Cabka N : Half Year Report 2022

Cabka N.V.

Amsterdam

Interim Report

&

Unaudited interim condensed

consolidated financial statements

first six months

of 2022

Cabka N.V. | 2022HY Interim Report | Page 1 of 32

Company Statement

Introduction to the first six months of Cabka N.V. in 2022

This half-year report is the first of its kind published by Cabka N.V. (Cabka) marking the transformation of Cabka from a privately owned company to a listed company following the support of 100% of Dutch Star Companies TWO B.V. (DSC2) shareholders for a business combination of Cabka Group GmbH and DSC2 into Cabka N.V. and subsequent listing on Euronext Amsterdam, on 1 March 2022. This report covers all operations of Cabka N.V. as of 1 January 2022 so retroactive from listing on 1 March 2022.

Governance

As a result of the listing governance of Cabka changed significantly to meet the requirements as a listed company. A two-tier Board was installed with a Management Board consisting of Mr. Tim Litjens CEO and Mr. Necip Küpcü CFO as well as a Supervisory Board of six members: Mr. Manuel Beja (Chair) Mr. Gat Ramon (Vice-Chair), Mr. Niek Hoek (Vice-Chair), Mrs. Tova Posner Henkin, Mrs. Jeanine Holscher, and Mr. Stephan Nanninga. Of the supervisory board members Messrs. Ramon, Hoek and Nanninga are not considered independent in accordance with the Dutch Corporate Governance Code. Mr. Özgür Yildirim is the corporate secretary for both the Management Board and Supervisory Board.

The Board of Management is further supported by a Management Team including Mr. Geert de Wilde as Chief Operations Officer, Mr. Jean-Marc van Maren as Chief Product Development Officer, and as of 1 July 2022 Mr. Wouter van der Woerd as Chief People officer responsible for HR and organizational development.

Financial and operational performance first six months of 2022

The first half of 2022 was dominated by the Russian invasion of Ukraine on 24 February and its subsequent impact on social and economic developments as well as financial markets.

Although Cabka had no direct exposure to the Ukraine, Russia or Belarus, indirect impact was significant. First and foremost, as energy and material prices increased unprecedentedly leading to significantly higher costs for energy and materials. Cabka is leading the industry in pricing and has achieved several price increases to compensate for the higher input costs. Nevertheless, despite compensation in pricing the higher production costs led to at least a temporarily margin pressure due to delays in passing on increased costs to customers as well as lower margins as (energy and material) costs now represent a higher fraction of total revenues. On the other hand, as lumber prices and supplies are far more impacted than plastics, the relative competitive position of plastic pallets and large containers improved.

Overall, we have seen exceptionally strong commercial results showing high demand for our products that continued throughout the half year leading to strong sales over the period of EUR

102.2 million (up 27% YoY). Various rounds of price increases and indexation covered rapidly rising costs for energy and materials (albeit with a delay), accounting for a total favorable price effect of 15% Year-on-Year. The remaining 40% of the increase was based on organic growth especially from customized solutions underlining Cabka's focus on key strategic objectives. The US-business with large containers was highly successful with a multi-year contract with Target bringing in significant revenues as of the third quarter 2022. Also, the European large container market looks promising as reflected in the new contracts with, among others, BMW and a leading material handling company starting up production in Q3 of 2022 but only resulting in new sales in the first half of next year.

Although Cabka has been able to compensate most of its higher costs through its product prices, the steep rise over a short period had bottom line impact (albeit partly temporarily due to a delay in translating higher costs into price increases). With an additional price increase of 5% announced early July for 1 August, pricing should be at par with costs at that moment and providing no extreme increases going further. In order to be able to react more dynamically to

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the currently highly volatile conditions in the energy and material market, an indexed pricing adjustment mechanism has been introduced as a prerequisite for all new contracts.

The increase in sales and ability to translate cost increases into product prices clearly reflects the resilient and strong market position of Cabka. In addition, Cabka was able to partly mitigate impact of the shortage and price increase of materials as Cabka sources a high amount of feed stock (up to 70%) from internal production recycling activities. However, due to lagging in time as well as an overall higher cost base, margins are affected at least in the short-term.

