Notes to individual items of the consolidated balance sheet

Intangible assets include industrial property rights, licenses and similar rights, goodwill, internally generated and developed assets and advance payments on intangible assets. The net carrying amounts increased from € 50.6 million in the previous year to € 52.3 million as of December 31, 2023. Impairment losses of € 0.2 million were recognized in the reporting year (previous year: € 0.2 million) and mainly relate to development costs in the Polyols & Derivatives segment. As of the reporting date, there were restricted rights of disposal on intangible assets in the amount of € 0.5 million (previous year: € 1.7 million).

Exploration and production activities are carried out in one subsidiary. The net carrying amount of this item included in intangible assets amounted to € 0.2 million as of the reporting date (previous year: € 0.2 million). There were no exploration activities in the year under review. This item is not material for the PCC Group and is therefore not presented separately in the reconciliation statement.

Any excess of cost of acquisition over net assets acquired during the initial consolidation of subsidiaries is recognized as goodwill in the consolidated balance sheet. This goodwill is not subject to scheduled amortization but is tested for impairment at least once a year in accordance with IFRS 3.

The presentation opposite shows all goodwill existing in the Group as of December 31, 2023. This also includes the goodwill of the US company PCC Chemax, Inc., Piedmont (South Carolina), which was transferred from the separate financial statements. As in the previous year, there were neither additions nor impairments in the year under review. The change in the goodwill of PCC Chemax, Inc. results from a currency effect, as the goodwill is carried in the currency of the cash-generating unit of the company, i.e. US dollars. The annual impairment tests were performed in the fourth quarter of the fiscal year and were based on the budgets approved by the company management for the three subsequent years. Using a perpetuity growth model, a terminal value was determined on the basis of the last budget year.

The recoverable amount was determined on the basis of value-in-use. As in the previous year, the growth rate assumed was 1.0 %. The budget assumptions derive from empirical values and estimates of the various business managements, taking into account centrally defined global positions such as exchange rates, estimates of economic development, market growth or commodity prices, for which purpose external sources were also consulted. The local tax rates assumed were 19.0 % for the Polish cash-generating units and 23.6 % for the US cash-generating unit. The tax rates were unchanged from the previous year. As in the previous year, the cost of capital was calculated on a region-specific basis. This was 8.61 % for Poland (previous year: 7.40 %) and 7.67 % for the USA (previous year: 6.28 %). Even taking into account a change in the weighted average cost of capital (WACC) of 10 %, there would be no impairment write-down requirement.

The net carrying amount of property, plant and equipment increased from € 928.2 million in the previous year to € 996.3 million as of December 31, 2023. This is mainly due to the investment measures in the PCC Group, which were continued or completed in the fiscal year under review, with replacement investments also ongoing. Additions to property, plant and equipment amounted to € 124.4 million in fiscal 2023 (previous year: € 89.6 million). The investments were mainly spread across the Logistics, Trading & Services and Surfactants & Derivatives segments, accompanied by project development activities in the Holding & Projects segment. Additions to depreciation of property, plant and equipment amounted to € 59.7 million in the year under review (previous year: € 57.6 million). Impairment losses on property, plant and equipment amounted to € 2.5 million (previous year: € 1.3 million) and mainly relate to capitalized project costs in the Holding & Projects segment in respect of projects that are no longer being continued, plus equipment and machinery in the Chlorine & Derivatives segment due to elevated wear and tear of plant components. There were no material reversals of impairment losses either in the reporting year or in the previous year.

As of the 2023 reporting date, there were disposal restrictions on individual items of property, plant and equipment amounting to € 501.5 million (previous year: € 519.6 million). These also serve as collateral for liabilities. In total, there were investment obligations of € 19.7 million as of December 31, 2023 (previous year: € 60.9 million), which were attributable to capital expenditures that had already been contractually agreed but had not yet been completed. In addition, € 0.6 million (previous year: € 4.0 million) in insurance compensation payments attributable to property, plant and equipment were received in the reporting year.

