ADDCON GmbH

Esseco Group S.r.l.

San Martino Trecate (NO)

Konzernabschluss zum Geschäftsjahr vom 01.01.2022 bis zum 31.12.2022

Values in thousands of euros

Board of Directors:

Board of Statutory Auditors:

Auditor:

EY S.p.A.

CONTENTS

• Management Report

• Balance Sheet, Income Statement, Cash Flow Statement

• Notes to the Financial Statement

• List of companies included in the scope of consolidation as at 31 December 2022

• Key data from the last balance sheet of the subsidiaries and associated companies

• Auditor's Report on the Consolidated Financial Statements of Esseco Group S.r.l. as at 31 December 2022 8

ECONOMIC BACKGROUND

The global economy in 2022 was affected by high general uncertainty, primarily due to the negative effects caused by the conflict in Ukraine, which caused the energy crisis and affected the volatility of the cost of raw materials, with a consequent slowdown in global production and trade. World economic growth has been slowed down by three main factors, the consequences of postpandemic management, increased inflation and monetary policies. The widespread decline of the world economy is evident above all in industry which is in recession, the energy shock has had, and in part continues to have, evident negative effects on the manufacturing sectors.

In the first few months of 2023, uncertainties regarding the world economy continued, associated with geopolitical problems and the persistence of high inflation rates.

The expectation of a slowdown in global GDP is confirmed, albeit less pronounced than that forecast in autumn 2022.

Economic activity decreased in the last quarter of 2022, GDP slowed down in the USA and China, almost stable in Japan and Russia, down by 2.1% on the total for 2022, as a result of the conflict in Ukraine. International trade decreased in the first months of 2023 compared with 2022.

Sources: National statistics for data on GDP growth for individual countries; OECD for data on world GDP and all forecasts, OECD Interim Economic Outlook. March 2023.

⁽¹⁾ Percentage points, revisions compared with OECD, OECD Economic Outlook, November 2022.
⁽²⁾ Quarterly data; for Japan, the United Kingdom and the United States, annualized and seasonally adjusted percentage changes on the previous quarter; for the other countries, year-on-year percentage changes.
⁽³⁾ The actual data and the forecasts refer to the fiscal year starting in April.

At the beginning of 2023 the global economy is generally still weak, whilst in the USA and the United Kingdom, economic activity in the manufacturing sector has slowed down. In China, there is a recovery due to the abandonment of pandemic containment policies, partly due to measures to support the economy.

In the first few months of 2023 inflation decreased, driven by the drop in the energy component and the consumer inflation expectations of households and businesses decreased. In the first two months of 2023, inflation in the USA decreased due to the decline in volatile components. On the other hand, in the United Kingdom, the price dynamics recovered in February, driven by the underlying component. Instead, in Japan, it is decreasing due to government interventions to support the energy consumption of households and businesses.

According to forecasts published by the OECD, global GDP growth has been revised upwards compared with the end of 2022 and is estimated to stand at 2.6 percent as an annual average for 2023, compared with 3.2 percent in 2022.

The uncertainties relating to the conflict in Ukraine, the high levels of inflation and the consequent restrictive orientation of monetary policies remain.

2022 was characterised by high volatility in the price of raw materials which saw important increases over the months, with significant peaks in the first half of the year. The oil situation is stabilising. After the stable first two months of 2023, there was a drop in March. However, in April, the prices were recovering due to the cut in production announced by the OPEC (Organisation of the Petroleum Exporting Countries). The price of natural gas has been falling since the second half of 2022, due to mild temperatures, limited household demand and the reduced trend in industrial consumption. The prices of non-energy raw materials, which saw some increases in the last quarter of 2022, were decreasing in the first months of 2023.

Euro-area GDP growth and inflation

(percentage changes)

Sources: Based on national statistics and on Eurostat data. The figures in brackets are preliminary estimates.

⁽¹⁾ Quarterly data adjusted for seasonal and calendar effects; percentage changes on previous period.

⁽²⁾ Monthly data; year-on-year percentage changes in the harmonized index of consumer prices (HICP).

In the Eurozone, GDP stagnated in the last months of 2022 with almost zero growth. The available indicators point to a slight growth in the first months of 2023. Inflation is declining, especially for the energy component. Household consumption has decreased, whilst supply is unchanged for industry in general, yet decreasing for the construction and services sector. In the last quarter of 2022, GDP stagnated in Italy and Germany, with a slight increase in Spain and France. Economic indicators forecast a slight growth in GDP in the Eurozone. A decrease in production should be noted, with a lower intensity than in the last quarter of 2022.

Inflation in the Eurozone is decreasing, driven by the drop in the energy component. In March 2023, inflation fell by 6.9 percent. The inflation of food products goes against the trend by increasing (to 15.4 percent). The transmission of inflation to wages is limited, with wages growing by only 2.9 percent year-on-year in the fourth quarter of 2022.

According to ECB forecasts, consumer price inflation in the Eurozone will decrease from an average of 8.4 percent in 2022, to 5.3 for the current year, to 2.9 in 2024 and to 2.1 in 2025.

The economic trend in Italy

Gross Domestic Product

The Italian economic expansion came to a halt at the end of 2022 and the main cause can be traced back to the decrease in household spending. According to the available indicators, in the first quarter of 2023, GDP increased slightly, benefiting from the contraction in energy costs. Italian industry has shown a post-pandemic recovery higher than other European countries, thanks to a diversified production structure and good stability in exports of consumer goods. The recessionary effects will probably manifest themselves from the second quarter of the new year.

In the last quarter of 2022, the Italian economy stagnated, demand decreased, while supply increased in the construction sector, decreased in industry and remained stable in services. Overall, GDP grew by 3.7 percent in 2022, compared with 7.1 percent in 2021.

Based on the latest estimates, GDP in the first quarter of 2023 recorded a modest improvement, due to the drop in energy costs and the normalisation of supply conditions along the value chains. While services are stable, there is growth in construction and manufacturing activity. Industrial production has been reduced since the beginning of 2023, only to recover from March.

As regards the trend in raw material prices, sharp increases have been recorded since 2021, especially for energy products following the Russian invasion of Ukraine. In Italy, but also in Europe, the increase was high for gas and electricity and these increases weighed on companies, affecting production and market pricing strategies. According to statistics, the producer prices of industrial goods sold on the market have grown more for energy-intensive sectors than in nonenergy-intensive ones. The surveys show that the energy-intensive sectors are subject to higher price revisions, but on the other hand have recorded lower use of the plants with a consequent reduction in production.

The Labour Market

Employment, after a period of stagnation in the summer of 2022, returned to growth in the last quarter of 2022. The number of employed persons increased in the services sector, whilst it remained stable in industry and decreased in construction. Permanent employees are constantly growing, many fixed-term contracts have been transformed into permanent contracts, the hours worked per employee have also increased and the dynamics of salaries have remained moderate. In the last months of 2022, the employment rate rose compared to the previous quarter, with an increase in the female component. Labour supply remains lower than pre-pandemic values, due to the reduction of the working-age population and the demographic composition.

The unemployment rate is stable (8 percent in January and February 2023), the vacancy rate in the private sector remains unchanged, but still at high levels.

In 2023, the employment rate is growing, compared to December 2022, rising to 60.8% (+0.1 points). The increase in employed persons in 2023 compared to 2022 is characterised by permanent employees or self-employed workers with a decrease in fixed-term contracts.

Inflation

Inflation reached high levels during 2022 and after reaching a peak at the end of the year, it began to decline, as a result of the decrease in the energy component. For 2023, inflationary pressures are expected to ease for both businesses and households. Inflation reached a peak of 12.6 percent, whilst in the first quarter of 2023 it decreased progressively to reach 8.2 percent. The decrease in consumer price inflation was mainly influenced by the drop in gas and electricity prices as well as the support measures approved by the budget law for 2023. The decrease in the price of electricity was defined by the Regulatory Authority for Energy, Networks and the Environment, as well as for the price of gas (monthly update).

Food price growth remained high (inflation at 12 percent in March 2023), driven by past energy increases, seen in the last quarter of 2022.

Performance of the Italian chemical sector

The Italian chemical sector recorded a fluctuating 2022, due to uncertain geopolitical balances and strong tensions on energy sources and raw material prices.

The basic chemicals sector is characterised by a well-established challenge attributable to the energy and environmental transition, with de-carbonisation objectives and recycling targets contained in the new European regulations. The other major challenge of 2022 was the energy crisis, with the consequent problem of transferring these price increases to the market.

As regards basic inorganic chemistry and in particular chlor-alkali production, the Italian scenario has been hit by an unprecedented increase in energy costs. In the first half of 2022, the PUN recorded an average value of Euro 250/Mwh, then reaching an average value of Euro 470/Mwh in the third quarter, to then decrease in the last quarter to Euro 200/Mwh (average value in 2021 of Euro 125/Mwh and in 2019 of Euro 39/Mwh). The producers in this sector have reacted in two ways, by transferring the cost on the selling prices to the market, above all caustic soda, hydrochloric acid, sodium hypochlorite and by modulating the productions; plant operations decreased from 87% at the beginning of 2022 to 70% at the end of July and 60% in the quarter of 2022. The price increases have led to a drastic reduction in demand, causing concern for the chloralkali industry with weak demand and high prices.

As regards hydrochloric acid, in a scenario of stable demand, annual shutdowns have occurred at European level due to "force majeure". Product availability has decreased, particularly in the Italian market, the almost total elimination of German imports and the difficulties of national producers to compensate for this lack, has caused market prices to rise.

The global sulphuric acid market, was characterised by product scarcity, due to plant maintenance, high energy costs and the war in Ukraine. Large Italian consumers recorded a large reduction in consumption and production and the most affected sectors were the automotive, textile and ceramics.

ESSECO INDUSTRIAL DIVISION

General trend in 2022 and recent developments in the group

The excellent result that materialised in 2022 derives mainly from 2021 post pandemic. After the end of the lock downs in Europe, USA and all over the world except China, there was a consumption boom with the money saved in 2020 and first months of 2021. The highest consumption was achieved in the construction sector, also driven by state incentives for renovations. Whilst consumption has risen, logistics has gone into crisis and the lack of container ships has generated months of delay for the delivery of goods.

Meanwhile, in Europe, production was at its maximum and energy began to grow from September 2021, driven by the collective delirium of those who had to buy in Europe, due to the absence of imports caused by paralysed naval transport.

Since February 2022, the invasion of Ukraine has begun and the price of energy has undergone further increases. Logistics are still struggling and raw materials are undergoing exceptional increases. All of this has generated unprecedentedly high inflation which has led to a significant slowdown in the economy.

The purchases sustained to overcome supply difficulties in the second half of 2022 when the downstream market then slowed down sales, resulted in a significant overstocking that continued throughout the first quarter of 2023.

Esseco Industrial's market is mainly the European one, which accounts for 88% of the total volumes sold in 2022. In Europe, the first country by volume is Italy, which accounts for 56% of the total European market, followed by the United Kingdom (9%) and France (7%). Whilst Italy saw a limited decrease of -9% compared with 2021, the United Kingdom and France recorded a decrease of -17% and -24%, respectively. In opposite trend is Germany which achieved volumes in 2022 in line with 2021, for excellent volumes of KOH by Altair Chimica S.p.A. which offset Addcon's low deicer volumes. Good development in Turkey with more than double volumes on ammonium-based products compared to the previous year.

