Expected Developments

Future Orientation of the Group

We do not plan on making any fundamental changes to the Group’s strategy or organizational structure in the next two years. The focus on specialty markets and the offer of innovative chemical solutions based on our customers’ requirements will continue to drive our business development.

We do not anticipate our entry into new market segments or application areas, including the acquisition of the Von Roll Group in the 2023 reporting year and the completion of the Silberline Group acquisition at the beginning of 2024, to lead to any significant alterations to our sales structure in the medium term. Furthermore, we expect the equilibrium in regional sales distribution to remain essentially stable.

Acquisitions, however, could lead to changes in our sales and market structures. Bolt on acquisitions and particularly the integration of a new business division could result in a shift.

Going forward, the area of occupational safety and the focus on environmentally compatible management will continue to result in ambitious targets that will impact the ALTANA Group’s strategic orientation.

Economic and Industry Outlook

ALTANA foresees an initial improvement in demand development in 2024, with global economic growth expected to remain relatively stable. Nevertheless, the persistent geopolitical conflicts are likely to continue influencing economic development, and an increase in uncertainties cannot be ruled out at this time. The substantial increase in inflation rates over the past two years has been moderated and stabilized, albeit at a high level, through monetary policy measures. We anticipate a slight further decline in inflation in 2024. Price volatility and the supply situation in the energy sector stabilized throughout 2023. According to the International Monetary Fund (IMF), global economic output is projected to maintain the same growth rate of 3.1 % in 2024 as in 2023 (2023: 3.1 %).

Consistent with the previous year, economic growth is anticipated to be weaker in industrialized nations compared to emerging and developing countries. The IMF projects a growth rate of 1.5 % for all industrialized nations in 2024 (compared to 1.6 % in the previous year), a trend observed across economies, albeit with varying intensities. In the U.S., a growth rate of 2.1 % is forecasted for 2024, following a 2.5 % increase in the previous year. The IMF predicts modest growth of 0.9 % for the Eurozone economy in 2024, a slight improvement over the previous year (2023: 0.5 %). For Germany, the IMF expects limited growth of 0.5 % in 2024, after a contraction of 0.3 % in 2023. As anticipated, industrialized nations concluded 2023 with a cyclical decline in demand and correspondingly weak development. The energy shortage feared at the end of 2022, especially for Europe, did not materialize in 2023, and the decline in energy and commodity prices had an overall relieving effect. A similarly subdued development is forecasted for 2024, with a further slight fall in prices and only a marginal increase in demand.

According to the IMF forecast, growth in emerging markets is projected to reach 4.1 % in 2024, remaining above the global average and on par with the previous year (2023: 4.1 %). However, the expected scenario varies among individual economies. Based on the IMF’s 2024 forecast, China is anticipated to have a slower growth rate of 4.6 %, compared to the previous year’s 5.2 %. The ongoing crisis in the Chinese real estate sector and deflationary trends continue to exert a weakening effect on growth. In contrast, India remains one of the most dynamic economies globally, with an expected growth rate of 6.5 % in 2024, only slightly below the previous year’s level (2023: 6.7 %). The Latin American economies, at 1.9 %, display a weaker overall growth forecast compared to other emerging markets, indicating a slowdown from the previous year (2023: 2.5 %). Brazil, which exceeded expectations with a 3.1 % growth in the previous year, falls below expectations for other countries in the region with a forecast of just 1.7 %.

The IMF identifies several macroeconomic risks for 2024 that could undermine the forecasted growth. Foremost among these is the risk of an escalation of existing conflicts and the emergence of additional military and political disputes. Such developments could lead to a rapid increase in energy, commodity, and food prices, reigniting inflation and disproportionately impacting poorer economies. Another significant risk is the potential expansion of the real estate crisis in China, coupled with the ongoing formation of geopolitical blocs, which may further constrain international trade relations. Additionally, the risks stemming from climate change have gained prominence. The increased frequency of major natural disasters poses a threat to all economies, as evidenced by the array of extreme weather events across continents in 2023.

Global growth in the general chemical sector is anticipated to align with the overall economic development forecast for 2024. The American Chemistry Council (ACC), an industry association, projects a 2.9 % increase in global chemical production in 2024, following minimal growth of 0.3 % in the preceding fiscal year. Similar to the broader economic trends, the chemical industry foresees weaker growth in industrialized nations compared to emerging and developing countries. North America is expected to experience a growth of 0.5 %, while Europe is projected to grow by 1.9 %, trailing behind Asia, which is forecasted to achieve 4.2% growth, and Latin America with a growth rate of 3.1 %.