Within the PCC Group, leases exist particularly in the areas of developed and undeveloped land, buildings, plant and machinery, factory and office equipment, and vehicle fleets. Extension and termination options are agreed in some cases to ensure flexibility. When determining the term of the lease, all circumstances and facts are considered which, based on the current state of knowledge, have an influence on the exercise of a renewal or extension option or the non-exercise of a termination option. In determining lease liabilities and corresponding right-of-use assets, all sufficiently assured cash outflows are taken into account. The net carrying amounts of right-of-use assets as of year-end amounted to € 81.0 million (previous year: € 58.3 million). The breakdown by underlying asset type reads as follows:

The underlying contractual terms for leases on land and buildings range from one to 28 years. Plant and machinery are leased for between one and four years, and other facilities, factory and office equipment, including our vehicle fleet, for between one and six years. Classified by underlying asset type, the depreciation expenses totaling € 14.6 million (previous year: € 13.7 million) on right-of-use assets in fiscal 2023 break down as follows:

Non-current financial assets include shares in affiliated companies that are not consolidated for reasons of materiality, investments in other entities, and securities held as financial assets. Also reported under this item are positive fair values of derivative financial instruments. As of the reporting date, non-current financial assets amounted to a total of € 17.1 million (previous year: € 19.6 million), of which € 11.0 million (previous year: € 9.6 million) was mainly attributable to affiliated, non-consolidated companies and € 6.1 million (previous year: € 9.9 million) to positive fair values of derivative financial instruments.

Other non-current financial assets include loans to affiliated companies that are not consolidated for reasons of materiality, loans to joint ventures and other loans. As of the reporting date, other non-current financial assets amounted to a total of € 18.0 million (previous year: € 16.8 million). This includes in particular loans to the joint venture OOO DME Aerosol in the amount of € 13.9 million (previous year: € 13.6 million).

Trade accounts receivable as of December 31, 2023 all had a remaining term of up to one year in their full amount. They decreased from € 141.3 million in the previous year to € 103.3 million as of year-end 2023.

The expected future losses determined on the basis of the impairment model remained constant in comparison to the previous year at € 0.1 million. At € 2.0 million, additions to value adjustments due to losses already incurred also remained at the previous year’s level. In total, valuation allowances on trade receivables amounting to € 2.1 million were recognized in both the previous and reporting year.

The maturity structure of all unimpaired trade accounts receivable is shown opposite. Around 90.7 % of the Group’s receivables were neither impaired nor past due as of December 31, 2023 (previous year: 89.4 %). In addition, the default risks and the level of expected credit losses (ECL) are shown over the remaining term to maturity for each age group.

Individual companies within the PCC Group use factoring as a means of financing receivables. The volume of all receivables sold as of the reporting date amounted to € 30.4 million (previous year: € 3.3 million).

As was the case in the previous year, accounts receivable from affiliated companies as of December 31, 2023 all have a remaining term of up to 1 year in their full amount. They comprise accounts receivable from affiliated, non-consolidated companies. Further information is also provided in the section on related parties, see Note (39). These are largely loan receivables from project companies. Impairments of receivables from affiliated companies amount to € 6.4 million.

Revenue reserves and other reserves comprise unappropriated earnings achieved in the reporting period by the subsidiaries included in the consolidated financial statements. The Group’s share of the previous year’s consolidated comprehensive income of € 126.3 million is reported as retained earnings carried forward to revenue reserves. In fiscal 2023, a distribution of € 14.05 million (previous year: € 4.75 million) was made to the shareholder of PCC SE from the retained earnings of PCC SE. This corresponds to a dividend per share of € 2.81 (previous year: € 0.95). Differences arising from foreign currency translation are reported under other equity items. In the past fiscal year, these increased Group equity by € 24.3 million to a total of € – 15.9 million (previous year: € – 39.2 million). The development of gains and losses recognized directly in equity is shown in the adjacent table:

