AFARAK GROUP SE

The Board of Directors Report 2024 and the Annual Financial Statements 

1 January-31 December 2024

Domicile: Helsinki

Company number: 0618181-8

Contents

THE BOARD OF DIRECTORS REPORT

Dear Shareholders,

In an extremely tough year 2024, we generated a positive EBITDA of € 2.6M. The stainless steel demand was historically low, especially in Europe. The demand for low carbon ferro-chrome suffered from this fact. In addition the price pressure from low cost imports (India, Kazakhstan, Russia and China) weighed heavily on our margins. We have decreased the OPEX by 21.2%, but that wasn't enough to generate a good result. The Chrome Ore prices decreased sharply in the second half year, which further impacted the revenues and margins. Nonetheless, we succeeded in keeping our financial situation stable. The company will follow the new dividend policy and the board intends to decide about the actual dividend allocation at a later stage. 

Guy Konsbruck

CEO

Our commitment

Afarak vows to deliver its contribution to environmental and social sustainability through its production processes. We believe that our efforts will support several United Nations' resolutions on sustainability, such as decreasing poverty and hunger, but also increasing gender equality, education and access to clean water.

Our most significant impact on local host communities lies in providing direct and indirect employment. We support local communities in their needs related to education and infrastructure whilst supporting social causes.

SUSTAINABILITY, HEALTH AND SAFETY AT AFARAK GROUP 

Afarak Group extracts, processes, markets and trades specialised metals and is trusted by a highly diversified customer base that covers the aviation, nuclear, oil & gas and automotive industries. Our customers are leaders in their sectors and look to their suppliers to uphold their high standards for ethical conduct, health and safety and environmental protection. The communities in the regions where we operate also look to us to support their economic development. 

Our sustainability commitments and our work to date is designed to provide all our stakeholders with the assurance that we are a well-managed business that respects people and the planet. 

There were two fatal accidents to a subcontractor's workers in the company's South African mines during 2024. The Board has taken seriously these incidents and have been investigating the cause so as to ensure that similar incidents do not happen in the future. Our goal is to ensure that our employees work in a safe environment at all times.

CSRD REPORT

ESRS 2: General Disclosures 

BP-1: General principles for the preparation of the sustainability declaration

This report is the first sustainability report of Afarak SE (Societas Europaea) (hereinafter referred to as "Afarak"). In accordance with the EU Corporate Sustainability Reporting Directive (CSRD), the group is obliged to report for the 2024 financial year and is therefore preparing this sustainability report in accordance with the European Sustainability Reporting Standards (ESRS). 

The information in this sustainability report relates to the 2024 financial year, with deviations marked accordingly. The scope of consolidation for this sustainability report includes the locations in Germany, South Africa and Turkey. The locations not included in the scope of consolidation are Serbia and Malta, as they were not classified as material in accordance with the materiality criteria of the ESRS standard for sustainability reporting. No significant economic activities took place there in the reporting year.

The sustainability report relates to two value chains. The first chain relates to Afarak's mining sites, which serve as the primary source for the extraction of raw materials and therefore represent the beginning of the value chain. The second chain comprises the Group's production site. It should be mentioned here that some of the raw materials extracted from the mines' value chain are processed in the company's own production facilities.

Afarak has decided not to omit any information regarding intellectual property, know-how or innovative results from the sustainability statement. Similarly, in accordance with Article 19a (3) and Article 29a (3), no omissions of information on forthcoming developments or issues currently under negotiation are made.

BP-2: Disclosures in connection with specific circumstances

Time horizons and further information

In accordance with the time horizons defined in ESRS 1, Afarak has not made any deviations. The medium-term time horizon extends up to five years after the end of the current reporting period, while the long-term time horizon extends beyond that. The reporting also does not include any upstream or downstream value chain metrics based on estimates from indirect sources such as industry average data or other approximations. Furthermore, no quantitative key figures or monetary amounts are reported that would be subject to a high degree of measurement uncertainty.

As this is Afarak's first Sustainability Report, no changes have been made in the preparation and presentation of the sustainability information compared to previous reporting periods, and there are no errors from previous reports to mention. Furthermore, this Sustainability Report does not include any additional information based on other legal requirements or generally accepted standards and frameworks, including standards of the European Standardization System (ISO/IEC or CEN/CENELEC standards). Furthermore, no specific information has been incorporated by reference into the sustainability statement.

Use of transitional periods

Afarak makes use of some transitional periods and thus omits ESRS E4 (Biodiversity and Ecosystems), ESRS S1 (Own Workforce) and ESRS S3 (Affected Communities) in accordance with Appendix C of ESRS 1. Although detailed reporting on these topics will be dispensed with in the first reporting year, they shall remain a central component of Afarak's strategic orientation. The plan is to cover these topics in detail in the sustainability reports in the coming years. The importance of these aspects is already firmly integrated into the Group's business model and strategic direction, as explained in more detail below:

In relation to E4 (Biodiversity and ecosystems)

Afarak's business model is closely linked to the use of natural resources. Although Afarak's mine sites are not located in ecologically protected areas, the Group recognizes the importance of preserving biodiversity and ecosystems even in areas outside officially protected regions. The long-term strategy aims to minimize negative impacts on the environment. Afarak is constantly working to establish sustainable practices at its production and mining sites.

Afarak is already integrating aspects of biodiversity and ecosystem protection into its environmental management systems to ensure that operations are in line with local and global objectives. The measures are aimed at maintaining soil health and protecting water resources.

The Group's current materiality assessment shows that topic standard E4 has only just reached the required threshold for a material classification. In light of this, Afarak considers it appropriate to take advantage of the transitional period and not report on this topic standard in the 2024 reporting year. This decision will allow a new and more comprehensive review of materiality to be performed next year, based on the disclosures required by ESRS E4. If the topic remains material, Afarak will establish detailed reporting on E4 by 2026 at the latest.

In addition, it is expected that regulatory requirements may change in the near future, which may result in either a higher classification or a more detailed analysis. The use of the transition period allows Afarak to ensure that reporting not only meets current standards,  but is also flexible enough to respond to regulatory developments and provide a solid basis for future evaluation.  The aim is to ensure sound and responsible reporting that meets both stakeholder requirements and internal standards.

With regard to S1 (Own employees)

Afarak's business model is geared towards long-term growth and stability, with the well-being and development of employees playing a central role. Great emphasis is placed on promoting health and safety in the workplace. Risks are continuously assessed at all sites and measures are implemented to improve health and safety guidelines. Afarak also offers continuous training and development opportunities and is mindful of diversity and inclusion within the workforce. These principles are firmly anchored in the corporate strategy to ensure a sustainable and motivated workforce. Afarak will establish more detailed reporting on S1 by 2025 at the latest.

With regard to S3 (Communities concerned)

Afarak's strategy aims to achieve positive social and economic effects in the regions in which the company operates. The Group is actively involved in initiatives that support local communities, particularly those close to the mining sites in South Africa. Such initiatives include job creation, access to education and the promotion of environmental awareness. Afarak also maintains an open dialogue with local stakeholders to better understand their needs and minimize any potential negative impacts of its operations. If the topic remains material, Afarak will establish more detailed reporting on S3 by 2026 at the latest.

Goals on these topics

In view of the measures and targets already implemented in the social area of sustainability, Afarak intends to establish a stronger and more detailed reporting system over the next two years. This will include a more detailed presentation of current and future initiatives. To achieve this, the Group plans to further strengthen its interaction with relevant stakeholder groups. The aim is to better understand the expectations and concerns of internal and external stakeholders and integrate them into strategic planning. In addition, Afarak will concretize its future plans by precisely setting out its long-term goals and strategies, particularly with regard to social aspects such as its own employees (ESRS S1) and the affected communities (ESRS S3). Another component of future reporting will be the detailed presentation of past projects in order to transparently disclose progress and successes to date and derive valuable insights for future initiatives.

Guidelines on these topics

As part of the Group's corporate social responsibility, the promotion of human rights and the improvement of the quality of life are at the heart of the concepts and guidelines. This shall include ensuring fair working conditions and the health and safety of employees. In addition, Afarak is committed to working with affected communities to focus on their needs, respond to them and promote positive social impacts. Furthermore, the guidelines of the Code of Conduct, the Code of Ethics and the Supplier Code of Conduct apply, which regulate the standards of conduct at Group level. All Afarak sites are instructed to act in accordance with these guidelines, in line with local legislation.

Measures on these topics

Afarak is committed to consistently striving to implement the Group-wide "Zero Harm Policy" at all levels of its business activities. This Group-wide guiding principle includes the intention to ensure a safe and healthy working environment for both employees and contractors. Regular exchanges in health and safety committees enable Afarak to integrate its corporate activities in such a way that the social, environmental, health and safety concerns of all stakeholders are adequately taken into account.

Afarak is actively committed to improving the working conditions of its employees by creating a safe environment and specifically addressing key health issues - particularly HIV/AIDS at its South African sites. In addition to safety, health is a top priority for Afarak. By providing comprehensive healthcare, the Group actively contributes to the long-term well-being of its employees. Continuous assessments, monitoring and controls of risks to employees are carried out at the sites.

There are various bodies and committees at all locations to protect the interests of the workforce. In Turkey, for example, there are health and safety committees, while in South Africa employee rights are represented by committees such as those for labor relations, equal opportunities and skills development. In Germany, employees have a works council and are represented by a trade union. At European level, the Group's employee representatives are also organized in an SE Works Council, which deals with Group-wide issues and employee interests.

Afarak also supports local communities through social programs such as:

• the care of orphans

• Supporting schools through a food aid program that ensures the nutritional needs of children are met

• Support for daycare centers that provide children with professional care and promote their early childhood education and development

• Support for a refuge center for abused women, which offers protection and support for families 

GOV-1: The role of the administrative, management and supervisory bodies

The Group's administrative, management and supervisory bodies are crucial in the formulation, monitoring and implementation of corporate policy. The Board of Directors (BoD), which is equivalent to the Advisory Board, is ultimately responsible to monitor environmental, social and governance (ESG) strategies, while the Executive Management Team (EMT) is responsible for the implementation of corporate policy and risk management. The Audit and Risk Management Committee ensures the effectiveness of the internal control systems.

These bodies have the strategic responsibility to define the impacts, risks and opportunities (IROs) and integrate them into the corporate objectives. Their task is to approve comprehensive sustainability strategies and ensure that sufficient expertise is available in key areas. Sustainability issues are an integral part of the meetings of the relevant bodies. Care is taken to ensure that sustainability goals are integrated into the company's overall strategy. The bodies themselves have extensive expertise in the areas of risk management, ESG strategies and compliance. This enables them to effectively monitor and implement corporate policy. In addition, they call on specialized teams and experts to support them in the development and implementation of policies.

The responsibilities for monitoring the IROs and implementing the ESG strategies are structured in the following committees :

Board of Directors (BoD)

The Board of Directors (BoD) is equivalent to the Advisory Board or Executive Board and bears the highest responsibility for monitoring sustainability-related risks and ESG issues. The BoD is responsible for approving and evaluating ESG strategies and analyzing the impacts, risks and opportunities of all sustainability issues affecting the company. In this role, the BoD oversees the Executive Management Team (EMT) and the Audit Committee to ensure that policies and risk management processes are implemented appropriately. Afarak's BoD holds regular meetings at least four times a year to monitor and manage strategic, financial and operational issues. In addition, a strategy meeting is held at least once a year. This meeting is attended by the BoD, the EMT and the Corporate Management Team (CMT). The aim of this meeting is to review and agree strategic objectives and define the long-term direction of the company.

• Chairman and independent non-executive director: Thorstein Abrahamsen

• Independent non-executive director: Dr. Jelena Manojlovic

• Chief Executive Office (CEO) and Managing Director: Guy Konsbruck

Board Committees

Audit and Risk Management 

Afarak's Audit and Risk Management Committee monitors the company's financial reporting, internal control system and risk management processes. It collaborates closely with external auditors, reviews their reports and ensures that the company's management complies with legal and regulatory requirements. It also supports the BoD in evaluating growth strategies and investments.

Nomination and Remuneration Committee

Afarak's Nomination and Remuneration Committee is responsible for the selection and nomination of Management Board members and executives as well as the development and monitoring of the remuneration policy. It ensures that appointments to management positions reflect the necessary expertise, diversity and experience. It also develops performance-oriented remuneration structures that are in line with the company's long-term goals.

Committee for Health, Safety and Sustainability

Afarak's Committee for Health, Safety and Sustainability monitors compliance with health and safety standards and the implementation of sustainability initiatives. It promotes projects to improve working conditions, environmental protection and cooperation with local communities. It also supports investments in sustainable technologies, such as alternative energy sources and measures to reduce environmental pollution.

Executive Management Team (EMT)

The EMT is responsible for implementing ESG strategies, monitoring IROs and risk management. Risk factors, opportunities and their impact are regularly reviewed here to ensure that appropriate management plans are implemented.

The EMT acts as a supportive and advisory body that does not make any independent decisions. However, it provides input and recommendations that are implemented either by the CEO, a responsible EMT member or the BoD. This model ensures that all decision-making processes remain under the control of the highest levels of management, in particular the CEO and the BoD. It should be emphasized that the Chief Compliance Officer (CCO) in particular monitors the legal and regulatory requirements in the area of sustainability, including compliance with the CSRD and other reporting standards. He also acts as ESG manager at Group level. The EMT meets at least once a year for a strategy meeting with the CMT and the BoD. The EMT reports on risk reviews to the BoD on a quarterly basis. In addition, the EMT submits half-yearly interim financial reports to the BoD.

The members of the EMT are as follows:

• Chief Technology Officer (CTO): Christoph Kemper

• Chief Compliance Officer (CCO): Stefano Bonati

• Chief Financial Officer (CFO): Kylie Gauci

• Chief Executive Officer (CEO): Guy Konsbruck

Corporate Management Team (CMT)

The CMT comprises the national managing directors and senior functions responsible for compliance with national laws and local ESG requirements in the respective regions in which Afarak operates. They ensure the direct implementation of the company's strategic guidelines in the operational business.

The members of the CMT are as follows:

• Seyda Caglayan 

• Dr.-Ing. Christoph Kemper

• Christoph Schneider

• Dr. Kurt Maske

• Kylie Gauci

• Dr. Stefano Bonati

The CMT reports primarily to the EMT, which serves as the central interface for the coordination and monitoring of operational activities. The EMT reviews and consolidates the CMT's reports before strategically relevant issues are forwarded. The CMT meets at least once a year for a strategy meeting with the EMT and the BoD.

ESG team

Afarak's ESG team was established to meet CSRD reporting requirements and support the company's ESG objectives. Led by Dr. Stefano Bonati, CCO and ESG Manager, the team helps to ensure compliance with international ESG standards and regulatory requirements. The team reports directly and continuously to the EMT on ESG-related findings.

The team forms a central unit for the transparent communication of environmental, social and governance aspects to internal and external stakeholders. It consolidates the ESG data from all operating locations and ensures their compliance with current reporting obligations. A key focus is on developing strategies that will enable a gradual expansion of reporting in the coming years in order to meet future regulatory and market-specific requirements.

Composition and diversity of the administrative, management and supervisory bodies

The composition of Afarak's Board of Directors is as follows:

Controls and procedures for IRO management

The members of the EMT and BoD regularly receive comprehensive reports to keep them informed of relevant findings and developments in IRO management (Impact, Risks, and Opportunities), which have already been listed in the previous chapter.

To ensure effective IRO management, Afarak significantly expanded its IRO management in the course of introducing CSRD reporting and systematically integrated it with the help of the double materiality assessment (Doppelte Wesentlichkeitsanalyse = DWA). While IRO management was previously less extensive and focused on basic risk aspects, it has now been embedded in Group-wide risk management. Through regular reviews, Afarak strives to ensure that IRO management is closely aligned with corporate objectives and sustainability reporting requirements.

Expertise in monitoring the IROs

Afarak's BoD and EMT take targeted measures to ensure that appropriate skills and expertise are in place at both operational and strategic levels to monitor and develop sustainability issues. The clear division of tasks between operational implementation and strategic responsibility aims to ensure that sustainability expertise is leveraged at a detailed level and also feeds into strategic decisions at management level.

1. Deployment of specialist personnel: Afarak deploys employees with in-depth expertise in environmental management, social responsibility and corporate governance in key positions. ESG officers and compliance specialists, who report directly to management, play a central role in this. The ESG team coordinates strategies in the areas of environmental, social and governance, including the assessment of risks such as carbon accounting and the development of climate strategies. Site-based HR teams promote equal opportunities and implement anti-discrimination measures, while site managers analyze operational risks in the supply chain and production sites and develop suitable risk mitigation strategies.

2. Targeted further training: The existing members of the relevant bodies regularly take part in training sessions on current sustainability topics. This training covers legal requirements such as the CSRD and the strategic ESG objectives to ensure that the company is always up to date.

3. External expertise: For specific sustainability issues, the bodies call in external consultants or organizations to assist with specific sustainability issues or with the development of new strategies.

4. Continuous development: The executive bodies regularly review existing skills and knowledge and continuously adapt their strategies in order to proactively meet future requirements and sustainably promote the company's development.

Employee representation

Afarak's locations are represented by the CMT, which includes the managers responsible for each location. This team acts as a central platform for coordination and exchange between the operating units and reports directly to the EMT. The aim of this structure is to ensure that the interests of employees at all sites are incorporated into the Group's strategic decision-making.

