Risk Management

Heinzel Group generally defines a risk as an imminent deviation from corporate goals. The companies’ different areas of activity and the resulting variety of risk factors mean that risk is spread at the group level. In addition, the high degree of vertical integration reduces vulnerability to external influences. The group’s risk policy is generally characterized by a conservative approach. Significant importance is attached to risk avoidance and mitigation, which are achieved, as far as is economically justifiable, by means of appropriate measures and supplemented by the group’s insurance program.Market risksMarket risks may result, in particular, from general economic developments as well as the political and regulatory environment in the relevant sales markets. In addition, the pulp and paper markets are characterized by fierce competition. A major uncontrollable risk is consequently posed by price fluctuations relating to the products sold, which are also subject to exchange rate volatility. A sound liquidity position can adequately cushion such risks.Procurement risksOn the procurement side, Heinzel Group’s production companies depend on the supply of raw materials, predominantly wood and recovered paper as well as energy and chemicals. The group proactively counters other procurement risks by using professional purchasing organizations, which continuously monitor the market and look for new potential suppliers. Heinzel Group also operates as a single entity in the market for certain purchasing processes in order to optimize costs and risks. As the potential loss of a major supplier represents a high risk in the trading business, constant efforts are also undertaken to ensure a spread of suppliers.Operational risksThe group’s production sites face a risk of equipment failure, which is accounted for by a comprehensive insurance program that covers the entire Heinzel Group. Production facilities and processes are state of the art and subject to systematic further development. In addition, annual risk audits are conducted together with the group’s insurance company. Risks are identified and appropriate countermeasures taken as part of these audits.Geopolitical risksRisks can also arise due to geopolitical conflicts and uncertainty related to international trade disputes resulting in sales markets being lost and supply chains disrupted. Since the start of the Ukraine war, Heinzel Group has been closely monitoring developments in Russia and its Europapier business in this market. The risks at heinzelsales associated with the war in the Middle East and the discussion of customs tariffs in the USA are also regularly evaluated.Acquisition risksIn addition to organic growth, selected acquisitions also support Heinzel Group in the implementation of its growth strategy. The challenges associated with such acquisitions include successfully integrating the companies acquired in order to achieve strategic goals and tap synergies.Sustainability risks and materiality analysisIn the course of the ESRS materiality analysis for the CSRD reporting purposes, the impacts of material sustainability matters such as climate change, circular economy, own workforce, and business practices were systematically analyzed. This analysis was performed on the basis of double materiality taking into account both financial and impact factors. A key focus was on climate change and reducing CO2 emissions by measures such as switching to renewable energy sources, increasing energy efficiency, and increasingly using biomass to produce energy. The materiality analysis was performed in 2024 and not renewed in 2025, as HEINZEL GRROUP’s business model and its sustainability risks have not significantly changed and the regulatory requirements of the Omnibus package have not been finalized by the regulator.At the same time, climate transition risks such as rising CO2 costs, stricter regulatory requirements and physical climate risks were assessed based on different climate change scenarios in 2025. Although there are no material physical climate risks in the short and medium term, temperature- and water-related climate risks as well as changes in raw material supply can have a negative impact on Heinzel Group in the long term. However, the results of the physical climate risk and climate scenario analysis show that adaptation measures will become a focus at a later time.Credit risksIn international trade, the political risk in some countries and, above all, the credit risk of business partners, are monitored continuously and managed by means of credit insurance, internal credit limits and standardized approval processes.Personnel risksThe loss of important employees in key positions and difficulties in filling positions may have a negative impact on the company’s success. The Group Development Program and apprenticeship and training programs counter these risks and promote long-term company affiliation.IT risksGiven rising levels of cybercrime, the focus is not only on continually improving the technical protection of IT and operational technologies (production-related systems) but also on raising the users’ risk awareness. Heinzel Group is preparing for the implementation of the EU directive on network and information security (NIS2), which will be implemented in Austrian law in 2026. The information security management system (ISMS) was also further developed and the insourcing of the CISO function in 2024 also focused on this aspect of cyber and information security.Financial risksHeinzel Group’s financial risks comprise foreign exchange, interest rate and liquidity risks. In order to reduce the latter to a minimum, the group works with banks possessing good credit ratings in both the investment and borrowing areas, and ensures sufficient access to credit lines. Foreign exchange and interest rate risks are continually monitored and either limited or mitigated by means of appropriate hedging measures. In doing so, receivables and payables are initially netted, and the remaining exposures are hedged with forward exchange and swap transactions.At present, Heinzel Group is aware of no immediate risks which could threaten the continued existence of the group.