Notes to individual items of the statement of income

Sales revenues in the 2023 financial year amounted to € 993.6 million (previous year: € 1,324.7 million). This figure includes € 1.4 million (previous year: € 0.4 million) in sales proceeds from contractual obligations at the beginning of the reporting period. Revenues comprised € 865.9 million from the sale of goods and € 127.7 million from the provision of services, primarily in the form of transport services.

The majority of revenues from the sale of goods relate to the manufacture and sale of chemical products, which are mainly recognized at a point in time. In total, sales recognized at a specific point in time amounted to € 974.4 million and sales recognized over a specific period of time totaled € 19.2 million. Group sales in the reporting segments are distributed across various geographical markets. For more information, please refer to the segment report under Note (17).

The cost of purchased goods and services decreased by € 215.8 million year on year to € 649.9 million. This was mainly due to lower purchase prices for key raw materials, while procurement costs for energy and logistics remained virtually flat. Purchase prices, some of which were at record levels in the previous year, fell equally sharply, continuing the volatility of previous years. The production operations of the silicon metal plant in Iceland also contributed to this development, with only one furnace being kept in service due to a decline in market prices coupled with a reluctance to purchase stock on the part of customers in the face of high economic uncertainty. Ongoing optimization of the raw material mix and production processes and the resulting reduction in the use of raw materials had a positive effect, however.

The total of other internal costs capitalized essentially derives from manufacturing costs in respect of work or assets capitalized, with any material intercompany profits eliminated. This item increased from € 12.8 million in the previous year to € 19.6 million in fiscal 2023.

Personnel expenses decreased year on year from € 143.6 million to € 138.0 million. However, adjusted for performancerelated remuneration components that were granted in the previous year due to the historically good results, personnel expenses again increased in fiscal 2023. This development was mainly due to a shortage of skilled labor coupled with inflation-related wage and salary cost pressures.

As of December 31, 2023, the PCC Group employed a total of 3,265 people (previous year: 3,391). On average for 2023, the PCC Group employed 3,297 people (previous year: 3,358).

The decrease was attributable to a large degree to the Trading & Services segment, where overcapacities were reduced, with job losses also occurring in the Polyols & Derivatives and Chlorine & Derivatives segments. The number of employees in the Silicon & Derivatives segment was likewise reduced due to the shutdown of one of the two furnaces. The breakdown of employees by Group segment as of the balance sheet date is as follows:

Geographically, the number of employees as of the balance sheet date was distributed as follows:

Other operating income increased by € 2.3 million from € 31.6 million in the previous year to € 34.0 million in the year under review. The increase is mainly due to compensation payments in connection with CO2 certificates, which were almost three times as high as in the previous year. These payments are granted by the Polish state as compensation for price increases in CO2 certificates.

Income from the deconsolidation of subsidiaries is mainly attributable to AO PCC Rail, Moscow, Russia, which was removed from the scope of consolidation due to the discontinuation of its business operations. Also included are the results from the deconsolidation of OOO PCC Consumer Products i.L., Moscow (Russia), and Elpis Sp. z o.o., Brzeg Dolny (Poland).

Energy efficiency certificates are granted free of charge upon application for particularly energy-saving investments. All such allowance certificates that are not required to cover the company’s own energy requirements are sold. No certificates were sold in the reporting year (previous year: € 1.7 million).

Income from insurance claims decreased compared to the previous year by € 4.9 million to € 0.8 million. In the previous year, one-off income from insurance reimbursements was received in connection with the fire at a tanker cleaning facility.

As in the previous year, sundry other operating income is comprised of various separate items that are not individually material.

Other operating expenses increased by € 10.8 million from € 98.9 million in the previous year to € 109.7 million in the year under review. As in the previous year, maintenance and repair expenses constituted the largest single item at € 31.8 million. These expenses were mainly attributable to the asset-intensive business activities of the chemical sites.

The other taxes item includes all tax expenses that are not income taxes. Domestic and foreign income taxes and deferred taxes are reported separately in the tax result and explained in Note (16).

As in the previous year, sundry other operating expenses are comprised of various separate items that are not individually material.

Research and development expenses amounted to € 7.0 million in the reporting period (previous year: € 14.3 million). In addition, expenses for internally developed intangible assets and property, plant and equipment in the amount of € 10.2 million were capitalized.

Due to loss allocations that exceeded the equity value of OOO DME Aerosol, Pervomaysky (Russia), the equity value for this company is reported as zero. The losses are carried forward in a sub-ledger and initially offset against future profits before a positive share of earnings is reported in the consolidated income statement. The negative pro rata annual result of OOO DME Aerosol amounts to € – 3.3 million. In the previous year, a positive pro rata annual income of € 0.8 million was recognized. As of the reporting date of December 31, 2023, the cumulative losses therefore amounted to € 7.4 million (previous year: € 4.1 million).

