Dr Hönle : Q3 2021/2022

Third Quarterly Statement

for the period from 1 October 2021 to 30 June 2022

Earnings Development	01.10.2021-	01.10.2020-
in T€	30.06.2022	30.06.2021	+/- %
Revenue	95,141	84,932	12.0
Gross profit	58,809	54,800	7.3
Operating result/EBIT	7,214	7,162	0.7
Earnings before tax/EBT	6,138	6,395	-4.0
Consolidated profit for the year	4,736	4,849	-2.3
Earnings per share in €	0.77	0.79	-2.5
Number of shares	6,062,930	6,062,930	0.0
Statement of Financial Position
in T€	30.06.2022	30.09.2021	+/- %
Non-current assets	123,564	120,350	2.7
Current assets	87,090	81,605	6.7
Equity	120,022	111,122	8.0
Non-current liabilities	57,401	64,131	-10.5
Current liabilities	33,232	27,652	20.2
Total assets	210,654	202,905	3.8
Equity ratio as a %	57.0	54.8	4.0
Liquidity Development	01.10.2021-	01.10.2020-
in T€	30.06.2022	30.06.2021	+/- %
Cash generated from operations	3,170	6,278	-49.5
Cash flow from operating activities	-1,561	1,917	-181.4
Cash flow from investing activities	-5,494	-18,005	69.5
Cash flow from financing activities	1,092	1,617	-32.5
Change in cash and cash equivalents	-5,743	-14,486	60.4
	01.10.2021-	01.10.2020-
Staff	30.06.2022	30.06.2021	+/- %
Average member	658	653	0.8

Market Development

The upswing in the global economy has slackened in the light of new negative developments. Given the Russian attack on Ukraine, high inflation rates and rising interest rates, economic conditions have worsened.

After the economic upturn in the second half of 2021, the recovery lost considerable momentum at the beginning of 2022. The key factors were first the renewed adverse effects of the pandemic, followed by Russia's attack on Ukraine, both of which led to an increase in already existing supply bottlenecks and further fuelled the high inflation rates. The Kiel Institute for the World Economy indicates an increase in global production of only 0.6% in the first quarter of 2022, which is less than the average for the years before the coronavirus crisis.

Course of Business

Sales revenues generated by the Hönle Group rose by 12% to T€ 95,141 in the first nine months of financial year 2021/2022 compared with the prior-year period. While revenues in the Adhesives segment picked up slightly (1.1%), those recorded in the Equipment & Systems and in the Glass & Lamps segments saw a significant rise of 16.8% and 12.6%, respectively.

The earnings development lagged behind planning in the third quarter, in particular in June, and the situation on the procurement markets as well as higher energy prices had a significant negative impact on the quarterly result which was additionally impaired by one-off effects associated with the personnel changes implemented at the management level of Dr. Hönle AG. The operating result (EBIT) amounted to T€ -449 in the third quarter of the year.

In the 9-month period, the operating result (EBIT) increased slightly from T€ 7,162 in the previous year to T€ 7,214 in the year under review.

Business Development by Segments

At T€ 20,661, revenues generated in the Adhesives Segment in the first nine months of financial year 2021/2022 were slightly above the figure of T€ 20,432 recorded in the previous year. Since the production sites of many customers are located in China, this sales territory is of great significance for the Hönle Group. Coronavirus-related restrictions hampered sales activities in that area until recently, in some cases even considerably. In particular, it was not possible to acquire new customers in China as planned. Moreover, the realisation of several adhesives projects in different sales regions was delayed.

The segment's operating result came to T€ 2,776, which is below the prior year's figure of T€ 4,053. The main reason for the lower result for the period was higher personnel expenses in connection with the expansion of the workforce. In the course of the planned sales growth, manpower was further increased in the development, application technology and sales areas.

Business developed favourably in the Equipment & Systems segment. While the previous year was still marked by the reluctance to invest, particularly in the printing press industry, the economic upswing made itself felt in almost all product areas and sales markets in the current financial year.

Revenues climbed from T€ 44,033 in the prior year to T€ 51,428 in the current financial year.

One major growth driver was the printing industry. The Hönle Group produced significantly more UV drying systems for printing press manufacturers than a year ago. Series equipment manufacturing also benefited from the economic recovery, selling significantly more UV drying systems for industrial adhesives. This equipment is used primarily in electronics manufacturing. Another business area also developed positively: Although the pandemic situation eased off, sales of air disinfection equipment increased year-on-year. The main customers were social institutions such as schools and retirement homes, but many companies also equipped their offices with air disinfection equipment.

Despite temporarily significantly lower gross profit margins, the segment's operating result improved significantly from T€ 1,872 in the prior year to T€ 4,345 in the current financial year. A large part of the implemented or planned price adjustments will take effect in the next few months.