The representation of employees' interests has been adapted to the individual legal and organizational requirements of the respective sites.  The representation of employees and workers in the bodies of Afarak is organized as follows:

German site:

At the German site, a works council represents the co-determination rights of employees, while a representative body for severely disabled employees is specifically dedicated to the interests of employees with disabilities. The employees are unionized in the IG Metall trade union. The members of the works council and the representative body for severely disabled employees work closely with the workforce and management to comply with legal and operational requirements. In addition, some unionized employees are active as shop stewards in the company in order to represent and strengthen the interests of employees directly on site.

Furthermore, regular committee meetings with employee participation are dedicated to topics such as occupational health and safety. In addition, staff meetings are held to promote communication and transparency between company management and employees. In addition to the physical notice boards, an employee app is also used for structured and open communication in all areas of activity, which promotes transparent exchange and information for the entire workforce.

South Africa:

In South Africa, employees are represented by various committees. These committees focus on topics such as labor relations, equality and skills development and offer employees a platform for co-determination and to voice their concerns. 

Turkey:

In Turkey, too, health and safety councils in the mines play a central role in co-determination and dealing with safety-related issues

Afarak SE as a company:

As a European company, Afarak is subject to EU regulations on employee involvement and therefore has an SE Works Council. This is made up exclusively of employees from the EU sites and represents the interests of the European workforce in important corporate decision-making processes. The SE Works Council consists of three members of the German Works Council, one trade union representative from IG Metall and one member from the administrative location in Malta. Together, they represent the interests of the EU employees. 

GOV-2: Information and sustainability aspects addressed by the company's administrative, management and supervisory bodies

Administrative, management and supervisory structures in ESG management

Afarak's management and supervisory bodies receive regular reports on the main IROs relating to sustainability, at least every six months and sometimes quarterly. Afarak uses a structured reporting system to monitor the effectiveness of implemented measures: 

• The site managers, who are part of the CMT, report directly to the EMT.

• The ESG team reports to the CCO (ESG manager at Group level) on progress and measures in the field of sustainability.

• The EMT consolidates the reports from the site managers and the ESG team and forwards them to the BoD together with its own strategic assessments.

IROs are deliberately taken into account in strategy monitoring by including them in ESG and climate-related decisions. Comprehensive risk analyses are carried out before important transactions are carried out. IROs are regularly assessed and monitored as part of risk management. Trade-offs between short-term costs and long-term sustainability goals are also carefully examined.

In the 2024 reporting period, the administrative, management and supervisory bodies and their committees dealt with a number of key IROs. The following topics reflect the strategic planning priorities for 2024 and emphasize the Group's commitment to integrating sustainability both operationally and strategically:

Results of the double materiality assessment (DWA):

In the 2024 reporting period, Afarak conducted a comprehensive double materiality assessment to identify the key sustainability issues that are of strategic importance to the company and its stakeholders. The assessment takes into account both the impact of business activities on the environment and society as well as financial risks and opportunities resulting from sustainability factors.

• In the "Environment" area, the focus was on the efficient use of resources and minimizing negative effects. Particular attention was paid to water consumption, which has already been optimized at the mine sites and reduced through targeted measures for reuse. Energy consumption was also assessed as a key factor. Afarak plans to reduce costs and promote sustainability in the long term by increasing the integration of renewable energies.

• In the "Social" area, the working conditions of the company's own employees and the rights of the affected communities were examined in more detail. Afarak is committed to fair working standards, safe working environments and the promotion of employee health and safety. At the same time, responsibility towards the communities in the vicinity of the sites plays a central role. The aim is to take local needs into account and further expand social initiatives in order to achieve positive effects in the regions.

The results of the materiality assessment form the basis for concrete measures that contribute to the integration of sustainability goals into the business strategy. They illustrate Afarak's commitment to promoting sustainability in the long term, both operationally and strategically.

Development of the ESG management system:

Afarak's executive bodies have worked intensively on integrating all operating sites into a central ESG management system in order to meet the requirements of the CSRD. One focus was on integrating all sites into the Life Cycle Assessment (LCA). In addition, the first data collections for a "Climate Change Transition Plan" were started in order to develop long-term strategies, measures and targets.

In addition, ESG reporting structures have been created to ensure consistent and transparent data collection and reporting. The aim is to define clear responsibilities and establish processes that make it possible to efficiently consolidate ESG data from all operating units and report on this data in accordance with the requirements of the CSRD and other international standards. The focus here is on continuously improving data quality and creating a reliable basis for future sustainability reports.

Energy dependencies:

Uncertainties and rising energy supply costs were treated as a significant risk, with the aim of using renewable energies at all sites. The focus was on pilot projects for the use of solar energy and to improve energy efficiency.

Market fluctuations:

The ongoing price volatility of low carbon ferrochrome, particularly due to imports from Russia and India, was closely monitored.

GOV-3: Inclusion of sustainability-related performance in incentive systems

Description of the remuneration system

• Base salary: Determined by the position, skills and experience of the respective executive.

• Annual bonus plan: An incentive based on annual performance.

• Long-term share-based incentives: To promote long-term corporate goals and align the interests of management and shareholders.

The remuneration of the BoD was determined by the 2024 Annual General Meeting as follows

• Non-executive members: EUR 5,000 per month.

• Chairman of the Board: Additional EUR 1,500 per month.

• Committee members: An additional EUR 1,500 per month for work on Board committees.

Members of the Board who also hold executive roles in the company do not receive any additional remuneration for their work on the Board.

Approval of the remuneration system

The remuneration system is monitored and approved by the Nomination and Remuneration Committee:

• The committee consists of two independent board members: Thorstein Abrahamsen and Jelena Manojlovic.

• It conducts the process for Board appointments and management remuneration and makes recommendations to the BoD and the Annual General Meeting.

Sustainability-related incentives

The remuneration system does not currently contain any explicit sustainability targets or ESG-related remuneration components.

GOV-4: Declaration on due diligence

GOV-5: Risk management and internal controls over sustainability reporting

While currently the existing risk management system primarily covers financial and operational risks, non-financial risks, such as ESG aspects, will also be given greater consideration in the future. The topics identified in the double materiality assessment provide a valuable basis for gradual integration. 

In contrast to financial reporting, which is based on standardized key figures and accounting standards, the focus of sustainability reporting is on qualitative and forward-looking aspects, such as the assessment of climate risks or social impacts. The necessary data is collected in close coordination with the operating units in order to better capture material ESG risks and opportunities.

The double materiality assessment helps us to systematically identify, assess and monitor sustainability-related risks. At the same time, it supports the gradual integration of these risks into our existing risk management process. This enables a closer integration of financial and non-financial risks with the strategic and operational management of the Group.

Scope and main features of the new risk management system

Scope

The risk management systems cover all of Afarak's locations and business units.

Main features

Risks are systematically identified and assessed using a matrix that focuses on the materiality and impact of risks and opportunities. Group-wide standardization enables uniform application, which is, however, specifically adapted to the needs of the individual locations.

Components of the risk management systems

Risk management

Risks and opportunities are identified and evaluated using standardized assessment methods and the double materiality assessment. In addition, control measures are implemented to mitigate identified risks, such as systems for monitoring environmental pollution or ensuring compliance.

Internal control

Regular reviews are carried out by internal teams. The findings that emerge from it are forwarded to the next higher authority - such as the CMT or EMT. Based on the risk assessment, action plans are then developed and reviewed on a regular basis.

Reporting

Annual planning and regular reports to the EMT and the BoD are used to monitor and manage ESG-relevant risks.

ESG initiatives

In future, the control mechanisms will integrate environmental and social factors including climate protection, resource management, and the safeguarding of labor standards.

Main responsibilities in risk management

The EMT ensures that standards are adhered to and the quality of reporting is guaranteed. The implementation of the measures is the responsibility of the local CMT members, while a central ESG team consolidates and checks the data collected in order to fulfill the reporting obligations with regard to sustainability reporting.

Approach to risk assessment

Afarak's risk assessment follows a systematic and Group-wide approach based on consistent methods. Risks and opportunities are identified, analyzed and evaluated using a matrix. This matrix is used to assess materiality. The risk assessment is carried out regularly to ensure that changes in operational and external conditions are taken into account. The process includes the following steps in detail:

• Risk classification: Each risk is categorized based on an assessment grid that represents the severity of the potential impact on Afarak's objectives and activities.

• Matrix structure: The matrix structure is used to analyze different levels of financial, operational and reputational impact; the risk assessment is then carried out in graduated stages to determine the tolerance limit.

• Integration: Afarak's risk management process is firmly integrated into the annual business planning and is managed by both the locations and the Group's central functions. 

• Process description: The assessment of the likelihood of a risk occurring is carried out by the operational teams at the respective locations. The impact is assessed by analyzing potential financial and non-financial losses. Management reviews and approves the final prioritization of risks and determines suitable risk mitigation measures.

Main identified risks and mitigation strategies

Specific risks were identified in four areas: External risks, operational risks, sustainability risks and regulatory risks. The risks and the associated mitigation strategies are outlined below:

External risks

Afarak sees the volatility of product prices, currency fluctuations and uncertain macroeconomic conditions as key external risks. To counter these challenges, the company relies on a broad diversification of its business areas and geographical presence as well as hedging strategies to stabilize financial fluctuations. In addition to these economic factors, regulatory ESG requirements and changing market expectations, which can have a long-term impact on competitive conditions and business strategies, are also becoming increasingly important. Control mechanisms such as continuous market monitoring and strategic adjustments make it possible to react flexibly to volatile markets

Operational risks

Safety risks and unexpected operational incidents, including environmental risks, pose significant operational challenges for Afarak. To minimize such risks, strict safety guidelines have been introduced, employees receive regular training, and environmental standards are monitored consistently. Control mechanisms such as regular safety reviews and internal audits are implemented to ensure the highest safety standards.

Sustainability risks

Afarak considers the tangible effects of climate change and increasing demands for sustainable business practices to be key sustainability risks. To counter these, the company relies on energy-efficient technologies and makes targeted investments in renewable energies. Here, control mechanisms include the continuous monitoring of energy consumption and emissions as well as the implementation of planned projects such as the construction of solar plants.

Regulatory risks

Significant regulatory risks for Afarak are the increasing requirements resulting from restrictive environmental and occupational health and safety regulations. In response, the company relies on strict compliance with all relevant standards through internal guidelines and regular audits, both internally and externally. As a control mechanism, the CMT, which consists of the specific local site managers, ensures continuous compliance, monitoring, and adaptation of these regulations.

The results of the risk assessment are integrated into the relevant internal functions and processes by the Board Committees. Continuous reporting on the results of the risk assessment and internal controls to the administrative, management and supervisory bodies takes place at the "Board of Directors Meeting", which is held at least four times a year, and at the "Strategy Meeting", which is held at least once a year. The EMT, the CMT and the BoD take part in the latter.

SBM-1: Strategy, business model and value chain

Afarak's business model and value chains

Afarak is a globally active, vertically integrated producer and innovator of specialty alloys. The Group focuses on the production of ferrochrome (FeCr) and the mining of chrome ore. These raw materials form the basis for the production of customer-specific special alloys that are sold worldwide.

Afarak serves renowned customers from various industries including the aerospace, nuclear, oil and gas, automotive, and renewable energy industries. Thanks to this diversification, targeted investments and the highest safety and quality standards, Afarak occupies a significant position as a manufacturer of individual special alloys.

As a global company, Afarak strives to create added value along the entire value chain. The company attaches great importance to sustainable development by actively working to reconcile environmental, social and economic interests. At the same time, it ensures long-term benefits for its shareholders through healthy financial performance.

Afarak's areas of activity include:

• Extraction: Our own mines in South Africa and Turkey ensure a high-quality supply of chrome ore concentrate for further processing in Germany and trading on the global market.

• Research and development: The in-house laboratory at the German site is used for our own quality assurance. It specializes in inorganic analysis and offers precise, customer-specific solutions. State-of-the-art analysis technology is used to examine materials in order to develop and test tailor-made special alloys. The laboratory meets the highest quality standards and works according to recognized norms to ensure reliable and fast results.

• Processing: Advanced technologies and know-how are used to process the raw materials into high-quality special alloys.

• Global distribution: Afarak distributes its products worldwide with in-depth industry knowledge and maintains long-term customer relationships.

• Logistics and delivery: Efficient logistics ensure punctual deliveries in all quantities and optimize inventory management.

These areas of activity can be described in two main value chains, each of which has its own characteristics:

Mining value chain

The mining value chain is focused on the extraction and processing of chrome ore, which is extracted in the company's own mines. The chrome ore concentrate produced is sold worldwide and is a key raw material for the production of stainless steel. Close cooperation with steel manufacturers enables us to reliably meet their requirements in terms of quality and quantity. This value chain is strategically aligned to meet global demand and ensure a reliable supply. The combination of own mines, efficient processing and a strong customer focus makes Afarak an important player in the steel industry value chain.

Production value chain

Thanks to vertical integration, the company controls the entire process - from raw material procurement to processing and distribution. This ensures high flexibility and product quality. The supply of raw materials is ensured by the company's own mine value chain and close partnerships with local suppliers, while central coordination in Malta supports the efficient distribution process. The products from this value chain are distributed worldwide. Afarak cultivates long-term relationships in order to understand the needs of its customers and offer customized solutions.

According to the ESRS sector classification, Afarak generates significant sales in the following sectors:

• Mining; Mining and quarrying of metal ores subsector; NACE code 07

• Fabricated metal products; subsector Manufacture of basic metals; NACE code 24

These classifications reflect Afarak's activities in the area of chrome ore mining in Turkey and South Africa and the production of ferrochrome in Germany.

Afarak employs people in Turkey, Germany, South Africa, Serbia and Malta. In addition, there are employees without a fixed geographical location, including our Board of Directors and other employees. The following table shows the number of employees in these geographical areas as well as employees not based in a specific location:

* For non-financial reporting in accordance with the materiality criteria of the ESRS standards, only the locations in Germany, Turkey and South Africa are part of the consolidated group, as only these locations have relevant economic activities in terms of sustainability reporting.

Sustainability goals

The Group's main products are ferrochrome (FeCr) and chrome ore (Cr ore), which are primarily sold on the global metals market. Afarak extracts, processes, markets and trades chrome ore concentrate and ferrochrome specialty alloys. Its diversified customer base includes the aerospace, automotive, defense and sustainable energy technology industries. These customers expect their suppliers to maintain high standards of ethical behavior, health, safety and environmental protection. Similarly, the communities in the regions in which Afarak operates expect support in their economic development. Building on this, Afarak has set itself sustainability targets in the areas of product groups, customers, geographical areas and stakeholders. The targets in the individual categories are outlined below:

Product groups

Afarak strives for continuous process optimization in order to increase production efficiency while minimizing resource consumption and environmental impact.

Customers

In order to meet customer requirements, Afarak relies on the continuous optimization of logistics processes. Targeted, efficient transport routes and sustainable packaging should not only enable faster delivery to customers, but also reduce CO₂ emissions in supply chain management. This contributes to a more sustainable value chain and at the same time meets customers' increasing expectations for environmentally friendly delivery processes.

Geographical areas

In South Africa and Turkey, Afarak focuses on continuously increasing the efficiency of water management and on renaturation and land restoration projects due to the medium to high water stress. In addition, measures to reduce emissions, particularly in the area of energy efficiency, are being implemented at all locations.

Stakeholders and suppliers

Personal and transparent contact with those responsible at each location is intended to ensure that the interests of local communities, employees and suppliers are an integral part of the sustainability strategy.

Sustainability strategy

The sustainability aspects of Afarak's business strategy include health and safety, environmental protection (including water management, waste management, soil remediation and emissions reduction) and community engagement and support. Afarak is committed to contributing to environmental and social sustainability through its production processes. These efforts are intended to support several United Nations resolutions, such as poverty and hunger reduction and gender equality, education and access to clean water.

The creation of direct and indirect employment is Afarak's most significant impact on local communities. In addition, Afarak supports local communities in meeting their needs in the areas of education and infrastructure and also promotes social causes. The subsidiaries are working on programs to improve water and waste management and focus on reducing emissions. The introduction of data collection processes enables the company to set benchmarks and develop long-term targets to measure performance.

Responsibility

The BoD and EMT actively monitor the sustainability strategies and ensure they are in line with the company's objectives. Clear responsibilities have been established to manage sustainability-related IROs and achieve health and safety, environmental and social objectives. As Afarak operates in different national markets, operational responsibility for sustainability lies with the national managing directors. They are best placed to ensure compliance with national laws and market expectations. The BoD and EMT take a holistic approach to monitoring sustainability initiatives at national level and ensuring that they meet investor expectations.

Key inputs and their influence on the sustainability strategy

The key inputs include raw materials, technology, skilled labor, customer data, industry knowledge and logistics. Afarak strengthens its business model and value chain through a targeted combination of vertical integration, continuous research and development and strategic, long-term partnerships. Particular emphasis is placed on sustainability and the protection of intellectual property in order to promote innovation and quality in the future. These diverse approaches ensure long-term success and strengthen the company's leading position and the distribution of raw materials on global markets.

