Pyrum Innovations : Annual Financial Statements 2023

2023

Annual Report

Pyrum Innovations AG

PYRUM INNOVATIONS AG - Annual Report 2023

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Annual report for the 2023 financial year

The Pyrum Group's KPIs at a glance

Results of operations and financial position

(EUR thousand)	2023	2022
Sales	1,147	982
Total output	12,799	19,069
Other operating income1	715	1,318
EBITDA2	-7,087	-5,061
EBITDA (adjusted)3	-7,087	-4,776
EBIT4	-9,173	-7,615
EBIT (adjusted)3	-9,173	-7,330
Net income/loss	-9,511	-7,808

Net assets

(EUR thousand)	31 December	31 December
2023	2022
Total assets	50,926	49,857
Equity	22,380	31,891
Equity ratio5	43.9%	64.0%
Available liquidity	4,275	12,519
Employees6	73	63

1. Research grants, subsidies and R&D services
2. Consolidated net income for the period before depreciation, amortisation and write-downs, before financial result, before income taxes
3. 2022 reporting period: adjusted for costs of the secondary listing (EUR 285 thousand)
4. Consolidated net income for the period before financial result, before income taxes
5. Equity/total assets
6. Annual average

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TABLE OF CONTENTS

TABLE OF CONTENT
Letter from the Executive Board	7
Report of the Supervisory Board	10
The company
Pyrum share	16
Introduction to Pyrum Innovations AG	17
Combined management report
Profile of the Group and of Pyrum Innovations AG	30
Economic report	46
Opportunities and risks of future development	59
Supplementary report	72
Annual and consolidated financial statements for 2023
Consolidated balance sheet	74
Consolidated income statement	76
Consolidated cash flow statement	77
Consolidated statement of changes in equity	79
Balance sheet of Pyrum Innovations AG	80
Income statement of Pyrum Innovations AG	82
Combined notes to the financial statements
I. General disclosures on Pyrum Innovations AG and the Group	85
II. Consolidated Group	86
III. Principles of consolidation	86
IV. Accounting policies	87
V. Balance sheet disclosures	90
Consolidated gross statement of changes in non-current assets	92
Gross statement of changes in fixed assets Pyrum Innovations AG	93
VI. Income statement disclosures	100
VII. Related Parties	103
VIII. Cash flow statement disclosures	104
IX. Significant events after the reporting date	104
X. Other disclosures	105
Independent Auditor's report	107
Financial calendar and legal notice	112
PYRUM INNOVATIONS AG - Annual Report 2023	5

LETTER FROM THE EXECUTIVE BOARD

Dear Shareholders, Partners and Supporters of Pyrum,

We have had another eventful year in which we achieved many of our goals and partially realised others, though some things proved impossible to achieve as planned. We have also had to grapple with new challenges and unforeseen events almost every day, forcing us to think outside the box and improvise on more than one occasion. But that is precisely what a company at our stage needs to do: It is impossible to plan everything 100% and we have to be creative every day to solve problems very few people have ever faced. After all, we are developing a new technology in a market still in its infancy. Even the partners who often cannot yet foresee what exactly will be needed in the future. But being involved in this very development process and helping to shape it will secure us, Pyrum, a position on the market which no one will be able to take from us that quickly.

The main highlight of the year was completing the construction, at long last, of our two new lines (TAD 2 and 3) and that TAD 2 operated with rubber from for the first time. It all took longer than planned, and we often had to make the impossible possible in order to source some components. But we ultimately resolved all issues together and fed the first rubber into Reactor 2 at the start of November. It was truly an exhilarating feeling and the whole company was thrilled when the first rubber went into the reactor. We even arranged a live camera feed into the control room so that every employee could be there at 11 p.m. Then, in one fell swoop we forgot all the hardships and disputes with our suppliers, including those we had to beg to get parts delivered. We even chartered an aeroplane to assemble some parts at the factory on time and not lose any more weeks. There have been some tough years behind us, Corona and the war in Ukraine did not really help us with the construction of the two new lines and we had to find solutions to problems we would never have thought possible before. Yet one thing has always kept me motivated and spurred me on: that was building our new Pyrum plant (costing just shy of EUR 30 million) just as quickly as it took my father-in-law to install his heat pump at home. So our delivery times were not all that bad.