Based on the economic and industry-specific conditions, we assume that general demand in the markets relevant to ALTANA will generally develop slightly positively, albeit with regional and market-specific differences. The extent to which changes in inventory behavior along the value chain influence the actual demand for products of our divisions largely depends on the short to medium-term development expected by our customers. Movements in inventory levels can have a significant impact on business development.

The price trend for crude oil is challenging to reliably predict. While the average price per barrel experienced a decline in 2023, it maintained a high level. A further slight decrease in the price of oil is anticipated for 2024. The availability, pricing, and consumption volume of chemical products are influenced, to varying degrees, by the dynamics of the crude oil market. Furthermore, the expectations of market participants regarding the future development of oil prices can instigate substantial changes in warehousing practices throughout the entire value chain of the chemical industry.

As in previous years, the key exchange rates for ALTANA in 2024 may show pronounced volatility. In addition to the development of regional interest rates and economic performance, political influence can also be decisive for exchange-rate movements. Specific risks, but also opportunities, can arise from a deviation of the actual exchange-rate development from our planning assumptions.

Expected Earnings, Asset, and Financial Situation

Expected Sales and Earnings Performance

On the basis of the expected moderate growth of the global economy, we anticipate a further positive development in demand for our products and services in the 2024 fiscal year. Operating sales growth, that is sales growth adjusted for exchange-rate and acquisition effects, is expected to be in the mid single-digit percentage range. The main driver of growth should be an increase in sales volumes.

No significant exchange-rate effects are expected for 2024 compared to the previous year, meaning that nominal and operating sales growth will be at the same level. By contrast, we expect significant effects for the current year, 2024, from the acquisitions made in 2023 and early 2024, which must be taken into account when determining the forecast nominal growth rate in the BYK, ECKART and ELANTAS divisions. We expect the acquisition of the Von Roll Group and its integration into the ELANTAS division to result in a mid single-digit percentage increase in Group sales. The acquisition of the business of Imaginant and its integration into the BYK division should also contribute to a slightly positive sales growth trend. Additionally, the sales generated by the acquisition of the Silberline Group, which, coupled with the company’s integration into the ECKART division, will also ensure a sales increase in the low single-digit percentage range for the Group as a whole.

We assume that there will be no significant shifts in cost ratios in relation to sales for the main functional cost variables. The cost of materials ratio is expected to remain at a comparatively high level despite a slight decrease compared to the previous fiscal year.

In the case of human resources costs and certain other cost items, we are planning a relative increase for 2024 that will be higher than the level of operating sales growth. The reasons for this include the acquisitions we made, personnel pay rises, and further inflation-related cost increases, as well as costs for regional expansion and the further modernization of our IT systems. The acquisitions completed at the end of 2023 alone will result in an increase of approximately one thousand new employees.

In operational terms, the EBITDA margin for 2024 is projected to be in line with the previous year. However, due to the lingering inflationary effects from previous years, the impact of the cyclical decline in sales, and integration costs associated with the recent acquisitions, the EBITDA margin is anticipated to remain below our strategic target range of 18 % to 20 %. Nevertheless, absolute EBITDA is expected to see an increase of approximately 10 % compared to the previous year.

After 2024, we expect operating growth momentum for Group sales, in keeping with our strategic goals, in the mid single-digit percentage range and a continuous improvement in our profitability, which is expected to return to our long-term target range from 2026.

Expected Asset and Financial Situation

Overall, there should be no significant shifts in the balance sheet structure in 2023. The level of our investments in property, plant and equipment and intangible assets should remain within our long-term target range of 5 % to 6 % of sales over the next two years. The absolute values of net working capital are expected to develop in line with the general business performance, although our aim is to reduce the relative level slightly compared with the end of 2023.

Based on the expected business development, we will continue to generate a clearly positive cash flow from operating activities in the coming years, which should be higher than in the previous year. We will use the cash inflow primarily to finance investments and further acquisitions.

