Surteco Group SE

Annual Report • Apr 14, 2023

We make rooms worth living in.

Annual Report 2022

Our new organizational structure is empowering even greater alignment with our customers and our markets. To help us achieve this, we have created new Business Units that we would like to share with you on the coming pages.

Furthermore, acquisition of the divisions "Laminates and performance films and coated fabrics" from Omnova has taken our company to a new level. This acquisition perfectly complements our product range in North America and creates an additional mainstay for our business in Asia with vinyl-coated materials.

WE MAKE ROOMS WORTH LIVING IN

2022 was a year of reset for our future business development

[ € million ]	2020	2021	2022	∆ 21-22 in %
Sales revenues	627.0	757.1	747.7	-1
Foreign sales ratio in %	73	75	76
EBITDA	88.3	114.8	84.2	-27
EBITDA margin in %	14.1	15.2	11.3
Deprecation and amortization	-42.2	-42.2	-44.0
EBIT	46.1	72.5	40.2	-45
EBIT margin in %	7.4	9.6	5.4
Financial result	-2.8	-2.6	-3.4
EBT	43.3	70.0	36.8	-47
Consolidatet net proft	33.7	47.8	25.2	-47
Earnings per share in €	2.17	3.08	1.63	-47
Number of shares	15,505,731	15,505,731	15,505,731
Additions to fixed assets	38.4	33.1	50.5
Balance sheet total	798.8	795.1	851.8	+7
Equity	373.3	413.7	426.1	+3
Equity ratio in %	46.7	52.0	50.0	-2.0 pts
Net financial debt at 31 December	144.7	152.6	152.8	-
Gearing (level of debt) at 31 December in %	39	37	36	-1 pts
Average number of employees for the year	3,103	3,144	3,147	-
Number of employees on 31 December	3,052	3,165	3,052	-4
Profitability indicators in %

Return on sales	6.9	9.2	4.9
Return on equity	9.3	12.0	6.1
Total return on total equity	6.0	9.4	4.9

At a glance

SOUTH AMERICA As part of the strategic realignment, operational control of the Group will be implemented through a customer and market-oriented approach in future. In Europe and South America, the Business Units SURFACES, EDGEBANDS and PROFILES will serve their customers in the relevant sectors. The regional Business Units NORTH AMERICA and ASIA / PACIFIC will supply their markets with the full, comprehensive product range of SURTECO. The Corporate Centre will provide strategic control of the Group across all Business Units.

THE NEW ORGANIZATION

materials Living Kitchen Office Doors Flooring Caravan Ship

Business Unit SURFACES

The Business Unit SURFACES specializes in surface solutions for virtually all spheres of daily living. The decor papers, finish foils and melamine edgings from SURFACES are found in homes, at the workplace and even in mobile living situations and on ships.

SPECIALISTS FOR SURFACES

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Living Kitchen Office Caravan Bathroom

Business Unit EDGEBANDS

Sectors

EDGEBANDS concentrates on the manufacture and sale of plastic edgebands in Europe and South America. EDGEBANDS offers the ideal edgings in a multitude of variations and designs to suit any application

SPECIALISTS FOR EDGEBANDS

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Business Unit PROFILES

Interior Design Craftsmanship Caravan Wholesale Sectors The speciality produced by PROFILES features plastic-based skirtings for professional floorlayers and technical plastic profiles as a complementary range and destined for virtually all industrial areas of application. SPECIALISTS FOR PROFILES

Business Unit ASIA/PACIFIC

The ASIA / PACIFIC area is a top priority for strategic alignment. Bundling companies into the Business Unit will enable the successful business operations to be further expanded in these geographical regions.

COMPLETE RANGE FOR ASIA

Business Unit NORTH AMERICA

The Business Unit serves the North American market with the complete product range manufactured by SURTECO. This approach offers customers short delivery pathways and an ideal product range perfectly tailored to the target market accompanied by optimum service for customers.

COMPLETE RANGE FOR AMERICA

Business Overview

The acquisition of the divisions "Laminates and performance films and coated fabrics" from Omnova Solution Inc, USA, represents an important step on our roadmap to further internationalization of the Group. The divisions operate in the markets Kitchen & Bathroom, Luxury Vinyl Tiles and Caravan, and in the transport sector. The product range of SURTECO is perfectly complemented with these divisions and has undergone further diversification.

Single-ply PVC, clear (LVT) and pigmented laminates

• PVC Coated Fabrics

Rigid and semi-rigid embossed, printed and coasted PVC laminates AUBURN, PENNSYLVANIA

• Laminates & performance films

Acquisition of "Laminates and performance films and coated fabrics"

Paper and speciality film laminates MONROE, NORTH CAROLINA

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JEANNETTE, PENNSYLVANIA

RAYONG, THAILAND

COMPLEMENTARY AND INTERNATIONAL

FOREWORD BY THE MANAGEMENT BOARD	20
REPORT OF THE SUPERVISORY BOARD	22
MANAGEMENT REPORT	28
Basic principles of the Group	29
Economic report	32
Net assets, financial position and result of operations	35
Research and development	40
People and training	41
Internal controlling and risk management system	42
Risk and opportunities report	44
Outlook report	51
Disclosures pursuant to § 289a and § 315a	53
German Commercial Code (HGB)
Declaration on corporate governance	55
THE SURTECO SHARE	56
CONSOLIDATED FINANCIAL STATEMENTS	60
SURTECO GROUP SE ANNUAL FINANCIAL STATEMENTS (SHORT VERSION)	140
Glossary	142
Ten year overview	144
Financial calendar	146

CONTENTS

DEAR SHAREHOLDERS,

We did not succeed in matching the very good result from the previous year in 2022. The start to the year was reasonable. Nevertheless from the middle of the year, the difficult macroeconomic framework conditions resulted in tangibly weaker demand. Although our sales at € 748 million are within the expected range, this is primarily due to passing on the continued high level of the raw-materials costs. Since this transfer is only partly possible and indeed with a delay, and the weak demand impacts negatively on the productivity of the manufacturing facilities owing to capacity-utilization issues, EBIT at € 40 million in the business year 2022 is below the original targets.

STRATEGY

In 2022, we drove forward two important aspects within the framework of our strategy. Firstly, we intend to place a greater focus on our markets and customers with a new organizational structure. In future, we will manage the Group through the Business Units SURFACES, EDGEBANDS and PROFILES, and through the geographical Business Units NORTH AMERICA and ASIA / PACIFIC. The clearly defined responsibilities for each Business Unit and Group-wide functions are a significant step for ongoing implementation of our strategy.

We have completed a further important strategic step towards the goal of focused internationalization with the takeover of the divisions "Laminates and performance films and coated fabrics" from Omnova. The divisions perfectly complement our product range in North America, and Coated Fabrics enables us to create an additional mainstay in Thailand with a completely new market for us.

BALANCE SHEET STRUCTURE

At the end of the year, our balance sheet continues to be robust as usual with an equity ratio of 50 % and a level of debt of 36 %. The balance sheet total underwent a moderate increase essentially due to our taking out a promissory note loan at the beginning of 2022. In 2023, the takeover of the divisions will be clearly reflected in the balance sheet. The purchase price was essentially financed through borrowing and this will increase the level of debt. We will fully fund the bridging finance over the long term and our aim is to consistently reduce working capital.

APPROPRIATION OF THE NET PROFIT

The Supervisory Board and Management Board will propose a dividend of € 0.70 to the Annual General Meeting to be held on 7 June 2023 – which will again take place as an in-person event this year. The payout rate in relation to the consolidated net profit of around 43 % is therefore above the year-earlier value. The dividend return is 3.7 % in relation to the annual closing price of € 19.10 for the share.

OUTLOOK

We continue to anticipate that difficult economic framework conditions arising from geopolitical tensions, inflation and additional projected interest-rate rises will define the situation in the year 2023. The divisions we have acquired will contribute to the result from 1 March 2023. However, this will be offset by transaction and integration costs during the initial phase. The foundation stone for sustainable growth of the SURTECO Group has been laid with the new organization and the acquisition. We should like to thank you for the trust you have placed in us and we would be delighted if you continued to accompany us on our journey.

This means that we are currently assuming sales in the range between € 920 million and € 950 million for the entire year 2023. We expect EBIT to be within a corridor from € 45 million to € 55 million.

• WOLFGANG MOYSES CHAIRMAN OF THE MANAGEMENT BOARD

ANDREAS PÖTZ MEMBER OF THE MANAGEMENT BOARD

DEAR SHAREHOLDERS,

In the business year 2022, the Supervisory Board carried out all the functions allocated to it under statutory regulations and the Articles of Association. We advised the Management Board regularly on the management of the company and monitored the measures it took. In this process, we were involved in all the fundamental decisions taken. The Management Board regularly kept us informed in comprehensive written and verbal reports. We were notified promptly about the key aspects of the performance of the business and about significant business transactions. We were also given detailed information about the current income situation and planning, as well as the risks and risk management. The economic situation presented in the reports by the Management Board and the development perspectives of the Group, the individual business areas and important participations in Germany and abroad, as well as the general economic environment were the subject of careful and detailed discussion in the Supervisory Board. Resolutions were adopted as far as this was necessary in compliance with statutory regulations or the Articles of Association. The Supervisory Board convened for a total of 6 meetings during the course of the business year 2022, of which three meetings were held as video conferences – with the consent of the Members of the Supervisory Board. The Members of the Supervisory Board took part in the meetings of the Supervisory Board and the meetings of its committees as follows in the business year 2022:

		Plenary Supervisory Board		Audit Committee		Personnel Committee
Meeting participation / Total number of meetings	Number	In %	Number	In %	Number	In %
Mr. Andreas Engelhardt Chairman	6/6	100	4/4	100	1/1	100
Mr. Tim Fiedler Deputy Chairman	6/6	100	-	-	1/1	100
Mr. Tobias Pott Vice Chairman	6/6	100	4/4	100	1/1	100
Mr. Jens Krazeisen	6/6	100	-	-	-	-
Mr. Jochen Müller	6/6	100	4/4	100	-	-
Mr. Dirk Mühlenkamp	6/6	100	-	-	-	-
Mr. Jan Oberbeck	6/6	100	-	-	1/1	100
Mr. Thomas Stockhausen	6/6	100	-	-	-	-
Mr. Jörg Wissemann	6/6	100	4/4	100	-	-

FOCUSES OF ADVICE

In the business year 2022, the Supervisory Board intensively addressed the reporting of the Management Board in detail and discussed the position of the company on the basis of the latest business figures available for the company. The most recent relevant indicators of the SURTECO Group and the subsidiary companies and participations, in particular, the key financial controlling parameters were presented by the Management Board at the meetings of the Supervisory Board, where they were analysed and compared with the projected figures.

The economic environment in which the Group is operating was subject to especially intensive discussion. These deliberations related in particular to the changed global situation resulting from the invasion of Ukraine by Russia and the impacts on the overall economic development and society. Discussions also focused on the weakening of the global economy, the development of raw material prices, the availability of raw materials and energy, as well as exchange rates. Various scenarios involving a situation with a shortage of gas were also the subject of discussions together with corresponding action and emergency plans.

At its meeting held on 13 April 2022, the Supervisory Board approved the annual financial statements of SURTECO GROUP SE and the SURTECO Group for the business year 2021, as well as the summarized Management Report, the Sustainability Report, appropriation of the net profit and the Report of the Supervisory Board. At this meeting, the Supervisory Board furthermore approved the Compensation Report for the business year 2021, adopted the proposals for the agenda of the ordinary virtual Annual General Meeting 2022 and approved the proposal by the Audit Committee for the appointment of the auditor for the financial statements for the business year 2022.

COMPENSATION OF THE MANAGEMENT BOARD

PERSONNEL DECISIONS

The Supervisory Board held in-depth discussions at several meetings about the ongoing development of the strategy of the company and the principles of the resulting new organizational structure and approved a number of individual implementation measures. The new organizational structure establishes the Business Units Surfaces, Edgebands and Profiles in the regions EU and South America. These are augmented by the regions of North America and Asia/Australia, along with reinforcement of functions across the Group.

The Supervisory Board approved the variable compensation elements for the Members of the Management Board for the business year 2021 at the meeting held on 13 April 2022. At this meeting, the board contract of service of Mr. Andreas Pötz was approved with the key points for compensation. The Supervisory Board formed an Audit Committee and a Personnel Committee whose members are listed in the Notes of the Annual Report. The committees have the function of preparing issues, topics and resolutions for the meetings of the Supervisory Board. There is also a Presiding Board of the Supervisory Board in accordance with the Rules of Procedure of the Supervisory Board.

At several meetings, the strategy for external growth and potential takeover targets were debated. At its meeting on 7 September 2022, the Supervisory Board was informed about the possibility of a takeover of the divisions "Laminates and performance films and coated fabrics" from Omnova Solutions Inc., a subsidiary company of the British group Synthomer plc. The divisions comprise facilities in the USA and Thailand. The Supervisory Board noted and approved the submission of a non-binding offer. At its meeting held on 25 October 2022, the Supervisory Board approved the submission of a binding offer for acquisition of the divisions. The raising of outside capital for the acquisition was also approved. Signing and closing of the deal were approved at the meeting of the Supervisory Board held on 8 December 2022. The signing of the acquisition took place on 13 December 2022.

OF THE SUPERVISORY BOARD After the Supervisory Board already approved the appointment of Mr. Andreas Pötz as a Member of the Management Board at its meeting held on 21 December 2021, the Supervisory Board approved the conclusion of the contract of service at the meeting of the Supervisory Board held on 13 April 2022. Mr. Pötz took up his office on 1 April 2022. The appointment was made for a period of office until midnight on 30 March 2025. At the meeting held on 15 December 2022, the Supervisory Board approved the appointment to the Management Board of Mr. Andreas Pötz as the Managing Director of SURTECO GmbH with effect from 1 February 2023. At this meeting, the Supervisory Board also resolved not to renew the appointment of Dr. Manfred Bracher, which runs out on 31 January 2023. No other personnel measures in the Management Board were adopted in 2022. ESTABLISHMENT OF THE COMPENSA-TION FOR THE AUDIT COMMITTEE At its meeting on 15 December 2022, the Supervisory Board defined the compensation for the members of its Audit Committee for the business year 2022 The Presiding Board of the Supervisory Board prepares the resolutions of the Supervisory Board if they relate to measures requiring the consent of the Supervisory Board. In urgent cases, the Rules of Procedure permit the Presiding Board to take the place of the Supervisory Board and grant consent to specific measures and transactions requiring approval. The Presiding Board did not need to make any decisions in the reporting period. The Audit Committee addressed issues relating to accounting and risk management, the Annual Financial Statements and the quarterly figures, the mandatory independence of the auditor, the tender for the audit of the financial statements, the appointment of the auditor to carry out the audit, the determination of the focuses of the audit and the agreement of the fee. The Audit Committee was in regular contact with the Management Board and the auditors. The Audit Committee was convened four times during the course of the business year, and held one of these meetings at which the auditors carrying out the audit on the consolidated financial statements were present and reported on the result of their audit. Three meetings of the Audit Committee were held as video conferences.

The plans submitted by the Management Board (budget and investment plan) for the business year 2023 were discussed and approved at the meeting of the Supervisory Board held on 15 December 2022. Planning was drawn up for the first time in the new structure of the Business Units. At this meeting, the Supervisory Board also resolved to propose to the Annual General Meeting an amendment to the Articles of Association as a precautionary measure to authorize the convening of a virtual Annual General Meeting in the near future.

pursuant to § 12 (3) of the Articles of Association at a total amount of € 32,000.00 plus sales tax, which does not breach the upper limit of € 40,000.00 defined in the Articles of Association. The amount of € 32,000.00 was allocated to the individual members of the Audit Committee on the basis of their respective time commitment. The Personnel Committee primarily addressed the strategic personnel planning following the organizational realignment of the Business Units and the Group. The Personnel Committee convened once during the course of the reporting year. This meeting was held in-person.

WORK OF THE COMMITTEES

Reports on the meetings convened by the committees were submitted to the plenary session of the Supervisory Board.

CORPORATE GOVERNANCE

The Supervisory Board continued to address the development of the corporate governance principles in the company in 2022 and also took particular account of the amendments to the German Corporate Governance Code from 28 April 2022.

At its meeting held on 15 December 2022, the Supervisory Board approved the appointment of Mr. Jörg Wisseman to the Supervisory Board as an expert for sustainability issues. Furthermore, the Management Board and the Supervisory Board submitted a new Declaration of Compliance at this meeting, which was included in the Declaration on Corporate Governance pursuant to § 289a German Commercial Code (HGB) and may be viewed on the Internet site of the company.

ANNUAL FINANCIAL STATEMENTS AND CONSOLIDATED FINANCIAL STATEMENTS, AUDITING

The Annual Financial Statements of the company were drawn up in accordance with German accounting principles. The Consolidated Financial Statements for the business year 2022 were prepared on the basis of the International Financial Reporting Standards (IFRS). The Management Board submitted to the Supervisory Board the Annual Financial Statements, and the Consolidated Financial Statements and the Management Report and the Consolidated Management Report, and the Sustainability Report together with its recommendation for the appropriation of the net profit to be submitted to the Annual General Meeting. The professional services firm, PricewaterhouseCoopers GmbH Wirtschaftsprüfungsgesellschaft, Munich, audited the Consolidated Financial Statements and the Annual Financial Statements of SURTECO GROUP SE, as well as the Management Report and the Consolidated Management Report and granted each of the documents an unqualified audit opinion. The Annual Financial Statements and Management Report, and the Consolidated Financial Statements and the Consolidated Management Report, and the Sustainability Report, and the audit reports of the auditor, and the recommendation for the appropriation of the net profit were submitted punctually to all the Members of the Supervisory Board. Intensive discussions on the financial statements were carried out in the Audit Committee meeting and at the Balance Sheet Meeting of the Supervisory Board held on 13 April 2023 in the presence of the auditor and following a report by the auditor pursuant to § 171 (1) sentences 2 and 3 Stock Corporation Act (AktG).

We examined the submitted documents. Furthermore, we took note of the report by the auditor. We have no objections. We therefore concur with the result of the audit. The Supervisory Board approves the Annual Financial Statements and the Consolidated Financial Statements prepared by the Management Board. The Annual Financial Statements have therefore been adopted. We are in agreement with the Management Reports and in particular with the assessment of the ongoing development of the company and the Sustainability Report. We agree with the proposal by the Management Board relating to the appropriation of net profit that provides for a dividend of € 0.70 for each no-par-value share.

The Audit Committee submitted a proposal for the appointment of the auditor of the accounts for the business year 2023 and the Supervisory Board also accepted this proposal.

The Supervisory Board would like to thank the Management Board, the executive managers, the members of the Works Councils, and all the members of staff for the work they have carried out and for their commitment during the business year 2022.

BUTTENWIESEN, APRIL 2023. THE SUPERVISORY BOARD

ANDREAS ENGELHARD CHAIRMAN

Combined Management Report

SURTECO GROUP AND SURTECO GROUP SE, BUTTENWIESEN FOR THE BUSINESS YEAR 2022

Principles of the Group

OVERVIEW

The SURTECO Group is a Group of mutually complementary companies operating on the global stage. It has primarily specialized in the manufacture of decorative surface coatings for furniture, flooring and interior design. The Group also develops, produces and sells skirtings and technical extrusions (profiles). SURTECO GROUP SE operates within this structure as the holding company with a controlling function. The products are mainly used in the flooring, woodbased, caravan and furniture industries, as well as by carpenters and artisan businesses. The manufactured surface products are used to coat wood-based materials such as chipboard and fibreboard. These materials thereby gain their final surface with appealing visual and haptic properties. The skirtings and technical extrusions (profiles) are supplied to craft trades, wholesale, industry and do-it-yourself stores. Paper and plastic-based edgebandings constitute the product group generating the strongest sales within the SURTECO Group. These products are used to refine the narrow edges and the cut edges of woodbased boards. The finish foils of SURTECO are used for coating large areas of wood-based materials and consequently influence the visual and haptic properties of finished products such as items of furniture or panelling. As in the case of edgebandings, the finish foils are based on specialist technical papers and on plastics. The SURTECO Group is also a producer of decorative papers (printed decorative designs). These specialist papers are printed with wood, stone ed, dried and cut into formats. The product range is mainly deployed for surfaces subject to particularly heavy-duty usage, such as laminate flooring or worktops. The skirtings produced by the SURTECO Group are either manufactured entirely of plastic or they consist of a wood core that is wrapped in a special extrusion process. The Group also has a long track record in the manufacture of a wide range of extrusion products for interior design, furniture shutter systems and manifold industrial applications. The products are either marketed by direct sales or shipped to customers through the Group's own sales locations, and through dealers and agents on all continents of the world. The most important sales markets for the Group include Germany, the rest of Europe, and North and South America. Production and sales facilities in Europe, North and South America, and Australia and Asia ensure fast delivery tailored to the target market.

or fantasy decors and used as a material for providing a decorative finish. They are deployed within the Group for the manufacture of finish foils and impregnates. They are also supplied directly to customers from the flooring, furniture and wood-based materials industry. Decor development takes place at the Group's in-house design studio, which also produces the printing cylinders necessary for production. Similar to finish foils, impregnates from SURTECO are used to refine large areas of wood-based materials The base is formed by printed or single-colour decor paper, overlay or release paper, which is impregnat-

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INTERNAL CORPORATE CONTROLLING SYSTEM

Central controlling for the Group is carried out by the holding company SURTECO GROUP SE with registered office in Buttenwiesen, Bavaria, Germany. The holding company implements strategic planning and controlling, group-wide finance, investment and risk management, human resources strategy, Group accounting, IT management and investor relations activities. The individual subsidiary companies of the Group manage their business on the basis of groupwide parameters. Up to the business year 2022, the controlling for the Group is carried out through the Segments Decoratives, Profiles and Technicals. Technicals comprises all other non-reportable business segments. SURTECO GmbH is positioned in the Segment Decoratives together with its subsidiary companies and it primarily serves the woodbased, flooring, door and furniture industries, and the caravan sector. The Segment Profiles comprises Döllken Profiles GmbH including its subsidiary companies and supplies trade floor-layers and the interior-design industry. Technical extrusions (profiles) are also manufactured in this segment by the same type of production processes. They are used for a wide range of applications such as mobile homes or in the automotive industry. The companies Kröning GmbH, Dakor Melamin Imprägnierungen GmbH and Gislaved Folie AB are bundled in the other Segments Technicals as specialist manufacturers in niche markets. Within the framework of the corporate strategy, the organizational structure of the Group continued to be adapted to the needs of the customers. In the business year 2023, the controlling of the company and therefore also the segment reporting will be carried out through the new segments of "Surfaces", "Edgebands" and "Profiles", which encompass the regions of Europe and South America, and through the regional segments of "North America" and "Asia/Pacific". The segments are organized across companies on the basis of sales markets. In line with this reorganization, all surface activities including melamine

PRODUCTION AND SALES LOCATIONS

SURTECO GmbH have production facilities in the USA, Canada, Brazil, Portugal, Indonesia and Australia. Other sales and finishing sites in the United Kingdom, Italy, France, Russia, Mexico, China and Singapore ensure worldwide distribution.

The subsidiary SURTECO art GmbH in Willich, Germany, is responsible for the development of new decors and for engraving new printing cylinders.

PROFILES

Döllken Profiles GmbH manufactures floor strips and skirtings, wall edging systems and technical extrusions (profiles) at its German headquarters in Bönen and its branch in Nohra and Dunningen (both in Germany). Additionally, the accessories and other products required for laying the products relating to all aspects of flooring are supplied as product ranges for resale. The company maintains sales subsidiary companies in Poland and the Czech Republic. Nenplas Ltd. including its subsidiary company Polyplas Extrusions Ltd., both located in Ashbourne, UK, (Nenplas Group) also manufacture technical extrusions (profiles) for a wide range of industrial applications.

edgings in Europe and South America are situated in the Segment Surfaces. The Segment Edgebands bundles activities with plastic edgebandings in these regions while Profiles concentrates on skirtings and technical extrusions (profiles). The regional segments comprise all activities in the relevant geographical markets, independently of products.

DECORATIVES The Segment Decoratives comprises SURTECO GmbH including its subsidiary companies. The companies produce decor papers, finish foils and edgebandings. The registered office of SURTECO GmbH is in Buttenwiesen, Germany. Other production sites in Germany are located in Sassenberg, Laichingen and Gladbeck. Outside Germany, the subsidiary companies of The manufacture and sale of impregnated products in Germany is carried out through Dakor Melamin Imprägnierungen GmbH in Heroldstatt. Gislaved Folie AB in Gislaved, Sweden, produces finish foils based on plastic and technical plastic foils for other industrial sectors and for further processing to form carpets. Kröning GmbH in Hüllhorst, Germany, is a specialist provider for surface coatings with individual, customer-specific requirements. The product portfolio comprises edgebandings, finish foils and multilayer hybrid foils made of genuine metals, paper and plastic.

Sales revenues and earnings before financial result and income tax (EBIT) are the most important financial controlling parameters for the SURTECO Group. A combined true and fair view of a number of indicators, the covenants, is also applied as a bundle of key financial controlling parameters. These are comprised of the indicators equity ratio, level of debt (gearing) and interest cover factor. The covenants define threshold values which the Group does not intend to exceed or fall short of. Compliance or non-compliance with these covenants is monitored, and reports are regularly submitted. Non-financial controlling parameters are not applied as controlling parameters at Group level or within the holding company.

For SURTECO GROUP SE as an individual company, financial and non-financial performance indicators and hence also their forecast play a subordinate role. Compliance with statutory requirements under corporate law is not affected by this.

TECHNICALS

• MANAGEMENT AND CONTROLLING
• The management of the SURTECO Group operates on the basis of the dual management and controlling system in which the Members of the Management Board are appointed by the Supervisory Board and manage the affairs of the company in accordance with the statutory regulations, the Articles of Association, and the rules of procedure governing the Management Board and the Supervisory Board. The Management Board and the Supervisory Board gear their actions and their decisions to the interests of the company. They are committed to the objective of sustainably increasing the value of the company in accordance with the interests of the shareholders, business partners, employees and general collectivity of stakeholders.
• The Supervisory Board monitors and advises the Management Board on the running of the company. It is made up of nine members. Six members are appointed by the Annual General Meeting as representatives of the shareholders. Three members are sent by the works councils of the three domestic companies with the largest number of employees to represent the employees.

Economic report

MACROECONOMIC FRAMEWORK CONDITIONS

On the basis of our experience, the inclination of consumers to consume and hence the demand for our products correlates with general economic growth. According to the assessment of the Council of Experts (Sachverständigenrat) for assessing macroeconomic development1 , the high energy prices impacted global economic growth in the whole of the second half year of 2022. Insofar, the Council of Experts only perceives growth of gross domestic product (GDP) for global trade in 2022 of +2.9 % after +6.2 % in 2021. The advanced economies are therefore attributed an increase of +2.6 % (2021: +5.3 %) and the emerging markets a rise of +3.5 % (2021: +7.7 %). GDP in Germany increased by +1.8 % (2021: +2.6 %) and went up in the eurozone by +3.5 % after + 5.3 % in 2021. GDP in the USA posted an increase of +2.1 % (2021: +5.9 %) and grew in the United Kingdom by +4.0 % (2021: +7.5 %). Growth in Central and Eastern Europe amounted to +4.4 % (2021: +5.7 %), in Latin America +4.1 % (2021: +7.7 %) and in Asia +3.2 % (2021: +6.8 %).

The customer sectors relevant for SURTECO posted robust growth among German manufacturers in the business year 2022. Hence, sales with office furniture and shop fittings rose by +7.4 %, with other furniture by + 7.8 % and with kitchen furniture by 9.5 %. Manufacturers of wood-based panels and chipboard succeeded in increasing their sales by +8.4 % in 2022.2 Key factors in this trend were the price adjustments necessary owing to increases in the cost of materials and energy costs.3

SALES AND BUSINESS PERFORMANCE FOR THE GROUP

After a good start to the year 2022, the framework conditions for business development of the SURTECO Group deteriorated dramatically as the year progressed. Against the background of the conflict between Russia and Ukraine, and increased inflation, our perspective indicates that demand in key sales sectors underwent a tangible drop. While sales in the first half year of 2022, supported by price effects from passing on the increased costs of raw materials, were still +10 % above the year-earlier value, sales in the second half of 2022 fell back by -12 % compared with the equivalent year-earlier period. Overall, sales of the SURTECO Group in 2022 at € 747.7 million were -1 % below the year-earlier amount of € 757.1 million. Business transactions are therefore within the forecast corridor of € 730 million to € 750 million. Business transacted in Germany in 2022 decreased by -5 % compared with the previous year and fell in the rest of Europe (not including Germany) by -6 %. In North and South America, business during this period went up by +13 % and in Asia, Australia and other markets by +4 %.