German and international minority shareholders hold noncontrolling interests in various entities of the PCC Group. The share of these non-controlling interests reported in Group equity as of December 31, 2023 was € 73.5 million, representing a decrease of € 23.9 million compared to year-end 2022. Subsidiaries with significant non-controlling interests operate in various segments of the PCC Group. Information on the company name, registered office and capital shares of subsidiaries with significant non-controlling interests is provided in the schedule of shareholdings pursuant to Section 313 (2) HGB (German Commercial Code) in Note (44). There are no significant restrictions that go beyond the usual company law and contractual provisions.

Hybrid capital relates to a hybrid financing instrument with a volume of € 78.7 million (previous year: € 79.2 million). In accordance with IAS 32, the hybrid capital is classified as equity. There is neither a contractual obligation to repay the principal nor to pay interest. Rather, repayment is subject to conditions that depend on the decision of the management of the company to make distributions to its shareholders. As soon as resolutions are passed on such distributions, the hybrid capital will also be serviced on a pro rata basis.

The € 0.6 million reduction in the hybrid capital total compared to the previous year is the result of offsetting pro rata transaction costs.

Most of the employees of the Polish subsidiaries of the PCC Group are granted non-recurring benefits under statutory pension plans in addition to their statutory retirement pensions. These defined benefit plans are, as a rule, based on length of service and salary. Benefits under defined benefit plans are generally granted upon reaching retirement age or upon disability or death.

Defined contribution plans exist mainly in the form of statutory pension schemes in Germany and at the international subsidiaries. For employees of the German subsidiaries and the holding company, there may also be individual contributions to other defined contribution plans in addition to the statutory pension plan. Typical risk factors for defined benefit plans are longevity, nominal interest rate changes, and inflation and salary increases. The present value of the defined benefit obligation under a pension plan is determined based on the best estimate of the probability of death of the employees participating in the plan, both during the employment relationship and after its termination. An increase in the life expectancy of the beneficiary employees or a decrease in the bond interest rate leads in each case to an increase in the plan liability. Furthermore, the present value of the defined benefit obligation under a pension plan is determined on the basis of the future salaries of the beneficiary employees. Wage and salary increases of the beneficiary employees lead to an increase in the plan liability.

A total of 2,904 employees of PCC Group companies (previous year: 2,926) are covered by defined benefit pension plans, 74.8 % of whom are men and 25.2 % women. The average age as of the 2023 reporting date remained unchanged from the previous year at 40.3 years. A uniform discount rate of 3.15 % (previous year: 3.65 %) was used to determine the pension obligations. The rate of increase in salaries was calculated at 5.3 % (previous year: 6.7 %). The Polish mortality table 2021 of the Central Statistical Office, which serves as the basis for the calculation, assumes a life expectancy of 79.3 years (previous year: 75.7 years). An adjustment to the key actuarial parameters would have the following effects on the amount of the pension obligations:

The above sensitivity analysis is unlikely to be representative of the actual change in the defined benefit obligation, as it is considered improbable that deviations from the assumptions made would occur in isolation.

The pension obligations have the following profile of remaining terms to maturity:

The cash outflows from pension obligations are as follows:

Other provisions decreased from € 57.1 million in the previous year to € 50.9 million as of December 31, 2023. The main reason for the decline lies in a € 7.8 million reduction in provisions for the purchase of CO2 certificates. Provisions for energy efficiency certificates decreased by € 2.3 million to € 0.8 million. These provisions result from the requirements of the Polish energy mix system, whereby a shortfall in the supply of energy from renewable sources for the production process has to be offset either by the purchase of so-called green certificates or by compensation payments. Provisions for personnel expenses increased from € 18.4 million in the previous year to € 22.3 million as of December 31, 2023 and mainly relate to accruals for bonus and vacation entitlements.

