Risk
management

Alestis manages its operational risks through the APQP (Advanced Product Quality Planning) Model, implemented homogeneously in the company's operations in accordance with the model established in EN9145, as well as specific customer requirements.

In the new programs, risks during the design phase are identified, evaluated and mitigated using the DFMEA (Design Failure Mode and Effect Analysis) tool of the APQP. Similarly, in the development, mass production and transfer phases, this tool is also used. Although this information is not usually reported periodically to the Board of Directors, each of the plants has developed the tools applicable to each specific program and their management is carried out at work team level.

Financial risks are monitored on a monthly basis by Corporate Management, which analyzes the financial variables that could affect the company's results and adopts the measures it considers necessary at any given time to mitigate them. Specifically, it addresses the mechanisms necessary to control exposure to variations in interest and exchange rates, as well as credit and liquidity risks.

Financial risks are monitored monthly by Corporate Management, which analyzes the financial indicators that could affect the company's results, and adopts the measures it considers necessary at any given time to mitigate them.

The main financial risks identified are listed below:

Credit risk

In general, the company maintains its cash and equivalent liquid assets in financial institutions with a high credit rating. In relation to accounts receivable, it should be noted that the vast majority of sales are made to companies of the AIRBUS Group and Embraer, of recognized prestige and international solvency.

Cash flow risk

In order to ensure liquidity and to be able to meet all payment commitments arising from its activity, Alestis has sufficient cash. Additionally, for specific cash needs, it could resort to the non-recourse confirming offered by a financial institution, an operation contracted by its main customer.

Market risk

including interest rate, exchange rate and other price risks.

Both cash and financial debt are exposed to interest rate risk, which could have an adverse effect on financial results and cash flows. However, it is estimated that, given the company's financial structure, this risk is not considered significant.

Exchange rate risk

Alestis operates internationally and, therefore, is exposed to the variability of exchange rates for foreign currency transactions, specifically the dollar, the sales currency. The exchange rate risk arises from future commercial transactions and recognized assets and liabilities. The company evaluates at each moment the needs for action in this area, considering, among other aspects, the net risk assumed, the historical situation of the currencies involved (generally the US dollar) and their foreseeable evolution according to the criteria of the main analysts.

Alestis has used, in 2022 and 2021, derivative financial instruments to hedge the risks to which its activities, operations and future cash flows are exposed, having subscribed during the year several FXForward exchange rate insurance contracts.

The main premise for meeting the company's objectives is to achieve recurring turnover, which in turn is based on the evolution of the aeronautical market, which is still very much affected by the recent pandemic. In public statements, some executives of the main customer are optimistic about the sector's outlook for the coming years, highlighting figures that are beginning to pick up again after the pandemic, despite contingencies such as the war in Ukraine or those resulting from delays in supplies. With this, it is expected that between 2023 and 2025 there will be a full recovery of the commercial market.

In summary, the evolution of the war in Ukraine or tensions in the Asia-Pacific environment and the full recovery of supply deliveries are risks that may threaten the achievement of these objectives. One formula for mitigating these risks is "dual sourcing" of supplies, so that production is not impacted in the event of a particular crisis in a particular part of the world.

The industry is also aiming to reduce its carbon footprint, with a clear objective in the sector to have a zero-emission aircraft by 2035. It is therefore the right time to develop the technologies and materials that will be needed in the future and thus take advantage of this change of model and turn it into an opportunity.

In terms of results, high European and Spanish inflation is also a significant risk to the achievement of our objectives, as it can irrevocably burden our costs. In this chapter we are mitigating this risk by containing all types of expenses, encouraging operational improvements and productivity increases.

At the same time, we are managing compliance, environmental, labor and safety risks (see corresponding sections).

It is the right time to develop technologies and materials that will be needed in the future and thus take advantage of this model change and turn it into an opportunity.