Melitta Group Annual Report 2023

Opportunity and Risk Report

The Melitta Group uses a differentiated risk management system aimed at the structured identification and assessment of those risks to which the company is exposed. It includes all organizational regulations and measures for the early recognition, evaluation and analysis of risks.

The Melitta Group pursues a balanced risk policy. In the course of auditing the annual financial statements 2023, we commissioned the external auditors once again to conduct a voluntary audit of our early recognition system according to Sec. 91 (2) of the German Stock Corporation Act (AktG). They were able to confirm that our early recognition system was appropriate and complied with statutory requirements, also with regard to the revised auditing standard IDW AuS 340. Irrespective of this, the risk management process was continuously refined in 2023.

The risk management system comprises suitable reporting procedures. These ensure that the managers responsible are constantly and quickly informed about potential risks and opportunities. This enables both the Group and individual companies to take fast and effective corrective measures.

The main risks of the Melitta Group result from general economic developments, sector developments, and risks from general operating activities. In order to identify fluctuations in demand and changes in customer behavior at an early stage, markets are monitored continuously and in detail. This ensures that product strategies can be updated and adapted to changing customer requirements and the reactions of competitors. Price increases for commodities (especially green beans), energy costs (especially gas and electricity), supply chains that are not always free of disruptions (especially green beans and aluminum), and unfavorable exchange rate developments (especially due to a stronger US dollar) may have a negative impact on the Group’s earnings. These risks are also dominated by the economic effects of geopolitical conflicts on our business fields.

In the field of production, all facilities are regularly maintained to reduce the risks of equipment downtime and the associated risk of business interruptions. In addition, insurance policies cover the effects of production downtime depending on the insurance event. Working time models ensure in principle that the required human resources can be adjusted to the respective degree of capacity utilization. To reduce quality risks, quality management systems are in place at production sites to ensure compliance with and fulfillment of the specified standards.

The Melitta Group has a continuous need for specialist and managerial personnel. Risks arise from a shortage of various employee categories on the labor market and a resulting delay in filling vacancies. The Group therefore actively promotes young talent internally and provides systematic training and personnel development. In addition to apprenticeships, the international trainee program ensures that employees are trained within the company. Moreover, measures are offered to promote and maintain health.

The Melitta Group’s business processes are based on powerful and modern IT systems. Like all companies, the Melitta Group also regards potential cyber attacks as a material risk. To prevent disruptions, the Group places particular emphasis on the further development of hardware and software applications, on the integrity and security of its data resources, and on controlling access authorizations. The reliable technical securing of data is supplemented by systematic awareness-raising and training of the workforce by various means.

The monitoring and controlling of financial risks is entrusted to the Group’s treasury division. Foreign exchange and interest hedging instruments (options, swaps, futures, and interest derivatives) are used to hedge against specific risks from existing or foreseeable underlying transactions. Liquidity risks and risks from cash flow fluctuations are countered constantly by local and group-wide liquidity planning.

However, these general risks are also countered by opportunities. For the Melitta Group, these arise in particular from the tapping of market potential via a further expansion of our international presence and growing awareness of the Group’s brands, as well as from the rising propensity to purchase commercial coffee machines.

Financial and profit-related opportunities with positive deviations from the planned trend in revenue and earnings result from additional sales, falling commodity prices, and more favorable exchange rates.

Our risk management system also includes sustainability risks. Based on the defined risks, we derive integrated strategies and processes for risk avoidance and mitigation. The holistic integration of sustainability in our core business and the resulting measures serve not only to reduce existing or expected risks, such as the effects of climate change, but also to generate further opportunities in our markets, e.g., by offering innovative and sustainable products.

Against the background of the above-mentioned explanations, the overall risk and opportunity situation has changed only marginally compared with the previous year. There is no threat to the continued existence of the Melitta Group.

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