Analysing the European market in more detail, the most significant decreases were achieved in the volumes of sulphuric acid (-24% compared to 2021), ammonium-based products (-22%) and potassium derivatives (-10%).

The products that recorded a drop in content were those based on chlorine and sodium. As regards chlorine-based products, aromatic hydrochloric acid and chlorine recorded increases compared to the previous year.

Considering seasonal businesses, it can be seen that de-icers, intended for the de-icing of airport runways and more generally for public roads, recorded a year down by more than 20% compared to 2021, which was, however, a year exceptional. This drop had been foreseen in the budget forecasting phase; in fact, volumes are in line with expectations. The start of 2023 was not very positive due to unfavourable climatic conditions that did not favour this business.

Despite the decrease in volumes compared to 2021, product profitability was more than excellent, with an unprecedented result. The overall turnover of the Esseco Industrial division grew by 60% and the contribution margin by 77%, driven by the exceptional performance of Altair Chimica S.p.A. which quadrupled its contribution margin compared with 2021.

This strong increase in margins was driven by the dynamics of prices, to counter the sharp increases in the costs of raw materials and electricity. The energy self-production policy at the Saline di Volterra, Pieve Vergonte and Trecate sites has limited the increase in energy prices from the end of 2021. Furthermore, as regards Altair Chimica S.p.A., the advance procurement strategy of the main raw materials (potassium and sodium salts), purchased in large quantities since 2021, has further contributed to this extraordinary result.

2022 closed with very high turnover and decreasing volumes starting from the second half of the year. Volumes in 2023 are also down by an average of 20% compared with 2022. All companies in the Esseco Industrial division recorded declines in volumes. In contrast, Hydrochem Italia S.r.l. and Esseco USA L.l.c. recorded an increase in volumes sold in 2022 compared with the previous year of 11% and 23%, respectively.

Production plant performance

During 2022, the Esseco Industrial division recorded investments of around Euro 18 million. The main investment of the year regards Altair S.p.A. for the Renewability project for the supply of electricity from renewable sources, as well as optimising existing processes and upgrading some production departments, including improvements to the salt recovery system in brine from tanks, chlorine-paraffin system, fire-extinguishing system and membrane change for electrolysis system. Subsequently, Esseco UK Ltd invested in a significant extraordinary maintenance of the sulphur combustion furnace and a new reactor for the production of SAS, Addcon Nordic A.s. completed the investment in the new compactor for potassium formate and Hydrochem Italia S.r.l. is investing in the Quarazza dam project and in improvements to the aromatic chlorine plants and the chlorine-soda plant.

RAW MATERIALS TREND

SULPHUR

The availability of sulphur in the first quarter of 2022 remained low on the Italian market, due to the shutdown of some refineries and the reduction in production, forcing the main Italian consumers to turn to the international market. The main sources were the Greek and Bulgarian refineries, with problems related to the cost of logistics. Since the end of May 2022, all the main Italian refineries have resumed production and/or increased production rates, gradually returning to normal in terms of product availability.

The purchase cost of sulphur which maintained a very low price in 2020 due to the spread of the Covid-19 pandemic from the beginning of 2021 continued to grow up to $500 per tonne in May 2022, partly due to the Russian-Ukrainian conflict. From the second half of 2022, the cost began to fall, reaching its lowest peak in August, and then resumed a slight increase from September, without, however, approaching the peak of May 2022. The trend is downward in the first months of 2023.

SODIUM HYDROXIDE

Strong increase for the cost of caustic soda which saw a high increase with prices more than tripled compared with the 2021 average. Peak reached in October 2022 with around 2 thousand Euro/ton, from November 2022 the descent began.

SODIUM CARBONATE

After a slight increase at the beginning of 2022, the price of soda ash did not increase during the year.

POTASSIUM CHLORIDE

KCI has had a sharp increase since March 2022, with the cost more than doubling the 2021 trend. The cost remained constant in the months of 2022, with a decrease as of December 2022. The quotation remains high in the first months of 2023.

AMMONIA

The energy crisis together with the war in Ukraine has brought the price of this raw material to very high values, reaching peaks of over $1,200/tonne. Drastic decline starting from the beginning of 2023.

ESSECO OENOLOGY DIVISION

General trend in 2022

Global wine production in 2022, excluding juices and musts, is estimated at 258 million hl (OIV data), down slightly on the previous year. This is explained by a higher than expected harvest volume in Europe, despite drought and heat waves during the spring and summer, and average production levels in the southern hemisphere. Generally speaking, in 2022, hot and dry weather conditions in different regions of the world led to early harvests with average volumes.

The production volume in the EU in 2022 is estimated at 161 million hl, excluding juices and musts, 4% more than in 2021, a result driven by a significant increase in France where it is estimated at 45.6 million hl, 21% compared with the previous year but also higher than its five-year average (+7%). Spain follows France with 35.7 mhl, up 1% compared with 2021, whilst remaining 5% lower than the five-year average.

In Italy, 2022 was characterised by a constant price of grapes: only for some varieties, such as Prosecco, IGT and DOC, there was a partial increase. 2022 closed with a production in line with 2021 and slightly above the average of the last five years, with volumes collected on average also at a global level; wine production in Italy stood at around 50 million hectoliters, in line with the 50.2 million in 2021. It should be remembered that the checks carried out in December 2021 on the fertility of the gems foreshadowed a very rich harvest, but the scarcity of water and the very high temperatures of the year led to a decrease in the results. The Covid-19 pandemic seems to have had no negative effects on the Italian market during 2022: the feeling is that the wine sector has overcome the difficult moment and is looking to next year with optimism.

In France, wine production in 2022 is estimated to be 45.6 million hl. After a weak 2021 harvest, curtailed by a series of severe frosts in spring, production has picked up again this year. The episodes of frost and hail had mainly affected the wine-growing regions of the South-West and the Loire Valley. The lack of rain since spring this year and the strong summer temperatures have reduced the potential in several areas, especially in the South-West and in Alsace. However, several wine regions have held up better, such as Champagne, Burgundy and Languedoc.

In Europe, we underline the important growth in production in Germany of 6% (8.9 mio hl) thanks to a dry and hot growing season which favoured the vines. Worst result in Greece (2.1 mio hl), i.e., -21% compared with 2021 and one of the lowest in recent years.

In non-EU Europe, the most significant wine production in 2022 is in Russia (4.7 mio hl, up 4% compared with 2021), Georgia (2.1 mio hl, up 2% from last year) and Moldova (1.4 mio hl, -2% of 2021 production).

In the USA, the preliminary estimate for wine production is around 22.4 mio hl, a volume 7% lower than the previous year, whilst in China wine production continues the contraction that began in 2016, for structural reasons. In the southern hemisphere, on the other hand, there is a decline in wine production amongst the main producing countries, with few exceptions.

Most of the major wine-producing countries in South America recorded a decline in production compared to 2021. Chile is the leading producer in South America in 2022, with wine production reaching 12.4 mio hl: 7% less than the exceptionally high production of the previous year. Argentina marks a reduction of its wine production to 11.5 mio hl (-8% compared with 2021) due to the extremely variable weather conditions of 2022.

In Oceania, Australia produced 12.7 mio hl in 2022 (-14% compared with 2021) while New Zealand saw record wine production (3.8 mio hl, +44% compared to 2021) thanks to excellent weather conditions and the increase in international demand.

In South Africa, where drought has had a significant impact on harvests in recent years, wine production in 2022 is estimated at 10.2 mio hl (-6% compared with 2021).

A look at consumption

Since 2018, world wine consumption has steadily decreased. This negative trend is mainly attributable to the fall in wine consumption in China, which has since lost an average of around 2 Mhl per year. The advent of Covid-19 has further slowed down consumption and distribution. This partial recovery of 2021 was cancelled in 2022 with the conflict in Ukraine, which generated an energy crisis and a difficulty in managing the logistics chain such as to lead to a sharp increase in production and distribution costs. The result of these events is the significant increase in consumer wine prices.

Due to the events described above, in 2022, there was a slight decrease in consumption of around 1%. Consumption fell for the second consecutive year in China, which lost a further 2 million HL of consumption, followed by Italy with a decrease in consumption between 2022 and 2021 of 5% (-1 million HL).

In fact, just 5 countries consume more than half of the world's wine: USA (15%), France (11%), Italy (10%), Germany (8%) and the UK (6%).

In 2022, the global volume of exports reached 107 million hl, down by 5% compared with the historically high volume of 2021 but with a much higher average price (+15%) which generated a positive record of Euro 37.6 billion.

Italy is the main one in terms of volume (21.9 mio hl with a 20% share), on all the other exporters we see decreases in exports including Spain (-2.4 mio hl).

In France, wine sales are increasing in terms of value (+8%), but decreasing in terms of volume (- 5%). The situation is masked by the strong rebound of Champagne compared to the other denominations, in particular with respect to Bordeaux, the value quotations of which also continue to decrease this year. In terms of export value, France is the leader (12.3 billion, or 30% of the total export value).

As regards the type of wine traded, bottled wine (which account for 68% of the wine market) decreases in volume by 4% but increases in value by 7%. The sparkling wine category is the only wine category that grows in value and volumes thanks to Italy, Spain and France, in the latter the value of sparkling wine grows by 19%.

Esseco Enology - Future prospects

In 2022, for the business of the Enartis brand, there was a favourable economic structure, the world that emerged from the covid resumed consumption and the war has not had a negative impact on sales so far. There were strong tensions on price increases, both for raw materials and for transport, which, however, were almost fully implemented on the market without having an impact on margins.

As regards 2023, the concerns are linked to the slowdown of the economy combined with a general drop in prices that had already begun at the end of 2022 which could affect both sales volumes on the one hand and margins on the other.

In addition to this, the harvests in the southern hemisphere which ended within the first quarter of 2023 have already shown, albeit with unofficial data, a drop in production compared with previous years.

In terms of consumption, the growth of white and rosé wines persists above all in Europe to the detriment of reds, especially the IGT ones and those of the medium-low range which however represent the majority in terms of volumes; the fear is that in the future the volume of bottled wine will decrease, which, for Enartis, represents the highest share of business.

Ever's turnover has significantly exceeded the forecast budget: this result is partly linked to the generalised increase in the prices of many raw materials, but the now consolidated strategy oriented towards direct presentation to customers and "in the cellar" of innovative proposals with precise and personalised solutions aimed at supporting the oenological processes.

Having adopted clear and considered price-change policies from the first months of 2022 has allowed us to leave the sales prices unchanged until the end of the wine campaign: this approach, which initially generated some perplexity and difficulty, proved successful during the harvest. The large volume of stock at the beginning of the year has allowed us to deal with deliveries with the correct margins and guaranteeing the usual standard of punctuality and timeliness.

The generalised increase in prices has eroded part of our customers' margins with a consequent reduction in their spending power: we therefore consider the turnover achieved in 2022 to be very satisfactory, although we point out that since the end of the harvest there has been a slight drop in demand with effects also on the first quarter of 2023.

Continuous attention to company organisation, investments in R&D activities and constant certification activities have allowed us to obtain competitive conditions with suppliers without sacrificing quality. Investments in R&D also push us in the coming years to invest in systems that make the use of our "solutions" more easily applicable but above all safer and more controlled to avoid inefficiencies and errors in application by the operators.

