Alleima GmbH

Alleima GmbH

Werther (Westf.)

Befreiender Konzernabschluss zum Geschäftsjahr vom 01.01.2024 bis zum 31.12.2024

Alleima AB

Sandviken/Schweden

Financial-information

Directors’ report

Risks and risk management

Financial information and notes

Consolidated financial information

Group notes

Parent company financial information

Parent company notes

Auditor’s report

Directors’ report

Summary

Financial overview - Group

Notes to the reader: Tables and cal-culations in the report do not always agree exactly with the totals due to rounding. Comparisons refer to the corresponding period last year, unless otherwise stated. Adjusted operating profit (EBIT) excludes items affecting comparability (IAC) and metal price effects, see Note 2 and description of Alternative Performance Measures on pages 130-131 for further details. Definitions and glossary can be found on www.alleima.com/investors.

1) The annual number is based on a four quarter -average.

Market development

Market development for full-year 2024 was mixed for the various customer segments. Demand in mainly Nuclear and Medical remained high and increased compared with the corresponding period last year. Demand in the Oil and Gas segment was stable. Demand in the Chemical and Petrochemical, Industrial Heating and Industrial segments weakened slightly.

Order intake and revenues

Order intake decreased by 10% to SEK 19,419 million (21,684), with organic growth of -6%. The development was mainly attributable to a lower order intake in the Oil and Gas segment of the Tube division, compared to last year’s strong build-up of the order book. The regions of North America and Asia noted organic order intake growth of 32% and 9%, respectively.

The region Europe noted organic order intake growth of -19%. Revenues decreased by 5% to SEK 19,691 million (20,669), with organic growth of 1%. The Tube Division grew organically, mainly driven by deliveries to the Oil and Gas, Nuclear and Transportation segments, while the Industrial segment recorded a decline. Kanthal noted a decline mainly in the Industrial and Industrial heating segments, while Medical accounted for a positive development. Strip noted a slightly negative development.

Book-to-bill was 99%. The backlog remained solid with a good product mix.

Structure had an impact of 0%, while currency had an impact of -1% on both order intake and revenues. Alloy surcharges had an impact of -4% on both order intake and revenues.

Orderingång och intäkter

Earnings

Gross profit

Cost of goods sold decreased by 2% to 15,740 million (16,090), driven by decreased sales

volumes, changed product mix and increased cost for intermediate goods. Gross profit decreased by 14% to SEK 3,951 million (4,579), corresponding to a gross margin of 20.1% (22.2). The decrease was primarily driven by negative metal price effects.

Sales, administrative and R&D costs

Selling expenses decreased by 3% to SEK 1,250 million (1,288).

Administrative expenses amounted to SEK 975 million (973).

Research and development costs increased by 15% to SEK 292 million (255), primary due to higher activity in a few prioritized development projects.

Other operating income and expenses amounted to SEK 64 million (-16), mainly driven by positive currency effects.

Operating profit (EBIT)

Adjusted EBIT decreased by 9% to SEK 1,944 million (2,141) corresponding to a margin of 9.9% (10.4). Currency had a negative impact of SEK

11 million year on year. Depreciation and amortization amounted to SEK -913 million (-911).

Reported EBIT amounted to SEK 1,498 million (2,046), corresponding to a margin of 7.6% (9.9). Metal price effects had a negative impact of SEK -446 million (-95).

Financial items

Net financial items were SEK 73 million (28). The change was due primarily to improvements in interest net.

Taxes

Income tax expense amounted to SEK 350 million (500), corresponding to an effective tax rate of 22.3% (24.1). See Note 10 Income tax for more information.

Profit

Profit for the period amounted to SEK 1,221 million (1,574), corresponding to earnings per share, diluted, of SEK 4.87 (6.27). Adjusted profit for the period amounted to SEK 1,573 million (1,647) and adjusted earnings per share, diluted, amounted to SEK 6,27 (6.56). See page 130 for further details.

Financial position, capital resources and l i quidity

Capital employed

Capital employed excluding cash increased to SEK 15,983 million (15,533). The increase was mainly attributable to growth investments and fx effects. Return on capital employed excluding cash decreased to 9.5% (12.9).

Working capital

Net working capital amounted to SEK 6,821 million (6,825). Net working capital in relation to revenues was 35.1% (34.3).

Capital expenditure

Capex amounted to SEK -1,190 million (-815), corresponding to 130.4% (89.5) of scheduled depreciation and -6.0% (-3.9) of revenues. The increase was mainly attributable to growth investments.

Cash flow

Cash flow from operating activities declined to SEK 2,123 million (2,234).

Free operating cash flow declined to SEK 1,266 million (1,688). The change was primarily attributable to lower operating profit and growth investments.

Free operating cash flow

1) Free operating cash flow before acquisitions and disposals of companies, net financial items and paid taxes.

Funding and liquidity

On December 31 2024, SEK 1,912 million (1,595) was reported as Cash and Cash equivalents, whereof SEK 1,229 million (1,021) in cash directly available for Group Treasury and SEK 683 million (574) is restricted cash such as short-term deposits and cash accounts with, for Group Treasury, limited access. The short-term deposits are considered as cash equivalent as they have a time to maturity of less than 3 months.

Net debt amounted to SEK -631 million (-242), i.e. a net cash position. Net debt in relation to equity was -0.04x (-0.02). The financial net debt position was SEK -1,911 million (-1,590). Net pension liability decreased year on year to SEK 820 million (843). Net debt in relation to rolling 12-month adjusted EBITDA was -0.22x (-0.08).

During 2024, Alleima has prolonged the revolving credit facility of SEK 3,000 million one year by utilizing the last one-year prolongation option, extending the facility to 2029. On December 31, 2024, available credit facilities were unutilized. The short-term liquidity reserve, comprising committed credit facilities and accessible cash and cash equivalents was SEK 4,229 million (3,908). See Note 26 for further information.

Share and share capital

As of December 31, 2024 Alleima’s share capital amounted to SEK 250,877,184 represented by 250,877,184 shares.

Alleima’s General Meeting held on May 2, 2024 approved the Board’s proposal for a long-term share-based incentive program (LTI 2024). As of December 31, 2024, LTI 2023 and LTI 2024 comprises 687,758 share rights. The delivery of these shares is secured through equity swap agreement with a third party.

The Annual General Meeting held on May 2, 2024, resolved for the financial year 2023 on an ordinary dividend of SEK 2.00 (1.40) per share. The dividend of SEK 502 million (351) was distributed to the shareholders on May 10, 2024.

Significant events in 2024

Significant events after year-end 2024

Significant agreements

The manufacture and sale of rock drill steel products is a business segment (the ”RDS business”) within Alleima with multiple customers, including subsidiaries in the Sandvik group. The RDS business is operated by Alleima Rock Drill Steel AB (the “RDS company”). 10% of the shares in the RDS company are held by Sandvik AB and the remaining shares are held by Alleima EMEA AB. The co-ownership is regulated in a shareholders’ agreement to which the owners are party. The terms of the shareholders’ agreement provides Sandvik AB with certain protective rights, including a call option which Sandvik AB may exercise upon, e.g., a change of control in Alleima AB, whereby an owner, who was not a major shareholder at the time of signing of the agreement, gains control of 30 per cent or more of all votes in the company, and which call option provides Sandvik AB with a right to purchase Alleima EMEA AB’s shares in the RDS company at fair market value. Upon exercise of the call option and Sandvik AB’s subsequent purchase of Alleima EMEA AB’s shares, the shareholders’ agreement will lapse. As a change of control that causes the call option to become exercisable may be a public take-over offer, the shareholders’ agreement is deemed such a significant agreement as is intended by the Annual Reports Act (1995:1554) Chapter 6 section 2 item 9.

Workforce

The number of employees at year-end was 6,309 (6,110). Wages, salaries, and other remunerations for the year totaled SEK 3,858 million (3,577). The number of third-party workers at year-end was 516 (596).

Alleima guidelines for the remuneration of senior executives

The Alleima guidelines for the remuneration of senior executives is described in the Corporate governance section on page 91.

Research and development (R&D)

The R&D team works in close collaboration with the sales organization and directly with customers to identify present and future customer needs. Focus areas are evolutionary upgrades and refinement of existing materials and processes, such as developing new super duplex alloys, austenitic materials, and new efficient compressor valve steels, as well as more revolutionary developments that expand the existing product portfolio. Alleima’s R&D spend amounted to SEK 292 million (255) during 2024, corresponding to approximately 1.5% (1.2) of sales. The number of employees in R&D was approximately 249 (250) by year end.

Tax

Alleima is a multinational group with several inter-company transactions cross borders. The OECD has issued transfer pricing guidelines for multinational groups. Alleima adheres to these guidelines and also to the local legislation of each country to ensure that a correct pricing model is applied and that a correct amount of tax is paid in each country. Alleima monitors the OECD’s tax reform work and the EU initiatives on tax transparency carefully and observes these standards as and when enacted. Alleima strives to have good relations with our stakeholders, such as tax authorities, non-governmental organizations and investors and is -convinced that an open discussion and cooperation with tax authorities around the globe will help us to reduce uncer-tainty about the taxes we are obliged to pay. However, the guidelines on transfer pricing can be interpreted in various ways.

Alleima contributes to the local communities and countries in which we operate in the form of, for example, taxes and employment opportunities. In 2024, the Group paid SEK 451 million (419) in income taxes globally. Income tax comprises just a portion of all taxes paid by Alleima worldwide. In addition, Alleima pays social security contributions, environmental and energy taxes, property taxes, etc. Furthermore, Alleima collects and pays taxes at the request of governments and authorities, including indirect taxes and withholding taxes.