Afarak also integrates sustainable solutions and process optimization into its value chain in order to create long-term environmental, social and economic benefits:

• Energy-efficient technologies: The company uses technologies to reduce energy consumption and emissions. These include planned solar systems and energy-optimized machines.

• Water management: Recycling and closed-loop systems are used in the extraction of raw materials to minimize water consumption.

• Waste minimization: By implementing closed-loop production systems, Afarak reduces waste and increases resource efficiency. Waste is specifically converted into usable recyclable materials, such as the processing of slag into a product for road construction. In this way, Afarak contributes to the circular economy and creates additional added value.

• Process optimization: Production methods are constantly becoming more efficient in order to minimize the environmental impact in the long term.

Key outputs and their influence on the sustainability strategy

The Group's outputs, including customized special alloys, innovative solutions and the procurement and distribution of essential raw materials for the global metal processing industry, offer significant benefits for the company's customers, investors and other stakeholders. Customers benefit from high-quality, customized products and a reliable supply chain. Investors benefit from stable financial results and future-oriented innovations. Employees, partners and the environment also benefit from Afarak's sustainable practices and long-term stable business relationships. In the future, the company expects technological innovations and sustainable growth to create additional added value for all stakeholders.

SBM-2: Stakeholders' interests and positions

Afarak's key stakeholders include employees, employees in the value chain, shareholders and financial institutions, customers, the environment, local residents, society and the public as well as the supply chain. Afarak attaches great importance to including the interests and perspectives of these stakeholders in its decision-making processes. The aim is to build trusting relationships, promote the principles of sustainability and responsibility and ensure economic success through close cooperation with all interest groups. This exchange takes place in particular with the groups of employees, customers, environmental institutions, the supply chain and shareholders.

Organization of stakeholder involvement

The involvement of the interest groups is organized as follows:

Affected stakeholders

Employees: Communication with employees is organized autonomously at each Afarak site. At some sites, works councils and trade unions represent the workforce vis-à-vis the management.

Environment: At each location, there are institutions that represent country-specific environmental aspects. Afarak is always available to these institutions to develop sustainable solutions together.

Supply chain: Similar to Afarak's customers, personal contact is maintained in the supply chain in order to be able to respond to specific needs.

Users of the sustainability declaration

Customers: Afarak relies heavily on personal contact with its customers. Each customer is therefore looked after by a dedicated contact person.Shareholders: As a listed company in the legal form of an SE, Afarak's shareholders are entitled to participate in the Annual General Meeting. Votes are held on key business decisions, and shareholders are entitled to vote.

The results of this stakeholder involvement are integrated into the company's strategic planning and operational decisions. The independent organization of the locations enables direct contact with various stakeholder groups. This allows local circumstances to be taken into account flexibly and ensures rapid interaction. Feedback from interest groups such as customers, local communities and employees is recorded and evaluated directly by the site managers and incorporated into local decisions. The insights gained from this are incorporated into management decisions in order to continuously improve sustainability measures, process efficiency and social responsibility.

Afarak's Code of Conduct defines how we interact with the environment, and all site representatives are obliged to adhere to these guidelines and act accordingly. The direct exchange with stakeholders enables the sites to immediately address and evaluate their concerns and interests. A central analysis of stakeholder concerns at Group level has not yet been carried out systematically, as this task is a local responsibility. Issues that require escalation are reviewed by the CMT, which is made up of various managers and site representatives. In particularly critical cases, the matter is forwarded to the EMT, which carries out the overarching assessment and, if necessary, involves the highest authority, the BoD

Strategy changes and adjustments

The continuous adaptation and expansion of Afarak's processes is essential in order to meet the diverse interests and viewpoints of stakeholders. In 2024, the requirements of the new CSRD sustainability reporting in particular contributed to significant adjustments to the strategy. This led to the integration of all locations into the LCA and the introduction of a system for consolidated data collection. In addition, the promotion of sustainable energy was prioritized at all locations. At the same time, the continuous optimization of processes and the supply chain was continued in order to drive efficiency and sustainability in Afarak's business processes.

As part of reporting in accordance with the CSRD, dynamic adaptation and further development of internal processes is essential in order to meet the constantly changing regulatory requirements. This is intended to ensure that all data required under the ESRS in the areas of "Social" and "Environmental", which were previously only collected superficially at Group level and in detail only at local level, are recorded accurately and promptly and disclosed transparently in the annual sustainability reports. Through these measures, Afarak continues to pursue the long-term integration of social responsibility into its corporate strategy, which meets both stakeholder expectations and legal requirements.

It is foreseeable that the implementation of these steps will have a positive impact on relationships with stakeholders. Increased stakeholder involvement, combined with expanded data collection and regular reporting, will lead to greater transparency. This will enable stakeholders to better understand the company's development and strengthen confidence in the Group's strategic decisions.

Information to the administrative, management and supervisory bodies

The CSRD report is dealt with at Group level, with the EMT and BoD actively involved in discussions on materiality assessments and future implementation. Key social, environmental and economic aspects are discussed in regular meetings to ensure that stakeholder concerns are incorporated into the Group's strategic decisions. The relevant information from the individual locations is collected by a central ESG team and evaluated at Group level. The aim of this approach is to align the sustainability strategy with both the corporate objectives and the expectations of stakeholders.

SBM-3: Significant impacts, risks and opportunities and their interaction with strategy and business model

Significant effects, risks and opportunities

In the reporting year, Afarak carried out a double materiality assessment (DWA) for the first time in accordance with the requirements of the CSRD in order to identify material impacts, risks and opportunities (IROs) associated with its strategy and business model. In addition to the company's own business activities, the entire value chain was considered, i.e. both upstream and downstream activities. As this is the first report prepared in accordance with the requirements of the CSRD, there are no material changes in the IROs to report compared to the previous reporting period.  Future reports will document changes and developments in IROs. In addition, no company-specific IROs were identified that go beyond the disclosure requirements of the ESRS. In the reporting year, Afarak identified 47 material IROs, out of which 33 are impacts, 6 are risks and 8 are opportunities. Accordingly, the following topic standards are material for Afarak:

• ESRS E1 Climate change

• ESRS E2 Environmental pollution

• ESRS E3 Water and marine resources

• ESRS E4 Biodiversity and ecosystems

• ESRS E5 Resource utilization & circular economy

• ESRS S1 Own staff

• ESRS S3 Communities concerned

• ESRS G1 Business behavior

Below is a description of the IROs identified as material for Afarak, broken down by the material sustainability topics based on the ESRS.

E1 Climate change

Climate protection

Energy

E2 Environmental pollution

Soil contamination

Water pollution

Air pollution

E3 Water and marine resources

Water

E4 Biodiversity and ecosystems

Direct causes of biodiversity loss

Effects on the extent and condition of ecosystems

E5 Resource utilization and circular economy

Resource inflows including resource utilization

Waste

S1 Own workforce

Working conditions

Equal treatment and equal opportunities for all

Other work-related rights

S3 Communities concerned

Economic, social and cultural rights of communities

G1 Corporate policy

Management of relationships with suppliers, including payment practices

Political commitment

Corporate culture

Response to the main IROs in the areas of environment, social affairs and corporate governance

Environment

Afarak recognizes the fundamental importance of environmental protection, particularly in the raw materials sector. The subsidiaries are already intensively involved in the introduction of programs to improve water and waste management. At the same time, they are working to reduce emissions. Afarak has started to implement data collection processes that allow the Group to set benchmarks and develop realistic long-term targets to make improved performance measurable. In addition, the Group expanded the LCA in the 2024 reporting period to include other environmentally relevant factors such as water consumption, resource use and waste in addition to GHG emissions.

Social

Afarak pursues a zero-harm policy and strives to create a safe and healthy working environment for all employees and contractors. Regular health and safety committees coordinate the Group's activities and address social, environmental, health and safety issues. Afarak improves working conditions by providing a safe environment and addressing key health issues, such as HIV/AIDS in South Africa. In addition to safety, the health of employees is a top priority for Afarak. By providing health benefits, the company promotes the long-term well-being of its workforce. Risks to employees are assessed, monitored and controlled at the production sites. In the highly differentiated national markets in which Afarak operates, operational management and sustainability management are primarily the responsibility of the national managing directors, who are in the best position to take account of national legislation and cultural characteristics.

Corporate management

Afarak commits itself and its suppliers to the highest ethical standards with the "Code of Ethics" and other guidelines in order to meet the expectations of stakeholders - including employees, customers, shareholders and supervisory authorities. The company also has strict guidelines on human rights and combating bribery and corruption. Through direct contact with suppliers and decentralized supplier management at each location, Afarak can count on personal contact persons. Afarak actively promotes the interests of the industry through its membership of EUROALLIAGE (Association of European Ferro Alloy Producers) and the ICDA.

Integration of the effects into the corporate strategy

The Group's strategy aims to ensure the sustainability and resilience of the business model through improvements in environmental and social dimensions.  The findings from the LCA and future scenario analyses are systematically used to continuously optimize strategic planning and specifically address the key impacts of the business model. In this way, Afarak aims to comprehensively integrate the findings into the corporate strategy in order to proactively address not only climate-related but also other environmental challenges.

Integration of ecological aspects

Afarak's strategic approach is aimed at promoting energy-intensive but resource-efficient production processes. The use of resources, particularly in chrome ore mining, has a direct impact on the availability of finite resources and can lead to water shortages and environmental problems if processes are inefficient.

Afarak is responding to this with an expanded LCA, which was carried out in the 2024 reporting period. After the first analysis was completed at the EWW smelting plant in Germany, the LCA was extended to other sites during the reporting period. This represents significant progress in assessing the environmental impact of the business model. This assessment includes not only climate protection measures, but also water consumption, raw material consumption and waste. This expands the Group's strategy to include a holistic view of environmental impact.

Integration of social aspects

In addition to the ecological impact, Afarak's corporate strategy also takes into account social aspects such as ensuring fair working conditions and occupational safety as well as the long-term retention of qualified specialists through attractive working conditions. 

Resilience of the corporate strategy and business model

The resilience of Afarak's strategy and business model in the face of material impacts and risks is based on the Group's ability to proactively manage environmental and social challenges:

• Environmental resilience: By implementing LCA, Afarak can systematically record GHG emissions, water consumption and resource use and assess minimization. Investments into renewable energy and energy-efficient technologies help to adapt to regulatory requirements and climate risks while ensuring long-term profitability.

• Social resilience: The promotion of fair working conditions, strict occupational safety measures and workforce development strengthen social stability and productivity within the company. In addition, the business model is geared towards cooperation with local stakeholders at the sites, which improves the ability to effectively manage social risks such as skills shortages or conflicts with communities.

The combination of these measures ensures that the business model reacts flexibly to environmental and social changes in order to make targeted use of opportunities such as technological innovations or the development of new markets. This integrated approach strengthens Afarak's resilience to current and future challenges.

Sources of the expected impact

Afarak's own activities include the mining of chrome ore, the processing of raw materials and the manufacture of ferrochrome products. These processes have a direct impact, for example on geography, infrastructure and GHG emissions. Indirect impacts from business relationships arise both in the upstream and downstream value chain, for example in the procurement of external raw materials or the further processing of chrome ore. These impacts include high energy consumption, transportation emissions and indirect environmental impacts.

By combining its direct responsibility with strategic cooperation within the entire value chain, the Group strives to minimize its environmental and social impact in all areas. This dual approach enables a comprehensive assessment and optimization of the entire value chain.

Financial impact of the most important IROs

Afarak is using the transition period for the disclosure requirement ESRS 2 SBM-3 paragraph 48 letter e, as the necessary analyses and assessments have not yet been fully completed in the current reporting period. Future reports will include this information once the relevant assessments have been completed.

IRO-1: Description of the process for the identification and assessment of significant impacts, risks and opportunities

In May 2024, Afarak's sustainability managers and a consulting partner began the preparatory work for the sustainability report using a DWA. 

The starting point was the impact assessment, which was carried out by the sustainability team together with the respective departments. Suitable impacts and sustainability topics for the Group were identified on the basis of a general internet search and then evaluated. The Afarak departments involved included the CMT, the ESG team, HR management, shipping management, purchasing management, commercial management and production management. 

An attempt was made to gain as complete a picture as possible of Afarak's business activities, including business relationships along the entire value chain. The management and employees from the specialist departments were also integrated into this process. In order to take into account the perspective of the most important stakeholder groups with regard to their sustainability-related concerns, proxy stakeholders were used in accordance with the ESRS and no direct involvement of stakeholders was carried out as part of the materiality assessment. Interests and concerns that were known with regard to the stakeholder groups were included in the IRO collection. In accordance with the ESRS, the severity (extent, scope and irreversibility of positive impacts, on a rating scale of 1 to 5 (from 1 = very low/minimal/short-term to 5 = very high/absolute/irreversible)) for actual impacts and additionally the probability of occurrence (on a rating scale of 1-5 (from 1 = very unlikely to 5 = very likely) for potential impacts) were assessed. 

Following the definition of those topics on which Afarak as a company has a significant influence (impact assessment), financial risks and opportunities were identified that could arise from these positive and negative impacts or from dependencies on resources (financial assessment). These sustainability-related risks and opportunities were then supplemented by risks already identified in the Board of Directors Report (BoD Report) from 2023. Identification was mainly carried out by the sustainability team. The opportunities and risks were then assessed according to their probability of occurrence (scale from 1 (highly unlikely or very low) to 10 (certain or full) and potential financial impact (scale from 1 (<€10,000 or very low) to 10 (>€50 million or full) in the short, medium and long term.

The material IROs were determined on the basis of this assessment using threshold values. The IROs were assigned to the sustainability topics anchored in the ESRS at sub-topic level (see ESRS 1 AR 16). 

Finally, a comparison was made with the ESRS overall topic overview (see ESRS 1 AR16) to ensure that all ESRS-relevant sustainability aspects were considered in the assessment. Additions were placed in the double materiality assessment in accordance with the above procedure.

A sustainability topic at the level of the sub-topics in accordance with ESRS 1 AR 16 was classified as, in total, material if a material impact, a material risk or a material opportunity was identified for it.

The procedure and the results of the DWA developed by the specialist departments were presented to the ESG team in a workshop, supported by members of the Corporate Management Team. As part of this workshop, the classification of the sustainability topics into material and immaterial from a strategic perspective was reviewed and the underlying impacts, opportunities and risks were finally assessed. The sustainability topics were also checked for completeness in accordance with ESRS 1 AR 16. The result of the workshop was the final list of material sustainability topics as the basis for reporting.

As this is Afarak's first reporting under the ESRS, there have been no changes to the process for identifying, assessing and managing IROs compared to a previous reporting period. Therefore, no information is currently available on the date of the last change to the process or on future revisions to the materiality assessment

From now on, the DWA process  be carried out annually, with experts from the relevant functions of Afarak exchanging information. This also includes continuous monitoring and monitoring of the actual impact on people and the environment. 

In the initial process, Afarak considered all activities and business relationships without restrictions and took into account the effects of both its own business activities and business relationships.

The processes for identifying, assessing and managing impacts, risks and opportunities are not yet integrated into the general risk management process.

ESRS 2 IRO-1 - E1: Description of procedures for the identification and assessment of significant climate-related impacts, risks and opportunities

Climate-related impacts, risks and opportunities were identified and assessed as part of the general double materiality assessment process described in ESRS 2 IRO-1. Specific climate-related factors such as physical climate risks, regulatory developments, energy consumption and market and reputational risks were taken into account.

ESRS 2 IRO-1 - E2: Description of procedures for the identification and assessment of significant impacts, risks and opportunities related to environmental pollution

The identification and assessment of material impacts, risks and opportunities in connection with environmental pollution was carried out in accordance with the double materiality assessment procedure described in ESRS 2 IRO-1. This involved examining the extent to which Afarak's business activities contribute to or counteract environmental pollution. Emissions to air, water and soil were assessed.

ESRS 2 IRO-1 - E3: Description of procedures for the identification and assessment of significant impacts, risks and opportunities related to water and marine resources

The assessment of impacts on water and marine resources was also based on the general methodology of the double materiality analysis from ESRS 2 IRO-1. In particular, water consumption, potential risks from water stress and measures to reduce negative impacts were considered.

ESRS 2 IRO-1 - E5: Description of procedures for the identification and assessment of significant impacts, risks and opportunities associated with resource use and the circular economy

The analysis of resource use and the circular economy was carried out in accordance with the general procedure from ESRS 2 IRO-1 using the double materiality assessment. Key aspects were the efficient use of materials from our own value creation, local resource inflows from external value creation, resource consumption in production and the durability of our products.

IRO-2: Disclosure requirements included in the ESRS that are covered by the company's sustainability declaration

A list of the disclosure requirements covered by this sustainability report can be found at the beginning of this report on page 1. 

List of data points from other EU legislation:

The table below includes all data points from ESRS 2 and from the thematic ESRSs arising from other EU legislation, including the Sustainable Finance Disclosure Regulation (SFDR), Pillar 3 (S3), Benchmark Regulation (BV) and EU Climate Law (EUKG) listed in Appendix B of ESRS 2. The list indicates where the data points can be found here in Afarak's report and which data points were classified as "not material", "no indication as use of a phase-in regulation" and "no indication as use of the transition period". The transition period refers to the temporary suspension of an entire standard, while phase-in regulations relate to individual data points within an applied standard that are introduced gradually

Information in accordance with Article 8 of Regulation 2020/852 (Taxonomy Regulation)

EU Taxonomy

The EU taxonomy is a classification system that defines environmentally sustainable business activities. Companies required to report non-financial information must disclose the extent to which their operations align with the EU's sustainability objectives.

