Mayr Melnhof Karton : Remuneration Report 2023

TOGETHER

Financial year 2023

After the record result of the previous year, the MM Group faced a significantly lower demand in the paper and car- tonboard industry as well as increasing price pressure in 2023. In addition to destocking in the supply chain, inflation- related changes in consumer behaviour which led to lower consumption of everyday goods and the overall economic slowdown in our European main markets were the main causes.

The difficult general conditions were reflected in particular in the weak result and volume development in the division MM Board & Paper. In addition to significant market-related machine downtimes, there was also considerable capex-related downtime as part of the implementation of the so far most extensive modernisation programme at three large cartonboard mills.

In contrast, the division MM Packaging recorded an overall solid performance despite a heterogeneous packaging mar- ket. Furthermore, last year's acquisitions in the resilient area of pharmaceutical packaging were successfully integrated with a result development above plan.

The decrease in adjusted operating profit to EUR 229.2 million after EUR 562.4 million in 2022 was primarily volume- and price-related from the division MM Board & Paper, while MM Packaging recorded a significant increase. The Group's operating margin was therefore 5.5 % (2022: 12.0 %) and the return on capital employed was 6.5 % (2022: 17.9 %). Adjusted EBITDA amounted to EUR 450.2 million (2022: EUR 769.0 million), resulting in an EBITDA margin of 10.8 % (2022: 16.4 %).

Financial income went up to EUR 8.7 million (2022: EUR 4.3 million). The increase in financial expenses from EUR -32.1 million to EUR -58.3 million resulted in particular from the rise in interest rates for variable-interest loans and further financing of the accomplished acquisitions and organic growth projects. "Other financial result - net" changed to EUR -11.4 million (2022: EUR -15.5 million), in particular owing to foreign exchange effects.

Profit before tax was EUR 136.7 million compared to EUR 467.0 million in the previous year. Income tax expense amounted to EUR 47.6 million (2022: EUR 121.7 million), resulting in an effective Group tax rate of 34.8 % (2022: 26.1 %).

1 PRESENTATION OF THE TOTAL REMUNERATION OF THE MEMBERS OF THE MANAGEMENT BOARD

1.1 Main Features of the Remuneration Policy

The currently valid principles of the remuneration policy of the members of the Management Board and the Supervisory Board of Mayr-Melnhof Karton AG were drawn up based on the proposal of the Presidium, which assumes the tasks of a Compensation Committee, by resolution of the Supervisory Board at its meeting on March 14, 2022 and presented for resolution at the 28th Annual General Meeting on April 27, 2022. The complete Remuneration Policy is available on the Company's website at https://www.mm.group/en/about-us/responsibility/corporate-governance/.

The remuneration policy is intended to ensure that the total remuneration of the Management Board includes appropriate incentives to promote the implementation of corporate strategy and the long-term development of the Company. The remuneration of the Management Board is to be commensurate with the Company's situation and in line with market conditions for usual remuneration in comparable companies. To this end, remuneration in industrial companies of comparable and ascending size beyond the DACH region from the international labour market is used to attract and retain qualified Management Board members.

The members of the Management Board receive both fixed and variable remuneration. The variable components of remuneration are granted on the condition that several performance criteria are met. The variable remuneration components of the Management Board's compensation provide an incentive for corporate development with sustainable value creation at reasonable risk.

The remuneration of the Management Board is made up as follows:

1. The cappings, the minimum amount and the target values of the management bonus as well as the bonus for the reduction in the non-financial key figures for Peter Oswald and Franz Hiesinger are value-hedged annually by the CPI 2015. Due to economic developments, the Management Board has decided not to hedge the value of the fixed and variable remuneration for 2024 and has therefore suspended it.

The total remuneration that is composed of the fixed and variable remuneration components is provided with a maximum limit. Furthermore, the included annual performance related component as well as the long-term incentive component are also limited to a maximum gross amount per annum.

Due to the economic development, the Management Board has waived value protection for 2024, which is therefore suspended.

