Risk and Opportunities Report

Risks

Principles of risk and opportunity management

Running a business entails risks and opportunities. Handling potential risks and opportunities responsibly is a key element of sound corporate governance for BLG LOGISTICS. Our risks and opportunities policy aims to increase the company’s value without taking any disproportionately high risks.

Risk and opportunity culture

The BLG Group aims to achieve profitable growth while accounting for sustainability-related targets.

As part of the corporate culture of BLG LOGISTICS, our risk and opportunity culture encompasses the company’s basic attitude and code of conduct for managing risks and opportunities. It has a substantial impact on risk awareness in our business decisions and provides the foundation for establishing appropriate and effective measures to enable us to pursue our opportunities in a safe and responsible manner.

Our risk and opportunity culture therefore lays the groundwork for success in risk management. Risk management works provided that transparency and a willingness to actively communicate and collaborate are practiced as part of a tangible risk culture.

Integrating compliance and risk management systems with the internal control system¹

Responsible, continuous and systematic management of operating risks and of opportunities is of fundamental importance to BLG LOGISTICS. For that reason, we rely on a close integration of the compliance and risk management systems with the internal control system (ICS). The three systems are described in more detail below:

Main features of the compliance organization

Compliance means conforming to all statutory and internal company regulations, such as guidelines and organizational instructions, with the goal to avoid and minimize liability.

In its Code of Conduct, BLG LOGISTICS undertakes to comply at all times with the applicable laws and with the company’s internal guidelines.

Using these fundamental values and on our own ethical principles, we want to be a fair and reliable partner for our customers, business partners and shareholders.

The goal of compliance is to ensure that an organization operates in a manner that is legally and ethically sound. This includes preventing breaches of law from within the organization. It is therefore the job of the compliance officer to support the management and employees responsible for BLG LOGISTICS’ business processes in achieving these goals.

In accordance with the rules of procedure of the Board of Management of BLG AG, the compliance officer reports to the Board of Management member responsible for compliance, the Chief Compliance Officer. At the invitation of the Board of Management, the compliance officer reports on the current status of compliance activities at BLG LOGISTICS at meetings of the entire Board of Management. The compliance officer also reports directly to the Supervisory Board of BLG AG.

The entire Board of Management supports the compliance officer in the exercising of their duties.

The compliance officer has set up a regular Compliance Committee. The compliance officer acts as the point of contact for the external compliance ombudsperson, and at the same time assumes the role of internal ombudsperson. In December 2024, BLG LOGISTICS launched the BLG Integrity Line, a web-based whistleblower system that allows whistleblowers to report potential violations of relevant laws or internal guidelines. These reports can be submitted anonymously. This system helps to improve transparency and fosters an open corporate culture by providing employees, business partners and other stakeholders with a safe platform for addressing potential misconduct. The BLG Integrity Line complements our compliance management system (CMS) and actively contributes to preventing and investigating breaches of law.

In the event of a violation of relevant laws or internal guidelines of BLG LOGISTICS, the compliance officer also supports the internal investigations of the Audit department.

Where sanctions are required, the compliance officer, in coordination with the Human Resources department, proposes the necessary measures on the Compliance Committee. The Human Resources department then implements the proposals in coordination with the Board of Management, the relevant management body and the Compliance Committee.

The compliance management system (CMS) prevents misconduct within the organization and counters compliance risks or breaches of law within the organization or from within BLG LOGISTICS through preventive measures.

The German Supply Chain Act (Lieferkettensorgfaltspflichtengesetz – LkSG), which came into force on January 1, 2023, is intended to improve compliance with human rights internationally by establishing the human rights due diligence obligations that companies must observe. It also aims to achieve improvements in environmental matters. The act defines requirements for responsible management based on these aims.

In 2024, we further expanded our initiatives under the Supply Chain Act. BLG LOGISTICS has specifically identified and assessed potential risks in our supply chain in order to effectively implement human rights and environmental due diligence obligations.

Basic elements of risk management

In line with the risk strategy of the BLG Group, the basic conceptual elements of the risk management system are implemented centrally and described in the Group’s risk management guidelines, using a standardized approach to ensure that the Group is covered by clear risk accountability. This results in systematic and comparable risk identification/documentation and risk analysis/assessment.

Particular attention is given to so-called extreme risks, namely risks with a high level of damage but a low likelihood of occurrence. Extreme risks include catastrophic natural disasters, economic crises or terrorist attacks. Our Business Continuity Management (BCM) also intervenes in the event of resulting business interruptions. This system develops strategies, plans and actions that safeguard activities or processes or provide alternative procedures.

The objective of risk management is to create a shared awareness and positive understanding among management and all employees of how to manage business risks in order to maintain the company’s risk-bearing capacity. The aim is to identify and assess risks, to manage these risks efficiently through appropriate and effective measures, to monitor these risks, and to ensure ongoing risk reporting as a basis for making substantiated decisions. Risk management should thus contribute to implementing the corporate strategy and achieving the corporate aims.

The objectives of risk management are:

• Early detection and prevention of crises and insolvencies (security of business)
• Improving planning reliability and minimizing risk costs through optimum risk management
• Substantiated preparations for business decisions with risk analyses as a way of improving the success of the business
• Achieving sustainability-related business targets and monitoring sustainability-related risks with regard to the three aspects of ESG (environment, social, governance), taking into account the principle of double materiality (i.e. both the impact of external risks on BLG LOGISTICS and the impact of the Group on its external environment are taken into consideration)

Risk management organization

Responsibility and roles in connection with the measures pursuant to Section 91 (2) and (3) AktG are clearly defined in the BLG Group’s organizational charts and specified, communicated and documented in the risk management tool. BLG LOGISTICS ensures that those vested with responsibility meet the required personal and professional criteria and receive regular training from central Risk Management. As part of the annual planning process, BLG ensures that sufficient resources are made available for measures designed to promptly identify, evaluate, control and monitor developments that could jeopardize the organization’s continued existence as a going concern. The main rules on the organizational structure and workflows are documented and made binding.

