Varta : Half-year financial Report VARTA AG Group as of JUne 30, 2020 – Marketscreener.com

HALF-YEAR FINANCIAL REPORT VARTA AG GROUP AS OF JUNE 30, 2020

VISION

We are defining the future of battery technology with the

aim of facilitating a more independent life.

MISSION

Through investing continuously in research and development, it sets the standard for battery technologies and customization in aspiring to market leadership in its business areas.

VARTA AG – SELECTED GROUP KPIs

Period ended

Period ended

(€ k)

Jun. 30, 2020

Jun. 30, 2019

Sales revenue

390,678

151,517

EBITDA

81,448

35,850

Adjustments:

Cost of share-based payment

499

1,385

Inventory step-up from Purchase Price Allocation (PPA)

8,661

0

Costs of M&A transactions

1,285

0

Costs of Restructuring

10,188

0

Adjusted EBITDA

102,081

37,235

Adjusted EBITDA Margin (%)

26.1%

24.6%

Group net result

39,890

19,471

Investments (CAPEX)

123,658

20,026

Free Cash Flow

-125,500

-4,747

Equity ratio

44.2%

62.0%*

Balance sheet total

1,021,701

668,830*

Employees at the end of half year

4,342

2,394

* as of Dec. 31, 2019

  • HALF-YEARSTATEMENT 2020 VARTA AG

VARTA AG

VARTA AG produces and markets a comprehensive battery portfolio that ranges from microbatteries, household batteries and energy storage systems all the way to customer-specific battery solutions for a wide range of uses, setting the industry standards as technology leader in many important areas. As the parent company of the Group, it is active in the “Microbatteries & Solutions” and “Household Batteries” business segments. The “Microbatteries & Solutions” segment focuses on the OEM business for microbatteries and the lithium-ion battery pack business. Through intensive research and development, VARTA sets global standards in the microbatteries segment and is a recognized innovation leader in the important growth markets of lithium-ion technology and primary hearing aid batteries. The “Household Batteries” segment covers the battery business for end customers, including household batteries, rechargeable batteries, chargers, portable power (power banks), lights and energy storage systems. The VARTA AG Group currently employs around 4,000 staff. VARTA AG‘s operating subsidiaries are currently active in more than 75 countries around the world, with five production and assembly facilities in Europe and Asia as well as distribution centers in Asia, Europe and the USA.

MICROBATTERIES & SOLUTIONS

The “Microbatteries & Solutions” segment focuses on the OEM business for microbatteries and the lithium-ion battery pack business. The Group is an internationally leading manufacturer of microbatteries for hearing aids and rechargeable microbatteries in the area of Entertainment. VARTA AG ranks among the most important companies for its customers and manufactures batteries in numerous key electro-chemical systems as well as in a variety of structural shapes and sizes. The range of applications extends from hearing aid batteries to wireless headsets all the way through to automotive applications operated on the basis of microbatteries. The two segments, Healthcare and Entertainment & Industrial, work together in a synergistic manner. In the Power Pack Solutions segment, the Group boasts comprehensive industry experience in the construction of high-performance, safe and needs-based lithium battery packs

  • for medical technology, robotics, connectivity and telecommunications. The product portfolio ranges from customer- specific battery packs to fully configured standard batteries.

HOUSEHOLD BATTERIES

The “Household Batteries” segment covers the battery business for end customers, including household batteries, rechargeable batteries, chargers, portable power (power banks), lights and energy storage systems. In the area of household batteries, VARTA AG is the European market leader via the Consumer Batteries segment with production located in Germany. The innovative, high-quality products are developed and manufactured using cutting-edge technology and by way of the expertise of internationally qualified specialists. A combination of innovative capacity, diversity, quality and design make the product range unique. For VARTA, a pronounced focus on consumer lifestyles and close working relationship with retail partners are essential in order to react quickly and flexibly to emerging device trends with the best energy solutions. By developing and manufacturing energy storage solutions within its “Energy Storage” business segment, VARTA is contributing to the energy revolution. The energy storage solutions developed by VARTA in the home and mass storage markets range from compact, basic models such as the wall-mountedVARTA pulse neo to large-scale storage solutions such as the VARTA flex storage for commercial applications. The AC-coupled systems feature integrated battery inverters and can be combined with all sources of green energy without the need for additional PV inverters. This makes them suitable for all new installations and retrofit projects. The smart energy management system also ensures optimal use of self-produced solar energy and is designed to significantly increase domestic solar power use.

HALF-YEAR STATEMENT 2020 VARTA AG

3

Contents

BUSINESS DEVELOPMENT IN THE FIRST HALF OF 2020

5

CONDENSED CONSOLIDATED MANAGEMENT REPORT FOR

THE FIRST HALF OF FISCAL YEAR 2020

7

1

GROUP STRUCTURE

7

1.1

Business model

7

1.2

Strategy and goals

8

1.3

Corporate management

8

1.4

Management and control

8

2

ECONOMIC REPORT

9

2.1

Markets and influencing factors

9

2.2

Macroeconomic and industry-related framework conditions

9

2.3

Key events in the first half of 2020

10

2.4

Business development

10

3

DEVELOPMENT OF EARNINGS, FINANCIAL POSITION AND NET ASSETS

12

3.1

Earnings

12

3.2

Net assets and financial position

15

4

INVESTMENTS EXCLUDING M&A (CAPEX)

17

5

SEGMENT EARNINGS

18

6

EMPLOYEES

20

7

GUIDANCE, OPPORTUNITY AND RISK REPORT

20

8

OUTLOOK

45

INTERIM FINANCIAL STATEMENT OF THE VARTA AG GROUP

AS OF JUNE 30, 2019

25

STATEMENT FROM MANAGEMENT

64

  • HALF-YEARSTATEMENT 2020 VARTA AG

Business development in the first six months

VARTA AG with very high growth dynamics in the first half of 2020 – forecast for the 2020 financial year will be raised

  • Group revenues grow in the first half of 2020 by almost 158% to € 390.7 million (+66.5% without the acquisition of VARTA Consumer)
  • Adjusted group EBITDA even increases by 174% to € 102.1 million (+124.8% without acquisition of VARTA Consumer)
  • Adjusted group EBITDA margin improves by 1.5 percentage points to 26.1%
  • “Microbatteries & Solutions” segment: H1 revenue € 239.7 million (+70%), adjusted EBITDA €
    1. million (+132%), margin 34.4% (+9.1PP)
  • “Household Batteries” segment better than expected: H1 revenues € 150.8 million, adjusted EBITDA €
    1. million, margin 13,0% (-3.1PP)
  • Expansion of the production capacities for lithium-ion batteries to 300 million cells annually by the end of 2021
  • Forecast1) for the 2020 financial year increased:
    Group revenues between € 810 and 830 million (previously: € 780-800 million);
    adjusted group EBITDA between € 210 and 215 million (previously: € 175-185 million); CAPEX for further
    capacity expansion between € 320 and 360 million (previously: € 300-330 million)

VARTA Group is continuing its high revenues and earnings growth: Group revenues rose by 157.8% to € 390.7 million

in the first half of the year. Organic revenue growth was 66.5% (without first-time consolidation of VARTA Consumer).

Adjusted EBITDA rose by 174,2 % to € 102.1 million (+ 124.8% without VARTA Consumer). The adjusted EBITDA

margin improved by 1.5 percentage points to 26.1%. The group profit more than doubled with an increase of 104.9% to

39.9 million €.

Herbert Schein, CEO of VARTA AG: “We have more than doubled revenue and almost tripled the operating result. All

business areas contributed to this gratifying result in the first half of the year, with our lithium-ion cells continuing to

record the highest growth rates. We are continuing our growth path with the expansion of production capacities for

lithium-ion cells to 300 million batteries by the end of 2021. There continues to be a high demand for VARTA products

because the market demands innovative and powerful batteries – especially in the area of premium headsets.”

  1. In view of the ongoing Covid-19 crisis, negative influences on the VARTA AG Group cannot be entirely ruled out. However, at the time the financial statements were prepared, there were no indications that these risks would materialize. VARTA does not therefore anticipate any impairments in its outlook.

HALF-YEAR STATEMENT 2020 VARTA AG

5

Chief Financial Officer (CFO) Steffen Munz adds: “We have increased the high revenues and earnings growth of the past in the first half of the year and improved profitability again. Since we continue to have a high order backlog despite the macroeconomic conditions, we are increasing the revenue and earnings forecast for the 2020 financial year.”

  • HALF-YEARSTATEMENT 2020 VARTA AG

Condensed consolidated management report for the first half of fiscal year 2020

VARTA Aktiengesellschaft, Ellwangen (Jagst)

1 GROUP STRUCTURE

VARTA Aktiengesellschaft, Ellwangen, Germany (VARTA AG) is the parent company of the corporate Group.

1.1 BUSINESS MODEL

VARTA AG is a company headquartered in Ellwangen, Jagst. The company produces and markets a comprehensive battery portfolio that ranges from microbatteries, household batteries and energy storage systems all the way to customer-specific battery solutions for a wide range of uses. As the parent company of the Group, it is active in the “Microbatteries & Solutions” and “Household Batteries” business segments. The “Microbatteries & Solutions” segment focuses on the OEM business for microbatteries and the lithium-ion battery pack business. The “Household Batteries” segment covers the battery business for end customers, including household batteries, rechargeable batteries, chargers, portable power (power banks), lights and energy storage systems. VARTA AG’s operating subsidiaries are currently active in more than 75 countries around the world, with five production and assembly facilities in Europe and Asia as well as distribution centers in Asia, Europe and the USA. Operating on a global basis today, VARTA AG can proudly look back on more than 130 years of company history.

Segments and organizational structure

MICROBATTERIES & SOLUTIONS

The “Microbatteries & Solutions” segment focuses on the OEM business for microbatteries and the lithium-ion battery pack business. The Group is an internationally leading manufacturer of microbatteries for hearing aids and rechargeable microbatteries in the area of Entertainment. VARTA AG ranks among the most important companies for its customers and manufactures batteries in numerous key electro-chemical systems as well as in a variety of structural shapes and sizes. The range of applications extends from hearing aid batteries to wireless headsets all the way through to automotive applications operated on the basis of microbatteries. The two segments, Healthcare and Entertainment & Industrial, work together in a synergistic manner. In the Power Pack Solutions segment, the Group boasts comprehensive industry experience in the construction of high-performance, safe and needs-based lithium battery packs – for medical technology, robotics, connectivity and telecommunications. The product portfolio ranges from customer-specific battery packs to fully configured standard batteries.

HOUSEHOLD BATTERIES

The “Household Batteries” segment covers the battery business for end customers, including household batteries, rechargeable batteries, chargers, portable power (power banks), lights and energy storage systems. In the area of household batteries, VARTA AG is the European market leader via the Consumer Batteries segment with production located in Germany. The innovative, high-quality products are developed and manufactured using cutting-edge

HALF-YEAR STATEMENT 2020 VARTA AG

7

technology and by way of the expertise of internationally qualified specialists. A combination of innovative capacity, diversity, quality and design make the product range unique. For VARTA, a pronounced focus on consumer lifestyles and close working relationship with retail partners are essential in order to react quickly and flexibly to emerging device trends with the best energy solutions. By developing and manufacturing energy storage solutions within its “Energy Storage” business segment, VARTA is contributing to the energy revolution. The energy storage solutions developed by VARTA in the home and mass storage markets range from compact, basic models such as the wall-mountedVARTA pulse neo to large-scale storage solutions such as the VARTA flex storage for commercial applications. The AC-coupled systems feature integrated battery inverters and can be combined with all sources of green energy without the need for additional PV inverters. This makes them suitable for all new installations and retrofit projects. The smart energy management system also ensures optimal use of self-produced solar energy and is designed to significantly increase domestic solar power use.

1.2 STRATEGY AND GOALS

With both segments, the Group is very well placed to exploit the relevant growth trends for both segments. The key growth trends are demographic change, technological progress, increased connectivity and renewable energies.

Here, the VARTA AG Group focuses on the following growth areas and objectives:

  • Strengthening and expanding global market position in core products
  • Expanding innovation and technology leadership
  • Strong financial profile to enable focus on profitable growth

1.3 CORPORATE MANAGEMENT

The VARTA AG Group is managed on the basis of internally defined financial and non-financial metrics to pursue a strategy centered on sustainable value growth. In last year’s consolidated financial statements, the following key financial metrics were used for the purposes of value-orientated management:

  • Sales revenue
  • Adjusted EBITDA
  • CAPEX (capital expenditure on the acquisition of intangible and tangible assets)
  • Net working capital

Changes in employee numbers remains an important non-financial key performance indicator on account of the dynamic growth enjoyed by the Group.

1.4 MANAGEMENT AND CONTROL

The Executive Board of VARTA AG comprises two members:

Herbert Schein (CEO) and Steffen Munz (CFO). The Executive Board members share joint responsibility for the management of the company.

There were no changes to the Supervisory Board in the first half of 2020.

  • HALF-YEARSTATEMENT 2020 VARTA AG

2 ECONOMIC REPORT

2.1 MARKETS AND INFLUENCING FACTORS

The markets in which the VARTA AG Group operates and the influencing factors to which it is exposed have remained practically identical in comparison with the prior year. The VARTA AG Group manufactures and sells batteries around the world, benefiting from a positive consumer landscape despite its relative independence from the macroeconomic environment.

In geographical terms, the sales distribution is highly diversified. Most of our products are sold in Asia, followed by Europe and North America. This therefore means that dependency on individual countries and their respective economic development is comparatively low. The Asian market plays the largest role because of its market and customer structure; many major manufacturers of wireless headphones have their products produced here. The key influencing factors are dealt with in the following chapter (“2.2 Macroeconomic and industry-related framework conditions”).

2.2 MACROECONOMIC AND INDUSTRY-RELATED FRAMEWORK CONDITIONS

The macroeconomic conditions observed in the sales markets relevant to the VARTA AG Group in 2020 continue to develop positively.

Increased life expectancy of people across all societies in addition to rising acceptance of hearing aids supports sales of hearing aids and therefore also of hearing aid batteries. In 2019, 9.1% of the global population was aged 65 or over, and this proportion will rise further to hit 11.7% by 2030 and 15.9% by 2050. In Europe and North America, this proportion of the population is much higher, at 18% (2030: 22.1%; 2050: 26.1%). At the same time, life expectancy is continually rising. In the reporting year, this stood at 72.6 years on a global basis, and is expected to rise to 77.1 years by 2050 (United Nations: World Population Prospects 2019 Highlights). Demand for hearing aids is therefore also set to rise further. IDTechEx Research has published the following forecast for the development of sales: For 2019, global hearing aid sales of $ 7.8bn including the OTC market (from 2019 onwards) are expected ($ 7.4bn in 2018), equating to growth of 4.8%. For 2020, the growth forecast amounts to 5.3% with a positive outlook for the next few years. Revenue will therefore be boosted by the strong rise in freely available hearing aids (OTC).

The area of Entertainment is benefiting from the unabated high level of customer demand for high-tech consumer products, in particular for wireless premium headsets with rechargeable lithium-ion cells. For wireless headsets, Zhiyan Consulting is anticipating a global increase of nearly 54% from 2018 to 2019, and of 50% for 2020. Moreover, the company is also very positive with regard to the future development in this area. Improvements to the operating time and expanded functionality will see the market share of wireless headsets increased further. The more wireless devices that are developed, particularly for micro-applications (e.g. headsets), the stronger the position of the VARTA AG Group here.

In the Household Batteries segment, the company is benefiting from stable growth rates in Consumer Batteries. According to a study by Global Industry Analysts, annual growth for the period from 2015 to 2022 comes to 3.3%. The Smart Health/Smart Home area is generating positive impetus, as is increasing life expectancy. People aged 55 and above use disproportionately large numbers of batteries, for instance.