Ever's future development objectives and strategies cannot be separated from a continuous dedication to the customer and its production processes, in order to guarantee increasingly higher levels of quality and safety throughout the supply chain. Ever is organising itself so that 2023 represents the continuation of a path which has, amongst the main objectives, the achievement of ever greater recognition on the market for the level of attention dedicated to the care of its products.

Sofralab continues with the development in export with the aim of having a global presence in all wine producing countries and markets, consequently reducing the weight of France in the turnover and EBITDA of the Sofralab Group, as well as reducing the risk deriving from a this dependence on a single market (already done in recent years).

The star of these coming years will be the Oenoterris range, with its innovative and vertical approach both in terms of offer and parallel product sales. The opportunities presented to us turn out to be very broad (more than initially anticipated) and with great development potential in the future.

The Sofralab brand wants to create a strong synergy, especially in France, with the development of the laboratory operating unit in 2024 following the acquisition of Oceania S.a.S. Now is the right time to implement it and to review and expand the Sofralab Group's analysis offer, especially with regards to specific analyses, in relation to the current and future needs of the wine market. We hope for a synergy with a significant impact for wine products on the French market, gaining new customers.

GROUP RESULTS

With reference to the Consolidated Financial Statements as at 31 December 2022, the Group's main economic, equity and financial highlights for the last two years are presented below:

Summary of economic information

The Group's income statement for the financial year 2022 closed with a value for the sale of goods and services of Euro 873,865 thousand, distributed amongst the Group's various business sectors, an increase of 61.1% compared to the year 2021 which was attributable to both divisions.

The gross margin increased significantly by 77% compared with 2021, accounting for 47% of total sales. This increase is partially absorbed by the generalised increase in structural expenses, in particular due to higher personnel expenses (+8%) mainly due to extra bonuses linked to the result and one-off payments for concrete support to families, and to greater maintenance at the sites production plants of Saline di Volterra and Pieve Vergonte, leading to a total gross operating margin (EBITDA) of Euro 257,634 thousand (+181%).

The net result (EAT) increased significantly (+327%) to Euro 156,723 thousand with a ROS of 18%.

Summary of Balance Sheet Data

The following table presents the Group's financial statements in a condensed and reclassified form, showing the structure of invested capital and financing sources.

Total working capital amounted to Euro 228,537 thousand and shows an increase of Euro 72,470 thousand compared with 2021, mainly linked to the increase in trade receivables due to the continuous increase in market prices and inventories. Investments net of accumulated depreciation and including revaluation amount to a total of Euro 264,761 thousand, attributable to production investments for Euro 219,745 thousand, intangible investments for Euro 46,329 thousand, equity investments for Euro 3,796 thousand, financial derivative assets for Euro 9,221 thousand, to non-current receivables from third parties and associated companies for Euro 483 thousand and for the remainder, from the provision for deferred taxes equal to Euro 14,813 thousand. The decrease in net assets compared with 31 December 2021 equal to Euro 16,888 thousand is linked to the higher depreciation of tangible fixed assets compared to the higher investments, as well as the depreciation of goodwill, offset by the increase for the investment in Centro per I'Enologia S.r.l. and in derivative instruments.

With regard to sources of financing, the change in net financial position (calculated as long-term and short-term financial debts net of bank and cash balances) shows a decrease of Euro 74,689 thousand from Euro 76,647 thousand in the financial year 2021 to Euro 1,958 thousand at the end of 2022.

Group and Third-Party equity amounted to Euro 491,340 thousand (Euro 361,069 thousand as at 31 December 2021) and is calculated as the sum of the Group's shareholders' equity of Euro 446,856 thousand, minority interest of Euro 10,103 thousand and the cash pooling debt to the parent company San Martino S.p.A. of Euro 34,381 thousand.

Summary of financial data

Final net financial position decreased from Euro 76,647 thousand in 2021 to Euro 1,958 thousand in 2022, a change of Euro 74,689, mainly due to: (i) operations that generated a cash inflow of Euro 184,072 thousand (determined by an EBITDA of Euro 257,634 thousand and the variation in trade working capital and other provision of Euro 73,562 thousand); (ii) industrial investment activities that absorbed Euro 31,237 thousand; (iii) the change in shareholders' equity for a total of Euro 27,574 thousand, which included the cash pooling debt for a balance of Euro 34,381 thousand and the dividend distributed for Euro 50 thousand, both to the parent company San Martino S.p.A. The remaining amount relates to financial income and expenses, for Euro 1,237 thousand and taxes for Euro 49,334 thousand.

INFORMATION RELATING TO THE ENVIRONMENT, STAFF AND INVESTMENTS

In view of the social role of the companies belonging to the Group, as also highlighted in the 'Management Report Document of the National Council of Chartered Accountants and Accounting Experts', it is deemed appropriate to provide the following information concerning the environment and investments.

Personnel

No fatal accidents occurred during the financial year. In addition, no occupational illnesses of employees or former employees nor mobbing cases for Group companies were reported during the financial year.

Finally, it should be noted that during the financial year, both the investment plan for activities related to plant safety and the health of staff members, and projects for reducing environmental impact were continued. In addition, training courses on Health, Safety and the Environment were provided within the Group. The Group participated in events promoted by universities and high schools with the aim of facilitating the matching of job supply and demand.

Environment

During the financial year, no damage was caused to the environment as a result of which companies belonging to the Esseco Group were declared definitively liable, i.e., no definitive sanctions or penalties were imposed on any company for environmental crimes or damage.

Investments

Investments in tangible assets made in 2022 for approximately Euro 25,000 thousand are mainly attributable to investments made by the Group relating to the Esseco Industrial division. These consisted of investments to increase the level of automation and safety at the various industrial sites, and to build new production facilities for new products as well as dedicated storage facilities. They were mainly made by the subsidiaries Altair Chimica S.p.A. for Euro 4,325 thousand, Hydrochem Italia S.r.l. for Euro 3,520 thousand, Esseco S.r.l. for Euro 2,922 thousand, Addcon Nordic A.s. for Euro 2,264 and Esseco UK Ltd for Euro 1,955 thousand.

Oenological investments were predominantly made by Enartis Sepsa S.a.u., Esseco S.r.l., Sofralab and its subsidiaries, and Ever S.r.l.

RESEARCH AND DEVELOPMENT

Research and development activities during financial year 2022 involved all of our business areas.

During financial year 2022, Esseco S.r.l. continued its research and development activities and focused its efforts, in particular, on the analysis, research, study, development and experimentation of projects that we consider innovative in the industrial and oenological fields at the Trecate (NO) production site. In September 2018, the company launched a special project related to 'product' research and development activities, which was supported by the Ministry of Economic Development 'MISE' through the 'Fondo per la crescita sostenibile e fondo rotative per il sostegno alle imprese e gli investimenti in ricerca - Bando Industrie Sostenibile FRI DM 18 10 2017' ['Sustainable Growth Fund and Revolving Fund for Business Support and Research Investment -Sustainable Industry Call FRI DM 18 10 2017'] for which the company received, upon conclusion of the reporting process and verification of the first progress report, a Euro 1,140 thousand grant for the previous financial year.

Ever S.r.l., in the Esseco Oenology division, also continued with its research and development activities and focused its efforts on projects that the group considers particularly innovative. The projects were developed in the Pramaggiore (VE) plant and the company incurred costs of Euro 221 thousand, of which Euro 215 thousand eligible for the purposes of the tax credit for research, development, technological innovation, design and aesthetic design pursuant to Article 1, paragraphs 198 - 209 of Law No. 160 of 27 December 2019.

In 2018, Altair Chimica S.p.A. completed the R&D project called GREEN Impact CAPACITY, awarded with regional funding POR FRSR 2014-2020 - Strategic Research and Development Projects, DD 3389 30/7/2014, which covered all the Company's production sectors and enabled it to achieve qualitative excellence in almost all of its inputs. This project was verified, both from an administrative and a technical point of view, by experts appointed by the Tuscany Region, with more than positive results for the Company, with delivery of the final certification certifying the excellent work. At the end of 2020, it completed a further R&D project - called 'Green Field Peas'. This new process involved, and still involves, new energy optimisation initiatives including the recovery of CO ₂ and H2, to improve industrial costs and decrease the company's overall environmental impact. As part of the Green Field Peas project, the company built the new energy self-generation plant, which was put into operation in November 2020. As part of the aforementioned projects, R&D projects typically of the Smart Factory type were also implemented. The company is automating and robotising as much as possible in its production cycles; with regard to this automation, in 2020, the SODA 4.0 variant, presented in November 2018, was completed as part of the Green Field Peas project. The design variant, approved in 2019, has enabled the company to equip itself with a highly integrated and automatic management and decision-making system, which prevents human errors in non-routine manoeuvres. This has helped improve the overall performance of any of the plant's continuous production cycles, in terms of energy consumption, safety at work, and processing yield, through the full automation of many of the current daily manual operations. In 2021 and 2022, a commitment was made to the Enterprise project, which stands for Enhanced Technological R&D of new Products and Processes for Innovation, Smart Factory and green Economy.

FINANCIAL SITUATION OF ESSECO GROUP S.R.L.

Esseco Group S.r.l. acts as the holding company of the Esseco Group and holds all the companies in the group. All the shares of Esseco Group S.r.l. are held by San Martino S.p.A.. Esseco Group S.r.l. has its registered office in Trecate (NO) and has no branch offices.

The tables presented and discussed below have been prepared on the basis of the financial statements for the year ended 31 December 2022.

Summary of economic information

Sales refer to services rendered to subsidiaries. The change in the gross operating margin (EBITDA), negative by Euro 4,765 thousand, is mainly attributable to higher directors' fees and higher legal consultancy.

The financial charges/incomes result was positive by Euro 81,050 thousand as a result of financial income from equity investments. The 2022 financial year closed with a net profit of Euro 76,000 thousand (Euro 13,333 thousand in 2021).

Summary of Balance Sheet Data

The Company's net invested capital as at 31 December 2022 amounted to Euro 234,026 thousand, an increase of Euro 8,676 thousand due to the purchase of 35% of Centro per I'Enologia S.r.l. for Euro 2,456 thousand and a reduction in the value of the equity investment provision for Euro 2,497 thousand due to the improvement in the economic situation of the subsidiaries Esseco do Brasil L.t.d.a, Enartis South Africa L.t.d., Enartis Pacific L.t.d., Esseco Chemicals de Mexico SA DE C.V. and Italiana Biotecnologie S.r.l.

The Company's net financial position as at 31 December 2022 (calculated as long-term and shortterm financial payables net of cash and bank balances) amounted to Euro 11,991 thousand, a decrease of Euro 52,670 thousand mainly due to the decrease in payables to banks for Euro 35,406 thousand and the increase in cash for Euro 17,264 thousand.

Total equity amounted to Euro 222,035 thousand (Euro 160,690 thousand as at 31 December 2021) and was calculated as the sum of the company's shareholders' equity in the amount of Euro 143,754 thousand, and the cash pooling debt to subsidiaries and the parent company San Martino S.p.A. in the amount of Euro 78,281 thousand.

RELATIONS WITH PARENT COMPANIES, SUBSIDIARIES, ASSOCIATES AND RELATED PARTIES

It should be noted that the Group is controlled and coordinated by San Martino S.p.A., pursuant to Article 2497 et seq. of the Italian Civil Code pursuant to Article 2497 bis of the Italian Civil Code. The Notes to the Financial Statements contain the essential data referring to the last approved financial statements of San Martino S.p.A., which exercises management and control over it.

