Burckhardt Compression
Annual Report 2022

Plain-text annual report

Annual Report 2022 We create leading compression solutions for a sustainable energy future. 02220006_Burckhardt-Compression_GB_2022_EN.indd 1 02220006_Burckhardt-Compression_GB_2022_EN.indd 1 05.06.23 18:44 05.06.23 18:44 Burckhardt Compression is the world- wide market leader for reciprocating compressor systems and the only manufacturer and service provider that covers a full range of recipro- cating compressor technologies and services. Its customized and standard compressor systems are used in the chemical, petrochemical, gas trans- port and storage, hydrogen mobility and energy, industrial gas, refinery and gas gathering and processing markets. Since 1844 its highly skilled workforce has crafted superior solutions and set the benchmark in the gas compression industry. ONLINE REPORT report.burckhardtcompression.com/en 02220006_Burckhardt-Compression_GB_2022_EN.indd 2 02220006_Burckhardt-Compression_GB_2022_EN.indd 2 05.06.23 18:44 05.06.23 18:44 02 Report section 30 Sustainability 70 Corporate governance 84 Compensation report 96 Financial report Table of contents Cover: Burckhardt Compression workshop in Winterthur, Switzerland From left to right: André Schneider, Head of Assembly; Veronika Schelling, Hydrogen Mobility & Energy Lead; Tsering Netsang, Manager Design Master Data 1 02220006_Burckhardt-Compression_GB_2022_EN.indd 1 02220006_Burckhardt-Compression_GB_2022_EN.indd 1 05.06.23 18:44 05.06.23 18:44 Burckhardt CompressionAnnual Report 2022 At a Glance New financial records Fiscal year 2022 marks new historical records for order intake, sales and operating income. Both divisions have made strong contributions to this success. Order intake in CHF mn Sales in CHF mn 1’268.3 829.7 Operating income (EBIT) in CHF mn 95.0 . 6 6 7 9 6 9. 2 6 3 9. 9 5 . 6 8 5 6 . 7 0 5 6 . 7 8 5 6 3 7. 0 6 . 6 6 7 6 . 3 0 7 . 8 0 6 . 8 4 5 . 5 4 4 8 1 9 1 0 2 1 2 2 2 8 1 9 1 0 2 1 2 2 2 8 1 9 1 0 2 1 2 2 2 Net income in CHF mn Shareholders’ equity in CHF mn Net financial position in CHF mn 70.0 261.6 –7.1 . 0 5 4 3 5 7. 1 3 . 9 2 4 2 6 9. 1 2 . 4 0 5 2 7. 4 9 9. 3 . 2 2 3 8 1 9 1 0 2 1 2 2 2 8 1 9 1 0 2 1 2 2 2 2 4 9. 4 – 8 1 7 . 1 9 – 9 1 . 8 6 5 – . 4 2 8 – 0 2 1 2 2 2 02220006_Burckhardt-Compression_GB_2022_EN.indd 2 02220006_Burckhardt-Compression_GB_2022_EN.indd 2 05.06.23 18:44 05.06.23 18:44 Burckhardt CompressionAnnual Report 2022At a Glance Sustainable growth 40% 40% of our order intake is supporting the world’s energy transition. Renewable electricity +57% Our global use of renewable electricity has increased by 57% Performance FY2022 Total Shareholder Return FY2022 in % 2 2 r a M 2 2 r p A 2 2 y a M 2 2 n u J 2 2 l u J 2 2 g u A 2 2 p e S 2 2 t c O 2 2 v o N 2 2 z e D 3 2 n a J 3 2 b e F 3 2 r a M Performance since IPO Total Shareholder Return 26 June 2006 to 31 March 2023 in % 30 20 10 0 –10 –20 –30 900 800 700 600 500 400 300 200 100 0.0 +18.5 –6.4 Burckhardt Compression SPI +798.8 +150.3 Burckhardt Compression SPI 6 0 n u J 7 0 n u J 8 0 n u J 9 0 n u J 0 1 n u J 1 1 n u J 2 1 n u J 3 1 n u J 4 1 n u J 5 1 n u J 6 1 n u J 7 1 n u J 8 1 n u J 9 1 n u J 0 2 n u J 1 2 n u J 3 2 r a M 3 02220006_Burckhardt-Compression_GB_2022_EN.indd 3 02220006_Burckhardt-Compression_GB_2022_EN.indd 3 05.06.23 18:44 05.06.23 18:44 Burckhardt CompressionAnnual Report 2022 Milestones 2022 Record orders for solar-panel-related applications We received a record number of orders for our Hyper and Boos t er/ Primary Compressors, which are used for low density polyethyl- ene (LDPE)/ethylene-vinyl acetate (EVA) production, mainly due to the growing demand for solar panel production in China and South Korea. Our compressors create the required high pressure for EVA to be produced. EVA is then applied to encapsulate the photovoltaic cells inside the solar panel. In addition, we received a large number of orders for compressors used in the synthesis of polysilicon, which is a core component of the solar cells them- selves. Glass EVA film Solar cell EVA film Backsheet Record order in USA for the hydrogen mobility and energy market Following a first award of two compressors in March 2022, Joule Processing & Plug Power have again selected Burckhardt Compression to deliver 12 large hydrogen refrigeration compressors for six hydrogen liquefaction plants in the USA. These plants will be able to liquefy a total of 180 tons of hydrogen per day and will enable Plug Power to support its custo mers and an existing network of 50’000 fuel cells installed mostly in forklift trucks. Net-zero by 2035 New Mid-Range Plan 2023 to 2027 We communicated our new Mid-Range Plan in Novem- ber 2022, targeting CHF 1.1 bn in sales and a 12% to 15% operating profit margin in fiscal year 2027. Sustai n - ability now sits at the core of our strategy, with im- plications on target markets, R&D projects, CAPEX investments, operational KPIs and long-term incentive plans for senior management. This new strategy is a step forward in achieving our new purpose of creating leading compression solutions for a sustainable energy future. We aim, in particular, to achieve 40% of our order intake from applications that support the world’s energy transition and to reduce our greenhouse gas emission intensity by 50% (Scope 1 and Scope 2) by fiscal year 2027. Acknowledging the scale and urgency of combating climate change, we have also developed a long-term commitment and road map to achieve operational net-zero for our Scope 1 and Scope 2 emissions by 2035. 4 02220006_Burckhardt-Compression_GB_2022_EN.indd 4 02220006_Burckhardt-Compression_GB_2022_EN.indd 4 05.06.23 18:44 05.06.23 18:44 Burckhardt CompressionAnnual Report 2022Celebrating exceptional team performance To ensure we recognize and celebrate our teams’ achievements across the globe that make all our milestones and successes possible, we have launched a global team award pro- gram. 36 teams have been nominated, involving over 250 employees from 15 countries. The winning team from Chi- na has shown exceptional resilience and performance, delivering services to customers during the height of the Covid-19 pandemic. 250 employees nominated Milestones 2022 Going wireless Cost-effective condition monitoring with PROGNOST®-Wireless PROGNOST®-Wireless is a new tool in our digital pro d - uct and services suite that enables customers to ex- pand their fleet of equipment under condition moni- toring and predictive maintenance: no more handheld devices, but instead easy-to-handle, cost-effective and reliable measuring of important machine values. The installation of PROGNOST®-Wireless is simple and inexpensive, making it possible for customers to include a larger number of machines in the mainte- nance strategy, or for installation in hazardous areas. Record order intake for LNG marine compressors and services LNG and its transport by ship enable companies and countries to access secure energy sources. Supporting this growing need, Burckhardt Compression received in 2022 a record level of orders for its Laby®-GI com- pressors and for related services. Thanks to its ab- sence of methane slippages, our compressor solution is unique in the market, and upcoming regulations for CO2 taxes may further benefit the ME-GI/Laby®-GI solution in the coming years. 5 02220006_Burckhardt-Compression_GB_2022_EN.indd 5 02220006_Burckhardt-Compression_GB_2022_EN.indd 5 05.06.23 18:44 05.06.23 18:44 Burckhardt CompressionAnnual Report 2022International Always close to our customers Customer proximity is one of our success factors. Burckhardt Compression is represented on all continents with 36 subsidiaries, 3 manufacturing and 5 assembly sites worldwide. 36subsidiaries worldwide 2’973 employees (FTE) over 80 countries worldwide with a Burckhardt Compression presence 6 Annual Report 2022 Burckhardt Compression 02220006_Burckhardt-Compression_GB_2022_EN.indd 6 02220006_Burckhardt-Compression_GB_2022_EN.indd 6 05.06.23 18:44 05.06.23 18:44 International International Burckhardt Compression Manufacturing/Assembly Sites Burckhardt Compression Subsidiaries, Associates and Service Centers Our customers Our customer base includes some of the largest, most famous, and most innovative companies in the world. We serve – Energy companies – Gas transportation and storage companies (onshore and offshore) – Customers in the marine sector – Hydrogen processing companies – Petrochemical/chemical companies – Industrial gas companies – General engineering companies that design and construct production lines or entire plants for our end customers Sales of new machines, mostly via general contractors, are the responsibility of the Systems Division, while the Services Division is responsible for all service and spare parts activities. Burckhardt Compression attaches great importance to a partnership-based relation- ship with its customers. In order to understand their needs even better and continuously improve, both divisions conduct regular customer surveys. 7 02220006_Burckhardt-Compression_GB_2022_EN.indd 7 02220006_Burckhardt-Compression_GB_2022_EN.indd 7 05.06.23 18:44 05.06.23 18:44 RubrikBurckhardt CompressionAnnual Report 2022 Letter to Shareholders Dear Shareholders, The fiscal year 2022 was a very successful business year for Burckhardt Compression and confirms that we are on the right path with our transformation and growth agenda towards a sustainable energy future. Despite the challenges stemming from the macroecono m ic and political environment, we achieved a record-level order intake of CHF 1.27 bn, exceeding the CHF 1 bn mark for the first time in Burckhardt Compression’s history. Strong deliveries throughout the year underpinned sales growth of 27.5% versus the previous year, rea ching a new record of CHF 829.7 mn, while the focus on opera- tional excellence supported an improved operating margin of 11.4% and a new record opera ting income of CHF 95.0 mn. With these strong results, we achieved our Mid-Range Plan for the period 2018 to 2022, delivering on our stated ambitions to reach CHF 700 mn in sales and a 10% to 15% operating margin. On the strategic and operational side, we made significant advances in transforming the business and developing new growth avenues with the hydrogen mobility and energy market, made further progress on our digita l- ization and sustainability agenda, and set a new Mid-Range Plan for 2023 to 2027, focusing on creating leading compression solutions for a sustainable energy future. Well positioned in highly dynamic markets The events witnessed this and last year have highlighted the com- plexity and interconnectedness of the global energy system and, in turn, have led to an increased focus on energy security. We see our markets developing strongly towards applications which sup- port the transition to more secure and sustainable energy sourc- es. Burckhardt Compression’s strong positioning in these markets continued strengthening and supported the exceptional order intake of the Systems Division. Our growth was driven by an ex- ceptional demand for low density polyethylene (LDPE) and eth- ylene-vinyl acetate (EVA) compressors to support the solar pan- el industry, exceptional orders for Liquefied Natural Gas (LNG) applications, and a high growth in the hydrogen mobility and en- ergy applications. The Services Division also had an exceptional sales growth of 22%, driven by pent-up demand after Covid-19, an- ticipated spare parts procurement from customers, a few large re- vamp projects and by exceptional orders for its PROGNOST(R) digi- tal product line. From a geographical perspective, China, Korea and USA have driven the growth of the Group's order intake. Demonstrating resilience amid ongoing macroeconomic challenges The fiscal year 2022 has not been without its challenges, and the Group continued to see headwinds stemming from the macroeco- nomic and political environment. Lockdowns in China, ongoing sup- ply chain tensions and inflationary pressures on energy and specific material categories continued to present operational challenges. 8 Annual Report 2022 Burckhardt Compression 02220006_Burckhardt-Compression_GB_2022_EN.indd 8 02220006_Burckhardt-Compression_GB_2022_EN.indd 8 05.06.23 18:44 05.06.23 18:44 Letter to Shareholders Our employees’ outstanding commitment, as well as the Group’s global footprint, resilient service business, strong market positio n ing, diversified application portfolio and agile global supply network helped to mitigate and compensate for these challenges. As a direct result of the war in Ukraine, we have refrained from accepting any orders from the Russian market since March 2022. Growth in other markets has more than compensated for the loss of volume in Russia, and the one-off costs related to the wind-down of the Russian backlog have been more than offset by profitable sales growth globally, a favorable product mix in the Systems Division and strong operational performance. Strong financials in fiscal year 2022 and significant increase of dividends proposed Gross profit was up 28.1% to CHF 244.5 mn, yielding a gross pro fit margin of 29.5% (previous year: 29.3%). Research & Development expenses increased by CHF 4.2 mn to CHF 23.9 mn to devel- op innovative solutions for the marine and hydrogen mobili- ty and energy markets. Selling, marketing and general admin- istrative expenses amounted to CHF 117.0 mn or 14.1% of sales (previous year: 16.4%). Other operating income and expenses (net) were at CHF -8.6 mn, including non-recurring costs related to the exit from the Russian market in the amount of CHF 7.1 mn. De- s pite these one-off costs, the consolidated operating profit (EBIT) rose substantially by 35.0% to CHF 95.0 mn, corresponding to an EBIT margin of 11.4% (previous year: 10.8%). Net income of CHF 70.0 mn clearly exceeded the previous year’s fi gure by 38.9%, while earn- ings per share attributable to Burckhardt Compression Group share- holders rose likewise by 39.3%, from CHF 14.82 to CHF 20.64. Value creation was further enhanced, with a Return on Net Operat- ing Assets (RONOA) substantially increased from 19.7% to 25.7%. The balance sheet total at the end of March 2023 was at CHF 940.6 mn, 12.3% higher than in the previous year, mainly due to the increase in advance payments from custo mers and the growth in inventories on the back of the high order intake. The net financial position at the end of fiscal year 2022 improved to CHF -7.1 mn (CHF -56.8 mn at the end of fiscal year 2021). Total equity increased to CHF 261.6 mn (+18.7 mn), while the equity ratio of 27.8% remained slightly below the mid-term ambition level of over 30%. Based on these strong results, the Board of Directors will propose at the Annual General Meeting a dividend of CHF 12.00 per share, within our overall attractive div- idend policy of 50% to 70% pay-out ratio and representing an in- crease of 60% compared with the previous year. Confidence into 2023 and beyond, with sustainability at the core of our new strategy As we enter fiscal year 2023, we do so in a solid financial position with good momentum in both divisions, a strong team and an am- bitious plan. As the world transitions towards more sustainable and secure ener gy sources, we expect to continue benefiting from our strong position- ing in related applications. A key ingredient to our success in the past and the future is our people. We increased our workforce globally by 8.8% to 2'973 FTE and further ramped-up our training and develop- ment activities to deliver our increased order backlog and achieve our growth ambitions. In addition, we added bench strength with two new members of the Executive Management team that bring a wealth of experience from world-class industrial companies. On April 1st, 2022, Fabrice Billard took over as CEO and was succeeded as Systems Division President by Andeas Brautsch. In addition, Vanessa Valentin joined the Executive Management team as Chief Human Resources Officer. Guidance for fiscal year 2023 We expect supply chain tensions in certain material categories to persist in the coming year as well as some uncertainty about the development of the global economy. However, based on the strong order intake over the past two fiscal years, we expect sales to reach between CHF 950 mn and CHF 1'000 mn at the Group level for fiscal year 2023. Operating margin is expected at a similar level as in fiscal year 2022, considering no further one-off costs for Russian projects, an increased share of Systems business in the overall sales mix as well as a less favorable product mix within the Systems Division. Within the fiscal year, the second half is expected to be stronger than the first half due to the distribution of project deliveries. 9 02220006_Burckhardt-Compression_GB_2022_EN.indd 9 02220006_Burckhardt-Compression_GB_2022_EN.indd 9 05.06.23 18:44 05.06.23 18:44 Burckhardt CompressionAnnual Report 2022Letter to Shareholders Mid-Range Plan 2023 to 2027 started We communicated our new Mid-Range Plan in Novem ber 2022, tar- geting CHF 1.1 bn in sales and a 12% to 15% ope rating margin in fiscal year 2027. Sustainability now sits at the core of our strategy, with implications on target markets, R&D projects, CAPEX investments, operational KPIs and long-term incentive plans for senior manage- ment. This new strategy is a step forward in achieving our purpose of creating leading compression solutions for a sustainable ener- gy future. We aim, in particular, to achieve 40% of our order intake from applications that support the world’s energy transition and to reduce our greenhouse gas emission intensity by 50% (Scope 1 and Scope 2) by fiscal year 2027 compared to fiscal year 2021. Acknow- ledging the scale and urgency of combating climate change, we have also developed a long-term commitment and roadmap to achieve operational net-zero for our Scope 1 and Scope 2 emissions by 2035. The achievement of these goals will be supported by inte- grating sustainability into our operational excellence activities and continuous investments in innovation and digitalization. On the fi- nancial side, in addition to the growth and profitability targets, our ambition is to reach a Return on Net Operating Assets (RONOA) of more than 25%, and we intend to keep an attractive dividend policy, with a 50% to 70% payout ratio. Fabrice Billard, CEO Ton Bücher, Chairman of the Board of Directors Thanks We remain excited about the next steps of our journey and fun- damentally positive about our markets and ability to transform for a sustainable energy future. The significant and profitable growth achieved in fiscal year 2022 showcases our resilience amid on- going market challenges and demonstrates inherent strength in our market positioning. We have delivered attractive results sup- ported by our employees’ commitment and efforts worldwide. Their dedication remains a critical factor behind our success, and we sin- cerely thank them on behalf of the Board of Directors and Executive Management team. We would also like to thank our shareholders and customers worldwide for their trust and for being part of our sustainable growth journey. Kind regards, Ton Büchner Chair of the Board of Directors Fabrice Billard CEO Winterthur, June 6, 2023 10 02220006_Burckhardt-Compression_GB_2022_EN.indd 10 02220006_Burckhardt-Compression_GB_2022_EN.indd 10 05.06.23 18:44 05.06.23 18:44 Burckhardt CompressionAnnual Report 2022 Key Figures Key figures in CHF mn Total Order intake Sales Operating income (EBIT) in % of sales Net income in % of sales Return on net operating assets (RONOA) Systems Division Order intake Sales Operating income (EBIT) in % of sales Services Division Order intake Sales Operating income (EBIT) in % of sales Balance sheet Balance sheet total Shareholders’ equity in % Net financial position Share Net income per share Dividend per share Payout ratio Market capitalization (in CHF mn) Employees Employees as per end of fiscal year (FTE) Apprentice Turnover rate Average company affiliation (years) Environment Energy use (MWh) Greenhouse gas emissions Scope 1 (tCO2e) Greenhouse gas emissions Scope 2 (tCO2e) Water (m3) 11 2022 2021 Change 2022/2021 1’268.3 829.7 95.0 11.4 70.0 8.4 25.7% 911.2 489.7 30.3 6.2 357.1 340.0 75.0 22.1 940.6 27.8 –7.1 20.64 12.0 58.1% 1’931.2 2’973 71 10.7% 8.0 59’107 4’674 15’396 78’687 976.6 650.7 70.3 10.8 50.4 7.7 19.7% 651.1 372.7 21.1 5.7 325.5 278.0 58.4 21.0 837.8 29.0 –56.8 14.82 7.5 50.6% 1’662.6 2’732 64 10.1% 8.4 49’928 4’221 13’198 83’810 29.9% 27.5% 35.0% 38.9% 39.9% 31.4% 43.5% 9.7% 22.3% 28.6% 12.3% 39.3% 60.0% 16.2% 8.8% 10.9% –4.7% 18.4% 10.7% 16.7% –6.1% 02220006_Burckhardt-Compression_GB_2022_EN.indd 11 02220006_Burckhardt-Compression_GB_2022_EN.indd 11 05.06.23 18:44 05.06.23 18:44 Burckhardt CompressionAnnual Report 2022 Our Company and Strategy We create leading com- pression solutions for a sustainable energy future In a dynamic market environment where the transition towards a new energy economy plays an increasing role, we have defined a new ambitious strategic plan, with sustainability at its core. Both divisions are aiming for substantial growth, especially in applications supporting the energy transition, and are expected to increase their profitability. 12 02220006_Burckhardt-Compression_GB_2022_EN.indd 12 02220006_Burckhardt-Compression_GB_2022_EN.indd 12 05.06.23 18:44 05.06.23 18:44 Burckhardt CompressionAnnual Report 2022Our Company and Strategy New purpose and Mid-Range Plan Mid-Range Plan 2018 to 2022 successfully completed with pro fitable growth and an attractive market positioning Our strategy process is based on a Mid-Range Plan, which is de- fined every five years and reviewed annually. In our last Mid-Range Plan, which covered the fiscal years from 2018 to 2022, we have strengthened our leading market position, accelerated our sustai n- ability journey, and successfully delivered on our stated ambitions to reach CHF 700 mn in sales and a 10 to 15% operating profit margin. We have enhanced our positioning in traditional new equipment and service markets through an unwavering focus on operatio nal excellence, an increased investment in innovation and selected acquisitions. Amid the global drive towards energy security and sustainability, we have established strong positions in new markets, and we enter the fiscal year 2023 in a solid financial position with a strong growth momentum and many opportunities ahead of us. New purpose and new Mid-Range Plan 2023 to 2027 to contribute to a sustainable energy future We defined our new purpose: “We create lea ding compression solu- tions for a sustainable energy future.” This sets the guiding star for our Mid-Range Plan 2023 to 2027. It also provides the basis to- gether with our refined values and behaviors to nurture and evolve our leadership and culture. We will con tinue to build an organi- zation that is customer-oriented, passionate, performance-driv- en and mindful of its responsibilities towards the environment and society at large. We will further drive competitiveness through a continued focus on operational excellence, and innovate to keep our growth momentum in new, fast-growing markets. We are also ready to capture external growth opportunities and a potential market upside when the energy transition accelerates beyond our Mid-Range Plan assumptions. 2035 We aim to become operational net-zero for our Scope 1 and Scope 2 emissions by 2035. Our culture, values, and behaviors guide our actions and create a great place to work and thrive in Along with our purpose, we have, with our global leadership teams, reflected on and revised how our culture, values and behaviors will evolve to support our growth. Our four values “Partnership”, “Pas- sion”, “Performance” and “Responsibility” determine our daily de- cisions and actions; our customers are always at the center of our considerations and actions. We focus on teamwork and act as “one” company. We are entrepreneurs with a strategic mindset and act decisively with a focus on operational excellence and innova- tion. We love what we do and inspire others with the aim of cre - a ting a more sustainable energy future for the world. At the heart of it all we keep ourselves, partners, suppliers, and customers safe. We foster an inclusive environment where everyone can reach their po- tential and where integrity and reliability are the basis for the trust we enjoy among our colleagues, customers, partners, and suppliers. -50% We aim to reduce our greenhouse gas emission intensity by 50% (Scope 1 and 2) until 2027 compared to 2021. 13 02220006_Burckhardt-Compression_GB_2022_EN.indd 13 02220006_Burckhardt-Compression_GB_2022_EN.indd 13 05.06.23 18:44 05.06.23 18:44 Burckhardt CompressionAnnual Report 2022Our Company and Strategy Objectives and strategy Our key objectives 2027: Sustainable, profitable growth We communicated our new Mid-Range Plan in November 2022, targeting CHF 1.1 bn in sales and a 12 to 15% operating profit mar - gin in fiscal year 2027. Sustainability sits now at the core of our strategy, with implications on target markets, R&D projects, CAPEX investments, operational KPIs and long-term incentive plans for senior management. We aim, in particular, to achieve 40% of our order intake from applications that support the world’s energy transition and to reduce our greenhouse gas emission intensity by 50% for Scopes 1 and 2 until fiscal year 2027 (compared to 2021). Acknowledging the scale and urgency of combating climate change, we have developed a long-term commitment and road- map to become operational net-zero for our Scope 1 and Scope 2 emissions by 2035. Achieving these goals will be suppor ted by the integration of sustainability into our operational excellence acti v- ities and by continuous investments in innovation and digitalization. On the financial side, in addition to the growth and profitability targets, our ambition is to reach a Return on Net Operating Assets (RONOA) of more than 25%, and our intention is to keep an attrac- tive dividend policy, with a 50% to 70% payout ratio. Growth in a highly dynamic market environment Our markets are expected to continue to develop with strong dynamics on the back of the world's energy transition and a con- tinuous growth of the world's population. The exact developments are difficult to predict, but in any scenario identified by the Inter- national Energy Agency (IEA), the world will need more gases, and therefore more compressors. We have based our projections on a middle scenario, and a potential acceleration of the energy mar- kets towards more secure and sustainable energy sources would tendentially accelerate our growth. 40% By 2027, we aim to generate 40% of our order intake from appli- cations that support the global energy transition. Growth in the global market for hydrogen mobility and energy In the past two years, we actively participated in the strong growth in the global hydrogen mobility and energy market. The two Divi- sions Systems and Services have established our company as one of the market leaders in this developing market. With our compres- sion solutions and related services, we are present in the whole hydrogen value chain, from the hydrogen production to its trans- portation and storage, and finally its distribution. The long-term po- tential is considerable, not least because of global efforts to reduce CO2 emissions and switch to more secure and sustainable energy sources. To fully exploit this opportunity, we will continue to focus on innovation, customer partnerships and increasingly rely on digital products and services. H2 We are present in the whole hydrogen value chain. 14 02220006_Burckhardt-Compression_GB_2022_EN.indd 14 02220006_Burckhardt-Compression_GB_2022_EN.indd 14 05.06.23 18:44 05.06.23 18:44 Burckhardt CompressionAnnual Report 2022Our Company and Strategy New opportunities through upgrades, marine services and digitalization Further, new market opportunities arise in supporting existing cus- tomers in their efforts to reduce energy consumption and green- house gas emissions by upgrading their plants with modern com- pression solutions. Addressing this opportunity requires strong engineering capabilities, where Burckhardt Compression can dif- ferentiate. In addition, the number of our compressors installed on ships has increased significantly in the past few years and consti- tutes a special growth area for our Services Division, which has de- veloped a strong global platform to serve this demanding market. Finally, we plan to expand our range of digital customer services under the UP! Solutions products and services suite, which aims to increase the reliability and service life of compressors. Innovation as essential part of our growth strategy Innovation is at the core of our purpose and is an essential thrust in our new strategy. We have significantly increased our R&D invest- ment in the past three years, launched several new products and developed unique digital services. We will continue to innovate at a high pace to support our strategy and further strengthen our competitive position. In particular, new materials and products are under development for the hydrogen mobility and energy market, as well as for marine applications. For the Services Division, new com- ponents are under development with the aim to provide high op- e r ational reliability, optimal service intervals and easy maintenance – all with the aim of achieving the lowest possible operating costs for our customers and increasing the sustainability of our solutions. With our digital solutions, we can in- crease the service life of compressors and extend their uptime. 15 02220006_Burckhardt-Compression_GB_2022_EN.indd 15 02220006_Burckhardt-Compression_GB_2022_EN.indd 15 05.06.23 18:44 05.06.23 18:44 Burckhardt CompressionAnnual Report 2022Our Company and Strategy Integrated business model Integrated business model as the key to our success Most compressors function as critical components of a larger sys- tem with an average lifespan of 40 years or more, so it is vital to have the support of a long-term oriented organization that offers expertise in all aspects, with highly trained employees. Our two divisions, Systems and Services, cooperate closely and between them cover the entire life cycle of reciproca ting compressor sys- tems. Customers are supported throughout the whole life cycle of their systems by a wide range of products and services, from pro- ject definition, project execution, systems installation and commis- sioning, ongoing service, and spare parts through to the complete overhaul of their system or even its conversion for a new purpose. The table below shows the entire life cycle of a compressor project and displays the interaction between the two divisions in the dif- ferent project phases: Life cycle of a typical project Duration 1–3 years 10–22 months 1–12 months 1–2 months 2 years (avg) 40 years (avg) Phase Evaluation and start of construc- tion Engineering and manufacturing of compressor system Decision maker End customer/ EPC/Licensor End customer/ EPC Compressor installation Compressor start-up Warranty period Post-warranty End customer Project progression Decision to build plant and pur- chase order Compressor shipped & transfer of ownership Product acceptance Repair & main- tenance; structural machine build Division in charge Systems Division Systems Division Services Division Services Division 16 02220006_Burckhardt-Compression_GB_2022_EN.indd 16 02220006_Burckhardt-Compression_GB_2022_EN.indd 16 05.06.23 18:44 05.06.23 18:44 Burckhardt CompressionAnnual Report 2022Our Company and Strategy Key markets Petrochemical/chemical industry The petrochemical/chemical industry is one of Burckhardt Com- pression’s main markets. It covers the production of a vast range of commodities, which are present in our daily lives, such as lacquers, synthetic rubbers, adhesives and dyes, solvents, paints, fertilizers, and textiles. This market is driven primarily by the growing world- wide demand for products made of plastic, which requires an ex- pansion of production capacity, combined with a trend towards greater local added value. The strong growth of the past couple of years was in particular driven by the need to increase production capacity for low-density polyethylene (LDPE) and ethylene-vinyl acetate (EVA), which is used as encapsulant for solar panels. Chem- ical recycling, which also uses reciprocating compressors, is an ap- plication that will gain in importance as it conserves resources. In the petrochemical and chemical in dustry market, companies will continue their efforts to reduce costs by replacing smaller plants with larger ones, establishing strategic production sites, and ex- tending value-added chains. Gas transport and storage Gas transport and storage is another key market for Burckhardt Compression. To store or transport gases, they must be compressed or liquefied. Gases typically used in this market are Liquefied Nat- ural Gas (LNG), Liquefied Petroleum Gas (LPG), and Compressed Natural Gas (CNG). Gas transport in specialized ships offers flexibili- ty and avoids the geo-political risks associated with a dependence on pipelines. The process chain supported by Burckhardt Compres- sion’s compressors and services includes liquefaction, transfer to the carrier, handling the boil-off gases (BOG) during transport, un- loading, storage until regasification, and feeding into the consum- er network. Burckhardt Compression provides unique solutions for the compression and reliquefication of BOG and fuel gas injection in two- or four-stroke marine diesel engines, at high or low pres- sure. It has recently won compressor orders for a significant share in LNG-powered ships, including commercial and cruise ships, which increasingly use LNG as fuel to reduce CO2 emissions and meet stricter environmental regulations. Hydrogen mobility and energy Hydrogen mobility and energy is a new and fast-growing mar- ket for Burckhardt Compression. It is particularly growing in USA, Europe, China, Middle East, Korea and Japan, where this well- known molecule is given a significant potential role in the transi- tion towards more secure and sustainable energies. The energy and transport industries are indeed increasingly using hydrogen to store energy and reduce carbon dioxide emissions. Compressors play a key role in the whole hydrogen value chain and the company has developed unique solutions for hydrogen production and liquefac- tion plants, hydrogen fueling stations with high mass flows, trailer filling and power-to-gas hydrogen production. Hydrogen is also a core component of green ammonia and e-fuels, which are emerg- ing markets with significant growth potential. 17 60 Burckhardt Compression has more than 60 years of experience with hydrogen compression and offers a broad product range, including oil-free compressors for fuel cells applications. Industrial gas This market has been growing fast in the past years for Burckhardt Compression thanks to the increasing demand for polysilicon, which itself is the consequence of the rising demand for solar panels. Other industrial gases, such as argon, helium, carbon dioxide, car- bon monoxide, oxygen, and nitrogen are usually produced in air separation plants. Their end markets are diverse, encompassing industries like metalworking and metallurgy, chemical companies, food manufacturing, glass, pulp and paper manufacturing, elec- tronics, construction, and healthcare. Market drivers are regional growth and industry-specific growth. Refinery Refineries use distillation and chemical reactions to turn crude oil into a range of fuels, lubricants, and raw materials for further down- stream processes. In this market, Burckhardt Compression main- ly supplies compressors for various hydrogen applications (hydro- treating, isomerization, hydrocracking, reforming). The compressors are typically used to clean the raw products and reduce their nitro- gen and sulfur content. Stricter environmental regulations, facility expansions and the requirement to process raw products of differ- ing quality in a single facility are important drivers in this market. In addition, standard refineries are increasingly converted into biore- fineries processing biomass. Gas gathering and processing The production of marketable natural gas begins with a pre-pro- cessing at the gas field itself using high-speed compressors. Gas- es can also be injected into wells to enhance the recovery of oil. Burckhardt Compression provides onshore and offshore solutions for these applications. 02220006_Burckhardt-Compression_GB_2022_EN.indd 17 02220006_Burckhardt-Compression_GB_2022_EN.indd 17 05.06.23 18:44 05.06.23 18:44 Burckhardt CompressionAnnual Report 2022Our Company and Strategy Laby®-GI Compressors The Laby®-GI Compressor is mainly used for the compression of LNG boil-off gas. It has a fully balanced design that eliminates un- balanced moments and forces, so it can be used on offshore vessels and installations where strict guidelines on maximum allow- able vibration levels on deck structures must be observed. The unique combination of labyrinth seal design and tried-and-tes ted ring seal technology makes Laby®-GI Com- pressors the solution of choice for both low-temperature and high-pressure appli- cations. The proven technology guarantees maximum efficiency and lowest life cycle costs without any gas slippages. Compressor systems Burckhardt Compression’s reciprocating compressors lie at the heart of our custom- ers’ processes. Laby® – Labyrinth Piston Compressors The Labyrinth Piston Compressor is unique with its exceptional level of reliability and availability. The special labyrinth seal on pistons and piston rods creates a com- pletely oil-free, contactless seal. This pre- vents piston ring debris from contamina t- ing the gas as well as friction-induced hot spots. The result is a longer service life, which has a positive impact on overall reliability and operating costs. The Laby® Compres- sor is designed to compress bone-dry, dirty, abrasive, and other gases. The gas-tight and pressure-resistant casing reduces gas emissions and losses to the environment to virtually zero. The Laby® Compressor easi- ly manages the compression of LNG boil- off gas at suction temperatures down to -160°C (-250°F). Process Gas Compressors per API 618 We have many years of experience with hy- drogen compression systems for the refining industry and now also offer hydrogen com- pression solutions for hydrogen mobility and energy applications. Burckhardt Compres- sion offers non-lubricated and lubricated Process Gas Compressors, horizontal and vertical. They are suited in particular to the high-pressure compression of hydrogen, hydrocarbon, and corrosive gases. Pro- cess Gas Compressors built by Burckhardt Compression are synonymous with unri- valed availability and long operating lives. Optimal sizing and the use of top-quality compressor components and materials en- sure low operating and maintenance costs. The design, the advanced Burckhardt Compression technology and superb quality together with the robust construction translate into excellent reliability and low life cycle costs. Hyper Compressors Burckhardt Compression is the world mar ket leader for Hyper Compressors. The Hyper Compressor is a high-pressure reciprocat- ing compressor for low-density polyethylene (LDPE) and ethylene-vinyl ace tate (EVA) plants with a discharge pressure of up to 3’500 bar. Burckhardt Compression has es- tablished an outstanding track record with nearly 70 years of experience in building this type of compressor. It is characterized by a long operational life and high safe- ty standards, which can be traced to its unique construction design and Burckhardt Compression’s global one-stop mainte- nance and service capabilities. The most powerful compressor in the world, driven by a 33’000 kW electric motor and compres- sion capacity of 400’000 tons of ethylene a year, was built by Burckhardt Compres- sion in 2016. 18 02220006_Burckhardt-Compression_GB_2022_EN.indd 18 02220006_Burckhardt-Compression_GB_2022_EN.indd 18 05.06.23 18:44 05.06.23 18:44 Burckhardt CompressionAnnual Report 2022Our Company and Strategy High-Speed Compressors High-Speed Compressors are essentially Process Gas Compressors with shorter strokes and higher rotational speeds. These com- pressor systems are used for natural gas processing and transport applications. Standard High-Pressure Compressors Burckhardt Compression’s Standard High- Pressure Compressors are reciprocating compressors with a compact design and low weight. They are delivered skid-mounted with structural supports that dampen vi- bration, so there is no need for a special foundation. The air and water-cooled com- pressors are used to compress air, hydrogen, nitrogen, helium, argon, natural gas and other non-corrosive gases and gas mixtures at land facilities and on ships. Compressor systems and packages Beyond the compressor itself, we engineer the complete system in-house to customers' specifications and use proven and qualified suppliers. We work together with our customers' teams to make every project a success for their business. Diaphragm Compressors Diaphragm Compressors compress gas by means of a flexible membrane. These mem- branes are usually metallic, have a limited stroke and are used for smaller gas flows at high pressure. The advantage of this technology is that the gas is hermetically sealed by the membrane during compres- sion, enabling very high levels of gas pu- rity. Burckhardt Compression’s diaphragm compressors are used for hydrogen fueling stations and for the compression of small quantities of pure gas for medical and oth- er purposes. 