DERICHEBOURG - Universal registration document 2019-2020

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Group management report Risk factors

Risks

Risk management systems

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.

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.

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

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. The Group is seeking priority access to landfill sites because shredder residue is the final waste, and these sites accept less well sorted products. Regarding the financial considerations, the Group anticipates adding the TGAP increase to its purchase prices. In the longer term, eco-design is likely to enable better recycling of end-of-life products. These regulations will cover all European stakeholders in the business. There is a multiple-year timetable for implementing these measures. The Group has used financing lines to make these investments, with the investment budget currently being drawn up.

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 could 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 contributionadjustments despite therebeing no intentionto circumvent theregulations. 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 its subsidiary AFM Recyclage (as the final operator) entered into an agreement with a public-private partnership representing the local authority, which was renewed in 2018 and 2019. Under this agreement, they would release land, transfer it to the public-private partnership and transfer their activity to a nearby site. Conventionally, the financial obligation for decontamination was limited to decontamination for industrial, non-sensitive use, on the basis of preliminary studies showing a low decontamination cost. On the basis of more in-depth surveys, an estimate was made of the cost of this decontamination, and its total cost calls into question whether or not the process is cost-effective. 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.

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, 2020, the amount of the provisions for rehabilitation and decontamination was €6.6 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 2019/2020 Universal Registration Document 108