Risk and opportunity management at BLG LOGISTICS

The risk management organization encompasses the following components:

• The organizational structure describes the tasks and responsibilities of all persons responsible for the risk management process and the measures taken to maintain the implemented system at a consistently high level and to communicate developments to those responsible in a structured and systematic manner.
• The risk management process is the process of assessing risks by identifying, documenting, analyzing, evaluating, controlling, monitoring, and communicating and reporting risks.
• The platform for an effective risk management system is the risk management tool, which enables risk managers to exchange information, prepare assessments and consolidate risks in a timely and flexible manner.
• The divisions submit reports on the risk management tool on a continuous basis. The risks entered in the risk management tool are evaluated and monitored by centrally responsible risk managers. The Risk Committee then validates and examines reported risks with regard to their nature and scope. This also involves the option of transferring risks to another risk officer and appointing a person to be in charge of the measures taken. The committee is responsible for general quality assurance, including presenting and commenting on risk exposure. Furthermore, the committee supports the further development of corporate governance (including the integration between the risk management system, internal control system, compliance and internal audit, i.e. integrated GRC). Detailed risk reports are submitted to the Board of Management and the Supervisory Board at least four times a year.

Aims and methods of financial risk management

The principal financial instruments used to finance the Group include non-current loans, current borrowings, lease liabilities, other borrowings, factoring and cash, including short-term deposits with banks. BLG LOGISTICS has access to a range of other financial instruments, such as trade receivables and payables, that arise directly as part of its operations.

Financial risk management is the responsibility of the Treasury department, whose tasks and objectives are described in guidelines adopted by the Board of Management. The central task besides managing liquidity and arranging financing is minimizing financial risks at Group level. This includes preparing and analyzing financing and hedging strategies and contracting hedging instruments.

The material risks for the Group resulting from financial instruments are credit risks (of receivables), counterparty risks, foreign currency risks, liquidity risks and interest rate risks. The Board of Management adopts risk management guidelines for each of these risks and verifies compliance with these guidelines. At Group level, the current market price risk for all financial instruments is also monitored.

Hedge accounting is applied if derivative financial instruments are used as hedging instruments and the requirements for hedge accounting in accordance with IFRS 9 are met. The objective is to reduce inconsistencies in recognition or measurement arising from gains or losses from a hedging instrument not being credited or charged to the same account in the financial statements as the gains or losses from the hedged risk, for instance. The Group’s accounting and valuation policies for derivatives and other disclosures on hedge accounting are presented in the “Derivative financial instruments” section.

Capital risk management

An important capital management objective for BLG LOGISTICS is to ensure the ability of the company to continue as a going concern in order to provide income to shareholders and to provide other stakeholders with the benefits to which they are entitled. Additional goals are to optimize liquidity security and maintain an optimum capital structure (incl. the company’s equity base) in order over the long term to reduce the costs of capital in general and the refinancing risk in particular.

BLG LOGISTICS monitors its capital on the basis of the equity ratio and other key performance indicators. Assurances have been made to all partner banks with regard to equal treatment and the change-of-control clause.

Internal control system

As the set of all systemically defined controls and monitoring activities in the company, the internal control system (ICS) is designed to safeguard assets, to ensure the security, completeness and reliability of internal and external reporting and to guarantee compliance of all activities with the relevant laws, regulations, ISO standards, internal directives and work instructions. The ICS is embedded in the procedural workflows of BLG LOGISTICS and helps create transparency in the business processes.

By design, the internal control system at BLG LOGISTICS considers all material business processes and goes beyond controls in the accounting process. The non-financial ICS covers topics such as environmental violations, occupational health and safety, and anti-corruption.

The ICS and the elements that contribute to it are regularly the focus of audit activities by the Internal Audit department. These are activities carried out either within the scope of the risk-based annual audit plan or within the scope of audits scheduled during the year at the request of management.

Integrated risk, compliance and ICS approach¹

Risk management within the BLG Group is based on an integrated governance, risk and compliance model, which facilitates responsible management of risks and opportunities.

First line of defense:
Operational management

Operational management of the individual business areas and central departments forms the front line of defense. They manage and are responsible for their processes, identify and assess risks locally at the level of the operating companies. Countermeasures are rolled out promptly and the residual potential impact is assessed. Material risks are reported in the risk management system on the basis of the published internal risk management guideline. The outcomes are continuously incorporated into risk reporting, thereby also providing the Board of Management with an overall picture of the current risk situation over the course of the year through the documented reporting lines.

Second line of defense:
Central risk management system, compliance management system, internal control system

Central risk management is closely integrated with the two other governance control systems: the compliance management system and the internal control system. All three systems are designed to support and systemically monitor operational management. These three core governance control systems provide the organizational framework and control the implementation of the framework guidelines in the operational processes, thereby ensuring compliance with laws and our internal corporate standards and rules. In consideration of the findings from the other two control systems – the compliance management system and the internal control system – central Risk Management draws up the central risk map and acts as an important node for passing on relevant information to the Internal Audit department as well as for preparation of the annual financial statements. In order to meet the increasing regulatory requirements, BLG LOGISTICS continuously monitors these aspects and systematically develops the processes in the second line of defense.

Third line of defense:
Audit by the Group Internal Audit department

The Group Internal Audit department provides support with overseeing the various divisions and business units within the Group on behalf of the Board of Management. It regularly reviews the early risk identification system and the structure and implementation of risk management as part of its independent audit activities. Group Internal Audit also carries out independent process audits. In these process audits, Group Internal Audit also reviews elements and controls of the ICS.

Fourth line of defense:
Audit by the independent auditor

The risk management system and the ICS are assessed with regard to the accounting process by the independent auditor within the scope of the audit of the annual financial statements.

