{"id":5237,"date":"2025-05-06T11:13:40","date_gmt":"2025-05-06T09:13:40","guid":{"rendered":"https:\/\/geschaeftsbericht-2024.pcc.eu\/group-management-report\/opportunities-for-and-risks-to-future-development\/"},"modified":"2025-05-20T15:26:44","modified_gmt":"2025-05-20T13:26:44","slug":"opportunities-for-and-risks-to-future-development","status":"publish","type":"page","link":"https:\/\/geschaeftsbericht-2024.pcc.eu\/en\/group-management-report\/opportunities-for-and-risks-to-future-development\/","title":{"rendered":"Opportunities for and risks to future development"},"content":{"rendered":"\t\t
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\n\t\t\t\t\t\t\t\t\tThe future economic development of the PCC Group is heavily dependent\non further economic trends, not only in our main sales\nmarkets in Europe but also worldwide. The further development of\nenergy prices and inflation as a whole will also play a major role.\nFurther details can be found in the section \u201cOutlook for fiscal 2025\nand beyond\u201d<\/a>. \n

The ongoing Russia-Ukraine war poses a not inconsiderable political\nrisk for the PCC Group that lies outside our sphere of influence. A\nfurther escalation of the war could result in renewed transportation\nand supply chain problems. The continued existence of our remaining\ninvestments in Russia could also be jeopardized. However, this is\nnot expected at the time of preparing this management report. In\nrelation to the total assets of the PCC Group, the proportion of Russian\nassets is also only in the low single-digit percentage range. In\naddition to a further escalation of the Russia-Ukraine war, the Middle\nEast conflict, which broke out again in October 2023 and is already\ncausing transport and supply chain problems in the Suez Canal and\nthe Red Sea, could likewise have a negative impact on the global\neconomy. This also applies to a possible escalation of the conflict\nbetween China and Taiwan. Similar restrictions on global economic\nactivity could also arise in the context of any new pandemics. Since\nJanuary 2025, a new president has been in office in the USA, whose\ndecisions, for example with regard to new tariffs, cannot yet be conclusively\nassessed at the time of preparing this management report.\nDue to the many current uncertainties, the overall financial impact\non the PCC Group cannot be specifically estimated. \n

A new Bundestag (parliament) was elected in Germany in February 2025. With the swift formation of a new government, PCC believes that confidence in political decisions in Germany and clear communication on the part of the responsible politicians must again prevail. Immediate measures to stabilize the energy supply, a reduction in bureaucracy and measures to boost investment all need to be adopted. We welcome the balanced budget amendment known as Germany\u2019s \u201cdebt brake\u201d and thus the opportunity to invest a significant volume in German infrastructure over the next twelve years. At the same time, we demand that this additional debt be invested in a targeted and well-managed manner. This is because, supplemented by additional funds from the European Union, such measures might actually trigger a significant demand pull that could jeopardize the inflation targets. \n

The \u201cEuropean Green Deal\u201d and the \u201cFit for 55\u201d package of measures\nadopted by the EU Commission in July 2021 represent a further challenge.\nThe aim of implementing these measures is to achieve the\nEuropean climate targets by 2055. In addition, the new sustainability\nreporting obligations are to become mandatory for a large number\nof European companies from the 2025 financial year. The PCC Group\nwelcomes the concessions and simplifications for reporting entities\npublished in February 2025. We also welcome the postponement of\nthe introduction of mandatory reporting. For the European chemical\nindustry and thus for large parts of the PCC Group, the associated\nrequirements represent a far-reaching transformation of their production\nprocesses, which will entail considerable additional costs\nthat cannot yet be specifically estimated. This could also have a negative impact on the future dividend inflows of the Group holding company. At the same time, this transformation and the associated introduction of innovative processes, the development of which the PCC Group is working on at several levels, will open up further growth opportunities in the future. However, one of the main risks lies in the European Union going it alone, which would result in significant competitive disadvantages for producers in the EU with, for example, producers in the USA or Asia having to comply with fewer or no requirements or price regimes such as CO2 taxes. \n