The total annual remuneration of the Management Board in 2023 (incl. long-term incentive) is divided based on the actual target achievement as follows:

Composition of Management Board remuneration in % of

total annual remuneration

Long-term incentive1)

27.8 %

Fixed remuneration

45.2 %

Fixed remuneration

Annual management bonus

Long-term incentive

Annual

management bonus

1. 27.0 %

2. The long-term incentive relates to the earned third from the 2021 - 2023 tranche, the earned third from the 2022 - 2024 tranche and the earned third from the 2023 - 2025 tranche.

The individual components and their basis of calculation are explained in detail below.

Variable remuneration - annual management bonus

One part of the variable remuneration for the financial year 2023 consists of a performance related bonus, measured by the following quantitative Group key indicators:

1. EBITDA (Earnings before Interest, Income Taxes, Depreciation and Amortisation) is calculated as operating profit plus depreciation, amortisation and impairment of property, plant and equipment and intangible assets. This measure re- flects the operating profitability of the Mayr-Melnhof Group.
2. Earnings per share is taken into account as a short-term financial performance indicator for the annual result.
3. Return on capital employed (ROCE) is calculated as operating profit divided by the sum of average total equity, average current and non-currentinterest-bearing financial liabilities including lease liabilities according to IFRS 16, less average cash and cash equivalents . ROCE is a key indicator for assessing capital efficiency and profitability and is intended to ensure economically balanced growth.

These key indicators are adjusted on the basis of the IFRS consolidated financial statements for non-recurring income and non-recurring expenses if they exceed EUR 10 million and were not included in the budget (e.g., restructuring, gains/losses from disposals of assets, etc.). In addition, in case of acquisitions and company disposals during a financial year, the financial ratios are adjusted according to the periods in which these acquisitions and company disposals affect the ratios.

In addition to financial targets, the annual management bonus scheme also takes into account the achievement of non financial performance indicators:

• Reduction of occupational accidents for all members of the Management Board
• Reduction of CO2 consumption per ton of cartonboard: additional for the CEO

For the change in non-financial targets compared with the previous year, acquisitions in the year of acquisition and the following year are not to be taken into account. In case of disposals of companies, the corresponding figures for the previous year are to be adjusted in a way that these companies are also excluded for the previous year.

The majority of the variable remuneration is based on financial targets.

The target values of the performance indicators are determined by the Presidium within the framework of the periodic budgets. Targets are set in each case for a board period or also annually.

Table 1: Targets for the annual bonus per Management Board member based on achievement of the performance indicators

If the total entitlement to the annual management bonus achieved in the respective financial year is less than thous. EUR 1,393 (2022: thous. EUR 1,264), taking into account the additions or deductions resulting from the deviation between target figures and actual target achievement, the annual management bonus for the Chairman of the Management Board is at least thous. EUR 1,393 (2022: thous. EUR 1,264). There is no such minimum bonus for Franz Hiesinger. If the total entitlement exceeds the total maximum amount, the cap applies. With exception of the Chairman of the Management Board, the entitlements resulting from the achievement of the individual target key indicators are also capped by a maximum amount (see Table 1).

With exception of the Chairman of the Management Board, the annual management bonus in the Group is linked to the condition that an EBIT threshold of thous. EUR 220,350 (2022: thous. EUR 200,000) is reached in the financial year 2023.

If this threshold is not exceeded, no annual management bonus is due. From the financial year 2023 onwards, this EBIT threshold is subject to value protection, which is suspended for 2024.

Calculation of the annual management bonus

If occupational accidents are reduced compared to the previous year, the amount of the premium related to this indicator is the target bonus. If remaining unchanged or increasing, the target bonus from this non-financial target does not apply (taking into account a possible minimum limit for Peter Oswald with regard to the total bonus). The same applies to the reduction of specific CO2 emissions per ton cartonboard for Peter Oswald.

Variable remuneration - long-term incentive ("LTI")

The basis for the LTI is the planning of the Operating Profit margin for the next three years based on a three-year plan. For an Operating Profit margin determined at the beginning, the Management Board is entitled to a bonus in a defined amount. Deviations from this average Operating Profit margin lead to additions or deductions from this amount. The first payment of long-term incentive is made in the year of the Annual General Meeting (2024) which decides on the last year (2023) of the three-year plan (2021-2023).