Environment

In Sweden, Alleima has operations where environmental permits are required. All operations held valid permits during the year. Guideline values in some of these permits were exceeded for emissions to air and water during the year. In all such incidents, a notification was sent to the authority. To comply with the target values, corrective actions were prompted.

Alleima conduct licensed operations in accordance with environmental legislation at four locations: Sandviken, Söderfors, Hallsta-hammar and Surahammar. The permits for these sites relate to production volumes, allowed intake of water from water bodies, emission to air and water as well as waste disposal to own landfill.

Two subsidiaries in Sweden are included in the EU Emissions Trading System (EU ETS). Should Alleima not execute its carbon reduction plan, an associated cost would incur. In 2024, the number of allowances allocated for the year was 55,410. Actual emissions in the trading system amounted to around 61,800 tonnes. The cost to cover the deficit amounted to approximately SEK 5.6 million.

Statutory sustainability report

Alleima has issued a statutory sustainability report. The report was prepared in accordance with the Annual Accounts Act and approved by the Board of Directors and the President and CEO. The statutory Sustainability Report includes pages 11, 32, 34, 36, 93-126.

Parent company

The parent company’s (Alleima AB) revenues amounted to SEK 27 million (24) and the operating result was SEK -50 -million (-59).

As of December 31, 2024 Alleima AB’s share capital amounted to SEK 250,877,184 represen-ted by 250,877,184 shares. The largest shareholders of the parent company at -year-end were Industrivärden (20.41%) and Lundbergföretagen AB (10.04%). The ten largest shareholders amounted to 54.48% of total shares and votes.

The number of employees in the parent company as of December 31, 2024 was 9 (9).

Proposed appropriation of earnings

To the Annual General Meeting on April 28, 2025, Alleima Board of Directors proposes for the financial year 2024 a dividend of SEK 2.30 (2.00) per share (SEK 577 million), to be paid in May 2025, and that the parent company shall retain the remaining part of non-restricted equity. The record date for entitlement to receive dividends is proposed as April 30, 2025 and payment is expected to be made on May 6, 2025.

The Board of Directors proposes that earnings be distributed as follows:

For further information on Shareholders’ Equity, see Group Note 19.

Statement of the Board in compliance with the Swedish Companies Act (2005:551) clause 18:4

The Board has proposed that the Annual General Meeting 2025 resolve on a dividend distribution of SEK 2.30 per share.

After the dividend distribution, the remaining non-restricted equity of SEK 13,160 million is proposed to be retained in the business and brought forward. The total amount of the proposed dividend distribution corresponds to approximately 4.2% of the non-restricted equity of the parent company, which in total amounts to SEK 13,737 million prior to the transaction. After the proposed dividend of SEK 577 million, an amount of SEK 13,160 million will remain. In the consolidated balance sheet per December 31, 2024, retained earnings, including the result of the year 2024, amount to SEK 16,007 million prior to the proposed dividend distribution and will amount to SEK 15,430 million after the proposed dividend distribution. The Board notes that there will be full coverage for the restricted reserves of the company after the dividend distribution.

The Board makes the assessment that the company’s and the group’s equity after the

dividend distribution will be able to sustain the requirements which the nature, size and risks of the business will present.

The Board further considers the actions reasonable in light of the company’s and the group’s consolidation requirements, liquidity and position in general.

The dividend distribution is not assumed to present any risk for the company’s or the group’s ability to fulfil its short or long term payment obligations, and neither of these measures are assumed to affect the ability of the company to make required investments.

In summary, the Board considers the proposed dividend distribution to be justifiable according to the Swedish Companies Act (2005:551) chapter 17 section 3, second and third paragraph.

January 24, 2025

Alleima AB (publ)

The Board of Directors

Divisions

Alleima has three divisions: Tube, Kanthal and Strip.

The largest production facilities are located in Sandviken, Sweden, and in Chomutov, Czech Republic.

Tube

Tube develops and manufactures seamless tubes and other long products in advanced stainless steel and special alloys, tailored for specific end applications. The customers are primarily found in the segments of Oil and Gas, Chemical and Petrochemical, Industrial, Mining and Construction, Nuclear, and Transportation. The offering also includes products and solutions for the growing segment of Hydrogen and Renewable Energy. Order intake decreased by 15% to SEK 13,677 million (16,052), with organic growth of -10%. Revenues decreased by 3% to SEK 14,027 million (14,475), with organic growth of 2%. Adjusted EBIT margin was 10.1% (10.3). EBIT margin was 7.4% (10.1) and included metal price effects of SEK -378 million (-30).

1) Number of employees and Number of third-party workers is based on full-time equivalents.

Strip

Strip develops and manufactures a wide range of precision strip steel and compressor valve steel and also offers a portfolio of coated strip steel for components in hydrogen fuel cells. The customers are in the segments Consumer, Industrial, Transportation, Hydrogen and Renewable Energy, as well as Medical. Order intake increased by 27% to SEK 1,665 million (1,310), with organic growth of 32%. Revenues decreased by 8% to SEK 1,465 million (1,585), with organic growth of -4%. Adjusted EBIT margin was 4.5% (6.9). EBIT margin was 3.8% (6.9) and included metal price effects of SEK -9 million (0).

1) Number of employees and Number of third-party workers is based on full-time equivalents.

Kanthal

Kanthal is a provider of products and services in the area of industrial heating technology and resistance materials, and also offers ultra-fine wire in stainless steel for use in medical appliances. The customers are primarily in the segments Industrial Heating, Consumer, Medical and Industrial. Order intake decreased by 6% to SEK 4,077 million (4,321), with organic growth of 0%. Revenues decreased by 9% to SEK 4,200 million (4,609), with organic growth of -3%. Adjusted EBIT margin was 17.9% (18.3). EBIT margin was 16.5% (16.9) and included metal price effects of SEK -59 million (-65).

1) Number of employees and Number of third-party workers is based on full-time equivalents.

Risks and risk management

Alleima is exposed to a number of risks that can have a negative impact on the Group’s operations. Therefore, it is of great importance that the company has a systematic and effective process to identify, manage, and reduce the effects of these risks.

The purpose of Alleima’s risk work is to support the business in managing and effectively preventing risks that may affect the company’s ability to achieve its financial and strategic goals.

Alleima’s board of directors decides on the Group’s strategic direction. The responsibility for the long-term and overall management of risks follows the company’s decision and delegation order. This means that the Group’s risk management generally follows the company’s decentralized structure, where the management teams of the various business operations manage their operational risks but must follow the minimum requirements defined in “The Alleima Way”, the Group’s common compilation of policies and procedures.

Enterprise Risk Management

The Enterprise Risk Management (ERM) process within Alleima is part of the strategy- and business--planning process. All divisions and selected Group functions perform, at least once a year, as part of the strategic work, an assessment of business risks in accordance with the ERM methodology.

The Group management reviews and discusses Alleima’s risk level and decides on the Group’s risk profile at least once a year. Alleima’s overall risk profile is based on the organization’s overall risk assessment and also takes into account environmental monitoring and the Group management’s own view of risks to the business.

The ERM report, which summarizes important risks and preventive activities, was presented to the Audit Committee and the Board of Directors in December 2024.

The participation of the Board and the Audit Committee in the ERM process is described in more detail in the section on corporate governance.

Continuity Planning and Crisis Management

Alleima’s operational units, such as production units, have continuity plans in place to ensure that the organization can continue business operations at an acceptable level in the event of a disruption. In the event of a serious incident, crisis preparedness plans are in place.

Insurance as a Risk Management Tool

Alleima has tailored insurance programs that manage risks associated with, among other things, the Group’s property, transport, and liability exposures. Insurable risks are continuously evaluated, and measures are taken to reduce these risks.

Internal Audit and Internal Control in Alleima’s Risk Work

The internal audit function monitors the implementation of various risk management processes such as ERM and continuity planning at the operational units that are expected to have this in place.

Financial Risks

Alleima’s financial risk management is centralized, with a central finance function, Group Treasury, which manages most of the Group’s financial risks and transactions. Financial risk management is handled in accordance with the Group’s financial risk management policy, which is part of “The Alleima Way.”

The financial risks managed include currency risks in the form of transaction and translation exposure, commodity price risks regarding metals and energy, interest rate risk, liquidity and refinancing risks, and credit risks.

Derivatives are widely used as hedging instruments in hedging strategies and are valued at fair value. Hedge accounting is applied to all commodity-related derivatives and certain currency derivatives to avoid volatility in results from revaluations of derivatives. For a more detailed description of financial risk management and hedge accounting, see note 26.

Sustainability Risks

Sustainability risks are assessed as other risks within the Group at least once a year and are part of the consolidation of all organizations’ risk assessments before the Group management conducts its annual risk assessment.

The most important sustainability risks are assessed in terms of both probability and impact. To further understand sustainability risks, Alleima’s materiality analysis is used to identify risks regarding sustainability and climate in the value chain. For more information on sustainability-related risks and opportunities, see the sustainability report on pages 93-126.

Strategic risks

→ Unchanged risk assessment ↑ Increased likelihood and/or impact ↓ Reduced likelihood and/or impact

Operational risks

Financial risks

See Note 26 for a more detailed description of financial risks.

