-audit services (article 5 par. 1 of the EU regulation) were provided by us and that we remained independent of the audited company in conducting the audit. Responsible Austrian Certified Public Accountant The engagement partner on the audit resulting in this independent auditor’s report is Mrs. Mag. Johanna Hobelsberger-Gruber, Certified Public Accountant. Linz, March 13, 2023 Ernst & Young Wirtschaftsprüfungsgesellschaft m.b.H. Mag. Johanna Hobelsberger-Gruber ppa DI (FH) Hans Eduard Seidel Wirtschaftsprüferin / Certified Public Accountant Wirtschaftsprüfer / Certified Public Accountant ____ )This report is a translation of the original report in German, which is solely valid. Publication or sharing with third parties of the financial statements together with our auditor's opinion is only allowed if the financial statements and the management report are identical with the German audited version. This audit opinion is only applicable to the German and complete financial statements with the management report. Section 281 paragraph 2 UGB (Austrian Company Code) applies to alternated versions. Financial statements and management report as of December 31, 2022 FACC AG, Ried im Innkreis Income Statement for the Financial Year from 1 January to 31 December 2022 2021 2022 EUR'000 EUR 1.Sales revenue 10,789 10,305,088.99 2.Own work capitalized 13 0 3.Other operating income a) Income from the reversal of provisions 0 65,377.00 b) Other 320 130,851.36 320 196,228.36 4.Personnel expenses a)Salaries –3,756 –4,338,459.24 b)Social expenses –1,463 –1,508,154.93 thereof expenses for pensions –343 –367,847.41 aa) expenses for severance payments and contributions to corporate employee pension funds –260 –257,945.31 bb) expenses for statutory social security contributions as well as income-dependent levies and compulsory contributions –811 –847,838.23 –5,218 –5,846,614.17 5.Depreciation and amortization a) of intangible assets and property, plant and equipment –5 –10,295.39 –5 –10,295.39 6.Other operating expenses a) Other –5,420 –4,193,885.92 7.Subtotal of items 1 to 6 (EBIT) 478 450,521.87 8.Other interest and similar income 81 80,604.17 thereof affiliated companies 81 80,604.17 9.Interest and similar expenses –1 –481.99 thereof affiliated companies 0 0 10.Subtotal of items 8 to 9 (financial result) 80 80,122.18 11.Result before taxes 558 530,644.05 12.Taxes on income (and earnings) 79 –67,611.50 thereof deferred taxes 85 –68,938.50 Corporate income tax from group taxation –6 –6,250.00 thereof carried over to the group member 0 0 13.Result after taxes 637 463,032.55 14.Profit for the year 637 463,032.55 15.Profit carryforward from the previous year 15,615 16,251,555.47 16.Net profit 16,252 16,714,588.02 Balance Sheet as of 31 December 2022 Assets 31.12.2021 31.12.2022 EUR'000 EUR A. Fixed assets I.Intangible assets: 1.Concessions and rights 24 16,987.34 24 16,987.34 II.Financial assets: 1. Investments in affiliated companies 267,823 267,822,715.00 2. Securities (book-entry securities) 1,977 0 269,799 267,822,715.00 269,823 267,839,702.34 B. Current assets: I.Accounts Receivable and other assets: 1.Accounts Receivable from affiliated companies 25,112 25,922,033.48 thereof with a remaining term of more than one year 0 0 2.Other receivables and assets 6,416 9,325,116.90 thereof with a remaining term of more than one year 0 0 31,528 35,247,150.38 II. Cash balances, cheques, bank deposits 392 430,143.65 31,920 35,677,294.03 C. Deferred items 536 944,049.30 D. Deferred tax assets 33,320 31,023,282.51 TOTAL ASSETS 335,600 335,484,328.18 Liabilities 31.12.2021 31.12.2022 EUR'000 EUR A.Equity: I.Called, acquired and paid share capital 45,790 45,790,000.00 II.Capital reserves: 1.Appropriated 134,215 134,215,000.00 2.Unappropriated 95,041 95,041,250.00 229,256 229,256,250.00 III.Retained earnings (thereof profit carryforward EUR 16,521,555.47; previous year: TEUR 15,615) 16,252 16,714,588.02 291,298 291,760,838.02 B.Provisions: 1.Provisions for severance payments 1,113 1,241,119.00 2.Provisions for pensions 1,977 0 3.Tax provisions 33,049 30,821,005.53 4.Other provisions 703 891,281.10 36,841 32,953,405.63 C.Liabilities 1.Trade payables 920 1,185,617.52 thereof with a remaining term of up to one year 920 1,185,617.52 thereof with a remaining term of more than one year 0 0 2.Liabilities towards affiliated companies 6,401 9,384,044.37 thereof with a remaining term of up to one year 6,401 9,384,044.37 thereof with a remaining term of more than one year 0 0 3.Other liabilities 139 200,422.64 thereof with a remaining term of up to one year 139 200,422.64 thereof with a remaining term of more than one year 0 0 thereof taxes 9 13,329.89 thereof with a remaining term of up to one year 9 13,329.89 thereof with a remaining term of more than one year 0 0 thereof relating to social security 73 86,131.27 thereof with a remaining term of up to one year 73 86,131.27 thereof with a remaining term of more than one year 0 0 Total liabilities 7,461 10,770,084.53 thereof with a remaining term of up to one year 7,461 10,770,084.53 thereof with a remaining term of more than one year 0 0 TOTAL LIABILITIES 335,600 335,484,328.18 Notes for the Financial Year from 1 January to 31 December, 2022 of FACC AG, Ried im Innkreis 1. General These Annual Financial Statements for the financial year from 1 January to 31 December 2022 were prepared by the Management Board of the company in accordance with the provisions of the Austrian Commercial Code (UGB). The company is to be classified as a large corporation in accordance with section 221 of the Austrian Commercial Code (UGB). To the extent necessary to present a true and fair view of the net asset position, financial position and profit situation, additional information has been provided in the Notes. FACC AG, headquartered in Ried im Innkreis, prepares the Consolidated Financial Statements as the parent company of FACC Operations GmbH, which are published at the Commercial Court of Ried im Innkreis. FACC AG is included in the scope of consolidation of AVIC Cabin Systems Co., Limited (ACS) headquartered in Hong Kong (Room 2201, 22/F, Fairmont House, 8 Cotton Tree Drive, Admiralty, Hong Kong), company register number 1394811. FACC AG is subject to duties and responsibilities of a holding company. As the parent company of FACC Operations GmbH it performs managerial activities and provides financial services for the Group. 2. Accounting and measurement methods The Annual Financial Statements for the financial year from 1 January to 31 December 2022 were prepared in accordance with generally accepted accounting principles and in compliance with the general standard of presenting a true and fair view of the net asset position, financial position and profit situation of the company. In preparing the Annual Financial Statements, the principle of completeness was observed. Valuation was based on the going concern assumption. Assets and liabilities were valued in accordance with the principal of individual valuation. The principle of prudence was taken into due account, in particular, by only recording profits realized as of the balance sheet date. All discernible risks and pending losses as of the balance sheet were taken into account. All discernible risks and pending losses, which occurred in the financial year from 1 January to 31 December 2022 or in a previous financial year, were taken into account. Estimates are made on the basis of prudent assessments. To the extent that experiences of similar circumstances exist and are amenable to statistical analysis, the company has taken these into account in making estimates. Fixed assets Acquired intangible assets are valued at acquisition cost less scheduled amortization. The scheduled amortization of software and licenses is performed linearly over a period of 3 years. Property, plant and equipment are valued at acquisition or production cost less scheduled depreciation. Low-value assets (individual acquisition value up to EUR 800.00) are capitalized in the year of acquisition and are immediately depreciated. According to tax regulations, additions made in the first half of the year are depreciated at the full annual rate, while additions made in the second half of the year are depreciated at half the annual rate. Financial assets are recognized at cost or, if lower, at fair value if the impairment is expected to be permanent. Investments in affiliated companies are generally valued at acquisition cost. Unscheduled amortization is recognized if the fair value on the balance sheet date is lower than the carrying amount and the impairment is expected to be permanent. The fair value is determined according to KFS/BW 1 using the discounted cashflow method. Securities (book-entry securities) held as fixed assets are valued at acquisition cost. Loans are recognized at acquisition cost. Receivables and other assets Receivables and other assets are recognized at their nominal value or the lower fair value. Current assets are written up if the reasons for depreciation have definitely ceased to apply. Deferred tax assets Deferred taxes are recognized in accordance with section 198 paragraphs 9 and 10 of the Austrian Commercial Code (UGB) in line with the asset/liability approach and without discounting on the basis of the current corporate income tax rate of 23 % (previous year: 25 %). Deferred taxes on tax loss carryforwards, if any, are recognized to the extent that sufficient deferred tax liabilities exist or if there is clear and strong evidence that sufficient taxable income will be available in the future. Provisions Provisions for severance payments are calculated according to actuarial principles using the "projected unit credit" method in accordance with IAS 19. The end date of the employment relationship was taken to be 65, taking into account the probability of early retirement in accordance with the age limits of section 607 paragraph 10 of the Austrian General Social Security Act (ASVG) and section 3 of Austrian Federal Constitutional Law on Age Limits (BVG), an actuarial interest rate of 4.63 % (previous year: 1.31 %) and planned salary increases of 3.50 % (previous year: 2.00 %). As in the previous year, no fluctuation discount was applied in the calculation. Provisions for anniversary bonuses are made in accordance with IAS 19; provisions are calculated applying an interest rate of 4.53 % (previous year: 1.10 %) and a salary increase of 3.50 % per year (previous year: 2.00 %). The end date of the employment relationship was taken to be 65, taking into account the probability of early retirement in accordance with the age limits of section 607 paragraph 10 of the Austrian General Social Security Act (ASVG) and section 3 of Austrian Federal Constitutional Law on Age Limits (BVG). In addition, a fluctuation discount of 11.17 % (previous year: 12.77 %) was applied. Employee fluctuation is determined on a company-specific basis. Service costs are spread over the entire service period from joining the company until reaching the statutory retirement age. The actuarial interest rate for provisions for severance payments and anniversary bonuses is derived from the interest rate on the balance sheet date based on market interest rates of companies with a high credit rating and a remaining term of 20 years for provisions for severance payments and 15 years for provisions for anniversary bonuses. Actuarial gains and losses are immediately recorded to profit or loss. Calculations are based on the AVÖ-2018-P mortality table. The pension provision is based on the actuarial reserve confirmed by the insurance company since pension claims are fully covered by the insurance company. In line with the principle of prudence, other provisions include all risks identifiable at the time of preparation of the balance sheet as well as liabilities, which are uncertain in terms of amount and cause, in the amounts required according to reasonable business judgement. Liabilities Liabilities are recognized at the repayment amount with due consideration for the principle of prudence. 3. 