Sales revenues also increased in the Glass & Lamps segment, climbing from T€ 20,467 in the prior year period to T€ 23,052 in the financial year under review. As in the previous year, sales revenues generated by uv-technik

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Speziallampen GmbH continued to rise in the reporting year. Raesch Quarz (Germany) GmbH also succeeded in increasing its sales revenues, which were clearly above the previous year's period in the semiconductor market, in particular. The high energy prices had a noticeable impact on earnings. The further significant rise in energy prices in the wake of the Russia-Ukraine war had a considerable adverse impact on Raesch Quarz (Germany) GmbH's result for the period.

Overall, the operating result of the Glass & Lamps segment dropped from T€ 1,236 achieved in the first nine months of the previous year to T€ 93 in the current financial year due to higher energy prices.

Results of Operations

The Hönle Group's sales revenues in the nine-month period amounted to T€ 95,141, a 12.0% increase compared to the prior year period.

The earnings development in the third quarter was significantly worse than planned. The situation on the procurement markets and the rise in energy prices temporarily had a substantial negative impact on earnings. The cost of materials ratio rose from 41.1% in the previous year to 48.3% in the reporting year.

In the nine-month period, it advanced from 38.3% to 45.2%. Gross profit increased by 7.3% to T€ 58,809 in the nine months under consideration. Personnel expenses were up 11.7% to T€ 32,591. They include one-off factors that mainly relate to the personnel changes implemented at the management level of Dr. Hönle AG and which led to a T€ 1,300 rise in personnel expenses in the third quarter. The personnel expense ratio stood at 32.0% (PY: 33.4%) after the first nine months of the financial year. The ratio of other operating expenses improved slightly from 13.9% in the previous year to 13.3% in the current financial year.

The operating result (EBIT) came to T€ 7,214 in the period from 1 October 2021 to 30 June 2022, which is 0.7% higher than the previous year's figure and corresponds to an EBIT margin of 7.1% (PY: 8.2%). The pre-tax result (EBT) came to T€ 6,138 (PY: T€ 6,395). Consolidated profit after income taxes amounted to T€ 4,736, corresponding to a decline of 2.3%. Earnings per share decreased marginally from € 0,79 to € 0,77. Net profit on sales thus stood at 5.0% (PY: 5.7%).

Earnings Development	01.10.2021-	01.10.2020-
in T€	30.06.2022	30.06.2021	+/- %
Revenue	95,141	84,932	12.0
Gross profit	58,809	54,800	7.3
Operating result (EBIT)	7,214	7,162	0.7
Earnings before tax (EBT)	6,138	6,395	-4.0
Consolidated profit for the year	4,736	4,849	-2.3
Earnings per share in €	0.77	0.79	-2.5
Number of shares	6,062,930	6,062,930	0.0

Financial Position

The T€ 9,208 increase in inventories and the payment of income taxes in the amount of T€ 3,740 played a main role in the negative cash flow from operating activities of T€ -1,561 (PY: T€ 1,917) reported in the nine-month period. The increase in the inventory balance is mainly due to the rise in stock in connection with the SteriWhite Air product line.

At T€ 5,494, capital expenditure was clearly below the previous year's level of T€ 18,005. While the prior year was still characterised by the substantial payments made for the new corporate premises, these expenses declined perceptibly in the current financial year. In addition, the cash flow from investing activities included capital equipment spending on systems and business equipment at Dr. Hönle AG, Panacol-Elosol GmbH, Raesch Quarz (Germany) GmbH and other entities.

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The cash flow from financing activities, which amounted to T€ 1,092 (PY: T€ 1,617) is primarily due to bank borrowings, the repayment of loans and bank liabilities as well as the payment of lease liabilities. In addition, dividend payments were made in the amount of T€ 1,212 (PY: T€ 4,800).

Overall, cash and cash equivalents declined by T€ 5,743 (PY: T€ -14,486) in the first nine months of the current financial year.

Liquidity Development	01.10.2021-	01.10.2020-
in T€	30.06.2022	30.06.2021	+/- %
Cash generated from operations	3,170	6,278	-49.5
Cash flow from operating activities	-1,561	1,917	-181.4
Cash flow from investing activities	-5,494	-18,005	69.5
Cash flow from financing activities	1,092	1,617	-32.5
Change in cash and cash equivalents	-5,743	-14,486	60.4

Net Assets

On the assets side of the statement of financial position, property, plant and equipment came to T€ 89,395 (PY: T€ 87,801) as at 30 June 2022. In this context, capital expenditure on plant and machinery led to a rise in property, plant and equipment. Inventories stood at T€ 56,118 as at 30 June 2022. The production of UVC air disinfection systems at Dr. Hönle AG largely led to a T€ 9,393 rise in inventories.

