ALLERSHAUSEN CARE GmbH

SOL S.p.A. Deutschland Zweigniederlassung der SOL S.p.A.

Krefeld

Konzernabschluss zum Geschäftsjahr vom 01.01.2022 bis zum 31.12.2022

Registered office

Via Borgazzi, 27

20900 Monza - Italy

Share Capital

Euro 47,164,000.00 fully paid-up

Tax Code and Register of Companies of Milan, Monza Brianza, Lodi under n° 04127270157

R.E.A. n° 991655

C.C.I.A.A. Milano, Monza Brianza, Lodi

BOARD OF DIRECTORS

Chairman and Managing Director

Aldo Fumagalli Romario

Deputy Chairman and Managing Director

Marco Annoni

Director with special powers

Giovanni Annoni

Director with special powers

Giulio Fumagalli Romario

Directors

Alessandra Annoni

Duccio Alberti

Cristina Grieco (Independent)

Anna Gervasoni (Independent)

Antonella Mansi (Independent)

Elli Meleti (Independent)

Erwin Paul Walter Rauhe (Independent)

GENERAL MANAGER

Andrea Monti

BOARD OF STATUTORY AUDITORS

Chairman

Giovanni Maria Alessandro Angelo Garegnani

Regular auditors

Alessandro Danovi

Livia Martinelli

Alternate Auditors Maria

Gabriella Drovandi

Alessandro Manias

AUDITING COMPANY

DELOITTE & TOUCHE Spa

Via Tortona n. 25

20144 Milan

POWERS GRANTED TO THE DIRECTORS

(CONSOB Communication No. 97001574 dated February 20, 1997)

To the Chairman and Deputy Chairman: the legal representation of the Company in dealings with third parties and before the legal authorities; powers of ordinary management acting severally; powers of extraordinary management, acting jointly, it being understood that for the execution of the related acts the signature of one of the two with the written authorisation of the other is sufficient; exception is made for certain specific acts of particular importance reserved for the competence of the Board.

To Directors with special appointments: powers of ordinary administration relevant to Legal and Corporate Business (Giulio Fumagalli Romario) and the Organisation of Information Systems (Giovanni Annoni) with single signature.

MANAGEMENT REPORT SOL GROUP INTRODUCTION

This Annual Financial Report as at December 31, 2022 is drawn up pursuant to Article 154 ter of Italian Legislative Decree 58/1998 and prepared in accordance with the International Accounting Standards (IFRS) issued by the International Accounting Standard Board (IASB) recognised by the European Union pursuant to Regulation (EC) no. 1606/2002 of the European Parliament and of the Council of July 19, 2002, as well as with the implementation regulations set out in Article 9 of Italian Legislative Decree no. 38/2005. These IFRS principles also include all revised international accounting standards ("IAS") and all of the interpretations of the International Financial Reporting Interpretation Committee (IFRIC), previously called Standing Interpretations Committee (SIC). It should be noted that in 2022, as the required conditions were met, IAS 29 - Financial Reporting in Hyperinflationary Economies was applied to the financial statements of the Turkish Group companies.

GENERAL CONTEXT

The SOL Group is primarily engaged in production, applied research and distribution activities pertaining to industrial, pure and medical gases, in door-to-door medical care, as well as in the supply of related medical equipment in Italy, presently active in 24 other European Countries, in Turkey, in Morocco, in India, in Brazil and in China. The products and services of companies belonging to the Group are used in the chemical, electronics, iron and steel, engineering and foodstuff industries, as well as in sectors such as environmental protection, research and health.

2022 started with a new wave of Covid-19 due to the Omicron variant with, however, less severe effects on the population than in the previous two years.

In February, following Russia's invasion of Ukraine, a war began between the two countries that is still ongoing. The conflict led to the gradual reduction of the main natural gas supply channel for many European countries, resulting in abnormally high prices for all energy commodities, which reached unprecedentedly high exchange values.

These increases, together with those caused by a booming global economy un 2021 and in the first half of 2022, caused inflation to rise by as much as 10% in all Western countries in 2022. This level of inflation had never occurred in recent decades.

The spread of inflationary pressures led all Western central banks to embark on a period of raising official interest rates, which in turn led to an increase in the interest rates charged by the credit system to its customers. In the scenario presented, the economic situation was expansionary in the first nine months of the year, with a tendency towards slower growth in the last quarter.

With regard to the technical gas and home care sector, in which the SOL Group operates, we would like to highlight the significant growth in the technical gas sector, due mainly to the recovery of the increase in production costs following the rise in the price of natural gas and, above all, electricity. In terms of quantities sold, there was a slight slowdown in the last few months of the year compared with the previous year.

Growth in the home care services sector showed good growth, partly due to the resumption of prescriptions for new patients, after a slowdown in the previous two years due to the effects of Covid-19, which had reduced the normal operations of hospitals and private laboratories.

With regard to the year 2023, economic growth is expected to be very low in almost all countries and inflation is expected to slow down, partly due to the significant rise in interest rates.

We expect activity in the technical gas sector to continue to grow, albeit much less than in 2022, while the home care sector should confirm pre-pandemic levels of development.

SUMMARY RESULTS

In this context, we believe that the results achieved by the SOL Group in 2022 were extremely positive.

The net sales achieved by the SOL Group in 2022 were equal to Euro 1,379.2 million (+23.9% compared to those of 2021 and +22.3% on a like-for-like basis).

The gross operating margin was Euro 328.3 million, equating to 23.8% of sales, up by 25.9% when compared to 2021 (Euro 260.8 million, or 23.4% of sales).

The operating result came to Euro 192.5 million, equating to 14.0% of sales, up by 41.8 million compared to the figure for the same period of 2021 (Euro 135.8 million, or 12.2% of sales).

The net profit amounted to Euro 133.7 million, up 49.3% from 89.5 million euro in 2021.

The cash flow amounted to Euro 266.5 million (19.3% of sales), up by 25.1% compared to 2021 (equal to Euro 213.1 million).

The technical investments carried out in 2022 amounted to Euro 121.3 million (Euro 123.3 million in 2021). The average number of employees as at December 31, 2022 amounted to 5,374 (4,916 as at December 31, 2021).

The net financial indebtedness was equal to Euro 389.7 million (310.9 million as at December 31, 2021).

The application of IAS 29 had no material impact on the consolidated financial statements of the SOL Group.

MANAGEMENT TREND

During 2022, the technical gas sector showed an increase in sales of 36.5% when compared with the previous year achieving a turnover from third-party customers equating to Euro 762.4 million.

The Technical gas division had to implement a strong action to recover the cost increase as a result of the very high increase in the prices of electricity and natural gas, raw materials in the production of technical gases. The effect of the price adjustment on growth is 70.0%.

The home-care business reported a growth by 11.2%, both in Italy and abroad, with sales to third-party customers of Euro 616.7 million.

The growth in the sector is due to the resumption of new patient prescriptions, which had been severely slowed in the 2020 and 2021 due to reduced activity in hospitals and laboratories as a result of the Covid-19 pandemic. Overall, in the healthcare sector, the Group's sales amounted to Euro 777 million, or 56.3% of total turnover. The gross operating margin increased by Euro 67.5 million or 25.9% compared to 2021.

The operating result increased by Euro 56.7 million compared to 2021, up 41.8%.

The Group's net indebtedness increased by only Euro 78.9 million, compared to December 31, 2021, against technical and intangible investments and acquisitions of Euro 219.4 million made in 2022.

The debt ratios remain very solid, with a debt/equity ratio of 0.45 and a cash flow cover of 1.19. During 2022, technical gas reserves remained within the safety levels.

In 2022, the SOL Group's work force increased by 650 people, from 5,101 to 5,751. Personnel training and qualification activities, aimed at improving the qualities of our people committed to pursuing the Group's development objectives, continued on a regular basis.

SHARE PERFORMANCE ON THE STOCK EXCHANGE

SOL stock opened 2022 with a price of Euro 20.95 and closed as at December 30, 2022 at Euro 17.70. During the year, the stock achieved a maximum price of Euro 21.35, while the minimum came to Euro 15.12.

QUALITY, SAFETY, HEALTH AND ENVIRONMENT

The focus on issues of quality, health, safety and environment was constantly high throughout 2022 with an intense internal auditing activity and with checks by third parties, both by Notified Bodies for Certification and by the Auditing Bodies of the Public Administration.

All of these checks have always had a positive outcome.

Overall, the certifications obtained over the years pursuant to international standards ISO 9001, ISO 14001, ISO 13485, OHSAS 18001/ISO 45001, ISO 22000 - FSSC 22000, ISO 50001, ISO 27001, ISO 22301, ISO 17025 were not only renewed, but extended to new activities (ISO 9001) as well as other new operational sites of the Group. An example from outside Italy is the new production site of SOL BRANCH BELGIUM WANZE, which in 2022 obtained certification according to ISO 9001, ISO 22000 and FSSC 22000.

With regard to the ISO 9001 certification for the technical gases area, the scope was extended to include 6 new services, provided in the area of marketing/technical customer management.

The certification status was also confirmed to the Group for the enforcement of the PED directive in the internal production of vaporisers and of the 93/42 Directive for the production of medical devices.

Always during 2022, the accreditation according to ISO 17025 was confirmed for the analytical methods applied in the laboratory of GAS PURI MONZA, of GTS (Albania), of SOL SERBIA and of STERIMED (Italy - company specialised in services and solutions for health and the environment), companies that therefore maintained the status of a Testing Laboratory approved and accredited by the ACCREDIA accreditation body.

In 2022, the GAS PURI MONZA unit received the first surveillance visit for ISO 17034 accreditation again from ACCREDIA as a producer of certified environmental mixtures.

In the field of technical gases and biotechnology, ISO 9001 certification status of the individual sites stands at 42 sites in Italy and 50 outside of Italy (one of which belongs to the German company CT BIOCARBONIC, a jointly controlled company consolidated using the equity method).

In the area of food safety, the number of sites outside of Italy certified to ISO 22000 is 29 (of which one belongs to the German company CT BIOCARBONIC), while in Italy, the sites are 2.

The FSSC 22000 certified sites among those certified to ISO 22000 are 24 sites outside Italy (of which 1 belonging to the German company CT BIOCARBONIC) and 2 in Italy.

As part of the activities related to technical gas, ISO 14001 certification was confirmed for the environmental management system for 11 sites in Italy and 11 sites outside of Italy.

The certification of the safety management system according to the ISO 45001/OHSAS 18001 standard is applied in 40 sites in Italy and 8 sites outside of Italy.

The excellence certification status (ISO 9001, ISO 14001, ISO 45001/OHSAS 18001) was confirmed, maintaining European EMAS Registration for the Verona, Mantua (Italy) and Jesenice (Slovenia) plants. It is also worth mentioning that SOL Spa obtained the European EMAS Registration for its activities at its headquarters in Monza. As part of home care activities, the certification status (ISO 9001) of the VIVISOL premises was 22 sites in Italy and 43 sites outside of Italy.

The ISO 14001 certification of the environmental management system of VIVISOL Srl Registered office and 8 sites outside Italy was confirmed, as well as the certification of the safety management system according to the ISO 45001/OHSAS 18001 standard, applied at 21 sites in Italy and 9 sites outside Italy.

The Sustainability Report will accompany the Financial Statements this year as well, which was prepared in accordance with the requirements of Articles 3 and 4 of Italian Legislative Decree no. 254 of 30 December 2016 and the "Global Reporting Initiative Sustainability Reporting Standards" defined by the GRI - Global Reporting Initiative.

Work also continued on the implementation of the Responsible Care Programme and in accordance with the principles of corporate Social Responsibility.

CONSOLIDATED NON-FINANCIAL STATEMENT

The consolidated non-financial statement of SOL Spa for the year 2022, prepared in accordance with Italian Legislative Decree 254/16, constitutes a separate report ("Sustainability Report") with respect to this management report, as provided for by Article 5 paragraph 3, letter b) of Italian Legislative Decree 254/16, and is available on the company's website http://www.solgroup.com/, in the "Sustainability" section.