4. Explanatory notes to the balance sheet Intangible and tangible fixed assets The development of the individual fixed asset items and the breakdown of annual depreciation according to individual items are shown in the Table of Assets (see Annex 1 of the Notes). Financial assets Investments in affiliated companies The company holds investments in the following companies (section 189a number 2 of the Austrian Commercial Code): Capital share % Currency Equity EUR Annual net profit EUR Balance sheet date Affiliated companies FACC Operations GmbH, Ried im Innkreis 100 EUR 137,246,713.55 5,391,716.94 31.12.2022 Investment securities (book-entry securities) The book-entry securities represent the surrender values of the pension reinsurance policy for the Group's pension obligations for the financial year from 1 January to 31 December 2021. These are valued at the actuarial reserve confirmed by the insurance company on the balance sheet date. The value roughly corresponds to the expected inflow of funds in the event of the termination of the insurance policy on the balance sheet date. These claims were pledged to the beneficiaries of the pension commitment. Receivables and other assets Receivables from affiliated companies include receivables from the provision of funds in the amount of EUR 5,300,000.00 (previous year: kEUR 5,300), from the ongoing settlement of accounts in the amount of EUR 15,773,520.08 (previous year: kEUR 14,957), from tax allocation in the amount of EUR 4,848,513.40 (previous year: kEUR 4,855) As in the previous year, the item Other receivables and assets does not contain any income that remains non-cash until after the balance sheet date. Deferred items For the purpose of accrual accounting, deferred items in the amount of EUR 944,049.30 (previous year: kEUR 536) were recorded in the balance sheet as of the balance sheet date 31 December 2022. Deferred tax assets Deferred tax assets as of the balance sheet date were recognized for temporary differences between the tax and corporate valuation for the following items: 31.12.2021 EUR'000 31.12.2022 EUR Personnel provisions 1,131 929,463.50 Tax loss carry forwards 132,149 133,954,371.80 133,280 134,883,835.30 Thereof deferred tax assets 33,320 31,023,282.51 The deferred tax assets developed as follows: As of 01 January 2022 33,320,031.40 Changes recognized in profit or loss –68,938.50 Changes of tax loss carryfowards FACC Operations GmbH –2,227,810.39 As of 31 December 2022 31,023,282.51 In the 2022 financial year, no deferred tax assets were recognized for tax loss carryforwards amounting to EUR 30,404,428.02. The recognition of deferred tax assets on tax loss carryforwards is justified as sufficiently positive results can be expected in the coming financial years. A tax rate of 23 % (previous year: 25 %) was used to calculate deferred taxes. Equity The share capital of the listed company amounts to EUR 45,790,000.00 and is fully paid up. It is divided into 45,790,000 no-par value shares of EUR 1.00 each. Authorized capital At the Annual General Meeting on 9 July 2019, a resolution was passed approving the creation of authorized capital. The Management Board is thus entitled, subject to the approval of the Supervisory Board, to increase the share capital by a nominal amount of up to EUR 9,000,000.00 by issuing up to 9,000,000 new shares against cash or non-cash contributions within a maximum of five years from the registration of the authorized capital in the commercial register. The new shares may also be issued to the exclusion of shareholders' subscription rights. Conditional capital At the Annual General Meeting on 9 July 2019, a resolution was passed approving the creation of conditional capital. The Management Board is thus entitled, subject to the approval of the Supervisory Board, to increase the share capital by a nominal amount of up to EUR 3,000,000.00 by issuing up to 3,000,000 new shares against cash or non-cash contributions within a maximum of five years from the registration of the authorized conditional capital in the commercial register. This authorized conditional capital serves the purpose of granting stock options to employees, senior executives and members of the Management Board of the company or one of its affiliated companies as part of the company's stock option plan. The capital increase is earmarked for a specific purpose and may only be effected to the extent that option holders exercise their options under a stock option plan of the company. Provisions The provisions can be broken down as follows: 31.12.2021 EUR'000 31.12.2022 EUR Provisions for severance payments 1,113 1,241,119.00 Pension provisions 1,977 0.00 Tax provisions 33,049 30,821,005.53 Other provisions Personnel provisions 343 498,746.11 Other 359 392,534.99 36,841 32,953,405.63 Other provisions mainly comprise provisions for unused vacation days, attorneys' fees and other uncertain liabilities. Liabilities As in the previous year, all liabilities have remaining terms of less than one year as of the balance sheet date. There are no liabilities with a remaining term of between one and five years or of more than five years. The liability towards affiliated companies in the amount of EUR 9,384,044.37 exclusively comprises sales tax credits of the Group member FACC Operations GmbH, which is offset via FACC AG due to the fact that both are members of a value added tax group (previous year: kEUR 6,401). The item Other liabilities includes the following major expenses which remain non-cash until after the balance sheet date: 31.12.2021 EUR'000 31.12.2022 EUR Liabilities towards the regional health care fund 73 86,131.27 73 86,131.27 No real securities have been provided. Contingent liabilities 31.12.2021 EUR'000 31.12.2022 EUR Other contingent liabilities (guarantees) 194,583 190,416,666.69 194,583 190,416,666.69 thereof towards affiliated companies 194,583 190,416,666.69 The company has provided guarantees for a loan in the amount of EUR 120,416,666.69 (previous year kEUR 124,583) and for a promissory note loan in the amount of EUR 70,000,000.00 (previous year kEUR 70,000) of FACC Operations GmbH. Obligations arising from the use of property, plant and equipment not recognized in the balance sheet Total financial obligations arising from the use of property, plant and equipment not recognized in the balance sheet for the next five years amount to EUR 179,379.05 (previous year: kEUR 85). Of this amount, EUR 69,912.65 (previous year: kEUR 51) is attributable to the following year. 5. notes to the profit and loss statement Sales revenue 2021 EUR'000 2022 EUR Domestic revenues Revenues from managerial activities 10,789 10,305,088.99 10,789 10,305,088.99 FACC AG is subject to duties and responsibilities of a holding company. As the parent company of FACC Operations GmbH, it performs managerial and financing activities, provides financial services for the Group and invoices FACC Operations GmbH for the costs incurred. Expenses for severance payments, pensions and contributions to corporate employee pension funds are made up as follows: 2021 EUR'000 2022 EUR Management 230 245,859.41 Other employees 30 12,085.90 260 257,945.31 Expenses for pensions are made up as follows: 2021 EUR'000 2022 EUR Management 332 339,126.06 Other employees 11 28,721.35 343 367,847.41 Expenses for severance payments and contributions to corporate employee pension funds include expenses for severance payments of EUR 128,608.00 (previous year: kEUR 223) and contributions to corporate employee pension funds of EUR 129,337.31 (previous year: kEUR 37). Salary and payroll obligations include income of EUR 3,053.00 (previous year: kEUR -3) from the change in provisions for anniversary bonuses. Changes in personnel provisions are recorded in the following items to profit or loss: Provisions for anniversary bonuses and other personnel provisions are recorded under salary and payroll obligations. Provisions for severance payments are recorded under expenses for severance payments and contributions to company employee pension funds. Other operating expenses Other items recorded under other operating expenses include in particular legal and consulting expenses as well as expenses for insurance. With regard to the disclosures pursuant to section 238 paragraph 1 number 18 of the Austrian Commercial Code (UGB), recourse is made to the exemption provision based on the publication of the expenses in the Consolidated Financial Statements. Taxes on income and earnings Taxes on income and earnings reduced earnings before taxes by EUR 67,611.50 (previous year: kEUR -79). Due to the group agreement no tax amount has been charged to the Group parent in the 2022 financial year (previous year: kEUR 0). Taxes on income include expenses from the reversal of deferred tax assets in the amount of EUR 68,938.50 (previous year: kEUR -85). As of 13/15 February 2012, Aerospace Innovation Investment GmbH (now FACC AG) as Group parent and the former Aero Vision Holding GmbH and FACC AG (now FACC Operations GmbH) as Group members concluded a group and tax allocation agreement in accordance with the provisions of section 9 of the Austrian Corporation Tax Act (KStG) with first-time effect for the 2012 financial year. On 28 February 2017, a new group agreement was concluded by and between FACC AG and FACC Operations GmbH. In the financial 2021, Colt Prüf und Test GmbH was included in the Group by way of an amendment to the Group agreement dated February 28, 2017. The tax allocation agreement is in principle based on the stand-alone method according to which a tax allocation amounting to 25% of the positive income attributed by the Group member to the Group parent is to be made. The positive income of the Group member is to be balanced with carried forward negative income of the Group member (loss carryforward), whereby a limited loss deduction of the Group parent has to be taken into consideration. In the event a Group member earns negative income, a negative tax allocation of 25% is to be made to the extent that the negative income is covered by positive comprehensive income of the Group parent. An agreement on settlement payments of loss carryforwards of the Group member not yet accounted for has been made. Since June 2014, FACC Operations GmbH and FACC AG have established a value added tax group as defined in section 2 paragraph 2 number 2 of the Austrian Value Added Tax Act (UStG), whereby FACC AG as Group parent submits the advance value added tax returns for the value added tax group. 6. supplementary information Events after the balance sheet date On 17 February 2023, FACC Operations GmbH concluded an extension of syndicated loan in the amount of EUR 225,442,666.69 with five participating banks. FACC AG acts as guarantor. There were no other events requiring disclosure. Non-financial reporting The company makes use of the exemption provision stipulated in section 243b (7) of the Austrian Commercial Code (UGB) regarding its obligation to prepare non-financial statements and non-financial reports. The company is included in the separate consolidated non-financial report of FACC AG, which is available on the company website www.facc.com. Appropriation of net income It is proposed to distribute a dividend of EUR 0.00 from the balance sheet profit of EUR 16,714,588.02 and to carry forward the reaining amount to new account. Relations to related parties and persons All transactions with related companies and persons are concluded on arm’s length terms. Employees 2021 Heads 2022 Heads White collar 40 41 40 41 Management Board The Management Board of the company consists of the following members: Robert Machtlinger, Hohenzell Andreas Ockel, St. Florian am Inn Aleš Stárek, Salzburg Zhen Pang, Neuhofen im Innkreis (since October 01, 2022) Yongsheng Wang, Ried im Innkreis (until September 30, 2022) The members of the Management Board each have joint power of representation together with a further member of the Management Board or an authorized signatory. The remuneration of the members of the Management Board for the period 1 January to 31 December 2022 was as follows: Non-success-related 2022 EUR Success-related 2022 EUR Termination benefit 2022 EUR Employer contribution to pension fund 2022 EUR Total 2022 EUR Robert Machtlinger 417,716.98 0.00 0.00 170,000.00 587,716.98 Andreas Ockel 401,519.96 0.00 70,594.00 100,000.00 572,113.96 Aleš Stárek 326,520.00 0.00 33,750.00 60,000.00 420,270.00 Yongsheng Wang (until September 30, 2022) 208,640.00 0.00 31,667.00 0.00 240,307.00 Zhen Pang (since October 01, 2022) 70,084.00 0.00 10,000.00 0.00 80,084.00 1,424,480.94 0.00 146,011.00 330,000.00 1,900,491.94 Supervisory Board The Supervisory Board consisted of the following members in the financial year: Jian Wang (Chairman) (since May 31, 2022) Zhen Pang (Chairman) (until May 31, 2022) Fusheng Chen (Vice Chairman) (since May 31, 2022) Ian Chang (since May 31, 2022) Weixi Gong (since May 31, 2022) Jing Guo (since May 31, 2022) Yu Mei (since May 31, 2022) Junqi Sheng (since May 31, 2022) Tom Williams (since May 31, 2022) Jiajia Dai (until May 31, 2022) Qinghong Liu (until May 31, 2022) George Maffeo (until May 31, 2022) Jürgen Fischer (employee representative) (since May 31, 2022) Barbara Huber (employee representative) (since May 31, 2022) Ulrike Reiter (employee representative) (since May 31, 2022) Karin Klee (employee representative) (since May 31, 2022) The expenses for Supervisory Board members recorded in the Financial Statements amounted to EUR 349,479,06 (previous year: kEUR 175). Ried im lnnkreis, 13 March 2023 Robert Machtlinger m.p. Chairman of the Management Board Andreas Ockel m.p. Member of the Management Board Aleš Stárek m.p. Member of the Management Board Zhen Pang m.p. Member of the Management Board Annexes to the Notes: Annex 1 to the Notes: Table of Assets Table of Fixed Assets as of 31 Decmeber 2022 Acquisition and production cost Balance as of Additions Transfers Disposals Balance as of 01.01.2022 31.12.2022 EUR EUR EUR EUR EUR I.Intangible assets: 1. Concessions and rights 27,179.74 0.00 0.00 0.00 27,179.74 27,179.74 0.00 0.00 0.00 27,179.74 II.Tangible assets: 1. Other equipment, furniture and fixtures thereof low-value assets according to section 13 of the Austrian Income Tax Act (EStG) 0.00 3,500.46 0.00 3,500.46 0.00 0.00 3,500.46 0.00 3,500.46 0.00 III. Financial assets: 1. Investments in affiliated companies 267,822,715.00 0.00 0.00 0.00 267,822,715.00 2. Securities (book-entry securities) 1,976,625.29 0.00 0.00 1,976,625.29 0.00 269,799,340.29 0.00 0.00 1,976,625.29 267,822,715.00 269,826,520.03 3,500.46 0.00 1,980,125.75 267,849,894.74 Accumulated depreciation Net carrying amounts Balance as of Additions Disposals Balance as of Carrying amount Carrying amount 01.01.2022 31.12.2022 31.12.2022 31.12.2021 EUR EUR EUR EUR EUR EUR 3,397.47 6,794.93 0.00 10,192.40 16,987.34 23,782.27 3,397.47 6,794.93 0.00 10,192.40 16,987.34 23,782.27 0.00 3,500.46 3,500.46 0.00 0.00 0.00 0.00 3,500.46 3,500.46 0.00 0.00 0.00 0.00 0.00 0.00 0.00 267,822,715.00 267,822,715.00 0.00 0.00 0.00 0.00 0.00 1,976,625.29 0.00 0.00 0.00 0.00 267,822,715.00 269,799,340.29 3,397.47 10,295.39 3,500.46 10,192.40 267,839,702.34 269,823,122.56 Management Report of FACC AG for the 2022 financial year 1. INDUSTRY ENVIRONMENT The aviation industry continued to recover from the effects of the COVID-19 pandemic in 2022, as forecast. The reason for this positive development was the lifting of traffic restrictions, which had been imposed by virtually all countries worldwide to contain the spread of the pandemic. The regained freedom to travel was exercised intensively on all continents, with the exception of China, where restrictions were not lifted until the beginning of 2023. This trend is expected to continue into 2023 and beyond. Even the war in Ukraine and the resulting geopolitical and economic upheavals have not dampened this development. Against the backdrop of a strong increase in the number of flights, global air traffic, measured in passenger kilometers, thus grew by 64.4 percent in 2022 according to the International Air Transport Association (IATA). While the first quarter was still impacted by COVID-19 restrictions, demand in Europe and North America improved noticeably from spring onwards. Looking at 2022 as a whole, air traffic volumes had reached 68.5 percent of their pre-pandemic level. By December 2022, this figure had risen to 76.9 percent. International air traffic saw particularly strong growth, increasing by 152.7 percent relative to 2021 and thus reaching 62.2 percent of its pre-crisis level. Here, too, this figure stood at 75.1 percent in December 2022, thus well above the annual average. By contrast, domestic flights increased by only 10.9 percent worldwide, but returned to just under 80 percent of their pre-pandemic level. Substantial economic slowdown, high inflation The global economy is facing a number of disruptions and challenges: inflation is the highest it has been in decades, and Russia’s invasion of Ukraine and the energy supply situation are weighing heavily on the outlook. The future recovery of the global economy will depend crucially on the successful calibration of monetary policy by central banks, the unfolding of the war in Ukraine and the stabilization of global supply chains. According to a forecast by the International Monetary Fund, global growth is expected to fall from 6.0 percent in 2021 to 3.2 percent in 2022 and 2.7 percent in 2023. According to the EU’s winter forecast (January 2023), GDP growth in Austria is expected to be 4.8 percent in 2022, compared to 3.5 percent in the eurozone. A significant decline in economic performance is expected for 2023: experts currently predict growth rates of just 0.5 percent for Austria and 0.9 percent for the eurozone. Global air freight traffic, which had largely returned to normal in 2021 after increasing by nearly 7 percent after two sluggish years, decreased by approximately 8 percent in 2022. According to current estimates, the average global inflation rate in 2022 stood at 8.75 percent, the highest level since 1996. Experts also expect further price increases in the coming years: an average global inflation rate of 6.52 percent is forecast for 2023, and 4.13 percent for 2024. In 2025 and 2026, however, global inflation is expected to fall below 4 percent again. This means that the change in strategy implemented by the major central banks in 2022 is likely to have a positive impact on inflation in the medium term. Continued high demand for aircraft, … Notwithstanding the currently subdued economic environment, the growth trend in the aviation industry is unbroken, as it is in the aircraft industry. In 2022, Airbus delivered a total of 663 aircraft, including two aircraft for Aeroflot, which are subject to the ongoing sanctions against Russia. This represents an increase of 52 aircraft, or 8.5 percent, on the previous year (2021: 611). Meanwhile, Boeing recorded an increase of 120 aircraft, or an impressive 35 percent, with 480 aircraft delivered in 2022 (2021: 340). New orders in 2022 were even higher: Airbus received 820 orders for new aircraft, and Boeing 774, which in total represents an increase of around 50 percent compared to 2021. This also confirms the positive long-term forecasts of the two manufacturers and the ongoing trend among airlines to increase their capacities and replace older aircraft with more modern and efficient models. Both Airbus and Boeing expect a steady upward trend in air traffic volumes, particularly in the Asian markets, thus underpinning the need for new aircraft. Boeing and Airbus forecast an average annual increase in passenger kilometers of 3.8 percent up to 2041, while fleets are likely to expand by 2.8 percent annually over the same period. This means that a total of 41,170 new aircraft will be delivered by 2041. Airbus forecasts a somewhat lower, but similarly impressive figure of around 39,500 new aircraft. The reason for these different figures is that Boeing’s forecast also includes regional jets, i.e. aircraft with a capacity of less than 100 passengers, while Airbus does not include this aircraft market in its analyses. North America, Europe and China will be the biggest customers, followed by Southeast Asia, the Middle East, South Asia and Latin America. In terms of aircraft types, Boeing expects to deliver 30,880 single-aisle aircraft, 7,230 wide-body aircraft, 2,120 regional jets and 940 transport aircraft by 2041. … drones and space vehicles The demand for drones will also increase significantly, driven not least by the “Drone Strategy 2.0” presented by the EU Commission on 29 November 2022. The strategy contains a list of 19 legal, technical and financial measures with which the European Union intends to make drones part of the everyday lives of its citizens by 2030. The EU Commission estimates that the market for drone services in the EU could reach a volume of EUR 14.5 billion by that time, with annual growth of 12.3 percent. The German Aviation Association (BDL) shares a similar view, forecasting an average annual growth rate of 14.5 percent for the German drone market up to 2025. The space sector also offers considerable potential: while the global space industry generated sales of USD 424 billion in 2020 (an increase of 70 percent relative to 2010), forecasters predict that this figure will more than double to USD 1 trillion by 2030, with a 95 percent drop in start-up costs. This could create many more opportunities for technological expansion and innovation and enable more services from orbit, such as satellite broadband services. Aviation and sustainability Air travel is often unjustly portrayed as a form of transport with an enormous environmental impact. In fact, air travel accounts for only around 2.7 percent of global CO2 emissions. At the same time, the aviation industry is implementing a wide range of measures to increase sustainability. The declared goal of the industry is to implement carbon-neutral flights by 2050; in December 2021, the International Air Transport Association (IATA) presented a concrete roadmap toward net-zero emissions by 2050. This is to be achieved through a combination of synthetic aircraft fuel, alternative propulsion methods, the increased use of lightweight construction methods, a continuous materials cycle and direct point-to-point flights. As a result of these initiatives, the volume of sustainable aircraft fuel consumed increased from 8 million liters in 2016 to over 100 million liters in 2021. FACC has also set ambitious climate protection targets as part of its Strategy 2030 and aims to implement carbon-neutral production by 2040. 2. GENERAL INFORMATION 2.1. Information according to Section 243 of the Austrian Commercial Code (UGB) The FACC Group based in Ried im Innkreis is an Austrian group of companies specializing in the development, production and maintenance of components for the aerospace industry. Its product range includes structural components (components for fuselages and tail units, fan cowls and composite components for engines, wing parts and winglets) as well as systems for aircraft interiors (complete aircraft cabin systems for passenger aircraft, overhead stowage compartments, cabin linings, service units, interior solutions for business jets, cabin retrofit solutions, etc.). In addition, the FACC Strategy 2030 was presented in the 2020 financial year. The company’s core business will thus be expanded to include drones and autonomous flight mobility as well as lightweight construction systems for space travel. FACC AG is already actively involved in both areas. The first space contract, which was secured in 2021, represents a particularly gratifying achievement. Due to different applications of the products, three operative segments were created. • Aerostructures is responsible for the development, production, distribution and repair of structural components. • Engines & Nacelles covers the production, distribution and repair of engine components. • Cabin Interiors focuses on the development, production, distribution and repair of interior solutions. • The product portfolio has been expanded to include after-market services, which are of relevance to all three divisions. After customer contracts have been concluded and the orders processed, the individual orders are then manufactured in the Group’s six plants. In addition to the three operative segments, the Group also comprises the central services Strategy, Marketing & Corporate Communications, Human Resources, Innovation & Research, Purchasing, Quality, Logistics, Facility Management, Environment, Health & Safety, Finance, Controlling, Taxes, Treasury, IT, Legal, Investor Relations, Internal Auditing and Risk Management. The central services support the operating segments in the fulfillment of their tasks within the framework of a matrix organization. 