19 Our compressor portfolio 02220006_Burckhardt-Compression_GB_2022_EN.indd 19 02220006_Burckhardt-Compression_GB_2022_EN.indd 19 05.06.23 18:44 05.06.23 18:44 Burckhardt CompressionAnnual Report 2022Our Company and Strategy Services and components The Services Division provides a comprehensive range of services, from simple modifications to extensive retrofit, revamp projects, and turnkey solutions. It is backed by original equipment manufac- turer (OEM) parts with high supply readiness and vast engineering know-how. Experienced field service technicians ensure close in- teraction with the customer and rapid response. Service Centers around the world also handle repairs of all brands. Depending on the size of the project and the construction site, Burckhardt Compression offers a 24/7 shift operation so that the plants can be put back into operation even faster. We also provide reliable expert monitoring and diagnostic solutions and advisory services – all from a single source. Comprehensive engineering, revamp, and repair expertise For operators, the reliability, availability and cost-effectiveness of reciprocating compressor systems, and their compliance with en- vironmental and emission regulations, are crucial. Thus, partners that can offer expertise and sound advice are essential. Burckhardt Compression stands out thanks to its comprehensive in-house ex- pertise. A wide range of complementary services are offered for all brands of reciprocating compressors and their auxiliary systems in 50 service workshops around the world. Our specialists use pro- prietary, advanced software tools to model, calculate, and opti- mize reciprocating compressor performance, regardless of make or brand. A highly motivated team carries out revamp projects of any complexity to the full satisfaction of customers and can pro- long the operating life of older compressors by retrofitting them with the latest technology. This range of services also includes a valve service, overhaul of compressors and repairs to the current best practice level. UP! Solutions represent user-friendliness and maximize productivity through op- timized uptime and overall cost manage- ment, resulting in customer success. Original spare parts for optimal compressor operation Compressor components, such as valves, seals, and packings are subject to wear and tear, and therefore largely determine the dura- tion of service intervals, operational availability and, ultimately, the overall life cycle costs of reciprocating compressors. Original spare parts backed by Burckhardt Compression’s full warranty as an ori g - inal equipment manufacturer (OEM) stand for superior quality and ensure low life cycle costs and the optimal operation of compressor systems. These top-quality compressor components are tailored to specific system requirements. Monitoring and diagnostics – digital service solutions Under the name UP! Solutions, Burckhardt Compression provides a range of services that offer significant levels of control and con- venience and enable its customers to optimize their operations. UP! Remote Support has been on the market since this reporting per - iod and offers a remote support solution where customers receive direct, on-the-job support from the Burckhardt Compression experts via a tablet or HoloLens. Reliable condition monitoring and diagnostic systems for re- ciprocating compressors and equipment, integrated within the top-level systems for monitoring an entire production facility, are effective tools for enhancing workplace safety and prolonging the service intervals of a compressor system. Continuous machine di- agnosis detects potential and actual anomalies at an early stage and thus helps to avoid costly and unexpected downtime. The diagnostic systems made by our subsidiary PROGNOST Systems GmbH are designed for use with all types of reciprocating com- pressors and with many other types of rotating machinery. They are backed by unrivaled technology and deliver value day after day to our customers. Finally, the myFleet portal offers a rapid, transparent, and efficient overview of queries, documentation, and spare parts for compressors. Field Service – close to the customer Geographic proximity and trusting relationships are vital to Burckhardt Compression’s success. Around 400 experts in Field Service, from engineers to local site managers, provide a rapid re - s ponse capability that covers all the necessary skills and are known for their pronounced service mentality. A local presence simplifies interaction with the customer, shortens the supply chain and ma x- imizes uptime. This service network will continue to grow. Customer trainings The objective of our ever-growing range of customer training and learning programs is to foster regular technical exchange with our customers on compressors and their operation, and to pass on Burckhardt Compression’s engineering expertise. Theoretical and practical training programs for various types of compressors and for our own and third-party components are offered at our modern training center in Winterthur, and at locations in Korea, China, India, Germany, and the US. We also provide on-site training at customer sites for their systems. As part of our digitalization strategy, online training has become predominant in the past couple of years. Around 400 Field Service Experts have gained their know-how over many years and have extensive expertise in each application. 20 02220006_Burckhardt-Compression_GB_2022_EN.indd 20 02220006_Burckhardt-Compression_GB_2022_EN.indd 20 05.06.23 18:44 05.06.23 18:44 Burckhardt CompressionAnnual Report 2022Our Company and Strategy From engineering workshop to global market leader 1844 Franz Burckhardt opens an engineering workshop in Basel 1935 Development and sale of the first Labyrinth Piston Compressor (Laby) for oxygen compression in steel production 1951 Manufacture of low-density polyethylene (LDPE) thermoplastic using Hyper compressors 2015/19/22 Acquisition of Arkos Field Services, USA, in two stages; access to a qua l - ified workforce and service centers across the USA; in 2022 merger with Burckhardt Compression US Inc. 1883 Development and sale of the first single-stage, dry-running recipro- cating compressor 1890 August Burckhardt founds the Burckhardt Maschinenfabrik 1913 Delivery of the first compressor for am- monia synthesis to BASF Ludwigshafen, Germany 1920 Start of fertilizer production using ammonia synthesis compressors 1969 Acquisition by Sulzer 1971 Transport and storage of natural gas with labyrinth piston compressors 1982 Consolidation of Sulzer’s activities in the field of reciprocating com- pressors to form Maschinenfabrik Sulzer-Burckhardt AG 1999 Consolidation of Basel and Win- terthur sites at the Winterthur site 2002 Five members of the manage- ment board buy out the business together with a financial investor; name changed to Burckhardt Compression 2006 Stock exchange listing on the SIX Swiss Exchange (IPO), valor BHCN 2013 Laby®-GI compressors are used on LNG tankers 2016 New company structure with two divisions, Systems and Services 2016/20 Acquisition of Shenyang Yuanda Compressors, the leading Chinese manufacturer of reciprocating com- pressor systems, in two stages; proximity to local market, expansion of the product portfolio and direct access to an established local supply chain 2020 Acquisition of the compressor busi- ness of The Japan Steel Works JSW to strengthen position in the global market and particularly in Japan 2021 Acquisition of Mark van Schaick in The Netherlands 2021 Market introduction of two com- pressor ranges for LNG-fueled ships 2021 Launch of high pressure non- lubricated compressor for hydrogen mobility and energy 2023 Acquisition and integration of assets and employees of SPAN Maintenance and Service Co. Ltd. in Thailand into the newly founded subsidiary Burckhardt Compression (Thailand) Co. Ltd. Company history Compressor development 21 02220006_Burckhardt-Compression_GB_2022_EN.indd 21 02220006_Burckhardt-Compression_GB_2022_EN.indd 21 05.06.23 18:44 05.06.23 18:44 Burckhardt CompressionAnnual Report 2022Systems Division Systems Division Order intake in CHF mn Sales in CHF mn Gross profit in CHF mn 911.2 489.7 96.3 Operating income (EBIT) in CHF mn 30.3 . 4 5 7 3 . 3 8 8 3 8 9. 0 4 . 7 2 7 3 1 . 1 5 6 . 0 8 2 4 . 6 4 0 4 2 . 1 6 3 3 . 1 7 1 9. 5 . 8 2 4 . 5 0 3 8 1 9 1 0 2 1 2 2 2 8 1 9 1 0 2 1 2 2 2 8 1 7 1 0 2 1 2 2 2 1 . 1 2 . 2 6 1 0 2 1 2 2 2 4 6 . 9 1 . 7 8 – 8 1 in CHF mn Order intake Sales Gross profit in % of sales EBIT in % of sales Headcount at end of fiscal year (FTE) 22 2022 911.2 489.7 96.3 19.7% 30.3 6.2% 1’684 2021 651.1 372.7 71.3 19.1% 21.1 5.7% 1’518 Change 2022/2021 39.9% 31.4% 35.1% 43.5% 10.9% 02220006_Burckhardt-Compression_GB_2022_EN.indd 22 02220006_Burckhardt-Compression_GB_2022_EN.indd 22 05.06.23 18:44 05.06.23 18:44 Burckhardt CompressionAnnual Report 2022 Systems Division Exceptionally strong order intake, growing by +40% 23 Annual Report 2022 Burckhardt Compression 02220006_Burckhardt-Compression_GB_2022_EN.indd 23 02220006_Burckhardt-Compression_GB_2022_EN.indd 23 05.06.23 18:44 05.06.23 18:44 Systems Division In a challenging market environment affected by trade sanctions and supply chain disruptions, the Systems Division looks back at a very successful fiscal year 2022. The division has further expan d- ed its already strong market position, and reached new historical records for order intake, sales, gross profit, and EBIT. These results represent a strong over-achievement compared to the targets de- fined in the Mid-Range Plan 2018-2022. Financials Order intake of the Systems Division stood at CHF 911.2 mn, repre- senting an increase of 40% after an increase of 61% in the pre vious year. The division also recorded a substantial increase in sales of 31% to CHF 489.7 mn on the back of the high order intake of the past two years. Proactive measures to expedite the supply chains combined with a certain stabilization of global logistics allowed to deliver large projects in the final weeks of fiscal year 2022, some of them even ahead of schedule. Gross profit increased by 35% to CHF 96.3 mn, resulting in a slightly higher gross margin of 19.7%, sup- ported by the high utilization of production capacities, a favora- ble product mix and robust project execution. EBIT grew by 44% to CHF 30.3 mn, owing to higher volumes and slightly improved gross margins. This resulted in an EBIT margin of 6.2% (previous year: 5.7%), despite CHF 7.1 mn one-off costs and provisions for write-offs and other expenses in the context of the exit from the sanctioned Rus- sian market. Market developments The extraordinary order growth was driven by the strong po sition of the Systems Division in the ecosystem of new market segments, like the rising solar panel production, Liquefied Natural Gas (LNG) use in marine applications and in hydrogen mobility and energy applications. By being a first mover in those market segments, the division was able to shape the specifications with its cus- tomers, supporting them towards a technically and economi- cally optimized solution. In particular, the division won large orders of non-lube Laby®-GI for LNG carriers as well as Hy- per and Booster-Primary Compressors for low density polyeth- ylene (LDPE)/ethylene-vinyl acetate (EVA) production. In the The hydrogen mobility and energy continues its rapid growth world- wide. hydrogen mobility and energy sector, the growth was driven by the US and European markets. At the same time, the division defended its strong market share in established market segments. Chemical and petrochemical industry The Systems Division benefited significantly from a strong mar- ket position in the chemical and petrochemical industry segment, where an extraordinary high demand for LDPE/EVA compressors arose in 2022. EVA production capacity in particular is increasing in support of the solar panel industry, which has been growing glob- ally. 2022 has most likely been an extraordinary peak for LDPE/EVA compressor orders, yet the Systems Division will maintain its strong market share even in a slightly cooled-down market environment. Gas transport and storage The order intake in the gas transport and storage segment be n- efited from a boom of demand for Laby®-GI compressors for LNG carriers. A significant amount of these orders has been preponed from fiscal year 2023 and will be delivered over several years. Going forward, China will become an important market for merchant ship- ping and LNG carriers, and we will benefit from our strong position in this country. Finally, the marine LPG application has seen a clear decrease in fiscal year 2022. Hydrogen mobility and energy The hydrogen mobility and energy market continues its rapid growth worldwide, driven by a fruitful combination of strong political sup- port, public and private investments, and maturing technologies. Burckhardt Compression took an early mover position and deve l- oped the ecosystem with other suppliers and strategic customers in Europe, USA, and China, thanks to our portfolio of reciprocating and diaphragm compressors for trailer filling stations, hydrogen re- fueling stations, and hydrogen liquefaction plants. Our partnership with Shell New Energies to develop heavy-duty hydrogen refuel l- ing station compressor systems was reinforced in 2022 with a pilot project for feed compressors. The strategically important customer Plug Process Systems (PPS) in the USA trusted us with a significant order for hydrogen liquefaction plants. We also partnered with Hy- drogen-Refueling-Solutions (HRS) to supply diaphragm compres- sors for hydrogen refueling stations in Europe. Industrial gas Shenyang Yuanda Compressor gained a strong share of the gro w- ing compressor market for polysilicon production in China support- ing the solar panel industry. The rest of the global industrial gas market remained stable. Refinery The refinery market was impacted by a limited number of new pro- jects announcements, delayed projects, as well as the withdrawal from the Russian market. 24 02220006_Burckhardt-Compression_GB_2022_EN.indd 24 02220006_Burckhardt-Compression_GB_2022_EN.indd 24 05.06.23 18:44 05.06.23 18:44 Burckhardt CompressionAnnual Report 2022Systems Division Alongside the focus on hydrogen mobility and energy, we will strengthen our market share in low-emission marine fuels and solar-industry-driven applica- tions. Gas gathering and processing Gas gathering and processing remained active in the period under review but represents a small share of our total order intake. Infrastructure and capacity The increase of the Systems Division’s delivery capacity is a core priority: Every step along the value chain has been assessed and required measures for capacity extension have been defined. For instance, we completed a logistics expansion project, including new high-bay racking in our Swiss manufacturing facility. Moreover, we are continuing with our machine-shop upgrades in Switzerland, which includes a semi-automated machining cell put into operation for component handling via robot, and 3D-scanning equipment to replace manual processes. In India, we are expanding our existing premises with an upgrade of the test beds to increase capacity and enable the assembly and testing of larger process gas compres- sors. In Korea, we are building an additional floor on top of the of- fice building to strengthen our capacities in East Asia. In the USA, the existing assembly and testing infrastructure is being upgraded to ramp up capacity and expand the compressor portfolio. Finally, Shenyang Yuanda Compressor has inaugurated a new testing fa- cility for diaphragm compressors. Research and development The research and development activities of the last fiscal year fo- cused on solutions for new markets, as well as on the improvement of the competitiveness of our existing portfolio. For the hydrogen market, we have extended our product portfolio with heavy- duty, high-pressure solutions for trailer filling. We have launched new products for the LNG marine markets, especially addressing the growing demand for LNG-powered merchant ships. Finally, we have upgraded some of our solutions for the petrochemical market, further strengthening our technology leadership in this segment. Outlook In recent years, the Systems Division has reinforced its position as a market leader and has clearly exceeded its Mid-Range Plan targets for 2022. Going forward, the energy transition presents many new opportunities. While the speed of the transition remains uncertain, Burckhardt Compression is intrinsically hedged for all scena rios, with strong positions in both traditional and new applications. By fiscal year 2027, we aim to reach 40% of our order intake from appli- cations that support the world's energy transition and are prepared to capture a potential upside when the energy transition towards a net-zero scenario accelerates. The Systems Division will maintain its share in traditional markets whilst growing stronger in new markets. Alongside the focus on hydrogen mobility and energy, the fastest-growing segment, we will streng then our market share in low-emission marine fuels and solar-industry-driven applications. From a regional perspective, we will maintain our leading position in China and accelerate our growth in the USA and East Asia. We will realize this transforma- tion by building on customer partnerships, technological leadership, and a strong regional service presence. Strong sales growth is expected in an early phase of the Mid-Range Plan, on the back of the exceptionally high order volume of the past two years. From an operational perspective, delivering on this is a key priority and will be supported by leveraging the existing facto- ries and supply chain, via flexible project allocation between sites. 25 02220006_Burckhardt-Compression_GB_2022_EN.indd 25 02220006_Burckhardt-Compression_GB_2022_EN.indd 25 05.06.23 18:44 05.06.23 18:44 Burckhardt CompressionAnnual Report 2022Services Division Services Division Order intake in CHF mn Sales in CHF mn Gross profit in CHF mn 357.1 340.0 148.2 Operating income (EBIT) in CHF mn 75.0 . 5 5 2 3 1 . 2 7 2 1 . 6 4 2 . 7 0 3 2 . 0 8 7 2 3 . 1 4 2 . 8 8 4 2 . 9 3 2 2 6 9. 1 1 . 2 5 0 1 0 7. 0 1 1 7. 0 1 . 2 8 5 . 7 4 5 2 . 1 5 . 4 8 5 8 1 9 1 0 2 1 2 2 2 8 1 9 1 0 2 1 2 2 2 8 1 9 1 0 2 1 2 2 2 8 1 9 1 0 2 1 2 2 2 in CHF mn Order intake Sales Gross profit in % of sales EBIT in % of sales Headcount at end of fiscal year (FTE) 26 2022 357.1 340.0 148.2 43.6% 75.0 22.1% 1’275 2021 325.5 278.0 119.6 43.0% 58.4 21.0% 1’198 Change 2022/2021 9.7% 22.3% 23.9% 28.6% 6.4% 02220006_Burckhardt-Compression_GB_2022_EN.indd 26 02220006_Burckhardt-Compression_GB_2022_EN.indd 26 05.06.23 18:44 05.06.23 18:44 Burckhardt CompressionAnnual Report 2022 Services Division The Services Division suc- ceeded in significantly in- creasing its sales, driven by spare parts, revamp and repair solutions and digital products. +22% 27 Annual Report 2022 Burckhardt Compression 02220006_Burckhardt-Compression_GB_2022_EN.indd 27 02220006_Burckhardt-Compression_GB_2022_EN.indd 27 05.06.23 18:44 05.06.23 18:44 Services Division Continuing its successful growth strategy, the Services Division reached new historical records for order intake, sales, gross pro f- it and EBIT in fiscal year 2022. All regions have participated to this success and these results come close to the targets defined in the Mid-Range Plan 2018-2022. Financials The Services Division grew its order intake by 10% to CHF 357.1 mn in fiscal year 2022 and recorded a strong sales increase of 22% (21% net of the acquisition of Mark van Schaick) to CHF 340.0 mn. Gross profit grew by CHF 28.6 mn to CHF 148.2 mn, resulting in a gross margin of 43.6%, similar to the previous year (43.0%). EBIT strongly increased by 29% to CHF 75.0 mn thanks to higher sales, yielding an EBIT margin of 22.1%, which is 1.1 percentage points above the previous year. In the course of fiscal year 2022, Arkos Field Services (USA) was merged with Burckhardt Compression US Inc., after generating an EBIT margin of around 5%. Market developments The demand for complete solutions, on-site services, monitoring, and diagnostics was very strong in fiscal year 2022. This growth was mainly driven by Asia, Europe, and the USA. Asia-Pacific grew across products and applications and benefited from a large, newly installed base. In Western Europe, we grew thanks to large turn around projects and considerable marine service interventions, which more than compensated the negative effects linked to the war in Ukraine. The exit of the Russian market was more than off- set by an exceptionally high level of activity in Eastern Europe and by growth in the Middle East. The US market gained from positive market indicators mainly in gas gathering and processing as antici- pated. One additional driver for our growth was the marine business with new, long-term service agreements won during the year. In this and other markets, we are benefiting from a clear trend among cus- tomers seeking not just a supplier, but a competent partner that can offer a full range of services. With around 400 Field Service Representatives around the globe, we are ready to cover almost all needs in an appropriate time. Spare Parts Growth continued during the reporting period, thanks to an in- creasing installed base and a growing number of customer frame agreements. Engineering/revamp/repair solutions Substantially increased selling activities resulted in significant or- ders received from European and Asian customers. Thanks to the ongoing relaxation of Covid-19 restrictions, we were able to make better use of our capacity. The trend for long-term service con- tracts is continuing, and the requirement for complex engineering solutions for complete on-site overhauls (turnaround projects) rein - for ces this segment further. In the revamp business, the need for lower emission solutions opened up new opportunities. Field Service Highly skilled and professional field service technicians offer a va- riety of services to cover local requirements. With about 400 Field Service Representatives around the globe, we are ready to cover almost all needs in an appropriate time. This segment profi ted from the tendency of installation services being ordered toge ther with new compressor systems, as well as from the relaxation of Covid-19 restrictions, especially in China. Digital products and services We achieved a record order intake for PROGNOST® monitoring products and services in fiscal year 2022. We further developed our digital services for connected compressors to support custom- ers with predictive maintenance. In close collaboration with key customers, we achieved positive results with first pilot applications, such as UP! Remote Support and in the development of algorithms for failure prediction. Customer satisfaction Through the “Voice of Customer” initiative, we received more than 1’000 customer feedback responses, which will help to improve the way we provide services. One area of improvement is “conve- nience”. To make it easier for customers to work with us, we have further developed our customer portal solution, which can be used to order parts, ask for support, and see installed assets including drawings. Another important element for facilitating collabora- tion are the long-term service agreements, which clarify the spirit of partnership between the customer and ourselves, with defined terms and conditions, and scope of supply. 28 Annual Report 2022 Burckhardt Compression 02220006_Burckhardt-Compression_GB_2022_EN.indd 28 02220006_Burckhardt-Compression_GB_2022_EN.indd 28 05.06.23 18:44 05.06.23 18:44 Outlook The strategic focus of our Mid-Range Plan 2023 to 2027 is to strengthen our core business by becoming a full-service provider for gas compression solutions, improving coverage of the installed base, and increasing our presence in the USA, Asia and selected white spots. At the same time, we will expand our marine service offering. We will further improve our process efficiency and realize our digitalization potential, while increasing our spare parts perfor- mance. We will globalize our components production for Burckhardt Compression and other brand compressors and leverage our sel l- ing, general, and administrative expenses. We are transforming and building new growth avenues by developing a network and organization to service the hydrogen mobility and energy market and marine customers. We will grow service offe rings addressing customers’ operational excellence and sustain ability agendas, develop new business models and offerings inclu ding digital solutions, and enhance our business foundations by fostering EOHS (Environment, Occupational Health, and Safety) and a service culture. Services Division We are transforming and building new growth avenues by developing a network and organization to ser- vice the hydrogen mobility and ener- gy market and marine customers. Infrastructure and capacity We invested in service capabilities in China and built new service workshops in France, Turkey, and Singapore. We also strengthened our presence in Asia by integrating the acquired assets and the em- ployees of SPAN Maintenance and Service Co. Ltd. into the newly esta blished subsi diary Burckhardt Compression (Thailand) Co. Ltd. as of April 1st, 2023. In France, we purchased the land and building of Société d’Application du Métal Rouge (SAMR), and plan further investments in the machine park to increase capacity for sliding bearings. Acquisitions With the complete integration of Arkos Field Services in the USA, and merging the legal entity with Burckhardt Compression US Inc. as of January 1st, 2023, we now have one BCUS organization consisting of Systems and Services under one legal entity. We have stream- lined the local set-ups, sold the Houma Service Center in Louisiana, and have integrated its service business in our new Service Center in New Iberia. The integration of the business of Mark van Schaick BV was successfully completed and renamed in Burckhardt Com- pression (Nederland) BV. Research and development In May 2022, UP! Remote Support was released for sale, to support customers even better and faster on site. The new service provides clear benefits such as fast support by eliminating travel time, eas- ier access to expert know l edge, shorter machine downtime, and reduced operating costs. First orders for UP! Remote Support were recorded. In fiscal year 2022, we also introduced the new product PROGNOST®-Wireless, a cost-effective wireless sensor add-on for condition monitoring of a large number of equipment. 29 02220006_Burckhardt-Compression_GB_2022_EN.indd 29 02220006_Burckhardt-Compression_GB_2022_EN.indd 29 05.06.23 18:44 05.06.23 18:44 Burckhardt CompressionAnnual Report 2022Sustainability Report Sustainability «Sustainability is an integrated part of our new strategy, and a key to creating leading compression solutions for a sustainable energy future.» Fabrice Billard, CEO Online-AR report.burckhardtcompression.com/ sustainability-report 30 Annual Report 2022 Burckhardt Compression 02220006_Burckhardt-Compression_GB_2022_EN.indd 30 02220006_Burckhardt-Compression_GB_2022_EN.indd 30 05.06.23 18:44 05.06.23 18:44 Sustainability Report Ambitious sustainability targets for our Mid-Range Plan 2023–2027 and a net-zero commitment for Scope 1 and Scope 2 emissions by 2035 We have reached another milestone by embedding sustainability into our business strategy with our new Mid-Range Plan 2027. Sustainability is now deeply rooted in our new purpose and a key pillar for the business strategies of both divisions. To underline our commitment, we have defined eight key sustainability targets for 2027, one for each material topic. –50% Greenhouse gas emission intensity* 2021: 2.1 kg CO2e/h > 75% Share of renewable electricity* 2021: 23% +100% Revamp + upgrades activities in Services 2021: 100 (Index) ≥ 80% Engagement Score in employee survey** 2020: 79% < 0.7 Lost Time Injury Rate below 0.7 each year 2021: 1.1 0 Incidents related to product safety 2021: 0 40% Order intake supporting the energy transition 2021: 16% 0 Incidents on corruption or anti-competitive behavior 2021: 0 * Excluding the Shenyang foundry, where we rely on renewable grid electricity or technological developments to achieve our ambitions. **Based on current survey methodology. 31 Annual Report 2022 Burckhardt Compression 02220006_Burckhardt-Compression_GB_2022_EN.indd 31 02220006_Burckhardt-Compression_GB_2022_EN.indd 31 05.06.23 18:44 05.06.23 18:44 Sustainability Report On a strategic path to a sustai nable organization Our holistic approach to sustainability con- siders our beneficial and adverse impacts on the economy, society, and the environ- ment, as well as the opportunities and risks that arise for our company in return. We have rooted sustai n - ability deeply in our core business and our organization with our new Mid-Range Plan. 32 02220006_Burckhardt-Compression_GB_2022_EN.indd 32 02220006_Burckhardt-Compression_GB_2022_EN.indd 32 05.06.23 18:44 05.06.23 18:44 Burckhardt CompressionAnnual Report 2022n y g s Divisio n techn olo ustaina ble y future m e t s y S sio a s s e r p m o C r o f rg e n e S e r v i c S u p p e s t o r t ain o c D sust a c r u i b e s v i l i t a t o y t e i s i o n m e r s Customer v a l u e s Grou p i t y i n Sustainabi l organizat i o n and supply c h a i n Three main strategic directions guide us on our journey. Creating leading compression technology for a sustainable energy future The world has to meet a growing demand for energy while mastering the trilemma of energy security, environmental sustainability, and ener- gy equity. Our compression technology plays a key role in different areas of a sustainable energy future and the transition towards it. Compressors are needed to expand the production of solar panels, support energy security through versatile energy transportation options such as Liquefied Natural Gas (LNG), or enable scalable use of hydrogen as a future energy carrier. Supporting our customers on their sustainability journey Increasingly, our customers are embarking on a sustainability journey, just as we are. With our products and services, we can support our cus- tomers on this path. When it comes to energy efficiency or reduction of gas leakages, we can realize significant savings together with our cus- tomers, since around 99% of the greenhouse gas footprint of a compressor comes from the use phase. If we consider the approximately 70’000 existing industrial-sized reciprocating compres- sors in the world, our potential positive impact is substantial. Integrating sustainability in our organization and the supply chain As a global industrial technology company with close to 3’000 employees (FTE), we have the ca- pabilities and the commitment to contribute to a sustai nable development. We have integrated sustai nability in our core strategy, our new Mid- Range Plan. We also recognize our responsibility to exer cise our due diligence obligations in the supply chains and uphold our product responsi- bility. The largest sustainability potentials for our company lies in our eight material topics as out- lined in this Sustainability Report. 33 02220006_Burckhardt-Compression_GB_2022_EN.indd 33 02220006_Burckhardt-Compression_GB_2022_EN.indd 33 05.06.23 18:44 05.06.23 18:44 Sustainability ReportBurckhardt CompressionAnnual Report 2022 Sustainability Report Systems Division Compression technology for a sustainable future Compressors are critical components in several areas of the energy transition and therefore a decisive building block for its success. 34 02220006_Burckhardt-Compression_GB_2022_EN.indd 34 02220006_Burckhardt-Compression_GB_2022_EN.indd 34 05.06.23 18:44 05.06.23 18:44 Burckhardt CompressionAnnual Report 2022Our compressors are a key component in a wide range of applications related to power generation, transport, and supply. Glass EVA film Solar cell EVA film Backsheet H2 Applications on the journey towards a sustai nable energy future include hydrogen, biodiesel, ammo- nia, solar energy, Liquefied Natural Gas (LNG), and others. In recent years, three applications in particular have contributed to our fast growth. Enabling the expansion of solar power Burckhardt Compression’s technology is used in two steps of solar cell production. First, a solar panel usually contains a thin, transparent plas- tic film made from ethylene-vinyl acetate (EVA) encapsulating the solar cell. This layer needs to have good radiation transmission properties and demonstrate low sunlight degradation. EVA is produced with a chemical reaction at more than 3’000 bar, requiring some of the largest com- pressors available in the world, and for which Burckhardt Compression is a leader. The second step requiring our compressors is the production of polysilicon, which is the core of the solar cell. Empowering hydrogen as an energy carrier Our equipment has been compressing hydrogen for decades, but the importance of this molecule as a key building block of a sustainable energy future gives it entirely new dimensions. There are several critical components to make hydrogen a viable and economical option such as the elec- trolyser, the compressor, its motor, and the dis- penser in fuel stations. We have stand-out tech- nology for scaling hydrogen compression, which will be an important step toward an economic use of this gas. Making LNG accessible as a transitional energy Liquefied Natural Gas (LNG) is an important com- ponent of the global energy supply as a short- and medium-term bridge energy for replacing coal or as a fuel for marine applications, replacing carbon-intensive heavy fuel oil until zero-emis- sions solutions are available. Our compression technology is used, for example, in re-liquefaction processes, boil-off-gas handling, or for providing fuel gas to modern dual-fuel engines. 35 02220006_Burckhardt-Compression_GB_2022_EN.indd 35 02220006_Burckhardt-Compression_GB_2022_EN.indd 35 05.06.23 18:44 05.06.23 18:44 Sustainability ReportBurckhardt CompressionAnnual Report 2022Sustainability Report Services Division Energy efficiency for our customers Our compressors are used mostly in indus- trial and energy supply processes. Savings and improvement measures that we achieve with our customers have a multiplier effect due to the long operating hours and service lives. We were able to success- fully implement various revamp and upgrade services for our customers. 36 02220006_Burckhardt-Compression_GB_2022_EN.indd 36 02220006_Burckhardt-Compression_GB_2022_EN.indd 36 05.06.23 18:44 05.06.23 18:44 Burckhardt CompressionAnnual Report 2022Contributions to the sustainable development goals (SDGs) SDG 7 Enabling energy savings through efficiency gains. SDG 13 Reduction of CO2 emissions resulting from energy savings. SDG 12 Extension of service life for wear parts. Considerable energy and wear part savings achieved With the overhauled compressor solution, we were able to facilitate several sustainability ben- efits for our customer. In addition to an improved uptime of the compressor, internal leakages could be eliminated, and a nominal gas flow restored. The service life of the wear parts was exten ded, thus reducing maintenance costs. Looking at the energy balance, an approximate efficiency gain between 500-1’000 MWh per year could be re- alized. This corresponds to the annual electricity consumption of around 150 to 250 average Swiss households. A path away from shutdowns and wasteful energy consumption In the past fiscal year, we enabled significant ef- ficiency gains for one of our customers, a glob- al chemicals company. Two vertical Process Gas Compressors equipped with another brand’s rings were facing challenges with extensive leakages, reduced gas flow, temperature issues, and a very short lifetime of wear parts. This led to frequent compressor shutdowns and wasteful energy con- sumption. Our thorough system integrity analysis provid- ed the basis for our repair and overhaul meas- ures. We upgraded the piston and packing rings to Persisto® 850, a leading material that we de- veloped for dry-running reciprocating compres- sors. Further, we repaired the piston rods, applied an enhanced coating, and refurbished the pack- ing and other components at our local Service Center. 37 02220006_Burckhardt-Compression_GB_2022_EN.indd 37 02220006_Burckhardt-Compression_GB_2022_EN.indd 37 05.06.23 18:44 05.06.23 18:44 Sustainability ReportBurckhardt CompressionAnnual Report 2022Sustainability Report Sustainability Report 2022 Our sustainability roadmap is fully integra- ted in our Mid-Range Plan 2027. It follows a strategic approach, is focused on eight material topics, and has a firmly anchored governance. 38 02220006_Burckhardt-Compression_GB_2022_EN.indd 38 02220006_Burckhardt-Compression_GB_2022_EN.indd 38 05.06.23 18:44 05.06.23 18:44 Burckhardt CompressionAnnual Report 2022Our Strategic Approach We create leading compression solutions for a sustainable energy future and aspire to incorporate economic, environmental, and so- cial aspects into our business activities and decisions. Burckhardt Compression is an industrial technology company specializing in re- ciprocating compression solutions for all types of gases. With a com- pany history stretching back over 179 years and products with a useful life of more than half a century, we base our business decisions on a long-term perspective. And we approach sustainability with the same mindset: pragmatic, focused on the long-term, creating value and impact driven. Strategic focus on eight material topics In our sustainability approach, we focus on eight material top- ics, which we identified by analyzing our impacts on the economy, environment, and society. These eight material topics build our framework and the core of our sustainability roadmap. Burckhardt Compression is committed to supporting the Sustain- able Development Goals (SDGs) as defined by the United Na- tions. These SDGs address the world’s most pressing sustainability challenges and are to be achieved as part of Agenda 2030 for Sustainable Development. We have stated five sustainability ambitions, each linked to a strategic SDG and directly related to our material topics: – Safeguarding human health (SDG 3: Good health and well-being) – Promoting prosperous work (SDG 8: Decent work and economic growth) – Tackling climate change (SDG 13: Climate action) – Driving energy transition (SDG 7: Affordable and clean energy) – Valuing natural resources (SDG 12: Responsible consumption and production) We have also identified six additional SDGs to which we can con- tribute. Strategic sustainability framework Tackling climate change Promoting prosperous work Driving energy transition Environmental im G H G emissions & climate change s n p a cts of a Energ f cie e y u s e n c & y s i n e ss conduct u B p p li c a t i o n p u r p o L s o c y n c g e l a e v Valuing natural resources Sustainability Roadmap b i t i l i y t y & nal health & s a fe t y W g o rki n c o n diti o atio p u c c O ct y u t d fe o a r P s Safeguarding human health 39 02220006_Burckhardt-Compression_GB_2022_EN.indd 39 02220006_Burckhardt-Compression_GB_2022_EN.indd 39 05.06.23 18:44 05.06.23 18:44 Sustainability ReportBurckhardt CompressionAnnual Report 2022 Our senior leaders play a key role in achieving our goals, which is why sustainability is now part of the remuneration in the form or our long-term incentive plan. Our 2027 target to reduce our green- house gas emission intensity by 50%* (2021: 2.1 kg CO2e/h) is one of three key performance indicators for the long-term incentive of our top management. We developed a commitment to net-zero greenhouse gas emissions by 2035 which goes beyond our Mid-Range Plan target for 2027. We follow a 1.5°C climate aspiration in reference to the Paris Climate Agreement for our Scope 1 and Scope 2 emissions. In addition, we are committed to reducing our Scope 3 emissions. Overarching due diligence on human rights and international environmental standards The focus on our material topics and sustainability ambitions in- cludes an overarching due diligence approach. We acknowledge the responsibility to respect internationally recognized human rights and international environmental standards, which is also defined in our Code of Conduct. We incorporate the precautionary principle into our activities and decision-making, such as the consideration of environmental requirements in product design, the considera- tion of human rights in our supply chain, and the assurance of safe product operation at our customers' sites. Supply chain management plays a key role in this. Burckhardt Compression taps into its suppliers’ experience to continuously im- prove its products, because an important part of the value crea- tion is provided by them. We source raw materials for the foundry in Shenyang, China, raw materials and semi-finished products for the manufacture of compressors in our factories, and components and other accessories to complete and maintain the compressor systems on-site. For this, we have an established global supply chain, with core suppliers for production located in the wider re- gional area. Through our Code of Conduct for business partners, we set the same high standards for suppliers as we do within our company, and we also include them in our environmental and quality policy. Material topics value chain impacts supply chain own operations use/end- of-life 1. Greenhouse gas emissions & climate change Impacts on climate change, including greenhouse gas emissions along the value chain, and mitigation of climate change risks. 2. Energy use & efciency Energy consumption, efficiency and sources for the production, provision and operation of Burckhardt Compression’s products and services. 3. Longevity & cyclability Fostering a long lifecycle and the circularity of materials and products in Burckhardt Compression’s business activities, including maintenance and repair services. 4. Environmental impacts of application purpose Environmental impacts of the use case of Burckhardt Compression’s products and services, including the contribution to a sustainable energy transition. 5. Working conditions Employment terms including working hours, compensation, and labor-management relations as well as the satisfaction of employees with those terms. 6. Occupational health & safety 7. Product safety Maintaining and promoting a safe and healthy working environment for workers involved in the production and provision of Burckhardt Compression’s products and services. Maintaining and promoting the safe and healthy operation of Burckhardt Compression products and maintained products of other brands. 8. Business conduct Ensuring and promoting that Burckhardt Compression’s business activities are conducted in compliance with regulations, standards and ethical principles. t n e m n o r i v n E i y t e c o S y m o n o c E * Excluding the Shenyang foundry where we rely on renewable grid electricity or technological developments to achieve our ambitions. 40 02220006_Burckhardt-Compression_GB_2022_EN.indd 40 02220006_Burckhardt-Compression_GB_2022_EN.indd 40 05.06.23 18:44 05.06.23 18:44 Sustainability ReportBurckhardt CompressionAnnual Report 2022Sustainability Report We conduct checks on-site or when goods arrive to ensure obser- vance of specifications and verify this by reviewing the required audit reports. We adopted a policy on conflict minerals and initi- ated a risk-identification process for child labor and other human rights risks. In the reporting period we also updated our supplier assessment process, including sustainability, which we will roll out in fiscal year 2023. Burckhardt Compression commits to net-zero emissions in its operations by 2035 We follow a 1.5° C climate aspiration in reference to the Paris Climate Agreement for our Scope 1 and 2 emissions. In addition, we are committed to also reduce our Scope 3 emissions. Our road- map to operational net-zero emissions is built on four key pillars: Decoupling business growth from emission growth through avoidance and savings programs Conversion to renewable electricity (by 2027: 75% renewable electricity without foundry) Reduction of Scope 1 emissions until 2035 through savings and replacement Counterbalance any remaining emissions through carbon removal 2035 business as usual assumption 2021 (Baseline) Net-zero 2035 Our Material Topics 1. Greenhouse gas emissions and climate change Topic lead: President Systems Division Target: Reduce greenhouse gas emission intensity for Scope 1 and 2 by 50%.* (2021: 2.1 kg CO2e/h) Tackling climate change is one of the most pressing global chal- lenges. The potential consequences of climate change are grave, in some cases irreversible, and affect individuals, organizations, and countries alike. The Paris Agreement of 2015 is a legally binding in- ternational treaty between states on climate change. It recognizes the need to limit global warming to below 2°C above pre-industrial levels, preferably as low as 1.5°C. Burckhardt Compression recognizes its responsibility and the potential to reduce its greenhouse gas emissions across the entire value chain. Our activities and technology make an increasing con- tribution to combating climate change and to supporting Sustai n - able Development Goal 13: Climate action. The majority of the emissions associated with our business ac- tivities arises in the use phase of our compressors due to their long lifetime of 30 to 50 years. Other emissions occur in our operating facilities, where we have the most direct influence, and in logistics and the materials used. Our approach Burckhardt Compression endeavors to reduce the company’s car- bon footprint and optimize emissions during the use phase of the compressors. We focus on three key areas: – Reduction of the company’s carbon footprint – Optimization of the impact of our inbound and outbound logistics – Improvement of the carbon footprint of compressors Reduction of greenhouse gas emissions during the use phase of our compressor systems is an integral part of our product and innova- tion management. With our services, we help our customers reduce emissions from installed compressors. * Excluding the Shenyang foundry where we rely on renewable grid electricity or technological developments to achieve our ambitions. 