Economic growth in 2022 in %1

1 Source: Council of Experts (Sachverständigenrat) for assessing macroeconomic development, Updated Economic Forecast 2023 and 2024 published on 22 March 2023

2.9 World
1.8 Germany
3.5 Eurozone
4.0 United Kingdom
2.1 USA
4.4 Central and Eastern Europe
4.1 Latin America
3.2 Asia

SURTECO GROUP Sales revenues in € million

¹ Source: The Council of Experts (Sachverständigenrat) for assessing macroeconomic development, Updated Economic Forecast 2023 and 2024 published on 22 March 2023, year-earlier values: annual expert report dated 9 November 2022

² Source: Destatis Federal Statistical Office. https://www.destatis.de. Wirtschaftszweige WZ08-1621, WZ08-3101, WZ08-3102, WZ08-3109

³ Source: Associations of the German furniture industry (VDM/VHK). Press Release dated 22/2/2023

DECORATIVES

Customers in the Segment Decoratives are primarily in the household, office and kitchen furniture industries, in the wood-based sector and in the door and caravan industries. Essentially, the European companies in the segment experienced a decline in demand, while sales in America and Asia/Pacific, supported by positive exchange-rate effects, continued to remain above the figures for the previous year. Overall, sales of Decoratives at € 537.3 million in 2022 remained -2 % below the year-earlier value of € 549.3 million. Even taking account of this slight decline, the sales forecast for the segment was still achieved. Business transacted with edgebandings eased by -1 %, with decorative printing by -6 % and with other products and commercial goods by -12 %, while business transacted with finish foils was +4 % above the previous year.

PROFILES

The Segment Profiles sells its skirtings primarily to trade floor-layers, the wholesale sector, and to the home improvement market and do-it-yourself stores. The technical extrusions (profiles) of the segment are also used in numerous industrial applications. Since business with Profiles is generated virtually exclusively in Europe, a decline in demand was also experienced in this segment during the second half of the year 2022. Nevertheless, the favourable development in the first half of the year enabled sales in the year overall to be increased by +5 % to € 143.0 million (2021: € 136.5 million). The forecast for the segment (sales at around the year-earlier level) was thereby exceeded. As part of this development, sales with skirtings went up by +2 % and with technical extrusions (profiles) by +10 %. Conversely, business with commercial goods and other products fell back by -3 % compared with the year-earlier period.

Net assets, financial position and results of operations

CASH FLOW STATEMENT

TECHNICALS

Providers of specialist products such as products for use in ship construction and products for small series and niche markets in the furniture industry are grouped in Technicals. The companies in Technicals primarily operate in Europe. Hence, the fall in sales during the second half of the year amounted to -21 % compared with the year-earlier period, following an increase of +10 % in the first half of the year. Accumulated across the entire year, sales fell back by 5 % to € 67.5 million (2021: € 71.2 million). The shortfall therefore exceeded the forecast slight easing. Sales with edgebandings came down by -16 % and with impregnated products by -7 %, while sales with finish foils and other products remained approximately at the year-earlier level.

Essentially due to lower earnings before income tax (EBT), the internal financing of the Group in 2022 fell to € 61.9 million (2021: € 97.0 million). The change in assets and liabilities (net) in the business year 2022 amounted to € 7.2 million after € -53.2 million in the previous year. Insofar, cash flow from current business operations amounted to € 69.1 million (2021: € 43.8 million) in 2022. After deduction of cash flow from investment activities in the amount of € 38.9 million (2021: € -30.7 million), free cash flow of € 30.2 million (2021: € 13.1 million) is the outcome for the year 2022. Primarily due to the repayment of financial liabilities totalling € 85.0 million (2021: € -79.4 million) while taking on financial debt of € 121.5 million (2021: € 30.0 million) cash flow from financing activities amounted to € 15.1 million after € -72.6 million in the previous year. Hence, cash and cash equivalents rose from € 73.1 million at year-end 2021 to € 117.8 million at 31 December 2022.

BALANCE SHEET PERFORMANCE

The balance sheet total of the Group rose to € 851.8 million as at 31 December 2022 after € 795.1 million as at 31 December 2021. On the assets side, current assets increased from € 303.5 million in the previous year to € 341.8 million on the balance sheet date for 2022, essentially due to taking out promissory note loans for general company financing totalling € 125 million and the resulting inflow of funds. Non-current assets increased from € 491.6 million to € 510.0 million. On the liabilities side of the balance sheet, current liabilities came down owing to settlements of financial liabilities from € 204.1 million at year-end 2021 to € 114.7 million, while non-current liabilities went up from € 177.3 million to € 311.0 million owing to taking out promissory note loans. Equity increased to € 426.1 million after € 413.7 million on 31 December 2021.

Change in financial resources at 31 December

€ million 2021 2022
Cash flow from current business	69.1
operations	43.8
Cash flow from investment	-38.9
activities	-30.7
Cash flow from financial	15.1
activities	-72.6
Change in cash and cash	45.3
equivalents	-59.6

Calculation of free cash flow

€ million	1/1/-31/12/2021	1/1/-31/12/2022
Cash flow from current business operations	43.8	69.1
Purchase of property, plant and equipment	-28.7	-45.2
Purchase of intangible assets	-4.4	-5.1
Proceeds from disposal of property, plant and equipment	2.4	11.4
Cash flow from investment activity	-30.7	-38.9
Free cash flow	13.1	30.2

Balance sheet structure of the SURTECO Group

€ million	31/12/2021	Percentage of the balance sheet total in %	31/12/2022	Percentage of the balance sheet total in %
ASSETS
Current assets	303.5	38.2	341.8	40.1
Non-current assets	491.6	61.8	510.0	59.9
Balance sheet total	795.1	100.0	851.8	100.0
LIABILITIES
Current liabilities	204.1	25.7	114.7	13.5
Non-current liabilities	177.3	22.3	311.0	36.5
Equity	413.7	52.0	426.1	50.0
Balance sheet total	795.1	100.0	851.8	100.0

Balance sheet indicators of the SURTECO Group

	2021	2022
Equity ratio in %	52.0	50.0
Level of debt in %	36.9	35.9
Working capital in € million	151.8	142.6
Interest cover factor	26.2	21.0
Debt-service coverage ratio in %	59.0	45.3

The equity ratio (equity/balance sheet total) eased by 2.0 percentage points to 50.0 %. Net financial debt at € 152.8 million was slightly above the year-earlier value of € 152.6 million and the level of debt (net debt/ equity) fell from 36.9 % to 35.9 %. The working capital came down primarily due to reduced trade accounts receivable from € 151.8 million at year-end 2021 to € 142.6 million on the balance sheet date for 2022. In the business year 2022, the covenants (-> internal corporate controlling system) were complied with. On 31 December 2022, the Group had external credit lines amounting to € 36.3 million. At this point, € 0.9 million had been drawn on these lines.

INVESTMENTS

Additions to property plant and equipment, and intangible assets (investments) amounted to € 50.5 million (2021: € 33.1 million) in the business year 2022. An addition of € 45.2 million (2021: € 28.7 million) was attributable to property, plant and equipment. This essentially results from replacement and expansion investments in technical systems and machinery, and for land and buildings, and assets under construction. The addition to intangible assets amounted to € 5.3 million (2021: € 4.4 million) and primarily includes software expenses. In the business year 2022, investments of € 40.4 million (2021: € 17.0 million) were attributable to Decoratives, € 7.2 million (2021: € 12.6 million) to Profiles and € 2.9 million (2021: € 3.4 million) to Technicals.

EXPENSES

The cost of materials forms the biggest expense item in all the segments of the Group. Purchase prices for technical raw papers, various plastics and chemical additives exert the greatest impact. In the case of virtually all plastics, papers and chemical additives, purchase prices in 2022 were above the expected values and also above the year-earlier value. Since the higher prices could moreover only be passed on in part and with a time lag, the cost of materials went up in relation to total output (cost of materials ratio) to 52.0 % after 49.4 % in 2021. The absolute cost of materials amounted to € -390.7 million after € -381.8 million in the previous year. Personnel expenses in the business year 2022 at € -174.9 million were slightly below the year-earlier value of € -175.2 million. As a ratio of total output, the personnel expense ratio increased from 22.7 % in the previous year to 23.3 % during the reporting period. In absolute terms, the other operating expenses at € -112.5 million were above the year-earlier value of € -107.4 million. In relation to total output, the ratio increased to 15.0 % (2021: 13.9 %).

HGB (GERMAN COMMERCIAL CODE) FINANCIAL STATEMENTS FOR SURTECO GROUP SE

assets side of the balance sheet, fixed assets at € 313.1 million remained approximately at the yearearlier level (€ 314.5 million), while net assets and liabilities rose from € 273.5 million in the previous year to € 297.7 million on 31 December 2022. On the liabilities side of the balance sheet, equity capital eased slightly to € 326.6 million (2021: € 330.7 million). Consequently, the equity ratio came down from 56.2 % in the previous year to 53.4 %. On the balance sheet date for 2022, liabilities increased to € 270.8 million (2021: € 241.6 million), while provisions eased slightly to € 14.2 million (2021: € 15.5 million). The sales revenues of SURTECO GROUP SE in the amount of € 1.8 million (2021: € 1.8 million) result entirely from intragroup reallocations. Personnel expenses amounted to € -5.5 million (2021: € 7.3 million) and other operating expenses amounted to € 8.7 million after € 4.7 million in the previous year. Income from profit and loss transfer agreements fell from € 50.8 million in the previous year to € 26.4

million in the business year 2022. The interest income amounted to € -1.4 million (2021: € -2.7 million) and income taxes amounted to € 2.3 million

GROUP RESULTS

million (2021: € 12.7 million) in 2022. The forecast for this segment was therefore fulfilled (approximately at the year-earlier level). (2021: € -11.2 million). Consequently, the net income of SURTECO GROUP SE for 2022 decreased to € 11.4 million (2021: € 27.8 million).

The financial statements of the holding company SURTECO GROUP SE were prepared on the basis of the accounting principles in accordance with the Third Book of the German Commercial Code (§§ 242 ff. and 264 ff. German HGB) for large jointstock companies and the Stock Corporation Act (Aktiengesetz, AktG). As at 31 December 2022, the balance sheet total of SURTECO GROUP SE amounted to € 611.6 million after € 588.3 million in the previous year. On the In the business year 2022, framework conditions in the sales markets and on the purchasing side underwent steady deterioration. Sales development only made progress within the forecast parameters on the back of increased raw material prices being transferred to customers. Since these costs could only be partly passed on and with a time lag, and a marked drop in demand exerted a negative impact on capacity utilization and productivity, the business year closed with earnings significantly worse than originally expected.

The total output of the Group at € 751.3 million fell by -3 % in the business year 2022 compared with the year-earlier value of € 773.2 million. Taking account of the expense items totalling € 678.1 million (2021: € -664.4 million) and the operating income amounting to € +10.9 million (2021: € +6.4 million), earnings before financial result, income tax and depreciation and amortization (EBITDA) fell by 27 % to € 84.2 million (2021: € 114.8 million). The EBITDA margin (EBITDA / sales) fell from 15.2 % in the previous year to 11.3 % in 2022. Depreciation and amortization amounted to € -44.0 million after € -42.2 million in the previous year. Consequently, earnings before financial result and taxes (EBIT) amounted to € 40.2 million (2021: € 72.5 million). The Group therefore fell short of the original EBIT target of between € 55 million and € 65 million. The EBIT target of € 37 million to € 42 million, adjusted on 11 October 2022, was achieved. The EBIT margin (EBIT / sales) came down to 5.4 % (2021: 9.6 %). The financial result at € -3.4 million deteriorated compared with the year-earlier value of € -2.6 million. Earnings before income tax (EBT) at € 36.8 million were -47 % below the year-earlier value of € 70.0 million. Deducting income tax of € -11.6 million (2021: € -22.2 million) yields consolidated net profit of € 25.2 million (2021: € 47.8 million) in the business year 2022. Earnings per share amounted to € 1.63 for an unchanged number of shares at 15.5 million after € 3.08 in the previous year.

RESULTS OF THE SEGMENTS

EBIT of the Segment Decoratives at € 39.8 million (2021: € 62.3 million) meant that earnings for the segment fell significantly more than forecast (slight fall). There was a similar fall in the other Segments Technicals. Instead of the slight fall forecast, EBIT sustained a tangible drop from € 5.6 million in the previous year to € 0.2 million in the business year 2022. EBIT of the Segment Profiles was € 11.9

OVERALL STATEMENT ON THE ECONOMIC SITUATION

38 39

People and training

The number of employees across the Group decreased to 3,052 at year-end 2022 after 3,165 on 31 December 2021. In Decoratives, the number of employees was 2,218 (2021: 2,289), in Profiles 554 (2021: 579) and in Technicals 262 (2021: 278). As at 31 December 2022, 18 employees were working in the holding company SURTECO GROUP SE (2021: 19). The average age of the employees in the Group increased to 42.4 years (2021: 41.8 years) and the average length of service increased to 12.5 years (2021: 12.1 years). The average sickness rate went up slightly in 2022 to 4.4 % (2021: 4.3 %) while the fluctuation rate fell to 10.8 % (2021: 11.0 %). In the business year 2022, an average of 95 apprentices (2021: 99) were employed at the German Group sites. In relation to the average number of employees in Germany, the training rate was therefore 5.7 % (2021: 5.9 %).

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Research and development

Research and development at the SURTECO Group is carried out at local level owing to the specialization of the production locations. In the case of surface products, the focus is on advanced development of the optical and haptic properties, and the resilience of the products. The focus for technical extrusions (profiles) and skirtings is on the technical characteristics. The research and development departments also work consistently on achieving qualification for alternative raw materials, the development of new product categories, optimization of the production processes and in research on sustainable products and raw materials.

In the business year 2022, expenses for research and development in the Group amounted to € 3.5 million after € 2.1 million in the previous year. An average of 141 (2021: 140) employees were working in the research and development departments of the Group. The corresponding personnel costs for employees in research and development are included in the Group's personnel expenses.

SURTECO ANNUAL REPORT 2022 … MANAGEMENT REPORT … NET ASSETS, FINANCIAL POSITION AND RESULTS OF OPERATIONS SURTECO ANNUAL REPORT 2022 … MANAGEMENT REPORT … NET ASSETS, FINANCIAL POSITION AND RESULTS OF OPERATIONS RESEARCH AND DEVELOPMENT PEOPLE AND TRAINING

Employees by regions

Location	Employees 31/12/2021	Employees 31/12/2022	Change
Germany	1,698	1,627	-71
Portugal	277	242	-35
Brazil	238	227	-11
United Kingdom	190	182	-8
USA	176	175	-1
Sweden	118	119	+1
Asia	116	117	+1
Canada	104	111	+7
Australia	92	98	+6
Poland	42	38	-4
Mexico	40	40	-
Italy	25	26	+1
France	23	23	-
Russia	14	12	-2
Czech Republic	12	15	+3
	3,165	3,052	-113

Internal controlling and risk management system

OVERALL INTERNAL CONTROLLING SYSTEM*

The SURTECO Group in its current form was created by the merger and acquisition of various individual companies and groups of companies with established processes and IT systems. This means that the entire Internal Controlling System is made up of many different modules which are gradually being transferred to standardized processes and group-wide software solutions. The appropriateness and effectiveness of the entire Internal Controlling System are continuously monitored by the Management Board as the responsible body and guaranteed using the essential components of the Internal Controlling System described below. The Management Board has no indication that the risk management system and the internal controlling system as a whole are not adequate or effective.

Instructions

The platform for internal controlling is the provision of guidelines, directives and instructions. Alongside instructions relating to location, divisional and process issues, group-wide guidelines and directives from the Management Board are applicable. The Group uses different systems for distribution and the biggest companies in Germany are already equipped with the future group-wide solution.

Training and information

Furthermore, a number of the Group's locations also have quality, environmental, energy and workplace safety systems certified by external agencies. An overview of the certified locations is provided in the meet the principle of minimum information.

Transparency

Information can be disseminated quickly using the "RoomMe" Intranet of the SURTECO Group. An online system with testing options is available for training sessions. Locations that are not yet connected to the online system train their employees and communicate with them in classic face-to-face events. Controlling Controlling activities are carried out by various offices. The checks carried out by Internal Audit include the entire Internal Controlling System. topics geared to relevant target groups. A whistleblower system, which is also available to third parties, can be used to report information about legal violations within the company in a protected framework. A defined Compliance Team directs this process and reports directly to the Management Board. Any compliance risks are recorded and monitored as part of the risk management system. The risk assessment is carried out with an analysis of the potential extent of damage and the probability of occurrence. The measures are tailored accordingly with defined responsibilities and monitoring of implementation.

Compliance Management System (CMS)

The CMS is based on the triad of specifications, avoidance and control. The values of corporate culture form the foundation for the specifications applicable throughout the Group. They are defined in the "SURTECO Code of Conduct" and in binding guidelines. Global distribution to all employees of the Group is ensured through a management software system. The company implements training sessions for all employees for purposes of prevention (avoidance). These cover general compliance principles and special

company's sustainability report. Authorities and auditors provide the corresponding process-dependent checks. Authorization concepts and access controls guarantee the protection of business secrets and Comprehensive internal reporting to the relevant executive management, the Management Board and the Supervisory Board is implemented as part of the individual management systems. External information is primarily provided through financial reporting, the declaration on corporate governance and through the sustainability report The Risk Management System is an integral part of the group-wide planning, control and reporting process. It consists of a large number of building blocks that are integrated into the overall structure and process organization. The Management Board is responsible for risk policy in the SURTECO Group. Risks are identified on the basis of group-wide guidelines by the Management Board together with the management of the subsidiaries. The management of the subsidiary companies receives the instructions of the Management Board and in this context, it is responsible for the risks that it takes in its business. The management integrates employees in risk management as part of governance functions. Binding rules for risk management processes are defined in the risk management manual applicable throughout the Group.

RISK MANAGEMENT SYSTEM (RMS)

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• * The content of this section relates to unaudited, voluntary content

ACCOUNTING-BASED INTERNAL CONTROLLING SYSTEM – REPORT IN ACCORDANCE WITH § 289 (4) AND § 315 (4) GERMAN COMMERCIAL CODE (HGB)

The Internal Controlling System comprises the accounting-based processes and controls which are fundamental for the consolidated financial statements. The SURTECO Group bases the structure of its Internal Controlling System on the relevant publications of the Institute of Auditors (Institut der Wirtschaftsprüfer, IDW).

The preparation of the accounts and the financial statements is primarily carried out decentrally and in accordance with local standards. The consolidated financial statements are prepared in accordance with the regulations of the International Financial Reporting Standards (IFRS) of the International Accounting Standards Board (IASB), in accordance with EU adoption, taking into account the interpretations of the International Financial Reporting Interpretations Committee (IFRIC) and the regulations to be applied in addition pursuant to § 315e (1) German Commercial Code (HGB). A uniform chart of accounts for the Group and the use of accounting policies form the basis for these documents. The Group holding company supports the companies on issues relating to accounting and manages the consolidated accounting process

The subsidiary companies are included in the consolidated financial statements and in the combined management report using a partly integrated accounting and consolidation system, and on the basis of reporting packages. Consolidation is initially carried out as a multistage process at the level of the subsidiary companies, then at the level of segments and finally at Group level. The consolidated financial statements are prepared using a permanent structured process based on a calendar for the financial statements.

The plausibility of the figures is ensured at every level by manual and systematic checks. Transparent responsibilities and access rules for IT systems relevant to the financial statements are significant elements in this process. The controlling principles of separation of functions, double-check principle and approval and release procedures are applied to the annual financial statements and the consolidated financial statements. Information from external service providers is checked for plausibility.

Risk and opportunities report

The SURTECO Group with its individual subsidiary companies is exposed to a large number of risks on account of global activities and intense competition. A risk is deemed to be any event or circumstance that can lead to a negative deviation for the SURTECO Group now and/or in future from the planned corporate goals. The Group deliberately enters into risks with the aim of ensuring sustainable growth and increasing the corporate value, but avoids unreasonable risks. The remaining risks are reduced and managed by taking adequate measures. Foreseeable risks are covered by taking out insurance policies, if this is feasible at reasonable commercial conditions. However, it is not possible to exclude the possibility that insurance cover or hedging with financial instruments is inadequate in individual cases or that appropriate protection cannot be obtained for specific risks.

The following section is a description of the risks and opportunities that can exert a significant impact on the financial position, results of operations and net assets of the SURTECO Group. Group Investment Controlling prepares a consolidated risk report from the individual risks reported. On the basis of the amount of damage, the risks are allocated to damage classes in accordance with the following table:

The identified individual risks are also allocated to risk categories to which the SURTECO Group is fundamentally exposed. The following risk and opportunities report explains these risk categories in general terms and provides information about the recorded individual risks in each category. Compared with the previous year, the classification of the individual risks was adjusted to the size of the

company. Hence, the damage class and the probability class were each extended to five levels and the

values of the damage classes were adjusted in ac
cordance with the risk-bearing capacity of the Group.
The classification on the basis of the matrix ensures
a more comprehensible presentation of the risks.
Appropriate measures for reducing and overcoming
the risks are defined and implemented with min
imum costs for purposes of risk control and risk
management. This may involve, for example, the
tools of risk avoidance, risk limitation, risk transfer
and the creation of adequate potential coverage.

		Damage class
		1	2	3	4	5
Probability class	5	L	M	H	H	H
	4	L	M	M	H	H
	3	L	L	M	M	H
	2	L	L	M	M	M
	1	L	L	L	M	M

Damage class	Qualitative	Quantitative
1	Slight	€ 000s 1,000 - € 000s 4,999
2	Minor	€ 000s 5,000 - € 000s 9,999
3	Moderate	€ 000s 10,000 - € 000s 14,999
4	Major	€ 000s 15,000 - € 000s 19,999
5	Threat to existence as a going concern	> € 000s 20,000

The probability of occurrence is allocated in the following classes:

Probability class	Qualitative	Quantitative
1	Very improbable	1 % - 15 %
2	Improbable	16 % - 40 %
3	Possibly	41 % - 60 %
4	Probably	61 % - 85 %
5	Very probably	86 % - 100 %

All risks are classified and aggregated from a combination of these two factors according to risk categories into the categories Low (L), Moderate (M) and High (H) using the following matrix:

Since risks are continuously changing over time, the Risk Management System is also subject to continuous implementation of monitoring, documentation and reporting of the risks. Apart from regular reporting to the Management Board and the Supervisory Board, managers have a duty to report risks that occur unexpectedly without delay. The usefulness and efficiency of risk management and the controlling systems are monitored at regular intervals by the Management Board and the management of the sub-sidiary companies. The Group is continually developing measures directed towards risk avoidance, risk reduction and risk hedging while also taking advantage of any business opportunities that arise. Risks and opportunities resulting from sustainability aspects are integrated in the group-wide Risk Management System of the SURTECO Group. They include risks and opportunities arising from social, environmental and governance factors, which can exert an impact on the financial position, results of operations and net assets of the SURTECO Group. Opportunities essentially arise on account of positive developments from outside influences of the kind that are described in the risk categories. Any opportunities identified are also recorded and documented, although they are not allocated to classes. The risk and opportunities report is already based on the future segments of the Group, as described in the section "Internal Controlling and Risk Management System".

The risks and opportunities presented below apply equally to SURTECO GROUP SE and the SURTECO Group.

STRATEGIC CORPORATE RISKS AND OPPORTUNITIES

Macroeconomic risks, market risk and market opportunities

In our opinion, the business development of the SURTECO Group depends significantly on macroeconomic conditions due to the Group's global activities and the high proportion of foreign sales. The economic development of the relevant countries is therefore analysed as an indicator for the business performance of the company since the manufactured products are primarily processed to create durable goods, such as furniture and flooring. Experience tells us that the inclination of consumers to purchase these goods correlates with economic development. In our opinion, the performance of the flooring, furniture and wood-based industries in the individual countries and markets is particularly important for the business development of the Group. The Group has production sites and additional sales locations on four continents, and this places the Group in the position of being able to supply its customers worldwide locally, as well as being in a position to identify trends in regional markets at an early stage. This gives the company an opportunity to gain first-mover advantage when participating in trends. The qualitative and quantitative data from the markets and the subsidiary companies are recorded and evaluated in a differentiated system of internal reporting. This highlights and analyses any deviations from budgets, compliance with plans, and the emergence of new monetary and non-monetary risks. The business is then managed on the basis of the information gathered. The most relevant geographical markets are located in Europe, in North and South America, and Australia. The Group may be able to benefit from an economic upswing in individual markets that stimulates demand for furniture. This would enable the companies to benefit indirectly in the upturn as a supplier. On the other hand, a global or local recession could result in consumers refraining from making investments in durable goods such as furniture, which could entail a drop in orders at the SURTECO Group.

A low risk in this category was identified in the Segment Surfaces.

Similar to the development of geographical markets, the Group also monitors the dynamic performance of relevant sectors. The focus of this analysis is essentially on the flooring, furniture and wood-based industries. The Group will also be able to benefit from an upswing in sector development but equally will also be affected by an adverse development. depth quality inspection on the basis of jointly agreed specifications, arranging supply contracts, the qualification of alternative suppliers and detailed research into alternative raw materials. A low risk in this class was identified in the Segment Edgebands and a moderate risk in this class was identified in the Segment Surfaces.

Competitive risks and opportunities An increased production depth has been observed in the market over recent years. This can lead to excess capacities and tougher competition. Furthermore, new local competitors may enter the market at any time. Since the SURTECO Group is represented worldwide through its sales network and, in our opinion, already holds a strong market position in its most important divisions, there is an opportunity to achieve further market penetration, for example on the back of integration of sales and marketing activities of the individual subsidiary companies. There is also an opportunity to play a proactive role in future consolidation The company will be presented with opportunities if there is an unexpected reduction in the price of raw materials since this would exert a significantly positive impact on the earnings situation. The research and development departments have a rolling programme of continuously carrying out research into alternative raw materials and additives so that there is a possibility of identifying cheaper or higher quality substitute products. IT risks Ensuring secure operation of all business process-

within the sector. A low risk in this category was identified in the Segment Asia/Pacific. OPERATIONAL RISKS Procurement risks and opportunities The Group is dependent on outsourcing from suppliers and partners for the procurement of semi-finished products and services. Inclusion of third parties in the equation creates risks, for example unexpected supply difficulties or unforeseeable price increases resulting from market consolidation, market bottlenecks or currency effects, and other macroeconomic influences which could impact negatively on results. The Group meets risks associated with supply by a process of continuous material and supplier management. The measures involve es requires constant monitoring and improvement of the information technologies used in the Group. Against the background of a growing potential for risk based on increasing integration of computer-supported business processes in communication between the Group companies and in communication with customers, suppliers and business partners, ongoing development of the measures used to make information secure are a top priority. Risks relating to the availability, dependability and efficiency of information technology systems are limited by making strategic investments and as appropriate by commissioning specialist companies. The Group reacts selectively to increased demands placed on the security of our systems within the scope of comprehensive security management. These include, for example, investment in current firewall, antivirus and high-availability systems. Potential risks can also be avoided through the planned implementation of uniform software systems where all aspects relating to production and business administration are inte-

analysing the market intensively, carrying out ingrated and efficiently processed.

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No risk above the damage potential of €000s 1,000 was identified in this class.

Personnel risks

In our opinion, the success of the company is bound up with having a workforce of qualified personnel at all levels. Shorter innovation cycles and increasingly international links place ever more stringent demands on the skills of technical specialists and managers. The unexpected loss of employees, temporary absence of personnel or difficulties in the search for suitable employees can exert negative impacts on business activities.

No risk above the damage potential of €000s 1,000 was identified in this class.

Production risks / Technology risks

An efficient and smooth-running production process is the enabler for the delivery capability of the companies. This entails the risk that machines or equipment may break down or the production workflow may be disrupted in some other way. To a certain extent, the companies of the Group are able to distribute production over several sites and thereby effectively minimize the risk of downtime. Production processes that cannot be distributed, or this can only be done with difficulty, are protected against production outage with standard measures such as subdivision into different fire zones. Furthermore, the production procedures, manufacturing technologies, machinery used and processes are continuously developed and optimized, the systems and equipment are carefully maintained, and the employees receive training. If there are any complaints, extensive investigations are carried out in order to ascertain the causes. It is not possible to exclude the possibility that complaints may actually be traced to semi-finished products, and when this is the case, it is not always effective to seek recourse with the supplier. Environmental officers apply defined standards and regulations to monitor the environmental safety of products and production.

No risk above the damage potential of €000s 1,000 was identified in this class.

The production area also offers opportunities. A continuous improvement process was implemented to identify and continuously realize any established potential for efficiency increases. The development of new production techniques and improvements in the existing processes also offer the opportunity of further improving the profitability of the company.

FINANCIAL RISKS

Interest and currency risks, currency opportunities The global nature of the business activities of the SURTECO Group results in delivery and payment flows in different currencies. Conversion of business figures and balance sheets from foreign subsidiaries into euros may entail currency risks (translation risks). For example, the Proadec Group generates around one third of its sales revenues in Brazil denominated in the historically volatile currency of the Brazilian real. However, the biggest proportion of sales in a foreign currency within the SURTECO Group was represented by the US dollar with approximately 14 % in 2022. The translation risk is not hedged because the influences are non-cash. Conversely, transaction risks arise as a result of the procurement or sale of goods in different currencies and from foreign-currency loans, which are given out to Group companies for financing.

The financial liabilities are structured with variable and fixed-interest rates. The company meets the remaining variable-interest and currency risks with regular and intensive analysis of a range of early-warning indicators.

Hedging of individual risks is discussed and decided by the central Treasury Department with the Management Board and the responsible Managing Directors. Where possible, currency fluctuations are balanced through natural hedging.