We expect a significant increase in the key figures of value management compared with the past fiscal year. This will mainly result from an increase in the underlying profits compared to the prior year. We expect a corresponding development for the relative and absolute ALTANA Value Added (AVA) and the return on capital employed (ROCE).

Expected Development in the Area of Occupational Safety and the Environment

In the realm of occupational safety, we set ourselves the following target ranges for 2024 for the three work accident indicators: WAI 1: 0 to 2.3; WAI 2: 0 to 1.5; and WAI 3: 0 to 27.0.

The target for the specific energy parameter in 2023 is 1.17 MWh / t, following an actual value of 1.18 MWh / t in the previous fiscal year. In subsequent years, further reductions in specific energy consumption in the order of 2 % per year are sought. The planned values stated here do not take into account the locations of the companies acquired after 2022. A site-specific assessment will be carried out in the course of 2024 and specific reduction targets will be set.

Risks

Management and control of the ALTANA Group are geared to the strategy that has been defined and the target levels derived from it. Due to changes in the economic environment or internal and external factors of influence, it might not be possible to implement the strategy successfully or to achieve targets in the planned time frame or to the planned extent. To be optimally prepared for such situations, ALTANA systematically identifies, evaluates, and considers risks within the framework of decision-making processes.

To anchor our risk policy at all decision-making levels, we established a Group-wide risk management system that brings together various information, communications, and monitoring systems. Core elements of our risk management include strategic corporate planning, internal reporting, our internal control system, compliance organization, and risk management in the strict sense.

Our strategic corporate planning is closely tied to our medium- to long-term financial planning. The extent of the fulfillment of our targets is examined in monthly reports on the company’s business performance and in our short-term financial planning. Apart from an analysis of the current business situation, in these reports our expectations for the current fiscal year are discussed extensively at the divisional level on a regular basis. As a result, deviations from planned developments can be recognized and countermeasures introduced if necessary.

Our internal control system defines, among other things, organizational and procedural requirements that serve to prevent damage to the company. It is intended to ensure the correctness of internal and external financial reporting as well as non-financial key figures, the effectiveness and efficiency of the company’s business activities, and compliance with the relevant legal regulations and internal guidelines. It comprises all principles, instructions, and measures introduced for this purpose. In connection with our established compliance organization, it aims to prevent possible violations of guidelines and laws on the part of employees.

At ALTANA, risk management in the strict sense is viewed as the systematic compilation, evaluation, documentation, communication, and, if not already in place, derivation of measures regarding the relevant risks as well as the determination and assessment of riskbearing capacity. Thus it is an essential component of the company’s system of early risk recognition in accordance with section 91 (2) of the German Stock Corporation Act. This system was voluntarily examined by the auditor again in 2023. The audit deemed that the Management Board took the measures required under section 91 (2) of the German Stock Corporation Act, in particular to set up a monitoring system, in an appropriate form and that the monitoring system is suitable in all material respects for identifying developments that could jeopardize the company’s continued existence at an early stage with sufficient certainty.

Risks that are identified are evaluated in a uniform way. Socalled evaluated risks are assessed based on the probability of their occurring and the potential damages. Individual risks are assigned to certain risk groups. Risks or risk groups rated as very high are risks which could cost the company more than € 25 million in the next twelve months. Individual risks that could cost the company between € 12 million and € 25 million are rated as high risks; risks that would cost between € 5 million and € 12 million are categorized as medium risks, and risks that would cost less than € 5 million are deemed low risks. The prioritization resulting from the assessment determines focal points for the development and initiation of countermeasures to prevent or reduce the potential effects of risks.

The individual risks and risk fields described below could have a material adverse effect on the Group’s earnings, financial, and asset situation in the years to come and thus give rise to a negative deviation from the forecast development. For risks categorized as “medium,”,“high,” and “very high” we address changes in our appraisal compared to the previous year.

A year ago, significant disruptions to the energy supply in Europe due to Russia’s war against Ukraine were identified as a major risk with an impact on sales, procurement, investments, and production as well as competitiveness. These risks are now considered to be largely manageable and have therefore significantly lowered the risk values in the areas mentioned.

Economic and Industry Risks

The development of the general economic conditions worldwide has a decisive impact on our business performance. The performances of the economies of the U.S., China, and Germany – industrial nations important for ALTANA – have a particularly strong influence on the direction and intensity of demand for our products.