The restructuring of the Eco business with the closure of Genthin and shift to Weira is set to additionally improve long-term profitability albeit having a temporarily negative operational impact of EUR 0.8 million in the second quarter of 2022. This was mainly triggered by the temporary shutdown of production to facilitate the move, which conclusively reduced the intake of mixed plastics. However, this effect is expected to be offset in the second half of the year as economies of scale and increase of additional processing capacities should result in a higher output.

Overall, the 27% increase in total revenues over the first half year compared to the same period of 2021 could not fully compensate the 67% increase in the costs for materials, energy and purchased services resulting in just a EUR 5 million higher gross profit at EUR 47.3 million (2021HY: EUR 42.3 million) and a lower relative gross margin (gross profit/sales) down to 46.3% from 52.4% in 2021HY.

Overall management is positive on top line development and absolute margins, however, long- term impact on the relative margins is highly depending on the development of costs for energy and materials and the probability of returning to the levels of previous years. To improve margins management closely followed market developments and the opportunity to translate cost inflation in prices. In addition, several actions were initiated primarily focused to reduce costs with a target of 10% for this year and local management requested to also allow for bottom-up initiatives to drive local costs down. Given the current markets Cabka is shifting its own production facilities to higher added value (customized) products and using tollers as much as possible for more standardized products.

EBITDA

Group EBITDA excluding extraordinary items came in at EUR 13.1 million (2021HY: EUR 14.7 million). This result primarily reflects the trends underlying the development in revenue and gross profit. The latter is affected especially as due to lag in price increases some EUR 1.2 million in higher energy costs over the first quarter 2022 could not be recovered. Further a lower intake of mixed plastics due to the physical consolidation led to missing revenues in the Eco Products business of EUR 0.8 million in the second quarter of the year.

Additionally, higher production and revenues in the first half year 2022 (+27%) resulted in higher personnel and operating expenses versus the comparable period in prior year. Salary and wage adjustments in the entire Group were made beginning of the second quarter to compensate inflationary developments.

The table below compares the buildup of EBITDA excluding extraordinary items as reported earlier based on German GAAP to the current IFRS based figures.

Buildup EBITDA from German GAAP to IFRS	2022 HY	2021 HY
in EURk
EBITDA German GAAP	12,217	13,555
IFRS 16	(leasing)	1,555	1,487
IFRS 15	(revenue recognition)	3	113
Share based payment expense (PS/PSU)	-220	0
Reclassification other taxes in expenses	-495	-418
EBITDA IFRS	13,060	14,737

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Cash flows and cash position

The first half-year saw a lower cash conversion as absolute Net Working Capital was higher than usual at EUR 38.8 million or 20.3%1 (HY 2021: 18.7%) although still within the mid-term guidance of approximately 20%. Higher requirements for working capital were mainly driven by inflation as higher product pricing leads to higher inventory value and higher receivables. Nevertheless, actions were taken to improve the NWC position which is expected to normalize in line with the supply side.

Cash flows from operating activities came in at EUR -11.0 million, predominantly by the increase of Net Working Capital by EUR 11.4 million. Based on higher demand for products in the first half year 2022 the trade account receivables increased by EUR 2.6 million and the inventories by EUR 8.6 million. The latter is caused by producing certain customer demands on stock, but also by inflation. Additionally, some of the raw materials were secured at still decent cost prices versus market developments. Trade account payables were reduced by EUR 0.2 million. The other non-cash transactions are including primarily the value change of warrants EUR 3.5 million and change in share-based programs EUR 1.5 million besides other non-cash items.

Cash flows from investing activities totaling EUR 32.8 million are including sale of assets EUR 0.7 million, investments for growth, maintenance, and replacement EUR 10.9 million, intangible asset of EUR 0.2 million, US minority shares EUR 1.8 million and the cash injection from the Business combination of EUR 45.2 million.

Cash flows from financing activities combined from repayments and receipt are totaling EUR 4.7 million. The changes in cash and cash equivalents result in a cash position of EUR 36.5 million.

CAPEX

Group CAPEX for first six months of 2022 came in at EUR 13 million including the acquisition of minority shares of the US subsidiary totaling EUR 1.8 million. The remaining investments mainly account for ECO Restructuring and new molds (EUR 8.7 million). Maintenance and replacement CAPEX is at EUR 2.4 million or with 2.3% of revenues in line with then mid-term guidance (app. 4%) also due to the significant increase in revenues.

Commercial performance

The first half of 2022 showed record sales of EUR 102.2 million a 27% increase over the same period last year. Growth was especially strong in reusable transport packaging (RTP), whereas RTP US up 49% to EUR 15.0million as well in customized solutions and contract manufacturing in Europe, up respectively 40% to EUR 18.7 million and 46% to EUR 20.3 million. The increase of European RTP portfolio to EUR 32.6 million was approximately in line with the regular price increases, while ECO products temporarily shrunk by 6% as a result of the relocation of activities to Weira.

The geographical spread of sales did not significantly change in the first half-year except for sales in the US that showed a very strong increase by 50% to EUR 15 million (2021HY: EUR 10 million). Average daily order intake in first half-year 2022 was up 36% compared to same period last year, with especially high order intake for June as a result of the new multi-year Target contract.

Strategic progress

Cabka has made substantial progress with regard to its strategic objectives. With major long- term commercial contracts, the company is underlining its focus on providing highly customized solutions and is growing its footprint in the large container segment.

• Actual NWC includes liabilities for invoices to be received in trade payables under IFRS, corresponding NWC under German GAAP would be app. 24% of revenue

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Operationally, the closure of the Genthin site on 31 May 2022, enables the company to concentrate all Eco production activities in the Weira plant. This consolidation helps Cabka in its efforts to continuously improve production efficiencies within its Eco-product lineup.

Principal risks

As every company in these challenging times, Cabka underlies some business-related risks that must be mentioned. Though central risks have been previously detailed in the Shareholder Circular issued in the course of Cabka's IPO on 1 March 2022, there are some factors that need to be revisited or addressed separately.

The war between Russia and Ukraine has not had direct implications for the organization. Nonetheless, it caused high uncertainty in the energy markets which led to highly volatile prices for gas and energy in general. As a production company specialized in injection molding, energy scarcity and ambiguous energy pricing are highly relevant factors for Cabka and are, thus, being

closely monitored on a regular basis.

The war in the region has not only impacted value chains and commodity prices but has also created pressure on finance markets and exchange rates. As a result, the Euro has suffered from substantial depreciation versus the US-Dollar in Q3-2022. This is an important factor for Cabka due to its operations and broad customer base in the United States. With this leading to US revenues increasing there are also positive implications to this development.

In the context of the USA, another geopolitical risk to be wary of is the tension with China around Taiwan. Although Cabka does not conduct business in the area and there is therefore no direct impact expected in case of an escalation, the situation might have implications in a broader, possibly global, scope.

Finally, while the signing of another major long-term supply agreement in the FLC--business with US-retailer Target entails promising revenue outlooks for Cabka and helps the company to further establish its strong competitive position, it can also be associated with risks. As mentioned in the Shareholder Circular, a material share of Cabka's revenue is dependent on a limited group of large customers. The new agreement must also be accounted for in this context. The associated large volumes are also expected to intermittently occupy large shares of Cabka's overall production capacity, limiting the possibility to produce other products. However, this risk is being mitigated by an additional machine, that was acquired especially for the realization of said volumes.

ESG

Cabka is striving to be the circularity leader in its industry. As to circularity, with our products in the first half of 2022 for 87% made from recycled materials, 100% reusable with take-back clauses for recycling and supporting the collection of additional plastics for recycling we clearly established a leading position. The average for Europe was in 2021 still at 14% recycled plastics targeting to get to 33% by 2030.2

This year we turned focus not only to the recycling of plastics, but also on how we recycle plastics. Until recently Cabka -as a privately owned company- did not specifically measure ESG performance and efforts. To counteract this, Cabka has initiated efforts to outline an ESG Strategy. Currently, the first stage of the ESG Strategy Project is ongoing with the goal to establish a running reporting structure by the end of 2022. The project comprises of a thorough analysis of Cabka's current ESG position and stakeholder expectations to meet the requirements according to the non-financial reporting directive (NFRD). A double materiality assessment supported by PwC Netherlands was conducted leading to the establishment of base ambition levels that were agreed upon with the full management team in June.

• Systemiq April 2022 report Reshaping plastics. Pathway to a circular climate neutral plastics system in Europe

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