PHARMACEUTICAL-REGULATORY ACTIVITIES AND MEDICAL DEVICES

The Group's regulatory activities, both in Italy and abroad, continued in 2022 as well.

At the end of 2022, the Group had 147 Marketing Authorisations for medical gases filed in 25 countries (18 EU and 7 non-EU).

It also has 64 pharmaceutical workshops, of which 62 are gas production workshops, plus SITEX (production of galenic drugs) and DIATHEVA (production of APIs from biotechnology).

There are 15 gas production workshops in the home care area (of which 5 in Italy), and 47 in the technical gas area (of which 17 in Italy).

In 2022, 20 GMP inspections of gas production workshops were carried out by the relevant national agencies. Medical regulatory activity focused on changes to the oxygen and medical air dossiers to include the sites of the Greek company TAE HELLAS. Moreover, at the end of 2022, the decentralised registration process for peritoneal dialysis solutions containing icodextrin, for which VIVISOL is the owner, came to an end; the "national phase" of granting national marketing authorisations is underway.

The year 2022 saw a strong commitment of the medical device regulatory service in the conversion to Regulation and submission to the Notified Body (DNV) of the 4 gas technical files and in the follow-up of the evaluation to MDR of the 3 F.T.'s (gas and vacuum distribution systems, anaesthetic gas evacuation systems and cryobanks) of which SOL Spa is the manufacturer.

SOL GROUP INVESTMENTS

During the 2022 financial year, investments were made for Euro 58.2 million in the "technical gases" sector, of which Euro 20.4 million by the parent company SOL Spa, and Euro 73.0 million in the "home care" sector. The main investments made were as follows:

MAJOR CORPORATE TRANSACTIONS

During 2022, several acquisitions were made, both in Italy and abroad. The most important ones are highlighted below:

RESEARCH AND DEVELOPMENT ACTIVITIES

Research activities, which characterise and support the Group's development, continued during the year; these activities mainly comprise research associated with the development of new production and distribution technologies, with the promotion of new applications for technical gases and with the development of new services in health and home care.

SHARES OF THE PARENT COMPANY HELD BY GROUP COMPANIES

As at December 31, 2022, the Parent Company SOL Spa did not own treasury shares. The other companies of the Group did not own shares of the parent company SOL Spa.

During the 2022 reporting year, no SOL shares were purchased or sold either by the Parent Company itself or by other Group Companies.

INTRA-GROUP TRANSACTIONS AND TRANSACTIONS WITH RELATED PARTIES

Transactions carried out with related parties, including intra-group transactions, cannot be considered as atypical or unusual, as they are part of the normal activities of Group companies. These transactions are settled at arm's length, taking into account the characteristics of the supplied goods and services.

Information concerning relations with related parties, including those requested by the Consob communication dated July 28, 2006, is presented in our Consolidated Financial Statements as at December 31, 2022.

MAIN RISKS AND UNCERTAINTIES TO WHICH THE SOL GROUP IS EXPOSED RISKS RELATED TO THE GENERAL ECONOMIC TREND

The Group performance is affected by the increase or decrease of the gross national product and industrial production, cost of energy products and health expense policies adopted in the different European countries in which the Group works.

The economic trend in the post-pandemic period and the consequences of the recent Ukrainian crisis could cause a slowdown in various sectors of the economy in the countries where the SOL Group operates.

RISKS RELATING TO THE GROUP'S RESULTS

The SOL Group partially operates in sectors considerably regulated by economic cycles related to the trend in industrial production, such as the steel, metal working, engineering, chemical and glass manufacturing industries. In the case of an extended decline in business, the growth and profitability of the Group could be partially affected.

Moreover, government policies for reducing healthcare expenses could reduce margins in the home-care and medical gas and service sectors.

RISKS RELATED TO FUND REQUIREMENTS

The SOL Group carries on an activity that entails considerable investments both in production and in commercial equipment and expects to face up to requirements through the flows deriving from the operational management and from new loans.

Operational management should continue to generate sufficient financial resources, while the use of new loans, notwithstanding the Group's excellent capital and financial structure, may show higher interest rates and spreads than in the past.

OTHER FINANCIAL RISKS

The Group is exposed to financial risks associated with its business operations:

Credit risk

The granting of credit to end customers is subject to specific assessments by means of structured credit facility systems.

Positions amongst trade receivables for which objective partial or total non-recoverability is ascertained, are subject to individual write-down. Provisions are made on a collective basis for receivables that are not subject to individual write-down, taking into account the historic experience, the statistical data and, as a result of the introduction of the new accounting standard IFRS 9, on the basis of a predictive approach, based on the counterparty's probability of default, the ability to recover in case of loss given default and also of expected future losses.

Liquidity risk

The liquidity risk may arise with the inability to raise, under good financial conditions, the financial resources necessary for the anticipated investments and the financing of working capital.

The Group has adopted a series of policies and processes aimed at optimising the management of financial resources, reducing liquidity risk, such as the maintenance of an adequate level of available liquidity, the obtaining of appropriate credit facilities and the systematic monitoring of the forecast liquidity conditions, in relation to the corporate planning process.

Management believes that the funds and the credit facilities currently available, in addition to those that will be generated by operating and financing activities, will permit the Group to satisfy its requirements resulting from investment activities, working capital management and debt repayments on their natural maturity dates.

Exchange rate risk

In relation to sales activities, the Group companies may find themselves with trade receivables or payables denominated in currencies other than the reporting currency of the company that holds them.

A number of Group subsidiary companies are located in countries outside the Eurozone, in particular Switzerland, Bosnia, Serbia, Albania, North Macedonia, Bulgaria, Hungary, Romania, the UK, Morocco, Poland, Czech Republic, India, Turkey, Brazil and China. Since the reference currency for the Group is the Euro, the income statements of these companies are translated into Euro using the average exchange rate for the period and, revenues and margins in local currency being equal, changes in interest rates may have an effect on the equivalent value in Euro of revenues, costs and economic results.

Assets and liabilities of the consolidated companies whose reporting currency is not the Euro can adopt equivalent values in Euro that differ depending on the exchange rate trend. As envisaged by the accounting standards adopted, the effects of these changes are booked directly to shareholders' equity, under the item "Other reserves". Some Group companies purchase electricity that is used for the primary production of technical gasses. The price of electricity is affected by the Euro/dollar exchange rate and by the price trend of energy commodities. The risk related to their fluctuations is mitigated by signing, as much as possible, fixed price purchase contracts or with a variation measured over a longer time period. Moreover, almost all supply contracts to customers are index-linked in such a way as to cover the fluctuation risks shown above.

The Parent Company has two bond loans outstanding for a total of USD 22.5 million. To hedge the exchange rate risk, two cross currency swaps were made in Euros on the total loan amount and for the entire duration (12 years). The fair value of the CCSs as at December 31, 2022 was positive in the amount of Euro 3,143 thousand. With regard to the currency weakness involving the Turkish lira, note that Group companies resident in Turkey operate only within the country, but there could be a negative effect on their profitability as a result of the higher cost of products purchased from third countries.

As the conditions were met, IAS 29 - Hyperinflation to Financial Statements was applied to the financial statements of Turkish companies in 2022.

Interest rate risk

The interest rate risk is managed by the parent company by centralising most of the medium/long-term debt and by appropriately dividing the loans between fixed rate and floating rate, favouring, when possible and convenient, medium/long-term debt with fixed rates, also through specific Interest Rate Swap agreements.

Some Group companies have entered into a number of Interest Rate Swap agreements linked to two floating rate medium-term loans with the aim of guaranteeing a fixed rate on said loans. The nominal value as at December 31, 2022 is equal to Euro 133,909 thousand and the positive fair value is equal to Euro 9,851 thousand.

RISKS RELATING TO PERSONNEL

In various countries in which the Group operates, employees are protected by different laws and/or collective labour contracts that guarantee them the right to be consulted on specific issues - including the downsizing and closing of departments and the reduction of staff numbers - through representations. This could affect the Group's flexibility in strategically redefining its own organisations and activities.

The management of the Group consists of persons of proven expertise who normally have long-standing experience in the sectors in which the Group operates. The replacement of any person in management may require a long period of time.

There are potential risks to the health and safety of workers as well as to compliance with occupational health and safety regulations that are mitigated by the adoption of an integrated management system compliant with ISO 45001.

RISKS RELATED TO THE ENVIRONMENT AND CLIMATE CHANGE

The products and the activities of the SOL Group are subject to increasingly complex and strict authorisation and environmental rules and regulations. This concerns manufacturing plants subject to regulations on atmospheric emissions, waste disposal and waste water disposal and the ban on land contamination.

High charges should be shouldered in order to observe such regulations.

During 2022, the Group further deepened its previous assessments of the significance of climate changerelated risks, both physical and transitional, and their economic/financial implications.

With particular reference to transition risks, which depend on an overall scenario of change in the economic context with a view to limiting the increase in global temperature to 1.5-2°C, as per the agreement signed in Paris, the Board considers that factors related to changes in market demand (increased sensitivity of customers and, more generally, of the Group's stakeholders to sustainability issues), technological evolution (risks related to the necessary technological innovations) and regulatory evolution (i.e. risks arising from legislative or political impositions aimed at triggering change) are of greater importance to the Group.

In this context, in the industrial gas sector, which is characterised by a high energy content in production costs, the Group is constantly monitoring possible regulatory changes in order to meet the expectations of the market and the Group's stakeholders, and has planned investments in photovoltaic and wind power plants in order to increase the share of energy from renewable sources. Although there are currently no circumstances in which the Group's production processes are at risk of becoming obsolete as a result of the transition to a low-carbon economy, the Group intends to reaffirm its commitment to continue with the planned renewal and rationalisation of its plants, taking advantage of the opportunities offered by technological developments to reduce energy consumption and greenhouse gas emissions.

On the other hand, the Group is already active in the home care sector, continuously streamlining equipment and introducing new, less polluting technologies.

The common objective of both activities is to limit the fuel consumption and related greenhouse gas emissions generated directly and indirectly by the Group in connection with transport, which is mainly carried out by third-party suppliers. To this end, the Group has already experimented with electric vehicles and intends to encourage its suppliers to replace diesel-powered tractors with other lower-emission vehicles, in line with the expected evolution of the market offer of lower-emission alternatives. In this context, these measures will have no direct impact on SOL investments and costs.

It should also be noted that all of the above initiatives to limit energy consumption and emissions, as well as the procurement of energy from renewable sources, have already been outlined in the Group Sustainability Plan. With regard to the exposure of tangible assets (plants, buildings) to physical risks related to climate change and the business continuity risk resulting from these factors, the Group considers that the overall risk is medium/ low and has not identified any need for urgent action or significant investment.

Please refer to the Non-Financial Statement for a more detailed discussion of the initiatives implemented by the Group.

RISKS RELATING TO IT MANAGEMENT AND DATA SECURITY

The increasing use of IT tools in the management of company activities and the interconnection of company systems with external IT infrastructures expose these systems to potential risks with regard to the availability, integrity and confidentiality of data, as well as the efficiency of the IT tools themselves.

To ensure effective business continuity, the Group adopted a disaster recovery and business continuity system to ensure immediate replication of the main legacy system workstations. The choice of these systems to be managed in business continuity was made on the basis of a risk analysis.

Moreover, multiple levels of physical and logical protection, at the level of servers and at the level of clients, ensure the active security of data and business applications. The SOL Group also has innovative artificial intelligence-based products to protect the digital identity of its employees.

Vulnerability analyses and audits on the security of information systems are periodically carried out by independent technicians to check the adequacy of the company's IT systems.

Finally, with regard to the problem of fraud through the use of IT resources by external parties, all employees are periodically informed and trained on the correct use of the resources and IT applications available to them.

TAX RISKS

The SOL Group is subject to taxation in Italy and in several other foreign jurisdictions.

The various companies of the Group are subject to the assessment of the income tax returns by the competent tax authorities of the countries in which they operate.

As already occurred in the past, any findings reported in the tax audits are carefully assessed and, when necessary, challenged in the appropriate venues.

At present, a dispute is in progress in Italy for findings - considered groundless - on Transfer pricing.

The opening of the MAP (Mutual Agreement Procedure) between Italy and four other European countries has been requested and has not yet been completed.

However, at Group level, this should not have a significant effect on profitability, given that the level of taxation in the countries involved is very similar.

RISKS DERIVING FROM THE WAR IN UKRAINE

The risks to which the SOL Group is exposed in connection with the war between Russia and Ukraine that broke out in February 2022 are essentially indirect, in that there are no activities carried out directly by subsidiaries in the two countries involved.

In fact, the likely negative effects caused by the current conflict on the economic growth of European countries could lead to a lower rate of development of the sales of the SOL Group.

Moreover, the war is contributing to keeping the cost of energy products at high levels, resulting in the continued high cost of purchasing electricity and fuel; this could mean the risk of not being able to fully transfer these costs to the sales prices of technical gases and services on the market, with a consequent negative effect on the Group's margins. The continuation of the war is also contributing to the inflationary effects of high energy commodity prices, with the consequent negative impact on investment costs and operating expenses.

In particular, a significant effect on home care activities is on the supply chain of medical equipment, for which there are delays and difficulties in deliveries and consequent shortages to meet growing demand, as well as an increase in purchase prices.

OTHER RISKS

It is stated that on October 21, 2022 the subsidiary VIVISOL Srl was notified of the interim measure prohibiting it from contracting with the Public Administration pursuant to Article 25, paragraph 2, of Italian Legislative Decree No. 231/2001 in connection with criminal suit No. 6036/2022 GEN. CRIM. REG. - No. 4500/2022 RGGIP pending before the Court of Palermo, which involves several natural and legal persons including a manager and a former manager of the Company, who are under investigation for the offences provided for and punished by Articles 319 and 321 of the Italian Penal Code, which were allegedly committed in connection with a tender dating back to 2017 called by the ASP of Palermo and from which, inter alia, no profit was made. An appeal was immediately lodged against the aforesaid precautionary measure pursuant to Article 299 of the Code of Criminal Procedure and on November 2, 2022, with the favourable opinion of the Prosecutors in charge of the investigation, the Investigating Magistrate suspended the aforesaid measure with immediate effect, allowing the company to continue its operations. The measure was lifted on February 10, 2023.

As stated in the press releases immediately issued by the company, VIVISOL reiterates that it is not involved in this matter and firmly believes that this will be confirmed by the ongoing judicial investigations.

That being said, as an immediate self-cleaning activity, the VIVISOL Board of Directors promptly suspended the manager involved and revoked all delegations and powers of attorney assigned, and the necessary internal checks were initiated. It should also be noted that since 2006 VIVISOL has had a Code of Ethics and an Organisation, Management and Control Model pursuant to Italian Legislative Decree 231/2001 that is periodically updated and effectively implemented through the implementation of ad hoc protocols and procedures.

On December 15, 2022, the Public Prosecutor's Office of the Court of Milan served a notice of conclusion of the investigation into the criminal proceedings following the double fatal accident that occurred on September 28, 2021 on the Humanitas Mirasole Spa university campus involving two drivers of the transport company Pè Giuseppe Srl, which was entrusted by SOL Spa with the delivery of nitrogen, according to which, inter alia, the former General Manager and employer of SOL Spa is being investigated pursuant to Articles 113 and 589, paragraphs I, II and IV of the Italian Penal Code and the company SOL Spa is being prosecuted for the administrative offence referred to in Articles 5, 9 and 25 septies of Italian Legislative Decree no. 231/2001; on the other hand, it appears that the Chairman and Vice-Chairman of SOL Spa, who were initially under investigation, have been dismissed. Both the company and its former employer are confident that they will be able to prove their innocence in the subsequent proceedings.

MANAGEMENT AND CO-ORDINATION ACTIVITIES (PURSUANT TO ARTICLE 37, SUB-PARAGRAPH 2, MARKET REGULATION ISSUED BY CONSOB)

The body of shareholders of SOL Spa consists of a controlling shareholder, GAS AND TECHNOLOGIES WORLD Bv, (in turn controlled by STICHTING AIRVISION, a Dutch foundation), which holds 59.978 % of the share capital. Neither GAS AND TECHNOLOGIES WORLD BV nor STICHTING AIRVISION exercise the activity of direction and coordination of SOL Spa pursuant to art. 2497 of the Italian Civil Code, as the majority shareholder, a holding company, is limited to exercising the rights and prerogatives of each shareholder and does not get involved, with the management of the Company (fully entrusted to the autonomous decisions of the Board of Directors of SOL Spa).

IMPORTANT FACTS OCCURRING AFTER THE 2022 REPORTING PERIOD AND BUSINESS OUTLOOK

The ongoing war in Ukraine, which started in February 2022 with the invasion by Russia, is economically causing continuous changes in the prices of oil, gas, electricity and other products.

This is reflected in the production and purchase costs of technical gases and, due to inflationary effects, also in investment and operating costs.

However, the SOL Group will continue with its investment programmes and, where possible, acquisitions, with the aim of achieving good sales growth and maintaining profitability at appreciable levels.

CONSOLIDATED FINANCIAL STATEMENTS AND EXPLANATORY NOTES SOL GROUP

SOL GROUP CONSOLIDATED INCOME STATEMENT

(amounts in thousands of Euro)

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME SOL GROUP

(amounts in thousands of Euro)

CONSOLIDATED STATEMENT OF FINANCIAL POSITION SOL GROUP

(amounts in thousands of Euro)

CONSOLIDATED CASH FLOW STATEMENT SOL GROUP

(amounts in thousands of Euro)

Flows are shown net of the effect of acquisitions on the Group's assets and liabilities, as indicated in Chapter 10 -Goodwill and consolidation differences.

STATEMENT OF CHANGES IN CONSOLIDATED SHAREHOLDERS' EQUITY SOL GROUP

(amounts in thousands of Euro)

EXPLANATORY NOTES

The 2022 consolidated financial statements have been drawn up in accordance with the International Accounting Standards (IFRS) established by the International Accounting Standards Board and approved by the European Union. The IFRS are understood to also be all the international accounting standards reviewed (IAS), all the interpretations of the International Financial Reporting Interpretations Committee (IFRIC), previously known as the Standing Interpretations Committee (SIC), approved by the European Union and contained in the relevant EU Regulations.

The financial statements are prepared on the basis of the historical cost principle, amended as requested for the valuation of various financial instruments, as well as on a going concern basis. The SOL Group, in fact, evaluated that no significant uncertainties exist (as defined by paragraph 25 of accounting standard IAS 1) on the principle of going concern The income statement has been drawn up with the allocation of the costs by nature; the Balance Sheet has been prepared in accordance with the format that highlights the separation of the "current/non-current" assets and liabilities, while the indirect method was adopted for the statement of cash flows, adjusting the profit for the period of non-monetary components. Statement of changes in shareholders' equity shows comprehensive income (expenses) for the year and other changes in Shareholders' Equity.

In the Income statement, income and costs deriving from non-recurring operations have been shown separately. The analysis of the income statement and the consolidated statement of financial position and cash flow statement has also been carried out in accordance with the provisions of IFRS 8, highlighting the contribution of the technical gases and home-care service activity sectors taken as primary sectors and providing the most important data relating to the activities by geographic area, Italy and other countries, identified as secondary sectors. Further to the enforcement of Legislative Decree no. 38 of February 28, 2005, implementing in the Italian regulations the European Regulation No. 1606/2002, companies with securities admitted for trading on Member European Union States' regulated markets must from 2006 draw up their financial statements in accordance with the international accounting standards (IAS/IFRS) issued by the International Accounting Standard Board (IASB), as approved by the EU Commission.

The financial statements and the notes to the financial statements have been prepared supplying also the additional information on diagrams and budget disclosure provided by Consob resolution no. 15519 and by Consob notification no. 6064293 issued on July 28, 2006.

GROUP COMPOSITION AND SCOPE OF CONSOLIDATION

The consolidated financial statements comprise the financial statements as at December 31, 2022 of the SOL Spa Parent Company and of the following companies, which are, pursuant to Article 38, paragraph 2 of Italian Legislative Decree No. 127/91 as amended by the provisions of Italian legislative decree no. 139 of 18 August 2015 "Implementation of directive 2013/34/EU related to the financial statements, consolidated financial statements and related reports of certain types of companies, amending directive 2006/43/EC and repealing directives 78/660/EEC and 83/349/EEC, for the part related to the regulations of the financial statements and consolidated financial statements".

a) directly or indirectly controlled subsidiaries, consolidated on a line-by-line basis

¹⁾ The Group's share as at December 31, 2022 includes a 5.40 % equity investment of SIMEST Spa; under an agreement entered into between SOL Spa and SIMEST Spa on November 25, 2022, SOL Spa is under obligation to repurchase the entire SIMEST Spa share by November 30, 2030.

²⁾ The Group's share as at December 31, 2022 includes a 47.44 % equity investment of SIMEST Spa; under an agreement entered into between SOL Spa. and SIMEST Spa on November 25, 2022, SOL Spa is under obligation to repurchase the entire SIMEST Spa share by November 30, 2030.

b) jointly controlled companies, consolidated by adopting the equity method

c) non-consolidated subsidiary and associated companies

The companies FLOSIT PHARMA Sa and GTE Sl were not consolidated in that inactive and not relevant for the purposes of giving a true and fair view of the financial position, the results of the operations and of the cash flows of the Group.

The companies NIPPON SANSO SHENWEI GASES Co. Ltd and SHANGHAI SHENWEI GAS FILLING Co. Ltd were not consolidated in that they are minority interests.

ZDS JESENICE doo was not consolidated since it is administered by a minority shareholder.

d) associated companies, consolidated by adopting the equity method

Finally, equity investments in other companies were carried at fair value through profit and loss, as they cannot be included among subsidiary and associated companies.

The scope of consolidation between December 31, 2022 and December 31, 2021 underwent the following changes:

According to paragraph 264 Section 3 of the German Commercial Code, German subsidiaries:

are exempted from the obligation to prepare and publish in Germany both the financial statements in accordance with generally accepted German accounting standards and the report on management and to allow the audit of those financial statements.

ACCOUNTING AND CONSOLIDATION PRINCIPLES

GENERAL PRINCIPLES

The consolidated financial statements of the SOL Group have been drawn up in Euro since this is the legal tender of the economies in the countries where the Group operates. The balances of the consolidated financial statement items, taking into account their importance, are expressed in thousands of Euro. Foreign subsidiaries are included in accordance with the principles described in the section "Consolidation principles - Consolidation of foreign companies".

CONSOLIDATION STANDARDS

Subsidiary companies

These are companies over which the Group exercises control. Such control exists when the Group has the power, directly or indirectly, to determine the financial and operating policies of a company, for the purpose of obtaining the benefits from its activities. The financial statements of the subsidiary companies are included in the consolidated financial statements as from the date when control over the company was taken up until the moment said control ceases to exist. The portions of shareholders' equity and the result attributable to minority shareholders are indicated separately in the consolidated balance sheet and income statement, respectively. Subsidiaries are enterprises over which SOL has the power to determine autonomously the strategic choices of the enterprise in order to obtain the related benefits. In general, the existence of control is presumed when more than half of the voting rights in the ordinary Shareholders' Meeting are directly or indirectly held also considering the potential votes i.e. voting rights deriving from convertible instruments.

Dormant subsidiaries are not included in the consolidated financial statements.

Jointly controlled companies

These are companies over whose activities the Group has joint control, as defined by IFRS 11 - Joint Arrangements. The consolidated financial statements include the portion pertaining to the Group of the results of the jointly controlled companies, recorded using the equity method, as from the date on which the significant influence started and until it ceases to exist.

Associated companies

These are companies in which the Group does not exercise control or joint control over the financial and operating policies (joint ventures that do not qualify as joint operations and associated companies) over which SOL exercises significant influence in determining their strategic decisions, albeit without having control over them, also considering the potential votes i.e. voting rights deriving from convertible instruments; significant influence is presumed when SOL holds, directly or indirectly, more than 20% of the voting rights in the ordinary Shareholders' Meeting.