Description of the main features of the ICS with regard to the accounting process in accordance with Section 315 (4) HGB

Definition and elements

With regard to accounting, the internal control system of BLG LOGISTICS includes all principles, procedures and measures to ensure the appropriate and legally compliant recognition, measurement and presentation of business transactions in financial accounting and reporting, as well as non-financial information within the scope of sustainability reporting. The objective is to avoid any material misstatements in accounting and external reporting. As the internal control system is an integral component of risk management, they are presented in combination.

The internal monitoring and management systems are components of the internal control system. The Board of Management of BLG LOGISTICS has assigned responsibility for the internal management system relating to the financial reporting process in particular to the Financial Services department.

The internal monitoring system comprises controls that are both integrated into and independent of the financial reporting process. The controls integrated into the process particularly include the dual control principle, the separation of functions between related departments (particularly creditor and treasury management) and IT-supported controls, as well as the involvement of internal departments such as Legal or Tax departments and of external experts.

Controls that are independent of the financial reporting process are carried out by the Internal Audit department, the Quality Management department and the Supervisory Board, in the latter case principally through its Audit Committee. In line with the Supervisory Board’s profile of skills and expertise, consideration has also been given to ensuring that its members have appropriate expertise in sustainability aspects that are material for BLG LOGISTICS. The Audit Committee concerns itself in particular with the financial accounting of the company and the Group, including reporting on and supervising the auditing of the financial statements. The activities of the Audit Committee also focus on the risk situation, the further development of risk management and on compliance issues. This also includes the effectiveness of the internal control system.

Audit activities that are independent of the financial reporting process are also performed by external auditing bodies such as the German public auditing firm or the external tax auditor.

Accounting-related risks

Accounting-related risks can arise, for example, through the conclusion of unusual or complex business dealings as well as the processing of non-routine transactions.

Potential risks also result from discretionary scope in the recognition and measurement of assets and liabilities, or from the effect of estimates on the annual financial statements, such as for provisions or contingent liabilities.

Financial accounting and reporting process and measures to ensure compliance with the applicable legal requirements

Business transactions are generally accounted for in the single-entity financial statements published by the subsidiaries of BLG LOGISTICS using the standard software SAP S/4HANA. The consolidated financial statements are prepared using the SAP consolidation module Group Reporting (previous year: SAP EC-CS). The separate financial statements of foreign subsidiaries and domestic subsidiaries not integrated into the SAP system are included on the basis of the standardized, Excel-based reporting packages audited by audit firms, which are transferred into the Group Reporting consolidation system.

To ensure consistent recognition and measurement, BLG LOGISTICS has issued accounting guidelines for financial reporting in accordance with International Financial Reporting Standards (IFRS). Impairment tests for the Group’s cash-generating units are carried out centrally. This ensures that consistent and standardized measurement criteria are used. The same applies to the specification of the parameters to be used for the measurement of pension provisions and other provisions made on the basis of expert opinions.

When preparing the debt consolidation, internal balances are regularly reconciled in order to clarify and remedy any differences in good time. At Group level, in addition to a validation by the system of the data reported in the separate financial statements, the reporting packages in particular are subject to a plausibility check and adjusted if necessary.

In addition, disclosure management software is used for preparing the separate financial statements and the combined financial statements, which uses a uniform data pool and includes validations, history traceability and a clearly defined workflow. A high degree of automation significantly reduces the risk of error and increases efficiency.

Special software is used for tax accounting. Current and deferred taxes are calculated at the level of the individual subsidiaries and the recoverability of the deferred tax assets is tested.

Qualifying notes

The internal control and risk management system as well as the compliance management system, i.e. the set of all governance systems, ensure the compliance of the financial accounting and reporting process with legally required accounting principles and with the relevant legal requirements as well as the sustainability-related objectives. Discretionary decisions, erroneous controls or fraud may, however, limit the effectiveness of the internal control and risk management system and the compliance management system, rendering the established systems unable to guarantee with absolute certainty that the risks will be identified and managed.

Effectiveness of the internal control system, risk management system and compliance management system¹

With the integrated governance, risk and compliance approach, the Board of Management has created and implemented a management framework for BLG LOGISTICS, which aims to ensure appropriate and effective internal control and risk management. The measures implemented as part of this approach are similarly aimed at ensuring the effectiveness and appropriateness of internal control and risk management as well as compliance management and are explained in more detail in this report. In relation to anchoring the three lines of defense business model and the legal framework, independent reviews and audits are conducted simultaneously, in particular through audits carried out by the Internal Audit department, and reporting on these audits to the Board of Management and Supervisory Board, and by the Supervisory Board’s Audit Committee, as well as through other external audits.

Based on its review of the internal control and risk management system and compliance management system, as well as the reporting by the Internal Audit department, the Board of Management is not aware of any circumstances which undermine the appropriateness and effectiveness of these systems.

Opportunities

Our business model

As an international group with three divisions and their business areas, BLG LOGISTICS is exposed to a wide range of trends on the various national and international markets. Based on the business development described in this report and the company’s position, the current macroeconomic conditions present various potential opportunities. The effects of sustainable positive economic trends are of overriding importance here. The development of innovative solutions for our customers in the context of future-oriented research projects also has a high priority. For further information, please refer to the “Research and development” section.

We also want to make optimum use of opportunities in the various fields of activity that open up to us in future. The premise for this is our integrated services, and the innovative intermodal offering in the AUTOMOBILE Division. The established business models offer us sales and acquisition opportunities in the CONTRACT Division, combined with additional automation and digitization activities in Germany and the rest of Europe. The individual business areas benefit from a continuing growth market because our customers want to improve their own cost structures and make them more flexible through increased outsourcing.

For the CONTAINER Division, the completed adjustment of the Elbe fairway and the still outstanding deepening of the Outer Weser was and continues to be of great importance to secure and position the German seaports in the “North Range” so that ever larger container vessels can operate into and out of Hamburg and Bremerhaven with only minor restrictions. Following the implementation of the fairway adjustment measures in the Elbe, the nautical problems encountered by the growing number of ever-larger mega carriers had improved somewhat, especially at the Hamburg location. In the course of 2023, however, the second expansion phase of the deepening of the Elbe was canceled due to the discovery of extensive munitions. As things currently stand, it is not possible to foresee when the most recently imposed draft restrictions on the Elbe are likely to be lifted.

