URD 2020 Universal Registration Document MERSEN Universal Registration Document page 1 Group Profile 3 2 Corporate governance report 17 3 Management Report 75 4 Social responsibility and sustainable development 101 5 Information about the share capital and share ownership 147 6 Consolidated financial statements 165 7 Parent company financial statements 225 8 Additional information & glossaries 253 This document is a free translation into English for convenience purposes only of the French URD fi led with the Autorité des Marchés Financiers on March 15, 2021. URD 2020 | MERSEN 1 2 MERSEN | URD 2020 1 GROUP PROFILE 2020: AN UNPRECEDENTED YEAR 5 2020 KEY FIGURES 6 GROUP B USINESS M ODEL 8 VISION, MISSION AND VALUES 10 URD 2020 | MERSEN 3 GROUP PROFILE 1 4 MERSEN | URD 2020 GROUP PROFILE 2020: an unprecedented year 1 2020: AN UNPRECEDENTED YEAR After several years of growth, the Covid-19 pandemic hit the The additional direct costs caused by Covid-19 (purchase of global economy hard in 2020, with many countries introducing masks, cleaning costs, exceptional transportation, etc.) were travel restrictions, lockdown measures and quarantines to slow recorded but were for the most part offset by decreased spending the spread of the pandemic. These restrictions began in January as a result of slower business activity (especially reduced travel and February in China and then reached Europe in early March expenses). and America at the end of March. All in all, the Group demonstrated its resilience and ability to adapt Although some countries eased their lockdowns after the fi rst its expenditure, delivering operating margin of 8.1% of sales. wave of the pandemic, business only began to pick up gradually In addition to these cost-reduction measures, targeted plans during the summer. Then as we moved out of summer new had to be drawn up to adapt businesses that will be lastingly restrictions had to be applied, albeit not as strict, due to the start impacted by the crisis, primarily those serving the chemicals and of a second wave of the pandemic. aeronautics industries. Restructurings were therefore carried out As nations faced this unprecedented situation, many governments at some manufacturing sites, including two in France. Mersen also put in place fi nancial support measures such as short-time working continued to review operational effi ciency in its Electrical Power and furlough schemes, subsidies and government-backed loans. segment, regrouping or relocating some facilities. The Group recorded impairment losses on property, plant, and equipment Mersen’s operations were classifi ed as essential by the authorities and on intangible assets, mainly as a result of a morose chemicals in most of the countries where lockdowns were imposed. This market and the fact that certain production equipment is not being meant that most of its sites were able to stay open, with at least used to full capacity on markets that are structurally weak. This 85% of them operational in April and May 2020 when the fi rst resulted in a net loss of €8.8 million. wave of the pandemic peaked. However, some sites had to be temporarily shut for health and safety reasons (for example for Mersen has a solid fi nancial structure, with over €160 million deep cleans or precautionary measures due to confi rmed Covid in undrawn credit lines and more than €110 million in cash at cases), or due to supply-chain issues, such as supply stoppages. December 31, 2020, meaning that the Group will be able to cover its debt repayments at least until 2023. The leverage ratio (net The Group generated sales of €847 million, down 11.4% on an debt/EBITDA) of 1.65x and gearing ratio (debt/equity) of 33% are organic basis. The Group’s business was above all affected well within its banking covenants. by lower demand, although the picture was extremely mixed across its various markets and geographies. While aeronautics, During this unprecedented year, the Group’s priority has been chemicals and process industries all fell dramatically, down nearly to ensure the health and safety of its employees throughout the world. Shared best practices and support for solidarity efforts 20%, sustainable development markets, which now account for have also been encouraged. Moreover, in line with this solidarity approximately 56% of the Group’s total sales, held up extremely approach, the Board of Directors decided that at the Annual well and on the whole remained stable over the year. General Meeting it would not recommend a dividend payment In order to adapt to the lower business volumes, the Group or seek authorization to allocate free shares to executives and signifi cantly reduced its budgeted operating costs and capital managers. Finally, the Group’s corporate offi cers (Chairman of expenditure, except for programs related to the environment, the Board of Directors and Chief Executive Offi cer) decided to health & safety and growth markets. reduce their fi xed compensation by 12.5% for the year order to