Recylex : Statutory Auditors’ Report on the 2020 Consolidated Financial Statements

KPMG Audit
Tour EQHO	Tour Majunga
2 Avenue Gambetta	6 place de la Pyramide
CS 60055	92800 Puteaux
92066 Paris la Défense Cedex
France

Recylex S.A.

Statutory auditors' report on the consolidated

financial statements

This is a translation into English of the statutory auditors' report on the consolidated financial statements of the Company issued in French and it is provided solely for the convenience of English speaking users.

This statutory auditors' report includes information required by European regulation and French law, such as information about the appointment of the statutory auditors or verification of the information concerning the Group presented in the management report.

This report should be read in conjunction with, and construed in accordance with, French law and professional auditing standards applicable in France.

Year ended December 31, 2020

Recylex S.A.

6, place de la Madeleine 75008 PARIS

This report contains XX pages

reg 8 appx 0

KPMG Audit
Tour EQHO	Tour Majunga
2 Avenue Gambetta	6 place de la Pyramide
CS 60055	92800 Puteaux
92066 Paris la Défense Cedex
France

Recylex S.A.

Registered office: 6, place de la Madeleine 75008 PARIS

Statutory auditors' report on the consolidated financial statements

Year ended December 31, 2020

To the Recylex S.A. Annual General Meeting,

Disclaimer of opinion

In compliance with the engagement entrusted to us by the Annual General Meeting, it is our role to audit the accompanying consolidated financial statements of Recylex S.A. for the year ended December 31, 2020.

We are unable to express an opinion on whether the consolidated financial statements give a true and fair view of the assets and liabilities and of the financial position of the Group as of December 31, 2020 and of the results of its operations for the year then ended in accordance with International Financial Reporting Standards as adopted by the European Union. Due to the materiality of the matters described in the section "Basis for disclaimer of opinion", we were unable to collect sufficient and appropriate information on which to base an opinion on the consolidated financial statements.

The opinion expressed above is consistent with our report to the Audit Committee.

Basis for disclaimer of opinion

As disclosed in the notes to the consolidated financial statements ("Business continuity" section of Note 2, "Accounting policies and application of IFRS", Section 32.5, "Liquidity risk" of Note 32, "Financial risk management" and Note 39, "Post-balance sheet events"), the Group's financial and operational difficulties, and in particular those met by the German sub-group (including the Weser-Metall GmbH

foundry), as well as the impacts of the Covid-19 global pandemic on metal prices and more specifically on the price of zinc, led these entities to:

recognize that the business continuity outlook was significantly impaired, as the new financing requirements generated by this situation could not be covered by their financial partners; file a request to open insolvency proceedings. This request was granted by the Göttingen German Court on May 15, 2020. This procedure led to the immediate loss of control by the Group of its German subsidiaries and, therefore, their deconsolidation from that date. The Recylex Group is now limited to its French businesses, that is the two used lead battery recycling plants operated by Recylex S.A. and C2P S.A.S. and the 50% stake in Recytech S.A.

In this context, the Group reviewed its outlook, which is based on a certain number of assumptions, items and ongoing actions, including:

• continuation of Weser-Metall GmbH's activity and of the supply of secondary materials to its foundry by Recylex S.A. Weser-Metall GmbH is now outside the Recylex Group and is subject to insolvency proceedings,
• Recylex S.A.'s ability to find new outlets for its products in the mid-term in order to reduce its dependency on Weser Metall GmbH which is practically its only customer. No commercial agreement guarantees the purchase of volumes by this company from Recylex S.A.,
• changes in the commercial terms and conditions of secondary materials (processing costs), lead and zinc prices and the €/USD exchange rate, as Recylex S.A.'s activity is highly sensitive to changes in these parameter,
• changes in used lead battery volumes and purchase prices, as the commercial margin and cash generated by Recylex S.A.'s activity is heavily dependent on these parameters,
• changes in the recycled polypropylene market and its impact on the business of the subsidiary C2P S.A.S, Recylex S.A.'s sole outlet for the sale of polypropylene residue from battery recycling.
  The subsidiary C2P SAS, located on the Recylex SA recycling site in Villefranche sur Saône, uses the same infrastructures as Recylex SA, therefore enabling economies of scale. The interdependency of both companies is a factor to be taken into account when assessing their financial risks,
• extension beyond January 31, 2022 of the deferral of the maturity date of the €16 million loan granted in 2014 by Glencore International AG, conditional on the continued supply by Recylex