However, the CONTAINER Division can offer its customers an excellent alternative with Germany’s only deep-water port, EUROGATE Container Terminal Wilhelmshaven (CTW), and its facilities for the handling of container ships with corresponding deep-water access. The entry of Hapag-Lloyd as a further shareholder of CTW marks another important step in the further development of this location.

Strategic opportunities

BLG LOGISTICS as strong logistics architects

Today, both we and our customers face massive challenges and opportunities. Advancing digitalization is opening up new possibilities in all areas of the value creation chain. At the same time, global competition demands ever-faster responses. To an increasing extent, logistics processes are also a factor in how competitive companies are.

As “logistics architects”, the expert teams at BLG LOGISTICS specialize in designing, configuring, implementing and managing customized logistics centers, ranging from conventional to highly automated.

We have a large staff of in-house experts who draw on comprehensive experience from a wide range of projects and industries of various sizes. This cross-industry logistics know-how has already enabled us to develop outstanding and innovative concepts and large-scale logistics projects and we see this as a strong argument for our existing and new customers in the future.

Collaboration across divisions holds the key to success

One example of cross-division collaboration in 2024 was the Combined Performance Support (CPS) project, which will be rolled out in day-to-day operations in 2025.

CPS is a key service area that combines the expertise of the CONTRACT and AUTOMOBILE Divisions. The aim behind the project is to facilitate the transfer of valuable knowledge, generate momentum and create sustainable added value for the operational teams in both divisions.

Both divisions are actively supported in their day-to-day business and work closely with operations to jointly implement concrete projects. The focus is on integrated management systems, real estate, improvement and technology. By working together in projects such as these, we are helping to boost efficiency and optimize both divisions.

Eco Power Port in Bremerhaven: BLG LOGISTICS and EUROGATE strengthen cooperation on wind energy

In the future, the majority of renewable energies will be handled and produced at ports. In Bremerhaven, BLG LOGISTICS and EUROGATE plan to work together under the Eco Power Port brand and pool their expertise in the field of wind energy. Both companies can draw on their many years of expertise in the handling of heavy goods and wind energy components. Under the new Eco Power Port brand, BLG LOGISTICS and EUROGATE are now adopting a “one face to the customer” approach that guarantees customers seamless and efficient support. Sharing space at the container terminal and potentially in the “Roter Sand” southern port creates valuable synergies – to the benefit of our customers and the entire wind energy industry. Collaboration enables us to expand our services and better meet the needs of our customers.

New domestic terminal in Ahlhorn

BLG LOGISTICS has leased 355,000 m² at the disused NATO airport in Ahlhorn. A new domestic terminal for automotive logistics with space for up to 15,000 vehicles will be put into operation at the site from 2025 onwards.

The new site in Ahlhorn, approx. 40 minutes southwest of Bremen, will primarily focus on three areas: renting parking spaces, handling and technical services.

Around 200 jobs will be created between April 2025 and 2026.

Climate mission

The topic of climate protection is right at the top of the agenda – in politics as well as in many companies. We are no exception. In the previous year, the German government tightened its climate protection targets once again and set Germany the goal of net zero emissions by 2045. As a logistics company, we want to play our part – and at the same time support our customers in improving their own climate footprint.

We are on a shared mission to protect our climate. Our target is to make BLG LOGISTICS a carbon-neutral company by 2030. To achieve this, we will once again submit our absolute target of 50.4 percent CO₂e savings across the company (Scope 1+2) and -30 percent across the supply chain (Scope 3) to be assessed and certified by the independent Science Based Targets initiative (SBTi) in 2025. We aim to improve our competitive edge by reducing our emissions.

BLG LOGISTICS has also contributed to an improved carbon balance by shifting from road to rail transport. BLG AutoRail can transport more than 200 cars per train, and operates in the German and Austrian rail network using green electricity every kilometer of the way.

At the Güterverkehrszentrum (GVZ) in Bremen, Germany’s largest cargo distribution center, BLG LOGISTICS opened a new location for industrial logistics in the previous year. From “C3 Bremen”, BLG LOGISTICS provides sustainable and efficient supplies to the foreign assembly plants of a major car manufacturer.

The actions we have taken to adapt to climate change offer an array of opportunities. For example, carport roofs with photovoltaic systems installed contribute to generation of renewable energy and covered storage for vehicles.

Opportunities arising from digitalization and automation

Both digitalization and automation technologies offer BLG LOGISTICS considerable potential when it comes to optimizing processes, increasing efficiency and bringing down costs. In an increasingly competitive market, they enable us to modernize processes and better adapt to the demands of a globalized economy. BLG LOGISTICS starts with an MVP – the minimal viable product – or a proof of concept that allows us to speed up the roll-out process and receive quick feedback from users. Central IT and departments work together to create holistic and optimized solutions. This requires an end-to-end process design, whereby the joint concept is tested in sections in the near term in the sense of an agile approach. This approach has proven to be very effective. We look at a process from an end-to-end viewpoint because it constitutes a complete solution that cannot be broken down and outsourced. We found that working together with the departments and testing in small sections – the agile approach – was highly productive.

Ultimately, we plan to take advantage of the diverse range of opportunities offered by digitalization, particularly those presented by networking systems and processes. By employing modern software solutions such as transport management systems (TMS), warehouse management systems (WMS) and enterprise resource planning (ERP), we can make our supply chains more efficient as a whole. Real-time data permits more precise planning and management of transport routes, inventories and delivery times. In turn leading to improved customer satisfaction and greater flexibility in order processing.

At BLG LOGISTICS, one of the other keys to the future of the logistics industry lies in automation due to its capability to significantly accelerate processes and minimize sources of errors. At the same time, automation increases flexibility by allowing systems to adapt quickly to changing requirements and order volumes.

