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Report by the Supervisory Board

Report by the Supervisory Board

Before I inform you about the work of the Supervisory Board and its committees in fiscal year 2022 / 2023 I would like to take a brief look back at this year as a whole and the diverse range of topics to which we devoted our time and attention. The year was once again overshadowed by geopolitical crises and uncertainties. Russia’s war of aggression against Ukraine is continuing and its future course is uncertain. The relationship between the democratic, industrialized countries and autocratic states is changing and is a matter of intense concern for politicians and companies. In October this year, the situation in the Middle East flared up again as a consequence of the terrorist attack by Hamas. We were relieved that Covid has now basically passed or at any rate has become relatively manageable. However, the various crises in the world are a cause of considerable concern and require great vigilance. At the end of 2022, one threat – cybercrime – became a concrete experience rather than an abstract scenario for us at thyssenkrupp. The company’s IT infrastructure was the direct target of an attack. The attackers were detected and isolated in time, preventing considerable damage to the company and its employees. However, it showed how alert we need to be and how serious the threat is.

One issue at the top of the agenda for politicians, industry and society is the fight against climate change. That has special dimensions for our company. A key milestone for us and for the achievement of the climate targets in Germany and Europe was the EU Commission’s approval for the German government and the state of North Rhine-Westphalia to provide funding of around €2 billion for the construction of thyssenkrupp Steel’s first direct reduction plant in Duisburg. Other elements in the transformation of thyssenkrupp are the successful IPO of our hydrogen subsidiary thyssenkrupp nucera in a challenging capital market environment and the establishment of our new Decarbon Technologies segment, which the company prepared in the fourth quarter and implemented at the start of the new fiscal year. This brings our competencies and the potential of our portfolio into our focus and draws them to the attention of prospective customers around the world. Our technologies and solutions can make a substantial contribution to the decarbonization of the world.

I would specifically like to draw attention to various personnel matters relating to the Executive Board of thyssenkrupp AG. In November 2022, the Supervisory Board extended the appointment of CHRO Oliver Burkhard, who has been a member of the Executive Board and Labor Director of thyssenkrupp AG since 2013, by a further five years to the end of September 2028. He is doing an excellent job in difficult times and has also been setting a clear direction as CEO of thyssenkrupp Marine Systems since May 2022.

At the end of April Martina Merz requested talks on early termination of her service contract and left the company by mutual agreement on May 31, 2023. We secured the services of Miguel Ángel López Borrego to succeed her as CEO of thyssenkrupp AG with effect from June 1, 2023. On behalf of the Supervisory Board, I would like to extend our sincere thanks to Martina Merz for her tremendous commitment to thyssenkrupp in a period that was exceptionally challenging for the global economy, for our country and above all for our company. She instigated the necessary restructuring of thyssenkrupp in a decisive phase for the company with great circumspection and strategic rationale. Mr. López has taken up the change process that has been initiated and is consistently driving it forward. At its heart is the logical alignment of the businesses to future viability.

Furthermore, Dr. Klaus Keysberg has decided not to renew his contract when it ends on July 31, 2024. He has served the thyssenkrupp group in various senior management positions for nearly 28 years and has been a member of the Executive Board of thyssenkrupp AG and CFO since October 2019. I would like to thank Dr. Klaus Keysberg for his long commitment to the company in a wide range of roles and especially for his work on the Executive Board in the past four years. During this time he supported the extensive change process at the company with wisdom and great circumspection and made a key contribution to the progress that has been made in the transformation of thyssenkrupp.

In fiscal year 2022 / 2023 the Supervisory Board regularly advised the Executive Board on the management of the company and continuously supervised its conduct of business. We satisfied ourselves that the Executive Board’s work complied with all legal and regulatory requirements at all times. The Executive Board fulfilled its duty to inform. It furnished us with regular written and verbal reports containing up-to-date and comprehensive information on all issues of relevance to the company and the group relating to strategy, planning, business performance, the risk situation, compliance and the sustainability strategy. This also included information on variances between actual performance and previously reported targets as well as on budget variances (follow-up reporting). In addition, the Executive Board regularly reports on the development and implementation of sustainability topics. In the committees and in full Supervisory Board meetings, the members of the Supervisory Board had ample opportunity to critically examine the reports and resolution proposals submitted by the Executive Board and contribute suggestions. In particular, we discussed intensively and examined the plausibility of all transactions of importance to the company on the basis of written and verbal reports by the Executive Board. On several occasions, the Supervisory Board dealt at length with the company’s targets, the risk situation – and in this context with cybersecurity in particular –, refinancing and liquidity planning and the equity situation. Based on the analysis of the value potential of the group’s businesses and the opportunities and risks of strategic steps, critical operating issues were presented to the Supervisory Board for discussion. Where required by law, the Articles of Association or the rules of procedure for the Executive Board, the Supervisory Board gives its approval for individual business transactions.