The equity value of IRPC Polyol Company Ltd., Bangkok (Thailand), was adjusted in the reporting year essentially due to the positive pro rata annual income of the company and amounted to € 2.1 million as of the reporting date (previous year: € 2.2 million). The other changes relate to exchange rate effects.

The equity value of PCG PCC Oxyalkylates Sdn. Bhd., Kuala Lumpur (Malaysia), was adjusted in the year under review by the negative pro rata annual result of the company and amounted to € 12.0 million as of the reporting date (previous year: € 13.1 million).

PCC SE has issued the financing bank of PCG PCC Oxyalkylates Sdn. Bhd. with a guarantee. At the time of preparation of these consolidated financial statements, utilization of this guarantee is not anticipated.

Depreciation and amortization increased by € 4.2 million from € 74.7 million in the previous year to € 78.9 million in the year under review. Amortization of intangible non-current assets related to industrial property rights and similar rights and also internally generated and developed intangible assets. No impairment losses were recognized on goodwill in the reporting period or in the previous year. Further information on goodwill can be found in Note (19).

Fiscal 2023 saw impairment losses of € 2.6 million recognized on intangible assets, property, plant and equipment and rightof-use assets (previous year: € 1.5 million). These mainly relate to capitalized project costs in the Holding & Projects segment in cases where the projects concerned are no longer being pursued, and to plant and machinery in the Chlorine & Derivatives segment due to certain technical facility components suffering elevated wear and tear.

The result from interest income and interest expenses declined from € – 23.8 million in the previous year to € – 39.6 million in the year under review. As in the previous year, the largest single item was interest expenses on bearer bonds. Both the parent company of the PCC Group and several subsidiaries issue bonds to finance investments and also to refinance maturing liabilities. Note (32) contains a detailed presentation of the liabilities arising from bonds and their maturities.

The largest absolute increase was recorded in interest expenses on bank liabilities. This is due to both higher bank liabilities and the generally higher interest rate levels prevailing.

Interest attributable to investment projects that represent a qualifying asset is capitalized during the construction period in accordance with IAS 23. Interest expenses of € 0.9 million were capitalized in the fiscal year under review (previous year: € 2.4 million). The financing cost rate amounted to 5.8 % (previous year: 4.6 %). The weighted interest rate of all interest-bearing liabilities amounted to 4.7 % in fiscal 2023 (previous year: 4.3 %).

Income and expenses from currency translation are reported in the financial result. While income from currency translation decreased from € 66.7 million in the previous year to € 64.4 million in the reporting year, expenses from currency translation increased from € 64.6 million in the previous year to € 77.8 million in fiscal 2023. On balance, this resulted in a negative result of € 13.3 million. In the previous year, there was a positive result of € 2.1 million. The main factors influencing the result from foreign currency translation are the exchange rate movements of the currencies of relevance to the PCC Group, primarily the Polish złoty and the US dollar.

The income taxes paid or owed in the individual countries and the deferred taxes recognized in profit or loss are reported as taxes on income. Taxes on income comprise trade and corporation tax, the solidarity surcharge and the corresponding foreign income taxes. Other taxes include property taxes, wealth taxes and other comparable types of taxes. They are allocated to other operating expenses.

Taxes on income are primarily attributable to the segments Chlorine & Derivatives in the amount of € 6.8 million and Holding & Projects with € 5.3 million. These amounts were countervailed by € –13.3 million attributable to the Silicon & Derivatives segment. Regionally, Poland accounted for € 11.7 million,
with Other Europe accounting for € –13.5 million.

The relationship between the actual and expected tax expense or income based on the consolidated income result is shown in the adjacent table. As in the previous year, the expected tax expense or income is based on a simplified income tax rate of 30 %. The effective tax rate of the PCC Group in the year under review was – 20.4 % (previous year: 25.3 %).

Tax loss carryforwards exist in individual Group companies. The table below shows the time bands in which tax loss carryforwards for which deferred taxes have been recognized can be used.

The loss carryforwards for which deferred taxes were recognized increased by € 72.0 million compared to the previous year, which is mainly due to losses from silicon metal production in Iceland. Due to the declining market price level and a reluctance to purchase on the part of customers in the face of high economic uncertainty, this plant was largely restricted to operation of just one of two furnaces in the 2023 fiscal year. Loss carryforwards for which no deferred taxes were recognized amounted to € 179.8 million (previous year: € 191.5 million) and mainly arose in the Group holding company.