The consolidated financial statements include the portion pertaining to the Group of the results of the associated companies, recorded using the equity method, as from the date on which the significant influence started and until it ceases to exist.

Equity investments in other companies

Equity investments in other companies (normally involving a percentage ownership of less than 20%) are carried at fair value and possibly written down to reflect any permanent losses in value. Subsequently, gains and losses deriving from changes in fair value are recognised directly in profit or loss for the period as permitted by IFRS 9.

Transactions eliminated during the consolidation process

All the balances and the significant transactions between Group companies, as well as unrealised gains and losses on inter company transactions, are eliminated during the preparation of the consolidated financial statements. Any unrealised gains or losses generated on transactions with associated companies are eliminated in relation to the value of the Group's shareholding in said companies.

The criteria applied for consolidation are as follows:

Foreign currency transactions

Transactions in foreign currencies are recorded at the exchange rate in force as of the date of the transaction. Monetary assets and liabilities in foreign currencies at the reporting date are translated at the exchange rate in force at that date. Exchange differences arising from the settlement of monetary items or from their translation at exchange rates different from those used at the time of initial recording during the year or in previous financial statements, are booked to the income statement.

Consolidation of foreign companies

All the assets and liabilities of foreign companies denominated in currency other than the Euro that are included within the scope of consolidation are converted using the exchange rates in force at the reporting date (current exchange rate method). Income and costs are translated using the average rate for the year. The exchange differences emerging from the application of this method are classified as an equity account until the equity investment is disposed of.

Goodwill and adjustments to the fair value generated by the acquisition of a foreign company are stated in the relevant currency and translated using the period-end exchange rate.

The exchange rates used for converting the financial statements not expressed in Euro are indicated in the table below:

Business combinations

The business combinations are accounted for in accordance with the acquisition method in accordance with IFRS 3. According to this method, the consideration transferred in a business combination is measured at fair value, calculated as the sum of the fair value of the assets transferred and liabilities undertaken by the Group at the date of acquisition and of the equity instruments issued in exchange for the control of the acquired company. The expenses related to the transaction are generally recognised in the income statement when they are incurred. The goodwill is determined as the surplus between the sum of the amounts transferred in the business combination, the value of shareholders' equity attributable to minority interests and the fair value of any equity investment previously held in the acquired company compared to the fair value of net assets acquired and liabilities undertaken at the date of acquisition. If the value of the net assets acquired and liabilities undertaken at the date of acquisition exceeds the sum of the amounts transferred, the value of shareholders' equity attributable to minority interests and the fair value of any equity investment previously held in the acquired company, this surplus is immediately recognised in the income statement as income arising from the concluded transaction.

The portions of shareholders' equity attributable to minority interests, at the date of acquisition, can be measured at fair value or at the pro-rata value of net assets recognised for the acquired company. The choice of the measurement method is carried out for each transaction.

Any amount subject to conditions stipulated by the contract of business combination are measured at fair value at the date of acquisition and included in the value of the amounts transferred in the business combination for the purposes of determining the goodwill.

In the case of business combinations that occurred in stages, the equity investment previously held by the Group in the acquired company is revalued at fair value at the date of acquisition of control and any ensuing gain or loss is recognised in the income statement. Any value arising from the equity investment previously held and recorded in Other profits (losses) are reclassified in the income statement as if the equity investment had been transferred.

The business combinations that occurred before January 1, 2010 were recognised according to the previous version of IFRS 3.

Minority shareholders

The portion of capital and reserves pertaining to minority shareholders in subsidiaries and the portion pertaining to minority shareholders of profit or loss for the year of consolidated subsidiaries are separately identified in the consolidated income statement and balance sheet. Changes in ownership shares of subsidiaries that do not involve acquisition/loss of control are accounted for under changes in shareholders' equity.

Acquisition of minority shares

After obtaining the control of a company, transactions in which the parent company acquires or transfers more minority interests without modifying the control over the subsidiary are to be considered transactions with shareholders and therefore must be recognised under shareholders' equity. It follows that the book value of the controlling interest and minority interests must be adjusted to reflect the change in interest in the subsidiary and any difference between the amount of the adjustment made to minority interests and the fair value of the price paid or received in respect of that transaction is recognised directly in the shareholders' equity and is attributed to the shareholders of the parent company. There will be no adjustment to the value of goodwill and profits or losses will be recognised in the income statement. The expenses arising from such transactions must also be recognised in equity in accordance with the requirements of IAS 32 in paragraph 35.

Under common control transactions

A business combination involving enterprises or groups under common control (transaction under common control) is a combination in which all of the enterprises or businesses are ultimately controlled by the same person or persons both before and after the business combination and the control is not temporary.

If a significant influence on future cash flows after the transfer is demonstrated for all parties involved, these transactions are treated as described under "Business combinations and goodwill".

If, however, this cannot be demonstrated, such transactions are recognised according to the principle of continuity of values.

In particular, the accounting recognition criteria, in application of the principle of continuity of values, falling within the scope of what is indicated in IAS 8.10, in line with international practice and the orientations of the Italian accounting profession on the subject of business combinations under common control, envisage that the purchaser recognises the assets acquired on the basis of their historical book values determined on a cost basis. If the transfer values are higher than the historic values, the excess is reversed, reducing the shareholders' equity of the acquiring Group, with the recording of a special reserve in its financial statements.

Similarly, the accounting standard adopted in preparing the financial statements of the transferring Group provides that any difference between the transaction price and the pre-existing book value of the transferred assets is not recognised in the income statement, but is instead recognised as a credit to shareholders' equity.

ACCOUNTING STANDARDS TANGIBLE FIXED ASSETS

Cost

Real estate property, plant and machinery are stated at purchase or production cost, inclusive of any related charges. For assets that justify capitalisation, the cost also includes the financial expenses that are directly attributable to the acquisition, construction or production of said assets.

The costs incurred subsequent to purchase are capitalised only if they increase the future economic benefits inherent to the assets to which they refer.

Gains and losses from sale or disposal of assets are calculated as the difference between the sales revenue and the net book value of the asset and are recognised in profit or loss of the financial year.

All the other costs are recorded in the income statement when incurred.

Assets held under financial lease agreements, via which all the risks and benefits associated with the ownership are essentially transferred to the Group, are recorded as Group assets at their current value or, if lower, at the net current value of minimum lease payments due. The corresponding liability owed to the lessor is recorded in the financial statements under financial payables. The assets are depreciated by applying the following method and rates. The recoverability of their value is ascertained in accordance with the approach envisaged by IAS 36 illustrated in the following paragraph "Impairment of assets". Write-downs made may be reversed in the context of the original cost incurred.

The costs capitalised for leasehold improvements are attributable to the classes of assets to which they refer and depreciated over the residual duration of the rental contract or the residual useful life of the improvement, whichever period is shorter.

If the individual components of the compound fixed asset are characterised by different useful lives, they are recorded separately so as to be depreciated on a consistent basis with their duration ("component approach). Specifically, according to this approach, the value of land and the value of the buildings on it are separated and just the building is depreciated.

Depreciation

Depreciation is calculated on a straight-line basis over the estimated useful life of the assets, as follows:

Lease agreements

The Group must assess whether the agreement is, or contains, a lease at the date it is entered into. The Group recognises the Right of Use and the related lease liability for all lease arrangements as lessee, except for short- term leases (i.e. leases of 12 months or less) and leases of low-value assets (by Group policy, such assets are those with a value of less than Euro 10,000 when new). For the latter, the Group recognises the related payments as operating expenses on a straight-line basis over the term of the contract unless another method is more representative. The agreements for which this last exemption was applied fell mainly within the following categories:

With reference to these exemptions, the Group recognises the related payments as operating expenses recognised on a straight-line basis over the term of the agreement

The lease payments included in the value of the lease liability include:

Subsequent to initial recognition, the book value of the lease liability increases due to accrued interest (using the effective interest method) and decreases due to payments made under the lease agreement.

The Group recalculates the lease liability (and adjusts the corresponding right-of-use value) if:

The right-of-use asset comprises the initial measurement of the lease liability, lease payments made before or on the effective date of the lease and any other initial direct costs. The right of use is recognised in the financial statements net of depreciation and any impairment losses.

Lease-related incentives (e.g. rent-free periods) are recognised as part of the initial value of the right-of-use and lease liability over the contractual period.

The right of use is depreciated on a systematic basis at the lower of the lease term and the residual useful life of the underlying asset. If the lease agreement transfers ownership of the related asset or the cost of the right of use reflects the Group's intention to exercise the purchase option, the related right of use is amortised over the useful life of the asset in question. Depreciation starts from the commencement of the lease term.

The Group applies IAS 36 Impairment of Assets in order to identify the presence of any impairment losses.

Public grants

Public grants are recognised in the financial statements when there exists a reasonable certainty that the company will meet all the conditions for receiving the contributions and that the contributions will be received. When the contributions are related to cost components, they are recognised as revenues, but are allocated systematically across the financial periods in order to be proportionate to the costs that they intend to compensate. If a contribution is related to an asset, the asset and the contribution are recognised for their nominal values and they are gradually discharged to the income statement, on a straight-line basis, along the expected useful life of the asset of reference.

If the Group receives a non-monetary contribution, the asset and contribution are recognised at their nominal value and discharged to the income statement, on a straight-line basis, along the expected useful life of the asset of reference. In case of loans or similar forms of assistance supplied by government entities or similar institutions that have an interest rate lower than the current market rate, the effect related to the favourable interest rate is considered as an additional public grant.

INTANGIBLE ASSETS

Goodwill and consolidation differences

In the event of the acquisition of businesses, the assets, liabilities and potential liabilities acquired and identifiable are stated at their current value (fair value) as of the date of acquisition. The positive difference between the purchase cost and the portion of the current value of these assets and liabilities pertaining to the Group is classified as goodwill and recorded in the financial statements as an intangible asset. Any negative difference ("negative goodwill") is by contrast stated in the income statement at the time of acquisition.

Goodwill is not amortised, but is subject annually (or more frequently if specific events or changed circumstances indicate the possibility of having suffered an impairment) to checks in order to identify any reduction in value, carried out at Cash Generating Unit level to which the Company's management charges said goodwill, in accordance with the matters anticipated by IAS 36 - Impairment of assets. After initial recognition, goodwill is valued at cost, net of any accumulated impairment losses.

Any write-downs made are not subject to subsequent reinstatement.

At the time of the disposal of a portion or of the whole of a company previously acquired, whose acquisition gave rise to goodwill, account is taken of the corresponding residual value of the goodwill when determining the capital gain or loss on the disposal.

At the time of initial adoption of the IFRS, the Group chose not to retroactively apply IFRS 3 - Business Combinations, to the acquisitions of businesses that took place prior to January 1, 2004; consequently, the goodwill generated on the acquisitions prior to the date of transition to the IFRS is maintained at the previous value, as are the consolidation reserves recorded under the shareholders' equity, determined in accordance with Italian accounting standards, subject to assessment and recognition of any impairment losses at that date.

Other intangible fixed assets

The other intangible fixed assets purchased or produced internally are identifiable assets lacking physical consistence and are recorded under assets, in accordance with the matters laid down by IAS 38 - Intangible assets, when the company has control over said assets and it is probable that the use of the same will generate future economic benefit and when the cost of the assets can be reliably determined.

These assets are measured at purchase or production cost and amortised on a straight-line basis over their estimated useful lives, if the same have a definite useful life. Intangible fixed assets with an indefinite useful life are not amortised, but are subject annually (or more frequently if there is indication that the asset may have suffered an impairment) to assessment in order to identify any reductions in value.

Other intangible fixed assets recorded following the acquisition of a company are recorded separately from the goodwill, if their current value can be determined reliably.

IMPAIRMENT OF ASSETS

IAS 36 requires the company to test tangible and intangible and fixed assets for impairment where indicators that such problem may persist are present. In the case of other intangible assets with an indefinite useful life or assets not available for use (in progress), this assessment is made at least annually.