Opportunities are possible if there are appropriate

No risk above the damage potential of €000s 1,000 was identified in this class.

positive developments of the currencies and interest rates. At Group level, a low risk in this class was identified. Liquidity risks The Corporate Treasury Department in the holding company SURTECO GROUP SE is responsible for monitoring and controlling the liquidity of the Group and the major subsidiary companies. This provides an up-to-date picture of liquidity development at any time. The positive level of operating cash flow and the short payment targets mean that the companies have adequate liquid funds continuously available. There is also the option of drawing on open credit lines and a factoring agreement. Nevertheless, there is a risk that earnings and liquidity can be compromised by default on customer accounts receivable and non-compliance with payment targets. The Group counters this risk by regularly reviewing the credit ratings of contracting parties and carefully monitoring default with customers. The Group counters the risk arising from debit balances in accounts payable by means of a broadly-based Management Board and the Supervisory Board. If there is an impending breach of any of the covenants, consultations on individual measures take place as necessary. If the covenants are breached, the lenders have the right to serve notice on the loan agreements. The covenants were complied with during the business year 2022. Loans amounting to € 200 million with their own covenants were raised for financing the purchase price in relation to the acquisition of the divisions "Laminates and performance films and coated fabrics" from Omnova Solutions Inc, USA. From today's perspective, the covenants can be complied with over the next 12 months. Nevertheless, there is a general risk that notice may be served on this loan agreement if there is any breach of the covenants. Owing to the acquisition-related increase in financial debt after the balance sheet date, non-compliance with the covenants for some of the old contracts with a volume of € 15.0 million is likely during the next 12 months. The company is in talks with lenders in relation to a waiver for covenants during the year. Consequently, the company perceives no risk arising from this matter.

customer structure and cover provided by appropriate trade credit insurance policies. The company has identified a moderate risk in this class at Group level.

Financing risks and financing opportunities The refinancing of the Group and the subsidiary companies is generally carried out centrally by SURTECO GROUP SE. The majority of the financial liabilities of the Group have residual terms of up to five years (-> maturity structure in sub-section 32.3 of the Notes to the Consolidated Financial Statements). The Group operates with a wide base of lenders comprising insurance companies and banks. Financial indicators (covenants) were agreed with the lenders at standard market conditions in a number of loan agreements, for example the ratio of EBITDA to interest income, and these have to be complied with. These covenants are continuously monitored by the The SURTECO Group recognizes goodwill in the balance sheet. The values in use for the cash generating unit DAKOR were assessed as being lower than the net asset values within the scope of the impairment test for the business year 2022. As a consequence, the allocated goodwill was corrected by € 0.5 million. Under commercial law, the investment in DAKOR was written down by € 5.1 million. There was also no requirement for adjustments in any of the remaining units. However, the possibility that planned targets for these units may not be reached in the future cannot be excluded; there may also be a consequent requirement to carry out an impairment. No risk above the damage potential of €000s 1,000 was identified in this class.

Fluctuations in value for participations

48 49

LEGAL AND REGULATORY RISKS / OPPORTUNITIES

Changes in supervisory requirements, customs regulations or other barriers to trade, as well as possible restrictions on price or foreign currency could impact negatively on the sales and the profitability.

The companies in the Group have formed adequate provisions to meet warranty claims. Part of the warranty risks have been covered by commercially effective insurance policies. Risks are reduced by the high level of production certainty, and the outstanding quality standard for the manufactured products reduces risk.

Risks can also arise from compliance breaches. The Management Board has implemented a Compliance Management System in order to prevent this from happening. Nevertheless, the possibility of becoming involved in court or arbitration proceedings cannot be excluded.

When business activities are carried out in third-party countries and at foreign locations of the Group, there are risks of social unrest, and economic and political instability. In particular, the conflict between Russia and Ukraine could lead to restrictions on trade in these countries.

Furthermore, there is the general risk that unexpected fiscal risks may occur on account of the international alignment of the Group and the large number of subsidiaries.

A moderate risk in this category was identified in the Segment Asia/Pacific.

RISKS FROM THE ACQUISITION OF THE DIVISIONS "LAMINATES AND PERFORMANCE FILMS AND COATED FABRICS"

On 28 February 2023, the Group took over the divisions "Laminates and performance films and coated fabrics" from Omnova Solutions Inc, USA, a company owned by the British group Synthomer plc. The divisions have specialized in the production and sale of laminates, foils, and vinyl-coated materials, and employ approximately 880 co-workers in the USA and Thailand. SURTECO financed the transaction through bridging finance. The purchase price prior to any purchase-price adjustments amounts to a total of USD 255 million. There is a generalized risk that future sales and profits cannot be generated within the expected framework.

The company has identified a low risk at Group level on account of this fact.

RISKS FROM THE RUSSIA-UKRAINE WAR

At the beginning of the conflict between Russia and Ukraine, the company had decided not to produce any orders relating to the Russian market until further notice and to discontinue deliveries to the Russian market. Following in-depth analysis of the situation, the company decided to restart business activity within the framework of the statutory possibilities in light of its responsibilities to employees. Continuation of operations was additionally planned for the business year 2023. Even more stringent sanctions could impair this activity.

No risk above the damage potential of €000s 1,000 was identified in this class.

OVERALL RISK ASSESSMENT

The Group regularly monitors the attainment of business targets and the risks and risk-limiting measures. The Management Board and the Supervisory Board are informed of risks at an early stage. There are no risks which alone or in combination with other risks could pose a threat to the continued existence of the company as a going concern. Even taking the Russia-Ukraine war into account, risks of this nature posing a threat to the continued existence of the company as a going concern cannot currently be identified. The analysis of all risks and opportunities leads to MACROECONOMIC FRAMEWORK CONDITIONS According to the Council of Experts (Sachverständigenrat) for assessing macroeconomic development1 , the high level of inflation will dampen global growth well into 2024. In Germany, economic output is likely to undergo only moderate growth owing to the continuing high energy prices. The Council of Experts is therefore assuming an increase in GDP of +0.2 % in Germany for the year 2023. Growth throughout the eurozone is likely to be only around +0.9 % while a fall in the United Kingdom is forecast at -0.5 %. The Council of Experts projects growth of +1.1 % for the USA and +1.0 % for Latin America. An increase of 0.9 % is expected in Central and Eastern Europe. According to the Council of Experts, GDP in Asia is likely to rise by +4.4 % in 2023.

The opportunities and risks described can exert a significant effect on the net assets, financial position and results of the Group's operations. Additional risks that are unknown at the moment could also impact negatively on business activities.

Outlook report

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the conclusion that the substantive influencing factors for the business operations of the SURTECO Group come from the procurement markets and arise from the framework conditions for the global economy and the relevant sectors. Consequently, the main potential for risk relates to an unexpected price increase or shortage of raw materials, and in a major and extended recession in the global economy or in individual markets and sectors relevant for the Group. By the same token, an economic upswing or more favourable purchasing conditions also offer the most significant opportunities for more positive business development. The overall risk situation of the SURTECO Group remained about at the year-earlier level. The Associations of the German Furniture Industry (including the upholstered-furniture and mattress industries) anticipate sales in 2023 to remain at the year-earlier level, with an expectation of subdued market development in the first half of the year. A gradual economic recovery is expected for the second half of the year, since consumer uncertainty will decrease and relaxation in the energy markets will become tangible.2

¹ Source: The Council of Experts (Sachverständigenrat) for assessing macroeconomic development, Updated Economic Forecast 2023 and 2024 published on 22 March 2023

² Source: Associations of the German Furniture Industry (VDM/VHK). Press release dated 22 February 2023

FRAMEWORK CONDITIONS FOR THE SURTECO GROUP

The ongoing war between Russia and Ukraine and the resulting geopolitical tensions combined with high inflation lead to massive uncertainties in markets and among consumers. Consequently, restrained demand is anticipated in 2023. Furthermore, increased energy costs need to be compensated on the cost side, at least in Europe.

These factors are offset by additional business derived from the acquired divisions. These will be extrapolated on the basis of the business plan relating to the acquisition of Omnova for the Business Unit North America from 1 March 2023. The forecast is therefore based on the original budget of the Group in accordance with the new segment structure and the pro-rata results from the business plan derived from the acquisition.

SALES FORECAST FOR THE GROUP AND SEGMENTS

Based on pro-forma sales for the Business Unit (BU) Surfaces of € 277.6 million for the business year 2022, sales revenues for 2023 will be slightly above the year-earlier level for this segment. The expected sales of the BU Edgebands are likely to be at the level of the pro-forma value for 2022 amounting to € 162.5 million. This is also anticipated for the sales of the BU Profiles (pro-forma value for 2022: € 148.5 million). The BU North America expects sales to increase to significantly above the proforma-value for 2022 of € 102.0 million on the back of the acquisition, while the BU Asia/Pacific assumes that the pro-forma sales for 2022 of € 57.0 million will be slightly exceeded in the business year 2023. Accumulated at Group level, sales revenues for 2023 are expected to be in the range between € 920 million and € 950 million.

EARNINGS FORECAST FOR THE GROUP AND SEGMENTS

In the business year 2023, EBIT for the BU Surfaces is expected to be significantly above the pro-forma EBIT of € 1.8 million from 2022, while EBIT for the BU Edgebands is projected to be significantly below the pro-forma EBIT for 2022 of € 19.6 million. EBIT of the BU Profiles is forecast to be significantly above the pro-forma EBIT of € 12.3 million. The BU North America anticipates a significant increase in the segment EBIT in 2023 owing to the additional earnings from the acquired divisions compared with

EXPECTED PERFORMANCE

Owing to the economic uncertainties due to the war in Ukraine and the high level of inflation, restrained demand is anticipated at least until the middle of 2023. The expected increase in sales is based on effects related to sales prices in the operations of the continuing divisions and on additional business derived from the acquired divisions. The increase in earnings is likely to be primarily generated from the acquired divisions notwithstanding the transaction costs. From today's perspective, the covenants for financing the divisions of Omnova will be complied with over the next 12 months, while non-compliance with the covenants for some of the old contracts is likely within the next 12 months.

the pro-forma earnings of € 7.5 million in 2022. The BU Asia/Pacific is assuming a significant increase compared with pro-forma EBIT of € 10.2 million. Taking account of expenses in conjunction with the acquisition, Group EBIT is forecast to be within the range from € 45 million to € 55 million. OVERALL STATEMENT ON AND SHARE TRANSFERS The Management Board is aware that shareholders of SURTECO GROUP SE have joined together to form a share pool. The objective of this pool is to jointly exercise the voting rights of 8,818,310 no-parvalue shares in SURTECO GROUP SE (in accordance with voting rights announcements), which is equivalent to a proportion of 56.87 % of the voting rights.

Information pursuant to § 289a and § 315a German Commercial Code (HGB)

CAPITAL STOCK

The subscribed capital (capital stock) of SURTECO GROUP SE is € 15,505,731.00 and is fully paid up. it is divided into 15,505,731 no-par-value bearer shares (ordinary shares) corresponding to a proportion of the capital stock of € 1.00 in each case. Each share guarantees one vote at the Annual General Meeting of the company. Apart from the statutory restrictions in certain cases, there are no restrictions on the voting right. There are no different categories of voting rights.

RESTRICTIONS ON VOTING RIGHTS

DIRECT OR INDIRECT

PARTICIPATIONS GREATER THAN

10 % OF THE VOTING RIGHTS

Alongside the share pool, the following shareholders have notified us of a direct or indirect participation in our company that is greater than 10 % of the voting

rights (status 31 December 2022):

Forecast economic growth 2023 in %1

1 Source: The Council of Experts (Sachverständigenrat) for assessing macroeconomic development, Updated Economic Forecast 2023 and 2024 published on 22 March 2023

2.2 World
0.2 Germany
0.9 Eurozone
-0.5 United Kingdom
1.1 USA
0.9 Central and Eastern Europe
1.0 Latin America
4.4 Asia

Name, place	Voting rights in %
Banasino Investments Ltd., Cyprus	11.22
ECCM Bank plc, Malta	15.00

SIGNIFICANT AGREEMENTS SUBJECT TO CONDITIONS

On the balance sheet date, SURTECO GROUP SE had several promissory note loans and credits with a total nominal value of € 240.8 million outstanding. If there is a change of control, the creditors have the right to terminate their outstanding loans early.

APPOINTMENT AND DISMISSAL OF MEMBERS OF THE MANAGEMENT BOARD

The appointment and dismissal of Members of the Management Board is carried out pursuant to §§ 84 ff. Stock Corporation Act (AktG). Changes to the Articles of Association are made in accordance with the regulations of §§ 179 ff. Stock Corporation Act (AktG).

SEPARATE NON-FINANCIAL GROUP REPORT

The Non-financial Group Report (Sustainability Report) for the business year 2022 pursuant to § 315b German Commercial Code (HGB) is published on the Internet portal of the company at www.surteco.com.

FOLLOW-UP REPORT

On 1/1/2023, the organizational structure of the SURTECO Group was changed. The three Business Units "Surfaces", "Edgebands" and "Profiles", and the regions North America and Asia-Pacific were established as independent divisions. These divisions hold responsibility across legal entities. They possess all functions that are necessary for achieving the strategic and operating goals. As far as the customers and products are concerned, the new structure contributes to increasing the profitability of the SURTECO Group and driving forward growth over the long term.

On 13 December 2022, SURTECO GROUP SE concluded a purchase contract for the takeover of the divisions "Laminates and performance films and coated fabrics" from Omnova Solutions Inc, USA, a subsidiary of British group Synthomer plc, through its subsidiary company SURTECO North America Inc, USA. The transaction was closed on 28 February 2023. You can find detailed information on the acquisition in the Notes to the Consolidated Financial Statements (37).

Up until 13 April 2023, there were no further events or developments that could lead to a significant change to the recognition or valuation of individual assets or liabilities as at 31 December 2022.

Declaration on corporate governance

The Declaration on Corporate Governance pursuant to § 289f and § 315d German Commercial Code (HGB) in the form of the Corporate Governance Report including details on defining the promotion of women in management positions in accordance with § 76 (4) and § 111 (5) Stock Corporation Act (AktG), the description of the diversity concept in relation to the composition of the body authorized to represent the company and the Supervisory Board, the Declaration of Compliance with justification and archive, the information on the practices of company management, the composition and working methods of the Management Board and the Supervisory Board including its committees, the Articles of Association (statutes), and the auditor for 2022, can be DIVIDEND PROPOSAL The Management Board and the Supervisory Board of SURTECO GROUP SE will submit a proposal to the ordinary Annual General Meeting of the company being held on 7 June 2023 that the net profit of SURTECO GROUP SE amounting to € 11,374,547.85 is to be appropriated as follows. Payment of a dividend per share of € 0.70 (2021: € 1.00). This corresponds to a total amount distributed as dividend of € 10,854,011.70 for 15,505,731 shares. Appropriation is made to retained earnings in the amount of € 520,536.15. For computational reasons, rounding differences of +/- one unit can occur.

accessed on the home page of the company by going to www.surteco.com and clicking on the menu item "Investor Relations – Corporate Governance".

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Calculation of indicators

Cost of materials ratio in %	Cost of materials/Total output
Debt-service coverage in %	(Consolidated net profit + Depreciation and amortization) / Net debt
Earnings per share in €	Consolidated net profit/Weighted average of the issued shares
EBIT margin in %	EBIT/Sales
EBITDA margin in %	EBITDA/Sales
Equity ratio in %	Equity/Total equity (= balance sheet total)
Free cash flow in €	Cash flow from current business operations - (Acquisition of property, plant and equipment + Acquisition of intangible assets + Acquisition of companies + Proceeds from disposal of property, plant and equipment + Dividends received)
Interest cover factor	EBITDA/Interest (net) (Interest income – Interest expenses)
Level of debt in %	Net debt/Equity
Net debt in €	Short-term financial liabilities + Long-term financial liabilities – Cash and cash equivalents
Personnel expense ratio in %	Personnel expenses/Total output
Working Capital in €	(Trade accounts receivable + Inventories) – Trade accounts payable

plant and equipment + Acquisition of intangible assets + Acquisition of companies + Proceeds from disposal of property, plant and equipment +

SURTECO shares in the context of stock market sentiment

The stock market year 2022 was defined by a number of crises. The negative news relating to the war in Ukraine and the development of inflation dominated stock markets last year. Furthermore, hikes in interest rates accompanied by a sharp increase in bond yields slowed the performance of stock exchanges. The latter responded to the framework conditions with extreme volatility and with losses. Hence, the DAX, MDAX and SDAX indexes each ended the stock market year with significant downside. In the context of this environment, although SURTECO put in an impressive performance at the beginning of the year by achieving the best result in the history of the company, the forecast provided was rather restrained on account of the geopolitical framework conditions and the upward trend in prices. Hence, the share already fell back by around -39 % during the first half of the year. As the year progressed, the value fell further to the low for the year of € 18.90 on 9 September, before stabilizing in the range between € 19.00 and € 21.00. The price at the close of the year was € 19.10.

Market capitalization of € 296.2 million at year-end

As a consequence of the decline in share-price development, the market capitalization also came down to € 296.2 million at year-end 2022 after € 587.7 million in the previous year with an unchanged number of shares amounting to 15,505,731 no-par-value issued shares. There were no significant changes to the shareholder structure in 2022. On the basis of the voting rights notifications, the proportion of the "SURTECO Pool", which is made up of founding and family members, continues to hold 56.9 % of the voting rights shares. The LUDA Foundation currently holds 26.2 % of the voting rights shares and Lazard Frères Gestion 4.7 %. Since Lazard as a fund company counts as part of the free float, this is 16.9 %.

All information on the company can be found onthe Internet pages of SURTECO GROUP SE (www.surteco.com). Furthermore, you are always very welcome to contact the Investor Relations Department of the company directly if you have any questions or ideas you wish to discuss:

Investor Relations and Press Office Johan-Viktor-Bausch-Str. 2 86647 Buttenwiesen

T: +49 8274 9988-508 F: +49 8274 9988-515 ir@surteco.com

SURTECO shares (Close price XETRA)

€	2021	2022
Number of shares at 31 December	15,505,731	15,505,731
Year-end price	37.90	19.10
Price per share (high)	40.00	37.10
Price per share (low)	22.10	18.90
Stock-market turnover in shares per month	92,430	18,994
Market capitalization at year-end in € million	587.7	296.2

Shareholder indicators for the SURTECO Group

€ million	2021	2022
Sales	757.1	747.7
EBITDA	114.8	84.2
EBIT	72.5	40.2
EBT	70.0	36.8
Consolidated net profit	47.8	25.2
Earnings per share	3.08	1.63

Indicators of the share

Type of security	No-par-value share
Market segment	Official market, Prime Standard
WKN	517690
ISIN	DE0005176903
Ticker symbol	SUR
Reuters' ticker symbol	SURG.D
Bloomberg's ticker symbol	SUR
Date of first listing	2/11/1999

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	Consolidated Income Statement	62
	Statement of Comprehensive Income	63
	Consolidated Balance Sheet	64
	Consolidated Cash Flow Statement	65
	Consolidated Statement of Changes in Equity	66
	NOTES TO THE CONSOLIDATED FINANCIAL	67
	STATEMENTS FOR THE BUSINESS YEAR 2022
I.	Accounting principles	67
II.	Accounting principles in accordance with the	68
	international financial reporting standards
III.	Consolidated companies	69
IV.	Use of § 264 (3) GERMAN COMMERCIAL CODE (HGB)	71
V.	Consolidation principles	71
VI.	Currency translation	72
VII.	Accounting and valuation principles	73
VIII.	Notes to the income statement	91
IX.	Notes to the balance sheet	98
X.	Supplementary information	121
XI.	Executive Officers of the Company	128
XII.	Declaration of Compliance with the German	129
	Corporate Governance Code pursuant to § 161
	Sentence 1 Stock Corporation Act (AktG)
	SURTECO Shareholdings	130
	Auditor's Report	132
	Responsibility Statement	139

CONTENTS

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€ 000s	Notes	1/1/-31/12/ 2021	1/1/-31/12/ 2022
Sales revenues	(1)	757,060	747,698
Changes in inventories	(2)	12,382	-1,082
Other own work capitalized	(3)	3,750	4,649
Total output		773,192	751,265
Cost of materials	(4)	-381,759	-390,731
Personnel expenses	(5)	-175,244	-174,880
Other operating expenses	(6)	-107,392	-112,473
Income/Expenses due to impairments under IFRS 9	(7)	-458	124
Other operating income	(9)	6,425	10,876
EBITDA		114,764	84,181
Depreciation and amortization	(18)	-42,240	-44,000
EBIT		72,524	40,181
Interest income		438	984
Interest expenses		-4,810	-4,997
Other financial expenses and income		1,818	655
Financial result	(10)	-2,554	-3,358
EBT		69,970	36,823
Income tax	(11)	-22,164	-11,590
Consolidated net profit		47,806	25,233
Basic and diluted earnings per share (€)	(12)	3.08	1.63
Number of shares at 31 December		15,505,731	15,505,731

Consolidated Income Statement Statement of Comprehensive Income

€ 000s	1/1/-31/12/ 2021	1/1/-31/12/ 2022
Consolidated net profit	47,806	25,233
Components of other comprehensive income not to be reclassified to the income statement
Remeasurements of defined benefit obligations	520	1,446
of which included deferred tax	-156	-427
Components of other comprehensive income
that may be reclassified to the income statement
Exchange differences translation of foreign operations	3,118	1,661
Other comprehensive	3,482	2,680
Comprehensive income	51,288	27,913

€ 000s	Notes	31/12/2021	31/12/2022
ASSETS
Cash and cash equivalents	(13)	73,056	117,752
Trade accounts receivable	(14)	74,515	61,391
Inventories	(15)	140,900	142,129
Current income tax assets	(16)	2,745	5,901
Other current non-financial assets	(17)	9,156	9,272
Other current financial assets	(17)	3,136	5,371
Current assets		303,508	341,816
Property, plant and equipment	(19)	241,527	251,193
Intangible assets	(20)	46,822	43,832
Rights of use	(21)	27,769	32,112
Goodwill	(22)	162,911	161,979
Financial assets	(23)	10	10
Non-current income tax assets		4,507	4,507
Other non-current non-financial assets		148	855
Other non-current financial assets		1,358	1,353
Deferred taxes	(11)	6,590	14,202
Non-current assets		491,642	510,043
		795,150	851,859
LIABILITIES AND SHAREHOLDERS' EQUITY
Short-term financial liabilities	(27)	92,784	9,510
Trade accounts payable		63,582	60,946
Contract assets under IFRS 15		4	4
Income tax liabilities	(24)	10,692	9,260
Short-term provisions	(25)	7,047	6,021
Other current non-financial liabilities	(26)	3,276	3,939
Other current financial liabilities	(26)	26,758	25,012
Current liabilities		204,143	114,692
Long-term financial liabilities	(27)	132,827	261,001
Pensions and other personnel-related obligations	(28)	11,888	9,548
Long term provisions		505	140
Other non-current non-financial liabilities		107	90
Other non-current financial liabilites		39	15
Deferred taxes	(11)	31,959	40,299
Non-current liabilities		177,325	311,093
Capital stock		15,506	15,506
Capital reserve		122,755	122,755
Retained earnings		227,615	262,580
Consolidated net profit		47,806	25,233
Equity	(29)	413,682	426,074
		795,150	851,859

€ 000s	Notes	1/1/-31/12/ 2021*	1/1/-31/12/ 2022
EBT		69,970	36,823
Payments for income tax		-18,488	-15,408
Reconciliation to cash flow from current business operations:
- Depreciation and amortization on property, plant and equipment	(18)	42,240	44,000
- Interest income and result for investments	(10)	4,372	4,013
- Gains/losses from the disposal of fixed assets		-770	-5,272
- Change in long-term provisions		-1,300	-2,706
- Other expenses/income with no effect on liquidity		972*	458
Internal financing		96,996*	61,908
Increase/decrease in
- Trade accounts receivable	(14)	-19,400*	14,196
- Other assets		-139*	-3,019
- Inventories	(15)	-29,398*	164
- Accrued expenses		-3,744*	-1,007
- Trade accounts payable		-1,076*	-1,914
- Other liabilities		514*	-1,191
Change in assets and liabilities (net)		-53,243*	7,229
CASH FLOW FROM CURRENT BUSINESS OPERATIONS	(33)	43,753	69,137
Purchase of property, plant and equipment	(19)	-28,659	-45,187
Purchase of intangible assets	(20)	-4,441	-5,134
Inflows / outflows from the disposal of property, plant and equipment		2,417	11,381
CASH FLOW FROM INVESTMENT ACTIVITIES	(33)	-30,683	-38,940
Dividend paid to shareholders	(29)	-12,405	-15,506
Repayment of lease obligations		-6,444	-1,908
Borrowing of financial liabilities	(32)	30,000	121,463
Repayment of financial liabilities	(32)	-79,412	-84,953
Interest received	(10)	438	984
Interest paid	(10)	-4,810	-4,996
CASH FLOW FROM FINANCIAL ACTIVITIES	(33)	-72,633	15,084
Change in cash and cash equivalents		-59,563	45,281
Cash and cash equivalents
1 January		133,466	73,056
Effect of changes in exchange rate on cash and cash equivalents		-847	-585
31 December	(13)	73,056	117,752

Consolidated Balance Sheet Consolidated Cash Flow Statement

* Changed reporting of exchange rate effects. See Notes (33)

Consolidated Statement of Changes in Equity

€ 000s	Capital stock	Capital reserve	Other compre hensive income	Currency trans lation adjust ments	Other retrained earnings	Consoli dated net profit	Total
1 January 2021	15,506	122,755	-2,628	-19,909	223,918	33,687	373,329
Consolidated net profit	0	0	0	0	0	47,806	47,806
Other comprehensive income	0	0	364	3,118	0	0	3,482
Allocation to retained earnings	0	0	0	0	33,687	-33,687	0
Dividend payout SURTECO GROUP SE	0	0	0	0	-12,405	0	-12,405
Withdrawals from consolidation group	0	0	0	1,470	0	0	1,470
31 December 2021	15,506	122,755	-2,264	-15,321	245,200	47,806	413,682
1 January 2022	15,506	122,755	-2,264	-15,321	245,200	47,806	413,682
Consolidated net profit	0	0	0	0	0	25,233	25,233
Other comprehensive income	0	0	1,019	1,661	0	0	2,680
Allocation to retained earnings	0	0	0	0	47,806	-47,806	0
Dividend payout SURTECO GROUP SE	0	0	0	0	-15,506	0	-15,506
Withdrawals from consolidation group	0	0	0	-15	0	0	-15
31 December 2022	15,506	122,755	-1,245	-13,675	277,500	25,233	426,074

I. Accounting principles

SURTECO GROUP SE (Societas Europaea) is a company listed on the stock exchange under European law and is based in Buttenwiesen, Germany. The address is Johan-Viktor-Bausch-Str. 2, 86647 Buttenwiesen (Germany). The company is the ultimate parent company of the Group and is registered in the Company Register of the Local Augsburg Court (Amtsgericht Augsburg) under HRB 23000. The purpose of the companies consolidated in the SURTECO Group is the development, production and sale of coated surface materials based on paper and plastic.

The consolidated financial statements of SURTECO GROUP SE and its subsidiaries for the fiscal year 2022 have been prepared in accordance with the regulations of the International Financial Reporting Standards (IFRS) of the International Accounting Standards Board (IASB) applicable on the balance-sheet date, as they were adopted by the EU, taking into account the interpretations of the International Financial Reporting Interpretations Committee (IFRIC) and the regulations to be applied in addition pursuant to § 315e (1) German Commercial Code (HGB). New standards adopted by the IASB will be applied after they have been adopted by the EU from the date on which they are first mandatory. Application and change to the valuation and accounting principles will be explained under the appropriate items in the Notes to the Consolidated Financial Statements as necessary.

Pursuant to § 315e German Commercial Code (HGB), the consolidated financial statements have been drawn up in accordance with Clause 4 of Directive (EU) No. 1606/2002 of the European Parliament and the Council dated 19 July 2002 relating to application of the International Accounting Standards in accordance with the International Financial Reporting Standards (IFRS) promulgated by the International Accounting Standards Board (IASB) and were supplemented by specific information and the consolidated management report, and were adjusted in conjunction with § 315e German Commercial Code (HGB).

The consolidated financial statements have been drawn up in the reporting currency euros (€). Unless otherwise indicated, all amounts have been given in thousand euros (€ 000).

We refer to that fact that differences may occur when rounded amounts and percentages are used on account of commercial rounding.

The reporting date of SURTECO GROUP SE and the consolidated subsidiaries is 31 December 2022.

The consolidated financial statements and the combined management report of the SURTECO Group and SURTECO GROUP SE for 2022 will be published in the Federal Gazette (Bundesanzeiger).

Some items in the consolidated income statement and the consolidated balance sheet for the Group have been combined and stated separately in the Notes to the Consolidated Financial Statements. This is intended to improve the clarity and informative nature of presentation of the consolidated financial statements.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF SURTECO GROUP SE FOR THE BUSINESS YEAR 2022

The income statement has been drawn up in accordance with the cost of production method.

The consolidated financial statements of SURTECO GROUP SE for the fiscal year 2022 were prepared on 13 April 2023 and forwarded to the Supervisory Board for auditing. The Supervisory Board has the function of auditing the consolidated financial statements and declaring whether it approves the consolidated financial statements. The Supervisory Board is to approve the consolidated financial statements at the meeting on 13 April 2023. The Management Board will then release the statements for publication.

II. Accounting principles in accordance with the international financial reporting standards

CHANGE IN ACCOUNTING AND VALUATION METHODS

With the exception of the changes presented below, the accounting and valuation methods correspond to the methods applied in the previous year.

