SFC Energy : Annual Report 2023 of SFC Energy AG incl. Consolidated Financial Statements and Group Management Report and Report of the Supervisory Board

W W W.SF C .COM

ANNUAL REPORT 2023

CONTENT

SFC ENERGY AG - KEY FIGURES													3
TO SHAREHOLDERS																			4
Letter to the shareholders															5
Milestones in 2023																		9
Success Stories																	15
Supervisory board report														16
SFC ENERGY on the capital markets											23
GROUP MANAGEMENT REPORT FOR FINANCIAL YEAR 2023						28
CONSOLIDATED FINANCIAL STATEMENTS FOR FINANCIAL YEAR 2023					94
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS			104
RESPONSIBILITY STATEMENT					180
INDEPENDENT AUDITOR'S REPORT					181
CORPORATE GOVERNANCE STATEMENT PURSUANT TO SECTION 289F HGB OR
SECTION 315D IN CONJUNCTION WITH SECTION 289F HGB			189
REMUNERATION REPORT OF THE MANAGEMENT BOARD AND
SUPERVISORY BOARD OF SFC ENERGY AG		201
FINANCIAL CALENDAR 2024		227
SHARE INFORMATION			227
INVESTOR-RELATIONS		227
IMPRINT		228

SFC ENERGY AG - KEY FIGURES

CONSOLIDATED KEY FIGURES												in EUR thousands
														2023				2022
															01.01.- 31.12.	01.01.- 31.12.			Change
Sales												118,148				85,229	38.6%
Gross profit												46,794				31,406	49.0%
Gross margin												39.6%				36.8%
EBITDA												14,619				8,593	70.1%
EBITDA margin												12.4%				10.1%
EBITDA underlying												15,158				8,150	86.0%
EBITDA margin underlying				12.8%				9.6%
EBIT												9,157				3,599	154.4%
EBIT margin												7.8%				4.2%
EBIT underlying												9,696				3,157	207.1%
EBIT margin underlying												8.2%				3.7%
Consolidated net result												21,062				1,067	1,684.1%
Net result per share, undiluted (in EUR)				1.21				0.07	1,682.1%
Net result per share, diluted				1.18				0.07	1,672.1%
SALES BY QUARTER																				in EUR thousands
Q1						27,454															2023
		17,905																	2022
Q2						29,599
		20,253
Q3						30,977
						25,617
Q4				30,118
				21,453
FY																							118,148
																	85,229
SALES BY REGION									in EUR thousands		SALES BY SEGMENT				in EUR thousands
01.01.-31.12.2023													01.01.-31.12.2023
RoW									Canada
2,102											37,200
Asia													Clean Power				Clean Energy
															79,032
12,970															Management
Germany										USA	39,116
9,907											17,256
Netherlands									Europe w/o GER & NL
15,846
										22,867

01

TO SHAREHOLDERS

LETTER TO SHAREHOLDERS	5
MILESTONES 2023	9
SUCCESS STORIES	15
SUPERVISORY BOARD REPORT	16
SFC ENERGY ON THE CAPITAL MARKETS	23

LET TER TO SHAREHOLDERS

Dear Shareholders,

Dear Business Partner,

Dear SFC Employees,

2023 was another record year for our Company. With sales of EUR 118.1 million (2022: EUR 85.2 million), ad-

justed EBITDA of EUR 15.2 million (2022: EUR 8.2 million) and adjusted EBIT of EUR 9.7 million (2022: EUR

3.2 million), we could exceed our targets for all key performance indicators. The sustained strong demand for our products and solutions was underpinned by both business segments and all regions.

The consistent implementation of our growth strategy, which is based on three pillars, (1) further market penetration and international expansion, (2) expansion of our technological leadership and (3) sensible, complementary M&A activities, confirms our pioneering role as a profitable market leader in fuel cell technolo- gies.

SFC technology in high demand in North America, now also addressed locally

In addition to the consistently stable growth of over 20% in Europe, the dynamic growth outside Europe testifies to the success of our regional expansion, which we are consistently driving forward. North America is the region with the highest sales, accounting for 46.1% of the total, ahead of Europe with 41.2%. Fuel cell solutions for industrial applications were the main driver behind the strong year-on-year growth of 43.5% in North America. We will be leveraging this momentum and opening up the rapidly growing US market via our newly established SFC location in Salt Lake City, which will serve as the first sales, service and logistics hub for the US market.

Footprint in India and Asia greatly expanded

With growth of 93.2%, Asia was the fastest-growing region in 2023. The establishment of our subsidiary and the commencement of production in India are decisive steps forward in our expansion in Asia. The first major deliveries from our own site were completed in the first quarter of 2024. Our presence in New Delhi/Gurgaon has created a solid basis for sustainable expansion both in India and beyond that throughout Asia. We also intend to harness the supply chain potential of the Indian market and the opportunities of the Indian labour market for the benefit of the entire Group.