Commercial and other transactions

All operations and transactions with the companies mentioned below are carried out under normal market conditions. Transactions with Group companies mainly relate to management services. IT services and insurance costs managed at the parent company level in order to optimise these services. The receivable from the parent company San Martino S.p.A. of Euro 548 thousand refers to the compensation for tax losses for IRES purposes relating to 2020 and 2021 not refunded, due to the consolidation agreements pursuant to Article 118, paragraph 2 of the Italian Consolidated Income Tax Act.

Esseco Group S.r.l. has entered into agreements with a number of companies:

- an interest-bearing centralised cash pooling contract in zero balance mode. These contracts have a one-year duration with tacit renewal between the parties and allow both Esseco Group S.r.l. and its subsidiaries to optimise the management of cash flows and related financial charges.

INFORMATION PURSUANT TO ARTICLE 2428, Paragraph 2, point 6-bis OF THE ITALIAN CIVIL CODE

Pursuant to Article 2428, paragraph 2, point 6-bis of the Italian Civil Code, information is provided below on the use of financial instruments insofar as they are relevant for the purpose of evaluating the equity and financial situation. It should also be noted that all financial instruments used by the group are disclosed in a separate section of the notes to the financial statements.

GROUP POLICIES ON THE MANAGEMENT OF FINANCIAL AND OTHER RISKS

Foreign exchange rate risk

Exposure to the risk of exchange rate fluctuations arises from the company's operations in currencies other than the Euro (in particular, the US dollar and British Pound Sterling) and from the time lag between the recognition, on an accrual basis, of revenues and costs denominated in currencies other than the balance sheet currency and their financial realisation (transaction foreign exchange rate risk). In general, the Group is exposed to foreign exchange rate risk in those countries subject to strong currency fluctuations and where it has its own structure, particularly in Argentina, Brazil, South Africa and Chile.

Interest Rate Risk

The interest rate risk to which the Group is exposed mainly arises from medium- and long-term financial debts, indexed to a variable market rate (Euribor), with the resulting risk of fluctuations in cash flows and related financial expenses. Therefore, as rates rise, both the company's results and cash flows worsen (and vice versa). The Group hedges this risk, where it considers it appropriate, by means of derivative instruments.

Commodities Risk

The Group's results are heavily influenced by changes in the prices of raw materials, in particular sodium carbonate, sulphur, potassium chloride and the commodities of natural gas and electricity. With regard to natural gas and electricity, portfolio management was undertaken, which consists of interim hedging, based on the values of the relative (Italian and European) stock exchanges. To make the best of the major new development in the energy markets, a fixing strategy was adopted. Adopting this strategy paid off in 2019 and 2020. The lows reached in those periods helped us to make very low price fixings for the year 2021, the year in which prices escalated, meaning that we were able to benefit from the fixings made before the escalation: since mid-2021, a parallel policy to increase the Green energy portfolio has also begun, which should also balance out the effects of changes in electricity market prices from the end of 2022.

Credit risk

Credit risk is associated with the normal performance of commercial operations, with heterogeneous counterparties and is monitored by a specific corporate function, therefore, the exposure to this risk is reduced.

As at 31 December 2022, the provision for impairment losses amounted to Euro 4,874 thousand, or 2.2% of the total amount of trade receivables. Credit insurance has been in place since 2017 to partially cover the receivables of the Esseco Industrial division (both domestic and foreign).

Liquidity risk

Liquidity risk is the risk that available financial resources may be insufficient to cover maturing obligations. The Group finances its activities by generating cash flow, diversifying financing sources and by providing committed and uncommitted credit lines. There are no significant liquidity concentration risks in the group, either in terms of financial assets or sources of financing.

Country risk

The breakdown of the Group's revenues is as follows: Italy 28%, other European countries 48%, and 'rest of the world' 24%.

With regard to revenues realised in the 'rest of the world', it must be specified that the corresponding sales, distributed among some 70 countries, also include countries that may be experiencing political, economic or monetary instability. When dealing with such countries, the company, in order to prevent possible future non-performing loans, undertakes sales mainly by means of letters of credit, advance payments or other means of guarantee to safeguard the successful completion of transactions.

The company has no significant direct or indirect investments in areas experiencing political or institutional instability. The major event to be reported, relating to the first months of 2022, is the ongoing conflict which began following Russia's invasion of Ukraine in February 2022. The Esseco Group is not directly active in either of these two countries. Altair Chimica S.p.A. taking advantage of the long contract with Belarus, it managed to stock up on product and guarantee a 2022 covered by sufficient quantities of potassium chloride. However, the situation is increasingly critical, as the Russian producer Uralkali is now also sanctioned, after the outbreak of the Russia- Ukraine war on 24 February 2022.

Hyperinflated economy

Accounting standards require the financial statements of an entity whose functional currency is the currency of a hyperinflationary economy to restate its operating results and financial position to account for the effects of inflation. This approach is necessary because money can lose purchasing power so quickly that comparing values for transactions and other events that occurred at different times, even in the same financial year, can be misleading.

The need to restate the values in the financial statement, in accordance with National Accounting Standards, must be taken into account. Situations indicative of hyperinflation include the following:

The Esseco Group fell into category e) with its subsidiary Enartis Argentina. The latter's balance sheet was restated by applying a general price index of the country in whose currency it is drawn up, before it was included in the consolidated financial statements of the parent company.

BUSINESS OUTLOOK

The first quarter of 2023 saw a path of progressive normalisation of the prices of raw materials, transport costs and energy costs compared with the increases recorded last year.

The situation in the first quarter is characterised by a progressive increase in interest rates to counter the rise in inflation. This restrictive monetary policy of the Central Banks and the consequent greater difficulty in financing investment projects is leading to a situation of great uncertainty regarding the economic evolution in the coming months.

Therefore, it is essential for the Group to continuously monitor the trend in the prices of energy resources, the modulations of production and the price negotiation activity in order to safeguard the company's margins. To date, therefore, there are no significantly negative effects on the business and, consequently, there is no evidence to report regarding any indicators of permanent loss on the value of the assets recorded in the financial statements as at 31 December 2022. The economic trend recorded in the first months of 2023 is still positive for the Group, but the Esseco Enology division is the one that is most negatively deviating from budget expectations. Given the volatility of the general economic situation described above, difficult quarters are expected for the company's profitability.

The Group aims to confirm its leadership in the reference markets by leveraging energy independence, technological innovation and ESG initiatives, emphasising the propensity to invest in transformation infrastructures with characteristics capable of reducing the carbon footprint.

CONSOLIDATED FINANCIAL STATEMENTS AS AT 31/12/2022

BALANCE SHEET

ASSET

BALANCE SHEET LIABILITIES

PROFIT AND LOSS

NOTES TO THE FINANCIAL STATEMENTS

Esseco Group S.r.l. is a holding company of industrial investments whose subsidiaries are grouped by business area within the Esseco Industrial division (chemical products) and the Esseco Enology division (products for oenology).

BASIS OF PREPARATION

The criteria used in the preparation and evaluation of the financial statements for the year ending 31/12/2022 take into account the changes introduced into the national system by Legislative Decree no. 139/2015, through which Directive 2013/34/EU was implemented, and are pursuant to Legislative Decree 127/91. Pursuant to Legislative Decree no. 139/2015, the OIC national accounting standards were amended.

The following financial statements correspond to the results of the accounting records duly kept, and comply with the provisions of Articles 2423 et seq. of the Italian Civil Code, interpreted and supplemented by the OIC national accounting standards, as shown in these notes, drawn up in accordance with Article 2427 of the Italian Civil Code, which constitute, pursuant to Article 2423, an integral part of the financial statements.

Unless otherwise stated, the values indicated in the Notes to the Financial Statements are expressed in thousands of euros.

BUSINESS CONTINUITY

The Directors, on the basis of future business plans, assess compliance with the principle of business continuity in the preparation of the Consolidated Financial Statements of Esseco Group S.r.l., despite the difficult ponderability of recent geopolitical events. These financial statements have been drawn up on the assumption of business continuity, which is consistent with the economic and financial indicators of the company and the Group, indicated in the Management Report of the Board of Directors. There are no elements of uncertainty regarding the capital solidity of the Group or its ability to meet corporate and tax obligations. Directors and management continue to monitor the developments of the crisis in Ukraine. Taking into account the measures introduced by the States to contain the impacts of the war conflict, the Group undertakes to comply with all applicable laws and regulations. Although there have been no significant impacts on company operations, management continues to monitor the evolution of the contingent situation and its impact on the financial situation and results.

CONTENT AND FORM OF THE CONSOLIDATED FINANCIAL STATEMENTS

The Consolidated Financial Statements as at 31 December 2022 are presented with a comparison of the figures contained therein with those reported in the financial statements as at 31 December 2021.

These financial statements consolidate the figures of Esseco Group S.r.l., the parent company, and its Italian and foreign subsidiaries in which Esseco Group S.r.l. directly or indirectly holds the majority of voting rights, on a line-by-line basis.

Associated companies, in which Esseco Group S.r.l. directly or indirectly holds an ownership percentage of between 20% and 50%, have been recorded in the financial statements and valued according to the so-called 'Shareholders' equity' method.

Companies in which Esseco Group S.r.l. directly or indirectly owns less than 20%, as well as subsidiaries that are not yet operative due to their recent incorporation or liquidation, have instead been valued at cost.

The list of equity investments held in subsidiaries and affiliated companies pursuant to Section 5 of Article 2427 of the Italian Civil Code and the consolidation methods adopted are analytically identified in Annexes 'A' and 'B' of these Notes to the Financial Statements.

Compared to the previous financial year, the scope of consolidation changed as follows:

As for the previous financial year, the following should be noted:

Finally, it should be noted:

In order to ensure comparability of the financial statements, both in terms of equity and income, the effects of these changes, where significant, have been commented on in the notes to the financial statements.

The financial statements of the Italian subsidiaries used for consolidation purposes are those approved by their respective shareholders in accordance with current legislation. For foreign subsidiaries, reporting packages were used that were prepared for the purposes of consolidation in accordance with group accounting principles, which are in line with statutory regulations and Italian accounting principles.

CONSOLIDATION CRITERIA

The consolidation criteria adopted are set out below:

The exchange rates of the currencies adopted for the translation into euros of the financial statements expressed in foreign currencies for the year 2022 are as follows (local currency for one euro):

ACCOUNTING PRINCIPLES AND VALUATION CRITERIA

The criteria used for the preparation of the consolidated financial statements for the year ended 31 December 2022 do not differ, in substance, from those used for the preparation of the consolidated financial statements for the previous year ended 31 December 2021.

Any changes in the application of accounting principles with respect to the previous year have always been reported in the notes to the items to which they pertain in order to give a more accurate representation of the underlying economic activities.

The accounting principles and valuation criteria were applied uniformly to the consolidated companies. The valuation criteria adopted for the consolidated financial statements were those used by the parent company Esseco Group S.r.l. and comply with the aforementioned legal provisions in force. Furthermore, they are supplemented and interpreted by the Accounting Principles issued by the Consiglio Nazionale dei Dottori Commercialisti e degli Esperti Contabili [National Council of Chartered Accountants], in the current version validated by the OIC.