3. Development of FACC AG FACC AG is subject to the duties and responsibilities of a holding company. As the parent company of FACC Operations GmbH, it performs managerial activities and is responsible for the financial services of the Group. The figures of the individual financial statements of FACC AG are prepared in accordance with the Austrian Commercial Code (UGB), and those of the consolidated financial statements of the FACC Group according to IFRS. The revenues of EUR 10.3 million in the 2022 financial year (2021: EUR 10.8 million) resulted from the settlement of management services to FACC Operations GmbH. The earnings before taxes of FACC AG amounted to EUR 0.6 million (2021 EUR 0.6 million). FACC AG achieved a net profit of EUR 0.4 million in the financial year 2022 (2021: net profit of EUR 0.6 million). Equity changed to EUR 291.7 million in the financial year 2022, compared to EUR 291.2 million in the previous year. As of the balance sheet date of 31 December 2022, the equity ratio of FACC AG stood at 87.0 percent (2021: 86.8 percent). 4. DEVELOPMENT OF THE FACC GROUP 2020 2021 2022 Revenues 526.9 497.6 607.0 Of which product revenues 497.7 455.8 545.4 Of which revenues from development services 29.2 41.8 61.5 EBIT (reported) –74.4 –25.1 5.5 One-time effects –47.6 29.4 0.0 EBIT (operating) –26.8 4.3 5.5 EBIT margin (operating) –5.1 % 0.9 % 0.9 % Earnings per share –1.68 –0.52 –0.02 In the financial year 2022, the FACC Group generated revenues of EUR 607.0 million, representing an increase of EUR 109.4 million compared to the previous year. Besides a higher demand for product deliveries, this year-on-year increase in revenues of approximately 20 percent was driven by the offsetting of non-recurring development costs in connection with projects. In the Aerostructures and Cabin Interiors divisions in particular, the Airbus A320 family is a major revenue driver. In Engines & Nacelles, significant revenues are generated with products for wide-body aircraft, a market segment which, as expected, is recovering more slowly from the effects of the COVID-19 crisis. Revenues in this division remained stable compared to the previous year. Reported earnings before interest and taxes (EBIT) amounted to EUR 5.5 million in the financial year 2022 (2021: EUR –25.1 million). EBIT for the financial year 2022 was impacted by further challenges along the supply chain, increased logistics costs for shipping products to customers, rising material and energy costs in connection with the geopolitical situation, and product start-up costs for various new projects. The optimization program launched at the beginning of the financial year 2020 to optimize the group-wide cost structure began to take effect in 2021, and continued to produce the required positive results in 2022. However, these were largely offset by further challenges along the supply chain, rising material and energy costs in connection with the geopolitical situation, and the sharp rise in inflation. Due to the very high cost increases due to inflation, these measures remain an essential instrument for securing a sustainable improvement in earnings in view of the anticipated future increases in revenues. 4.1. Financial position The main objective of FACC’s financial management is to ensure that the Group has access to adequate liquidity at all times, to avoid financial risks and to guarantee financial flexibility. In order to secure the company’s liquidity and reduce risks, FACC makes use of various internal and external funding sources with differing maturities. Long-term liquidity forecasts are based on the Group’s operational planning. The cash flow from operating activities in the operating segments constitutes the Group’s main source of liquidity. This reduces external borrowing requirements and the associated interest expenses. FACC also makes use of a variety of funding instruments, such as bonds, promissory note loans, loan agreements, leasing models and factoring programs to assure its liquidity. Financing instruments The banking policy, procedures for the approval of banking relationships and financing agreements, liquidity and financial asset management, and the management of currency and interest rate risks are set down in FACC’s treasury principles. In accordance with the Group’s policy, credit lines are managed throughout the Group by the Treasury department. For information on the company’s capacity to raise funds through authorized and conditional capital and on its funding sources, please refer to Note 38 of the Consolidated Financial Statements. FACC has thus created the essential prerequisites for sustainable and stable financing. On 17 February 2023, FACC Operations GmbH undersigned an extension of the syndicated loan in the amount of EUR 225.4 million with five participating banks. FACC AG and FACC Solutions Croatia d.o.o. are serving as guarantors. The syndicated loan has a term of three years plus a two-year prolongation option. The contract stipulates five facilities with various intended uses. With the exception of the framework credit of the Austrian Kontrollbank (OEKB), which is also part of the syndicated loan agreement, all other facilities are unsecured. The facility of EUR 60 million (KRR COVID-19 framework credit of OEKB), which was additionally subscribed during the COVID-19 pandemic on 26 June 2020, was repaid as of 10 March 2023. In turn, an amount of EUR 36 million was drawn from the equity financing program of OEKB, and EUR 33.5 million from Exportinvest. The following financial covenants have been defined: 31.12.2022 31.12.2023 31.12.2024 31.12.2025 Net financial debt/EBITDA 4.50 4.50 4.25 3.75 Equity ratio 25 % 25 % 25 % 25 % The financial covenants applicable at the end of the respective year also apply as of 30 June of the same year (e.g. a ratio of 4.25 applies on 30 June 2024 and on 31 December 2024) and are tested every six months. Creditors have a right of termination in the event that the ratios are exceeded. For all relevant reporting dates after 31 December 2025, a net financial debt/EBITDA ratio of 3.5 as well as an equity ratio of at least 25 percent are required. All other material provisions of the original syndicated loan agreement and the subsequent amendment agreements were largely carried over to the extension of the syndicated loan. On 31 July 2019, promissory note loans in a total amount of EUR 70.0 million were issued. The individual tranches have both fixed and variable interest rates and are due for repayment after five, seven and ten years. The financing agreements contain an interest rate increase clause of 50 basis points if net financial debt/EBITDA exceeds a value of 3.75. This interest rate increase clause is based on the net financial debt/EBITDA ratio and has been applied since fiscal year 2020. The ratio is tested annually. 4.1.1. Liquidity analysis 2020 in EUR million 2021 in EUR million 2022 in EUR million Cash flow from operating activities 13.8 82.3 5.5 Cash flow from investing activities –15.2 –11.7 –8.6 Free cash flow –1.4 70.5 –3.1 Cash flow from financing activities 20.7 –45.2 –13.4 Net change in cash and cash equivalents 18.2 25.3 –16.5 Effects from foreign exchange rates –1.5 –2.9 4.2 Cash and cash equivalents at the beginning of the period 75.8 92.5 115.0 Cash and cash equivalents at the end of the period 92.5 115.0 102.7 One of FACC’s key performance indicators is free cash flow, which the company determines by combining its cash flow from operating activities with its cash flow from investing activities. Cash flow from operating activities At EUR 5.5 million, cash flow from operating activities in the reporting year 2022 was EUR 76.7 million lower than the previous year’s figure of EUR 82.3 million. The change is mainly due to the increase in working capital for inventories, as well as receivables due to the higher operating performance. Cash flow from investing activities Cash flow from investing activities amounted to EUR –8.6 million in the reporting year 2022, compared with EUR –11.7 million in the previous year. Cash flow from financing activities In the reporting year 2022, cash flow from financing activities amounted to EUR –13.4 million (2021: EUR –45.2 million). Compared to the previous year, no new financing was concluded in fiscal year 2022. 4.1.2. Net debt Net debt amounted to EUR 188.6 million on 31 December 2022 (2021: EUR 177.8 million). As of the balance sheet date, cash and cash equivalents of the FACC Group totaled EUR 102.7 million (2021: EUR 115.0 million). 31.12.2020 in EUR million 31.12.2021 in EUR million 31.12.2022 in EUR million Promissory note loans 70.0 70.0 70.0 Other financial liabilities 254.6 222.8 221.3 Gross financial liabilities 324.6 292.8 291.3 Less Cash and cash equivalents 92.5 115.0 102.7 Financial assets 92.5 115.0 102.7 Net debt 232.1 177.8 188.6 Net financial debt/EBITDA, a key indicator for group financing, developed as follows: 31.12.2020 in EUR million 31.12.2021 in EUR million 31.12.2022 in EUR million Earnings before interest and taxes (EBIT) –74.4 –25.1 5.5 Plus/minus Depreciation, amortization and impairment 50.1 22.8 22.8 Amortization of contract performance costs 11.8 13.91) 16.12) Impairment of contract performance costs 2.9 0.0 0.0 Negative effects from the London arbitration court ruling 0.0 25.5 0.0 EBITDA (adjusted) -9.6 37.1 44.4 Net financial debt/EBITDA (adjusted) N/A 4.79 4.25 1) 31.12.2021: Amortization of contract performance costs of EUR 21.9 million minus one-off payments of EUR 8.1 million in December 2021 2) 31.12.2022: Amortization of contract performance costs of EUR 26.1 million minus one-off payments of EUR 10.0 million in December 2022 4.2. Asset position 31.12.2020 in EUR million 31.12.2021 in EUR million 31.12.2022 in. EUR million Non-current assets 326.9 323.7 298.9 Current assets 322.7 320.8 355.1 Assets 649.5 644.5 654.0 Equity 243.2 206.0 203.5 Non-current liabilities 179.6 172.6 159.1 Current liabilities 226.7 265.9 291.4 Debt 406.4 438.5 450.5 Equity and liabilities 649.5 644.5 654.0 Equity ratio 37.4 % 32.0 % 31.1 % 4.2.1. Assets As of the balance sheet date 31 December 2022, the non-current assets of the FACC Group decreased by EUR 24.8 million to EUR 298.9 million relative to the previous year. Current assets increased by EUR 34.3 million compared to the same period of the previous year. Cash and cash equivalents decreased by EUR 12.3 million to EUR 102.7 million. Inventories increased from EUR 90.8 million in the financial year 2021 to EUR 116.3 million in the reporting period 2022. Trade receivables increased in the financial year 2022 by EUR 8.0 million to EUR 61 million. 4.2.2. Equity Equity of the FACC Group stood at EUR 203.5 million at the end of the reporting year. This corresponds to an equity ratio of 31.1 percent as of 31 December 2022 (2021: 32.0 percent). 4.2.3. Debt Within non-current liabilities, other financial liabilities decreased from EUR 9.6 million in the financial year 2021 to EUR 5.0 million in the financial year 2022. Within current liabilities, trade payables increased by EUR 13.4 million to EUR 66.7 million relative to the previous year as a result of active working capital management. Other financial liabilities were subject to only minor fluctuations in the financial year 2022. Compared to the previous year, no new financing agreements were concluded in the year under review. 5. DEVELOPMENT OF THE SEGMENTS Segment reporting follows internal management and reporting of the FACC Group. The operating result before interest and taxes (EBIT) is the key performance indicator used to steer the business segments, and is reported to the corporate body responsible (Management Board of FACC AG). Due to different applications of the products, three operative segments were created: • Aerostructures: development, production, distribution and repair of structural components • Engines & Nacelles: development, production, distribution and repair of engine components • Cabin Interiors: development, production, distribution and repair of interiors 5.1. Aerostructures segment 2020 in EUR million 2021 in EUR million 2022 in EUR million Revenues 184.7 167.5 235.1 EBIT (reported) –26.7 –28.5 3.9 EBIT margin (reported) –14.5 % –17.0 % 1.7 % One-time effects –22.2 27.8 0.0 EBIT (before one-time effects) –4.5 –0.8 3.9 EBIT margin (before one-time effects) –2.5 % –0.4 % 1.7 % Revenues in the Aerostructures segment amounted to EUR 235.1 million in the financial year 2022 (2021: EUR 167.5 million). In terms of revenue distribution at the Group level, this segment is the second-largest division after Cabin Interiors, accounting for 38.7 percent of total revenues. Apart from the Airbus A320 family, FACC is also benefiting from the ramp-up of the Airbus A220 platform. Deliveries of business jet products have also increased. In the Aerostructures segment, reported earnings before interest and taxes (EBIT) amounted to EUR 3.9 million in the 2022 financial year (2021: EUR –28.5 million). 