ACCOUNTING STANDARDS AND INTERPRETATIONS APPLIED

During the business year, revised standards and interpretations were applied for the first time. They give rise to no material effects on the net assets, financial position and results of operations of the Group.

INTERNATIONAL FINANCIAL REPORTING STANDARDS AND INTERPRETATIONS THAT HAVE BEEN PUBLISHED AND HAVE TO BE APPLIED IN THE FUTURE BUT ARE NOT YET MANDATORY

The following new and revised standards and interpretations, which were not yet mandatory during the reporting period or had not yet been adopted by the European Union, are not being applied in advance.

(A) Amended

(R) Revised

* Date of first-time application in accordance with IASB-IFRS (since these regulations have not yet been adopted in EU law)

III. Consolidated companies

SURTECO GROUP SE and all significant companies, in which SURTECO GROUP SE has a controlling influence, are included in the consolidated financial statements as of 31 December 2022. Control exists if SURTECO GROUP SE has a right to receive variable returns based on the relationship with a company and possesses power of disposal over the company. The term "power" implies that SURTECO GROUP SE has existing rights enabling it to direct the relevant activities of the company and thus exert a significant influence on the variable returns. The ability to control another company generally derives from direct or indirect ownership of a majority of the voting rights. Within structured entities, control usually derives from contractual agreements. The financial statements of subsidiary companies are included in the consolidated financial statements from the point in time at which control exists until it is no longer possible to exercise such control.

Standard/Interpretation	Application obligation to apply for the business on or from	Adoption by the EU Commission	Expected effects on SURTECO
Amendments to IFRS 3: Reference to the Conceptual Framework	01/01/2022	yes	none
Amendments to IAS 16: Proceeds before Intended Use	01/01/2022	yes	none
Amendments to IAS 37: Onerous contracts – Cost of Fulfilling a Contract	01/01/2022	yes	none
Annual Improvements to IFRS (2018-2020 Cycle) with amendments to IFRS 1, IFRS 9, IFRS 16 and IAS 41	01/01/2022	yes	none

Standard/Interpretation	Application obligation to apply for the business years on or from	Adoption by the EU Commission	Expected effects on SURTECO
IFRS 17 and amendments to IFRS 17 from June 2020 for deferral of the mandatory effective date	01/01/2023	yes	being analysed
Amendments to IAS 1 and Practice Statement 2: Disclosure of Accounting Policies	01/01/2023	yes	being analysed
Amendments to IAS 8: Definition of Accounting Estimates	01/01/2023	yes	being analysed
Amendments to IFRS 17: Initial Application of IFRS 17 and IFRS 9 – Comparative Information	01/01/2023 *	yes	being analysed
Amendments to IAS 12: Deferred Tax Related to Assets and Liabilities arising from a Single Transaction	01/01/2023 *	yes	being analysed
Amendments to IAS 1: Classification of Liabilities as Current or Non-current incl. the deferral of the mandatory effective date published in July 2020	01/01/2024 *	no/open	being analysed
Amendments to IFRS 16: Lease Liability in a 'Sale and Leaseback'	01/01/2024 *	no/open	being analysed

As of the reporting date, one company, as in the previous year, is not included in the consolidated financial statements as there were only minimal business activities in the course of the year under review and the influence of their aggregate value on the true and fair view of the net assets, financial position and results of operations of the Group was not significant.

Alongside SURTECO GROUP SE, the following companies are included in the consolidated financial statements for the Group:

The companies included in the consolidated financial statements as of 31 December 2022 and disclosures on subsidiaries and participations held directly and indirectly by SURTECO GROUP SE are included in the list under "Shareholdings". The annual financial statements and the management report of SURTECO GROUP SE for the business year 2022 are submitted to the Federal Gazette (Bundesanzeiger) and published there.

In the business year 2022, the following structural changes were recognized within the SURTECO Group:

• Dissolution of Proadec UK Limited incl. final consolidation

IV. Use of § 264 (3) GERMAN COMMERCIAL CODE (HGB)

The exemption clauses pursuant to § 264 (3) German Commercial Code (HGB) were applied for the following subsidiary companies included in the consolidated financial statements in order to provide them exemption from the requirement to draw up their respective management report and notes, and to audit and to disclose their annual financial statements:

V. Consolidation principles

The financial statements included in the consolidation process have been prepared on the basis of the accounting and valuation principles, uniformly applicable – which have remained fundamentally unchanged by comparison with the previous year – to the SURTECO Group.

The consolidated financial statements have been prepared on the basis of historic acquisition and production cost, with the exception of measuring derivative financial instruments and financial assets available for sale at their fair value or market value.

The reporting date of the consolidated financial statements coincides with the reporting date of all the individual companies included in the consolidated financial statements (31 December 2022).

The accounting of business combinations is carried out by the acquisition method. The purchase costs of the acquisition correspond to the fair value of the assets provided, the equity instruments issued, and the liabilities incurred or taken over on the date of exchange. In the context of a business combination, assets, liabilities and contingent liabilities identified within the course of a first-time consolidation are measured at their acquisition-date fair values. For each business acquisition, the Group decides on an individual basis whether the non-controlling shares in the acquired company should be recognized at their respective fair value or on the basis of their proportion in the net assets of the acquired company. Costs relating to the acquisition are charged to expenses at the time they occur.

Any remaining positive netting difference between the purchase price and the identified assets and liabilities is recognized as goodwill. Any remaining negative difference is recognized as profit or loss in the income statement.

Goodwill arising from the acquisition of a subsidiary company or business operation are recognized separately in the balance sheet.

	31/12/2021	Additions	Disposals	31/12/2022
Consolidated subsidiaries
- of which in Germany	6	0	0	6
- of which abroad	24	0	1	23
Subsidiaries reported at acquisition costs
- of which in Germany	0	0	0	0
- of which abroad	1	0	0	1
	31	0	1	30

Name	Registered office
SURTECO GmbH	Buttenwiesen
SURTECO art GmbH	Willich
Dakor Melamin Imprägnierungen GmbH	Heroldstatt
Kröning GmbH	Hüllhorst
Döllken Profiles GmbH	Bönen
SURTECO Beteiligungen GmbH	Buttenwiesen

In accordance with IFRS 3 and in conjunction with IAS 36, goodwill arising from company acquisitions is not subject to scheduled amortization, but is subject to an annual impairment test if there are any indications of declines in value.

Receivables, liabilities and loans between the Group companies are netted.

Sales, expenses and income within the Group and intercompany profits arising from sales of assets within the Group, which have not yet been disposed of to third parties, will be eliminated if they materially affect the presentation of the actual relationships of current net assets, financial position and results of operations.

Deferred income tax arising from consolidation measures recognized in the income statement has been accrued.

Intercompany trade accounts are accounted on the basis of market prices and transfer prices that are determined according to the principle of "dealing at arm's length".

Transactions with non-controlling interests without loss of control are accounted for as transactions with the owners of the Group who act in their capacity as owners. A difference between the fair value of the consideration paid and the acquired share in the carrying value of the net assets of the subsidiary company arising from the purchase of a non-controlling interest is recognized in equity. Gains and losses which arise on disposal in respect of non-controlling interests are also recorded in equity.

VI. Currency translation

Business transactions in foreign currency are reported at the exchange rate on the date of first-time reporting. Exchange gains and losses arising from the valuation of receivables or liabilities up to the reporting date are reported at the rate on the balance sheet date. Gains and losses arising from changes in rates are reported with effect on earnings in the financial result (from non-operating matters) or in other operating income or other operating expenses (from operating matters).

The earnings and the balance sheet items of the foreign subsidiary companies included in the consolidated financial statements which have a different functional currency to the euro are converted into euros as follows. Assets and liabilities, as well as contingent obligations and other financial obligations, are therefore translated at the rate prevailing on the reporting date, whereas equity capital is translated at historic rates. Expenses and income and hence also the profit/loss for the year recognized in the income statement are translated at the average rate for the year. Differences arising from currency translation for assets and debts compared with translation in the previous year and translation differences between the income statement and the balance sheet are reported with no effect on income under shareholders' equity in retained earnings (currency translation adjustments). Since all consolidated companies operate their financial, business and organizational transactions independently, the relevant national currency is the functional currency.

Translation was based on the following currency exchange rates:

VII. Accounting and valuation principles

UNIFORM ACCOUNTING AND VALUATION PRINCIPLES

The consolidated financial statements were drawn up in accordance with uniform accounting and valuation principles for similar business transactions and other events in similar circumstances.

CONSISTENCY OF ACCOUNTING AND VALUATION PRINCIPLES

The accounting and valuation principles have been complied with, unless defined otherwise below, by comparison with the previous year.

STRUCTURE OF THE BALANCE SHEET

Assets and liabilities are recognized as non-current in the balance sheet if their residual term is more than one year or realization is expected within the normal business cycle. Liabilities are generally recognized as current if there is no unrestricted right to fulfil the obligation within the period of the next year. Shorter residual terms are recognized as current assets or liabilities. Pension provisions and other personnel-related obligations, and claims or obligations arising from deferred taxes are reported as non-current assets or liabilities.

REVENUE AND EXPENSES REALIZATION

IFRS 15 establishes the principles that an entity shall apply to report useful information about the nature, amount, timing and uncertainty of revenue and cash flows arising from a contract with a customer. The core principle is that a company shall recognize revenues to depict the transfer of promised goods and services in an amount that likely reflects the consideration.

Exchange rates in euros			Rate on the reporting date		Average rate
		31/12/2021	31/12/2022	2021	2022
US dollar	USD	0.8829	0.9376	0.8454	0.9507
Canadian dollar	CAD	0.6948	0.6925	0.6744	0.7304
Australian dollar	AUD	0.6404	0.6372	0.6351	0.6595
Singapore dollar	SGD	0.6545	0.6993	0.6292	0.6893
Swedish krone	SEK	0.0976	0.0899	0.0986	0.0941
Sterling GBP	GBP	1.1901	1.1275	1.1629	1.1732
Turkish lira	TRY	0.0656	0.0501	0.0977	0.0579
Polish zloty	PLN	0.2175	0.2136	0.2191	0.2135
Russian rouble	RUB	0.0117	0.0128	0.0115	0.0142
Czech koruna	CZK	0.0402	0.0415	0.0390	0.0407
Mexican peso	MXN	0.0432	0.0479	0.0417	0.0473
Brazilian real	BRL	0.1585	0.1773	0.1570	0.1854
Chinese yuan	CNY	0.1390	0.1359	0.1311	0.1411

All components of IFRS 15 relevant for SURTECO were reviewed and accounted for within the scope of revenue and expense realization relating to the business year 2022.

Revenues should be recorded when a performance obligation is satisfied by the transfer of a promised good or promised service to a customer. An asset is deemed to have been transferred if the customer is able to exert power of disposal over the asset.

Revenues should be recognized if it is likely that the economic benefit will accrue to the Group and the amount of the income can be reliably determined. Income is valued at the fair value of the reciprocal product or service.

Sales originating from the sale of goods have been recorded if the following conditions are fulfilled:

• The Group has transferred the power of disposal over them arising from ownership of the goods to the purchaser.
• The level of the sales revenues can be reliably determined.
• It is probable that the economic benefit arising from the business will accrue to the Group.
• The costs incurred or still to be incurred due to the sale can be reliably determined.

SURTECO realizes sales revenues when the power of disposal over definable goods or services is transferred to the customer. In other words, as soon as the customer has the capability to determine the use of the transferred goods and services, and essentially derives the remaining benefit from them. The prerequisite is the existence of a contractual agreement which establishes legally enforceable rights and obligations.

The level of the recorded sales revenues corresponds to the expected consideration to which SURTECO has a contractual claim.

Sales revenues are recorded without value added tax and after sales reductions, such as bonuses, discounts or rebates. Provisions for customer price reductions and rebates, as well as returns, other allowances, and warranties are recognized in the same period in which the sales were reported.

Volume discounts partly acting retrospectively are agreed for the sale of products. These are based on the total sales of a 12-month period. The revenues from these sales are reported in the amount of the price defined in the contract, less the estimated volume discount. The estimate for the liability is based on experience values. Sales revenues are only reported in the scope in which it is highly probable that a significant cancellation of the sales is not necessary, insofar as the associated uncertainty no longer exists.

Sales revenues arising from the sale of goods are realized on the date when the power of disposal is transferred to the purchaser, generally when the goods are delivered. The sales revenues derived from services are recorded over the period of service provision because the customer benefits from the use uniformly over the period when the service is provided and the customer consumes this use at the same time.

When goods are sold to the customer, the customer makes payment after invoicing takes place following delivery. As appropriate, advance payments are requested from customers. The payment conditions vary in accordance with the standard conditions applicable in the individual countries and sectors, and usually grant short-term payment conditions.

All revenues are realized on a specific date in the SURTECO Group. Revenues are recorded on transfer of risk depending in each case on the agreed delivery and shipping conditions, i.e. on a defined date.

A financial component remains for the level and the time of the sales realization when the period between the transfer of goods or services and the payment by the customer is a maximum of one year.

Additional costs for contract initiation whose amortization period would be no longer than one year are always recognized immediately as expense.

Sales are only defined as the product sales resulting from the ordinary activities of the company.

A receivable is recognized when the goods are dispatched because at this point the claim to a consideration is unconditional, i.e. the due date is defined automatically from this point in time.

Dividend income arising from financial assets available for sale is recognized if the legal right to payment of SURTECO as a shareholder has arisen.

Overall, expenses are recognized if it is probable that there will be an outflow of economic resources from the company.

Operating expenses are reported as expenses at the point in time at which they are incurred when the service is used, insofar as they fall within the reporting year.

Interest income and interest expenses are recorded pro rata. Income from financial assets is recorded when the legal right to payment has occurred.

EBITDA

EBITDA is earnings before financial result, income tax and depreciation and amortization.

EBIT

EBIT is earnings before financial result and income tax.

EBT

EBT is earnings before tax.

EARNINGS PER SHARE

The basic earnings per share are calculated by dividing the proportion of the share in the consolidated net profit attributable to the shareholders of SURTECO GROUP SE by the weighted average of the issued shares. Shares which have been newly issued or bought back during a period are recognized pro rata for the period in which they are in free float. There were no dilution effects during the reporting periods referred to.

DETERMINATION OF THE FAIR VALUE

In accordance with IFRS 13, the fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction at arm's length between market participants at the measurement date. This applies independently of whether the price can be observed directly or has been estimated. When applying valuation procedures for calculating the fair value, it is important to use as many (relevant) observable input factors as possible and as few non-observable input factors as possible.

A three-level fair value hierarchy is to be applied. The input factors used in the valuation procedures are classified as follows:

Level 1 – Unadjusted quoted prices in active markets for identical assets and liabilities, where the entity drawing up the financial statements must have access to these active markets on the valuation date. Level 2 – Directly or indirectly observable input factors which cannot be classified under Level 1. Level 3 – Unobservable input factors.

The scope of IFRS 13 is far-reaching and encompasses non-financial assets and liabilities and equity instruments. IFRS 13 is always used if another IFRS prescribes or permits a valuation at fair value or information on the calculation of the fair value is requested.

FINANCIAL INSTRUMENTS

In accordance with IAS 32, a financial instrument is a contract, which simultaneously leads to a financial asset for one entity and a financial liability or an equity capital instrument for another entity. Financial instruments comprise primary financial instruments such as trade accounts receivable or trade accounts payable, financial receivables, debts and other financial liabilities, as well as derivative financial instruments which are used to hedge risks arising from changes in currency exchange rates and interest rates.

First-time recognition and derecognition of financial instruments in the balance sheet are carried out on the date of fulfilment. When first-time recognition is carried out, the SURTECO Group measures a financial asset at the fair value plus the transaction costs incurred directly on the acquisition of this asset, insofar as the asset is subsequently not reported at fair value. In the case of such instruments, the transaction costs are recorded immediately in the income statement. The following exception applies to this regulation for trade accounts receivable that are first valued at their transaction price in accordance with IFRS 15.

Derecognition of the receivables and other financial assets is carried out if the Group has transferred its contractual rights to cash flows from the financial assets, and essentially all opportunities and risks associated with the property have been transferred, or alternatively if the power of disposal over the asset has been transferred. If the prerequisites for derecognition of the receivables are not fulfilled, the assets are not derecognized.

Financial assets and liabilities are netted and recognized as a net amount in the balance sheet if there is a legal entitlement to this and it is intended to bring about a settlement on a net basis or release the associated liability and realize the relevant asset simultaneously. The legal entitlement to offsetting must not depend on a future event and must be implementable in the course of normal business and in the case of a default, an insolvency or a bankruptcy.

The liabilities arising from primary financial instruments can either be recognized at the amortized costs or as liabilities "at fair value through profit and loss". SURTECO measures all financial liabilities at amortized costs. Financial obligations with fixed or determinable payments are recognized in the balance sheet under other liabilities in accordance with their remaining term. A financial liability is then derecognized when it is settled, i.e. the obligations defined in the contract have been fulfilled or have been cancelled or have expired.

CLASSIFICATION AND VALUATION

In accordance with IFRS 9, principle-based regulations are applicable for the classification of financial assets. A distinction is drawn between the following valuation criteria set out below.

DEBT INSTRUMENTS

The valuation of debt instruments depends on the business model of the SURTECO Group for managing the asset and the cash flows of the asset. The SURTECO Group classifies its debt instruments at amortized costs. These are defined as assets that are held to collect contractual cash flows, and for which payment flows are exclusively interest payments and settlement repayments, and they are measured at amortized costs. Interest income from these financial assets is recognized in financial income by applying the effective interest method. Profits or losses from derecognition are reported directly in other operating income or expenses. Impairments are recognized under impairment expenses or impairment reversal income in accordance with IFRS 9.

These regulations are to be applied to a financial asset in entirety, even if this includes an embedded derivative.

In the SURTECO Group, financial instruments are classified in the following categories:

• At amortized costs (AC) for trade accounts receivable and for other assets (loans issued, etc.) • At fair value through profit and loss for trade accounts receivable which have been assigned in the scope

• of the factoring programme

The SURTECO Group only reclassifies debt instruments if the business model used to manage such assets changes.

If a hedging instrument expires, is sold or terminated, or the hedging relationship no longer meets the criteria for the reporting of hedging relationships, any accumulated deferred hedging gains/losses at this point and the deferred hedging costs remain in equity until the expected transaction occurs and then leads to recording of a non-financial asset. If the transaction is no longer expected to occur, the accumulated hedging gains and losses and the deferred hedging costs are reallocated to profit or loss.

IMPAIRMENTS

IFRS 9 requires expected losses to be reported. The scope of application includes all financial instruments which are reported at amortized costs and at fair value through other comprehensive income, and contractual and leasing assets. Here, a distinction is drawn between the general and simplified model used to determine impairments.

General impairment model

The level of impairment depends on the allocation of the financial instrument to one of the following levels: 1. Level 1: All financial instruments are allocated to this level when they are first recognized. The expected loss corresponds to the amount which can arise from possible default events within the next 12 months after the reporting date. An expected loss is already recognized when the item is first reported. In the case of financial instruments whose credit risk has not increased significantly since first-time recognition, a company must record a risk provision in the amount of the credit defaults, whose occurrence is expected within the next twelve months, i.e. 12-month ECL. This should be understood as the present value of the payment defaults which arise from possible default events over the next twelve months after the

1. Level 2: If, since the first-time recognition, a significant increase of the default risk has been recorded for the counterparty, the financial instrument should be transferred to Level 2. The impairment expense corresponds to the amount which can arise from possible default events during the residual term of the

2. reporting date.

3. instrument.

4. effective interest method on the basis of the (impaired) net book value.

5. Level 3: If there is an objective indication that an impairment has taken place, the financial asset should be transferred to this level. The risk provision to be recorded should be determined using the same approach as in Level 2. However, interest can only be recognized for these financial instruments using the

Expected losses are a probability-weighted estimate of losses. Default probabilities are determined for this which are multiplied by the nominal amount for the receivable.

Simplified impairment model

The simplified approach is distinguished by the fact that there are no differences in the credit risk and the expected credit losses are always recorded from the first-time recognition. Instead, a risk provision in the amount of the total term ECL must be recorded on first-time recognition and on every subsequent reporting date. The simplified approach must be applied mandatorily for trade accounts receivable without significant financial components and for contractual assets.

EQUITY INSTRUMENTS

Equity instruments are generally measured at fair value through profit and loss. Adjustments to the fair value are reported in the income statement under the other financial expenses and income.

The SURTECO Group does not make use of the fair-value OCI option.

DERIVATIVE INSTRUMENTS

The Group uses derivative financial instruments, such as forward exchange contracts and interest/currency swaps, in order to hedge risks associated with foreign currency and changes in interest rate which can occur in the course of ordinary business activities and within the scope of investment and financial transactions. Derivative financial instruments are used exclusively to hedge existing or held underlyings. These derivative financial instruments are recognized for the first time in the balance sheet at their fair value on the date at which the contract is closed. They are subsequently revalued at market value on the reporting date. Derivative financial instruments are recognized as assets if their fair value is positive and as liabilities if their fair value is negative.

At the beginning of the hedging transaction, the hedge between both the underlying transaction and the hedging transaction as well as the risk management targets and Group strategy are formally defined and documented in relation to hedging. The documentation includes the definition of the hedging instrument, the underlying transaction or the hedged transaction, as well as the type of hedged risk and a description of how the company calculates the effectiveness of the hedging instrument in the compensation of the risks arising from changes in the fair value or cash flow of the hedged underlying transaction.

For purposes of hedge accounting, hedging instruments are classified as follows:

• as hedging of the fair value, if the relationship relates to hedging the risk of a change in the fair value of a reported asset or a reported liability or a fixed obligation not reported (apart from currency risk),
• as hedging of cash flow, if the relationship relates to hedging the risk of fluctuations in the cash flow, which can be assigned to the risk associated with a reported asset, a reported liability or with a future transaction very likely to occur or to the currency risk of a fixed obligation not reported, or
• as hedging of a net investment in a foreign business operation.

The accumulated amounts reported in equity are reclassified to the periods in which the hedged underlying transaction exerts effects on the profit or loss, as follows:

• If the hedged underlying business leads to the recognition of a non-financial asset, the deferred hedging gains and losses are included in the original acquisition costs of the asset.
• The profit or loss from the effective part of the interest swap, which hedges the variable interest borrowings, is recognized under the item financial expenses under profit or loss for the period in which the interest expense is incurred for the hedged borrowings.

Inventories comprise raw materials, consumables and supplies, services in progress, purchased merchandise, and work in progress and finished goods. They are valued at acquisition or production cost or at the lower net sale value. The net sale value corresponds to the estimated recoverable proceeds from disposal in normal business operations less the necessary variable sales expenses.

Raw materials, consumables and supplies are valued at cost prices or at the lower net sale value of the goods to be manufactured. Carrying values have been calculated by the weighted-average method. Downward valuation adjustments have been undertaken to reflect impairments due to obsolescence and technically restricted application.

Finished products and work in progress have been recognized at production cost. These costs include costs directly attributable to the manufacturing process and a reasonable proportion of production-related overheads. These include production-related depreciation, proportionate administrative expenses, and proportionate social security costs. Inventory risks arising from the storage period or reduced usability have been taken into account by write-downs.

In the case of inventories, write-downs on the net sale proceeds are carried out, if the book values of the inventories are too high on the basis of the lower stock-market or market values.

Development costs for intangible assets produced within the company have been capitalized under income at directly attributable acquisition or production cost, if the following criteria are complied with:

• The technical feasibility of completing the intangible asset is such that it will be available for use.

• The form and manner in which the intangible asset will generate probable future economic benefits are

• The management intends to complete the intangible asset and to use or sell it.
• There is an ability to use or to sell the intangible asset.
• traceable.
• to use or sell the intangible asset.

• Adequate technical, financial and other resources are available in order to complete the development and

• The expenditure attributable to the intangible asset during its development can be reliably measured.

Development costs which do not meet with these criteria are recorded as expenses in the period when they were generated. Development costs already recognized as expenses are not subsequently capitalized as assets.

Property, plant and equipment have been recognized at acquisition or production cost, including incidental acquisition expenses, less accumulated scheduled depreciation and, if necessary, extraordinary depreciation.

Finance costs have not been capitalized under income as an element of acquisition or production costs because no manufacturing processes are involved over an extended period of time. Interest and other borrowing costs are recognized as expenses for the period.

The production costs of self-constructed plant include directly attributable costs and an appropriate proportion of the overheads and depreciation.

The SURTECO Group only has trade accounts receivable. The expected credit losses are calculated using a provision matrix depending on the overdues of individual receivables. The underlying default rates were established on the basis of historical experience data and current expectations, and are updated on each reporting date. In addition, future-oriented information (for example forecasts on economic performance indicators) are taken into account if these imply a connection with expected credit defaults on the basis of the historical data. Depending on the diversity of the customer base, appropriate groupings (for example on the basis of geographical area, product type, etc.) can be used if previous experience with credit losses demonstrates outcome patterns with significant deviation between different customer segments. The customers of the SURTECO Group are allocated within a homogenous portfolio because no special characteristics were identified here, for example in relation to the customer's country of origin.

Receivables with a clear indication of lack of recoverability continue to be checked individually for an impairment. If it is highly certain that no further incoming cash flow is to be expected, the instruments are written down.

The book value of the financial assets corresponds to the maximum amount at risk of default.

Cash and cash equivalents comprise liquid funds and sight deposits, as well as financial assets that can be converted into cash at any time and are only subject to minimal fluctuations in value. For the valuation category in accordance with IFRS 9, the cash and cash equivalents are classified as "debt instruments at amortized costs (AC).

Receivables and other financial assets, apart from derivative financial instruments and any receivable assigned under the factoring programme, are reported at amortized costs (AC). Allowances are carried out on a case-by-case basis in accordance with the expected default risks through an allowance account. Final derecognition is carried out if the receivable is not recoverable. Measurement of the requirement for individual allowance adjustments is based on the age structure of the receivable and the findings related to the customer-specific credit and default risk. Objective indications for an increased default risk are provided, for example, in the case of a pending insolvency, compulsory enforcement proceedings for the customer, one/ several complaints and late payments by customers, an affidavit by the customer, composition proceedings or a lawsuit in connection with the customer. The payment targets for the customers are agreed individually with the customer. No predefined critical overdues are applicable in the SURTECO Group. Critical receivables are assessed on the basis of the objective evidence available. Trade accounts receivable with standard payment terms are recognized at amortized costs, reduced by bonuses, discounts and allowances. The Group sells trade accounts receivable under factoring agreements. Most of these agreements were terminated in the business year 2021, with the exception of Italy.

These receivables are reported at fair value through profit and loss. The incoming payment from the sale of receivables is recognized under cash. Recognition of a short-term financial liability in the same amount is reported under current liabilities.

Furthermore, leasing payments arising from adequately certain utilization of extension options should be included in the valuation of the leasing liability.

The interest rates underlying the leasing payments are defined by the SURTECO Group for fixed terms and adjusted each year. Country-specific classification of the interest rate is not carried out because the important financing for the SURTECO Group is carried out through SURTECO GROUP SE.

Rights of use are valued at acquisition costs and they are comprised as follows:

• The amount of initial valuation of the leasing liability
• All leasing payments made at or before delivery less all/any leasing incentives received
• All direct costs initially incurred by the lessee and
• asset and returning to the conditions required in the leasing agreement.

• Any estimated costs which are likely to be incurred by the lessee on disassembly/disposal of the underlying asset, on reinstatement of the location at which the asset is set up, or for refurbishing the underlying

Rights of use are depreciated straight line over the shorter of the two periods relating to the useful life and term of the underlying lease agreement. If the exercise of a call option is regarded as sufficiently certain from the perspective of the SURTECO Group, depreciation is carried out over the useful life of the underlying asset. The SURTECO Group applies the acquisition cost method for reporting rights of use.

Owing to the different rules relating to (scheduled) subsequent valuation – the right of use primarily "at cost" (IFRS 16.29/30: after the start of the lease, the lessee values the right of use on the basis of a cost model, i.e. acquisition costs less accumulated depreciation and accumulated impairments, and the liability in accordance with the "effective interest method"), the recognized items no longer correspond over the term of the agreements.

The following rights of use are categorized in the SURTECO Group:

• Rights of use for land and buildings
• Rights of use for technical plant and machinery
• Rights of use for office equipment
• Rights of use for vehicles
• Rights of use for IT and communication

The SURTECO Group rents land and buildings, technical plant and machinery, office equipment, vehicles, and IT and communications equipment. Rental agreements are generally concluded over fixed periods from six months to eight years, but they may also have extension options. Rental conditions are negotiated individually and include different conditions, such as variable lease payments, residual value guarantees and extension and termination options. Leasing agreements do not include any credit conditions and are not used as collateral for drawing on credit lines.

Expenses in connection with variable leasing payments, payments on account and other expenses which are not included in leasing liabilities, are recognized in the framework of other operating expenses.

If significant proportions of a non-current asset have varying useful lives, they are reported as separate non-current assets under "Property, plant and equipment" and are subject to scheduled depreciation (component accounting).

The costs for replacement of part of a fixed asset are included in the book value of the fixed asset (property, plant and equipment) at the date on which they were incurred, insofar as the criteria for recognition are fulfilled. When a major inspection is carried out, the costs are capitalized in the book value of the fixed asset as a replacement, insofar as the criteria for recognition are fulfilled. All other maintenance and repair costs are immediately recognized under income.