The table provided shows the development of other provisions in fiscal 2023. Other changes mainly relate to foreign exchange rate effects.

The financial liabilities of the PCC Group are essentially composed of non-current and current liabilities arising from bonds, amounts owed to banks, lease liabilities and amounts owed to affiliated companies.

Financial liabilities increased from € 862.0 million in the previous year to € 902.9 million as of December 31, 2023. The largest absolute increase of € 22.8 million to € 347.8 million was recorded in liabilities to banks. Lease liabilities also rose significantly by € 17.2 million to € 66.3 million. Liabilities from bonds increased by € 0.9 million to € 488.8 million.

Interest rates of between 0.4 % p.a. and 9.9 % p.a. are charged on liabilities to banks. The unutilized, secured credit lines within the PCC Group amounted to € 61.6 million as of the reporting date (previous year: € 40.7 million). The financial liabilities existing within the PCC Group as of the reporting date have the maturity profile shown in the adjacent table.

The relevant factors when presenting the maturities of contractual cash flows from financial liabilities are interest payments and redemption of principal, plus other payments in respect of derivative financial instruments. The adjacent table shows non-discounted future cash flows. Derivatives are included on the basis of their net cash flows where they have negative fair values and thus represent liabilities. Derivatives with positive fair values are assets and are therefore not considered. Trade accounts payable are essentially non-interest-bearing and due within one year. The carrying amount of trade accounts payable therefore corresponds to the total of the future cash flows.

The liabilities to banks reported under financial liabilities and those from leases were secured in their entirety in 2023 by land charges or similar liens, by the assignment of claims, the assignment of property, plant and equipment as chattel mortgages or by other collateral assignments. In total, the collateral granted amounted to € 415.3 million as of December 31, 2023 (previous year: € 441.8 million).

Bond liabilities result from the bond issuances of PCC SE and the international subsidiaries PCC Rokita SA and PCC Exol SA. Bonds of the PCC Group are issued in euros and Polish złoty. The public bonds denominated in euros (EUR) carry interest rates of between 2.0 % and 6.0 % p.a., while the bonds issued in złoty (PLN) carry interest rates of between 5.0 % and 9.1 % p.a. The bonds issued in złoty with a total volume of PLN 277.0 million (previous year: PLN 227.0 million) had an equivalent value of € 44.6 million as of the reporting date (previous year: € 47.8 million).

Other liabilities increased from € 110.9 million in the previous year to € 136.5 million as of December 31, 2023, with a particular increase occurring in other liabilities and deferred income relating to subsidies and grants for investment projects. The result for the reporting year includes releases of deferred income from subsidies totaling € 3.7 million (previous year: € 2.8 million). The rise in deferred income was accompanied by an increase in liabilities arising from investments as of the reporting date. These are liabilities from supplies or services provided by third parties resulting from the investment projects as of the reporting date. Liabilities from interest payment obligations mainly relate to interest on bonds due at the beginning of the following quarter.

Deferred taxes are recognized on temporary differences between the carrying amounts of assets, liabilities and accruals in the balance sheet and their tax base. For German subsidiaries, the tax rate applied is a uniform 30 %, as was the case in the previous year. For international entities, the relevant national tax rates are applied. Without exception, these remained constant year on year.

The distribution of deferred taxes among the various balance sheet items is shown in the table below right. Within the PCC Group, deferred tax assets and liabilities are offset and disclosed as netted balances where they relate to the same tax jurisdiction and where there is an enforceable right to the netting of tax liabilities and tax receivables. Deferred tax assets of € 24.7 million (previous year: € 10.6 million) and deferred tax liabilities of € 16.6 million (previous year: € 11.1 million) were recognized for the reporting year.

The table below shows the non-netted deferred taxes. Future tax benefits from a special economic zone are reported under other deferred taxes. Deferred tax assets on tax loss carryforwards increased in the year under review by € 10.9 million to € 26.0 million as of the reporting date. This item includes a reversal of deferred tax assets on tax loss carryforwards at a subsidiary in the amount of € 1.1 million (previous year: € 8.6 million) due to reduced earnings prospects.