Financial information and notes

Consolidated financial information

Consolidated income statement

Consolidated statement of comprehensive income

Consolidated balance sheet

Consolidated statement of cash flows

Consolidated statement of changes in equity

Group notes

Note 1 Significant accounting principles - assessments and assumptions for accounting purposes

Note 2Segment information and revenue

Note 3 Personnel information and remuneration of management

Note 4 Fees and remuneration to auditors

Note 5 Research, development and quality -assurance

Note 6 Other operating income

Note 7 Other operating expenses

Note 8 Operating expenses

Note 9 Net financial items

Note 10 Income tax

Note 11 Earnings per share

Note 12 Intangible assets

Note 13 Property, plant and equipment

Note 14 Leases

Note 15 Non-current financial assets

Note 16 Inventories

Note 17 Trade receivables

Note 18 Other current receivables

Note 19 Equity

Note 20 Provision for pensions and other non-current benefits

Note 21 Other interest-bearing liabilities

Note 22 Other provisions

Note 23 Other non-interest-bearing liabilities

Note 24 Accrued expenses

Note 25 Contingent liabilities and pledged assets

Note 26 Financial risk management

Note 27 Related parties

Note 28 Business combinations

Note 29 Government grants

Note 30 Events after the close of the period

Parent company financial information

Parent company income statement

Parent company statement of comprehensive income

Parent company balance sheet

Parent company cash flow statement

Parent company changes in equity

Parent company notes

Note 1 Significant accounting principles - assessments and assumptions for accounting purposes

Note 2 Revenue

Note 3 Interest revenue and similar income

Note 4 Income tax

Note 5 Shares in group companies

Note 6 Receivables from group companies

Note 7 Contingent liabilities and other commitments

Note 8 Employees

Note 9 Fees and remuneration to auditors

Consolidated financial information

Consolidated income statement

Consolidated statement of comprehensive income

Consolidated balance sheet

Consolidated statement of cash flows

Consolidated statement of changes in equity

Note 1 | Significant accounting -principles - assessments and assumptions for accounting purposes

The consolidated financial statements comprise Alleima AB, corporate registration number 559224-1433 (the Parent Company) and all its subsidiaries, jointly the Alleima Group with registered office in Sandviken, Sweden. The address to the head office is SE-811 81 Sandviken.

The Parent Company’s functional currency is Swedish kronor (SEK), which is also the presentation currency of the Parent Company and the Alleima Group. Accordingly, the financial statements are presented in SEK. All amounts are in million SEK unless otherwise stated. Roundings may occur.

The Parent Company’s Annual Report and the consolidated financial statements were approved for issuance by the Board of Directors on March 12, 2025. The Group’s and the Parent Company’s income statements and balance sheets are subject to adoption at the Annual General Meeting on April 28, 2025.

Accounting principles

Basis for preparation

The consolidated financial statements for the year 2024 covering the period from January 1 to December 31, 2024, have been prepared in accordance with International Financial Reporting Standards (IFRS) as endorsed by the EU. The statements are also prepared in accordance with the Swedish recommendation RFR 1 “Supplementary Accounting Rules for Groups” and applicable statements issued by the Swedish Financial Reporting Board. These require certain additional disclosure requirements for Swedish consolidated financial statements prepared in accordance with IFRS.

Basis of measurement

Assets and liabilities are stated on a historical cost basis except for certain financial assets and liabilities, which are stated at their fair value. Financial assets and liabilities measured at fair value comprise of derivative instruments and plan assets in the defined benefit plans. Receivables and liabilities and items of income and expense are offset only when required or expressly permitted in an accounting standard.

The preparation of financial statements in conformity with IFRS requires management to make assessments, estimates and assumptions that affect the application of accounting policies and recognized amounts of assets and liabilities, income and expenses. Actual results may differ from these assessments. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.

Judgments made by management in the application of IFRS that have had a significant effect on the financial statements and estimates with a significant risk of material adjustment in the next year, are discussed further below.

Events after the balance sheet date refer to both favorable and unfavorable events that have occurred after the balance sheet date but before the date the financial statements were authorized for issue by the Board of Directors. Significant non-adjusting events, that is, events indicative of conditions that arose after the balance sheet date, are disclosed in the financial statements. Only adjusting events, that is, those that provide evidence of conditions that existed at the balance sheet date, have been considered in the final establishment of the financial statements. The most significant accounting policies for the Group, as set out below and in the notes, have been applied consistently to all periods presented in these consolidated financial statements except as specifically described. Moreover, the Group’s accounting policies have been consistently applied in the Group reporting by all members of the Group.

Basis of consolidation

The combined accounts are prepared in accordance with the Group’s accounting principles and include the accounts of the Parent Company and all entities in which the Parent Company, directly or indirectly has control. Control exists when the Parent Company has power over the entity, is exposed, or has rights, to variable returns from its involvement with the entity and has the ability to use its power to affect its returns. Generally, control and hence consolidation is based on ownership. Group companies are consolidated from the date the Parent Company exercises control or influence over the Company. Divested companies are included in the consolidated accounts until the date the Parent Company ceases to control or exercise influence over them. In preparing Alleima’s combined financial statements, any intra-group transactions have been eliminated. For cases in which the subsidiary’s accounting policies do not coincide with the Group’s accounting policies, adjustments were made to comply with the Group’s accounting policies.

The consolidated financial statements are prepared in accordance with the acquisition method. In business combinations, acquired assets and assumed liabilities are identified and classified, and measured at fair value on the date of acquisition (also known as a

purchase price allocation). Transaction costs in conjunction with acquisitions are recognized directly in profit or loss for the year as other operating expenses. Contingent considerations are recognized as financial liabilities and at fair value on the acquisition date. Contingent considerations are remeasured at each reporting period with any change recognized in profit or loss for the year.

Foreign currency

Foreign currency transactions

Transactions in foreign currencies are translated into functional currency at the foreign exchange rate prevailing at the date of the transaction. The functional currency is the currency of the primary economic environment in which the Group entities operate. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated to the functional currency at the foreign exchange rate prevailing at that date. Foreign exchange differences arising on translation are recognized in profit or loss for the year. Non-monetary assets and liabilities measured in terms of historical cost in a foreign currency are translated using the exchange rate prevailing at the date of the transaction. Non-monetary assets and liabilities that are measured at fair value are re-translated to the functional currency at the exchange rate prevailing at the date that the fair value was determined.

Financial statements of foreign operations

The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on consolidation, are translated from the foreign operation’s functional currency to the Group’s presentation currency, SEK, at foreign exchange rates prevailing at the balance sheet date. Revenues and expenses of foreign operations are translated to SEK at average rates that approximate the foreign exchange rates prevailing at each of the transaction dates. Translation differences arising from the translation of the net investment in foreign operations are recognized in other comprehensive income and are accumulated in a separate component of equity, a translation reserve. When the foreign operation is divested, the accumulated translation differences attributable to the divested foreign operation are reclassified from equity to profit or loss for the year as a reclassification adjustment at the date on which the profit or loss of the divestment is recognized. For cases in which divestments made include a residual controlling influence, the proportionate share of accumulated translation differences from other comprehensive income is transferred to non-controlling interests.

Changes in accounting policies

IASB has published amendments of standards that are effective as of January 1, 2024 or later. The standards have not had any material impact on the financial reports.

IASB has published IFRS 18 Presentation and Disclosure in Financial Statements with an implementation date of January 1, 2027. The standard has not yet been approved by the EU. IFRS 18 will replace IAS 1 Presentation of Financial Statements. IFRS 18 primarily concerns three key areas for presentation and disclosures in the financial statements, with a focus on the income statement and reporting of financial performance. The company has not completed its evaluation of the effects of IFRS 18.

Adjustment of hedge accounting

During 2024 a correction of some hedge accounting transactions related to 2022 was made, which resulted in a restatement of the closing balance for equity as of December 31, 2022 between the hedge reserve and retained earnings of SEK -277 million. The adjustment had no effect on total equity. Retained earnings post the adjustment amounts to SEK 15,276 million as of December 31, 2023.

Reporting of operating segments

Alleima’s management monitors its operations from an operating segment perspective. In accordance with IFRS 8 Operating segments, Alleima’s management has identified the three divisions Tube, Kanthal and Strip as the reportable segments.

Alleima’s business is organized in a manner that allows the Group’s Chief Operating Decision Maker (CODM), meaning the CEO, to monitor results, return and cash flow generated by the various products and services in the Group. Each operating segment has a Division Head (the Strip-division has one division head and one head for the business unit Surface Technology) that is responsible for day-to-day activities and who regularly reports to the CEO regarding the results of the operating segment’s work and the need for resources. Since the CEO monitors the business’ result and decides on the distribution of resources based on the products the Group manufactures and sells and the services it provides, these constitute the Group’s operating segments.

The Group’s operations are organized in Divisions based on products and services. The market organization also reflects this structure. The same accounting principles are applied for the segments and the Group.

Segment results, assets and liabilities include only those items that are directly attributable to the segment and the relevant portions of items that can be allocated on a reasonable basis to the segments. Unallocated items comprise interest, gains on disposal of financial investments, interest expense, losses on the disposal of financial investments, income tax expense and certain administrative expenses. Unallocated assets and liabilities include income and deferred tax receivables and payables, financial investments and financial liabilities.

Revenue from goods and services

Revenue is recognized when the control of goods and services is transferred to the customer at an amount reflecting the expected and entitled consideration for the goods or services provided. The supply of goods and services comprises, advanced stainless steels and special alloys as well as products for industrial heating and medical technology.

Allocation of transaction price

The transaction price is allocated to each identified performance obligation on a relative stand-alone selling price basis. This means that each performance obligation will be allocated its share of revenue based on its stand-alone selling price put in relation to the sum of all performance obligation’s stand-alone selling price. Adjusted market assessment approach and expected cost plus a margin approach are normally used to determine the stand-alone selling price if no observable selling price is available for one or more of the performance obligations. Variable consideration is generally allocated proportionally to all performance obligations unless there is evidence that the entire variable consideration is related to a specific performance obligation in the contract.

