Rain Carbon GmbH

Castrop-Rauxel

Befreiender Konzernabschluss zum Geschäftsjahr vom 01.01.2022 bis zum 31.12.2022

Rain Carbon Inc.

Stamford, Connecticut/USA

Independent Auditors' Report

To the Shareholders of Rain Carbon Inc

Report on the Audit of the Consolidated Financial Statements

Opinion

We have audited the consolidated financial statements of Rain Carbon Inc. and its subsidiaries (collectively referred to as "the Group"), which comprise the consolidated balance sheet as at December 31, 2022, the consolidated statements of income, comprehensive income (loss), changes in stockholder's equity and cash flows for the year then ended, and notes, comprising significant accounting policies and other explanatory information.

In our opinion, the accompanying consolidated financial statements give a true and fair view of the consolidated balance sheet of the Group as at December 31, 2022, and of its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with generally accepted accounting principles in the United States of America ("US GAAP").

Basis for Opinion

We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditors' Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Group in accordance with International Ethics Standards Board for Accountants International Code of Ethics for Professional Accountants (IESBA Code) together with the ethical requirements that are relevant to our audit of the consolidated financial statements in India and we have fulfilled our other ethical responsibilities in accordance with these requirements and the IESBA Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Responsibilities of Management and Those Charged with Governance for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with US GAAP and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the consolidated financial statements, management is responsible for assessing the Group's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Group's financial reporting process.

Auditors' Responsibilities for the Audit of the Consolidated Financial Statements

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors' report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.

Auditors' Responsibilities for the Audit of the Consolidated Financial Statements (continued)

As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

―	Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
―	Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group's internal control.
―	Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
―	Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors' report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Group to cease to continue as a going concern.
―	Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
―	Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

Bengaluru, India, March 16, 2023

Consolidated Balance Sheets At December 31, 2022 and 2021

(in millions of dollars)

Assets

	Note	2022	2021
Current assets
Cash and cash equivalents	2d	$ 168.7	$ 163.1
Restricted cash	2d	4.6	4.6
Trade accounts receivable (less allowance for doubtful accounts of $0.9 in 2022 and $1.6 in 2021)		311.1	243.8
Due from affiliated companies	7&15	13.2	4.5
Inventories	9c	523.3	320.2
Prepaid expenses and other current assets		30.0	40.2
Current tax receivables		11.8	9.6
Total current assets		1,062.7	786.0
Investments	7	11.4	12.1
Property, plant and equipment, net	3	572.0	629.1
Operating lease right-of-use assets, net	8	56.8	44.7
Goodwill	6	593.7	611.3
Intangible assets, net	5	24.8	46.8
Loan to related parties	15	1.3	-
Deferred income tax assets	10	40.4	29.8
Other non-current assets		8.6	3.9
Total assets		$ 2,371.7	$ 2,163.7
Liabilities and Equity
Current liabilities
Trade and other payables		$ 193.1	$ 192.0
Due to affiliated companies	15	1.4	8.2
Accrued liabilities	9a	66.5	68.2
Current tax liabilities		8.4	9.2
Short term debt	11	151.5	71.3
Total current liabilities		420.9	348.9
Long-term debt, less current portion and debt issuance cost	11	939.3	977.9
Accrued post-retirement benefit obligation	13	86.7	158.7
Other non-current liabilities	9b	72.8	63.9
Deferred income tax liabilities	10	67.0	28.5
Stockholder's equity
Additional paid-in capital		345.1	345.1
Accumulated other comprehensive loss		(174.2)	(192.5)
Retained earnings		533.0	367.5
RCI stockholder's equity		703.9	520.1
Non-controlling interests		81.1	65.7
Total stockholders' equity		785.0	585.8
Commitments and contingencies	16
Total liabilities and stockholders' equity		$ 2,371.7	$ 2,163.7

Consolidated Statements of Income For the Years Ended December 31, 2022 and 2021

(in millions of dollars)	Note	2022	2021
Revenue, net	14	$ 2,470.2	$ 1,753.5
Cost of goods sold		1,944.3	1,406.6
Selling, general, and administrative expenses		86.7	82.1
Depreciation and amortisation	2(l), 3&5	98.3	103.7
Long-lived asset impairment loss	4	5.8	2.2
Other operating income		3.9	10.8
Operating income		339.0	169.7
Interest expense (income), net		56.7	56.2
Loss (gain) on foreign currency transactions, net		10.0	(3.0)
Other income, net		(0.7)	(7.3)
Income before income taxes		273.0	123.8
Income tax expense, net	10	77.0	50.7
Net income		196.0	73.1
Less: Net income attributable to non-controlling interests		27.9	19.5
Net income attributable to RCI stockholders		$ 168.1	$ 53.6

Consolidated Statements of Comprehensive income (loss) For the Years Ended December 31, 2022 and 2021

(in millions of dollars)	2022	2021
Net income	$ 196.0	$ 73.1
Changes in other comprehensive income (loss), net of tax:
Foreign currency translation adjustments	(40.6)	(17.5)
Pension and other post-retirement benefit plans
Net actuarial gain (net of tax)	55.9	19.1
Prior service credits (cost), net of amortisation	0.2	(0.1)
Pension and other post-retirement benefit plans	56.1	19.0
Total comprehensive income	211.5	74.6
Less: Comprehensive income attributable to non-controlling interests	25.2	18.4
Comprehensive income attributable to RCI stockholders'	$ 186.3	$ 56.2

Accumulated other Comprehensive loss

Accumulated other comprehensive loss is disclosed as a separate component of Stockholder's equity in the accompanying consolidated balance sheets. Accumulated other comprehensive loss at December 31, 2022 and December 31, 2021 consist of the following:

(in millions of dollars)	Foreign Currency Translation Adjustments	Defined Benefit Pension Items	Other	Total
Ending balance December 31, 2020	$ (147.0)	$ (47.6)	$ (0.5)	$ (195.1)
Net current period change	(16.4)	19.0	-	2.6
Ending balance December 31, 2021	$ (163.4)	$ (28.6)	$ (0.5)	$ (192.5)
Net current period change	(37.8)	56.1	-	18.3
Ending balance December 31, 2022	$ (201.2)	$ 27.5	$ (0.5)	$ (174.2)

The related tax effects allocated to each component of accumulated other comprehensive income for the period ended December 31, 2022 and December 31, 2021:

(in millions of dollars)

	2022
	Before-tax amount	Tax (expense) or benefit	Net-of-tax amount
Foreign currency translation adjustments	$ (40.6)	$ -	$ (40.6)
Pension and post-retirement benefits:
Net actuarial gain	70.6	(14.7)	55.9
Prior service credits (cost), net of amortisation	0 .2	-	0.2
Pension and other post-retirement benefit plans	70.8	(14.7)	56.1
Other comprehensive income	$ 30.2	$ (14.7)	$ 15.5

	2021
	Before-tax amount	Tax (expense) or benefit	Net-of-tax amount
Foreign currency translation adjustments	$ (17.5)	$ -	$ (17.5)
Pension and post-retirement benefits:
Net actuarial gain	40.2	(21.1)	19.1
Prior service credits (cost), net of amortisation	(0.3)	0.2	(0.1)
Pension and other post-retirement benefit plans	39.9	(20.9)	19.0
Other comprehensive income	$ 22.4	$ (20.9)	$ 1.5