The Supervisory Board and Executive Board worked together intensively and shared information. At 14 meetings of the Executive Committee, the majority of which were attended by Executive Board members and occasionally by external advisors as well, all topics were discussed in detail and meetings of committees and the Supervisory Board were prepared and followed up.

In addition, in the periods between meetings, the chairs of the Supervisory Board and its committees engaged in a close and regular exchange of views and information with the Executive Board and were informed about major developments. Important facts were reported at the latest at the subsequent Supervisory Board or committee meetings. Before the Supervisory Board meetings, the shareholder and the employee representatives each held separate meetings to discuss the agenda items.

The Supervisory Board members are required by law and by the German Corporate Governance Code (GCGC) to immediately disclose any conflicts of interest. In the past fiscal year, there were no conflicts of interest relating to Executive Board or Supervisory Board members that would have had to be disclosed immediately to the Supervisory Board.

thyssenkrupp assists the members of the Supervisory Board in the organization of the training and professional development measures that the members themselves are generally responsible for undertaking in fulfillment of their duties and assumes the costs for such measures. To supplement this, the company offers information events and training sessions on specific topics. In fiscal year 2022 / 2023, the Supervisory Board held a training session with external support on ESG regulations and frameworks of relevance for the Supervisory Board. Tours of thyssenkrupp sites and further training sessions with external support are already planned for fiscal year 2023 / 2024. There is an established onboarding process to familiarize new Supervisory Board members with the thyssenkrupp business model, group structures and special topics. The Corporate Office acts as coordinator. In addition, it provides information on rights and obligations, offers support in the form of personal discussions and ensures that the necessary documents and authorizations for digital information interchange are provided.

In total, seven Supervisory Board meetings and one training session were held in the reporting year. The range of topics that the Supervisory Board dealt with included the current business and earnings situation and the parent-company and consolidated financial statements for the year ended September 30, 2022. On the recommendation of the Audit Committee and after discussion with the auditors, PricewaterhouseCoopers GmbH Wirtschaftsprüfungsgesellschaft (PwC), the Supervisory Board approved the parent-company and consolidated financial statements for fiscal year 2021 / 2022 and thus adopted the parent-company financial statements.

Further topics were corporate governance, the thyssenkrupp approach to the internal control system (ICS), compliance and the mandatory EMIR audit for fiscal year 2021 / 2022 pursuant to § 32 German Securities Trading Act (WpHG), as well as the regular updates on all segments.

The reports by the Executive Board on the state of the thyssenkrupp group and its ongoing development were supplemented by more detailed reports on the CO2 roadmap and status updates on the value and development plans of the individual segments. This formed the basis for the continued intensive discussions on improving performance, portfolio measures and the short- and mediumterm earnings targets for all segments. On the basis a focused analysis of value drivers along the entire length of the segments’ value chains, the Supervisory Board regularly discussed the performance targets and the extent to which they had been achieved, together with recommendations for implementing the necessary measures faster. The Supervisory Board also discussed in detail the business and investment plans for fiscal year 2023 / 2024, which were adopted at the September meeting. The portfolio topics considered intensively included the IPO of thyssenkrupp nucera and the plans to place the Marine Systems and Steel Europe segments on a stand-alone basis. In particular, detailed consideration was given to the measures needed for the green transformation of Steel Europe, for example, the decision to build the first direct reduction plant at the Duisburg site and the related significant investment. Another focal topic was the establishment of the new Decarbon Technologies segment and the associated portfolio restructuring to position thyssenkrupp clearly as a technology leader for the energy transition.

Following examination of the recommendations and suggestions of the GCGC, in fiscal year 2022 / 2023, the Supervisory Board adopted a resolution to issue the declaration of conformity. The current declaration of conformity, issued at October 1, 2023, is available on the our website here. In addition, the Executive Board and Supervisory Board report on corporate governance at thyssenkrupp in the corporate governance statement.

The primary task of the Supervisory Board’s six committees is to prepare decisions and topics for discussion at the full meetings. The Supervisory Board has delegated individual decision-making powers to the committees where this is legally permissible. The powers of the committees and the requirements on committee members are set out in the rules of procedure for the respective committees. The chairs of the committees provided the Supervisory Board with regular detailed reports on the work of the committees in the reporting year. The chairs of the committees were also in close contact with the other members of their committees outside the regular meetings to exchange views on particularly important topics. The compositions of the six committees as of September 30, 2023, are here.

