Tessenderlo : 2022 Interim report Tessenderlo Group HY22 English

INTERIM REPORT

Regulated information 1

Brussels, August 25, 2022, 8:00 am CET

TESSENDERLO GROUP

INTERIM REPORT FOR

THE 6 MONTH PERIOD ENDED

JUNE 30, 20222

1. The enclosed information constitutes regulated information as defined in the Royal Decree of November 14, 2007, regarding the duties of issuers of financial instruments which have been admitted for trading on a regulated market.
2. Note that Tessenderlo Group published, in addition to this interim report, also a press release on the HY22 results. This press release can be consulted on our websitewww.tessenderlo.com.

Table of contents
Management report.................................................................................................................	3
1.1	Key events from the first half of 2022 ................................................................................	3
1.2	Group key figures................................................................................................................	4
1.3	Operating segments performance review ..........................................................................	6
Statement on the true and fair view of the condensed consolidated interim financial statements
and the fair overview of the management report......................................................................	8
Condensed consolidated interim financial statements June 30, 2022 .........................................	9
3.1	Condensed consolidated income statement ......................................................................	9
3.2	Condensed consolidated statement of comprehensive income ........................................	9
3.3	Condensed consolidated statement of financial position ................................................	10
3.4	Condensed consolidated statement of changes in equity................................................	11
3.5	Condensed consolidated statement of cash flows ...........................................................	13
3.6	Notes to the condensed consolidated interim financial statements................................	14
Independent Auditors' report on the review of the condensed consolidated interim financial
statements as per June 30, 2022 .............................................................................................	32
Financial glossary ...................................................................................................................	33
Alternative performance measures.........................................................................................	35

Note

• The half year information has been subject to a review by external auditors. Reference is made to the independent auditor's review report in chapter 4 of this report.
• Figures may not add up due to rounding.

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Management report

• 1.1 Key events from the first half of 2022

• In February 2022, Tessenderlo Group announced its takeover of the production unit and related activities of Pipelife France. The plant, which is situated in Gaillon (Eure, France), specializes in the production of pipes for gas, water, and cable protection. The acquisition is expected to be completed by the end of September, after which the company will be integrated into the DYKA Group business unit (Industrial Solutions segment). The transaction will not materially affect the group's results.
• The second quarter of 2022 saw the completion of the acquisition of the assets of B.V. Fleuren Tankopslag, which is a tank storage and transshipment company for liquid products, located in the Port of Cuijk (the Netherlands). The activities of Fleuren Tankopslag were integrated into the Tessenderlo Kerley International business unit (Agro segment). This transaction will have no material impact on the group's results.
• Construction work on Tessenderlo Kerley International's new Thio-Sul® plant in Geleen (the Netherlands) is scheduled to start in the fourth quarter of 2022. The plant is expected to be operational from the first quarter of 2024.
• Tessenderlo Kerley, Inc. will start the construction of a new plant in Defiance (Ohio, USA) in the third quarter of 2022. This plant will produce the leading liquid and sulfur-based fertilizers Thio-Sul®, KTS®, and K-Row 23®, as well as sulfate chemicals for industrial markets (Agro and Industrial Solutions segments). The plant is scheduled to be operational in the first half of 2024.
• The group also announced in March that Violleau will build a new production line for organic fertilizers in Vénérolles (Aisne, France). The production line will be operational from the second quarter of 2023, and it will be built on the site of the Akiolis plant in Vénérolles. From January 2022, Violleau has been included in the group's Agro segment.
• In early March 2022, Tessenderlo Group submitted another permit application to the Flemish Region for the construction of a new 900 MW combined cycle gas turbine (CCGT) power plant in Tessenderlo (Belgium). This entails an investment of approximately 500 million EUR. Tessenderlo Group expects the Flemish minister's decision on the permit by September 24, 2022, at the latest. However, the new gas plant will only be built when Tessenderlo Group can present a financially profitable project.
• In February 2022, Tessenderlo Group bought back 35.0 million EUR of its outstanding 2022 bonds at a price of 102.875%. This buyback resulted in a cash-out of EUR 36.0 million and the remaining amount of outstanding 2022 bonds, amounted to EUR 130.5 million and was repaid at maturity in July 2022.
• In February 2022, the group also concluded two term loan facilities of 30.0 million EUR each, with terms of 7 years (started in April 2022) and 5 years (starting in August 2022). These two loans, with quarterly capital repayments, have fixed interest rates of 1.17% and 0.94% and are without financial covenants. Both transactions will further reduce the group's liquidity risk and interest costs.
• The current conflict in Eastern Europe and the subsequent economic and financial sanctions imposed are negatively affecting the supply and purchase prices of raw materials as well as energy prices. This applies in particular to MOP (muriate of potash), the main raw material for SOP fertilizers (sulfate of potash) produced at Tessenderlo Kerley Ham (Belgium). Tessenderlo Group previously purchased MOP mainly in Russia and Belarus, as well as, to a lesser extent, from some other countries. Due to the high MOP inventory position at the start of the year, as well as a revision of the sourcing mix, the supply difficulties had only a limited impact on Tessenderlo Group's profitability during the first six months of 2022. A limited impact is also expected for the second half of 2022, despite the reduced availability. The increase in energy prices had a negative impact on our various activities, although this could be somewhat limited by our previously concluded forward purchase contracts, as well as by the increase in our sales prices.