A fixed asset (property, plant and equipment) is either derecognized on disposal or if no economic benefit can be derived from further use or sale of the asset. The resulting gains or losses incurred from derecognition of the asset are calculated as the difference between the net sale proceeds and the book value of the asset and reported in the income statement for the period in which the asset is derecognized.

LEASING ACTIVITIES

Leases are reported as a right of use and corresponding leasing liability at the date on which the leased item is delivered to the SURTECO Group for use in accordance with IFRS 16 "Leases". The right of use has to be recognized as part of the fixed assets and is depreciated straight line over the term of the lease/rental agreement. The liability is capitalized as a liability in the amount of the present value of the lease payments to be made in the future and depreciated using the effective interest method.

The SURTECO Group makes use of the following simplifications defined by the standard:

• Application of a fixed-term interest rate
• Application of a single interest rate on a portfolio of similarly structured lease agreements
• Leases for "small tickets" (low-value assets) and "short-term" leases are not reported
• Excluding initial costs in the valuation of rights of use at the date of first-time application
• The retrospective determination of the term of leases in the case of contracts with extension or termination options.

Initial and subsequent valuation

The starting point is the present value of the obligations for payment of future leasing rates. At the point of taking on a new lease/rental relationship, the amount of the right of use corresponds to the amount of the leasing liability.

The leasing liabilities include the present value of the following leasing payments:

• Fixed payments (incl. de facto fixed payments), less any leasing incentives receivable
• Variable lease payments which are linked to an index or (interest) rate, initially valued with the index or interest at the delivery date
• Expected payments from making use of residual value guarantees
• The exercise price of a call option, the exercise of which by the SURTECO Group is sufficiently certain
• Penalty payments in conjunction with the termination of a leasing relationship as long as the term provides for the SURTECO Group taking up the relevant termination option

Goodwill resulting from company acquisitions is allocated to the identifiable cash-generating units which are supposed to derive benefit from the synergies arising from the acquisition. Such cash-generating units are the lowest reporting level in the Group at which the goodwill is monitored by the management for internal controlling purposes. The recoverable amount of a cash-generating unit, which is allocated goodwill, is regularly subjected to an annual impairment test. Reference is made to our comments under section (22) in the notes to the consolidated financial statements for further details.

The standard IFRS 3 (Business Combinations) and the standard IAS 36 (Impairment of Assets) no longer permit goodwill to be subject to scheduled depreciation and amortization, rather a review of the value of these assets is carried out at regular intervals in an impairment test and additionally if there is evidence of a potential reduction in value at other points in time.

If goodwill or intangible assets with unlimited useful life are to be allocated to a cash-generating unit, the impairment test of those assets should be carried out annually or also, if events or changed circumstances result which could indicate a possible impairment, more frequently. The asset values taking into account the net working capital of the individual cash-generating units are compared with their individual recoverable amount, i.e. the higher value from the net sale price and value in use. In the determination of the recoverable amount, the present value of the future payments, which are anticipated on the basis of the ongoing use by the Strategic Business Unit, are used as the basis. The forecast of the payments is based on the current mediumterm plans of SURTECO.

The group of cash-generating units of the Group are identified in consultation with the internal reporting of the management taking into account customer-centric allocations. The group of cash-generating units are the operating divisions under the reportable segments. The group of cash-generating units relates to 'Decoratives', 'Profiles', and 'DAKOR', 'Kröning' and 'Technical Foils'.

In the cases in which the book value of the cash-generating unit is higher than its recoverable amount, the difference amounts to an impairment loss. The goodwill of the affected group of cash-generating units is amortized in the amount of the allowance thus determined as affecting expenses in the first stage. Any remaining residual amount is distributed to the other assets of the relevant group of cash-generating units proportionately to the book value. Any allowance carried out as necessary is recognized under other depreciation and amortization in the income statement. A subsequent write-up of the goodwill as a result of the reasons no longer being applicable is not permitted.

The actual income taxes paid or owed for the current and earlier periods are measured with the amount at the level at which a rebate from the tax authorities or a payment to the tax authorities is expected. The calculation of the amount is based on the country-specific tax rates and tax regulations which are applicable on the reporting date.

The actual income tax liabilities relate to the relevant tax year and any obligations arising from the previous years. The valuations are subject to the applicable statutory regulations taking into account current legal precedents and the prevailing professional opinion.

Intangible assets are recognized at acquisition costs or production costs. Such assets with a limited useful life are depreciated over their economic useful life using the straight-line method. Intangible assets with unlimited duration are checked every year to ascertain if a possible impairment arises.

Scheduled depreciation of assets has been carried out exclusively by the straight-line method. The remaining useful lives and the method of depreciation are reviewed each year and adjusted to future expectations. Depreciation is essentially based on the following commercial service lives applied uniformly across the Group:

The shares in unconsolidated companies recorded under financial assets are recognized at acquisition costs.

On each reporting date, the Group checks the book values of intangible assets and property, plant and equipment to ascertain whether there might be grounds for carrying out an Impairment. If such grounds exist, or if an annual impairment test is necessary for an asset, the Group carries out an estimate of the recoverable value for the relevant asset. The recoverable value of an asset is the higher of the two values comprising the fair value of an asset less the sale costs and the value in use. The recoverable value should be determined for each individual asset, unless an asset does not generate cash flows which are largely independent of the cash flows of other assets or other groups of assets. In this case, the recoverable amount is determined for the cashgenerating unit to which the asset is allocated. If the book value of an asset exceeds its recoverable amount, the asset is impaired and is written down to its recoverable amount. In order to determine the value in use, the expected future cash flows are discounted to their present value based on a discount rate after taxes, which reflects the current market expectations in relation to the interest effect and the specific risks of the asset. The fair value less the sales costs is calculated using a recognized valuation method. This method takes into account market data on current transactions available externally and valuations of third parties.

A test is carried out for assets, except for goodwill, on every reporting date, to ascertain whether there are grounds indicating that a previously recorded impairment expense no longer exists or has been reduced. If such grounds exist, the Group estimates the recoverable amount. A previous recorded impairment expense is only reversed if a change in the estimates, which were used to determine the recoverable amount, has occurred since the last impairment expense was recorded. If this is the case, the book value of the asset is increased to its recoverable amount. However, this amount must not exceed the book value which resulted after taking into account scheduled depreciation, if no impairment expense would have been recorded for the asset in previous years. An impairment reversal is recorded in the result for the period.

	Years
Concessions, patents, licences and similar rights	3-15
Customer relations, trademarks, technology and similar values	10-15
Development expenses	3
Buildings	40-50
Improvements and fittings	10-15
Technical plant and machinery	3-30
Other equipment, factory and office equipment	6-13

Current non-financial liabilities have been recorded with their repayment or performance amount.

Contractual liabilities correspond to the obligation to transfer goods to a customer for which the SURTECO Group has already received a consideration.

Pension provisions and other personnel-related obligations include obligations arising from regulations relating to company retirement provision, partial retirement and long-service awards.

Obligations arising from regulations relating to company pension provision relate to defined benefit plans which essentially cover benefit recipients employed in Germany. The arrangement depends on the legal, tax and economic relations pertaining and is generally based on the period of service and pay of the employee. The majority of pension obligations in Germany based on contractual conditions relate to life-time pension benefits, which are paid out in case of invalidity, death and attaining the age of retirement.

The pension funds were closed in the past. New employees will be offered a company pension plan through an external welfare fund and pension scheme; they will not receive any direct commitments from the company.

Since no further obligations or risks are incurred by the company beyond the payment of the contributions, these were classified as defined contribution plans and are therefore not taken into account for the determination of the provision.

The pension obligations of SURTECO are subject to various market risks. The risks essentially relate to changes in market interest rates, inflation which exerts an effect on the level of pension adjustments, longevity and on general market fluctuations.

Pension provisions are valued using the projected unit credit method in accordance with IAS 19. This method not only recognizes the pensions and projected unit credits acquired on the reporting date, it takes account of the increases in pensions and salaries anticipated in the future. The obligation is determined using actuarial methods taking into account biometric accounting assumptions. The expense of allocating pension accruals, including the interest portion contained therein, is recognized under personnel expenses. Remeasurements (actuarial gains or losses) arising from defined-benefit plans are recognized in equity (other comprehensive income for the year) with no effect on net income. The standardized income on the plan assets is generated in the amount of the interest rate of the pension obligations at the start of the reporting period. These returns are recognized with netting of the expenses arising from the pension obligations on the basis of a standardized return. Differences between the expected income and the actual income based on the standard return on plan assets are to be recognized with no effect on net income in equity (other comprehensive income for the year). Furthermore, the past service costs still to be offset are recognized immediately at the point of arising with an effect on earnings.

The reporting of income tax uncertainties is generally based on individual income tax treatment. If it is unlikely that an income tax treatment will be accepted by the local tax authorities, the SURTECO Group uses the amount with the highest probability for determining the taxable profit or the tax base.

Deferred income tax is determined in accordance with IAS 12 on the basis of the liability method. According to this method, deferred taxes result from temporary differences between the carrying amount (value) of an asset or a liability in the balance sheet and the tax value.

Deferred tax assets are recorded for all deductible temporary differences, unused tax loss carry-forwards and unused tax credits to the extent it is probable that taxable earnings will be available against which the deductible temporary differences and the unused tax loss carry-forwards and tax credits can be used, with the exception of

• deductible temporary differences from first-time recognition of an asset or a liability arising from a transaction that is not a business combination and at the point in time of the transaction influences neither the result for the period in accordance with IFRS nor the taxable earnings.

Deferred tax liabilities are reported for all deductible temporary differences, with the exception of

• temporary differences from the first-time recognition of goodwill or an asset or liability arising from a transaction which is not a business combination and at the point in time of the transaction neither influences the result for the period in accordance with IFRS nor taxable earnings, and
• taxable temporary differences which occur in conjunction with shareholdings in subsidiary companies, if the temporal reversal of the temporary differences can be controlled and it is likely that the temporary differences will not be reversed in the foreseeable future.

The book value of the deferred tax assets is audited on each reporting date and as necessary reduced by the amount by which it is no longer likely that an adequate taxable result will be available against which the deferred tax assets can be at least partly applied. Unrecognized deferred taxes are audited on each reporting date and recognized in the amount at which it has become likely that a future taxable result will be available to realize the deferred tax assets. Deferred tax assets and liabilities are measured on the basis of the tax rates that are likely to be valid during the period in which an asset is realized or a debt liability is fulfilled. The tax rates (and tax laws), which are applicable or adopted on the reporting date, are used as the basis for calculation. Future changes in tax rates should be considered at the reporting date, insofar as material requirements for effectiveness are fulfilled pursuant to a legislative procedure.

Income and expenses arising from actual and deferred income taxes that relate to the items that are reported directly under equity or in other comprehensive income for the year are not reported in the income statement but are also recorded directly under equity or in other comprehensive income for the year. Deferred tax assets and deferred tax liabilities are offset, if the Group has an enforceable legal claim to netting the actual tax reimbursement claims against actual tax liabilities and these relate to income tax of the same tax subject and are levied by the same tax authority.

In accordance with IAS 1.56, deferred taxes are recognized as long term.

Provisions for long-service bonuses are calculated by actuarial methods. The settlement backlogs and topup amounts for partial retirement obligations were added pro rata for partial retirement obligations until the end of the active phase.

The obligations from defined-benefit plans principally exist in Germany and they are calculated by taking the following actuarial assumptions into account:

The interest rate for the pension obligation is currently a uniform 3.69 % (2021: 0.90 %). Different interest rates were applied as necessary for similar other personnel-related obligations with shorter terms.

Provisions have been formed in accordance with IAS 37, if a legal or de facto obligation arises from a past event in respect of a third party, which is likely in the future to lead to an outflow of resources and where it can be reliably estimated. If numerous similar obligations exist – as in the case of statutory warranty – the probability of a charge on assets is calculated on the basis of the group of these obligations. A provision is recognized under liabilities, if the probability of a charge on assets is lower in relation to an individual obligation held within this group. Provisions for warranty claims are formed on the basis of previous or estimated future claims. The provisions for legal disputes and other provisions have also been recorded in accordance with IAS 37 for all recognizable risks and uncertain obligations in the amount of their probable occurrence and not recognized with rights of recourse. A provision for restructuring measures is recognized as soon as the Group has approved a detailed and formal restructuring plan and the restructuring measures have either commenced or have been announced in the public domain. When a restructuring provision is measured, only the direct expenses for the restructuring are entered. This therefore only relates to amounts which have been caused by restructuring and is not related to the ongoing business operations of the Group.

Changes in equity without effect on income are also reported under the item Statement of Changes in Equity, if they are not based on capital transactions of the shareholders. This includes the difference arising from currency translation, accrued actuarial gains and losses arising from the valuation of pensions, and unrealized gains and losses arising from the fair valuation of financial assets available for sale and derivative financial instruments.

Contingent liabilities are possible obligations which result from events in the past, whereby their existence can only be confirmed through the occurrence or non-occurrence of one or more events in the future, which are not fully under the control of the SURTECO Group. Furthermore, contingent liabilities arise from current obligations which are based on past events, but which cannot yet be reported in the financial statements because the outflow of resources is not likely or the level of the obligations cannot be estimated with a sufficient level of reliability.

Segment reporting

Presentation of the business segments is consistent with internal reporting to the main decision-maker. The main decision-maker is responsible for decisions on the allocation of resources to the operating segments and for reviewing their earnings power. The Management Board of SURTECO was defined as the main decision-maker.

Decisions of judgment and estimates

The preparation of consolidated financial statements in accordance with IFRS requires, up to a certain level, decisions of judgement, estimates and assumptions of the management which exert effects on the recognition, measurement and reporting of assets, liabilities, income and expenses, and contingent assets and liabilities. The significant facts which are affected by such decisions of judgement and estimates relate to the definition of the period of use of fixed assets, the determination of discounted cash flows within the scope of purchase price allocations and impairment tests, accrual of cash-generating units, the formation of provisions for restructuring, for legal proceedings, pension benefits for employees and corresponding deductions, taxes, inventory valuations, price reductions, product liability and warranties.

The costs for obtaining contracts include additional commissions that are paid in connection with the listing of our products and which would not have arisen without the conclusion of the contract. These costs are amortized on a straight-line basis over a period of four years because this represents the expected term of the contracts.

The assumptions and estimates are based on premises that rely on the knowledge available at the time. In particular, the expected future business development takes account of the circumstances prevailing at the time when the consolidated financial statements were prepared and realistic assumptions on the future development of the global and sector-specific environment. Any developments of these framework conditions deviating from these assumptions and outside the sphere of influence of the management may result in deviations of the actual amounts from the estimated values originally projected. If the actual development deviates from the projected development, the premises and, if necessary, the book values of the relevant assets and liabilities are adjusted appropriately. Further explanations are described under the appropriate items.

	2021	2022
Interest rate	0.90%	3.69%
Salary increases	2.0%	3.5%
Pension increases	2.0%	2.0%
Fluctuation rate	0.0%	0.0%
Biometric data	Heubeck 2018G	Heubeck 2018G

Reporting and valuation principles should be regarded as important if they significantly influence the presentation of the net assets, financial position, results of operations and cash flows of the SURTECO Group and require a difficult, subjective and complex assessment of facts and circumstances that are often uncertain in nature, may change in subsequent reporting periods, and whose consequences are therefore difficult to estimate. The published accounting principles, based on estimates, do not necessarily exert significant effects on reporting. There is only the possibility of significant effects.

State grants and subsidies

State grants and subsidies are reported in conformity with IAS 20.7, if there is reasonable certainty that the company will comply with the conditions associated with the grants and subsidies, and the grants and subsidies are awarded. The subsidies are recorded in profit or loss in accordance with IAS 20.12 during the periods when the company recognizes the expenses eligible for support.

If expenses or losses have already been incurred or if the grants and subsidies serve to provide immediate financial support independently of special expenses, the grants and subsidies will be recorded in accordance with IAS 20.20 in profit or loss during the period when the corresponding claim exists.

SURTECO has correspondingly recorded the state grants and subsidies for the business year 2022 in accordance with IAS 20, if there is reasonable certainty that the company will comply with the conditions associated with the grants and subsidies, and the grants and subsidies are awarded.

SURTECO has deducted from the personnel expenses government grants and subsidies relating to the social security contributions attributable to short-time work and other comparable grants and subsidies in conjunction with the foreign subsidiary companies.

The most important accounting and valuation principles are described in the notes to the consolidated financial statements.

VIII. Notes to the income statement

(1) SALES REVENUES

The sales revenues are comprised as follows:

The sales revenues are broken down into individual segments as follows:

Business (product) € 000s	2021	2022
Edgebandings	286,441	282,002
Finish foils	132,430	136,657
Decorative printing	105,545	99,267
Impregnates / Release papers	62,220	55,384
Skirtings and related products	78,531	82,141
Technical extrusions	52,490	56,188
Other	39,403	36,059
	757,060	747,698

€ 000s	2022
	Decoratives	Profiles	Technicals	Total
Edgebandings	272,553	0	9,449	282,002
Finish foils	106,265	0	30,392	136,657
Decorative printing	99,267	0	0	99,267
Impregnates / Release papers	28,562	0	26,822	55,384
Skirtings and related products	4,898	77,243	0	82,141
Technical extrusions	487	55,701	0	56,188
Other	25,236	10,020	803	36,059
	537,268	142,964	67,466	747,698

€ 000s	2021
	Decoratives	Profiles	Technicals	Total
Edgebandings	274,750	406	11,285	286,441
Finish foils	102,042	0	30,388	132,430
Decorative printing	105,545	0	0	105,545
Impregnates / Release papers	33,496	0	28,724	62,220
Skirtings and related products	3,016	75,515	0	78,531
Technical extrusions	1,866	50,624	0	52,490
Other	28,625	9,976	802	39,403
	549,340	136,521	71,199	757,060

(2) CHANGES IN INVENTORIES

The changes in inventories relate to work in progress amounting to € 000s -3,222 (2021: € 000s 3,246) and finished products amounting to € 000s 2,140 (2021: € 000s 9,136).

(3) OTHER OWN WORK CAPITALIZED

Other own work capitalized is essentially self-manufactured tools, printing cylinders and intangible assets.

(4) COST OF MATERIALS

Composition of the cost of materials in the Group:

(5) PERSONNEL EXPENSES

The following table shows personnel expenses:

Regarding the defined-contribution pension provision systems, the company pays contributions to state pension insurance institutions based on statutory obligations. Contributions amounting to € 000s 695 (2021: € 000s 573) are also paid to welfare funds and pension schemes. The pension costs also include payments of € 000s 7,985 (2021: € 000s 7,784) to statutory pension annuity guarantors. These payments entail no further obligations for the company to make payments.

Personnel expenses include amounts resulting from the net interest expense/income and the current service cost for pension obligations.

State grants and subsidies for reimbursement of social security contributions due to COVID-19 amounting to € 000s 34 (2021: € 000s 74) were included in personnel expenses. Short-time work allowances amounting to € 000s 1,509 (2021: € 000s 96) were paid out to employees. Furthermore, other government grants and subsidies in connection with the COVID-19 pandemic amounting to € 000s 0 (2021: € 000s 188) were received by the foreign companies.

The average number of employees amounts to 3,147 (2021: 3,144).

The following table shows the employee structure:

The number of employees by region is as follows:

(6) OTHER OPERATING EXPENSES

The other operating expenses are composed as follows:

The operating expenses essentially include expenses for maintenance, servicing, repairs, waste removal and temporary workers.

The sales expenses essentially include expenses for transport, travel, trade fairs, promotion and commissions.

The administrative expenses essentially include expenses for deductions, contributions, insurance policies, IT and consulting.

Uncapitalized research and development costs (personnel expenses and cost of materials) in the Group amounted to € 000s 3,460 (2021: € 000s 2,107).

The effects of changes in exchange rate through profit and loss included in other operating expenses amounted to € 000s 430 (2021: € 000s 220) in the business year 2022.

We refer to explanations in the sections (8) and (21) for rental and lease expenses.

€ 000s	2021	2022
Cost of raw materials, consumables and supplies, and purchased merchandise	380,658	389,904
Cost of purchased services	1,101	827
	381,759	390,731

€ 000s	2021	2022
Wages and salaries	145,924	143,546
Social security contributions	19,514	20,260
Pension costs	9,806	11,074
	175,244	174,880

	2021	2022
Germany	1,692	1,665
European Union	485	488
Rest of Europe	207	202
America	550	571
Asia/Australia	210	221
	3,144	3,147

€ 000s	2021	2022
Operating expenses	30,729	29,302
Sales expenses	52,812	54,820
Administrative expenses	23,851	28,531
	107,392	112,473

			2021			2022
	Industrial	Salaried		Total Industrial	Salaried	Total
Production	1,652	214	1,866	1,646	222	1,868
Sales	34	356	390	21	357	378
Engineering	152	47	199	159	52	211
Research and development,
quality assurance	54	86	140	58	83	141
Administration and materials management	185	364	549	188	361	549
	2,077	1,067	3,144	2,072	1,075	3,147

(7) IMPAIRMENT EXPENSES / IMPAIRMENT REVERSAL INCOME IN ACCORDANCE WITH IFRS 9

In the business year 2022, income in the amount of € 000s 285 (2021: expenses of € 000s 99) was recorded for trade accounts receivable. This was determined by the simplified impairment model (provision matrix). Total income arising from impairment reversals on trade accounts receivable amounts to € 000s 124 (2021: expenses of € 000s 458).

The following financial instruments are subject to general impairment recognition in accordance with IFRS 9:

On account of the slight default risk for bank balances, no allowance should be carried out for reasons of materiality.

(8) LEASES

Depreciation and amortization on rights of use are broken down as follows:

The following expenses from rental/leasing obligations are included in other operating expenses:

In the business year 2022, payments for leasing liabilities amounted to € 000s 6,615 (2021: € 000s 5,371).

An interest expense for leases/rents in the amount of € 000s 574 (2021: € 000s 518) was recognized in interest expense.

(9) OTHER OPERATING INCOME

The following table shows other operating income:

The rental income recorded in the company is to be classified as an operating lease. It essentially results from subletting of individual building floorspaces. Income from asset disposals essentially results from property sales, some of which were rented back in a sale-and-lease-back transaction (€ 000s 2,477).

(10) FINANCIAL RESULTS

€ 000s
Interest and similar income
Interest and similar expenses
Interest (net)
Currency gains/losses, net
Other financial expenses and income
Financial result

	Credit risk	Impairment recognition
Bank balances	Slight	12-M Expected Credit Loss

€ 000s	2021	2022
Depreciation and amortization on rights of use
Land and buildings	3,532	4,545
Technical plant and machinery	49	57
Office equipment	297	290
Vehicles	608	1,070
IT and communication	23	250
	4,509	6,212

€ 000s	2021	2022
IFRS 16: Expenses in other operating expenses:
Expenses in conjunction with short-term leases	896	812
Expenses in conjunction with small-ticket assets	12	15
Expenses in conjunction with variable lease payments not included in leasing liabilities	0	0
Expenses in conjunction with other expenses not included in leasing liabilities	0	0
	908	827

€ 000s	2021	2022
Rental income	457	653
Claims for compensation	173	336
Income from reductions of allowances	824	372
Income from asset disposals	1,191	5,326
Other operating income	3,780	4,189
	6,425	10,876

€ 000s	2021	2022
Interest and similar income	438	984
Interest and similar expenses	-4,810	-4,997
Interest (net)	-4,372	-4,013
Currency gains/losses, net	1,818	655
Other financial expenses and income	1,818	655
Financial result	-2,554	-3,358

(11) INCOME TAX

Income tax expense is broken down as follows:

An average overall tax burden of 30.0 % (2021: 30.0 %) results for the German companies. The tax rate takes into account the trade tax (14.2 % unchanged by comparison with the previous year), the corporate income tax (15.0 % unchanged by comparison with the previous year) and the solidarity surcharge (5.5 % of corporate income tax, unchanged by comparison with the previous year). The applicable local income tax rates for the foreign companies vary between 19 % and 34 % (2021: 19 % - 34 %).

Deferred tax losses carried forward have been capitalized in the consolidated financial statements on the basis of a 5-year projection of earnings before income tax at the level of the individual companies. Uncertainties relating to different projected premises and framework conditions have been taken into account.

No deferred tax assets were recognized on loss carry-forwards for foreign Group companies amounting to € 000s 5,291 (2021: € 000s 464) due to restricted utility. The loss carry-forwards for corporate income tax amounting to € 000s 3,776 (2021: € 000s 6,392) and domestic trade tax amounting to € 000s 9,419 (2021: € 000s 0) can be carried forward indefinitely.

On the balance sheet date, one Group company that had generated a tax loss recognized a net surplus of deferred tax assets amounting to € 000s 436 (2021: several companies amounting to € 2.58 million) which results from SURTECO GROUP SE (2021: essentially from SURTECO CANADA LTD). The realization of the full amount of deferred tax assets from the foreign companies was no longer assessed to be probable.

Deferred tax liabilities were not recognized on temporary differences in connection with investments in subsidiaries amounting to € 000s 7,753 (2021: € 000s 7,876), as the Group is in a position to control the timing of the reversal and these temporary differences will not be reversed in the foreseeable future.

The deferred tax assets and liabilities reported in the financial statements listed below are attributable to differences in recognition and valuation of individual items on the balance sheet and to tax losses carried forward:

Non-current deferred taxes are included in the deferred tax assets in the amount of € 000s 13,730 (2021: € 000s 11,369), in the deferred tax liabilities in the amount of € 000s 41,711 (2021: € 000s 40,322).

Reconciliation between expected and actual income tax expenditure is as follows:

The average expected tax rate amounts to 30.0 % (2021: 30.0 %).

€ 000s		Deferred tax assets		Deferred tax liabilities
	2021	Change	2022	2021	Change	2022
Inventories	1,533	33	1,566	664	258	922
Receivables and other assets	3,031	-1,109	1,922	217	81	298
Tax losses carried forward	1,527	405	1,932	0	0	0
Goodwill	0	0	0	4,217	-118	4,099
Property, plant and equipment	1,646	1,499	3,145	21,702	4,070	25,772
Intangible assets	18	3	21	10,833	-2,170	8,663
Other current assets	0	59	59	0	0	0
Other non-current assets	87	-77	10	269	108	377
Financial liabilities	5,970	1,631	7,601	2,820	40	2,860
Pensions and other personnel-related
obligations	2,121	-1,101	1,020	482	-482	0
Trade accounts payable	990	-239	751	253	-82	171
Other liabilities	1,162	232	1,394	1,998	358	2,356
	18,085	1,336	19,421	43,453	2,063	45,518
Netting	-11,494	6,274	-5,220	-11,494	6,274	-5,220
	6,591	7,610	14,201	31,959	8,338	40,298

€ 000s 2021	2022
Earnings before Taxes (EBT) 69,970	36,823
Expected income tax 20,991	11,047
Reconciliation
Changes in tax rates 88	531
Difference in tax rates -1,391	-2,595
Use of loss carry-forwards not including deferred tax assets -25	1,948
Expenses not deductible from taxes 3,779	2,619
Tax-free income -4,157	-32
Valuation allowance on deferred tax assets 0	1,116
Tax expenses / income not related to the reporting period 3,298	-3,097
Permanent differences -23	17
Other effects -396	36
Income tax 22,164	11,590

€ 000s	2021	2022
Current income taxes
- Germany	10,723	-1,758
- international	9,385	12,578
	20,108	10,820
Deferred income taxes
- from time differences	-1,570	1,175
- on losses carried forward	3,626	-405
	2,056	770
	22,164	11,590

Income taxes recorded directly in other comprehensive income

Income tax which directly exerts a negative impact on, or was credited to, other comprehensive income for the year is comprised as follows:

(12) EARNINGS PER SHARE

The earnings per share are calculated by dividing the proportionate earnings of the shareholders of SURTECO GROUP SE by the weighted average of the issued shares.

IX. Notes to the balance sheet

(13) CASH AND CASH EQUIVALENTS

(14) TRADE ACCOUNTS RECEIVABLE

The allowances relate to the specific allowances and the allowances in accordance with the simplified impairment model.

The allowances developed as follows:

There is no significant concentration of risk in the trade accounts receivable on account of the diversified customer structure of the SURTECO Group. The current values of the trade accounts receivable essentially correspond to the book values.

The following table shows the maturity structure of receivables and the allowances due in accordance with IFRS 9:

There were no indications on the reporting date that payment defaults would occur for trade accounts receivable which were neither overdue nor impaired.