For industrial companies like Afarak, this means assessing the share of revenue, capital expenditure (CapEx), and restricted operating expenditure (OpEx) associated with activities that qualify under the EU Taxonomy Regulation (2020/852).

Under the regulation, activities are categorized as:

• Eligible: Activities that fall within the scope of the taxonomy.

• Aligned: Eligible activities that make a substantial contribution to at least one environmental objective while avoiding significant harm to others and complying with minimum safeguards on human and labor rights.

In 2024, the European Commission introduced additional technical screening criteria covering water management, circular economy, pollution prevention, and biodiversity (EU 2023/2486) and revised existing climate-related regulations (EU 2023/2485).

Afarak has evaluated its operations against EU taxonomy criteria and has determined that neither ferrochrome processing nor chrome ore mining qualifies as an eligible activity under the current framework.

Assessment of Afarak´s Business Activities

Non-Eligible Activities

Afarak's core business operations-ferrochrome production and chrome ore mining-are classified as non-eligible under EU taxonomy, meaning they do not contribute to the EU's defined sustainability objectives.

• Ferrochrome Production:

  • The high-energy smelting process used to produce ferrochrome does not meet the EU taxonomy's criteria for sustainability.

  • Emissions-intensive processes, such as carbon-based reduction in smelting, are not classified as sustainable activities.

• Chrome Ore Mining & Processing:

  • The extraction, beneficiation, and refining of chrome ore are not recognized as environmentally sustainable under the current EU taxonomy framework.

  • While responsible mining practices are followed, ore extraction remains non-eligible under the EU's defined environmental objectives.

• Energy Procurement:

  • Although Afarak secures electricity for its furnaces, the company does not own renewable energy assets that could contribute to taxonomy-aligned sustainability targets.

Key Performance Indicators (KPI´s) for 2024

Do No Significant Harm (DNSH) Criteria 

Even though Afarak's activities are non-eligible, the company has taken measures to align with sustainability best practices, including:

• Climate Change Adaptation:

  • Physical risks to production sites have been assessed and integrated into the company's risk management strategy.

• Water & Biodiversity Protection:

  • All production sites comply with environmental regulations and operate under approved water management and biodiversity protection plans.

• Pollution Prevention & Control:

  • Emission control technologies are in place, and Afarak continues to evaluate methods for reducing environmental impact.

The company does not use prohibited substances, and where chemicals of concern are used, they are either:

1. Essential (recognized as Best Available Technology in EU industrial guidelines).

2. Insignificant in terms of total business operations.

Capital & Operating Expenditure Classification

Capital Expenditure (CapEx)

Taxonomy-reported capital expenditure is measured on a cash basis and includes:

• Purchases of property, plant, and equipment.

• Investment in production efficiency improvements.

As both ferrochrome processing and chrome ore mining are non-eligible, nearly all CapEx is classified as non-eligible. However, certain energy-efficiency upgrades and emission-reduction projects may be reassessed in the future for potential eligibility.

Restricted Operating Expenditure (OpEx)

Operating expenditure under the taxonomy includes:

• Maintenance and servicing costs for production assets.

• Research & development (R&D) costs related to process improvements.

Since Afarak's core activities remain non-eligible, the majority of associated OpEx also falls outside the EU taxonomy framework.

Research & Development Initiatives

Afarak's R&D efforts focus on process improvements that could reduce environmental impact. In 2024, Afarak's total R&D expenditure amounted to EUR 148,000, representing 0.1% of annual revenue.

Sustainability-Driven Initiatives

Although Afarak's core activities are non-eligible, the company remains committed to improving sustainability performance through:

• Energy Efficiency Investments: Exploring waste heat recovery and improved furnace technology.

• Circular Economy Strategies: Investigating slag reuse and by-product recycling to minimize waste.

• Carbon Reduction Initiatives: Researching bio-based reductants to replace fossil coke in ferrochrome smelting.

• Water Management Innovations: Strengthening recycling systems to reduce freshwater intake at production sites.

Conclusion & Outlook

As ferrochrome processing and chrome ore mining remain non-eligible activities, Afarak will continue to focus on sustainable operational improvements while monitoring regulatory updates. The company remains committed to adopting best practices that align with global environmental standards and will explore potential investments that could contribute to long-term sustainability objectives.

Afarak's EU taxonomy disclosure will evolve as new technical criteria emerge, ensuring compliance with the latest industry regulations.

Turnover

CapEx

OpEx

ESRS E1: Climate Change

E1-1: Transition plan for climate protection

Afarak demonstrates a strong commitment to environmental responsibility and sustainability and is actively seeking to reduce CO₂ emissions and integrate environmentally sustainable innovations into its production processes. In the reporting period, there is no transition plan for climate protection within the Group that meets the specific requirements of ESRS E1. However, a transition plan is now being developed across the Group in order to meet the requirements of the ESRS in the future. The individual Afarak sites will act independently to implement measures. This decentralized approach ensures compliance with the applicable national environmental laws and regulatory requirements. In future, the site-specific measures are to be systematically recorded and documented in a bundled form in the Climate Change Transition Plan at Group level - with responsibility for planning and implementation remaining with the respective sites.

The future transition plan, the "Climate Change Transition Plan", is intended to present the orientation and measures of the individual locations with regard to the challenges of climate change. It is to be implemented in 2025, or 2026 at the latest. It will serve as future documentation for the climate protection initiatives of the individual sites and ensure that they independently implement the necessary measures to achieve the defined environmental targets. This transition plan will thus strengthen the company's existing environmental and sustainability commitments.

ESRS 2 SBM-3 - E1: Significant impacts, risks and opportunities and their interaction with strategy and business model

Afarak has not yet carried out a resilience analysis of its strategy and business model in relation to climate change. However, such an analysis is planned as part of the Climate Change Transition Plan, which is intended to cover the extended, mandatory regulatory reporting. The plan is scheduled for completion by the end of 2026.

E1-2:  Concepts related to climate change mitigation and adaptation

To date, Afarak has not adopted any independent concepts with regard to climate change, as the company follows the guidelines of the umbrella organizations ICDA and EUROALLIAGES. Both organizations pursue goals that are geared towards sustainability, market development and the representation of their members' interests. In addition, Afarak takes into account the specific local guidelines and requirements at its sites in Germany, Turkey and South Africa in order to design measures in line with national requirements.

Afarak is currently in the process of developing its own concept at Group level, the Climate Change Transition Plan. With this "Climate Change Transition Plan", which is expected to be adopted in 2025 and 2026, the Group aims to intensify its climate protection efforts and develop a clear strategic direction, which will be implemented in the years 2025 and 2026. The national and regional legal requirements and regulatory requirements that form the basis for the climate-related measures include in:

• Germany: Implementation of the Federal Climate Protection Act and the EU Emissions Directives, which stipulate emission limits and energy-efficient production methods.

• Turkey: Following the ratification of the Paris Green Deal, Turkey is pursuing national targets for reducing emissions, including industrial energy efficiency and minimizing CO₂ emissions.

• South Africa: Implementation of the National Environmental Management Act together with other climate targets that require a reduction in GHG emissions.

E1-3: Measures and resources in connection with the climate concepts

Afarak has not yet adopted any specific measures in connection with overarching climate concepts, but has implemented some operational measures that make an indirect contribution to climate protection. These measures prepare for future concepts and reporting, but are not currently embedded in an overarching climate strategy. A comprehensive "Climate Change Transition Plan" is in progress and is to be introduced by 2025/2026 in order to bundle climate protection measures and ensure the achievement of environmental targets.

Afarak's measures are designed to make various aspects of the company's operations more sustainable and minimize its environmental impact. The initiatives implemented include the expansion of renewable energies and the optimization of processes to conserve resources and comply with local regulations:

Emission reduction and environmental management

This includes initiatives and optimizations of production processes to improve energy management and reduce CO₂ emissions and energy consumption with the aim of minimizing the ecological footprint. In addition, work began this year at the German site to reform the existing energy management system in accordance with ISO 50001:2018, which aims, among other things, to raise employee awareness of this issue and promote proactive, energy-conscious action. The introduction of the LCA process at all key locations supports these measures by systematically analysing environmental impacts and identifying data-based optimization potential.

Use of renewable energies

Projects that promote the use of renewable energies are supported at the various sites in order to ensure more sustainable operations. This year, investments were again made in the expansion of photovoltaic systems, accompanied by an examination of further expansion potential.

ESG integration and control

This includes the implementation of internal audits and risk management systems that take ESG aspects into account and thus monitor compliance with environmental targets. In addition, an ESG team was established this year, which is responsible for preparing reports, consolidating ESG-related data from all locations and further developing the ESG strategy. The implementation of the LCA process provides a valuable data basis for ESG reporting and supports the continuous monitoring and improvement of environmental performance at all key locations.

Strategic development

The work on a "Climate Change Transition Plan" aims to coordinate and standardize all climate protection measures across the Group in order to achieve long-term environmental goals more efficiently.

Afarak also works closely with these organizations as a member of the umbrella associations and EUROALLIAGES. Both associations promote dialog with political institutions and member companies in order to advance goals regarding sustainability, climate protection, energy efficiency and responsible production. The guidelines and insights offered by ICDA and EUROALLIAGES support companies in complying with international standards and further developing their ESG strategies.

Contributions from the associations

• Promoting sustainability: The ICDA advises its members on sustainability issues by providing guidelines and scientific findings that promote the development of sustainable production processes. It supports the exchange between members and thus contributes to compliance with international environmental standards.

• Regulatory monitoring: Both organizations advise members on international regulations such as the REACH Regulation (Registration, Evaluation, Authorization and Restriction of Chemicals) and play an active role in shaping the regulatory framework.

• Energy efficiency and climate neutrality: EUROALLIAGES promotes the reduction of energy consumption in production and develops strategies to integrate the industry into the EU climate targets, including the switch to renewable energies and low-emission technologies.

• Scientific research and innovation: ICDA and EUROALLIAGES fund studies on the safe and efficient use of chromium and on increasing production efficiency.

• Stakeholder dialogue: Both associations organize conferences and seminars to promote exchange between members and relevant stakeholders.

• Market promotion: The ICDA is working to open up new markets for chrome products and support existing applications.

Time horizons

The time horizons for implementing Afarak's key climate protection measures can only be communicated once the strategic development of the "Climate Change Transition Plan" has been completed. This plan will include a roadmap setting out the time horizons for the implementation and completion of the individual measures. Until then, Afarak will continue to work on individual environmental measures and improving the sustainability of its processes.

Mitigation measures for actual significant impacts

Afarak will not be able to disclose information on mitigation measures for material impacts, related results and progress, capital and operating expenditures, and any decarbonization levers until the development of the Climate Change Transition Plan and associated data collection is complete. 

E1-4: Goals related to climate protection and adaptation to climate change

Afarak has not yet adopted any specific measurable and results-oriented targets in connection with climate change. Nevertheless, the Group intends to develop such targets as part of the planned Climate Change Transition Plan. Once the transition plan has been finalized, specific measurable targets will also be defined and evaluated using relevant key figures. The exact reference period from which progress will be measured systematically and using specific indicators will also be defined. Until then, the assessment will be based on existing general ESG practices and internal monitoring processes. 

Although no formal targets have been set to date, Afarak nevertheless addresses the effectiveness of the strategies and measures with regard to the material impacts, risks and opportunities in the context of climate change. Qualitative indicators are currently used to assess progress, such as internal audits and ESG reports that monitor the effectiveness of the measures. Quantitative indicators such as emissions data and energy consumption metrics are also part of the data collection to set benchmarks and support long-term performance targets. In the manner described below, Afarak ensures that, despite the lack of specifically defined targets, the effectiveness of environmental measures is always kept in view and continuously adjusted:

Risk management and ESG integration

In future, Afarak's risk management system will be expanded to include ESG aspects by incorporating the double materiality assessment. This will enable the structured identification of environmental and climate risks and their targeted management through appropriate measures.

Internal audits and controls

Regular internal audit processes are used to check compliance with and the effectiveness of measures to reduce emissions and promote sustainable practices. The audits are reported to the BoD and the Audit Committee. In addition, the ESG team monitors the entire ESG management and reports regularly to the BoD. The BoD also has ultimate oversight of compliance with and the effectiveness of the climate strategies.

Key figures and metrics

Although specific climate-related targets are still being developed, Afarak uses existing indicators to assess energy consumption, emissions and resource use. These metrics are used to monitor progress and identify opportunities for improvement. With regard to data collection, processes have been implemented to monitor and adjust environmental performance. 

The foregoing is also supported by the gradual implementation of the LCA at all sites. The process began with coverage of the most energy-intensive site in Germany and has been extended to all other key sites since 2024. This ensures consistent and comprehensive recording and analysis of key figures and metrics.

E1-5: Energy consumption and energy mix

Climate-intensive sectors

Climate-intensive sectors are used to determine energy intensity. At Afarak, these include the mining sites, in particular the mining of chrome ore, the extraction of chrome ore concentrate and the processing industry, which includes the processing of the extracted raw material for the production of ferrochrome. 

Net revenue from the climate-intensive sectors

Both of the above sectors are climate intensive and require significant energy resources. Close monitoring and management of these activities is critical to minimizing environmental impacts and achieving sustainability goals. The two energy-intensive sectors are described in more detail below and the net revenues from these areas are presented:

FerroAlloys (South Africa)

This division comprises the Vlakpoort, Zeerust and Mecklenburg mines in South Africa. The main activity is the extraction of chrome ore, which is produced for sale on the global markets. The mining and processing of chrome ore are processes that require a great deal of energy. Although this area only accounts for a small proportion of the Group's total sales, it remains a key aspect of Afarak's raw material sourcing and marketing strategy.

Specialty Alloys (Turkey & Germany)

This section focuses on the production of ferrochrome-based specialty products from high-grade chrome ore. Mining takes place in Turkey, while the processing plant is located in Germany. These highly specialized products are supplied to leading companies in the aerospace, medical steel production and automotive industries. Energy-intensive production plays a central role in the international markets for high-quality alloys.  This area is also Afarak's strongest in terms of sales and plays a key role in the company's value chain. The following table provides a breakdown of revenue from these climate-intensive sectors:

The following energy intensity can be calculated from these sales:

Afarak's energy consumption and energy mix are made up as follows:

* Reference to the OWN company and not supply chain

E1-6: Gross GHG emissions in Scope 1, 2 and 3 categories and total GHG emissions

Gross GHG emissions

The 2024 reporting year is the first year in which Afarak publishes a CSRD report detailing its corporate carbon footprint (CCF). Accordingly, 2024 is the base year for future calculations

Gross GHG emissions 

The total GHG emissions are recorded. Different emissions are generated in Scope 1, Scope 2 and Scope 3. The emissions are broken down in detail below.

GHG emissions from Afarak - composition and analysis of scopes

Afarak's GHG emissions are made up of the three standardized scopes of the Greenhouse Gas (GHG) Protocol: Scope 1, Scope 2 and Scope 3. These cover all major sources of emissions along the value chain.

Scope 1: Direct emissions on site

Scope 1 comprises all direct emissions resulting from operational activities on site, such as the combustion of fossil fuels in production facilities or vehicles. This area accounts for the smallest share of the Group's total GHG footprint.

Scope 2: Emissions from purchased electricity

Scope 2 takes into account the indirect emissions caused by the purchase of electricity, heat or steam. These emissions depend heavily on the energy sources of the respective locations. They play an important role at Afarak, particularly at energy-intensive locations such as Germany.

Scope 3: Indirect emissions along the value chain

Scope 3 accounts for by far the largest share of Afarak's emissions. Various categories along the upstream and downstream value chain are taken into account here, including:

• Category 1: Purchased goods and services consumed in the reporting year.

• Category 3: Fuel and energy-related activities that do not fall under Scope 1 or 2.

• Category 4: Upstream transportation and distribution.

• Category 5: Waste generated during operation.

Summary of the distribution

The analysis of the distribution of emissions shows that the largest share of GHG emissions at Afarak, more than half of the total footprint, is attributable to Scope 3. Scope 2 follows with a significant but much smaller contribution, while Scope 1 accounts for the smallest share of emissions.

The reduction of emissions in Scope 1 and Scope 2 is largely within Afarak's direct control, as emissions can be reduced through targeted measures. These measures include, for example, process optimization, energy efficiency programs, the purchase of electricity from renewable sources instead of fossil fuels or grid electricity and the in-house production of electricity, for example from solar energy. 

On the other hand, Scope 3 can only be influenced by direct measures to a limited extent, as these emissions occur along the upstream and downstream value chain and are heavily dependent on external factors such as suppliers, transport partners and end consumers. Nevertheless, the reduction of Scope 3 emissions remains a central starting point for the Group's long-term sustainability strategy, as it has the greatest impact on the carbon footprint.

Biogenic emissions

The biogenic emissions of CO₂ caused by Afarak are disclosed in the following table:

*Emissions of other types of greenhouse gases (in particular CH₄ and N₂O) are included in Scope 1 GHG emissions and Scope 2 GHG emissions respectively.
**Emissions of other types of greenhouse gases (in particular CH₄ and N₂O) and CO₂ emissions that occur within the life cycle of biomass other than from combustion or biodegradation (for example, GHG emissions from the processing or transportation of biomass) are included in the calculation of Scope 3 GHG emissions.

Greenhouse gas intensity

The greenhouse gas intensity (GHG intensity) is calculated from Afarak's total turnover. The turnover used for the calculation is shown in the table below:

Afarak's total emissions amounted to 144,078 tCO₂e in the reporting year. They were applied to the total turnover in order to calculate the GHG intensity. The calculation results in a GHG intensity of around 1,120 tCO₂e per million euros in sales.

Calculation method and emission factors

Afarak calculates the CCF, which includes the GHG emissions of the sites in Germany, Turkey and South Africa, with the support of Sphera software. This software is based on the specifications of the GHG Protocol, which is recognized by the ESRS as the authoritative standard. The calculation includes the following methods, assumptions and emission factors:

Areas covered

• Scope 1: Direct emissions from the sites, such as from the combustion of fossil fuels.

• Scope 2: Indirect emissions as a result of purchased energy.

• Partial Scope 3: Includes categories 1 (goods and services purchased and consumed), 3 (energy-related activities), 4 (upstream transportation and distribution) and 5 (operational waste).

Areas not covered

Certain categories are not included in Scope 3 at Afarak, including: 

• Category 1: Goods not consumed but purchased. (Afarak avoids inventories as much as possible and purchased goods are largely consumed just-in-time. In this way, Afarak not only helps to conserve resources, but also minimizes potential emissions from unused materials, making this category negligible for the Group). 

• Category 2: Capital goods. (Afarak's capital goods have a comparatively long useful life and their proportionate annual emissions are negligible in relation to total emissions). 

• Category 6 to 15: Business travel, employee commuting, downstream transportation, end-of-life (EoL) treatment of products sold and other categories such as franchise agreements and investments. (These categories do not exist or are so marginal that they have been classified as negligible. Their emissions make up too small a proportion of Afarak's total emissions compared to the material categories such as energy consumption and raw material production). 

Application of methods

The calculation of emissions is based on energy consumption and material flow data from the production site in Germany, the chrome ore mines in South Africa and Turkey. The data is multiplied by specific emission factors taken from reliable international sources such as the International Energy Agency (IEA) and national databases.

Life cycle analysis (LCA)

Although LCAs are mainly product-related, Afarak uses this methodology to partially capture Scope 3 emissions and ultimately integrate them into the CCF. These analyses are based on the ISO 14040 and 14044 standards.

Calculation tools

For the CCF calculations, Afarak uses specialized LCA software from Sphera, which ensures a comprehensive database and precise modelling. This is based on the ecoinvent database, which is one of the world's leading sources for environmental and life cycle analyses and is regularly updated. Sphera is one of the world's largest and regularly updated databases, specially optimized for the metals and raw materials industry. This process enables a transparent and systematic presentation of climate-relevant corporate activities. The current CCF data is based on the extraction of chrome ore, chrome concentrate and the production of low carbon ferrochrome (LC FeCr) at the key sites mentioned above. 

Justification of the methods

Afarak uses the LCA method and the Sphera software, as these make it possible to analyze the environmental impact of Afarak's processes and products in detail. The LCA process provides a structured and standardized method that is directly compatible with the requirements of international standards such as the GHG Protocol and ISO 14040/44.

The use of Sphera ensures that:

• Data quality and consistency are guaranteed by access to comprehensive databases such as ecoinvent.

• precise calculations of emissions and environmental impacts, taking into account specific site conditions.

• transparency and traceability for reporting in accordance with ESRS standards.

This combination means that Afarak not only fulfills regulatory requirements, but also creates a sound basis for strategic decisions on emissions reduction and sustainability.

E1-8: Internal CO₂ pricing

Afarak does not currently have an internal carbon pricing system. Instead, the Group focuses on direct measures to reduce emissions, such as optimizing processes and promoting renewable energies as well as the sustainable optimization of business activities. However, Afarak will regularly evaluate whether such a measure can contribute to supporting its sustainability goals in the future.

E1-9: Expected financial effects of significant physical and transition risks and potential climate-related opportunities

For this disclosure requirement, Afarak makes use of the transition period in accordance with ESRS E1-9. The disclosure requirements on the expected financial effects of significant physical risks, transition risks and potential climate-related opportunities that were not fulfilled in the reporting period are addressed exclusively in qualitative terms in this first reporting year, as it is not currently feasible to prepare quantitative disclosures. In future, this information will form part of the planned "Climate Change Transition Plan", which is expected to be completed in 2025/2026. Quantitative information will be provided as soon as the necessary data and analyses are available.

ESRS E2: Pollution

E2-1:  Concepts related to environmental pollution

Afarak has not yet adopted any formalized pollution reduction concepts that meet the specific requirements of ESRS E2. Nevertheless, the company has long been active in implementing site-specific measures aimed at minimizing environmental impact. These activities include the optimization of production processes, the promotion of the circular economy and the use of low-emission technologies. They are based on the guidelines of the umbrella organizations ICDA and EUROALLIAGES as well as local legal requirements.

The "Climate Change Transition Plan" planned until 2025/2026 will transform these existing initiatives into a comprehensive Group-wide concept in order to meet the requirements of ESRS E2. Until then, the focus will be on the continuation and further development of current measures to address environmental pollution in a targeted and effective manner at the respective locations.

The following sections provide an overview of Afarak's activities in this area to date.

• 1. Adoption of guidelines from umbrella organizations

Afarak is guided by the environmental guidelines of the umbrella organizations ICDA and EUROALLIAGES, which serve as a standardized and industry-specific framework for sustainable processes. These guidelines are implemented on a site-specific basis in order to meet local conditions and legal requirements.

Joint measures and priorities

Both umbrella organizations emphasize the importance of sustainable pollution reduction practices, which are integrated into Afarak's processes as follows:

• Emission control: Afarak uses modern filter technologies at its production sites to reduce emissions and significantly improve air quality.

• Waste management: The company continuously optimizes its production processes in order to minimize waste volumes. For example, slag is processed and used for local purposes such as road construction, which helps to promote the circular economy.

• Cooperation with authorities: All sites work closely with local authorities to comply with strict environmental standards. This ensures that compliance with local regulations and international best practices is always prioritized.

Specific contributions from ICDA and EUROALLIAGES

• ICDA: The ICDA promotes the circular economy by recycling and reusing chrome products. At the same time, it supports its members in the introduction of technologies that minimize air and waste pollution in chrome production. The ICDA also works closely with international authorities to shape global environmental standards, which Afarak implements in its processes.

• EUROALLIAGES: EUROALLIAGES places particular emphasis on the reduction of pollutant emissions and waste management. This includes the promotion of low-emission technologies and energy-efficient processes. The association's strategic guidelines support Afarak in optimizing its operations and developing sustainable production practices.

• 2. Site-specific requirements

Responsibility for environmental measures lies with the respective locations in Germany, Turkey and South Africa. These locations act independently to meet the legal requirements and environmental targets of the respective countries. Due to local differences, it is currently difficult to implement a uniform strategy at Group level.

• 3. Climate Change Transition Plan in progress

Afarak is currently working on a Group-wide "Climate Change Transition Plan". This plan is intended to coordinate the existing site-specific environmental targets and measures and create a Group-wide framework structure. This will ensure that key issues such as reducing pollution, resource efficiency and compliance with environmental standards are included in the planning.

Afarak is committed to ensuring that this plan is consistent with the requirements of ESRS E2 (Pollution) and other relevant standards. In future reports, the progress documentation of this plan will be presented transparently in order to meet stakeholder expectations and ensure consistent reporting

E2-2: Measures and resources related to environmental pollution

Afarak has not yet implemented any uniform measures to combat environmental pollution. Instead, responsibility for implementing and enforcing environmental protection measures lies with the individual sites in Germany, Turkey and South Africa. These sites carry out locally adapted measures to reduce environmental pollution in the areas of air, water and soil in accordance with the legal requirements of the respective countries. In addition to optimizing production processes to minimize waste and emissions, this also includes the use of sustainable technologies and processes at the sites to reduce air, water and soil pollution. Continuous monitoring ensures that all processes comply with local and international environmental standards.

Local measures

Germany (Elektrowerk Weisweiler GmbH)

• Air filter systems to reduce emissions during production processes.

• Water treatment plants to minimize discharges into local waters.

• Rainwater collection basins that reduce the consumption of fresh water.

Turkey and South Africa (mining sites)

• Water treatment plants for the recycling of process water.

• Access to well water as a measure to reduce drinking water consumption.

• No chemical agents are used in the extraction of chrome ore concentrates.

In addition to these measures, the local sites comply with country-specific environmental regulations with regard to emission limits and waste management. This also includes regular monitoring and reporting on environmental impacts in accordance with the requirements of the local authorities.

With the development of a new "Climate Change Transition Plan" in the period 2025/2026, Afarak intends to establish an overarching corporate strategy that coordinates the specific environmental targets and measures of the various sites across the Group. The targets will continue to be adapted to the respective local requirements, as each country formulates different requirements and objectives.

E2-3: Targets related to environmental pollution

There are currently no specific, measurable and results-oriented pollution reduction targets. As part of the development of the Climate Change Transition Plan, Afarak will consider whether measurable pollution reduction targets can be set. The plan will also define the reference period that could be used to measure progress in pollution reduction.

Despite the lack of formal targets, Afarak tracks the effectiveness of its strategies and measures with regard to significant impacts, risks and opportunities related to pollution. These measures aim to ensure that pollution reduction strategies are systematically evaluated, monitored and adapted to new requirements as needed:

Risk management and ESG integration

A comprehensive risk management system that integrates ESG aspects enables the identification, analysis and assessment of environmental pollution risks, including potential pollution of air, water and soil. 

Internal audits and controls

Regular internal audit processes check compliance with and the effectiveness of measures to reduce air, water and soil pollution and identify areas that need to be optimized. The results are presented to the BoD and the Audit Committee. In addition, the ESG team continuously monitors the further development of regulatory requirements in accordance with the ESRS standards in the areas of environment, social affairs and corporate governance and regularly informs the BoD of the findings and any necessary measures. The BoD is responsible for the ultimate supervision of ensuring the effectiveness of and compliance with measures to reduce environmental pollution and regularly reviews progress and confirms any necessary adjustments.

Key figures and metrics

Although specific, measurable targets are still being developed, current metrics are used to monitor emissions, waste management and resource use. This data supports the evaluation of progress and promotes continuous improvement. 

E2-4: Air, water and soil pollution

Ferrochrome production and chrome ore extraction at Afarak generate emissions that (potentially) pollute the air, water and soil. 

Afarak is not only committed to complying with legal requirements, but also pursues the goal of making its production processes as environmentally friendly as possible. Here, the focus is on continuously reducing emissions and environmental impact in order to ensure sustainable production.

Nevertheless, environmental pollution cannot be completely avoided in industrial processes. Afarak therefore focuses on keeping unavoidable pollution to a minimum and actively implementing measures to further optimize environmental impact. This basic attitude forms the basis for the use of modern environmental technologies and the responsible use of natural resources at all sites.

The following table shows the pollution of air, water and soil in our own operations:

Air pollution

Ferrochrome production is an energy-intensive process that can release pollutants into the air in addition to GHG emissions. During the reporting period, air pollutants were emitted during production, in particular chromium and its compounds. These emissions mainly arise during the thermal processes in the smelting furnaces, where chrome ore is processed into ferrochrome at high temperatures.

Afarak meets the legal requirements by using modern filter and exhaust gas purification systems that are specially designed to minimize emissions of chromium and its compounds. Compliance with the limit values is ensured by continuous emission monitoring and regular inspections by the authorities.

Although the reported chromium emissions comply with current legal requirements, Afarak is committed to continuous improvement. The company is continuously testing and implementing advanced technologies to further reduce emissions and minimize environmental impact.

Pollution of the water

Afarak's production processes generate a small amount of water pollution, which is largely minimized by operating its own wastewater treatment plant. The remaining small amount of nitrogen discharged into a receiving watercourse cannot yet be completely avoided. This discharge complies with current legal requirements and is within the limits set by the relevant authorities.

Compliance with these requirements is monitored through strict and regular inspections by the authorities responsible for approving and inspecting wastewater discharges. Afarak works closely with these authorities to ensure that all water legislation requirements are met.

In addition to self-monitoring by Afarak's in-house laboratory, which carries out regular analyses and submits the results to the authorities, random samples are also taken by the authorities. These unannounced samplings by the responsible authorities ensure that all specifications are continuously adhered to and that there are no violations.

Afarak remains committed to further optimizing its wastewater processes in order to continue to reduce water pollution and meet the highest environmental standards.

Contamination of the soil

Chrome ore is extracted at Afarak completely without the use of chemicals. This applies both to the activities in the underground mines in Turkey and to the extraction of the chrome ore concentrate. As a result, there is no chemical contamination of the soil, which is why the issue of soil pollution does not directly apply to Afarak's processes.

Nevertheless, residues are produced during processing in the form of tailings, which are stored on the surface. Although these residues do not constitute direct soil pollution, Afarak considers the issue of soil to be essential, as physical and indirect environmental impacts such as erosion or sediment displacement could occur. In order to avoid any adverse effects and actively contribute to the preservation of healthy soils, the Group therefore attaches great importance to the responsible storage of tailings.

Afarak relies on sustainable and environmentally friendly extraction processes that ensure both soil quality and the long-term conservation of resources.

Monitoring of pollutant emissions

Afarak uses a variety of measurement methods to monitor pollutant emissions to ensure that the company keeps an eye on its emissions and meets all legal requirements:

Cooperation with official measuring institutes

Afarak cooperates with external, officially recognized measuring institutes that carry out regular and independent investigations of emission sources. This partnership not only ensures compliance with legal requirements, but also provides an objective assessment of the ecological impact.

Own chemical laboratory

With its in-house chemical laboratory, Afarak is able to continuously take samples and analyze pollutant concentrations in air and water directly on site. This capability enables the prompt and precise identification of irregularities, ensuring consistently high quality control of emissions.

Dust-tight measuring method

To monitor air emissions, Afarak uses dust-tight measurement technologies that record the concentration of particles in the air. These measures ensure compliance with defined limit values for dust and fine particles.

Analysis of wastewater volumes

Afarak's wastewater is routinely monitored and analyzed, whereby both the concentration of pollutants and the total volume of wastewater are monitored on the basis of the specified discharge guidelines. This makes it possible to precisely control the total load discharged into the water and to comply with the legal regulations on wastewater disposal.

Data collection for environmental accounting

For environmental accounting and reporting, Afarak collects comprehensive data on emissions, waste and resource consumption from various internal and external sources. This data is consolidated using the LCA process to provide standardized and structured information from all sites. This ensures coordinated further processing of the data, which forms a sound basis for analysis and reporting. The central processes and sources of information are listed below:

• Air and water emissions: The continuous monitoring methods and sampling for air and water emissions include data from official measuring institutes as well as from the in-house chemical laboratory. This data includes the concentrations of pollutants and the quantities of waste water.

• Emissions: Afarak's emissions are not measured directly, but are based on standardized calculations using specific emission factors. This methodology is preferred as direct emission measurements at all sites are currently not technically feasible, economically viable or regulatory necessary. The calculations are based on internationally recognized sources, in particular those of the IEA, to ensure a precise and consistent evaluation.

• Waste and recycling data: Internal reports and records of the disposal processes provide detailed information on the waste generated and the proportion of recycling.

• Energy and water use: Production reports and consumption data from the systems provide a comprehensive view of the resources used and play a decisive role in the environmental balance.

E2-6: Expected financial effects of impacts, risks and opportunities related to pollution

Afarak is making use of the transition period in accordance with ESRS E3-5 and is not disclosing the relevant information. This information will be part of the future "Climate Change Transition Plan", which is currently being developed and is expected to be finalized in 2025/2026. Quantitative information will be provided as soon as the necessary data and analyses are available.

ESRS E3:  Water and Marine Resources

E3-1:  Concepts related to water and marine resources

Afarak has not yet adopted any formalized concepts for the use and conservation of water and marine resources that meet the specific requirements of ESRS E3. Nevertheless, the company has long been implementing site-specific measures aimed at optimizing water consumption and minimizing the impact on water resources. These activities include the use of modern water recycling systems, the introduction of efficient wastewater treatment processes and the reduction of water pollution. 

The planned "Climate Change Transition Plan" will transform these existing initiatives into a comprehensive Group-wide document in order to meet the requirements of ESRS E3. Until then, the focus will be on the continuation and further development of current measures to promote the sustainable use and protection of water resources in a targeted and effective manner at the respective locations.

The following sections provide an overview of Afarak's activities in this area to date.

• 1. Adoption of general guidelines of the  organizations 

Afarak follows the general strategic guidelines of the ICDA and EUROALLIAGES to promote sustainable processes. These guidelines are implemented through technologies for the reuse and recycling of process water. At Afarak's sites, this is achieved through closed-loop water systems, which significantly reduce both fresh water consumption and wastewater discharges.

Afarak also attaches great importance to minimizing water pollution. The company's own wastewater treatment plants and optimized wastewater treatment processes significantly reduce the discharge of pollutants into water resources. The company recycles up to 95% of the process water at the mine sites, which makes a significant contribution to conserving resources.

In the spirit of promoting innovative solutions, Afarak uses alternative water sources such as rainwater and well water to further reduce dependence on fresh water resources - an important factor, especially for mine sites in water-scarce regions.

• 2. Site-specific requirements

Responsibility for the use of water and marine resources lies with the Group's sites in Germany, Turkey and South Africa. These operate independently in order to take account of the varying legal conditions and environmental protection requirements in the individual countries. In view of these differences, it is currently difficult to implement a uniform strategy at Group level.

• 3. Climate Change Transition Plan currently being planned

Afarak is currently developing a "Climate Change Transition Plan" with the aim of coordinating the existing environmental protection targets and measures across the Group and establishing a structured framework. The plan is intended to ensure that key issues such as the sustainable use of water resources, wastewater management and compliance with relevant water standards are given appropriate consideration.

Afarak is committed to meeting the requirements of ESRS E3 (Water and Marine Resources) and other relevant standards with this plan. Future reports will transparently document progress in implementing this plan to meet stakeholder expectations and ensure consistent reporting.

E3-2: Measures and resources related to water and marine resources

In the reporting period, Afarak did not introduce any specific measures with regard to water and marine resources.  However, Afarak has a large number of ongoing and already implemented measures that have been successfully contributing to the sustainable use and conservation of water resources for years.

Location-oriented personal responsibility

At the locations in Germany, Turkey and South Africa, individually adapted water management measures are implemented independently. This approach has proven to be sufficient to meet all applicable legal requirements and standards in the area of water resources. 

• Ongoing measures: The activities implemented include water conservation, recycling and the protection of local water sources, which have been operating successfully for years.

• Optimizations: These systems are regularly reviewed and improved in order to further increase efficiency and meet local environmental requirements.

Sector-specific requirements of the umbrella organizations

As described above, Afarak follows the environmental guidelines of the ICDA and EUROALLIAGES. Although these organizations set general environmental guidelines for the industry, they do not include specific regulations regarding water and marine resources. Nevertheless, Afarak also follows the general guidelines of the umbrella organizations in the area of water use to integrate environmentally friendly processes and promote the minimization of environmental impacts. These guidelines are integrated into the existing water management systems.

Future strategic orientation

As part of the planned "Climate Change Transition Plan", Afarak will document the existing, already well-functioning water management measures by continuously reviewing the existing measures in order to ensure their effectiveness and identify any potential for improvement. The aim is to maintain Afarak's high standards and to further expand them in a targeted manner in order to ensure the long-term and sustainable use of water resources at all sites. The autonomy of the sites with regard to local requirements will continue to be taken into account.

E3-3: Goals related to water and marine resources

At present, Afarak has not set any specific, measurable or results-oriented targets or quantitative or qualitative indicators to assess progress in the area of water and environmental protection. This is due to the fact that the company already has well-functioning water management measures in place that do not currently require any significant changes.

As part of the planned "Climate Change Transition Plan", the focus in this area will be on continuously reviewing the efficiency of existing processes. The aim is to ensure that these measures meet Afarak's high standards and are optimized where necessary. Measurable and results-oriented targets and specific indicators can be defined in this context if required.

Through this approach, Afarak ensures the systematic and sustainable further development of water management without unnecessarily changing the already established and functioning processes.

The main responsibility for monitoring environmental measures lies with the management of the respective sites. This ensures compliance with all local requirements and standards, including the regular review and adaptation of measures to current environmental conditions. The sites report regularly on the progress and status of their environmental initiatives to the Group's EMT. Afarak itself assumes an overarching control function to ensure comprehensive compliance with local requirements. This enables consistent monitoring and coordination of measures at all sites and allows any necessary corrections or additional support to be initiated in a targeted manner.

E3-4: Water Consumption

Total water consumption and water intensity

The total water consumption of Afarak amounts to 5,659,047 m³ and is made up of the following sources:

Water recycling and reuse

A total of 5,269,087 m³ of water consumption was successfully recycled and reused.

Water quality and water catchment areas

The water quality and the specific catchment areas are regularly monitored at each site. Drinking water is sourced from local suppliers and meets the regionally defined drinking water standards. Rainwater and well water are adapted to the conditions at the individual sites and are regularly checked for compliance with local quality standards. There is a high level of water stress at the mine sites in South Africa and Turkey, as these regions are characterized by limited water availability. This requires particularly efficient use of water in order to minimize the impact on local water resources. Measures for water conservation and sustainable use, such as the reuse of process water and the optimization of water consumption in operating processes, are therefore an integral part of the operational water strategy.

Data collection and methodology

The water consumption data is based on direct measurements and regular records, using industry-specific factors to categorize consumption from different sources. Standardized measuring devices and regional legal standards such as local environmental regulations and ISO standards (where applicable) are used for data collection and documentation.

Calculation basis

The data on total consumption and individual categories is based on annual records and monthly consumption reports that have been carefully calculated and analyzed. Measures to reuse and recycle water are based on internal efficiency programs to conserve resources, which are continuously updated.

E3-5: Expected financial effects of impacts, risks and opportunities related to water and marine resources

Afarak is making use of the transition period in accordance with ESRS E3-5 and is not disclosing the relevant information. This information will be part of the future "Climate Change Transition Plan", which is currently being developed and is expected to be finalized in 2025/2026. Quantitative information will be provided as soon as the necessary data and analyses are available.

ESRS E5: Resource Use and Circular Economy

E5-1: Concepts related to resource use and the circular economy

Afarak has not yet adopted any formalized resource use and circular economy concepts that meet the specific requirements of ESRS E5. Nevertheless, the company has long been implementing site-specific measures aimed at using resources efficiently and integrating material cycles into its processes. These activities include the introduction and expansion of LCA to all major sites, the continuous investigation and implementation of optimization opportunities in production processes and the reuse of by-products.

The LCA, which was extended to all major locations in the reporting year, analyzes and evaluates resource consumption along the entire value chain. These results create a solid data basis for identifying targeted measures to improve the use of resources and integrate material cycles.

As part of the development of the "Climate Change Transition Plan", Afarak will use the knowledge gained from the LCA process to enable in-depth analyses of resource use and the circular economy. The data collected will be used to identify potential for more sustainable resource use and the integration of material cycles. Based on these findings, it will be examined whether and to what extent specific measures or strategic goals can be included in the "Climate Change Transition Plan".

The focus here is on collecting and evaluating data in order to improve the efficiency of existing processes and make targeted adjustments where necessary. The planned timeframe for the review and further development of these approaches is set for 2025/2026.

E5-2: Measures and means related to resource use and circular economy

In the reporting year, Afarak implemented an important measure in the area of resource use and the circular economy by expanding the LCA to all major sites. This complements the already integrated site in Germany and now also includes the sites in Turkey and South Africa. The aim of this measure was to create uniform and comparable data collection for all environmental areas in order to be able to report on resource consumption in a well-founded manner. 

The LCA provides detailed findings on resource use, energy efficiency and potential environmental impacts along the entire value chain. This data forms the basis for future strategies and measures to promote the circular economy and the sustainable use of resources

Future strategic orientation

Afarak is also working on the creation of a "Climate Change Transition Plan", which is to be introduced in the period 2025/2026. This plan will use the knowledge gained from the LCA to develop, optimize and implement structured strategies and, if necessary, specific measures for resource use and the circular economy.

E5-3: Goals related to resource use and circular economy

Currently, Afarak has not established specific measurable and result-oriented targets and qualitative or quantitative indicators in relation to resource use and circular economy. However, the Group is in a dynamic development process that is driving forward the implementation and expansion of the LCA at the sites in order to obtain sound data. This data serves as the basis for analyses and makes it possible to identify potential and challenges in the area of resource use and the circular economy. With the planned completion of the "Climate Change Transition Plan" by 2025/2026, it will be examined whether and to what extent it is necessary to set measurable and results-oriented targets. This will build on the findings of the LCA processes to ensure that any targets are formulated in a well-founded and needs-based manner.

Although there are currently no specific targets, Afarak continuously measures the effectiveness of its resource use and circular economy strategies and initiatives. This is done through ongoing data collection as part of the LCA process and forms the basis for well-founded analyses and the evaluation of the effectiveness of implemented measures.

Afarak pursues various approaches to systematically monitor and optimize the effectiveness of its resource use and circular economy strategies:

1. Life Cycle Assessment (LCA)

The German site was already integrated into the LCA. In the reporting year, the sites in Turkey and South Africa were also included. The data on water consumption, waste management and resource use recorded in the LCA enables the environmental impact along the entire value chain to be assessed. These findings make it possible to identify trends and make well-founded decisions to optimize the use of resources.

2. Internal audits and reviews

Regular internal audits ensure compliance with Afarak's standards and evaluate the effectiveness of the measures implemented. These reviews help to identify potential areas for improvement.

3. Reporting and communication

Transparent reporting on progress and challenges is important to Afarak. This includes communicating with stakeholders and publishing information on environmental impacts and measures.

4. Adjustments and improvements

Based on the data collected and the results of audits, strategies and measures are continuously adapted to increase their effectiveness and meet new challenges.

E5-4: Resource Inflows

The following resources form the basis of Afarak's production processes and are integrated into Afarak's value chain with a strong focus on efficiency and reuse. No material from by-products or waste streams is used in the production processes. The main resource inputs in the upstream value chain include 

1. Raw materials

Chrome ore concentrate: This critical raw material for the production of ferrochrome is extracted directly from Afarak's own mines in Turkey and is of crucial importance for Afarak's ferrochrome production.

Lime: Lime is an important component in the ferrochrome production process and is sourced from local suppliers.

Silicochrome: This raw material is an intermediate product and is also sourced from local suppliers. Silicochrome is used as a starting material in the ferrochrome production process to achieve the desired chemical composition.

2. Water

The extraction of chrome ore concentrate from the chrome ore rock requires the use of considerable amounts of water. Afarak focuses on recycling and reusing the process water in order to reduce the consumption of natural resources.

3. Energy

Ferrochrome production requires a significant amount of energy in the form of electricity.

4. Property, plant and equipment and machinery

The use of large construction machinery is essential for chrome ore extraction at all operating sites. These heavy machines are of central importance for operations and represent a significant inflow of resources.

5. Transportation

The raw materials are transported to the production site both by truck and by ship, where they are processed into ferrochrome.

6. Packaging

To ship the ferrochrome, Afarak uses steel drums and single trip big bags, which are known for their durability. From the Group's perspective, these types of packaging are currently the most environmentally friendly options available, as they can be reused by customers or recycled worldwide, thus reducing the need for new packaging materials.

Data collection and methodology

The methods and assumptions used to calculate the products and materials used are explained below:

Data collection

Raw material data is recorded through regular and systematic documentation of consumption at the production sites. This important information is obtained from the internal production reports and the warehouse management systems.

Accounting

Balancing involves a comparison of quantities supplied and consumed. This process makes it possible to precisely determine raw material consumption over defined periods of time.

Standardized conversion

In order to standardize analysis and reporting, standardized conversion factors are used for certain raw materials, whereby input variables are converted into consistent units.

Assumptions

• Stability of sources of supply: It is assumed that the sources of supply for materials such as lime, silicochrome and chrome ore remain unchanged and that the raw materials supplied are of the specified quality.

• Production capacity: The assumption of stable production capacity supports the prediction of future raw material requirements.

• Market developments: To facilitate long-term planning, it is assumed that market prices and the availability of raw materials remain constant over the entire period under consideration.

E5-5: Resource Outflows

Afarak's ferrochrome is characterized by its longevity, corrosion resistance and high durability, making it a key component in numerous end products such as stainless steel and special alloys. Ferrochrome also retains its material properties in the end products. This enables an extended use cycle, as ferrochrome can be reintegrated into industrial applications by recycling at the end of the end product's use.

Chrome ore concentrate, on the other hand, is used as a raw material for the manufacture of products such as ferrochrome and is fully integrated into the production process. While the chromium from the concentrate is reused in durable and recyclable materials, the direct use cycle of the concentrate ends with further processing.

Afarak focuses on minimizing waste through sustainable production processes and generating by-products that can be reused in other industries, such as road construction. These approaches promote resource-conserving use.

Thanks to the special material properties of ferrochrome and the targeted use of chrome ore concentrate in industrial processes, Afarak actively contributes to the promotion of the circular economy and the reduction of resource discharges.

Relevant waste streams

In the Afarak sector, the relevant waste stream is the EWC code "C0809" of the European Waste Catalog (EWC), which refers to "slag and other waste from the metalworking industry". This waste stream includes materials generated during ferrochrome production and managed as part of waste management practices. Afarak's waste under this EWC code consists exclusively of slag. Afarak makes every effort to minimize this waste and convert it into by-products whenever possible. These in turn can be used in other sectors of the economy, such as road construction. This promotes the circular economy and contributes to the sustainable use of resources.

Breakdown of waste

The following tables provide a more detailed breakdown of what Afarak's waste is made up of and how it is disposed of.

Waste diverted from disposal:

A total of 31,412 tons of waste - 100% of which was non-hazardous - was diverted from disposal in the reporting year.

For the disposal of certain waste:

A total of 0 tons of waste - 100% of which was non-hazardous - was forwarded for disposal by Afarak in the reporting year:

Hazardous waste:

Afarak produces neither hazardous nor radioactive waste. For this reason, the quantities are not listed in a table.

Total amount of waste generated:

The total amount of waste generated in the reporting year was 31,412 tons. 

The total amount of non-recycled waste is 0 tons, which corresponds to 0%.

Data collection and methodology

The following methods and assumptions were used to calculate data on waste (especially slag) and its classification:

Data collection

The quantities of slag are collected by continuously recording and documenting the waste streams in the production facilities. This is done with the help of internal production reports and waste management systems.

Waste accounting

The slag is balanced by regularly weighing and recording the slag produced during the production process. This method enables precise recording and tracking of waste streams over precisely defined periods of time.

Standardized classification

Slags are classified according to the European Waste Catalog (EWC), whereby the slags are specifically assigned to the EWC code "C0809", which stands specifically for slags from the metalworking industry.

Assumptions

• Quality of the raw materials: It is assumed that the quality of the raw materials used remains constant, which influences the composition of the resulting slag.

• Production conditions: The assumption of stable production conditions supports the Group's ability to forecast slag volumes over time.

• Market developments: Afarak assumes that the demand for slag as a by-product in application areas such as road construction will remain constant.

Recyclability of products and packaging

The following table shows that Afarak's products and packaging have a high degree of recyclability

The figures are based on estimates and approximate values that were determined taking into account available industry standards and the following sources:

* Source: Worldstainless (https://www.worldstainless.org/about-stainless/environment/stainless-steels-and-co2-industry-emissions-and-related-data/?utm_source=chatgpt.com)

** Source: World Steel Association (https://worldsteel.org/about-steel/facts/steelfacts/) and Uniplast

Recyclability of the products (ferrochrome)

Ferrochrome is an essential component of stainless steel and has an exceptionally high recyclability. Stainless steel products, which are the main area of application for ferrochrome, have a recycling rate of more than 90%, based on established global recycling cycles. Within the recycling process, the majority of the ferrochrome contained is retained and can be almost completely reused without any loss of quality. The recovery rate of chromium in the smelting process is typically 95 to 98%. The recycling rate takes into account closed material cycles and efficient collection of stainless steel scrap, where low losses due to oxidation and impurities occur.

Recyclability of product packaging

The steel drums used have a recycling rate of over 85%. Steel is a material that can be recycled almost indefinitely without any loss of quality. The rate is based on the global steel recycling infrastructure and takes into account possible losses due to improper disposal.

The single-trip big bags are made of polypropylene, a plastic with a theoretical recyclability of almost 100%. Under real conditions, they achieve a recyclability of more than 85% with clean disposal and an efficient recycling infrastructure. The rate is based on the assumption that the single-trip big bags enter the local recycling cycle and are not affected by contamination or improper disposal.

The recyclability values stated represent average values and may vary depending on the regional infrastructure and collection processes. They are based on optimized recycling conditions in which material purity and efficient cycles are guaranteed. The figures are intended to emphasize the sustainability of the materials and packaging concepts used

Flexibility for customers:

Afarak offers customers the option of choosing between steel drums and single-trip big bags, depending on their needs and logistics requirements. This flexibility ensures that the type of packaging meets the customer's specific requirements without compromising the recyclability of the materials.

Circular economy as a focus:

Due to the global nature of transportation, Afarak specifically uses packaging materials that can be recycled internationally. This ensures that packaging - regardless of its destination - can be disposed of properly and returned to the material cycle. This approach supports the principles of the circular economy, reduces waste and conserves resources along the entire supply chain.

Shelf life of the products

Products such as ferrochrome and chrome ore are characterized by their exceptional shelf life. Although they serve as intermediate products in the supply chain and are not considered end products, they retain their quality for an almost unlimited period of time if stored properly. Ferrochrome remains stable under normal conditions and retains its alloying properties, while chrome ore offers a long shelf life due to its chemical resistance. These properties ensure that our products can be used reliably for decades in long-life applications such as stainless steel, making a significant contribution to sustainability in the supply chain.

1. Ferrochrome (FeCr):

Ferrochrome is characterized by exceptional durability and is used in long-lasting products such as stainless steel. Products containing ferrochrome have a service life of several decades. The durability of stainless steel made with ferrochrome therefore contributes significantly to the conservation of resources, as these products can be used over long periods of time without having to be replaced. The chemical stability of ferrochrome also ensures that it retains its properties throughout its service life. At the end of their useful life, materials containing ferrochrome can be returned to the cycle almost indefinitely worldwide without any loss of quality.

2. Chrome ore:

Chrome ore concentrate is a raw material that is used directly in further processing, such as the production of ferrochrome. Although its service life technically ends with further processing, it is used in durable products such as stainless steel. The chemical stability of chromium ore makes it an indispensable raw material in the metal industry. Even when stored, it remains unchanged over long periods of time and retains its quality, meaning it can continue to be used without restriction.

3. Big bags:

The single-trip big bags are made of polypropylene and are designed for single use (single trip). This type of packaging is common practice in the industry, as the return of single-trip big bags is often considered less sustainable. Polypropylene also offers the advantage that it can be easily recycled worldwide

4. Steel drums:

Steel drums are made from robust and durable material that is ideal for the transportation and storage of our products. Their durability allows them to be used safely for many years, making them a reliable choice for storage or onward transportation. The properties of steel ensure that the drums retain their stability and safety even during intensive use. In addition, steel offers the advantage that it can be easily and efficiently returned to the cycle worldwide, promoting sustainable use of the material.

E5-6: Expected financial effects of impacts, risks and opportunities related to resource use and the circular economy

Afarak is making use of the transition period in accordance with ESRS E5-6 and is not disclosing the relevant information. This information will be part of the future "Climate Change Transition Plan", which is currently being developed and is expected to be finalized in 2025/2026. Quantitative information will be provided as soon as the necessary data and analyses are available.

ESRS G1: Business Conduct

G1-1: Corporate culture and concepts for corporate management

Corporate culture at Afarak

Afarak is a globally active, vertically integrated company that operates its own mines in South Africa and Turkey to secure the supply of raw materials for its own ferrochrome production in Germany, among other things. Afarak's corporate culture is based on the company's core values: integrity, environmental responsibility, and social commitment. These values are defined by central corporate guidelines, which are described in the following chapters. Afarak attaches great importance to the individual responsibility of each site. This makes it possible to effectively meet local needs and to build and maintain close relationships with the local communities.

Afarak's values are promoted through targeted initiatives, regular meetings, company assemblies and the active involvement of employees in decision-making processes, as well as evaluated through ongoing feedback and audits. This holistic approach aims to ensure that the culture is not only part of the corporate strategy, but is actively filled with life. Among other things, the corporate culture is promoted through the following measures:

• Programs and initiatives: Afarak invests in health and safety programs, environmental management and social engagement, such as education, infrastructure and job creation in local communities.

• Communication: Internal communication channels such as notices, the employee app (available in Germany) and regular dialogue with committees and managers serve to promote the corporate culture.

• Corporate culture assessment: Compliance with Afarak's values is monitored through internal audits and reports that provide analysis on the strength of Afarak's corporate culture. Regular reviews of indicators such as employee satisfaction, workplace safety and community engagement help to evaluate the success of Afarak's cultural measures.

Concepts for corporate management and corporate culture

Afarak does not pursue a uniform company-wide "overall policy", but relies on a number of specialized guidelines, each of which covers specific aspects of company policy. These individual policies address areas such as risk management, ethical behavior, compliance and governance. In addition, Afarak develops country-specific codes of conduct that take into account local legal requirements and cultural characteristics. Each policy supports Afarak's corporate goals and values and is part of an overarching governance structure aimed at managing the company responsibly.

A central component of Afarak's strategy is the promotion of integrity, ethical behavior and a sense of responsibility. Key aspects are:

• Risk management to ensure long-term stability

• Transparency and compliance (in particular through the "Code of Ethics", "Code of Conduct" and future local codes of conduct)

• Whistleblower protection for the secure reporting of breaches

• Promoting social responsibility in dealing with employees and the environment

This central content strengthens trust, legal compliance and sustainable growth within the company and is reflected in several of the Group's central guidelines:

Risk management and compliance

The Risk Management Policy serves to systematically identify and manage risks in order to safeguard the corporate strategy in the long term and to optimally support the achievement of objectives in all business areas. It places particular emphasis on promoting a corporate culture based on risk awareness and compliance with both legal requirements and internal guidelines.

The matrix is regularly reviewed and updated to implement this policy. Risks are divided into categories such as financial, operational, legal and environmental aspects. The local management teams and central compliance teams report annually to the BoD on the risks identified. An escalation structure ensures that critical risks are identified and addressed at an early stage. 

Internal audits ("Internal Audit Charter") are also used to ensure the effectiveness of risk management. These independent audits are coordinated by the central internal audit department in order to review the efficiency of risk management processes and the implementation of measures to eliminate weaknesses. The results of the audits are presented to the BoD's Audit Committee. 

"Code of Conduct" and "Code of Ethics"

The "Code of Conduct" and the "Code of Ethics" serve as ethical guidelines for employees as well as for partners and suppliers and are aligned with the corporate values. The codes are committed to integrity and transparency and thus promote responsible behavior in day-to-day business.

"Whistleblowing policy"

Afarak's whistleblowing policy is a central component of the compliance strategy and aims to promote transparency and ethics within the organization and to effectively identify and address illegal behavior such as insider trading, market manipulation, violations of accounting standards or other compliance issues. It regulates how complaints and concerns from employees and external persons are received, documented, investigated and processed. The policy and its mechanisms enable employees and external stakeholders (e.g. business partners) to report concerns or potential violations safely and without fear of reprisals. The reporting process takes place via defined channels such as written reports or e-mail. All relevant contact details for reporting and the policy are publicly available on the Afarak website. For those without online access, they are available in written form at each location of the organization.  These mechanisms promote a secure reporting process through strict confidentiality protocols. 

Scope of the concepts

Afarak's corporate policy and corporate culture concepts are far-reaching and encompass employees, customers, suppliers and business partners. While employees and suppliers are directly involved through specific guidelines or contractual conditions, customers and business partners are primarily subject to contractual obligations that ensure core values such as compliance and transparency.

Employees: All internal guidelines such as the "Code of Conduct", the "Code of Ethics" and the whistleblowing policy are binding for employees. These cover aspects such as ethical behavior, compliance and transparency

Customers: By signing the sales orders, customers undertake to comply with the legal provisions contained therein ("Legals"). These provisions include provisions on compliance with statutory and contractual regulations as well as important clauses, such as those on dispute resolution and force majeure. 

Suppliers: Suppliers must accept and sign the "Code of Conduct for Suppliers" at the start of the business relationship. These requirements include guidelines on human rights, anti-corruption and compliance.

Business partners: The "Code of Ethics" formulates clear expectations towards business partners with regard to compliance with ethical and legal standards. However, it is not generally mandatory to sign it.

Limitations of the concepts

Although the concepts of corporate policy and corporate culture are very comprehensive, implementation is subject to a number of limitations. They arise due to local legislation, cultural differences and the complexity of policy coordination. Afarak continuously reviews and develops its concepts to ensure consistent adherence to the core values and corporate objectives in all markets. 

Local legislation: In some countries, specific adjustments are necessary to meet regulatory requirements.

Cultural differences: The perception and acceptance of policies such as the whistleblowing policy can depend heavily on the regional culture. In certain countries, employees or partners may be reluctant to raise concerns, even if anonymous channels are available.

Practical implementation: The large number of guidelines (e.g. "Code of Ethics", "Whistleblowing Policy", "Risk Management Policy") requires coordinated implementation in order to avoid redundancies and overlaps.

Ownership of the locations: The various locations are responsible for adapting and implementing the global corporate strategy to the specific needs and conditions of their respective local environment. This enables targeted and flexible implementation that takes regional differences into account.

Responsibilities 

Afarak's BoD is responsible for implementing the corporate strategy at Group level. It defines the strategic direction and monitors key areas such as risk management, compliance and ethical standards. The BoD also ensures that all necessary resources and structures are provided to achieve the strategic goals and uphold the corporate values. The Audit and Risk Committee is a central body that supports the BoD in monitoring key strategic areas. This includes risk management, adherence to compliance requirements and internal control. The committee also supports the implementation and management of whistleblowing mechanisms, including the documentation and investigation of incoming reports. 

In addition to the BoD and the Audit and Risk Committee, there are other supporting teams, such as the EMT, which consists of the CEO, CTO, CFO and CCO. This ensures that strategic objectives are effectively implemented both centrally and locally.

Local committees at the locations

In addition to the central committees, there are local operational and support committees that deal with local issues. They include, for example, the works council and committees for labor relations, safety and equality. They ensure compliance with local laws and internal standards, particularly in the areas of health, safety, equal opportunities and labor relations. At some locations, stakeholder engagement coordinators assume the role of interface to local communities and interest groups, for example in dialogue with neighbouring communities.

ESG team

The central ESG team is responsible for implementing the sustainability strategy throughout the Group. It collects and bundles ESG data from all locations that is required for reporting in accordance with the CSRD Directive. It also coordinates the development of future ESG strategies in order to meet long-term requirements.

Executive Management Team (EMT)

The EMT, consisting of the CEO, CTO, CCO and CFO, assumes a supporting role at Group level and is responsible for the operational implementation of strategic guidelines and assessments.  The EMT's core tasks include risk management, compliance with ESG standards and the monitoring of operational processes. The EMT acts as a link between the company's strategic objectives and their practical implementation at the locations. It ensures the uniform application of the guidelines and supports the locations in implementing the specified strategies. In addition, the EMT reports regularly to the BoD and the relevant committees in order to create transparency and monitor the company's strategic direction.

Inclusion of international standards 

Afarak complies with various international standards from third-party organizations when implementing its strategy. These standards ensure that Afarak operates in accordance with globally recognized principles for sustainable and ethical business practices. Such practices include the following guidelines and standards:

• UN Global Compact: The ten principles of the United Nations Global Compact cover key areas such as human rights, labor standards, the environment and anti-corruption. 

• OECD Guidelines for Multinational Enterprises: These guidelines promote ethical behavior and social responsibility in the international business environment.

• ILO Declaration of Principles: The Declaration of the International Labor Organization contains fundamental principles and rights at work, including labor and social standards. 

• Rio Declaration on Environment and Development: These standards promote the sustainable use of resources. 

• UN Guiding Principles on Business and Human Rights: These guidelines ensure the respect and promotion of human rights in business.

Consideration of the stakeholders 

Afarak systematically integrates the interests of the most important stakeholders into the corporate strategy, the foregoing being ensured by defined processes and committee structures. As an SE (Societas Europaea), the company is subject to European regulations on co-determination and employee participation. In addition, other mechanisms are used to ensure that the interests of stakeholders are incorporated into strategic decisions. Through these processes, Afarak ensures that strategic decisions are not only economically sustainable, but also take into account the social, ethical and legal expectations of key stakeholders. The following overview shows how this is taken into account:

Employee participation and co-determination

As an SE, Afarak has integrated bodies such as the works council and employee representatives at European level. They are involved in strategic decision-making processes in an advisory capacity. Employee representatives have information rights, consultation rights and/or co-determination rights in strategic matters, particularly in discussions in the BoD and in committees. This ensures that work-related issues are taken into account at an early stage.

Governance by the Board of Directors (BoD)

The Charter of the Board stipulates that the BoD includes the interests of all key stakeholder groups, i. e., shareholders, employees, customers and suppliers, in its strategic planning and takes them into account in decisions that affect the company's values. Regular meetings and strategic discussions with stakeholders ensure their concerns are recognized at an early stage and integrated into the corporate strategy.

Specialized committees and reporting structures

Specific committees, such as the Audit and Risk Committee, monitor compliance with standards and stakeholder requirements. These committees receive regular reports from a combination of internal departments, such as the ESG team, and external sources. These reporting structures ensure that both regulatory requirements and social and ethical standards are met in the interests of stakeholders.

Access to the strategy for stakeholders

Afarak makes its strategy available to its stakeholders via various communication channels, thus ensuring that the corporate strategy is communicated to stakeholders in a transparent and easily accessible manner:

Publications and reports

The strategic directions, including important corporate guidelines such as the Code of Conduct and the strategies for risk management and sustainability, are set out in detail in annual and ESG reports. These reports are available on the company website, making it easier for shareholders, customers, suppliers and the general public to access relevant information.

Company website

Via its company website, Afarak makes key documents, including the Code of Ethics and the Whistleblowing Policy, as well as other guidelines available to its stakeholders, particularly business partners and suppliers. The website also provides a clear insight into the current strategic guidelines and corporate values.

Complaints mechanisms

Afarak has established a comprehensive system of policies and procedures to identify, report and investigate concerns regarding unlawful acts or violations of the Code of Conduct and/or the Code of Ethics. The whistleblowing policy is the main mechanism for serious violations, supplemented by alternative reporting channels and structures. This ensures that all relevant concerns are effectively considered and dealt with according to their urgency.

To promote the use of these complaints mechanisms, Afarak provides basic information about their availability and use. This is done via various communication channels such as written notices, emails, staff meetings, staff representatives or an app. The distribution of information is organized independently at each location to ensure that all employees are informed in an equal fashion, regardless of their type of employment. These measures are intended to raise awareness of the reporting channels and ensure they are used effectively.

The main reporting processes are described in the following paragraphs:

Reporting serious violations via the whistleblowing system

Employees, external business partners and other internal and external stakeholders can report possible serious violations or unethical behavior anonymously or confidentially. Reports can be made either by e-mail to compliance@afarak.com or by mail to the following address:

General Counsel / Complaint

Afarak SE

Unioninkatu 20-22

00130 Helsinki

Finland

Incoming complaints can be addressed in writing to the CCO or directly to the Chairman of the Audit Committee. All reports will be treated in strict confidence, ensuring that the identity of whistleblowers is protected and no reprisals are taken against those who raise concerns in good faith. 

After receiving a report, the CCO assesses whether it is a whistleblowing complaint. If this is confirmed, a formal investigation is conducted in which all relevant information is systematically collected and analyzed. Afarak will involve external auditors or consultants as required to bring additional expertise and a neutral perspective to investigations.

Alternative reporting channels

In addition to the whistleblowing system, Afarak employees have a variety of other reporting channels for minor or personal complaints, including direct reporting to line managers or communication with internal bodies such as the Works Council in Germany or the SE Works Council at European level. Specific internal committees, such as local labor relations committees or health and safety committees, also offer platforms for expressing concerns and support in resolving them.

Reporting and escalation

Complaints reported via alternative channels, such as line managers or works councils, can be forwarded to the whistleblowing channel or the CCO depending on their severity. All cases reported via the whistleblowing channel are documented in a dossier ("docket") and reviewed by the CCO or directly by the Audit Committee. If a complaint concerns the CCO directly, the Audit Committee itself takes over the investigation in order to ensure independence and transparency. Depending on the case and the outcome of the investigation, Afarak may be obliged to forward relevant information to external supervisory authorities or regulatory bodies. The foregoing applies in particular when it comes to unlawful behavior that requires external intervention.

Protection against retaliation

Retaliation against anyone who makes a whistleblowing complaint or cooperates with an investigation in good faith is strictly prohibited under company policy. This also applies to immediate family members if they are employed by the Group. Those affected can report possible retaliation directly to the CEO.

The protection does not apply in the case of personal misconduct, unless this was ordered by a manager. Deliberately false complaints can result in disciplinary action, including dismissal.

Concepts and strategies for internal organizational training on business conduct  

Similarly, there are currently no systematic concepts for internal organizational training on the subject of "business conduct".  

Corruption and bribery 

At Afarak, the "Purchasing", "Sales", "Distribution" and "Business Development" functions are particularly susceptible to corruption and bribery risks. In Purchasing and Sales, the risk exists above all when awarding major contracts to external suppliers, as bribes could be used at this stage to obtain preferential treatment. In sales and business development, employees who are involved in the acquisition of major contracts or in international contract negotiations are at risk. They could become the target of bribery attempts in order to secure orders or new business opportunities.

G1-2: Management of relationships with suppliers

Strategies for preventing late payments

Afarak implements measures to avoid late payment, especially for small and medium-sized enterprises (SMEs): 

1. Efficient liquidity planning: Afarak pays particular attention to forward-looking liquidity planning. Regular cash flow analyses enable the company to identify potential bottlenecks at an early stage and take appropriate countermeasures. 

2. Clearly defined payment terms and negotiations: At the beginning of each business relationship, realistic payment terms are defined that are in line with both the company's liquidity situation and the needs of the suppliers. 

3. Communication and partnership with suppliers: An open and proactive approach to communication is of key importance to Afarak. If there are signs of late payment, suppliers are informed at an early stage in order to work together on solutions such as payment deadline extensions. This practice strengthens trust and promotes long-term partnerships.

4. Contract management and prioritization: Payments to strategically important suppliers, especially for critical raw materials or services, are treated as a priority. Efficient contract management ensures clear agreements in order to meet payment obligations on time. Particular attention is paid to SMEs, which tend to be more dependent on timely payments.

5. Avoidance of over-ordering: To avoid unnecessary financial burdens, Afarak takes care to avoid over-ordering and to focus on actual demand. This minimizes unnecessary costs and bottlenecks and ensures that liquidity is not tied up in excess stock.

Supplier relationship

Afarak relies on long-term and trusting partnerships with its suppliers. Suppliers are carefully selected according to criteria such as quality, reliability and sustainability. They must also demonstrate that they apply sustainable business practices. Afarak recognizes the risks that can arise from dependence on suppliers, particularly in the event of potential supply shortages or disruptions due to natural disasters, political instability or economic uncertainty. To mitigate risks, Afarak gives preference to local suppliers and maintains open communication to identify and mitigate risks at an early stage. In addition, the Group relies on its own upstream value chain to obtain the most important raw materials for production.

Integration of social and ecological criteria in supplier selection

Sustainability is a central component of the Group's supplier strategy, and it is important to the Group that suppliers comply with both environmental and social standards and criteria. The social criteria are set out in the "Code of Conduct for Suppliers". They include requirements on ethics, fair competition, the prevention of corruption, money laundering and conflicts of interest, the use of information and intellectual property, respect for human and labor rights, a healthy and safe working environment and the protection of personal data. 

Ecological criteria include, in particular, environmental protection with the aim of minimizing the impact of activities, products and services on the environment. Such criteria are, among others, the efficient use of natural resources, the use of renewable energies, proper waste disposal, control of GHG emissions and the reduction of impacts on biodiversity and ecosystems.

In addition, Afarak suppliers must comply with the OECD Guidelines and ensure the traceability of their supply chains. Suppliers must allow Afarak to verify compliance with this Code of Conduct at any time.

G1-5: Political influence and lobbying activities

As a member of the ICDA and EUROALLIAGES, Afarak is involved in lobbying activities to influence political decisions and thus promote both corporate and social objectives. Afarak mainly addresses the following topics:

• Environmental and climate policy: Regulation of CO₂ emissions and environmental regulations for the ferroalloy industry. 

• Trade policy and market access: access to international markets and removal of trade barriers. 

• Raw material security and availability: Sustainable use and responsible procurement of essential raw materials.  

• Labor and social standards: Regulation of working conditions and social standards in the metal industry.

• Research and development: Promotion of innovation and technological progress in the field of ferroalloy production.

G1-6: Payment practices

Below, Afarak provides a detailed overview of the company's payment terms according to the main supplier categories. 

The standard payment terms are categorized as follows: 

• Raw material suppliers: 14 to 30 days 

• Service provider: 0 to 60 days 

• Transportation and logistics suppliers: 0 to 7 days 

• Energy suppliers: 0 to 15 days

In addition, the average payment periods for Afarak's most important supplier groups were determined based on the agreed payment terms. The payment terms are: 22 days for raw material suppliers, 30 days for service providers, 3.5 days for transportation and logistics and 7.5 days for energy suppliers. These values result in an average payment period of 15.75 days - calculated as the sum of the payment terms divided by the number of categories.

THE FERROCHROME AND CHROME ORE MARKET

Afarak Group operates primarily in the chrome market.

Globally, most of the chrome ore is used in metallurgical applications. However, chrome ore is also used, though to a much lesser extent, in refractories, as foundry sands and as a chemical grade as shown below. Afarak produces ferrochrome which is the main type of chrome used in metallurgical applications, in turn mainly driven by the demand for stainless steel.  

Therefore, chrome ore and ferrochrome are very much correlated to the developments of the stainless-steel industry.

2024 Market overview

The stainless steel industry faced significant challenges in 2024, and signals are indicating that 2025 could become another challenging year. Throughout 2024, demand for stainless steel remained weak, particularly in Germany, with the entire European market remained subdued.

In the third quarter, and especially in the fourth Cr Ore prices saw an unexpected and substantial decline, driven by economic weakness in China. However, since mid-January, this trend has reversed, and market signals for Cr Ore have turned more positive.

Market sentiment for Q1/2025

Output of LC FeCr is expected to increase in 2025. The low market prices show signs of bottoming out.  We continue our efforts to lower our COP and dilute the fix cost via increased production of standard grades. Output of chrome ore is expected to remain at the same level. The market prices have recently begun to improve again. 

GROUP OPERATIONAL REVIEW

Operationally, 2024 presented higher sales and higher production for the Group.

Sales

The Group sales of processed material increased by 5.1% and stood at 21,759 (2023: 20,709) tonnes. 

Group mining

Group mining activity increased by 8.7% to 365,929 (2023: 336,601) tonnes during the year under review. 

Annual mining levels in the Speciality Alloys segment decreased by 1.1% to 64,945 (2023: 65,655) tonnes. Production within the FerroAlloys segment increased significantly as the output increased in South African mines to 300,985 (2023: 270,946) tonnes.

Group processing

Group processing for 2024 increased by 8.4% to 22,963 (2023: 21,179) tonnes on account of higher demand. 

Human resources

At the end of the year 2024, Afarak had 602 (596) employees. The average number of employees during the year 2024 was 594 (599). 

GROUP FINANCIAL PERFORMANCE

2024 performance

The Group revenue was lower compared to prior year EUR 128.6 (153.7) million mainly to a decline in prices. Speciality Alloys Processed material sold increased by 2.7%, to 21,759 (FY/2023: 20,709) tonnes.

The mining operation increased by 8.7%, to 365,929 (FY/2023: 336,601) tonnes.

Loss for the year totalled EUR -7.2 (FY/2023 profit: 10.0) million and EBITDA during the year decreased to EUR 2.6 (FY/2023: 16.6) million. EBIT stood at EUR -0.1 (FY/2023: 15.0) million. 

A hyperinflation adjustment of 1.9 million is included in the financial expenses with respect to the Turkish entities.

Balance Sheet, Cash Flow and Financing

The Group's total assets on 31 December 2024 stood at EUR 161.6 (2023:162.2) million and net assets totalled EUR 112.1 (2023:105.8) million. During the second half, the translation differences on conversion of foreign denominated subsidiaries was adjusted by EUR 4.6 million. The Group's cash and cash equivalents, as at 31 December 2024, totalled EUR 4.0 (2023:18.0) million. Operating cash flow stood at  EUR -6.3 (2023: 9.6) million. The equity ratio stood at 69.3% (2023:65.1%). Afarak's gearing at the end of the year was -1.2% (2023: -14.1%), as the company kept low interest-bearing debt of EUR 2.6 (2023:3.1) million.

Investments, Acquisitions and Divestments

Capital expenditure for the full year of 2024 totalled EUR 5.8 (3.0) million. Capital Expenditure was mainly incurred to sustain Group operations. 

SEGMENTS REVIEW

SPECIALITY ALLOYS SEGMENT

The Speciality Alloys business consists of Türk Maadin Şirketi A.S ("TMS"), the mining and beneficiation operation in Turkey, and Elektrowerk Weisweiler GmbH ("EWW"), the chromite concentrate processing plant in Germany. TMS supplies EWW with high quality chromite concentrate which produces speciality products including specialised low carbon and ultra-low carbon ferrochrome. Chrome ore from TMS that is not utilised for the production of specialised low carbon ferrochrome is sold to the market.

2024 in Review

Revenue for the year under review decreased by 20.7% to EUR 111.3 (2023:140.3) million, driven by a substantial decrease in market prices.

Nevertheless, processing levels by increased by 11.1% when compared to last year.  The decrease in revenue resulted in a lower EBITDA for the year to EUR 1.7 (2023:17.5) million, and EBIT of EUR -0.4 (2023:16.3) million.

Production

Total production levels during 2024 increased by 1.2% to 87,907(2023: 86,834) tonnes. The mining operations at TMS remained consistent, leading to a slight 1.1% decrease when compared to same period last year. Processing levels at the EWW plant in Germany was 8.4% higher than same period last year.

Sales

Speciality Alloys Processed material sold increased by 5.1%, to 21,759 (2023: 20,709) tonnes.

Financial performance

The declining sales resulted in a lower EBITDA for the year to EUR 17.5 (2023:17.5) million, and EBIT of EUR 16.3 (2023:16.3) million.

Looking ahead

Stability is expected in the Low carbon ferrochrome prices for standard grade going forward, although they persist at notably low levels. We do not expect increasing the output for these grades, unless the stainless mills improve their activity. The special grade market continues to grow and show some upside. Overall, Afarak is expecting solid results for 2024. However, the tense geopolitical landscape coupled with uncertainties in the money market could potentially cast a significant negative influence on these expectations.

FERROALLOYS SEGMENT

The FerroAlloys business consists of the Vlakpoort mine, Stellite mine, Mecklenburg mine and Zeerust mine in South Africa. The business produces chrome ore for sale to global markets.

2024 in Review

The Ferro Alloys segment showed a steady increase both  from the revenue  and mining aspects. This is manifested in the EBITDA of EUR 4.3  (2023:3.0) million, an increase of 43.3% over last year

Production

Operationally, the segment registered an increase of 11.1% with total production reaching 300,985 (2023: 270,946) tonnes. Production within the FerroAlloys segment increased significantly as the output increased in South African mines on account of the favourable market conditions. Opencast mining was resumed at the Mecklenburg mine.

Sales

The sales of mining material from the FerroAlloys segment increased by 25.8% in 2023 to EUR 16.6 million when compared to 2023 (EUR 13.2) million. 

Financial performance

Production within the FerroAlloys segment increased significantly as the output increased resulting in a positive EBITDA increase to EUR 4.3 (2023: 3.0) million during the reporting period. 

Looking ahead

Afarak continued with its mining activity in South Africa and plans to increase its output during 2024.

RISK MANAGEMENT

Afarak's prudent approach to risk management is a crucial component of our continued success and is present in managing all aspects of our performance.

By understanding and managing risk, we provide greater certainty and confidence for our shareholders, employees, customers, suppliers and host communities. In fact, we believe that successful risk management can be a source of competitive advantage.

Our risks are viewed and managed on a Group-wide basis. As a truly global operation, managing diversity in our operations, portfolio of products, geographies, economies and currencies is a key characteristic of our risk management approach.

Risk management is one of the key responsibilities of the Board and its Audit and Health & Safety Committees.

2025 Developments

Afarak's processing operations in Germany and South African mines are intensive users of energy, primarily electricity. Fuel and energy prices globally have been characterised by volatility and cost inflation. In South Africa the majority of the electricity supply, price and availability are controlled by one entity, Eskom. Increased electricity prices and/or reduced, or uncertain electricity supply, or allocation may negatively impact Afarak's current operations, which could have an impact on the Group's financial performance.

Management continued to work closely with the Units to provide continuous monitoring and oversight in accordance with the Group's risk management policy. Health & safety and the stated aim of 'Zero-Harm' will continue to be a central pillar of the Company's risk management strategy.

SHARE INFORMATION

On 31 December 2024, the registered number of Afarak Group SE shares was 277,041,814 (267,041,814) and the share capital was EUR 23,642,049.60 (23,642,049.60).

On 31 December 2024, the Company had 16,041,514 (6,541,514) own shares in treasury, which was equivalent to 5.79% (2.45%) of the issued shares. The total number of shares outstanding, excluding the treasury shares held by the Company on 31 December 2024, was 261,000,300 (260,500,300).

Flagging notifications

Afarak Group SE has on 29 February 2024 made a flagging notification to FIN-FSA pursuant to Chapter 9, Section 5 of the Finnish Securities Markets Act. According to the flagging notification Afarak's portion of the Company's shares has exceeded the threshold of 5 per cent.

According to the notification, Afarak holds 16,041,514 treasury shares in Afarak, which corresponds to approximately 5.79 % of the total shares in Afarak. This is based on the fact that a total of 10,000,000 new shares issued on the basis of the directed share issuance without payment to the Company itself decided by Afarak's Board of Directors on February 14, 2024 based on the authorization granted by Afarak's Annual General Meeting on June 21, 2023 have been registered in the Trade Register on 29 February 2024.

Trading information

Afarak Group SE's shares are listed on the main market of the London Stock Exchange and on NASDAQ Helsinki. Afarak shares are traded on the London Stock Exchange under the trading code AFRK and on the NASDAQ Helsinki under code AFAGR. The ISIN code is FI0009800098 and the trading takes place in Pound Sterling (GBP) and in Euros (EUR).

Share performance and Trading

At the beginning of the period under review as at December 2023, the Company's share price was EUR 0.40 on NASDAQ Helsinki and GBP 0.20 on the London Stock Exchange. At the end of the review period as at December 2024, the share price was EUR 0.29 and GBP 0.20 respectively. During the second half of 2024, the Company's share price on NASDAQ Helsinki ranged from EUR 0.22 to 0.35 per share and the market capitalisation, as at 31 December 2024, was EUR 80.34 (1 January 2024: 107.88) million. For the same period on the London Stock Exchange, the share remained at GBP 0.20 per share and the market capitalisation was GBP 55.41 (1 January 2023: 53.41) million, as at 31 December 2024.

Shareholders

On 31 December 2024, the Company had a total of 8,340 shareholders (8,387 shareholders on 31 December 2023), of which nine were nominee-registered. The registered number of shares on 31 December 2024 was 277,041,814 (2023: 267,041,814).

LARGEST SHAREHOLDERS ON 31 DECEMBER 2024

Afarak Group SE's Board members and Chief Executive Officer owned in total 2,450,000 (2023: 1,950,000) Afarak Group SE shares on 31 December 2024, including shares owned either directly, through persons closely associated with them or through controlled companies. This corresponds to 0.9% (2023: 0.7 %) of the total number of registered shares on 31 December 2024.

SHAREHOLDERS BY CATEGORY 31 DECEMBER 2024

SHAREHOLDERS BY SHAREHOLDER TYPE ON 31 DECEMBER 2024

RESOLUTIONS OF THE ANNUAL GENERAL MEETING

Afarak Group SE's Annual General Meeting was held in Helsinki on 31 May 2024.

The AGM adopted the financial statements and the consolidated financial statements and discharged the members of the Board of Directors and the CEO from liability for the financial period 2023. The AGM resolved that no dividend would be paid for 2023. The AGM also adopted the Remuneration Report and Remuneration Policy for the Company's governing bodies. 

THE BOARD OF DIRECTORS 

The AGM resolved that the Board of Directors would comprise of three (3) members: Dr Jelena Manojlovic (UK citizen), Mr. Thorstein Abrahamsen (Norwegian citizen) and Mr. Guy Konsbruck (Luxembourg citizen) were re-elected as Board members. 

The AGM resolved that the Non-executive Board Members shall be paid EUR 5,000 per month and the Chairman of the board shall be paid an additional EUR 1,500 per month. Non-Executive Board Members who serve on the Board's Committees shall be paid an additional EUR 1,500 per month for committee work. Those members of the Board of Directors that are executives of the Company are not entitled to receive any remuneration for Board membership. Board Members shall be compensated for travel and accommodation expenses as well as other costs directly related to Board and Committee work in accordance with the company's travel rules. 

THE AUDITOR 

The AGM resolved that the Company will pay the fee to the auditor against an invoice that is inspected by the Company and that according to the recommendation by the Audit Committee, the Authorised Public Accountant Tietotili Audit Oy was re-elected as the Auditor of the Company. Tietotili Audit Oy has informed the Company that the individual with the principal responsibility at Tietotili Audit Oy, is Authorised Public Accountant Urpo Salo. 

ONE-OFF RETROACTIVE ADDITIONAL COMPENSATION TO NON-EXECUTIVE BOARD MEMBERS 

The AGM resolved that the Non-Executive Board Members Thorstein Abrahamsen and Dr Jelena Manojlovic shall be paid EUR 25,000 each as a one-off retroactive additional compensation for during the last year having continued to take on substantial more work on a 24/7 availability basis, to facilitate operating through difficult times with challenged market conditions during the year and with further changes in the Company organization and a slimmed management team and continued recovery and improvement of the Company to one of the best financial result in 2023. 

AUTHORIZATION TO THE BOARD OF DIRECTORS TO DECIDE UPON SHARE ISSUE AND UPON ISSUING OTHER SPECIAL RIGHTS THAT ENTITLE TO SHARES 

The AGM resolved to authorize the Board of Directors to issue shares and stock options and other special rights that entitle to shares in one or more tranches up to a maximum of 250,000,000 new shares or shares owned by the Company. This equates to approximately 90.24 % of the Company's currently registered shares. The authorization may be used among other things to raise additional finance and enabling corporate and business acquisitions or other arrangements and investments of business activity or for employee incentive and commitment schemes. By virtue of the authorization, the Board of Directors can decide both on share issues against payment and on share issues without payment. The payment of the subscription price can also be made with consideration other than money. The authorization contains the right to decide on derogating from shareholders' pre-emptive right to share subscriptions provided that the conditions set in the Finnish Companies' Act are fulfilled. The authorization replaces all previous authorizations granted in the Annual General Meeting in 2023 and is valid two (2) years from the decision of the Annual General Meeting.

Information presented by reference

The Group's key financial figures, related party disclosures, information on share capital and option rights are presented in the notes to the consolidated financial statements. The share ownership of the parent company's Board members and Chief Executive Officer is presented in the notes to the parent company's financial statements.

The Corporate Governance Statement and the Remuneration Report are presented as separate reports in this Annual Report.

For the purposes of United Kingdom Listing Authority listing rules ("LR") 9.8.4C R, the information required to be disclosed by LR 9.8.4 R can be found in the following locations:

All the information cross-referenced above is hereby incorporated by reference into this Board of Directors report.

KEY FIGURES

FINANCIAL INDICATORS