Combining digitalization and automation creates vast synergies. Intelligent systems that collect, analyze, and evaluate data in real time enable predictive maintenance for machines and vehicles, reducing downtime and extending the service life of the equipment as a result and making a significant contribution to sustainable logistics.

Internationalization: Potential for expanding into Turkey and Poland

Internationalization presents an important opportunity for BLG LOGISTICS to expand into new markets, capitalize on new growth opportunities and build on its reputation as a global player. Turkey and Poland represent two particularly lucrative markets for expansion. In light of the expansion of automotive production in particular, Eastern Europe is a growth region. Building on our successful activities in Poland, we plan to expand operations in Hungary and possibly Romania in order to open up new markets. BLG LOGISTICS is already working with existing customers, particularly from the automotive industry, who are expanding into these regions and can therefore build on these relationships. These partnerships create synergies and make it easier for us to get our foot in the door. Our goal is to offer a broad portfolio of services to respond to market changes with more flexibility.

BLG LOGISTICS also considers Turkey a country with major growth potential. A cooperation agreement was signed with a Turkish partner in August 2024. As one of Europe’s largest automobile importers, Turkey imported 626,000 new cars last year. At the same time, 1.4 million vehicles are produced locally. Turkey’s strategic location, linking continental Europe with the Middle East and Asia, makes it an ideal transport center and logistics hub.

Both countries offer good opportunities to tap into new markets and establish long-term partnerships.

“Damietta Alliance” develops and operates new container terminal in Damietta, Egypt

A new container terminal is being built in the port of Damietta/Egypt. For this purpose, a joint venture was founded to develop and operate the new “Terminal 2” in the port. The “Damietta Alliance Container Terminal S.A.E.” joint venture consists of three core shareholders which are Hapag-Lloyd Damietta GmbH (39 percent), Eurogate Damietta GmbH (29.96 percent) and Contship Damietta S.p.A. (29.96 percent), plus two other shareholders.

The new Terminal 2 in the port of Damietta will have a total operational capacity of 3.3 million TEU and will serve as Hapag-Lloyd’s dedicated strategic transshipment hub in the Eastern Mediterranean.

The infrastructure work to be carried out by the Damietta Port Authority was completed in December 2024 with the complete dredging of the dock used by Damietta Alliance Container Terminal S.A.E. to a depth of 18 meters. All major trade contracts have also been awarded to suitable contractors. After the first ten of a total of forty rubber tyred gantry cranes (“RTGs”) were delivered to Damietta in September 2024, the first five of a total of twelve gantry cranes reached Damietta by sea in October. The commissioning of this equipment, the delivery of additional RTGs and gantry cranes, and the training of equipment drivers are planned for the period from February to July 2025.

With Terminal 2 scheduled to be operational in the third quarter of 2025, a state-of-the-art terminal with sufficient capacity, high productivity and a dense feeder network will be available.

The joint venture has been granted the concession to operate the facility for 30 years. This gives EUROGATE, the joint venture partners and our respective customers a long-term perspective in the port of Damietta.

Western expansion of EUROGATE Container Terminal in Hamburg

Progress on the western expansion of the EUROGATE Container Terminal in Hamburg continues to be of great importance for the EUROGATE Group (CONTAINER Division) in the course of establishing berths for large ships in a geographically and nautically advantageous location. In addition to the complete backfilling of the petroleum port, plans are in place to extend the Predöhlkai berth by around 600m and to build a further 400m quay wall on the Bubendey Ufer. Another key objective of the measures aimed at improving the nautical conditions at the Port of Hamburg as part of the planning approval process is to enlarge the turning basin at Waltershofer port into a 600m turning circle for the large container ships.

Potential construction measures by the Hamburg Port Authority (HPA) are expected to take five years to allow the terminal operator to hand over space according to the current schedule. As a result, as things currently stand – even with financing still to be secured – production of the terminal superstructure could not begin until 2032 at the earliest. Operations will therefore not commence at the site as a whole before 2033. The number of large container vessels in service has continued to increase in the meantime with large container vessels with capacities in excess of 24,000 TEU already being used. Other large container vessels of this size are in the order books of the container shipping companies. These figures underline the trend to date of a significantly disproportionate increase in the use of large container vessels on world trade routes.

EUROGATE is currently engaged in promising discussions and negotiations with HPA with the aim of concluding a project agreement and a lease agreement for the western extension site and the associated quay walls on commercially acceptable terms and, in relation to this, extending the term of the existing lease agreements at the Hamburg site until the end of 2054.

Risks

Risk categories and individual risks

From the risk types defined for BLG LOGISTICS, the material risks for BLG LOGISTICS by risk category are described in the following sections. In selecting materiality, risks are included that would have a noticeable effect on the company’s financial position, financial performance and cash flows if they were to occur. Furthermore, in line with the principle of dual materiality, we draw on risk analyses to assess and manage the impacts of our business activities on people and the environment. We consider risks from the area of Environment, Social and Governance (ESG) to be an integral part of the risk categories presented below. In principle, the assessment and derivation of measures is made on the basis of scenarios, taking into account all known influencing factors from opportunities and risks.

An overview of material risks is presented in the table.

Risk matrix

Service and infrastructure risks

Risks from business relationships

In all operating segments, close customer relationships and the sometimes demanding contract periods and conditions, especially with some major customers, make it necessary to monitor changes in economic trends and the demand and product life cycles especially closely.

Infrastructure capacity and security

Fluctuations in volumes or supply gaps affecting our customers can lead to temporary capacity bottlenecks. We have actively searched the market and have found additional third-party indoor and outdoor capacity, which will be leased for a fee, if required.

In contrast, when there is lower usage of our in-house capacity, no short-term alternative usage is normally generated. This results in a negative effect arising from fixed costs for floor space and hall costs for that are not covered by income. These risks are taken into account when drafting and calculating prices and contracts, including increasing the fixed remuneration component.