The Executive Committee (Präsidium) met 14 times in the past fiscal year due to the current situation and the preparations for the seminal meetings of the Supervisory Board. In addition to preparing the full Supervisory Board meetings, the work of this committee focused on the financial position and earnings performance of the group and topics relating to the transformation of thyssenkrupp.

The Personnel Committee held seven meetings in fiscal year 2022 / 2023 in order to prepare personnel matters concerning members of the Executive Board of thyssenkrupp AG for the Supervisory Board. Where required, resolutions were passed or recommendations for resolutions were made to the Supervisory Board. Alongside the personnel change on the Executive Board, the meetings focused on decisions on aspects of compensation, especially setting the variable compensation, the review during the year of the defined individual targets and the disclosures in the compensation report pursuant to § 162 German Stock Corporation Act (AktG) as well as preparations for Executive Board contracts and the termination of such contracts. The committee also dealt with general Executive Board matters, partly in the context of benefits for former Executive Board members, as well as succession planning for the Executive Board.

The Audit Committee met five times in fiscal year 2022 / 2023. Alongside Executive Board members, following the election of KPMG Aktiengesellschaft Wirtschaftsprüfungsgesellschaft (KPMG) as the auditor at the 2023 Annual General Meeting and its formal appointment by the Audit Committee, representatives of KPMG were present at the meetings. KPMG gave the Audit Committee a declaration that no circumstances exist that could lead to the assumption of prejudice by the auditors. The Audit Committee obtained the required auditors’ statement of independence, reviewed their qualification and concluded a fee agreement with the auditors. In addition, a survey with a reduced scope was carried out on satisfaction with the auditor; the results of this as well as the additional services provided by KPMG alongside the audit of the financial statements were discussed in the Audit Committee.

Dr. Verena Volpert, Chair of the Audit Committee, engaged in a regular exchange of views with the auditors between meetings. The heads of relevant group functions were also available to provide reports and take questions in the committee meetings.

The committee’s work focused on examining the 2021 / 2022 parent-company and consolidated financial statements along with the combined management report including the fully integrated nonfinancial statement and the combined corporate governance statement of the Executive Board and Supervisory Board, as well as on preparing the Supervisory Board resolutions on these items. In addition, the interim financial reports for fiscal year 2022 / 2023 (half-year and quarterly reports) were discussed in detail and adopted, taking into account the auditors’ review reports. With regard to the relationship with KPMG, the list of non-audit services provided by the statutory auditor that require approval was established and the budget for the performance of non-audit services for fiscal year 2023 / 2024 was set.

In several meetings, the Audit Committee monitored the accounting process and discussed the effectiveness of the internal control system and optimizations made to it, the effectiveness of the risk management system and the internal auditing system. It also dealt in detail with the main legal disputes and compliance in the company and discussed at length the development of strategic compliance measures at thyssenkrupp.

The Audit Committee defined the following mandate as the focus of the audit: “Audit of key measures in the internal control system and the risk management system to support the Executive Board’s statement on their effectiveness pursuant to GCGC A.5.” The auditors reported the results of their audit to the Audit Committee at its meeting on November 16, 2023.

In addition, in the presence of the head of Corporate Internal Auditing, the committee discussed the internal audit results, the audit processes and the audit planning of the internal auditing team for fiscal year 2022 / 2023, including audit support for the investment in Steel Europe’s first direct reduction plant. Further points of focus were the non-financial statement, which is fully integrated into the management report, the equity capital and rating situation, the EMIR compliance audit for fiscal year 2021 / 2022 pursuant to § 32 WpHG, the current performance of all segments and implementation of the reporting requirements of the EU Taxonomy Regulation.