41 02220006_Burckhardt-Compression_GB_2022_EN.indd 41 02220006_Burckhardt-Compression_GB_2022_EN.indd 41 05.06.23 18:44 05.06.23 18:44 Burckhardt CompressionAnnual Report 2022Our climate policy is the basis for all our activities related to cli- mate change and part of our wider environmental policy. Our en- vironmental management system, certified in accordance with ISO 14001, is a key instrument in reducing our environmental footprint. Each subsidiary takes responsibility for reducing its own greenhouse gas emissions according to the global targets. We have embedded our target of reducing our greenhouse gas emission intensity by 50%* (2021: 2.1 kg CO2e/h) as part of top man- agement’s long-term incentives. Progress in fiscal year 2022 We focused on the analysis of our mid- and long-term reduction potential for direct (Scope 1) and energy-related indirect (Scope 2). This enabled us to set our ambitious 2027 target for the Mid-Range Plan and develop a roadmap for net-zero emission. In addition, we were able to successfully map the data collection for Scope 1 and Scope 2 emissions onto a new software platform. On an operational level, we continued with various projects addressing our emissions. The measures implemented locally fo- cused mainly on electricity consumption and renewable electricity. Burckhardt Compression Spain, for example, installed solar panels on their roof which cover around 40% of their energy use. We are also pursuing similar initiatives in other locations like Switzerland, China, and South Korea. Greenhouse gas emissions of various compressors over the entire life cycle in % Process Gas Compressor 2B1Y life cycle 20 years Materials: 0.0764% Transport: 0.0251% Production: 0.0306% Use phase: 99.8678% End-of-life: 0.0001% Diaphragm Compressor MD10 life cycle 20 years Materials: 0.7802% Transport: 0.0850% Production: 0.3620% Use phase: 98.7718% End-of-life: 0.0010% Laby®-GI Compressor 5LP250V life cycle 30 years Materials: 0.0751% Transport: 0.0114% Production: 0.0086% Use phase: 99.9047% End-of-life: 0.0002% Hyper Compressor K8 life cycle 30 years Materials: 0.0381% Transport: 0.0129% Production: 0.0010% Use phase: 99.9479% End-of-life: 0.0001% The vast majority of emissions over the entire life cycle of a compressors are caused in the use phase due to the high power range of our compressors, their long lifetime and their uninterrupted operation. * Excluding the Shenyang foundry where we rely on renewable grid electricity or technological developments to achieve our ambitions. 42 02220006_Burckhardt-Compression_GB_2022_EN.indd 42 02220006_Burckhardt-Compression_GB_2022_EN.indd 42 05.06.23 18:44 05.06.23 18:44 Sustainability ReportBurckhardt CompressionAnnual Report 2022We started a screening and approximate calculation of our Scope 3 emissions. We expect to publish this data in fiscal year 2023. The majority of our Scope 3 emissions is in the use phase of the com- pressor. The key factor is the electricity source used by our cus- tomers to power the electric motor which is driving the compressor. Inbound and outbound logistics are less significant than the use phase, but we have a direct influence. We therefore analyzed our logistics more closely to identify improvement potentials. Greenhouse gas emissions also play a vital role in our contin- ued product development and collaboration with our customers. We see high potential for avoidance of gas leakage, particularly where greenhouse gases are compressed. We therefore continued our efforts in research and development projects for comprehensive emissions management of existing compressors. In addition, we have invested further in digitalization and are one of the pioneers in our industry. Solutions such as UP! Solutions Remote Support contribute to a reduction of greenhouse gas emis- sions through reduced travel by service technicians. Our performance The absolute greenhouse gas emissions for Scope 1 and Scope 2 amount to 20’070 metric tons of CO2 equivalents (CO2e). Scope 1 and Scope 2 emissions have increased due to a continuous strong growth, especially in China where renewable energy options are limited. The greenhouse gas emission intensity by working hours rose from 3.3 to 3.4 (2.1 to 2.3 without foundry) but the greenhouse gas emission intensity in tons of CO2e per million sales decreased from 26.8 to 24.2. The results correspond with our expectation and planning for the 2027 sustainability target to reduce the greenhouse gas emission intensity by 50%* (2021: 2.1). Business travel forms only a small part of Burckhardt Compres- sion’s other indirect greenhouse gas emissions (Scope 3) but can be directly influenced. Compared with the previous year, the number of business trips has increased but remains below the pre-pandemic level of 2019 (3’429 tCO2e). By strengthening our digital infrastruc- ture, we intend to reduce travel frequency in the medium term. Outlook for fiscal year 2023 In the coming year, we are launching a global Mid-Range Plan initi- ative to reduce our greenhouse gas emissions as a key to reaching our 2027 sustainability target. We also expect to be able to imple- ment further solar panel projects next fiscal year. We continue to support our customers in reducing their emissions and are working to further develop special service offerings. Greenhouse gas emissions in tons of CO2e (per calendar year) 20’070 6 9 3 5 1 ’ 4 7 6 4 ’ 2 2 8 9 1 ’ 3 1 1 2 2 4 ’ 1 2 9 6 3 8 ’ 7 8 1 ’ 5 0 2 Scope 2 Scope 1 Greenhouse gas emissions intensity Scope 1 and 2 in kg of CO2e per working hour (per calendar year) 3.4 3 3 . . 7 2 0 2 2 1 2 2 Greenhouse gas emissions business travel in tons of CO2e (per calendar year) 2’567 Airplane Train Bus Car 1’902 26 56 584 * Excluding the Shenyang foundry where we rely on renewable grid electricity or technological developments to achieve our ambitions. 9 1 0 2 1 2 2 2 43 02220006_Burckhardt-Compression_GB_2022_EN.indd 43 02220006_Burckhardt-Compression_GB_2022_EN.indd 43 05.06.23 18:44 05.06.23 18:44 Sustainability ReportBurckhardt CompressionAnnual Report 2022Sustainability Report 2. Energy use and efficiency Energy consumption in MWh (per calendar year) 59’107 Topic lead: Vice President Compressor Engineering & Manufacturing Target: Increase the share of renewable electricity to 75%.* (2021: 23%) 8 2 9 9 4 ’ 9 1 6 5 4 ’ The development of society depends on the conversion, use, stor- age, and transmission of power. Reliable and affordable access to power is a basic need. However, the extensive demand for energy is also tied to significant environmental impacts. Burckhardt Compression’s business activities have a significant impact on energy consumption, especially in production, raw ma- terial supply and the electricity consumption of our compressors in the use phase. Through energy-saving production processes, com- pressor design and services we can contribute to the Sustainable Development Goal 7: Affordable and clean energy. Our activities require energy in the manufacturing process, but by far the largest impact of our activities is in the use phase of our products. Our approach Burckhardt Compression endeavors to reduce energy demand and promote renewable energies. The focus is on: – Energy use, energy efficiency, and energy quality, including renewable energy in our operations. – Use and efficiency of energy in the operation of our products at customers’ sites throughout the use phase. Our environmental policy and ISO 14001-certified environmental management system form the basis of our activities related to en- ergy consumption in our value chain. Each subsidiary takes respon- sibility for reducing its energy consumption and increasing the share of renewable electricity according to our global target. Our Winterthur site, for example, is in the process of implement- ing a multi-year project to save energy in production operations and offices. As another example, the factory in Pune has won the GreenCo Star Performer Award (Gold Rating) several times. Green- Co is an initiative created by the Confederation of Indian Industry (CII). GreenCo’s rating system takes a holistic approach to measure- ment of the results of corporate environmental initiatives. The energy consumption of our compressor systems forms an in- tegral part of our product and innovation management. Through our comprehensive services, we improve the energy requirements of our own and third-party compressor systems throughout their entire life cycle. * Excluding the Shenyang foundry where we rely on renewable grid electricity or technological developments to achieve our ambitions. 44 0 2 2 1 2 2 Energy intensity in kWh/working hours (per calendar year) 10.1 1 9. 4 9. 0 2 1 2 2 2 Share of renewable electricity in % (per calendar year) 21 5 1 2 0 2 1 2 2 2 02220006_Burckhardt-Compression_GB_2022_EN.indd 44 02220006_Burckhardt-Compression_GB_2022_EN.indd 44 05.06.23 18:44 05.06.23 18:44 Burckhardt CompressionAnnual Report 2022Sustainability Report Progress in fiscal year 2022 In the reporting period, Burckhardt Compression continued its measures to reduce energy consumption at different sites. Our main production site in Winterthur, for example, was able to reduce the energy consumption for electricity and heating by around 4% de- spite the significantly higher capacity utilization. Burckhardt Com- pression India achieved an energy reduction of 153 MWh in the fac- tory through various efficiency projects. We have planned for the expansion of renewable electricity production at our facilities, following our new Mid-Range Plan tar- get of 75%* renewable electricity by 2027. Our subsidiary in Spain has already been able to install new solar panels on their roof, pro- ducing up to 40% of their electricity by solar energy. We also pursue corresponding initiatives in other locations like in Burckhardt Com- pression Switzerland, where we have initiated a project to install solar panels on the buildings. We made significant progress in defining measures and a meth- odology to track and compare the energy consumption rates of our compressor portfolio. This will allow us to better evaluate and benchmark the engineered-to-order compressor projects and drive measurable performance improvements in energy efficiency. Our performance The absolute energy consumption increased to 59’107 MWh as we went through major business growth. Subsequently, the energy in- tensity also increased from 9.4 to 10.1, partly because we were grew stronger in output than in working hours. We were able to increase the Group-wide proportion of renewable electricity from 15% to 21%. The performance is in line with our expectations and planning for reaching our sustainability targets 2027. With product improvements and services, we managed to re- duce our customers’ energy consumption in the reporting period. To date, we have evaluated few projects in terms of energy savings because access to data is challenging. We have identified this as an improvement area for our management approach. Second generation Multistage Clearance Adjustment enables energy savings up to 30% The second generation of our Pneumatic Multistage Clearance Adjustment System developed by our subsidiary Shenyang Yuanda Compressor builds on the successes of the first generation. The system has been installed in China successfully nine times in fiscal year 2022 (22 times since the launch in 2019), leading to an electricity saving of 34.5 MWh (based on 8’000 operating hours per year). A single installa- tion can save up to 30% of the compressors’ energy consumption during part-load operation. Since the initial launch of the first generation, a cumulative electricity saving of around 958 MWh was enabled. This is equivalent to the annual electricity consump- tion of over 250 average Swiss households. * Excluding the Shenyang foundry where we rely on renewable grid electricity or technological developments to achieve our ambitions. 45 Energy savings of 320 MWh per year achieved with minimal modifications A customer of Burckhardt Compression India oper- ated a compressor with reduced capacity due to low customer demand. The bypass system resulted in a high power loss of about 50 kW. Burckhardt Compression India offered a solution to reduce the volume flow to the customer’s requirements with min- imal modifications. With this solution, we achieved a power saving of 40 kW. On a standard yearly runtime of a compressor, this amounts to 320 MWh a year which is around a third of the entire electricity con- sumption of Burckhardt Compression India including the factory. Outlook for fiscal year 2023 In the fiscal year 2023, we will continue our roadmap to increase the share of renewable electricity across the Group. Specific projects are under evaluation or implementation in Switzerland, Korea, and China. Local energy-saving measures at operational level will be an ongoing activity. We also plan to undertake further efforts to better quantify our energy savings with our customers and increase our impacts with such services. 3. Longevity and cyclability Topic lead: President Services Division Target: Increase the revamp and upgrade sales of Services Division by 100%. (2021: 100 – Index) A large number of natural resources are finite, and raw material extraction is associated with significant environmental and social consequences. It is thus essential to keep raw materials for longer in the use phase and to close loops to use materials circularly. Our compressor systems are built for a defined lifetime of more than 25 years and the average lifetime is 30 to 50 years. Our oldest known compressor still in service is 93 years old. Our compressors are made of more than 95% iron and steel, which ensures a long service life and makes them highly recyclable. In the manufacture and servicing of compressors, we have a significant scope to contribute to a circular economy and support Sustainable Development Goal 12: Responsible consumption and production. Significant impacts result from the raw materials used for our compressors, the replacement of components during the use phase and the use of operating materials such as lubricant. 02220006_Burckhardt-Compression_GB_2022_EN.indd 45 02220006_Burckhardt-Compression_GB_2022_EN.indd 45 05.06.23 18:44 05.06.23 18:44 Burckhardt CompressionAnnual Report 2022Our approach Burckhardt Compression fosters long life cycles and the circularity of materials for own compressors and those from other manufac- turers by focusing on: – Longevity of new products through technology, engineering, easy maintenance, and optimized wear parts – Longer life cycles of existing compressor systems through retrofitting, overhauling, and longer maintenance intervals – Repairing of components and compressors – Use of recycled materials, in compliance with material requirements and standards – Recyclability of our products To foster longevity, we use our in-depth technical knowledge to develop reliable, long-lasting, and high-performance compressor solutions. Our innovations such as Persisto® materials and Redura® sealing systems ensure a long-lasting operation. We offer a full range of reliable services and durable compressor components developed in-house to achieve our long product lifetime of 30 to 50 years. By reconditioning equipment, we support the short recycling loop with a comprehensive range of revamp and upgrade services, as well as our refurbish programs for entire compressor systems. We also repair and refurbish compressor components such as valves using our global network of service centers. Proportion of reused or refurbished com- ponents in service work in 2021/2022 for selected key components. in % Valve 2021: 100% = 26’422 2022: 100%= 41’725 81% 76% 2021: 100% = 227 59% Crank gear 2022: 100% = 898 94% 2021: 100% = 1’223 51% Cylinder 2022: 100% = 4’893 88% Hyper components 2021: 100% = 1’680 69% 2022: 100% = 1’833 62% 100% = Total components recycled or newly manufactured by Burckhardt Compression for service activities. Complete overhaul of a hyper compressor for the next life cycle Burckhardt Compression was commissioned to con- duct a complete overhaul of a hyper compressor from another brand. The compressor was no longer fit for purpose in its unreliable condition. Through the total overhaul, including an upgrade of key components and a repair of the foundation, the compressor could be granted a second life, thereby avoiding the need to produce a new compressor. In the process, the closed-loop concept was also applied in small details. The old piston rods were used, for example, to make the new stud bolts for the bearing covers. Progress in fiscal year 2022 We have anchored the topic of longevity and cyclability in our busi- ness development for new machines and services as part of the new Mid-Range Plan. Our long-term approach in services business represents a paradigm shift in compressor maintenance: moving away from standardized replacement plans based on the operat- ing cycle to predictive maintenance based on the actual condition of the compressor. We were able to successfully implement various revamp and upgrade services for our customers. Projects went from smaller parts upgrades to full-scale and highly complex overhauls, where we transformed compressors for a second life. In one case, we ad- dressed our customer’s need with a second-hand compressor from our inventory. We maintain a stock of compressors which we bought back at the end of their service life in good condition. We are particularly proud of the successful retrofit of several Laby®-GI compressors to dry-running systems without cylinder lu- brication. Oil-free compression of the gas renders oil separation and filtration of the gas superfluous and saves up to 1’200 liters of lubricant per year and per compressor. 46 02220006_Burckhardt-Compression_GB_2022_EN.indd 46 02220006_Burckhardt-Compression_GB_2022_EN.indd 46 05.06.23 18:44 05.06.23 18:44 Sustainability ReportBurckhardt CompressionAnnual Report 2022 Our performance Our target for 2027 is to double our revamp activities compared to the base year 2021 (=100). In fiscal year 2022, we could increase sales to 159 compared with the base year, with some exceptionally large projects included. Repair instead of replacement is a key component in the circu- lar economy. We contribute to it through our services; for example, the share of refurbished components for valves is 76% in all service interventions. Sales volume for revamp and upgrade services in index points, base year 2021 = 100 159 Outlook for fiscal year 2023 We will continue our condition-based maintenance initiative in the current fiscal year 2023. This undertaking will continue until 2025 and, along with our digital offering, will be one of the main themes in the Services Division. Another focus will be to enhance our service activities with an emphasis on revamping, upgrading, and reprocessing compressor systems to extend their service life. 0 0 1 7 8 0 2 2 1 2 2 A circular compression solution for a Brazilian recycling pioneer Lwart Environmental Solutions offers a sophisticated waste management service based on the concept of circular economy. The company collects, allocates, and transforms finite natural resources to bring them back to the cycle. They needed a quick and a cost-ef- ficient compression solution to keep their processes running. Burckhardt Compression was able to provide already built but unused compressors which were available in the ’second-hand’ inventory. The techni- cally sound solution met the required operational con- ditions without the need to build a new compressor. Operating hours in comparison LABY® Compressor 3K160 Passenger car Weight: 9 t Operating hours: 8’000 per year 47 When our specialists carry out the first service, an average passenger car has already been repla- ced a long time ago. Weight: 1.5 t Operating hours: 5’000 total* * Assumption: 300’000 km with 60 km/h 02220006_Burckhardt-Compression_GB_2022_EN.indd 47 02220006_Burckhardt-Compression_GB_2022_EN.indd 47 05.06.23 18:44 05.06.23 18:44 Sustainability ReportBurckhardt CompressionAnnual Report 2022Sustainability Report 4. Environmental impacts of application purpose Topic lead: Vice President Sales Systems Division Target: Order intake of 40% in applications supporting the energy transition. (2021: 16%) Our core competence is mastering gas compression technologies for a wide range of gases and applications. Gas plays a crucial role in the process industries and energy supply, with applications rang- ing from conventional energy supply to industrial gases to renewa- ble energy systems. A significant part of the indirect environmental impact of our business activities is linked to the application purpose. We have the potential to contribute to three of our strategic Sustainable Development Goals (7, 12 and 13). The main impacts of this topic are related to the use phase of our products and services. Our Approach Burckhardt Compression is committed to the long-term alignment of its business activities with a sustainable economic system. We identified four positive impact areas: – Climate change mitigation – Energy transition – Circular economy – Environmental pollution prevention We have developed a sustainability screening approach to ana- lyze our business activities from an environmental impact perspec- tive. This classification system makes use of international standards such as the EU taxonomy for sustainable activities or South Korea’s K-Taxonomy, without claiming to fulfil all their technical require- ments. The main purpose of our screening system is to serve as a compass for the development of our business activities towards a sustainable energy future. Largest compressor package for Burckhardt Compression India to date Burckhardt Compression India has successfully delivered a 38-ton compressor package on a single skid including motor, consoles, and air coolers. The package is used for a hydrogen installation in Europe and is yet another successful step in our booming segment of hydrogen mobility and energy. 24 Standard High Pressure (SHP) Compressors for Biogas Burckhardt Compression India has been awarded several contracts with 24 Standard High Pressure (SHP) Compressors for compressed biogas. The compressed biogas market in India is growing fast due to the sub- sidy announced by the Indian government. Burckhardt Compression India is a market leader in this applica- tion in India. We are expanding the range of application for our customers and supporting the transition to a sustainable economy through our continuous innovation in compressor systems, materials, compo- nents, and services. Our approach is mainly driven by our innova- tion, product management and sales processes. We invest in R&D for key applications of the energy transition. The current focus lies on: – Solar energy value chain, where our compressors are key equipment for the production of a thin ethylene-vinyl acetate (EVA) film on top of a solar panel and for the polysilicon production of the core. – Liquefied Natural Gas (LNG) as a short- and medium-term bridge energy for replacing coal, ensuring energy security dur- ing the transition or as a fuel for marine applications, replacing carbon-intensive heavy fuel oil until zero-emission solutions are available. – Hydrogen as an important component of a sustainable energy future, in which our compressors play a key role in meeting the specific technical challenges of these new applications. The technological advantages of reciprocating compressors for this application are unrivaled efficiency and long service lives. Progress in fiscal year 2022 We have continued to expand our activities that contribute to a sustainable economy. We were able to achieve strong growth in hydrogen mobility and energy and to help the industry solve specific compressor-related technical challenges. This is not least due to our increased R&D and the strengthening of our business development resources for these markets. The fiscal year 2022 marked yet another significant increase of projects for the solar industry. We reached a new record order in- take for EVA and polysilicon applications. In addition to our focus areas of LNG, solar industry, and hy- drogen, we were able to win further projects in the areas of green ammonia and biodiesel. The development of the new test facility at Burckhardt Com- pression in Winterthur, Switzerland is progressing as planned and is expected to go live in fiscal year 2023. The facility is part of our partnership with Shell Renewables and Energy Solutions for the development of heavy-duty hydrogen refueling stations. 48 02220006_Burckhardt-Compression_GB_2022_EN.indd 48 02220006_Burckhardt-Compression_GB_2022_EN.indd 48 05.06.23 18:44 05.06.23 18:44 Burckhardt CompressionAnnual Report 2022Sustainability Report Our Performance We extended the application of our sustainability screening ap- proach to the entire Systems Division, representing 72% of the total order intake: – We classified around 17% (2021: 8%) of the total order intake as new energy applications. Examples are green hydrogen pro- jects in hydrogen mobility and energy or projects for the solar panel industry. – Around 23% (2021: 8%) of the total order intake is classified as being transitional with environmental advantages but not yet fully sustainable. Examples are, biogas applications in refin- ery, dual-fuel LNG applications in gas transport & storage, and grey hydrogen projects in hydrogen mobility and energy. – Around 32% (2021: 35%) of total order intake is classified as conventional applications. Examples are conventional industrial gas or petrochemical applications without a clear link to a sustainability use case. – 28% (2021: 49%) of the total order intake has not yet been classified. We had an exceptionally high order intake in fiscal year 2022 for projects supporting the energy transition. We expect a return to the previous reference range over the next two years. However, this year’s success shows that we are on track to achieve 40% of our order intake supporting the energy transition in the long term. Outlook for fiscal year 2023 In the coming fiscal year, we will continue our development of inno- vative non-lube, high-pressure and high-flow hydrogen compressor systems to meet the specific technical challenges along the hydro- gen value chain. We will also evaluate the extension of our screen- ing approach to the Services Division. Compressor for another green hydrogen production plant in Switzerland A major energy provider in Switzerland has started construction for a green hydrogen production plant, where a 2.5 MW Electrolyzer is fed with hydroelectric power. The hydrogen production capacity of this plant will reach up to 350 tons per year, which is equivalent to 1.5 million liters of diesel fuel. The hydrogen fuel will be delivered from the production site to the fuel sta- tions directly. Sustainability classification of order intake in % Conventional or not yet classified Transitional New energy 3 2 7 1 2 2 8 8 1 2 Overhaul of four non-Burckhardt Compressors for green steel production One of Europe’s most significant steelmaking compa- nies needed quick help to revive four non-Burckhardt compressors that had not been used in 10 years. The company turned one of its plants into a sustainable steelmaking plant. Burckhardt Compression success- fully supported the customer on its sustainability jour- ney and provided a customized solution responding exactly to the customer’s needs. 5. Working conditions Topic lead: Chief Human Resources Officer Target: Maintain an employee engagement score of ≥ 80% (2020: 79%) Jobs with decent working conditions are a basic premise for the development of individuals and society. They drive prosperity and provide a livelihood for people. Our employees are central to our success, and we are proud of our global and diverse workforce in our global production sites and service centers. 49 02220006_Burckhardt-Compression_GB_2022_EN.indd 49 02220006_Burckhardt-Compression_GB_2022_EN.indd 49 05.06.23 18:44 05.06.23 18:44 Burckhardt CompressionAnnual Report 2022With our engagement in providing good working conditions, we contribute to the targets of Sustainable Development Goal 8: De- cent work and economic growth. Our most direct impact concerns the working conditions of our more than 2’900 employees (FTE). Further impacts are along our supply chain, also with regard to hu- man rights. We recognize our responsibility to exercise due diligence in collaboration with our business partners. Our approach Burckhardt Compression is committed to upholding fundamental international labor standards and strives to provide conditions that exceed the local industry average overall. To achieve this, we focus on three areas: – Dialog and relations – Terms and compensation – Organizational culture The impacts on employees of suppliers, contractors, and out- sourced activities are managed mainly through our supply chain due diligence approach. Dialog and relations: We acknowledge and support freedom of association as set out in our Code of Conduct. Open dialog with employees is a priority for Burckhardt Compression and is fostered in various ways. In addition to employee surveys and a continuous exchange with line manag- ers, employees are informed online several times a year personal- ly by members of the Executive Management about the state of the business and other matters, whereby questions are answered. Our online platform and mobile application “BC Connect” is an ex- change platform accessible to all employees and allows them to receive, comment on, and write messages. Other dialog tools are used at local level in the form of collective bargaining and em- ployee representation. 63% of Burckhardt Compression’s employees worldwide are covered by a collective agreement. Among the most attractive employers in Switzerland Burckhardt Compression ranks as one of the most attractive Swiss employers in the mechanical and plant engineering sector 2023. This ranking is based on an independent survey of employees, and was carried out by data analyst Statista via an online access panel, combined with input from the readers of Handelszeitung and Le Temps. More than 1’500 employers with 200 or more employees in Switzerland were identified for the survey. Burckhardt Compres- sion was placed an excellent 10th in its sector and a good 123rd rank over all sectors which means a top 9% ranking. 50 Employee turnover ratio in % of yearly average of full-time equivalent Other 2.1 Involuntary 1.1 2020: 9.5 2021: 10.1 2022: 10.7 Voluntary 7.5 Terms and compensation: Burckhardt Compression offers attractive terms and conditions of employment adapted to prevailing requirements on an ongoing basis. We benchmark our salaries against external salary surveys conducted by Willis Towers Watson and have an ongoing monitor- ing system in place to eliminate significant salary differences be- tween equivalent positions. We have greatly expanded our flexi- bility in terms of staff working from home and have enhanced our infrastructure to enable our employees to work comfortably from a variety of locations. Organizational culture: We believe that our well-established corporate culture forms the foundation of our competitiveness. A comprehensive program called “Values and Behaviors” ensures that employees in all Group locations and companies share and actively uphold the same corporate values and principles. The internal Code of Conduct is designed to set fundamental standards and principles for how employees should interact and behave with partners, stakeholders, and the environment. A global Speak Up channel operated by a third party is available to report violations of our standards, values, and behavioral guidelines. Progress in fiscal year 2022 In the previous reporting period, we conducted our biennial world- wide employee survey with a high voluntary participation rate of 90%, which reflects the remarkable level of engagement of our staff. In this reporting period, we systematically analyzed the results to drive measures designed to improve the engagement of our em- ployees even more. These measures consider the specific local needs of the em- ployees in the individual subsidiaries. For example, numerous meas- ures were implemented at our production site in Shenyang based on the survey results. These include 21 new tea rooms, a football and basketball court, a new laundry room, sports training, and annual health checks. 02220006_Burckhardt-Compression_GB_2022_EN.indd 50 02220006_Burckhardt-Compression_GB_2022_EN.indd 50 05.06.23 18:44 05.06.23 18:44 Sustainability ReportBurckhardt CompressionAnnual Report 2022We also launched a global award program for the recognition of exceptional team performance. This program rewards teams that have particularly excelled and contributed to the success of the company through their performance. Our performance The employee turnover rate increased slightly to 10.7% in the report- ing period. This figure includes all departures, including fixed-term employment contracts that came to an end. Of this, 7.5 percent- age points are accounted for by voluntary departures. High levels of employee loyalty and identification with the company are also confirmed by the fact that the typical employee has been with the company for 8 years. We conduct our employee survey every two years. Therefore, there are no updated results this year compared to the last report. The average score for the statement “All in all, I am satisfied with my current work situation” is 77 out of a possible 100 points. For the statement “I would recommend Burckhardt Compression as a good place to work”, our rating is at 84 points. Burckhardt Compression conducts an annual appraisal and performance review with its employee which includes personal de- velopment goals and suggestions for continuous improvement. 86% of employees completed the performance appraisal cycle in the reporting period. Outlook for fiscal year 2023 In the coming fiscal year, we will refresh our employee survey. The findings will be our benchmark to drive measures locally in order to address the specific needs of our employees in the different regions. Equal pay for equal work Burckhardt Compression conducted a 2020 wage equality analysis between men and women for its main production site and headquarters in Winterthur. The Swiss legal requirements demand a maximum discrepancy between men and women of –5%. Burckhardt Compression is significantly below these requirements with –1.8%. The results were verified by an independent auditing organization. Equal pay for equal work is an important principle for us and we continue working to ensure this. Rating from employee survey January 2020 and January 2022 Average points scored for the statement: “All in all, I am satisfied with my current work situation” 20 22 71 77 0 Strongly disagree 100 Strongly agree Average points scored for the statement: “I would recommend Burckhardt Compression to others as a good place to work” 20 22 77 84 0 Strongly disagree 100 Strongly agree Average points scored for the statement: “The top management provides information to employees in a way they can understand” 20 22 72 80 0 Strongly disagree 100 Strongly agree Average points scored for the statement: “My work generally provides me with sufficient oppor- tunities to balance my work life and my private life” 20 22 67 74 0 Strongly disagree 100 Strongly agree Average points scored for the statement: “In our company employees are treated with respect, no matter what job they perform” 20 22 76 83 0 Strongly disagree 100 Strongly agree 51 02220006_Burckhardt-Compression_GB_2022_EN.indd 51 02220006_Burckhardt-Compression_GB_2022_EN.indd 51 05.06.23 18:44 05.06.23 18:44 Sustainability ReportBurckhardt CompressionAnnual Report 2022Sustainability Report 6. Occupational health and safety Rating from employee survey January 2020 and January 2022 Points scored for the statement: “My workplace is designed to prevent any harm to my health” 20 22 71 79 0 Strongly disagree 100 Strongly agree Progress in fiscal year 2022 We were able to successfully conduct our external audits at Group level in accordance with the ISO 45001 standard. We systemati- cally incorporated the findings of the local certification bodies. We launched a safety awareness campaign in all manufacturing sites including illustrative flyers. We have also evaluated a dedicated software to improve the management of precarious situations and near misses, which will be rolled out in fiscal year 2023. Further, we implemented a stringent safety management sys- tem for work done on customer sites under the overall supervision of Burckhardt Compression. We have incorporated the findings and feedback from the health and safety section of the bi-annual em- ployee survey. Topic lead: Vice President Quality & Infrastructure Target: Keep the Lost Time Injury Rate (LTIR) below 0.7 every year (2021: 1.1) The protection of physical integrity and the promotion of mental well-being are top priorities for us. By providing a safe working en- vironment and promoting health, we can help achieve Sustainable Development Goal 3: Good health and well-being, and also Sus- tainable Development Goal 8: Decent work and economic growth. Our influence in this area extends to our own employees, to external employees in our workplaces, and to working conditions in supply chain companies. Our approach We are committed to the prevention of accidents and work-relat- ed illnesses and to the promotion of the mental well-being of em- ployees and workers whose work or workplace is under the control of Burckhardt Compression. We focus our approach on two com- ponents: – Occupational health and safety system and prevention culture – Mental health and well-being The impact on employee health and safety in our supply chain is controlled through the responsible procurement approach. Our occupational safety policy and management system cer- tified in line with ISO 45001 form the basis that governs all activities relating to health and safety in the workplace. Numerous meas- ures ranging from detailed risk assessments, safety walks accom- panied by management to workplace safety training, and manda- tory wearing of protective footwear, protective eyewear, and other work-relevant protective equipment demonstrate their effective- ness through steadily falling risk exposure. Creation of a culture of prevention through raising awareness and involving employee rep- resentatives in the safety committee at each site is an important part of our approach. We have several local programs to support the mental health and well-being of our employees. These include developing knowl- edge on topics such as stress management, sleep, and nutrition as well as promoting and encouraging sports activities. 52 Annual Report 2021 Burckhardt Compression 02220006_Burckhardt-Compression_GB_2022_EN.indd 52 02220006_Burckhardt-Compression_GB_2022_EN.indd 52 05.06.23 18:44 05.06.23 18:44 Our performance The Lost Time Injury Rate (LTIR) has decreased from 1.1 to 0.6. This marks a clear improvement compared to last year and is within our target range for our sustainability targets 2027. Although the trend is encouraging, occupational health and safety remains a major challenge, particularly due to the increased workload in the facto- ries and the associated new hires. During this reporting period, we recorded no fatal accidents and no case of work-related ill-health. Outlook for fiscal year 2023 One focus will be to strengthen our safety culture, which we in- tend to achieve by enhancing the awareness campaign launched in 2022 and providing further information at local level. The expan- sion of our global health and safety organization will support this undertaking. A second focus will be on internal coordination and integration within the Group. In fiscal year 2023, we will focus on the locations Shenyang and Shanghai in China, the US, and the Netherlands. The aim is to align local approaches and achieve continuous improve- ment through shared learning experiences. Program to raise health and safety awareness In fiscal year 2022, we launched a broad aware- ness-raising program on the topic of occupational safety in our major production and assembly sites. Using various media, including leaflets, videos, and on-site installations, we highlighted the most important sources of danger. In this fiscal year, we conducted a review of the campaign and received very positive feedback from our employees. Lost Time Injury Rate (LTIR) Per 200’000 hours worked (per calendar year) 1 . 1 0.6 . 7 0 0 2 1 2 2 2 Severity Rate (SR) Lost days/recordable incidents (per calendar year) 24.6 . 0 5 2 . 0 4 2 0 2 1 2 2 2 Lost Time Workday Rate (LTWR) Per 200’000 hours worked (per calendar year) 8 7. 2 . 4 6 1 15.6 0 2 1 2 2 2 53 Annual Report 2022 Burckhardt Compression 02220006_Burckhardt-Compression_GB_2022_EN.indd 53 02220006_Burckhardt-Compression_GB_2022_EN.indd 53 05.06.23 18:44 05.06.23 18:44 Sustainability ReportSustainability Report 7. Product safety Topic lead: Vice President Contracting Systems Division Target 2027: Maintain zero incidents every year related to product safety (2021: 0) Compressors are critical equipment in various applications in the process industry and energy provision. System safety and reliabil- ity are the most important areas of expertise in our business due to the high pressures, continuous operation, integration in com- plex industrial processes, and the individual hazard potentials of the compressed gases. By ensuring product safety, we contribute to the Sustainable Development Goal 3: Good health and well-being. The main impacts are in the commissioning and operational phase and extend over the compressors’ decades of life. Successful launch of new engineering platform In a period characterized by new product launch- es, organizational developments, business growth, and regionalization it is of the utmost importance to maintain the Burckhardt Compressions engineering standard. We launched a new engineering plat- form, providing pre-engineered modules, ranging from pre-configured elements up to whole projects designs. These pre-configurations and the platform itself define a technical framework that supports compliance with product safety requirements. New developments for hydrogen applications are already being integrated into this platform, which offers a uniform, globally valid standard. Our approach Burckhardt Compression assures safe operation of compressor sys- tems in every phase of their life cycle. Our approach encompasses five main areas of risk mitigation: – International norms and standards Where available, we use and follow international standards for the development, production, commissioning, and main- tenance of compressor systems. This includes the evaluation of safety risks and certification in accordance with mandatory laws and standards. – Simulation, calculation and testing Our comprehensive knowledge of calculation and simulation allows us to optimize the dimensioning of compressor systems. We also use specific testing and inspection procedures to en- sure safety and functionality. – Outstanding processes Defined working principles, processes and our ISO 9001-cer- tified quality management system ensure our processes meet the strict requirements. – Control systems and maintenance Our compressor systems are fitted with a minimum protection system that shuts down the system in the event of a critical disruption. Our PROGNOST®-SILver system for monitoring and diagnosing the condition of reciprocating compressors and our UP! Solutions for long uptime and maximum reliability are further key tools for increasing reliability and safety. – Documentation and training To ensure the smooth and safe operation of compressor sys- tems, we produce a specific set of operating documents for each system and also offer a wide range of training modules available either online or at our training centers. Progress in fiscal year 2022 We have successfully implemented an updated pre-order risk as- sessment and risk mitigation process, which is applied for all pro- jects. Additionally, a new sales release matrix across all product lines serves as an advanced control and screening mechanism to comply with the different country standards and customer guide- lines. In the reporting year, we invested significantly in competence development throughout the organization. We strengthened the “career path for technical expertise” in contracting, conducted on- the job training for new products lines, empowered our project en- gineering office, and set up a competence center for several en- gineering disciplines, allowing for global knowledge management. In the area of control systems and instruments, we successful- ly implemented remote access devices for the first product lines in marine high-pressure applications. Additionally, we launched an engineering base software that allows the utilization of pre-engi- neered modules to ensure a high product and safety level for exe- cution during ramp-up and beyond. The new engineering platform 54 02220006_Burckhardt-Compression_GB_2022_EN.indd 54 02220006_Burckhardt-Compression_GB_2022_EN.indd 54 05.06.23 18:44 05.06.23 18:44 Burckhardt CompressionAnnual Report 2022Sustainability Report also presents the data source for a “digital twin”, enabling us to simulate operating conditions to improve our design, product reli- ability and safety. 