Greater vertical range of production

In the UK, the migration of IP, expertise and equipment from Johnson Matthey has been successfully comple- ted, construction is progressing according to plan and production will commence in the second quarter of 2024. We have factored in the associated start-up costs and initial capacity restrictions, which we regard as crucial investments to achieve long-term cost and competitive advantages. We will be achieving this through a combination of application technology and material science. We are also additionally reinforcing our supply chain stability.

SFC ENERGY ANNUAL REPORT 2023

5

LE T TER TO SHAREHOLDERS

Structural drivers intact

Although the development of a hydrogen economy will take more time worldwide and the financial support for the energy transition from public funds does not appear to be available as quickly or to the extent originally envisaged, the social consensus on the need to decarbonise the energy infrastructure without sacrificing resilience remains unchanged and a long-term priority. This is continuing to drive demand for our fuel cell technologies, something which is underlined by our order backlog of EUR 81.3 million as of 31 December 2023 (2022: EUR 74.2 million).

SFC now also with fuel cells with an output of up to 200 kW

As the market leader in stationary fuel cell technology, we have a deep understanding and knowledge of the market. This expertise has enabled us to develop an innovative SFC hydrogen fuel cell solution with a rated output of 50 kW and a modular design of up to 200 kW. This high-power platform was presented to the public for the first time at our and your company's first Capital Markets Day on 22 September 2023. Following successful prototype and customer testing, we plan to commence volume production of this product. The second Capital Markets Day is scheduled for 26 September 2024.

Balance sheet

As of 31 December 2023, the equity ratio improved to 72.6% (31 December 2022: 70.3%). Freely available cash and cash equivalents totalled EUR 59.7 million as of the 2023 reporting date, compared to EUR 64.8 million at the end of the 2022 fiscal year. Our good capital resources and generally solid balance sheet are enabling us to grow sustainably and to pursue our three-pillar strategy.

SFC Energy still part of the SDAX family

The volatile conditions in the equity markets did not spare our share in 2023. After reaching a high for the year of EUR 27.30 on 2 February, it dropped to a low of EUR 16.00 on 30 October 2023. The SFC Energy share closed the year at EUR 19.36, down 22.5 % on the previous year's closing price of EUR 25.10. Despite the company's extremely favourable business development, the share was unable to shrug off the falling share prices afflicting the sector as a whole.

As in the previous year, all five analyst firms rate the SFC Energy share a "buy", with a consensus target price of around EUR 28.60.

Forecast for 2024

On the strength of the company's successful business performance in 2023, which once again set new records in a challenging environment, and the continued momentum in order intake, the Management Board expects to see strong growth again in 2024.

6	SFC ENERGY ANNUAL REPORT 2023

LE T TER TO SHAREHOLDERS

Sales

Group sales are expected to grow by around 20% to 30% year-on-year to between roughly EUR 141.7 million and EUR 153.5 million in 2024 (2023: EUR 118.1 million), underpinned to a much greater extent by the Clean Energy segment. In 2024, the Management Board expects demand to rise in all regional markets, with the strongest impetus for growth set to come from North America and Asia.

Adjusted EBITDA

The Management Board projects an increase in adjusted EBITDA to between EUR 17.5 million and EUR 22.4 million in 2024 (2023: EUR 15.2 million), thus resulting in a stable to slightly wider EBITDA margin. Further margin expansion is contingent upon the timing of planned growth investments, particularly regional expan- sion, and the potential impact of increased material and procurement costs. This assumes that the higher costs can be passed on to customers to a certain extent.

Adjusted EBIT

Based on the budgets for the Clean Energy and Clean Power Management segments, the Management Board expects adjusted EBIT for the Group to be between EUR 9.8 million and EUR 14.7 million in 2024 (2023: EUR

9.7 million). In particular, this forecast factors in expenses in connection with regional expansion and the es- tablishment of MEA production.

Medium-term planning

The growth plan up to 2028 anticipates an increase in Group sales to between EUR 400 million and EUR 500 million. In addition, the Management Board confirms its goal of achieving a sustainable adjusted EBITDA margin of more than 15% (2023: 12.8%) before 2028. The sharp rise in sales by 2028 compared to the forecast for the current fiscal year is based on SFC's three-pillar growth strategy:

As a financially stable market leader, we aim to further utilise our technological lead and established market access to achieve above-average and profitable growth, particularly in a more challenging economic environ- ment. This course sets us clearly apart from our peer group and highlights our unique position in the indust- ry. Moreover, we see increasing opportunities for market consolidation, which we plan to actively utilise.