Indoor and outdoor facilities and transport and handling equipment are regularly serviced and repaired at fixed intervals. This ensures that we can provide services on an ongoing basis.

Should the still outstanding measure to deepen the Outer Weser fail to materialize or be seriously delayed, this could have a highly adverse effect on the future development of transshipment at the Bremerhaven location.

Personnel risks

Demographic change is creating a shortage of qualified employees in many areas. Not being able to fill positions as and when needed or with the right qualifications following (unplanned/planned) fluctuation leads to increased reliance on external personnel and the associated lack of productivity in certain cases. At the same time, this puts additional strain on the workforce, possibly resulting in increased absenteeism, accidents and further fluctuation.

In order to reduce the number of people leaving the company, we specifically invest in the skills of our employees and senior executives and update feedback channels to enhance the line of dialog between employees and top management. Employee retention is promoted through targeted personnel development measures, strong leadership and transparent remuneration systems that foster trust and satisfaction.

The HR organization has also been restructured in order to boost the effectiveness of the recruitment process. A central recruiting department pools the necessary knowledge to ensure that the application process is efficient and targeted. In addition, BLG LOGISTICS identifies key positions and develops comprehensive talent management to secure important competencies in the company and actively address future challenges. These measures ensure that BLG LOGISTICS also has qualified personnel in the long term and is perceived as an attractive employer.

Environmental risk

The increasing frequency and intensity of acute extreme weather events (for example heatwaves, storms, flooding), combined with the longer-term chronic changes in the mean values and fluctuation ranges of various climate variables (e.g. temperature, precipitation, sea level) pose threats to our assets and business processes. We analyzed various natural hazard scenarios for our property, plant and equipment and the potential operating downtimes associated with them.

To transfer the risk of consequential losses, BLG LOGISTICS has taken out property damage and business interruption insurance. Individual theoretical risks such as a storm surge currently cannot be fully insured. We address these risks to the greatest possible extent as part of our business continuity management.

IT risks

The number of cyber incidents, such as IT outages, ransomware attacks or data breaches, remained high in 2024.

As information security plays a central role in our business processes, this risk remains significant for BLG LOGISTICS. We have introduced various measures to avoid and mitigate risks and continuously review our processes and technologies.

Raising employees’ awareness of the importance of sensitive handling of all business-relevant information is something we take very seriously. We therefore conduct internal communication and training campaigns, and ensure that appropriate technical support is in place to guarantee the confidentiality, integrity and availability of information at all times.

In 2024, as in the previous year, the emergency processes were reviewed and a crisis team with appropriate decision-making powers was established to implement clearly defined processes to ensure a quick and efficient response in the event of a potential attack.

Together with the data protection officers, we make sure that personal data is processed exclusively in accordance with the regulations of the EU General Data Protection Regulation and the respective applicable local laws.

Financial risks

Credit risk

The Group’s credit risk mainly results from trade receivables and lease receivables. The amounts shown in the combined statement of financial position do not include allowance accounts for expected credit losses. Owing to the ongoing monitoring of receivables at management level and the use of commercial credit insurance depending on customer creditworthiness, we are not currently exposed to any significant credit risk.

The credit risk in respect of cash and derivative financial instruments is limited because these are currently held exclusively at banks that have been awarded high credit ratings by international rating agencies, which are highly secure thanks to a joint liability scheme and/or at which there are offsetting opportunities through non-current loans.

The maximum credit risk of the Group is represented by the carrying amounts of the financial assets recognized in the statement of financial position (including derivative financial instruments with positive market value). The Group is also exposed to a liability risk through the assumption of financial guarantees, which as of the reporting date was considered to be low risk.

At the reporting date, there were no further significant credit risk mitigation agreements or hedges.

Counterparty risk

At present, BLG LOGISTICS invests excess liquidity in overnight funds at various banks. This gives rise to counterparty risk, as a potential default of one of these banks would result in a loss of liquidity.

The ratings issued by banks are reviewed on a regular basis to counteract any potential counterparty risk. At the same time, we require a defined minimum rating for an investment and allocate short-term investments to several banks.

Foreign currency risk

With very few exceptions, the Group companies operate in the eurozone and invoice only in euros. As a result, currency risk could only arise in isolated cases, such as in relation to foreign dividend income or the purchase of goods and services from abroad. An interest rate and currency swap has been concluded to hedge against the foreign currency risk from a variable USD loan granted in the context of Group financing.

Liquidity risk

Liquidity risks may arise from payment bottlenecks and the resulting higher financing costs. The Group’s liquidity is ensured by central cash management at the level of BLG KG.

All significant subsidiaries are included in cash management. Due to the centralized management of capital expenditure and liquidity management, financial resources (loans/leases) can be provided in good time to meet all payment requirements.

The Group’s liquidity needs are covered by cash and committed credit facilities. The issue of sustainability is also becoming increasingly important in the capital market. The definition of sustainability targets as part of the overall strategy, as well as the implementation of the corresponding measures, are increasingly in the focus of potential lenders and can be criteria for granting loans. Our sustainability measures are thus a factor in ensuring that we can meet our liquidity requirements in the future.

In parallel, the BLG Group uses the non-recourse sale of receivables under a factoring agreement as an off-balance-sheet financing instrument to further optimize the balance sheet structure. The obligations of the factor to purchase existing and future receivables are limited to a total maximum amount of EUR 75 million. BLG LOGISTICS is free to decide to what extent the revolving nominal volume is utilized. The risks material to disposal relate to the credit risk and the risk of late payment (late payment risk). The credit risk is transferred in full to the factor in return for payment of a factoring fee. There is no significant late payment risk. The receivables were therefore derecognized in full.

We counter the financial risks arising from the dynamics of the current geopolitical situation with a regular forecast process, from which appropriate measures are derived where necessary.

Interest rate risk

The increased requirements of banks in terms of creditworthiness and sustainability could put further pressure on the interest margin.