The inventory build-up played a major role in the reduction of cash and cash equivalents from T€ 12,073 to T€ 6,331.

Revenue reserves reported under equity capital rose by T€ 8,813 to T€ 71,495 on the liabilities side of the statement of financial position. The equity ratio rose to 57.0% (PY: 54.8%). Non-current loans came to T€ 43,382 and current bank liabilities stood at T€ 9,738. At the end of the previous financial year, the corresponding figures amounted to T€ 45,520 and T€ 3,890, respectively.

Statement of Financial Position
in T€	30.06.2022	30.09.2021	+/- %
Non-current assets	123,564	120,350	2.7
Current assets	87,090	81,605	6.7
Equity	120,022	111,122	8.0
Non-current liabilities	57,401	64,131	-10.5
Current liabilities	33,232	27,652	20.2
Total assets	210,654	202,905	3.8
Equity ratio as a %	57.0	54.8	4.0

Outlook

Overall Market

Russia's attack on Ukraine as well as a mix of high inflation rates and rising interest rates have worsened the general economic conditions. In July 2022 the International Monetary Fund reduced its growth forecasts for the global economy, and a further downward adjustment is likely.

The economy in the eurozone is in a phase of stagflation. If Russia were to discontinue gas supplies, this would lead to the threat of recession in the eurozone. The economic situation in the USA is suffering from consumer restraint, signs of a slowdown in economic growth have also increased perceptibly in recent months. In China, the economy continues to suffer from the government's strict zero-Covid policy. However, a package of measures to stimulate the economy and the lifting of the lockdown in Shanghai should have a positive impact.

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Overall, the risks of a global recession have increased, accompanied by political risks and an even tighter monetary policy providing additional headwinds for the global economy. Forecasts for economic growth in 2022 were reduced by the International Monetary Fund to 3.2% most recently.

Outlook for the Hönle Group

Business development in the third quarter and, in particular, in June 2022 was significantly worse than planned. The situation on the procurement markets and the sharp rise in energy prices temporarily had a significant negative impact on the Hönle Group's earnings. Moreover, one-off effects, mainly associated with the personnel changes implemented at the management level of Dr. Hönle AG, had an adverse impact on the result.

The Management Board does not anticipate any easing on the procurement markets for the fourth quarter of the reporting year, and also expects a further increase in energy prices. Energy prices are significantly influenced by the Russia-Ukraine war and supply reliability of the Nord Stream 1 gas pipeline.

This development has a particularly strong impact on the earnings strength of Raesch Quarz (Germany) GmbH. The Management Board therefore expects a significant negative impact on earnings at that company. The situation on the procurement markets is also expected to temporarily weigh on gross profit margins in the fourth quarter and result in the postponement of orders.

Moreover, the Hönle Group expects large-scale orders in the Adhesives segment, which will probably be postponed to the next financial year.

In the release dated 22 July 2022, the Management Board thus adjusted the revenue forecast from previously

• 130 million to 140 million to now € 125 million to € 130 million (PY: € 115 million) and the forecast for the operating result (EBIT) from previously € 14 million to € 17 million to now € 9 million to € 11 million (PY: € 0.3 million) for the Hönle Group in financial year 2021/2022.

The Hönle Group's high order backlog and a large number of ongoing customer projects represent a good starting point for the new financial year. The strains on margins in the current financial year are expected to be offset in financial year 2022/2023 as a result of already implemented or planned sales price adjustments. Assuming economic conditions remain unchanged, sales and earnings are therefore expected to rise in financial year 2022/2023.

Adhesives Segment

Sales revenues earned in the Adhesives segment in the year under review were roughly on a par with the previous year. The existing travel restrictions in China had an inhibiting effect on sales revenues. The situation has been normalising in this region in recent weeks. With respect to financial year 2022/2023, the high-volume adhesives projects are expected to realise, which is of great importance for the Company's further development.

Due to the large number of high-potential adhesives projects, the Management Board anticipates strong business development over the medium to long term. An additional managing director, responsible for international adhesives sales, is to further develop the sales territories in China and the USA in particular. For the planned increase in sales, both the spatial capacities and the number of application laboratories were extended and personnel capacities required for the areas of development and sales are also to be expanded in the relevant target markets.

Equipment & Systems Segment

Hönle is experiencing strong demand for UV-based drying solutions for adhesives. The adhesives predominantly are used in the electronics industry. Increasing requirements placed on product quality as well as high cycle times make the use of fast-curing adhesives indispensable in electronics manufacturing. UV dryers enable reliable adhesives drying and thus the immediate further processing of the products. Medical technology is another important sales market for UV drying equipment where very high demands are placed on the quality of the bonded components. Both the order intake in the current financial year and the order

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