HALF-YEAR STATEMENT 2020 VARTA AG

9

2.3 KEY EVENTS IN THE FIRST HALF OF 2020

On January 2, 2020, VARTA AG successfully concluded the purchase of the Europe-based business of VARTA Consumer Batteries (“VARTA Consumer“) from the US Energizer Holdings, Inc. VARTA Consumer comprises a number of country-specific companies, although its production headquarters are located in Dischingen, Germany. The European Commission had previously approved this acquisition back on December 3, 2019; in this context, VARTA AG has made a commitment to continue supplying both existing and potential customers with hearing aid batteries for a defined period of time. Following the takeover of VARTA Consumer, VARTA AG has created a globally leading manufacturer of battery solutions with a comprehensive product portfolio. This corporate acquisition has brought together the global VARTA brand rights for device batteries, microbatteries and energy storage systems under the umbrella of VARTA AG, strengthening the brand image of VARTA products across all segments. VARTA AG acquired VARTA Consumer Batteries for an agreed purchase price of € 180m.

On June 29, 2020, the company received a grant in connection with an IPCEI (Important Project of Common European Interest) for the further development of its small-scale cells based on innovative lithium-ion technology and for the transfer of this technology to larger scale formats.

These larger scale battery cells could be used in VARTA energy storage solutions, robots and also in mobility- related applications in future. These new battery formats are to be optimized on a pilot line and transferred into mass production. VARTA is also continuing to invest in research and development activities for special format battery cells, which are increasingly in demand for IOT applications, for example. The German Federal Ministry of Economics (BMWi) and the Federal States of Bavaria and Baden-Württemberg support the battery industry in Germany and Europe within the framework of an IPCEI. The German government and the Federal States will make subsidies of up to € 300m available to VARTA AG for the project up to the end of 2024.

On August 3, 2020, the Company announced the expansion of its cooperation with Samsung Electronics. VARTA will continue as the main supplier of rechargeable batteries for Samsung headsets over the coming years. After reaching an agreement for this supply contract, the Company has now settled its patent disputes with Samsung. VARTA has already withdrawn all lawsuits against Samsung and its customers. Batteries were found in the headsets, which, from the perspective of VARTA AG, breach the applicable patents in the field of lithium-ion cells. VARTA opted to take action against Samsung and its customers in Germany and the USA. The agreement now reached stipulates that VARTA AG will withdraw its lawsuits. In return, Samsung, for its part, waives lawsuits against the battery manufacturer.

2.4 BUSINESS DEVELOPMENT

General comments from the Executive Board regarding the economic situation

The VARTA AG Group can look back with pride on a highly successful first half of 2020. The high pace of growth continued with triple-digit growth rates in revenue and earnings compared with the same period of the previous year. Group revenue increased significantly, with growth of 157.8% achieved here. Organic sales growth amounted to 66.5% excluding the first-time consolidation of VARTA Consumer.

By far the strongest revenue growth was again recorded in the area of rechargeable lithium-ion batteries for high- tech consumer products, particularly premium true wireless headsets. Customer demand remains very high. As a leader in technology and innovation, VARTA AG has acquired unique competitive advantages and is therefore growing far faster than the market. VARTA AG will continue to invest massively in expanding production capacity

10 HALF-YEAR STATEMENT 2020 VARTA AG

for lithium-ion cells. Our global market position for hearing aid batteries was further expanded in a market that is subject to structural growth. After exceeding expectations with regard to business development in the first quarter of 2020, the VARTA Consumer segment developed in line with planning during the second quarter, despite the impact from the COVID-19 pandemic.

A significant, above-average increase of 174.2% to € 102.1m was again recorded for adjusted Group EBITDA. The adjusted EBITDA margin improved by 1.5 PP to 26.1%. Excluding VARTA Consumer, adjusted EBITDA rose by 124.8%.

Group profit has more than doubled, rising from € 19.5m to € 39.9m.

HALF-YEAR STATEMENT 2020 VARTA AG

11

3 DEVELOPMENT OF EARNINGS, FINANCIAL POSITION AND NET ASSETS

3.1 EARNINGS SITUATION

Consolidated income statement for the period January 1, 2020 to June 30, 2020 (unaudited)

Period ended Jun. 30,

Period ended Jun. 30,

(€k)

2020

2019

Sales revenue

390,678

151,517

Increase in finished and unfinished goods

8,287

3,506

Own work capitalized

2,579

8,330

Other operating income

20,424

3,685

Cost of materials

-158,865

-57,928

Personnel expenses

-124,595

-52,520

Other operating expenses

-57,060

-20,740

EBITDA

Depreciation and amortization

81,448

-22,898

35,850

-8,059

Operating earnings (EBIT)

Financial income

Financial expenses

Sundry financial income

Sundry financial expenses

58,550

208

-1,322

794

-1,625

27,791

128

-390

40

-459

Financial result

Profit and loss shares in companies recognized in the balance sheet under the equity method, after taxes

Earnings before taxes

Income tax expenses

-1,945

0

56,605

-16,715

-681

-6

27,104

-7,633

Consolidated result

39,890

19,471

Appropriation of profit:

Shareholders of VARTA AG

39,833

19,149

Non-controlling interests

57

322

Revenue

In the first six months of fiscal year 2020, the revenue of the VARTA AG Group increased by 157.8% from

  • 151.5m to € 390.7m. Organic revenue growth, excluding VARTA Consumer, which was consolidated for the first time, amounted to 66.5%. By far the strongest organic growth was again recorded for rechargeable lithium-ion batteries for high-tech consumer products, particularly premium wireless headsets (hearables). This is a consequence of unabated high customer demand in a rapidly expanding market. In the case of hearing aid batteries, the Company’s global market position has been further expanded in a market subject to structural growth. The Group is currently benefitting from its highly robust business model for primary hearing aid batteries in addition to the new business with a leading US retail chain initiated in the prior fiscal year. VARTA Consumer

achieved revenue of € 138.4m in the first half and recorded far more rapid growth in its brand business than in its private label business.

12 HALF-YEAR STATEMENT 2020 VARTA AG

Expenses and other operating income

In the reporting year, material expenses came to € 158.9m compared with € 57.9m in the previous year. This corresponds to an increase of 174.2%. Excluding VARTA Consumer, the increase in the cost of material was disproportionately low, at 29.9%, compared with revenue.

A below-average increase from € 52.5m to € 124.6m, namely by 137.2%, was posted under personnel expenses. Excluding VARTA Consumer, the increase in personnel expenses was disproportionately low, at 29.1%, compared with revenue. In particular, the increase in staff numbers to cope with very dynamic growth in the area of rechargeable lithium-ion batteries resulted in higher expenditure. Personnel costs also included expenses for share-based remuneration in the amount of € 0.5m (2019: € 1.4m). The personnel expenses of VARTA Consumer also include restructuring expenses totaling € 10.2m.

Other operating expenses have increased by € 36.3m in total from € 20.7m to € 57.1m. Excluding VARTA Consumer, other operating expenses have increased from € 20.7m to € 28.7k. This was largely the result of the increase in legal and consultancy fees associated with the acquisition of VARTA Consumer companies and the ongoing patent dispute in the amount of € 3.1m. Because of the expansion in production capacity, maintenance costs have risen by € 1.3m and the cost of energy by € 0.9m year on year.

Other operating income increased by € 16.7m from € 3.7m in the previous year to € 20.4m in the first half of 2020. Excluding VARTA Consumer, a decline of 5.1% would have actually been posted for other operating income. The balance sheet item of other operating income for VARTA Consumer also includes services for the Appliances segment (including household appliances and pet food, among other things) of the former owner Spectrum Brands, which is to be discontinued in future.

Adjusted EBITDA

Adjusted EBITDA (operating earnings before interest, taxes, depreciation and amortization adjusted for special effects) represents a sustainable earnings indicator for the Group. At the same time, adjusted EBITDA is a suitable control variable to effectively assess the operating earnings capacity of the Group and/or the two segments. Non-cash expenditure for share-based remuneration of € 0.5m (2019: € 1.4m) was adjusted as a special effect. In the context of the acquisition of VARTA Consumer, non-recurring expenses of € 1.3m were adjusted. Moreover, non-cash effects from the purchase price allocation (PPA) were adjusted within the framework of the PPA for VARTA Consumer. In particular, the (partial cost) profit in the amount of € 8.7m resulting from inventories was eliminated over the anticipated consumption period in profit or loss following the acquisition. The reversal of these supplementary amounts represented a non-cash special effect. Finally, restructuring costs of € 10.2m pertaining to VARTA Consumer were adjusted. The following table illustrates the reconciliation from EBITDA to adjusted EBITDA:

HALF-YEAR STATEMENT 2020 VARTA AG

13

Period ended Jun. 30,

Period ended Jun. 30,

(€ k)

2020

2019

EBITDA

81,448

35,850

Cost of share-based payment

499

1,385

Inventory step-up from Purchase Price Allocation (PPA)

8,661

0

Costs of M&A transactions

1,285

0

Costs of Restructuring

10,188

0

Adjusted EBITDA

102,081

37,235

Adjusted EBITDA increased from € 37.2m to € 102.1m in the first six months of 2020. This corresponds to an increase of 174.2% in comparison to the previous year. Excluding VARTA Consumer, adjusted EBITDA rose by 124.8%. The increase in adjusted EBITDA can be attributed to the very high and profitable revenue growth in lithium-ion cells and hearing aid batteries in addition to the simultaneous disproportionately low increase in costs due to the scaling of the business model.

Operating earnings (EBIT)

Operating earnings have more than doubled from € 27.8m to € 58.6m, having risen by 110.7% year on year. Excluding VARTA Consumer, EBIT increased by 138.6%. The above-average increase compared with growth in revenue was predominantly attributable to the highly successful development in the Microbatteries segment.

Financial result

In the reporting year, the financial result changed from € -0.7m in 2019 to € -1.9m in 2020. Excluding VARTA Consumer, the financial result would have changed from € -0.7m to € -1.5m. The result was adversely affected by the balance of currency gains and currency losses amounting to € 0.7m.

Taxes

Tax expenses increased primarily due to the positive trend in the pre-tax result from € 7.6m in 2019 to € 16.7m in 2020. This produced an effective tax ratio of 29.5% (2019: 28.2%) in relation to the pre-tax result. Excluding VARTA Consumer, the tax ratio would have amounted to 29.4%.

Consolidated result

The very profitable revenue growth in the area of lithium-ion cells and hearing aid batteries in conjunction with the positive performance by VARTA Consumer and the below-average increase in fixed costs due to the scaling of our business model had a positive impact on the consolidated result, which has risen by 104.9% year on year from € 19.5m to € 39.9m in 2019.

14 HALF-YEAR STATEMENT 2020 VARTA AG

NET ASSETS AND FINANCIAL POSITION

Consolidated statement of financial position as of June 30, 2020 (unaudited, preliminary)

(€ k)

JUNE 30, 2020

DECEMBER 31, 2019

ASSETS

Non-current assets

569,411

288,462

Current assets

452,290

380,368

Total assets

1,021,701

668,830

(€ k)

JUNE 30, 2020

DECEMBER 31, 2019

EQUITY AND LIABILITIES

Equity

452,006

414,802

Non-current liabilities

209,300

88,779

Current liabilities

360,395

165,249

Total Liabilities

569,695

254,028

Equity and total liabilities

1,021,701

668,830

Non-current assets

Non-current assets increased by € 280.9m from € 288.5m in 2019 to € 569.4m in the reporting year. This significant increase mainly resulted from the increase in property, plant and equipment from € 247.9m to

  • 444.5m as of June 30, 2020. Of this figure, around € 64m (provisional figures) was attributable to VARTA Consumer. Production capacities were increased in response to strong demand for rechargeable lithium-ion cells for high-tech consumer products, particularly premium wireless headsets (hearables).

Other assets were essentially unchanged and have increased only marginally from € 17.9m at the end of 2019 to € 18.8m at the end of the second quarter of 2020.

Current assets

Current assets have risen from € 380.4m as of December 31, 2019 to € 452.3m as of June 30, 2020. As a result of the increase in revenue and the first-time consolidation of VARTA Consumer (provisional figures), trade receivables have risen by € 73.0m. In addition, inventories have increased by € 64.8m. The cash outflow from the payment of the provisional purchase price for VARTA Consumer had a contrary effect, leading essentially to the reduction in cash and cash equivalents of € -81.4m. Utilization of the first tranche of a syndicated loan resulted in an increase in cash and cash equivalents of € 40.0m.

Equity/equity ratio

In the first six months, equity increased from € 414.8m as of December 31, 2019 to € 452.0m as of June 30, 2020. At the end of the first half of 2020, the equity ratio stood at 44.2% (December 31, 2019: 62.0%). The acquisition of VARTA Consumer, which above all produced an increase in the debth capital at the level of the VARTA AG Group, was a key factor in the decline in the equity ratio.

HALF-YEAR STATEMENT 2020 VARTA AG

15

Non-current liabilities

Non-current liabilities increased by € 120.5m from € 88.8m on December 31, 2019 to € 209.3m as of June 30, 2020. A key factor in this increase were the assumed pension obligations, lease liabilities and deferred tax liabilities (approximately € 80m) arising from the acquisition of VARTA Consumer. VARTA AG’s utilization of a syndicated loan means that non-current financial liabilities have increased by € 40.0m.

Current liabilities

Current liabilities have increased from € 165.2m to € 360.4m (provisional figures). Of this figure, around € 137m (provisional figure) can be attributed to the acquisition of VARTA Consumer, in which the assumed tax liabilities, lease liabilities, contract assets, trade payables and deferred liabilities are contained. At VARTA AG, customer prepayments totaling € 40.0m led to an increase in current liabilities.

Net working capital

Net working capital has risen from € 18.0m at the end of 2019 to € 73.9m as of June 30, 2020. This corresponds to an increase of € 55.9m in comparison to the previous year. Net working capital has increased by around

  • 57.0m (provisional figures) through the acquisition of VARTA Consumer. Excluding VARTA Consumer, net working capital would actually have fallen by € 1.1m. The net working capital ratio was 18.9% or 6.7% excluding

VARTA Consumer (for comparison: 5.0% as of December 31, 2019).

In comparison with the first quarter of 2020, net working capital declined by € 34.0m, with an advance payment received from a customer having a major impact here.

16 HALF-YEAR STATEMENT 2020 VARTA AG

Statement of cash flows

(IN T€)

Period ended Jun. 30, 2020

Period ended Jun. 30, 2019

Cash and cash equivalents as of January 1, 2020

244,781

149,741

Cash flow from ongoing operating activities

81,555

22,652

Cash flow from investing activities

-207,055

-27,399

Cash flow from financing activities

31,638

98,275

Net change in cash and cash equivalents

-93,862

93,528

The effects of changes in foreign exchange rates

-120

83

Cash and cash equivalents as of June 30, 2020

150,799

243,352

Cash flow from ongoing operating activities amounted to € 81.6m following the first half of 2020 and is therefore

  • 58.9m up on the figure for the previous year. This is primarily attributable to organic growth in operating earnings.

Negative cash flow from investing activities increased significantly in the first six months of 2020 to € 207.1m (previous year: € 27.4m). The increase was, on the one hand, predominantly caused by the acquisition of shares in VARTA Consumer Batteries in the amount of € 81.5m, which resulted from the now final purchase price of

  • 110.9m less the cash holdings acquired of € 29.4m. On the other hand, the increase in cash flow from investing activities was the result of investment in property, plant and equipment to expand production capacity for lithium- ion button cell batteries in response to strong demand. Disbursements for investments in intangible assets and property, plant and equipment (CAPEX) amounted to € 123.7m (previous year € 20.0m).