As an internationally active corporation, the PCC Group is exposed to financial risks in the course of its ordinary business operations. A major objective of the corporate policy is to generally restrict market, default and liquidity risks, in order both to secure enterprise value over the long term and to maintain the Group’s earning power and thus extensively cushion the negative impact of fluctuations in cash flow and earnings.

The Group holding company and the individual subsidiaries cooperate in the management of interest rate and currency risks, and also default risks. Each individual operating entity is responsible for managing its own commodity or raw material price risks, while liquidity control is the responsibility of the holding company.

Currency risks: Changes in exchange rates can lead to losses in the value of financial instruments and also to disadvantageous changes in future cash flows from planned transactions. Currency risks in respect of financial instruments result from the translation of financial receivables, loans, securities, cash sums and financial liabilities in the functional currency of the companies concerned at the closing rate as of the reporting date. Currency risks arise both on the purchase side through the procurement of commodities and raw materials, and on the selling side as a result of the sale of end products. A potential change in the Polish złoty of 10 % would affect the equity and annual net earnings of the Group to the tune of € 0.1 million (previous year: € 0.2 million). A change in the exchange rate of the US dollar of likewise 10 % would result in these financials experiencing a change of € 0.0 million (previous year: € 0.1 million).

Interest rate risks: These risks arise as a result of potential changes in the market interest rate, causing fluctuations in the fair value of financial instruments bearing a fixed interest rate, and fluctuations in interest payments in the case of financial instruments bearing a floating interest rate. A potential change in interest rates of 100 basis points would affect the equity and annual net earnings of the Group to the tune of € 4.4 million (previous year: € 3.9 million).

Commodity price risks: These risks result from market price changes in relation to commodity / raw material purchases and sales, and also the purchase of electricity and gas. The general risk situation of the PCC Group is greatly affected by the availability and also the price-dependency of relevant raw materials, input products and intermediate products. Within this context, the dependency of important commodity prices on foreign exchange rates and market movements is especially relevant, particularly in the case of petrochemical raw materials. Price volatilities are smoothed out, for example, through the agreement of price escalator clauses with suppliers and customers. Moreover, commodity price risks are restricted by internationally aligned sourcing activities. Backward integration along the value chain or along the various production stages encountered in the segments operating in the chemicals sector provides for an additional, high degree of independence in the procurement of raw materials and commodities, thus reducing risk. The Commodity Trading business in the Trading & Services segment is exposed to major price fluctuations that can occur from time to time.

Default or credit risks arise when contractual partners are unable to meet their contractual obligations. Credit limits are granted based on the continuous monitoring of the creditworthiness of major debtors. Because of the international activity and the diversified customer structure of the PCC Group, there are no major regional or segment-specific clusters of default risks. In selecting short-term capital investments, various safeguarding criteria are considered (e.g. ratings, capital guarantees or safeguards afforded by deposit protection funds). Given the selection criteria applied and our regime of constantly monitoring our capital investments, the PCC Group does not envisage any unidentified default risk occurring in this domain. The financial asset amounts shown in the balance sheet essentially represent the maximum default risk. Such risks are regularly monitored and analyzed within the framework of a receivables and credit management regime and also by a Working Capital Management unit with responsibility at both the operational and Group levels. In all, receivables from customers are secured in an amount of € 74.2 million (previous year: € 110.6 million). Financial assets that are neither impaired nor overdue are categorized as collectible in line with the creditworthiness of the debtor.

Liquidity risks result from cash flow fluctuations. Current liquidity is monitored and controlled by a treasury reporting system implemented across the Group based on an IT-supported solution (Treasury Information Platform). In mediumand long-term liquidity planning, liquidity risks are identified and managed at their inception on the basis of simulations of various scenarios. Obstacles that may arise within the SME bonds market segment could – at least temporarily – lead to liquidity bottlenecks. This risk is to be countered over the long term through the development of alternative financing sources at the institutional level. In addition, we are constantly engaged in partially replacing the liquidity loans granted to our affiliated companies with bank loans.