As part of the interest rate strategy, interest rate hedges were concluded with banks for financing volumes of EUR 90 million. For each of the years 2019 to 2024, EUR 15 million in loans is fixed via swaps.

The interest rate risk which BLG LOGISTICS is exposed to arises primarily from non-current loans and other non-current financial liabilities. Interest rate risks are managed with a combination of fixed-interest and floating-interest loan capital. The majority of the liabilities to banks have been concluded for the long term or fixed interest rates have been agreed through to the end of the financing term, either originally as part of the loan agreements or through interest rate swaps which have been concluded within micro-hedges for individual floating-interest loans.

In addition, while interest rates were low and attractive for investments, a portion of the financing requirement of the coming years was hedged by agreeing forward interest rate swaps. Further information is presented in note 32/the “Derivative financial instruments” section of the notes to the combined financial statements.

Interest rate risks are disclosed through sensitivity analyses in accordance with IFRS 7. These show the effects of changes in the market interest rate on interest payments, interest income and expense, other income items and on equity. The interest rate sensitivity analyses are based on the following assumptions.

With regard to non-derivative financial instruments with fixed interest rates, market interest rate changes are only recognized through profit or loss if these financial instruments are measured at fair value. All fixed-interest financial instruments measured at amortized cost are not subject to interest rate risks within the meaning of IFRS 7. This applies to all fixed-interest loan liabilities of BLG LOGISTICS, including lease liabilities. When hedging interest rate risks in the form of cash flow hedge-designated interest rate swaps, changes to the cash flows and to the contributions to earnings induced by changes to the market interest rate of the hedged primary financial instruments and the interest rate swaps balance each other out almost completely, effectively eliminating the interest rate risk.

Measuring hedging instruments at fair value through other comprehensive income has an effect on the hedging reserve in equity and is therefore taken into account in the equity-related sensitivity calculation. Changes in the market interest rate of non-derivative floating-interest financial instruments whose interest payments are not structured as hedged items as part of cash flow hedges against interest rate risks have an effect on net interest income (expense) and are therefore included in the calculation of income-related sensitivities. The same applies to interest payments from interest rate swaps which are, as an exception, not contained in a hedge accounting relationship in accordance with IFRS 9. In the case of these interest rate swaps, market interest rate changes also have an effect on the fair value and therefore affect the remeasurement of financial assets or financial liabilities to fair value and are therefore included in the income-related sensitivity analysis.

From today’s perspective, the likelihood of the financial risks described above arising at BLG LOGISTICS is estimated to be low.

Further disclosures on the management of financial risks can be found in note 32.

Political, legal and social risks

Legal and political environment

Following the outcome of the recent US election, uncertainty has arisen regarding tariff policies and the future development of trade relations. Growing trade tensions between China and the EU are also weighing on both imports and exports. In addition, German car manufacturers and their suppliers are facing growing competition from Chinese e-mobility providers.

Growing cost pressure among our customers is leading to greater scrutiny of new logistics concepts and thereby to delays in decision-making, which makes planning more difficult. Aside from the latest developments in German federal policy, structural challenges remain unresolved: Demographic change poses risks arising from fewer Germans entering the labor market and qualified immigration being unable meet the growing demand for skilled workers in the logistics industry. Public investment incentives for necessary infrastructure measures and the green transformation are also still limited, leading to additional burdens for companies and forcing them to exercise restraint when it comes to investments.

Contract risks

Contract risks result from the fact that the maturities of contracts with customers sometimes do not match those relating to property leasing. Contracts with customers sometimes have shorter maturities than rental contracts on real estate.

Changes in the market environment can lead to deviations from the assumptions with regard to quantities and cost structure made in the price calculation. Any resulting deviations from projections are addressed within the scope of renegotiations.

Risk provisions have been recognized for risks from onerous contracts. The level of risk may increase significantly as a result of changes in circumstances over time. Based on our current estimation, a risk of this kind should be viewed as low.

Growing regulatory requirements

Over the coming years, the BLG Group along with its suppliers and customers, will be confronted with new regulations and rules that not only constitute a heavy administrative burden, but that could also bring effectively restrict business activities. This includes repercussions from the implementation of the Supply Chain Act (LkSG), the CSDDD, the NIS 2 Directive, including in relation to the operational implementation.

By monitoring regulatory changes, BLG LOGISTICS reviews new requirements and ensures that any necessary adjustments to its own business processes are implemented early on.

Strategic risks

Risks from acquisitions and investments

In recent years, BLG LOGISTICS has grown through various acquisitions both in Germany and abroad. As part of process and quality management, a uniform M&A guideline on the procedure to be followed for all share purchases has been drawn up for this purpose. This draws on both in-house and external advisers, ensuring that all risks associated with an acquisition or investment are taken into consideration and assessed.

Despite this, in particular political, legal or economic risks associated with share purchases in other European countries cannot be ruled out.

Regular reporting to the Board of Management and the Supervisory Board and the regular meetings of these bodies ensure that the operating business is monitored and managed on an ongoing basis. This allows us to respond promptly to emerging risks with appropriate measures.

Market risks

Macroeconomic risks

In addition to the ongoing war in Ukraine, BLG LOGISTICS’ risk situation is also affected by other global conflicts. For example, an escalation of the China-Taiwan conflict would lead to a political chain reaction and have enormous consequences for the German automotive industry. The Chinese sales market and parts of the production centers would collapse and, more importantly, it would not be possible to utilize the important semiconductors and technology from Taiwan. A slump in volumes and disruptions to supply chains could lead to a significant decline in earnings in the AUTOMOBILE Division. Due to an ultimatum from the Chinese, it is assumed that the conflict will not escalate until 2027. In the meantime, as part of a “derisking” strategy, the industry is striving to become independent in terms of the supply of parts.

By further expanding segments such as high & heavy and used vehicles, BLG LOGISTICS is continuing to drive diversification. At the same time, it was agreed with our customers that the division would reduce its dependency on the volume of vehicles transshipped and instead generate more revenue from the provision of capacities.

