1.45 Financial risk factors

The operations expose the Group to financial risks, such as capital, liquidity, market, credit, currency, raw material price and interest rate risks.

Risk management focuses on mitigating the negative effects of the Group’s financial performance as much as possible. The Management Board manages risks on the basis of guidelines approved by the Supervisory Board. The Management Board identifies and assesses financial risks, and hedges them in conjunction with the Group’s subsidiaries.

1.45.1 Capital risk

The objectives as described in Hydratec’s strategy are as follows: The companies aim for revenue growth in line with or above the market, with an operating result (EBIT) of 8% to 10% of revenue. Besides this, the companies must be solidly financed with a solvency ratio of at least 25%. This focus helps the companies to seek continuity, which is an important instrument for Hydratec to protect its capital. Clear dialogue with the companies’ management on performance is also crucial for monitoring the achievement of long-term objectives.

To this end, there is a clearly defined reporting and assessment cycle which forms the basis for dialogue between management of the companies, and Hydratec’s Management Board and Supervisory Board. The company has voluntary agreements under the credit agreement.

1.45.2 Liquidity risk

Hydratec manages rolling forecasts of its liquidity position – comprising cash and cash equivalents of €24.9 million (2024: €9.1 million) and the current account facilities at the bank of €0.0 million (2024: €0.1 million) on the basis of projected cash flows. This is generally done at local level by the operating companies, within the guidelines and limits set by the Group. The Group’s liquidity management furthermore includes monitoring bank covenants to meet the banks’ requirements, and keeping up with repayment schedules.

Contractual cash outflow for current financial instruments is as follows:

1.45.3 Credit risk

Management applies internal policies to manage credit risk, which is kept under constant supervision. If relevant, the creditworthiness of all third-party receivables is assessed, taking into account their financial position, past experience, macroeconomic developments and other factors. Credit insurance has been taken out to provide cover for outstanding receivables, with the maximum credit amount being determined for each individual customer. Only banks and financial institutions with an independent rating of ‘A’ or higher are accepted. The total debtor balance at year-end 2025 was €25.7 million for Industrial Systems (2024: €20.2 million) and €15.1 million for Hightech Components (2024: €18.7 million). Please refer to note 1.34 for an analysis of the age of debtors.

1.45.4 Market risk

Hydratec is exposed to the following potential market risks:

• commodity price risk: the risk that fluctuations in procurement prices for raw materials adversely affect the companies’ profitability;

• currency risk: the risk that the value of a financial instrument will change as a result of exchange rate fluctuations;

• interest rate risk: the risk that interest expenses will rise due to changes in market interest rates.

Hydratec hedges currency and interest rate risks by buying and selling derivatives and attempts to mitigate volatility in the statement of profit or loss as much as possible by applying hedge accounting.

These risks are described in more detail below.

1.45.5 Commodity price risk

The Group procures raw materials for the companies in Hightech Components, which can be directly or indirectly designated as ‘commodities’. The risk of price fluctuations is mitigated by making agreements with customers for partly passing on commodity price rises.

1.45.6 Currency risk

The Group holds monetary items in currencies other than the euro. Those in the consolidation relate mainly to Helvoet and Rollepaal in India, Helvoet in Poland, Polmer in Poland, Pas Reform North America in the US, and Pas Reform do Brasil and ION in Brazil. Local assets and liabilities are predominantly measured in local currencies. Fluctuations in currency exchange rates between the opening balance sheet date and the closing balance sheet date lead to valuation differences of such assets and liabilities in euros during the consolidation process. Such differences are recognised in the unrealised translation results in the Group’s shareholders’ equity. Please refer to 1.38.3 for more information.

On the basis of the monetary items in these subsidiaries at year-end 2025, the impact of a fluctuation in local currency is as follows:

• a 10% fluctuation in the Indian rupee to euro exchange rate would result in a movement of €19 thousand;

• a 10% fluctuation in the Brazilian real to euro exchange rate would result in a movement of €50 thousand;

• a 10% fluctuation in the Polish zloty to euro exchange rate would result in a movement of €80 thousand;

• a 10% fluctuation in the US dollar to euro exchange rate would result in a movement of €198 thousand.

1.45.7 Interest rate risk

The Group has credit facilities at an interest rate which depends on the European Interbank Offered Rate (EURIBOR). The facilities, which are combined with fixed interest rate swaps, were completely hedged at year-end 2025. The swaps are valued at fair value. The change in value in 2025 was €62 thousand negative (2024: €80 thousand negative). Debts to credit institutions that are subject to an interest rate risk amounted to €0.0 million at year-end 2025 (2024: €0.1 million). The Group had cash and cash equivalents worth €19.7 million at the balance sheet date (2024: €8.8 million). If the interest rate rises by one percentage point, this will affect the result before tax by approximately €0.1 million positive.