€ 000s	2021	2022
Actuarial gains/losses	-156	-427
	-156	-427

	2021	2022
Consolidated net profit in € 000s	47,806	25,233
Weighted average of no-par-value shares issued	15,505,731	15,505,731
Basic and undiluted earnings per share in €	3.08	1.63

€ 000s	2021	2022
Trade accounts receivable	75,865	62,473
Less allowances	-1,350	-1,082
Book value	74,515	61,391

€ 000s	2021	2022
Cash in hand and bank balances	39,084	45,624
Fixed-term deposits	33,792	72,128
	73,056	117,752

€ 000s			2022
	Specific allowance	Allowance matrix	Specific allowance	Allowance matrix
1/1/	1,799	375	511	839
Recourse	-151	0	-80	0
Release of unused amounts	-1,575	0	-182	-307
Addition (effect on expenses)	371	464	322	0
Exchange rate differences	67	0	-21	0
31/12/	511	839	550	532

€ 000s		Total Receivables not overdue	up to 3 months	3-6 months	6-12 months	over 12 months
				Overdue receivables
31/12/2022		0%	2%	14%	22%	55%
Book value of trade accounts receivable
(without factoring)	60,189	52,099	7,148	165	615	161
Allowance	532	131	156	23	133	89
31/12/2021		0%	4%	20%	33%	53%
Book value of trade accounts receivable
(without factoring)	73,408	65,985	6,152	745	393	133
Allowance	839	273	221	147	128	71

€ 000s		Total Receivables not overdue	up to 3 months	3-6 months	6-12 months	over 12 months
				Overdue receivables
31/12/2022		0%	2%	14%	22%	55%
Book value of trade accounts receivable
(without factoring)	60,189	52,099	7,148	165	615	161
Allowance	532	131	156	23	133	89
31/12/2021		0%	4%	20%	33%	53%
Book value of trade
accounts receivable
(without factoring)	73,408	65,985	6,152	745	393	133
Allowance	839	273	221	147	128	71

(15) INVENTORIES

The inventories of the Group are comprised as follows:

Impairments of € 000s 2,274 (2021: € 000s 4,223) were reported on inventories.

Of the inventories, € 000s 20,733 (2021: € 000s 23,728) were recognized under assets at the net disposal value.

(16) CURRENT INCOME TAX RECEIVABLES

Claims arising from income tax are recognized under current tax assets insofar as their due date is not twelve months after the reporting date.

(17) OTHER FINANCIAL AND NON-FINANCIAL ASSETS

A: Current assets

No significant allowances were carried out on the other current assets recognized.

The Italian subsidiary SURTECO Italia s.r.l. continues to operate the sale of receivables (factoring) from which no financial risks result. The value of the sold receivables amounted to € 000s 6,847 (2021: € 000s 9,682) on the balance sheet date.

B: Non-current assets

€ 000s	2021	2022
Raw materials, consumables and supplies	47,805	52,499
Work in progress	12,739	9,518
Finished products and goods	80,355	80,077
Payments on account for inventories	1	35
	140,900	142,129

Other current non-financial assets
Other current financial assets

€ 000s	2021	2022
Other current non-financial assets
Income tax assets (value added tax, wage tax)	4,185	3,511
Prepaid expenses	3,437	4,028
Other	1,534	1,733
	9,156	9,272
Other current financial assets
Bonuses receivables	801	426
Creditors with debit balances	492	725
Receivables from employment relationships	152	171
Assets from contracts with customers	0	364
Other	1,691	3,685
	3,136	5,371
	12,292	14,643

€ 000s	2021	2022
Other non-current non-financial assets
Other non-current assets	148	855
Other non-current financial assets
Assets from contracts with customers	1,066	532
Other non-current assets	293	822
	1,507	2,209

(18) FIXED ASSETS

The fixed assets are comprised as follows:

(19) PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment are comprised as follows:

As at 31 December 2022, no property, plant and equipment was pledged as collateral for existing liabilities as in the previous year.

€ 000s	Property, plant and equipment	Intangible assets	Goodwill	Rights of use	Total
Acquisition costs
1/1/2021	691,371	124,532	182,035	50,450	1,048,388
Currency adjustment	8,416	1,237	661	568	10,882
Additions	28,659	4,441	0	3,990	37,090
Disposals	-18,537	-897	-167	-2,585	-22,186
Transfers	9,846	738	0	-10,584	0
31/12/2021	719,755	130,051	182,529	41,839	1,074,175
1/1/2022	719,755	130,051	182,529	41,389	1,074,175
Currency adjustment	1,982	-1,409	-217	159	515
Additions	45,188	5,134	0	14,735	65,257
Disposals	-25,575	-1,563	0	-7,144	-34,482
Transfers	796	-28	0	-768	0
31/12/2022	742,146	132,185	182,312	48,821	1,105,465
Depreciation and amortization
1/1/2021	455,156	75,794	19,133	14,898	564,981
Currency adjustment	5,173	783	485	276	6,718
Additions	30,765	7,547	0	4,633	42,945
Disposals	-16,892	-895	0	-1,714	-19,501
Transfers	4,024	0	0	-4,024	0
31/12/2021	478,226	83,230	19,618	14,070	595,144
1/1/2022	478,226	83,230	19,618	14,070	595,144
Currency adjustment	1,299	-880	218	129	766
Additions	30,241	7,550	498	5,712	44,201
Disposals	-19,466	-1,547	0	-2,549	-23,762
Transfers	654	0	0	-654	0
31/12/2022	490,953	88,353	20,334	16,708	616,349
Book values at 31/12/2021	241,529	46,821	162,911	27,769	479,030
Book values at 31/12/2022	251,193	43,832	161,978	32,112	489,116

€ 000s	Land and buildings	Financial leasing for land and buildings	Technical equipment and machines	Other equipment, factory and office equipment	Payments on account and assets under con struction	Total
Acquisition costs
1/1/2021	142,503	0	424,042	96,979	27,847	691,371
Currency adjustment	2,000	0	5,965	426	25	8,416
Additions	3,564	0	9,848	4,630	10,617	28,659
Disposals	-292	0	-11,580	-5,639	-1,026	-18,537
Transfers
(incl. on account of IFRS 16)	22,025	0	7,130	3,610	-22,919	9,846
31/12/2021	169,800	0	435,405	100,006	14,544	719,755
1/1/2022	169,800	0	435,405	100,006	14,544	719,755
Currency adjustment	666	0	2,016	-590	-110	1,982
Additions	1,765	0	13,608	5,676	24,139	45,188
Disposals	-11,842	0	-7,244	-6,285	-204	-25,575
Transfers (incl. on account of IFRS 16)	1,668	0	6,905	3,348	-11,125	796
31/12/2022	162,057	0	450,690	102,155	27,244	742,146
Depreciation and amortization
1/1/2021	63,511	0	317,376	74,263	5	455,156
Currency adjustment	676	0	4,229	268	0	5,173
Additions	4,573	0	19,421	6,771	0	30,765
Disposals	-244	0	-11,171	-5,477	0	-16,892
Transfers	5,028	-951	0	-53	0	4,024
31/12/2021	73,544	-951	329,855	75,772	5	478,226
1/1/2022	73,544	-951	329,855	75,772	5	478,226
Currency adjustment	76	0	1,499	-276	0	1,299
Additions	4,547	0	18,886	6,808	0	30,241
Disposals	-6,904	0	-6,615	-5,947	0	-19,466
Transfers	0	0	0	654	0	654
31/12/2022	71,263	-951	343,625	77,011	5	490,953
Book values 31/12/2021	96,257	951	105,550	24,233	14,539	241,529
Book values 31/12/2022	90,765	951	107,065	25,143	27,239	251,193

€ 000s	Land and buildings	Financial leasing for land and buildings	Technical equipment and machines	Other equipment, factory and office equipment	Payments on account and assets under con struction	Total
Acquisition costs
1/1/2021	142,503	0	424,042	96,979	27,847	691,371
Currency adjustment	2,000	0	5,965	426	25	8,416
Additions	3,564	0	9,848	4,630	10,617	28,659
Disposals	-292	0	-11,580	-5,639	-1,026	-18,537
Transfers
(incl. on account of IFRS 16)	22,025	0	7,130	3,610	-22,919	9,846
31/12/2021	169,800	0	435,405	100,006	14,544	719,755
1/1/2022	169,800	0	435,405	100,006	14,544	719,755
Currency adjustment	666	0	2,016	-590	-110	1,982
Additions	1,765	0	13,608	5,676	24,139	45,188
Disposals	-11,842	0	-7,244	-6,285	-204	-25,575
Transfers (incl. on account of IFRS 16)	1,668	0	6,905	3,348	-11,125	796
31/12/2022	162,057	0	450,690	102,155	27,244	742,146
Depreciation and amortization
1/1/2021	63,511	0	317,376	74,263	5	455,156
Currency adjustment	676	0	4,229	268	0	5,173
Additions	4,573	0	19,421	6,771	0	30,765
Disposals	-244	0	-11,171	-5,477	0	-16,892
Transfers	5,028	-951	0	-53	0	4,024
31/12/2021	73,544	-951	329,855	75,772	5	478,226
1/1/2022	73,544	-951	329,855	75,772	5	478,226
Currency adjustment	76	0	1,499	-276	0	1,299
Additions	4,547	0	18,886	6,808	0	30,241
Disposals	-6,904	0	-6,615	-5,947	0	-19,466
Transfers	0	0	0	654	0	654
31/12/2022	71,263	-951	343,625	77,011	5	490,953
Book values 31/12/2021	96,257	951	105,550	24,233	14,539	241,529
Book values 31/12/2022	90,765	951	107,065	25,143	27,239	251,193

€ 000s	Land and buildings	Financial leasing for land and buildings	Technical equipment and machines	Other equipment, factory and office equipment	Payments on account and assets under con struction	Total
Acquisition costs
1/1/2021	142,503	0	424,042	96,979	27,847	691,371
Currency adjustment	2,000	0	5,965	426	25	8,416
Additions	3,564	0	9,848	4,630	10,617	28,659
Disposals	-292	0	-11,580	-5,639	-1,026	-18,537
Transfers
(incl. on account of IFRS 16)	22,025	0	7,130	3,610	-22,919	9,846
31/12/2021	169,800	0	435,405	100,006	14,544	719,755
1/1/2022	169,800	0	435,405	100,006	14,544	719,755
Currency adjustment	666	0	2,016	-590	-110	1,982
Additions	1,765	0	13,608	5,676	24,139	45,188
Disposals	-11,842	0	-7,244	-6,285	-204	-25,575
Transfers
(incl. on account of IFRS 16)	1,668	0	6,905	3,348	-11,125	796
31/12/2022	162,057	0	450,690	102,155	27,244	742,146
Depreciation and amortization
1/1/2021	63,511	0	317,376	74,263	5	455,156
Currency adjustment	676	0	4,229	268	0	5,173
Additions	4,573	0	19,421	6,771	0	30,765
Disposals	-244	0	-11,171	-5,477	0	-16,892
Transfers	5,028	-951	0	-53	0	4,024
31/12/2021	73,544	-951	329,855	75,772	5	478,226
1/1/2022	73,544	-951	329,855	75,772	5	478,226
Currency adjustment	76	0	1,499	-276	0	1,299
Additions	4,547	0	18,886	6,808	0	30,241
Disposals	-6,904	0	-6,615	-5,947	0	-19,466
Transfers	0	0	0	654	0	654
31/12/2022	71,263	-951	343,625	77,011	5	490,953
Book values 31/12/2021	96,257	951	105,550	24,233	14,539	241,529
Book values 31/12/2022	90,765	951	107,065	25,143	27,239	251,193

€ 000s	Land and buildings	Financial leasing for land and buildings	Technical equipment and machines	Other equipment, factory and office equipment	Payments on account and assets under con struction	Total
Acquisition costs
1/1/2021	142,503	0	424,042	96,979	27,847	691,371
Currency adjustment	2,000	0	5,965	426	25	8,416
Additions	3,564	0	9,848	4,630	10,617	28,659
Disposals	-292	0	-11,580	-5,639	-1,026	-18,537
Transfers
(incl. on account of IFRS 16)	22,025	0	7,130	3,610	-22,919	9,846
31/12/2021	169,800	0	435,405	100,006	14,544	719,755
1/1/2022	169,800	0	435,405	100,006	14,544	719,755
Currency adjustment	666	0	2,016	-590	-110	1,982
Additions	1,765	0	13,608	5,676	24,139	45,188
Disposals	-11,842	0	-7,244	-6,285	-204	-25,575
Transfers (incl. on account of IFRS 16)	1,668	0	6,905	3,348	-11,125	796
31/12/2022	162,057	0	450,690	102,155	27,244	742,146
Depreciation and amortization
1/1/2021	63,511	0	317,376	74,263	5	455,156
Currency adjustment	676	0	4,229	268	0	5,173
Additions	4,573	0	19,421	6,771	0	30,765
Disposals	-244	0	-11,171	-5,477	0	-16,892
Transfers	5,028	-951	0	-53	0	4,024
31/12/2021	73,544	-951	329,855	75,772	5	478,226
1/1/2022	73,544	-951	329,855	75,772	5	478,226
Currency adjustment	76	0	1,499	-276	0	1,299
Additions	4,547	0	18,886	6,808	0	30,241
Disposals	-6,904	0	-6,615	-5,947	0	-19,466
Transfers	0	0	0	654	0	654
31/12/2022	71,263	-951	343,625	77,011	5	490,953
Book values 31/12/2021	96,257	951	105,550	24,233	14,539	241,529
Book values 31/12/2022	90,765	951	107,065	25,143	27,239	251,193

(20) INTANGIBLE ASSETS

Intangible assets are comprised as follows:

A trademark right in the amount of € 000s 3,558 (2021: € 000s 3,420) with an unlimited useful life is included in the category "Customer relations, trademarks, technology and similar values". The trademark rights generate inflows for an unlimited period of time.

(21) RIGHTS OF USE

The following rights of use with the book values shown are differentiated in the SURTECO Group:

The allocations to rights of use during the business year 2022 amounted to € 000s 14,735 (2021: € 000s 3,990). A sale and leaseback transaction in connection with a strategic property sale (sale price: € 000s 10,075) resulted in an increase in the right of use of € 000s 1,914. The associated lease liability amounts to € 000s 6,583. The difference corresponds to the profit share in the lease liability and is realised pro rata in other income over the term of the right of use.

(22) GOODWILL

Goodwill is comprised of the following amounts from the takeover of business operations and from capital consolidation.

Goodwill developed as follows:

Goodwill is allocated to the groups of cash-generating units for purposes of carrying out annual or eventrelated (triggering events) impairment tests. These correspond to the operating divisions in the groups of cash-generating units 'Decoratives', 'Profiles', 'Technical Foils', 'Dakor' and 'Kröning'.

€ 000s	Concessions, patents, licences and similar rights	Customer relations, trademarks, technology and similar values	Development expenses	Payments on account	Total
Acquisition costs
1/1/2021	34,543	77,797	11,360	833	124,532
Currency adjustment	267	1,145	-175	0	1,237
Additions	1,628	0	1,074	1,739	4,441
Disposals	-435	0	-459	-3	-897
Transfers	843	0	13	-118	738
31/12/2021	36,846	78,942	11,813	2,450	130,051
1/1/2022	36,846	78,942	11,813	2,450	130,051
Currency adjustment	-34	-664	-711	0	-1,409
Additions	2,321	0	632	2,181	5,134
Disposals	-1,461	0	-90	-12	-1,563
Transfers	2,350	0	17	-2,395	-28
31/12/2022	40,022	78,278	11,661	2,225	132,185
Depreciation and amortization
1/1/2021	30,517	38,188	7,089	0	75,794
Currency adjustment	220	676	-112	0	784
Additions	2,004	4,571	972	0	7,547
Disposals	-436	0	-459	0	-895
Transfers	5	0	-5	0	0
31/12/2021	32,310	43,435	7,485	0	83,230
1/1/2022	32,310	43,435	7,485	0	83,230
Currency adjustment	-39	-381	-460	0	-880
Additions	2,234	4,451	865	0	7,750
Disposals	-1,457	0	-90	0	-1,747
Transfers	0	0	0	0	0
31/12/2022	33,048	47,505	7,800	0	88,353
Book values at 31/12/2021	4,536	35,507	4,328	2,450	46,821
Book values at 31/12/2022	6,974	30,773	3,861	2,224	43,832

€ 000s	2021	2022
1/1/	162,902	162,911
Currency adjustment	176	-435
Disposal	-167	0
Valuation allowance	0	-498
31/12/	162,911	161,978

€ 000s		31/12/2021 31/12/2022
Rights of use
Land and buildings	25,895	29,053
Technical plant and machinery	251	203
Office equipment	93	54
Vehicles	1,126	2,446
IT and communication	404	356
	27,769	32,112

The book value of the goodwill was attributed to the groups of cash-generating units as follows:

The book value of intangible assets with an unlimited useful life in the amount of € 000s 3,558 (2021: € 000s 3,420) was allocated to the group of cash-generating unit Decoratives.

The value in use to be applied for carrying out the impairment test is calculated based on a company valuation model (discounted cash flow). The calculation is carried out using cash flow plans which are based on medium-term planning for a period of five years that has been approved by the Management Board and is valid at the time when the impairment test was carried out. These plans include experiences and expectations relating to the future market development. Growth rates are calculated individually for each subsidiary company on the basis of the macroeconomic framework data for the regional market, the market opportunities and experiences in the past. The underlying growth rates applied for the impairment test are based on medium-term planning for a period of five years and amount to an average of 6.1 % for sales and 13.3 % for EBITDA. For the period after the fifth year, a growth rate of 1.5 % (2021: 0.25 %) in relation to all Group cash-generating units for sales and for EBITDA in order to take sufficient account of the inflation rate.

Significant influencing factors impacting an impairment are on the one hand sales and EBITDA and on the other hand development of the interest rate and the terminal value.

Expected changes in the input variables sales, EBITDA and terminal value lead to a lower amount than the book value for the group of cash-generating units Dakor. As a result, the allocated goodwill in the amount of € 000 498 was corrected to € 000 0 taking impairment of existing assets into account.

No need for impairment was identified for all the others in the group of cash-generating units.

On the basis of experience in the group of companies, a change in the interest rate that is considered possible amounts to +1.0 % after tax. This leads to an impairment requirement for the group of cash-generating units Technical Foils in the amount of € 000s 3,875. Under the current assumptions, a headroom of € 000s 253 (2021: € 000s 4,069) exists before the impairment occurs.

The table below shows details for development of growth rates for sales and EBITDA in the groups of cashgenerating units:

The costs of capital are calculated as a weighted average of the costs of equity and debt. External information from the comparator group or available market data are used. The costs of equity correspond to the expectations of return held by investors in shares. Market conditions for loans are taken into account for borrowing costs. This yielded an interest rate for all cash-generating units of 8.0 % (2021: 5.7 %) after taxes in December 2022.

Based on the impairment tests carried out in the business year 2022, the recoverable amounts of the cash-generating units, with the exception of the cash-generating unit Dakor (valuation allowance: € 000s -498), are estimated higher than the net asset values.

(23) FINANCIAL ASSETS

The financial assets developed as follows:

(24) INCOME TAX LIABILITIES

Tax liabilities include the income tax due for the business year 2022 or earlier business years and not yet paid, and the anticipated tax payments for previous years.

Values in %	Sales	EBITDA
Decoratives	6.00	9.50
Profiles	5.30	11.10
Technical Foils	6.90	19.00
DAKOR	13.70	112.90
Kröning	4.60	8.10
SURTECO	6.10	13.30

€ 000s	2021	2022
1/1/	10	10
Changes	0	0
31/12/	10	10

€ 000s	2021	2022
Decoratives	117,202	117,395
Profiles	36,281	36,281
Technical Foils	7,948	7,321
DAKOR	498	0
Kröning	982	982

(25) SHORT-TERM PROVISIONS

The warranty provision was formed for warranty obligations arising from the sale of products. The valuation is made on the basis of experience values.

The legal disputes essentially relate to a protective rights agreement and warranty matters. Provisions were set aside in accordance with the best possible estimates at the current time. The maturity of the obligations is based on the current estimates and can be varied as necessary.

The restructuring provision includes expenses which are used for personnel measures in order to adjust to the changed market conditions.

The provision for impending losses was essentially formed for risks arising from pending sales transactions. It is likely that the sale of products will be below the costs of manufacture. The time of anticipated outflow is determined with fulfilment of pending sales transactions.

(26) OTHER CURRENT FINANCIAL AND NON-FINANCIAL LIABILITIES

The liabilities from employment relationships primarily include, apart from the wage and salary payments not yet paid on the reporting date, obligations arising from bonuses, holiday and working time credits.

(27) FINANCIAL LIABILITIES

The financial liabilities are comprised as follows:

Financial liabilities are essentially made up of promissory note loans currently in the amount of € 000s 225,000 raised in the business years 2017 and 2022. These are divided into tranches with different terms of up to ten years. The interest rates of the promissory note loans are in a range between 1.480 % and 2.603 %.

The liabilities from leasing obligations are repaid over the contract term and are due on the reporting date as follows:

€ 000s	2021	2022
Other current non-financial liabilities
Tax liabilities (value added tax)	1,468	2,389
Social insurance against occupational accidents	941	807
Supervisory Board remuneration	454	311
Deferred income	304	252
Other	109	180
	3,276	3,939
Other current financial liabilities
Liabilities from employment relationships *	19,818	17,796
Debtors with credit balances	2,931	2,410
Bonuses and promotional costs	1,480	1,182
Payments on account received	540	523
Commissions	257	232
Other	1,732	2,869
	26,758	25,012
	30,034	28,951
* of which social security.	984	904

€ 000s	2021	2022
Long-term financial liabilities to banks	115,958	237,363
Long-term financial liabilities for leases	16,869	23,638
Long-term financial liabilities	132,827	261,001
Short-term financial liabilities to banks	88,552	3,599
Short-term financial liabilities for leases	4,232	5,911
Short-term financial liabilities	92,784	9,510
Financial liabilities	225,611	270,511

Leasing payments to be made in the future

-

Interest share

-

€ 000s	2021	2022
Leasing payments to be made in the future
in less than one year	4,676	6,431
between one year and five years	17,620	21,193
after more than five years	669	3,618
Interest share
in less than one year	-444	-520
between one year and five years	-1,404	-1,059
after more than five years	-17	-114
Present value
in less than one year	4,232	5,911
between one year and five years	16,216	20,134
after more than five years	652	3,504
	21,100	29,549

Present value

-

€ 000s	1/1/2022	Currency adjustment	Expense	Release		Addition 31/12/2022
Warranty	882	-2	-808	0	1,108	1,180
Legal disputes	2,942	0	-4	-600	0	2,338
Restructuring	635	0	-295	-185	0	155
Impending losses	289	0	-289	0	297	297
Other	2,299	-18	-720	-267	757	2,051
	7,047	-20	-2,116	-1,052	2,162	6,021

(28) PENSIONS AND OTHER PERSONNEL-RELATED OBLIGATIONS

Commitments for company pensions were concluded for individual employees of the SURTECO Group. The defined-benefit commitments were concluded through individual contracts and in collective agreements. They essentially provide for pension payments when an employee retires, becomes incapacitated and/or in cases of death. The level of the provision payments depends on the final salary achieved taking account of length of service with the company and fixed pension components for each year of service. The pension commitments in Germany are subject to the German Company Pensions Act (Betriebsrentengesetz).

The financing of the projected unit credits arising from pension obligations results internally through the formation of a pension provision in the amount of € 000s 7,901 (2021: € 000s 9,917). This is made up of the present value of the obligation in the amount of € 000s 8,142 (2021: € 000s 10,137) and through pledged reinsurance amounting to € 000s -241 (2021: € 000s -220), which secures the obligations partly or fully congruently.

The pension obligations, the plan assets and the provision developed as follows:

There is no active market price quotation for the plan assets.

The Group recognizes remeasurements from defined-benefit plans in shareholder's equity (other comprehensive income). The amount included for 2022 before deferred taxes amounts to € 000s 1,446 (2021: € 000s 520). Up to now, a total of € 000s 1,806 (2021: € 000s 3,230) has been recognized in shareholders' equity.

The annual payments by the employer (expected pension payments) in the next business year are likely to be € 000s 485.

If the other assumptions remain constant, the changes which were possible, subject to an objective analysis on the reporting date, would have exerted an influence on the defined-benefit obligation in the event of one of the significant actuarial assumptions set out below (sensitivity analysis):

A similar approach was adopted in determining the sensitivities and the scope of obligation. The other valuation assumptions were applied unchanged. If several assumptions are changed at the same time, the overall effect does not necessarily have to correspond to the sum of the individual effects due to the changes in the assumptions. Furthermore, the effects are not linear.

The weighted average residual term of the benefit obligations is 10.0 years as at 31 December 2022.

The additional personnel-related obligations include partial-retirement and long-service agreements. There were no partial-retirement obligations on the balance sheet date (2021: € 000s 61). The obligations in the previous year were balanced by plan assets amounting to € 000s 37 because of the statutory requirement for insolvency protection. The long-service obligations amount to € 000s 1,647 on the reporting date (2021: € 000s 1,947).

€ 000s	Present value of obligation	2021 Fair value of plan assets	Provision	Present value of obligation	2022 Fair value of plan assets	Provision
1/1/	11,421	-222	11,199	10,137	-220	9,917
Pension payments on account	-857	0	-857	-678	0	-678
Payments from plan settlements	0	7	7	0	14	14
Current service expense	84	0	84	82	0	82
Interest income	0	-5	-5	0	-35	-35
Interest expense	54	0	54	86	0	86
Remeasurements
Actuarial gains / losses
from changes in demographic parameters	0	0	0	0	0	0
from experience adjustments	-53	0	-53	971	0	971
from changes in financial parameters	-467	0	-467	-2,415	0	-2,415
	-520	0	-520	-1,446	0	-1,446
Other changes	0	0	0	0	0	0
Currency adjustments	-45	0	-45	-39	0	-39
31/12/	10,137	-220	9,917	8,142	-241	7,901

€ 000s	2021		2022
	Increase	Decrease	Increase	Decrease
Decrease in the interest rate by 0.25 %	298		186
Increase in the interest rate by 0.25 %		283		179
Decrease in future pension rises by 0.25 %		251		137
Increase in future pension rises by 0.25 %	262		169

(29) SHAREHOLDERS' EQUITY

The subscribed capital (capital stock) of SURTECO GROUP SE is € 15,505,731.00 and is fully paid in. It is divided into 15,505,731 no-par-value bearer shares (ordinary shares) corresponding to a proportion of the capital stock of € 1.00 in each case.

Capital reserve

The capital reserve of SURTECO GROUP SE includes the amounts by which the capital investment values of shareholdings in affiliated companies paid within the scope of capital increases against non-cash considerations exceed the amounts of capital stock allocated to the SURTECO shares released for this purpose.

The capital reserve is unchanged by comparison with the previous year and amounts to € 000s 122,755.

Retained earnings

Retained earnings include transfers from consolidated net profit and the accumulated comprehensive income resulting from the following items:

• Offsetting of actuarial gains and losses with no effect on net income
• Differences arising from currency translations of annual financial statements of foreign subsidiaries with no effect on net income

Reconciliation of the equity components affected by other comprehensive income:

Dividend proposal

The Management Board and the Supervisory Board of SURTECO GROUP SE will submit a proposal to the ordinary Annual General Meeting of the company being held on 7 June 2023 that a resolution be passed such that the consolidated net profit of SURTECO GROUP SE amounting to € 11,374,547.85 is to be appropriated as follows. Payment of a dividend per share of € 0.70 (2022: € 1.00). This corresponds to a total amount distributed as dividend of € 10,854,011.70 for 15,505,731 shares and appropriation is made to retained earnings in the amount of € 520,536.15.

(30) CONTINGENT LIABILITIES AND OTHER FINANCIAL OBLIGATIONS

Obligations arising from rental, hire and leasing contracts are explained in the disclosures relating to IFRS 16 (see section (27)).

Commitments amounting to € 000s 1,157 (2021: € 000s 53) were recognized arising from orders for investment projects already in progress or planned in the area of the items property, plant and equipment and intangible assets (commitments from orders).

(31) CAPITAL MANAGEMENT

The goals of capital management are derived from the financial strategy. This includes safeguarding liquidity and guaranteeing access to the capital market. The capital is defined as the shareholders' equity recognized in the balance sheet and the net debt.

Measures for achieving the goals of capital management are optimization of the capital structure, equity capital measures, compliance with covenants, acquisitions and disinvestments, as well as the reduction of net debts. The Group is not subject to the imposition of any statutory capital requirements.

A dividend in the amount of € 000s 15,505 (2021: € 000s 12,405) was paid out in the business year 2022.

Our finance controlling is based on the indicators defined in our finance strategy. The interest cover factor was 21.0 (2021: 26.2) in 2022. The debt-service coverage ratio was 45.3 % in 2022 (2021: 59 %). The net debt amounted to € 000s 152,759 (2021: € 000s 152,555) on 31 December 2022 and the equity ratio was 50.0 % (2021: 52.0 %). The calculation of the indicators is presented in the management report.

The international business profile of the Group means that different legal and supervisory regulations have to be observed according to the region. The status and development of these regulations are tracked at local level and centrally, and any changes are taken into account for purposes of capital management.

€ 000s		31/12/2021			31/12/2022
	Fair value measurement for pension provisions	Currency translation adjustments	Total other comprehen sive income	Fair value measurement for pension provisions	Currency translation adjustments	Total other comprehen sive income
Components of other comprehensive income not to be reclassified to the income statement
Remeasurements of defined benefit obligations	364			1,019
Components of other comprehensive income that may be reclassified to the income statement
Exchange differences in translation of foreign companies		3,118			1,661
Exchange differences in translation of foreign participations valued at equity		0			0
Other comprehensive income	364	3,118	3,482	1,019	1,661	2,680

(32) FINANCIAL INSTRUMENTS AND FINANCIAL RISKS MANAGEMENT

The significant financial risks of the Group are described below. More extensive descriptions of the risks are included in the risk and opportunities report provided in the management report.

1. Security guidelines and principles of financial risk management

Due to the international activities of the SURTECO Group, changes in interest rates and currency exchange rates impact on the net assets, financial position and results of operations of the SURTECO Group. The risks result from foreign currency transactions carried out in the course of operating business, from financing and from investment.