The Strategy, Finance and Investment Committee held five meetings in fiscal year 2022 / 2023. Discussions focused on preparing decision recommendations in its area of responsibility for the Supervisory Board. At each meeting, the committee dealt with the operational and economic situation of thyssenkrupp and its ongoing development. As in the previous year, the other main topics addressed by the committee included the progress towards stand-alone solutions for Marine Systems and Steel Europe segments. The committee also looked intensively at Steel Europe’s investment application for the erection of the first direct reduction plant and the related feasibility study. Further areas of focus were the assessment of the risk of cyberattacks, the successful interception of an actual attack on the IT infrastructure of some units in the thyssenkrupp group and the enhancement of IT security measures, financing and liquidity planning and the review of the profitability of specific completed investment projects. Finally, in September 2023, the committee dealt at length with the group’s business and investment plans for fiscal year 2023 / 2024 and decided on those plans. At the September meeting, the committee also discussed a partial realignment of the group’s structure and recommended the following resolution to the Supervisory Board: The Rothe Erde business unit (Bearings business unit until September 30, 2023) and the Uhde, Polysius and thyssenkrupp nucera business units should be combined in the new Decarbon Technologies segment effective October 1, 2023. By establishing this new segment, thyssenkrupp is positioning itself as a technology leader for the energy transition and thus underscoring its extensive expertise for the green transformation.

The members of the Nomination Committee held one meeting in the past fiscal year. With a view to the upcoming election of shareholder representatives at the 2023 Annual General Meeting, the committee established that – in terms of diversity, financial expertise and fulfillment of the profile of required skills and expertise – the composition of the Supervisory Board is appropriate. Since one shareholder representative was stepping down, the members of the Nomination Committee proposed a successor for election at the Annual General Meeting.

There was once again no cause to convene the Mediation Committee under § 27 (3) Codetermination Act (MitbestG) in the reporting year.

Elected by the Annual General Meeting on February 3, 2023 to audit the financial statements for fiscal year 2022 / 2023, KPMG audited the parent-company financial statements for the fiscal year from October 1, 2022 to September 30, 2023 prepared by the Executive Board in accordance with the German Commercial Code (HGB) rules and the management report on thyssenkrupp AG, which is combined with the management report on the thyssenkrupp group. The auditors issued an unqualified audit opinion. In accordance with Art. 315e of the German Commercial Code (HGB), the consolidated financial statements of thyssenkrupp AG for the fiscal year from October 1, 2022 to September 30, 2023 and the management report on the thyssenkrupp group were prepared on the basis of International Financial Reporting Standards (IFRS) as applicable in the European Union. The consolidated financial statements and the combined management report were also given an unqualified audit opinion by KPMG. The auditors also confirmed that the Executive Board has installed an appropriate reporting and monitoring system that is suitable in its design and handling to identify, at an early stage, developments that could place the continued existence of the company at risk.

The financial statement documents and audit reports for fiscal year 2022 / 2023 were discussed in detail in the meetings of the Audit Committee on November 16, 2023 and the Supervisory Board on November 21, 2023. The auditors reported on the main findings of their audit. They also outlined their findings on the internal control system in relation to the accounting process as well as the risk early detection system, and were available to answer questions and provide additional information. The Chair of the Audit Committee reported in depth at the full Supervisory Board meeting on the Audit Committee’s examination of the parent-company and consolidated financial statements. The Supervisory Board examined the parent-company and consolidated financial statements and the combined management report, including the non-financial statement fully integrated into the management report, as well as the compensation report pursuant to § 162 AktG and raised no objections. The parent-company and consolidated financial statements were approved. The parent-company financial statements prepared by the Executive Board of thyssenkrupp AG were thus adopted.

The Executive Board and Supervisory Board will propose to the Annual General Meeting on February 2, 2024, to pay a dividend of €0.15 dividend-bearing per share for fiscal year 2022 / 2023

There were the following personnel changes on the Supervisory Board of thyssenkrupp AG in the reporting year:

On the shareholder representatives side, Friederike Helfer stepped down from the Supervisory Board with effect from the end of the Annual General Meeting on February 3, 2023. Dr. Patrick Berard was elected as her successor.

On the employee representatives side, Isolde Würz stepped down as of December 31, 2022, Peter Remmler resigned with effect from the end of the 2023 Annual General Meeting and Dirk Sievers left the Supervisory Board on June 20, 2023. Katrin Krawinkel, Ulrich Wilsberg and Kirstin Zeidler were appointed by the court to succeed them as members of the Supervisory Board from January 1, 2023, February 3, 2023 and July 7, 2023, respectively, for the remaining term of office of the employee representatives on the Supervisory Board.

The members of the Supervisory Board thanked the departing members for their good and constructive work over many years.

The Supervisory Board thanks the Executive Board members, all thyssenkrupp group employees worldwide and the employee representatives of all group companies for their significant efforts and achievements in fiscal year 2022 / 2023.

The Supervisory Board

Prof. Dr.-Ing. Dr.-Ing. E. h. Siegfried Russwurm
Chairman

Essen, November 21, 2023

Source: thyssenkrupp Annual Report 2022/23