5.2. Engines & Nacelles segment 2020 in EUR million 2021 in EUR million 2022 in EUR million Revenues 115.3 103.7 97.3 EBIT (reported) –22.9 8.7 0.5 EBIT margin (reported) –19.9 % 8.4 % 0.5 % One-time effects –11.9 0.9 0.0 EBIT (before one-time effects) –11.0 9.6 0.5 EBIT margin (before one-time effects) –9.6 % 9.3 % 0.5 % Revenues in the Engines & Nacelles segment amounted to EUR 97.3 million in the financial year 2022 (2021: EUR 103.7 million). In this segment, revenues were particularly impacted by the low construction rates for the Boeing 787 program. Engine products in the business jet segment contributed positively to earnings. In the Engines & Nacelles segment, reported earnings before interest and taxes (EBIT) amounted to EUR 0.5 million in the financial year 2022 (2021: EUR 8.7 million). 5.3. Cabin Interiors segment 2020 in EUR million 2021 in EUR million 2022 in EUR million Revenues 226.9 226.4 274.6 EBIT (reported) –24.7 –5.2 1,0 EBIT margin (reported) –10.9 % –2.3 % 0.4 % One-time effects –13.5 0.7 0.0 EBIT (before one-time effects) –11.2 –4.5 1.0 EBIT margin (before one-time effects) –4.9 % –2.0 % 0.4 % Revenues in the Cabin Interiors segment amounted to EUR 274.6 million in the financial year 2022 (2021: EUR 226.4 million). In addition to the Airbus A320 family, particularly projects on the business jet platforms were able to generate revenue growth in the Cabin Interiors segment. The two programs of our Chinese customer COMAC also developed positively. In the fall, the C919 medium-haul aircraft received type certification from the Chinese civil aviation authority. Following this important program milestone, deliveries of the COMAC C919 to airline customers can now begin. FACC expects to see a steady increase in customer demand for FACC aerostructures and cabin components from 2023 onwards. Reported earnings before interest and taxes (EBIT) in the Cabin Interiors segment amounted to EUR 1.0 million in the 2022 financial year (2021: EUR –5.2 million. 6. RISK REPORT In the course of its business activities, the FACC Group is exposed to a number of risks that are inseparably linked to its business operations. FACC is committed to identifying, evaluating and actively managing risks in the business environment at an early stage. The corporate risk strategy and hedging measures are implemented centrally for the entire Group. The respective risk owner bears direct responsibility for risk management. The Vice President Controlling/Investor Relations/Enterprise Risk Management is responsible for the risk management system, the aggregation of corporate risks and the internal control system, and reports directly to the Management Board, which assumes overall responsibility for risk management and the internal control system. As part of the risk management process, both risks that have occurred and potential future risks are continuously monitored and evaluated by the operative units and reported to the Management Board twice a year in the course of the Management Reviews. In addition, the top-15 risks that could affect the Group are reviewed in detail every quarter. Exceptional events are reported immediately to the Vice President Controlling/Investor Relations/Enterprise Risk Management, who decides whether the Management Board is to be notified straight away. The latter, in turn, informs the Supervisory Board at its meetings. This ensures that the control process is adhered to, and that significant risks are identified at an early stage and measures can be taken to counteract or limit risks. According to an assessment of the Management Board, risks within the aviation sector are intensifying, but potential risks currently identified are deemed manageable and, therefore, do not jeopardize the company’s ability to continue as a going concern. The following key risk areas have been identified: 6.1. Management risks Based on market observations and analyses, a five-year business plan is prepared, which supplements the FACC Strategy 2030 with economic components and is reviewed by the Supervisory Board. The specific business objectives for each financial year are derived from this plan, which is updated on an annual basis. Short-term changes in the market constitute the greatest risk. In addition, successful implementation must be continuously questioned and reassessed due to external factors, which often can scarcely be influenced. In this context, FACC adopts a resilient approach to be able to react flexibly to changes and new conditions. FACC’s management is responsible for monitoring the consistent implementation while promptly responding to short-term changes in line with the defined strategy. In doing so, it must be ensured that the strategic direction of the company as well as the planned revenue and earnings targets continue to be observed. 6.2. Sales risks The FACC Group operates in a global and highly competitive environment. FACC’s business activities are cyclical and sensitive to the profit situation of commercial airlines and their orders for aircraft placed with manufacturers. The business performance of commercial airlines, in turn, is influenced by the global economic situation and the geopolitical environment. The industry-specific risks to which the Group is exposed lie in changes to aircraft delivery schedules between manufacturers and final customers. The risk of a change in future aircraft deliveries directly affects the Group’s future revenues as the supply volumes of components manufactured by the Group change accordingly. This risk can take the shape of a reduction or a postponement of aircraft deliveries. One of the consequences is that development costs cannot be recovered within the calculation period. FACC responds to this risk by achieving diversification within the industry: on the one hand, by maintaining supply contracts with the two dominant suppliers of commercial aircraft and, on the other hand, by entering into supply contracts in both the wide-body passenger aircraft and business jet segments. In order to remain competitive, FACC also plans to tap into the space and drone markets. With this measure, FACC is strengthening its market position to ensure the long-term success of the company. Furthermore, FACC is geographically diversified as it maintains supply contracts with customers in the American, European and Asian markets. FACC also acts as a development partner for the enhancement of existing aircraft types, thus laying the foundation for additional contracts for the retrofitting of the existing aircraft fleet. 6.3. Procurement and supplier risks Procurement at FACC regularly carries out risk assessments of the company’s suppliers in order to identify potential threats and risks at an early stage. The aim is to be able to set priorities for the planning and implementation of audits and support the decision-making process when awarding new contracts. The Procurement Quality Assurance (PQA) department is involved in the selection of new suppliers. It ensures that the necessary qualifications and approvals have been obtained. At the start of new projects and in the event of major changes, suppliers are subjected to a mandatory first sample test to minimize product risk. The ongoing quality-compliant and timely delivery of materials and of semi-finished and finished products is evaluated via SAP on a regular basis. This evaluation is also an integral part of the overall risk assessment. Deviations from the targeted component quality and delivery performance are systematically tracked, analyzed, evaluated and benchmarked against defined goals. Noticeable variations are reported to the Management Board in the course of the Management Reviews. 6.4. Business interruption risks The company’s manufacturing sites and plants are constantly maintained and serviced, thus keeping the risk of breakdowns or of lengthy production downtimes to a minimum. Moreover, business interruption risk is covered by business interruption insurance with an indemnity period of 24 months. 6.5. Project management Project management at FACC is responsible for implementing the objectives defined by management by way of concrete projects. In this regard, projects are differentiated according to whether FACC is to assume development responsibility or not. Feasibility is assessed for each contract, and the risks associated with the project are identified, evaluated as well as closely monitored and analyzed during the course of the project in order to initiate and implement appropriate measures, if deemed necessary. The major risks concern external factors, which the project team may encounter via the company’s interfaces or via third parties. 6.6. Product liability and quality risks The products designed and manufactured by the company are intended for installation in aircraft or engines. Defects or malfunctions of the manufactured products may, directly or indirectly, jeopardize the property, health or life of third parties. Long-term safety is therefore a top priority. The company is not in a position to reduce or exclude its liability towards customers, consumers or third parties by way of sales agreements. Each product developed and/or manufactured in-house, which is supposed to leave the company, is therefore subject to qualified quality and functionality checks. Projects for which FACC bears development responsibility are subject to greater risks due to the possibility of construction errors. These risks can, however, be effectively minimized through systematic quality management methods. Regular controls at all stages of development as well as targeted fault probability analyses and influence analyses help to identify and reduce risks at an early stage. Moreover, FACC operates an archive system for quality records, which are either contractually stipulated or go beyond contractual obligations in individual cases. This is to demonstrate that services were rendered and products manufactured according to specifications defined and approved by both customers and the aviation authorities. Although product liability risks are adequately insured, quality problems may negatively affect the company’s net asset, financial and profit position. 6.7. Financial risks In addition to financing risks, FACC’s operating activities are also exposed to interest rate and currency risks. The Group’s risk management focuses on the unpredictability of developments on the financial markets and aims to minimize potentially negative effects on the Group’s financial position. In order to hedge against specific risks, the Group makes use of derivative financial instruments. FACC uses derivative financial instruments exclusively for the purpose of hedging underlying transactions; speculative transactions are strictly prohibited. The Group’s Accounting & Treasury department identifies, evaluates and hedges financial risks in close cooperation with the Group’s operative units. 6.7.1. Currency risks While the vast majority of sales of the FACC Group are transacted in USD, significant parts of the costs are incurred in currencies other than USD, notably in EUR. FACC makes use of forward exchange transactions to hedge against adverse changes in the EUR-USD exchange rate. Such transactions are concluded using appropriate hedging strategies, with the aim of managing and reducing the impact of exchange rate fluctuations. The hedging strategies are adopted as part of an internal policy and their validity regularly reviewed. They are approved by the Management Board and periodically reported to the Supervisory Board. The risk management of Accounting & Treasury is focused on hedging expected net cash flows in USD (revenues less purchases of raw materials) for the next 12 months (on a rolling monthly basis). The hedge ratio, which indicates the percentage of coverage, is expected to be 80 percent on average. If market levels are favorable, hedging periods can be extended to up to 36 months. FACC conducts sensitivity analyses showing the effects of hypothetical changes in exchange rates on the Consolidated Profit and Loss Statement and on equity. According to IFRS 7, currency risks result from financial instruments of a monetary nature that are not denominated in the reporting company’s functional currency. As a consequence, receivables, liabilities, means of payment and foreign currency derivatives serve as the basis for calculating the sensitivity of the Consolidated Profit and Loss Statement. The sensitivity of equity also reflects the valuation effects of the cash flow hedges for foreign currency risks recorded in other comprehensive income. Translation differences from the translation of financial statements drawn up in a currency other than the Group currency were not included in the calculation. A change in the EUR-USD exchange rate of +5% would have resulted in a change in equity in the amount of kEUR 9,566 in the financial year 2022 (2021: kEUR 6,924). A change in the EUR-USD exchange rate of -5% would have resulted in a change in equity in the amount of kEUR –10,572 in the financial year 2022 (2021: kEUR –7,653). 