Variable consideration

Customer contracts can include variable considerations such as cash discounts and rebates. When such components are identified, an assessment is made to determine if the identified portion of revenue and any related cost of goods sold should be deferred to a later period. This is established by applying the expected value method or the most likely amount method with the threshold of being highly probable that a reversal of revenue will not occur.

Significant financing component

When advances are received, Alleima adjusts the promised amount of consideration for the effects of the time value of money. Alleima uses the practical expedient to not calculate and account for significant financing component if the period between the transfer of a good or service to a customer and payment is 12 months or less.

Cost to obtain a contract

Incremental costs to obtain a customer contract shall be recognized as a contract asset if the cost is incremental and Alleima expects to recover the costs. The contract asset is periodized over the contract lifetime. Contract asset for costs to obtain a contract is not recognized if the contract has a duration equal to or shorter than 12 months. Examples of incremental costs are agent fees, commission to sales employees, signing fees etc.

Goods sold

Revenue from goods sold (e.g. high value-added products in advance stainless steels and special alloys and products for industrial heating) is recognized at a point in time when the control has been transferred to the customer. To assess when the control has been transferred, indicators such as, but not limited to, significant risks and rewards of ownership, transferred physical possession, the customer has accepted the asset, present right to payment and legal title of goods and services are considered. For sale of goods the transfer of control usually occurs when the significant risks and rewards are transferred in accordance with the Incoterms.

When goods sold are highly customized and there is an enforceable right to payment for performances completed to date, the goods are recognized over time. Progress of satisfaction of each performance obligation is used to measure the revenue by the proportion of cost incurred to date compared to estimated total cost of each performance obligation.

If a customer contract includes a buy-back clause, exercised at the customer discretion and a significant transfer of control has not taken place, the transaction is then accounted for as an operational lease in accordance with IFRS 16 Leases. If the customer is not considered to have a significant economic incentive to exercise the option, the contract is then accounted for by applying the principles of variable consideration.

Payment is generally due between 30-90 days from the transfer of control. In some contracts, short-term advances are required before the product is delivered. Some contracts contain late delivery penalties and volume rebates, which give rise to variable consideration subject to constraint.

Operating expenses

Operating expenses are classified according to function, as described below. Depreciation and amortization and personnel costs are stated by function.

Cost of goods sold

Cost of goods sold is defined as the costs of production and procurement of the goods sold and other order specific costs. The cost of goods sold also includes inventory write-down and valuation items, the part of the cost for personnel, premises, purchased services and depreciation and amortization of non-current assets, including right-of-use assets, attributable to the production of sold goods.

Selling expenses

Selling expenses include costs for the internal sales organization, purchased services, personnel costs, cost for right-of-use assets, bad debt losses, IT costs of sales systems and logistics systems as well as depreciation and amortization of non-current assets attributable to sales activities. Advertising and other marketing activities are also included and are expensed as incurred.

Administrative expenses

Administrative expenses consist of the part of the personnel costs, purchased services as well as depreciation and amortization of non-current assets, including right-of-use assets, attributable to the other joint functions. Costs associated with the Board of Directors, executive management and corporate functions are included in administrative expenses.

Other operating income and other operating expenses

Other operating income and other operating expenses include secondary activities, exchange rate differences in operating activities and gain/loss on the sale of tangible and intangible assets.

Financial income and expenses

Financial expenses consist of interest expense on borrowings. Unrealized gains and losses on hedging instruments are recognized in profit or loss for the year.

Income tax

Income tax comprises current and deferred tax. Income tax is recognized in profit or loss for the year except when the underlying transaction is recognized in other comprehensive income. In these cases, the associated tax effects are recognized in other comprehensive income.

Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted at the balance sheet date, and any adjustment to tax payable in respect to previous years.

Current tax liabilities are offset against current tax receivables and deferred tax assets are offset against deferred tax liabilities when the entity has a legal right to offset these items and intends to do so.

Deferred tax is recognized based on temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and their value for tax purposes. Deferred taxes are measured at their nominal amount and based on the expected manner of realization or settlement of the carrying amount of the underlying assets and liabilities, using tax rates and fiscal regulations enacted or substantively enacted at the balance sheet date.

Deferred tax assets relating to deductible temporary differences and tax losses carried forward are recognized only to the extent that it is probable they can be utilized against future taxable profits.

Government grants

Government grants are recognized as deferred income in the balance sheet when there is reasonable assurance that the grant will be received, and that the entity will comply with the conditions attached to them. Grants are recognized in profit or loss for the year in the same way and over the same periods as the related costs that they are intended to compensate, on a systematic basis.

Grants related to assets are presented by deducting the grant from the carrying amount of the asset.

Intangible assets

Goodwill

Goodwill acquired in a business combination repre-sents the excess of the cost of the business combination over the net fair value of the identifiable assets, liabilities and contingent liabilities recognized.

Goodwill is measured at cost less any accumulated impairment losses and is reported as an indefinite useful life intangible asset. Goodwill is allocated to cash generating units that are expected to benefit from the synergies of the business combination and is tested for impairment yearly, or when there is an indication of impairment. Impairment losses on goodwill are not reversed.

Research and development

Expenditure on research activities related to the obtaining of new scientific or technical knowledge is expensed as incurred. Expenditure on development activities, whereby the research results or other knowledge is applied to accomplish new or improved products or processes, is recognized as an intangible asset in the balance sheet, provided the product or process is technically and commercially feasible and the Company has sufficient resources to complete development, and is subsequently able to use or sell the intangible asset.

The carrying amount includes the directly attributable expenditure, such as the cost of materials and services, costs of employee benefits, fees to register intellectual property rights and amortization of patents and licenses. Other expenses for development are expensed as incurred. In the balance sheet, capitalized development expenditure is stated at cost less accumulated amortization and any impairment losses.

Emission rights

Emission rights are recognized at cost less any accumulated impairment. The cost for the rights received free of charge is zero. A provision is made if a deficit of emission rights has been identified between the rights owned and the rights to be delivered due to actual emissions. The provision is valued at the market value of the rights required to cover the excess consumption of emissions made. Gains or losses on the disposal of emission rights are recognized in the income statement.

Other intangible assets

Other intangible assets acquired by the Company are recognized at cost less accumulated amortization and any impairment losses. Capitalized expenditure for the development and purchase of software for the Group’s IT operations are included here.

Intangible assets also include patents, trademarks, licenses, customer relationships and other rights. They are split between acquired and internally generated intangible assets.

Amortization of intangible assets

Amortization is charged to profit or loss for the year on a straight-line basis over the estimated useful lives of intangible assets unless such lives are indefinite. Intangible assets with an indefinite useful life, consisting of goodwill, are systematically tested for impairment annually or as soon as there is an indication that the asset may be impaired. Intangible assets with a finite useful life are amortized as of the date the asset is available for use.

The estimated useful lives are as follows:

Impairment and reversals of impairment

Assets with an indefinite useful life are not amortized but tested annually for impairment. Assets that are amortized or depreciated are tested for impairment whenever events or changed circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized in the amount by which the carrying amount of an asset exceeds its recoverable amount, which is the greater of the fair value less cost of disposal and value in use.

In assessing value in use, the estimated future cash flows are discounted to their present value using a rate that reflects current market assessments of the time value of money and the risks specific to the asset. For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash generating units to which the asset belongs. Goodwill is tested at the level of operating segments.

An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation and amortization, if no impairment loss had been recognized. Impairment of goodwill is not reversed.

Property, plant and equipment

Owned assets

Property, plant and equipment are recognized at cost less accumulated depreciation and any impairment losses.

Depreciation of property, plant and equipment

Property, plant and equipment are depreciated over their estimated useful lives. Land is not depreciated. Depreciation is recognized on a straight-line basis (unless otherwise described) based on the cost of the assets, adjusted by residual value when applicable, and estimated useful lives. The following depreciation periods are applied.

If an item of property, plant and equipment comprises components with different useful lives, each such significant component is depreciated separately. Depreciation methods and estimated residual values and useful lives are reviewed at each year-end.

Impairment and reversals of impairment

Impairment and reversals of impairment is applicable also for property, plant and equipment. For details see Intangible assets.

Borrowing costs

Borrowing costs attributable to the construction of qualifying assets are capitalized as a portion of the qualifying asset’s cost. A qualifying asset is an asset that takes a substantial time period to get ready for its intended use or sale and to a substantial amount. The Group considers a period in excess of one year to be a substantial time period.

Leases

In the consolidated financial statements, leases when Alleima being a lessee are recognized as right-of-use assets and when being a lessor either as a finance lease or an operational lease.

Impairment and reversals of impairment

Impairment and reversals of impairment is applicable also for right-of-use assets. For details see Intangible assets.

Alleima as a lessee

For all contracts an evaluation is done to identify if a lease exists by testing if Alleima has the right to obtain substantially all the economic benefits from use of the identified assets and has the right to direct the use of the identified asset and that the supplier has no substantial rights of substitution.

Alleima has decided to separate non-lease components from the lease components in contracts concern-ing buildings. The non-lease component cost should then be recognized as an expense and not be included in the calculation of a right-of-use asset and lease liability for asset class buildings. For all other asset classes non-lease components are included in the calculation of a right-of-use asset and lease liability.

The lease contracts are assessed at the commence-ment date whether the lessee is reasonably certain to exercise an option to extend the lease; or to exercise an option to purchase the underlying asset; or not to exercise an option to terminate the lease. In cases of open-ended contracts local law can provide protection to the lessee from being given notice. This requires the Alleima lessee to determine the contract period instead of considering the termination clause. The lessee then determines the length of the contract period based on factors such as the importance of building to the business, any planned or made leasehold investments and the market situation for premises.