PCC\u2019s chemical-producing segments are also exposed to the risk of\nrising environmental protection costs as a result of the tightening\nof waste, wastewater and other environmental regulations across\nEurope. Potentially resulting investment obligations could in future\nhave a negative impact on the earnings position of these segments\nand thus also on the PCC Group as a whole. The same applies to\nany additional expenses that may arise in connection with the EU\u2019s\nREACH regulation (Regulation concerning the Registration, Evaluation\nand Authorization of Chemicals). REACH-like regulations are also\ncurrently being planned or are already being implemented by other\ncountries. This applies to Tu\u0308rkiye, the USA and some Asian countries,\namong others. It remains to be seen what consequences this will\nhave for the further development of the PCC Group. \n

Further risks exist relating to the supply of strategically important\nraw materials, particularly for the business areas in the chemical-producing\nand Silicon & Derivatives segments. The number of suppliers\nfor these feedstocks has already fallen in recent time and is being\nfurther reduced by trade conflicts or sanctions. Fortunately, the\nPCC Group was able to conclude a long-term offtake agreement\nwith the most important supplier of the key feedstock ethylene\noxide as early as 2021, although this will entail considerable investments\non the PCC side both now and in the coming fiscal year. In the\nlong term, these investments will contribute to the further growth\nof our chemicals activities. \n

Other indirect factors that can affect the performance of our segments\ninclude price change and default risks. These risks should be\neliminated as far as possible by taking out trade credit insurance.\nPrice change risks are countered by concluding back-to-back transactions,\nby means of price formulas and \/ or by price hedging. \n

In addition, both PCC SE as a holding company and the operating\nbusiness areas are exposed to interest rate and foreign exchange\nrisks that can be at least partially reduced by hedging. The exchange\nrate and foreign currency risk of the PCC Group could be significantly\nreduced by the introduction of the euro as the official currency in\nPoland. However, this is not to be expected in the short term. \n

Further risks may arise from changes to legal or regulatory provisions.\nFor example, current tax law is subject to constant change,\nincluding in its administrative application. Future changes to the\nlaw and deviating interpretations of the law by the tax authorities\nor courts cannot be ruled out. This could possibly result in higher\ntax burdens for the companies of the PCC Group in Germany and\nabroad. \n

Negative effects may also result from subsequent changes in the\nassessment of government support measures and any associated\nrepayment claims. For example, the European Commission examined\nwhether the financial assistance granted directly by the Polish\ngovernment to PCC MCAA Sp. z o.o. in 2012 and 2013 amounting\nto the equivalent of around \u20ac 16 million was compatible with EU\nregulations on regional state aid. The financial assistance received\nwas declared correct in February 2025, meaning there should be\nno clawback ruling against PCC. The matter is therefore considered\nclosed. Similar scenarios cannot be ruled out in the future. \n

Some Group companies are also confronted with the increasing\nobsolescence of their assets. This applies in particular to the production\nfacilities of PCC Synteza S.A. As their heavy-duty utilization\ncontinues, expenses for maintenance and repair increase, as does\nthe risk of breakdowns and production stoppages. \n

In our financial planning, we assume that the holding company will\ncontinue to receive regular inflows of liquidity from the issuance of\ncorporate bonds in the future. Any obstacles in the market segment \nfor bonds in Germany could lead to liquidity bottlenecks, at least\ntemporarily. We are therefore working continuously to replace the\nliquidity loans granted to subsidiaries with local bank loans. In addition,\nany new major projects will only be implemented if appropriate\nproject financing can be secured. In addition to corporate\nbonds, the development of alternative sources of financing at the\ninstitutional level will also be considered in the long term. The latter\nrequires a stable level of indebtedness. At Group level, the aim is\nto achieve and maintain a leverage ratio of less than 5.0, with ever\nlower values desirable. \n