A global economic crisis leading to an economic collapse would bring about significant sales decreases with corresponding influences on our earnings. Recessions limited to certain regions in sales markets important for us could also significantly impair our business performance. With the global orientation of our sales activities, we try to shape our dependence on regional or national markets in such a way that the effects of geographically confined economic crises on the Group are limited.

Thus, the U.S. and China, the most important countries for us, each currently account for no more than 20 % of total Group sales. The distribution of our business activities in the core regions of Europe, Asia, and the Americas also has a balanced structure.

Furthermore, we continually update our appraisal of the regional economic development in our internal reporting system to be able to react to foreseeable effects by controlling our procurement, production, and sales activities. We react to long-term shifts in the regional significance of sales markets by adjusting our sales, production, and organizational structures.

In addition to general economic risks, there are market related sales risks concerning individual product groups or application areas. Particularly medium- to long-term trends that structurally lead to a decrease in demand in our target markets can mean that we will not achieve our growth and profitability targets. We try to counteract industry related sales risks by broadly diversifying our offer. We supply many different industries, which in turn sell their end products in various markets. Therefore, our dependence on the underlying markets is limited. We estimate that no single consumer segment, such as the automotive sales market, the graphic arts industry, or the construction sector accounts for significantly more than 20 % of our sales.

The analysis of our industry specific and application related sales is a component of our annual planning process. In addition, we examine changes in future growth potential arising from demand trends and technological developments, and adjust our strategic orientation in the divisions if necessary.

The potential occurrence of a global economic crisis and the emergence of regional economic crises continue to present significant risks, albeit with a lower estimated probability for the individual risk of a global economic crisis compared to the previous year. The forecasted loss values have also decreased, resulting in a reduction in the assessed risk level. Overall, the risk is now categorized as medium. Similarly, the risk of regional economic crises is considered lower than in the previous year. Assuming a consistent probability of occurrence, a lower level of loss is expected. The assessed risk for regional economic crises is still classified as a medium risk. These reduced risks can be attributed, in part, to the prevailing weak economic conditions.

Sales Risks

Sales risks result primarily from changes in the market and customer structure and an associated increase in the intensity of competition, as well as from marketing risks for products or product groups due to specific demand trends or technological changes.

This can lead to decreasing sales revenues, which can be caused by declining sales volumes or falling prices. To the extent that it is not possible to adjust the cost structure in the short term, this can give rise to a drop in profitability.

We counter sales risks by continually optimizing our product and service portfolio, above all on the basis of our innovative ability. In the process, it is decisive that we cooperate closely with our customers at an early stage of development work to adapt to market needs. With our innovation strategy, we can counter increased competition in our markets.

A loss of, mergers of, or backward integration of customers can lead to major changes in the customer structure. Due to our very diversified customer structure, however, these risks are limited. In addition, we cooperate closely with our core customers within the framework of our key account management.

Within the sales risks in the market and technology segment, the assessment of potential damage has significantly decreased compared to the previous year, primarily due to the reduction in energy risks. However, the probability of occurrence, particularly concerning sales price development, has slightly increased from the previous year. Overall, the evaluated risk magnitude is still categorized as high. The integration of the Von Roll Group and the commencement of commercializing new technologies have contributed to a slight elevation in both the potential probability of occurrence and the potential loss amount within the sales and distribution subgroup of risks. This specific subgroup, previously considered a low risk, is now reclassified as a medium risk.

Risks from Business Combinations, Participations, and Other Investments

Apart from operating growth, acquisitions of companies, business activities, and individual technologies play a key role in the implementation of the strategy for sustainable profitable growth at ALTANA. Depending on the size of the activities acquired, inadequate integration can place a burden on the Group’s earnings situation and limit its financial headroom. In addition, a business performance that is worse than what was expected when the acquisition was made can lead to impairments of assets with a negative impact on earnings. A significant acquisition was made at the end of September 2023 with the takeover of the Von Roll Group.

In addition, the restructuring of business activities or the implementation of long-term efficiency measures may result in impairment losses on assets.

To minimize the effects of the risks from business combinations, we examine our acquisition targets systematically and comprehensively and analyze them in detail in a multistage approval process.