The valuation of the items in the financial statements was based on the general criteria of prudence and accrual and on a going-concern basis. The application of the principle of prudence involved the individual evaluation of elements making up the single entries or items under assets and liabilities in order to avoid offsetting losses that had to be recognised and unrealised profits that did not have to be booked. In accordance with the accrual principle, the effect of transactions and other events has been recognised in the accounts and attributed to the financial year to which these transactions and events relate in accordance with the correspondence between costs and revenues, and not to the year in which the related cash movements (receipts and payments) materialise.

Profits are therefore included if realised or collected by the end of the financial year, while risks and losses are taken into account even if they become known after the end of the financial year, up to the date of approval by the Board of Directors.

More specifically, the valuation criteria adopted in the preparation of the consolidated financial statements as at 31 December 2022 were as follows:

Intangible fixed assets

Intangible fixed assets, considered to be of long-term use, are recorded at purchase or production cost and shown net of amortisation over the years. Amortisation is calculated taking into account the expected future utility as shown in the following table:

If, irrespective of the amortisation already accounted for, an impairment loss arises, the company estimates the recoverable amount of the asset, which is written down accordingly. If, in future years, the conditions for the write-down no longer apply, the original value adjusted only by depreciation is restored. This provision does not apply to value adjustments related to goodwill and deferred charges.

Property, plant and equipment (non-recurrent tangible assets)

Property, plant and equipment items are recorded at production cost or purchase cost, including ancillary charges, or at transfer cost, adjusted if necessary to allocate the higher value recognised at the time of acquisition.

Costs incurred during the useful life of the asset for improvements, modernisations and transformations are capitalised if they result in a significant extension of the useful life of the asset, an improvement in the quality of the products or processing conditions, or a reduction in consumption and waste. Normal repair and periodic maintenance costs are charged directly to the income statement.

As suggested by accounting standard OIC 16, reinterpreted in the light of the changes introduced by Legislative Decree no. 223/2006, and also following a revision of the estimates of the useful life of capital properties, the portion of the cost referring to the underlying and appurtenant areas was separated in the financial statements of the group companies.

The value attributed to the land in the individual companies, for the purposes of the aforementioned separation, was identified on the basis of the specific cost of the land, increased by directly attributable expenses, since it was acquired independently and prior to the construction of the building.

Consequently, as of the 2006 financial year, no amortisation is applied to the value of the aforementioned land as it is deemed, based on updated company estimates, to be an asset not subject to deterioration and having an indefinite useful life. This approach is reflected in the consolidated figures.

The depreciation of the various categories of assets included in property, plant and equipment (non-recurrent tangible assets) was calculated using the straight-line method, which is considered representative of the useful life of the assets, as shown in the following table:

In accordance with the new requirements of OIC 16, depreciation has also been calculated for assets that are temporarily unused.

The depreciation plan adopted was based on compliance with the statutory criteria for the inclusion of property, plant and equipment in the production of services and complies with tax deductibility provisions.

The depreciation rate is reduced to half in the first year in which the assets are used and brought into operation.

If, irrespective of the depreciation already accounted for, an impairment loss arises, the company estimates the recoverable amount of the asset, which is written down accordingly. If, in future years, the conditions for the write-down no longer apply, the original value adjusted only by depreciation is restored.

Capital goods acquired under finance leases are recorded solely for consolidation purposes according to the financial method.

Depreciation allowances allocated to the value of assets acquired under leases and recognised in the income statement are consistent with those allocated to similar depreciable goods owned.

Financial fixed assets

Holdings in associated companies are valued according to the equity method, determined on the basis of the closing balance sheet. Holdings in non-consolidated subsidiaries and other holdings are recorded at acquisition cost. In the event of permanent losses, the value of these holdings is adjusted by means of appropriate write-downs.

Inventories

Inventories are recorded at purchase or production cost, or at realisable value based on the performance of the market, whichever is lower. To this end, the value thus obtained is adjusted by the 'inventory obsolescence provision' to account for goods for which the realisation value is expected to be lower than the cost. The cost is calculated using the weighted average cost method.

Receivables and Payables

Receivables are recorded at their amortised cost, taking into account the time factor and their estimated realisable value, and classified as financial fixed assets or current assets.

Payables are recorded using the amortised cost method.

Accruals and deferrals

Shares of costs and income common to two or more financial years are entered under these headings on an accrual basis.

Provisions for risks and charges

Provisions for risks and charges are intended to cover losses or debts of a given nature, the existence of which is certain or probable, but whose amount or date of occurrence was unknown at the close of the financial year. The general principles of prudence and accrual were complied with in the valuation of these funds, and no generic provisions for liabilities were established without economic justification.

Contingent liabilities have been recognised in the balance sheets and provided for when they are deemed probable and when the amount of the related charge can be reasonably estimated.

Provisions are quantified on the basis of estimates that take into account all available elements.

Severance indemnity provision

The severance indemnity provision is set aside to reflect the liability accrued to all employees in accordance with current legislation and collective bargaining agreements, considering all forms of remuneration of an ongoing nature. The provision corresponds to the total of the individual indemnities accrued in favour of employees as at the balance sheet date, net of advances paid, and is equal to the amount that would have been payable to employees had they terminated their employment on that date.

Income Tax

Current taxes are accrued on the basis of a reasonable estimate of the tax liability for the financial year calculated in accordance with current regulations.

Deferred tax assets and liabilities are calculated on temporary differences that arise between the value of assets or liabilities in the financial statements and the corresponding values for tax purposes.

In particular, deferred tax assets are recognised as assets only if there is reasonable certainty of their future recovery.

Recognition of costs and revenues

Sales revenue is recognised on an accrual basis at the time when the company's right to collect the related remuneration arises. As a rule, for the supply of goods, this refers to the moment at which ownership of the goods is transferred, whereas for the provision of services, this refers to the moment at which the service is rendered, i.e. the moment at which the service is performed. Costs are recognised on an accrual basis.

Foreign currency transactions

Transactions in foreign currencies are accounted for at the exchange rate in force on the day on which they are executed. Assets and liabilities in foreign currencies, if any, are recognised at the spot exchange rate at the end of the financial year on the basis of the records made by the Italian Foreign Exchange Office as at 31 December 2022 and the related gains and losses are recognised in the income statement under item C 17 bis; any presumed net profit is set aside in a special non- distributable reserve called 'riserva art. 2426 n.ro 8 bis C.C.' [Reserve art. 2426 no. 8 bis Civil Code] until it is realised.

BALANCE SHEET

RECEIVABLES FROM SHAREHOLDERS FOR PAYMENTS STILL DUE

There are no receivables from shareholders for payments still due.

INTANGIBLE FIXED ASSETS

Total intangible fixed assets, net of accumulated amortisation, amounted to Euro 49,508 thousand as at 31 December 2022 (Euro 54,282 thousand as at 31 December 2021).

Changes in intangible fixed assets during the period under observation are shown in the following table:

The total gross increases recorded in the period amounted to Euro 3,797 thousand and were mainly attributable to:

a. Development costs for Euro 70 thousand following costs for development projects and studies incurred within the Esseco Enology division in Enartis Sepsa S.a.u.;

b. Purchases of industrial patents and intellectual property rights, for a total of Euro 443 thousand, mainly relating to the purchase of application software from Esseco Group S.r.l. for Euro 125 thousand, in Enartis Sepsa S.a.u. for Euro 97 thousand and Esseco S.r.l for Euro 84 thousand;

c. Intangible assets in progress and payment on account for Euro 3,181 thousand referring to the payment of the first 30% to the company Renewability S.c.a.r.l. against the consideration for the procurement of electricity from renewable sources by Altair Chimica S.p.A.;

d. Other fixed assets amounting to Euro 47 thousand for improvements made to buildings at the production sites located in Italy.

Total depreciation amounted to Euro 8,956 thousand and related to the normal depreciation process of intangible assets.

In the column 'Other movements', increases and decreases relating to reclassifications and exchange rate differences at the opening of the year and price fluctuations during the year are recorded.

PROPERTY AND EQUIPMENT (NON-RECURRENT TANGIBLE ASSETS)

Total property and equipment (non-recurrent tangible assets), net of the related amortisation fund, amounted to Euro 216,565 thousand as at 31 December 2021, and Euro 243,027 thousand as at 31 December 2021. Non-recurrent tangible assets mainly consist of production plants, buildings and offices, and are stated at purchase or construction cost, or at contribution cost. The changes that occurred in 2022 are shown below:

Increases in gross tangible assets amounted to Euro 24,655 thousand and related to industrial investments made by the group.

The item "Land and buildings" increased by Euro 1,257 thousand during the year, mainly due to some structural improvement works carried out by the subsidiary Altair Chimica S.p.A., Enartis Sepsa S.a.u., Enartis Usa Inc. and by Esseco UK Ltd.

Investments in company-owned "Plants and Machinery" amounted to Euro 7,828 thousand. The change mainly relates to Altair Chimica S.p.A. for Euro 2,974 thousand, Esseco S.r.l. for Euro 1,400 thousand, and Enartis Sepsa S.a.u. for Euro 2,046 thousand.

Investments in Altair Chimica S.p.A. they were carried out in execution of the three-year industrial plan approved in 2020, in Saline di Volterra, and concern the optimisation of existing processes and the upgrading of some production departments as well as important extraordinary maintenance works on parts of the plant with a production life exceeding thirteen years. In Esseco S.r.l, at the Trecate site, several investment projects were carried out both in the Esseco Industrial division and in the Esseco Enology division and, at the San Cipriano Po site, we note the completion of the new sulphur grinding plants and ancillary works.

The subsidiary Enartis Sepsa S.a.u., also during the year, acquired more equipment relating to the wine-making process. The remaining investments relate to purchases of 'plants and machinery1 aimed at maintaining high quality standards of production.

Industrial and commercial equipment increased by Euro 3,323 thousand, attributable for Euro 2,446 thousand to fixed assets acquired from Esseco S.r.l.; Euro 207 thousand from Italiana Biotecnologie S.r.l.; and Euro 203 thousand from Ever S.r.l.

"Tangible assets in progress and payments on account" relate to the increase in the value of plants under construction for a total of Euro 9,974 thousand, mainly attributable to the subsidiary Hydrochem Italia S.r.l. for the portion of the year equal to Euro 3,520 thousand relating to the expansion of the photo-chlorination plant, the continuation of instrumental, plant engineering and other projects in the HSE area as well as the continuation of the necessary interventions to make the basin safe supply of one of the two hydroelectric plants for compliance with the "full millenary" requirements, to the subsidiary Addcon Nordic S.a. for Euro 2,264 thousand for the completion of a solid de-icer production plant and to the subsidiary Esseco UK Ltd for Euro 1,578 thousand for extraordinary maintenance of the sulphur combustion furnace at the Wakefield site.

Decreases for the year refer to disposals relating to the items land and buildings, machinery and miscellaneous equipment for a total of Euro 4,608 thousand.

Total depreciation and amortisation as at 31 December 2022 amounted to Euro 40,667 thousand, of which 78.6% related to plant and machinery, 9.8% to industrial and commercial equipment, 7.9% to buildings, and the remainder to other assets. Depreciation relates to the normal process of depreciation of assets as a result of their use, as indicated in the section on the preparation of financial statements, and to the depreciation of capital gains allocated as a result of the consolidation of investee companies.