A second highlight was finally finding the right location for our new Pyrum-owned plant in Perl/Besch. After almost two years of searching, we finally identified a property in Saarland that met our requirements. Just to be clear: We were welcomed with open arms everywhere! The challenge was to find an industrial area at least 20,000 m² in size, situated outside of a water protection area and preferably on a river. If you type in these criteria and search for property in the Saarland, at first you get no hits. So we had to talk to owners who had no intention of selling their land: a rather tedious task, even with the state government's help. We initially thought we had found such a site in Homburg. But the requirements of the water protection area would have made the plant incredibly expensive and, in some instances, forced a shutdown if the oil had not been transported out several times a day. Despite getting a great deal of support from the city of Homburg, we unfortunately had to pull the plug and find a different solution. As they say: "better a terrible end than terror without end".

As fate would have it, the solution took shape shortly afterwards in the form of a site on the Moselle in Perl/Besch. It is logistically perfectly located and more than big enough, but (and sadly there always has to be a "but") while it is located in the middle of an industrial zone, it was designated as woodland and used as a protective forest between the former ammonia plant and the district of Besch. As the ammonia plant was closed in 1995 and this part of the forest was artificially planted with poplars in the 1960s, the forestry authorities told us that it is not a protected woodland and is not inhabited by

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LETTER FROM THE EXECUTIVE BOARD

animals due to its location in the middle of the industrial area. In addition, poplars only have a limited lifespan and most of them were already rotten. To secure the adjacent railway line, approximately a third of the area would have to have been cleared without creating compensatory areas. With our presence, a new, high-quality forest is being planted in the municipality of Perl, just where nature needs it and wildlife can benefit. In addition, the municipality of Perl is setting aside part of the existing woodlands for forestry activities so that no more trees are felled there. So in summary, there will be more woodland and more green than before, and between November 2023 and May 2024 we turned an area of forest into an industrial zone in spite of all the official requirements in place. It was a mammoth effort by our entire team and was only possible with the support of the municipality of Perl, the municipal and local councils and the state government. This means that almost nothing else now stands in the way of the construction of our new three-line plant in Perl/Besch and initial work can begin.

In parallel with Pyrum's next plant of its own in Perl/Besch, the pipeline of partner plants has grown massively and geat progress has been made on existing projects. Applications for approval have already been submitted in Greece and Czechia. Working with Remondis in Bremen, Unitank in Emleben and SUEZ in the UK, we have taken huge strides in the planning of the plants: Sites have been identified, preliminary talks have been held with the authorities that grant approval and the financial planning has been largely finalised. We now expect the project to start in 2024, at least in Bremen with Remondis and in Emleben with Unitank. With our latest joint venture project in Sweden, we are now working on eight projects in various stages and have more than enough to do to get all these plants over the finishing line in the next three years. Let us not forget that we are dealing with a construction volume well in excess of EUR 300 million! So it is safe to say that we are completely sold out, not just in terms of the works, but also our end products.

Moving on to other highlights of 2023: Sales of our end products rCB and oil and the deepening of our partnerships with BASF and Continental. The joint research project with Continental (JDA) helped to produce rCB (carbon black) to a standard Continental has been using to produce all its solid tyres with our rCB at the Korbach plant since calendar week 23 2023. This is an incredible milestone and has resulted in us also being approved as suppliers by Pirelli and Hankook. We completely underestimated what was needed to win approval as an automotive supplier in accordance with VDA 6.3 and were faced with a huge task to qualify for them in 2023. We only had to restructure the entire company, create new departments, build a laboratory, set up quality assurance, recruit several specialists, write reams and reams of working instructions to turn a start-up into a certified automotive supplier permitted to supply safety-relevant parts for the automotive industry. This was really an effort that we had not initially planned, but we were still able to successfully complete it in 2023. We have been regularly supplying Continental and Schwalbe with rCB since August 2023. Unfortunately, we are not yet in a position to produce enough rCB to even come close to meeting Continental's needs, let alone supply Pirelli and Hankook.

