Componenta : Annual Review 2023

Componenta in brief

Componenta Corporation is an international technology company and Finland's leading contract manufacturer in the machine building industry. Sustainability and customers' needs are at the core of the company's extensive technology portfolio.

Breakdown of net sales by market area in 2023

Componenta produces components for its global customers, which are manufacturers of machinery and equipment. The company's shares are listed on Nasdaq Helsinki (CTH1V).

Other

countries

EUR 0.3 million

Other

European countries

EUR 5.0 million

Germany

EUR 2.4 million

2023 in brief

Our net sales and EBITDA continued to grow in the first half of the year in a very challenging operating environment, thanks to higher delivery volumes and the implementation of our own development measures as planned. However, in the second half of the year, production volumes were lower than expected because our main customers' own order books developed modestly as a result of market uncertainties, and because stock levels were optimised as part of working capital management. This caused our factories' utilisation rates to decrease, which had a negative impact on production process efficiency, capability and profitability.

Componenta signed an agreement on a EUR 4 million net working capital loan in the fourth quarter of 2022 and drew down the first instalment (EUR 2 million) in December 2022. Componenta drew down the second and final instalment (EUR 2 million) in March 2023.

Componenta terminated its factoring and credit facility agreement on 31 August 2023 and entered into an agreement with a new partner. In most Group companies, the services were transferred to the new partner largely during 2023. On the balance sheet date, a new EUR 4 million credit facility remained unused.

Under the authorisation granted by the Annual General Meeting, Componenta Corporation's Board of Directors decided on 13 April 2023 to launch an option programme for the company's key personnel. Option programmes are used to encourage key employees to commit to long-term employment at the company in order to increase shareholder value. Option rights are also intended to commit key personnel to the company. The maximum number of option rights to be issued is 400,000. The option rights entitle their holders to subscribe for a maximum of 400,000 new shares in the company or shares held by the company. The option rights are issued without consideration. Of the option rights, 133,348 were marked as option 2023A, 133,326 will be marked as option 2023B, and 133,326 will be marked as option 2023C. The shares to be subscribed for based on the option rights to be issued correspond to a total maximum of 3.9% of all the shares and votes in the company after any share subscriptions if new shares are issued to be subscribed for. The target group of the option programme consists of around 15 key people, including the members of the Group's Corporate Executive Team.

In an IFRS assessment of Componenta on 30 September 2023, it was noted that long-term profit expectations for the foundry business had improved. Consequently, an impairment loss of around EUR 4.2 million, related to the machinery and equipment of the production operations of the foundry business, was reversed. On the balance sheet date, future profit expectations and the outlook were unchanged.

Key figures

• The year 2022 has been adjusted due to a change in the principle of preparing real estate valuations. More information about the change in the accounting principle and its effects on previous years' figures can be found in the section "Valuation of properties and land areas" in the accounting principles for the consolidated financial statements.

• The operating result for 2023 includes a non-recurring income of EUR 4.2 million from the reversal of the impairment loss related to the foundry business's production machinery and equipment. More information on the reversal of the impairment loss can be found in the note "Tangible assets" in the consolidated financial statements.

CEO's review

"Dear stakeholders,

2023 was a year of contrasts. The first half of the year was a good continuation of the strategic development in previous years. However, in the second half of the year and especially in the last quarter, our production volumes were markedly lower than expected, which had a negative impact on our key figures. On the whole, our net sales and EBITDA fell slightly from 2022, so we are not satisfied with our financial performance in 2023. Nevertheless, our liquidity remained good throughout 2023.

In recent years, our operating environment has been in exceptional turmoil. The pandemic, the war in Ukraine and the subsequent market uncertainties, combined with rising interest rates, have had a negative impact on the overall economic situation. Challenges in the availability of materials, strong fluctuations in electricity prices and high inflation levels have also affected our operations. Despite this, we have been able to increase our market share and systematically develop our own operations and improve our service capacity.

The general availability of raw materials and other materials improved markedly during 2023. As a result, the cost level of procurement has begun to normalise. Inflation, which had risen to a high level, also began to fall towards the end of the year. New wind power capacity was created in Finland throughout 2023, and no significant near-term risks are currently seen in the availability of electricity. However, because of the limited regulating power so far, the strong fluctuation in the price level of electricity at the daily level has

become a significant part of the market mechanism. In our own operations, we successfully managed our supply chain and secured our production and deliveries to customers despite the challenging circumstances and cost development.

Componenta's new strategy period began this year. Naturally, the measures and development work aimed at growth and improving profitability in the previous strategy period will continue during this strategy period. Five focus areas have been identified for the 2024-2026 strategy period: in-depth customer knowledge; sustainability; personnel; operational renewal; and inorganic growth.