The Corporate Treasury Department of the SURTECO GROUP SE holding company controls centrally the currency and interest-management of the Group and also the key business transactions with financial derivatives and other financial instruments. In individual cases, currency hedging transactions are concluded at the foreign subsidiaries in close consultation with Central Treasury. Financial instruments and derivatives are used exclusively to hedge interest and currency risks. Only commercial instruments with sufficient market liquidity are used for this purpose. Derivative financial positions for trading purposes are not held as at 31 December 2022. Risk assessments and checks are carried out continuously.

The subsidiaries report on their key currency and interest-rate risks within the scope of Group reporting. These risk positions are then analysed and evaluated on the basis of the gross financial burden anticipated on EBT and the likelihood of occurrence.

2. Financial risks

The refinancing of the Group and the subsidiary companies is generally carried out centrally by SURTECO GROUP SE. Most of the Group's financial liabilities have residual terms of up to five years (see maturity structure section (32.3)). The Group operates with a wide base of lenders comprising insurance companies and banks. Financial indicators (covenants) agreed with some of the lenders at standard market conditions in loan agreements, for example the ratio of EBITDA to interest income (Interest Coverage Factor, see Notes to the Consolidated Financial Statements section (31)) and these have to be complied with by the SURTECO Group. These covenants are continuously monitored by the Management Board and the Supervisory Board. If there is an impending breach of any indicators, consultations on individual measures take place as necessary. If the covenants are breached, the lenders have the right to serve notice on the loan agreements. The covenants were complied with during the business year 2022. Loans amounting to € 200 million with their own covenants were raised for financing the purchase price in relation to the acquisition of the divisions "Laminates and performance films and coated fabrics" from Omnova Solutions Inc, USA. From today's perspective, the covenants can be complied with over the next 12 months. Nevertheless, there is a general risk that notice may be served on this loan agreement if these covenants are breached. Owing to the acquisitionrelated increase in financial debt after the balance sheet date, non-compliance with the covenants for some of the old contracts with a volume of € 15.0 million is likely during the next 12 months. The company is in talks with lenders in relation to a waiver for the covenants during the year. Consequently, the company perceives no risk arising from this matter.

No risk concentration was identified for financial risks.

3. Liquidity and credit risks

The Corporate Treasury Department of SURTECO GROUP SE holding company monitors and controls the development of liquidity for the major subsidiary companies. This provides an up-to-date picture of liquidity development at any time. The positive operating cash flows and the short payment targets mean that the SURTECO Group has adequate liquid funds continuously available. There is also the option of drawing on open credit lines and on a factoring agreement.

However, there is the risk that earnings and liquidity are compromised by default on accounts receivable from customers and non-compliance with payment targets. The Group counters this risk by regularly reviewing credit rating and carefully monitoring default with customers. The Group counters the risk arising from debit balances in accounts payable by a broad customer structure and by credit insurance policies.

The following table shows the undiscounted contractually agreed cash outflows and inflows from primary financial liabilities and derivative financial instruments with gross fulfilment. If the maturity date is not fixed, the liability relates to the earliest due date.

Book value	2023		2024 - 2027		2028 ff.
		Repay ment	Interest	Repay ment	Interest Repay	ment
240,962	4,528	3,599	15,354	159,363	4,727	78,000
29,549	520	5,911	1,059	20,134	114	3,504
270,511	5,048	9,510	16,413	179,497	4,811	81,504
60,946			-	-	-	-
25,027	-	25,012	-	15	-	-
		31/12/2022 Interest	- 60,946

2021
€ 000s	Book value	2022		2023 - 2026		2027 ff.
	31/12/2021 Interest		Repay ment	Interest	Repay ment	Interest Repay	ment
Financial liabilities to banks	204,510	2,988	88,537	6,828	56,764		1,257 59,500
Financial liabilities from leasing obligations	21,100	444	4,676	1,404	17,620	17	669
Financial liabilities	225,610	3,432	93,213	8,232	74,384	1,274	60,169
Trade accounts payable	63,582		- 63,582	-	-	-	-
Other financial liabilities	26,797	-	26,758	-	39	-	-

4. Interest and currency risks

Due to the global nature of the business activities of the SURTECO Group, delivery and payment flows result in different currencies. Conversion of business figures and balance sheets from foreign subsidiaries into euros can entail risks which can only be hedged to a certain extent.

The financial liabilities are structured with variable and with fixed-interest rates. The company counters the remaining interest and currency risks with regular and intensive observation of a range of early-warning indicators.

Hedging of individual risks is discussed and decided through the Central Treasury with the Management Board and the responsible Managing Directors.

The following table shows the sensitivity on the reporting date of the available derivatives and variableinterest primary financial instruments in the SURTECO Group to the rise or fall of interest rates by 100 basis points (bp):

The analysis assumes that all other variables, in particular exchange rates, remain unchanged.

The Group operates in several currency areas. In particular effects arise from the performance of the US dollar.

A rise in the key relevant foreign currencies in the Group against the euro would exert the following effects:

The analysis assumes that all other variables, in particular interest rates, remain unchanged.

No risk concentration was identified for risks relating to change in interest rates and currency.

5. Wertangaben zu Finanzinstrumenten

The calculation and recognition of the fair values of financial instruments is based on a fair value hierarchy which takes into account the significance of the input data used for the valuations and classifies it as follows:

Level 1 – Unadjusted quoted prices in active markets for identical assets and liabilities, where the entity drawing up the financial statements must have access to these active markets on the valuation date. Level 2 – Directly or indirectly observable input factors which cannot be classified under Level 1. Level 3 – Unobservable inputs.

The following table shows the book values and fair values of financial assets and financial liabilities including their levels in the fair value hierarchy.

No fair value reporting is carried out in accordance with IFRS 7.29 for short-term financial instruments or financial instruments reported at acquisition costs.

€ 000s	Income statement		Equity / Other comprehensive income
	10% Rise	10% Fall	10% Rise	10% Fall
31/12/2022
Primary financial instruments
in US dollars	1,013	-829	0	0
in other currencies	-250	204	1,693	-1,385
	763	-625	1,693	-1,385
31/12/2021
Primary financial instruments
in US dollars	310	-253	0	0
in other currencies	-338	276	1,838	-1,504
	-28	23	1,838	-1,504

€ 000s		Income statement
	100 bp	100 bp
	Rise	Fall
31/12/2022
Variable interest assets	455	-455
Variable interest liabilities	0	0
	455	-455
31/12/2021
Variable interest assets	527	-527
Variable interest liabilities	-129	1
	398	-526

					Book value at 31/12/2021
€ 000s	Category acc. IFRS 9	Book value at 31/12/ 2021	(amor tized) Acquisi tion costs	not affecting income	Fair value affecting income	Carrying amount acc. IFRS 16	Fair value (IFRS 13)	Level
Assets
Cash and cash equivalents	AC	73,056	73,056	-	-	-	-	-
Trade accounts receivable (without factoring)	AC	72,080	72,080	-	-	-	-	-
Trade accounts receivable (with factoring)	FVPL	2,435	0	-	-	-	2,435	3
Other current financial assets
- Continuing involvement	n.a.	0	-	-	-	-	-	-
- Receivable tenant loan	AC	0	0	-	-	-	-	-
- Miscellaneous other current financial assets
of which in the scope of IFRS 7	AC	1,492	1,492	-	-	-	-	-
of which not in the scope of IFRS 7	n.a.	1,644	1,644	-	-	-	-	-
Financial assets
- Participations	FVPL	10	-	-	10	-	-	-
Other non-current financial assets
- Miscellaneous other non-current financial assets	AC	1,358	1,358	-	-	-	-	-
Liabilities
Short-term financial liabilities
- Liabilities to banks	AC	88,552	88,552	-	-	-	89,289	2
- Liabilities acc. to IFRS 16	n.a.	4,232		-	-	4,232	-	-
Trade accounts payable	AC	63,582	63,582	-	-	-	-	-
Other current financial liabilities
- Continuing Involvement	n.a.	0	-	-	-	-	-	-
- Contractual liabilities	n.a.	4	-	-	-	-	-	-
Other current financial liabilities
of which not in scope of IFRS 7	n.a.	25,025	25,025	-	-	-	-	-
of which in scope of IFRS 7	AC	1,729	1,729	-	-	-	-	-
Long-term financial liabilities
- Liabilities acc. to IFRS 16	n.a.	16,869		-		- 16,869	-	2
- Liabilities to banks		AC 115,958 115,958		-	-		- 123,340	2

Key to abbreviations

AC Amortised Cost

FVPL At Fair Value through Profit & Loss

		Book value at 31/12/2022
€ 000s	Category acc. IFRS 9	Book value at 31/12/ 2022	(amor tized) Acquisi tion costs	not affecting income	Fair value affecting income	Carrying amount acc. IFRS 16	Fair value (IFRS 13)	Level
Assets
Cash and cash equivalents	AC	117,752	117,752	-	-	-	-	-
Trade accounts receivable (not including factoring)	AC	59,224	59,224	-	-	-	-	-
Trade accounts receivable (including factoring)	FVPL	2,167	0	-	-	-	2,167	3
Other current financial assets
- Continuing involvement	n.a.	0	-	-	-	-	-	-
- Receivable tenant loan	AC	0	-	-	-	-	-	-
- Other current financial assets
of which in the scope of IFRS 7	AC	3,142	3,142	-	-	-	-	-
of which not in the scope of IFRS 7	n.a.	1,865	1,865	-	-	-	-	-
Financial assets
- Participations	FVPL	10	-	-	10	-	-	-
Other non-current financial assets
- Miscellaneous other non-current financial assets	AC	1,354	1,354	-	-	-	-	-
Liabilities
Short-term financial liabilities
- Liabilities to banks	AC	3,599	3,599	-	-	-	3,544	2
- Liabilities acc. to IFRS 16	n.a.	5,911		-	-	5,911	-	-
Trade accounts payable	AC	60,946	60,946	-	-	-	-	-
Other current financial liabilities
- Continuing involvement	n.a.	0	-	-	-	-	-	-
- Contractual liabilities	n.a.	4	-	-	-	-	-	-
Other current financial liabilities
- of which not in the scope of IFRS 7	n.a.	22,237	22,237	-	-	-	-	-
- of which in the scope of IFRS 7	AC	2,771	2,771	-	-	-	-	-
Long-term financial liabilities
- Liabilities acc. to IFRS 16	n.a.	23,638		-	-	23,638	-	-
- Liabilities to banks		AC 237,363 237,363		-	-		- 207,830	2

Cash and cash equivalents, trade accounts receivable, (not including those receivables which are assigned within the framework of a factoring programme), loans to associated companies and components of other current financial assets and current financial liabilities, trade accounts payable and other financial liabilities that primarily have short residual terms are recognized at "Amortized Costs" (AC). The values reported therefore correspond approximately to the fair values on the reporting date.

The trade accounts receivable that are assigned within the framework of the factoring programme are recognized at fair value through profit and loss.

The fair value of liabilities to banks is determined as a present value taking account of the payments associated with the liabilities based on the relevant interest structure curve in each case and the credit spread curve differentiated according to currencies.

During this business year and the previous business year, there were no reclassifications between the measurement categories or reclassifications within the fair value hierarchy. The SURTECO Group decides as necessary with the date of the event or the change in circumstances which have caused a regrouping whether a reclassification is necessary.

The net gains and losses in the income statement arising from financial instruments are presented in the following table:

The net gains and losses for assets recognized at amortized costs essentially relate to changes in allowances and currency translations, allowance reversals and interest income. The net gains and losses for liabilities recognized at amortized costs result from currency translation and interest expenses.

No derivative financial instruments were held on the reporting date.

Interest income on financial instruments in the amount of € 000s 984 (2021: € 000s 438) and interest expenses in the amount of € 000s 4,382 (2021: € 000s 3,651) relate to the net gains and losses respectively.

X. Supplementary information

(33) NOTES TO THE CASH FLOW STATEMENT

The cash flow statement was prepared in accordance with IAS 7. It is structured by cash flows arising from operating activities, from investment and financing activities. The effects of changes in the group of companies consolidated are eliminated in the relevant items. The cash flows arising from investment and financing activities are calculated on the basis of payments, cash flow arising from current business operations is derived indirectly.

The values for the previous year were adjusted with regard to reporting the exchange rate effects. Consequently, the foreign exchange effects (€ 000s 2,075) included in the net assets and liabilities were reclassified in other cash expenses/income.

The financial resources only include the cash and cash equivalents of the SURTECO Group reported in the balance sheet. By contrast, financial controlling in the SURTECO Group is based on the financial balance, which apart from cash and cash equivalents also includes debt.

The operating expenses and income with no effect on liquidity and results from disposal of assets, are eliminated in cash flow from current business operations.

The cash flow from financing activities is comprised of dividend payments, borrowing and repayment of debts and leasing obligations, business transactions with non-controlling interests, as well as interest payments from loans and financial liabilities.

The change in net liabilities is made up as follows:

€ 000s	2021	2022
Gains from assets recognized at amortized costs	1,706	2,132
Losses from assets recognized at amortized costs	-723	-444
Gains/losses from assets recognized at amortized costs	983	1,688
Gains from liabilities recognized at amortized costs	451	1,112
Losses from liabilities recognized at amortized costs	-3,918	-4,850
Gains/losses from liabilities recognized at amortized costs	-3,467	-3,738

€ 000s	2021	2022
Cash and cash equivalents	73,056	117,752
Borrowings (including current account)	-204,511	-240,962
Leasing liabilities	-21,100	-29,549
Net liabilities	-152,555	-152,759
Cash and liquid financial investments	73,056	117,752
Gross liabilities – fixed interest rates	-195,611	-250,511
Gross liabilities – variable interest rates	-30,000	-20,000
Net liabilities	-152,555	-152,759

(34) SEGMENT REPORTING

The activities of the SURTECO Group are segmented by operating segments according to IFRS 8 within the scope of reporting. The breakdown is based on internal controlling and reporting. It takes into account the customer-centric alignment of SURTECO into the Strategic Business Units (SBUs) Decoratives, Profiles and Technicals. The latter comprises all other non-reportable business segments. Each company within the Group is assigned to the appropriate segments essentially in accordance with the list "Shareholdings".

• The Segment Decoratives primarily serves the wood-based, flooring, door and furniture industries, and the caravan industry.
• The Segment Profiles supplies trade floor-layers and the interior design and construction industries.
• The other segments Technicals are specialist providers supplying niche markets in the furniture, flooring and caravan industries, and in interior design for ships.

The segment information is based on the same recognition, accounting and valuation principles as those used in the consolidated financial statements. There are no changes in valuation principles compared with previous periods. Assets and liabilities, provisions, income and expenses, as well as earnings between the segments are eliminated in the consolidations. Internal sales within the Group are transacted at commercial prices.

The segment working capital describes the difference between current assets and current liabilities. The current assets include current liabilities and inventories.

The SURTECO Group uses two controlling parameters in segment reporting and EBIT is applied as the primary controlling parameter.

The Management Board holds the power of decision-making with regard to the allocation of the resources and the measurement of the earnings power of the reportable segments. Uniform performance and asset values are used in the relevant business segments for this purpose.

The business relationships between the companies in the segments are organized on the basis of dealing at arm's length. Administrative services are calculated as cost allocations.

€ 000s Liabilities from financial activities

	Cash/Bank
	current account	Borrowings	Leases	Total
Net liabilities at 1 January 2021	133,466	-253,754	-24,425	-144,713
Cash flows	-61,695	53,535	4,562	-3,598
New leases	0	0	-719	-719
Adjustment resulting from currency translation	847	0	0	847
Other changes	438	-4,292	-518	-4,372
Net liabilities at 31 December 2021	73,056	-204,511	-21,100	-152,555
Net liabilities at 1 January 2022	73,056	-204,511	-21,100	-152,555
Cash flows	43,128	-32,028	2,642	13,742
New leases	0	0	-10,517	-10,517
Adjustment resulting from currency translation	584	0	0	584
Other changes	984	-4,423	-574	-4,013
Net liabilities at 31 December 2022	117,752	-240,962	-29,549	-152,759

Segment information € 000s	SBU Decoratives	SBU Profiles	SBU Technicals1	Reconcili ation	SURTECO Group
2022
External sales	537,269	142,964	67,465	0	747,698
Internal sales with the SURTECO Group	10,603	1,957	4,788	-17,348	0
Total sales	547,872	144,921	72,253	-17,348	747,698
Depreciation and amortization	-29,978	-9,281	-4,053	-6882	-44,000
Segment earnings (EBIT)	39,531	11,861	227	-11,438	40,181
Interest income	650	51	55	228	984
Interest expenses	-2,235	-975	-596	-1,190	-4,996
EBT	38,087	10,934	209	-12,407	36,823
Segment working capital	107,633	33,037	11,862	-3,111	149,421
Voluntary disclosures:
Income tax	-13,148	-2,105	265	3,398	-11,590
Investments (property, plant and equipment,
and intangible assets)	40,428	7,195	2,869	30	50,522
Employees	2,280	581	269	17	3,147
2021
External sales	549,340	136,521	71,199	0	757,060
Internal sales within the Group	14,646	1,887	4,792	-21,325	0
Total sales	563,986	138,408	75,991	-21,325	757,060
Depreciation and amortization	-29,199	-8,681	-4,225	-135	-42,240
Segment earnings (EBIT)	62,345	12,678	5,608	-8,107	72,524
Interest income	309	21	175	-67	438
Interest expenses	-1,610	-739	-614	-1,847	-4,810
EBT	62,411	11,959	5,437	-9,837	69,970
Segment Working Capital	115,564	34,558	13,737	-2,345	161,514
Voluntary disclosures:
Income tax	-16,148	-7,267	-2,941	4,192	-22,164
Investments (property, plant and equipment, and intangible assets)	17,026	12,603	3,410	61	33,100
Employees	2,290	561	274	19	3,144
1 All other segments in accordance with IFRS 8.16 2 Incl. impairment for Dakor

Sales revenues were allocated according to the destination of goods delivery. Non-current assets were recorded in accordance with the location of the relevant asset.

Non-current assets include property, plant and equipment, intangible assets and goodwill.

Goodwill was allocated to the non-current assets by regions.

(35) COMPENSATION FOR EXECUTIVE OFFICERS AND FORMER EXECUTIVE OFFICERS

Supervisory Board

The remuneration granted and owed (inflow) for the Supervisory Board, including former Board Members, amounted to € 000s 446 for the business year 2022. It includes basic remuneration of € 000s 410 and compensation for Audit Committee activities in the amount of € 000s 36.

Management Board

The Members of the Management Board, including former Members of the Management Board, received granted and owed remuneration (inflow) amounting to € 000s 3,541 in the business year 2022. This includes € 000s 300 for pension provision which is paid to an external welfare fund.

(36) AUDITOR'S FEE

At the Annual General Meeting on 7 June 2022, professional services firm PricewaterhouseCoopers GmbH Wirtschaftsprüfungsgesellschaft, Munich, was appointed as the auditor of the financial statements and auditor to carry out the audit inspection of the interim financial reports for the business year 2022.

The total fee for the business year amounted to € 000s 661 (2021: € 000s 599). Out of this, € 000s 579 (2021: € 000s 501) were attributed to services for auditing the financial statements, € 000s 82 (2021: € 000s 98) to tax consultancy services. Miscellaneous services were not invoiced in the business year (2021: € 000s 0). The auditing services include auditing of the consolidated financial statements and auditing of the separate financial statements of SURTECO GROUP SE and the domestic subsidiary companies. The tax consultancy services essentially relate to consultancy services for the preparation of tax returns for previous years and support for the ongoing company audit.

(37) EVENTS AFTER THE REPORTING DATE

On 28 February 2023, SURTECO North America, Inc. acquired 100 percent of the shares and voting rights in OMNOVA Engineered Surfaces Inc. in Thailand, Rayong, from OMNOVA Solutions Inc. in the course of a share deal and as a consequence obtained control over the company. Furthermore, all assets and production employees at four US locations of OMNOVA Solutions Inc. were transferred in the course of an asset deal.

The identifiable acquired assets and liabilities on the date of the acquisition include inputs (a headquarters in Thailand, several factories in the USA and Thailand, patented technologies, property, plant and equipment, inventories and customer relations), production processes and an organized workforce. SURTECO therefore concludes that the acquired inputs and processes will together contribute significantly to the capacity to generate income. SURTECO came to the conclusion that both the acquired company in Thailand and the acquired American assets are business combinations in compliance with IFRS 3.

On the basis of the transaction, SURTECO has the opportunity to expand its product portfolio. Furthermore, it is expected that the acquisition carried out by SURTECO will create substantial market shares in the business areas Laminates and Films (LF) and Coated Fabrics (CF) particularly in the USA as a result of access to the customer base of OMNOVA. SURTECO also expects cost reductions on the basis of scale effects.

Segment information by regional markets € 000s 2021 2022 Sales revenues Non-current assets Investments Sales revenues Non-current assets Investments Germany 192,999 252,690 21,193 182,407 254,996 26,164 Rest of Europe 357,863 146,590 6,688 337,852 144,421 11,848 America 139,727 48,849 4,415 158,042 57,397 9,278 Asia/Australia 59,461 30,899 804 63,837 32,302 3,232 Other 7,010 5,560 757,060 479,028 33,100 747,698 489,116 50,522

Reconciliation of balance sheet totals with net segment assets
€ 000s	2021	2022
Balance sheet total	795,150	851,859
Less financial assets
- Cash and cash equivalents	73,056	117,752
- Financial assets and investments accounted for using the equity method	10	10
- Tax assets / deferred tax assets	13,842	24,609
Segment assets	708,242	709,488
Current and non-current liabilities	381,468	425,786
Less financial liabilities
- Short-term and long-term financial liabilities	225,610	270,512
- Tax liabilities / deferred tax liabilities	42,651	49,559
- Pensions and other personnel-related obligations	11,888	9,548
Segment liabilities	101,319	96,167
Net segment assets	606,923	613,321

In the business year 2022, OMNOVA did not contribute sales revenues or a profit to consolidated earnings.

If the acquisition had taken place on 1 January 2022, the estimates of the Management Board indicate that the consolidated sales revenues would have amounted to € 986 million and the consolidated earnings (before tax) for the year would have been € 45 million. When calculating these amounts, the management assumed that the provisionally determined adjustments for fair values, which were determined on the date of acquisition, would also have been valid in the case of an acquisition on 1 January 2022.

The provisionally transferred consideration on the date of the acquisition is made up of a basic purchase price of € 240.1 million and a total purchase price adjustment in the sum of € 15.9 million calculated on the basis of preliminary values. The purchase price adjustment proposed by the seller is currently subject to review by SURTECO.

On the reporting date, costs associated with the company merger for the SURTECO Group (transaction costs) amount to € 1.6 million. These costs are recorded under administrative expenses.

The table below sets out details of the recorded amounts for the acquired assets and the debts assumed on the acquisition date:

All of the above amounts have been provisionally valued pending a full independent valuation. The same applies to deferred taxes.

If within the period of one year after the date of acquisition new information about the facts and circumstances that existed at the acquisition date become known that would have led to corrections to the above amounts or to additional provisions, the accounting for the business acquisition will be adjusted.

The provisional goodwill is determined as follows:

The goodwill results primarily from the skills and professional qualifications of the workforce of OMNOVA and the anticipated synergies arising from integration of the company within the SURTECO Group. None of the goodwill recognized is expected to be deductible for tax purposes.

The organisational structure was changed with effect from 1 January 2023 as part of the corporate strategy and to adapt to the needs of the customers of the SURTECO Group. The segments "Surfaces", "Edgebands" and "Profiles" and the regional segments North America and Asia-Pacific were established as independent Business Units. These business units bear responsibility across legal entities. They have all the functions required to achieve the strategic and operational goals. Geared to customers and products, the new structure helps to increase the profitability of the SURTECO Group and drive growth in the long term. The segments are organised across the companies on the basis of the sales markets. For this purpose, all surface activities including melamine edgebands in Europe and South America are included in Surfaces. The Edgebands segment bundles the activities with plastic edgebands in these regions, while Profiles concentrates on skirting boards and technical profiles. The regional segments comprise all activities in the respective geographic markets, irrespective of the products. Pro forma segment revenue for the 2022 financial year is € 277.6 million for Surfaces, € 162.5 million for Edgebands, € 148.5 million for Profiles, € 102.0 million for North America and € 57.0 million for Asia-Pacific. The pro forma EBIT of the segments for the financial year 2022 is € 1.8 million for Surfaces, € 19.6 million for Edgebands, € 12.3 million for Profiles, € 7.5 million for North America and € 10.2 million for Asia-Pacific.

Up until 13 April 2023, there were no further events or developments that could lead to a significant change to the recognition or valuation of individual assets or liabilities as at 31 December 2022.

€ million
Property, plant and equipment	39.5
Intangible assets	72.1
Inventories	37.5
Trade accounts receivable	25.5
Other assets	1.0
Cash and cash equivalents	12.6
Financial liabilities	-5.4
Trade accounts payable and other liabilities	-38.3
Total identifiable acquired net assets

€ million
Transferred consideration (provisional)	256.0
Fair value of the identifiable net assets
Goodwill	111.4

XI. Executive Officers of the Company

XII. Declaration of Compliance with the German Corporate Governance Code pursuant to § 161 Sentence 1 Stock Corporation Act (AktG)

The Management Board and the Supervisory Board of SURTECO GROUP SE submitted the Declaration of Compliance in respect of the Corporate Governance Code pursuant to § 161 Sentence 1 Stock Corporation Act (AktG) on 15 December 2022 and made this declaration available to shareholders on the website of the company at: www.surteco.com.

Management Board (in the business year 2022)

Name, Place of residence	Main activity	Supervisory Board memberships of other companies and other mandates
Wolfgang Moyses Business Manager, Munich	Chairman of the Management Board	• Member of the Advisory Board of Brabender Inc., South Hackensack, USA • Customer Member of the Advisory Board of Landesbank Rheinland-Pfalz, Mainz
Manfred Bracher Engineer Frankfurt am Main (until 31 January 2023)	Member of the Management Board COO	-
Andreas Pötz Business Administrator Weißensberg (from 1 April 2022)	Member of the Management Board CFO	• Member of the Exchange Council of Munich Stock Exchange

Members of the Supervisory Board (in the business year 2022)

Name, Place of residence	Regular occupation	Supervisory Board memberships of other companies and other mandates
Christa Linnemann Gütersloh Honorary Chairwoman	-	-
Andreas Engelhardt Bielefeld (Chairman)	Personally liable shareholder of Schüco International KG, Bielefeld and OTTO FUCHS Beteiligungen KG, Meinzerhagen	• Member of the Supervisory Board of SAINT-GOBAIN ISOVER G+H AG, Ludwigshafen • Chairman of the Supervisory Board of BDO AG WPG, Hamburg
Tim Fiedler Düsseldorf (Vice Chairman)	Economist	• Member of the Advisory Board of nvisQ GbmH, Aachen • Member of the Advisory Board of Smart Coloring GmbH, Aachen • Member of the Advisory Board of Drewsen Spezialpapier GmbH & Co. KG, Lachendorf • Member of the Board of Trustees of Gustav & Catharina Schürfeld-Stiftung, Lachendorf • Member of the Supervisory Board of Geiger Notes AG, Mainz-Kastel • Member of the Supervisory Board of CMPC Europe GmbH & Co. KG, Hamburg
Tobias Pott Gütersloh (Deputy Chairman)	Business Administrator	• Deputy Chairman of the Management Board of Robert und Christa Linnemann-Stiftung, Gütersloh
Jens Krazeisen* Buttenwiesen	Chairman of the Works Council of SURTECO GmbH, Buttenwiesen	-
Jochen Müller Neunkirchen-Seelscheid	Engineer	• Deputy Chairman of the Supervisory Board of A.S. Création Tapeten AG, Gummersbach • Member of the Supervisory Board of WKW Aktien gesellschaft, Velbert (until July 2022)

Members of the Supervisory Board (in the business year 2022)
Name, Place of residence	Regular occupation	Supervisory Board memberships of other companies and other mandates
Dirk Mühlenkamp* Gladbeck	Chairman of the Works Council of SURTECO GmbH, Gladbeck	-
Jan Oberbeck St. Augustin	Economist	• Member of the Supervisory Board of All4Lables GmbH, Hamburg • Member of the Advisory Board of Smart Coloring GmbH, Aachen • Member of the Supervisory Board of Geiger Notes AG, Mainz-Kastel
Thomas Stockhausen* Sassenberg	Chairman of the Works Council of SURTECO GmbH, Sassenberg	-
Jörg Wissemann Schlossborn	Business Administrator	-

* Employee representatives

Committees of the Supervisory Board (as at 31 December 2022)

Presiding Board
Andreas Engelhardt (Chairman) Tim Fiedler Tobias Pott
Personnel Committee
Andreas Engelhardt (Chairman)	Tim Fiedler	Jan Oberbeck	Tobias Pott
Audit Committee
Jochen Müller (Chairman)	Andreas Engelhardt	Tobias Pott	Jörg Wissemann

Shareholdings as at 31/12/2022

	Town/City	Country	Consoli dated	Percentage of shares held	Partici pation		Town/City	Country	Consoli dated
PARENT COMPANY
100 SURTECO GROUP SE	Buttenwiesen	Germany
BUSINESS UNIT DECORATIVES						BUSINESS UNIT TECHNICALS
300 SURTECO GmbH	Buttenwiesen	Germany	F	100.00	100	200 Surteco Beteiligungen GmbH	Buttenwiesen	Germany	F
321 SURTECO art GmbH	Willich	Germany	F	100.00	300	410 Kröning GmbH	Hüllhorst	Germany	F
341 SÜDDEKOR LLC	Agawam	USA	F	100.00	300	330 DAKOR Melamin Imprägnierungen GmbH Heroldstatt		Germany	F
405 SURTECO UK Ltd.	Burnley	United Kingdom	F	100.00	300	610 SURTECO Svenska AB	Gislaved	Sweden	F
441 BauschLinnemann North America Inc. Myrtle Beach		USA	F	100.00	300	611 Gislaved Folie AB	Gislaved	Sweden	F
443 SURTECO North America Inc.	Myrtle Beach	USA	NC	100.00	300
470 SURTECO Italia s.r.l.	Martellago	Italy	F	100.00	300
501 Global Abbasi, S. L.	Madrid	Spain	F	100.00	300	BUSINESS UNIT PROFILES
502 Proadec Portugal, S. A.	Mindelo	Portugal	F	100.00	501	520 Döllken Profiles GmbH	Bönen	Germany	F
503 Proadec Brasil Ltda.	Sao José dos Pinhais Brazil		F	100.00	502	531 Döllken Sp.z o.o.	Katowice	Poland	F
504 Chapacinta, S. A. de C. F.	Tultitlán	Mexico	F	99.99	502	532 Döllken CZ s.r.o.	Prague	Czech Republic	F
				0.01	501	540 Nenplas Holdings Ltd.	Ashbourne	United Kingdom	F
512 SURTECO Australia Pty Limited	Sydney	Australia	F	100.00	300	541 Nenplas Ltd.	Ashbourne	United Kingdom	F
513 SURTECO PTE Ltd.	Singapore	Singapore	F	100.00	300	542 Polyplas Extrusions Ltd.	Stourport-on-Severn United Kingdom		F
514 PT Doellken Bintan Edgings & Profiles Batam		Indonesia	F	99.00	300
				1.00	513
516 SURTECO France S.A.S.	Beaucouzé	France	F	100.00	300
518 SURTECO OOO	Moscow	Russia	F	100.00	300
550 SURTECO USA Inc.	Greensboro	USA	F	100.00	300
560 SURTECO Canada Ltd	Brampton	Canada	F	100.00	300
580 SURTECO Decorative Material Co. Ltd. Foshan		China	F	100.00	513	F = Full Consolidation NC = Not Consolidated

BUTTENWIESEN, 13 APRIL 2023 THE MANAGEMENT BOARD

WOLFGANG MOYSES ANDREAS PÖTZ

"The following copy of the auditor's report also includes a "Report on the Assurance on the Electronic Rendering of the Consolidated Financial Statements and the Group Management Report Prepared for Publication Purposes in Accordance with § 317 Abs. 3a HGB" ("Separate report on ESEF conformity"). The subject matter (ESEF documents) to which the Separate report on ESEF conformity relates is not attached. The audited ESEF documents can be inspected in or retrieved from the Federal Gazette."

Independent Auditor's Report

To SURTECO GROUP SE, Buttenwiesen

REPORT ON THE AUDIT OF THE CONSOLIDATED FINANCIAL STATEMENTS AND OF THE GROUP MANAGEMENT REPORT

Audit Opinions

We have audited the consolidated financial statements of SURTECO GROUP SE, Buttenwiesen, and its subsidiaries (the Group), which comprise the consolidated statement of financial position as at 31 December 2022, and the consolidated statement of comprehensive income, consolidated statement of profit or loss, consolidated statement of changes in equity and consolidated statement of cash flows for the financial year from 1 January to 31 December 2022, and notes to the consolidated financial statements, including a summary of significant accounting policies. In addition, we have audited the group management report of SURTECO GROUP SE, which is combined with the Company's management report, for the financial year from 1 January to 31 December 2022. In accordance with the German legal requirements, we have not audited the section "Overall Internal Controlling System" of the group management report.

In our opinion, on the basis of the knowledge obtained in the audit,

• the accompanying consolidated financial statements comply, in all material respects, with the IFRSs as adopted by the EU and the additional requirements of German commercial law pursuant to § [Article] 315e Abs. [paragraph] 1 HGB [Handelsgesetzbuch: German Commercial Code] and, in compliance with these requirements, give a true and fair view of the assets, liabilities, and financial position of the Group as at 31 December 2022, and of its financial performance for the financial year from 1 January to 31 December 2022, and
• the accompanying group management report as a whole provides an appropriate view of the Group's position. In all material respects, this group management report is consistent with the consolidated financial statements, complies with German legal requirements and appropriately presents the opportunities and risks of future development. Our audit opinion on the group management report does not cover the content of the section of the group management report referred to above.

Pursuant to § 322 Abs. 3 Satz [sentence] 1 HGB, we declare that our audit has not led to any reservations relating to the legal compliance of the consolidated financial statements and of the group management report.

Basis for the Audit Opinions

We conducted our audit of the consolidated financial statements and of the group management report in accordance with § 317 HGB and the EU Audit Regulation (No. 537/2014, referred to subsequently as "EU Audit Regulation") in compliance with German Generally Accepted Standards for Financial Statement Audits promulgated by the Institut der Wirtschaftsprüfer [Institute of Public Auditors in Germany] (IDW). Our responsibilities under those requirements and principles are further described in the "Auditor's Responsibilities for the Audit of the Consolidated Financial Statements and of the Group Management Report" section of our auditor's report. We are independent of the group entities in accordance with the requirements of European law and German commercial and professional law, and we have fulfilled our other German professional responsibilities in accordance with these requirements. In addition, in accordance with Article 10 (2) point (f) of the EU Audit Regulation, we declare that we have not provided non-audit services prohibited under Article 5 (1) of the EU Audit Regulation. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions on the consolidated financial statements and on the group management report.

Key Audit Matters in the Audit of the Consolidated Financial Statements Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements for the financial year from 1 January to 31 December 2022. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our audit opinion thereon; we do not provide a separate audit opinion on these matters.

In our view, the matter of most significance in our audit was as follows:

➊ Recoverability of goodwill

Our presentation of this key audit matter has been structured as follows:

• ➀ Matter and issue
• ➁ Audit approach and findings
• ➂ Reference to further informationn

Hereinafter we present the key audit matter:

➊ Recoverability of goodwill

➀ In the Company's consolidated financial statements goodwill amounting in total to EUR 162.0 million

(19.0 % of total assets or 38.0 % of equity) is reported under the "Goodwill" balance sheet item.

Goodwill is tested for impairment by the Company once a year or when there are indications of impairment to determine any possible need for write-downs. The impairment test is carried out at the level of the groups of cash-generating units to which the relevant goodwill is allocated. The carrying amount of the relevant cash-generating units, including goodwill, is compared with the corresponding recoverable amount in the context of the impairment test. The recoverable amount is generally determined using the value in use. The present value of the future cash flows from the respective group of cash-generating units normally serves as the basis of valuation. Present values are calculated using discounted cash flow models. For this purpose, the adopted medium-term business plan of the Group forms the starting point which is extrapolated based on assumptions about long-term rates of growth. Expectations relating to future market developments and assumptions about the development of macroeconomic factors are also taken into account. The discount rate used is the weighted average cost of capital for the respective

• is materially inconsistent with the consolidated financial statements, with the group management report

• disclosures audited in terms of content or with our knowledge obtained in the audit, or
• otherwise appears to be materially misstated.

Responsibilities of the Executive Directors and the Supervisory Board for the Consolidated Financial

Statements and the Group Management Report

The executive directors are responsible for the preparation of the consolidated financial statements that comply, in all material respects, with IFRSs as adopted by the EU and the additional requirements of German commercial law pursuant to § 315e Abs. 1 HGB and that the consolidated financial statements, in compliance with these requirements, give a true and fair view of the assets, liabilities, financial position, and financial performance of the Group. In addition, the executive directors are responsible for such internal control as they have determined necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud (i.e., fraudulent financial reporting and misappropriation of assets) or error.

In preparing the consolidated financial statements, the executive directors are responsible for assessing the Group's ability to continue as a going concern. They also have the responsibility for disclosing, as applicable, matters related to going concern. In addition, they are responsible for financial reporting based on the going concern basis of accounting unless there is an intention to liquidate the Group or to cease operations, or there is no realistic alternative but to do so. Furthermore, the executive directors are responsible for the preparation of the group management report that, as a whole, provides an appropriate view of the Group's position and is, in all material respects, consistent with the consolidated financial statements, complies with German legal requirements, and appropriately presents the opportunities and risks of future development. In addition, the executive directors are responsible for such arrangements and measures (systems) as they have considered necessary to enable the preparation of a group management report that is in accordance with the applicable German legal requirements, and to be able to provide sufficient appropriate evidence for the assertions in the group management report. The supervisory board is responsible for overseeing the Group's financial reporting process for the preparation of the consolidated financial statements and of the group management report.

Auditor's Responsibilities for the Audit of the Consolidated Financial Statements and of the Group Management Report

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 whether the group management report as a whole provides an appropriate view of the Group's position and, in all material respects, is consistent with the consolidated financial statements and the knowledge obtained in the audit, complies with the German legal requirements and appropriately presents the opportunities and risks of future development, as well as to issue an auditor's report that includes our audit opinions on the consolidated financial statements and on the group management report. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with § 317 HGB and the EU Audit Regulation and in compliance with German Generally Accepted Standards for Financial Statement Audits promulgated by the Institut der Wirtschaftsprüfer (IDW) will always detect a material misstatement. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements and this group management report.

group of cash-generating units. As a result of the impairment test, even after taking into account the value in use for the groups of cash-generating units, there was an impairment of € 0.5 million in total for the cash-generating unit DAKOR.

The outcome of this valuation is dependent to a large extent on the estimates made by the executive directors with respect to the future cash inflows from the respective group of cash-generating units, the discount rate used, the rate of growth and other assumptions, and is therefore subject to considerable uncertainty. Against this background and due to the complex nature of the valuation, this matter was of particular significance in the context of our audit.

➁ As part of our audit, we assessed the methodology used for the purposes of performing the impairment test, among other things. After matching the future cash inflows used for the calculation against the adopted medium-term business plan of the Group, we assessed the appropriateness of the calculation, in particular by reconciling it with general and sector-specific market expectations. In addition, we assessed the appropriate consideration of the costs of Group functions. In the knowledge that even relatively small changes in the discount rate applied can have a material impact on the value of the entity calculated in this way, we focused our testing in particular on the parameters used to determine the discount rate applied, and assessed the calculation model. In order to reflect the uncertainty inherent in the projections, we evaluated the sensitivity analyses performed by the Company and carried out our own sensitivity analyses. We verified that the necessary disclosures were made in the notes to the consolidated financial statements relating to groups of cash-generating units for which a reasonably possible change in an assumption would result in the recoverable amount falling below the carrying amount of the cash-generating units including the allocated goodwill.

Overall, the valuation parameters and assumptions used by the executive directors are in line with our expectations and are also within the ranges considered by us to be reasonable.

➂ The Company's disclosures on goodwill are contained in section IX (22) of the notes to the consolidated financial statements.

Other Information

The executive directors are responsible for the other information. The other information comprises the section "Overall Internal Controlling System" of the group management report as an unaudited part of the group management report.

The other information comprises further

• the statement on corporate governance pursuant to § 289f HGB and § 315d HGB
• the separate non-financial group report to comply with §§ 315b to 315c HGB
• all remaining parts of the annual report excluding cross-references to external information with the exception of the audited consolidated financial statements, the audited group management report and our auditor's report

Our audit opinions on the consolidated financial statements and on the group management report do not cover the other information, and consequently we do not express an audit opinion or any other form of assurance conclusion thereon.

In connection with our audit, our responsibility is to read the other information mentioned above and, in so doing, to consider whether the other information

We exercise professional judgment and maintain professional skepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the consolidated financial statements and of the group management report, 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 audit opinions. 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 controls.
• Obtain an understanding of internal control relevant to the audit of the consolidated financial statements and of arrangements and measures (systems) relevant to the audit of the group management report in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an audit opinion on the effectiveness of these systems.
• Evaluate the appropriateness of accounting policies used by the executive directors and the reasonableness of estimates made by the executive directors and related disclosures.
• Conclude on the appropriateness of the executive directors' use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in the auditor's report to the related disclosures in the consolidated financial statements and in the group management report or, if such disclosures are inadequate, to modify our respective audit opinions. 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 be able 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 present the underlying transactions and events in a manner that the consolidated financial statements give a true and fair view of the assets, liabilities, financial position and financial performance of the Group in compliance with IFRSs as adopted by the EU and the additional requirements of German commercial law pursuant to § 315e Abs. 1 HGB.
• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express audit opinions on the consolidated financial statements and on the group management report. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinions.
• Evaluate the consistency of the group management report with the consolidated financial statements, its conformity with German law, and the view of the Group's position it provides.
• Perform audit procedures on the prospective information presented by the executive directors in the group management report. On the basis of sufficient appropriate audit evidence we evaluate, in particular, the significant assumptions used by the executive directors as a basis for the prospective information, and evaluate the proper derivation of the prospective information from these assumptions. We do not express a separate audit opinion on the prospective information and on the assumptions used as a basis. There is a substantial unavoidable risk that future events will differ materially from the prospective information.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with the relevant independence requirements, and communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or safeguards applied.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter.

OTHER LEGAL AND REGULATORY REQUIREMENTS

Report on the Assurance on the Electronic Rendering of the Consolidated Financial Statements and the Group Management Report Prepared for Publication Purposes in Accordance with § 317 Abs. 3a HGB

Assurance Opinion

assurance as to whether the rendering of the consolidated financial statements and the group management report (hereinafter the "ESEF documents") contained in the electronic file SURTECO_KA_LB_ESEF-2022-12- 31-de.zip and prepared for publication purposes complies in all material respects with the requirements of § 328 Abs. 1 HGB for the electronic reporting format ("ESEF format"). In accordance with German legal requirements, this assurance work extends only to the conversion of the information contained in the consolidated financial statements and the group management report into the ESEF format and therefore relates neither to the information contained within these renderings nor to any other information contained in the electronic file identified above.

In our opinion, the rendering of the consolidated financial statements and the group management report contained in the electronic file identified above and prepared for publication purposes complies in all material respects with the requirements of § 328 Abs. 1 HGB for the electronic reporting format. Beyond this assurance opinion and our audit opinion on the accompanying consolidated financial statements and the accompanying group management report for the financial year from 1 January to 31 December 2022 contained in the "Report on the Audit of the Consolidated Financial Statements and on the Group Management Report" above, we do not express any assurance opinion on the information contained within these renderings or on the other information contained in the electronic file identified above.

Basis for the Assurance Opinion

We conducted our assurance work on the rendering of the consolidated financial statements and the group management report contained in the electronic file identified above in accordance with § 317 Abs. 3a HGB and the IDW Assurance Standard: Assurance Work on the Electronic Rendering, of Financial Statements and Management Reports, Prepared for Publication Purposes in Accordance with § 317 Abs. 3a HGB (IDW AsS 410 (06.2022)) and the International Standard on Assurance Engagements 3000 (Revised). Our responsibility in accordance therewith is further described in the "Group Auditor's Responsibilities for the Assurance Work on the ESEF Documents" section. Our audit firm applies the IDW Standard on Quality Management 1: Requirements for Quality Management in the Audit Firm (IDW QS 1).

Responsibilities of the Executive Directors and the Supervisory Board for the ESEF Documents

The executive directors of the Company are responsible for the preparation of the ESEF documents including the electronic renderings of the consolidated financial statements and the group management report in accordance with § 328 Abs. 1 Satz 4 Nr. [number] 1 HGB and for the tagging of the consolidated financial statements in accordance with § 328 Abs. 1 Satz 4 Nr. 2 HGB.

In addition, the executive directors of the Company are responsible for such internal control as they have considered necessary to enable the preparation of ESEF documents that are free from material non-compliance with the requirements of § 328 Abs. 1 HGB for the electronic reporting format, whether due to fraud or error. The supervisory board is responsible for overseeing the process for preparing the ESEF documents as part of the financial reporting process.

Group Auditor's Responsibilities for the Assurance Work on the ESEF Documents

Our objective is to obtain reasonable assurance about whether the ESEF documents are free from material non-compliance with the requirements of § 328 Abs. 1 HGB, whether due to fraud or error. We exercise professional judgment and maintain professional skepticism throughout the assurance work. We also:

• Identify and assess the risks of material non-compliance with the requirements of § 328 Abs. 1 HGB, whether due to fraud or error, design and perform assurance procedures responsive to those risks, and obtain assurance evidence that is sufficient and appropriate to provide a basis for our assurance opinion.
• Obtain an understanding of internal control relevant to the assurance work on the ESEF documents in order to design assurance procedures that are appropriate in the circumstances, but not for the purpose of expressing an assurance opinion on the effectiveness of these controls.
• Evaluate the technical validity of the ESEF documents, i.e., whether the electronic file containing the ESEF documents meets the requirements of the Delegated Regulation (EU) 2019/815 in the version in force at the date of the consolidated financial statements on the technical specification for this electronic file.
• Evaluate whether the ESEF documents provide an XHTML rendering with content equivalent to the audited consolidated financial statements and to the audited group management report.
• Evaluate whether the tagging of the ESEF documents with Inline XBRL technology (iXBRL) in accordance with the requirements of Articles 4 and 6 of the Delegated Regulation (EU) 2019/815, in the version in force at the date of the consolidated financial statements, enables an appropriate and complete machinereadable XBRL copy of the XHTML rendering.

Further Information pursuant to Article 10 of the EU Audit Regulation

We were elected as group auditor by the annual general meeting on 7 June 2022. We were engaged by the supervisory board on 19 December 2022. We have been the group auditor of the SURTECO GROUP SE, Buttenwiesen, without interruption since the financial year 2011.

We declare that the audit opinions expressed in this auditor's report are consistent with the additional report to the audit committee pursuant to Article 11 of the EU Audit Regulation (long-form audit report).

REFERENCE TO AN OTHER MATTER– USE OF THE AUDITOR'S REPORT

Our auditor's report must always be read together with the audited consolidated financial statements and the audited group management report as well as the assured ESEF documents. The consolidated financial statements and the group management report converted to the ESEF format – including the versions to be filed in the company register – are merely electronic renderings of the audited consolidated financial statements and the audited group management report and do not take their place. In particular, the "Report on the Assurance on the Electronic Rendering of the Consolidated Financial Statements and the Group Management Report Prepared for Publication Purposes in Accordance with § 317 Abs. 3a HGB" and our assurance opinion contained therein are to be used solely together with the assured ESEF documents made available in electronic form.

GERMAN PUBLIC AUDITOR RESPONSIBLE FOR THE ENGAGEMENT

The German Public Auditor responsible for the engagement is Dietmar Eglauer.

Munich, 13 April 2023 PricewaterhouseCoopers GmbH Wirtschaftsprüfungsgesellschaft

Jürgen Schumann Dietmar Eglauer Wirtschaftsprüfer Wirtschaftsprüfer (German Public Auditor) (German Public Auditor)

Responsibility Statement

To the best of our knowledge, and in accordance with the applicable reporting principles, the consolidated financial statements give a true and fair view of the assets, liabilities, financial position and profit or loss of the group, and the group management report includes a fair review of the development and performance of the business and the position of the group, together with a description of the principal opportunities and risks associated with the expected development of the group.

Buttenwiesen, 13 April 2023

The Management Board

Wolfgang Moyses Andreas Pötz

RESPONSIBILITY STATEMENT

Balance Sheet (HGB) (SHORT VERSION) Income Statement (HGB) (SHORT VERSION)

€ 000s	31/12/2021	31/12/2022
ASSETS
Intangible assets	24	20
Tangible assets	149	113
Investments
- Interest in affiliated enterprises	297,767	297,767
- Notes receivable to affiliated enterprises	16,536	15,240
- Participations	1	1
Fixed assets	314,477	313,141
Receivables and other assets
- Receivables from affiliated enterprises	224,641	200,125
- Other assets	3,629	5,597
Cash in hand, bank balances	45,256	92,009
Current assets	273,526	297,731
Prepaid expenses	293	697
	588,296	611,569
LIABILITIES AND SHAREHOLDERS' EQUITY
Subscribed capital	15,506	15,506
Additional paid-in capital	170,178	170,178
Retained earnings	117,222	129,510
Net profit	27,794	11,375
Equity	330,700	326,569
Tax accruals	8,531	7,895
Other accruals	6,975	6,333
Accrued expenses	15,506	14,228
Liabilities to banks	204,797	242,577
Trade accounts payable	441	696
Liabilities to affiliated enterprises	36,252	27,384
Other liabilities	92	111
Liabilities	241,582	270,768
Deferred income	3	4
Deferred taxes	505	0
	588,296	611,569

The Annual Financial Statements of SURTECO GROUP SE have been published in the Federal Gazette (Bundesanzeiger) and filed at the Company Register of the Local Court Augsburg (Amtsgericht Augsburg). The Balance Sheet and the Income Statement (short version) from these Annual Financial Statements are published here. PricewaterhouseCoopers GmbH Wirtschaftsprüfungsgesellschaft, Munich, audited the Annual Financial Statements and provided them with an unqualified auditor's opinion.

The Annual Financial Statements can be requested from SURTECO GROUP SE, Johan-Viktor-Bausch-Straße 2, 86647 Buttenwiesen, Germany.

€ 000s	1/1/-31/12/ 2021	1/1/-31/12/ 2022
Sales revenues	1,755	1,831
Income from profit and loss transfer agreements	50,801	26,422
Expenses from loss transfer	0	-4,003
Other operating income	880	99
Personnel expenses	-7,343	-5,532
Amortization and depreciation on intangible assets and property, plant and equipment	-78	-71
Other operating expenses	-4,729	-8,710
Income from long-term securities and loans from financial assets	450	429
Interest income	-2,699	-1,352
Income taxes	-11,240	2,264
Earnings after tax	27,797	11,377
Other taxes	-3	-2
Net income	27,794	11,375
Net profit	27,794	11,375

Glossary

Corporate Governance

Corporate Governance relates to the framework for managing a company based on legal and objective principles.

Dealing-at-arm's-length principle

Services between legally independent companies of a group are exchanged at intercompany prices. Intercompany prices must stand up to the test of dealing-at-arm's length, which involves an offset of an exchange of services between affiliated companies at conditions that were agreed or would have been agreed under comparable circumstances with or among third parties.

Derivative financial instruments

Financial products in which the market value can be derived from classic underlying instruments or from market prices such as interest rates or exchange rates. Derivatives are used for financial management at SURTECO in order to limit risk.

German Corporate Governance Code

The German Corporate Governance Code includes principles, recommendations and ideas for the Management Board and Supervisory Board that are intended to contribute to the company being managed in the interests of the enterprise. The code elucidates the duties of the Management Board and Supervisory Board to act in harmony with the principles of the social market economy taking into account the concerns of the shareholders, the workforce and the other groups associated with the enterprise (stakeholders) in the interests of the enterprise and creating the enterprise's long-term value added (interest of the enterprise).

EBIT

Earnings before financial result and income tax

EBITDA

Earnings before financial result, income tax and depreciation and amortization

EBT

Earnings before income tax

Equity method

Method for presenting participations in companies whereby a controlling influence can be exerted over their business and financial policy. The participation is initially valued at acquisition cost and this value is then adjusted on a pro rata basis to reflect performance of the associated enterprise.

Extrusion

The process of extrusion involves plastics being squeezed through a nozzle in a continuous procedure. The plastic is initially melted as it passes through an extruder by the application of heat and internal friction, and homogenized. The necessary pressure for extruding the material through the nozzle is built up in the extruder. After the plastic has been extruded from the nozzle, it generally sets in a water-cooled calibration. The merging of like or unlike plastic melts before exiting from the extruder nozzle is also known as coextrusion.

Hybrid products

This product group covers finish foils which combine in a multilayer structure the technical and optical advantages of several different basic materials such as paper, plastic or true metals.

Impairment test

Periodic comparison of an asset´s book value with its recoverable amount (fair value). A company must record an impairment charge if it determines that an asset´s fair value has fallen below its book value. Goodwill, for example, is tested for impairment on at least an annual basis.

International Accounting Standards Board (IASB)

IASB is the abbreviation for the International Accounting Standards Board. The function of the IASB is to draw up and revise international accounting standards (IFRS - International Financial Reporting Standards).

International Financial Reporting Interpretations Committee (IFRIC)

The IFRIC is a committee in the International Accounting Standards Committee Foundation. The function of the IFRIC is to publish interpretations of accounting standards in cases where different or incorrect interpretations of the standard are possible, or new factual content was not adequately taken into account in the previous standards.

International Financial Reporting Standards (IFRS)

The International Financial Reporting Standards (IFRS) are international accounting standards. They comprise the standards of the International Accounting Standards Board (IASB), the International Accounting Standards (IAS), the International Accounting Standards Committee and the interpretations of the International Financial Reporting Interpretations Committee (IFRIC) and the former Standards Interpretation Committee (SIC).

Impregnated products

Impregnates are special papers (generally decorative papers) which are saturated in a resin bath in the same way as fully impregnated materials. However, in contrast to these materials, the impregnates are not provided with a final varnish coating. They only receive their final surface when they are compressed with the wood-fibre boards.

SE

Abbreviation for Societas Europaea – legal form of a European joint-stock company.

Release papers

These are an auxiliary material used in the compression of melamine impregnates with wood-fibre boards. The release papers form a separating layer between the hot pressed boards and the material. The release paper controls the texture and the degree of gloss finish to be provided on the surface being generated.

Ten year overview

	2013	2014	2015	2016	2017	2018	2019	2020	2021	2022
Sales revenues in € 000s	402,115	618,469	638,394	639,815	689,651	698,977	675,272	626,989	757,060	747,698
Foreign sales in %	70	72	72	73	75	76	75	73	75	76
EBITDA in € 000s	59,660	62,842	64,957	74,338	83,093	72,779	66,294	88,322	114,764	84,181
Depreciation and amortization in € 000s	-22,613	-35,235	-33,847	-33,461	-38,423	-40,577	-45,175	-42,177	-42,240	-44,000
EBIT in € 000s	37,047	27,607	31,110	40,877	44,670	32,202	21,119	46,145	72,524	40,181
Financial result in € 000s	-9,056	-5,344	-4,293	-5,840	-11,155	-5,069	-4,901	-2,847	-2,554	-3,358
EBT in € 000s	27,991	22,263	26,843	35,037	33,515	27,133	16,218	43,298	69,970	36,823
Consolidated net profit in € 000s	21,876	18,464	17,721	23,867	26,192	18,630	9,428	33,687	47,806	25,233
Balance sheet total in € 000s	626,109	636,669	655,727	673,869	842,596	844,541	780,325	798,776	795,150	851,859
Equity in € 000s	311,025	321,101	334,381	346,552	349,236	353,205	354,633	373,329	413,682	426,074
Equity ratio in %	50	50	51	51	41	42	45	47	52	50
Average number of employees for the year	2,114	2,682	2,727	2,736	3,091	3,329	3,217	3,103	3,144	3,147
Number of employees at 31/12	2,664	2,705	2,695	2,833	3,295	3,304	3,172	3,052	3,165	3,052
Capital stock in €	15,505,731	15,505,731	15,505,731	15,505,731	15,505,731	15,505,731	15,505,731	15,505,731	15,505,731	15,505,731
Number of shares at 31/12	15,505,731	15,505,731	15,505,731	15,505,731	15,505,731	15,505,731	15,505,731	15,505,731	15,505,731	15,505,731
Earnings per share in € (by weighted average of shares issued)	1.86	1.19	1.14	1.54	1.69	1.20	0.61	2.17	3.08	1.63
Dividend per share in €	0.65	0.70	0.80	0.80	0.80	0.55	-	0.80	1.00	0.70*
Dividend payout in € 000s	10,079	10,854	12,405	12,405	12,405	8,528	-	12,405	15,506	10,854
PROFITABILITY INDICATORS
Return on sales in %	6.9	3.6	4.2	5.5	4.8	3.8	2.4	6.9	9.2	4.9
Return on equity in %	7.3	6.0	5.5	7.2	7.8	5.5	2.7	9.3	12.0	6.1
Total return on equity in %	5.9	5.1	5.5	6.5	5.0	4.1	3.0	6.0	9.4	4.9

* (Proposal by the Management Board and Supervisory Board)

PUBLICATION DETAILS

Published by

SURTECO GROUP SE Johan-Viktor-Bausch-Straße 2 86647 Buttenwiesen Germany T: +49 8274 9988-508 F: +49 8274 9988-505 ir@surteco.com www.surteco.com

Concept and Design DesignKonzept, Neusäß

Printing RCDRUCK GmbH & Co. KG, Albstadt

Three-month report January – March 2023

Annual General Meeting

Dividend payout

Six-month report January – June 2023

Nine-month report January – September 2023

CONTACT

Martin Miller Investor Relations and Press Office Johan-Viktor-Bausch-Straße 2 86647 Buttenwiesen

T: +49 8274 9988-508 F: +49 8274 9988-515 martin.miller@surteco.com

www.surteco.com

The paper used for this Annual Report was produced from cellulosesourced from certified forestry companies that operate responsibily and comply with the regulations of the Forest Stewardship Council®.