8. Business conduct Our performance As part of the approval process, 100% of the new product config- urations have been through a risk and design assessment that in- cludes product safety. No incidents related to the product safety of our compressors were registered over the reporting period. Similarly, no violations of regulations or voluntary codes took place in rela- tion to product safety. In the reporting period, we registered one near miss for a new product application. The problem was identi- fied before the compressor was handed over to the customer and rectifications have been implemented by Burckhardt Compression as part of the installation and commissioning process. The number of new compressors fitted with a Burckhardt Compression control system was further increased. We firmly be- lieve that our control solutions offer significant added value in terms of reliability, safety, and lifecycle management of our compressors. Outlook for fiscal year 2023 Our focus for the coming period will be on the further strengthen- ing of our organizational capacities for project execution and for new product launches. We also aim to utilize our new engineering platform for the majority of new projects globally. The applied con- cepts for product release, risk assessments, as well as knowledge, competence, and reliability management will be strengthened in collaboration with all internal and external stakeholders, including clients and suppliers. Topic lead: General Counsel Target 2027: Maintain zero incidents every year related to corruption or anti-competitive behavior (2021: 0) Unethical business practices have the potential to damage the economy and society. They cause economic losses, promote so- cial inequality, and undermine democratic processes. As a global business with a far-reaching network of business partners, we are committed to conducting our business ethically, legally, and in an environmentally and socially responsible manner, which is a pre- condition for all other material sustainability topics. Our approach Burckhardt Compression undertakes to carry out its business activ- ities in an ethical, legal, and environmentally and socially responsi- ble manner. We expect every business partner with which we have a business relationship to conduct itself in a similar manner. We assess every aspect of our business relationship and focus par- ticularly on: – No corruption – Free competition – Export compliance Our Code of Conduct defines the fundamental standards and prin- ciples for employee interaction and behavior with partners, stake- holders, and the environment. With the Code of Conduct for busi- ness partners, our suppliers, local agents, and partners commit to conducting their business in an ethical, legal, and environmentally and socially responsible manner. Both have been reviewed and approved by the Board of Directors. All employees are required to explicitly acknowledge their understanding of the Code of Conduct on a regular basis. We train our employees in the fields of anti-cor- ruption, compliance with free competition, and strict adherence to export controls. Burckhardt Compression carries out regular internal audits of all its subsidiaries with a focus on financial, legal, and compliance topics. Every subsidiary is audited in a three-year cycle. Our Speak Up reporting system is a complaints channel oper- ated by an independent third party. It allows employees, business partners, and third parties that are or might be aware of suspected misconduct to register it in the reporting system. The system is de- signed to allow protection of the identity of the reporting party and for comments to be made anonymously. Burckhardt Compression 55 02220006_Burckhardt-Compression_GB_2022_EN.indd 55 02220006_Burckhardt-Compression_GB_2022_EN.indd 55 05.06.23 18:44 05.06.23 18:44 Burckhardt CompressionAnnual Report 2022is committed to investigating all cases according to our Speak Up policy and to cooperating in the remediation of negative impacts caused or contributed to. 5 Speak Up notifications, 2022 Notifications of potential misconduct External 1 Internal 4 ment authorities in the investigation and is of the opinion that its employees acted correctly but leaves the legal assessment of the matter to the court. Our existing processes and preliminary clarifications of export controls have proven their worth. 24 requests for clarification of ex- port regulations were forwarded to the appropriate authorities dur- ing the reporting period. Of these, 22 cases were approved, and two were rejected by the authorities. One initially approved case has been reversed at a later stage whereupon we withdrew from the project. No violations of export controls were identified. Outlook for fiscal year 2023 We are planning to further strengthen our training activities for busi- ness conduct. We are increasing the reach of our Code of Conduct for business partners, particularly in cooperation with our suppliers. Progress in fiscal year 2022 We have updated and rolled out our “Values and Behaviors” which, together with our Code of Conduct, form the fundamental behav- ioral guidelines at Burckhardt Compression. The updated version clearly emphasizes the importance of “Responsibility” as one of the four pillars of our “Values and Behaviors”. We also continued with the roll-out of our Code of Conduct for our business partners, which has been signed by suppliers and business partners representing more than 80% of our purchasing volume. To further raise awareness of compliance with the law in our focus areas of no corruption, free competition, and export com- pliance, we provide targeted modules for employees concerned. In the reporting period, a total of 372 employees who deal with these areas in their work have successfully completed such train- ing modules. Speak Up, which is now running for the second year, is active- ly used and accepted among employees and business partners. We comply diligently with the export control provisions and legal sanctions applicable concerning Russia’s war with Ukraine. We de- cided not to accept any new contracts from or with Russia as of mid-March 2022 and have maintained this policy ever since. We do not have any subsidiaries in either Russia or Ukraine. Our performance A total of five suspected cases of misconduct in violation with the Code of Conduct or law were recorded on the Speak Up reporting system: four by employees and one by external business part ners. All the cases were processed and closed within the reporting pe- riod. The average processing time to the conclusion of the investi- gation was 45 days. We conducted nine internal audits of subsidiaries following our audit cycle. All past identified risks have been mitigated and no significant new risks regarding corruption and anti-competitive behavior have been detected in this financial year. No violations of competition law or instances of corruption con- nected to our business activities were identified during the report- ing period, nor were any sanctions imposed for any other significant non-compliance with environmental, social, or any other legislation. In the reporting period, two employees of Burckhardt Com- pression AG were accused of having exploited insider knowledge when they purchased shares for the company’s ordinary employee stock ownership program on behalf of the company in May 2020. Burckhardt Compression has cooperated fully with the law enforce- 56 02220006_Burckhardt-Compression_GB_2022_EN.indd 56 02220006_Burckhardt-Compression_GB_2022_EN.indd 56 05.06.23 18:44 05.06.23 18:44 Sustainability ReportBurckhardt CompressionAnnual Report 2022Sustainability governance at Burckhardt Compression Board Strategy & Sustainablity Committee t n e m e g a n a M y t i l i i b a n a t s u S Executive Sustainability Team Executive Management & Corporate Communication Sustainability Steering Group Topic leaders, Managing Directors & Regional Heads Implementation Support Topic contributors Sustainability Report Our Commitment Firmly anchored sustainability governance The very top of our organization is committed to sustainability. Re- sponsibilities are clearly defined at every level and closely linked to strategy. All sustainability-related activities are supervised by the Board of Directors. The Strategy and Sustainability Committee supports the CEO in developing corporate strategy and advises the Board of Directors on all matters relating to strategy and sus- tainability. All members of the Executive Management are also members of the Executive Sustainability Team, which is responsible for the strategic approach at Group level and compliance with our sus- tainability roadmap. Every material topic is led by a member of senior management. These managers form the Sustainability Steering Group together with the Managing Directors of the production and assembly sites, and the Regional Heads from the Services Division. The Sustain- ability Steering Group is responsible for implementing the sustain- ability roadmap and defining the topic-specific management approach. Implementation is supported by designated experts in the field and key local individuals in the subsidiaries. They provide technical expertise and ensure on-site implementation. A designated sustainability manager leads and moderates the sustainability-related activities at Group level and, as a technical expert, supports all functions and subsidiaries with implementation of the roadmap. EcoVadis silver medal award Burckhardt Compression was awarded the EcoVadis silver medal for sustainability management with its place in the top 25% in the sector. EcoVadis is one of the largest platforms for assessment of suppli- er sustainability and is used by many Burckhardt Compression customers. We also improved our score in major ESG ratings like MSCI, Sustainalytics, ISS ESG and S&P Global, which puts us in the top 10% – 50% of companies in our industry, depending on the rating agency. 57 02220006_Burckhardt-Compression_GB_2022_EN.indd 57 02220006_Burckhardt-Compression_GB_2022_EN.indd 57 05.06.23 18:44 05.06.23 18:44 Burckhardt CompressionAnnual Report 2022 A clear focus based on our materiality analysis We use a materiality analysis to determine where our company’s activities have the greatest impact on society, the environment, and the economy. For this purpose, we conducted an impact anal- ysis, where we assessed actual and potential positive and nega- tive impacts of our activities along the value chain. The aspects of scale, scope, and likelihood of impacts were considered as as- sessment categories with a precedence of scale and scope. In this process, we gathered the views and concerns of our key stakehold- ers – investors, customers, employees, and suppliers – online and in person. We updated the analysis in this reporting period to reflect the updated requirements of the GRI Standards. Impact is now the only determinant for materiality definition, and water has been in- cluded as an operational topic. For each of the eight material topics, we have appointed a top- ic leader who, together with subject matter experts, develops our approach. Operational topics are important to us as well, but we do not pursue them with the same strategic approach as the material topics. They are integrated into the operational business activities at the departmental level. Other topics may be of greater relevance for a specific subsidiary, but not across the whole Group. We address these topics on a situation-specific basis. Material topics Operational topics Other topics • Business conduct • Energy use & efciency • Environmental impacts of application purpose • Greenhouse gas emissions & climate change • Longevity & cyclability • Occupational health & safety • Product safety • Working conditions • Asset & process integrity • Data security & privacy • Diversity, inclusion & equal opportunity • Biodiversity • Conflict & security • Corporate citizenship & community impacts • Non-greenhouse gas air emissions • Economic contribution • Resource/material efciency • Forced labor/child labor • Training & development • Water & effluents • Waste & hazardous substances • Intellectual property & access to knowledge • Land degradation • Land rights/indigenous rights • Noise, vibration, odor & radiation • Political accountability • Sales & project implementation practices • Social impacts of application purpose • Tax contribution & allocation High Significant Moderate Aggregated impact on society, environment and economy 58 02220006_Burckhardt-Compression_GB_2022_EN.indd 58 02220006_Burckhardt-Compression_GB_2022_EN.indd 58 05.06.23 18:44 05.06.23 18:44 Sustainability ReportBurckhardt CompressionAnnual Report 2022 Our employees are the key to our success Together, we are successful and create sustainable value. Burckhardt Compression is thus engaged in the advancement of all employees and a diverse workforce. They are a vital factor in the implementation of our sustainability ambitions. We appreciate our employees’ expertise and promote knowl- edge sharing. Personal training and development are part of the annual appraisal and performance review process and are finan- cially supported by the company. To ensure the ongoing develop- ment of technological expertise and personal and managerial skills within the company, employees around the world participate in in- ternal technical, product, and leadership training modules, which are conducted across the Group throughout the year with a range of programs. In the fiscal year 2022, we provided on average 13.2 h of internal training per FTE and reached 84% of our employees with our offering. We promote and support new talent at all levels and are com- mitted to the Swiss system of apprentice training. The company currently has 49 apprentices in Switzerland and 22 in India in eight occupations. Burckhardt Compression is a founding member of the initiative launched under the auspices of the Swiss Federal Office for Professional Education and Technology and the Swiss-Indian Chamber of Commerce to establish an apprenticeship system in India based on the Swiss model; the company is also a corporate sponsor of the AZW Training Center in Winterthur for vocational career pathways. Burckhardt Compression fundamentally believes that mixed teams perform better. In the reporting period, women made up 33.3% of the Board of Directors and 20% of Executive Management. Of the global workforce, 15.6% (2021: 15.2%) is female. Dialog with our stakeholders The appropriate involvement of our various stakeholders is extremely important to Burckhardt Compression. We have identified four key stakeholders within our sustainability management: customers, employees, investors, and suppliers. We are engaged in more detailed discussions with them and actively involve them in identifying material topics. In addition, we also maintain an open dialog with other stakeholder groups, such as the local community, media, the scientific community, associations, civil society, and the state, as required. Global workforce by gender Employees (FTE) 2’973 5 6 4 8 0 5 2 ’ 6 1 4 6 1 3 2 ’ 9 7 3 8 5 1 ’ 2 0 2 2 1 2 2 female male Global workforce by region, 2022 in % Americas 10 APAC 47 EMEA 43 2’973 FTE Global workforce by age, 2022 in % 55+ years 14 45 – 54 years 21 2’973 FTE <25 years 4 25 – 34 years 26 35 – 44 years 35 59 02220006_Burckhardt-Compression_GB_2022_EN.indd 59 02220006_Burckhardt-Compression_GB_2022_EN.indd 59 05.06.23 18:44 05.06.23 18:44 Sustainability ReportBurckhardt CompressionAnnual Report 2022Suppliers We work closely with suppliers in the development phase, with the aim of long-term partnerships. Exchanges and performance reviews take place on a regular basis via on-site visits, virtual meetings, audits, or inspections. The central sustainability priorities for suppli- ers are occupational health and safety, energy consumption, and business conduct. All three topics are key elements of our approach to sustainability. Communities and other stakeholders We maintain an open relationship with the local community. We established distinct communication channels for inquiries and com- municated these contact points on our website. We also support and promote local initiatives, for example in the areas of education and sports. We practice transparency in our exchange with the me- dia and authorities and strive for timely and open communication. Customers Burckhardt Compression seeks long-term customer relations. The longest-standing customer relationship dates back to 1885, when the company supplied BASF in Ludwigshafen with one of the first compressors ever built. Customer satisfaction is measured using various tools. The results are evaluated as part of the manage- ment process with the divisional management teams, and actions are initiated and implemented in accordance with the results. For example, customer surveys were carried out in the reporting peri- od with a focus on the Services Division. Customer priorities in the field of sustainability were climate, energy, and occupational safety. All three topics are key elements of our approach to sustainability. Investors Burckhardt Compression maintains an open and transparent dialog with its investors and other interested parties. The aim of investor relations is to accurately portray the company and its markets to enable a fair valuation of Burckhardt Compression stock. Leading Swiss business newspaper “Finanz und Wirtschaft” gives Burckhardt Compression’s investor relations and transparency an A– rating (A is the highest rating). In recent years, the importance of ESG (Environment, Social, Governance) rating agencies have also increased significantly for our investors. Important sustainability priorities for our investors in- clude climate change, business conduct, and energy consumption. All three are covered in the material topics. Employees Open dialog with employees is a central priority for Burckhardt Compression and is carried out in different ways. The most impor- tant dialog channels are described in this report in the material topic working conditions. The key priorities for employees are health and safety at work, working conditions, and training and develop- ment. We actively deal with the first two within our material topics. Training and development are a central pillar of our HR manage- ment. 60 02220006_Burckhardt-Compression_GB_2022_EN.indd 60 02220006_Burckhardt-Compression_GB_2022_EN.indd 60 05.06.23 18:44 05.06.23 18:44 Sustainability ReportBurckhardt CompressionAnnual Report 2022Sustainability Report Extended key figures Environmental metrics1 Energy Energy use Electricity Fuels and combustibles 2 District heating Share of renewable electricity Energy intensity Greenhouse gas emissions Greenhouse gas emissions Scope 1 3 Combustibles Fuels Others MWh % kWh /working hour tCO2e Greenhouse gas emissions Scope 2 4, 5 tCO2e Electricity District heating Greenhouse gas emission intensity by working hours (Scope 1 and 2) kgCO2e /working hour Greenhouse gas emission intensity by working hours without foundry (Scope 1 + 2) kgCO2e /working hour Greenhouse gas emission intensity by sales volume (Scope 1 + 2) Greenhouse gas emissions business travel (Scope 3) Water and waste Water 6 Waste 6 tCO2e / mCHF tCO2e m3 t 2022 2021 2020 59’107 30’658 18’585 9’864 21 10.1 4’674 1’551 2’914 209 15’396 13’712 1’684 3.4 2.3 24.2 2’567 78’687 3’530 49’928 27’779 16’608 5’541 15 9.4 4’221 1’485 2’508 228 13’198 12’252 946 3.3 2.1 26.8 1’361 45’619 18’915 18’569 8’135 2 9.1 5’187 2’541 2’421 225 8’369 6’980 1’389 2.7 1.9 20.6 1’211 83’810 2’805 91’218 2’605 1 With the exception of the figures for water consumption and waste, the data relate to all sites of the Burckhardt Compression Group. The data collection for environmen- tal data is performed by calendar year. The denominators sales volume and working hours are collected per fiscal year. The greenhouse gas inventory was calculated according to the WRI/WBCSD Greenhouse Gas Protocol Standard. ’Operational control’ was selected as the consolidation approach. Energy and greenhouse gas emissions data for 2020 and 2019 have been recalculated due to methodological adjustments, conversion factors and working hours calculation. The values are higher than in the previous report. 2 From fossil sources. 3 Scope 1 includes all directly caused emissions (e.g. combustion of fuels, loss of refrigerants). 4 Scope 2 includes emissions caused with purchased energy (electricity, district heating). 5 Reported according to the market-based approach under the Greenhouse Gas Protocol Scope 2 standard. The location-based approach results in emissions of 15’801 tCO2e in 2022 (2021: 13’653 tCO2e, 2020: 8’574 tCO2e). 6 Data refer to the production and assembly sites of the Burckhardt Compression Group, including headquarter (Switzerland, India, China, South Korea, United States). 61 02220006_Burckhardt-Compression_GB_2022_EN.indd 61 02220006_Burckhardt-Compression_GB_2022_EN.indd 61 05.06.23 18:44 05.06.23 18:44 Burckhardt CompressionAnnual Report 2022Health and Safety1 Health and Safety1 Lost Time Injury Rate (LTIR)2 Severity Rate (IR)3 Lost Time Workday Rate (LTWR)4 1 The data collection for occupational health and safety data is performed by calendar year. 2 Rate per 200’000 working hours for number of recordable incidents with lost time > 1 working day. 3 Number of lost days/incidents subject to registration with loss > 1 working day. 4 Rate per 200’000 working hours for total of lost workdays. Employee structure Employee structure Number of employees FTE Permanent Male Female EMEA APAC Americas Temporary Male Female EMEA APAC Americas Full-time Male Female EMEA APAC Americas Part-time Male Female EMEA APAC Americas Number of external workers Number trainees & apprentices 62 2022 2021 2020 0.6 24.6 15.6 1.1 25.0 27.8 0.7 24.0 16.4 2022 2021 2020 2’973 2’724 2’320 404 1’264 1’155 305 249 188 61 19 229 1 2’856 2’442 414 1’167 1’384 305 117 66 51 116 0 1 305 178 2’732 2’508 2’145 363 1’152 1’066 290 224 171 53 16 207 1 2’628 2’256 372 1’065 1’273 290 104 60 44 103 0 1 298 153 2’538 2’339 2’000 339 1’037 1’014 288 199 158 40 13 185 1 2’445 2’103 342 959 1’199 287 93 56 37 91 0 2 187 91 02220006_Burckhardt-Compression_GB_2022_EN.indd 62 02220006_Burckhardt-Compression_GB_2022_EN.indd 62 05.06.23 18:44 05.06.23 18:44 Sustainability ReportBurckhardt CompressionAnnual Report 2022 Employee turnover New employee hires (% of yearly average) New employee hires (% of end of year) Male Female <25 years 25–34 years 35–44 years 45–54 years 54+ years Employee turnover (% of yearly average) Employee turnover (% of end of year) Male Female <25 years 25–34 years 35–44 years 45–54 years 54+ years 1 Turnover data for 2020 is based on headcount. 2022 2021 2020 FTE % yearly average FTE % yearly average FTE % yearly average 510 17.7% 451 17.1% 149 5.8% FTE % end of year FTE % end of year FTE % end of year 510 427 83 55 210 145 63 37 17.2% 17.0% 17.9% 43.6% 26.9% 13.8% 10.3% 9.2% 451 382 69 45 171 121 69 45 16.5% 16.5% 16.6% 50.2% 22.2% 13.7% 11.6% 11.4% 149 119 30 16 54 35 27 17 5.9% 5.5% 7.8% 20.3% 6.9% 4.5% 4.9% 4.8% FTE % yearly average FTE % yearly average Headcount1 % yearly average1 308 FTE 308 264 44 17 100 80 43 68 10.7% % end of year 10.4% 10.5% 9.4% 13.4% 12.8% 7.6% 7.0% 16.9% 266 FTE 266 230 36 17 82 87 36 44 10.1% 249 9.5% % end of year Headcount1 % end of year 9.7% 9.9% 8.7% 19.1% 10.6% 9.9% 6.0% 11.1% 249 214 35 19 77 53 39 61 9.6% 9.8% 8.8% 23.5% 9.8% 6.7% 6.9% 16.7% 63 02220006_Burckhardt-Compression_GB_2022_EN.indd 63 02220006_Burckhardt-Compression_GB_2022_EN.indd 63 05.06.23 18:44 05.06.23 18:44 Sustainability ReportBurckhardt CompressionAnnual Report 2022Sustainability Report GRI content index Burckhardt Compression has reported in accordance with the GRI Standards for the period 1 April 2022 to 31 March 2023. GRI 1 Foundation 2021 has been used for compiling this report and there is no applicable GRI Sector Standard. GRI standard Disclosure Reference Further information and omissions GRI 1: Foundation 2021 GRI 2: General disclosures 2021 The organization and its reporting practices GRI 2: General disclosures 2021 2-1 Organizational details 2-2 Entities included in the organization’s sustainability reporting 2-3 Reporting period, frequency, and contact point 2-4 Restatements of information p. 102, pp. 124–125 p. 100, pp. 124–125 – – a. Burckhardt Compression Holding AG iii. Consolidation approach applies to all disclosures. a. Sustainability report: 04.01.2022 to 03.31.2023, yearly b. Annual report: 04.01.2022 to 03.31.2023 c. Publication: 06.06.2023 d. Contact: sustainability@burckhardtcom- pression.com Energy consumption and intensity, and subsequently CO2 emissions and intensity. for 2019 and 2020 have been recalculated due to methodological adjustments of conversion factors and working hours cal- culation. The values are higher than stated in the previous report. Share of renewable electricity of 2020 has been recalculated due to methodological adjustments. The values are slightly higher than stated in the previous report. We adjusted the 2021 values for project sustainability screening due to more rigorous classification criteria. 2-5 External assurance – This report was not externally verified. Activities and workers GRI 2: General disclosures 2021 2-6 Activities, value chain, and other business relationships 2-7 Employees p. 7, p. 40, p. 102, p. 104 p. 62 2-8 Workers who are not employees p. 62 c. FTE at the end of the reporting period. d. Trainees & apprentices are not included since some of our apprentices have an ex- ternal work contract with the AZW Training Center in Winterthur. a. i. Production employees, service technicians and engineers. a. ii. Engineering, project management, field services, compressor manufacturing and assembly. b. FTE at the end of the reporting period. 64 02220006_Burckhardt-Compression_GB_2022_EN.indd 64 02220006_Burckhardt-Compression_GB_2022_EN.indd 64 05.06.23 18:44 05.06.23 18:44 Burckhardt CompressionAnnual Report 2022Governance GRI 2: General disclosures 2021 2-9 Governance structure and composition pp. 73-79 2-10 Nomination and selection of the highest governance body Bylaws Art. 15-16, pp. 73-79 b. i. Annual discussion with major share- holders and proxy advisors. b. ii.-iv. Disclosed, applying not publicly disclosed criteria. 2-11 Chair of the highest governance body 2-12 Role of the highest governance body in overseeing the management of impacts 2-13 Delegation of responsibility for managing impacts pp. 74-76 p. 55, p. 57, pp. 76-79, Organi- zation regulation 1.-4. p. 57, pp. 76-79, Organi- zation regulation 1.-5. 2-14 Role of the highest governance body in sustainability reporting – 2-15 Conflicts of interest 2-16 Communication of critical concerns 2-17 Collective knowledge of the highest gov- ernance body 2-18 Evaluation of the performance of the highest governance body 2-19 Remuneration policy 2-20 Process to determine remuneration p. 71, pp. 73-75 pp. 55-56, Speak Up policy p. 77, Or- ganization regulation 1.4.4. p. 79 pp. 84-87 pp. 84-87 2-21 Annual total compensation ratio – Board of Directors releases the Annual Report for the general assembly of shareholders. a. Annual written confirmation by all members of the highest governance body. Through ongoing communication and reporting. This information is not available. We are evaluating the possibility of providing such information in the future. Strategy, policies, and practices GRI 2: General disclosures 2021 2-22 Statement on sustainable development strategy pp. 8-10 2-23 Policy commitments 2-24 Embedding policy commitments 2-25 Process to remediate negative impacts 2-26 Mechanisms for seeking advice and raising concerns pp. 39-41, pp. 55-56, Code of Conduct pp. 55-56, Organiza- tion regula- tion 3.-4. pp. 55-56, Speak Up policy pp. 55-56, Speak Up policy 2-27 Compliance with laws and Regulations p. 56 65 02220006_Burckhardt-Compression_GB_2022_EN.indd 65 02220006_Burckhardt-Compression_GB_2022_EN.indd 65 05.06.23 18:44 05.06.23 18:44 Sustainability ReportBurckhardt CompressionAnnual Report 2022GRI standard Disclosure Reference Further information and omissions 2-28 Memberships associations – Stakeholder engagement GRI 2: General disclosures 2021 2-29 Approach to stakeholder engagement pp. 59-60 2-30 Collective bargaining agreements p. 50 Material topics GRI 3: Material Topics 2021 3-1 Process to determine material topics 3-2 List of material topics Greenhouse gas emissions and climate change GRI 3: Material Topics 2021 3-3 Management of material topics GRI 305: Emissions 2016 305-1 Direct (Scope 1) GHG emissions p. 58 p. 58 pp. 41-43 p. 43, p. 61 305-2 Energy indirect (Scope 2) GHG emissions p. 43, p. 61 305-3 Other indirect (Scope 3) GHG emissions p. 43, p. 61 305-4 GHG emissions intensity p. 43, p. 61 Energy use and efficiency GRI 3: Material Topics 2021 3-3 Management of material topics GRI 302: Energy 2016 302-1 Energy consumption within the organ- ization 302-3 Energy intensity Own indicator Share of renewable electricity Longevity and recyclability pp. 44-45 p. 44, p. 61 p. 44, p. 61 p. 44, p. 61 GRI 3: Material Topics 2021 3-3 Management of material topics pp. 45-47 Own indicators Reused or refurbished components Sales of revamp and upgrade services p. 46 p. 47 Environmental impacts of application purpose GRI 3: Material Topics 2021 3-3 Management of material topics pp. 48-49 Own indicators Working conditions Sustainability classification of business activities p. 49 GRI 3: Material Topics 2021 3-3 Management of material topics GRI 401: Employment 2016 401-1 New employee hires and employee turnover Own indicators Score satisfaction work situation Score workplace recommendation Score employee engagement pp. 49-51 p. 50, p. 63 p. 51 p. 51 p. 51 66 – AZW Winterthur, Board – CII Confederation of Indian Industry – EFRC - European Forum for Reciprocat- ing Compressors – ICAAMC - Compressor Applications and Machinery Committee – Joint Chamber of Commerce Switzerland – CIS/Georgia – SWISSMEM - Schweizer Maschinen-, Elektro- und Metall-Industrie – Swiss Mechatronics – Swiss-American Chamber of Commerce – Swiss-Chinese Chamber of Commerce – Swiss-Indian Chamber of Commerce – Switzerland Global Enterprise b. Where usual and available we take existing bargaining agreements as a benchmark. We are working on a full Scope 3 emission calculation. We expect to publish this data in fiscal year 2023. The breakdown by region is not disclosed for business reasons. 02220006_Burckhardt-Compression_GB_2022_EN.indd 66 02220006_Burckhardt-Compression_GB_2022_EN.indd 66 05.06.23 18:44 05.06.23 18:44 Sustainability ReportBurckhardt CompressionAnnual Report 2022Occupational health and safety GRI 3: Material Topics 2021 3-3 Management of material topics GRI 403: Occupational Health and Safety 2018 403-1 Occupational health and safety management system p. 52 p. 52 403-2 Hazard identification, risk assessment, and incident investigation – 403-3 Occupational health services 403-4 Worker participation, consultation, and communication on occupational health and safety – – 403-5 Worker training on occupational health and safety p. 52 403-6 Promotion of worker health p. 52 b. All employees who are under the care and control of Burckhardt Compression (including external employees on our prem- ises) are covered. a. The EOHS team (Environment, Occupa- tional Health, and Safety team), under the direction of the Quality Team and Safety Officer, is responsible for conducting risk assessments using risk graphs. The risk assessment will be used for training and awareness activities in the respective work area. Safety inspections are used for risk mitigation. b. Notifications will be made using a dedi- cated EOHS notification form. c. A work stoppage procedure is in place to stop work in the event of an unsafe situation. d. There is a procedural policy for reporting near misses, incidents, investigations, non- conformities, and corrective and preventive actions. There is a company ambulance service at the site in Winterthur, which is operated in conjunction with surrounding companies. A specific procedure for Consultation & Participation, Communication regulates the involvement of employees. Involvement takes place at all levels (steering commit- tee, core team, execution teams). In addition to mandatory training during in- duction, regular specific training is provided on work-related hazards, first aid, and emergency and evacuation. Non-occupational services and offerings depend on country-specific implementa- tion and may include the following: – regular health check-ups – access to medical facilities – other preventive measures, for example as part of our Dr. BeWell program 403-7 Prevention and mitigation of occupa- tional health and safety impacts directly linked by business relationships pp. 40-41 This aspect is covered in our approach to supply chain due diligence. 403-8 Workers covered by an occupational health and safety management system p. 52 403-9 Work-related injuries pp. 52-53, p. 62 403-10 Work-related ill health p. 53 i. 100% are covered by an occupational health and safety management system. ii. 100% of employees are covered by an internally audited system. iii. 91.6% are covered by an externally certified system. We have no differentiation between high-consequence work related injuries (a. ii.) and work-related injuries (a. iii.). 67 02220006_Burckhardt-Compression_GB_2022_EN.indd 67 02220006_Burckhardt-Compression_GB_2022_EN.indd 67 05.06.23 18:44 05.06.23 18:44 Sustainability ReportBurckhardt CompressionAnnual Report 2022GRI standard Disclosure Reference Further information and omissions Product safety GRI 3: Material Topics 2021 3-3 Management of material topics pp. 54-55 GRI 416: Customer Health and Safety 2016 416-1 Assessment of the health and safety impacts of product and service categories 416-2 Incidents of non-compliance concerning the health and safety impacts of products and services p. 55 p. 55 Business conduct GRI 3: Material Topics 2021 3-3 Management of material topics pp. 55-56 GRI 205: Anti-corruption 2016 205-1 Operations assessed for risks related to corruption 205-2 Communication and training about anti-corruption policies and procedures 205-3 Confirmed incidents of corruption and actions taken GRI 206: Anti-competitive behavior 206-1 Legal actions for anti-competitive be- havior, anti-trust, and monopoly practices p. 56 p. 56 p. 56 p. 56 68 02220006_Burckhardt-Compression_GB_2022_EN.indd 68 02220006_Burckhardt-Compression_GB_2022_EN.indd 68 05.06.23 18:44 05.06.23 18:44 Sustainability ReportBurckhardt CompressionAnnual Report 2022Sustainability Report SASB Mapping SASB Sustainability Disclosure Topics & Accounting Metrics Topic SASB Accounting Metric Code Reference Energy Management (1) Total energy consumed, (2) percentage grid electricity, (3) percentage renewable RT-IG-130a.1 Further Information and omissions Percentage grid electricity has not been evaluated separately until now. We are working on making this breakdown available in the future. We do not yet track near miss fre- quency rate (NMFR). We are eval- uating the possibility of providing such information in the future. Not applicable to our products. The vast majority of Burckhardt Compression’s compressors are powered by electricity. GRI 302-1 GRI 302-3 Page 61 GRI 403-1 to 8 Pages 53, 62 RT-IG-320a.1 RT-IG-410a.1 n/a RT-IG-410a.2 n/a RT-IG-410a.3 n/a RT-IG-410a.4 n/a RT-IG-440a.1 Pages 40-41, 78-79, RT-IG-440b.1 This information is not disclosed for business reasons. Employee Health & Safety Fuel Economy & Emissions in Use-phase Materials Sourcing Remanufacturing Design & Services SASB Activity Metrics (1) Total recordable incident rate (TRIR), (2) fatality rate, and (3) near miss frequency rate (NMFR) Sales-weighted fleet fuel efficien- cy for medium- and heavy-duty vehicles Sales-weighted fuel efficiency for non-road equipment Sales-weighted fuel efficiency for stationary generators Sales-weighted emissions of: (1) nitrogen oxides (NOx) and (2) par- ticulate matter (PM) for: (a) marine diesel engines, (b) locomotive die- sel engines, (c) on-road medium- and heavy-duty engines, and (d) other non-road diesel engines Description of the management of risks associated with the use of critical materials Revenue from remanufactured products and remanufacturing services Activity Metric Code Reference Further Information and omissions Number of units produced by product category RT-IG-000.A n/a This information is not disclosed for business reasons. Number of employees RT-IG-000.B GRI 102-8 Page 62 69 02220006_Burckhardt-Compression_GB_2022_EN.indd 69 02220006_Burckhardt-Compression_GB_2022_EN.indd 69 05.06.23 18:44 05.06.23 18:44 Burckhardt CompressionAnnual Report 2022Corporate Governance Corporate Governance Burckhardt Compression is committed to responsible corporate governance. The company adheres to the Directive on Information Relating to Corporate Go v - ernance (DCG) issued by SIX Swiss Ex- change, where applicable to Burckhardt Compression, and the “Swiss Code of Best Practice for Corporate Governance” issued by economiesuisse. 70 02220006_Burckhardt-Compression_GB_2022_EN.indd 70 02220006_Burckhardt-Compression_GB_2022_EN.indd 70 05.06.23 18:44 05.06.23 18:44 Burckhardt CompressionAnnual Report 2022Corporate Governance Burckhardt Compression has scheduled its Annual General Meeting 2023 on July 1, 2023. Among the proposals for which approval will be sought is the amendment of the Bylaws to reflect changes in Swiss corporate law, which has been revised to strengthen corporate governance and update various processes, among other changes. The information presented in this report reflects the situation on March 31, 2023, unless otherwise noted and this report is structured in accordance with the latest DCG's outline and numbering. 1.2. Significant shareholders According to information available to the company from the dis- closure notifications of the SIX Exchange Regulation Ltd., the share- holders listed in the following table reported shareholdings of at least 3% of the voting rights as per March 31, 2023. In accordance with the company’s Bylaws, the voting rights of NN Group N.V., The Goldman Sachs Group Inc and UBS Fund Management (Switzer- land) AG are limited to 5.0% of the total number of BCHN registered shares recorded in the share register: 1. Group structure and shareholders 1.1. Group structure 1.1.1. Description of the operational group structure Burckhardt Compression is managed through a divisional organi- zational structure consisting of two divisions, the Systems Division (compressor manufacturing business) and the Services Division (compressor services and components). The management struc- ture of the Burckhardt Compression Group is given in the organi- zational chart below: CEO Fabrice Billard CHRO Vanessa Valentin CFO Rolf Brändli President Systems Division Andreas Brautsch President Services Division Rainer Dübi 1.1.2. Listed Group companies Burckhardt Compression Holding AG, a corporation organized un- der the laws of Switzerland with its legal domicile in Winterthur, is the only listed Group company. Burckhardt Compression regis- tered shares (BCHN) are listed on the SIX Swiss Exchange in Zurich (ISIN: CH0025536027; security number 002553602). Its market cap- italization as per March 31, 2023 amounted to CHF 1’931’200’000. Burckhardt Compression Holding AG holds 33’413 BCHN shares (0.98% of the total registered shares) per March 31, 2023. 1.1.3. Unlisted Group companies Information on the unlisted companies included in the scope of consolidation of Burckhardt Compression Holding AG is given in the financial report on page 133, Note 102, “Subsidiaries”. With the exception of Burckhardt Compression Holding AG, none of the companies included in the scope of consolidation hold any BCHN shares. Name Country of shares in % MBO Aktionärsgruppe (Valentin Vogt, Daniela Vogt, Harry Otz, Leonhard Keller, Martin Heller, Ursula Heller, Marcel Pawlicek) NN Group N.V.* The Goldman Sachs Group, Inc** UBS Fund Management (Switzerland) AG BlackRock, Inc. CH NL US CH US 12.40 9.86 7.37 5.02 3.07 * According to the notification to the Disclosure office of SIX Exchange Regulation Ltd. published on November 19, 2021. ** According to the notification to the Disclosure Office of SIX Exchange Regulation Ltd. published on June 24, 2022, with the following remark: “This notification is being made because The Goldman Sachs Group, Inc. (“GS Group”) has acquired control of NN Investment Partners Holdings N.V. (“NNIP”) and NNIP has a discre- tionary asset management mandate with respect to BCHN shares which are owned by NN Group N.V.” More detailed information on the disclosure notifications is avai l- able on the website of the SIX Swiss Exchange’s Disclosure Office: (https://www.ser-ag.com/en/resources/notifications-market- participants/significant-shareholders.html#/). 1.3. Cross-shareholdings Burckhardt Compression Holding AG has no cross-shareholdings with any other company or group of companies. 2. Capital structure 2.1. Capital The issued share capital of Burckhardt Compression Holding AG amounts to CHF 8’500’000, comprising 3’400’000 fully paid regis- tered shares with a nominal value of CHF 2.50 each. The Board of Directors is authorized to increase the share ca- pital anytime on or before June 30, 2024 in the maximum amount of CHF 850’000 by issuing up to 340’000 fully paid in registered shares with a nominal value of CHF 2.50 per share (authorized share capital). 