The Group periodically assesses the recoverability of the book value of the Intangible assets and the Real estate property, plant and machinery, so as to determine if there is any indication that said assets have suffered an impairment loss. If such indication occurs, it is necessary to estimate the recoverable amount of the assets in order to establish the entity of the possible impairment loss. An intangible asset with an indefinite useful life is tested for impairment annually or more frequently, whenever there is an indication that the asset may be impaired.

When it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the unit generating the financial flows to which the asset belongs.

The recoverability of the recognised amounts is tested by comparing the book value recognised in the financial statements with the fair value net sale price, if an active market exists, or the value in use of the asset, whichever is greater.

In calculating the usage value, the estimated future cash flows are discounted to their current value using a rate that reflects the current market valuations of the current value of cash and the asset's specific risks. The main assumptions used for calculating the value of use concern the discount rate, growth rate, expected changes in selling prices and cost trends during the period used for the calculation. The growth rates adopted are based on future market expectations in the relevant sector. Changes in the sales prices are based on past experience and on the expected future changes in the market. The Group prepares operating cash flow fore- casts resulting from the business plan prepared by the Directors and approved by the Board of Directors of the parent company and determines the terminal value (current value of perpetual income), based on a medium- and long-term growth rate in line with that of the specific sector to which it belongs.

If the recoverable amount of an asset (or CGU) is estimated to be lower than its book value, the latter is reduced to the lower recoverable amount, immediately recognising impairment in the income statement.

When there is no longer any reason for a write-down to be maintained, the book value of the asset (or of the cashgenerating unit) - with the exception of goodwill - is increased to the new value resulting from the estimate of its recoverable amount, but not beyond the net book value that the asset would have had if it had not been written down for impairment. Reversal of impairment loss is recognised immediately in the income statement.

FINANCIAL INSTRUMENTS

Financial assets and financial liabilities are recognised in the Group's statement of financial position when the Group becomes a party to the contractual provisions governing the instrument.

The Equity investments and other non-current financial assets item includes the equity investments in non-consolidated companies and other non-current financial assets (securities held with the intention of maintaining them in the portfolio until maturity, non-current receivables and loans and other non-current financial assets available for sale).

Current financial instruments include trade receivables, current securities, other current financial assets and liquid funds and equivalents.

Financial liabilities include financial payables and trade payables.

Equity investments in non-consolidated companies are stated in accordance with the matters established by IAS 28 -Investments in associated and Joint Ventures , as described in the previous section entitled "Consolidation principles"; equity investments in other companies are stated at cost net of any write-downs. Other non-current financial assets, as well as current financial assets and financial liabilities, are stated in accordance with the approach established by IAS 39 - Financial instruments: recognition and measurement.

Current financial assets and securities held with the intention of maintaining them in the portfolio until maturity are recorded in the accounts with reference to the date of trading and, at the time of initial recognition in the financial statements, are measured at acquisition cost, including any costs related to the transaction.

Subsequent to initial recognition, the financial instruments at FVTOCI and those available for trading are measured at fair value. If the market price is not available, the fair value of the financial instruments at FVTOCI available for sale is measured by means of the most appropriate measurement techniques, such as, for example, the analysis of the discounted back cash flows, made with the market information available at the end of the reporting period.

When an investment in a debt instrument measured as FVTOCI is derecognised, the cumulative gain (loss) previously recognised in other comprehensive income is reclassified from equity to profit or loss through a reclassification adjustment.

Conversely, when an investment in an equity instrument designated as measured at FVTOCI is derecognised, the cumulative gain (loss) previously recognised in other comprehensive income is subsequently transferred to retained earnings without passing through profit or loss.

Current assets denominated in foreign currencies for which hedging transactions through derivative instruments are undertaken are measured in accordance with hedge accounting, where applicable.

Gains and losses on financial assets available for sale are recorded directly under shareholders' equity until the financial asset is sold or is written down; then, the accumulated gains or losses, including those previously recorded under shareholders' equity, are recorded in the income statement for the period.

Loans and receivables that the Group does not hold for trading purposes (loans and receivables originated during core business activities), securities held with the intention of being maintained in the portfolio until maturity and all the financial assets for which listings on an active market are not available and whose fair value cannot be determined reliably, are calculated at amortised cost, if they have a pre-established maturity, using the effective interest method. When the financial assets do not have a pre-established maturity, they are measured at purchase cost.

Measurements are regularly carried out so as to check if objective evidence exists whether a financial asset or a group of assets have suffered an impairment loss. If objective evidence exists, the impairment loss will have to be recorded as a cost in the income statement for the period.

The financial liabilities hedged by derivative instruments are valued in accordance with the formalities established by IAS 39 for hedge accounting applying the following accounting treatments:

IMPAIRMENT OF FINANCIAL ASSETS

The recoverability of financial assets not measured at fair value through profit or loss is measured on the basis of the Expected Credit Loss (ECL) model introduced by IFRS 9.

Expected losses are generally determined by multiplying: (i) the exposure to the counterparty by (ii) the probability of default (PD) of the counterparty; (iii) the estimate, in percentage terms, of the amount of credit that will not be recovered in the event of a defined loss given default (LGD), as well as past experience and possible recovery actions available.

DERECOGNITION OF FINANCIAL ASSETS AND LIABILITIES

Financial assets are derecognised whenever one of the following conditions occurs:

The financial liabilities are derecognised when they are extinguished, i.e. when the contractual obligation is discharged, cancelled or expired.

When an existing financial liability is replaced by another to the same creditor on substantially different terms, or the terms of an existing liability are substantially changed, such replacement or change is treated as derecognition of the original liability and recognition of a new liability. The difference between the respective book values is recognised in the income statement.

DERIVATIVE INSTRUMENTS

The financial liabilities hedged by derivative instruments are valued in accordance with the formalities established by IAS 39 for Hedge accounting applying the following accounting treatments:

The Group decided to continue to use the hedge accounting rules set out in IAS 39 for all hedges already designated in hedge accounting in previous years and for new hedges designated in 2020.

DISCLOSURE

IFRS 7 requests additional information aimed at appreciating the importance of the financial instruments in relation to economic performances and to the financial position of a company. The accounting principle requires a description of the targets, policies and procedures carried out by the Management for the different types of financial risk (liquidity market and credit risk) to which the subject is exposed, including sensitivity analysis for each type of market risk (exchange rate, interest rate, equity, commodity) and report on the concentration and average, minimum and maximum exposure to the different types of risk during the period of reference, if the existing exposure at the end of the period is not sufficiently representative.

IAS 1 regulates among other things report obligations to be supplied on the targets, policies and management processes of the share capital, specifying, in case of capital requirements imposed by third parties, the management nature and method and any consequence of lack of compliance. For qualitative and quantitative analysis, refer to Note 25 "Financial Instruments".

INVENTORIES

Inventories of raw materials, semi-finished and finished products are valued at the lower of cost and market value, cost being determined using the weighted average cost method. The measurement of the inventories includes the direct costs of the materials and the labour and the indirect costs (variable and fixed). Write-down allowances are calculated for materials, finished products and other supplies considered obsolete or slow-moving, taking into account their future expected usefulness or their realisable value.

Contract work in progress is measured on the basis of the stage of completion, net of any advance payments invoiced to customers.

Any losses on these contracts are booked to the income statement in full at the time they become known.

LOANS

Loans are initially measured at cost, corresponding to the fair value of the amount received, net of additional charges incurred to obtain the loan.

After initial recognition, loans are recognised at amortised cost calculated by applying the effective interest rate. The effective interest method is the method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that discounts future payments (including all fees, transaction costs and other premiums or discounts) over the term of the financial liability or, if more appropriate, over a shorter period. Loans are classified among current liabilities unless the Group has the unconditional right to defer discharge of a liability by at least 12 months after the reporting period.

EMPLOYEE BENEFITS

Post-employment benefits are defined on the basis of plans, even if not yet formalised, which, based on their nature, are classified as "defined contribution" and "defined benefit". In defined contribution plans, the company's obligation is limited to the payment of contributions to the State or to a legally separate entity (so called Fund), and is determined on the basis of contributions due, reduced by amounts already paid over, if any.

The liability for defined benefit plans, net of any assets serving the plan, is determined on the basis of actuarial calculations and is recognised on an accrual basis on a consistent basis with the period of employment necessary to obtain the benefit.

The severance indemnity is classified as a defined benefit plan-type post-employment benefit, whose accrued sum must be projected so as to estimate the amount to be paid out on termination of the employment relationship and subsequently discounted back, using the projected unit credit method, which is based on demographic and financial type hypothesis in order to make a reasonable estimate of the sum total of the benefits that each employee has already accrued against their employment services.

By means of the actuarial measurement, the current service cost that defines the sum total of the rights accrued during the year by the employees is charged to the income statement item "payroll and related costs" and the interest cost which represents the figurative liability that the company would incur by requesting the market for a loan for the same amount as the severance indemnity is booked under "financial income/expense". The remeasurement components of the net liabilities, which include the actuarial profits and losses, are immediately recorded in the Statement of Comprehensive Income. Such components need not be reclassified in the Income Statement.

PROVISIONS FOR RISKS AND CHARGES

The Group records provisions for risks and charges when it has a legal or implied obligation vis-à-vis third parties, and it is probable that it will become necessary to use Group resources in order to fulfil the obligation and when a reliable estimate of the sum total of said obligation can be made.

The estimate changes are reflected in the income statement in the period when the change took place.

TREASURY SHARES

Treasury shares, if present, are stated as a decrease to the shareholders' equity. The original cost of the treasury shares and the revenues deriving from any subsequent sales are recorded as changes in shareholders' equity.

FOREIGN CURRENCY TRANSACTIONS

Transactions in foreign currencies are recorded at the exchange rate in force as of the date of the transaction. Monetary assets and liabilities in foreign currency are translated at the exchange rate in force at the reporting date. Exchange differences arising from the settlement of monetary items or from their translation at exchange rates different from those used at the time of initial recording during the year or in previous financial statements, are booked to the income statement.

HYPERINFLATIONARY ECONOMIES

The SOL Group controls companies based in Turkey, a country that has been defined as having high inflation in 2022, as the cumulative inflation rate over the last three years has exceeded 100 %. According to the accounting standard IAS 29 Financial Reporting in Hyperinflationary Economies, the financial statements of Turkish companies must be restated according to specific procedures and a valuation process, in order to eliminate the distorting effects of the loss of the purchasing power of money.

In the income statement, costs and revenues are revalued by applying the change in the general consumer price index. With regard to the balance sheet, monetary items are not revalued as they are already expressed in the current unit of measurement at the end of the reporting period; On the other hand, non-monetary assets and liabilities are revalued from the date of initial recognition to the end of the reporting period.

The financial statements are translated into Euro by applying the period-end exchange rate for both balance sheet and income statement items.

REVENUE RECOGNITION

Revenues are recognised to the extent that control is transferred so that it is probable that the Group will receive the economic benefits and their amount can be reliably measured.

Revenues are stated net of any adjusting entries.

Revenue from contracts with customers are recognised on the basis of the following five steps:

(i) identifying the contract with a customer;

(ii) identifying the performance obligations, represented by promises in a contract to transfer to a customer goods or services;

(iii) determining the transaction price;

(iv) allocating the transaction price to each performance obligation on the basis of the relative selling prices of each distinct good or service;

(v) recognising revenue when a performance obligation is satisfied by transferring a promised good or service to a customer. The transfer is considered completed when the customer obtains control of the good or service, which can take place continuously (over time) or at a specific time (at a point in time).

Revenue is recognised at the fair value of the amount of consideration to which the company believes it is entitled in exchange for the goods and/or services promised to the customer, excluding amounts collected on behalf of third parties. In the presence of a variable consideration, the company estimates the amount of the consideration to which it will be entitled in exchange for the transfer of the goods and/or services promised to the customer; in particular, the amount of the consideration may vary where there are discounts, rebates or bonuses or where the price itself depends on the occurrence or non-occurrence of certain future events. Exchanges between goods or services of a similar nature and value, since they do not represent sales transactions, do not result in the recognition of revenues.

Revenue from sales is recognised upon the transfer of ownership, which generally coincides with the shipment or delivery of the goods. Grants related to income are fully recognised in the income statement when the recognition requirements are met. Financial income and expense are recognised on an accrual basis.