Cash flow from financing activities decreased in the first six months from € 98.3m in 2019 to € 31.6m in 2020. A capital increase was carried out in 2019, which led to a cash inflow of € 102.1m. The Group also received € 40m in 2020 by drawing a tranche of the existing syndicated loan.

Holdings of cash and cash equivalents have decreased mainly due to an increase in investing activities. As of June 30, 2020, this balance sheet item amounted to € 150.8m (June 30, 2019: € 243.4m).

4 INVESTMENTS EXCLUDING M&A (CAPEX)

The Group refers to investments in intangible and tangible assets as CAPEX. This is an important control variable for high-growth manufacturing companies. In 2019, VARTA AG launched an extensive investment program, which is expected to be implemented in the period from 2019 to 2021. The aim of these investments is to expand capacities in the Microbatteries & Solutions segment substantially.

In the first six months of 2020, capital expenditure on the acquisition of intangible assets and property, plant and equipment totaled € 123.7m (previous year: € 20.0m).

The major part of investment in property, plant and equipment served to expand production capacity of lithium-ion button cells in response to demand. Replacement investment to renew production equipment, to develop new products and for quality assurance measures is also required at regular intervals.

HALF-YEAR STATEMENT 2020 VARTA AG

17

  • SEGMENT EARNINGS

Since the beginning of the year, the company has undertaken a resegmentation of its operating business and combined Healthcare, Entertainment and Power Pack Solutions in the Microbatteries & Solutions segment. The second segment, Household Batteries, comprises the VARTA Consumer Batteries business and energy storage solutions. Both segments have contributed positively to the growth in sales and revenue in the first six months of 2020. In particular, the Microbatteries & Solutions segment continued its very dynamic growth and recorded a further improvement in profitability. By far the strongest growth was again recorded for rechargeable lithium-ion batteries for high-tech consumer products, particularly premium wireless headsets (hearables). The Household Batteries segment also developed better than expected over the course of the first half of the year.

Microbatteries & Solutions

Period ended Jun. 30,

Period ended Jun. 30,

2020

2019

YoY

Sales revenue (K€)

239,680

140,800

70.2%

Adjusted EBITDA (K€)

82,425

35,569

131.7%

Adjusted EBITDA margin (%)

34.4

25.3

9.1 PP

*Previous year’s figures were adjusted to the new segmentation (retrospective pro-forma adjustment)

In the first six months of fiscal year 2020, revenue in the Microbatteries & Solutions segment increased from

  • 140.8m to € 239.7m. This corresponds to very significant sales growth of 70.2% year on year. By far the strongest growth in revenue is still being achieved by rechargeable lithium-ion cells for high tech consumer products, especially for premium wireless headphones (hearables). This is a consequence of unabated high customer demand within a market that continues grow in highly dynamic fashion. Our global market position for hearing aid batteries has been further expanded in a market subject to structural growth. The Group is currently benefiting from its highly resilient business model for primary hearing aid batteries as well as the new business with a leading US retail chain initiated in the prior financial year. The rapid growth in the Power Pack Solutions business continued thanks to the new customer projects started in the last year. Adjusted EBITDA rose from € 35.6m to € 82.4m, which equates to growth of 131.7%. The increased profit is due to strong growth in the comparatively high-margin product groups and the disproportionately low rise in fixed costs due to the scaling of our business model. This resulted in an adjusted EBITDA margin of 34.4% in relation to revenue, which corresponds to an improvement in the adjusted EBITDA margin of 9.1 percentage points in comparison with the prior year.

Household Batteries

Period ended Jun. 30,

Period ended Jun. 30,

2020

2019

YoY

Sales revenue (K€)

150,781

10,346

1,357.4%

Adjusted EBITDA (K€)

19,656

1,666

1,079.8%

Adjusted EBITDA margin (%)

13.0

16.1

-3.1 PP

*Previous year’s figures were adjusted to the new segmentation (retrospective pro-forma adjustment)

The Household Batteries segment comprises the Consumer Batteries and energy storage solutions business. The previous year’s segment reporting reflects business in connection with energy storage solutions only. The first- time consolidation of VARTA Consumer Batteries has resulted in an incredibly sharp increase in revenue and

18 HALF-YEAR STATEMENT 2020 VARTA AG

adjusted EBITDA (revenue: + 1,357.4%; adjusted EBITDA: +1,079.8%). VARTA Consumer Batteries performed better than expected in the reporting period. By focusing on brand business, profitability has improved significantly since we acquired the business. Highly dynamic growth that outpaced the market was recorded for business involving energy storage solutions over the first six months of 2020.

The following table illustrates the reconciliation from the previous segment reporting to the new segment reporting:

Period ended Jun. 30,

Period ended Jun. 30,

(€m)

2020

2019

YOY in%

Microbatteries

Sales revenue

218.6

126.2

73.2%

Adjusted EBITDA

81.3

35.7

127.7%

Adjusted EBITDA-Margin

37.2%

28.3%

8.9 PP

Power & Energy

Sales revenue

33.7

25.0

34.8%

Adjusted EBITDA

2.4

1.5

60.0%

Adjusted EBITDA-Margin

7.1%

6.0%

1.1 PP

Total VARTA without acquisition VARTA Consumer

Sales revenue

252.3

151.5

66.5%

Adjusted EBITDA

83.7

37.2

125.0%

Adjusted EBITDA-Margin

33.2%

24.6%

8.6 PP

Consumer Batteries

Sales revenue

138.4

Adjusted EBITDA

18.4

Adjusted EBITDA-Margin

13.3%

Total VARTA inclusive acquisition VARTA Consumer

Sales revenue

390.7

Adjusted EBITDA

102.1

Adjusted EBITDA-Margin

26.1%

Over the reporting period, the number of employees has risen by 1,948 or 81.4%, increasing from 2,394 to 4,342 staff members as of June 30, 2020. The completed acquisition of VARTA Consumer Batteries added a total of 1,139 employees. In total, 609 additional employees joined the two main production locations in Nördlingen and Ellwangen in order to expand production capacities in the area of lithium-ion cells.

HALF-YEAR STATEMENT 2020 VARTA AG

19

7 GUIDANCE, OPPORTUNITIES AND RISK REPORT

The interim management report on the first half-year does not contain any comprehensive and complete statement on the guidance, opportunities and risk report. These notes should therefore be read in conjunction with the consolidated annual financial statements published as of December 31, 2019.

The risk management system as a whole is evaluated at Group level and focuses on strategic, operating, financial and other risks. In this process, the risks are categorized as low, medium or high according to the net loss potential.

The Chief Financial Officer (CFO) bears responsibility for managing all opportunities and risks, which is an integral part of corporate governance. Based on the assessment of the Executive Board, the risks are still considered manageable as of the publication date. There continues to be no discernible individual risks that may endanger the existence of the company. At the same time, there is also a firm conviction that the VARTA AG Group remains well-placed strategically and financially to exploit all opportunities that arise.

A comprehensive review of the risk situation was carried out as of June 30, 2020.

There were no material changes in the area of operating, strategic, financial and default risks compared with December 31, 2019. The opportunities and risks that pose a threat to the company’s continuing existence were updated, as scheduled, on June 30, 2020.

8 OUTLOOK

Following the very impressive revenue and income growth over the course of the first half of 2020 and the continued high order volume, the Company is revising its guidance for revenue and income in fiscal year 2020.

On account of the continuing very high demand for lithium-ion batteries (CoinPower), VARTA is expanding production capacities for lithium-ion cells from the current level of 200 million cells per year to 300 million cells per year by the end of 2021. To this end, the Company is planning for an additional investment volume of around

  • 175m. The expansion plans mainly relate to the production facility in Nördlingen/Germany and involve the construction of a new building adjacent to the existing production facility. Here, a new generation of production facilities will be installed for the first time. These are set to increase the speed of manufacturing processes while at the same time reducing investment costs. This will allow VARTA to react quickly and flexibly to rising demand.

The structural growth of core markets, what we regard as our strong market position in core markets and continuing massive investment in the expansion of production capacity will lead to positive business development in 2020 and the years to come. This outlook is based on the assumption of constant exchange rates.

In view of the global spread of the coronavirus (COVID-19), negative impacts on the VARTA AG Group can still not be ruled out. This could impact our ability to produce at our sites, our ability to transport to our customers and also lead to problems with our suppliers. The fact that our customers may not be able to purchase products from us at times because of their own production being disrupted cannot be ruled out either. These risks were not

20 HALF-YEAR STATEMENT 2020 VARTA AG

assessable at the time that these financial statements were prepared and could not therefore be taken into consideration in the Group’s planning.

VARTA AG Group

Group revenue of between € 810m and € 830m (previously € 780m and € 800m) is expected. This corresponds to revenue growth of between 123% and 129% in comparison with the previous year (including VARTA Consumer). Organic revenue growth, excluding VARTA Consumer, will stand at between 47% and 53%.

Adjusted Group EBITDA for 2020 will be in a corridor between € 210m and € 215m (previously € 175m and

  • 185m) and will therefore increase by 115% to 121% compared with the previous year (including VARTA Consumer). Adjusted EBITDA is adjusted for special effects: the Executive Board defined as special effects (where applicable) costs related to a capital increase, impacts on the profit and loss account resulting from the reimbursement claim from an assumption of debt in connection with pension obligations, effects from the share- based remuneration scheme, disposal effects from sale and lease-back transactions, potential restructuring costs and expenses in connection with M&A transactions as well as non-cash effects from the purchase price allocation (PPA).

Due to the unabated very high demand for lithium-ion batteries (CoinPower), production capacities are being further massively expanded. For the planned expansion of production capacities from the current level of 200 million cells per year to 300 million cells per year by the end of 2021, the Company is increasing its CAPEX guidance – i.e. payments made to purchase intangible assets and property, plant and equipment – for 2020 from the previous level of between € 300m and € 330m to between € 320m and € 360m.

Microbatteries & Solutions segment

In the hearing aid batteries business, the company intends to further consolidate what it regards as its market- leading position in a market subject to structural growth. Due to strong demand for lithium-ion batteries for wireless headsets, the company plans to carry out a huge production capacity expansion in the Entertainment & Industrial area; this will constitute the largest growth potential in the Microbatteries & Solutions segment. There is an assumption of very significant, namely double-digit, revenue growth in the Microbatteries & Solutions segment for financial year 2020. As a result of the further scaling of our business model, we also expect to see a significant rise in adjusted EBITDA, which is set to experience further above-average growth in relation to sales.

Household Batteries segment

Very significant growth is expected for stationary energy storage solutions, in line with market growth at the very least. The VARTA Consumer business acquired will provide additional revenue of approximately € 300m in financial year 2020. An EBITDA margin in the low double-digits is expected for financial year 2020.

HALF-YEAR STATEMENT 2020 VARTA AG

21

Our long-standing experience over many years in the battery business is factored into the opportunity and risk forecasts mapping further business development. This report contains information and forecasts that refer to the company’s future development. However, it must be noted that actual results may vary greatly from the expectations surrounding the projected developments.

Ellwangen, August 13, 2020

VARTA Aktiengesellschaft

Chief Executive Officer (CEO)

Chief Financial Officer (CFO)

– Herbert Schein –

– Steffen Munz –

22 HALF-YEAR STATEMENT 2020 VARTA AG

HALF-YEAR FINANCIAL REPORT

VARTA AG group as of June 30, 2020

Consolidated statement of financial position as of January 1, to June 30, 2020 (unaudited, preliminary) VARTA Aktiengesellschaft, Ellwangen (Jagst)

(€k)

JUNE 30, 2020

DECEMBER 31, 2019

ASSETS

Property, plant and equipment

444,535

247,896

Intangible assets

93,385

20,783

Long-term investments and other participations recognized in the

74

55

balance sheet under the equity method

Other financial assets

333

548

Deferred tax assets

12,323

1,271

Other assets

18,761

17,909

Non-current assets

569,411

288,462

Inventories

128,836

63,995

Contract assets

6,972

2,032

Trade receivables

124,933

51,966

Other financial assets

189

0

Tax refund claims

1,254

216

Other assets

39,307

17,378

Cash and cash equivalents

150,799

244,781

Current assets

452,290

380,368

Total assets

1,021,701

668,830

HALF-YEAR STATEMENT 2020 VARTA AG

23

(€k)

JUNE 30, 2020

DECEMBER 31, 2019

EQUITY AND LIABILITIES

Subscribed capital

40,422

40,422

Capital reserve

251,118

250,619

Retained earnings

118,444

68,700

Net income

39,833

50,390

Other reserves

1,917

4,456

Equity of the VARTA AG Group

451,734

414,587

Non-controlling interests

272

215

Total Equity

452,006

414,802

Lease liabilities

45,066

20,476

Other financial liabilities

46,305

2,832

Provisions for employee benefits

69,607

27,241

Advance payments received

23,541

34,296

Other liabilities

78

95

Deferred tax liabilities

18,847

0

Other provisions

5,391

3,839

Accruals

465

0

Non-current liabilities

209,300

88,779

Tax liabilities

51,900

14,325

Lease liabilities

11,688

4,603

Other financial liabilities

6,202

4,058

Provisions for employee benefits

2,101

1,195

Contract liabilities

38,964

11,198

Trade payables and advance payments received

147,847

88,807

Other liabilities

34,603

20,025

Other provisions

24,189

4,407

Accruals

42,901

16,631

Current liabilities

360,395

165,249

Liabilities

569,695

254,028

Equity and total liabilities

1,021,701

668,830

24 HALF-YEAR STATEMENT 2020 VARTA AG

Consolidated income statement for the period 01/01-06/30/2020 (unaudited)

VARTA Aktiengesellschaft, Ellwangen (Jagst)

Period ended Jun. 30,

Period ended Jun. 30,

(€k)

2020

2019

Sales revenue

390,678

151,517

Increase in finished and unfinished goods

8,287

3,506

Own work capitalized

2,579

8,330

Other operating income

20,424

3,685

Cost of materials

-158,865

-57,928

Personnel expenses

-124,595

-52,520

Other operating expenses

-57,060

-20,740

EBITDA

Depreciation and amortization

81,448

-22,898

35,850

-8,059

Operating earnings (EBIT)

Financial income

Financial expenses

Sundry financial income

Sundry financial expenses

58,550

208

-1,322

794

-1,625

27,791

128

-390

40

-459

Financial result

Profit and loss shares in companies recognized in the balance sheet under the equity method, after taxes

Earnings before taxes

Income tax expenses

-1,945

0

56,605

-16,715

-681

-6

27,104

-7,633

Consolidated result

39,890

19,471

Appropriation of profit:

Shareholders of VARTA AG

39,833

19,149

Non-controlling interests

57

322

HALF-YEAR STATEMENT 2020 VARTA AG

25

Consolidated statement of comprehensive income for the period 01/01-06/30/2020 (unaudited) VARTA Aktiengesellschaft, Ellwangen (Jagst)

Period ended Jun. 30,

Period ended Jun. 30,

(€k)

2020

2019

Consolidated result

39,890

19,471

Items that will not be reclassified under profit or loss

Revaluation of the net defined benefit liability

-1,774

-2,815

Revaluation of the reimbursement claim

914

2,195

Related tax

214

177

-646

-443

Items that were reclassified or may be reclassified later under profit or loss

Currency translation differences

-2,647

151

Result of fair value changes in cash flow hedges

154

-341

Related tax

-46

-1

-2,539

-191

Other comprehensive income for the period, net of tax

-3,185

-634

Comprehensive income

36,705

18,837

Profit attributable to:

Shareholders of VARTA AG

36,648

18,514

Non-controlling interests

57

323

Earnings per share (€)

Period ended Jun. 30,

Period ended Jun. 30,

2020

2019

Basic earnings per share

0.99

0.50

Diluted earnings per share

0.99

0.50

26 HALF-YEAR STATEMENT 2020 VARTA AG

Consolidated statement of cash flows for the period 01/01-06/30/2020 (unaudited)

VARTA Aktiengesellschaft, Ellwangen (Jagst)

Period ended Jun. 30,

Period ended Jun. 30,

(€k)

2020

2019

Cash flow from ongoing operating activities

Earnings before taxes

56,605

27,104

Net financial result less sundry financial expense/sundry financial income

1,114

262

Results from at equity measurement

0

6

Depreciation and amortization

22,898

8,059

Gains and losses from the sale of property, plant and equipment and intangible

52

-26

assets

Other non-cash income and expenses

3,549

-2,929

Change in working capital

Inventories

-14,060

-10,411

Trade receivables and other current assets

10,817

-8,091

Trade payables and other current and non-current liabilities

-371

11,167

Provisions and liabilities from pensions

13,262

5,053

Income tax paid

-12,311

-7,542

Cash flow from ongoing operating activities

81,555

22,652

Cash flow from investing activities

Capital expenditure on the acquisition of intangible and tangible assets

-123,658

-20,026

Own work capitalized

-2,579

-8,330

Cash receipts from the sale of intangible and tangible assets

486

1,029

Payments from raising loans

-151

-238

Investment in investments

-81,355

0

Receipts from the repayment of loans

0

40

Interest received

202

126

Cash flow from investing activities

-207,055

-27,399

Cash flow from financing activities

Receipts from capital measures

0

102,120

Assumption of financial liabilities

41,342

0

Repayments of current financial liabilities

-8,918

-3,798

Interest paid

-786

-47

Cash flow from financing activities

31,638

98,275

Net change in cash and cash equivalents

-93,862

93,528

Cash and cash equivalents as of January 1

244,781

149,741

The effects of changes in foreign exchange rates

-120

83

Cash and cash equivalents as of June 30, 2020

150,799

243,352

HALF-YEAR STATEMENT 2020 VARTA AG

27

Consolidated statement of changes in equity (unaudited)

VARTA Aktiengesellschaft, Ellwangen (Jagst)

OTHER RESERVES

NON-

SUBSCRIBED

CAPITAL

RETAINED

CURRENCY

HEDGING

CONTROLLING

(€k)

CAPITAL

RESERVE

EARNINGS

DIFFERENCES

RESERVE

INTERESTS

TOTAL EQUITY

As of January 1, 2019

38,200

149,374

66,887

3,924

-389

1,426

259,422

Effect of share-based payment

0

1,184

0

0

0

0

1,184

Capital increase

2,222

101,531

0

0

0

0

103,753

Transaction costs from capital increase

0

-1,157

0

0

0

0

-1,157

Comprehensive income

Profit/loss for the year

0

0

19,149

0

0

322

19,471

Other comprehensive income

0

0

-444

150

-342

2

-634

Comprehensive income

0

0

18,705

150

-342

324

18,837

As of December 31, 2019

40,422

250,932

85,592

4,074

-731

1,750

382,039

OTHER RESERVES

NON-

SUBSCRIBED

CAPITAL

RETAINED

CURRENCY

HEDGING

CONTROLLING

CAPITAL

RESERVE

EARNINGS

DIFFERENCES

RESERVE

INTERESTS

TOTAL EQUITY

As of January 1, 2020

40,422

250,619

119,090

4,459

-3

215

414,802

Effect of share-based payment

0

499

0

0

0

0

499

Comprehensive income

Profit/loss for the year

0

0

39,833

0

0

57

39,890

Other comprehensive income

0

0

-646

-2,647

108

0

-3,185

Comprehensive income

0

0

39,187

-2,647

108

57

36,705

As of June 30, 2020

40,422

251,118

158,277

1,812

105

272

452,006

28 HALF-YEAR STATEMENT 2020 VARTA AG

Interim Consolidated financial statements 2020 of VARTA AG

as of June 30, 2020

9 GENERAL INFORMATION

VARTA Aktiengesellschaft (VARTA AG) is a company headquartered in Ellwangen (Jagst), Germany, registered in the Commercial Register of the Ulm District Court, Germany, under HRB 728059. The company’s present condensed consolidated interim financial statements comprise the company and its subsidiaries (collectively, “VARTA AG Group“). The reporting date for these interim financial statements for VARTA AG, all subsidiaries and for the consolidated accounts is June 30, 2020. The Group’s interim financial statements are presented in euro, which is the company’s functional currency. All financial information presented in euro was, unless specified otherwise, rounded up to the next thousand. The interim financial statements were prepared in compliance with the International Financial Reporting Standards (IFRS), as adopted by the EU.

The business activities of VARTA AG, which it conducts through its operating subsidiaries, comprise production, sales, research and development split, into two business segments: “Microbatteries & Solutions” and “Household Batteries”. The VARTA AG Group is a globally operating international company with over 130 years of experience.

The VARTA AG is headquartered in Ellwangen, VARTA-Platz 1, Germany. The ultimate parent company of VARTA AG is Montana Tech Components AG, subsequently referred to as “MTC” (Reinach, Switzerland).

The shares of VARTA AG are traded on the regulated market under the securities identification number (SIN) A0TGJ5, the international securities identification number (ISIN) DE000A0TGJ55 and the ticker symbol “VAR1”. VARTA has also been listed in the MDAX and in the TecDAX since December 23, 2019.

HALF-YEAR STATEMENT 2020 VARTA AG

29

10 CHANGES IN THE SCOPE OF CONSOLIDATION

In fiscal year 2020, the scope of consolidation changed as follows:

JUNE 30, 2020

JUNE 30, 2019

FULL

EQUITY

FULL

EQUITY

CONSOLIDATION

CONSOLIDATION

CONSOLIDATION

CONSOLIDATION

As of January 1

12

1

12

2

Disposals from the scope of consolidation

0

0

0

-1

Start-Up

1

0

0

0

Acquisition

30

0

0

0

As of June 30

43

1

12

1

Start-ups

VARTA Consumer Hungaria Kft.

VARTA Consumer Hungaria Kft. was established as a subsidiary of VARTA Consumer Batteries Benelux B.V. on May 15, 2020. The company, which is based in Budapest, was registered in the Commercial Register under the number 01-09-358466.The object of the company is trade in electronics and parts for telecommunication.

Business combinations

VARTA Consumer Batteries

On January 2, 2020, the Group acquired 100% of the shares and voting rights in the following companies:

  • VARTA Consumer Batteries Benelux B.V. (Netherlands), with the (direct and indirect) subsidiaries (100% in each case)
    o Spectrum Brands Europe GmbH (Germany) o ROV German Limited GmbH (Germany)
    o ROV German General Partner GmbH (Germany)
    o VARTA Consumer Batteries GmbH & Co. KGaA (Germany) o Anabasis Handelsgesellschaft GmbH (Germany)
    o VARTA Consumer Batteries Italia S.r.l. (Italy) o VARTA Pilleri Ticaret Ltd. Sirketi (Turkey)
    o Spectrum Brands Czech spol. s.r.o. (Czech Republic) o Spectrum Brands Denmark NS (Denmark)
    o Spectrum Brands France S.A.S. (France) o Spectrum Brands Finland Oy (Finland) o Spectrum Brands Norway AS (Norway) o Spectrum Brands Austria GmbH (Austria) o Spectrum Brands Hrvatska d.o.o. (Croatia)
    o Spectrum Brands Bulgaria EOOD (Bulgaria) o Spectrum Brands Trgovina d.o.o. (Slovenia)
    o Spectrum Brands Slovakia spol. S.r.o. (Slovakia)

30 HALF-YEAR STATEMENT 2020 VARTA AG

    • Spectrum Brands Schweiz GmbH (Switzerland)
    • SPB Sweden AB (Sweden)
    • EMEA Consumer Batteries (Shenzhen) Co. Ltd. (China)
  • VARTA Consumer Batteries Poland Sp. z o.o. (Poland)
  • Limited Liability Company Consumer Batteries Company (Eastern Europe) (Russia)
  • VARTA Consumer Batteries Iberia. S.L.U. (Spain)
  • Varta Consumer Batteries UK Ltd (UK)
  • Energizer Real Estate Holdings, LLC (USA), with its subsidiary (100%)
    • Paula GmbH & Co. KG (Germany)

Following approval, subject to conditions regarding the hearing aid battery business, from the European Commission on December 3, 2019, the purchase agreement covering the shares in the companies listed above dated May 29, 2019 came into effect on January 2, 2020 when all conditions were met. The conditions have no material effects on the existing hearing aid battery business of VARTA AG.

Together, the companies acquired form the “VARTA Consumer Batteries” business unit. VARTA Consumer Batteries is one of Europe’s leading manufacturers of consumer device batteries and has established itself as the market leader in many European countries. The basis for the successful business development of VARTA Consumer Batteries is provided by the strong European distribution network featuring a large number of local companies as well as long-standing customer relationships with virtually all European key retailers. The product portfolio includes batteries, rechargeable batteries, chargers, power banks and lights. VARTA Consumer Batteries has sales companies in over 20 countries.

The acquisition of VARTA Consumer Batteries has allowed VARTA AG to include device batteries for end consumers in its product portfolio. Through the acquisition, the Group will obtain even better access to the attractive retail sales channels that it has so far not been able to effectively penetrate. With this merger, the global VARTA trademark rights for devices and microbatteries as well as energy storage systems will once again be combined under the umbrella of VARTA AG. This will reinforce the brand image of VARTA products across all segments.

The consideration and the consolidated acquisition balance sheet of the acquired business unit were determined unanimously by the seller and the purchaser on January 1, 2020; there were no relevant transactions between January 1 and January 2, 2020.

a) Consideration transferred

The fair value of the consideration applicable on the date of the acquisition is shown below:

(€k)

JANUARY 1, 2020

Cash and cash equivalents (given at closing)

Reimbursement of cash and cash equivalents (expected adjustment to the purchase price from the SPA adjustment mechanism)

Recording asset for tax compensation (Idemnification Asset)

Total consideration transferred

131,122

-20,220

-5,219

105,683

HALF-YEAR STATEMENT 2020 VARTA AG

31

At closing, VARTA AG paid a preliminary purchase price, which was set on the basis of the balance sheet data of the VARTA Consumer Batteries business unit as of October 2019. The share purchase agreement provided for adjustments based on the acquisition balance sheet, which led to some of the purchase price being reimbursed.

The share purchase agreement provides for warranties in the event of the companies acquired having to pay income taxes for periods up to the acquisition date. After determining the purchase price in accordance with the contract, the Group provided for income taxes for past periods in the amount of utilization currently expected of

  • 5,218k and recognized a matching asset of the same amount for the tax compensation from the contractual warranty. The asset is considered recoverable on the basis of the contractual agreement and the seller’s creditworthiness.

b) Costs associated with the business combination

Costs of € 3,731k for due diligence, legal, bank and notary’s fees were incurred in the consolidated financial statements for fiscal year 2019 in connection with the business combination. Of this figure, € 3,071k was recorded in other operating expenses and € 660k in financial expenses in the previous year’s income statement.

In the interim financial statements for the current fiscal year 2020, costs of € 1,147k were incurred in connection with the business combination. These costs were recognized in other operating expenses.

32 HALF-YEAR STATEMENT 2020 VARTA AG

c) Identifiable assets acquired and liabilities assumed

The amounts recognized for the main groups of assets acquired and liabilities assumed at the acquisition date are summarized below:

(€k)

Intangible assets

Property, plant and equipment

Financial assets

Other non-current assets

Deferred tax assets

Inventories

Trade receivables

Contract assets (IFRS 15)

Tax refund claims

Other current assets

Cash and cash equivalents

Deferred tax liabilities

Other financial liabilities

Provisions for employee benefits

Other provisions

Trade payables

Contract liabilities (IFRS 15)

Tax liabilities

Other liabilities

Total identified net assets acquired

JANUARY 1, 2020

70,540

64,558

50

18

10,544

51,108

90,394

1,594

793

20,719

29,408

-23,746

-32,985

-41,073

-30,966

-31,824

-29,636

-27,667

-19,502

102,327

Trade receivables comprised gross amounts of contractual receivables of € 93,446k, of which € 3,052k were estimated to be probably unrecoverable at the acquisition date.

As part of the due diligence investigations for the acquisition, it emerged that existing agreements covering the provision of services by the VARTA Consumer Batteries segment for the seller in the areas of sales, marketing and administration would no longer be continued after the transaction, having been terminated by the seller, and in this respect, material overheads of the VARTA Consumer Batteries segment could no longer be covered. As part of detailed investigations, the impact from this was established with regard to operating earnings. At the same time, corresponding analyses of the restructuring of the functions affected were prepared to minimize the impact on operating earnings and ensure it is as brief as possible. Both the impact on operating earnings and the expected restructuring expenses were taken into account to reduce the purchase price.

In connection with this, VARTA AG adopted a restructuring plan immediately after the acquisition date, which will be implemented in 2020. The expenses for implementing the restructuring plan are currently estimated at around

  • 25.000k. Since the requirements for a restructuring provision were only met after the acquisition date, the identifiable net assets do not include a restructuring provision.

HALF-YEAR STATEMENT 2020 VARTA AG

33

Preliminary measured assets:

The amounts for the identifiable intangible assets of VARTA Consumer Batteries (trademarks, patented and patent-less technology, contractual and non-contractual customer relationships) are still preliminary since the work for the independently executed allocation of the purchase price was not yet complete at the time the interim financial statements were approved for publication.

The amounts for property, plant and equipment are still preliminary since the independently executed remeasurement of leases in accordance with IFRS 16 is not yet completed. The independently executed measurement of in-house property, plant and equipment is not yet final either.

The amounts for inventories are still preliminary, since the mark-downs for the costs still required for completion or sale and the appropriate profit surcharges on the still outstanding costs have not been finally determined.

The present acquisition balance sheet is based on unaudited consolidated data for the VARTA Consumer Batteries segment, which was originally prepared according to US-GAAP and converted in accordance with IFRS. It is possible that there will be adjustments or reclassifications in accordance with IFRS or audit adjustments as part of the audit of individual balance sheet items.

d) Goodwill

The preliminary goodwill resulting from the acquisition was recognized as follows:

(€k)

Consideration transferred

Fair value of the identifiable net assets

Goodwill

JANUARY 1, 2020

105,683

-102,327

3,356

Goodwill results primarily from sales synergies created by access for VARTA AG products to retail sales channels and the skills of workforce. Goodwill is not expected to be tax deductible.

e) Contributions to revenue and financial results

The segment acquired contributed revenue of € 138,350k and a loss of € 5,916k to the Group’s results between January 1 and June 30, 2020. The loss is due to depreciation and amortization on supplementary PPA (Purchase price allocation) amounts as well as restructuring costs incurred as part of the restructuring plan.

34 HALF-YEAR STATEMENT 2020 VARTA AG

Mezzanin Finanzierungs GmbH

On April 2, 2020, the Group acquired 100% of the shares and voting rights in Mezzanin Finanzierungs GmbH, Vienna/Austria. In turn, Mezzanin Finanzierungs GmbH holds 80% of the shares and voting rights in CONNEXIO alternative investment holding GmbH (formerly Connexio alternative investment holding AG), Vienna/Austria. At the date of acquisition, the Group already held 20% of the shares in CONNEXIO alternative investment holding GmbH. Mezzanin Finanzierungs GmbH also holds 100% of the shares in VAMI-SK neunzehn GmbH, Graz/Austria.

With the acquisition of the shares, the Group has obtained control over Mezzanin Finanzierungs GmbH, CONNEXIO alternative investment holding GmbH and VAMI-SK neunzehn GmbH.

Considered on an isolated basis, the companies acquired do not constitute a business within the meaning of IFRS 3, since they are legal shells with no input of resources, processes and services. In this respect, this acquisition is not, from an independent perspective, a business combination but an acquisition of assets (IFRS 3.3).

However, the acquisition is directly associated with the acquisition of 82.26% of the shares in VARTA Micro Innovation GmbH, Graz/Austria, which took place after the reporting date (see the section on events after the reporting date below for more details). The stages of the transaction and the draft agreements envisaged for the various share acquisitions were specified in a master agreement on March 30, 2020. Since these are linked transactions, the acquisitions as a whole must be viewed as a business combination. The transaction carried out in the current reporting period covers a part of the business combination.

Because of the contractual measures under company law and the code of obligations agreed in advance at VARTA Micro Innovation GmbH and the resulting chronology of the individual transactions, the acquisition of Mezzanin Finanzierungs GmbH, CONNEXIO alternative investment holding GmbH as well as VAMI-SK neunzehn GmbH took place in the second quarter and the acquisition of VARTA Micro Innovation GmbH will take place in the third quarter of fiscal year 2020. The existing share of 20% in CONNEXIO alternative investment holding GmbH is part of a step-by-step acquisition.

Synergies in the form of tax loss carry forwards resulted from the partial acquisition in the second quarter, which are earmarked for subsequent use by the Group.

a) Consideration transferred

The fair value of the consideration applicable on the date of the acquisition is shown below:

(€k)

JANUARY 1, 2020

Cash and cash equivalents (given at closing)

345

Fair value of the 20% equity interest in CONNEXIO alternative investment holding GmbH

86

Total consideration transferred

431

The profit arising from the remeasurement of the existing 20% share in CONNEXIO alternative investment holding

GmbH came to € 86k and was included in other operating income.

HALF-YEAR STATEMENT 2020 VARTA AG

35

b) Costs associated with the acquisition

Costs of € 138k for legal, consulting and notary’s fees were incurred in the Group in connection with the acquisition, which were recognized in other operating expenses.

The costs also contain preparatory costs for the subsequent stages of the transaction, which are not yet depicted in the present interim financial statements; any allocation to the present acquisition and the acquisition after the reporting date would only be possible on a notional basis given the overall context.

c) Identifiable assets acquired and liabilities assumed

The amounts recognized for the main groups of assets acquired and liabilities assumed at the acquisition date are summarized below:

(€k)

Property, plant and equipment

Other current assets

Cash and cash equivalents

Deferred tax assets

Other provisions

Trade payables

Other liabilities

Total identifiable net assets acquired

Other current assets contained value added tax receivables at fair value.

APRIL 2, 2020

59

1

80

310

-15

-2

-2

431

Given that the present transaction involved the acquisition of individual assets and not the acquisition of a

business, no goodwill was generated.

Preliminary measured assets:

  • The amounts recognized for the deferred tax assets are preliminary and will be reviewed again as part of the overall transaction.
  • The present acquisition balance sheet is based on the unaudited consolidated data for the companies acquired according to Austrian commercial law. It is therefore possible that there will be adjustments or reclassifications in accordance with IFRS or audit adjustments as part of the analysis of individual balance sheet items.

d) Contributions to revenue and financial results

The companies acquired contributed revenue of € 0k and a loss of € 52k to the Group’s results between April 2

and June 30, 2020.

If the acquisition of Mezzanin Finanzierungs GmbH and its subsidiaries had already taken place on January 1,

2020, consolidated revenue of € 390,678k and a consolidated post-tax profit of € 39,822k would have been

generated in the Group’s income statement.

36 HALF-YEAR STATEMENT 2020 VARTA AG

The companies included in the scope of consolidation are listed in Chapter 42 “Investment Companies” of these notes to the interim consolidated financial statements.

11 NOTES EXPLAINING THE CONSOLIDATED ACCOUNTING PRINCIPLES

11.1 DECLARATION OF COMPLIANCE

The interim consolidated financial statements as of June 30, 2020 were prepared in compliance with the principles of the International Financial Reporting Standards, Interim Financial Reporting (IAS 34). The condensed consolidated interim financial statements were prepared on the basis of all IAS / IFRS published by the International Accounting Standards Board (IASB) that were applicable on the reporting date as well as all interpretations (IFRIC / SIC) drawn up by the International Financial Reporting Interpretations Committee and the Standing Interpretations Committee, provided these have been adopted by the European Union through the endorsement process. The present interim report does not contain all the disclosures in the notes that are usually included in annual financial statements. This report must therefore be read in conjunction with the consolidated financial statements prepared as of December 31, 2019.

Use was made of the option of preparing condensed interim financial statements. All obligatory interpretations of the International Financial Reporting Interpretations Committee (IFRIC) as of June 30, 2020 were applied. This interim report is also consistent with the German Accounting Standard 16 (DRS 16 Interim Financial Reporting) of the Deutsche Rechnungslegungs Standard Committee e.V. (DRSC).

Given the absence of any obligation to audit the interim financial statements, the interim report was not subjected to an audit or a review by an auditor.

11.2 GOING CONCERN

In compliance with IAS 1.25, the interim consolidated financial statements were prepared on the assumption that the company is a going concern.

11.3 CONSOLIDATION PRINCIPLES

The scope of consolidation comprises all companies which VARTA AG controls, either directly or indirectly. Control is deemed to exist if VARTA AG holds the majority of voting rights (including potential voting rights) or can determine the financial and business policy directly or indirectly on the basis of a controlling position and can therefore benefit from the business activity. These companies are fully consolidated. Subsidiaries are consolidated for the first time when control is acquired. Subsidiaries are deconsolidated when control ends.

Intragroup gains and losses, expenses and income as well as receivables and liabilities between consolidated companies are eliminated.

Joint ventures in which VARTA AG holds 50% directly or indirectly or for which management responsibility is performed equally are accounted for in accordance with the equity method, as specified in IAS 28.

The consolidated companies are presented in a table under Chapter 42 “Investment Companies” of these notes to the interim consolidated financial statements.

11.4 ACCOUNTING AND MEASUREMENT POLICIES

The same accounting and measurement policies were applied to the condensed interim consolidated financial statements as were applied to the consolidated financial statements as of December 31, 2019. A detailed

HALF-YEAR STATEMENT 2020 VARTA AG

37

description of these policies is included in the consolidated financial statements as of December 31, 2019. Changes that result from the first-time application/amendment of new standards are presented in the notes.

11.5 FUNCTIONAL AND PRESENTATIONAL CURRENCY

The Group currency is the euro. Unless indicated otherwise, all amounts are given in thousand euro (€k).

Please note that rounding may result in differences compared with the mathematically precise figures calculated (monetary units, percentages etc.).

12 KEY ACCOUNTING AND MEASUREMENT POLICIES

12.1 CURRENCY TRANSLATION

The exchange rates used for foreign currency translation that have a significant impact on the interim consolidated financial statements are as follows:

1 EURO EQUALS

AVERATE RATE

REPORTING DATE RATE

DECEMBER

JUNE 30, 2020

JUNE 30, 2019

JUNE 30, 2020

31, 2019

US dollar (USD)

1.1020

1.1298

1.1198

1.1234

Polish zloty (PLN)

4.4120

4.4560

Russian rubels (RUB)

76.6692

79.6300

Turkish lira (TRY)

7.1492

7.6761

The Chinese yuan (CNY), pound sterling (GBP), Norwegian krone (NOK), Hungarian forint (HUF), Swiss franc (CHF), Swedish krone (SEK), Croatian kuna (HRK), Bulgarian lev (BGN), Czech koruna (CZK), Danish krone (DKK) and Romanian leu (RON) also affect the interim consolidated financial statements but the effect is not significant for the VARTA AG Group.

12.2 CHANGES TO ACCOUNTING STANDARDS

Accounting standards applied for the first time in 2020

The effects of the new accounting policies applied from January 1, 2020 are disclosed below. They have resulted in no significant effects for the Group.

Changes to the accounting framework

The new framework contains revised definitions of assets and liabilities as well as new guidelines on measurement and derecognition, presentation and disclosures. The new framework does not constitute a fundamental revision of the document, as originally intended, when the project started in 2004. Rather, the IASB restricted itself to those topics that were previously unregulated or which have discernible weaknesses which had to be remedied. The revised framework is not subject to the endorsement process.

Together with the revised concept, the IASB has also issued changes to references to the framework in some standards. These include changes to IFRS 2, IFRS 3, IFRS 6, IFRS 14, IAS 1, IAS 8, IAS 34, IAS 37, IAS 38, IFRIC 12, IFRIC 19, IFRIC 20, IFRIC 22 and SIC -32. The changes to the standards as a consequence of the publication of the new framework are subject to the endorsement process.

38 HALF-YEAR STATEMENT 2020 VARTA AG

IFRS 3 Business Combinations

The narrowly defined changes to IFRS 3 aim to solve the problems that arise when a company determines whether it has acquired a business or a group of assets. The problems arise from the fact that the accounting provisions for goodwill, acquisition costs and deferred taxes when acquiring a business are unlike those when acquiring a group of assets.

Amendments associated with the IBOR reform

The amendments to IFRS 9, IAS 39 and IFRS 7 are expected to mitigate the effects of the reform of reference interest rates (known as the IBOR reform) on financial reporting. The amendments aim to ensure that hedging relationships in the balance sheet (hedge accounting) can remain in place or continue to be designated despite the uncertainties associated with the anticipated replacement of various reference interest rates.

Amendments to IAS 1/IAS 8 – Amendments in relation to the definition of “material”

The amendments create a more uniform and more precisely delineated definition of the materiality of information in financial statements in IFRS and supplement it with accompanying examples. In this context, the definitions from the framework concept, IAS 1, IAS 8 and the IFRS Practice Statement 2 Making Materiality Judgments are harmonized.

12.3 NEW AND AMENDED IFRS STANDARDS AFTER JUNE 30, 2020

The following new and revised standards and interpretations have been agreed, but will not come into force until later and were not applied prematurely in the present consolidated financial statements. The company does not plan to apply them prematurely either. Unless specified otherwise below, the effects are currently being investigated.

New or amended standards and interpretations

ENACTMENT

Not yet adopted in EU law:

Standards:

IFRS 17

Insurance contracts

January 1, 2021

Amendments:

IAS 1

Amendments classification of liabilities as current or non-current

January 1, 2022

IFRS 10/ IAS 28 Sale or contribution of assets between an investor and an associate or joint venture

uncertain

Application of the following innovations and amendments published by the IASB is not yet mandatory and VARTA AG has not yet applied them to date either. The Group currently assumes that they will have no material effects on the consolidated financial statements.

IFRS 17 – Insurance Contracts

The standard regulates accounting for insurance contracts. IFRS 17 replaces the previously valid transitional standard IFRS 4. The scope covers insurance contracts, reinsurance contracts and investment contracts with discretionary participation features. Under IFRS 17, insurance contracts are measured in principle according to the general model. The fulfillment value and contractual service margin are determined for a group of insurance contracts when it is recognized for the first time. Depending on the scope of changes to the underlying parameters, either the actuarial result or actuarial financial income/expenses will be affected in the subsequent measurement or the contractual service margin may be adjusted first, which will only affect the income statement in subsequent periods.

HALF-YEAR STATEMENT 2020 VARTA AG

39

Changes to IAS 1 – Changes to the Classification of Liabilities as Current or Non-Current

The changes introduced a more generally accepted approach to the IFRS for the classification of liabilities, which is based on contractual agreements applicable as at the reporting date. The changes only relate to the recognition of liabilities in the presentation of the financial position – not the amount or date of recognition of assets, liabilities, income or expenses or the disclosures which companies provide about these items.

IFRS 10/IAS 28 – Sale or contribution of assets between an investor and an associate or joint venture

The changes react to a conflict in the existing guidelines and the resulting diversity in practice. If a parent company loses control of a subsidiary in a transaction with an associate or a joint venture (JV), there is a conflict between the existing guidelines on consolidation and on accounting in accordance with the equity method. According to the consolidation standard, the parent company recognizes the entire profit from the loss of control. However, according to the standard for associates and JVs, the parent company only recognizes the profit in the amount of the shares of non-affiliated investors in the associate or JV. In response to this conflict and the different practices resulting from this circumstance, the IASB published Sales or contributions of assets between an investor and an associate or joint venture (amendments to IFRS 10 and IAS 28) on September 11, 2014. The date for these changes to come into effect has now been postponed until a more comprehensive review is completed.

13 SEGMENT REPORTING

The accounting and measurement policies for the segment reporting are based on the IFRS used in the present consolidated financial statements. The Executive Board uses adjusted EBITDA for management purposes, as it allows it to assess operating performance despite increasing investment in property, plant and equipment and the resulting depreciation. Shares of profits or losses of companies included in the consolidated financial statements under the equity method are not included in segment reporting as they are not a component of reported EBIT and adjusted EBITDA and are not regularly reported to the management board otherwise.

The elimination of intra-Group interrelations between the segments is combined in the reconciliation column. The reconciliation column also contains facts that cannot be directly allocated to any segment, such as the effects of share-based payment.

The management variables, which are used to assess the performance of the operating segments, are shown below:

40 HALF-YEAR STATEMENT 2020 VARTA AG

Information according to reportable segments:

MICROBATTERIES &

CONSOLIDATED FINANCIAL

SOLUTIONS

HOUSEHOLD BATTERIES

Σ TOTAL

RECONCILIATION

STATEMENTS

Period ended

Period ended

Period ended

Period ended

Period ended

Period ended

Period ended

Period ended

Period ended

Period ended

(€k)

Jun. 30, 2020

Jun. 30, 2019

Jun. 30, 2020

Jun. 30, 2019

Jun. 30, 2020

Jun. 30, 2019

Jun. 30, 2020

Jun. 30, 2019

Jun. 30, 2020

Jun. 30, 2019

Segment revenue

247,085

140,800

150,871

10,346

397,956

151,146

128

371

398,084

151,517

Revenue with other

7,406

0

0

0

7,406

0

0

0

7,406

0

segments

Revenue with third

239,679

140,800

150,871

10,346

390,550

151,146

128

371

390,678

151,517

parties

Thereof

232,905

132,739

132,581

10,346

365,486

143,085

128

371

365,614

143,456

Point-in-time

Thereof

6,774

8,061

18,290

0

25,064

8,061

0

0

25,064

8,061

Point-over-time

Depreciation and

-15,023

-6,926

-7,875

-1,133

-22,898

-8,059

0

0

-22,898

-8,059

amortization

Material effects in

0

0

-19,236

0

-19,236

0

-1,397

-1,385

-20,633

-1,385

income and expenses

EBITDA

82,425

35,569

420

1,666

82,845

37,235

-1,397

-1,385

81,448

35,850

The following facts are included in the reconciliation of Group EBITDA:

Period ended Jun. 30, 2020

Period ended Jun. 30, 2019

NOT

NOT

ATTRIBUTABLE

ATTRIBUTABLE

TO CORE

SPECIAL

TO CORE

SPECIAL

(€k)

BUSINESS

EFFECTS

Σ TOTAL

BUSINESS

EFFECTS

Σ TOTAL

Sales revenue

128

0

128

371

0

371

Effects in income and

0

-20.633

-20,633

-1,385

0

-1,385

expenses

EBITDA

-1,397

-19,236

-20,633

-1,385

0

-1,385

Circumstances taken into account in adjusting EBITDA are shown in the column “Special effects”. In fiscal year 2020, such circumstances existed at VARTA AG and the VARTA Consumer companies. The “special effects” of M&A transactions amounting to € 898k and the effects of share-based remuneration totaling € 499k (2019: € 1,385k) were assigned to VARTA AG as the parent company. In the “Household Batteries” segment, “special effects” were shown in connection with the integration and restructuring process following the acquisition of the VARTA Consumer companies in fiscal year 2020. The effects of restructuring come to € 10,188k, while the integration costs total € 387k. In addition, expenses of € 8,661k from the inventory valuation as part of the PPA are shown.

In the “Household Batteries” segment, “special effects” were shown as a result of the integration and restructuring of the Consumer business unit in fiscal year 2020. The effects of the restructuring came to € 10,188k and the integration costs were € 387k. A total of € 8,661k also resulted from the measurement of inventories as part of the PPA.

HALF-YEAR STATEMENT 2020 VARTA AG

41

The following table shows the reconciliation of the EBITDA of the segments to earnings before taxes.

(€k)

Period ended Jun. 30, 2020

Period ended Jun. 30, 2019

EBITDA

Depreciation and amortization

EBIT

Financial result

Result from joint ventures

Earnings before taxes

81,448

-22,898

58,550

-1,945

0

56,605

35,850

-8,059

27,791

-681

-6

27,104

Geographical segment information

The following statement shows the Group’s revenue divided according to specific geographical locations. In the presentation of this information on a geographical basis, a segment’s revenue is based on the geographical locations of customers and a segment’s assets on the geographical locations of the assets.

Period ended Jun.

Period ended Jun. 30,

DECEMBER

30, 2020

JUNE 30, 2020

2019

31, 2019

NON-CURRENT

NON-CURRENT

(€k)

REVENUES*

ASSETS**

REVENUES*

ASSETS**

Europe

199,708

526,138

65,174

262,295

Thereof in Germany

82,236

511,741

30,913

251,737

America

30,144

6,562

28,489

748

Asia

152,349

5,220

55,769

5,636

Other

8,477

0

2,085

0

Total Group

390,678

537,920

151,517

268,679

  • Sales revenues are based on the customer’s headquarters.
  • For this purpose, non-current assets include property, plant and equipment and intangible assets.

Accordingly, the revenue of the Asia and America regions is mainly assigned to the “Microbatteries” segment.

Products and services

The Group’s revenue as well as the trade receivables and contract assets are split between products and services as follows:

Period ended Jun. 30,

Period ended Jun. 30,

2020

JUNE 30, 2020

2019

DECEMBER 31, 2019

(€k)

REVENUES

TRADE RECEIVABLES

REVENUES

TRADE RECEIVABLES

Of which from product sales

389,206

130,676

149,045

53,132

Of which from the sale of services

1,472

1,229

2,472

866

Total Group

390,678

131,905

151,517

53,998

42 HALF-YEAR STATEMENT 2020 VARTA AG

Significant customers

In 2020, revenue with a specific customer amounted to € 103,917k, which equates to a share of revenue or more than 10% of consolidated revenue. The revenue is attributable to the “Microbatteries & Solutions” segment.

14 PROPERTY, PLANT AND EQUIPMENT

RIGHT-OF-

CONSTRUCTI

USE

ON IN

TECHNICAL

TECHNICAL

PROGRESS

RIGHT-OF- EQUIPMENT

EQUIPMENT

RIGHT-OF-

AND

TANGIBLE

USE

AND

AND

OTHER

USE OTHER

PREPAYMEN

FIXED

(€k)

LAND

BUILDINGS

BUILDINGS

MACHINERY

MACHINERY

EQUIPMENT

EQUIPMENT

TS

ASSETS

Acquisition costs

Status January 1, 2019

0

258

0

76,388

0

29,804

0

60,336

166,786

Currency differences

0

2

4

4

0

34

5

-8

41

First-time application IFRS 16

0

0

21,322

0

42

0

2,593

0

23,957

Additions

0

351

4,719

60,258

0

4,702

692

54,045

124,767

Disposals

0

-251

-442

-2,117

0

-1,081

0

5,412

1,521

Transfer postings

0

0

0

0

0

2,863

0

-2,863

0

Status December 31, 2019

0

360

25,603

134,533

42

36,322

3,290

116,922

317,072

Currency differences

0

-4

-38

-68

-1

-12

-21

-10

-154

Additions

0

6

11,138

28,416

60

2,083

823

110,956

153,482

Additions in scope of consolidation

3,165

11,687

11,425

11,870

12,750

6,302

3,063

4,333

64,595

Disposals

0

-31

-1,035

-661

0

-301

-196

0

-2,224

Transfer postings

0

0

0

22,854

0

2,270

0

-25,218

-94

Status June 30, 2020

3,165

12,018

47,093

196,944

12,851

46,664

6,959

206,983

532,677

HALF-YEAR STATEMENT 2020 VARTA AG

43

Cumulative depreciation and amortization and impairment expenses

RIGHT-OF-

USE

TECHNICAL

TECHNICAL

CONSTRUCTION

RIGHT-OF- EQUIPMENT

EQUIPMENT

RIGHT-OF-

IN PROGRESS

USE

AND

AND

OTHER

USE OTHER

AND

TANGIBLE

(€k)

LAND

BUILDINGS BUILDINGS

MACHINERY

MACHINERY

EQUIPMENT

EQUIPMENT

PREPAYMENTS

ASSETS

Status January 1, 2019

0

122

0

37,090

0

16,771

0

0

53,983

Currency differences

0

2

-5

33

0

32

0

0

62

Additions

0

39

3,325

11,103

33

3,255

692

0

18,447

Disposals

0

-148

-38

-2,086

0

-1,044

0

0

-3,316

Transfer postings

0

0

-145

0

0

0

145

0

0

Status December 31, 2019

0

15

3,137

46,140

33

19,014

837

0

69,176

Currency differences

0

1

-10

-5

-1

6

-1

0

-10

Additions

0

327

3,278

11,179

1,335

2,680

1,087

0

19,886

Disposals

0

0

-273

-164

0

-292

-181

0

-910

Transfer postings

0

0

0

0

0

0

0

0

0

Status June 30, 2020

0

343

6,132

57,150

1,367

21,408

1,742

0

88,142

Carrying amounts

Carrying amounts on Jan 1, 2019

0

136

0

39,298

0

13,033

0

60,336

112,803

Carrying amounts on Dec 31, 2019

0

345

22,496

88,393

2,453

17,308

0

116,922

247,896

Carrying amounts on Jun 30, 2020

3,165

11,675

40,960

139,794

11,484

25,255

5,217

206,985

444,535

The major part of investment in property, plant and equipment served to expand production capacity of lithium-ion button cells in response to demand. Depreciation and amortization have increased from € 18,447k in 2019 to

  • 19,886k as at the end of the first half of 2020. This means that depreciation and amortization are already above the previous year’s level. This is attributable, in particular, to the demand-driven investment in property, plant and equipment because of the expansion of production capacity and reduction in useful lives in Coin Power battery production as a result of extending the shift model.

The acquisition of the VARTA Consumer business is another factor to the increase in property, plant and equipment. It contributed property, plant and equipment of € 64,595k to the Group (preliminary value).

Replacement investment to renew production equipment, to develop new products and for quality assurance measures is also required at regular intervals.

There were no restrictions on rights of ownership or disposal for property, plant and equipment during fiscal years 2019 and 2020. Order commitments from the purchase of property, plant and equipment amounted to € 186,706k (Dec. 31, 2019: € 153,516k).

44

HALF-YEAR STATEMENT 2020 VARTA AG

15 INTANGIBLE ASSETS

(€k)

GOODWILL

Acquisition values

Status January 1, 2019

500

Currency differences

0

Additions

0

Disposals

0

Status December 31, 2019

500

Additions

0

Additions in the scope of consolidation

3,356

Disposals

0

Transfer postings

0

Status June 30, 2020

3,856

(€k)

GOODWILL

Cumulative depreciation and amortization

Status January 1, 2019

0

Currency differences

0

Additions

0

Disposals

0

Status December 31, 2019

0

Additions

0

Disposals

0

Status June 30, 2020

0

Book values

TRADEMARK RIGHT

AND OTHER

COMMERCIAL

DEVELOPMENT

INTANGIBLE ASSETS

PROPERTY RIGHTS

COSTS

TOTAL

11,947

958

17,165

30,570

1

0

0

1

678

0

1,340

2,018

-49

0

0

-49

12,577

958

18,505

32,540

341

0

1,283

1,624

68,730

1,810

0

73,896

-77

0

0

-77

94

0

0

94

81,665

2,768

19,788

108,077

TRADEMARK RIGHT

AND OTHER

COMMERCIAL

DEVELOPMENT

INTANGIBLE ASSETS

PROPERTY RIGHTS

COSTS

TOTAL

2,513

431

6,452

9,396

-8

0

0

-8

304

132

1,972

2,408

-39

0

0

-39

2,770

563

8,424

11,757

1,946

62

1,005

3,013

-78

0

0

-78

4,638

625

9,429

14,692

Carrying values on January 1, 2019

500

9,434

527

10,713

21,174

Carrying values on December 31, 2019

500

9,807

395

10,081

20,783

Carrying values on June 30, 2020

3,856

77,027

2,143

10,359

93,385

The Group acquired intangible assets of € 73,896k through the first-time acquisition of the VARTA Consumer business (preliminary values). The majority of this was accounted for by the trademark right of € 68,730k (preliminary value).

Of the own work capitalized totaling € 2,579k (2019: € 8,330k), self-manufactured intangible assets, which are not

yet ready for use, of € 1,283k (2019: € 1,340k) were recognized in 2020.

HALF-YEAR STATEMENT 2020 VARTA AG

45

Research and development expenses amounting to € 8,501k (2019: € 15,505k) were recognized in the income statement.

There were no restrictions on rights of ownership or disposal for intangible assets during fiscal years 2019 and 2020.

16 LEASES

The Group leases various office buildings, warehouses as well plant and vehicles. Leases are usually concluded for fixed periods from 2 to 10 years but may include options to extend or may even be unlimited in individual cases. Changes to leased fixed assets are presented in Chapter 14 “Property, Plant And Equipment” of these notes to the interim consolidated financial statements.

Future lease payments based on non-terminable leases total:

(€k)

JUNE 30, 2020

DECEMBER 31,2019

Lease liabilities – current

11,688

4,603

Lease liabilities – non-current

45,066

20,476

Total

56,754

25,079

(€k)

Period ended Jun. 30, 2020

Period ended Jun. 30, 2019

Amounts recognized in the income statement

Interest expenses lease liabilities

329

307

Income from subleasing leased assets

-72

0

Expenses from short-term leases

1,573

510

Expenses from leases of low-value assets, excl. short-term leases of

387

low-value assets

340

Total

2,170

1,204

There has been a sale and lease back agreement in place with WertInvest Ellwangen Immobilien GmbH since 2015. No amendments have been made to this contract in the intervening period.

Since the VARTA Consumer business was acquired, the Group has maintained sub-leases with the former owner Spectrum Brands. At the date of the transition to IFRS 16, the rights of use under the main leasing relationship were shown in investment property and measured at fair value. The Group classified the sub-leases on the basis of the right of use and came to the conclusion that that they are operating leases according to IFRS 16.

Variable lease payments, residual value guarantees and options to extend and terminate do not apply at present.

46

HALF-YEAR STATEMENT 2020 VARTA AG

17 OTHER FINANCIAL ASSETS

(€k)

Loans

of which long-term

JUNE 30, 2020

333

333

DECEMBER 31, 2019

548

548

In the previous year, non-current receivables from affiliated companies of € 548k were reported under loans. As of June 30, 2020, loans have decreased to € 333k because of the consolidation effects of the VARTA Consumer business (preliminary value).

18 INVENTORIES

Inventories can be divided into the following items:

(€k)

JUNE 30, 2020

DECEMBER 31, 2019

Raw materials and supplies

47,321

27,037

Unfinished goods

24,053

15,665

Finished goods and merchandise

56,912

20,515

Advance payments made

550

778

Inventories

128,836

63,995

Impairment income (+) / expense (-) recognized in the income statement

-195

-1,223

Inventories increased in fiscal year 2020 because of the increase in revenue and the first-time consolidation of VARTA Consumer (preliminary values). The amount of impairment of inventories recognized as an expense in the reporting period amounted to € 593k (2019: € 1,304k). The amount of reversals undertaken, which was recognized as impairment of the cost of materials in the reporting period, amounted to € 398k (2019: € 81k). The carrying amount of inventories after impairment totaled € 13,074k (2019: € 7,829k).

HALF-YEAR STATEMENT 2020 VARTA AG

47

19 TRADE RECEIVABLES AND CONTRACT ASSETS

(€k)

JUNE 30, 2020

DECEMBER 31, 2019

Receivables due from third parties (gross)

127,953

52,012

Receivables due from related parties

8

126

Contract assets

6,972

2,032

Gross trade receivables and contract assets

134,933

54,170

Less loss allowances

-3,028

-172

Net trade receivables and contract assets

131,905

53,998

As of June 30, 2020, existing net receivables are reduced by € 8,095k by the framework agreement for the sale of receivables (2019: € 7,911k).

Receivables due from third parties (gross) have risen by € 75,941k year on year. This increase is attributable, firstly, to the expansion in operating activities and, secondly, to the acquisition of VARTA Consumer business (preliminary values).

Contract assets are mainly the Group’s claims to consideration for products, which are held in consignment warehouses and had therefore not been invoiced at the reporting date. In addition, customer-specific products, which are also in stock, are reported in contract assets. Contract assets are reclassified into receivables if the Group issues an invoice to the customer. The increase is primarily attributable to the acquisition of VARTA Consumer business (preliminary values).

20 OTHER ASSETS

(€k)

JUNE 30, 2020

DECEMBER 31, 2019

Other assets

58,068

35,287

of which current

39,307

17,378

of which non-current

18,761

17,909

The claim to reimbursement from the assumption of a joint debt obligation in June 2017 is reported in the amount of € 18,761k (2019: € 17,907k) under non-current other assets.

48

HALF-YEAR STATEMENT 2020 VARTA AG

Current other assets consisted of the following:

(€k)

JUNE 30, 2020

DECEMBER 31, 2019

Receivables from development projects

13,499

9,343

Other tax claims

8,643

3,654

Other receivable

11,687

3,658

Miscellaneous other assets

5,478

723

Other assets

39,307

17,378

Receivables from development projects of € 13,499k are largely due from the European Commission and relate to government subsidies for two projects in which the Group acts as coordinator and receives and manages the subsidies on a fiduciary basis from the funding authority. Advance payments passed on to the cooperation partners involved amounted to € 10,951k as of June 30, 2020 (2019: € 7,085k). The increase in receivables from promotional projects of € 4,156k was the result of new, additional development projects.

The other tax receivables are largely sales tax receivables. These increased by € 4,989k from € 3,658k in 2019 to € 8,643k in 2020 and are attributable to the acquisition of VARTA Consumer (preliminary values).

The increase in other receivables (preliminary value) is essentially attributable to the acquisition of the VARTA Consumer companies. A claim to tax reimbursement was also agreed as part of the purchase contract with Energizer Holdings Inc., which determines the tax refund relating to the period prior to the acquisition of the VARTA Consumer companies. As of June 30, 2020, this produces a preliminary receivable in the amount of €

5,219k.

21 CASH AND CASH EQUIVALENTS

Cash and cash equivalents can be broken down as follows:

(€k)

JUNE 30, 2020

DECEMBER 31, 2019

Cash equivalents

23,772

42,117

Cash

19

13

Credit balances with banks

127,008

202,651

Total

150,799

244,781

The item “Credit balances with banks” contains fixed deposits with a term of up to three months of € 60k (2019:

  • 19,494k). A capital increase was carried out in 2019, which led to an increase in credit balances with financial institutions.

A short term investment of free liquidity of € 23,772k (2019: € 42,117k) was made in an associated company at normal arm’s length terms (see Chapter 41 “Related Parties” of these notes to the interim consolidated financial statements). These are short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to only an insignificant risk of changes in value (cash equivalents).

HALF-YEAR STATEMENT 2020 VARTA AG

49

22 DEFERRED TAXES

Deferred taxes have increased by € 10,155k as a result of the first-time consolidation of VARTA Consumer (preliminary value).

23 EQUITY

There were the following changes to the equity of the VARTA AG Group in 2020:

OTHER RESERVES

NON-

SUBSCRIBED

CAPITAL

REVENUE

CURRENCY

HEDGING

CONTROLLING

CAPITAL

RESERVE

RESERVES

DIFFERENCES

RESERVE

INTERESTS

TOTAL EQUITY

January 1, 2020

40,422

250,619

119,090

4,459

-3

215

414,802

of share-based payment

0

499

0

0

0

0

499

comprehensive income

oss for the year

0

0

39,833

0

0

57

39,890

comprehensive income

0

0

-646

-2,647

108

0

-3,185

comprehensive income

0

0

39,187

-2,647

108

57

36,705

June 30, 2020

40,422

251,118

158,277

1,812

105

272

452,006

24 EARNINGS PER SHARE

The calculation of earnings per share* is based on the profit attributable to shareholders and a weighted average of the shares in circulation. Since there were no circumstances resulting in dilution effects either in the reporting period or in the previous year, diluted earnings per share correspond to basic earnings per share.

(€k)

JUNE 30, 2020

DECEMBER 31, 2019

Earnings attributable to shareholders in €k

39,833

19,149

Weighted average of ordinary shares in circulation (‘000 shares)

40,422

38,421

Undiluted result per share in EUR

0.99

0.55

Diluted result per share in EUR

0.99

0.55

  • Earnings per share represent the shares in VARTA AG

25 OTHER FINANCIAL LIABILITIES

Other financial liabilities consisted of the following:

50

HALF-YEARSTATEMENT H1/FEHLER! KEINE DOKUMENTVARIABLE VERFÜGBAR. VARTA AG

(€k)

JUNE 30, 2020

DECEMBER 31, 2019

Other financial liabilities

52,507

6,890

of which short-term

6,202

4,058

of which long-term

46,305

2,832

A syndicated loan agreement in the amount of € 120,000k was concluded in fiscal year 2019. The financial resources are being used, firstly, to finance the acquisition of the VARTA Consumer business and, secondly, to finance additional investment in the expansion of capacity. The loan was utilized in the amount of € 40,000k for the acquisition in April 2020. This utilization is shown as non-current in its entirety.

The acquisition of VARTA Consumer business has also resulted in a further loan from financial institutions of € 3,094k to finance buildings. Of this figure, € 2,531k was recognized as non-current and € 563k as current (preliminary values).

26 PROVISIONS FOR EMPLOYEE BENEFITS

26.1 COMPOSITION OF PROVISIONS FOR EMPLOYEE BENEFITS

(€k)

JUNE 30, 2020

DECEMBER 31, 2019

Total

71,708

28,436

of which current

2,101

1,195

of which long-term

69,607

27,241

Composition of provisions for employee benefits

Total

71,708

28,436

Pensions

58,324

19,930

Severance payments

8,097

6,591

Service anniversary bonuses

1,710

630

Partial retirement

3,577

1,285

As a result of the acquisition of the restructuring measures, provisions

VARTA Consumer business, pensions have risen by € 37,134k and, as a result of comprehensive for severance payments have risen accordingly by € 1,506k (preliminary values).

Provisions for employee benefits also rose because of changes to measurement parameters and the increase in personnel.

27 TAX LIABILITIES

The liabilities from income taxes of € 51,900k have risen by € 37,575k year on year. This was mainly, at € 22,070k, the result of the acquisition of the VARTA Consumer business (preliminary value).

HALF-YEAR STATEMENT 2020 VARTA AG

51

28 TRADE PAYABLES, CONTRACT LIABILITIES AND ADVANCE PAYMENTS RECEIVED

Trade payables, contract liabilities and advance payments received were composed as follows:

(€k)

JUNE 30, 2020

DECEMBER 31, 2019

Advances payments received

23,541

34,296

Non-current liabilities

23,541

34,296

Trade payables to third parties

62,510

36,781

Contract liabilities

38,964

11,198

Liabilities from the acquisition of property, plant and equipment and

36,074

19,227

intangible assets

Liabilities to related parties and companies

0

128

Advance prepayments received

49,263

32,671

Current liabilities

186,811

100,005

Total trade payables and advance payments received

210,352

134,301

Trade payables including advance payments received have increased by € 76,051k in total. This is attributable to the increase in business volume and, among other factors, also the acquisition of the VARTA Consumer business and the additional investment volume.

The increase in contract liabilities as of June 30, 2020 to € 38,964k (December 31, 2019: € 11,198k) was mainly attributable to the acquisition of the VARTA Consumer business. Higher revenue and the associated increase in bonuses and take-back obligations also led to an increase here. Contract liabilities are primarily liabilities for bonuses in kind, customer bonuses and take-back obligations.

29 OTHER LIABILITIES

(€k)

JUNE 30, 2020

DECEMBER 31, 2019

Other non-current liabilities

78

95

Other current liabilities

34,603

20,025

Other liabilities

34,681

20,120

Current other liabilities rose from € 20,025k to € 34,603k. This was largely, at € 15,725k, the result of the acquisition of the VARTA Consumer business. This figure included € 5,764 for tax liabilities and mainly deferred liabilities for personnel (preliminary values).

Deferred income of € 78k (December 31, 2019 € 95k) was posted under the balance sheet item non-current other liabilities.

52

HALF-YEARSTATEMENT H1/FEHLER! KEINE DOKUMENTVARIABLE VERFÜGBAR. VARTA AG

30 OTHER PROVISIONS

Other provisions in fiscal years 2020 and 2019 consisted of the following:

DISPOSAL,

RESTORATION &

WARRANTIES,

SIMILAR

(€k)

RESTRUCTURING

GUARANTEES

OBLIGATIONS

OTHER PROVISIONS

TOTAL 2020

Maturity

Current

11,614

3,870

299

8,406

24,189

Non-current

0

1,415

0

3,976

5,391

Total provisions

11,614

5,285

299

12,382

29,580

Changes in other provisions in 2020

Status January 1, 2020

0

4,228

0

4,018

8,246

Change in scope of consolidation

2,896

295

818

8,570

12,579

Reclassification

-67

0

0

0

-67

Allocation

10,018

1,609

30

2,401

14,058

Consumption

-1,233

-847

-547

-2,278

-4,905

Reversal

0

0

0

-332

-332

Foreign exchange differences

0

0

-2

3

1

Status June 30, 2020

11,614

5,285

299

12,382

29,580

DISPOSAL,

RESTORATION &

WARRANTIES,

SIMILAR

(€k)

RESTRUCTURING

GUARANTEES

OBLIGATIONS

OTHER PROVISIONS

TOTAL 2019

Maturity

Current

0

2,813

0

1,594

4,407

Non-current

0

1,415

0

2,424

3,839

Total provisions

0

4,228

0

4,018

8,246

Changes in other provisions in 2019

Status January 1, 2019

0

2,749

12

1,786

4,547

Allocation

0

2,526

0

2,499

5,025

Consumption

0

-692

-12

-286

-990

Reversal

0

-360

0

0

-360

Foreign exchange differences

0

5

0

19

24

Status December 31, 2019

0

4,228

0

4,018

8,246

Warranties, guarantees and miscellaneous provisions

Provisions for warranties and guarantees as well as miscellaneous provisions have risen in response to the

expansion in business volume.

HALF-YEAR STATEMENT 2020 VARTA AG

53

Restructuring

The acquisition of VARTA Consumer business has meant inevitable restructuring within the VARTA Group in certain areas. The management of VARTA developed a “garden leave” program to avoid having to undertake any socially responsible restructuring measures. Under this program, employees sign a voluntary termination agreement and, in return, continue receiving their monthly salary and receive a severance payment when they leave the company. A provision is recognized when they sign the termination agreement.

31 DEFERRED LIABILITIES

Deferred liabilities comprise the following material items:

(€k)

JUNE 30, 2020

DECEMBER 31, 2019

Holiday entitlements, overtime and time off in lieu

13,781

6,262

Employee bonuses

10,090

4,768

Outstanding invoices

4,186

2,106

Audit, tax advice and legal advice

1,472

1,391

Other deferred liabilities for personnel

2,704

1,300

Miscellaneous deferred liabilities

11,133

804

Deferred liabilities

43,366

16,631

Deferred liabilities have increased by € 26,735k overall. This was mainly, at € 18,729k, the result of the acquisition of the VARTA Consumer business (preliminary value). The increase was also driven by the expansion of business volume in the outstanding invoices and growth in personnel and the higher deferrals associated therewith.

32 SALES REVENUE

The following revenue was achieved from the sale of products and the supply of services:

(€k)

Period ended Jun. 30, 2020

Period ended Jun. 30, 2019

Revenue

390,678

151,517

of which from product sales

389,206

149,045

of which from the sale of services

1,472

2,472

The most important increase resulted from the area of “Entertainment” and from the sales revenue of VARTA

Consumer.

54

HALF-YEAR STATEMENT 2020 VARTA AG

33 DECREASE / INCREASE IN FINISHED AND UNFINISHED GOODS

(€k)

Period ended Jun. 30, 2020

Period ended Jun. 30, 2019

Change in unfinished goods

Change in finished goods

1,4314,706

6,856-1,200

Increase in finished and unfinished goods

8,287

3,506

Changes in finished and unfinished goods cannot be reconciled directly with the changes apparent from the consolidated balance sheet. This was due to existing currency differences that affect these items.

34 COST OF MATERIAL

(€k)

Period ended Jun. 30, 2020

Period ended Jun. 30, 2019

Expenses for raw materials, supplies and goods purchased

140,494

45,634

Other material expenses

12,056

9,746

Materials processing and refining by third parties

4,956

2,070

Other

1,359

478

Cost of materials

158,865

57,928

The item “Other” contains consumables which were purchased directly for production or customer orders and consumed without being stored. The costs of temporary staff have risen enormously because of the massive investment in the expansion of capacity and the need for personnel associated with this project. The Temporary staff is reported in the position “other material expenses”. Expenses for packaging, waste disposal and packaging material are also included under “Other”.

35 PERSONNEL EXPENSES

Personnel expenses contained the following items:

(€k)

Period ended Jun. 30, 2020

Period ended Jun. 30, 2019

Wages and salaries

95,805

43,511

Expenses for severance payments

10,508

1,004

Expenses for statutory social security contributions

11,976

4,178

Pension costs

4,885

2,923

Other personnel costs

1,421

904

Total

124,595

52,520

In the first half of 2020, personnel costs increased from € 52,520k to € 124,595k. The rise in personnel costs was caused by the acquisition of VARTA Consumer and the recruitment of staff in response to the expansion of production capacities. The number of employees has risen by 77.1 % from 2,394 employees to 4,342 employees

HALF-YEAR STATEMENT 2020 VARTA AG

55

as of June 30, 2020. Personnel costs included non-cash expenses for share-based remuneration in the amount of

€ 499k (previous year: € 1,385k).

36 DEPRECIATION AND AMORTIZATION

Depreciation and amortization comprised the following:

(€k)

Period ended Jun. 30, 2020

Period ended Jun. 30, 2019

Scheduled depreciation of property, plant and equipment (excluding right-of-

14,184

5,038

use assets)

Scheduled depreciation of right of use

5,703

1,871

Scheduled amortization of intangible assets

3,011

1,150

Total depreciation and amortization

22,898

8,059

Depreciation and amortization have almost doubled year on year through the commissioning of new machinery and equipment. The acquisition of the VARTA Consumer companies also had an additional impact totaling approximately € 6.900k on depreciation and amortization.

37 OTHER OPERATING INCOME

Other operating income contained the following items:

Period ended Jun. 30,

Period ended Jun. 30,

(€k)

2020

2019

Grants and public donations

2,027

1,854

Income from offsetting rental and services towards joint ventures

0

15

Reversal of provisions and deferred liabilities

426

142

Income from the sale of property, plant and equipment

118

47

Other

17,853

1,627

Other operating income

20,424

3,685

The increase in other operating income is attributable to the acquisition of the VARTA Consumer companies. Other operating income comes from services for the Appliances segment (including household appliances and pet food) of the former owner Spectrum Brands, which will no longer be offered by the end of 2020 at the latest.

56

HALF-YEAR STATEMENT 2020 VARTA AG

38 OTHER OPERATING EXPENSES

Other operating expenses contained the following items:

(€k)

Period ended Jun. 30, 2020

Period ended Jun. 30, 2019

Legal, audit and consultancy fees

7,943

2,952

Outward freight and customs duties

6,199

1,433

Maintenance

6,129

2,323

Other distribution costs

4,698

236

Cost of energy

4,267

2,149

Marketing, advertising and representation

3,770

1,249

Commission

2,449

1,848

Telephone, postage & IT

2,189

1,063

Rent, leases and tenancies

1,913

897

Warranties

1,658

873

Insurance contracts

1,604

724

Licenses & patent fees

961

704

Travel expenses

856

855

Contributions and fees

794

178

Accrual of provisions for bad debt

673

0

Cleaning

442

242

Bank charges / fund transfer fees

425

215

Apprenticeship and training costs

265

185

Consumer credit insurance

138

90

Engineering and professional fees

131

245

Expenses with related companies

110

406

Miscellaneous other operating expenses

9,446

1,873

Other operating expenses

57,060

20,740

Miscellaneous other operating expenses increased by a total of € 36,320k from € 20,740k to € 57,060k. The increase in the balance sheet item “miscellaneous other operating expenses” resulted from VARTA business and opposing expenses incurred as part of the services undertaken within the Appliances segment of the former owner Spectrum Brands, which will be discontinued by the end of 2020 at the latest. The other higher expenses were primarily the result of the rise in legal and consultancy expenses associated with the acquisition of the VARTA Consumer companies and the ongoing patent dispute in the amount of € 3,100k. Because of the expansion in production capacity and the acquisition of VARTA Consumer, maintenance costs have risen by € 3,806k, expenses for outward freight and customs duties by € 4,766k and the cost of energy by € 2,118k in comparison with the prior year.

HALF-YEAR STATEMENT 2020 VARTA AG

57

39 NET FINANCIAL INCOME

Sundry financial income and sundry financial expenses is composed as follows:

(€k)

Period ended Jun. 30, 2020

Period ended Jun. 30, 2019

Foreign exchange gains

794

40

Sundry financial income

794

40

Foreign exchange losses

-1,492

-309

Other financial expenses with third parties

-133

-150

Sundry financial expenses

-1,625

-459

40 INCOME TAX EXPENSES

Income tax expense is recognized on the basis of the estimate of the average annual income tax rate for the fiscal year as a whole. Accordingly, the estimated tax rate for the interim reporting period up to June 30, 2020 is 29.5% (June 30, 2019: 28.2%). The increase was due to the trend in earnings at the individual companies.

40.1 FINANCIAL RISK MANAGEMENT

(€k)

JUNE 30, 2020

STAGE 1

STAGE 2

STAGE 3

Financial instruments measured at fair value

through profit and loss

Factoring

-1,905

0

-1,905

0

Debtor warrant

-2,818

0

0

-2,818

Derivative financial instruments – assets

237

0

237

0

Derivative financial instruments – equity and liabilities

-1,586

0

1,586

0

Total

-6,072

0

-82

-2,818

(€k)

DECEMBER 31, 2019

STAGE 1

STAGE 2

STAGE 3

Financial instruments measured at fair value

through profit and loss

Factoring

-2,089

0

-2,089

0

Debtor warrant

-2,818

0

0

-2,818

Derivative financial instruments – assets

0

0

0

0

Derivative financial instruments – equity and liabilities

-1,278

0

-1,278

0

Total

-6,185

0

-3,367

-2,818

58

HALF-YEAR STATEMENT 2020 VARTA AG

(€k)

JUNE 30, 2020

DECEMBER 31, 2019

Derivative financial instruments

237

0

Derivative financial instruments measured at fair value through comprehensive

237

0

income

Cash and cash equivalents

150,799

244,781

Loans

333

548

Trade receivables

124,933

51,966

Other assets*

43,976

30,921

Loans and receivables

169,242

83,435

Total financial assets

320,278

328,216

Derivative financial instruments measured at fair value through comprehensive income

1,586

1,278

Derivative financial instruments measured at fair value through comprehensive

1,586

1,278

income

Other financial liabilities**

50,921

5,626

Trade payables***

98,584

56,136

Deferred liabilities****

40,791

4,301

Other liabilities*****

35,504

4,090

Measured at amortized cost

225,800

70,153

Total financial liabilities

227,386

71,431

  • Excluding other tax receivables of € 8,643k (2019: € 3,654k) and prepaid expenses of € 5,449k (2019: € 712k)
  • Excluding derivative financial instruments of € 1,586k (2019: € 1,278k); including a debt waiver of € 2,818k with an anticipated term of more than 5 years which can be repaid earlier because of specific circumstances.
    (see Chapter 25 “Other financial liabilities” of these notes to the interim consolidated financial statements)
  • Excluding advance payments received of € 49,263k (2019 € 32,671k), excluding contract liabilities of € 38,964k (2019: € 11,198k)
  • Excluding deferred liabilities for employee benefits of € 2,575k (2019: € 12,330k)
  • Excluding deferred income of € 78k (2019 € 95k), liabilities from promotional projects of € 13,169k (2019: € 12,394k), customs liabilities € 2,759k (2019: €
    1,557k), other liabilities from taxes of € 1,543k (2019: € 1,978k) and social security of € 397k (2019 € 6k)

41 RELATED PARTIES

The contractual relationships with related parties described in the 2019 annual report continue virtually unchanged.

In March 2020, a framework agreement was concluded for the acquisition of Mezzanin Finanzierungs GmbH, Connexio alternative investment GmbH, VAMI-SK neunzehn GmbH and VMI Micro Innovation GmbH. The transactions completed to date, namely Mezzanin Finanzierungs GmbH, Connexio alternative investment GmbH and VAMI-SK neunzehn GmbH are described in Chapter 10 “changes in the scope of consolidation”. The outstanding transaction involving VMI Micro Innovation GmbH is described under Chapter 43 “events after the reporting date of june 30, 2020”.

HALF-YEAR STATEMENT 2020 VARTA AG

59

42 INVESTMENT COMPANIES

The following companies were included for the periods presented in the consolidated financial statements in accordance with section 315e (1) in conjunction with section 313 (2) No. 1 – 6 HGB):

60

HALF-YEAR STATEMENT 2020 VARTA AG

SINCE/UP TO

Since 2012/09

Since 2007/12

Since 2012/04

Since 2018/04

Since 2007/12

Since 2007/12

Since 2007/12

Since 2014/10

Since 2014/01

Since 2007/12

Since 2009/09

Since 2017/06

Since 2017/06

Since 2017/09

Since 2009/08

Since 2020/01

Since 2020/01

Since 2020/01

Since 2020/01

Since 2020/01

Since 2020/01

Since 2020/01

Since 2020/01

Since 2020/01

Since 2020/01

Since 2020/01

Since 2020/01

Since 2020/01

Since 2020/01

Since 2020/01

REGISTERED

PARTICIPATION

COMPANY NAME

OFFICE

COUNTRY

CURRENCY

STAKE

VARTA Aktiengesellschaft

Ellwangen

Germany

EUR

100.00 %

VARTA Microbattery GmbH

Ellwangen

Germany

EUR

100.00 %

VARTA Storage GmbH

Nördlingen

Germany

EUR

100.00 %

VARTA Micro Production GmbH

Nördlingen

Germany

EUR

100.00 %

VARTA Microbattery Pte Ltd

Singapore

Singapore

USD

100.00 %

VARTA Microbattery Ltd Shanghai*

Shanghai

China

CNY

100.00 %

PT VARTA Microbattery Indonesia

Batam

Indonesia

USD

100.00 %

VARTA Microbattery Japan K.K.

Tokyo

Japan

USD

100.00 %

VARTA Microbattery S.R.L.

Brasov

Romania

RON

100.00 %

VARTA Microbattery Inc.

Rye, NY

United States of America

USD

100.00 %

VW-VM Verwaltungsgesellschaft mbH i.L.**

Ellwangen

Germany

EUR

50.00 %

Auditas GmbH

Nördlingen

Germany

EUR

25.10 %

Auditas Inc.

Ridgefield

United States of America

USD

25.10 %

Connexio alternative investment & holding

Vienna

Austria

EUR

100.00 %

GmbH***

VARTA Micro Innovation GmbH

Graz

Austria

EUR

17.74 %

VARTA Consumer Batteries GmbH & Co.

Ellwangen

Germany

EUR

100.00 %

KGaA

VARTA Consumer Batteries Benelux B.V.

Utrecht

Netherlands

EUR

100.00 %

VARTA Consumer Batteries UK Ltd.

Sword House

United Kingdom

GBP

100.00 %

VARTA Consumer Batteries Iberia S.L.U.

Madrid

Spain

EUR

100.00 %

VARTA Consumer Batteries Poland

Warsaw

Poland

PLN

100.00 %

Sp.z.o.o.

LLC Consumer Batteries Company (Eastern

Moscow

Russia

RUB

100.00 %

Europe)

VHB Real Estate Holdings LLC****

Delaware

United States of America

EUR

100.00 %

Paula Grundstücksverwaltungs GmbH & Co.

Pullach i. Isartal

Germany

EUR

100.00 %

Verm. KG

Spectrum Brands Finland Oy

Vantaa

Finland

EUR

100.00 %

Spectrum Brands Norway AS

Oslo

Norway

NOK

100.00 %

Spectrum Brands Schweiz GmbH

Dietlikon

Switzerland

CHF

100.00 %

SPB Sweden AB

Bromma

Sweden

SEK

100.00 %

Spectrum Brands Austria GmbH

Brunn am

Austria

EUR

100.00 %

Gebirge

Spectrum Brands Slovakia spol. s. r.o.

Prievidza

Slovakia

EUR

100.00 %

Spectrum Brands Hrvatska d.o.o.

Zagreb

Croatia

HRK

100.00 %

HALF-YEAR STATEMENT 2020 VARTA AG

61

Since 2020/01

Since 2020/01

Since 2020/01

Since 2020/01

Since 2020/01

Since 2020/01

Since 2020/01

Since 2020/01

Since 2020/01

Since 2020/01

Since 2020/01

Since 2020/01

Since 2020/04

Since 2020/04

Since 2020/05

*

**

***

****

*****

******

*******

Spectrum Brands Trgovina d.o.o.

Ljubljana

Slovenia

EUR

100.00 %

Spectrum Brands Bulgaria EOOD

Sofia

Bulgaria

BGN

100.00 %

VARTA Consumer Europe GmbH*****

Ellwangen

Germany

EUR

100.00 %

VARTA Consumer Kommandit GmbH******

Ellwangen

Germany

EUR

100.00 %

VARTA Consumer Batteries Italia s.r.l.

Basiglio

Italy

EUR

100.00 %

Spectrum Brands Czech spol. s.r.o.

Česká Lípa

Czech Republic

CZK

100.00 %

Varta Pilleri Ticaret Limited Sirketi

Istanbul

Turkey

TRY

100.00 %

Spectrum Brands Denmark A/S

Brondby

Denmark

DKK

100.00 %

VARTA Consumer General Partner

Ellwangen

Germany

EUR

100.00 %

GmbH*******

Spectrum Brands France S.A.S.

Courbevoie

France

EUR

100.00 %

Anabasis Handelsgesellschaft mbH

Dischingen

Germany

EUR

100.00 %

EMEA Consumer Batteries (Shenzhen) Co.

Shenzhen

China

CNY

100.00 %

Ltd.

Mezzanin Finanzierungs GmbH

Vienna

Austria

EUR

100.00 %

VAMI-SK neunzehn GmbH

Graz

Austria

EUR

100.00 %

VARTA Consumer Hungaria Kft.

Budapest

Hungary

HUF

100.00 %

In liquidation since Jan. 01, 2020

Accounted for at-equity, in liquidation since July 07, 2020

Acquisition of the remaining shares on April 21, 2020, name change to GmbH on May 6, 2020

Previously VHB Real Estate Holdings LLC

Previously Spectrum Brands Europe GmbH

Previously ROV German Limited GmbH

Previously ROV German General Partner GmbH

43 EVENTS AFTER THE REPORTING DATE OF JUNE 30, 2020

Settlement of legal disputes

VARTA AG is expanding its cooperation with Samsung Electronics. The Comapny will continue as the principal supplier of rechargeable batteries for Samsung headsets over the coming years. After reaching an agreement for this supply contract, the Company has now settled its patent disputes with Samsung.

VARTA has already withdrawn all lawsuits against Samsung and its customers. Batteries were found in the headsets, which, from the perspective of VARTA AG, breach the applicable patents in the field of lithium-ion cells. VARTA opted to take action against Samsung and its customers in Germany and the USA. The agreement now reached stipulates that VARTA AG will withdraw its lawsuits. In return, Samsung, for its part, waives lawsuits against the battery manufacturer.

62

HALF-YEAR STATEMENT 2020 VARTA AG

Key transactions with related parties

On June 30, 2020, WertInvest Ellwangen Immobilien GmbH as landlord and VARTA Microbattery GmbH as tenant signed a long-term tenancy agreement for commercial properties. The tenancy agreement was concluded for an unlimited period after the building was handed over and may be terminated for the first time after 10 years by VARTA and after 15 years by WertInvest. The monthly rental amounts to € 118,334 net. The value of the tenancy agreement up to the first possible termination date by VARTA amounts to € 14,200k assuming that use of the building started from July 1, 2020.

The landlord WertInvest is indirectly majority held by the indirect main shareholder in VARTA AG, Montana Tech Components AG, and is therefore a related company of VARTA AG within the sense of Section 111a AktG.

The object of the tenancy agreement are two new production buildings constructed to the specifications of VARTA and a comprehensively refurbished canteen at the Ellwangen site covering an area of around 7,000 m² in total. WertInvest has owned all the property at the VARTA Group’s site in Ellwangen since 2015 and currently leases the space to VARTA as open space and part of the factory site.

VARTA Micro Innovation GmbH

As explained in the section on business combinations, VARTA AG concluded a framework agreement on March 30, 2020 to acquire Mezzanin Finanzierungs GmbH, Vienna/Austria, CONNEXIO alternative investment holding GmbH, Vienna/Austria, VAMI-SK neunzehn GmbH, Graz/Austria, and the remaining shares in VARTA Micro Innovation GmbH, Graz/Austria. In addition to the acquisitions, a reorganization of VARTA Micro Innovation GmbH under company law and the code of obligations to be carried out by the seller before the acquisition of the shares was agreed in the framework agreement.

The reorganization of VARTA Micro Innovation GmbH includes the dissolution of an existing dormant company and a debt waiver by lenders. VARTA Micro Innovation GmbH will be free of debt at the date of acquisition, i.e. it will have no interest-bearing borrowings and its equity will be positive. On the basis of the pro forma analysis as of March 31, 2020, VARTA Micro Innovation GmbH will have equity with a carrying amount of around € 650k following the reorganization.

VARTA Micro Innovation GmbH is a leader in the areas of materials research and qualification for electrochemical energy storage and carries out various sponsored research projects. It also offers its expertise in the form of contract research for its customers.

Currently, the Group holds 17.74% of the shares in VARTA Micro Innovation GmbH. The Group will obtain control of the company with the acquisition of the remaining 82.26% of the shares. The acquisition of the shares was not yet complete at the time the interim financial statements were published.

The existing shares mean that this is a staged business combination where the existing share in VARTA Micro Innovation GmbH (carrying value in the interim financial statements: € 13k) is recognized at fair value. The fair value of the existing shares is estimated at € 86k on the basis of the preliminary purchase price.

As part of the dissolution of the dormant company, VGG GmbH will issue around 1,309 shares to the existing dormant shareholders in connection with the acquisition.

HALF-YEAR STATEMENT 2020 VARTA AG

63

The transaction is not yet reflected in the balance sheet in the interim report. The fair value of the net assets of VARTA Micro Innovation GmbH will be determined on the acquisition date. The company’s operating earnings and the assets and liabilities will be recognized from the acquisition date, which is expected to occur in the third quarter of 2020.

Ellwangen, August 13, 2020

VARTA Aktiengesellschaft

CEO

CFO

– Herbert Schein –

– Steffen Munz –

Statement from management

We hereby declare that, to the best of our knowledge, and in accordance with the applicable reporting principles for the interim financial reporting, the interim consolidated financial statements provide a true and fair view of the Group’s net assets, financial position and earnings and that the Group Interim Management Report presents the business development including the results of operations and the position of the Group in such a way that a true picture is provided and the significant risks and opportunities associated with the Group’s probable development over the course of the remaining fiscal year are described.

Ellwangen, August 13, 2020

VARTA Aktiengesellschaft

CEO

CFO

– Herbert Schein –

– Steffen Munz –

64

HALF-YEAR STATEMENT 2020 VARTA AG

Explanatory notes to the half-yearly report

The condensed consolidated interim financial statements were prepared on the basis of all IAS / IFRS published by the International Accounting Standards Board (IASB) that were applicable on the reporting date as well as all interpretations (IFRIC / SIC) drawn up by the International Financial Reporting Interpretations Committee and the Standing Interpretations Committee, provided these have been adopted by the European Union through the endorsement process. These condensed consolidated interim financial statements should be read in conjunction with the consolidated annual financial statements prepared as of December 31, 2019.

The condensed consolidated interim financial statements as of June 30, 2020 and the Group Interim Management Report have neither been audited in accordance with section 317 of the German Commercial Code (HGB) nor reviewed by an auditor.

HALF-YEAR STATEMENT 2020 VARTA AG

65

Financial calendar

Half-yearly report 2020

Interim report Q3 2020

August 14, 2020

November 12, 2020

66

HALF-YEAR STATEMENT 2020 VARTA AG

Imprint

Half-Year-Statement H1/2020: https://www.varta-ag.com/publications/

Investor Relations

Corporate Communications

VARTA AG

VARTA AG

Bernhard Wolf

Nicole Selle

T: +49 79 61 921 2969

T: +49 79 61 921 2221

E-mail: bernhard.wolf@varta-ag.com

E-mail: nicole.selle@varta-ag.com

HALF-YEAR STATEMENT 2020 VARTA AG

67

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Disclaimer

VARTA AG published this content on 14 August 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 14 August 2020 05:22:19 UTC

Source: https://www.marketscreener.com/VARTA-AG-646256/news/Varta-Half-year-financial-Report-VARTA-AG-Group-as-of-JUne-30-2020-31117832/

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