KME S p A : The Interim Financial Report on Operations at June 30, 2022 of KME Group SpA is approved

KME Group SpA

Registered office: 20121 Milan (MI) - Foro Buonaparte 44

Share capital Euro 335,069,967.44, fully paid-up

Tax Code and Milan Companies Register no. 00931330583

www.itkgroup.it

PRESS RELEASE

• THE HALF YEAR FINANCIAL REPORT AS AT 30 JUNE 2022 HAS BEEN APPROVED, WITH THE SEPARATE FINANCIAL STATEMENTS SHOWING THE FOLLOWING:

		IN MILLIONS OF EURO
		30/06/2022	31/12/2021
	NET INVESTMENTS	651.3	643.1
 HOLDING COMPANY NET FINANCIAL DEBT	92.3	91.4
	SHAREHOLDERS' EQUITY	558.9	551.7
	NET PROFIT (LOSS)	6.7	31.61

• KME SE:

EXTRAORDINARY TRANSACTIONS CARRIED OUT INVOLVING THE DISPOSAL OF ASSETS (TRANSFER OF CONTROL OF THE SPECIAL PRODUCTS BUSINESS, SALE OF WIRES BUSINESS AND ACQUISITION OF AURUBIS' LAMINATES BUSINESS)

EARLY PARTIAL REDEMPTION FOR EURO 190 MILLION OF THE BOND AND NET FINANCIAL POSITION DOWN FROM EURO 249.5 MILLION TO EURO 59.5 MILLION

EBITDA OF EURO 45.6 MILLION AS AT 30 JUNE 2022; 78.1% HIGHER COMPARING TO THE 30 JUNE 2021, ON A LIKE-FOR-LIKE BASIS

NET CONSOLIDATED PROFIT OF EURO 98.9 MILLION (EURO 6.7 MILLION IN 2021)

• CULTI MILANO:
  CONSOLIDATED EBITDA OF EURO 2.3 MILLION (EURO 1.7 MILLION IN THE FIRST HALF OF 2021)

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The Board of Directors of KME Group SpA, called Intek Group SpA up until 23 September 2022 (hereinafter also the "Company" or the "Parent Company"), today approved the half-year financial report as at 30 June 2022, the first document of this type published following the Company's decision to focus its activities on the business management of the equity investment in KME SE.

In order to ensure better comparability and understanding, considering the recent launch of the new strategic process, the effects of which have still not fully materialised, analysis continued to be focussed on the Parent Company, on the individual equity investments and their results, in continuity with the disclosure presented in the previous financial reports.

As at 30 June 2022, the net investments held by the Company amounted to Euro 651.3million (Euro 643.1 million at the end of 2021), of which 89% in the "copper" sector and the remainder in the perfumes and cosmetics sector and in financial assets.

1Figures relating to 30 June 2021. Said amount reflects the restatement of some figures in order to retroactively consider the effects of an update of the "Fair vale measurement policy" applied to "Investments in equity interests and fund units". Specifically, this amendment relates to the elimination of the provision according to which no changes in the carrying amount of investments are recognised when the result of their valuation in the interim financial statements differs, in absolute value, from the pre-valuation carrying amount by less than 10%. In addition, some calculation provisions were restructured to take account of the lower availability of interim information items. Said change involved an increase of Euro 35.5 million in profit in the first half of 2021. For more details, please refer to the press release of 18 February and the 2021 annual financial report.

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The Company maintains a sound financial structure: Shareholders' Equity as at 30 June 2022 amounted to Euro 558.9 million compared to Euro 551.7 million as at 31 December 2021. The change is to be attributed primarily to the result of the period, positive by Euro 6.7 million (Euro 31.6 million in the first half of 2021).

The main events that have characterised the Company's activities and those of its subsidiaries in the first half of 2022 are outlined below:

1. Extraordinary financial transactions
   From 25 July of this year, three voluntary public exchange offers were made for ordinary shares, savings shares and warrants of the Company, which were announced on 22 April 2022. The offer period closed on 13 September for savings shares and warrants and on 16 September for ordinary shares. A total of 82.3 million ordinary shares were tendered, 1.1 million savings shares and 20.2 million warrants. In exchange, 63,533,259 "KME Group S.p.A. 2022 - 2027" Bonds were issued as consideration, for a total nominal value of Euro 63.5 million.
2. Copper sector
   In this area, over the course of 2021 and the early months of 2022, significant transactions were carried out in order to implement the KME group's strategy of concentrating on copper and copper alloy rolled products, in which the group is the European leader and intends to focus its energy and future growth, given the appealing growth rates expected for the main reference markets:
3. • in January 2022, the agreement was executed with Paragon Partners GmbH ("Paragon"), a German private equity fund, for the transfer of control of the Special Products business. The agreement called for the creation of a company 55% held by Paragon and 45% by KME SE, to which the above-mentioned business was transferred. This transaction enabled KME SE to cash in around Euro 200 million, plus the repayment of around Euro 20 million in intragroup loans, relating to working capital, and after a Euro 32 million loan was granted to the newly-established company;
   • an additional disposal was completed in February 2022 with the sale of the Wires business, which enter the KME portfolio with the MKM acquisition. This transaction allowed to cash in approximately Euro 20 million, plus the value of inventory;
   • in July 2022, the acquisition of part of the flat rolled products production segment of Aurubis AG was completed. The scope of the transaction includes the FRP plant in Zutphen (Netherlands) and the slitting centres in Birmingham (United Kingdom), Dolný Kubín (Slovakia) and Mortara (Italy).

The cash proceeds of the extraordinary transactions enabled a significant improvement in KME SE's net financial position (from Euro 249.5 million as at 31 December 2021 to Euro

59.4 million as at 30 June 2022) and the partial early redemption, for Euro 190 million, of the KME SE Euro 300 million bond maturing in 2023.

Revenues from sales amounted to Euro 951.4 million (+4.7% compared to 2021 on a like- for-like basis), while those net of the value of raw materials totalled Euro 212.7 million (+27.1% compared to 2021, again on a like-for-like basis). This performance enabled a notable improvement in EBITDA, up to Euro 45.6 million (+78.1% compared to 2021, again on a like-for-like basis).

1. Culti Milano SpA
   Also in the first half of 2022, Culti Milano and its subsidiaries recorded significant commercial growth, confirming their differentiation and complementary channel strategy.
   In the first half of 2022, the Culti Milano Group recorded revenues of Euro 10.7 million and EBITDA of Euro 2.3 million compared to the same indicators in the first half of 2021 (on a like-for-like basis) of Euro 9.1 million and Euro 1.7 million, respectively, therefore marking a considerable increase in sales supported by significant profitability performances.

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Statement of financial position and income statement of the Parent Company

The main equity data of the Company as at 30 June 2022, compared with those as at 31 December 2021, are summarised in the following table.

Condensed separate statement of financial position

(in thousands of Euro)	30 Jun 2022	31 Dec 2021
KME SE	581,714	89.32%	581,546	90.43%
Culti Milano	37,990	5.83%	28,904	4.49%
Ducati Energia	16,700	2.56%	16,700	2.60%
Intek Investimenti	12,159	1.87%	11,984	1.86%
Other investments	1,877	0.29%	1,995	0.31%
Other assets/liabilities	855	0.13%	1,990	0.31%
Net investments	651,295	100.00%	643,119	100.00%
Outstanding bonds (*)	93,938		95,988
Net cash	(1,590)		(4,572)
Holding company net financial debt	92,348	14.18%	91,416	14.21%
Total shareholders' equity	558,947	85.82%	551,703	85.79%

Notes:

• In the table, investments are expressed net of any financial receivable/payable transactions outstanding with the Company.
• (*) Including accruing interest.
• It should be noted that the values of the equity investments held by the Company until 22 April 2022, based on the Company's qualification of investment entity, represented equity investments determined according to the fair value method; as a result of the change of status of "investment entity", the fair value method was replaced by the cost method.
• • * *

Shareholders' Equity

The Company's shareholders' equity amounted to Euro 558.9 million compared to Euro 551.7 million as at 31 December 2021; the change is determined primarily by the result for the period.

At 30 June 2022, the share capital amounted to Euro 335,069,758.93 and was divided into a total of 405,531,454 shares, of which 389,206,391 were ordinary shares and 16,325,063 savings shares. The balance under analysis rose by Euro 548.03 compared to 31 December 2021 owing to the exercise of 54,803 warrants and the subsequent issuing of as many ordinary shares.

As at 30 June 2022, the Company held 6,937,311 own ordinary shares (equal to 1.78% of the shares in said category).

Following the close of the first half, a total of 83,380,752 shares were cancelled, of which 82,302,194 ordinary shares and 1,078,558 savings shares, tendered to the respective Public Exchange Offers. The cancellation did not have any effects on share capital.

As a result of the exercise of an additional 20,851 warrants, 20,851 ordinary shares were also issued, with an increase of Euro 208.51 in share capital.

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As of today's date, the share capital is composed of 322,171,553 shares, of which 306,925,048 ordinary shares and 15,246,505 savings shares; the 6,937,311 own ordinary shares held in the portfolio account for 2.26% of the ordinary capital and 2.15% of total capital.

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Financial management

Net financial debt of the holding company (excluding intra-group loans and leasing liabilities) totalled Euro 92.3 million as at 30 June 2022. The balance as at 31 December 2021 was Euro 91.4 million. It increased as a result of financial expenses and management costs for the period.

The Company's financial debt as at 30 June 2022, compared to 31 December 2021, can instead be broken down as follows:

Financial debt(*)

	(in thousands of Euro)	30 Jun 2022	31 Dec 2021
A	Cash and cash equivalents	1,010	4,698
B	Cash equivalents	-	-
C	Other financial assets	63,266	1,067
D	Cash and cash equivalents (A+B+C)	64,276	5,765
E	Current financial debt	1,767	3,954
F	Current portion of non-current financial debt	644	603
G	Current financial debt (E+F)	2,411	4,557
H	Net current financial debt (G-D)	(61,865)	(1,208)
I	Non-current financial debt	22,193	2,441
J	Debt instruments	92,427	92,372
K	Trade payables and other non-current payables	-	-
L	Non-current financial debt (I + J + K)	114,620	94,813
M	Total financial debt (H + L)	52,755	93,605

1. Determined in compliance with the provisions of ESMA Document 32-382-1138 of 4 March 2021 − Guidelines regarding disclosure obligations pursuant to the prospectus regulation, as highlighted in CONSOB warning notice 5/21 of 29 April 2021.
2. • * *

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The income statement shows, in a format including sub-totals, the formation of the net profit for the period by indicating the figures commonly used to provide a summary representation of business results.

	Reclassified separate income statement
	(in thousands of Euro)	1st half	1st half
	2022		2021(*)
	Income from equity investments and other expenses/income from investment	10,129		35,959
	management
	Investment management costs	(65)	(119)
	Gross profit/(loss) from investments	10,064		35,840
	Guarantee fees assets (a)	431		433
	Net operating costs (b)	(2,700)	(2,405)
	Overheads (a) - (b)	(2,269)	(1,972)
	Reclassified operating profit/(loss)	7,795		33,868
	Net financial expense	(2,428)	(1,711)
	Profit/(loss) before taxes and non-recurring items	5,367		32,157
	Non-recurring income/(expenses)	1,176		(710)
	Profit/(loss) before taxes	6,543		31,447
	Taxes for the year	148		186
	Net profit (loss) for the period	6,691		31,633

(*) see the note shown on page 1.

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Trend in main equity investments

KME SE

Consolidated revenues as at 30 June 2022 totalled Euro 1,025.3 million, down by 7.3% compared to the first half of 2021 (Euro 1,106.2 million). Net of the value of raw materials, revenues were down by 13.5%, from Euro 264.7 million to Euro 229.0 million.

On a like-for-like basis, i.e. considering the sale of the special products and wires businesses, shows that total revenues increased by 4.7%, from Euro 908.9 million to Euro 951.4 million, while revenues net of the value of raw materials recorded a significant increase of +27.1%, up from Euro 167.4 million to Euro 212.7 million.

Gross operating income (EBITDA) as at 30 June 2022 came to Euro 45.6 million, slightly lower than the figures in 2021 (Euro 47.6 million), which also included the contribution of the two businesses sold. EBITDA in the first half of 2022, thanks to the improvement in the margins driven by the revision of the policies for determining product prices, also to face the increasing cost of material, recorded a significant increase (+78.1%) compared to that of the previous year on a like-for-like basis, amounting to Euro 25.6 million.

Net operating income (EBIT) stood at Euro 30.0 million (Euro 26.4 million in 2021). Profit before non-recurringitems was Euro 12.2 million (Euro 6.4 million in 2021).

During the half under review, non-recurring items had a positive impact of Euro 106.5 million, of which Euro 114.0 million deriving from the capital gain from the transfer of control of the special products and disposal of wires businesses. The valuation of inventories and forward agreements net of taxes had a negative impact of Euro 0.2 million compared to a positive impact of Euro 21.5 million recorded in 2021.

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