The lease liability and right-of-use asset is calculated by using the implicit rate in the contract. If the implicit rate cannot be identified the incremental borrowing rate is instead applied, which is the interest rate the Company had been given if the investment had been financed through a loan from a financial institute. The measurement of the right-of-use asset includes amount of initial measurement of lease liability, lease payments at or before the commencement date, any initial direct cost and restoration costs. Alleima depreciates the right-of-use asset from the commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term.

After commencement date the carrying amount of the lease liability and the right-of-use asset is remeasured to reflect any modification or reassessment of a lease contract.

Alleima has chosen to apply the two expedients concerning leases shorter than one year (defined as leases with a lease term of 12 months or less at commencement date) and low value assets (with a value as new below USD 5,000) which are expensed on a current basis.

Alleima as a lessor

As a lessor, Alleima has classified its leases as operating leases.

An operating lease is a lease that does not transfer substantially all the risks and rewards as a result from ownership of an underlying asset. A sublease should also be classified as finance or operational lease by reference to the right-of-use asset arising from the head lease, rather than by reference to the underlying asset, for example, an item of property, plant or equipment.

When the agreement is recognized as an operating lease the asset is classified as tangible assets and valued at cost less accumulated depreciation. The cost of an asset comprises the acquisition value and any initial direct costs related to the contract. The lease payments and the depreciations are included in profit or loss on a straight-line basis over the term of the lease.

Inventories

Inventories are stated at the lowest of cost and net realizable value, with due consideration of obsolescence. Net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses.

Cost is based on the first-in/first-out (FIFO) principle and includes expenditure incurred in acquiring the inventories and bringing them to their existing location and condition. In the case of manufactured inventories and work in progress, cost includes an appropriate share of overheads based on normal operating capacity.

Financial instruments

Financial instruments recognized in the balance sheet include assets, such as account receivables, financial investments, cash and cash equivalents and derivatives, and liabilities such as loan liabilities, account payables, and derivatives.

Cash and cash equivalents consist of cash and bank balances as well as current investments with maturities up to and including 3 months.

Recognition and derecognition

A financial asset or a financial liability is recognized on the balance sheet when the entity becomes a party to the contractual provisions of the instrument. Account receivables are recognized upon issuance of the invoice. A liability is recognized when the counterparty has performed under the agreement and the Company is contractually obliged to settle the obligation, even if no invoice has been received.

At initial recognition, the Group measures financial assets and liabilities at its fair value plus or minus, in the case of a financial asset or liability not at fair value through profit or loss (FVPL), transaction costs including all fees, premiums and discounts that are directly attributable to the acquisition or issue of the financial asset and liability. Transaction costs of financial assets and liabilities carried at FVPL are expensed in the income statement.

A financial asset is derecognized when the rights to receive cash flows under the agreement have expired or have been transferred and the group has substantially transferred all the risks and rewards. A financial liability is derecognized when the obligation specified in the contract is discharged or otherwise expires.

A financial asset and a financial liability are offset and presented in a net amount in the balance sheet only if there is a legally enforceable right to offset the recognized amounts and there is an intention either to settle on a net basis or to realize the asset and settle the liability simultaneously.

Classification and measurement

Financial assets, excluding derivatives, including equity- and debt instruments

The Group classifies its financial assets as those to be measured at fair value, and those to be measured at amortized cost.

For debt instruments, which includes accounts receivables, the classification depends on the Group’s business model for managing the financial assets and the contractual terms of the cash flows:

Amortized Cost: Assets that are held for collection of contractual cash flows, where those cash flows represent solely payments of principal and interest, are measured at amortized cost. Interest income from these financial assets is included in financial income using the effective interest rate method. Any gain or loss arising on derecognition is recognized directly in the income statement.

Fair Value through profit and loss: Assets that do not meet the criteria for amortized cost are measured as fair value through profit and loss.

Financial liabilities

Financial liabilities excluding derivatives are classified and subsequently measured at amortized cost. Any difference between the loan amount, net of transaction costs, and the repayable amount is allocated to profit or loss for the year over the term of the loan using the effective interest method. For information on contractual terms, scheduled repayments and the exposure to interest risk and foreign-currency risk, refer to Note 26 Financial risk management.

Financial instruments measured at fair value in the balance sheet

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Under the IFRS 13 Fair Value Measurement disclosure requirements, the method applied to the valuation of assets and liabilities measured at fair value in the balance sheet is presented below. The valuation is divided into three levels:

Measurements of fair value

The fair value of foreign exchange contracts, raw materials- and electricity- and gas derivatives are determined based on observable market prices.

For means of payment, receivables and payables with variable interest and current receivables and payables (for example, trade receivables and accounts payable), the fair value has been considered to correspond to the carrying amount.

Hedge accounting

Hedge accounting is applied in accordance with IFRS 9 and to meet the criteria there must be a clear relationship between the hedging instrument and the hedged item. The relationship is expected to be highly effective, and it must be possible to reliably measure such effectiveness. Moreover, the hedge must be formally designated and documented. Gains and losses on remeasurement of derivatives used for hedging purposes are recognized as described below under cash flow hedges.

Cash flow hedges

Hedge accounting is applied when hedging a partic-ular risk associated with highly probable future cash flows and forecast transactions.

Alleima applies hedge accounting for derivatives that are used to hedge the Group’s exposure to electricity-, gas- and metal price risk. In addition, hedge accounting is applied for some derivatives that are used to hedge the exchange rate exposure in orders and investments. Changes in the fair value of the derivatives designated for hedge accounting are recognized in Other comprehensive income and accumulated in the Hedge reserve within equity. Changes in fair value are subsequently reclassified to profit or loss in the same period as the Group reports the expense of the hedged consumption of electricity, gas and metal or included in the carrying amount of the purchased metals or acquired property, plant and equipment as appropriate. Any ineffectiveness is recognized immediately in profit or loss.

Derivatives, for which hedge accounting is not applied, are measured at their fair value directly through profit or loss.

Current receivables

Trade receivables

Trade receivables are recognized at amortized cost.

Alleima evaluates its trade receivables, contract assets and financial leases on a collective basis for each category, respectively. Each reporting entity classifies their receivables in suitable risk categories according to Group policy based on expected credit losses.

Expected credit loss provisions are based on the full lifetime expected credit loss model with a provision matrix where fixed provision rates are applied depen-ding on the number of days outstanding. The entities consider reasonable and supportable information about past events, current conditions and reasonable and supportable forecasts of future economic conditions when measuring the expected credit losses.

Credit risks are classified based on credit information provided by credit agencies, identified payment behavior of the customer and other relevant information available, such as lost contracts, changes in company management and other customer specific information. Additionally, a macroeconomic evaluation is conducted on the outlook of industries and countries relevant for Alleima’s customers if needed. Changes to the allowance for expected credit losses for accounts receivables are recognized in selling expenses.

Alleima’s principles for the writing off receivables are based on several prerequisites, such as proof of write-off, insolvency or failed legal and other collection processes. An assessment is made whether one or several of these prerequisites are fulfilled before the write-off takes place.

The Group selectively utilizes different forms of credit securities, such as letters of credit, retention of title or credit insurance.

Alleima sells certain trade receivables for larger volume and credit worthy customers without recourse. The receivable is derecognized when substantially all risks and rewards of ownership of the financial asset has been transferred.

Contract assets

A contract asset is recognized when the right to consideration for a performance obligation is conditional on completion of promises other than the passage of time.

Equity

Equity is defined as total shareholders’ equity including non-controlling interests.

The translation reserve comprises all foreign exchange differences arising on the translation of the financial statements of foreign operations stated in a currency different from the Group’s presentation currency.

Dividends are recognized as a liability in the period in which they are resolved at a shareholders’ meeting.

Retained earnings including profit or loss for the year comprises the earned profit of the parent company and its subsidiaries.

Equity swap raised to secure the delivery of shares under the incentive program is reported in equity with adjustment for related expenses and any dividends on the shares.

Non-controlling interests are recognized as a separate item in the Group’s equity. Acquisitions of non-controlling interests are recognized as a transaction within shareholders’ equity, meaning between the parent company’s owners and non-controlling interests. Accordingly, goodwill does not arise in conjunction with such transactions. Gains or losses on disposals to non-controlling interests are also recognized in equity.

Pensions

Defined-contribution plans

A defined-contribution plan is a post-employment benefit plan under which an entity pays fixed contributions into a separate entity and will have no legal or constructive obligation to pay further amounts. The size of the pension that the employee will ultimately receive in such cases depends on the size of the contributions that the entity pays to the plan or an insurance company and the return that the contributions yield. Obligations for contributions to defined-contribution pension plans are recognized as an employee benefit expense in profit or loss for the year as the employee renders services to the entity.

Defined-benefit plans

The Group’s net obligation in respect to defined-benefit pension plans is calculated separately for each plan by estimating the amount of future benefit that employees have vested in return for their service in the current and prior periods. This benefit is discounted to its present value. The discount rate is the yield on high-quality corporate bonds, mortgage bonds - or if there is no deep market for such bonds, government bonds - that have maturity dates approximating the terms of the Group’s obligations. The calculation is performed annually by a qualified actuary. In addition, the fair value of any plan assets is assessed. This method of accounting is applied to the most significant defined-benefit plans in the Group.

A few plans, which neither individually nor in the aggregate are significant in relation to the Group’s total pension obligations, are still recognized in accordance with local regulations.