In the column 'Other Changes', increases and decreases relating to exchange rate differences at the opening of the year and price fluctuations during the year are recorded.

Capital grants

In the financial year ended 31/12/2022, the Group reflected the capital grants in the financial statements through the subsidiary Esseco S.r.l. for Euro 795 thousand as tax credits following tax breaks on new investments made in the previous year, for Euro 643 thousand as a tax benefit due to the effect of new investments facilitated by the contribution of the merger, for Euro 439 thousand as tax credits following tax breaks on new investments completed during the year and for Euro 238 thousand as contributions from Finpiemonte S.p.A. at the conclusion of a tender for energy efficiency and renewable energy, on the construction of a trigenerator. Through the subsidiary Essemar S.p.A. for Euro 27 thousand through the tender of the Piedmont Region for energy efficiency and renewable energy, for the construction of an inverter on the plant.

The indirect method of accounting for these contributions and the remainder received in previous years was chosen, i.e. they are recognised in deferred income and released to the income statement over the useful life of the asset to which they relate. The long-term deferral method has been retained for the remaining contributions.

FINANCIAL FIXED ASSETS

Equity investments

The balance as at 31 December 2022 was Euro 3,796 thousand, and Euro 1,392 thousand in the previous year.

Investments in subsidiaries companies (a) not consolidated

Investments in associated companies (b) valued at net equity

Other minor investments (d-bis) valued at cost

The total of "investments in subsidiaries non-consolidated " equal to Euro 234 thousand is attributable to the investments in currently non-operating companies held by Esseco Group S.r.l. and valued at purchase cost.

With reference to these companies, it should be noted that the subsidiary Addcon Nutrition Technology Co. Ltd. started and completed the voluntary liquidation process in 2023.

The increase in "investments in associated companies" is the result of the change in the shareholders' equity of the consolidated subsidiaries, using the so-called equity method.

The increase in the item 'Investments in other companies', valued at purchase cost in the amount of Euro 7 thousand, is attributable exclusively to the investment in the company Energy for Growth S.c.a.r.l. through the subsidiary Altair Chimica S.p.A..

Financial receivables from others

The item 'Financial receivables from others' amounted to Euro 483 thousand as at 31 December 2022, compared with Euro 467,000 thousand as at 31 December 2021. The change is due to loans to others for an increase of Euro 39 thousand and loans granted to companies valued using the equity method for a decrease of Euro 23 thousand.

Derivatives

The amount of Euro 4,746 thousand as at 31 December 2022 refers to the portion exceeding 12 months of a commodity swap on the price of natural gas attributable to the subsidiary Altair Chimica S.p.A. for Euro 2,240 thousand and to the subsidiary Hydrochem Italia S.r.l. for Euro 241 thousand and for the remainder to four IRS derivatives implemented by Esseco Group S.r.l.

CURRENT ASSETS

Inventories

This item is broken down as follows:

Total "Inventories" as at 31 December 2022 amounted to Euro 168,046 thousand, an increase of Euro 53,895 thousand compared to 31 December 2021 (+47.2%).

The change is mainly attributable to a strong increase in volume and value of raw materials, consequent to the policy of maximising inventories in order not to run out of raw materials necessary for the production of products relating to the Esseco Industrial division and to the increase in value of finished products and goods deriving mainly from the joint effect of the increase in quantities in stock at the end of the year but above all from the growing dynamics of market prices. The item "advances" includes advances paid to suppliers of industrial raw materials. The valuation of final inventories of raw materials, consumables and products in progress, as well as finished goods and commodities, is carried out using the weighted average cost method. The value of inventories was recorded net of a provision for inventory impairment losses of Euro 3,150 thousand.

RECEIVABLES

The breakdown of receivables as at 31 December 2022 by geographical area is shown in the table below:

'Trade receivables' as at 31 December 2022 amounted to Euro 221,905 thousand, compared to Euro 142,904 thousand for the same period of the previous year. This value is shown net of the provision for bad debts of Euro 4,874 thousand, which is deemed adequate in view of possible losses that may be incurred in future years. The majority of trade receivables are due within the next financial year. The increase in receivables is essentially due to the continuous increase in the sales prices of the products recorded in the year compared to the previous year due to the adjustments of the price lists in order to reflect the increase in the price of raw materials and utilities.

Receivables "owed by associated companies", amounting to Euro 1,257 thousand as at 31 December 2022, mainly refer to receivables due from Centro per I'Enologia S.r.l. for Euro 1,244 thousand and to Enosfera S.r.l. for Euro 13 thousand relating to relationships of a commercial nature due within the year.

Receivables "owed parent companies", amounting to Euro 1,261 thousand as at 31 December 2022, relate to tax advances transferred to San Martino S.p.A. as a result of the consolidation agreements pursuant to Article 118, paragraph 2, of the TUIR for Euro 1,258.

"Tax receivables" relate to VAT receivables accrued during the year for a total of Euro 19,907 thousand, from the tax credit on research and development mainly in the subsidiaries Altair Chimica S.p.A. for Euro 1,457 thousand, Esseco S.r.l. for Euro 252 thousand, Ever S.r.l. for Euro 15 thousand, to the energy-intensive tax credit in the subsidiaries Altair Chimica S.p.A. for Euro 4,075 thousand, Hydrochem Italia S.r.l. for Euro 1,096 thousand and Esseco S.r.l for Euro 571 thousand, from the gas tax credit in the subsidiary Hydrochem Italia S.r.l. for Euro 1,180 thousand, the remainder to advances paid in excess of the tax for the period and other miscellaneous tax receivables.

The positive balances for "Deferred tax Assets" amount to Euro 7,858 thousand (Euro 11,838 thousand as at 31 December 2021) and include the tax effect of the temporary differences between the values recognised in the balance sheet of the assets and liabilities and the related recognised values for tax purposes.

'Other debtors' are recorded at their nominal value and had a balance of Euro 2,573 thousand as at 31 December 2022, compared to a balance of Euro 2,174 thousand as at 31 December 2021. They mainly refer to advances paid to service providers against future supplies, expense provisions, guarantee deposits and receivables from personnel.

FINANCIAL ASSETS THAT DO NOT CONSTITUTE FIXED ASSETS

This item is broken down as follows:

Derivative financial instruments receivable are related to natural gas pricing operations put in place by the subsidiaries Altair Chimica S.p.A. and Hydrochem Italia S.r.l., aimed at containing the impact caused by changes in market prices on business margins and the consequent stabilisation of cash flows. The year-end value refers to the recognition of their fair value as at 31 December 2022. The fair value recorded was derived from the prospectuses provided by the banking counterparty with which the commodity derivatives were negotiated. In view of the existence of the conditions for the application of hedge accounting treatment, the fair value is recognised with a balancing entry in the 'Reserve for expected cash flow hedging transactions', which includes the valuation effects arising from the recognition of derivatives in the financial statements, which are classified as cash flow hedges.

CASH AND CASH EQUIVALENTS

The balance as at 31 December 2022 represents the cash and cash equivalents on Italian and foreign bank accounts as of the closing date of the financial year and shows an increase of Euro 26,142 thousand compared to 31 December 2021 (+60.3%).

PREPAID EXPENSES AND ACCRUED INCOME

This item mainly includes income and expenses whose accrual is anticipated or deferred with respect to the cash and/or documentary event; they are irrespective of the date of payment or collection of the related income and expenses and are allocated on a time basis.

The balance as at 31 December 2022 was Euro 2,496 thousand (Euro 3,367 thousand as at 31 December 2021), a decrease of Euro 871 thousand compared to the previous year. This item mainly refers to accrued income and prepaid expenses concerning EDP, maintenance and rental fees, as well as insurance premiums, sponsorships and incentives expected from green and white certificates.

As at 31 December 2022, there were no accruals or deferrals with a duration exceeding five years.

STATEMENT OF ASSETS AND LIABILITIES

• LIABILITIES

SHAREHOLDERS' EQUITY

The following table shows the changes in consolidated shareholders' equity for the last two financial years:

The Group's shareholders' equity as at 31 December 2022 amounted to Euro 446,856 thousand (Euro 338,726 thousand as at 31 December 2021). The change in the year is attributable to the "Profit for the financial period" for the year for Euro 155,095 thousand, the increase linked to "Other movements" for Euro 3,035 thousand and the payment of the dividend by Esseco Group S.r.l. for Euro 50,000 thousand in favour of the Sole Shareholder San Martino S.p.A. 'Other movements' refer mainly to: (i) the change in the reserve for expected cash flow hedging transactions for Euro 3,058 thousand which includes the valuation effects deriving from the recognition in the financial statements, under assets, of the fair value of financial derivatives hedging cash flows, (ii) exchange differences for Euro 2,521 thousand; (iv) for the remainder to the effect of hyperinflation recorded by the subsidiary Enartis Argentina Sa.

As at 31 December 2022, the Legal Reserve had a balance of Euro 2,000 thousand, resulting from the allocation of 5% of the parent company's profits, as provided for by Article 2430 of the Italian Civil Code.

Below is the reconciliation between the parent company's annual financial statements and the consolidated financial statements, with regard to shareholders' equity and the result for the last two years:

The shareholders' equity of the parent company amounted to approximately Euro 143,754 thousand, compared to a consolidated shareholders' equity of Euro 446,856 thousand. The difference refers, for Euro 170,611, to pro quota results of consolidated companies, for Euro 130,787 thousand to the difference between the value of the investments registered in the parent company and the reference shareholders' equity of the subsidiaries, for Euro 17,156 thousand to the positive consolidation differences and for Euro 8,386 thousand to eliminations of intercompany margins on inventories. The adjustment to the bad debt provisions on loans disbursed by the subsidiary Ever S.r.l. is recognised under "other changes". vs Ever France S.a.u., Blu Agri S.r.l. and Bluagri Industria e Comercio Fertilizantes L.t.d.a. for a total of Euro 2,573 thousand. Minority interests amounted to Euro 10,100 thousand.

PROVISIONS FOR LIABILITIES AND CHARGES

The balances of these funds at the end of the year were as follows:

As at 31 December 2022, the 'provision for liabilities and charges' amounted to Euro 20,599 thousand. The item in question is broken down as follows:

a. Euro 3,018 thousand for 'pensions and similar obligations'. These provisions refer to the value of the goodwill indemnity accrued, pursuant to Article 1751 of the Italian Civil Code, on agency contracts in force as at 31 December 2022. The balance shows a net increase of Euro 198 thousand, mainly due to the increase of Euro 323 thousand attributable to the provisions of Ever S.r.l. (Euro 160 thousand), Esseco S.r.l. (Euro 67 thousand) and Sofralab S.a.S. and its subsidiaries (Euro 25 thousand);

b. For Euro 14,813 thousand (Euro 13,749 thousand as at 31 December 2021) from the provision 'For Taxation (yet deferred)', entirely relating to deferred taxes. This provision has been allocated to cover differences, of a temporary nature, between the results taxable for fiscal purposes in accordance with tax regulations and those reported in the individual financial statements, prepared in accordance with the provisions of the Italian Civil Code and used for consolidation purposes. It also includes the tax provisions that emerge as a result of the consolidation operations, the provision relating to the revaluation of Legislative Decree 104/2020 on intangible fixed assets ("Trademarks") attributable to the subsidiary Esseco S.r.l. and the recognition of deferred taxes calculated on the positive balance of the reserve for hedging transactions of expected cash flows.