Process of the long-term incentive scheme:

Table 2: Long-term incentive p.a. (LTI):

1. The cappings and the minimum amount of the long-term incentive of Peter Oswald and Franz Hiesinger are adjusted annually by the CPI 2015. Due to the economic development, the Management Board has waived value protection for 2024, which is therefore suspended.

If the total entitlement to the long-term incentive achieved at the end of the observation period is less than thous. EUR 348, taking into account the additions or deductions resulting from the deviation between the target key indicator and the actual target achievement, the long-term incentive for the Chairman of the Management Board is at least thous. EUR 348. There is no such minimum long-term incentive for Franz Hiesinger.

1.2 Presentation of the total remuneration of the Management Board

Table 3: Remuneration granted or owed per Management Board member in the financial years 2022 and 2023:

The remuneration granted relates to remuneration components that are economically attributable to this reporting period based on legal or contractual obligations, but whose final determination and payment will only take place in (a) later period(s). This concerns the respective annual tranches within the 3-year observation period of the long-term incentive scheme. This does not include allocations to provisions for severance payments and pensions. These can be found in the notes to the consolidated financial statements, section 15.

The remuneration owed includes the amounts actually received by the member of the Management Board within the reporting period which are attributable to this reporting period as well as the entitlements finally acquired for this period, even if payment is not made until a later period. This concerns, inter alia, the base salary, non-monetary remuneration, pension and insurance contributions as well as the annual management bonus. The non-monetary remuneration (e.g., for company cars) is stated with taxable non-monetary remuneration values.

In the financial year 2023, post-employment benefits totaling EUR 4,407,648 (2022: EUR 1,036,791) were paid to former members of the Management Board, of which EUR 3,200,483 were paid to Andreas Blaschke.

Andreas Blaschke resigned from the Management Board with effect from October 31, 2022. The employment contract ended by mutual agreement on April 30, 2023. The annual management bonus for the financial year 2022 was paid out after the Annual Shareholders' Meeting in 2023 in accordance with the results and the contract. The annual management bonus for the short year 2023 was settled by a payment of one third (due to the factoring) of the average of the annual management bonuses 2020 - 2022 in the amount of thous. EUR 465. The long-term incentive for the periods 2021 - 2023, 2022 - 2024 and 2023 - 2025 were settled with a lump-sum payment of thous. EUR 800. Furthermore, the current base salary for the period until April 30, 2023 in the amount of thous. EUR 156 as well as a compensation for non-competition in the amount of thous. EUR 600 (of which thous. EUR 343 were paid out in 2023) were remunerated. The existing pension entitlements of Andreas Blaschke were transferred to an inter-company pension fund with a one-time and mutually agreed transfer amount of thous. EUR 4,500.

1.3 Determination of the variable remuneration

Based on the achievement of the financial and non-financial performance indicators and the exceeding of the EBIT threshold as a condition for the annual management bonus, the Remuneration Committee decided on an annual management bonus for the past financial year in the following amount:

Table 4: Entitlement to annual bonus per Management Board member in 2023

1. Franz Hiesinger has an additional minimum Group EBIT target of EUR 220.35 million for the achievement of a variable management bonus. This was not achieved in 2023.

Table 5: Weighting of key figures in relation to annual management bonus in 2023 and 2022

The weighting is not shown, as no annual management bonus is granted in this year. In the case of the Chairman of the Management Board, the minimum amount is granted.

Table 6: Target achievement of the key figures in 2023 and 2022

For the key indicators for the annual management bonus and the long-term incentive, the results of acquired companies since belonging to the Group (2022: Eson Pac, Essentra Packaging) and expenses in connection with the acquisitions were not taken into account. Furthermore, the key figures 2022 were adjusted for non-recurring income and non-recurring expenses exceeding EUR 10 million if not included in the budget. In the financial year 2022, this concerned the expenses from the sale of MM Polygrafoformlenie Packaging, MM Polygrafoformlenie Rotogravure, Tann Nevskiy incl. consulting costs as well as expenses in connection with the restructuring at MM Kolicevo. There were no adjustments in the financial year 2023.

For the change in non-financial targets compared to the previous year, acquisitions in the year of acquisition and the following year are not to be taken into account.