Mersen also received government aid (primarily in China) and contribute to the collective effort required by the economic context. made use of schemes covering the costs of short-time working Looking ahead to the future and building on the performance of this and furloughs for its employees. At the height of the crisis, in year like no other, when the resilience of the Mersen model truly April/May 2020, up to 10% of the Group’s workforce was came through, the Board of Directors will be proposing a dividend furloughed or on short-time working arrangements. However, the of €0.65 per share at the General Meeting of Shareholders for Group did not apply for any government-backed loans. the 2020 fi nancial year. URD 2020 | MERSEN 5 GROUP PROFILE 1 2020Key Figures Key Figures 2020 KEY FIGURES SALES BREAKDOWN BY MARKETS Energies €847m Processes - 11.4% VS 2019 20% 32% 56% 22% Electronics 11% Chemicals 16% Transportation 56% of sales for sustainable development markets RESULTS €123m €69m €(12)m EBITDA operating income n et income before non-recurring items FINANCIAL STRUCTURE DIVIDEND PER SHARE* 7.8% 1.65 €0.65 r eturn on net debt capital employed to EBITDA ratio * Subject to shareholder’s approval at the General Meeting. 6 MERSEN | URD 2020 GROUP PROFILE 2020 Key Figures 1 MERSEN WORLDWIDE 6,434 EMPLOYEES EMPLOYEES 1 950 NORTH INDUSTRIAL SITES 14 EMPLOYEES 2 374 AMERICA CA 33% EUROPE INDUSTRIAL SITES 23 CA 34% SOUTH EMPLOYEES 522 EMPLOYEES 1 588 AMERICA- INDUSTRIAL SITES 5 ASIA- NDUSTRIAL SITES AFRICA CA 3% I 13 PACIFIC CA 30% 16 92% 55 R&D centers of plant managers sites in the world recruited locally (with 15 > 125 employees) COMMITMENT A signatory of the United Nations Silver medal Global Compact since 2009 Ecovadis URD 2020 | MERSEN 7 GROUP PROFILE 1 2020Group Key B usiness Figures M odel MISSION We provide manufacturers all over the world with innovative OUR RESOURCES OUR BUSINESSES HUMAN CAPITAL DESIGN 6,400 employees in 35 countries TRANSFORMATION, ASSEMBLY including baking, graphitization, purifi cation, brazing SOCIETAL CAPITAL TREATMENT PROCESS, Code of ethics FINISHING Purchasing charter Machining, coating 92 % of plant managers recruited locally OUR ASSETS INDUSTRIAL CAPITAL 2 EXPERTISES 55 industrials sites ADVANCED MATERIALS ELECTRICAL POWER €57m in Capex • Graphite specialties • Electrical protection • Anti-corrosion & control equipment • Power management • Power transfer solutions technologies INTELLECTUAL CAPITAL 16 R&D centers 5 VALUES Excellence FINANCIAL CAPITAL Collaboration People-Conscious Net debt/EBITDA = 1.65 Agility & Entrepreneurial Spirit Partnering with our Customers All data above refer to 2020. 8 MERSEN | URD 2020 GROUP PROFILE Group2020 B usiness Key Figures M odel 1 solutions to enhance the performance of their offer VALUE CREATION SOCIAL €252m in fi xed salaries €16m in profi t sharing plans 10.9 hours of training/employee 91% of employees proud OUR MID-TERM to belong to the group AMBITION Safety / LTIR(1) = 1.54 Pursuing the development of solutions tailored to our SOCIETAL customers’ needs by relying €407m in purchase on our high value-added expertise CSR Commitment (Ecovadis silver medal) Fostering growth in buoyant markets that contribute to sustainable development ENVIRONMENTAL by off ering innovative and sustainable solutions 56% of sales geared to sustainable development Continuing to implement its 40% sites certifi ed ISO 14001 competitiveness and performance program while taking a socially 60% of waste recycled responsible approach Optimizing human capital ECONOMICAL development by providing €11m in income tax a motivating work environment €8m in interest paid to banks (1) Lost-time injury rate. URD 2020 | MERSEN 9 GROUP PROFILE 1 Vision,Group Bmission usiness and M odel values VISION, MISSION AND VALUES At Mersen, our vision, mission and values inspire the decisions 3. Continuing to implement its competitiveness and and actions that drive our development. performance program while taking a socially responsible Our ambition is to contribute to technological progress across approach the globe. We are convinced that our products and solutions are Mersen wants to gain in operational effi ciency while constantly essential to progress and technological innovation, which gives improving the security and safety of its plants and the people the Group a role to play in improving the way we live and in who work there and strengthening its ties with stakeholders protecting the environment and its resources. in its host communities. The Group has implemented a global To implement our vision and fulfill our purpose, the Group operational excellence initiative for all parts of the company, adheres to a set of shared values: Excellence, because it from operations through to sales, with special emphasis on enhances our competitiveness and protects our fl exibility and improving safety and reducing the environmental footprint of future; Collaboration, because by pooling our skills and working its production sites.