In measuring the present value of pension obligations and the fair value of plan assets, actuarial gains and losses may accrue either because the actual outcome differs from earlier assumptions (so-called experience adjustments) or the assumptions are changed. These actuarial gains and losses are recognized in the balance sheet and in other comprehensive income.

When the benefits under a plan are improved, the portion of the increased benefits that relate to past service by employees is recognized in profit or loss for the year. The amount of obligations recognized in the balance sheet for pensions and similar obligations reflects the present value of the obligations at the balance sheet date, less the fair value of any plan assets.

Other provisions

A provision is recognized in the balance sheet when the Group has a legal or constructive obligation as a result of a past event, and it is probable that an outflow of resources will be required to settle the obligation, and a reliable estimate of the amount can be made. If the effect is material, the provision is determined by discounting the expected future cash flows at a pre-tax rate that reflects the current market assessments of the time value of money and, where appropriate, the risks specific to the liability. The provisions are mainly related to termination benefits, warranty commitments, restructuring, long-term incentives, environmental obligations and legal disputes and claims, such as value-added tax issues, and customer and supplier claims relating to ongoing or finished projects.

Termination benefits

When employment is terminated, a provision is recognized only when the entity is demonstrably committed either to terminate the employment of an employee or a group of employees before the normal retirement age or provide termination benefits as a result of an offer made to encourage voluntary redundancy. In the latter case, a liability and an expense are recognized if it is probable that the offer will be accepted and the number of employees that will accept the offer can be reliably estimated.

Warranty commitments

A provision for warranties is recognized when the underlying products or services are sold. The provision is based on historical warranty data and a weighing of all possible outcomes against their associated probabilities.

Restructuring

A provision for restructuring is recognized when the Group has approved a detailed and formal restructuring plan and the restructuring has either commenced or has been announced publicly. Future operating costs are not provided for.

Employee benefits

A provision for personnel-related benefits is recognized in accordance with agreements entered for long-term incentive programs, local bonus programs, part-time pensions, and other personnel obligations.

Environmental obligations

Environmental provision is recognized when there is a legal obligation or a decided defined action, such remediation or testing programs. Every year a provision is recognized for waste material and slag deposits. Monitoring programs in continuous operations are regarded as cost as they occur.

Site restoration

Provision for costs for restoring contaminated land is made in accordance with when there is a legal requirement or other binding commitment to restore established contaminated land and when the cost can be measured with reasonable precision. Site restoration is included in environmental obligations.

Legal disputes

Legal disputes include provisions for claims which, at the balance sheet date, had not been closed.

Other obligations

Other obligations include provisions for onerous contracts. Provisions classified as current are expected to result in an outflow of resources within twelve months from the balance sheet date.

Share-based payments

The costs for equity-settled payments are based on the fair value of the share rights calculated by an independent party at the date of grant. These payments are reported as employee costs during the vesting period with a corresponding increase in equity. The vesting conditions in the program are linked to non-market performance conditions (earnings per share and reduction of carbon dioxide) and service conditions (employment period) which are taken into account in employee cost during the vesting period by the change in the number of shares that are expected to finally vest. Alleima records a liability for social security expenses, at each reporting period, for all outstanding share-based payments. Social security expenses attributable to equity-based instruments to employees as compensation for provided services are expensed in the periods during which the services are performed. The provision for social security expenses is based on the fair value of the share rights at each reporting period.

Other liabilities

Other liabilities excluding derivatives are classified and subsequently measured at amortized cost.

Contract liabilities are recognized when a payment is received before the performance obligation has been satisfied.

Alleima is party of supply chain financing arrangements, also known as reversed factoring. Those liabilities are part of the working capital used in Alleima’s normal operating cycle, and represents a liability to pay for received goods or services, which were invoiced or formally agreed with the supplier. Thus, these liabilities are presented as part of Accounts payable in the balance sheet.

Contingent liabilities

A contingent liability is recognized when there is a possible obligation that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events.

A contingent liability is also recognized when there is a present obligation that cannot be recognized as a liability because it is not probable that an outflow of resources will be required, alternatively because the amount of the obligation cannot be measured with sufficient reliability.

Cash flow statement

The consolidated cash flow statement is prepared in accordance with the indirect method. A short-term investment is classified as a cash and cash equivalent if:

Critical estimates and key judgments

In order to prepare the financial statements, management and the Board make various judgments and estimates, including impact from climate change, that can affect the amounts recognized in the financial statements for assets, liabilities, revenues and expenses as well as information in general, including contingent liabilities. The judgments and estimates discussed below are those deemed to be most important for an understanding of the financial statements, considering the level of significant estimations and uncertainty. The conditions under which Alleima operates are gradually changing meaning that the judgments also change.

Business combinations

The Group uses estimates and judgments regarding allocation of goodwill and other surplus values in a business combination, see Note 12 Intangible assets and Note 28 Business combinations.

Income tax

Estimates are made to determine both current and deferred tax liabilities/assets, not least the value of deferred tax assets.

The actual results may differ from these estimates, for instance due to changes in the business climate, changed tax legislation, or the outcome of the final review by tax authorities and tax courts of tax returns, see Note 10 Income tax.

Valuation of inventory

The Group use estimates to determine inventory reserves. When calculating inventory reserves, Alleima considers production and sales volumes, as well as the demand for certain products, see Note 16 Inventories.

Impairment of non-current assets

Impairment tests of goodwill

Goodwill is tested for impairment annually and whenever events or changes in circumstances indicate that the carrying amount of goodwill has been impaired, for example due to a changed business climate or a decision taken either to sell or close down certain operations. In order to determine if the value of goodwill has been impaired, the cash generating unit or group of cash generating units to which goodwill has been allocated must be valued using present value techniques. When applying this valuation technique, Alleima relies on a number of factors, including historical results, business plans, forecasts and market data. As can be deduced from this description, changes in the conditions for these judgments and estimates can significantly affect the assessed value of goodwill, see Note 12 Intangible assets.

Impairment tests of other non-current assets

Alleima’s intangible and tangible assets, excluding goodwill, are stated at cost less accumulated amortization and depreciation and any impairment losses. Other than goodwill, Alleima has not identified any intangible or tangible assets with indefinite useful lives. The assets are amortized over their estimated useful lives to their estimated residual values. Both the estimated useful life and the residual value are reviewed at least at each financial year-end, see Note 12 Intangible assets and Note 13 Property, plant and equipment.

The carrying amount of the Group’s non-current assets is tested for impairment whenever events or changes in circumstances indicate that the carrying amount will not be recovered. The carrying amount of intangible and tangible assets not yet available for use is tested annually. If such analysis indicates an excessive carrying amount, the recoverable amount of the asset is estimated. The recoverable amount is the higher of the asset’s fair value less costs of disposal, and its value in use. Value in use is measured as the discounted future cash flows of the asset, alternatively the cash generating unit to which the asset belongs.

A call for an impairment test also arises when a non-current asset is classified as being held for sale, at which time it must be remeasured at the lower of its carrying amount and fair value less costs of disposal.

Post-employment benefits

Actuarial assumptions are used to measure pension obligations and they significantly affect the recognized net liability and the annual pension cost. One critical assumption - the discount rate - is essential for the measurement of both the interest expense of the year and the present value of the defined-benefit obligations’ current year. The discount rate is used both for calculating the present value of the obligation and as an estimate for the return on plan assets. The discount rate is reviewed quarterly, which affects the net liability, and annually, which also affects the expense for the coming year. All other assumptions, both financial and demographic are reviewed at least annually, see Note 20 Provision for pensions and other non-current post-employment benefits.

The financial risk management associated with the defined benefit plans are presented in Note 26 Financial risk management.

Environmental obligations

The nature and long history of the operations of the Alleima Group typically entail a risk of claims in relation to contaminations, since the environmental requirements on operations were generally less stringent in the past. Claims to investigate or to carry out remedial measures may arise following inquiries from authorities, in connection with property transfers, property development or review of permits. Environmental provision is updated at least annually and whenever events or changes in conditions indicate a need of review, e.g. requirements from authorities or decision to sell or close down certain operations. The ongoing provision for waste material and slag is based on estimated cost and time before final coverage of the landfill.

Environmental obligation is presented in Note 22 Other Provisions.

Note 2 | Segment information and revenue

Alleima’s management monitors its operations from an operating segment perspective. In accordance with IFRS 8, Operating segments, Alleima’s management has identified the three divisions Tube, Kanthal and Strip as the reportable segments.

Alleima monitors and evaluates the segments on adjusted operating profit (Adjusted EBIT), see Alternative Performance Measures presented in page 130. Further information see Reporting of operating segments in Note 1.

Division Tube develops and manufactures seamless tubes and other long products in advanced stainless steels and special alloys. Division Kanthal is a provider of products and services in the area of industrial heating technology and resistance materials, and also offers ultra-fine wire in stainless steel for use in medical appliances. Division Strip develops and manufactures a wide range of precision strip steel products and also offers pre-coated strip steel for components in the hydrogen fuel cell stack.

2.1 Information on business segments/divisions

2.1 Information on business segments/divisions

All transactions between the divisions are on market terms. For information regarding business combinations, see Note 28.

2.2 Revenue and Non-current assets by country and contract liabilities

Non-current assets consists of -intangible assets, property, plant and equipment and right-of-use assets.

Non-current assets are specified by country based where the assets are located.

2.3 Revenue per customer segment

Note 3 | Personnel information and remuneration of management

3.1 Average number of employees

3.2 Wages, salaries, other remuneration and social costs

3.3 Wages, salaries, other remuneration by market area

3.4 Gender distribution in senior management

3.5 Remuneration to executive management

Remuneration to the board of directors

Fees to the Chairman and other external Board members are paid in accordance with the resolution at the Annual General Meeting. No Board fees are paid to the President and the employee representatives.