COST RECOGNITION

Costs and expenses are recognised in the financial statements on an accrual basis.

FINANCIAL INCOME AND EXPENSE

Financial income and expense are recognised in the income statement on an accrual basis.

In particular, interest income and expense are recognised on an accrual basis, according to the amount of the loan and the effective interest rate, which represents the rate used to discount estimated future cash receipts/ payments over the expected life of the financial asset/liability to the book value.

TAX

Income taxes include all the taxation calculated on the Group's taxable income. Income taxes are recorded in the income statement, with the exception of those relating to items directly debited against or credited to shareholders' equity, in which case the tax effect is booked directly to shareholders' equity. Provisions for taxation that might be generated by the transfer of the non-distributable profit of subsidiary companies, are made solely when there is the real intention to transfer said profit.

Other taxes not linked to income, such as taxes on property and on capital, are included under Operating expense. Deferred taxes are provided for according to the method of the overall provision of the liability. They are calculated on all the timing differences that emerge between the taxable base of an asset or liability and the book value in the consolidated financial statements, with the exception of goodwill not deductible for tax purposes. Deferred tax assets on tax losses and unused tax credits carried forward, are recognised to the extent that future taxable income may be available against which they can be recovered.

Current and deferred tax assets and liabilities are offset when the income taxes are applied by the same tax authority and when there is a legal right to offset. Deferred tax assets and liabilities are determined using the tax rates that are expected to be applicable, within the respective legal systems of the countries where the Group operates, during the accounting period when the timing differences will be realised or cancelled.

Pursuant to Italian Enabling Act no. 80 of April 7, 2003, as amended, from the current financial year, the parent company SOL Spa is the consolidating company; in addition to SOL Spa, the scope of consolidation also includes AIRSOL Srl, BIOTECHSOL Srl and DIATHEVA Srl.

DIVIDENDS

Dividends payable are represented as changes in shareholders' equity during the accounting period when they are approved by the shareholders' meeting.

EARNINGS PER SHARE

The basic earnings per share are calculated by dividing the Group's economic result by the weighted average of the shares in circulation during the year, excluding treasury shares.

CASH FLOW STATEMENT

The cash flow statement is drawn up by applying the indirect method via which the pre-tax result is adjusted by the effects of the non-monetary transactions, by any deferral or provision of previous or future operative collections or payments.

USE OF ESTIMATES

The preparation of the financial statements and the related notes in accordance with the IFRS requires management to make estimates and assumptions that have an effect on the values of the financial statement assets and liabilities and on the disclosures relating to the potential assets and liabilities at the end of the reporting period. The results that will make up the final balances may differ from said estimates. The estimates are used to obtain provisions for risks and charges, asset write-downs, employee benefits, taxation, other provisions, determining the lease term and funds. The estimates and assumptions are periodically reviewed and the effects of each change are immediately reflected in the income statement.

In general, the use of estimates is particularly important for depreciation/amortisation, measurement of derivative instruments, calculation of risk provisions and write-down provisions or other assets, calculation of revenue as well as impairment test.

RIGHTS OF USE

The new standard IFRS 16 provides a new definition of lease and introduces a criterion based on the control (right of use) of an asset to distinguish lease agreements from service contracts, identifying the following as discriminating: the identification of the asset, the right to replace it, the right to substantially obtain all of the economic benefits resulting from the use of the asset and, most recently, the right to direct the use of the asset underlying the contract.

As a result of the introduction of the new standard in the income statement as from January 1, 2019, the depreciation charges of rights of use determined on the basis of the defined lease terms, based on the assessments made regarding the probability of renewal, and the accrued portion of financial expense related to the liabilities are recognised. This process implies a high degree of judgement by the management.

ALLOWANCE FOR DOUBTFUL ACCOUNTS

The allowance for doubtful accounts reflects the Group's estimate of losses on receivables from customers. The estimate of the allowance for doubtful accounts is based on expected losses, calculated on the basis of past experience for similar receivables, current and historical past dues, losses and payments received, the careful monitoring of credit quality, and projections of economic and market conditions.

RECOVERABLE AMOUNT OF NON-CURRENT ASSETS

Non-current assets include property, plant and equipment, intangible assets, equity investments and other financial assets. The Management periodically reviews the book value of non-current assets held and used and of the assets that must be disposed of, when events and circumstances require such a review. This activity is carried out using estimates of cash flows expected from the use or sale of the asset and appropriate discount rates to calculate the current value. When the book value of a non-current asset is impaired, the company recognises an impairment loss for the amount by which the book value of the asset exceeds its recoverable amount through use or sale, calculated by reference to the most recent plans.

DEFERRED TAX ASSETS AND DEFERRED TAX LIABILITIES

The company recognises current taxes, deferred tax assets/liabilities in accordance with the regulations in force. The recognition of taxes requires the use of estimates and assumptions as to how to read the applicable rules and their effect on the company's taxation in relation to transactions during the year. Moreover, the recognition of deferred tax assets/liabilities requires the use of estimates of future taxable income and its changes as well as the actual applicable tax rates. These activities are carried out by analysing transactions and their tax profiles, also with the support, where necessary, of external consultants for the various issues addressed and through simulations of future income and their sensitivity analyses.

PENSION PLANS

Some Group companies can participate in pension plans; in Italy, the Employee Severance Indemnity fund is configured as a defined-benefit plan (with the exception of the portions of Employee Severance Indemnities accrued from January 1, 2007, which are configured as defined contribution plans). The Group uses various statistical assumptions and assessment factors in order to anticipate future events for the calculation of expenses, liabilities and assets related to these plans. The assumptions concern the discount rate, the expected return on plan assets and the rates of future salary increases. Moreover, the Group's consulting actuaries also use subjective factors, such as mortality and resignation rates or assumptions about the expected return on plan assets.

POTENTIAL LIABILITIES

The Group is subject to legal and tax disputes regarding a wide range of issues that are within the jurisdiction of various countries. Given the uncertainties surrounding these issues, it is difficult to predict whether and to what extent they will give rise to a payout.

Cases and disputes against the Group can derive from complex and difficult legal issues, which may be subject to varying degrees of uncertainty, including the facts and circumstances surrounding each case, jurisdiction and different applicable laws. In the ordinary course of business, the Group consults as necessary with its legal advisors and experts in tax or regulatory matters. The Group recognises a liability for disputes when it considers it probable that a financial outlay will be made and when the amount of resulting losses can be reasonably estimated. If a financial outlay becomes possible but the amount cannot be determined, that fact is reported in the explanatory notes.

All the amounts represented in the diagrams and tables are expressed in thousands of Euro.

ACCOUNTING STANDARDS, AMENDMENTS AND INTERPRETATIONS

OF THE IFRS APPLIED AS FROM JANUARY 1, 2022

The Group applied the following accounting standards, amendments and IFRS interpretations for the first time as from January 1, 2022:

The adoption of these amendments had no impact on the consolidated financial statements of the Group.

ACCOUNTING PRINCIPLES, AMENDMENTS AND IFRS AND IFRIC INTERPRETATIONS APPROVED BY THE EUROPEAN UNION THAT ARE NOT YET OBLIGATORY AND THAT THE COMPANY HAS NOT APPLIED IN ADVANCE AS AT DECEMBER 31, 2022

ACCOUNTING STANDARDS, AMENDMENTS AND IFRS AND IFRIC INTERPRETATIONS NOT YET APPROVED BY THE EUROPEAN UNION

At the end of the reporting period, the competent bodies of the European Union have not yet completed the approval process required to adopt the amendments and standards described below:

INFORMATION ON RISKS

RISKS RELATED TO THE GENERAL ECONOMIC TREND

The Group performance is affected by the increase or decrease of the gross national product and industrial production, cost of energy products and health expense policies adopted in the different European countries in which the Group works.

The economic trend in the post-pandemic period and the consequences of the recent Ukrainian crisis could cause a slowdown in various sectors of the economy in the countries where the SOL Group operates.

RISKS RELATING TO THE GROUP'S RESULTS

The SOL Group partially operates in sectors considerably regulated by economic cycles related to the trend in industrial production, such as the steel, metal working, engineering, chemical and glass manufacturing industries. In the case of an extended decline in business, the growth and profitability of the Group could be partially affected.

Moreover, government policies for reducing healthcare expenses could reduce margins in the home-care and medical gas and service sectors.

RISKS RELATED TO FUND REQUIREMENTS

The SOL Group carries on an activity that entails considerable investments both in production and in commercial equipment and expects to face up to requirements through the flows deriving from the operational management and from new loans.

Operational management should continue to generate sufficient financial resources, while the use of new loans, notwithstanding the Group's excellent capital and financial structure, may show higher interest rates and spreads than in the past.

OTHER FINANCIAL RISKS

The Group is exposed to financial risks associated with its business operations:

Credit risk

The granting of credit to end customers is subject to specific assessments by means of structured credit facility systems.

Positions amongst trade receivables for which objective partial or total non-recoverability is ascertained, are subject to individual write-down. Provisions are made on a collective basis for receivables that are not subject to individual write-down, taking into account the historic experience, the statistical data and, as a result of the introduction of the new accounting standard IFRS 9, on the basis of a predictive approach, based on the counterparty's probability of default, the ability to recover in case of loss given default and also of expected future losses.

Liquidity risk

The liquidity risk may arise with the inability to raise, under good financial conditions, the financial resources necessary for the anticipated investments and the financing of working capital.

The Group has adopted a series of policies and processes aimed at optimising the management of the financial resources, reducing the liquidity risk, such as the maintenance of an adequate level of available liquidity, the obtaining of adequate credit facilities and the systematic monitoring of the forecast liquidity conditions, in relation to the corporate planning process.

Management believes that the funds and the credit facilities currently available, in addition to those that will be generated by operating and financing activities, will permit the Group to satisfy its requirements resulting from investment activities, working capital management and debt repayments on their natural maturity dates.

Exchange rate risk

In relation to sales activities, the Group companies may find themselves with trade receivables or payables denominated in currencies other than the reporting currency of the company that holds them.

A number of Group subsidiary companies are located in countries outside the Eurozone, in particular Switzerland, Bosnia, Serbia, Albania, North Macedonia, Bulgaria, Hungary, Romania, the UK, Morocco, Poland, Czech Republic, India, Turkey, Brazil and China. Since the reference currency for the Group is the Euro, the income statements of these companies are translated into Euro using the average exchange rate for the period and, revenues and margins in local currency being equal, changes in interest rates may have an effect on the equivalent value in Euro of revenues, costs and economic results.

Assets and liabilities of the consolidated companies whose reporting currency is not the Euro can adopt equivalent values in Euro that differ depending on the exchange rate trend. As envisaged by the accounting standards adopted, the effects of these changes are booked directly to shareholders' equity, under the item "Other reserves". Some Group companies purchase electricity that is used for the primary production of technical gasses. The price of electricity is affected by the Euro/dollar exchange rate and by the price trend of energy commodities. The risk related to their fluctuations is mitigated by signing, as much as possible, fixed price purchase contracts or with a variation measured over a longer time period. Moreover, almost all supply contracts to customers are index-linked in such a way as to cover the fluctuation risks shown above.

The Parent Company has two bond loans outstanding for a total of USD 22.5 million. To hedge the exchange rate risk, two cross currency swaps were made in Euros on the total loan amount and for the entire duration (12 years). The fair value of the CCSs as at December 31, 2022 was positive in the amount of Euro 3,143 thousand. With regard to the currency weakness involving the Turkish lira, note that Group companies resident in Turkey operate only within the country, but there could be a negative effect on their profitability as a result of the higher cost of products purchased from third countries.

As the conditions were met, IAS 29 - Hyperinflation to Financial Statements was applied to the financial statements of Turkish companies in 2022.

Interest rate risk

The interest rate risk is managed by the parent company by centralising most of the medium/long-term debt and by appropriately dividing the loans between fixed rate and floating rate, favouring, when possible and convenient, medium/long-term debt with fixed rates, also through specific Interest Rate Swap agreements.

Some Group companies have entered into a number of Interest Rate Swap agreements linked to two floating rate medium-term loans with the aim of guaranteeing a fixed rate on said loans. The nominal value as at December 31, 2022 is equal to Euro 133,909 thousand and the positive fair value is equal to Euro 9,851 thousand.

RISKS RELATING TO PERSONNEL

In various countries in which the Group operates, employees are protected by different laws and/or collective labour contracts that guarantee them the right to be consulted on specific issues - including the downsizing and closing of departments and the reduction of staff numbers - through representations. This could affect the Group's flexibility in strategically redefining its own organisations and activities.

The management of the Group consists of persons of proven expertise who normally have long-standing experience in the sectors in which the Group operates. The replacement of any person in management may require a long period of time.

RISKS RELATED TO THE ENVIRONMENT AND CLIMATE CHANGE

The products and the activities of the SOL Group are subject to increasingly complex and strict authorisation and environmental rules and regulations. This concerns manufacturing plants subject to regulations on atmospheric emissions, waste disposal and waste water disposal and the ban on land contamination.

High charges should be shouldered in order to observe such regulations.

The SOL Group considers the most significant risks to be those related to customer demands regarding the sustainability of its supply chain and purchased products, as well as those related to the increase in the cost of raw materials (in particular, the electricity used in main plants). In this context, and in line with the implementation of its Sustainability Plan, the SOL Group has identified specific actions to manage these risk factors in order to minimise their potential impact on the company's business in the foreseeable future.

Please refer to the Non-Financial Statement for a more detailed discussion of the initiatives implemented by the Group.

RISKS RELATING TO IT MANAGEMENT AND DATA SECURITY

The increasing use of IT tools in the management of company activities and the interconnection of company systems with external IT infrastructures expose these systems to potential risks with regard to the availability, integrity and confidentiality of data, as well as the efficiency of the IT tools themselves.

To ensure effective business continuity, the Group adopted a disaster recovery and business continuity system to ensure immediate replication of the main legacy system workstations. The choice of these systems to be managed in business continuity was made on the basis of a risk analysis.

Moreover, multiple levels of physical and logical protection, at the level of servers and at the level of clients, ensure the active security of data and business applications. The SOL Group also has innovative artificial intelligence-based products to protect the digital identity of its employees.

Vulnerability analyses and audits on the security of information systems are periodically carried out by independent technicians to check the adequacy of the company's IT systems.

Finally, with regard to the problem of fraud through the use of IT resources by external parties, all employees are periodically informed and trained on the correct use of the resources and IT applications available to them.

TAX RISKS

The SOL Group is subject to taxation in Italy and in several other foreign jurisdictions.

The various companies of the Group are subject to the assessment of the income tax returns by the competent tax authorities of the countries in which they operate.

As already occurred in the past, any findings reported in the tax audits are carefully assessed and, when necessary, challenged in the appropriate venues.

At present, a dispute is in progress in Italy for findings - considered groundless - on Transfer pricing.

The opening of the MAP (Mutual Agreement Procedure) between Italy and four other European countries has been requested and has not yet been completed.

However, at Group level, this should not have a significant effect on profitability, given that the level of taxation in the countries involved is very similar.

NOTES

INCOME STATEMENT

1. Net sales

Revenues by type of business break down as follows:

Reference should be made to the Directors' Report and the analysis of the results by type of business for comments regarding the trend in revenues.

Net sales achieved by the SOL Group as at December 31, 2022 amounted to Euro 1,379.2 million (up by 23.9% compared to the previous year, at Euro 1,112.9 million).

The effect of applying IAS 29 "Financial Reporting in Hyperinflationary Economies" to companies in Turkey led to an increase in revenue of Euro 2.0 million.

In particular, during 2022, the home-care business showed an 11.2% growth in sales (up by Euro 62.3 million) compared to the same period last year.

The technical gases sector experienced a 36.5% increase in revenues (up by Euro 204.0 million) over December 31, 2021.

2. Other revenues and income

The item "Other revenues and income" breaks down as follows:

Contingent assets include Euro 28.5 million of tax credits granted in some countries to energy-intensive companies for the abnormal increase in electricity procurement costs.

The item "Other" includes Euro 43.5 million related to the different treatment of electricity sales and purchases abroad. The costs if purchasing this energy are included in material purchases.

3. Internal works and collections

The item "Internal works and collections" breaks down as follows:

The item "Transfers to assets" includes the collection from the warehouse, mainly for equipment not intended for sale, but to rent, transferred to assets.

The item "Time work" is related to costs incurred for the internal construction of fixed assets.

4. Total costs

The breakdown of the item is as follows:

The item "Purchase of materials" includes purchases of gas and materials, electricity, water, diesel and methane for production.

The item "Services rendered" includes costs of transports, maintenance, third-party services, consultancy and insurances.

The item "Other costs" includes rentals, taxes other than income tax, contingent liabilities and capital losses.

Reference should be made to the Directors' Report for comments regarding the trend in costs.

5. Payroll and related costs

The breakdown of the item is as follows:

The composition of the workforce is analysed below by category:

6. Amortisation/depreciations, provisions and write-downs, non-recurring expenses

The breakdown of the item is as follows:

The breakdown of the item "Amortisation and depreciation" of intangible and tangible fixed assets by asset category, is presented below:

Depreciation of tangible fixed assets and rights of use

The increase in depreciation is linked to investments made during the period, amounting to Euro 121.3 million.

Amortisation of other intangible fixed assets

The breakdown of the item "Provisions and write-downs" is as follows:

7. Financial income / (expenses)

The breakdown of the item is as follows:

The breakdown of the item "Financial income" is as follows:

The item "Other financial income" includes the positive change in mark to market derivatives to hedge the fair value of the hedged item (Fair Value Hedge - FVH), equal to Euro 39.5 thousand.

For further information on derivatives, see paragraph "Payables and other financial liabilities".

The breakdown of the item "Financial expense" is as follows:

"Other financial expenses" include Euro 1.5 million related to lease contracts and Euro 2.7 million related to the effect of applying IAS 29 "Financial Reporting in Hyperinflationary Economies".

The breakdown of the item "Results from equity investments" is as follows:

The item "Revaluations of equity investments" refers to the measurement at equity of the jointly controlled companies CT BIOCARBONIC GmbH (Euro 353 thousand) and CONSORZIO ECODUE (Euro 2 thousand) and the associated company SHANGHAI JIAWEI MEDICAL GAS Co. Ltd (Euro 109 thousand).

The item "Write-downs of equity investments" refers to the measurement at equity of the associates CONSORGAS Srl (Euro 67 thousand) and NEMO LAB Srl (Euro 10 thousand) and to the write-down of the equity investment in the company ULJANIK BRODOGRADNJA 1856 doo by the subsidiary UTP doo (Euro 19 thousand).

8. Income taxes

The breakdown of the item is as follows:

The reconciliation between the tax liability recorded in the financial statements and the theoretical tax liability, calculated on the basis of the theoretical tax rates in force in Italy, is as follows:

BALANCE SHEET

9. Tangible fixed assets

Breakdown of tangible fixed assets and rights of use

Changes in tangible fixed assets and rights of use, with reference to their historical cost, depreciation and net value are as follows:

Analysis of tangible fixed assets

Changes in tangible fixed assets, with reference to their historical cost, depreciation and net value are as follows:

The breakdown of major changes for the period relating to tangible fixed assets is shown below.

Please note that the Mantua, Verona, Jesenice and Varna plants have mortgages and liens governed by mediumterm mortgage agreements between financial institutions and several group companies.

As at December 31, 2022, mortgages amounted to Euro 67,450 thousand. As at December 31, 2022, liens amounted to Euro 68,788 thousand.

The item "Other changes" includes the effects of the application of hyperinflation in Turkey as summarised below:

Breakdown of rights of use

Changes in tangible fixed assets, with reference to their historical cost, depreciation and net value are as follows:

10. Goodwill and consolidation differences

The breakdown of the item is as follows:

The increase for the period in the item "Consolidation differences" is related to the acquisition of BLA SERVICOS HOSPITALARES Ltda, JML SERVICOS HOSPITALARES Ltda, PROFI GESUNDHEITS - SERVICE GmbH, WIP WEITERBILDUNG IN DER PFLEGE GmbH, ITOP Spa OFFICINE ORTOPEDICHE and its subsidiaries ITOP ORTOPEDIE ASSOCIATE Srl, ITOP SERVIZI Srl, ITOP SICILIA Srl and ORTHOHUB Srl, POLAR ICE and the adjustment of the goodwill of ISIMED Srl acquired in the last quarter of 2021 and merged by incorporation into VIVISOL Srl during this financial year.

In April 2022, the subsidiary P PAR PARTICIPACOES Ltda acquired 60% of BLA SERVICOS HOSPITALARES Ltda, a company governed by Brazilian law active in the hospital sector. If the acquisition had occurred on January 1, 2022, the group's revenues and the profit would have increased by Euro 614 thousand and by Euro 208 thousand, respectively, for the 12-month period ending December 31, 2022.

In April 2022, the subsidiary P PAR PARTICIPACOES Ltda acquired 60% of JML SERVICOS HOSPITALARES Ltda, a company governed by Brazilian law active in the hospital sector. If the acquisition had occurred on January 1, 2022, the estimated revenues and profit of the Group would have been higher by Euro 192 thousand and lower by Euro 229 thousand, respectively, for the 12-month period ended December 31, 2022.

In July 2022, the subsidiary VIVISOL DEUTSCHLAND GmbH acquired 100% of the shares of PROFI GESUND- HEITS -SERVICE GmbH, a German company operating in the home-care sector. If the acquisition had occurred on January 1, 2022, the group's revenues and the profit would have increased by Euro 1,681 thousand and by Euro 213 thousand, respectively, for the 12-month period ending December 31, 2022.

In August 2022, the subsidiary VIVICARE HOLDING GmbH acquired 100% of the shares of WIP WEITERBIL- DUNG IN DER PFLEGE GmbH, a German company operating in the home-care sector. If the acquisition had occurred on January 1, 2022, Group profit would have decreased by Euro 7 thousand for the 12-month period ended December 31, 2022.

In September 2022, the subsidiary AIRSOL Srl acquired 51% of the shares of ITOP Spa OFFICINE ORTOPEDICHE and its subsidiaries ITOP ORTOPEDIE ASSOCIATE Srl, ITOP SERVIZI Srl, ITOP SICILIA Srl and ORTHOHUB Srl, Italian companies operating in the field of orthopaedic prostheses. If the acquisition had occurred on January 1, 2022, the group's revenues and the profit would have increased by Euro 9,790 thousand and by Euro 1,378 thousand, respectively, for the 12-month period ending December 31, 2022.

In November 2022, the subsidiary AIRSOL Srl acquired 61% of the POLAR ICE Ltd, an Irish company that produces and sells dry ice. If the acquisition had occurred on January 1, 2022, the group's revenues and the profit would have increased by Euro 3,257 thousand and by Euro 828 thousand, respectively, for the 12-month period ending December 31, 2022.

In December 2022, the parent company acquired 52.56% of the shares of GREEN ASU PLANT PRIVATE Ltd, an Indian company operating in the technical gas and renewable energy sectors.

In December 2022, the parent company acquired 45.60% of the shares of BHORUKA SPECIALTY GASES PRIVATE Ltd, an Indian company operating in the technical gas sector.

The result of the acquisitions on the assets and liabilities of the Group is set below:

The Group checks the recoverability of goodwill at least annually or more frequently if specific events or changed circumstances indicate the possibility of having suffered an impairment loss, at Cash Generating Unit level to which the Company's management charges said goodwill, in accordance with the matters anticipated by IAS 36 "impairment of assets".

Impairment test

As provided by IAS 36 Impairment of assets, the value of intangible assets with an indefinite useful life is not amortised, but instead subject to an Impairment test at least once per year. The Group does not record intangible assets with an indefinite useful life other than goodwill.

IAS 36 also requires a company to assess at each reporting date the existence of indications of impairment in relation to any other asset.