71 02220006_Burckhardt-Compression_GB_2022_EN.indd 71 02220006_Burckhardt-Compression_GB_2022_EN.indd 71 05.06.23 18:44 05.06.23 18:44 Burckhardt CompressionAnnual Report 2022Corporate Governance 2.2. Authorized capital and conditional capital in particular The company does not have any conditional capital. Details on the authorized share capital: The date of the issuance, the issue price, the beginning of the di v- idend rights and any contributions in kind or planned acquisitions to be financed by a capital increase are to be defined by the Board of Directors. The Board of Directors is entitled to conduct more than one capital increase. The transferability of the shares shall be sub- ject to the registration requirements set forth in the Bylaws. The Board of Directors is entitled to revoke the right to subscribe for new shares and to transfer such subscription rights to third parties (i) in case of an acquisition of a company through a share swap or (ii) in order to finance the acquisition of companies or of parts thereof. Furthermore, the Board of Directors is entitled to revoke the right to subscribe for new shares if such new shares are to be publicly placed in the market. Shares which have not been subscribed for by existing shareholder will be allocated by the Board of Directors at its free discretion. 2.3. Changes in capital There has been no movement (increase or decrease) in share ca p- ital since the IPO in June 2006. 2.4. Shares and participation certificates Voting rights may only be exercised after the shareholder has been registered in the Share Register. All shares are entitled to full divi- dend rights. Voting rights per shareholder are restricted to 5.0% of the total number of the registered shares recorded in the commer- cial register. This does not apply to shareholders who were in pos- session of more than 5.0% of the shares of Burckhardt Compression Holding AG before the Initial Public Offering (IPO). The voting rights of treasury shares – held by Burckhardt Compression Holding AG – will be suspended. The company has not issued any participation certificates. Dividend-right certificates 2.5. The company has not issued any dividend-right certificates. 2.6. Limitations on transferability and nominee registrations 2.6.1. Limitations on transferability No person or entity will be registered as a shareholder in the Share Register for more than 5.0% of the issued share capital. This entry restriction is also applicable to persons whose shares are totally or partially held by Nominees (please refer to below Chapter 2.6.3). This restriction is also valid if shares are acquired through the exer- cise of subscription, option, or conversion rights, with the excep- tion of shares acquired through inheritance, division of an estate or marital property law. Legal entities and partnerships associa t - ed with each other by uniformly managed capital or votes or in any other way, as well as private and legal entities or partnerships which form an association to evade registration restrictions, are re- garded as one person. 72 This restriction on voting rights does not apply to shareholders who were in possession of more than 5.0% of the shares of Burckhardt Compression Holding AG before the IPO. The Board of Directors is entitled to grant exceptions to the registration requirements in special circumstances. A shareholder may be represented at the Annual General Meeting by the independent proxy holder or by another person with legal capacity. All shares held by a shareholder can only be represented by one person. The company may further refuse registration as a shareholder with voting rights, if the acquirer does not expressly declare upon re- quest that he/she/it holds the shares in his/her/its own name and for his/her/its own account. 2.6.2 Reasons for granting exceptions The company has not granted any exceptions during the last year. 2.6.3. Nominee registrations Individual persons who have not expressly declared in their re- gistration application that they hold the shares for their own ac- count (nominees) will be entered in the Share Register with voting rights if the nominee concerned provides proof that he/she/it is subject to supervision by an accredited bank and financial market regulator and if he/she/it has concluded an agreement with the Board of Directors concerning his/her/its status. Nominees hold- ing up to 2.0% of the issued shares will be entered in the Share Register with voting rights without having to sign an agreement with the Board of Directors. Nominees holding more than 2.0% of the issued shares will be entered in the Share Register with 2.0% voting rights and, for the remaining shares, without voting rights. Above this 2.0% cap, the Board of Directors may have nominees entered in the Share Register with voting rights if they disclose the names, the addresses, the nationalities, and the shareholdings of the persons for whom they hold more than 2.0% of the issued share capital. The Board of Directors is entitled to approve excep- tions from the statutory conditions for registration with respect to special circumstances. 2.6.4. Cancelling privileges and limitations on transferability Amendments to the Bylaws (including cancelling privileges and limitations on transferability) require the approval of at least two- thirds of the share votes represented at the Annual General Meeting. 2.7. Convertible bonds and options The company does not have any outstanding convertible bonds and has not issued any option rights. 02220006_Burckhardt-Compression_GB_2022_EN.indd 72 02220006_Burckhardt-Compression_GB_2022_EN.indd 72 05.06.23 18:44 05.06.23 18:44 Burckhardt CompressionAnnual Report 2022Corporate Governance 3. Board of Directors 3.1./3.2. Members of the Board of Directors/ Other activities and vested interests The Bylaws stipulate that the Board of Directors consists of a mini- mum of three and a maximum of seven members. Since the An- nual General Meeting 2021, all members are non-executive and in- dependent members of the Board of Directors in the context of the “Swiss Code of Best Practice for Corporate Governance“ from economiesuisse1. The composition of the Board of Directors is as follows: Name Nationality Function First elected Term expires Ton Büchner Urs Leinhäuser Dr. Monika Krüsi Dr. Stephan Bross David Dean Maria Teresa Vacalli CH/NL CH CH/IT DE CH CH Chair, non-executive; Chair SSC Member, non-executive; member AC Member, non-executive; member SSC, Chair NCC Member, non-executive; member NCC Member, non-executive; Chair AC Member, non-executive; member AC AC = Audit Committee | NCC = Nomination and Compensation Committee | SSC = Strategy and Sustainability Committee 2020 2007 2012 2014 2019 2022 2023 2023 2023 2023 2023 2023 No member of the Board of Directors has served as a member of the Executive Management of Burckhardt Compression Holding AG and/or any subsidiary within the Burckhardt Compression Group. Furthermore, none of the members of the Board of Directors have material business relationships with Burckhardt Compression AG and/or any subsidiary within the Burckhardt Compression Group. Biographical details and information on other activities and com- mitments of the individual members of the Board of Directors are given below: 1As approved by economiesuisse on November 14, 2022. 73 02220006_Burckhardt-Compression_GB_2022_EN.indd 73 02220006_Burckhardt-Compression_GB_2022_EN.indd 73 05.06.23 18:44 05.06.23 18:44 Burckhardt CompressionAnnual Report 2022Corporate Governance Ton Büchner (1965) Independent Board Member since 2020 Urs Leinhäuser (1959) Independent Board Member since 2007 Dr. Monika Krüsi (1962) Independent Board Member since 2012 Education PhD in Business Informatics, MBA University of Zurich, Switzerland Professional background Since 2003 Partner, MKP Consulting AG, Switzerland 2001–2003 Partner, Venture Incubator Partners AG, Switzerland 1991–2001 Associated Partner, McKinsey & Co., Inc., Switzerland 1986–1990 Credit Suisse, Switzerland Duties and responsibilities as a director of Burckhardt Compression Holding AG – Member of the Board of Directors – Chair of the Nomination and Compensation Committee – Member of the Strategy and Sustainability Committee Other activities and commitments – Chair of the Board of Directors, Repower AG, Switzerland – Chair of the Board of Directors of Oskar Ruegg AG, Switzerland – Member of the Board of Directors, 360°, Switzerland – Member of the Board of Directors Accelleron Industries AG, Switzerland Education MBA, IMD Business School, Switzerland, MSc in Civil Engineering, Delft University of Technology, Netherlands Education Degree in Business Administration, University of Applied Sciences, Zurich, Switzerland, IMD Lausanne (SSE), Switzerland Professional background 2012–2017 Chair of the Executive Management and CEO, AkzoNobel NV, Netherlands 2007–2011 CEO, Sulzer AG, Switzerland 2003–2007 President, Sulzer Pumps, Switzerland 2000–2002 President, Sulzer Turbomachinery Services, Switzerland 1994–2000 Various management positions, Sulzer AG, Switzerland Duties and responsibilities as a director of Burckhardt Compression Holding AG – Chair of the Board of Directors – Chair of the Strategy and Sustainability Committee Other activities and commitments – Member of the Board of Directors, Novartis, Switzerland – Chair of the Board of Directors, Swiss Prime Site AG, Switzerland – Member of the Advisory Committee “Adviescommissie Maatwerkafspraken Verduurzaming Industrie” of the Ministry of Economic Affairs and Climate of the Netherlands – Advisor, Ammega, Switzerland Professional background Since 2016 Managing Partner ADULCO GmbH, Switzerland 2014–2016 Self-employed, Switzerland 2011–2014 CFO and Deputy CEO, Member of Executive Board, Autoneum Holding AG (the Group), Switzerland 2003–2011 CFO and Head Corporate Center, Member of Group Executive Com- mittee, Rieter Holding AG, Switzerland 1999–2003 CFO, Member of Group Exe c - utive Committee, Mövenpick Holding, Switzerland 1997–1999 CFO, Piping Systems Division, Georg Fischer AG, Switzerland 1995–1997 Head of Corporate Controlling, Georg Fischer AG, Switzerland 1992 Managing Director, Cerberus, Denmark 1988–1994 Group Controller, Cerberus AG, Switzerland 1986–1988 Deputy Head, Tax Consultancy Department, Refidar Moore Stephens, Switzerland 1983–1986 Tax Inspector, Cantonal Tax Department SH, Switzerland Duties and responsibilities as a director of Burckhardt Compression Holding AG – Member of the Board of Directors – Member of the Audit Committee Other activities and commitments – Chair of the Board of Directors, Avesco AG, Switzerland – Member of the Board of Directors, Ammann Group Holding AG, Switzerland – Member of the Board of Directors , Liechtensteinische Landesbank AG, Liechtenstein – Vice Chair of the Board of Directors, VAT Group AG, Switzerland – Member of the Board of Directors , PENSADOR Partner AG, Switzerland 74 02220006_Burckhardt-Compression_GB_2022_EN.indd 74 02220006_Burckhardt-Compression_GB_2022_EN.indd 74 05.06.23 18:44 05.06.23 18:44 Burckhardt CompressionAnnual Report 2022Corporate Governance Dr. Stephan Bross (1962) Independent Board Member since 2014 David Dean (1959) Independent Board Member since 2019 Maria Teresa Vacalli (1971) Independent Board Member since 2022 Education PhD in Mechanical Engineering, TU Braunschweig, Germany Professional background Since 2018 Executive Management mem- ber (CTO), KSB SE & Co. KGaA, Germany 2017 Executive Management member, Technology, KSB AG, Germany 2014–2017 Senior Vice President, Pumps, KSB AG, Germany 2007–2013 Senior Vice President, Service, KSB AG, Germany 2002–2007 Head Product Management and Development Engineered Pumps, KSB AG, Germany 1997–2001 Head Development and Services Fluid Flow Technical Systems, KSB AG, Germany 1996–1997 Head of Fluid Mechanics Research, KSB AG, Germany 1993–1996 R&D Engineer, KSB AG, Germany Duties and responsibilities as a director of Burckhardt Compression Holding AG – Member of the Board of Directors – Member of the Nomination and Compensation Committee Education Swiss certified Expert for Accounting and Controlling, Swiss certified Public Accountant Completed executive education programs at Harvard Business School, Boston, USA, and at IMD, Lausanne, Switzerland Professional background Since 2019 Self-employed, Switzerland 2004–2019 CEO, Bossard Group, Switzerland 1998–2004 CFO, Bossard Group, Switzerland 1993–1998 Deputy CFO and Corporate Controller, Bossard Group, Switzerland Duties and responsibilities as a director of Burckhardt Compression Holding AG – Member of the Board of Directors – Chair of the Audit Committee Other activities and commitments – Member of the Board of Directors, Bossard Group, Switzerland – Member of the Board of Directors Komax Group, Switzerland – Member of the Board of Directors, Brugg Group, Switzerland – Chair of the Board of Directors, Haag-Streit Group, Switzerland (a division of Metall Zug Group) Education MSc in Industrial Management and Manufacturing, ETH Zurich, Switzerland Professional background 2019–2022 Chair of the Executive Board and Head of the Executive Committee, Bank Cler AG, Switzerland 2018–2019 Head of Digital Market Services & Member of the Executive Com- mittee, Basler Kantonalbank, Switzerland 2016–2018 CEO, Moneyhouse AG, NZZ Me- diengruppe, Switzerland 2013–2016 Sunrise Communication AG, Switzerland 2008–2013 Executive Director Wholesale, Switzerland 2002–2008 Director, Cablecom, Switzerland 2002 Manager GCI Management, Switzerland 2001 Manager, Ernst & Young, Center for Business Innovation (CBI), Switzerland 2000–2001 Partner & Owner, Seavantage, Switzerland 1998–2000 Manager, Pricewater- houseCoopers, Switzerland Duties and responsibilities as a director of Burckhardt Compression Holding AG – Member of the Board of Directors – Member of the Audit Committee Other activities and commitments – Member of the Board of Directors, Swiss Post, Switzerland 75 02220006_Burckhardt-Compression_GB_2022_EN.indd 75 02220006_Burckhardt-Compression_GB_2022_EN.indd 75 05.06.23 18:44 05.06.23 18:44 Burckhardt CompressionAnnual Report 2022Corporate Governance Independence of the Board of Directors All members are non-executive and independent members of the Board of Directors in the context of the Swiss Code of Best Prac- tice for Corporate Governance from economiesuisse. Non-execu- tive members of the Board of Directors are considered independent if they have never, or not within the last three (3) years, worked for Burckhardt Compression, and have no or only relatively small busi- ness relationships with the company. 3.3. Rules in the Bylaws concerning the number of permitted activities Members of the Board of Directors may not hold more than ten (10) additional board memberships, of which not more than four (4) in listed companies. 3.4. Election and term of office Each member of the Board of Directors, the Board Chair, and each member of the Nomination and Compensation Committee are elected annually by the Annual General Meeting. The members of the Board of Directors shall be automatically retired from the Board of Directors in the year in which they reach the age of 70. 3.5. Internal organization and structure 3.5.1. Allocation of tasks within the Board of Directors The competencies of the Board members are depicted in the fol- lowing matrix: 3.5.2. Committees of the Board of Directors The Board of Directors has set up the following committees: Audit Committee The Audit Committee advises and supports the Board in all mat- ters related to external and internal audits, risk management, ac- counting policies and practices and compliance with accounting standards issued. The CEO, the CFO, the head of the internal audit unit and representatives of the external auditors also participated in the Audit Committee’s ordinary meetings. The members are David Dean (Chair), Urs Leinhäuser and Maria Teresa Vacalli. Nomination and Compensation Committee This committee advises and assists the Board of Directors on ap- pointing, assessing and dismissing members of the Executive Mana g - ement, and draws up proposals for the appointment or dismissal of members of the Board of Directors. Furthermore, the Nomination and Compensation Committee advises and assists the Board of Directors on questions relating to the compensation of the direc- tors and the Executive Management members. The CEO and the CHRO also attend the ordinary meetings of the NCC. The members are Dr. Monika Krüsi (Chair) and Dr. Stephan Bross. Ton Büchner Urs Leinhäuser Monika Krüsi Stephan Bross David Dean Maria Teresa Vacalli Executive competence (>200 FTE) Strategic competence Competence in non-European cultures Sustainability competence Supply chain competence Competence in BC markets Technological competence Financial competence M&A competence Board-level competence CEO coaching competence • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • The company’s General Counsel, who serves as Secretary to the Board of Directors, has a degree in law (mag.iur.). 76 02220006_Burckhardt-Compression_GB_2022_EN.indd 76 02220006_Burckhardt-Compression_GB_2022_EN.indd 76 05.06.23 18:44 05.06.23 18:44 Burckhardt CompressionAnnual Report 2022Corporate Governance Strategy and Sustainability Committee The Strategy and Sustainability Committee supports the CEO in developing corporate strategy, advises the Board of Directors on strategic matters such as acquisitions and divestments, and ensures that sustainability (and social responsibility) is an integral part of the company strategy. It evaluates the implementation of the company strategy on a regular basis and submits proposals to the Board of Directors if adjustments or other measures are deemed necessary. The members are Ton Büchner (Chair) and Dr. Monika Krüsi. Addi- tionally, the Strategy and Sustainability Committee helps prepare together with the CEO the annual strategy day. 3.5.3. Working methods The Board of Directors has the final responsibility for the business strategy and the management of the Burckhardt Compression Group. It has final authority and defines the guidelines regar d- ing strategy, organization, financial planning, and accounting for the Burckhardt Compression Group. The Board of Directors has delegated executive management responsibility to the CEO of Burckhardt Compression Group. The Board of Directors appoints a Secretary for the Board and for the company. The Secretary does not need to be a member of the Board. The Board of Directors meets as often as business requires, but at least four times per year. In fiscal year 2022, the Board of Directors and Board committees convened the following meetings (see table below). The Board of Directors has a quorum when the majority of the mem- bers are present. Decisions are passed by a simple majority. In the event of a tie, the Chair has the casting vote. The CEO, the two Presidents of the Systems and Services Divi- sions, the CFO, the CHRO and the General Counsel, in his role as Secretary, are regularly invited to attend Board meetings to report on developments in their respective business areas. Meeting Governing body Duration Ton Büchner Urs Leinhäuser Monika Krüsi Stephan Bross David Dean Maria Teresa Vacalli 04/12/2022, meeting of 05/09/2022, meeting of 05/16/2022, meeting of 06/01/2022, meeting of 06/01/2022, meeting of 06/02/2022, meeting of 08/31/2022, meeting of 08/30/2022, meeting of 08/31/2022, meeting of 09/30/2022, meeting of SCC NCC AC AC NCC BOD BOD NCC SCC NCC 10/07/2022, meeting of AC 10/14/2022, meeting of 10/25/2022, meeting of SCC NCC 10/25/2022, meeting of AC 9.5 hours 3.5 hours 1 hour 4 hours 3.5 hours 7 hours 6 hours 3.5 hours 7 hours 1.5 hours 1 hour 6 hours 3 hours 3 hours 10/26/2022, meeting of BOD 6.5 hours 11/09/2022, meeting of AC 1 hour 12/09/2022, meeting of BOD 6.5 hours 01/10/2023, meeting of AC 03/22/2023, meeting of 03/08/2023, meeting of NCC BOD 03/08/2023, meeting of SCC 1 hour 2 hours 5 hours 2 hours • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • BOD = Board of Directors | AC = Audit Committee | NCC = Nomination and Compensation Committee | SSC= Strategy and Sustainability Committee 77 02220006_Burckhardt-Compression_GB_2022_EN.indd 77 02220006_Burckhardt-Compression_GB_2022_EN.indd 77 05.06.23 18:44 05.06.23 18:44 Burckhardt CompressionAnnual Report 2022 Corporate Governance 3.6. Definition of areas of responsibility The Board of Directors has delegated the Executive Management of the company and the Group to the CEO of Burckhardt Com- pression Group, with the exception of the duties which may not be delegated by law and in particular the following: – Definition of the Group’s business policies and strategy – Definition of the top-level organizational structure of the Group – Approval of the periodic forecasts, the annual report and of reporting and accounting policies – Ensuring adequate internal control systems based on the recommendations of the Audit Committee – Determination of the appropriate capital structure – Appointment and dismissal of members to and from the Executive Management, as well as compensation of the Executive Management – Decisions on new subsidiaries, major capital expenditure projects, acquisitions, financing transactions, the insurance concept and the provision of guarantees if such decisions exceed the powers conferred to the CEO. The powers of the Executive Management and of the Group com- pany executives are listed in detail in the organization regula- tion (https://www.burckhardtcompression.com/investors/corpo- rate-governance). 3.7. Information and control instruments vis-à-vis the Executive Management Order intake, the income statement, balance sheet, liquidity plan- ning and cash flow, headcount, personnel costs and capital ex- penditure are consolidated and annotated on a monthly basis. A rolling forecast of Burckhardt Compression Group results for the cur- rent and coming fiscal years is also prepared and annotated four times a year (April, July, October and January). Targets for the co- ming fiscal year are determined based on the January forecast. The financial reports and the forecasts are distributed to the members of the Executive Management and all members of the Board of Di- rectors. At every meeting of the Board of Directors, the members of the Executive Management report on the course of business and on all issues of relevance to the Burckhardt Compression Group. Internal Group Audit and internal control system (ICS) The internal audit reports to the Chair of the Audit Committee of the Board of Directors. Management responsibility for the unit has been delegated to the Head of Group Controlling, who is also responsible for planning and conducting the audits. The CFO is re- sponsible for coordination between the Audit Committee and the Head of Internal Group Audit. The Internal Group Audit team con- sists of qualified staff from the Finance and Controlling depart- ments of Burckhardt Compression AG and several selected financial specialists from the Burckhardt Compression Group’s subsidiaries. Qualified subject matter experts from other fields (e.g. IT, Legal or Human Resources) may be consulted, depending on the auditing assignment. These employees perform the internal audit duties as- signed to them in addition to their regular duties and in this addi- tional capacity they report directly to the Head of Internal Group Audit, who in turn reports in this function directly to Chair of the Board of Directors’ Audit Committee. This efficient organization is tailored to the needs and size of the Burckhardt Compression Group and fosters an active exchange of information and best practic- es with the objective of creating sustained added value for the Burckhardt Compression Group by means of continual process im- provement. The internal auditors undergo regular training for the performance of their tasks. The training received is coordinated by the Head of internal Group Audit. The schedule for internal audits is determined by the Audit Committee of the Board of Directors on an annual basis and may be changed or expanded by the Audit Committee as and when required. Nine internal audits were carried out in fiscal year 2022. The internal auditors’ reports were distributed to the management of the audited company, the members of the Audit Committee of the Board of Directors, the Executive Manage- ment members and to the external company auditors. The statuto- ry auditor assesses the effectiveness of the internal control system (ICS) in a written report submitted to the Audit Committee and the Board of Directors once a year. Risk management Burckhardt Compression has an integrated risk management po l- icy. In a two-stage process, key risks are identified using an antici- patory approach and grouped under one of four risk categories – strategic, financial, operational or legal/compliance – that have been defined by the Board of Directors. The risks are then eva l - uated, managed and stringently monitored, avoided, mitigated or transferred to third parties through appropriate risk manage- ment measures. The first stage of risk management consists of a conti nuous risk management process, in which the Division Presi- dents and the Burckhardt Compression Group functions (CEO, CFO, CHRO, CDIO, Legal) systematically identify and assess the risks in a regular rhythm, define the necessary risk mitigation measures to- gether with the responsible persons, and set and monitor deadlines for implementation. Internal and external factors are included in the evaluation of potential risks. The second stage of the risk management process consists of a periodic risk management review that takes place twice a year at the meetings of the Board of Directors’ Audit Committee. To this 78 02220006_Burckhardt-Compression_GB_2022_EN.indd 78 02220006_Burckhardt-Compression_GB_2022_EN.indd 78 05.06.23 18:44 05.06.23 18:44 Burckhardt CompressionAnnual Report 20224. Executive Management 4.1./4.2 Members of the Executive Management/Other activities and vested interests Name Nationality Function Fabrice Billard Rolf Brändli Vanessa Valentin Andreas Brautsch Rainer Dübi * since June 2022 ** since October 2022 CH/FR CH CH DE CH CEO CFO CHRO* President Systems Division** President Services Division Biographical details and information on other activities and com- mitments of the members of the Executive Management: Corporate Governance end, the Executive Management prepares an overview of the main risks faced by Burckhardt Compression Group and an assessment of the likelihood of these risks occurring and the effects they would have. This overview is presented to the Audit Committee together with the risk mitigation measures, the people responsible for imple- menting them, and an implementation timetable. The Audit Com- mittee then reports to the Board of Directors about the findings of the risk management review. Compliance Burckhardt Compression has a group-wide compliance focusing on compliance with legal and internal regulations which include also the Code of Conduct and the Burckhardt Compression Values and Behaviors. The Compliance program has a three-pillar framework: – prevention (through policies and trainings), – early detection (though different grievance channels) and – response (different actions on compliance breaches and fine tuning of policies). The updated Code of Conduct was launched in 2021 and conveyed to all employees accompanied by e-trainings. A grievance channel was introduced to all employees and business partners. Also, data protection is an important topic taken very seriously at Burckhardt Compression. In 2022, the Data Protection Officer has continued to prioritize and focus on the implementation of the EU’s General Data Protection Regulation (GDPR) requirements within Burckhardt Compression’s projects, processes, and documentation. For many years Burckhardt Compression has also been investing in IT Secu- rity to ensure technical resilience to cyber-attacks. In 2022, the fo- cus of the work was on strengthening the safety awareness of all employees. In addition, Burckhardt Compression has reviewed the IT Security assessment to identify and protect the most relevant assets (Crown Jewels). 3.8. Gender guidelines As part of its extended duties, the Nomination and Compensation Committee assesses succession planning for the Board of Directors in order to ensure a balanced composition of the Board of Directors. The Board of Directors has increased the gender ratio from 20% to 33% of women on the Board of Directors during the last elections in 2022. 3.9. Self-evaluation of the Board of Directors Regarding fiscal year 2021, the Board of Directors conducted a self-evaluation looking at the work of the Board of Directors and its individual committees. The evaluation process covered purpose, scope, composition and responsibilities and was done as an inter- nal evaluation only. Each of the members of the Board of Directors completed a questionnaire and the detailed findings were presen t - ed back to the Board of Directors. Improvement measures were defined and will be regularly reviewed. 79 02220006_Burckhardt-Compression_GB_2022_EN.indd 79 02220006_Burckhardt-Compression_GB_2022_EN.indd 79 05.06.23 18:44 05.06.23 18:44 Burckhardt CompressionAnnual Report 2022Corporate Governance Fabrice Billard (1970) Rolf Brändli (1968) Vanessa Valentin (1979) Education MSc in Aeronautics and Aerospace Engineering. Ecole Centrale Paris, France Education Degree in Business Administration, HWV Zürich, Switzerland Professional background Since 2008 CFO, Burckhardt Compression Group, Switzerland 2001–2008 Head of Finance & Adminis- tration, Sulzer Brasil S.A., Brazil; Regional Controller, Sulzer Pumps South America & South Africa 1997–2001 Regional Controller Asia/ Pacific, Sulzer International Ltd.; General Manager, Sulzer Hong Kong Ltd., Hong Kong, SAR China 1994–1997 Management Consultant, OBT Treuhand AG Zurich, Switzerland Professional background Since April 2022 CEO Burckhardt Compression Group, Switzerland 2016–2022 President Systems Division, Burckhardt Compression Group, Switzerland 2015–2016 Chief Strategy Officer, Sulzer, Switzerland 2012–2015 Head Business Unit Mass Transfer Technology, Sulzer Chemtech, Switzerland/Singapore 2010–2012 Head Europe, Middle East, India, Russia & Africa Business Unit, Mass Transfer Technology, Sulzer Chemtech, Switzerland 2008–2010 Vice President Business Development, Sulzer Chemtech, Switzerland 2005–2008 Head Global Customer Services, Sulzer Pumps, Switzerland 2004–2005 Strategic Development Manager, Sulzer Corporate, Switzerland 1999–2004 Principal, The Boston Consulting Group, Switzerland/France Education BSc in Developmental Psychology, University of Sussex, UK MSc in Human Resources, The London School of Economics and Political Science (LSE), UK Professional background Since June 2022 Chief Human Resources Officer, Burckhardt Compression Group, Switzerland 2016 – 2022 Senior VP Human Resources, VAT Group, Switzerland 2012 – 2016 Human Resources Director, Alstom, Switzerland 2007 – 2012 Human Resources Leader, GE Oil & Gas, Italy, Australia, US 2005 – 2007 Human Resources Leadership Program, GE, Germany, Italy, US 2003 – 2005 Human Resources Manager, Health Protection Agency, UK 80 02220006_Burckhardt-Compression_GB_2022_EN.indd 80 02220006_Burckhardt-Compression_GB_2022_EN.indd 80 05.06.23 18:44 05.06.23 18:44 Burckhardt CompressionAnnual Report 2022Corporate Governance Rainer Dübi (1969) Andreas Brautsch (1974) Education Degree in Mechanical Engineering, HTL Winterthur, Switzerland MASBA School of Management, Switzerland Education MSc in Mechanical Enginee r ing, TH Regensburg, Germany PhD, Mechanical Engineering, Heriot Watt University, Edinburgh, UK Professional background Since 2019 President Services Division, Burckhardt Compression Group, Switzerland 2012–2019 Head of Design & Manufacturing, Burckhardt Compression AG, Switzerland 2010–2012 Senior Sales Manager, Burckhardt Compression AG, Switzerland 2007–2010 Manager Sizing, Burckhardt Compression AG, Switzerland 2003–2007 Sizing Project Engineer, Burckhardt Compression AG, Switzerland 2001–2003 Commissioning Lead Engineer, Alstom, Switzerland 1999–2001 Commissioning Engineer, ABB, Switzerland Professional background Since October 2022 President Systems Division, Burckhardt Compression Group, Switzerland 2019–2022 Group Vice President, Global Lead Switchgear Business Hitachi Energy, Switzerland 2017–2019 Group Vice President, Business Transformation Lead Hitachi Energy, Switzerland 2015–2017 Global Business Lead Industrial Gas Power Business, General Electric, USA 2012–2015 Platform Director H-class Gas Power Generation, Alstom Power, Switzerland 2008–2012 Head of Products, Carbon Capture Systems, Alstom Power, Switzerland 2002–2008 Global Innovation Lead, Alstom Power, USA 1998–2000 Implementation Lead for local joint venture, Siemens, China 81 02220006_Burckhardt-Compression_GB_2022_EN.indd 81 02220006_Burckhardt-Compression_GB_2022_EN.indd 81 05.06.23 18:44 05.06.23 18:44 Burckhardt CompressionAnnual Report 2022Corporate Governance 4.3. Rules in the Bylaws concerning the number of permitted activities Members of the Executive Management may not hold more than five (5) additional board memberships, of which not more than two (2) additional may be in listed companies. 5.2.3. on the vote on pay at the Annual General Meeting The rules in the Bylaws on the vote on pay at the Annual General Meeting are available on the website of Burckhardt Compression in the Bylaws (Art. 24). (https://www.burckhardtcompression.com/investors/corpo- rate-governance). 4.4. Management contracts There are no management contracts with third parties. 4.5. Gender Guidelines As part of its extended duties, the Nomination and Compensa- tion Committee assesses succession planning for the Executive Ma nagement in order to ensure a balanced composition of the Executive Management. The Board of Directors aims to ensure a diversified Executive Management. The gender ratio is currently 20% women in the Executive Management. Compensation and shareholding programs 5. Compensation, shareholdings and loans 5.1. The principles and elements of compensation paid to members of the Board of Directors and the Executive Management as well as the authority and the mechanisms used to determine such com- pensation are explained in the Compensation Report on pages 84 to 92. The shareholdings of the members of the Board of Directors and the Executive Management in Burckhardt Compression Holding AG are listed in the Compensation Report on pages 84 to 92 and in the financial statements, note 103, “Share capital and sharehold- ers” on page 133 Burckhardt Compression Group did not grant any loans, credit or collateral to any of the members of the Board of Directors or the Executive Management in fiscal year 2022 and there are no ar- rangements of this nature outstanding. Rules in the Bylaws 5.2. 5.2.1. on performance-related payments and allocations The rules in the Bylaws on the principles applicable to perfor- mance-related pay and to the allocation of shares, contingent rights to receive shares or comparable instruments of the company, as well as the additional amount for payments to members of the Executive Management appointed after the vote on pay at the An- nual General Meeting of shareholders are available on the website of Burckhardt Compression in the Bylaws (Art. 25, Art. 26 and Art. 27). (https://www.burckhardtcompression.com/investors/corpo- rate-governance). 5.2.2. on loans, credit facilities and post-employment benefits The rules in the Bylaws on loans, credit arrangements and pension plan benefits for members of the board and the Executive Ma n- agement are available on the website of Burckhardt Compression in the Bylaws (Art. 29). (https://www.burckhardtcompression.com/investors/corpo- rate-governance). 82 6. Shareholders’ participation rights 6.1. Voting rights restrictions and representation 6.1.1. Rules in the Bylaws on restrictions to voting rights Please refer to above Chapter 2.6.1. 6.1.2. Rules in the Bylaws on the issue of instructions to the independent proxy The rules in the Bylaws on the issue of instructions to the indepen- dent proxy are available on the website of Burckhardt Compression in the Bylaws (Art. 9 and Art. 13). (https://www.burckhardtcompression.com/investors/corpo- rate-governance). 6.2. Statutory quorums A majority of at least two-thirds of the voting rights represented is required for changes to the company’s Bylaws. Dissolution or merging of the company requires the presence or representation of at least half of the issued shares and the approval of at least two-thirds of the present or represented share votes on the peti- tion submitted. 6.3 . Convocation of the Annual General Meeting of Shareholders None of the applicable rules deviate from the law. 6.4. Inclusion of items on the agenda Under the Bylaws, shareholders representing jointly at least ten (10) percent of the share capital may request discussion of an item at an Annual General Meeting. The corresponding petition should be submitted in writing to the Board of Directors of the company at least forty (40) days prior to the scheduled meeting stating the proposed item and petitions of the shareholders. 6.5. Entries in the Share Register The record date for registered shareholders to be entered in the Share Register prior to an Annual General Meeting will be stated in the invitation to the Annual General Meeting. 7. Changes of control and defensive measures Duty to make an offer 7.1. Once a shareholder acquires 33% of share capital and voting rights, he/she will be under an obligation to submit a public tender offer. The Bylaws contain neither an opting-out nor an opting-up clause. 02220006_Burckhardt-Compression_GB_2022_EN.indd 82 02220006_Burckhardt-Compression_GB_2022_EN.indd 82 05.06.23 18:44 05.06.23 18:44 Burckhardt CompressionAnnual Report 2022Corporate Governance 7.2. Clauses on change of control There are no provisions for special severance payments for mem- bers of the Board of Directors or members of the Executive Ma n- agement or other employees in the event of a change of control over Burckhardt Compression Holding AG. 7A. Transparency on non-financial matters The report on non-financial matters is included on page 30. 8. Auditors 8.1. Duration of mandate and term of office of the auditor in charge 8.1.1. Date of assumption of the current audit mandate PricewaterhouseCoopers AG (PwC) has been the statutory auditor of Burckhardt Compression Holding AG since 2002 and is also in charge of the audit of the consolidated financial statements. The statutory auditor is elected by the Annual General Meeting of share hol- ders for one year at a time. Burckhardt Compression plans to tender its external audit contracts at least every ten (10) years and exam- ine all bids received. The most recent invitation to tender was issued du r ing fiscal year 2012. PwC was awarded the contract in March 2013 and was re-elected as statutory auditor by the Annual Gen- eral Meeting of Shareholders in June 2013. Burckhardt Compression is planning to tender its external audit contract again in the course of fiscal year 2023. 8.1.2. Date on which the lead auditor responsible for the current audit mandate took up ofce The auditor in charge will be changed after a maximum period of seven (7) years. Sandra Böhm Uglow has served as auditor in charge since the 2020 reporting period. 8.2. Auditor’s fees Total fees for auditing services provided by PwC worldwide during fiscal year 2022 amounted to TCHF 406 (previous year: TCHF 372). 8.3. Additional fees The additional fees for services provided by PwC worldwide du r - ing fiscal year 2022 are in the amount of TCHF 41 (previous year: TCHF 110) for consulting services in the context with the long-term incentive plan. Additional services rendered by PwC outside the audit mandate are compatible with the audit assignment. 8.4. Information instruments pertaining to the external audit The Audit Committee assists the Board of Directors in monitoring the company’s accounting and financial reporting. It assesses the internal control procedures, the management of business risks, the audit plan and scope, the conduct of the audits and their results. The Audit Committee also reviews the auditor’s fees. The statutory auditor is present during the examination of the consolidated an- nual and semi-annual financial statements. Once a year, the mem- bers of the Audit Committee receive from the statutory auditor a summary of the audit findings and suggested improvements. The Audit Committee held two meetings during the 2022 reporting 83 period. The auditor in charge and another representative of the auditor took part in these meetings. 9. Information policy In general, Burckhardt Compression Holding AG reports order intake, sales, operating results, balance sheet, cash flow, and chan ges in shareholders’ equity on a semi-annual basis, together with comments on the trend of business and the outlook for the future. Burckhardt Compression Holding AG provides price-sensitive in- formation in accordance with the ad hoc disclosure requirements set out in the Listing Rules of the SIX Swiss Exchange. Burckhardt Compression Holding AG will send price-sensitive information to all interested parties via an email distribution list. Financial reports are available on our website (www.burckhardtcompression.com) and will be delivered to interested parties on request. Key dates for 2023 and 2024 July 1, 2023 Annual General Meeting October 31, 2023 Results for the first half of 2023 (closing September 30, 2023) June 4, 2024 2023 Annual Report (closing March 31, 2024) July 5, 2024 Annual General Meeting Details of these dates, possible changes, the company profile, current share prices, presentations, and contact addresses can be found at www.burckhardtcompression.com, where interested par- ties can also subscribe to the email distribution list. 10. Quiet periods No member of the Board of Directors, member of the Executive Management or other employee of Burckhardt Compression speci f - ically notified by the CFO may trade with Burckhardt Compression shares listed in the stock exchange or any other exchange-tra d ed financial instruments relating to BCHN shares, such as derivates, during the period starting from April 1 and October 1 respec- tively and ending with the close of the second trading day after Burckhardt Compressions’ public release of the relevant annual or half-year report. Besides these recurring lock-out periods, there was no specific lock-out period during the fiscal year 2022. 02220006_Burckhardt-Compression_GB_2022_EN.indd 83 02220006_Burckhardt-Compression_GB_2022_EN.indd 83 05.06.23 18:44 05.06.23 18:44 Burckhardt CompressionAnnual Report 2022Compensation Report Compensation Report This Compensation Report describes the policies and system in place for the com- pensation of the Board of Directors and the Executive Management of Burckhardt Compression, together with informa- tion on their annual compensation and shareholdings. 84 02220006_Burckhardt-Compression_GB_2022_EN.indd 84 02220006_Burckhardt-Compression_GB_2022_EN.indd 84 05.06.23 18:44 05.06.23 18:44 Burckhardt CompressionAnnual Report 2022Compensation Report 1. Basis This Compensation Report describes the policies and system in place for the compensation of the Board of Directors and the Ex- ecutive Management of Burckhardt Compression, together with in- formation on their annual compensation. This report was prepared in accordance with the provisions of the Swiss Federal Ordinance Against Excessive Compensation in Listed Companies (OAEC), the Directive on Information relating to Corporate Governance (DCG) issued by the SIX Swiss Exchange, and the Bylaws of Burckhardt Compression Holding AG. 2. Organization, Duties and Powers The Nomination and Compensation Committee (NCC) is comprised of at least two members of the Board of Directors. The members of the NCC are elected individually and annually by the Annual Gen- eral Meeting and their term of office shall expire at the end of the next Annual General Meeting. The Annual General Meeting of July 1, 2022 re-elected Dr. Monika Krüsi and Dr. Stephan Bross to the Nomination and Compensation Committee. The Board of Directors appointed Dr. Monika Krüsi Chair of the Nomination and Compen- sation Committee. The NCC meets a minimum of twice a year, in 2022 it met six times. The CEO and CHRO attend these meetings in an advisory capacity, except during deliberation on meeting topics that pertain to themselves. Following each NCC meeting the Board of Directors will be informed of the topics discussed and the proposals of the NCC are brought to the next possible Board Meeting. The duties and powers of the NCC are set forth in the com- pany’s ByLaws and Organizational Regulations (www.burckhardt- compression.com/corporate-governance). The regulations are regularly reviewed. The NCC supports the Board of Directors in the performance of its duties pertaining to the compensation and per- sonnel policies of the company and the entire Group as prescribed by law or the company’s Bylaws. The most important duties and powers of the NCC with regard to compensation are given in the table below. No external advisors have been consulted. Topic Proposal/ recommendation by Approval authority Compensation principles and guidelines Compensation Report Compensation of Board of Directors Compensation of Executive Management Loans to members of the Executive Management NCC NCC NCC NCC CEO BOD BOD BOD, subject to AGM approval BOD, subject to AGM approval NCC BOD = Board of Directors AGM= Annual General Meeting | NCC = Nomination and Compensation Committee | 85 The Annual General Meeting of Burckhardt Compression Holding AG casts the following votes in relation to the compensation of the Board of Directors and Executive Management: – a prospective vote on the maximum aggregate amount of fixed compensation for the Board of Directors for the fiscal year following the Annual General Meeting – and a prospective vote on the maximum aggregate amount of fixed compensation for the Executive Management for the fiscal year following the Annual General Meeting – a retrospective vote on the maximum aggregate amount of variable compensation for the Executive Management for the fiscal year preceding the Annual General Meeting – In addition, the principles of compensation are governed by the Articles of Bylaws, which are also approved by the shareholders – The provisions of the articles of the Bylaws are listed below: https://www.burckhardtcompression.com/wp-content/up- loads/2022/08/BCHN_Bylaws_english_2022-07-01.pdf – Article 24: Approval of compensation by the Annual General Meeting – Article 25: Supplementary amount of compensation for mem- bers of the Executive Management – Article 26: General compensation principles – Article 27: Contracts relating to compensation – Article 29 Loans, credit arrangements and pension benefits over and above those provided in mandatory occupational pension plans Furthermore, the Annual General Meeting casts a consultative vote on the Compensation Report. 3. Compensation system Burckhardt Compression Group’s compensation system consists of a mix of fixed and variable components. In accordance with the Bylaws of Burckhardt Compression Holding AG, variable compen- sation can be paid in whole or part in the form of shares, condi- tional rights to receive shares, or in comparable instruments of the company. 02220006_Burckhardt-Compression_GB_2022_EN.indd 85 02220006_Burckhardt-Compression_GB_2022_EN.indd 85 05.06.23 18:44 05.06.23 18:44 Burckhardt CompressionAnnual Report 2022Compensation Report 3.1. Compensation system for the Board of Directors In order to guarantee the independence of the members of the Board of Directors in exercising their supervisory duties, their com- pensation consists of a fixed renumeration only. The compensation of the Board of Directors is market-competitive and strengthens the alignment with the interests of the shareholders. Compensation for the Board of Directors is delivered 80% in cash and 20% in free shares; a fixed cash supplement for directors who serve on a formal Board committee; and a fixed lump-sum for expenses. The number of shares awarded is based on the av- erage share price (daily closing price on the SIX exchange) of the 30 trading days before the Annual General Meeting. Revised com- pensation regulation for the Board of Directors came into effect on July 2, 2022. The fixed component amounts to CHF 81’000 for members of the Board of Directors and to CHF 184’000 per year for the Chair of the Board of Directors. The fixed cash supplement for directors serving on a formal Board committee is CHF 10’000 a year. The lump sum for expenses is CHF 4’000 for members of the Board of Directors and CHF 6’000 per year for the Chair of the Board of Di- rectors. For the Board of Directors only mandatory pension benefits are granted. 3.2 Compensation system for the Executive Management Burckhardt Compression has established a comprehensible com- pensation system which is well balanced between shorter- and longer-term orientation. The objectives pursued with this system are to ensure that the compensation of the company executives is market-competitive and to achieve a good balance between the interests of the shareholders, the directors, and Executive Manage- ment. Market-competitive pay is a basic prerequisite for attracting well-qualified executives and ensuring that they remain with the company in the long run. The structure of compensation system of the Executive Management Components Program Purpose Plan period Monthly cash salary Variable perfor- mance- and profit related annual cash bonus Variable perfor- mance- and profit related long-term incentive bonus awarded in form of free shares Attract and retain continuous Pay for performance Reward long-term performance aligned with shareholders annual 6 years Monthly contributions Protect against risk continuous Annual Base Salary Short-term incentive Long-term incentive Benefits: Pension and Insurance 86 Base salary The functions performed by members of the Executive Manage- ment are assigned to so-called Global Grades as defined by a global functional grading system (Willis Towers Watson Global Grading System). Market data for each Global Grade based on Willis Towers Watson’s Global 50 Remuneration Planning Report are taken into consideration when determining the base salary of the members of the Executive Management. In addition, individual executive performance goal achievements like e.g. expansion of product portfolio and geographic scope, sustainability, and digitali - zation are reviewed annually. The base salary is reviewed annually. Annual Short-Term Incentive (STI) The members of the Executive Management receive a variable performance- and profit-related bonus in addition to their base salaries. The STI is calculated from the group net income of the Burckhardt Compression Group – if a minimum financial thresh- old of 4% return on sales at the net profit level is achieved – and a percentage rate determined by the Global Grade. This measure focuses on profitability and aligns the Executive Management with the interests of all stakeholders. The percentage rate applied for the CEO is 0.28%. The percentage rate for other members of the Exec- utive Management – depending on their Global Grade – ranges from 0.12% to 0.16%. The STI is limited to 50% of the base salary. The STI plan is regularly reviewed. In 2022 the NCC has made slight revi- sions to the STI plan which will be applicable as of fiscal year 2023. Long-Term Incentive (LTI) Members of the Executive Management additionally receive LTI pay awarded in the form of free shares. The LTI program is valid for a six- year period (fiscal years 2017–2022). LTI pay is based on the attain- ment of the Mid-Range Plan targets for organic growth (sales) and net income of Burckhardt Compression Group for the fiscal years 2017 to 2019 as well as 2020 to 2022. The basis upon which the LTI pay is calculated consists of a fixed, predefined amount per Global Grade. If the sales and net income targets set in the Mid-Range Plan are attained by the end of fiscal year 2022, this fixed amount will be multiplied by a factor of 1.0. Each KPI is weighted 50% (for sales and net income) and award- ed in the form of free shares. 02220006_Burckhardt-Compression_GB_2022_EN.indd 86 02220006_Burckhardt-Compression_GB_2022_EN.indd 86 05.06.23 18:44 05.06.23 18:44 Burckhardt CompressionAnnual Report 2022The KPIs have been chosen to balance top-line growth and bot- tom-line efficiency, as well as the commitment to sustainability, measured by the reduction of GHG emission intensity by 50% by 2027. The plan includes malus and clawback provisions which allow to reduce or reclaim all or parts of the award in defined cases. With this revision of the LTI policy the company aims to drive not only sustainable retention of our leadership team but also provides the opportunity to participate in the long-term success of the company. Employment contract terms and shareholding guideline Employment contracts with Executive Management members are entered into for an indefinite period with a notice period of six months. The Executive Management is not contractually entitled to sign-on payments, termination payments, change-of-control provisions (except the accelerated vesting under the LTI plan) or non-competition compensation. Pension benefits are part of the regular company occupational pension plans. Starting from fiscal year 2023, the Executive Management will be required to build up and own at least a minimum multiple of their annual base salary in Burckhardt Compression shares. Compensation Report The targeted amount of the LTI for the entire six-year period is CHF 900’000 for the CEO and between CHF 450’000 and CHF 600’000 for the members of the Executive Management, depending on their Global Grade. For new joiners to and promotions within the Execu- tive Management the target amount is pro-rated. The sales target in the Mid-Range Plan (aggregate) for the six years amounts to CHF 3’819 mn; the net income target (aggregate) is CHF 300 mn. If the targets are only partially achieved, the factors will be reduced by a corresponding amount. Minimum financial targets have been defined for both cumulative sales and for cumulative net income. The minimum cumulative sales target is set at CHF 3’346 mn, mini- mum cumulative net income at CHF 195 mn. If cumulative sales or net income fall short of these minimum thresholds, the correspond- ing factor will be reduced to zero. If the Mid-Range Plan targets for sales or net income are exceeded, the corresponding factors will be increased up to a maximum amount of 0.6 each (1.2 in total). An interim evaluation of the attained targets was conducted after three years. Members of the Executive Management whose employment with the company had not been terminated as of July 31, 2020 were on that date awarded a number of free shares for the fiscal years 2017, 2018, and 2019, based on attainment of the targets. These free shares were distributed at the end of July 2020. The factors used for the multiplication of the fixed amount in the interim evaluation are limited to 0.3 each (total 0.6). The second allotment of free shares for the fiscal years 2020, 2021 and 2022 will be distributed at the end of July 2023, subject to approval by the Annual General Meeting. The number of shares awarded are based on the average share price for the periods from the announcement of the full-year results to the Annual General Meetings for the fiscal years 2019 and 2022, respectively. All shares received will not be subject to any restrictions upon the date of transfer. Based on the NCC’s regular review of the compensation poli- cies and the expiring of the current LTI plan, the Board of Directors has approved a new LTI policy which will replace the current and expiring LTI plan. To align compensation stronger to the interests of shareholders, increase the pay for performance relationship and strengthen the retention of the most senior employees, a new LTI policy will come into effect with the start of fiscal year 2023. The LTI plan will be awarded in form of Performance Share Units (PSUs) which are conditional upon the fulfillment of certain per- formance conditions. The vesting of the award is based on the achievement of three KPI’s over a period of three years, subject to continued employment: – Cumulative Earnings per Share (50% weighted) – Cumulative Revenue (25% weighted) – ESG measure (25% weighted) 87 02220006_Burckhardt-Compression_GB_2022_EN.indd 87 02220006_Burckhardt-Compression_GB_2022_EN.indd 87 05.06.23 18:44 05.06.23 18:44 Burckhardt CompressionAnnual Report 2022Compensation Report 4. Compensation allocated with com parative figures for the previous year 4.1. Compensation allocated to the Board of Directors The following aggregate compensation was allocated to the members of the Board of Directors for the fiscal years 2022 and 2021: in CHF 1’000 (gross) Function Fees Members of the Board of Directors Ton Büchner Urs Leinhäuser Dr. Monika Krüsi Dr. Stephan Bross David Dean Maria Teresa Vacalli1 Total Approved by the 2021 AGM for FY2022 Chair Member Member Member Member Member 194 91 101 91 91 68 636 in CHF 1’000 (gross) Function Fees Social security contributions and other benefits* 18 10 11 10 12 8 69 Social insurance contributions and other benefits* Members of the Board of Directors Ton Büchner Urs Leinhäuser Dr. Monika Krüsi Dr. Stephan Bross David Dean Total Approved by the 2020 AGM for FY2021 Chair Member Member Member Member 194 91 101 91 91 568 18 10 11 10 7 56 2022 212 101 112 101 103 76 705 750 2021 212 101 112 101 98 624 650 1 From July 2, 2022 *Includes mandatory required social security contributions only as per local Swiss regulations, and expenses as per Board of Directors compensation regulation The total fixed compensation for the Board of Directors for the fiscal year under review is CHF 81’000 higher than for the previous fiscal year due to an additionally appointed member of the Board of Directors. The Annual General Meeting of July 2, 2021 approved aggregate fixed compensation in the amount of CHF 750’000 (gross, incl. social security contributions) for the Board of Direc- tors (six members) for fiscal year 2022. The amount of compensa- tion actually paid was CHF 705’000 which is within the limit of the approved amount by the AGM. 88 02220006_Burckhardt-Compression_GB_2022_EN.indd 88 02220006_Burckhardt-Compression_GB_2022_EN.indd 88 05.06.23 18:44 05.06.23 18:44 Burckhardt CompressionAnnual Report 2022Compensation Report 4.2. Compensation allocated to the Executive Management The following compensation was allocated to the members of the Exe cutive Management for the fiscal years 2022 and 2021: in CHF 1’000 (gross) Function Fixed base salary, cash Total fixed compen- sation Short-term incentive, cash Share- based long-term incentive Social insurance contri- butions and other benefits 2022 Total Total variable compen- sation Social security contri- butions and other benefits Executive Management Fabrice Billard (highest paid) Other members of the Executive Management1 Total Approved by the 2021 AGM for FY 2022 CEO 400 102 502 196 180 78 454 956 951 1’351 287 389 1’238 1’740 2’400 350 546 375 555 143 221 868 1’322 2’106 3’062 in CHF 1’000 (gross) Function Fixed base salary, cash Total fixed compen- sation Short-term incentive, cash Share- based long-term incentive Social insurance contri- butions and other benefits 2021 Total Total variable compen- sation Social security contri- butions and other benefits Executive Management Marcel Pawlicek (highest paid) Other members of the Executive Management1 Total Approved by the 2020 AGM for FY 2021 CEO 445 115 560 151 180 106 437 997 1’081 1’526 256 371 1’337 1’897 2’200 337 488 360 540 216 322 913 1’350 2’250 3’247 1 Includes changes in the Executive Management: new CHRO from June 2022 including CHFk 60 as replacement award for the forfeiture of unvested equity at the previous employer; new President for Systems Division from October 2022 The total fixed compensation for the highest paid member of the Executive Management for the period under review is 10% lower compared to the total fixed compensation for the highest paid member of the Executive Management for the previous fiscal year, due to a new CEO in role. The total amount of fixed compensation for the other members of the Executive Management for 2022 is 7% less than for the previous year’s period. This is due to chan ges in the Executive Management composition. The Annual General Meeting of July 2, 2021 approved a maximum aggregate amount of CHF 2’400’000 (gross, including social security contributions) for the fixed compensation of the entire Executive Management for the fiscal year 2022. The amount of fixed compensation actually paid (gross, including social security contributions) is within the limit of the approved amount by the AGM 2021. The annual STI for the Executive Management for fiscal year 2022 was 12% higher than in the previous year as a result of a higher net income achieved in fiscal year 2022 compared to previous fis- cal year. This is based on a formulaic calculation where no discre- tion has been applied. Expenses for the Executive Management’s LTI compensation rose by 3% from the previous year. This is due to changes in the Executive Management composition. The provision made for the LTI compensation has been adjus ted based on the assessment of the business performance over a mul- ti-year period. Such an adjustment is in accordance with Swiss GAAP FER, requiring that the related expenses must be allocated over the program’s vesting period which can lead to adjustments within individual fiscal years. The total variable compensation for the individual members of the current Executive Management for the period under review ranged from 36% to 48% of total compensation. Payments to former members of the Executive Management To the former CEO, compensation in the amount of CHF 56’000 was paid to support the transition period of the new CEO. Additionally, in line with the LTI plan rules the final tranche granted to the former CEO in the amount of CHF 203’000 (gross, includ- ing social security contributions) will be due for payment, following and subject to shareholder approval at the AGM 2023. No other payments were made to former members of the Exec- utive Management or their closely related parties. 89 02220006_Burckhardt-Compression_GB_2022_EN.indd 89 02220006_Burckhardt-Compression_GB_2022_EN.indd 89 05.06.23 18:44 05.06.23 18:44 Burckhardt CompressionAnnual Report 2022 Compensation Report Aggregate amount of variable compensation for the Executive Management for fiscal year fiscal year 2022 subject to approval at the AGM For the fiscal year 2022 the total amount of CHF 1’525’000 (gross, including social security contributions and other benefits) has been allocated. This includes the amount of CHF 1’322’000 for the Executive Management and the amount of CHF 203’000 for a former member of the Executive Management. 5. Overview of shareholdings and distributed shares 5.1. Detailed overview of distributed shares In the fiscal years 2022 and 2021 the following shares were distributed: Name Members of the Board of Directors Ton Büchner Urs Leinhäuser Dr. Monika Krüsi Dr. Stephan Bross David Dean Maria Teresa Vacalli1 Total Executive Management Fabrice Billard2 Marcel Pawlicek3 Other members of the Executive Management Total4 Total Board of Directors and Executive Management 1 From July 2, 2022 2 From April 1, 2022 appointed CEO 3 Until March 31, 2022 former CEO in office 4 Shares have not been allocated or distributed under the LTI program every year Function Shares distributed in FY 2022 Shares distributed in FY 2021 Chair Member Member Member Member Member CEO Former CEO 86 38 38 38 38 0 238 0 n/a 0 0 238 98 44 44 44 44 n/a 274 0 0 0 0 274 90 02220006_Burckhardt-Compression_GB_2022_EN.indd 90 02220006_Burckhardt-Compression_GB_2022_EN.indd 90 05.06.23 18:44 05.06.23 18:44 Burckhardt CompressionAnnual Report 2022Compensation Report 5.2. Detailed overview of shareholdings As per March 31, 2023, the members of the Executive Management and the Board of Directors (and related persons) owned the following numbers of shares of Burckhardt Compression Holding AG: Function 31.3.2023 Total shares 31.3.2022 Total shares Chair Member Member Member Member Member CEO Former CEO CFO CHRO President Services Division President Systems Division 5’184 1’796 1’201 431 490 0 9’102 1’300 n/a 1’223 0 824 0 3’347 12’449 0.4 5’098 1’758 1’163 393 452 n/a 8’864 1’300 37’737 1’223 n/a 824 n/a 41’084 49’948 1.5 Name Members of the Board of Directors Ton Büchner Urs Leinhäuser Dr. Monika Krüsi Dr. Stephan Bross David Dean Maria Teresa Vacalli1 Total Executive Management Fabrice Billard2 Marcel Pawlicek3 Rolf Brändli Vanessa Valentin4 Rainer Dübi Andreas Brautsch5 Total Total Board of Directors and Executive Management As a % of all outstanding share 1 From July 2, 2022 2 From April 1, 2022 appointed CEO. Previously, President Systems Division 3 Until March 31, 2022 former CEO in office 4 From June 1, 2022 5 From October 1, 2022 6. Transactions with the Board of Directors, the Executive Management and related parties No other payments or fees for additional services were paid to the members of the Board of Directors or the Executive Management or to related parties during the fiscal year 2022. No sign-on bonuses, loans, or credit lines had been granted to members of the Board of Directors and Executive Management as well as their closely rela- ted parties during the fiscal year 2022. 91 02220006_Burckhardt-Compression_GB_2022_EN.indd 91 02220006_Burckhardt-Compression_GB_2022_EN.indd 91 05.06.23 18:44 05.06.23 18:44 Burckhardt CompressionAnnual Report 2022Compensation Report 7. 7.1. Motions for the Annual General Meeting Approval of the maximum aggregate amount of variable compensation for the Executive Management for fiscal year 2022 The Board of Directors proposes that an aggregate amount of CHF 1’525’000 (gross, including social security contributions and other benefits) be approved as variable compensation for current and former members of the Executive Management for fiscal year 2022. 7.2. Consultative vote on the Compensation Report for fiscal year 2022 The Board of Directors proposes that shareholders approve the Compensation Report for fiscal year 2022 in a consultative vote. 7.3 Approval of the maximum aggregate amount of fixed compensation for the members of the Board of Directors for fiscal year 2024 The Board of Directors proposes that a maximum aggregate amount of CHF 890’000 (gross, including social security contribu- tions and other benefits) be approved as fixed compensation for six members of the Board of Directors for fiscal year 2024. This is the same amount as approved by the AGM in 2022 for fiscal year 2023. 7.4. Approval of the maximum aggregate amount of fixed compensation for members of the Executive Management for fiscal year 2024 The Board of Directors proposes that a maximum aggregate amount of CHF 2’400’000 (gross, including social security contri- butions and other benefits) be approved as fixed compensation for the five members of the Executive Management for fiscal year 2024. This is the same amount as approved by the AGM in 2022 for fiscal year 2023. 8. Evaluation of the compensation system Burckhardt Compression’s compensation system is regularly re- viewed by the Nomination and Compensation Committee and the Board of Directors and may be modified if necessary. A compensation benchmark based on external salary surveys compiled by Willis Towers Watson and presented in its Global 50 Remuneration Planning Report is one element of the integrated compensation system for the Executive Management. 92 02220006_Burckhardt-Compression_GB_2022_EN.indd 92 02220006_Burckhardt-Compression_GB_2022_EN.indd 92 05.06.23 18:44 05.06.23 18:44 Burckhardt CompressionAnnual Report 2022 Compensation Report Report of the statutory auditor to the General Meeting of Burckhardt Compression Holding AG Winterthur Report on the audit of the compensation report Opinion We have audited the compensation report of Burckhardt Compression Holding AG (the Company) for the year ended 31 March 2023. The audit was limited to the information on remuneration, loans and advances pursuant to Art. 14 to 16 of the Ordinance against Excessive Remuneration in Listed Companies Limited by Shares (Ordinance) contained in the tables on pages 88 to 89 of the compensation report. In our opinion, the information on remuneration, loans and advances in the compensation report (pages 88 to 89) com- plies with Swiss law and article 14 to 16 of the Ordinance. Basis for opinion We conducted our audit in accordance with Swiss law and Swiss Standards on Auditing (SA-CH). Our responsibilities under those provisions and standards are further described in the 'Auditor’s responsibilities for the audit of the compen- sation report' section of our report. We are independent of the Company in accordance with the provisions of Swiss law and the requirements of the Swiss audit profession, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Other information The Board of Directors is responsible for the other information. The other information comprises the information included in the annual report, but does not include the audited tables in the compensation report, the consolidated financial state- ments, the financial statements and our auditor’s reports thereon. Our opinion on the compensation report does not cover the other information and we do not express any form of assur- ance conclusion thereon. In connection with our audit of the compensation report, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the audited financial information in the compen- sation report or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Board of Directors' responsibilities for the compensation report The Board of Directors is responsible for the preparation of a compensation report in accordance with the provisions of Swiss law and the company's articles of incorporation, and for such internal control as the Board of Directors determines is necessary to enable the preparation of a compensation report that is free from material misstatement, whether due to fraud or error. The Board of Directors is also responsible for designing the remuneration system and defining individual remuneration packages. Auditor’s responsibilities for the audit of the compensation report Our objectives are to obtain reasonable assurance about whether the information on remuneration, loans and advances pursuant to article 14 to 16 of the Ordinance is free from material misstatement, whether due to fraud or error, and to PricewaterhouseCoopers AG, Bahnhofplatz 8, Postfach, 8400 Winterthur, Switzerland Telefon: +41 58 792 71 00, www.pwc.ch PricewaterhouseCoopers AG is a member of the global PricewaterhouseCoopers network of firms, each of which is a separate and independent legal entity. 93 02220006_Burckhardt-Compression_GB_2022_EN.indd 93 02220006_Burckhardt-Compression_GB_2022_EN.indd 93 05.06.23 18:44 05.06.23 18:44 Burckhardt CompressionAnnual Report 2022 Burckhardt Compression Holding AG Winterthur Report of the statutory auditor to the General Meeting on the remuneration report 2022 Compensation Report 94 02220006_Burckhardt-Compression_GB_2022_EN.indd 94 02220006_Burckhardt-Compression_GB_2022_EN.indd 94 05.06.23 18:44 05.06.23 18:44 Burckhardt CompressionAnnual Report 2022 3 Burckhardt Compression Holding AG | Report of the statutory auditor to the General Meeting issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guar-antee that an audit conducted in accordance with Swiss law and SA-CH will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this compensation re-port. As part of an audit in accordance with Swiss law and SA-CH, we exercise professional judgment and maintain profes-sional scepticism throughout the audit. We also: • Identify and assess the risks of material misstatement in the compensation report, whether due to fraud or error, de-sign and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropri-ate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropri-ate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's in-ternal control. • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and re-lated disclosures made. We communicate with the Board of Directors or its relevant committee regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide the Board of Directors or its relevant committee with a statement that we have complied with relevant ethical requirements regarding independence, and communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or safe-guards applied. PricewaterhouseCoopers AG Sandra Boehm Uglow Kevin Mueller Licensed audit expert Auditor in charge Licensed audit expert Winterthur, 5 June 2023 Burckhardt Compression Holding AG Winterthur Report of the statutory auditor to the General Meeting on the remuneration report 2022 02220006_Burckhardt-Compression_GB_2022_EN.indd 95 02220006_Burckhardt-Compression_GB_2022_EN.indd 95 05.06.23 18:44 05.06.23 18:44 Financial Report Financial Report Burckhardt Compression Holding AG's fiscal year 2022 comprises the period from April 1, 2022 to March 31, 2023. Comments on financial report summary in CHF 1’000 Order intake Sales Gross profit Operating income (EBIT) in % of sales Net income Total assets Total equity Earnings per share attributable to shareholders of Burckhardt Compression Holding AG (in CHF) FTEs as per end of fiscal year 96 2022 2021 Change 2021/2022 1’268’270 829’701 244’467 94’963 11.4% 70’001 940’602 261’583 20.64 2’973 976’559 650’698 190’844 70’336 10.8% 50’399 837’798 242’889 14.82 2’732 29.9% 27.5% 28.1% 35.0% 38.9% 12.3% 7.7% 39.3% 8.8% 02220006_Burckhardt-Compression_GB_2022_EN.indd 96 02220006_Burckhardt-Compression_GB_2022_EN.indd 96 05.06.23 18:44 05.06.23 18:44 Burckhardt CompressionAnnual Report 2022 Financial Report Sales and gross profit Total sales in the fiscal year 2022 were 27.5% above the previous year at CHF 829.7 mn, with strong growth mainly in Europe and North America, but also in China. Excluding the effects of currency translation and acquisitions, year- on-year sales growth was in total 29.4%. The Systems Division recorded a substantial increase in sales of 31.4% (no impact from acquisitions) to CHF 489.7 mn on the back of the high order intake of the past two years. Proactive measures to expedite the supply chains combined with a certain stabilization of global logistics allowed to deliver large projects in the final weeks of fiscal year 2022, some of them even ahead of schedule. Sales at the Services Division increased by 22.3% (net of acquisitions +20.9%) to CHF 340.0 mn. Gross profit increased by 28.1% to CHF 244.5 mn, generating a gross profit margin of 29.5% (previous year: 29.3%). The Systems Division reported a growth of 35.1% in gross profit to CHF 96.3 mn, with a resulting gross profit margin of 19.7% (previous year: 19.1%). Gross profit at the Services Division increased by 23.9% to CHF 148.2 mn, resulting in a gross profit margin of 43.6% (previous year: 43.0%). Operating income Total operating profit (EBIT) rose by 35.0% to CHF 95.0 mn, yielding an EBIT margin of 11.4% (previous year: 10.8%), despite non-recurring costs of CHF 7.1 mn related to the exit from the Russian market. Selling, marketing and gen- eral administrative expenses amounted to CHF 117.0 mn, which is 9.2% (prior year: 10.9%) of order intake, respec- tively 14.1% (prior year: 16.4%) of sales. Research and development expenses were at 23.9 mn, which is CHF 4.2 mn above the previous year, mainly due to an increase in activities to develop innovative applications for new marine solutions and hydrogen mobility and energy. Other operating income and expenses (net) were at CHF -8.6 mn, in- cluding the above mentioned non-recurring expenses. Further details to the divisional results are disclosed in the segment reporting under note 5. Financial income and tax expenses Financial expenses decreased by CHF 0.9 mn to CHF 3.8 mn mainly due to higher interest income on bank deposits in some subsidiaries, while debt interest is largely derived from bond financing and is fixed at 1.5%. The income tax expenses amounted to CHF 21.2 mn at a resulting tax rate of 23.2%, same as in the prior year, including withhold- ing tax on internal dividend distribution. Net income Group net income increased by 38.9% to CHF 70.0 mn, which is 8.4% of sales (previous year: 7.7%). Earnings per share attributable to shareholders of Burckhardt Compression increased from CHF 14.82 to CHF 20.64 (+39.3%). Balance sheet The balance sheet total rose by 12.3% to CHF 940.6 mn. Property, plant and equipment decreased by 6.1%, due to lower amounts in buildings and other business assets. In line with the steep ramp up in order intake, inventories grew substantially by CHF 93.9 mn to CHF 286.2 mn, mainly in work in progress on ongoing customer projects as per closing date. Trade accounts receivable ended the fiscal year at CHF 245.5 mn, 5.2% below the prior-year level. The aging structure of the accounts receivable overdue more than 60 days improved to 19.1% (prior year: 30.0%). The balance between advance payments from customers compared to work in progress and advance payments to suppliers ended the year at CHF 60.7 mn (previous year: CHF 52.0 mn), as a result of the further increase in orders received. The equity ratio closed at 27.8% (prior year: 29.0%), which is below our ambition level of 30%. This can be attributed to the volume induced inflation of the balance sheet with a strong increase in advance payments from customer and work in progress for customer projects as per closing date as well as the relatively high amount of cash on the one hand, while we carry a bond with a term until September 2024 on the balance sheet. Total net operating assets increased by 3.2% compared to the previous year to CHF 283.5 mn. Cash flow Cash and cash equivalents increased by CHF 28.1 mn, similar to the previous year (CHF +25.6 mn) to CHF 129.1 mn in fiscal year 2022, with a lower cash inflow from operating activities but lower cash outflow for investing and financing activities. The net financial position (net debt) strongly improved from CHF -56.8 mn to CHF -7.1 mn. 97 02220006_Burckhardt-Compression_GB_2022_EN.indd 97 02220006_Burckhardt-Compression_GB_2022_EN.indd 97 05.06.23 18:44 05.06.23 18:44 Burckhardt CompressionAnnual Report 2022Financial Report Consolidated income statement in CHF 1’000 Sales Cost of goods sold Gross Profit Selling and marketing expenses General and administrative expenses Research and development expenses Other operating income Other operating expenses Operating income Financial income and expenses Earnings before taxes Income tax expenses Net income Share of net income attributable to shareholders of Burckhardt Compression Holding AG Share of net income attributable to non-controlling interests Basic earnings per share (in CHF) Diluted earnings per share (in CHF) Notes 2022 2021 5 7 8 8 9 10 11 11 829’701 –585’234 244’467 –62’742 –54’277 –23’897 30’245 –38’833 94’963 –3’805 91’158 –21’157 70’001 69’942 59 20.64 20.64 650’698 –459’854 190’844 –57’188 –49’735 –19’698 23’957 –17’844 70’336 –4’746 65’590 –15’191 50’399 50’244 155 14.82 14.82 The enclosed notes are an integral part of the consolidated financial statements. 98 02220006_Burckhardt-Compression_GB_2022_EN.indd 98 02220006_Burckhardt-Compression_GB_2022_EN.indd 98 05.06.23 18:44 05.06.23 18:44 Burckhardt CompressionAnnual Report 2022 Financial Report Consolidated balance sheet in CHF 1’000 Notes 03/31/2023 03/31/2022 Non-current assets Intangible assets Property, plant and equipment Deferred tax assets Other assets Total non-current assets Current assets Inventories Trade receivables Other current receivables Prepaid expenses and accrued income Cash and cash equivalents Total current assets Total assets Equity Share capital Capital reserves Treasury shares Retained earnings and other reserves Equity attributable to shareholders of Burckhardt Compression Holding AG Non-controlling interests Total equity Liabilities Non-current liabilities Non-current financial liabilities Deferred tax liabilities Non-current provisions Other non-current liabilities Total non-current liabilities Current liabilities Current financial liabilities Trade payables Customers' advance payments Other current liabilities Accrued liabilities and deferred income Current provisions Total current liabilities Total liabilities Total equity and liabilities 12 13 10 14 15 16 17 18 18 19 10 20 21 19 15 22 23 20 11’744 172’039 17’915 3’735 205’433 286’246 245’545 68’522 5’777 129’079 735’169 940’602 8’500 574 -15’772 267’882 261’184 399 261’583 132’000 14’246 11’901 3’044 161’191 4’214 109’073 222’849 40’505 108’363 32’824 517’828 679’019 940’602 13’460 183’236 16’225 4’077 216’998 192’362 258’983 65’177 3’262 101’016 620’800 837’798 8’500 525 –2’136 235’450 242’339 550 242’889 128’881 11’502 12’920 3’306 156’609 28’925 97’263 162’656 36’131 84’853 28’472 438’300 594’909 837’798 The enclosed notes are an integral part of the consolidated financial statements. 99 02220006_Burckhardt-Compression_GB_2022_EN.indd 99 02220006_Burckhardt-Compression_GB_2022_EN.indd 99 05.06.23 18:44 05.06.23 18:44 Burckhardt CompressionAnnual Report 2022 Financial Report Consolidated cash flow statement in CHF 1’000 Notes 2022 2021 Cash flow from operating activities Net income Income tax expenses Financial income and expenses Depreciation Amortization Change in inventories Change in trade receivables Change in other current assets Change in trade payables Change in customers' advance payments Change in provisions Change in other liabilities Change in provision in equity Adjustment for non-cash items Interest received Interest paid Income taxes paid Total cash flow from operating activities Cash flow from investing activities Purchase of property, plant and equipment Sale of property, plant and equipment Purchase of intangible assets Sale of financial assets Acquisition of group companies net of cash acquired Total cash flow from investing activities Cash flow from financing activities Increase in financial liabilities Decrease in financial liabilities Purchase of treasury shares Acquisition of non-controlling interests Dividends paid Total cash flow from financing activities Currency translation differences on cash and cash equivalents Net change in cash and cash equivalents Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period Net change in cash and cash equivalents 10 9 13 12 10 13 12 4 18 4 70’001 21’157 3’805 17’981 3’788 –86’565 585 –9’922 17’058 50’625 4’940 32’662 4’288 1’329 1’028 –3’324 –18’804 110’632 –16’175 4’165 –4’282 3’208 – –13’084 3’887 –25’779 –13’695 – –25’597 –61’184 –8’301 28’063 101’016 129’079 28’063 50’399 15’191 4’746 16’775 3’232 –41’350 1’611 –10’837 4’839 70’382 874 30’874 4’395 –484 57 –2’432 –13’513 134’759 –17’662 520 –5’115 – –11’820 –34’077 22’350 –22’640 – –51’500 –22’152 –73’942 –1’094 25’646 75’370 101’016 25’646 The enclosed notes are an integral part of the consolidated financial statements. 100 02220006_Burckhardt-Compression_GB_2022_EN.indd 100 02220006_Burckhardt-Compression_GB_2022_EN.indd 100 05.06.23 18:44 05.06.23 18:44 Burckhardt CompressionAnnual Report 2022 Financial Report Consolidated statement of changes in equity in CHF 1’000 Share capital Capital reserves Treasury shares Hedge reserve Translation reserve Goodwill offset Non- controlling interests Total equity Other retained earnings Equity attribut- able to share- holders of Burckhardt Compres- sion Hold- ing AG Balance at 04/01/2021 Result for the period Currency translation differences Changes of cash flow hedges Dividends paid Changes in treasury shares Share-based payments (distributed) Share-based payments (provision in equity) Goodwill on acquisition1 Balance at 03/31/2022 Balance at 04/01/2022 Result for the period Currency translation differences Changes of cash flow hedges Dividends paid Changes in treasury shares Share-based payments (distributed) Share-based payments (provision in equity) Balance at 03/31/2023 8’500 486 –2’206 –242 –3’129 –146’707 362’402 219’104 499 219’603 –1’905 1’836 50’244 50’244 155 50’399 –1’905 1’836 11 –1’894 1’836 –22’037 –22’037 –115 –22’152 39 70 –109 – – 4’395 4’395 –9’298 –9’298 – – 4’395 –9’298 8’500 525 –2’136 1’594 –5’034 –156’005 394’895 242’339 550 242’889 8’500 525 –2’136 1’594 –5’034 –156’005 394’895 242’339 550 242’889 –17’644 1’384 –13’695 49 59 69’942 69’942 59 70’001 –17’644 –43 –17’687 1’384 1’384 –25’430 –25’430 –167 –25’597 –13’695 –13’695 –108 – 4’288 4’288 – 4’288 8’500 574 –15’772 2’978 –22’678 –156’005 443’587 261’184 399 261’583 1 See note 4 “Business Combinations and Other Changes in the Scope of Consolidation” The enclosed notes are an integral part of the consolidated financial statements. 101 02220006_Burckhardt-Compression_GB_2022_EN.indd 101 02220006_Burckhardt-Compression_GB_2022_EN.indd 101 05.06.23 18:44 05.06.23 18:44 Burckhardt CompressionAnnual Report 2022Financial Report Notes to the consolidated financial statements 1. General information Burckhardt Compression is a manufacturer and service provider for a full range of reciprocating compressor tech- nologies and services. Its customized compressor systems are used in the petrochemical, chemical, gas trans- port and storage, hydrogen mobility and energy, industrial gas, refinery and gas gathering & processing sectors. Burckhardt Compression’s leading technology, broad portfolio of compressor components and the full range of services help customers around the world to find their optimized solution for their reciprocating compressor systems. Burckhardt Compression Holding AG is a company limited by shares incorporated and domiciled in Switzer- land. The address of its registered office is: Franz-Burckhardt-Strasse 5, 8404 Winterthur, Switzerland. Burckhardt Compression registered shares (BCHN) are listed on the SIX Swiss Stock Exchange in Zurich (ISIN: CH0025536027). Burckhardt Compression Holding AG’s fiscal year 2022 comprises the period from April 1, 2022 to March 31, 2023. These consolidated financial statements were authorized for issue by the Board of Directors on June 5, 2023 and will be submitted to shareholders for approval at the annual general meeting scheduled for July 1, 2023. 2. Accounting policies 2.1 Basis of preparation The consolidated financial statements of Burckhardt Compression Holding AG have been prepared in accordance with the entire Swiss GAAP FER accounting and reporting standards. In addition, the provisions of the Listing Rules of the SIX Swiss Exchange and Swiss accounting law were complied with. The consolidated financial statements have been prepared under the historical cost convention unless otherwise stated in the following consolidation and accounting policies. 2.2 Use of judgments and estimates These consolidated financial statements include estimates and assumptions that affect the reported figures and related disclosures. Actual results may differ from these estimates. Estimates and underlying assumptions are re- viewed on an ongoing basis. Revisions to estimates are recognized prospectively. 2.3 Principles of consolidation The consolidated financial statements include all entities where Burckhardt Compression Holding AG has the power to control the financial and operating policy, usually as a result of directly or indirectly owning more than 50% of the voting rights. All of the assets and liabilities as well as the income and expenses of these companies are fully included. Non-controlling interests are presented separately in the balance sheet and the income statement. In- tercompany transactions, balances and unrealized gains or losses on transactions between group companies are eliminated. Group companies are disclosed in note 32. Acquired companies are fully consolidated from the date on which control was effectively transferred. When a company is acquired in a step up acquisition, the existing interest is revalued at the time when the company is first consolidated. The revaluation of shares previously owned is offset against retained earnings. Com- panies which have been divested are included in the consolidated financial statements until the date on which control ceased. Capital consolidation is based on the acquisition method (purchase method). At the time of the acquisition, all previously recognized assets and liabilities of the company are initially valued at fair value. Acqui- sition-related costs are expensed as incurred. The net assets acquired are compared with the purchase price, and any resulting goodwill is directly offset against equity. In the notes to the financial statements, the effects of a theoretical capitalization and any impairment are shown using an amortization period of five years. In the event of a possible subsequent sale, the goodwill offset against shareholders' equity at the time of the acquisition is recognized in the income statement against the proceeds of the sale. Associates are those entities in which Burckhardt Compression has significant influence, but no control, over the financial and operating policies. Significant influence is generally presumed to exist when Burckhardt Compression holds, directly or indirectly, between 20% and 50% of the voting rights. Associates are accounted for using the equity method. The proportionate share of net income is shown in the consolidated income statement. As of March 31, 2023 Burckhardt Compression does not hold any Associates. 102 02220006_Burckhardt-Compression_GB_2022_EN.indd 102 02220006_Burckhardt-Compression_GB_2022_EN.indd 102 05.06.23 18:44 05.06.23 18:44 Burckhardt CompressionAnnual Report 2022Financial Report 2.4 Foreign currency translation The consolidated financial statements of Burckhardt Compression are prepared in Swiss francs (CHF). Foreign currency translation at company level Foreign currency transactions are recorded at the exchange rate of the transaction date. Monetary assets and liabilities which are denominated in foreign currencies are translated at period-end exchange rates. Resulting translation differences are recorded in the income statement. Foreign currency translation for consolidation purposes Assets and liabilities of foreign subsidiaries are translated into CHF using period-end exchange rates. Average ex- change rates are used for the translation of the income statements. Translation differences arising from the con- solidation of financial statements are recorded as a separate component of equity. Likewise, exchange differences arising on inter-company loans with equity character are directly recorded in equity. Major foreign currency exchange rates Average rates 2022 2021 03/31/2023 03/31/2022 Period-end rates 1 EUR 1 USD 100 CNY 0.99 0.95 13.93 1.07 0.92 14.31 1.00 0.92 13.33 1.03 0.92 14.58 Impairment of assets 2.5 All non-current assets are tested for impairment when indicators exist that the carrying amount of the asset might exceed its recoverable amount. Where the carrying amount of an asset is higher than the recoverable amount, the asset is impaired to its recoverable amount. The recoverable amount is the higher of an asset's fair value less cost to sell and its value in use. Impairment tests are performed based on discounted cash flows at the level of the corre- sponding cash-generating units, representing the lowest level at which such assets are evaluated for recoverability. Intangible assets and goodwill 2.6 Acquired software licenses are capitalized on the basis of the costs incurred to acquire and bring to use the specific software. The estimated useful life for software generally amounts to three to five years. Internal costs associated with developing or maintaining software are recognized as an expense as incurred. Other intangible assets are recorded at acquisition or production costs less accumulated amortization. The amortization expense is calculat- ed on a straight-line basis over the estimated useful life of the asset. Goodwill resulting from acquisitions is offset against equity at the date of acquisition. The consequences of a theoretical capitalization and amortization of goodwill (using an amortization period of five years) are disclosed in note 12. 2.7 Property, plant and equipment Items of property, plant and equipment are stated at cost less accumulated depreciation. They are depreciated on a straight-line basis over their estimated useful lives. Land is stated at cost and is not depreciated, except land use rights in China, which are depreciated over their useful lives. The estimated useful lives are as follows: – Buildings: 20 to 50 years – Machinery: 5 to 15 years – Technical equipment: 5 to 10 years – Land use rights in China: maximum 40 years – Other non-current assets: maximum 5 years 103 02220006_Burckhardt-Compression_GB_2022_EN.indd 103 02220006_Burckhardt-Compression_GB_2022_EN.indd 103 05.06.23 18:44 05.06.23 18:44 Burckhardt CompressionAnnual Report 2022Financial Report 2.8 Other assets Other assets include loans and long-term rental deposits. Furthermore, other assets also include costs incurred from cloud computing arrangements. Cloud computing arrangements are capitalized on the basis of the costs incurred to acquire and bring to use the specific cloud computing solution. The costs relating to the cloud computing ar- rangements are distributed on a straight-line basis over the estimated useful life of five to ten years. Internal costs regarding the development and maintenance of these arrangements are recognized as an expense as incurred. Inventories 2.9 Inventories are stated at the lower of cost or net realizable value. The cost of work in progress and finished goods comprises material costs, direct and indirect production costs and other order-related production costs. Invento- ries are stated at weighted average costs or standard costs based on their type and use. Valuation allowances are recognized for slow-moving and excess inventory items. Inventories are presented net of advance payments received from customers on a project-by-project basis, if they do not include a right of clawback. Negative contract balances after offsetting are presented as customers’ advance payments. 2.10 Trade and other current receivables Trade receivables and other current receivables are stated at nominal value less valuation allowances for doubtful amounts. Impairments are assessed case by case. An impairment loss is recognized when there is objective evi- dence that Burckhardt Compression will not be able to collect the full amount due, such as substantial financial problems of the customer or a declaration of bankruptcy. 2.11 Cash and cash equivalents Cash and cash equivalents includes cash in hand, deposits held at call with banks and other short-term highly liquid investments with original maturities of three months or less. 2.12 Financial liabilities Financial liabilities mainly consist of bank debts and a bond. They are recognized at their nominal value. Borrowing related costs are expensed as incurred in the income statement. 2.13 Provisions Provisions are recognized for warranty obligations, unprofitable contracts, personnel expenses and various com- mercial risks where Burckhardt Compression has an obligation towards third parties arising from past events, the amount of the liability can be reliably measured and it is probable that the settlement will result in an outflow of resources. The amount of the provisions is based on the expected expenditures required to cover all obligations and liabilities. 2.14 Treasury shares Treasury shares are stated at acquisition cost and deducted from equity. No subsequent valuation is made. If the treasury shares are disposed of, the resulting gain or loss is recognized as an addition to or a reduction of capital reserves. 2.15 Transactions with non- controlling interests Transactions with non-controlling interests that do not result in a loss of control are treated as a transaction with shareholders of Burckhardt Compression. A change in ownership interest results in an adjustment between the carrying amounts of the controlling and the non-controlling interests. Any difference between the amount of the adjustment to non-controlling interests and any consideration paid or received is recognised in retained earnings within the equity attributable to shareholders of Burckhardt Compression. The related cash flows are presented as financing activities in the cash flow statement. 104 02220006_Burckhardt-Compression_GB_2022_EN.indd 104 02220006_Burckhardt-Compression_GB_2022_EN.indd 104 05.06.23 18:44 05.06.23 18:44 Burckhardt CompressionAnnual Report 2022Financial Report 2.16 Government grants Grants from governments or similar organizations are recognized at their nominal value when there is reasonable assurance that the grant will be received, and Burckhardt Compression will comply with all attached conditions. Government grants related to income are deferred and recognized as income over the period necessary to match them with the related costs which they are intended to compensate. Government grants related to assets are deducted directly from the carrying amount of the asset which they are intended to compensate. 2.17 Derivative financial instruments Burckhardt Compression uses derivative financial instruments to mitigate currency risks. The risk management policy is described in note 3. The derivative financial instruments are recognized at fair value. Where such derivative financial instruments are linked to specific projected transactions and cash flows, the hedging is deemed to be effective and documented accordingly, changes in the fair value of the cash flow hedges are recognized in equity as long as the hedged item has not been recognized on the balance sheet. Otherwise, the gain or loss relating to fair value changes of the derivative financial instruments is recognized immediately in the income statement as part of other operating income or other operating expenses. 2.18 Revenue recognition Burckhardt Compression recognizes revenue from the sale of goods and the provision of services once the contract is completed, net of sales or value-added taxes, credits, discounts, and rebates. Revenue and the corresponding cost of goods sold are recorded in the accounts when the risks and rewards have transferred to the customers or the contracted service has been performed, according to the agreed sales conditions. The following conditions must be met: – A contractually-agreed sales price exists or can be reliably estimated. – Collection of the payment is reasonably assured. – The costs (including those yet to be incurred) can be reliably measured. 2.19 Research and development Research and development costs are expensed as incurred. 2.20 Income taxes Income tax expenses include all income tax on the taxable profits of the group. Deferred income tax is recorded in full using the liability method. Deferred income tax assets and liabilities arise on temporary differences between the carrying amounts of assets and liabilities under Swiss GAAP FER and their related tax values. The tax rates and laws enacted or substantively enacted at the balance sheet date are used to determine deferred income tax. De- ferred income tax assets result from tax loss carry-forwards, tax credits as well as temporary valuation differences of assets and liabilities. They are recognized to the extent that realization through future taxable profits is probable. 2.21 Off-balance-sheet transactions Contingent liabilities and other non-recognizable commitments are valued and disclosed on each balance sheet date. 2.22 Share-based payments Share-based payments with compensation through equity instruments are valued at fair value at the grant date. The corresponding personnel expenses are distributed over the vesting periods. 2.23 Employee benefits There are various pension plans within Burckhardt Compression based on local conditions in their respective coun- tries. An economic obligation is recognized as a liability if the requirements for the recognition of a provision are met under Swiss GAAP FER. An economic benefit is capitalized provided that Burckhardt Compression is entitled to such benefit in the future, for example, to offset future pension expenses. For Swiss pension plans, economic benefits and/or economic obligations are determined on the basis of the annual financial statements of the pension funds prepared in accordance with Swiss GAAP FER 26. Freely avail- able employer contribution reserves are recognized as financial asset. For foreign plans, the economic impact is determined according to country-specific methods. 105 02220006_Burckhardt-Compression_GB_2022_EN.indd 105 02220006_Burckhardt-Compression_GB_2022_EN.indd 105 05.06.23 18:44 05.06.23 18:44 Burckhardt CompressionAnnual Report 2022Financial Report 2.24 Alternative performance measures Alternative Performance Measures are key figures not defined by Swiss GAAP FER. Burckhardt Compression uses alternative performance measures as guidance parameters for both internal and external reporting to stakehold- ers. For the definition of Alternative Performance Measures please visit https://www.burckhardtcompression.com/ investors/reports-financial-results/key-figures. 3. Financial risk management Basic principles The goal of the group-wide risk management policy is to minimize the negative impact of changes in the financing structure and financial markets, particularly with regard to currency fluctuations. Derivative financial instruments such as foreign exchange contracts may be used to address the respective risks. Burckhardt Compression pursues a conservative, risk-averse financial policy. Financial risk management is based on the principles and regulations established by the Board of Directors. These govern Burckhardt Compression’s financial policy and outline the conduct and powers of the group’s treasury department, which is responsible for the group-wide management of financial risks. The financial principles and regulations govern areas such as financing policy, the management of foreign currency risk, the use of derivative financial instruments and the investment policy applicable to financial resources not required for operational purposes. Liquidity risks Each Burckhardt Compression group company is responsible for managing its liquidity so that day-to-day busi- ness can be handled smoothly, while the group treasury is responsible for maintaining the group’s overall liquidi- ty. Some of the group subsidiaries may secure loans from local creditors within the limits approved by the group management. The group treasury provides the local group companies with the necessary funds or invests their excess liquidity. The group treasury maintains sufficient liquidity reserves and open credit and guarantee lines to fulfill the financial obligations at all times. The actual and future cash flows and cash reserves are compiled monthly in a rolling liquidity forecast. The Executive Management and the Board of Directors are informed about the liquidity situation and outlook with the regular financial reporting. Currency risks Burckhardt Compression hedges all major USD-denominated sales transactions of its non-US entities to the extent that such transactions are not fully or partially naturally hedged. EUR-denominated sales and purchase transac- tions of the Swiss company are fairly evenly balanced when viewed over a period of 1–2 years and are therefore, to a certain extent, naturally hedged at the net profit level over said period. These foreign-exchange flows are regularly monitored by the group treasury; if there is evidence of a sustained shift in these flows, major sales and purchase transactions will be hedged on a case-by-case basis. For this, the group treasury normally uses forward exchange contracts. The other companies belonging to Burckhardt Compression group may, after consultation with group treasury, hedge the foreign-exchange risks of their sales and purchase transactions through local qual- ified institutions or group treasury, the objective being the optimization of the net profit of each group company as reported in its functional local currency. The group management regularly monitors the changes in the most important currencies and may adjust the hedging policy accordingly in the future. As a globally active corporation, Burckhardt Compression is also exposed to currency risks resulting from the translation into Swiss francs of items in the balance sheets of the foreign group companies. Burckhardt Compression does not hedge these translation risks. Credit risks Credit risk in respect of trade receivables is limited due to the diverse nature and quality of the customer base. Such risk is minimized by means of regular credit checks, advance payments, letters of credit and other tools. There is no concentration of customer-related risks within Burckhardt Compression Group as the most important cus- 106 02220006_Burckhardt-Compression_GB_2022_EN.indd 106 02220006_Burckhardt-Compression_GB_2022_EN.indd 106 05.06.23 18:44 05.06.23 18:44 Burckhardt CompressionAnnual Report 2022Financial Report tomers in the project business, which account for a large share of Burckhardt Compression’s overall business, vary from one year to the next. In past years Burckhardt Compression experienced no major impairments of receivables. Credit risks of banks and financial institutions are monitored and managed centrally. Generally, only inde- pendently rated parties with a strong credit rating are accepted, and the total volume of transactions is split among several banks to reduce the individual risk with one bank. Interest rate risks Interest rate risks arise from fluctuations in interest rates which could have a negative impact on the financial po- sition of Burckhardt Compression. Assets and liabilities at variable rates expose Burckhardt Compression to cash flow interest rate risk. Capital risks The capital managed by Burckhardt Compression is its consolidated equity. With regard to its capital management policies, Burckhardt Compression seeks to secure the continuation of its business activities, to achieve an accept- able return for the shareholders and to finance the growth of the business to a certain extent from own cash flow. In order to achieve these objectives Burckhardt Compression can adjust the dividend payments, repay share cap- ital, issue new shares or divest parts of the assets, subject to approval by the general assembly, where applicable. 4. Business combinations and other changes in the scope of consolidation Shenyang Yuanda Compressor Co. Ltd. (China) On March 11, 2022, the remaining payment of CHF 51.5 mn (deferred consideration) was made for the acquisition of the remaining 40% of the shares of Shenyang Yuanda Compressor Co. Ltd. The acquisition of the 40% minority interest took place in fiscal year 2020. Mark van Schaick BV (Netherlands) On December 21, 2021, Burckhardt Compression AG acquired 100% of the shares in Mark van Schaick BV, a com- pany based in Rotterdam, Netherlands. The company has more than 20 years of experience in machining and is a leader in servicing complex repairs such as crankshafts. With the acquisition of Mark van Schaick BV, Burckhardt Compression specifically complements its repair and service capabilities in Europe and further expands its presence in the service business for reciprocating compres- sors. Burckhardt Compression hereby also gains highly specialized machining expertise and repair capabilities for the global customer base in the maritime and petrochemical industry. The following table shows the fair value of assets and liabilities acquired at the acquisition date and the good- will arising from this transaction. in CHF 1’000 Property, Plant and Equipment Inventories Trade receivables and other receivables Prepaid expenses and other current assets Current liabilities Non-Current liabilities Net assets/liabilities acquired at fair value Goodwill from acquisition Total purchase price Less cash and cash equivalents acquired Net cash outflow on acquisition 107 2’898 7 955 35 –3’543 –188 164 9’298 9’462 – 9’462 02220006_Burckhardt-Compression_GB_2022_EN.indd 107 02220006_Burckhardt-Compression_GB_2022_EN.indd 107 05.06.23 18:44 05.06.23 18:44 Burckhardt CompressionAnnual Report 2022Financial Report The Japan Steel Works Ltd. (Japan) On July 5, 2021, the remaining payment of CHF 2.4 mn (deferred consideration) was made for the acquisition of the global compressor business from the Japan Steel Works Ltd. (JSW), Japan. The acquisition took place in fis- cal year 2020. 5. Segment reporting Systems Division Burckhardt Compression's Systems Division covers a complete range of reciprocating compressor technologies. Its customized compressor systems are used in the petrochemical, chemical, gas transport and storage, hydrogen mobility and energy, industrial gas, refinery and gas gathering & processing sectors. Depending on the customers' needs, Burckhardt Compression offers solutions to minimize life cycle costs of the reciprocating compressor systems or solutions to minimize the capital expenditure. Services Division Burckhardt Compression’s Services Division is a one-stop provider of a full range of services for reciprocating com- pressors and stands for top-quality, high-performance components for all makes of reciprocating compressors, as replacement parts, or to repair or upgrade existing installations. Original spare parts backed by Burckhardt Com- pression’s manufacturing guarantees stand for superior quality and ensure together with various complementary service modules both low life cycle costs as well as the optimal operation of compressor systems. Others Certain expenses related to the corporate center are not attributable to a particular segment. They are reported in the column “Others”. Furthermore, “Others” includes real estate income and expenses as well as expenses for strategic projects. in CHF 1’000 Systems Division Services Division Others Total 2022 2021 2022 2021 2022 2021 2022 2021 Sales 489’663 372’657 340’038 278’041 Cost of goods sold –393’358 –301’384 –191’876 –158’470 Gross profit Gross profit as % of sales Operating income Operating income as % of sales 96’305 19.7% 30’294 6.2% 71’273 148’162 119’571 19.1% 21’108 5.7% 43.6% 75’041 22.1% 43.0% – – – – – – – – 829’701 650’698 –585’234 –459’854 244’467 190’844 29.5% 94’963 11.4% 29.3% 70’336 10.8% 58’353 –10’372 –9’125 21.0% – – 108 02220006_Burckhardt-Compression_GB_2022_EN.indd 108 02220006_Burckhardt-Compression_GB_2022_EN.indd 108 05.06.23 18:44 05.06.23 18:44 Burckhardt CompressionAnnual Report 2022Financial Report Geographic information in CHF 1’000 Sales by customer location Europe Africa North America South America Middle East China Other Asia & Australia Total in CHF 1’000 Capital expenditure for property, plant and equipment Europe Africa North America South America Middle East China Other Asia & Australia Total 6. Personnel expenses 2022 2021 275’816 5’217 105’576 6’626 25’259 291’483 119’724 829’701 177’546 4’174 73’603 11’148 49’391 240’334 94’502 650’698 2022 2021 9’163 32 2’353 22 55 2’073 1’070 14’768 9’324 27 562 28 87 3’395 804 14’227 in CHF 1’000 2022 2021 Wages and salaries Social security and pension expenses Other personnel expenses Total personnel expenses –197’875 –41’572 –24’589 –264’036 –173’249 –34’758 –19’597 –227’604 109 02220006_Burckhardt-Compression_GB_2022_EN.indd 109 02220006_Burckhardt-Compression_GB_2022_EN.indd 109 05.06.23 18:44 05.06.23 18:44 Burckhardt CompressionAnnual Report 2022Financial Report 7. Research and development expenses In the fiscal year 2022, Research and Development activities focused on the development of new and standardized solutions for the hydrogen market. Furthermore, we centered our activities to further enhance our marine solutions with increased customer value as well as on adapting our PCI portfolio to the latest market requirements. 8. Other operating income and expenses in CHF 1’000 Currency exchange gains Other operating income Total other operating income Currency exchange losses Other operating expenses Total other operating expenses Total other operating income and expenses 2022 17’224 13’021 30’245 –21’469 –17’364 –38’833 2021 7’022 16’935 23’957 –7’683 –10’161 –17’844 8’588 6’113 Other operating income includes real estate income of CHF 6.8 mn (prior year: CHF 6.9 mn). Other operating expenses include real estate expenses amounting to CHF 3.6 mn (prior year: CHF 3.7 mn) and one-off costs and provisions in amount of CHF 7.1 mn for write-offs and other costs relating to the exit from the Russian market. 9. Financial income and expenses in CHF 1’000 Interest expenses Interest income Other financial income (+) and expenses (–) Total financial income and expenses 2022 –3’402 1’125 –1’528 –3’805 2021 –3’361 350 –1’735 –4’746 Other financial income and expenses include the currency exchange gains and losses on intercompany loans. 110 02220006_Burckhardt-Compression_GB_2022_EN.indd 110 02220006_Burckhardt-Compression_GB_2022_EN.indd 110 05.06.23 18:44 05.06.23 18:44 Burckhardt CompressionAnnual Report 2022Financial Report 10. Income taxes Income tax expenses in CHF 1’000 Current income tax expenses Deferred income tax income (+) and expenses (–) Total income tax expenses Reconciliation of income tax expenses 2022 2021 –21’003 –154 –21’157 –16’221 1’030 –15’191 in CHF 1’000 2022 2021 Earnings before taxes Weighted average tax rate in % Expected income tax expenses at weighted average tax rate Effect of non-recognition of tax loss carry forwards Effect of income tax of prior periods Effect of changes in tax rates Effect of Goodwill amortization for tax purposes Effect of non-deductible expenses / income not subject to tax Total income tax expenses as % of earnings before taxes 91’158 65’590 21.8% –19’827 –997 –109 – 659 –883 –21’157 23.2% 22.5% –14’728 –27 –1’663 – 1’300 –73 –15’191 23.2% The effective tax rate of Burckhardt Compression Group of 23.2% (prior year: 23.2%) corresponds to the weighted average tax rate based on the profit before income taxes and the tax rate of each group company. 2022 2021 6’026 – 20’894 –18’804 537 8’653 2’960 11’613 4’676 – 14’558 –13’513 305 6’026 2’323 8’349 Current income taxes in CHF 1’000 Net current income tax liabilities Balance as per 04/01/2022 / 04/01/2021 Changes in the consolidation scope Recognized in the income statement Income taxes paid Translation differences Balance as per 03/31/2023 / 03/31/2022 thereof current tax assets thereof current tax liabilities 111 02220006_Burckhardt-Compression_GB_2022_EN.indd 111 02220006_Burckhardt-Compression_GB_2022_EN.indd 111 05.06.23 18:44 05.06.23 18:44 Burckhardt CompressionAnnual Report 2022Financial Report Deferred income taxes in CHF 1’000 Net deferred income tax liabilities Balance as per 04/01/2022 / 04/01/2021 Changes in the consolidation scope Recognized in the income statement Recognized in equity Translation differences Balance as per 03/31/2023 / 03/31/2022 thereof deferred tax assets thereof deferred tax liabilities Tax loss carry forwards in CHF 1’000 Expiring in the next 3 years Expiring in 4 years or later Total tax loss carry forwards Potential deferred tax assets from tax loss carry forwards Effect of non-recognized tax loss carry forwards Effective deferred tax assets from tax loss carry forwards 11. Earnings per share Net income attributable to the shareholders of Burckhardt Compression Holding AG (in CHF 1’000) Average number of outstanding shares Earnings per share (CHF) 2022 2021 –4’723 – 154 710 190 –3’669 17’915 14’246 –3’417 – –1’030 119 –395 –4’723 16’225 11’502 03/31/2023 03/31/2022 – 49’725 49’725 11’445 –7’179 4’266 2’389 43’457 45’846 10’302 –5’507 4’795 2022 2021 69’942 3’388’306 20.64 50’244 3’390’572 14.82 The average number of outstanding shares is calculated based on the issued shares minus the weighted aver- age number of treasury shares. There are no conversion rights or option rights outstanding; therefore, there is no potential dilution of earnings per share. 112 02220006_Burckhardt-Compression_GB_2022_EN.indd 112 02220006_Burckhardt-Compression_GB_2022_EN.indd 112 05.06.23 18:44 05.06.23 18:44 Burckhardt CompressionAnnual Report 2022Financial Report 12. Intangible assets Acquisition costs in CHF 1’000 Software Other intangible assets Intangible assets under con- struction 2022 Total Software Other intangible assets Intangible assets under con- struction 2021 Total Balance as per 04/01/2022 / 04/01/2021 Changes in the consolidation scope Additions Disposals Reclassifications Currency translation differences Balance as per 03/31/2023 / 03/31/2022 Accumulated amortization 5’674 41’082 32’904 685 3’431 37’020 34’721 – 1’124 687 – 64 –1’580 –39 – 3’292 –44 – 4’480 –1’663 452 –293 34’424 80 –4’435 –3’903 –53 739 –36 4’451 –382 39’614 – 453 – 1’693 –329 34’721 – 3 – – –1 687 – 4’659 –731 –1’693 – 5’115 –731 – 8 –322 5’674 41’082 in CHF 1’000 Software Other intangible assets Intangible assets under con- struction 2022 Total Software Other intangible assets Intangible assets under con- struction 2021 Total Balance as per 04/01/2022 / 04/01/2021 –27’009 –613 Changes in the consolidation scope Additions Disposals Reclassifications Currency translation differences – –3’726 1’578 1’651 233 – –62 35 – 43 Balance as per 03/31/2023 / 03/31/2022 –27’273 –597 – – – – – – – –27’622 –24’097 –572 – – –3’788 –3’187 1’613 1’651 276 – – 275 – –45 – – 4 –27’870 –27’009 –613 – – – – – – – –24’669 – –3’232 – – 279 –27’622 Net book value in CHF 1’000 Software Other intangible assets Intangible assets under con- struction 2022 Total Software Other intangible assets Intangible assets under con- struction 2021 Total As per 04/01/2022 / 04/01/2021 As per 03/31/2023 / 03/31/2022 7’712 7’151 74 142 5’674 4’451 13’460 11’744 8’807 7’712 113 74 3’431 5’674 12’351 13’460 Burckhardt Compression has reclassified costs relating to cloud computing arrangements from Intangible Assets to Other Assets (note 14). 113 02220006_Burckhardt-Compression_GB_2022_EN.indd 113 02220006_Burckhardt-Compression_GB_2022_EN.indd 113 05.06.23 18:44 05.06.23 18:44 Burckhardt CompressionAnnual Report 2022Financial Report Goodwill Goodwill from acquisitions is fully offset against equity at the date of acquisition. The theoretical amortization of goodwill is based on the straight-line method and an amortization period of five years. Goodwill from new ac- quisitions is fixed to Swiss francs using the closing rate at acquisition date. Therefore, there are no exchange rate differences in the movement schedules. The impact of the theoretical capitalization and amortization of goodwill is disclosed below. in CHF 1’000 Acquisition costs Balance as per 04/01/2022 / 04/01/2021 Additions from acquisitions Balance as per 03/31/2023 / 03/31/2022 2022 2021 156’005 – 156’005 146’707 9’298 156’005 in CHF 1’000 2022 2021 Accumulated amortization Balance as per 04/01/2022 / 04/01/2021 Amortization expense Balance as per 03/31/2023 / 03/31/2022 in CHF 1’000 Net book value –122’404 –10’462 –132’866 –111’589 –10’815 –122’404 2022 2021 Theoretical net book value as per 04/01/2022 / 04/01/2021 Theoretical net book value as per 03/31/2023 / 03/31/2022 33’601 23’139 35’118 33’601 in CHF 1’000 03/31/2023 03/31/2022 Theoretical impact on equity Equity as per balance sheet Theoretical capitalization of goodwill Theoretical equity including net book value of goodwill 261’583 23’139 284’722 242’889 33’601 276’490 in CHF 1’000 2022 2021 Theoretical impact on net income Net income as per income statement Amortization of goodwill Theoretical net income after goodwill amortization 70’001 –10’462 59’539 50’399 –10’815 39’584 114 02220006_Burckhardt-Compression_GB_2022_EN.indd 114 02220006_Burckhardt-Compression_GB_2022_EN.indd 114 05.06.23 18:44 05.06.23 18:44 Burckhardt CompressionAnnual Report 2022Financial Report 13. Property, plant & equipment Acquisition costs in CHF 1’000 Balance as per 04/01/2022 / 04/01/2021 Changes in the consolidation scope Additions Disposals Balance as per 03/31/2023 / 03/31/2022 Accumulated depreciation in CHF 1’000 Balance as per 04/01/2022 / 04/01/2021 Changes in the consolidation scope Additions Disposals Reclassifications Land and buildings Machinery and equipment Other business assets Assets under con truction 2022 Total Land and buildings Machinery and equipment Other business assets Assets under con truction 2021 Total 163’959 143’746 34’754 7’882 350’341 157’343 134’846 33’617 6’807 332’613 – – – – – 854 6’375 2’250 5’289 14’768 – 271 2’957 4’840 –3’808 –1’042 –3’074 –224 –8’148 –257 –1’122 Reclassifications 1’255 4’525 733 –7’455 –942 Currency translation differences –2’840 –3’703 –1’331 –184 –8’058 7’644 –1’042 2’701 –476 – 1’777 –305 – 7’339 –273 214 –6’163 2’957 14’227 –1’957 4’396 –549 172 –1’895 159’420 149’901 33’332 5’308 347’961 163’959 143’746 34’754 7’882 350’341 Land and buildings Machinery and equipment Other business assets Assets under con truction 2022 Total Land and buildings Machinery and equipment Other business assets Assets under con truction 2021 Total –39’678 –102’139 –25’288 – –167’105 –35’356 –94’681 –22’496 – –152’533 – – – – – – – – –4’940 –9’309 –3’732 – –17’981 –4’576 –8’749 –3’450 1’231 – 972 251 2’976 –251 995 – – – 5’179 – 3’985 8 – 246 992 – 299 271 – 387 – – – – – – –16’775 1’271 – 932 Currency translation differences 806 2’184 Balance as per 03/31/2023 / 03/31/2022 Net book value in CHF 1’000 –42’581 –108’041 –25’300 – –175’922 –39’678 –102’139 –25’288 – –167’105 Land and buildings Machinery and equipment Other business assets Assets under con truction 2022 Total Land and buildings Machinery and equipment Other business assets Assets under con truction 2021 Total As per 04/01/2022 / 04/01/2021 124’281 41’607 9’466 7’882 183’236 121’987 40’165 11’121 6’807 180’080 As per 03/31/2023 / 03/31/2022 116’839 41’860 8’032 5’308 172’039 124’281 41’607 9’466 7’882 183’236 115 02220006_Burckhardt-Compression_GB_2022_EN.indd 115 02220006_Burckhardt-Compression_GB_2022_EN.indd 115 05.06.23 18:44 05.06.23 18:44 Burckhardt CompressionAnnual Report 2022Financial Report 14. Other assets Other assets mainly include rental deposits and capitalized costs relating to cloud computing arrangements. 15. Inventories in CHF 1’000 Raw materials, supplies and consumables Work in progress Finished products and trade merchandise Advance payments to suppliers Valuation allowance Total inventories 03/31/2023 03/31/2022 69’990 120’549 76’228 41’616 –22’137 286’246 44’022 82’858 55’517 27’846 –17’881 192’362 The capital invested in work in progress and advance payments to suppliers is fully financed by advance pay- ments from customers, leaving a positive balance as of March 31, 2023 of CHF 60.7 mn (prior year: CHF 52.0 mn). Burckhardt Compression presents inventories and customers’ advance payments on a net basis. The offsetting impact is illustrated in the table below. in CHF 1’000 03/31/2023 03/31/2022 Customers’ advance payments Inventories Customers’ advance payments Inventories Gross amounts 381’332 317’935 266’444 236’738 Offsetting of customers’ advance payments 95’086 95’086 74’082 74’082 Net amounts reported in the consolidated balance sheet 286’246 222’849 192’362 162’656 16. Trade receivables in CHF 1’000 Trade receivables, gross Allowance for bad debts Trade receivables, net 03/31/2023 03/31/2022 269’997 –24’452 245’545 274’273 –15’290 258’983 116 02220006_Burckhardt-Compression_GB_2022_EN.indd 116 02220006_Burckhardt-Compression_GB_2022_EN.indd 116 05.06.23 18:44 05.06.23 18:44 Burckhardt CompressionAnnual Report 2022Financial Report in CHF 1’000 2022 2021 Allowance for bad debts Balance as per 04/01/2022 / 04/01/2021 Changes in the consolidation scope Additions Release Utilization Currency translation adjustments Balance as per 03/31/2023 / 03/31/2022 –15’290 – –11’125 738 4 1’221 –24’452 –10’703 – –5’576 952 261 –224 –15’290 The allowance for bad debts at the end of the 2022 and 2021 fiscal years was entirely related to accounts receiv- ables which were more than 90 days overdue as per closing date. in CHF 1’000 03/31/2023 % 03/31/2022 % Maturity profile of trade receivables Not due Overdue 1–30 days Overdue 31–60 days Overdue 61–90 days Overdue more than 90 days Balance as per 03/31/2023 / 03/31/2022 166’386 20’374 11’949 2’470 44’366 245’545 67.8 8.3 4.8 1.0 18.1 100.0 140’546 23’464 17’247 12’409 65’317 258’983 54.3 9.1 6.6 4.8 25.2 100.0 Trade receivables overdue more than 90 days are mainly related to projects in China. 17. Other current receivables in CHF 1’000 Notes receivable VAT receivables Derivative financial instruments Current tax assets Other current receivables Total other current receivables 03/31/2023 03/31/2022 11’790 7’568 5’207 2’960 40’997 68’522 12’295 7’483 3’330 2’323 39’746 65’177 Other current receivables include the outstanding government grants in connection with the completed relocation project of Shenyang Yuanda Compressor Co. Ltd in China. 117 02220006_Burckhardt-Compression_GB_2022_EN.indd 117 02220006_Burckhardt-Compression_GB_2022_EN.indd 117 05.06.23 18:44 05.06.23 18:44 Burckhardt CompressionAnnual Report 2022Financial Report 18. Share capital and treasury shares 03/31/2023 03/31/2022 Number of shares issued 3’400’000 3’400’000 The nominal value per share amounts to CHF 2.50. All shares are registered shares and are paid in full. The break- down of equity into its individual components is shown in the statement of changes in equity. The board of Directors is empowered to increase the company's share capital by a maximum of CHF 850’000 at any time until June 30, 2024 by issuing a maximum of 340'000 fully paid registered shares with a nominal value of CHF 2.50 each (authorized capital). At the upcoming annual general meeting of shareholders on July 1, 2023, the Board of Directors of Burckhardt Compression Holding AG will propose a dividend for the 2022 fiscal year of CHF 12.00 (prior year: CHF 7.50). As of March 31, 2023, non-distributable reserves amounted to CHF 1.7 mn (prior year: CHF 1.7 mn). 03/31/2023 03/31/2022 Number of treasury shares 33’413 9’343 During the fiscal year 2022, 24'327 treasury shares were purchased at an average share price of CHF 563.00 in the amount of CHF 13.7 mn. No treasury shares were purchased in fiscal year 2021. All treasury shares are held for the share-based long-term incentive program within the Burckhardt Compres- sion Group respectively for the fixed compensation of the board of directors (20% of which paid in shares). 19. Financial liabilities in CHF 1’000 03/31/2023 03/31/2022 Non-current financial liabilities Current financial liabilities Total financial liabilities 132’000 4’214 136’214 128’881 28’925 157’806 The average effective interest rate amounted to 1.7% in fiscal year 2022 (prior year: 1.3%). Currencies of financial liabilities in CHF 1’000 03/31/2023 03/31/2022 Financial liabilities in CHF Financial liabilities in USD Financial liabilities in other currencies Total financial liabilities 132’029 1’261 2’924 136’214 134’988 20’928 1’890 157’806 118 02220006_Burckhardt-Compression_GB_2022_EN.indd 118 02220006_Burckhardt-Compression_GB_2022_EN.indd 118 05.06.23 18:44 05.06.23 18:44 Burckhardt CompressionAnnual Report 2022Financial Report Maturities of non-current financial liabilities in CHF 1’000 Due within 2 years Due within 3 years Due within 4 years Due within 5 years Due beyond 5 years Total non-current financial liabilities 03/31/2023 03/31/2022 100’692 290 – – 31’018 132’000 586 100’681 198 – 27’416 128’881 On September 30, 2020, Burckhardt Compression issued a bond for a total of CHF 100 mn with a coupon of 1.5%. The issue price was 100% of the nominal value. It will be redeemed at par value on September 30, 2024. The bond is listed on the SIX Swiss Exchange. 20. Provisions in CHF 1’000 Employee- related Warranties, penalties, unprofitable contracts Other 2022 Total Employee- related Warranties, penalties, unprofitable contracts Other 2021 Total Balance as per 04/01/2022 / 04/01/2021 9’111 31’070 1’211 41’392 11’508 26’426 3’118 41’052 Changes in the consolidation scope Additions Release Utilization Currency translation differences Balance as per 03/31/2023 / 03/31/2022 – 2’543 –533 –1’060 –369 9’692 12’684 –2’294 –8’053 –1’089 32’318 – – – 2’798 18’025 –44 –2’871 – 1’537 –664 195 14’470 –487 – 1’031 –236 195 17’038 –1’387 –1’117 –10’230 –2’873 –9’185 –2’719 –14’777 –133 –1’591 2’715 44’725 –397 9’111 5’271 3’840 –349 31’070 7’641 23’429 17 1’211 8 1’203 –729 41’392 12’920 28’472 Thereof non-current Thereof current 4’545 5’147 7’255 25’063 101 11’901 2’614 32’824 Employee-related provisions include employee benefit obligations (see note 30), provisions for long-term service awards and ordinary termination benefits. 21. Other non-current liabilities Other non-current liabilities mainly consist of various government grants in China. 119 02220006_Burckhardt-Compression_GB_2022_EN.indd 119 02220006_Burckhardt-Compression_GB_2022_EN.indd 119 05.06.23 18:44 05.06.23 18:44 Burckhardt CompressionAnnual Report 2022Financial Report 22. Other current liabilities in CHF 1’000 Notes payable VAT payables Derivative financial instruments Current tax liabilities Other current liabilities Total other current liabilities 03/31/2023 03/31/2022 10’887 3’923 1’648 11’613 12’434 40’505 9’570 3’987 868 8’349 13’357 36’131 Other current liabilities mainly consist of various social securities payables as well as various taxes payables such as VAT or withholding taxes. 23. Accrued liabilities and deferred income in CHF 1’000 03/31/2023 03/31/2022 Contract-related liabilities Vacation and overtime Salary and bonus payments Miscellaneous Total accrued liabilities and deferred income 73’835 5’040 22’133 7’355 108’363 58’451 4’011 14’262 8’129 84’853 24. Derivative financial Instruments Burckhardt Compression uses derivative financial instruments to mitigate currency risks. The risk management policy is described in note 3. On the balance sheet, derivative financial instruments are shown as “Other current receivables” and “Other current liabilities”. in CHF 1’000 Contract value Positive fair values Negative fair values 03/31/2023 03/31/2022 263’599 5’207 1’648 167’506 3’330 868 120 02220006_Burckhardt-Compression_GB_2022_EN.indd 120 02220006_Burckhardt-Compression_GB_2022_EN.indd 120 05.06.23 18:44 05.06.23 18:44 Burckhardt CompressionAnnual Report 2022Financial Report 25. Contingent liabilities Guarantees Burckhardt Compression guarantees essentially for securing customer advance payments and for eventual war- ranty claims from customers. The majority of current customer advance payments as well as major warranty exposures are covered either by third party bank guarantees or guarantees issued by Burckhardt Compression Holding AG. As per March 31, 2023, Burckhardt Compression had issued guarantees in amount of CHF 346.6 mn (prior year: CHF 238.8 mn). Other contingent liabilities As per March 31, 2023, Burckhardt Compression does not have any other contingent liabilities. 