3 l RECYLEX SA l Statutory auditors' report on the consolidated financial statements l Year ended December 31, 2020

S.A. of secondary materials to Weser-Metall GmbH, or the successful continuation of Recylex S.A.'s financial and non-financial debt restructuring process,

• suspension of interest payments on the €16 million loan granted by Glencore International AG for at least the next 12 month (for an amount of €1.2 million), and changes to the amount, repayment conditions and interest in the mid-term,
• compatibility of annual rehabilitation expenditure for the former mines and the discontinued
  Estaque site with Recylex S.A.'s ability to generate cash, it being specified that Recylex S.A. will certainly need to find external financing for work at the Estaque site or sell the site in its current state to satisfy its current obligations. The rehabilitation schedule defined by the additional prefectural order of January 15, 2021 sets a completion date of December 31, 2024 for a total works amount of €9 million,
• financial income and notably dividends received from Recytech S.A. (equity associate), whose results are highly sensitive to zinc prices,
• developments in ongoing legal procedures against Recylex S.A. and contingent liabilities,
• temporary suspension of the payment plan for the European Commission fine and changes to the payment schedule to make it compatible with Recylex S.A.'s cash generation capacity. To this end, a request was submitted to the European Commission in July 2020 seeking changes to the amount and payment plan in line with the Group's new economic situation in its new configuration,
• Recylex S.A.'s ability to find the new financing necessary to rehabilitate the discontinued Estaque site and the former mines, or the ability to sell this site in its current state.

No definitive items of assessments allow the attainment of the assumptions and items adopted or the outcome of ongoing actions to be foreseen. A material uncertainty therefore exists, casting doubt on the Company's ability to continue as a going concern. Should the assumptions and items adopted not be confirmed or the outcome of ongoing actions be unfavorable, the application of IFRS accounting standards as adopted by the European Union in a normal context of business continuity, notably for the assessment of assets and liabilities, could prove inappropriate.

Based on a similar situation and items of the same nature, we were already unable to certify the financial statements for the year ended December 31, 2019 in our report of October 23, 2020.

4 l RECYLEX SA l Statutory auditors' report on the consolidated financial statements l Year ended December 31, 2020

We also recall that our inability to attend the physical inventory counts of the German sub-group entities as of December 31, 2019 and to attest the existence of the inventories using other control procedures was disclosed in our report on the fiscal year ended December 31, 2019. Due to the deconsolidation of the German sub-group entities during the first-half of the year, this situation could impact the presentation of current net income and non-current net income in the consolidated financial statements for the year ended December 31, 2020.

Justification of Assessments - Key Audit Matters

Due to the global crisis related to the Covid-19 pandemic, the financial statements of this period have been prepared and audited under specific conditions. Indeed, this crisis and the exceptional measures taken in the context of the state of sanitary emergency have had numerous consequences for companies, particularly on their operations and their financing, and have led to greater uncertainties on their future prospects. Those measures, such as travel restrictions and remote working, have also had an impact on the companies' internal organization and the performance of the audits.

It is in this complex and evolving context that, in accordance with the requirements of Articles L.823-9 and R.823-7 of the French Commercial Code (code de commerce) relating to the justification of our assessments, we inform you that, given the disclaimer of opinion detailed above, we have no key audit matters to bring to your attention relating to risks of material misstatement that, in our professional judgment, were of most significance in the audit of the consolidated financial statements of the current period, other than those detailed in the section "Basis of disclaimer of opinion".

Specific verifications

As required by law and regulations, we have also verified, in accordance with professional standards applicable in France, the information pertaining to the Group presented in the management report of the Board of Directors.

We have the same matters to report on its fair presentation and its consistency with the consolidated financial statements, as disclosed in the section "Basis of disclaimer of opinion".

5 l RECYLEX SA l Statutory auditors' report on the consolidated financial statements l Year ended December 31, 2020