Hoffmann Green Cement Technologies : 2023 Annual Financial Report

2023 ANNUAL FINANCIAL REPORT

This document is available free of charge at the Company's registered office in La Bretaudière, Chaillé-sous-les-Ormeaux,

85310 Rives de l'Yon, as well as in an electronic version on the Company's website (www.ciments-hoffmann.fr).

Hoffmann Green Cement Technologies

A public limited company (société anonyme) with a Management Board and a Supervisory Board with a capital of €14,648,193.

Registered office: La Bretaudière, Chaillé-sous-les-Ormeaux, 85310 Rives de l'Yon, France

Trade and Companies Register 809 705 304 La Roche-sur-Yon

RESPONSIBLE PERSON

"I hereby certify, to the best of my knowledge, that the financial statements have been prepared in accordance with applicable accounting standards and give a true and fair view of the Company's assets, financial position and results, and that the management report in chapter 1 of this annual financial report presents a true and fair view of changes in the Company's operations, results and financial position and describes the main risks and uncertainties to which it is exposed."

18 March 2024,

Julien Blanchard,

Chairperson of the Company's Management Board.

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TABLE OF CONTENTS
1.	MANAGEMENT BOARD REPORT	5
1.1.	RISK FACTORS	5
1.2.	BUSINESS OVERVIEW	21
1.3.	ORGANISATIONAL STRUCTURE	42
1.4. REVIEW OF FINANCIAL POSITION AND INCOME	42
1.5.	REGULATORY ENVIRONMENT	46
1.6.	EMPLOYEES	50
1.7.	SHARE CAPITAL	52
1.8.	MAIN SHAREHOLDERS	53
2.	FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2023	56

2.1. FINANCIAL STATEMENTS PREPARED UNDER IFRS FOR THE YEAR ENDED 31 DECEMBER

2022

56

2.2. STATUTORY AUDITOR'S REPORT ON THE IFRS FINANCIAL STATEMENTS FOR THE

FINANCIAL YEAR ENDED 31 DECEMBER 2023 - IFRS CONSOLIDATED FINANCIAL
STATEMENTS 2023 AND 2022	126

2.3. PARENT COMPANY FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31

DECEMBER 2023

131

2.4. STATUTORY AUDITOR'S REPORT ON THE ANNUAL FINANCIAL STATEMENTS FOR THE

	FINANCIAL YEAR ENDED 31 DECEMBER 2023	171
3.	REPORT OF THE SUPERVISORY BOARD ON CORPORATE GOVERNANCE	176

3.1. ADMINISTRATIVE, MANAGEMENT, SUPERVISORY AND EXECUTIVE MANAGEMENT

	BODIES	176
3.2.	COMPENSATION AND BENEFITS	186
3.3. OPERATION OF THE ADMINISTRATIVE AND MANAGEMENT BODIES	194
3.4.	RELATED-PARTY TRANSACTIONS	198

3.5. SUMMARY TABLE OF DELEGATIONS OF POWERS AND AUTHORITY GRANTED BY THE

	GENERAL MEETING	202
4.	CORPORATE SOCIAL RESPONSIBILITY REPORT	205
5.	DOCUMENTS AVAILABLE	238
6.	GLOSSARY	239
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GENERAL REMARKS

Definitions

In this annual financial report, and unless otherwise indicated:

• "AMF" means the Autorité des Marchés Financiers;
• the terms "Company" and "Hoffmann Green" refer to the company Hoffmann Green Cement Technologies, whose registered office is located at La Bretaudière, Chaillé-sous-les-Ormeaux, 85310 Rives de l'Yon, France, registered in the La Roche-sur-Yon Trade Register under number 809 705 304;
• the term "Group" means the group of companies formed by the Company and its subsidiaries. This legal scope is presented in section 1.3 of the Annual Financial Report;
• the term "Annual Financial Report" means this annual financial report on the financial statements for the financial year ended 31 December 2023.

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1. MANAGEMENT BOARD REPORT

1.1. RISK FACTORS

In accordance with the provisions of Regulation (EU) No. 2017/1129 ("Prospectus 3" Regulation) and Delegated Regulation (EU) 209/980, this chapter only presents the risks specific to the Company and which are significant for anyone making an informed investment decision. In addition, in accordance with the provisions of Article L. 225-100-1 of the French Commercial Code, the financial risks relating to prices, credit, liquidity and cash flow are described in the notes to the IFRS financial statements for the financial year ended 31 December 2023 presented in section 2.1 of the Annual Financial Report.

Each of these risks is specific to the Company and is classified according to its degree of criticality, which is based on a joint analysis of (i) the probability of the risk occurring and (ii) the estimated magnitude of its negative impact, in the aforementioned relevant category.

The probability of occurrence of each of the risk factors relating to the Company and its impact, assessed on three levels ("limited", "moderate" and "high"), are presented in the table below. The main risk factors are grouped into five categories, it being specified that within each of them, the risk factors are presented in decreasing net degree of criticality according to the Company's assessment at the date of approval of the Annual Financial Report, which takes into account risk management measures. The most significant risk factors are listed first and are marked with an asterisk.

The occurrence of new events, either internal to the Company or external, may change this order of importance in the future.

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Summary table:

Risk name	Probability	of		Risk magnitude	Net degree of
	occurrence				criticality
Risks related to the macroeconomic environment
Risks related to global price increases	High			High	High
due to the war in Ukraine and the
macro-economic environment
Risks related to the Company's activity
Risks related to the competitive	Moderate			High	High
environment and the deployment of
industrial facilities*
Risks related to the operation of	Moderate			High	High
production sites*
Risks related to dependence on	Moderate			High	High
suppliers*
Risks related to the development of	Moderate			Moderate	Moderate
the Company's activity internationally
Risks related to information systems	Moderate			Moderate	Moderate
management and cybercrime
Risks related to the Company's	Moderate			Moderate	Moderate
reputation and image
Risks related to dependency on key	Limited			High	Moderate
people
Risks related to the cement industry
Risks related to dependence on the	Moderate			Moderate	Moderate
construction, real estate and public
works markets
Risks related to regulatory constraints	Limited			Limited	Limited
Legal risks
Risks related to intellectual property*	High			High	High
Financial risks
Risks related to working capital	Limited			High	Moderate
requirements

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RISKS RELATED TO GLOBAL PRICE INCREASES DUE TO THE WAR IN UKRAINE AND THE MACROECONOMIC ENVIRONMENT

Neither the Company's partners nor its suppliers are located in Eastern Europe or Russia, meaning that the Company's activity is not directly affected.

Nevertheless, the invasion of Ukraine by Russia in February 2022 had significant repercussions on the financial markets and on the price of certain raw materials, and will impact the entire world economy. As a result, since February 2022, some of the Company's suppliers are currently facing rising energy prices, as well as rising transport costs.

The purchase contracts entered into with its suppliers stipulate a price cap. Insofar as the pricing conditions were unfavourable to certain suppliers due to the increase in energy prices and transport costs, certain raw material purchase contracts were renegotiated at the initiative of the suppliers.

Furthermore, energy and fuel price hikes and supply difficulties for some commodities could impact the entire construction sector and some projects under way could be postponed or even cancelled.

More generally, the Company is particularly vigilant about the impacts of inflation, potential supply chain disruptions and rising interest rates in an uncertain geopolitical and economic context.

The magnitude of this risk is therefore considered high for the Company.

The probability of occurrence of this risk is considered high although it is difficult to assess as it is difficult to anticipate the duration of the war in Ukraine and more generally, due to uncertainty and volatility of the macro-economic environment.

In view of these elements, the net degree of criticality of this risk is considered by the Company to be high.

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RISKS RELATED TO THE COMPANY'S ACTIVITY

• Risks related to the competitive environment and the capacity to deploy industrial facilities.

The cement market in France is dominated by a limited number of players, including five world leaders who alone account for 95% of cement production in France1: Holcim, HeidelbergCement, Vicat, CRH and Imerys.

As cement is a heavy product and its transport costly, the operating radius of a cement plant does not exceed 300 km by land. The regional network is therefore a necessary prerequisite for access to the cement market. In addition to the regional network, the intensity of competition in each regional market also depends on the production capacities of the players present.

The Company's ability to develop its business and its presence in cement markets therefore depends on its ability to meet market needs with its production facilities. The presence of other players with available or surplus capacity on a regional market or nearby, as well as the presence of one or more players that already have cement import infrastructure or are able to set up such infrastructure on the regional market under satisfactory economic conditions, are likely to create a situation of increased competition.

This intense competitive situation is likely to have a material adverse effect on the Company, its business, financial position, results, outlook or development.

The Company's strategic industrial development plan, described in section 1.2 "Business overview" of the Annual Financial Report, includes the construction of two production sites "H2" and "H3", each capable of producing 250,000 metric tons of cement per year, in order to rapidly increase the Company's production capacities and implement a gradual network in the region. The "H2" site was commissioned in 2023 and the "H3" site will be commissioned in 2025. A delay in commissioning the new production site "H3" would slow penetration of the French market, which could have a significant adverse effect on the Company, its business, its financial position, its results, its outlook or its development.

Penetration of the cement market is also based on the Company's ability to set up and maintain commercial partnerships with players in the construction sector, and to be present in cement distribution networks. In this respect, it is specified that the Company has already set up several partnership agreements (see section 1.2 "Business overview" of the Annual Financial Report).

1 Source: INSEE Focus No. 121 of 25/07/2018.

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It should be noted that, even though the main players in the French cement market are trying to reduce the carbon footprint of traditional cement and have launched several initiatives in this direction, to its knowledge, at the date of the Annual Financial Report, the Company is the only player able to produce and market decarbonised cement without clinker, a fivefold reduction in the carbon footprint of cement compared to traditional Portland cement2. In addition, the innovations developed by the Company are a major competitive advantage (see section 1.2.5 "Competitive strengths and assets" of the Annual Financial Report).

Even though the Company believes it has a technological lead, it cannot guarantee that its competitors will not succeed in developing decarbonised cements comparable or even better than those currently marketed or being developed by the Company. The development and marketing of low-carbon cements by one or more of the Company's competitors could have a material adverse effect on the Company, its business, financial position, results, outlook or development.

According to the Company, it will take a relatively long time to develop and market competing decarbonised cements given the time spent developing Hoffmann Green cements (eight years of research and development work) and setting up an innovative and adapted industrial process.

The Company believes that the net degree of criticality of this risk is high, given that:

• the effectiveness of the measures put in place by the Company to understand the increased competitive environment in which it operates may be mitigated (in the event of delays in the commissioning of production sites for reasons external to the Company or if competing decarbonised cements are developed);
• the occurrence of the events described in this section could have a significant negative impact on the Company (impact on the Company's revenue and profitability).

• Risks related to the operation of production sites

As part of its construction projects for new production sites, such as the "H3" site, the commissioning of which is scheduled for 2025 (the "H2" production site having been commissioned in 2023), the Company may encounter difficulties resulting in the delay of construction sites, the commissioning of production sites or the ramp-up of production.

2 Results for cement made based on H-UKR technology compared to conventional Portland cement type CEM I.

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These difficulties could, for example, be related to administrative procedures (obtaining a building permit, ICPE authorisation, etc.), weather conditions during construction or non- performance by suppliers or subcontractors contracted to work on construction sites.

Such delays could have a material adverse effect on the Company, its business, financial position, results, outlook or development.

As part of the construction of "H3", the Company intends to capitalise on the industrial knowhow acquired during the construction of "H1" and "H2" and use the various stakeholders who took part in these first projects.

Once the production sites are commissioned, the Company may face interruptions, breakdowns or other factors that could slow down or stop cement production. Such events could have a material adverse effect on the Company, its business, financial position, results, outlook or development.

The Company has implemented various procedures applied at the "H1" and "H2" sites to ensure the resumption of production in the event of an interruption due to an internal or external event. In addition, the production site is constantly monitored by the Company's employees, who are trained to intervene in the event of interruption. The Company intends to implement these procedures on the "H3" site.

The Company believes that the net degree of criticality of this risk is high, given that:

• the construction, commissioning and optimal operation of production sites depends in part on external circumstances over which the Company has no control (financing of investments, weather conditions, non-performance by a subcontractor or supplier, lockdowns related to health risks); and
• the occurrence of the events described in this section could have a significant negative impact on the Company (impact on the Company's revenue and profitability).

• Risks related to dependence on suppliers

The manufacturing process for Hoffmann Green cements is based on the use of co-products from industry:

• blast furnace slag: a co-product generated by steel production;
• clay: a co-product from the washing of aggregates and clay sludge; and
• gypsum or desulphogypsum: gypsum comes from site cuttings and desulphogypsum is generated by thermal power plants.
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