6.7.2. Interest rate risks Interest rate risks depend on the average financing term and the type of interest. Fixed interest rates are subject to the risk of falling interest rates, whereas variable interest rates carry the risk of rising interest rates. An increase in interest rates by 50 basis points in the financial year 2022 would have resulted in a reduction in earnings after taxes and in equity of kEUR 837 (2021: kEUR 616). A reduction in interest rates by 50 basis points would have resulted in an increase in earnings after taxes and in equity in the amount of kEUR 532 (2021: kEUR 621). The calculation is based on variable interest-bearing assets and liabilities. In the course of the financial year, all core banks of FACC in the euro area started to charge negative interest on balances exceeding defined thresholds. The resulting interest costs amounted to kEUR 10 (2021: kEUR 23) and are recorded in the financial result. 6.8. Risks related to administrative and production systems Within the scope of its business processes, FACC is also exposed to IT and system risks which, in extreme cases, can lead to the impairment of administrative and production facilities. Risk factors falling under this category include, for instance, standard cyber-crime risks (cyber-crime attacks such as hacking, phishing, ransomware, etc.) as well as typical fraud scenarios (social engineering) and the risk of unauthorized persons physically entering sensitive production or company areas. FACC has taken appropriate systemic security precautions for IT-related areas. Within the scope of fraud prevention, FACC relies on the continuous training of its employees working in sensitive areas as well as on information campaigns within the company. Physical plant security is ensured by measures such as access controls. 6.9. Risks related to information security Information security risks are on the rise, while cyber threats are constantly evolving. FACC is also exposed to these risks due to its increasing vulnerability to attacks as a result of ongoing digitalization and the growing number of work activities performed from home. Incidents resulting in the loss, corruption or encryption of critical or sensitive data can lead to reputational damage and financial losses. FACC counteracts these risks through raising awareness among its staff and regular training sessions, and by implementing systemic measures. 6.10. Risks related to intellectual property Intellectual property from research and development activities is a key success factor for securing FACC’s competitiveness in the long run. Protecting intellectual property against misuse and theft is therefore a key concern of the company. To this end, FACC makes use of instruments such as confidentiality agreements and patents. However, this does not completely exclude misuse or potential negative consequences resulting from patent disputes. FACC operates in a high-tech and constantly growing environment with a very large patent landscape. In order to avoid unintentional patent infringements as far as possible, FACC conducts extensive patent research; nevertheless, a residual risk always remains. 6.11. Risks resulting from legal disputes FACC is occasionally involved in various civil lawsuits. For some of these proceedings, provisions are created to cover potential liabilities, in line with the assessment of the legal advisors involved. However, no provisions are created for cases where a negative outcome of proceedings is highly unlikely, or where the outcome can currently not be quantified. Negative developments in legal proceedings may, under certain circumstances, damage the reputation of FACC. 6.12. Special risks in connection with the COVID-19 pandemic The COVID-19 pandemic resulted in a massive drop in revenues and earnings throughout the entire aircraft industry. Against this backdrop, FACC implemented an extensive set of adjustment measures (e.g. efficiency enhancement programs, adjustment of its headcount, vertical integration of components/component groups, application for government support programs, and reduction of fixed costs). In spite of these adjustment measures, the global impact of the pandemic on virtually all areas of civil aviation and the resulting effects on FACC’s liquidity and earnings directly reduced the Group’s risk-bearing capacity. Risk management processes at FACC therefore take into account the risks resulting from the COVID-19 pandemic as follows: There was no significant increase in corporate insolvencies after the end of direct government aid programs, but the financial situation in the supply chain is still strained and may lead to potential defaults. FACC is countering this with the COMPETE initiative, and is strengthening its key partners along the supply chain. With regard to sales, uncertainties are also emerging due to the effects of the COVID-19 pandemic. Differences in the planned sales figures may lead to negative deviations in the planned development of sales and earnings. A resulting decline in cash flows or earnings increases the risk of breaching the adjustment provision of the financial covenant (net financial debt/EBITDA) in the syndicated loan agreed with FACC’s core banks. This could theoretically give rise to a right of termination on the part of the syndicate banks. These specific risks are monitored and evaluated as part of the risk management process and mitigated by appropriate countermeasures (e.g. intensification of risk assessments in the supplier and customer areas, increased personnel marketing activities, stringent cost and investment controlling, rigorous collection of receivables). 7. RESEARCH, DEVELOPMENT AND INNOVATION FACC continuously invests in research and development in order to strengthen business relationships with its customers and develop new fields of business. Here, the main focus lies on proprietary in-house development in order to be able to use the expertise acquired for the benefit of all current and future customers of the company. Moreover, FACC forms strategic alliances with customers and research institutions to further optimize its products. In the 2022 financial year, FACC spent EUR 43.5 million, i.e. just under 7 percent of its revenues, on business-related and customer-specific research and development activities. FACC considers being active, and responding promptly, in the field of research and innovation to be a fundamental guarantee of the future success of the company, and will therefore continue to regard this as the main approach to distinguish itself from its competitors on the market. FACC is working intensively on the efficient production of fiber composite components and their carbon impact in order to support the achievement of the stipulated climate targets. The core objective of FACC’s Research and Innovation department is to explore new manufacturing technologies that allow for high-rate and climate-friendly production of lightweight components. At a general level, FACC is constantly working on new product solutions and manufacturing technologies. The company is currently focusing its research on the following major topics: • Urban Air Mobility (UAM) and space • Thermoplastic manufacturing processes and rate increases in FACC’s core business • Sustainable and fast-curing materials Patents and awards The company filed nine patents in 2022 and was granted 26 patents. As of the end of December 2022, FACC thus holds 466 valid patents. In 2022, FACC was among the finalists of the Crystal Cabin Award, and was presented with the AIRBUS “Best Quality Mindset Supplier Award” and the BOMBARDIER “Diamond Award”. In addition, FACC was able to consolidate its status as a “Class Leading Supplier” with both Collins and Rolls-Royce. Moreover, FACC was awarded the research prize of the Christian Doppler Research Association in 2022. UAM and space Urban Air Mobility (UAM) offers the possibility of industry-specific product diversification. FACC views the application of aviation know-how and the relevant production standards, also in this growth market, as an opportunity and a mission. In the financial year 2022, large-scale development work was undertaken with three renowned UAM customers, which will continue in 2023. It is expected that technological achievements resulting from these UAM projects will also generate innovative impulses for FACC’s primary business, aerospace. In the space segment, FACC continued to advance the Ariane Kick Stage project in 2022, and is currently discussing potential projects with a number of private space providers. Development of new materials and processes to increase rate capability and a materials cycle system In 2022, FACC continued on the development path of fiber-reinforced thermoplastic components, which had been initiated in previous years. Thermoplastic components are considered promising candidates for a cost-effective combination of high rate capability, low weight and a circular economy. In the middle of the year, a research project was launched in collaboration with an FACC customer. This project completes our strategy to replace all current components in the area of wing control surfaces with technologically new products. With this research project we enable a direct benchmark between currently used technologies and possible new technologies. Performance, manufacturing costs and product maintenance costs will be evaluated up to a direct comparison of LCA (life cycle assessment) analyses. Sustainable and fast-curing materials Implementing a circular economy and meeting EU climate targets are challenges that can be supported by an intelligent choice of materials and manufacturing processes. FACC is working on material systems based on renewable resources and fast-curing material systems in order to reduce process times and energy consumption in manufacturing. In order to evaluate the CO2 reduction targets, FACC is part of the Airbus LCA Supplier Council, and is also involved in the collection of data for the subsequent life cycle assessment. Lightweight construction as a key technology Creating components with the lowest possible weight is considered a key technology for FACC’s business. Reduced weight translates into less energy required to move the product, which directly affects operating emissions on a large scale. Moreover, to be viable as a product, lower weight is imperative for the eVTOL and space markets. Research and innovation activities in this area are therefore focusing intensively on how FACC solutions can be made even lighter without undermining their competitiveness and rate capability. 8. EMPLOYEES As of 31 December 2022, the total headcount of the FACC Group amounted to 2,919 full-time equivalents (2021: 2,538 FTE). In Austria, 2,443 FTE were employed as of 31 December 2022. This corresponds to approximately 83.7 percent of the Group’s total workforce. Blue-collar White-collar Total Central Services 243 413 655 Aerostructures 576 164 739 Engines & Nacelles 179 103 282 Cabin Interiors 523 154 677 Subsidiaries 253 271 524 FACC AG 0 42 42 Total 1,773 1,146 2,919 The international nature of FACC is also reflected in its personnel structure. Employees from 45 different countries and from all continents are currently working at the Austrian locations. 52 percent of the workforce have Austrian citizenship, and 15 percent are German nationals. For a technology company, FACC’s share of women in the total workforce remains high, increasing by 6 percent over the previous year to 33 percent. The fact that 49 percent of FACC’s apprentices are women is also particularly pleasing. 8.1. Motivation and health: FACC as a pioneer of employee satisfaction The last few years in particular have shown how important a motivated and committed workforce is in challenging times. FACC recognized this early on, and has been offering a wide range of measures to maintain and promote employee health, motivation and satisfaction as part of its “Healthy and Happy” campaign for several years. FACC offers an in-house health program with a wide range of activities to promote both physical and mental health. In the company canteen, staff can enjoy freshly cooked meals at reduced prices each day. Meals are subsidized by 50 percent, which means that lunches range from EUR 2.90 to EUR 3.25, depending on the choice of menu. In addition, a large number of employees took advantage of the opportunity to get vaccinated against TBE and influenza on the company premises. The distribution of isotonic beverages in production during the summer months and a blood drive in the fall of 2022 are further contributions that FACC has made to the health of its employees and the preservation of social responsibility for the region. These and other measures are implemented within the scope of the “Healthy and Happy” campaign, for which FACC was awarded the seal of approval for workplace health promotion (BGF) by the Upper Austrian Regional Health Insurance Fund in 2017. Recertification until 2022 was successfully completed in 2019. In Austria, the BGF seal of approval is regarded as a visible sign and recognized standard for high-quality workplace health promotion. FACC company bike campaign The company bike campaign was rolled out in spring 2022. With this campaign, FACC wishes to encourage its employees to integrate regular physical exercise into their everyday working lives. Since June 2022, FACC employees have been offered the opportunity to lease a bike or electric bike. They can select the model of their choice at the bicycle dealer, with a choice of several leasing and insurance options. One great advantage for employees is that the lease payments are deducted from their payroll tax by FACC’s personnel accounting department. Working time models Diverse working time models are becoming increasingly important. FACC recognized very early on that highly flexible models are attractive for the workforce and potential new crew members. Therefore, in addition to a very adaptable flexitime system for salaried employees and the integration of bridge days, FACC offers up to 10 flexitime days, or even up to 15 flexitime Fridays. Moreover, FACC has a particularly flexible home office policy: this is solely a matter of agreement between the employee and their manager, and is not otherwise subject to any limitations. In the financial year 2022, FACC employees worked a total of 29,119 days from home. Childcare When it comes to flexibility, FACC wishes to enable its employees to strike the right balance between their professional and family lives. The FACC Kids Clubs offer childcare throughout the year and during the summer vacation. In order to offer even more employees high-quality daycare for their children, FACC Kids Clubs are located in both Ried and St. Martin. 8.2. Personnel development and promotion Academy Continuous investment in the human capital of its entire workforce is a key factor contributing to the corporate success of FACC. The Group is committed to lifelong learning and, for this purpose, offers its employees a wide range of extra-occupational education and further training opportunities. The FACC Academy, which serves as the central hub for all training activities, organized 363 internal training sessions with a total of 3,328 participants in the 2022 financial year. In addition, 28 external training sessions attended by 204 employees were held. In order to make responsible use of its employees’ time resources, FACC has been offering selected training courses via e-learning for a long time. E-learning content is also created by internal developers, thus specifically tailoring the offering to the requirements of the workforce and the company. In addition to e-learning in the areas of “SAP Basic”, “SAP Advanced” and “System Management”, web-based training courses are also available on topics such as “Export Control Advanced”, “Known Consignor”, “Counterfeit & Suspected Unapproved Parts”, “Construction Deviation”, “Material Flow”, “Foreign Object Damage” (FOD; refers to the damage to aircraft or aircraft components caused by foreign bodies or substances), “Emergency Preparedness & Response”, “Waste Separation and Wrong Objections”, “Fire Protection”, “General Documentation”, “Safety Briefing General CoLT“, “Internal Auditor” and “Health & Safety for White-Collar”. The learning units can be completed directly at the workplace via FACC’s SAP system. Moreover, to ensure that employees meet all job requirements, FACC has completely revised the training matrix for both its Austrian and international locations. The so-called “LSO Learner” in SAP provides each manager and employee with an overview in real time of the qualifications they have obtained, or still need to acquire, for their respective job. Internal training sessions can be booked directly, and additional training needs can be registered at any time with the FACC Academy. The ongoing expansion of the training portfolio includes new, targeted training courses for foremen, executives and employees working in project management. Development paths Ensuring that the know-how and talents of each crew member can be contributed and applied as effectively as possible is important for the personal and professional development of employees as well as the success of the company. The different qualifications and strengths of employees are bundled in three development paths: Management career: Key criteria are leadership skills, proactive strategic thinking, a broad scope of action and impact on the operational success of the company. Expert career: Employees in this area are characterized by a high level of expertise, specialist knowledge, experience, independence and responsibility in their respective field. Project career: Here, the significance and scope of the project as well as the role assumed within the project are equally as important as organizational talent and flexibility. The implementation of the development paths and the allocation of employees to the individual levels was started in mid-2022. By the end of the year, approximately 70 percent had been implemented, with the remainder to follow in the first half of 2023. Employer branding In the area of employer branding, the focus in 2022 was on further expanding the employer brand. New projects in the fields of UAM and space required, and continue to require, new talents, which FACC seeks to attract with a variety of short and long-term measures. Active sourcing, approaching candidates on a wide variety of platforms and the implementation of social media campaigns were successfully pushed forward. The focus here was on addressing blue collar/production employees. With the FACC Future Crew, the company is placing a long-term focus on young talents. In order to succeed in this highly competitive market, new incentives were introduced, such as seven weeks of vacation for apprentices and free lunches. The new bachelor’s program enables master students to gain practical experience in the aerospace industry and establish close ties with FACC by offering very flexible working hours. The local reach was further strengthened by hosting an open house event in May, which attracted around 500 visitors. Guided tours of production facilities, getting to know various jobs and the presentation of new projects formed the highlights from an employer branding perspective. The presentation of the upcoming smart mobility initiative, which in future will provide employees with an electric vehicle fleet, was enthusiastically received at the annual Christmas party. 8.3. Global family As an international corporation with employees from 45 countries, FACC attaches great importance to cross-cultural dialogue. In order to ensure good cooperation between staff, a large number of our employees attend language and intercultural training courses. Traditional company-wide events such as anniversary celebrations and the annual Christmas party were finally able to take place again after a pause of two years. In addition, employees and their families and friends were invited to attend the FACC summer party in July. Corporate formats such as the quarterly “Flight Club” were held on the company premises again as of the summer. The numerous cooperative partnerships with authorities, foundations, schools and research-related institutions were continued to bring the right employees and the right know-how on board. 8.4. In-house development of young talents FACC also gives high priority to the training of its apprentices. At the end of the 2022 financial year, a total of 33 apprentices were enrolled in six different apprentice training programs at FACC. As a visible recognition of the quality of its apprentice training, the company was awarded the “State-Honored Training Company” prize by the Federal Ministry of Education, Science and Research. FACC offers aspiring young apprentices highly specialized training programs in design engineering, milling, cutting and machining techniques, plastics engineering, process engineering, information technology and application development. At FACC, apprentices have access to the latest technologies and equipment in the company as soon as they start their training. This gives them the opportunity to apply their innovative spirit and commitment to develop into the experts of the future. 8.5. FACC grant The FACC grant with a total value of approximately EUR 100,000 was awarded for the first time in the 2019 financial year in the study course “Lightweight Design and Composite Materials” at the University of Applied Sciences in Wels. In 2022, four new students were admitted to this study program. Students receive monthly financial support. In addition, FACC covers their tuition fees, offers internships in its plants, provides guidance and assistance through competent FACC employees and allows students to take part in training courses, among numerous other perks. 9. SUSTAINABILITY MANAGEMENT The sustainability management of the FACC Group is an integral part of the corporate strategy and directly reports to the Management Board. Its aim is to take due consideration of the environmental and societal impacts of each business process, and to reconcile the company’s economic imperatives with socio-ecological considerations. Sustainability management and the operative units cooperate closely with each other. The Sustainability Report of the FACC Group is prepared in accordance with the GRI standards (standards of the Global Reporting Initiative) and the requirements of the Austrian NaDiVeG (Sustainability and Diversity Improvement Act), and is published as a separate non-financial report in accordance with section 267a of the Austrian Commercial Code (UGB). 10. REPORT ON BRANCH OFFICES FACC AG does not operate any branch offices. 