DERICHEBOURG - Universal registration document 2018-2019

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Group management report Risk factors

Risks

Risk management systems

Major accident at a recycling center (explosion, fire, physical injury, etc.) or a natural disaster (earthquake, flood, etc.) interrupting operations.

The Group has a workplace safety policy (see section 1.4.1) in order to protect its employees. None of the Group’s sites handles more than 10% of volumes. Moreover, volumes may be diverted to sites that are geographically close. Lastly, the Group has insurance policies aimed at insuring against insurable financial consequences in the event of such events taking place. The aeronautical industry relies on several successive checks of operations. The implementation of Derichebourg Atis Aéronautique’s quality policy is verified by its customers. Furthermore, a specific insurance policy has been taken out. Historically speaking, the number of strike days (see section 1.4.3) has been low. The Group endeavors to maintain a high quality professional working environment with accessible management.

The subsidiary Derichebourg Atis Aéronautique carries out the assembly or quality inspection of a large number of aircrafts. In the event of an air accident involving an aircraft on which Derichebourg Atis Aéronautique has worked, it could be deemed to be liable.

A major strike affecting a number of service activities.

Regulatory risks

The Group exports a significant share of the tonnages of ferrous or non-ferrous metals that it processes. The majority of volumes exported do not require complicated formal procedures. Some exports have to undergo specific formalities (notifications). In the context of a changing regulatory environment, the export of goods that do not comply with specifications could occur, leading to goods being returned and/or fines being applied. The TGAP (French general tax on polluting activities) collected when shredding residues are sent to landfill could increase significantly and the opportunities for landfill be reduced. Should this situation arise, the Group’s profits would be affected. The implementation of the IED directive (Industrial emissions) could require investments to be made, mainly in order to reduce emissions to air from shredders, noise and discharge into water. Financial consequences of unintended non-compliance with employment regulations: the Group employs more than 30,000 employees in labor-intensive service activities. The complex nature of employment management (calculating hours, reductions in contributions, etc.) could lead to significant contribution adjustments despite there being no intention to circumvent the regulations. As the final operator at all of its operating sites, in the event that activities cease, the Group is responsible for rehabilitating the various sites in accordance with an objective to be agreed with local and regional authorities. The Group endeavors to limit the potential consequences of its activity on the environment, in particular through the presence of concrete slabs, but it does not have detailed knowledge of the history of all of the sites it operates. In the event of a cessation of activities, significant sums could be paid out to restore and to clean up certain sites. In 2012, Derichebourg SA and the subsidiary AFM Recyclage (as the final operator) entered into an agreement with the local authority, which was renewed in 2018. Under this agreement, they would release land, transfer it to the local authority and transfer their activity to a nearby site. Conventionally, the financial obligation for decontamination was limited to decontamination for non-sensitive and industrial uses. After the end of the fiscal year, an estimate was made of the cost of this decontamination and its total cost calls into question the economics of the operation. Discussions have begun with stakeholders in order to see whether it is possible to find a solution that is acceptable to everyone. Should this not be the case, AFM Recyclage would seek to continue its activity at the site.

Documents accompanying exported goods are subject to particular care and are prepared by people specializing in this area.

The eco-design of products is such as to enable the better recycling of end-of-life products. The Group is working to improve the sorting of fractions that are currently not recyclable (light shredding residue and induction waste) as part of one of the CSR targets that it has set itself (see section 1.6.1.2). The success of these initiatives requires commercial streams to be identified that are capable of using the various by-products. These regulations will concern all players in the business. The implementation schedule for these measures will be on a multi-annual (four to five-year) basis. In the face of increasing complexity, the Group is bringing together payroll functions in shared service centers in order to share expertise.

The Group’s intention is to continue activity at the vast majority of the sites that it operates. At the few sites where the Group is planning to cease activity, the Group recognizes provisions when it has management plans prepared in accordance with the future state of the site. At September 30, 2019, the amount of the provisions for rehabilitation and decontamination was €4.0 million.

The Group is not able to determine with sufficient certainty whether it will in fact continue its activity on this site and, where applicable, the amount of the total decontamination costs that it would be liable to pay.

DERICHEBOURG p 2018/2019 Universal Registration Document 101