Details of the composition of the tax provision can be found in the relevant section of these notes to the financial statements entitled 'Income Taxes'.

c. For Euro 2,768 thousand from "other provisions" (Euro 2,088 thousand as at 31 December 2021), which include provisions for potential liabilities and risks recognised against probable liabilities of a legal, corporate and tax nature. The increase mainly refers to future costs of waste disposal, solid and liquid materials in stock at the end of the year at the Pieve Vergonte plant in the subsidiary Hydrochem Italia S.r.l. for Euro 1,205 thousand, and the remainder to potential lawsuits with employees. The decrease in the period is attributable to the use of Euro 458 thousand relating to expenses and charges incurred as a result of the disposal of materials at the Pieve Vergonte site and Euro 100 thousand relating to expenses incurred during the year for securing and the subsequent demolition of the production plant located in Novara.

EMPLOYEE SEVERANCE INDEMNITY

This provision reflects the group's liabilities as at 31 December 2022 to the employees of the consolidated companies and has been allocated in accordance with current legislation and collective bargaining agreements. The balance, down by Euro 205 thousand compared to the financial year 2021, relates to the difference between increases resulting from provisions made during the year and decreases due to the payment of severance benefits for employees who terminated their employment in the financial year 2022.

The provision, for companies incorporated under Italian law, does not include indemnities accrued as from 01/01/2007 and allocated to supplementary pension schemes pursuant to Legislative Decree no. 252 of 05/12/2005.

LOANS AND PAYABLES

This item is broken down as follows:

The breakdown of liabilities by geographical area as at 31 December 2022 is presented in the table below:

The amount of "Payables to banks", which, as at 31 December 2022, amounted to Euro 71,136 thousand (Euro 119,641 thousand as at 31 December 2021) recorded a decrease of Euro 48,505 thousand mostly attributable to the lower banking exposure in the short term. Payables to banks to be paid by 2022 amount to a total of Euro 26,727 thousand, while the remaining part of Euro 44,409 thousand is due within 2-5 years linked to long-term loans taken out by Esseco Group S.r.l., Esseco S.r.l., by Altair Chimica S.p.A. and by Sofralab S.a.s.

"Payables to other financers" as at 31 December 2022 show a balance of Euro 10,343 thousand (Euro 10,388 thousand as at 31 December 2021). These payables refer to the financial debt of the subsidiary Hydrochem Italia S.r.l. to Tessenderlo Finance SA in liquidation, for an amount of Euro 10 thousand thousand, deriving from the complex operation to change the corporate structure and for the remainder to the financing portions of the leasing contracts entered into with other lenders.

"Trade payables" show a balance of Euro 119,838 thousand and Euro 92,429 thousand as at 31 December 2022 and 31 December 2021, respectively, and have increased significantly as a result of the aggressive raw material procurement policy; they are recorded at their nominal value and are payable within the following financial year.

"Payables to associated companies", amounting to Euro 295 thousand as at 31 December 2022, mainly refer to payables due to Ronci S.r.l. for Euro 156 thousand, Enosfera S.r.l. for Euro 96 thousand and from Centro per I'Enologia S.r.l. for Euro 44 thousand relating to commercial relationships due within the year.

"Payables to parent companies", totalling Euro 56,633 thousand (Euro 12,421 thousand in the previous year), refer to the payable from cash pooling and to the taxes to be transferred to the parent company San Martino S.p.A. as a result of the group joining the tax consolidation regime pursuant to Article 118, paragraph 2 of the Italian Consolidated Income Tax Act.

"Tax payables", the balance of which as at 31 December 2022 was Euro 26,401 thousand (Euro 15,497 thousand as at 31 December 2021), include payables for IRES, payables for withholding taxes on wages and salaries, payables for VAT, payables for the substitute tax on the revaluation of Legislative Decree 104/2020 and various tax payables. These tax liabilities mainly relate to the following subsidiaries: Addcon Gmbh for Euro 6,532 thousand, Altair Chimica S.p.A. for Euro 2,945 thousand, Addcon Nordic A.s. for Euro 2,284 thousand, Esseco S.r.l. for Euro 2,258 thousand, Esseco UK Ltd for Euro 2,020 thousand and Esseco Usa L.l.c. for Euro 1,828 thousand.

"Social security payables", equal to Euro 4,257 thousand, refer to the social security burden of the companies and employees on wages and salaries for the month of December 2022 and are almost in line with the previous year.

"Other payables", amounting to Euro 13,632 thousand, mainly relate to salaries, holidays and bonuses accrued by employees to be paid, reimbursement of damages and other minor payables.

ACCRUED EXPENSES AND DEFERRED INCOME

As at 31 December 2022, this item mainly included accrued liabilities for insurance premiums, personnel accruals and deferred income, including those related to capital grants for projects to improve the energy efficiency of company production processes and investments in capital goods. As at 31 December 2022, there were no accruals or deferrals with a duration exceeding five years.

Off-balance sheet guarantees, commitments and liabilities

In compliance with the provisions of Article 2427, first paragraph, n. 9) of the Italian Civil Code the following information on off-balance sheet guarantees, commitments and liabilities is provided.

Information on off-balance sheet agreements

The Group has no off-balance sheet agreements.

The balance as at 31 December 2022 amounted to Euro 24,720 thousand, whilst as at 31

December 2021 it amounted to Euro 16,085 thousand.

The item 'Group Guarantees' refers to:

INCOME STATEMENT

TOTAL VALUE OF PRODUCTION

REVENUES FROM GOODS AND SERVICES

Revenues from goods and services as at 31 December 2022 had increased by +61.1%, and totalled Euro 873,865 thousand (Euro 542,332 thousand as at 31 December 2021). These include the sale of industrial chemicals, food additives, oenological aids, the trading of elemental sulphur and the production of processed sulphur for industry and agriculture.

The breakdown of revenues from goods and services by geographical area shows that about 71% of product sales took place outside Italy, as shown in the table below:

The Group increased its market share, mainly in Italy and Europe, in both the wine and basic chemicals sectors.

The changes are closely related to what is set out in the Management Report.

Revenues by category of activity are broken down as follows:

The growth trend in sales revenues was achieved progressively during the course of the year also thanks to the recovery of the wine market, especially exports and a harvest again on high values which led to excellent performances of the Esseco division brands Group Enology. 2022 was also the year of the surge in raw material costs, already underway since the last months of 2021, which continued unabated throughout the first half of the year. Consequently, the increase in sales prices generated significant effects on the sales of products of the Group's Esseco Industrial division. Whilst on the volumes side, after a 2021 marked by the post-Covid crisis, 2022 was characterised by a smaller decrease than the previous year.

'Sales revenues' are expressed net of premiums, allowances and returns from customers.

"Revenues from services" increased compared to the previous year due to higher sales of surplus electricity.

OTHER REVENUES AND INCOME

The item consists of the following:

Other revenues and income amounting to Euro 24,246 thousand as at 31 December 2022, an increase of Euro 13,187 compared with the same period in 2021, and mainly resulting from: (i) energy bonuses resulting from the application of the Aid decrees approved in 2022 in favour of energy-intensive and gas-intensive companies for Euro 18,526 thousand; (ii) incentives from green certificates, revenues from the hydroelectric energy transmission service and other revenues relating to hydroelectric management and charges for utilities to tenants of leased properties for Euro 1,337 thousand; (iii) research and development tax credit mainly attributable to Altair Chimica S.p.A. for Euro 484 thousand, to Esseco S.r.l. for Euro 100 thousand and to Ever S.r.l. for Euro 43 thousand; (iv) insurance settlements for Euro 151 thousand at the Pieve Vergonte production site; (v) capital grants for Euro 455 thousand; (vi) contribution for sports sponsorships for Euro 125 thousand through the subsidiary Esseco S.r.l.; whilst for the remainder to other revenues of a non-recurring nature.

TOTAL COST OF PRODUCTION

COSTS FOR RAW MATERIALS, CONSUMABLES AND GOODS FOR RESALE

This item consists mainly of purchases of raw materials, packaging, production aids and products purchased for resale.

The amount of costs for raw materials, consumables and goods for resale as at 31 December 2022 was Euro 431,388 thousand. There was a significant increase of Euro 176,163 thousand compared with the same period of the previous year, mainly due to the exponential increase in the prices of raw materials such as potassium chloride, sodium chloride, sulphur, ammonia and sodium carbonate which form the basis of the productions of the Group companies.

COSTS FOR SERVICES

The breakdown of costs is as follows:

Costs for services had a balance, as at 31 December 2022, of Euro 155,870 thousand (Euro 124,355 thousand as at 31 December 2021), with an increase totalling 25.3%. These costs relate to commercial services (such as transport, commissions, advertising and marketing), industrial services (mainly comprising maintenance, consumption and services) and general services (such as professional consulting, travel, training, insurance and postal and telephone expenses).

The increase compared with the previous year is recorded in all types of costs for services and more in the costs of utilities which almost tripled (methane gas and electricity) and transport (+15.7%). As a result of soaring energy costs, the Group has taken special care to carefully monitor the energy balance of production sites in order to minimise the effects of price increases. There were higher maintenance costs at all production sites (+8.4%), a recovery in travel and communication costs (+44.6%) and increases in technical, professional and legal consultancy costs.

COSTS FOR USE OF THIRD PARTY ASSETS

These consist of the following:

The balance of costs for the use of third-party assets, as at 31 December 2022, was Euro 9,222 thousand (+5.0% compared to 31 December 2021) and was primarily related to costs for car rentals, industrial and commercial leases for the production sites of Trecate, Pieve Vergonte, Saline di Volterra and Epernay, property rentals, and the management of warehouses of the Italian and foreign sales network. The increases in the items are generalised in all the subsidiaries of the Group and the only item that decreases is related to the goods storage and handling service linked to the products of the Esseco Enology division.

PERSONNEL COSTS

These costs are broken down as follows:

Personnel costs as at 31 December 2022 amounted to Euro 87,812 thousand (Euro 81,125 thousand as at 31 December 2021), of which Euro 67,618 thousand related to wages and salaries and the remainder to social security charges and provisions for severance indemnities and pensions. Personnel costs amounted to 10% of revenues.

The average number of employees in 2022 was 1,276.

Details of the movements that took place during the year are given below:

AMORTISATION, DEPRECIATION AND IMPAIRMENT

The item consists of the following:

Depreciation of tangible and intangible fixed assets, for the year 2022, which amounted to Euro 50,596 thousand and was calculated on a straight-line basis based on the economic-technical life of the assets and taking into account their remaining useful life. These depreciations mainly refer to the production plants of the sites of Trecate and San Capriano Po (Esseco S.r.l.), Wakefield (Esseco UK Ltd), Saline di Volterra (Altair Chimica S.p.A.) and Epernay (Sofralab S.a.s.), as well as the amortisation of goodwill allocated as the difference between the value of the investment and the related net equity, following the consolidation process of the companies belonging to the Group.

It should also be noted that, during financial year 2022, the Group wrote off receivables included in current assets for a total of Euro 971 thousand, shown in item B10 d) of the income statement.