26. Commitments Operating leases in CHF 1’000 Operating leases due in less than 1 year Operating leases due in 1 to 5 years Operating leases due in more than 5 years Total operating lease commitments 03/31/2023 03/31/2022 3’675 10’097 2’331 16’103 3’132 11’606 5’108 19’846 Purchase commitments Purchase commitments for capital expenditure as per March 31, 2023 amounted to CHF 3.5 mn (prior year: CHF 4.7 mn). 27. Pledged assets As per March 31, 2023, Burckhardt Compression had pledged assets with a carrying amount of CHF 95.8 mn (prior year: CHF 91.0 mn) to secure mortgage loans and guarantees. The pledged assets consisted mainly of land and buildings, and to a lesser degree of inventories and trade receivables. 121 02220006_Burckhardt-Compression_GB_2022_EN.indd 121 02220006_Burckhardt-Compression_GB_2022_EN.indd 121 05.06.23 18:44 05.06.23 18:44 Burckhardt CompressionAnnual Report 2022Financial Report 28. Share-based payments Since 2017, there is a long-term incentive plan for the members of the Executive Management and certain other employees in place. Long-term incentive pay is awarded in the form of free shares. None of the shares are subject to any restrictions upon the date of transfer. In 2022, 257 shares at a fair value of CHF 431.20 were granted for the fixed compensation of the Board of Directors (20% of which paid in shares). In 2021, 291 shares at a fair value of CHF 372.50 were granted for the fixed compensation of the Board of Directors (20% of which paid in shares). Personnel expenses in 2022 for share-based payments amounted to CHF 4.3 mn (prior year: CHF 4.4 mn). 29. Related party transactions Except for the remuneration as disclosed in the Compensation Report of this Annual Report, no further relations or transactions existed in 2022 and 2021 with the members of the Board of Directors, Executive Management or other related parties. 30. Employee benefit obligations Burckhardt Compression has various pension plans to which most of its employees contribute. With the exception of companies in Switzerland and Germany, these pension plans are defined contribution pension arrangements. Under these, as a rule, payments are made into pension funds administered by third parties. Burckhardt Compres- sion has no payment obligations beyond making these defined contributions. Burckhardt Compression's pension plans in Switzerland consist of two independent pension funds: “Sulzer Vorsor- geeinrichtung” (SVE), a base plan for all employees, and “Johann Jakob Sulzer Stiftung” (JJS), a plan for employees with salaries exceeding a certain limit. The majority of the active participants in the two pension funds are employed at companies not belonging to Burckhardt Compression. The board of trustees for the base plan comprises ten employer representatives and ten employee representatives of the contributing companies and is responsible for asset alloca- tion and risk management. The pension plans contain a cash balance benefit formula. Under Swiss law, the pension funds guarantee the vested benefit amount as confirmed annually to members. Interest may be added to member balances at the discretion of the board of trustees. At retirement date, members have the right to take their retirement benefit as a lump sum, an annuity or part as a lump sum with the balance converted to an annuity. The pension funds may adapt the contribution and benefits at any time. In case of underfunding, this may involve special payments from the employer. The surplus or underfunding cannot be determined per company. The coverage of the collective plans as a whole as of December 31, 2022 amounted to 118.4% (SVE; prior year: 126.7%) and 115.2% (JJS; prior year: 127.2%). The technical interest rate used by both collective plans amounted to 1.5% (prior year: 1.5%). 122 02220006_Burckhardt-Compression_GB_2022_EN.indd 122 02220006_Burckhardt-Compression_GB_2022_EN.indd 122 05.06.23 18:44 05.06.23 18:44 Burckhardt CompressionAnnual Report 2022 Financial Report Employer contribution reserves Burckhardt Compression does not have any employer contribution reserves. Economic benefits/economic obligations and pension benefit expenses in CHF 1’000 Economic portion of the organization Change to prior year period recognized in the current result of the period Currency translation differences Contributions of the fiscal year Pension benefit expenses 03/31/2023 03/31/2022 2022 2022 2022 2022 2021 Pension plans with surplus Unfunded pension plans Total – –1’370 –1’370 – –1’773 –1’773 – 351 351 – 52 52 –9’386 –9’386 – 351 –9’386 –9’035 –8’408 181 –8’227 31. Events after the balance sheet date There were no events between the balance sheet date and the date these consolidated financial statements were approved by the Board of Directors which would require additional disclosures or changes in the consolidat- ed financial statements. 123 02220006_Burckhardt-Compression_GB_2022_EN.indd 123 02220006_Burckhardt-Compression_GB_2022_EN.indd 123 05.06.23 18:44 05.06.23 18:44 Burckhardt CompressionAnnual Report 2022 Financial Report 32. Group companies and associates Company Registered office Registered capital Interest in capital & h c r a e s e R t n e m p o e v e d l g n i r e e n g n e i & g n i r u t c a f u n a M g n i t c a r t n o C l s e a S i e c v r e S Burckhardt Compression AG 1 Burckhardt Compression Immobilien AG 1 Winterthur, Switzerland Winterthur, Switzerland Burckhardt Compression (Deutschland) GmbH Neuss, Germany Burckhardt Compression (Italia) S.r.l. Milan, Italy Burckhardt Compression (France) S.A.S. Cergy Saint Christophe, France Burckhardt Compression (España) S.A. Madrid, Spain Burckhardt Compression (UK) Ltd. Burckhardt Compression (US) Inc. Burckhardt Compression (Canada) Inc. Bicester, United Kingdom Houston, USA Mississauga, Canada Burckhardt Compression (Japan) Ltd. Tokyo, Japan Burckhardt Compression (Shanghai) Co. Ltd. Shanghai, China Burckhardt Compression (India) Private Ltd. Pune, India Burckhardt Compression (Brasil) Ltda. São Paolo, Brazil Burckhardt Compression (Middle East) FZE Dubai, United Arab Emirates Burckhardt Compression Korea Ltd. Seoul, South Korea Burckhardt Kompresör San. ve Tic. Ltd. Istanbul, Turkey Burckhardt Compression Singapore Pte Ltd. Burckhardt Compression South Africa (Pty) Ltd. Singapore, Singapore Sunnyrock, South Africa Burckhardt Compression Korea Busan Ltd. Busan, South Korea Burckhardt Compression (Saudi Arabia) LLC Burckhardt Compression North America Service LLC Burckhardt Compression (Netherlands) BV Dammam, Saudi Arabia Wilmington, USA Rotterdam, Netherlands 124 CHF 2’000’000 CHF 5’000’000 EUR 30’000 EUR 400’000 EUR 300’000 EUR 550’000 GBP 250’000 USD 18’250’000 CAD 200’000 JPY 50’000’000 CNY 14’238’000 INR 331’140’000 BRL 5’818’000 AED 2’000’000 KRW 250’000’000 TRY 800’000 SGD 700’000 ZAR 3’000’000 KRW 7’000’000’000 SAR 1’000’000 USD 1’800’000 EUR 18’000 100% • • 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% • 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • 02220006_Burckhardt-Compression_GB_2022_EN.indd 124 02220006_Burckhardt-Compression_GB_2022_EN.indd 124 05.06.23 18:44 05.06.23 18:44 Burckhardt CompressionAnnual Report 2022 Financial Report Company Registered office Registered capital Interest in capital Burckhardt Compression (Sweden) AB Landvetter, Sweden Burckhardt Compression (Thailand) Co. Ltd. Rayong, Thailand Shenyang Yuanda Compressor Co. Ltd. 1 Shenyang, China Liaoning Yuanyu Industrial Machinery Co. Ltd. Kaiyuan, China Shenyang Yuanda Compressor Automatic Control System Co. Ltd. Shenyang, China Compressor Tech Holding AG 1 Zug, Switzerland PROGNOST Systems GmbH Rheine, Germany PROGNOST Systems Inc. PROGNOST Machinery Diagnostics Equipment and Services LLC Société d’Application du Métal Rouge SAS Arkos Group LLC Arkos Field Services, LP Houston, USA Abu Dhabi, United Arab Emirates Pont Sainte Marie Cedex, France Houston, USA Houston, USA Arkos Realty & Investments, LP Houston, USA SEK 100’000 THB 5’000’000 CNY 100’000’000 CNY 39’000’000 CNY 5’000’000 CHF 200’000 EUR 200’000 USD 240’000 AED 300’000 EUR 501’000 USD 11’752’000 - - 100% 100% 100% 100% 60% 100% 100% 100% 100% 100% 100% 100% 100% & h c r a e s e R t n e m p o e v e d l g n i r e e n g n e i & g n i r u t c a f u n a M g n i t c a r t n o C l s e a S i e c v r e S • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • Company is directly held by Burckhardt Compression Holding AG. 1 All other companies are indirectly held by Burckhardt Compression Holding AG. 125 02220006_Burckhardt-Compression_GB_2022_EN.indd 125 02220006_Burckhardt-Compression_GB_2022_EN.indd 125 05.06.23 18:44 05.06.23 18:44 Burckhardt CompressionAnnual Report 2022 Financial Report Report of the statutory auditor to the General Meeting of Burckhardt Compression Holding AG Winterthur Report on the audit of the consolidated financial statements Opinion We have audited the consolidated financial statements of Burckhardt Compression Holding AG and its subsidiaries (the Group), which comprise the consolidated income statement for the year ended 31 March 2023, the consolidated balance sheet as at 31 March 2023, the consolidated cash flow statement, the consolidated statement of changes in equity for the year then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies. In our opinion, the consolidated financial statements (pages 98 to 125) give a true and fair view of the consolidated fi- nancial position of the Group as at 31 March 2023 and its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with Swiss GAAP FER and comply with Swiss law. Basis for opinion We conducted our audit in accordance with Swiss law and Swiss Standards on Auditing (SA-CH). Our responsibilities under those provisions and standards are further described in the 'Auditor’s responsibilities for the audit of the consoli- dated financial statements' section of our report. We are independent of the Group in accordance with the provisions of Swiss law and the requirements of the Swiss audit profession, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Our audit approach Overview Overall Group materiality: CHF 4'250'000 We concluded full scope audit work and audits of selected account balances at five reporting units in three countries. Our audit scope addressed over 65% of the Group's sales. As key audit matter the following area of focus has been identified: Accounting for work in progress of the systems division Materiality The scope of our audit was influenced by our application of materiality. Our audit opinion aims to provide reasonable assurance that the consolidated financial statements are free from material misstatement. Misstatements may arise due PricewaterhouseCoopers AG, Bahnhofplatz 8, Postfach, 8400 Winterthur, Switzerland Telefon: +41 58 792 71 00, www.pwc.ch PricewaterhouseCoopers AG is a member of the global PricewaterhouseCoopers network of firms, each of which is a separate and independent legal entity. 126 02220006_Burckhardt-Compression_GB_2022_EN.indd 126 02220006_Burckhardt-Compression_GB_2022_EN.indd 126 05.06.23 18:44 05.06.23 18:44 Burckhardt CompressionAnnual Report 2022 Financial Report 127 02220006_Burckhardt-Compression_GB_2022_EN.indd 127 02220006_Burckhardt-Compression_GB_2022_EN.indd 127 05.06.23 18:44 05.06.23 18:44 Burckhardt CompressionAnnual Report 2022 3 Burckhardt Compression Holding AG | Report of the statutory auditor to the General Meeting to fraud or error. They are considered material if, individually or in aggregate, they could reasonably be expected to influ-ence the economic decisions of users taken on the basis of the consolidated financial statements. Based on our professional judgement, we determined certain quantitative thresholds for materiality, including the overall Group materiality for the consolidated financial statements as a whole as set out in the table below. These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements, both individually and in aggregate, on the consolidated financial statements as a whole. Overall Group materiality CHF 4'250'000 Benchmark applied Earnings before taxes Rationale for the materiality bench-mark applied We chose earnings before taxes as the benchmark because, in our view, it is the benchmark against which the performance of the Group is most commonly measured, and it is a generally accepted benchmark. We agreed with the Audit Committee that we would report to them misstatements above CHF 425'000 identified during our audit as well as any misstatements below that amount which, in our view, warranted reporting for qualitative reasons. Audit scope We tailored the scope of our audit in order to perform sufficient work to enable us to provide an opinion on the consoli-dated financial statements as a whole, taking into account the structure of the Group, the accounting processes and con-trols, and the industry in which the Group operates. The audit strategy for the audit of the consolidated financial statements was determined taking into account the work performed by the Group auditor and the component auditors in the PwC network. The Group auditor performed the audit of the consolidation, the disclosures and the presentation of the consolidated financial statements. Where audits were performed by component auditors, we ensured that, as Group auditor, we were adequately involved in the audit in order to assess whether sufficient appropriate audit evidence was obtained from the work of the component auditors to provide a basis for our opinion. Our involvement comprised analysing the reporting, communication with the component auditors, communicating the risks identified at Group level and determining the materiality thresholds for the audits performed by component auditors. Key audit matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Accounting for work in progress of the systems division Key audit matter How our audit addressed the key audit matter Burckhardt Compression Group has projects in the sys-tems division, which are accounted for as work in progress in accordance with Swiss GAAP FER. As at 31 March 2023, work in progress in the amount of CHF 120.5 million was recognised in the balance sheet. Management applies judgement in determining the costs to be incurred until their completion, possible penalties as well as net realizable value. An incorrect estimate could have a significant impact on the result of the period. Our audit procedures regarding the accounting for work in progress of systems division projects included in particular the following: • We assessed the design and the existence of the key controls regarding the systems division projects and tested the effectiveness of selected controls. • We selected a sample of systems division projects, based on the contract volumes, the contribution margin and changes in the margin compared to the Financial Report 128 02220006_Burckhardt-Compression_GB_2022_EN.indd 128 02220006_Burckhardt-Compression_GB_2022_EN.indd 128 05.06.23 18:44 05.06.23 18:44 Burckhardt CompressionAnnual Report 2022 4 Burckhardt Compression Holding AG | Report of the statutory auditor to the General Meeting Please refer to page 104 (Accounting policies – Invento-ries) and page 116 (Inventories) in the Notes to the Consoli-dated financial statements. planning phase, and focused our testing on the fol-lowing: • We assessed the contract related calculations to de-termine whether the contractual terms had been rec-orded appropriately. • We discussed with the project controllers and pro-ject managers the progress of the projects based on the latest project reports, the costs still to be in-curred until their completion and changes in the esti-mated margin. • We obtained written information from the legal rep-resentatives of the Group. We inspected this written information with regard to indications of potential quality deficiencies or penalties and assessed whether these matters were accounted for appropri-ately in relation to work in progress. • During the audit, we conducted onsite inspections of various compressors still under construction. • For the systems division projects completed during the year under review, we compared various final parameters with the estimates made in the planning phase in order to assess, with hindsight, the accu-racy of the estimates made by Management. The results of our audit support the accounting of work in progress of the systems division in the consolidated finan-cial statements. Other information The Board of Directors is responsible for the other information. The other information comprises the information included in the annual report, but does not include the financial statements, the consolidated financial statements, the compensa-tion report and our auditor’s reports thereon. Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the consolidated financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial state-ments or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Board of Directors' responsibilities for the consolidated financial statements The Board of Directors is responsible for the preparation of the consolidated financial statements, which give a true and fair view in accordance with Swiss GAAP FER and the provisions of Swiss law, and for such internal control as the Board of Directors determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. In preparing the consolidated financial statements, the Board of Directors is responsible for assessing the Group's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern Financial Report 129 02220006_Burckhardt-Compression_GB_2022_EN.indd 129 02220006_Burckhardt-Compression_GB_2022_EN.indd 129 05.06.23 18:44 05.06.23 18:44 Burckhardt CompressionAnnual Report 2022 5 Burckhardt Compression Holding AG | Report of the statutory auditor to the General Meeting basis of accounting unless the Board of Directors either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so. Auditor’s responsibilities for the audit of the consolidated financial statements Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Swiss law and SA-CH will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements. As part of an audit in accordance with Swiss law and SA-CH, we exercise professional judgment and maintain profes-sional scepticism throughout the audit. We also: • Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrep-resentations, or the override of internal control. • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropri-ate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group's internal control. • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and re-lated disclosures made. • Conclude on the appropriateness of the Board of Directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group's ability to continue as a going concern. If we conclude that a material uncertainty ex-ists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evi-dence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern. • Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclo-sures, and whether the consolidated financial statements represent the underlying transactions and events in a man-ner that achieves fair presentation. • Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion. We communicate with the Board of Directors or its relevant committee regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide the Board of Directors or its relevant committee with a statement that we have complied with relevant ethical requirements regarding independence, and communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or safe-guards applied. From the matters communicated with the Board of Directors or its relevant committee, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. Financial Report 130 02220006_Burckhardt-Compression_GB_2022_EN.indd 130 02220006_Burckhardt-Compression_GB_2022_EN.indd 130 05.06.23 18:44 05.06.23 18:44 Burckhardt CompressionAnnual Report 2022 6 Burckhardt Compression Holding AG | Report of the statutory auditor to the General Meeting Report on other legal and regulatory requirements In accordance with article 728a paragraph 1 item 3 CO and PS-CH 890, we confirm that an internal control system exists which has been designed for the preparation of the consolidated financial statements according to the instructions of the Board of Directors. We recommend that the consolidated financial statements submitted to you be approved. PricewaterhouseCoopers AG Sandra Boehm Uglow Kevin Mueller Licensed audit expert Auditor in charge Licensed audit expert Winterthur, 5 June 2023 Financial Report Financial Statements of Burckhardt Compression Holding AG, Winterthur Balance sheet in CHF 1’000 Notes 31.03.2023 31.03.2022 704 1’628 – 2’332 38’945 253’681 292’626 294’958 – 10 976 5’648 6’634 100’000 100’000 8’500 1’700 172’319 21’577 –15’772 188’324 294’958 521 19 85 625 36’189 273’681 309’870 310’495 3 10 944 3’724 4’681 100’000 100’000 8’500 1’700 194’408 3’342 –2’136 205’814 310’495 102 103 104 Current assets Cash and cash equivalents Other current receivables due from third parties Other current receivables due from group companies Total current assets Non-current assets Financial assets Long-term loans to group companies Investments in subsidiaries Total non-current assets Total assets Current liabilities Trade payables due to third parties Other current liabilities due to third parties Accrued liabilities and deferred income Short-term loans from group companies Total current liabilities Non-current liabilities Loans third parties Total Non-current liabilities Equity Share capital Legal reserves from retained earnings Free reserves from retained earnings Profit brought forward Net income Treasury shares Total equity Total equity and liabilities 131 02220006_Burckhardt-Compression_GB_2022_EN.indd 131 02220006_Burckhardt-Compression_GB_2022_EN.indd 131 05.06.23 18:44 05.06.23 18:44 Burckhardt CompressionAnnual Report 2022 Financial Report Income statement in CHF 1’000 Income Dividend income from group companies Interest income from group companies Income from services provided to group companies Other operating income Total income Expenses Operating expenses Other operating expenses Financial expenses Direct Taxes Total expenses Net income 2022 2021 45’127 476 192 72 45’867 –1’616 –68 –21’600 –1’006 –24’290 21’577 5’128 856 192 3’807 9’983 –1’552 –3’090 –1’563 –436 –6’641 3’342 Notes to the financial statements of Burckhardt Compression Holding AG 101 Accounting policies The financial statements as per March 31, 2023 are in compliance with the requirements of Swiss corporate law. The financial statements have been prepared in accordance with the provisions of commercial accounting as set out in the Swiss Code of Obligations (Art. 957 to 963b CO). The following disclosures are not being made separately in the statutory financial statements pursuant to Art. 961d (1) CO as Burckhardt Compression Holding AG is presenting its consolidated financial statements according to Swiss GAAP FER: – Additional disclosures in the notes (auditor's fee; disclosure on non-current interest-bearing liabilities) – Cash flow statement – Management report Investments in subsidiaries are valued at cost less any necessary adjustments for impairment. The treasury shares are stated at acquisition cost and deducted from equity. No subsequent valuation is made. If the treasury shares are disposed of, the resulting gain or loss is recognized in the profit and loss statement. All values in the annual financial statements are reported in thousand Swiss Francs unless otherwise indicated. Burckhardt Compression Holding AG’s fiscal year 2022 comprises the period from April 1, 2022 to March 31, 2023. 132 02220006_Burckhardt-Compression_GB_2022_EN.indd 132 02220006_Burckhardt-Compression_GB_2022_EN.indd 132 05.06.23 18:44 05.06.23 18:44 Burckhardt CompressionAnnual Report 2022Financial Report 102 Subsidiaries The equity interests held directly and indirectly by Burckhardt Compression Holding AG are shown in note 32 “Group Companies” of the consolidated financial statements. In accordance with Art. 70 para. 3 of the Federal Act on Direct Federal Taxation the investment in Shenyang Yuanda Compressor Co., Ltd. was written off by CHF 20.0 mn in fiscal year 2022. 103 Share capital and shareholders The share capital amounts to CHF 8’500’000 and is composed of 3’400’000 shares, each with a nominal value of CHF 2.50. All shares are registered shares and are paid in full. No person will be registered in the Share Register as shareholder with voting rights with respect to more than five percent of the issued share capital. This entry restriction is also applicable to persons whose shares are total- ly or partially held by nominees. This restriction is also valid if shares are purchased when practicing subscription, warrant and conversion rights, with the exception of shares acquired by succession, distribution of inheritance or matrimonial regime. Legal entities and partnerships associated with each other by uniformly managed capital or votes or in any other way, as well as private and legal entities or partnerships, which form an association to evade the entry restriction, are regarded as one person. Individual persons, who have not expressly declared in the application of entry that they hold the shares for their own account (Nominees), will be entered in the Share Register with voting rights, if the Nominee concerned establishes his subordination to an accredited banking supervision and securities authority, and if he/she has con- cluded an agreement with the Board of Directors of the company concerning his/her position. Nominees holding two or less than two percent of the issued shares will be entered in the Share Register with voting rights without an agreement with the Board of Directors. Nominees holding more than two percent of the issued shares will be entered in the Share Register with two percent voting rights and, for the remaining shares, without voting right. Above this limit of two percent, the Board of Directors may enter in the Share Register Nominees with voting rights if they disclose the names, addresses, nationality, and shareholdings of the persons for whom they hold more than two percent of the issued shares. As of March 31, 2023, there is no such declaration between a nominee-shareholder and the board of directors. Shareholder groups which had existed before June 23, 2006 are excluded from the voting rights restrictions. According to information available to the company from the disclosure notifications of the SIX Exchange Reg- ulation Ltd., the following shareholders reported shareholdings of at least 3% of the share capital and voting rights as of March 31, 2023 (according to the statutory bylaws the voting rights of NN Group N.V., The Goldman Sachs Group Inc and UBS Fund Management (Switzerland) AG are limited to 5% of the total number of the registered BCHN shares recorded in the commercial register): Shareholders 31.03.2023 31.03.2022 Name Country % of shares % of shares MBO shareholder pool (Valentin Vogt, Daniela Vogt Harry Otz, Leonhard Keller, Martin Heller, Ursula Heller, Marcel Pawlicek) NN Group N.V.1 The Goldman Sachs Group, Inc2 UBS Fund Management (Switzerland) AG BlackRock, Inc. CH NL US CH US 12.40 9.86 7.37 5.02 3.07 12.40 9.86 <3.0 5.02 3.07 1 According to the notification to the Disclosure Office of SIX Exchange Regulation Ltd. published on November 19, 2021. 2 According to the notification to the Disclosure Office of SIX Exchange Regulation Ltd. published on June 24, 2022, with the following remark: “This notification is being made because The Goldman Sachs Group, Inc. (“GS Group”) has acquired control of NN Investment Partners Holdings N.V. ("NNIP") and NNIP has a discretionary asset management mandate with respect to BCHN shares which are owned by NN Group N.V.” 133 02220006_Burckhardt-Compression_GB_2022_EN.indd 133 02220006_Burckhardt-Compression_GB_2022_EN.indd 133 05.06.23 18:44 05.06.23 18:44 Burckhardt CompressionAnnual Report 2022Financial Report Detailed overview of shareholdings As per March 31, 2023, the members of the Executive Board and the Board of Directors (and related persons) owned the following numbers of shares of Burckhardt Compression Holding AG: Shareholders Name Members of the Board of Directors Ton Büchner Urs Leinhäuser Dr. Monika Krüsi Dr. Stephan Bross David Dean Maria Teresa Vacalli1 Total Executive Management Fabrice Billard2 Marcel Pawlicek3 Rolf Brändli Vanessa Valentin4 Rainer Dübi Andreas Brautsch5 Total Chair Member Member Member Member Member CEO Former CEO CFO CHRO President Services Division President Systems Division Function 31.3.2023 Total shares 31.3.2022 Total shares 5’098 1’758 1’163 393 452 n/a 8’864 1’300 37’737 1’223 n/a 824 n/a 41’084 49’948 1.5 5’184 1’796 1’201 431 490 0 9’102 1’300 n/a 1’223 0 824 0 3’347 12’449 0.4 2021 9’634 – –291 9’343 Total Board of Directors and Executive Management As a % of all outstanding share 1 From July 2, 2022 2 From April 1, 2022 appointed CEO. Previously, President Systems Division 3 Until March 31, 2022 former CEO in office 4 From June 1, 2022 5 From October 1, 2022 104 Treasury shares in CHF 1’000 Number at the beginning of the period Purchases Sales Number at the end of the period The average selling price did amount to CHF 228.56 (2021: CHF 228.56) 2022 9’343 24’327 –257 33’413 134 02220006_Burckhardt-Compression_GB_2022_EN.indd 134 02220006_Burckhardt-Compression_GB_2022_EN.indd 134 05.06.23 18:44 05.06.23 18:44 Burckhardt CompressionAnnual Report 2022Financial Report 105 Further disclosures pursuant to Article 959c par. 2 of the Swiss Code of Obligations: Full-time employees Burckhardt Compression Holding AG does not employ any employees. Liabilities to pension funds in CHF 1’000 31.03.2023 31.03.2022 Total liabilities to pension funds 0 0 Net release of undisclosed reserves in CHF 1’000 31.03.2023 31.03.2022 Net release of undisclosed reserves 0 0 Guarantees in CHF 1’000 Guarantees 31.03.2023 31.03.2022 28’399 25’605 Burckhardt Compression Holding AG issues advance payment guarantees and performance bonds in the name of Burckhardt Compression AG and in favor of a small number of selected customers. The credit lines and guarantee facilities extended to Burckhardt Compression AG by financial institutions do not require any assets or shares of Burckhardt Compression Holding AG to be pledged as collateral. 135 02220006_Burckhardt-Compression_GB_2022_EN.indd 135 02220006_Burckhardt-Compression_GB_2022_EN.indd 135 05.06.23 18:44 05.06.23 18:44 Burckhardt CompressionAnnual Report 2022 Financial Report Remuneration of the Board of Directors and the Executive Board Type and amount of remuneration of the members of the Board of Directors and the Executive Board as well as the principles and basic elements of the company’s compensation policy are depicted and explained in the com- pensation report on pages 84 to 92. Events after the balance sheet date There were no additional events after the balance sheet date which affect the annual results or would require an adjustment to the carrying amounts of Burckhardt Compression Holding AG’s assets and liabilities. Proposal by the Board of Directors for the appropriation of retained earnings in CHF 1’000 2022 2021 Retained earnings at the beginning of the period Distributed dividend Net income of the year Retained earnings at the disposal of the Annual General Meeting 197’749 –25’430 21’577 193’896 216’446 –22’038 3’342 197’749 The Board of Directors proposes the following appropriation Gross dividend –40’800 –25’500 Retained earnings carried forward 153’096 172’249 The Board of Directors will propose payment of a gross dividend of CHF 12.00 per registered share at the Annual General Meeting of Shareholders on July 1, 2023. Gross dividend Less 35% withholding tax Net dividend 2022 12.0 –4.2 7.8 2021 7.5 -2.6 4.9 2020 6.5 -2.3 4.2 136 02220006_Burckhardt-Compression_GB_2022_EN.indd 136 02220006_Burckhardt-Compression_GB_2022_EN.indd 136 05.06.23 18:44 05.06.23 18:44 Burckhardt CompressionAnnual Report 2022Financial Report Report of the statutory auditor to the General Meeting of Burckhardt Compression Holding AG Winterthur Report on the audit of the financial statements Opinion We have audited the financial statements of Burckhardt Compression Holding AG (the Company), which comprise the balance sheet as at 31 March 2023, the income statement for the year then ended, and notes to the financial state- ments, including a summary of significant accounting policies. In our opinion, the financial statements (pages 131 to 136) comply with Swiss law and the Company’s articles of incorpo- ration. Basis for opinion We conducted our audit in accordance with Swiss law and Swiss Standards on Auditing (SA-CH). Our responsibilities under those provisions and standards are further described in the 'Auditor’s responsibilities for the audit of the financial statements' section of our report. We are independent of the Company in accordance with the provisions of Swiss law and the requirements of the Swiss audit profession, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Our audit approach Overview Overall materiality: CHF 2'900'000 We tailored the scope of our audit in order to perform sufficient work to enable us to provide an opinion on the financial statements as a whole, taking into ac- count the structure of the Company, the accounting processes and controls, and the industry in which the Company operates. As key audit matter the following area of focus has been identified: Impairment testing of investments in subsidiaries Materiality The scope of our audit was influenced by our application of materiality. Our audit opinion aims to provide reasonable assurance that the financial statements are free from material misstatement. Misstatements may arise due to fraud or PricewaterhouseCoopers AG, Bahnhofplatz 8, Postfach, 8400 Winterthur, Switzerland Telefon: +41 58 792 71 00, www.pwc.ch PricewaterhouseCoopers AG is a member of the global PricewaterhouseCoopers network of firms, each of which is a separate and independent legal entity. 137 02220006_Burckhardt-Compression_GB_2022_EN.indd 137 02220006_Burckhardt-Compression_GB_2022_EN.indd 137 05.06.23 18:44 05.06.23 18:44 Burckhardt CompressionAnnual Report 2022 Financial Report 138 02220006_Burckhardt-Compression_GB_2022_EN.indd 138 02220006_Burckhardt-Compression_GB_2022_EN.indd 138 05.06.23 18:44 05.06.23 18:44 Burckhardt CompressionAnnual Report 2022 3 Burckhardt Compression Holding AG | Report of the statutory auditor to the General Meeting error. They are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements. Based on our professional judgement, we determined certain quantitative thresholds for materiality, including the overall materiality for the financial statements as a whole as set out in the table below. These, together with qualitative consider-ations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements, both individually and in aggregate, on the financial statements as a whole. Overall materiality CHF 2'900'000 Benchmark applied Total assets Rationale for the materiality bench-mark applied We chose total assets as the benchmark because, in our view, it is a relevant and generally accepted benchmark for holding companies. We agreed with the Audit Committee that we would report to them misstatements above CHF 290'000 identified during our audit as well as any misstatements below that amount which, in our view, warranted reporting for qualitative reasons. Audit scope We designed our audit by determining materiality and assessing the risks of material misstatement in the financial state-ments. In particular, we considered where subjective judgements were made; for example, in respect of significant ac-counting estimates that involved making assumptions and considering future events that are inherently uncertain. As in all of our audits, we also addressed the risk of management override of internal controls, including among other matters consideration of whether there was evidence of bias that represented a risk of material misstatement due to fraud. Key audit matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the fi-nancial statements of the current period. These matters were addressed in the context of our audit of the financial state-ments as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Impairment testing of investments in subsidiaries Key audit matter How our audit addressed the key audit matter Investments in subsidiaries is a significant asset category on the balance sheet (CHF 253.7 million). Impairment test-ing of investments whose book value is greater than the book value of the underlying net assets requires Manage-ment to consider the capitalised earnings method or the discounted cash flow (DCF) method. Doing so involves significant scope for judgement, particu-larly to determine the assumptions to use concerning future business results. In identifying the potential need for impairment of invest-ments in subsidiaries, Management uses a predefined im-pairment testing process. Please refer to page 133 (Subsidiaries) in the notes to the financial statements. In our audit of investments in subsidiaries, we performed the following main audit procedures: • We compared the book value of the investments in the year under review with their pro-rata share of the respective company's equity or the company's valuation, based on an acceptable valuation method. • We checked the key assumptions applied by Man-agement for reasonableness (revenue and margin growth, discount rate and long-term growth). We consider the valuation process and the assumptions used to be an appropriate and adequate basis for the im-pairment testing of the investments in subsidiaries as at 31 March 2023. Financial Report 139 02220006_Burckhardt-Compression_GB_2022_EN.indd 139 02220006_Burckhardt-Compression_GB_2022_EN.indd 139 05.06.23 18:44 05.06.23 18:44 Burckhardt CompressionAnnual Report 2022 4 Burckhardt Compression Holding AG | Report of the statutory auditor to the General Meeting Other information The Board of Directors is responsible for the other information. The other information comprises the information included in the annual report, but does not include the financial statements, the consolidated financial statements, the compensa-tion report and our auditor’s reports thereon. Our opinion on the financial statements does not cover the other information and we do not express any form of assur-ance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge ob-tained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Board of Directors' responsibilities for the financial statements The Board of Directors is responsible for the preparation of the financial statements in accordance with the provisions of Swiss law and the Company’s articles of incorporation, and for such internal control as the Board of Directors determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the Board of Directors is responsible for assessing the Company's ability to con-tinue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Board of Directors either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so. Auditor’s responsibilities for the audit of the financial statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from ma-terial misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Swiss law and SA-CH will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic de-cisions of users taken on the basis of these financial statements. As part of an audit in accordance with Swiss law and SA-CH, we exercise professional judgment and maintain profes-sional scepticism throughout the audit. We also: • Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, de-sign and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropri-ate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropri-ate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's in-ternal control. • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and re-lated disclosures made. • Conclude on the appropriateness of the Board of Directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence ob-tained up to the date of our auditor’s report. However, future events or conditions may cause the Company to cease to continue as a going concern. Financial Report 140 02220006_Burckhardt-Compression_GB_2022_EN.indd 140 02220006_Burckhardt-Compression_GB_2022_EN.indd 140 05.06.23 18:44 05.06.23 18:44 Burckhardt CompressionAnnual Report 2022 5 Burckhardt Compression Holding AG | Report of the statutory auditor to the General Meeting We communicate with the Board of Directors or its relevant committee regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide the Board of Directors or its relevant committee with a statement that we have complied with relevant ethical requirements regarding independence, and communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or safe-guards applied. From the matters communicated with the Board of Directors or its relevant committee, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. Report on other legal and regulatory requirements In accordance with article 728a paragraph 1 item 3 CO and PS-CH 890, we confirm that an internal control system exists which has been designed for the preparation of the financial statements according to the instructions of the Board of Di-rectors. We further confirm that the proposal by the Board of Directors for the appropriation of retained earnings complies with Swiss law and the Company’s articles of incorporation. We recommend that the financial statements submitted to you be approved. PricewaterhouseCoopers AG Sandra Boehm Uglow Kevin Mueller Licensed audit expert Auditor in charge Licensed audit expert Winterthur, 5 June 2023 Glossary Glossary We use abbreviations frequently in our daily work, so much so that we often don’t even notice them anymore. Here is a brief glossary of the most common abbreviations. LNG LPG LDPE EVA ME-GI X-DF Liquefied Natural Gas Liquefied Petroleum Gas Low-density polyethylene, soft polyethylene with high chemical resistance, good electrical insu- lation properties and good sliding behavior Ethylene vinyl acetate, plastic with high heat and good aging resistance dual propulsion system for ships from MAN dual propulsion system for ships from Win GD Boil-Off-Gas Liquid gas that heats up and turns back into gas OEM MRP Original equipment manufacturer Mid-range Plan Burckhardt Compression AG The statements in this review relating to matters that are not historical facts are forward-looking statements that are not guarantees of future performance and involve risks and uncertainties, including but not limited to: future global economic conditions, foreign exchange rates, regulatory rules, market conditions, the actions of competitors, and other factors beyond the control of the company. The Annual Report is published in German and English and is available on the internet under report.burckhardtcompression.com/en. The English version is binding. The financial report is available in English only. Publisher Burckhardt Compression Holding AG, Winterthur Concept/Design/Publication Linkgroup AG, Zurich Photography Severin Jakob, Zurich Scanderberg Sauer, Zurich iStock PR consultant PEPR, Oetwil am See 02220006_Burckhardt-Compression_GB_2022_EN.indd 141 02220006_Burckhardt-Compression_GB_2022_EN.indd 141 05.06.23 18:44 05.06.23 18:44 Burckhardt Compression Holding AG 8404 Winterhur, Switzerland Tel. +41 52 261 55 00 Fax +41 (0)52 262 00 51 info@burckhardtcompression.com www.burckhardtcompression.com 02220006_Burckhardt-Compression_GB_2022_EN.indd 142 02220006_Burckhardt-Compression_GB_2022_EN.indd 142 05.06.23 18:45 05.06.23 18:45 

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