Duroc : Sust. report 2022/23

1. Important events July 1, 2022-June 30, 2023
2. CEO's Comment
3. Business concept, business model and values

1. Duroc's Portfolio Companies - International Fibres Group
2. Duroc's Portfolio Companies - Drake Extrusion
3. Duroc's Portfolio Companies - Cresco
4. Duroc's Portfolio Companies - Plastibert
5. Duroc's Portfolio Companies - Duroc Machine Tool Group
6. Duroc's Portfolio Companies - Duroc Rail
7. Duroc's Portfolio Companies - Smaller Company Portfolio
8. Our approach to sustainability

1. Duroc Acquires And Develops Companies
2. The Duroc Group
3. The Duroc Share

18 Sustainable value creation

1. The auditor's opinion on the statutory sustainability­ report
2. Appendix
   27 Corporate Governance July 1, 2022-June 30, 2023
   31 Consolidated income statement
   31 Consolidated statement of comprehensive income
   32 Consolidated balance sheet
   33 Parent company income statement
   33 Parent company statement of comprehensive income
   34 Parent company balance sheet
   35 Important accounting policies

36 GRI Index

38 Company addresses and telephone numbers

• Net sales decreased by 6 percent during the financial year. Organic growth stood at -12 percent.
• Adjusted EBIT totaled MSEK 4.6 (90.1), and adjusted EBIT excl. Griffine totaled MSEK 21.7 (159.3).
• Net debt fell sharply during the year to MSEK 115.0 (265.7) excluding leasing debt.
• Ongoing strategic process improvements in the DMT Group contributed to a sales growth of 11 percent. DMT is currently in a growth phase where investments in personnel and processes burden earnings in the short term. The EBIT margin was 7.5 percent (9.3).
• The subsidiary IFG Holdings Ltd pension fund
  purchased­ an annuity from Aviva Life & Pensions UK Ltd in December 2022 through a buy-in solution, which provides an annual reduction of expenditures of around MSEK 6 and the cessation of all pension obligations within 12-14 months.
• Investments totaling MSEK 62, excluding new leases, were made to increase capacity and to streamline and develop operations in the portfolio companies.
• The insolvency regime in respect of Griffine Enduction S.A is for the most part concluded. Duroc has no further obligations concerning the operation and no additional costs are expected to burden Duroc's earnings.
• At the end of the financial year, Duroc had MSEK 273 in unutilized credit facilities and a continued low loan-to- value ratio with an equity/assets ratio of 58 percent (52).
• Given that the negative earnings in all material respects comprise non-recurring items that do not affect cash flow, and that the financial position has strengthened considerably, the Board proposes that a dividend of SEK 0.25 per share be maintained for the financial year 2022/2023.

3,493

MSEK

Net sales

4.6

MSEK

Adjusted EBIT

1,017

Average number of employees

Net sales

Adjusted EBIT

Operating profit (EBIT)

Profit after tax

Net debt excl. liabilities from IFRS 16

The financial year can be summarized by uneven development and a continued strong financial position. The Industrial Trading units developed well and according to plan, while the polymer-related companies fought an uphill battle against unusual market factors that affected demand and earnings negatively. Duroc presents a strongly heterogeneous­ picture for the financial year. The businesses with light balance sheets report decidedly good development resulting from the realization of well-developed business plans.

Thanks to effective sales and marketing work, DMT Group, Duroc Rail and Smaller Company Group have grown profitably. There was a sharp focus on fostering relations with new customers and reinforcing sales results while eliminating unprofitable activities. In all, these activities have had positive outcomes while conditions for aftermarket­ business have improved strongly.

Both DMT and Rail report record sales and operating profits. However, 71 percent of Duroc's sales consist of polymer-related operations with heavy production and large volumes. This includes IFG, Drake Extrusion, Plastibert and Cresco. Even though these units tie up a great deal

of ­capital, returns during the year were weak. Thus, this obscures the excellent earnings trends in the companies that are smaller in terms of sales.

The disposal of Griffine was concluded, resulting in a significant negative effect on this year's results which was, in all material respects, non-cash affecting. This chapter is now at an end.

The economic climate varied considerably between industries, segments and geographic location. Demand in the Nordics and Baltics was good during the past year. Demand in the rest of Europe and the USA was significantly lower in the markets where the polymer businesses operate. The extraordinary events experienced by the industry as a whole during the year deviate significantly from the modern norm.

All in all, the financial year developed far below expecta- tions. Net sales decreased by 6 percent to MSEK 3,493.1 (3,720.5). Adjusted earnings totaled MSEK 4.6 (90.1).

The highly profitable Industrial Trading unit generated an adjusted EBIT totaling MSEK 89.5 while the polymer-based companies burden the Group's results.

Despite the challenges during the year, the Group remains strong. Cost savings, price adjustments and a focus on keeping tied-up capital at reasonable levels helped Duroc maintain a good financial position. Net debt remains low and there are significant unutilized credits available for e.g. potential bolt-on acquisitions or investments in existing operations.

The Board proposes a dividend of SEK 0.25 per share, which reflects its and the management team's great confidence in Duroc's future opportunities and the Group's strong finances.

Outlook:

During the coming financial year, earnings trends in polymer-­related companies are expected to turn in the right direction, albeit at a continued low level. Current inventory levels with customers are estimated to be insufficient to cover requirements during the coming 12-month period. Even though the position is difficult to judge as a whole, I expect the coming financial year to trend more positively than the one just concluded. The subsidiaries that developed strongly during 2022/2023 are now stable as a result of the focus on sales and growth in recent years.

Based on the business plans set forth by each respective business unit, my assessment is that the Duroc Group's

potential­ earnings ability is substantially higher than what was achieved during the past year. Industrial Trading is already performing well, with good conditions for continued­ growth and value creation, while the capital-­intensivepolymer-based units have further to go before their earnings begin to match Duroc's expectations.

I would like to take this opportunity to thank all of our dedicated and capable employees who, in the face of exceptionally challenging factors, made such a strong contribution to Duroc's excellent financial position.

John Häger

CEO

THE DUROC WAY

RESOURCES

Financial capital

• Extensive real assets
• Low net debt
• Strong cash flow

Structural and cultural capital

• Solid market expertise
• Operational know-how
• Strong entrepreneurial spirit
• Decentralized governance
• Exchange of best practice
• Long-termapproach

Brands

Human capital

• Dedicated employees with extensive experience

ACTIVITIES

Duroc's acquisition strategy

• Constant market monitoring
• Flexible approach
• Conservative valuation model
• Good development potential
• Synergies with existing operations

Value-creation plan

• Goal-orientedgovernance
• Sharp, effective business analysis
• Customer focus
• Innovation in all parts of the business­
• Backed by the right com­ petences
• Focus on growth
• Strategic investments

Leadership

• The right leaders
• Trust and investment in employees
• Appreciation and responsibility

VALUE

• Customer satisfaction
• Attractive employer
• Long-term,trusting business relationships
• Efficient, sustainable
  businesses­ and products
• A contributing social partner

Shareholder value