We seek to deepen our knowledge of customers' business needs and increase customer knowledge throughout the organisation. This means closer cooperation with our customers, from long-term strategic planning to the production design of actual components, and throughout the contract manufacturing value chain, all the way to delivery logistics solutions.

In sustainability, we are implementing our long-term goals, which include increasing the use of renewable and fossil-free energy, reducing our carbon footprint in terms of raw materials, implementing various energy saving measures in our production, and optimising waste and sidestreams in a controlled manner. Safety at work and development needs related to the

wellbeing of our personnel will continue to be emphasised in our sustainability work. We work to be a zero-accident workplace, where diversity, non- discrimination and equality are an important part of the everyday corporate culture.

Our employees' competence, expertise, motivation and continuous development are essential and critical factors for us as a contract manufacturer. Componenta is a popular and well-known employer, and we have a consistent corporate culture with an emphasis on cooperation and continuous renewal. We develop effective processes and create consistent operating models for the different stages of the career path. We invest in working capacity management and continuous competence development through good supervisory work and engaging day-to-day management.

As a result of operational renewal, the quality level of products and services for which we are aiming, as well as highly reliable deliveries, are reflected throughout the supply chain. We also improve our productivity and focus on higher added value in our offering. We increase the availability and utilisation rates of our machines and ensure the availability of competitively priced materials. We also actively explore the opportunities that inorganic growth brings to our business operations.

In terms of new sales, we have systematically increased our market shares, and we believe this will have a positive impact on our sales volumes over the longer term. While there are differences between customers and industries in order backlogs, the full-year outlook for 2024 has remained generally positive despite slightly lower volumes at the beginning of the year. With the increase

in Componenta's market shares, we estimate that production volumes will grow markedly in 2024 from 2023. As a contract manufacturer, we will actively continue our efforts to strengthen our market position and are aiming to be the preferred overall sustainable supplier of a wide range of products to our customers.

I would like to take this opportunity to thank our employees for their commitment and strong input during the year, and our customers, suppliers and other stakeholders for their valued

cooperation and trust. We are off to a good start in 2024."

Sami Sivuranta

President and CEO

• • All the company's units have ISO 45001 certification for their occupational health and safety management system
• Safety training was provided to all personnel
  (550 people, participation rate 94%), and electronic safety training was further developed
• • Occupational healthcare services were concentrated into a single service provider, and their quality was further improved
  • • The sickness absence rate decreased significantly in 2023 and was 4.8%

• The company bike benefit was introduced for all personnel

• Componenta prepared its climate road
  map and long-term sustainability targets

• Componenta prepared for sustainability reporting in accordance with the CSRD by conducting a double materiality assessment, among other measures

Capital

Human and intellectual capital

• ~ 600 professionals
• An inspiring corporate culture that encourages development
• Metal industry expertise for 200 years
• Extensive manufacturing know-how
• Continuous improvement and development of manufacturing processes
• Targeted environmental, health and safety management
• Reducing waste and increasing recycling efficiency
• Innovative material reuse
• The company's recognizability and reputation as a reliable contract manufacturer

Financial capital

• Total assets EUR 57.3 million
• Financial net debt EUR 9.1 million
• Versatile ownership base
• Long-termcustomer relationships

Supply chain

• Purchases of raw materials, supplies and services EUR 65.4 million
• Comprehensive subcontracting network

Assets

• Production in Finland at 9 sites:
• • 2 foundries
  • 4 machining units
  • 1 forge
  • 1 tube service
  • 1 plate service
• Investments
• Factory properties in Karkkila and Pori

Sources of energy

• Share of electricity 77%
• Share of district heating 14%
• Share of liquefied petroleum gas 6%
• Share of oil 3%

Changes shaping our business

• Increasing sustainability requirements
• Changes in domestic competitiveness
• Availability of skilled labor

• Personnel is the key to success
• Inorganic growth

Our objective is to be the primary supplier with an extensive offering for our customers.

• Method design
• Component manufacturing design

Our carbon footprint

• In 2023, the Componenta Group's direct emissions and indirect emissions from purchased energy (Scope 1 and Scope 2) in relation to net sales were 0.091 tCO2e per EUR 1,000 in net sales.
• A safe and responsible employer
• Career opportunities for personnel
• A safe working environment for personnel

Environmental impact

• Improving the efficiency of manufacturing methods reduces the environmental burden
• Reuse and recycling of waste
• Taking into account the environmental aspects of investments
• Digitization and technological development
• Changes in the global market situation
• Consolidation of businesses

Business model

Componenta Corporation is an international technology company and Finland's leading contract manufacturer in the machine building industry. The company and its predecessors have more than 200 years' experience in metal processing, procedure design, product development cooperation and various manufacturing technologies and their development. The company's operational functions are located in Finland. Componenta has an extensive technology portfolio. The company manufactures cast and machined metal components, forged blanks, pipe products and metal sheet cuttings. Componenta's business model is built on long-term customer relationships. The company's customers are global machine and equipment manufacturers. Componenta's production is focused on serving customers flexibly, especially in short and medium- sized production runs. The wide range of production units covers sizes ranging from hundreds of grams to thousands of kilograms, volumes from individual units to series of tens of thousands, and a wide variety of material options.

In Componenta's value chain, value is mainly created during the use of the end products when Componenta's customers can produce long-term

end products. Componenta's raw material and supply chains are global.

Summary of key events in 2023

Our net sales and EBITDA continued to grow in the first half of the year in a very challenging operating environment, thanks to higher delivery volumes and the implementation of our own development measures as planned. However, in the second half of the year, production volumes were lower than expected because our main customers' own order books developed modestly as a result of market uncertainties, and because stock levels were optimised as part of working capital management. This caused our factories' utilisation rates to decrease, which had a negative impact on production process efficiency, capability and profitability.

Componenta signed an agreement on a EUR 4 million net working capital loan in the fourth quarter of 2022 and drew down the first instalment (EUR 2 million) in December 2022. Componenta drew down the second and final instalment (EUR 2 million) in March 2023.

Componenta terminated its factoring and credit facility agreement on 31 August 2023 and entered

into an agreement with a new partner. In most Group companies, the services were transferred to the new partner largely during 2023. On the balance sheet date, a new EUR 4 million credit facility remained unused.

Under the authorisation granted by the Annual General Meeting, Componenta Corporation's Board of Directors decided on 13 April 2023 to launch an option programme for the company's key personnel. Option programmes are used to encourage key employees to commit to long-term employment at the company in order to increase shareholder value. Option rights are also intended to commit key personnel to the company. The maximum number of option rights to be issued is 400,000. The option rights entitle their holders to subscribe for a maximum of 400,000 new shares in the company or shares held by the company. The option rights are issued without consideration. Of the option rights, 133,348 were marked as option 2023A, 133,326 will be marked as option 2023B, and 133,326 will be marked as option 2023C. The shares to be subscribed for based on the option rights to be issued correspond to a total maximum of 3.9% of all the shares and votes in the company after any share subscriptions if new shares are issued to be subscribed for. The target group of the option

programme consists of around 15 key people, including the members of the Group's Corporate Executive Team.

In an IFRS assessment of Componenta on 30 September 2023, it was noted that long-term profit expectations for the foundry business had improved. Consequently, an impairment loss of around EUR 4.2 million, related to the machinery and equipment of the production operations of the foundry business, was reversed. On the balance sheet date, future profit expectations and the outlook were unchanged.

Net sales

Net sales by market area

divided between customer industries as follows: machine building 45% (46%); agricultural machinery 30% (31%); forestry machinery 7% (7%); the energy industry 9% (8%); the defence equipment industry 4% (2%); and other industries 5% (6%).

Order book

Componenta's order book at the end of 2023 was EUR 14.5 million (EUR 18.5 million). The order book increased by EUR 1.0 million from the end of the previous quarter. The order book contains the orders confirmed to customers for the next two months. The decrease in the order book from the previous year was significantly affected by a decline in Componenta's main customers' own order books and stock level optimisation as part of working capital management.

Adjusted*

2023 2022

The Group's EBITDA decreased from the previous year, amounting to EUR 5.3 million (EUR 7.1 million). The following factors had a somewhat negative impact on profitability: the industry-specific wage agreements made in the first half of the year, the prolonged scheduled maintenance of the Karkkila foundry in the third quarter, and lower factory utilisation rates in the second half of the year, which were reflected in production process efficiency and ability to create high quality. In addition, in the last quarter of the year, profitability was burdened by the ramp-up of the manufacture of new high- volume products, which temporarily weakened profitability.

The Group's operating result increased from the previous year, amounting to EUR 3.8 million (EUR

* Rental income is presented in 2023 under other operating income.

Net sales decreased by 6.7% from the previous year to EUR 101.8 million (EUR 109.1 million). Net sales decreased because delivery volumes were lower

Operating result, EUR thousand

Operaing result, %

Result after financial items, EUR thousand

Net result, EUR thousand

Basic earnings per share, EUR Diluted earnings per share, EUR

3,762 1,565

3.7 1.4

1,568 -97

1,547 61

0.16 0.01

0.16 0.01

in the second half of the year, and because the level of the main raw material and energy indices included in sales prices were lower than in the comparison period. Componenta's net sales were

• The year 2022 has been adjusted due to a change in the principle of preparing real estate valuations. More information about the change in the accounting principle and its effects on previous years' figures can be found in the section "Valuation of properties and land areas" in the accounting principles for the consolidated financial statements.