Consolidated Statements of Changes in Stockholders' Equity For the Years Ended December 31, 2022 and 2021

(in millions of dollars)	Additional Paid-in capital	Accumulated Other Comprehensive Income (Loss)	Retained Earnings	Equity attributable to RCI Stockholder's ^*	Non-controlling Interests	Total Stockholders' equity
Balances at December 31, 2020	$ 325.1	$ (195.1)	$ 360.8	$ 490.8	$ 51.0	$ 541.8
Dividends declared	-	-	(46.9)	(46.9)	-	(46.9)
Capital reduction	-	-	-	-	(3.7)	(3.7)
Capital contribution	20.0	-	-	20.0	-	20.0
Net income	-	-	53.6	53.6	19.5	73.1
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments	-	(16.4)	-	(16.4)	(1.1)	(17.5)
Net change in pension and other
post-retirement benefits	-	19.0	-	19.0	-	19.0
Balances at December 31, 2021	345.1	(192.5)	367.5	520.1	65.7	585.8
Dividends declared	-	-	(4.0)	(4.0)	(9.7)	(13.7)
Net income	-	-	168.1	168.1	27.9	196.0
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments	-	(37.8)	-	(37.8)	(2.8)	(40.6)
Net change in pension and other
post-retirement benefits	-	56.1	-	56.1	-	56.1
Gain on disposal of subsidiary in a common
control transaction (Refer note 18)	-	-	1.4	1.4	-	1.4
Balances at December 31, 2022	$ 345.1	$ (174.2)	$ 533.0	$ 703.9	$ 81.1	$ 785.0

RAIN Carbon Inc. And Subsidiaries Consolidated Statements of Cash Flows Year Ended December 31, 2022 and 2021

(in millions of dollars)	2022	2021
Cash flows from operating activities
Net income	$ 196.0	$ 73.1
Adjustments to reconcile net income to net
cash provided by operating activities
Depreciation and amortisation	98.3	103.7
Long-lived asset impairment loss	5.8	2.2
Amortisation of deferred finance costs	3.1	3.0
Deferred income tax expense / (benefit)	12.5	4.2
Gain on sale of property, plant and equipment (net)	0.1	(4.4)
Gain on re-purchase of senior secured notes	(0.5)	0.1
Gain on disposal of subsidiaries	(0.4)	(0.5)
Exchange (gain) loss on monetary items	4.8	(3.3)
Allowance for doubtful accounts	-	0.8
Gain in Equity affiliated companies	-	0.1
Provision / (reversal of provision) for plant closure costs	-	(1.4)
Other non cash items	(2.4)	(18.5)
Changes in other liabilities	6.4	9.2
Changes in operating assets and liabilities
Trade, current tax and other receivables	(75.9)	(94.1)
Due from affiliated companies	(2.7)	(3.6)
Inventories	(224.1)	(128.8)
Prepaid expenses and other current assets	(6.9)	(36.2)
Trade and other payables	12.4	82.0
Due to affiliated companies	2.6	-
Current tax and accrued liabilities	(2.9)	17.5
Net cash provided by operating activities	26.2	5.1
Cash flows from investing activities
Proceeds from disposal of subsidiaries	4.3	0.5
Proceeds from sale of property plant and equipment	0.1	5.4
Loan repaid by affiliates	0.1	8.1
Capital expenditures	(54.2)	(57.3)
Loan to affiliates	(6.8)	(5.7)
Net cash used in investing activities	(56.5)	(49.0)
Cash flows from financing activities
Proceeds from short-term debt	254.3	97.0
Principal payments on long-term debt	(15.2)	(4.6)
Principal payments on short-term debt	(174.3)	(95.3)
Principal payment on finance leases	(0.6)	(0.7)
Proceeds from capital contribution	-	20.0
Repayment of equity	-	(3.7)
Dividends paid to RCI Stockholders	(11.2)	(39.7)
Dividends paid to Non-controlling interests	(9.7)	-
Net cash provided by/(used in) financing activities	43.3	(27.0)

(in millions of dollars)	2022	2021
Effect of exchange rate changes on cash and cash equivalents and restricted cash	(7.4)	(2.3)
Net (decrease) / increase in cash and cash equivalents and restricted cash	5.6	(73.2)
Cash and cash equivalents and restricted cash
Beginning of the year	167.7	240.9
End of the year	$ 173.3	$ 167.7
Supplemental cash flow information
Cash paid during the year for interest	$ 55.2	$ 55.3
Cash paid during the year for income taxes	59.2	43.9
Dividends declared not yet paid in cash (converted to debt)	-	7.2
Right-of-use assets recognised for operating leases	26.8	4.9

Refer to Note 8 for supplemental cash flow information on finance and operating lease obligations.

Notes to Consolidated Financial Statements December 31, 2022 and 2021

1. Description of Business

Rain Carbon Inc. (the "Company" or "RCI") is a leading vertically integrated global producer and up cycler of a diversified portfolio of carbon based and advanced material products that are essential raw materials for staples of everyday life. The Company along with its subsidiaries ("the Group" or "RCI Group") operates in two business segments: Carbon and Advanced Materials.

Carbon comprises of Calcined Petroleum Coke ("CPC"), Green Petroleum Coke ("GPC"), Coal Tar Pitch ("CTP"), Energy produced through Waste-heat recovery and other derivatives of Coal Tar distillation. Advanced Materials comprise derivative products generated from the downstream operations of Coal Tar distillation.

2. Summary of Significant Accounting Policies

a. Principles of Consolidation and Basis of Presentation

The accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles in United States of America ("U.S. GAAP") and include the accounts of RCI and its majority-owned subsidiaries that are required to be consolidated. All intercompany transactions and balances have been eliminated in consolidation.

The Group consolidates entities in which it has a controlling financial interest based on either the variable interest entity (VIE) or voting interest model. The Group is required to first apply the VIE model to determine whether it holds a variable interest in an entity, and if so, whether the entity is a VIE. If the Group determines it does not hold a variable interest in a VIE, it then applies the voting interest model. Under the voting interest model, it consolidates an entity when it holds a majority voting interest in an entity. When a disposal takes place, the Group deconsolidates the subsidiary as of the date the reporting entity ceases to have a controlling financial interest. Full gain or loss is recognized in net income in the period of deconsolidation or derecognition. In case the disposal is within common control, any difference in the amount paid (or payable) by the transferee versus the historical cost of the assets transferred to the transferee is recorded as an adjustment to equity (retained earnings). A subsequent adjustment to the amount paid (or payable) to the transferor is also recorded in equity (retained earnings).

As of December 31, 2022, the Group determined that all entities subject to the consolidation guidance are VIEs for which the Group is the primary beneficiary.

In cases where the Group does not fully own a subsidiary, it values any remaining outstanding noncontrolling interest at the end of reporting period at its proportionate share of the value of the net identified assets.

The equity method is used to account for investments in affiliates in which the Group can exercise significant influence over the affiliates' operating and financial policies.

b. Use of Estimates

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. We review our estimates on an ongoing basis, based on currently available information. Actual results could differ from those estimates. Significant items subject to such estimates and assumptions include allowance for doubtful accounts, the useful lives of fixed assets, estimated obsolescence of inventory, valuation of long-lived assets and goodwill, valuation of deferred tax assets and liabilities, lease liabilities and right-of-use assets, environmental liabilities, post-retirement and pension obligations, commitments and contingencies and valuation of derivatives.

c. Foreign Currency Translation and Transactions

The accompanying consolidated financial statements are reported in U.S. dollars. The translation from the respective functional currencies to the U.S. dollar is performed using the exchange rates prevailing at the balance sheet dates for assets and liabilities and average exchange rates prevailing during the reporting periods for revenue, costs, and expenses.