In accordance with the resolution of the 2024 Annual General Meeting the total fee to the external Board members elected at the Meeting amounts to in total SEK 4,637,000 on an annual basis.

¹⁾ Member leaves the Board and Remuneration Committee 3 July 2023

²⁾ Member in the Board since 2 May 2023 and remuneration committee since 21 July 2023

³⁾ Member in the Board since 2 May 2024

President and other senior executives

Guidelines for renumeration

For information on the guidelines for renumeration of senior executives, please refer to pages 91-92.

President and CEO

Alleima’s President and CEO, Göran Björkman, was paid an annual fixed salary of SEK 7,329,384. In addition, car allowance and an annual variable cash based salary of a maximum 70% of the fixed salary is payable. The variable salary for 2024 amounted to SEK 0.

Göran Björkman is entitled to retire at age 65. Göran Björkman has a Swedish pension plan (ITP 2) and supplementary defined contribution plan apply under which the company each year contributes 30% of fixed salary proportions in excess of 20 price base amounts. Pension premium amounted of 29% of his annual fixed salary.

In the event of termination of employment by the Company, Göran Björkman has a notice period of 12 months’ severance pay.

Other senior executives

Other members of the Group Executive Management are covered by a Swedish pension plan (ITP 1 or ITP 2) and for one member a German pension plan. The minimum retirement age is 62. For members of the Group Executive Management a supplementary defined contribution plan applies under which the company each year contributes 25-30% (depending on age and employment start in GEM) of fixed salary proportions in excess of 20 price base amounts. One member is covered by a German pension plan under which 3% of fixed salary is contributed.

Severance pay may be paid when employment is terminated by Alleima. The severance pay corresponds to 12 months fixed salary in addition to the notice period, which is 6 months. Any other income from employment can be deducted from the severance pay.

Short-term incentive program (STI)

Alleima annual incentive program for senior executives, and other managers in the Group, are linked to predetermined and measurable financial criteria, measured during 2024. Senior executives except Division mangers are measured 100% on Group performance. Division managers are measured 80% on own business performance and 20% on Group performance. During 2024 the criteria’s have been related to Alleima adjusted EBIT, cash conversion and growth.

Long-term incentive program (LTI)

Share-based incentive program 2023-2024

The Annual General Meetings approved the Board’s proposal to adopt a performance share program for each year for a maximum 30 senior executives and key individuals in the Alleima Group, divided into three categories. For all participants, a personal investment is required in each separate program and the programs encompass a grant of a maximum total of 1,002,520 shares. All program participants have invested in Alleima shares (“investment shares”), up to an amount corresponding to 8% of the employee’s fixed annual salary before tax at December 31, 2022 and December 31, 2023, respectively.

Provided certain performance targets are met, Alleima shares may be allotted (“performance shares”). The maximum number of performance shares that may be allotted for each acquired investment share depends on the category to which the participant belongs. The number of Performance Shares that will finally be allotted to the participant for each acquired Investment Share is dependent on the development of the Alleima Group’s (i) adjusted earnings per share, excluding (a) metal price effects and (b) items affecting comparability (IAC) (“adjusted EPS”) and (ii) reduction of carbon dioxide (CO₂ ). The two targets (adjusted EPS and CO₂ emission) are weighted among themselves at 90 and 10%, respectively, of the total target fulfilment.

In January 2024, the Board of Directors established the levels regarding adjusted EPS for the performance years and CO₂ emission for LTI 2024 that must be attained. After three years, 2023-2025, 2024-2026, will the outcome of the LTI 2023 and LTI 2024 be established. The level required for maximum allotment and the extent to which the established levels are attained will be disclosed in the 2025 and 2026 Annual Report. The allotments of performance shares in ongoing programs requires continuous employment and that all investment shares are held during a period of three years from the acquisition of the investment shares.

In order to fulfil Alleima’s obligations under the share savings program, the company has entered into an equity swap agreement with a financial institution. Under the terms of the agreement, the financial institution has committed to deliver to participants in the program Alleima shares at the time of delivery in accordance with the terms and conditions of the program.

Assumptions for determining the value, 2023-2024 LTI Program

¹⁾ Based on analysts’ 3 year combined expectations.

Cash-based incentive program (2022)

In 2022 the Board decided upon Remuneration Committee proposal to implement a cash based LTI program, LTI 2022. The payment is conditional on continued employment in Alleima for a three-year period until the end of 2024 and the Group achieving a defined profitability target in 2022. It is limited to a maximum of 75% of the fixed annual salary for the President and CEO and 60% of the fixed annual salary for other members of the Group Executive Management. Payment will be done since the performance targets, Adjusted EBITA, set by the Board of Directors were met.

Sandvik’s share-based incentive program

Members of Alleima’s Group Management and other senior executives and key employees have historically participated in Sandvik’s long term share-based-incentive program (“LTI”). Sandvik AB’s Annual General Meeting 2021 resolved, at the suggestion of Sandvik AB’s Board of Directors, to introduce a performance share program for senior executives and key employees. Performance shares under the LTI 2021 would be allotted because the performance targets were met, but with the separation from the Sandvik Group, a number of the shares vesting in the program will be forfeited for persons employed by Alleima. The Company has therefore decided to compensate the participants with a cash amount corresponding to the value of the forfeited shares. The assessed fair value on the grant date, August 15, 2022 was SEK 181.45 per investment share. Payment of the amount was made 2024 provided that the participant is still employed in Alleima.

Costs for the programs

The following IFRS 2 provisions were made during the year:

Preparation and decision-making process

The Board’s Remuneration Committee prepares issues relating to the Group Executive Management’s remuneration. The Committee met three times during the year. Issues dealt with included the magnitude of any pay increases and the long-term variable incentive program. The Board discussed the Committee’s proposals and made a decision, using the Committee’s proposal as a basis. Based on the Committee’s proposals, the Board decided on the remuneration of the President for 2024. The President decided on remuneration to other senior executives after consultation with the Committee. The Committee performed its task supported by expertise on remuneration levels and structures. For information on the composition of the Committee, refer to the Corporate Governance Report.

Remuneration and other benefits pertaining to 2024 expensed during 2024, in SEK

¹⁾ Amount pertaining to 2024 and expected to be paid in 2025

²⁾ Refers to LTI 2021 payment and expensed LTI 2023-2024

³⁾ Göran Björkmans fixed salary during 2024 amounts to 7,329,384. The remaining amount relates to vacation pay, etc. Board fees are not payable to President and CEO.

⁴⁾ Pertains to the following persons in 2024: Olof Bengtsson, Ulrika Dunker, Johanna Kreft, Mikael Blazquez, Tom Eriksson, Elja Nordlöf, Claes Åkerblom, Robert Stål, Carl von Schantz

Remuneration and other benefits pertaining to 2023 expensed during 2023, in SEK

¹⁾ Amount pertaining 2023 and expected to be paid in 2024

²⁾ Göran Björkman’s fixed salary 2023 amounted to 6,603,048, the remainder relates to holiday pay etc.

³⁾ Pertains to the following individuals during 2023: Olof Bengtsson, Ulrika Dunker, Johanna Kreft, Mikael Blazquez, Tom Eriksson, Elja Nordlöf, Claes Åkerblom, Michael Andersson (Jan-Feb), Robert Stål (Mar-Dec), Nigel Haworth (Mar-Oct), Carl von Schantz (Oct-Dec)

Note 4 | Fees and remuneration to auditors

Note 5 | Research, development and quality assurance

Note 6 | Other operating income

Note 7 | Other operating expenses

Other operating expenses consist of transaction cost related to acquisition SEK -3 million (-9) and other operating non-financial cost SEK -9 million (-4).

Note 8 | Operating expenses

Other expenses is mainly related to purchases of services, energy and IT.

Note 9 | Net financial items

Gain and loss from remeasurement of financial assets and liabilities are mainly temporary revaluation effects on foreign exchange derivatives due to discrepancies between contract rates and market exchange rates on the balance date.

Note 10 | Income tax

Recognized in profit and loss

Reconciliation of the Group’s tax expense

Alleima’s recognized tax expense for the year amounted to SEK 350 million (500) or 22.3% (24.1) of profit after financial items.

The weighted average tax rate for Alleima calculated in accordance with the statutory tax rates in each country is 23.7% (23.4).

Tax items attributable to Other comprehensive income

Recognized in the balance sheet

Deferred tax assets and liabilities

The deferred tax assets and liabilities recognized in the balance sheet are attributable to the following assets and liabilities:

Unrecognized deferred tax assets

The Group has additional tax losses carried forward of SEK 51 million (48) related to Brazil. No deferred tax asset was recognized for these losses.

The expiry dates of these tax losses carried forward are distributed as follows:

Related deferred tax assets were not recognized since utilization of the tax losses against future taxable profits is not deemed probable in the foreseeable future. The tax value of the unrecognized tax losses carried forward amounted to SEK 17 million (16).

Change of deferred tax in temporary differences an unused tax losses

In addition to the deferred tax assets and liabilities, Alleima reports the following tax liabilities and receivables:

Pillar 2

Alleima is covered by the OECD model rules for Pillar 2. The Group’s parent company, Alleima AB, is based in Sweden which has implemented the rules as of January 1, 2024. The rules are not expected to have a material impact on the Group for 2024.

Note 11 | Earnings per share

The calculation of the numerators and denominators used in the above calculations of earnings per share are presented below.

Dilution is related to the outstanding share-based LTI programs for 2023 and 2024. Refer to Note 3.5 for further information about the LTI programs.