To implement its strategic goals, ALTANA is constantly expanding and renewing its development, production, and other facilities. The projects, some of which are very complex, are always subject to certain risks regarding adherence to the schedules, budgeted costs, and the realization of the expected goals. The projects regularly undergo extensive approval and monitoring routines. The total potential losses decreased slightly compared to the previous year (including the effect of energy risks). However, the probability of occurrence has risen, primarily driven by the increased likelihood of complex IT projects. Risks from capital expenditures continue to be assigned to medium risks.

Procurement Risks

Among the main procurement risks are a restriction in the availability of individual raw materials and transport services as well as significant price increases for raw materials and logistics, which we cannot or can only partially pass on to the markets in the short term and which may thus have a negative influence on the Group’s earnings situation.

We continually analyze the situation on the raw-material markets that are relevant for ALTANA. By doing so, we can identify price trends and structural shifts on the part of suppliers at an early stage and devise suitable measures. We take this knowledge into account when we arrange supply contracts. In addition, we bear in mind the volatility of raw-material prices in our customer relations. To be able to pass on price increases to the markets in the short term, we use the flexibility of price mechanisms and price lockup periods.

The probability of occurrence for the group of procurement risks fell slightly overall compared to the previous year. However, the significant reduction in the potential level of loss essentially led to a reclassification of procurement risks from very high to high. Essentially, the risk for the procurement of energy, which arose due to the start of Russia’s war against Ukraine and the resulting upheavals in the energy sector in the previous year, decreased significantly in the current year.

Financial Market Risks

Financial market risks primarily concern short-term and significant changes in exchange-rate relations and interest rates, as well as default risks and the covering of financial resource needs.

Due to exchange-rate fluctuations, the translation of foreign currency positions into the Group currency, the euro, can have a negative effect on the Group’s sales and earnings performance (translation risks). Such negative effects can also result from business conducted in a foreign currency (transaction risks). Interest-rate changes influence financing costs. Defaults on trade accounts receivable or financial receivables can also have a negative effect on the Group’s earnings situation and its financial resources. If there is a lack of availability of financial resources for the implementation of acquisitions or major investment projects, we might not reach our strategic targets.

We safeguard against material transaction risks by concluding forward foreign-exchange contracts in cases where we assume that the underlying business can be realized with a sufficient degree of certainty. More information on our evaluation and accounting procedures for hedges can be found in the complete Consolidated Financial Statements.

To minimize credit default risks, we systematically examine the credit rating and payment behavior of our counter parties. The latter include customers, the banks we do business with, and other business partners where payment default can have an influence on our financial situation.

We safeguard availability of financial resources through central control and monitoring of our Group-wide financial resources. Additionally, a financial framework is made available through the use of various financing instruments. It can be used to cover unplanned financial requirements that arise in the short to medium term, for example due to acquisitions or a crisis-related decline in operating activities.

The group of financial market risks is still assessed as a medium risk. The assessment of the main individual risk in this risk group – negative earnings effects from exchange-rate changes – remained unchanged in terms of the probability of occurrence, although the potential amount of loss decreased and the risk is now classified as low. The individual risk relating to interest rate trends fell compared to the previous year. Overall, the development of the individual risks did not lead to a change in the classification of the risk group. The continuing high inflows from operating activities and the existing general financial resources will continue to be sufficient to cover the expected outflows for capital expenditures, repayments, and dividends.

Innovation Risks

ALTANA’s position as an innovation and technology leader is a major success factor for the company. It is important for a supplier of highly specialized chemical products to continually introduce new products on the market and to be perceived by our customers as a competent and innovative partner. If this was no longer the case in the future, risks could result for our sustainable growth, the attainment of our profitability targets, and ALTANA’s positioning in the relevant markets.

With our innovation culture, which is put into practice at all levels of our organization, we highlight the importance of innovation and safeguard its status. Both at a decentralized and at Group level, we can continually evaluate and control our research and development activities based on financial and non-financial criteria. By investing above average amounts in research and development, we can continually introduce products on the market that are tailored to customers’ individual and current needs and thus positively influence our competitive position.

It is important to protect knowhow we develop with patents to convert our knowledge edge into economic success. This includes safeguarding technologies as well as methods and product properties we currently use so that other companies cannot patent them.

Both the potential loss amount and the probability of occurrence for this risk group are slightly higher than in the previous year. Overall, we classify the group of innovation risks as still belonging to the medium risk group.

Other Risks

Production risks concern technical disruptions or human failure in production that can be harmful to people or the environment. Our goal is to minimize the effects of machine failure on the value chain by operating production lines independently from one another. It is compulsory for our staff to receive training in the clearly defined process and quality standards in the areas in question. In addition, we conclude property damage as well as plant and equipment breakdown insurances. The high loss potential of a gas shortage due to Russia’s war against Ukraine last year and the resulting risk of production interruptions decreased significantly over the course of the year. In conjunction with a downturn in the economy and the resulting drop in sales, this led to a significant decline in the potential loss amount. Despite a slight increase in the probability of occurrence, the production risk group has therefore been downgraded from high to medium.

Information technologies form the basis of nearly all of ALTANA’s business and communications processes. Breakdowns or other disruptions of IT systems can lead to farreaching impairments in all of the Group’s value added stages, which can have significant effects on business performance (IT risks). In addition, potential risks arise from data loss or theft of business secrets. ALTANA attaches great importance to smooth availability of IT applications and services. To guarantee this, corresponding processes and organizational structures have been established. These are continuously adapted to the changing risk situation and new technological possibilities. Emergency plans are in place in the event of significant disruptions or data loss. In the coming years, our focus will remain on security and protection measures, which we will continue to develop in line with the threat profile.

Delivery of faulty products can cause damage to people, property, or the environment and thus cause liability risks. This can have significant effects on the Group’s asset situation. We minimize this risk by standardizing production processes to a large extent and by taking comprehensive quality control measures. In addition, we continually conduct analyses to assess the hazardous potential of our input materials and products, and we conclude insurances.

Changes in political and regulatory framework conditions can lead to restrictions on trade or foreign-exchange transactions. Due to political unrest, it can be more difficult or even impossible to access the Group’s assets in the country or countries in question. On account of regulatory adjustments, it might no longer be possible to process or sell certain products or ingredients, or only with strong restrictions. We continually examine the political environment in the countries important for us and take current tendencies into account when evaluating business relationships. We only make direct investments in countries in which we assume the political environment is highly stable. We actively take part in legislative procedures and discussions important for us that focus on changes in the regulatory environment. As a result, we can anticipate possible new requirements early on.

While we continue to assess the risks in the realms of regulation and EH&S (Environment, Health & Safety) as low, the risk group in the area of political risks had to be raised from medium to high. Both the probability of occurrence and the potential level of damage increased compared to the previous year. Possible tightening of the sanctions policy due to Russia’s war against Ukraine and the consequences of the war in Israel, as well as the effects of other political conflicts that could lead to restrictions on property rights, among other things, caused the risk to increase.

Risks due to natural disasters, pandemics, and armed conflicts remain in the medium risk range in the potential assessment. However, the increasing aggravation of the global political situation has led to an increase in the likelihood of further military conflicts.

Logistics risks have now been classified as low risk due to the increased reliability of logistics chains. Both the probability of occurrence and the potential loss amount of the risk group decreased.

Legal violations (compliance risks) can give rise to liability risks or tarnish our reputation, which can have a significant effect on the Group’s earnings and asset situation. We counter these risks within the framework of our Compliance Management System, inter alia by regularly informing and training our employees about relevant legal requirements. The potential losses within the compliance risk group increased slightly, and the risk group is still classified as medium risk.

An important basis for long-term success are competent and committed employees. Should we no longer be able to recruit or retain suitable specialists or managers in the future, risks could arise for the successful implementation of our strategy (personnel risks). To counter these risks, ALTANA offers a sophisticated work environment and an attractive compensation system, which is supplemented by various pension plans and wealth creation schemes. Moreover, we regularly offer further education and training programs to budding junior staff members, as well as to specialized and managerial staff.

Compliant Group Accounting

Essential accounting related risks arise particularly when extraordinary or non-routine issues are handled. These include the first time consolidation of acquired businesses or parts of companies as well as the recording of the sale of Group assets. Accounting of financial instruments is also subject to risks due to the complex evaluation structure. Risks also arise from fraudulent acts.

At ALTANA, a separate department of the Group’s holding company coordinates and monitors Group accounting. A core component of the control system are the guidelines, process descriptions, and deadlines that this department defines centrally for all companies, guaranteeing a standardized procedure for preparing the financial statements. For complex issues, the instruments needed for uniform accounting are retained centrally for all Group companies. For recording extraordinary processes and complex special issues, we regularly obtain external reports, advice, and statements.

The financial statements of the individual Group companies are prepared decentrally by the local accounting departments. Hence the individual companies are responsible for preparing the financial statements, in keeping with Group guidelines and country-specific statutory accounting requirements.

The work steps needed to prepare the financial statements are defined such that important process controls are integrated. These include guidelines pertaining to the separation of functions and allocation of responsibilities, to control mechanisms, and to IT system access regulations. The respective management explicitly confirms to the Group’s management that the annual financial statements are correct and complete. In addition, important financial statements are audited by the company or Group auditors in charge.

The local financial statements are recorded and consolidated via standardized formats and processes in a central IT system. At the divisional and holding company levels numerous manual and IT-assisted control mechanisms are applied. They encompass an analysis and a plausibility examination of the registered data and the consolidated results by Group accounting as well as by the controlling department and other departments with expertise in this area. Required corrections of the information in the financial statements are generally made at the level of the individual company to ensure the data are uniform and reconcilable.

The company auditor and the Group auditor examine issues, processes, and control systems relevant for the gen Expected Developments eration of financial statements. The Group auditor reports on the audit directly to the Supervisory Board and the Audit Committee. In certain cases, audits are carried out by the central Internal Audit department.

After each process related to the preparation of the financial statements, optimization potential identified at the different levels is analyzed and adjustments of the processes are made.

Opportunities

The identification and evaluation of opportunities for our future business development is integrated into the different planning, analysis, and control processes.

Within the framework of strategic planning, we analyze demand trends as well as market and technology developments with regard to options for action that could enable ALTANA to create value. In addition, the divisions continually examine possibilities of developing new sales markets. During the financial planning process, the effects of action options are evaluated and discussed so that we can optimally exploit future opportunities. Finally, possible opportunities for short-term business development, along with the attendant risks, are dealt with in detail at all levels of management.

Below, major opportunities are described that could lead to ALTANA’s surpassing its short-, medium-, or long-term goals. The order corresponds to our assessment of the effects on our business performance.

Economic and Industry Development

Should the economic environment in the established industrial regions important for ALTANA, particularly in Asia, the Americas, and Europe, develop better than we anticipated, unexpected growth impetus could arise. As a result, demand for our products and services could develop more positively and exceed our forecast. The same applies to growth in the important emerging countries in Asia and South America. If the growth rates in these nations were higher than expected, we might be able to benefit from this to a disproportionately high extent due to our market positions.

In addition to regional factors, growth impetus can also result from individual branches of industry. Further potential could be opened up, in particular, if the automotive sector and the construction industry showed a positive development, or if there was an increase in the use of silver and gray colors in the consumer sector.

Innovation

We have to continually streamline our product and service portfolio to be able to continue to pursue our strategy for profitable and sustainable growth in the long term. Should ALTANA manage to enhance its innovativeness more quickly than expected or to increase its share of new products for which there is a high demand beyond the target level, there would be even better prospects for growth. Furthermore, customers could demand innovative products manufactured and sold by us more quickly and to a greater extent than we had expected. The same applies if we entered new markets or opened up new application fields for our products.

Business Combinations and Portfolio

Measures Acquisitions play a key role in ALTANA’s long-term value creation. In recent years, we continually advanced the Group strategically due to acquisitions. In recent years, we have been able to continuously develop the Group strategically through acquisitions and intend to continue to do so in the coming years. The acquisition of the Von Roll Group in 2023 expanded our product portfolio to include high-voltage insulation and opened up new opportunities to participate in the expansion of renewable energies. At the same time, we cleansed our portfolio of those activities that did not develop in line with our strategic objectives and did not promise to create value for the Group in the long term.

In the future, we intend to continue to boost our growth by acquiring businesses and activities. This is an essential prerequisite for us to achieve our strategic growth targets. Should opportunities arise in the future that exceed our expectations, this can help us strengthen our market positions and open up new market segments. This can also have a positive impact on the achievement of our strategic goals.

Synergies

The ALTANA Group is decentralized to a large extent. Still, in some areas of the value creation chain and in certain management functions, central units support the divisions and play a coordinating role or provide shared platforms. To the extent that we manage to push forward the networks within the Group more strongly than expected, this may spawn further potential to improve efficiency.