In addition to the financing risk, there are various other risks associated\nwith projects during the planning and construction phases, such\nas technical, rights ownership or approval risks. Furthermore, it cannot\nbe ruled out that external market conditions may change during\nthe implementation phase and that market developments may not\npan out as originally expected. Despite the most careful analysis, an\ninvestment project can therefore be significantly delayed or generate\na much lower return than planned. The complete failure of a\nproject and thus a total loss of the capital invested by the Group\nholding company or one of its subsidiaries likewise cannot be ruled\nout. Depending on the size of the project, this could have a significant\nnegative impact on the liquidity situation. For this reason, the\nGroup holding company will continue to aim for project financing\nthat is based on the viability of the respective project. \n

Last but not least, the PCC Group is also exposed to personnel risks.\nThe possible departure of key individuals, including from management\nor from the research and development team, and the associated\nloss of, for example, long-standing contacts, industry experience\nor know-how, could potentially have at least a temporary negative\nimpact on the continuation of business activities. In addition, the\nconsiderable influence of the sole shareholder of PCC SE may entail\na higher risk of poor entrepreneurial decisions than would be\nthe case with a more broadly diversified ownership structure. This \nrisk was reduced in 2021 with the change from a monistic to a dualistic\ngovernance system in the Group holding company, thereby\nstrengthening the position of the holding company\u2019s operational\nmanagement. Notwithstanding this reorganization, the sole shareholder, who is also Chairman of the Supervisory Board of PCC SE, remains in close and accessible proximity, thus maintaining the ability to react quickly and flexibly to new investment opportunities and to align activities in a timely fashion to the continued sustainable growth of the PCC Group.\n

The increasing focus on higher-value products and the diversification\nof sales markets currently being implemented represent, in the\nview of management, the main opportunities for the future growth\nof the PCC Group. In addition, there will be further investments in\nmodernization and expansion aimed at both backward and forward\nintegration. In this way, we aim firstly to further expand our market\nposition in the individual segments, and secondly to enhance our\nsustainability and secure our future viability by investing in efficient\nand environmentally friendly production facilities. In the long term,\nthe PCC Group should benefit from these investments in the form of\nrising profits. Additional earnings potential could arise from the sale\nof non-core activities or market-ready projects and affiliates. \t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t","protected":false},"excerpt":{"rendered":"

The future economic development of the PCC Group is heavily dependent on further economic trends, not only in our main sales markets in Europe but also worldwide. The further development of energy prices and inflation as a whole will also play a major role. Further details can be found in the section \u201cOutlook for fiscal […]<\/p>\n","protected":false},"author":6,"featured_media":0,"parent":5120,"menu_order":4,"comment_status":"closed","ping_status":"closed","template":"","meta":{"_acf_changed":false,"footnotes":""},"class_list":["post-5237","page","type-page","status-publish","hentry"],"acf":[],"_links":{"self":[{"href":"https:\/\/geschaeftsbericht-2024.pcc.eu\/en\/wp-json\/wp\/v2\/pages\/5237","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/geschaeftsbericht-2024.pcc.eu\/en\/wp-json\/wp\/v2\/pages"}],"about":[{"href":"https:\/\/geschaeftsbericht-2024.pcc.eu\/en\/wp-json\/wp\/v2\/types\/page"}],"author":[{"embeddable":true,"href":"https:\/\/geschaeftsbericht-2024.pcc.eu\/en\/wp-json\/wp\/v2\/users\/6"}],"replies":[{"embeddable":true,"href":"https:\/\/geschaeftsbericht-2024.pcc.eu\/en\/wp-json\/wp\/v2\/comments?post=5237"}],"version-history":[{"count":5,"href":"https:\/\/geschaeftsbericht-2024.pcc.eu\/en\/wp-json\/wp\/v2\/pages\/5237\/revisions"}],"predecessor-version":[{"id":5681,"href":"https:\/\/geschaeftsbericht-2024.pcc.eu\/en\/wp-json\/wp\/v2\/pages\/5237\/revisions\/5681"}],"up":[{"embeddable":true,"href":"https:\/\/geschaeftsbericht-2024.pcc.eu\/en\/wp-json\/wp\/v2\/pages\/5120"}],"wp:attachment":[{"href":"https:\/\/geschaeftsbericht-2024.pcc.eu\/en\/wp-json\/wp\/v2\/media?parent=5237"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}