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After the balance sheet date

• On July 8, 2022, Tessenderlo Group and Picanol Group (Picanol nv, Euronext: PIC) announced their intention to simplify and increase the transparency of the group structure of both companies, with a view to combining them into a single industrial group, with a single stock exchange listing and a single board of directors. The proposed transaction envisages the reference shareholders, Luc Tack and Patrick Steverlynck, contributing the Picanol Group shares that they hold, in the context of a voluntary public exchange offer by Tessenderlo Group. The other Picanol Group shareholders (free float: 10.66%) will also be offered the option of becoming direct shareholders of Tessenderlo Group, at the same exchange ratio of 1 Picanol Group share for 2.43 Tessenderlo Group shares. It is the intention of both parties that this integration will be effective as of January 1, 2023.
• Tessenderlo Group has access to committed bilateral agreements with 4 credit institutions for a total amount of 142.5 million EUR (of which a part can be called in USD) until 2024. These agreements were increased in July 2022 to an amount of 250.0 million EUR and the period was extended to July 2027. These facilities contain no financial covenants and ensure maximum flexibility for the various, planned activities. As of June 30, 2022, none of these credit lines had been used.
• In August 2022, Tessenderlo Kerley, Inc. acquired the product line Lannate® from Corteva Agriscience.
  Tessenderlo Kerley's NovaSource® business unit (Agro segment) will add the Lannate® product line to its existing, diversified portfolio of niche crop protection products to agriculture customers worldwide. This crop protection product is used to manage specific difficult to control pests in specific crops such as sweet corn, onions and garlic. The transaction will have no material impact on the results of Tessenderlo Group.
  1.2 Group key figures

Million EUR	HY22			HY21			% Change excluding			% Change as
				fx effect3			reported
Revenue	1,339.6			1,021.0		26.8%		31.2%
Adjusted EBITDA4	247.6			184.7		27.6%		34.0%
Adjusted EBIT5	182.6			119.4		44.0%		52.8%
Profit (+) / loss (-) for the period	163.6			97.3					68.2%
Total comprehensive income	218.8			121.6					79.9%
Capital expenditure	59.3			41.1					44.1%
Cash flow from operating activities	97.3			153.9					-36.8%
Operational free cash flow6	88.1			129.5					-32.0%
Operational free cash flow (excluding	77.3			118.5					-34.8%
IFRS 16 Leases)
Net financial debt7	48.5			117.8					-58.8%