Adjustments resulting from such translation are accumulated and reported as other comprehensive income (loss), a separate component of equity.

Transactions in foreign currency are recorded at the exchange rates prevailing on the date of the transactions. Monetary assets and liabilities denominated in foreign currency are restated at the prevailing year-end rates. The resulting gain/loss along with the realized gain/loss on account of foreign currency transactions are accounted for in the consolidated statements of income.

d. Cash and cash equivalents and Restricted cash

All highly liquid, short-term investments with original maturities of less than or equal to three months when purchased are considered to be cash equivalents. Cash and cash equivalents include $87.9 and $46.2 million of certificates of deposit with an initial term of less than three months at December 31, 2022 and December 31, 2021, respectively.

Restricted cash consists of cash balances which are legally or contractually restricted for usage or withdrawal.

The following table provides a reconciliation of cash and cash equivalents and restricted cash reported in the Consolidated Balance Sheet to the total of the amounts in the Consolidated Statement of Cash Flows.

(in millions of dollars)	2022	2021
Cash and cash equivalents	$ 168.7	$ 163.1
Restricted cash	4.6	4.6
Total cash, cash equivalents and restricted cash in the consolidated statement of cash flows	$ 173.3	$ 167.7

e. Revenue Recognition

The Group recognizes revenue when it satisfies performance obligations under the terms of its contracts, and control of its products is transferred to its customers in an amount that reflects the consideration the Group expects to receive from its customers in exchange for those products. This process involves identifying the customer contract, determining the performance obligations in the contract, determining the contract price, allocating the contract price to the distinct performance obligations in the contract, and recognizing revenue when the performance obligations have been satisfied. A performance obligation is considered distinct from other obligations in a contract when it (a) provides a benefit to the customer either on its own or together with other resources that are readily available to the customer and (b) is separately identified in the contract. The Group considers a performance obligation satisfied once it has transferred control of a good or product to a customer, meaning the customer has the ability to use and obtain the benefit of the product.

Shipping and other transportation costs charged to buyers are recorded in both sales and cost of sales.

Taxes assessed by a government authority that are both imposed on and concurrent with a specific revenue-producing transaction, that are collected by the Company from a customer, are excluded from sales.

The Group derives its revenue from the sale of carbon and advanced materials products. Sales are made to domestic and international customers whereby the prices are subject to negotiations based on movements in raw material prices, levels of offtake, demand and supply situation in the market. Such prices are agreed through a formal contract. The discounts offered to these customers are mostly contractually agreed. Certain discounts are recognized as and when the negotiations thereon are completed, and the rates are agreed.

The Group recognises revenues when control of the product is transferred to the customer in accordance with the underlying terms of arrangements. The terms of sales arrangements, customer acceptance terms including the timing of transfer of control, are varied and could affect the timing of recognition of the sales.

Break up of revenue based on timing of transfer of goods or services:

(in millions of dollars)	2022	2021
Revenue from Operations recognised at a point of time	$ 2,470.0	$ 1,753.1
Revenue from Operations recognised over a point of time	0.2	0.4
Total	$ 2,470.2	$ 1,753.5

Contract Assets and Liabilities:

Contract assets primarily represent revenue earnings over time that are not yet billable based on the terms of the contracts. The Company does not have impairment losses associated with contracts with customers for the period ended December 31, 2022 and 2021.

Contract liabilities consist of fees invoiced or paid by the Company's customers for which the associated performance obligations have not been satisfied and revenue has not been recognized based on the Company's revenue recognition criteria described above.

Contract assets and contract liabilities are reported in a net position on an individual contract basis at the end of each reporting period. Contract assets are classified as current on the consolidated balance sheet when the Company expects to complete the related performance obligations and invoice the customers within one year of the balance sheet date, and as long-term when the Company expects to complete the related performance obligations and invoice the customers more than one year out from the balance sheet date. Contract liabilities are classified as current on the consolidated balance sheet when the revenue recognition associated with the related customer payments and invoicing is expected to occur within one year of the balance sheet date and as long-term when the revenue recognition associated with the related customer payments and invoicing is expected to occur in more than one year from the balance sheet date.

The following table provides the details of contract assets and liabilities recorded in the consolidated balance sheet:

(in millions of dollars)	2022	2021
Contract assets	$ 1.6	$ 3.0
Contract liabilities	0.9	1.7

f. Trade Accounts Receivable

The Group grants credit to its customers based on periodic credit evaluations of customers' financial condition and generally does not require collateral but may require letters of credit for certain international sales. The Group believes its credit risk related to trade receivable is minimal. The Group maintains an allowance for doubtful accounts for estimated losses inherent in its Trade accounts receivable portfolio. In establishing the required allowance, management considers historical losses adjusted to take into account current market conditions and the Group's customers' financial condition, the amount receivables in dispute, and the current receivables ageing and current payment patterns.

Trade accounts receivable are recorded at the invoiced amount and do not bear interest. Amounts collected on trade accounts receivable are included in net cash provided by operating activities in the consolidated statements of cash flows.

g. Inventories

Inventories are stated at the lower of cost or net realizable value and consist principally of raw material, finished goods, work in progress, and materials and supplies. Cost is determined using the weighted average cost method. Net realizable value is the estimated selling price in the ordinary course of business, less the costs of completion and selling expenses. The Group reviews its inventory balances and writes down its inventories for estimated obsolescence or excess inventories equal to the difference between the cost of inventories and the estimated market value based upon assumptions about future demand and market conditions. The cost of inventories includes production costs and depreciation expense.

h. Property, Plant, and Equipment

Property, plant, and equipment is carried at cost and includes improvements, which significantly increase capacities or extend useful lives of existing plant and equipment and consists primarily of buildings and improvements, machinery and equipment, furnishings and land, which is being depreciated on a straight-line basis over the estimated useful lives of the assets (except for land). When fixed assets are sold or retired, cost and accumulated depreciation are eliminated from the accounts, and gains or losses are recorded in consolidated statements of income.

Cost of acquired assets includes purchase price, import duties and non-refundable purchase taxes, after deducting trade discounts and rebates, any other directly attributable cost of bringing the item to its working condition for its intended use such as initial delivery, handling costs and installation costs.

Cost of a self-constructed asset comprises the cost of materials and direct labor, any other costs directly attributable to bringing the item to working condition for its intended use such as costs of site preparation and remediation, estimated costs of dismantling and removing/disposal of the item and restoring the site on which it is located.

Subsequent expenditure related to an asset is capitalized only if it increases the future benefits from the existing assets beyond its previously assessed standards of performance.

Advances paid towards acquisition of assets outstanding at each balance sheet date are shown under other non-current assets as capital advances.

Cost of assets not ready for intended use, as on the balance sheet date, is shown as Construction in progress under Property, Plant and Equipment, net.

When significant parts of plant and equipment are required to be replaced at intervals, the Group depreciates them separately based on their specific useful lives. Likewise, when a major overhaul is performed, its cost is recognized in the carrying amount of the plant and equipment as a replacement if the recognition criteria are satisfied. All other repair and maintenance costs are recognized in profit or loss as incurred. The present value of the expected cost for the decommissioning of an asset after its use is included in the cost of the respective asset if the recognition criteria for a provision are met.