11. DISCLOSURES PURSUANT TO SECTION 243A OF THE AUSTRIAN COMMERCIAL CODE (UGB) 11.1. Reporting on the key features of the internal control and risk management system with regard to accounting procedures Pursuant to Section 243a para 2 of the Austrian Commercial Code (UGB), FACC is required to give an account of the key features of its internal control and risk management system with regard to the accounting process. In accordance with Section 82 of the Austrian Stock Corporation Act (AktG), the Management Board of FACC has to ensure that an accounting and internal control system is in place, which complies with the company’s requirements. Thus, the Management Board bears full responsibility for the implementation of an adequate internal control and risk management system with regard to the accounting process. The key features of risk management and the internal control system are laid down in FACC’s risk management and finance manuals. Among other things, these manuals describe and identify key finance and controlling processes and their associated risks. The accounting-related internal control system is designed to guarantee timely, uniform and correct recording of all business processes and transactions, while ensuring that well-founded statements about the company’s current business situation can be made at all times. The measures and rules include, amongst others, the separation of functions, the dual control principle, rules governing authorized signatories, only joint signatory powers for authorizing payments, which are restricted to a small number of persons, as well as system-supported checks by SAP, the IT software in use. FACC has been using this software in almost all areas across the company for more than ten years. The regularities of the SAP systems have been implemented in all relevant business processes. In the course of monthly reporting to the Management Board and second-level management, especially comparisons between actual and budgeted figures are made. During its quarterly meetings, the Supervisory Board of FACC AG is informed about current business performance and forecasts regarding the Group’s further course of business. In its meetings, the Audit Committee of the Supervisory Board dealt, amongst others, with topics such as the internal control system, risk management and measures to mitigate internal control risks. Within the framework of the budgeting process, budget costs are planned for each individual cost center. Every cost center manager is responsible for not exceeding budgeted costs and keeping in line with planned investments. All investment projects are subject to prior approval by the Management Board. Investments running over budget must also be approved by the Supervisory Board. 11.2. Disclosures on capital, share, voting and control rights and associated obligations The FACC Group’s share capital amounted to EUR 45,790,000 as of 31 December 2022 and is divided into 45,790,000 no-par value bearer shares. All shares have been admitted to trading in the Prime Market segment of the Vienna Stock Exchange. Each share corresponds to one vote at the Annual General Meeting. As of 31 December 2022, AVIC Cabin Systems Co. Limited (formerly FACC International Company Limited) held, either directly or indirectly, 55.5 percent of the shares of FACC. As of the balance sheet date of 31 December 2022, no other share-holders were known to hold more than 10 percent of the share capital. The free float of FACC shares amounted to 44.5 percent or 20,397,364 shares on 31 December 2022. There are no shares conferring special control rights. FACC does not have an employee stock option plan in place under which employees do not directly exercise their voting rights for their shares in the company. 11.3. Authorized capital At the Extraordinary General Meeting on 9 July 2019, authorized capital was approved. Accordingly, the Management Board is authorized, subject to the approval by the Supervisory Board and within at most five years from the date on which the authorized capital was entered in the commercial register, to increase the company’s share capital by up to a nominal figure of EUR 9,000,000 by issuing up to 9,000,000 new shares against cash or non-cash contributions. New shares can also be issued under the exclusion of shareholders’ subscription rights. The authorized capital was entered in the commercial register on 29 November 2019. 11.4. Conditional capital At the Extraordinary Annual General Meeting on 9 July 2019, a resolution was passed approving the creation of conditional capital. The Management Board is thus entitled, subject to the approval of the Supervisory Board, to increase the share capital by a nominal amount of up to EUR 3,000,000 by issuing up to 3,000,000 new shares against cash or non-cash contributions within at most five years from the registration of the authorized conditional capital in the commercial register. This authorized conditional capital serves the purpose of granting stock options to employees, senior executives and members of the Management Board of the company or one of its affiliated companies as part of a company stock option plan. The capital increase is earmarked and may only be carried out to the extent that option holders exercise their options under a stock option plan of the company. 11.5. Provisions for the appointment of the Management Board and Supervisory Board As long as AVIC Cabin Systems Co. Limited (formerly FACC International Company Limited) is a shareholder of FACC with a stake of at least 25 percent of the current share capital, AVIC Cabin Systems Co. Limited has the right to appoint up to one third of all members of the Supervisory Board in accordance with Article 11 of FACC’s Articles of Association. There are no other provisions in the Articles of Association that go beyond the statutory provisions governing the appointment of the Management Board and Supervisory Board and the amendments to the Articles of Association. 11.6. Other disclosures As of 31 December 2022, FACC AG held no treasury shares. FACC is unaware of any restrictions regarding the voting rights of FACC shares and any transfer thereof, including any restrictions resulting from agreements between shareholders. No compensation agreements exist between FACC and the members of its Management and Supervisory Boards in the event of a public takeover bid. Agreements regarding the promissory note loan of 2019 and the syndicated loan financing of 2018 include change-of-control clauses. Lenders shall be entitled to exercise their right of termination if • a person or a group of persons acting in concert acquires (direct or indirect) control over the guarantor (FACC AG), or • the guarantor (FACC AG) no longer directly or indirectly holds or controls at least 75 percent of the capital shares or voting rights of the borrower (FACC Operations GmbH). 12. OUTLOOK 12.1. The civil aviation market Development of air traffic volumes As mentioned at the beginning of this Group Management Report, aviation has continued to recover from the impacts of the COVID-19 pandemic thanks to the gradual lifting of traffic restrictions. According to IATA, air traffic measured in revenue passenger kilometers (RPK) increased by 64.4 percent in 2022. This is very encouraging, considering that far-reaching restrictions were still in place at the beginning of the year and air traffic in December 2022 had returned to 76.9 percent of its pre-pandemic level. 2022 saw very strong growth in international air travel (+152.7 percent compared to 2021), which had come to an almost complete halt at the onset of the COVID-19 pandemic. With the lifting of travel restrictions in China at the beginning of 2023, this market is also set to make a significant recovery, leading to a further increase in air travel. Demand for aircraft The growth trend in the aircraft industry will continue to develop positively in line with the increase in air traffic, measured in passenger kilometers, and notwithstanding the high inflationary environment. The demand from airlines for new and thus more efficient aircraft partly exceeds the currently available production capacities of the aircraft industry. Deliveries of Airbus aircraft increased by 8.5 percent (+52 aircraft), and deliveries of Boeing aircraft by an impressive 35 percent (+120 aircraft) relative to the previous year. The book-to-bill ratios of the two manufacturers were particularly pleasing. Airbus was thus able to secure 820 new orders and Boeing 774, corresponding to a ratio of 1.24 and 1.61 respectively. This means that more aircraft were sold than delivered in 2022, which in turn resulted in an increase in the order backlog. Moreover, this confirms the long-term forecasts of both manufacturers, with Boeing predicting 41,170 new aircraft and Airbus 39,500 by 2041. The industry expects an annual increase in passenger kilometers of 3.8 percent, resulting in an annual fleet growth of approximately 2.8 percent (taking into account current aircraft utilization and the number of available aircraft). Development of individual market segments (short and long-haul aircraft, business jets) Key aviation markets gradually stabilized over the course of 2022, thus confirming the planned increase in customer call-offs. Demand for short and medium-haul aircraft in particular was especially high. The demand for new aircraft called for an immense ramp-up of production rates for these models, resulting in difficulties along the supply chain and an adjustment of production rates in the fourth quarter of 2022. In line with demand, which is nevertheless increasing, and in order to facilitate planning of requirements for the coming periods, the OEMs have drawn up and communicated a transparent new plan for the rate ramp-up, taking into account the critical supply chain. Especially short and medium-haul aircraft as well as the development of the business jet market are of particular relevance to FACC as products for these aircraft generate approximately 60 percent of annual revenues. The demand for wide-body and long-haul aircraft continues to develop at a slower pace than before the onset of the COVID-19 pandemic. The market for long-haul aircraft is recovering more slowly, as was expected, but has been gaining momentum in recent periods, which in turn indicates an increase in aircraft construction rates in the long-haul aircraft segment. Over the next 24 months, the production rates of long-haul aircraft of key importance to FACC, such as the Airbus A350 and the Boeing B787, are set to increase by more than 20 percent due to market conditions. The business jet segment developed very positively in 2022; this trend will continue in 2023. This is of great importance for FACC as approximately 18 percent of its product sales are generated in this segment. 12.2. The FACC Group Key projects in the financial year 2023 The overarching goal of FACC remains to strengthen its profitability. By increasing manufacturing rates and new orders, the company is setting the stage for stable growth in 2023. In particular, management is focusing on the following measures for 2023: • One important cornerstone is the optimization of working capital. To this end, a dedicated organizational unit has been established in the CFO area, with the aim of optimizing the cash conversion cycle. As a result of the optimized capital commitment and improved liquidity, net debt is reduced while increasing FACC’s financial strength. • Following the scheduled start-up of production in 2022 at our new location in Croatia, planning of the plant expansion was begun, and the tripling of the plant’s area will be tackled in the course of 2023. The goal is to expand the workforce of the plant to approximately 600 employees by 2025. • Activities in the new UAM and space segments will be further intensified in 2023. Based on current market and customer information, the development projects in the UAM segment in particular are expected to generate significant revenue growth from the financial year 2024 onwards. • The major aim is to recover the unusually high inflation-related costs for energy, materials, logistics and human resources. • The stabilization of the ramp-up projects initiated in 2022 will be continued in 2023, with the aim of cutting costs and increasing profitability. The industry as a whole, including FACC, is currently facing a number of challenges. Inflation in western markets is higher than it has been for decades, and a tightening of financial conditions calls for consistent cost control and management. Aviation was on an upward trend in 2022, and this is forecast to continue in 2023 and the following years. Management believes that the planned growth will largely translate into increased profitability and thus higher EBIT. The above forecast is based on the assumption that the general economic situation will not deteriorate further and that no unexpected adverse developments will occur in 2023. With regard to the Ukrainian-Russian conflict, FACC is not in a position to assess general risks (e.g. gas price development, sanctions etc.) or the general economic development. As currently no customer or supplier relationships exist in these countries, the direct risk for FACC is considered to be low. Ried im Innkreis, 13 March 2023 Robert Machtlinger m.p. Chairman of the Management Board Andreas Ockel m.p. Member of the Management Board Aleš Stárek m.p. Member of the Management Board Zhen Pang m.p. Member of the Management Board