This outstanding result in 2023 is only due to the tireless efforts and outstanding professional expertise of our employees, whom we would like to thank most sincerely. Many of them have been with SFC for many ye- ars, many have joined the team in recent years and we all have worked hard to continuously develop our fuel cell technologies and power management electronics, which are now market leaders. This is always with the aim of making our product portfolio ever more attractive for our growing customer base. Thanks to the endeavours of every single person to constantly improve, innovate and become more efficient, we now stand on an extremely solid and, above all, profitable foundation.

SFC ENERGY ANNUAL REPORT 2023

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LE T TER TO SHAREHOLDERS

We would of course like to thank all our customers, business partners and shareholders for the trust they have placed in us. Jointly we look forward to continuing to exploit the extraordinary opportunities ahead of us.

Join us in shaping a sustainable future for the generations to come.

Sincerely yours,

Dr. Peter Podesser	Daniel Saxena	Hans Pol
Chief Executive Officer (CEO)	CFO	COO

8	SFC ENERGY ANNUAL REPORT 2023

MILESTONES IN 2023

January 2023	February 2023

Follow-up order from Canadian oil company worth more than C AD 5.3 million for the supply of fully integrated frequency converters (VFDs)

SFC Energy secures a follow-up order from a Cana- dian oil producer for the supply of fully integrated frequency converters (VFDs) for the operation of electric pumps for oil production. By significantly improving efficiency and thus optimizing pump ope- ration, the service life of the motors is extended and more efficient pump running times are ensured, which sustainably reduces the customer's CO2 foot- print.

March 2023

SFC Energy secures major order from the Indian Ministry of Defense for portable fuel cell solutions

SFC Energy, together with its strategic partner FCTec, has been awarded the largest fuel cell order ever placed by the Indian Defense Forces.

The major order includes the supply of 450 portable methanol fuel cell systems over a peri-

od of one year for an initial order value of more than EUR 16 million as well as the maintenance and repair of the systems over a period of five years.

Security company Linc Polska places follow -up order in Poland for EFOY Pro fuel cells worth more than EUR 1 million

SFC Energy delivers EFOY Pro 2800 series fuel cells with a total order value of more than EUR 1 million to Linc Polska. Linc Polska, a customer of SFC Energy since 2021, is the largest provider of civil surveillance technology in Poland and uses EFOY fuel cells for the self-sufficient power supply of its mobile iTower camera towers.

Kick -off for hydrogen and methanol fuel cell production by SFC Energy AG and FC TecNrgy Pvt Ltd. during the meeting of Chancellor Scholz and Prime Minister Modi

SFC Energy and its long-standing Indian partner FC TecNrgy Pvt Ltd ("FCTec") enter into a strategic cooperation agreement to establish a new hydrogen and methanol fuel cell manufacturing facility and further market development in India. The agreement, which was signed during a meeting between German Chancellor Olaf Scholz and Prime Minister Narendra Modi in New Delhi, fulfills the strategic framework of the "National Green Hydrogen Mission" initiated by Prime Minister Modi, which envisages a clean energy supply and CO2 reduction in India.

SFC ENERGY ANNUAL REPORT 2023

9

MILES TONES IN 2023

April 2023

Strategic partnership with Johnson Matthey focusing on hydrogen fuel cells expanded and technology transfer for direct methanol fuel cell systems concluded

SFC Energy and Johnson Matthey ("JM"), a global leader in sustainable technologies, are expanding their strategic partnership in the hydrogen field. As part of this partnership, JM is committed to developing and supplying proton exchange membrane (PEM) components for SFC Energy's H2 PEM stack, the core of the SFC hydrogen fuel cell.

In addition, SFC and JM have entered into a technology transfer agreement whereby SFC Energy will acquire equipment and technology from Johnson Matthey for the production of Membrane Electrode Assemblies (MEAs) for Direct Methanol Fuel Cells (DMFC).

May 2023	June 2023

Second major order from the Indian Ministry of Defense for stationary fuel cell generators

The second major order from the Indian defense forces within two months of the Indian subsidiary being founded, with a volume of more than EUR 17.5 million, is a strong signal from the Indian government to reduce CO2 emissions and a contribution to the announced political measures to promote clean energy solutions, including fuel cells.

The efficient and low-emission fuel cell solutions will be manufactured as part of the "Make in India" initiative.

Call-off milestone of the framework agreement with the NATO Support and Procurement Agency (NSPA) reached

The framework agreement signed by ZeroAlpha Solutions Ltd., acting on behalf of the NSPA and its partner countries, in summer 2022 has a total volume of around

EUR 10 million and a term until the end of 2026.

SFC Energy reaches the call-off milestone of over one million euros for direct me- thanol fuel cells (DMFC) of the JENNY and EMILY series and the associated power managers in June.

10	SFC ENERGY ANNUAL REPORT 2023