The residual values, useful lives and methods of depreciation of property, plant and equipment are reviewed at each financial year end and adjusted prospectively, if appropriate.

Plant and equipment held under finance leases are stated at the present value of minimum lease payments and are amortized on a straight-line basis over the shorter of the lease term or estimated useful life of the asset.

Interest expense is capitalized for qualifying assets under construction. Capitalized interest costs are included in property, plant and equipment and are depreciated over the useful life of the related asset.

The estimated useful lives for depreciation purposes are:

Buildings and improvements	1-59 years
Machinery and equipment	1-50 years

The Group evaluates impairment of its property, plant, and equipment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recovered. If circumstances require an asset be tested for possible impairment, the Group first compares undiscounted cash flows expected to be generated by an asset to the carrying value of the asset. If the carrying value of the long-lived asset is not recoverable on an undiscounted cash flow basis, impairment is recognized to the extent that the carrying value exceeds its fair value. Fair value is determined through various valuation techniques including discounted cash flow models, quoted market values, and third-party independent appraisals, as considered necessary (see note 4)

i. Leases

The Group accounts for leases in accordance with Topic 842, Leases (see Note 8). The Group determines if an arrangement contains a lease at the inception of a contract. Right-of-use assets represent the Group's right to use an underlying asset for the lease term are presented on the face of the balance sheet and lease liabilities represent the Group's obligation to make lease payments arising from the lease are grouped under accrued and other non-current liabilities. Right-of-use assets and lease liabilities are recognized at the commencement date of the lease based on the present value of the remaining future minimum lease payments. The lease liability is subsequently measure at amortized cost using the effective-interest method.

Key estimates and judgements include how the Group determines (1) the discount rate it uses to discount the unpaid lease payments to present value, (2) lease term, and (3) lease payments.

Topic 842 requires a lessee to discount its unpaid lease payments using the interest rate implicit in the lease or, if that rate cannot be readily determined, its incremental borrowing rate. Generally, the Group cannot determine the interest rate implicit in the lease because it does not have access to the lessor's estimated residual value or the amount of the lessor's deferred initial direct costs.

The present value of the lease payments is calculated using the incremental borrowing rate for operating and finance leases, which is determined using a portfolio approach based on the rate of interest that we would have to pay to borrow an amount equal to the lease payments on a collateralized basis over a similar term. We use the unsecured borrowing rate and risk-adjust that rate to approximate a collateralized rate in the currency of the lease.

Certain lease contracts include obligations to pay for other services, such as operations and maintenance. The services are accounted for separately and the group allocate payments to the lease and other services components based on estimated stand-alone prices.

When the contracts contain the option to extend the lease term, terminate the lease before the contractual expiration date, or purchase the leased asset, and if it is reasonably certain that Group will exercise the option, we consider these options in determining the classification and measurement of the lease.

Lease payments included in the measurement of the lease liability comprise the following:

―	Fixed payments, including in-substance fixed payments, owed over the lease term (includes termination penalties the Group would owe if the lease term reflects it's exercise of a termination option);
―	Variable lease payments that depend on an index or rate, initially measured using the index or rate at the lease commencement date;
―	Amounts expected to be payable under a Group-provided residual value guarantee; and
―	The exercise price of a Group option to purchase the underlying asset if the Group is reasonably certain to exercise the option

The ROU asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for lease payments made at or before the lease commencement date, plus any initial direct costs incurred less any lease incentives received.

For operating leases, the ROU asset is subsequently measured throughout the lease term at the carrying amount of the lease liability, plus initial direct costs, plus (minus) any prepaid (accrued) lease payments, less the unamortized balance of lease incentives received. Lease expense for lease payments is recognized on a straight-line basis over the lease term.

For finance leases, the ROU asset is subsequently amortized using the straight-line method from the lease commencement date to the earlier of the end of its useful life or the end of the lease term unless the lease transfers ownership of the underlying asset to the Group or the Group is reasonably certain to exercise an option to purchase the underlying asset. In those cases, the ROU asset is amortized over the useful life of the underlying asset. Amortization of the ROU asset is recognized and presented separately from interest expense on the lease liability.

Variable lease payments associated with the Group's leases are recognized when the event, activity, or circumstance in the lease agreement on which those payments are assessed occurs. Variable lease payments are presented as operating expense in the Group's consolidated statements of income in the same line item as expense arising from fixed lease payments (operating leases) or amortization of the ROU asset (finance leases).

Costs associated with operating lease assets or short-term leases are recognized on a straight-line basis within operating expenses over the term of the lease. Finance lease assets are amortized on a straight-line basis over the shorter of the estimated useful lives of the assets or, in the instance where title does not transfer at the end of the lease term included under depreciation and amortization expense. The interest component of a finance lease is included in interest expense and recognized using the effective interest method over the lease term.

The Group uses the long-lived assets impairment guidance in Subtopic 360-10, Property, Plant, and Equipment - Overall, to determine whether a ROU asset is impaired, and if so, the amount of the impairment loss to recognize. See Note 2(h) The Group monitors for events or changes in circumstances that require a reassessment of one of its leases. When a reassessment results in the remeasurement of a lease liability, a corresponding adjustment is made to the carrying amount of the corresponding ROU asset unless doing so would reduce the carrying amount of the ROU asset to an amount less than zero. In that case, the ROU asset is reduced to zero and the remainder of the adjustment is recorded in profit or loss.

The Group has elected not to recognize Right-of-use assets and lease liabilities for short-term leases that have a lease term of 12 months or less.

j. Intangible Assets

Identifiable intangible assets, other than goodwill and in process research and development ("IP/R&D"), are recorded at cost. Intangible assets that do not have indefinite lives are amortiezd on a systematic basis over their estimated useful lives.

The estimated useful lives of intangible assets are:

Customer contracts	7 - 15 years
Favorable contracts	13 years
Technology rights	10 - 12 years
Trade names	8 - 15 years
IP/R&D	15 years
Others	2 -10 years

The Group evaluates impairment of its intangible assets on an individual basis whenever circumstances indicate that the carrying value may not be recovered. If circumstances require an asset be tested for possible impairment, the Group first compares undiscounted cash flows expected to be generated by an asset to the carrying value of the asset. If the carrying value of the intangible asset is not recoverable on an undiscounted cash flow basis, impairment is recognized to the extent that the carrying value exceeds its fair value. Fair value is determined through various valuation techniques including discounted cash flow models, quoted market values, and third-party independent appraisals, as considered necessary.

k. Goodwill

Goodwill represents cost in excess of fair value of net assets acquired in business combinations. Goodwill is reviewed for potential impairment at least annually or more frequently if circumstances indicate that a potential impairment has occurred.

Goodwill is tested for impairment annually, and more frequently when there is a triggering event. The Company first performs a qualitative assessment by evaluating all relevant events and circumstances to determine if it is more likely than not that the Goodwill is impaired; this includes considering any potential effect on significant inputs to determining the fair value of the Goodwill. When it is more likely than not that the Goodwill is impaired, then the Company calculates the fair value of the Goodwill and performs a quantitative impairment test. An impairment loss is recognized as the difference, if any, between the reporting unit's carrying amount and its fair value, to the extent the difference does not exceed the total amount of goodwill allocated to the reporting unit.

The annual testing of goodwill is based on carrying value and the estimate of fair value as of November 30.

The group has performed an assessment of goodwill during 2022 and 2021 and no impairment was recorded.

A reporting unit is defined as an operating segment or a component of an operating segment. Accordingly, the following are considered as reporting units for the above assessment:

a. Calcination business forming part of Carbon Segment

b. Carbon distillation business (other than (c) below) forming part of Carbon Segment

c. Carbon distillation business - OOO RÜTGERS Severtar forming part of Carbon Segment

d. Advanced materials business

l. Plant Turnaround Costs

Certain major maintenance items require plant shutdown for a period of time to perform periodic overhauls and refurbishment activities necessary to sustain long-term production. The Group capitalizes periodic planned major maintenance activities (plant turnaround costs) and amortizes such costs over periods leading up to the next planned turnaround (generally 14 months).

Included in prepaid expenses and other current assets is $7.0 million and $5.4 million of deferred plant turnaround costs as of December 31, 2022 and December 31, 2021, respectively. For the years ended December 31, 2022 and 2021, $13.5 million and $12.7 million, respectively, of plant turnaround cost were amortized within depreciation and amortization in the accompanying consolidated statements of income.

m. Deferred Finance Costs

Deferred finance costs consist of debt financing fees, which are being amortized over the life of the instrument.

The deferred finance cost of $5.8 million and $8.8 million for the period ended December 31, 2022 and December 31, 2021, respectively are reduced from the long-term debt in consolidated balance sheet.

Amortization of deferred finance costs is included in interest expense, net in the accompanying consolidated statements of income and totaled $3.1 million and $3.0 million for the year ended December 31, 2022 and December 31, 2021, respectively.

n. Derivatives and Hedging Activities

The Group records its derivative instruments on the consolidated balance sheet at their respective fair values and any changes in fair value are recognized immediately in consolidated statement of income, unless the derivatives qualify as hedges of future cash flows or net investments. For derivatives qualifying as hedges of future cash flows, the effective portion of changes in fair value are recorded in accumulated other comprehensive income (loss) until the related hedge items impact earnings. Any ineffective portion of a hedge is reported in earnings immediately. Fair values for derivative financial instruments are based upon quoted market prices, where available, or pricing models.

As of December 31, 2022, and December 31, 2021, there are no derivative instruments.

o. Fair Value of Financial Instruments

The Group utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible. The Group determines fair value based on assumptions that market participants would use in pricing an asset or liability in the principal or most advantageous market.

The Group classifies assets and liabilities into one of three fair value levels depending on the observability of the input employed in the measurement as described below:

(i) Level 1 inputs: inputs are quoted prices in active markets for identical assets or liabilities.

(ii) Level 2 inputs: Other than quoted prices included in Level 1 inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability.

(iii) Level 3 inputs: Unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at measurement date.

The Group classifies assets and liabilities in their entirety based on the lowest level of input that is significant to the fair value measurement. The Group's methodology for categorizing assets and liabilities that are measured at fair value pursuant to this hierarchy gives the highest priority to unadjusted quoted prices in active markets and the lowest level to unobservable inputs.

The carrying amounts of cash, trade accounts receivable, trade and other payables and short-term debt approximate fair value because of the short maturity of these instruments. Additionally, the carrying amount of long-term debt (net of deferred finance cost) approximates fair value at December 31, 2022, since long-term debt is at a rate consistent with market rates currently available to the Group.

The following summarizes the assets and liabilities measured at fair value on a recurring basis as of December 31, 2022 and December 31, 2021. Assets consist of the Group's retirement plans and post-retirement benefits and derivative instruments, which are valued using quoted prices in active markets for identical assets or liabilities or directly or indirectly through market-corroborated input, and therefore, are classified as Level 1 or Level 2.

Recurring Fair Value Measurements

(in millions of dollars)	Level 1	Level 2	Fair Value as of December 31, 2022
Assets
Pension Plan Assets:
Mutual funds	$ 8.1	$ -	$ 8.1
Insurer managed fund	-	42.2	42.2
Total	$ 8.1	$ 42.2	$ 50.3

(in millions of dollars)	Level 1	Level 2	Fair Value as of December 31, 2021
Assets
Pension Plan Assets:
Mutual funds	$ 10.3	$ -	$ 10.3
Insurer managed fund	-	48.8	48.8
Total	$ 10.3	$ 48.8	$ 59.1

Nonrecurring Fair Value Measurements

Long-lived assets within an asset group were measured at fair value on a nonrecurring basis at December 31, 2022 and December 31, 2021 due to an impairment recognized on those assets at that date (see Note 4).

p. Income Taxes

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences reverse. The Group recognizes the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. The Group records interest related to income tax in interest expense and tax related penalties in selling, general, and administrative expenses.

CARES Act and CAA

On March 27, 2020 and December 27, 2020, the President of the United States signed and enacted into law the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) and the Consolidated Appropriations Act, 2021 (CAA). Among other provisions, the CARES Act and the CAA provide relief to U.S. federal corporate taxpayers through temporary adjustments to net operating loss rules, changes to limitations on interest expense deductibility, and the acceleration of available refunds for minimum tax credit carryforwards. The CARES Act and the CAA did not have a material effect on the Company's consolidated financial statements

q. Selling, General, and Administrative Expenses

Selling, general, and administrative expenses include the compensation costs, legal and professional consultants, travel costs, and other general expenses.

r. Borrowing costs and capitalized interest

Interest expense, net is the combination of interest expense associated with the outstanding debt of the Group and interest income.

Interest on external borrowings is capitalized on major projects with an expected construction period of one year or longer. Capitalized interest is added to the cost of the underlying asset and is amortized over the useful lives of the assets in the same manner as the underlying assets.

There is no interest capitalized during the year ended December 31, 2022 and December 31, 2021.

s. Environmental liabilities

The Group accrues for remediation costs and penalties when the responsibility to remediate is probable and the amount of related cost is reasonably estimable. Remediation liabilities are discounted if the amount and timing of the cash disbursements are readily determinable.

Recoveries of environmental remediation costs from third parties that are probable of realization are separately recorded as assets and are not offset against the related environmental liability.

t. Commitments and Contingencies

Amounts associated with litigation and contingencies are accrued when management, after taking into consideration the facts and circumstances of each matter including any settlement offers, has determined that it is probable that a liability has been incurred and the amount of loss can be reasonably estimated. Legal costs incurred in connection with loss contingencies are expensed as incurred.

u. Recently Issued Accounting Standards and pronouncements

Accounting Standards Adopted in the Current Year

Disclosure Requirements for Certain Employer-Sponsored Benefit Plans: In August 2018, the FASB issued ASU 2018-14, Compensation - Retirement Benefits - Defined Benefit Plans - General (Subtopic 715-20): Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans. The ASU changed certain disclosure requirements such as adding the requirement for a narrative description of the reasons for significant gains and losses affecting the benefit obligation for the period. The ASU also eliminated the requirement to reconcile the beginning and ending balance of plan assets whose fair value estimates are based on significant unobservable inputs (Level 3 in the fair value hierarchy), while adding requirements to disclose transfers of assets into and out of Level 3 and purchases of Level 3 assets.

Adoption of this ASU by the Group, did not have a material impact on the financial statements.