For this, we will need another grinding and pelletising plant five times the size of our existing one. The facilities have been ordered and the grinder has been delivered. The pelletising plant is still experiencing some delivery problems, as some components are being sourced from the US. However, we are currently doing everything in our power to get the pelletising plant up and running as quickly as possible. We were in negotiations with BASF for nearly nine months to finalise a new cooperation agreement, which was signed on 15 November 2023. The highlights of this new agreement are truly remarkable but have unfortunately not yet been fully understood by our shareholders. By that we mean BASF is providing us with a financing line of EUR 50 million to fund the expansion of the new plants on conditions that we would not get from any bank. In addition, the price of oil was raised from

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LETTER FROM THE EXECUTIVE BOARD

EUR 150 per tonne to a guaranteed EUR 400 per tonne and the purchase volume from 100,000 tonnes per year to 300,000 tonnes per year. We are talking about quantities of oil that we will never be able to produce over the next ten years. This means we can build one plant after another, with our oil volumes already sold, so to speak.

This was just a brief overview of the biggest milestones in 2023. There were also a number of other ones, such as increasing headcount to over 90 (as of today), a string of successes in research projects and countless improvements to our old and the two new plants.

And there are already huge new milestones on the horizon. 2024 will be a very exciting year in our company's history.

Warm regards,

Pascal Klein

CEO of Pyrum Innovations AG

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REPORT OF THE SUPERVISORY BOARD

REPORT OF THE SUPERVISORY BOARD

Dear Shareholders,

Pyrum Innovations AG's 2023 financial year was defined in particular by the assembly and start-up of the new TAD 2 and TAD 3 reactors at the main facility in Dillingen/Saar. The expansion of the plant in Dillingen is on track with processing capacity due to triple to 20,000 tonnes of end-of-life tyres per year. The first steps were taken for a new subsidiary called Pyrum GreenFactory II GmbH, which will run the second Pyrum plant in the Saarland currently in planning. As before, business progress was driven by the strategic acquisition of customers for the construction of new recycling plants. Among other things, a letter of intent was signed with REMONDIS to build a joint recycling plant in Bremen. The international expansion continued with plans to build recycling plants in Czechia, Greece and the UK. The signing of a new cooperation agreement between BASF and Pyrum with seed financing for at least three new plants by 2026 was also highly important to our growth plans. There was also a breakthrough in the recycling of carbon-fibre reinforced plastics (CFRP) with the development of the first automated semi-industrial recycling plant. This makes Pyrum the first company in the world to fully recycle CFRP. Cultivating this new market entails enormous growth potential.

I would especially like to thank you, our shareholders, for the trust you have shown in Pyrum Innovations AG, its Executive Board and its staff in the past financial year.

ONGOING DIALOGUE WITH THE EXECUTIVE BOARD

In the 2023 financial year, the Supervisory Board duly performed its supervisory and consulting duties in accordance with the law, the Articles of Association and its Rules of Procedure. We received regular written and verbal reports from the Executive Board on the situation of the company and we assisted the Executive Board in its governance, ongoing strategic development and significant business events.

In addition, the Executive Board and the Supervisory Board together discussed business performance, corporate policy and planning. All measures requiring the approval of the Supervisory Board and decisions of fundamental importance to the company were discussed in detail by the Supervisory Board with the Executive Board. Their working relationship was defined by a trusting dialogue at all times.

Besides the four regular meetings of the Supervisory Board on 20 March 2023, 17 May 2023, 27 September 2023 and 11 December 2023, there were also five extraordinary meetings of the Supervisory Board in the reporting year. The meetings were typically held in person and in some cases as video conferences.

At the meetings of the Supervisory Board, the Executive Board reported to the Supervisory Board comprehensively on the situation and development of the company. It coordinated all steps for the ongoing strategic development of the company and material individual measures with us. The Supervisory Board had ample opportunity to examine the reports and proposals by the Executive

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