OTHER OPERATING COSTS

The item consists of the following:

The item as at 31 December 2022 showed a balance of Euro 8,785 thousand. This mainly relates to indirect taxes and duties for the year, laboratory and miscellaneous consumables related to the core business, membership fees and bank charges accrued during the year. Specifically, the item "Other expenses" includes the extra costs for the decommissioning of the plants at the Pieve Vergonte site replaced by the new electrolysis plant with membrane technology, as well as entertainment expenses, promotional material, other miscellaneous minor management charges entity.

FINANCIAL INCOME AND CHARGES

OTHER FINANCIAL INCOME

'Other financial income' includes:

The largest component of this balance sheet item, which consists of other interest income in the amount of Euro 169 thousand (Euro 159 thousand as at 31 December 2021).

16 (d) other income different from the previous one (with the separate indication for those in subsidiary and associated companies, in parents company and in those controlled by this ones)

INTEREST PAYABLE AND SIMILAR CHARGES

"Interest charged by bank", amounting to Euro 823 thousand (Euro 980 thousand as at 31 December 2021), shows a decrease compared with the same period of the previous year of Euro 157 thousand, mainly attributable to the parent company Esseco Group S.r.l. due to the decrease in exposure to the banking market.

PROFIT AND LOSS FOR EXCHANGE RATE

The item consists of the following:

The management of financial transactions relating to currencies other than the euro, resulting in a negative balance of Euro 1,185 thousand.

Specifically, the profits already realised, amounting to Euro 3,740 thousand, largely originated from profits made by Addcon Gmbh and its subsidiaries for Euro 1,375 thousand, by Esseco S.r.l. for Euro 770 thousand, by Esseco UK Ltd for Euro 503 thousand and by Enartis Argentina S.a. for Euro 354 thousand.

Profit and loss for exchange rate to be realised, respectively amounting to a positive balance of Euro 1,795 thousand and a negative balance of Euro 3,471 thousand, resulted from the valuation of receivables and payables in foreign currency as at 31 December 2022.

In 2022, losses realised amounted to Euro 3,249 thousand, generated mainly by Addcon Gmbh and its subsidiaries for Euro 2,088 thousand, Enartis Argentina S.a. for Euro 625 thousand, Esseco S.r.l. for Euro 236 thousand and Esseco UK L.t.d. for Euro 198 thousand.

ADJUSTMENTS OF FINANCIAL ASSETS

Revaluations of equity investments in the amount of Euro 470 thousand and write-downs of equity investments in the amount of Euro 49 thousand in 2022 relate entirely to the equity valuation of the associated companies indicated in the section 'Equity investments' item b) associated companies, in this document.

INCOME TAX

Income taxes for the financial year 2022 are detailed as follows:

Taxes are allocated according to the principle of accrual; they therefore consist of:

Provision for deferred tax liabilities

INFORMATION ON THE FAIR VALUE OF DERIVATIVE FINANCIAL INSTRUMENTS

As required by Article 2427-bis, first paragraph, no. 1 of the Italian Civil Code, information is provided below for each category of derivative financial instruments subscribed by Esseco Group S.r.l., Esseco S.r.l., Altair Chimica S.p.A. and Hydrochem Italia S.r.l.

Esseco Group S.r.l.

Esseco Group S.r.l.

Esseco Group S.r.l.

Esseco Group S.r.l.

Esseco Group S.r.l.

Esseco S.r.l.

Altair Chimica S.p.A.

Hydrochem Italia S.r.l.

SIGNIFICANT EVENTS AFTER THE CLOSE OF THE FINANCIAL YEAR

Events occurring in early 2023 include:

INFORMATION PURSUANT TO ARTICLE 1, PARAGRAPH 125 OF LAW NO. 124 OF 4 AUGUST 2017

Pursuant to Article 1, paragraph 125 of Law no. 124 of 4 August 2017, in compliance with the obligation of transparency, it is reported that the following grants, paid assignments and any other economic advantages of any kind have been received from public administrations:

Esseco S.r.l. recognised during the year "energy-intensive" receivables for Euro 1,465 thousand resulting from the application of the various decrees issued by the State to undertake urgent measures to support the economy, businesses, to contain the effects of price increases in the electricity sector, on social and industrial policies, PNRR, etc., specifically: Decrees Law Support-ter no. 4 dated 02/01/2022, Energy no. 17 dated 01/03/22, Aiuti-ter 144 dated 23/09/22 and Urgent energy and financial support measures 176 dated 18/11/ 22 used in compensation through F24 delegation and/or transfer to other companies of the Group to which they belong. Furthermore, it was exempt from paying social security contributions for new hires/transformations to permanent contracts in the two-year period 2021-2022 (Article I paragraphs 10-15 of Law 178/2020); the instrument is "Tax relief/tax exemption" for an amount of aid equal to Euro 17 thousand. Lastly, it obtained confirmation and recognised the "tax credit for sports sponsorships" for Euro 125 thousand.

Altair Chimica S.p.A. collected, during the year, Euro 7,178 thousand in "energy-consuming" and "gas-consuming" contributions resulting from the application of the various decrees issued by the State to undertake urgent measures to support the economy, businesses, to contain the effects of increases prices in the electricity sector, on social and industrial policies, PNRR, etc., specifically: Decrees Law Supporter no. 4 dated 02/01/2022, Energy no. 17 dated 01/03/22, Aiutiter 144 dated 23/09/22 and Urgent energy and financial support measures 176 dated 18/11/ 22 used in compensation through F24 delegation and/or transfer to other companies of the Group to which it belongs and Euro 320 thousand as "State Aid 2020". Through Sviluppo Toscana S.p.A., it also collected Euro 44 thousand as the balance on the Enterprise project.

Hydrochem Italia S.r.l. collected, in 2022, Euro 3,532 thousand of "energy-consuming" and "gasconsuming" contributions deriving from the application of the various decrees issued by the State to undertake urgent measures to support the economy, businesses, to contain the effects of increases in prices in the electricity sector, in the field of social and industrial policies, PNRR, etc., specifically: Decrees Law Support-ter no. 4 dated 02/01/2022, Energy no. 17 dated 01/03/22, Aiuti-ter 144 dated 23/09/22 and Urgent energy and financial support measures 176 dated 18/11/ 22 used in compensation through F24 delegation and/or transfer to other companies of the Group to which it belongs and Euro 1 thousand thousand for incentives from green certificates (gross of withholding taxes of 4%) disbursed by the G.S.E. (Gestore dei Servizi Energetici).

It should be noted that the remaining Group companies did not receive any subsidies from public administrations significant for the purposes of this law.

DIRECTORS' COMPENSATION AND AUDITORS' FEES

As required by law, we inform you that the directors of the parent company Esseco Group S.r.l. accrued for the year 2022 emoluments in the amount of Euro 985 thousand for their positions held in the Board of Directors of Group companies and that the statutory auditors accrued emoluments in the amount of Euro 165 thousand for their positions held in the Board of Statutory Auditors of Group companies.

LEGAL AUDITOR OR AUDITING COMPANY FEES

Pursuant to the law, we hereby inform you that the fees for 2022 for the services provided by the Auditing Firm to the group companies amount to Euro 531 thousand by way of statutory audit of the annual accounts and Euro 74 thousand relating to the other audit services carried out.

DISCLOSURE OF GROUP MANAGEMENT AND COORDINATION ACTIVITIES Pursuant to Article 2497 bis, paragraph 4 of the Italian Civil Code, the following table shows the essential data of San Martino S.p.A., the company exercising management and coordination activities, with reference to the last approved financial statements:

These consolidated financial statements, consisting of the balance sheet, income statement, cash flow statement and notes to the financial statements, give a true and accurate view of the financial position and results of operations and correspond to the accounting records of the parent company and the information provided by the companies included in the consolidation. They also comply with legal requirements.

The following German subsidiaries included in the consolidated financial statements of Esseco Group S.r.l. are exempt from the obligation to disclose annual financial statements pursuant to Article 264 (3) of the HGB:

APPENDIX A

LIST OF COMPANIES IN THE CONSOLIDATION AREA AS OF 31.12.2022

APPENDIX B PRINCIPAL DATA OBTAINED FROM THE LATEST FINANCIAL STATEMENTS OF THE SUBSIDIARY AND ASSOCIATED COMPANIES

SECTION 1 - COMPANIES VALUE IN EURO

^* Last available financial statements 2021

SECTION 2 - COMPANIES VALUE IN CURRENCY DIFFERENT THAN EURO

^* Last available financial statements 2021

Independent auditor's report pursuant to article 14 of Legislative Decree n. 39, dated 27 January 2010

(Translation from the original Italian text)

To the Sole Quota Holder of

Esseco Group S.r.l.

Report on the Audit of the Consolidated Financial Statements

Opinion

We have audited the consolidated financial statements of Esseco Group S.r.l. (the Group), which comprise the balance sheet as at December 31, 2022, the income statement and consolidated statement of cash flows for the year then ended, and explanatory notes.

In our opinion, the consolidated financial statements give a true and fair view of the financial position of the Group as at December 31, 2022, and of its financial performance and its cash flows for the year then ended in accordance with the Italian regulations governing financial statements.

Basis for Opinion

We conducted our audit in accordance with International Standards on Auditing (ISA Italia) Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of Esseco Group S.r.l. in accordance with the regulations and standards on ethics and independence applicable to audits of financial statements under Italian Laws. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Responsibilities of Directors and Those Charged with Governance for the Consolidated Financial Statements

The Directors are responsible for the preparation of the consolidated financial statements that give a true and fair view in accordance with the Italian regulations governing financial statements, and, within the terms provided by the law, for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

The Directors are responsible for assessing the Group's ability to continue as a going concern and, when preparing the consolidated financial statements, for the appropriateness of the going concern assumption, and for appropriate disclosure thereof. The Directors prepare the consolidated financial statements on a going concern basis unless they either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so.

The statutory audit committee ("Collegio Sindacale") is responsible, within the terms provided by the law, for overseeing the Company's Group's financial reporting process.

Auditor's Responsibilities for the Audit of the Consolidated Financial Statements

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with International Standards on Auditing (ISA Italia) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.

As part of an audit in accordance with International Standards on Auditing (ISA Italia), we have exercised professional judgment and maintained professional skepticism throughout the audit. In addition:

We have communicated with those charged with governance, identified at an appropriate level as required by ISA Italia, regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

Report on compliance with other legal and regulatory requirements

Opinion pursuant to article 14, paragraph 2, subparagraph e), of Legislative Decree n. 39 dated 2.7 January 2010

The Directors of Esseco Group S.r.l. are responsible for the preparation of the Report on Operations of Esseco Group S.r.l. as at December 31, 2022, including its consistency with the related consolidated financial statements and its compliance with the applicable laws and regulations.

We have performed the procedures required under audit standard SA Italia n. 720B, in order to express an opinion on the consistency of the Report on Operations, with the consolidated financial statements of Esseco Group S.r.l. as at December 31, 2022 and on its compliance with the applicable laws and regulations, and in order to assess whether it contains material misstatements.

In our opinion, the Report on Operations is consistent with the consolidated financial statements of Esseco Group S.r.l. as at December 31, 2022 and comply with the applicable laws and regulations.

With reference to the statement required by art. 14, paragraph 2, subparagraph e), of Legislative Decree n. 39, dated 27 January 2010, based on our knowledge and understanding of the entity and its environment obtained through our audit, we have no matters to report.

This report has been translated into the English language solely for the convenience of international readers.