Simplifying the Accounting for Income Taxes: In December 2019, the FASB issued ASU 201912, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which removes certain exceptions for recognizing deferred taxes for investments, performing intra period allocation, and calculating income taxes in interim periods. The ASU also adds guidance to reduce complexity in certain areas, including recognizing deferred taxes for tax goodwill and allocating taxes to members of a consolidated group.

The Group adopted the ASU effective January 1, 2022. Its effect on the Group's consolidated financial statements was not material.

Discount Rate for Lessees That Are Not Public Business Entities: In November 2021, the FASB issued ASU 2021-09, Leases (Topic 842). This guidance provides lessees that are not public business entities to elect for a risk-free rate by class of underlying asset as the discount rate for all leases, rather than at the entity-wide level.

The ASU is effective for fiscal years beginning after December 15, 2021. The Group did not elect this option and continued using incremental borrowing rate, determined by class of underlying asset, to discount the lease payments. Hence the adoption of ASU 2021-09 did not have any impact on the Group's consolidated financial statement.

Accounting for equity method investments: In January 2020, the FASB issued ASU 2020-01, Investments - Equity Securities (Topic 321), Investments - Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815): Clarifying Interactions between Topic 321, Topic 323, and Topic 815. ASU 2020-01 addresses accounting for the transition into and out of the equity method and provides guidance on whether equity method accounting would be applied to certain purchased options and forward contracts upon settlement.

The Group adopted the ASU effective January 1, 2022. It did not have any impact on the Group's consolidated financial statements.

Disclosure requirements of government assistance received: In November 2021, the FASB issued ASU 2021-10, Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance, which requires business entities (except for not-for-profit entities and employee benefit plans) to disclose information about certain government assistance they receive. The Topic 832 disclosure requirements include: (i) the nature of the transactions and the related accounting policy used; (ii) the line items on the balance sheet and income statement that are affected and the amounts applicable to each financial statement line item; and (iii) significant terms and conditions of the transactions.

The Group adopted the ASU effective January 1, 2022. It did not have any impact on the Group's consolidated financial statements.

Accounting for modifications or exchanges of freestanding equity: In May 2021, the FASB issued ASU 2021-04, Earnings Per Share (Topic 260), Debt- Modifications and Extinguishments (Subtopic 470-50), Compensation-Stock Compensation (Topic 718), and Derivatives and Hedging- Contracts in Entity's Own Equity (Subtopic 815-40), which clarifies and reduces diversity in an issuer's accounting for modifications or exchanges of freestanding equity-classified written call options (for example, warrants) that remain equity classified after modification or exchange.

The Group adopted this ASU in 2022 and determined that it does not have any impact on the consolidated financial statements.

Determination of price of Equity-Classified Share-Based Awards: In October 2021, the FASB issued ASU 2021-07, Compensation - Stock Compensation (Topic 718): Determining the Current Price of an Underlying Share for Equity-Classified Share-Based Awards (a consensus of the Private Company Council), which provides private companies with a practical expedient to determine their restricted share price, or option-based award share price input, using a "reasonable application of a reasonable valuation method." The practical expedient applies to both employee and nonemployee equity-classified share-based payment awards and is applied on a measurement date-by-measurement date basis.

The Group adopted this ASU in 2022 and determined that it does not have any impact on the consolidated financial statements

Accounting Standards Not Yet Adopted

Fair Value Hedging - Portfolio Layer Method: In August 28, 2017, the FASB issued Accounting Standards Update No. 2017- 12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. The amendments in that Update made targeted improvements to the optional hedge accounting model with the objective of improving hedge accounting to better portray the economic results of an entity's risk management activities in its financial statements. The amendments in this Update apply to all entities that elect to apply the portfolio layer method of hedge accounting in accordance with Topic 815.

For public business entities, the amendments in this Update are effective for fiscal years beginning after December 15, 2022, and interim periods within those fiscal years. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years. Early adoption is permitted.

The Group does not expect the adoption of ASU 2017-12 to have any impact on its consolidated financial statements.

Troubled Debt Restructurings ("TDR") and Vintage Disclosures: Troubled Debt Restructurings by Creditors: The amendments in this Update eliminate the accounting guidance for TDRs by creditors in Subtopic 310-40, Receivables-Troubled Debt Restructurings by Creditors, while enhancing disclosure requirements for certain loan refinancings and restructurings by creditors when a borrower is experiencing financial difficulty. Specifically, rather than applying the recognition and measurement guidance for TDRs, an entity must apply the loan refinancing and restructuring guidance in paragraphs 310-20-35-9 through 35-11 to determine whether a modification results in a new loan or a continuation of an existing loan.

Vintage Disclosures - Gross Writeoffs: For public business entities, the amendments in this Update require that an entity disclose current-period gross writeoffs by year of origination for financing receivables and net investments in leases within the scope of Subtopic 326-20, Financial Instruments-Credit Losses-Measured at Amortized Cost For entities that have adopted the amendments in Update 2016-13, the amendments in this Update are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. For entities that have not yet adopted the amendments in Update 2016-13, the effective dates for the amendments in this Update are the same as the effective dates in Update 2016-13.

The amendments in this Update should be applied prospectively, except as provided in the next sentence. For the transition method related to the recognition and measurement of TDRs, an entity has the option to apply a modified retrospective transition method, resulting in a cumulative-effect adjustment to retained earnings in the period of adoption.

Early adoption of the amendments in this Update is permitted if an entity has adopted the amendments in Update 2016-13, including adoption in an interim period. If an entity elects to early adopt the amendments in this Update in an interim period, the guidance should be applied as of the beginning of the fiscal year that includes the interim period. An entity may elect to early adopt the amendments about TDRs and related disclosure enhancements separately from the amendments related to vintage disclosures.

The Group does not expect application of this accounting standards update to have an impact on the financial statements.

Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions: In June 2022, the FASB issued ASU 2022-03, Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions. The ASU clarifies that a contractual restriction on the sale of an equity security should not be considered in measuring the fair value of the equity security and cannot be recognized as a separate unit of account. The ASU also requires the investor to disclose the fair value of equity securities subject to contractual sale restrictions, the nature and remaining duration of the restriction(s), and the circumstances that could cause a lapse in the restriction(s). The ASU is effective for the Company for annual and interim periods beginning after December 15, 2024. Early adoption is permitted for both interim and annual financial statements that have not yet been issued or made available for issuance.

The Group does not expect application of this accounting standards update to have an impact on the financial statements.

Disclosure of Supplier Finance Program Obligations: In September 2022, the FASB issued ASU 2022-04, Liabilities - Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations. The amendments in this Update require that a buyer in a supplier finance program disclose sufficient information about the program to allow a user of financial statements to understand the program's nature, activity during the period, changes from period to period, and potential magnitude. To achieve that objective, the buyer should disclose qualitative and quantitative information about its supplier finance programs.

The amendments in this Update are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, except for the amendment on rollforward information, which is effective for fiscal years beginning after December 15, 2023. Early adoption is permitted.

The Group does not expect application of this accounting standards update to have an impact on the financial statements.

Accounting for convertible instruments and contracts: In August 2020, the FASB issued ASU 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity's Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity's Own Equity. ASU 2020-06 reduces the number of accounting models for convertible instruments and allows more contracts to qualify for equity classification. ASU 2020-06 is effective for the Company's annual reporting periods beginning after December 15, 2023. Adoption is either a modified retrospective method or a fully retrospective method of transition.