The recoverability of the book values is tested by comparing the book value of the asset with its fair value (for example, using market multiples obtained from comparable transactions) or its value in use, whichever is greater. The methodology used to identify the recoverable amount (value in use) consists of discounting future cash flows generated by activities directly attributed to the entity to which the goodwill (CGU) is allocated, as well as the value expected from its divestment or transfer upon the end of its useful life. Value in use is calculated as the sum of the current value of expected future cash flows based on the forecasts issued for every CGU and approved by the Board of Directors of the Company.

The business plans cover a time span of five years or, in some cases, given the type of business involving investments with medium-term returns, of 7 or 10 years and were implemented based on the 2023 budget drawn up by the Management. The growth rates considered in the plan's timeframe were calculated based on experience in the relative sectors.

The rate used to discount cash flows was calculated using the Weighted Average Cost Of Capital (WACC). The WACC was calculated on an ad-hoc basis for each CGU subject to impairment, taking into consideration the specific parameters of the geographical area: market risk premium and sovereign debt yields and parameters relating to the sector of activity).

To ensure that changes to the main hypotheses would not significantly influence the results of the impairment tests, sensitivity analyses were carried out in the event of a change in WACC and growth rates of +/- 0.5.

The outcomes of these simulations reasonably supported the measurement obtained.

None of the impairment tests carried out as at December 31, 2022 identified any impairment losses except that of HYDROENERGY ShpK. However, since the value in use is determined on the basis of estimates, the Group cannot guarantee that the value of goodwill or other intangible assets will not be subject to impairment in the future.

11. Other intangible fixed assets

The breakdown of the item is as follows:

The item "Other changes" includes the effects of the application of hyperinflation in Turkey as summarised below:

12. Equity investments

The breakdown of the item is as follows:

Except for:

all of the above investments are held by the parent company.

Non-consolidated subsidiaries and other minority interests are measured at fair value.

The following table shows the main economic and financial data of jointly controlled companies consolidated with the net equity method:

13. Other financial assets

The breakdown of the item is as follows:

The breakdown of the item "Amounts receivable from third parties" is as follows:

For further information on derivatives, see paragraph "Payables and other financial liabilities".

The item "Other receivables" mainly refers to long-term financial receivables to group companies not consolidated on a full line-by-line basis.

The breakdown for the item "Securities" is as follows:

The item "Securities" relating to SOL HELLAS refers to government securities of Greece, with maturity exceeding 12 months issued in payment of receivables claimed by the subsidiary SOL HELLAS from public bodies.

14. Deferred tax assets

The breakdown of the above item is as follows:

Deferred tax assets were measured in the case of probable realisation and tax recoverability considering the limited time horizon based on the business plans of the companies.

Deferred tax assets of Euro 3,520 thousand were recognised against prior losses in that there exists the probability of obtaining, in future financial years, taxable income sufficient to absorb the tax losses carried forward. The item "Other" includes the tax effect related to asset revaluations carried out by some Italian companies of the Group of Euro 9,328 thousand, which, although eliminated in the consolidated financial statements, allow the Group to receive the related tax benefits.

15. Inventories

The breakdown of the item is as follows:

16. Trade receivables

The breakdown of the item is as follows:

The "Allowance for doubtful accounts" changed as follows:

The item "Other changes" refers to exchange rate differences of Euro 54 thousand and to reversals of the fund of Euro 708 thousand.

17. Other current assets

The breakdown of the item is as follows:

"Prepayments and accrued income" represent the harmonising items for the period calculated on an accrual basis.

This item breaks down as follows:

The item "Other prepayments" mainly comprises purchase invoices referring to maintenance agreements or other expenses.

18. Current financial assets

The breakdown of the item is as follows:

The breakdown for the item "Short-term time deposits" is as follows:

19. Cash and cash at bank

The breakdown for this item is as follows:

20. Shareholders' equity

The share capital of SOL Spa as at December 31, 2022 comprised 90,700,000 ordinary shares with a par value of Euro 0.52 each, fully subscribed and paid up.

The breakdown of and changes in shareholders' equity at year-end are detailed below:

The item "Other reserves" mainly includes extraordinary reserves, the Cash Flow Hedge (CFH) reserve, the effects of hyperinflation in Turkey and unallocated profits.

As at December 31, 2022, the CFH reserve, gross of the tax effect, was positive and amounted to Euro 12,994 thousand (positive for Euro 1,278 thousand as at December 31, 2021). The change in the period is reported in the Consolidated Statement of Comprehensive Income.

For further information on derivatives, see paragraph "Payables and other financial liabilities".

The effects of hyperinflation in Turkey amounted to Euro 5,944 thousand, of which Euro 361 thousand were third parties.

Reconciliation of Parent Company's Financial Statements with the Consolidated Financial statements

21. Employee severance indemnities and benefits

The breakdown for this item is as follows:

Employee benefits are calculated on the basis of the following actuarial assumptions:

Sensitivity analysis

The effects of the variation of the assumptions used are presented here below:

Employee severance indemnities

The item "Employee severance indemnity" reflects the indemnity provided to employees during their working relationship which is paid at the time the employee leaves the company. In the presence of specific conditions, the employee may obtain a partial advance on said indemnity during their working relationship.

Other

The item "Other" comprises benefits such as the loyalty bonus, which accrues on attainment of a specific length of service within the company.

22. Provision for deferred taxes

The item "Provision for deferred taxes" represents the net balance of deferred tax liabilities provided for in the consolidated financial statements as at December 31, 2022 with regard to tax items present in the financial statements of the Group companies (accelerated depreciation), and the deferred tax liabilities referring to the other consolidation entries; the item comprises.

23. Provisions for risks and charges

The breakdown of the item is as follows:

Provisions for risks and charges are allocated exclusively in the presence of a current obligation assessable in a reliable way, as a result of past events, which may be legal, contractual or derive from declarations or behaviour of the company such as to create in third parties a reasonable expectation that the company is responsible or assumes the responsibility of fulfilling an obligation. If the financial effect of time is significant, the liability is discounted, the discounting effect is recorded under financial expense.

The provisions underwent the following changes:

24. Payables and other financial liabilities

The breakdown of the item is as follows:

The item "Bonds" refers:

The item "Amounts due to other lenders" comprises medium- and long-term loans granted by credit institutions. Some of these loans are backed by liens on movable assets and mortgages on real property, as already mentioned in the notes regarding tangible fixed assets.

The item ʺOthers" includes Euro 18 million in payables to SIMEST Spa for the repurchase of shares in the companies BHORUKA SPECIALTY GASES PRIVATE Ltd and GREEN ASU PLANT PRIVATE Ltd.

The detailed breakdown of the item "Bonds", "Amounts due to other lenders", "Lease liabilities" and "Derivatives" is as follows (with values expressed in thousands of euro:

Covenants

The loan agreements marked by an asterisk ( ^*) contain financial restrictions (covenants) that envisage the maintenance of certain ratios between net financial indebtedness and shareholders' equity, between net financial indebtedness and cash-flow, and between net financial indebtedness and EBITDA referable to the consolidated financial statements.

To date, these parameters were complied with and are complied with as at December 31, 2022.

Derivatives

Some loan agreements were covered by derivative contracts, as defined below.

1. The loan agreement outstanding with Mediobanca whose residual debt amounts to Euro 536 thousand was hedged by an IRS agreement entered into on May 19, 2010, which anticipates the payment of a fixed rate of 2.9% against a floating 6-month Euribor rate. The fair value as at December 31, 2022, calculated by the same bank, was negative in the amount of Euro 1 thousand (negative in the amount of Euro 55 thousand as at December 31, 2021).

2. The loan agreement outstanding with BNL - BNP Paribas, the residual debt of which amounts to Euro 34,960 thousand, was hedged by a fixed rate of 1.45% against a floating 6-month Euribor rate. The fair value as at December 31, 2022, calculated by the same bank, was positive in the amount of Euro 3,605 thousand (negative in the amount of Euro 351 thousand as at December 31, 2021).

3. The bond whose residual debt amounts to Euro 9,588 thousand was hedged by a CCS contract entered into with Intesa San Paolo on June 15, 2012. The fair value as at December 31, 2022, calculated by the same bank, was positive in the amount of Euro 1,529 thousand (at December 31, 2021 positive in the amount of Euro 1,407 thousand).

4. The bond whose residual debt amounts to Euro 8,121 thousand was hedged by a CCS contract entered into with Intesa San Paolo on May 29, 2013. The fair value as at December 31, 2022, calculated by the same bank, was positive in the amount of Euro 1,614 thousand (at December 31, 2021 positive in the amount of Euro 1,478 thousand).

5. The loan outstanding with Unicredit Bulbank whose residual debt amounts to Euro 1,000 thousand was hedged by a fixed rate of 2.40% against a floating 3-month Euribor rate. The fair value as at December 31, 2022, calculated by the same bank, was positive in the amount of Euro 2 thousand (negative in the amount of Euro 67 thousand as at December 31, 2021).

6. The loan agreement outstanding with Intesa San Paolo whose residual debt amounts to Euro 9,375 thousand was hedged by a fixed rate of 0.44% against a floating 6-month Euribor rate. The fair value as at December 31, 2022, calculated by the same bank, was positive in the amount of Euro 390 thousand (negative in the amount of Euro 178 thousand as at December 31, 2021).

7. The loan agreement outstanding with Banca Popolare di Bergamo, the residual debt of which amounts to Euro 7,664 thousand, was hedged by a fixed rate of 0.10% against a floating 3-month Euribor rate. The fair value as at December 31, 2022, calculated by the same bank, was positive in the amount of Euro 332 thousand (negative in the amount of Euro 95 thousand as at December 31, 2021).

8. The loan agreement outstanding with Intesa San Paolo whose residual debt amounts to Euro 17,500 thousand was hedged by a fixed rate of 0.10% against a floating 6-month Euribor rate. The fair value as at December 31, 2022, calculated by the same bank, was positive in the amount of Euro 1,069 thousand (negative in the amount of Euro 145 thousand as at December 31, 2021).

9. The loan agreement outstanding with BNL - BNP Paribas, the residual debt of which amounts to Euro 13,500 thousand, was hedged by a fixed rate of 0.535% against a floating 6-month Euribor rate. The fair value as at December 31, 2022, calculated by the same bank, was positive in the amount of Euro 685 thousand (negative in the amount of Euro 278 thousand as at December 31, 2021).

10. The loan agreement outstanding with Mediobanca, the residual debt of which amounts to Euro 27,500 thousand, was hedged by a fixed rate of 0.759% against a floating 6-month Euribor rate. The fair value as at December 31, 2022, calculated by the same bank, was positive in the amount of Euro 1,618 thousand (negative in the amount of Euro 560 thousand as at December 31, 2021).

11. The loan agreement outstanding with BNL - BNP Paribas, the residual debt of which amounts to Euro 21,875 thousand, was hedged by a fixed rate of -0.13% against a floating 6-month Euribor rate. The fair value as at December 31, 2022, calculated by the same bank, was positive in the amount of Euro 2,154 thousand (at December 31, 2021 positive in the amount of Euro 67 thousand).

The Group, where possible, applies hedge accounting, verifying compliance with the requirements of IAS 39. From January 1, 2018, the Group decided to continue to use the hedge accounting rules set out in IAS 39 and not IFRS 9 for all hedges already designated in hedge accounting at December 31, 2017 and for new hedges designated in subsequent periods.

Derivative instruments that qualify as hedges pursuant to IFRS 9 and IAS 39 comprise transactions put in place to hedge the fluctuations in cash flows (Cash Flow Hedge - CFH) and to hedge the fair value of the hedged element (Fair Value Hedge - FVH).

The contract numbered 1. was assessed at fair value hedge, while contracts numbered from 2. to 11. were assessed at cash flow hedge.

Hierarchical levels of fair value measurement

As regards the financial instruments recorded in the statement of financial position at fair value, the IFRS 7 requires that such values be classified on the basis of a hierarchical level that reflects the importance of the inputs used when determining the fair value.

The levels are broken down as follows:

The following table shows the fair value as at December 31, 2022 of financial instruments by hierarchical level of fair value measurement: