Derichebourg // 2020-2021 Universal Registration Document

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Financial and accounting information Consolidated financial statements at September 30, 2021 Accounting policies, rules and methods

Financial debt (current and non-current) 2.3.18 Financial debt includes: the syndicated loan agreement set up in March 2020 including a five-year refinancing loan; the non-recourse factoring agreement signed on January 1, 2015, renewed twice in April 2016 and November 2018; the bond issue issued in June 2021 as part of the proposed acquisition of the Ecore group; leases; other borrowings and bilateral lines. These debts are valued and recognized at amortized cost using the effective interest rate method. According to this method, the cost of the debt includes issuance costs, originally deducted from the nominal value of the debt as a liability. Also in this method, interest expenses are recognized on an actuarial basis. In the event that the terms of a loan agreement are modified, if the cash flows discounted at the initial effective interest rate under the new terms, including any fees paid and negotiation costs, exceed the discounted value of the flows anticipated under the agreement by more than 10%, the issuance costs and negotiation fees are recognized as expenses. Financial debt with a term of less than one year is recorded under “Current financial debt”. Fair value of derivative assets and liabilities 2.3.19 (IAS 32-IFRS 9) The Group uses derivatives to hedge its exposure to market risks (interest rates, exchange rates and raw material prices). According to IFRS 9, all derivatives must be recognized on the balance sheet at their “fair value”. If derivatives do not meet the criteria for hedge accounting, fluctuations in their fair value are recognized in the income statement. Derivatives may be considered hedging instruments in three situations: hedging of fair value; hedging of future cash flows; hedging of a net investment in a foreign operation. A fair value hedge covers exposure to the risk of changes in the fair value of an asset, liability or non-recognized firm commitment arising from changes in financial variables (interest rates, exchange rates, share prices, raw material costs, etc.). A future cash flow hedge covers changes in the value of future cash flows related to existing assets or liabilities or to a highly probable forecasted transaction. A hedge of a net investment in foreign currency covers the foreign exchange risk related to a net investment in a consolidated foreign subsidiary. The Group uses several types of interest rate risk management instruments to optimize its financial expenses, to hedge the foreign exchange risk related to loans in foreign currencies and to manage the fixed/variable rate split of its debt.

Interest rate swap agreements enable the Group to borrow long-term at variable rates and to exchange the interest rate on the debt incurred, either at the outset or during the term of the loan, against a fixed or variable rate. The Group may purchase interest-rate options, caps and floors as part of its strategy to hedge its debt and financial instruments. Interest rate and foreign exchange derivatives used by the Group to hedge changes in its debt denominated in foreign currencies qualify as hedges in accordance with IFRS 9 because: the hedging relationship is clearly defined and documented from the date of implementation; the efficiency of the hedging relationship is clearly demonstrated in the beginning and on a regular basis for as long as it lasts. The application of hedge accounting has the following consequences, the derivative always being measured on the balance sheet at its fair value: for fair value hedges of existing assets or liabilities, the change in fair value of the derivative is recognized in the income statement. This change is offset in the income statement by re-measuring the hedged item on the balance sheet. Any difference between the two changes in value represents the inefficiency of the hedging relationship; for hedges of future cash flows, the “efficient” portion of the change in fair value of the hedging instrument is recognized directly in shareholders’ equity in a specific reserve account, and the portion of the change in fair value considered “inefficient” is recognized in the income statement. The amounts recognized in the reserve account are entered in the income statement once the hedged cash flows are recognized; for hedges covering net investments in a foreign country, the “efficient” portion of the changes in fair value of the derivative instrument is recognized in shareholders’ equity under the heading “translation reserve” and the portion considered “inefficient” is recognized in the income statement. The profit or loss on the derivative that was recognized in the translation reserve must be transferred to the income statement in the event of the sale of the foreign entity that was the subject of the initial investment. As part of its trading business in non-ferrous metals, the Group uses forward purchase and sale agreements concluded on the London Metal Exchange (LME) in order to reduce its exposure to the risk of fluctuations in non-ferrous metal prices (copper, aluminum, nickel). Changes in the fair value of the derivative instruments (forward purchases and sales of metals on the LME) are recognized in the income statement. The classification of financial assets and liabilities has been revised to comply with IFRS 9 classifications. Equity securities and other current financial assets are recognized in the balance sheet at their fair value. Loans are recognized at amortized cost measured through the effective interest rate (EIR). The fair value of trade receivables and trade payables corresponds to their balance sheet value, taking into account their payment dates of less than one year.

DERICHEBOURG 2020/2021 Universal Registration Document 149