Early adoption is permitted, but no earlier than annual periods beginning after December 15, 2020. The Group does not expect application of this accounting standards update to have an impact on the financial statements.

Accounting for Contract Assets and Contract Liabilities acquired in a business combination: In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which provides an exception to fair value measurement for contract assets and contract liabilities related to revenue contracts acquired in a business combination. The ASU requires an entity (acquirer) to recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606. At the acquisition date, an acquirer should account for the related revenue contracts in accordance with Topic 606 as if it had originated the contracts.

The ASU is effective for the Company for annual and interim periods in fiscal years beginning after December 15, 2023. Early adoption is permitted. The ASU is applied to business combinations occurring on or after the effective date.

3. Property, Plant, and Equipment, net

Property, plant, and equipment at December 31, 2022 and 2021 consisted of the following:

(in millions of dollars)	2022	2021
Land	$ 42.1	$ 44.4
Buildings and improvements	119.6	116.5
Machinery and equipment	851.5	823.4
Construction in progress	56.0	104.8
	1,069.2	1,089.1
Less: Accumulated depreciation	(497.2)	(460.0)
	$ 572.0	$ 629.1

Depreciation expense for the years ended December 31, 2022 and 2021 was $64.2 million and $66.0 million, respectively.

Impairment for the years ended December 31, 2022 and 2021 was $ 5.8 million and $2.2 million, respectively (refer note 4 for details)

During the year ended December 31, 2021, the Group has sold its Moundsville plant located in the United States of America which was classified as "Assets of disposable group held for sale" in the Consolidated Balance Sheet as at December 31, 2020 for an amount of $3.8 million. The resultant gain of $2.9 million was recognized under other income, net.

4. Impairment

a) The Group has temporarily shut down one of its operating units. The management carried out an impairment analysis of this asset and no impairment was considered necessary. The Group will continue to monitor any material changes to future economic conditions.

b) During 2018, the Group initiated a "Dual-Solvent Process (DSP)" project towards replacement of the existing phenol distillation plant. The plant is under construction as at December 31, 2022. However, due to technical problems faced during the test runs, the facility cannot be used as initially planned. Based on the current evaluation and fair value computed, an impairment loss of $5.8 million has been recognized in the consolidated statement of profit and loss for the year ended December 31, 2022.

c) During 2020, the Group initiated a project to extract Coal Tar Pitch from a pond at its CastropRauxel site. The Group incurred capital expenditure towards certain equipment for extracting and melting the Pitch to avoid environmental issues and disposal costs to clean up the site. The equipment had a carrying value of $2.2 million as at December 31, 2021 and was classified under property, plant and equipment. The Group received permission from the authorities for the clean-up for a specified period of time and expected that the permissions would be renewed until the project was completed.

During the year ended December 31, 2021, upon expiry of the permit, a request was made to the authorities to extend the permit for additional time. However, subsequent to September 30, 2021, the authorities denied the request for extension. Accordingly, the Group evaluated the alternate usage of the asset for other purposes and concluded that it cannot be used for any other purpose.

Based on above evaluation and the fair value computed, the Group has recognized an impairment loss of $2.2 million in the consolidated statement of income for the year ended December 31, 2021.

5. Intangible Assets, net

Intangible assets comprised of the following as of December 31, 2022 and December 31, 2021:

(in millions of dollars)	2022	2021
Intangible assets with definite life
Customer contracts	$ 213.5	$ 221.3
Favorable contracts	0.9	1.0
Technology rights	1.7	1.8
Trade names	86.7	90.3
IPR&D	10.6	11.3
Others	19.0	20.1
Total intangible assets	332.4	345.8
Accumulated amortisation and impairment
Customer contracts	(202.7)	(195.0)
Favorable contracts	(0.7)	(0.7)
Technology rights	(1.5)	(1.5)
Trade names	(80.5)	(80.0)
IPR&D	(4.3)	(3.8)
Others	(17.9)	(18.0)
Total accumulated amortisation	(307.6)	(299.0)
Intangible assets, net	$ 24.8	$ 46.8

Amortization expense for the years ended December 31, 2022 and 2021 was $20.6 million and $25.0 million, respectively.

The estimated intangible asset amortization expenses for each of the next five years and thereafter are as follows:

(in millions of dollars)	2022
2023	$ 8.6
2024	7.5
2025	6.5
2026	1.4
2027	0.8
Thereafter	-
	$ 24.8

6. Goodwill

(in millions of dollars)	Carbon Calcination	Carbon Distillation -Other than OOO RÜTGERS Severtar	Carbon Distillation -OOO RÜTGERS Severtar	Advanced Materials	Total
Balance as of December 31, 2020	$ 347.5	$ 129.6	$ -	$ 156.3	$ 633.4
Currency translation	(0.5)	(9.1)	-	(12.5)	(22.1)
Balance as of December 31, 2021	$ 347.0	$ 120.5	$ -	$ 143.8	$ 611.3
Currency translation	(2.9)	(6.3)	-	(8.4)	(17.6)
Adjustments ^*	-	(11.0)	11.0	-	-
Balance as of December 31, 2022	$ 344.1	$ 103.2	$ 11.0	$ 135.4	$ 593.7

^* Subsequent to the conflict in Europe, OOO RUTGERS Severtar is operating largely independent of the Group and hence considered as a separate reporting unit for the purpose of impairment testing of goodwill for the year ended December 31, 2022.

7. Investments

(in millions of dollars)	2022	2021
Investments
Equity method investments	$ 1.1	$ 1.2
Other investments	10.3	10.9
	$ 11.4	$ 12.1

Other investments:

Other investments represent the long-term investment in Arsol Aromatics GmbH & Co. KG ("Arsol") located in Germany, which is accounted for using the cost method. Arsol is engaged in the business of refining crude benzene. The cost method is applied as the Group does not exercise significant influence over Arsol.

Equity method investments:

The Group holds an investment in InfraTec Duisburg GmbH ("InfraTec"), a 30 percent owned infrastructure service company located in Germany, acquired as part of the acquisition of RÜTGERS Group. No dividend was received for the years ended December 31, 2022 and 2021.

The Group recognized profit of $0.0 million for the year ended December 31, 2022 (loss of $0.1 million for the year ended December 31, 2021) from the above company in which the equity method of accounting is followed and such income is included in other (income) expense, net in the consolidated statements of income. The equity method of accounting is applied for these investments as the group has the ability to exercise significant influence, but not control, over the investees.

Transactions with the equity method investees during the years ended December 31, 2022 and December 31, 2021 and the closing balances as of December 31, 2022 and December 31, 2021 are as follows:

(in millions of dollars)	2022	2021
Transactions
Cost of goods sold	$ 11.2	$ 10.7
Other operating income	1.4	1.3

	2022	2021
Closing balances
Due from affiliates	$ 3.0	$ 3.5

8. Leases

The Group entered into operating leases for certain facilities and equipment used in operations. As of December 31, 2022, operating leases are having remaining lease term up to 38 years. Some operating leases contain renewal options. If the Group is reasonably certain to exercise these renewal options, the options are considered in determining the lease term.

The Group entered into finance leases covering certain machinery and equipment.