Note 12 | Intangible assets

Intangible assets

Goodwill at December 31, 2024 amounted to SEK 1,693 million (1,621), essentially related to the acquisition of Kanthal in 1997. The impairment test of goodwill is presented below.

For Alleima the cash-generating units (CGU) are the divisions Tube, Kanthal and Strip. The goodwill is allocated to the CGU based on where the business combinations have originally been made.

The recoverable amount of the CGU has been assessed based on estimates of value in use.

Calculations of value in use are based on the estimated future cash flows using forecasts covering a five-year period, which are in turn based on the five-year plans prepared annually by Alleima.

The plan is founded on the Divisions’ strategies and an analysis of the current and anticipated business climate, and the impact this is expected to have on the market in which the division operates. A range of economic indicators, which differ for each market, and external and internal studies of these, are used in the analysis of the business situation. The key assumptions mentioned below reflect past experience, current and future situation and are consistent with external information. The key assumptions when determining cash flow forecasts include anticipated demand, growth rate, operating margin and working capital requirements.

Alleima’s goal is to be an industry leader in sustainability. The long-term targets include reducing carbon dioxide emissions from Scope 1 and 2 by more than 50% by 2030 compared to 2019, SBTi net zero by 2050, 83% circularity in steel production and 76% circularity in generated waste. This also includes exploring, testing and implementing alternative solutions to reduce slag that ends up in landfills. The divisions build their strategies in the same way, i.e. there are plans and ambitions linked to sustainability in each strategy. It is thus also an integral part of the financial forecast for the strategy period.

The factor used to calculate growth in the terminal period after five years was 2% for Alleima, the same level as used previous years.

Need of working capital beyond the five-year period is deemed to increase approximately as the expected growth in the terminal period. The discount rate consists of a weighted average cost of capital for borrowed capital and shareholders’ equity.

The pre-tax discount rates used for Alleima are:

The specific risks of the CGU have been adjusted in future cash flow forecasts. The impairment testing of goodwill performed at year end 2024 did not indicate any impairment requirements. Sensitivity in the calculations indicates that the goodwill value would be maintained even if the discount rate was increased by 1 percentage points, the long-term growth rate was lowered by 1 percentage points, and the operating margin dropped 1 percentage points.

Note 13 | Property, plant and equipment

Tangible assets

Note 14 | Leases

Alleima as a lessee

The arrangements in which Alleima is a lessee consist of a number of assets such as facilities for production, warehouse, office premises, certain office equipment and vehicles. Most of the facilities have a rental period of 5-10 years and for most office equipment and vehicles the period is 3-5 years.

See note 21 for split of Lease liabilities on current and non-current leases.

Depreciation per line item in the income statement

Amounts recognized in the income statement

Leasing liabilities

Contracts not yet commenced

At December 31, 2024, Alleima Group has entered three contracts with commenced date in 2025 or later.

Alleima as a lessor

The Group holds no financial leases.

Alleima’s operational leases mainly consists of lease contracts related to two facilities owned by Alleima. Lease income amounted to SEK 52 millon (50).

Future minimum lease payments under non--cancel-able operational lease contracts was SEK 205 million (227) at December 31, 2024.

Operating leases

Note 15 | Non-current financial assets

Note 16 | Inventories

Inventories which were booked as expense amounted to SEK 15,740 million (15,409) during the year, whereof SEK 132 million (97) was related to write-down of inventories reported in cost of goods sold.

Note17 | Trade receivable

Note 18 | Other current receivables

Note 19 | Equity

As of December 31, 2024 Alleima’s share capital amounted to SEK 250,877,184 represented by 250,877,184 shares.

To the Annual General Meeting on April 28, 2025, Alleima’s Board of Directors proposes for the financial year 2024 an ordinary dividend of SEK 2.30 per share (SEK 577,017,523), to be paid in May 2025. The remaining amount for the parent company, SEK 13,159,539,579, should be carried forward. The Board makes the assessment that the parent company’s and the group’s equity after the dividend distribution will be able to sustain the requirements which the nature, size and risks of the business will present. The Board further considers the actions reasonable in light of the parent company’s and the Group’s consolidation requirements, liquidity and position in general. The dividend distribution is assumed to not present any risk for the parent company’s or the Group’s ability to fulfil its short- or long-term payment obligations, or assumed to affect the ability to make required investments.

The Annual General Meeting held on May 2, 2024, resolved for the financial year 2023 on an ordinary dividend of SEK 2.00 per share. The dividend of SEK 502 million was distributed to the shareholders on May 10, 2024, of which SEK 1 million was repaid to Alleima in form of dividend related to the equity swap for LTI 2023.

Alleima’s General Meeting held on May 2, 2024 approved the Board’s proposal for a long-term share-based incentive program (LTI 2024). After a period of three years, a certain number of Alleima shares free of charge will be allotted, provided that certain performance targets are met. As of December 31, 2024, LTI 2024 comprises 306,857 share rights and LTI 2023 380,901 (403,544). The delivery of these shares is secured through an equity swap agreement with a third party. Further information regarding the incentive programs are provided in Note 3.

Reserves

Consolidated equity includes certain reserves which are described below.

Translation reserves

The translation reserve comprises all exchange differences arising from the translation of the financial statements of foreign operations into Alleima’s presentation currency.

Hedge reserves

Alleima apply hedge accounting for derivatives that are used to hedge the Group’s exposure to electricity-, gas- and metal price risk and for some derivatives that are used to hedge the exchange rate exposure in orders and investments. Changes in the fair value of the derivatives designated for hedge accounting are recognised in Other comprehensive income and accumulated in the Hedge reserve within equity. Refer to Note 1 for the accounting principles and Note 26 for more information on derivatives.

Non-controlling interest

Non-controlling interest amounted to SEK 0 million (0) and refers to Alleima Rock Drill Steel AB (RDS) in which Sandvik AB owns 10% of the company. The Class B shares held by Sandvik are not subject to future dividends. Refer to Note 27 for further information.

Note 20
Provision for pensions and other non-current benefits

Alleima provides direct pension solutions or participates in defined benefit, defined contribution and other plans for post-employment benefits to all employees. These plans are structured in accordance with local regulations and practices. The Group’s most significant defined-benefit pension plans are described below.

Sweden

The Swedish pension plan is funded through a foundation and is based on salary at the time of retirement. It is partly closed for new participants, meaning that only new employees born prior to 1979 have the option of joining the plan. Employees born after 1979 are encompassed by a defined contribution plan. There are no funding requirements for the defined benefit plan. Pension payments to retirees are made directly from Alleima, the Company has the opportunity to request reimbursement for pension payments made which have been secured by the pension fund. The total value of Alleima’s assets held by the foundation was SEK 1,215 million (1,056), which was SEK 256 million lower (303 lower) than the capital value of the corresponding pension obligations for the entire foundation.

The commitment for family pension, also a defined-benefit plan, is insured with Alecta. Sufficient information to use defined-benefit accounting for this plan is not available, and therefore recognized as a defined-contribution plan. At the end of 2024, Alecta reported a plan surplus of 162% (158).

The Alleima Group’s share of Alecta’s saving premiums is 0.03%, the total share of active members in Alecta is 0.19%. For 2025, the expected contribution to Alecta is SEK 19 million (19).

The Group’s mutual responsibility as a credit insured company of PRI Pensionsgaranti in Sweden is classified as a contingent liability and amounts to SEK 29 million (27). This mutual responsibility can only be imposed in the instance that PRI Pensionsgaranti has consumed all of its assets, and it amounts to a maximum of 2% of the Group’s pension liability in Sweden.

US

In the US a defined benefit plan has been transformed to a defined contribution plan during 2024 and SEK 195 million of the plan assets has been transferred to an insurance company that will handle the defined contribution plan. Remaining defined benefit plan is a retiree medical plan that offers a dollar amount for each service year based on the age at which someone retires.

Germany

In Germany, Alleima has defined benefit pension plans. A few years ago, Alleima formed a foundation, a Contractual Trust Agreement, which covers the current employees of Alleima’s German companies. The pension commitments for retirees and paid-up policyholders remain unfunded. The pension is based on salary at the time of retirement and other parameters. There are no funding requirements and employees in the plan are required to contribute a certain percentage of their salary to the plan. Pension payments to retirees are mainly made from the Company.

Other

Other countries have no material defined benefit pension plans.

Risks and cash flows

Three main categories of risks are associated with the Company’s defined-benefit pension plans. The first category is linked to future pension payments. Greater life expectancy, increased inflation assumptions and higher salaries can increase future pension payments and thus also the liability for the pension obligation. The second category refers to the assets in the foundations that are funded. Low returns may, in the future, lead to the assets being insufficient for covering future pension payments. The third and final category pertains to the measurement methods and accounting of defined-benefit pension plans, primarily regarding the discount rate utilized in the measurement of the present value of the pension obligations. This rate can fluctuate, leading to major changes in the recognized pension liability. The discount rate also affects the interest rate component of the pension liability and that is recognized in net financial items.

To determine the discount rate, AA credit rated corporate bonds are used that correspond to the duration of the pension obligation. If there is no deep market for corporate bonds, government bonds are used as the basis for determining the discount rate. Mortgage bonds are used in Sweden to determine the discount rate.

A sensitivity analysis of the most important assumptions affecting the recognized pension liability is provided below. Note that this sensitivity analysis is not intended to be the expression of an opinion by the Company regarding the probability of such events occurring.

Governance

The defined benefit and defined contribution plans are governed through a Pension Supervisory Board (PSB). PSB meets twice a year and has the following areas of responsibility: