Masterplast : Publication of Q1 2024 results, interim management report

MASTERPLAST PLC.

INTERIM MANAGEMENT REPORT

14 May 2024.

THE MASTERPLAST PLC.

Interim management report 2024

Consolidated, non-audited

According to International Financial and Reporting Standards (IFRS)

14 May 2024

CONTENTS
MASTERPLAST	4
SUMMARY	5
BUSINESS PROSPECTS	7
Industrial environment	8
Analysis of turnover	9
Profit and loss account	11
Other comprehensive income	13
Balance sheet presentation and analysis	14
Cash flow, bank information	16
Investigations against Masterplast:	17
Change in equity	18
Contingent liabilities	18
Changes of the full-time employees (headcount)	19
Significant events between the quarter-end and the publication of this report	19
Balance sheet compared with 31 December 2023 status	20
Consolidated companies	21
Executives and (strategic) employees influencing the operation of the Issuer	22
Shareholders of the Company with a holding above 5%	22
Pre esentation of the amount of own shares (pcs)	23
Publications issued by Masterplast PLC. in the reference period	23
DECLARATION	24

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MASTERPLAST

Founded in 1997, Masterplast Group is the largest Hungarian-owned building materials manufacturing company in the Central European region. It has a direct market presence in 10 European countries through its subsidiaries and is present in most European countries through its export partners. It has a strong position in the market for façade insulation, high roof insulation and dry construction systems.

It ensures its product background mainly through manufacturing at its ISO and TÜV certified production sites in Hungary, Serbia and Germany and through strategic manufacturing partnerships. In 2020, the company entered the healthcare segment, and its strategic goal is to make the modular business division

a success as soon as possible. Due to the growing demand for fibre insulation materials, the company's focus in 2023 was on the establishment of rock wool and glass wool insulation material plants to meet the needs of the Hungarian and Central and Eastern European markets. Its production development plans are now in the implementation phase in both targeted product segments.

Masterplast provides competitive business services to its partners through a well-established customer- oriented sales system, continuous quality control of manufactured and distributed products, a stable product supply background and flexible logistics solutions.

SUMMARY

The improving trend continued, and a positive EBITDA was achieved in the first quarter of 2024, even in a subdued market environment. The comprehensive, efficient improvement measures taken last year ensure successful operations even with lower market demand.

The signs of a recovery in the construction market are already visible - the improvement in the interest rate

demand in the last quarter. Compared to last year's first quarter base, turnover fell by 13%, with the general wait-and-see attitude across Europe playing a major role. In addition, more than half of the target markets have already seen an increase in turnover compared to a year ago.

In the organization adapted to demand conditions, own production capacities operate more cost-

Data in 1000 EUR	Q1 2024	Q1 2023	Change
Sales revenues	32 665	37 602	-4 937
EBITDA	856	-2 032	2 888
EBITDA ratio	2,6%	-5,4%
Profit/loss after taxation	53	-5 837	5 890
Net income ratio	0,16%	-15,5%

Source: the Group's IFRS consolidated non-audited accounts as at 31st March 2023 and non-audited accounts as at 31st March 2023, and non-audited data from the Group's management information system

environment is projecting the start of new constructions - while renovation programs outlined according to EU directives are forecasting the start of the renovation segment. However, the construction industry continued to be characterized by subdued

effectively. The profitability of the Serbian fiberglass factory has improved significantly compared to a year ago, turning last year's loss-making operation back into profit. A major role in this is played by the fact that the previously higher-price raw materials ran out for

	8 400			EBITDA (m EUR)		EBITDA %
10,2%	14,6%
5 235		5 729
								2,1%	2,6%
			1 230			-1,1%		676	856
				-5,4%
					-463	- 439	-10,1%
				-2 032
							-3 194
2022 I.	2022. II.	2022. III.	2022. IV.	2023 I.	2023. II.	2023. III.	2023. IV.	2023. IV.*	2024 I.

*Q4 EBITDA cleraed from year-endone-off items

Source: the Group's IFRS consolidated non-auditedaccounts for 2023 and 2024 and non-audited data from the Group's management information system

the current year, while this effect significantly affected the base.

The cost of materials and services and other expenses also decreased. Personnel costs were at the same level as last year, despite the almost 200 people lower closing headcount (1 231). This reflects a significant increase in wage levels, which, in addition to the necessary wage increases in the inflationary environment, is also explained by the skilled workforce joining the start-up factories.

The EBITDA result of 856 thousand euros for the quarter represents an improvement of around 2.9 million euros compared to the base result of a year earlier (even with higher turnover), and also an improvement compared to the last closed quarter. Taking depreciation into account, the operating result still showed a loss, but the improving trend foreshadows a turnaround in profitability at EBIT level in the near future. Depreciation increased due to the investments capitalised at the XPS plant in Serbia and at the headquarters production site.

The financial result was positive in the period under review due to favourable exchange rate movements for the company. The same exchange rate effects caused a positive result for the associated companies.

Masterplast's profit after tax already shows a profit of 53 thousand euros in the seasonally weakest first quarter.

The Company's cash management - the level of cash, the successfully extended credit lines - ensure the stable operation and growth of the Company.

A significant business potential for Masterplast is that the Hungarian market is already in a preparatory stage and the new home renovation programme is expected to start in June. The building energy-focusedgrant programmes that are due to be launched across Europe in the foreseeable future are expected to further increase the Company's profitability.

With the measures on the table to meet the EU energy policy objectives (REPowerEU plan; "Fit for 55%" package of measures), the Company's medium- term business outlook in the insulation market remains positive. Relying on these factors, the Company - with intention to maintain its current production capacities - continues to implement the intensive investment strategy that lays the foundation for the growth path, including the elements of stone and glass wool production projects launched together with co-investors. The forecasts estimate a positive turnaround in the construction sector for 2025, so the timing of the new investments seems proper.

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BUSINESS PROSPECTS

From the end of 2023 onwards, inflation forecasts across Europe showed a significant improvement, with a wave of central bank rate cuts. The improvement in the interest rate environment could in itself have a stimulating effect on building investment, with previously frozen projects being restarted. The market recovery is expected to be slow in the new construction market, but the shorter-term outlook in the renovation segment is more favourable.

After two years of negotiations, the European Parliament and the Council have adopted the new Energy Performance of Buildings Directive. The Directive sets an ambitious target: to achieve a carbon dioxide-free building stock by 2050. The package, together with two other elements - directives to increase energy efficiency and to increase the use of renewable energy - calls for a huge energy improvement in the buildings sector, i.e. a multiplication of both the number and the depth (thoroughness) of building renovations over the next two and a half decades.

This will entail regulatory changes in member countries and the launch of renovation programmes, which will lead to a significant increase in demand for insulation in the medium to long term, but the market's wait-and-see attitude means that no recovery in demand is expected until these are underway. Improving the short-term outlook, the government in Hungary - the Company's largest market - has already announced the main elements of a new home renovation programme in April 2024, a very important step towards energy efficiency and carbon reduction. The new home renovation programme, expected to start in June 2024, will be available for the energy modernisation of family houses built before 1990.

For 2024, the Company has optimised the production capacity of its production units in anticipation of a more moderate construction environment. The resulting effective headcount and shift numbers can be increased, giving the factories flexibility to respond to any faster market recovery and higher customer demand. Even with its conservative calculations, the Company expects positive results for 2024 at its main production units.

In recent years, the Group has made significant investments in production development. The Group has significantly increased its capacity in the production of fiberglass mesh and diffusion roofing foils, which enables to serve the premium market with the highest quality standards. The new EPS and XPS plants, which started the production in 2023, will contribute significantly to increase the capacity in 2024, and will also allow further penetration of Western European markets.

The possibility of further progress in the medium term is inherent in the start of production of already launched joint venture projects. In Szerencs, on 4.3 hectares, with a non-refundable HIPA support of 5.645 billion forints, the glass fiber factory to be realized with the 50% involvement of the Polish Selena FM S.A is expected to start production in the first half of 2025. One of the main raw materials of the product is waste glass, which is recycled during production according to the principles of circular economy. The company is also working with Market Építő Zrt in Halmajugra to build a rock wool factory with an annual capacity of 35,000 tons, which is expected to start in the second half of 2025. Both fiber material manufacturing plants will be equipped with environmentally friendly, modern electric furnace manufacturing technology, the power supply of which will be partially provided by renewable energy sources.

For Masterplast, as a long-established producer of building materials and insulating materials in the Ukrainian market, there is also great business potential in the reconstruction of Ukraine, which,

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depending on a possible peace agreement, will also be exploitable in the medium to long term.

The Company's vision is that by the second half of the decade, Masterplast will be the only insulation materials manufacturer in the Central and Eastern European region with significant manufacturing and

market positions in both plastics and mineral insulation materials.

Masterplast's prospects are further strengthened by the increasing attention for the modular housing business. Masterplast Modulhouse Kft. has now started its first residential project, following previous successful office building projects. The future of the technology is also promising from an environmental point of view, as the production of the buildings in factory conditions eliminates waste on site. The future ramp-up of modular construction could be based on the completion of a prototype house in 2024, which could be built in Szentendre with significant government grant.

The Company's healthcare segment also has the potential to generate additional revenue and profit above expectations.

Industrial environment

The external economic and industrial environment has a significant effect on the production and sale of the insulation and other construction materials, which are the main activities of the Masterplast. While the sale of the constructional and accessories products is mainly in relation with the new buildings market, the insulation related materials (primarily the heat insulation) depend on both the new building and home renovation markets.

The recent events - the Russo-Ukrainian war, the pandemic measures, and the energy crisis - have led to a persistently unfavorable macroeconomic environment (high inflation and interest rates worldwide) that, although on the path to improvement, has not brought significant revitalization either in the market for new constructions or in the renovation segment at the European level. The phasing out of previous building

renovation support programs and the delay in launching new ones have led to a wait-and-see attitude in the market for several quarters. There are no procurement difficulties, and the supply of goods is good. As a result, the construction industry is characterized by a highly competitive situation where prices have significantly decreased.

With the adoption of the EU's Building Energy Directive, building energy renovation programs in Europe are in sight, which means a revival of the renovation market in the short term. In Hungary, the new home renovation program is already in the preparatory phase. The improvement of the interest rate environment is also awakening the market for new constructions, where a slow upturn is expected. It is a favorable position for manufacturers that construction traders typically have low inventory levels before the upturn.

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Analysis of turnover

Data in 1000 euros	Q1 2024	Q1 2023	Index
	(A)	(B)	(A/B-1)
Thermal insulation system
Roofing foils and accessories
Dry construction system
Heat, sound and water insulation materials
Building industry accessories
Industrial applications
Total sales revenue

Source: the Group's IFRS consolidated non-audited accounts as at 31 March 2023 and non-audited accounts as at 31 March 2023, and non-audited data from the Group's management information system

The roof foils and roof elements product group closed at the same level as a year earlier. Masterplast's recently launched diffusion roofing foils, manufactured in-house, performed well. Thanks to its own production capacity, the Group is gaining business opportunities in international markets.

Other construction product groups fell by between 17% and 28%. In the industrial applications product group, the turnover performance of both the own- account produced health care raw materials and other raw materials trading activities both increased compared to last year's base, with an overall increase of 7%.

25 000

20 000

-15%

1. 000

1. 000

1. 000
   -

Turnover by product groups (tEUR)

2023 I. 2024 I.

0%

-28%	-27%	8%
		-17%

Thermal	Roofing foils and	Dry construction	Heat, sound and	Building industry	Industrial
insulation system	accessories	system	water insulation	accessories	applications
			materials

Source: the Group's IFRS consolidated non-audited accounts as at 31 March 2024 and non-audited accounts as at 31 March 2023, and non- audited data from the Group's management information system

Masterplast's sales revenue in the first quarter decreased by 13% compared to the base quarter. The Thermal insulation systems product group accounted for more than half of sales. Here the decline was 15%. The sales of our own manufactured EPS insulation materials have decreased significantly, as this product range is most affected by price competition. The situation is somewhat better for our own manufactured fiberglass mesh, but overall, this product range also failed to grow in the quarter.

The breakdown of sales by country shows the revenue realized in countries where Masterplast has its own subsidiaries, regardless of which subsidiary made the sale in the territory of the given country. Sales in countries without subsidiaries are reported as Exports.

The Hungarian market accounted for one third of the Group's sales in the quarter. This share is decreasing from quarter to quarter, due to the increasing wait- and-see attitude towards renovation programmes. In the first quarter, domestic market sales fell by 22%

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Data in 1000 euros	Q1 2024	Q1 2023	Index
	(A)	(B)	(A/B-1)
Hungary	11 080	14 296	-22%
Export	4 276	4 136	3%
Poland	2 791	4 356	-36%
Serbia	2 635	2 414	9%
Italy	2 552	2 235	14%
Germany	2 456	2 400	2%
Romania	2 446	3 275	-25%
Ukraine	1 533	1 176	30%
Croatia	1 271	1 556	-18%
Slovakia	1 223	1 423	-14%
North-Macedonia	402	335	20%
Total sales revenue	32 665	37 602	-13%

Source: the Group's IFRS consolidated non-audited accounts as at 31 March 2024 and non-audited accounts as at 31 March 2023, and non-audited data from the Group's management information system

compared to a year earlier, but the performance was similar in Romania, Slovakia and Croatia.

he general downward trend of several quarters has been broken, as this time revenue has increased in more than half of the target markets. This is mostly due to the sales of thermal insulation systems and roofing folis. Strong growth was recorded in Serbia,

despite the war situation in Ukraine, in Italy and in Northern Macedonia, while sales in export territories and Germany increased slightly.

The Group's performance in Poland deserves special mention, where revenue has fallen sharply, but the Polish market is one of the exceptions that was able to grow steadily and at a good pace last year. However, it was difficult to keep up with the strong base from a year earlier.

Based on this, it can be said that although the Group's revenue has decreased compared to the base, the extent of the decrease shows an improving trend and is no longer general when considering the market composition. Building renovation programs aimed at achieving EU goals have already been envisioned, which are expected to have a market-stimulating effect that will be reflected in sales performance from the second half of the year.

15 000

13 000

-22%

1. 000

1. 000

1. 000

5 000	3%
3 000

Turnover by country (EUR t)

	9%				2023 I.		2024 I.
-36%	14%	2%				-18%
		-25%	30%

1 000

MO

EXP

PL

SRB

IT

DE

RO

UA

HR-SK-MKD

Source: the Group's IFRS consolidated non-audited accounts as at 31 March 2024 and non-audited accounts as at 31 March 2023, and non- audited data from the Group's management information system

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