1. As the group results might be impacted significantly by foreign exchange changes, the group reports some key financial indicators excluding any foreign exchange impact. The "% change excluding foreign exchange effect" is calculated by translating the HY22 result of foreign currency entities at the average exchange rate of HY21. The variance between this calculated result and the previous year result shows the effective result variance excluding any foreign exchange impact.
2. Adjusted EBITDA equals Adjusted EBIT plus depreciation and amortization.
3. Adjusted EBIT is considered by the group to be a relevant performance measure in order to compare results over the period 2021-2022 as it excludes adjusting items from the EBIT (Earnings Before Interests and Taxes). EBIT adjusting items principally relate to restructuring, impairment losses, provisions, gains or losses on significant disposals of assets or subsidiaries and the effect of the electricity purchase agreement.
4. Operational free cash flow equals to Adjusted EBITDA minus capital expenditure minus change in trade working capital.
5. Net financial debt equals non-current and current loans and borrowings and bank overdrafts, minus cash and cash equivalents and short term investments.

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Revenue

HY22 revenue increased by +31.2% (or increased by +26.8% when excluding the foreign exchange effect) compared to the same period last year. Excluding the foreign exchange effect, the revenue of Agro increased by +38.6%, Bio-valorization revenue increased by +22.7%, the revenue of Industrial Solutions increased by +19.3%, while the T-Power revenue remained stable. This revenue increase could be mainly realized thanks to higher sales prices, implemented to offset the increase of raw material, energy and transportation costs.

Adjusted EBITDA

The HY22 Adjusted EBITDA amounts to 247.6 million EUR compared to 184.7 million EUR one year earlier (+34.0%). When excluding the impact of the foreign exchange effect, the Adjusted EBITDA increased by +50.9 million EUR (+27.6%) compared to prior year. All 4 segments contributed to this increase (Agro +49.6%, Bio- valorization +14.9%, Industrial Solutions +12.9%, T-Power +7.7%).

Net financial debt

As per HY22, group net financial debt decreased to 48.5 million EUR, compared to 74.8 million EUR as per year- end 2021. Leverage amounts to 0.1x as per HY22 (year-end 2021: 0.2x).

Short-term borrowings for 180.3 million EUR and 205.6 million EUR long-term borrowings are almost entirely compensated for by cash and cash equivalents (337.4 million EUR). The short-term borrowings include the bond, issued in 2015 with a maturity of 7 years, for an amount of 130.5 million EUR, which matured and was reimbursed in July 2022. Excluding the IFRS 16 lease liabilities, group net cash position as per HY22 would have amounted to 5.5 million EUR compared to a net financial debt of 20.8 million EUR as per year-end 2021.

In February 2022, Tessenderlo Group repurchased 35.0 million EUR of its outstanding 2022 bonds at a price of 102.875%. This repurchase resulted in a cash-out of 36.0 million EUR. Also in February 2022, the group agreed two term loan credit facilities for 30.0 million EUR each, with a maturity of 7 years (started in April 2022) and a maturity of 5 years (starting August 2022) respectively. These loans, with quarterly capital reimbursements, have a fixed interest rate of 1.17% and 0.94% respectively, and contain no financial covenants. Both transactions will further reduce the liquidity risk as well as the interest costs of the group.

Profit (+) / loss (-) for the period

The HY22 profit amounts to 163.6 million EUR compared to 97.3 million EUR in HY21. The profit was impacted by exchange gains and losses, mainly on non-hedged intercompany loans and cash and cash equivalents in USD. Excluding these exchange gains and losses, the profit for HY22 would have amounted to approximately 150 million EUR, compared to a result of approximately 90 million EUR in HY21.

Operational free cash flow

The HY22 operational free cash flow amounts to 88.1 million EUR, compared to 129.5 million EUR in HY21. The decrease, despite the higher operational results, can be explained by a higher capital expenditure (-18 million EUR compared to HY21) and higher working capital needs (-100 million EUR in HY22, compared to -14 million EUR in HY21), mainly linked to higher raw material costs, which led to a higher inventory valuation, and an increase of trade receivables following higher sales prices.

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