BLG LOGISTICS is also counteracting this by adjusting the planning and management of customer volumes.

Dependency on the economic cycle and macroeconomic risks

As a logistics service provider with a global focus, BLG LOGISTICS is highly dependent on production and the associated flow of goods in the global economy. The dependency on both the manufacturing industry and on consumer behavior can be viewed as the largest risk.

Changes to legislation and in taxes or duties in individual countries may also have a major impact on international trade and result in considerable risks for BLG LOGISTICS.

Dependencies and competition

The main markets for BLG LOGISTICS are Germany and Poland. Due to the opening up of Western Europe to the East, increasing volumes of Eastern European transport capacities are accessing our main market, leading to sustained tough competition and price pressure.

There is also a dependency on the volume of exports of the automotive industry in Europe to overseas. In this context, the markets of China, the US, Japan and Korea are of special significance.

Employment in car parts logistics continues to lead to a dependency on German original equipment manufacturers (OEMs). To limit such dependencies, we actively manage the OEM share of our revenue in the overall customer portfolio.

Threats to market position and competitive advantages

Persistently strong competition with other ports in the AUTOMOBILE Division poses continuous challenges for us. Due to the increasing shareholdings of shipping companies in other seaport terminals, internal optimization measures taken by shipping companies may result in shifts in volumes at the expense of the Bremerhaven seaport terminal. As a consequence of the war between Russia and Ukraine, certain volumes are likely to continue to be lost for these regions. By optimizing planning and control tools, we are constantly working to better anticipate fluctuations in capacity utilization.

For break bulk cargo business and project logistics, the principal risks lie in high competition and price pressure.

The development of handling volumes at individual EUROGATE Group locations (CONTAINER Division) will likely be characterized by significant changes in the shipping company consortia in the short term.

It is not yet possible to anticipate exactly what changes this cooperation may entail in the future for liner services in the various trade lanes, and what impact this will have on the handling volumes at the respective container terminals.

The acquisition of an (indirect) shareholding in Hamburger Hafen und Logistik AG (HHLA) by Mediterranean Shipping Company S.A. (MSC) announced back in September 2023, which has since occurred, is causing a significant loss of handling for EUROGATE Container Terminal Hamburg GmbH due to the relocation of the services currently handled by MSC at EUROGATE terminals in Hamburg to HHLA terminals.

In addition to supporting the ongoing ramp-up of handling volumes at the Wilhelmshaven site, the company’s sales activities in the 2024 financial year were therefore strongly geared toward gaining suitable replacement customers at the Hamburg site and retaining remaining key accounts for as long as possible. Following the successful conclusion of negotiations, two Asian services operated by the Gemini Cooperation were acquired for the Hamburg site.

In addition to the macroeconomic trends, we are also exposed to other factors and risks associated with future transshipment and transport demand and corresponding handling volumes of our container terminals. These include the following aspects in particular:

• commissioning existing and new terminal handling capacities along with the increasing automation thereof at the North Range ports and in the Baltic region,
• commissioning additional large container vessels and the related operational challenges in transshipment handling (peak situations),
• changes in the market, network and processes resulting from changes in the structure of the shipping company consortia (mergers or consortia changes),
• mergers and the formation of joint ventures, as well as
• price structures in the market.

Added to this is the increasing shift to vertical integration among shipping lines along the entire logistics chain.

As of spring 2025, the following major consortia will dominate the market in addition to MSC:

• Gemini Cooperation, a cooperation between individual shipping companies Maersk and Hapag-Lloyd
• Ocean Alliance, a partnership between individual shipping companies CMA CGM, COSCO, Evergreen and OOCL
• Premier Alliance, a partnership between individual shipping companies ONE, Yang Ming and HMM

The trend on the part of the shipping lines to commission additional ultra-large shipping vessels with volumes in excess of 24,000 TEU by this point continues unabated. Given this trend, the EUROGATE Group will also see an increase in the number of ultra-large container ships calling at its terminals.

Because the container terminals still have capacity reserves, at least in the medium term, the remaining consortia/shipping companies gain market power as a result of consolidation. This also puts pressure on revenue and intensifies the need to identify and implement further cost reductions and efficiency improvements at the container terminals as well as standardization and automation measures.

Other risks

No other identifiable risks currently exist that could have a long-term negative influence on the company’s development. There are currently no potential risks to the company’s continued existence as a going concern, such as excessive indebtedness, insolvency or other risks that could significantly impact on the company’s financial position, financial performance and cash flows.

Assessment of the overall risk situation

The tense geopolitical situation continues to harbor risk potential for the BLG Group in 2025. Geopolitical tensions threaten to further impair trade, for example through import restrictions on goods. Consequently, we see growing volume risks in our customer business going forward. We are also expected the structural change in the automotive industry to gather momentum.

Given the tense situation, the risk of a cyberattack remains significant. We are seeing an increasing focus on sustainability issues in the areas of environment, social and governance, which present both risks and opportunities for the BLG Group. These issues can have an impact on the overall risk situation, for example in financing, human resources policy, regulation and procurement. Medium-term climate change adaptation and the increase in natural disasters call for special risk management for climate risks and the drafting of emergency plans.

On the back of demographic change, we are also seeing a growing shortage of qualified employees, resulting in the risk of a lack of skilled workers. In response, employee retention and recruitment measures have been given more attention.

Our transparent and systematic risk management with its structured processes contributes to efficient management of overall risks in the Group.

From today’s perspective and supported by the outcome of a risk-bearing capacity analysis at Group level, there are currently no risks that pose a threat to the continued existence of the company. Based on our medium-term planning and the uncertain geopolitical situation and taking the measures already initiated into account, there are currently no indications of any strategic or operational risks to future development that jeopardize the continued existence of the company as a going concern.

¹ The disclosures in this section are non-management report disclosures and have not been audited by the auditor.