Heidelberg Materials : Group Report on Payments for the financial year 2022

Group Report on Payments for the financial year 2022

Introduction

The Group Report on Payments of HeidelbergCement AG for the reporting period (financial year from 1 January to 31 December 2022) has been prepared in accordance with the provisions of §§ 341q to 341y of the German Commercial Code (HGB) and includes all subsidiaries that are obliged under the provisions of the German Commercial Code or in accordance with other national provisions through the implementation of EU Directive 2013/34/EU to create a report on payments, as well as the parent company. The Group Report on Payments was approved and released by the Managing Board on 21 June 2023.

The Group Report on Payments was drawn up in German and denominated in euro.

The Group Report on Payments is published in the Federal Gazette. It can also be downloaded in German and English from the Heidelberg Materials Group's website at www.heidelbergmaterials.com.

Fundamentals of the Group Report on Payments for 2022

Legal regulations

In accordance with § 341r of the HGB, activities in the mineral extraction industry are activities involving the exploration, prospection, discovery, development, and extraction of minerals, crude petroleum and natural gas deposits, or other materials, within the economic activities listed in section B, divisions 05-08 of Annex I to Council Regulation (EC) no. 1893/2006 of 20 December 2006 establishing the statistical classification of the economic activities in NACE Revision 2 and amending the Council Regulation (EEC) no. 3037/90, as well as some regulations of the EU on specific statistical domains (OJ L393 dated 30 December 2006, page 1).

In accordance with § 341v, section 1 of the HGB, HeidelbergCement AG, as a parent company within the meaning of § 290 of the HGB in conjunction with § 341q of the HGB, is required to create and publish a Group Report on Payments on an annual basis because it belongs to the relevant group of (large) corporations active in the raw material extraction industry in accordance with § 341q of the HGB and NACE Code Revision 2 ("Nomenclature statistique des activités économiques dans la Communauté européenne"). Since a Group Report on Payments has been published, the parent company is exempt from drawing up and publishing this information itself. This applies independently of its activity classified in division 23 of Council Regulation (EC) no. 1893/2006 of 20 December 2006.

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Scope of consolidation

In accordance with § 341v, section 3 of the HGB, the scope of consolidation of the companies included in the Group Report on Payments covers the parent company and all subsidiaries within the meaning of § 290 of the HGB and IFRS 10.

Joint operations that are recorded proportionately in the consolidated financial statements in accordance with § 315a of the HGB in conjunction with IFRS 11, as well as joint ventures and associates that are accounted for using the equity method in the consolidated financial statements of HeidelbergCement AG in accordance with § 315a in conjunction with IFRS 11 and IAS 28, do not form part of the Group Report on Payments, as there is no obligation to report their payments.

The inclusion of subsidiaries and their payments in the Group Report on Payments begins on the date of the first‐time consolidation and ends at the point of retirement from the scope of consolidation.

With regard to the scope of consolidation, we refer to the 2022 Annual Report of Heidelberg Materials.

Activities

• 341r of the HGB does not define the term "activities", but refers to the NACE classification, which provides the identification of an activity. In accordance with §§ 341q ff. of the HGB, the following activities fall under the reportable NACE codes 05-08:
• • Division 05 Mining of coal
  • Division 06 Extraction of crude petroleum and natural gas
  • Division 07 Mining of metal ores
  • Division 08 Other mining and quarrying

The activities of the Heidelberg Materials Group companies essentially concern the activities in division 08, group 08.1: extraction of natural stone, gravel, sand, clay, and kaolin, including the extraction of lime and gypsum, as well as sand and gravel. These are primarily the activities of the aggregates business line of the Heidelberg Materials Group.

If a company has a variety of different activities, the NACE classification in accordance with NACE Revision 2 provides for the assignment to the NACE code that is identified as the main activity of the company. The main activity is the activity that makes the greatest contribution to the added value of a company and must not account for more than 50% of its total activity. Added value is calculated as the difference between production value and intermediate consumption (gross added value). If an activity accounts for more than 50% of the total activity, this activity must be considered a main activity.

Heidelberg Materials uses the result from current operations to determine the greatest contribution to added value.

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This is also called the "top‐down method". In contrast, the so‐called "infection theory" - another permitted approach - does not distinguish between main and sideline activities and only uses engagement in the abovementioned activities of NACE codes 05-08 as a trigger for reporting.

Subject to legal clarification or supreme court jurisdiction, the Heidelberg Materials Group will continue to use the top‐down method in the Group Report on Payments. The approach of Heidelberg Materials is in line with the pronouncements of the Institute of Public Auditors in Germany (IDW) - Practice Statement 1/2017: creation of (group) reports on payments.

Payments

Payments are all amounts paid in cash or in kind in connection with activities in the mineral extraction industry, if they are due to the following reasons in accordance with § 341r, no. 3 of the HGB:

1. Production payment entitlements
2. Taxes levied on the income, production, or profits of corporations, excluding taxes on consumption, sales taxes, value added taxes, taxes on the wages of employees of corporations, and similar taxes
3. Royalties
4. Dividends and other profit distributions from company shareholdings
5. Signature, discovery, and production bonuses
6. Rental and entry fees, other considerations for licences or concessions
7. Payments for infrastructure improvements

In the 2022 financial year, no payments were made by the subsidiaries of the Heidelberg Materials Group in accordance with § 341r, no. 3 (a) (Production payment entitlements), (d) (Dividends and other profit distributions from company shareholdings), and (e) (Signature, discovery, and production bonuses) of the HGB. A tabular presentation in the Group overview and country reports section is therefore not required for these payment reasons.

Payments to governments, whether made as a single payment or a series of related payments and with a total amount not exceeding €100,000 during the reporting period, have not been taken into account in the Group Report on Payments in accordance with § 341t, section 4 of the HGB.

Payments in foreign currency have been converted into euro at the average annual exchange rate.

Payments actually made to governments have been recorded in the Group Report on Payments.

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The payments listed in this report on payments relate to cash payments. In the 2022 financial year, no reportable payments in kind corresponded to or exceeded individually or in total the amount of €100,000.

Governments

Governments within the meaning of § 341r, no. 4 of the HGB are national, regional, or local authorities of a Member State of the European Union, of another State which is a party to the Agreement on the European Economic Area, or of a third country, including departments or agencies that are controlled by an authority, as well as companies on which an authority can exercise a dominant influence within the meaning of § 290 of the HGB.

Projects

A project stands for the combination of operational activities that form the basis for payment obligations with a government, from which companies have usually received a quarrying license or concession. These mainly concern quarries or gravel and sand pits.

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