In the case of trade accounts receivable, receivables from affiliated companies or investments, other financial assets, cash and cash equivalents, trade accounts payable and other liabilities, the carrying amounts are regarded as realistic estimates of their fair values due to the shortness of their remaining terms.

1
FAaC = Financial assets measured at amortized cost
FLaC = Financial liabilities measured at amortized cost
FVtOCI = Fair value through other comprehensive income
FVtPL = Fair value through profit or loss

Individual liabilities from bonds issued by subsidiaries include sales commissions and are accounted for using the effective interest method. The fair value stated in this section corresponds to market quotations.

Net gains and net losses from financial instruments include valuation results, the amortization of premiums and discounts, the recognition and reversal of impairment losses, results from foreign currency translation, as well as interest, dividends and all other effects on earnings from financial instruments. Financial instruments at fair value through profit or loss only include results from those instruments that are not designated as hedging instruments in a hedging relationship in accordance with IFRS 9. Net gains and losses on financial assets measured at amortized cost include net interest income of € 4.2 million (previous year: € 1.7 million) and net foreign exchange losses of € –10.7 million (previous year: gain of € 5.7 million). Net gains and losses on financial liabilities measured at amortized cost include a net interest expense of € – 42.9 million (previous year: € – 33.7 million) and a net currency translation loss of € – 1.3 million (previous year: € – 5.9 million).

Financial assets and liabilities measured at fair value are shown opposite. These relate to shares measured at the stock market price (Level 1) and to derivatives. The fair value of derivative financial instruments depends on the development of the underlying market factors. The respective fair values are determined and monitored at regular intervals. The fair value determined for all derivative financial instruments is the price that would be received on the sale of an asset or paid to transfer a liability in an orderly transaction between independent market participants at the measurement date.

The subsidiaries of the PCC Group use derivative financial instruments to hedge interest rate and foreign currency risks. The valuation methods and assumptions underlying the valuation of the derivative financial instruments employed can be summarized as follows: Foreign exchange transactions and swaps are valued individually at their forward rate or price on the reporting date. The forward rates or prices are based, as far as possible, on market quotations, taking into account forward premiums and discounts where appropriate.

Subsidiaries use forward contracts to hedge foreign currency transactions. As of December 31, 2023, there were forward contracts with a nominal value of € – 1.0 million (previous year: € – 1.2 million). The insignificant fair values are recognized as assets. Interest rate swaps and interest rate options are used in the PCC Group to hedge interest rates and their long-term development. The nominal value of the derivatives existing as of the reporting date amounted to € 92.4 million (previous year: € 95.7 million), with the fair value amounting to € 6.1 million (previous year: € 9.9 million), said fair value being recognized as an asset as of the reporting date.

Leases in which the PCC Group is the lessee are accounted for using the rights-of-use model in accordance with IFRS 16. A tabular presentation of the rights of use for the year under review can be found in Note (21) Right-of-use Assets. Right-ofuse assets amounting to € 81.0 million were countervailed by lease liabilities of € 66.3 million as of the reporting date. The latter are reported under financial liabilities. Please refer to Note (32) Financial Liabilities. The maturity structure of payment obligations under leases is shown in the adjacent table.

Compliant with the exemptions allowed, no right-of-use assets have been recognized in the balance sheet where the underlying leased asset is of minor value or where the contractual term is less than twelve months. Instead, the lease is expensed. The table opposite shows the amounts recognized in the consolidated statement of income in connection with leases.

There was no income from subleases. The total cash outflow from leases in the year under review amounted to € 19.5 million (previous year: € 21.3 million). In addition to the leases, the PCC Group also has minor obligations arising from rental agreements. A corresponding maturity profile is presented in Note (37) below.

Contingent liabilities mainly result from guarantees given to the financing bank of a joint venture. They also relate to guarantees issued for non-consolidated entities in favor of third parties and include obligations to suppliers and to the public sector. The change in other contingent liabilities results from the inclusion of investment grants, some of which may still be subject to claims for repayment in the event that contractually agreed covenants are not met. The PCC Group currently expects that no claims will be made in respect of any such contingent liabilities.

As of December 31, 2023, the PCC Group had other financial obligations arising from investment commitments, rental obligations and other obligations amounting to € 25.6 million (previous year: € 61.9 million). The obligations arising from rental agreements with a remaining term of up to one year include commitments of € 0.4 million attributable to shortterm leases.

The statement of cash flows shows the changes in cash and cash equivalents that took place in the year under review and has been drawn up in accordance with IAS 7. The cash flows are broken down according to cash flow from operating activities, cash flow from investing activities and cash flow from financing activities.

Interest received and taxes paid on income are recognized as cash flow from operating activities. Interest paid is disclosed under cash flow from financing activities. Dividends paid are a component of the financing activities category. Dividends paid within the Group from income attributable to the previous year are eliminated. Dividend payments to the shareholder of PCC SE and dividend payments to co-shareholders at subsidiaries are separately disclosed in cash flow from financing activities. Financial funds disclosed equate to the total of cash and cash equivalents (cash on hand, credit balances at banks, and current, highly liquid financial assets) shown in the balance sheet.

In the event of changes in the scope of consolidation arising from the purchase or sale of entities (loss of control), the purchase price paid or received, adjusted for the financial funds acquired or sold, is recognized under cash flow from investing activities. If the acquisition or disposal of shares in a subsidiary takes place without a change in the control status, such transactions are disclosed as financing activities.

The conclusion of a lease agreement per IFRS 16 essentially constitutes a non-cash transaction. Payments made for investments in property, plant and equipment are netted against lease proceeds. Cash and cash equivalents disclosed in the balance sheet include an amount as of December 31, 2023 of
€ 4.1 million (previous year: € 3.8 million) in funds not freely available. These are almost entirely attributable to financing already earmarked for investment projects.

The following reconciliation statement shows changes in financial liabilities that are reported as cash inflows or outflows under cash flow from financing activities. The cash-effective changes amounted to € 23.6 million as of the reporting date (previous year: € 13.0 million).

The purpose of capital structure management is to remain financially flexible so that the business portfolio can be effectively further developed and strategic options exploited. The object of the financial policy of the Group is to secure its liquidity and solvency, limit financial risks and optimize the cost of capital. The control metric adopted in this context is the net debt / EBITDA leverage ratio. This metric shows the relationship between net borrowings, including current and non-current pension provisions, current and non-current financial liabilities, cash and cash equivalents and current securities, versus earnings before interest / financial result, taxes, depreciation and amortization (EBITDA), and is therefore a dynamic indebtedness indicator.

With net debt at € 775.5 million (previous year: € 699.4 million) and reported EBITDA at € 112.3 million (previous year: € 292.0 million), the net debt / EBITDA leverage ratio for fiscal 2023 came in at 6.9 (previous year: 2.4). Our goal of keeping this key figure below 5.0 was therefore not achieved.

Under financing agreements, individual subsidiaries are subject to external minimum capital requirements, which are reflected in the form of customary financial covenants, i.e. obligations to comply with specified financial requirements. These include standard market requirements for minimum equity ratios and maximum debt-to-equity ratios. Compliance with these requirements is also taken into account in the annual budget planning for the following year. According to the information provided by the consolidated entities for the preparation of the consolidated financial statements, there were two cases of failure to comply with mandatory covenants in fiscal 2023. These have not led to any adjustments to credit terms or similar measures imposed by the lenders. The cases each relate to typical financial ratios for loan agreements which two subsidiaries failed to achieve.