As of December 31, 2022, and December 31, 2021, the gross amount of assets under Finance leases and related accumulated amortization reflected in property, plant and equipment, net recorded were as follows:

(in millions of dollars)	2022	2021
Machinery and equipment	$ 17.7	$ 18.8
	17.7	18.8
Less: Accumulated amortisation	(7.7)	(7.3)
	$ 10.0	$ 11.5

The following table summarizes the leases recorded on the Balance Sheet: (in millions of dollars)

Right-of-use assets:	2022	2021
Operating leases	$ 56.8	$ 44.7
Finance leases	10.0	11.5
Total right-of-use assets	$ 66.8	$ 56.2
Lease liabilities:
Operating leases	$ 58.7	$ 46.4
Finance leases	11.0	12.8
Total lease liabilities	$ 69.7	$ 59.2
The following table summarizes the lease costs:
Variable lease cost	$ 1.1	$ 0.4
Operating lease cost	13.4	15.6
Finance lease cost:
Amortisation	0.9	1.0
Interest	0.4	0.5
Short-term lease cost	5.4	3.7
Total lease costs	$ 21.2	$ 21.2
Weighted-average remaining lease term:
Operating leases	13 years	10.6 years
Finance leases	11.2 years	11.9 years
Weighted-average discount rate:
Operating leases	5.9%	5.1%
Finance leases	3.8%	3.8%

The following table summarizes the supplemental cash flow information relating to leases:

(in millions of dollars)	2022	2021
Cash paid for amounts included in the measurement of lease liabilities
Cash used in operations for operating leases	$ 13.6	$ 15.3
Cash used in operations for finance leases	0.4	0.5
Payments made on finance leases	0.6	0.7
Right-of-use assets recognised for operating leases
Operating leases	$ 26.8	$ 4.9
Finance leases	-	-

The following table provides the expected future minimum maturities of lease obligations as of December 31, 2022

(in millions of dollars)	Finance leases	Operating leases
2023	$ 1.5	$ 13.0
2024	1.1	10.1
2025	1.1	6.6
2026	1.1	5.5
2027	1.1	5.1
Thereafter	7.6	56.3
Gross lease liabilities	13.5	96.6
Less: Imputed interest	(2.5)	(37.9)
Lease liabilities	$ 11.0	$ 58.7

9. Composition of certain Balance Sheet items:

a. Accrued liabilities

Accrued liabilities at December 31, 2022 and December 31, 2021 consist of the following:

(in millions of dollars)	2022	2021
Accrued goods and services received	$ 8.8	$ 9.1
Accrued interest	12.9	12.7
Liabilities for factoring	4.4	9.6
Provisions for severance plans	0.2	0.1
Environmental liabilities (Refer note 16)	3.9	4.1
Finance leases - current portion	0.1	0.1
Operating leases - current portion	12.8	11.7
Advance from customers	0.9	1.5
Accrued bonus	11.3	11.2
Other accrued liabilities	11.2	8.1
	$ 66.5	$ 68.2

b. Other non-current liabilities:

Other non-current liabilities at December 31, 2022 and December 31, 2021 consist of the following:

(in millions of dollars)	2022	2021
Environmental liabilities (Refer note 16)	$ 13.3	$ 13.6
Operating leases - non current portion	45.9	34.7
Finance leases - non current portion	10.9	12.7
Advance from customers	-	0.2
Other non-current liabilities	2.7	2.7
	$ 72.8	$ 63.9

c. Inventories:

Inventories at December 31, 2022 and December 31, 2021 consist of the following:

(in millions of dollars)	2022	2021
Raw materials	$ 259.7	$ 143.8
Finished goods	185.0	120.1
Work in progress	28.6	20.2
Materials and supplies	68.4	48.5
	541.7	332.6
Less: Reserve for lower of cost or net realisable value	(18.4)	(12.4)
	$ 523.3	$ 320.2

10. Income Taxes

a) For the years ended December 31, 2022 and 2021, income from operations before taxes consists of the following:

(in millions of dollars)	2022	2021
U.S. Operations	$ 116.7	$ 32.2
Foreign Operations	156.3	91.6
Total	$ 273.0	$ 123.8

b) Income tax expense (benefit) consists of the following:

(in millions of dollars)	2022	2021
Current:
U.S. Federal	$ 7.1	$ 8.9
U.S. State & local	1.8	0.8
Foreign jurisdiction	55.6	36.8
	64.5	46.5
Deferred:
U.S. Federal	$ 17.1	$ (10.4)
U.S. State & local	1.4	(0.8)
Foreign jurisdiction	(6.0)	15.4
	12.5	4.2
Total income tax expense	$ 77.0	$ 50.7

c) The income tax expense differs from the amounts that would be determined through the application of the federal statutory rate to pre-tax income as reflected below:

(in millions of dollars)	2022	2021
Federal income tax expense based on 21% of pre-tax income	$ 57.3	$ 26.0
State income tax expense, net of federal effect	1.7	1.2
Permanent differences	2.7	10.3
Impact of tax rate changes	0.1	-
Effects of tax-exempt income and other deductions	0.4	(5.2)
Change in valuation allowance	19.7	18.7
Effects of additional taxes for prior years	(3.7)	1.2
Impact of differences in tax rates between jurisdictions	(4.9)	(5.0)
Tax effects of tax base transfers	(0.2)	(0.3)
Taxes on un-distributed foreign earnings	(1.9)	-
Non-deductible expenses	1.9	2.5
Foreign-Derived Intangile Income (FDII) deduction	(2.1)	(1.5)
Other	6.0	2.8
Total income tax expense	$ 77.0	$ 50.7

d) Deferred tax assets and liabilities are determined based on differences between financial statement carrying amounts of existing assets and liabilities and their respective tax bases and are measured using the tax rates expected to be in effect in future years.

Significant components of the deferred income tax assets and liabilities were the following:

(in millions of dollars)	2022	2021
Deferred tax assets
Basis difference of property, plant, and equipment	$ 0.2	$ 1.5
Intangible assets	7.8	14.5
Pension	12.3	36.1
Other assets	2.2	3.4
Foreign Tax Credit	12.3	23.4
Other liabilities	4.1	5.5
Interest carried forward	35.8	30.5
Capital Loss	-	0.1
Net operating loss carryforward	22.1	12.3
Lease Liability	15.8	14.1
Other	3.6	4.5
Total	116.2	145.9
Less: Valuation allowance	(60.9)	(52.2)
Total deferred tax assets (A)	55.3	93.7
Deferred tax liabilities
Basis difference of property, plant, and equipment	46.3	43.6
Intangible assets	8.7	18.9
Financial assets	4.5	5.1
Inventory	0.2	0.7
Other assets	3.1	2.5
Pension	0.4	1.4
Other liabilities	0.5	2.2
Taxes on un-distributed foreign earnings	0.7	2.8
Right-of-use asset	15.1	13.3
Other	2.4	1.9
Total deferred tax liabilities (B)	81.9	92.4
Net deferred tax asset / (liability) (A-B)	$ (26.6)	$ 1.3

Based upon the level of historical taxable income, reversal of deferred tax liabilities, projections for future taxable income over the periods in which the deferred tax assets are deductible and taxplanning strategies, management believes it is more likely than not that the Company will realize the benefits of these deductible differences, net of the existing valuation allowances as at December 31, 2022. The amount of the deferred tax asset considered realizable, however, could vary based on actual results.

The valuation allowance for deferred tax assets as of December 31, 2022 and 2021 was $60.9 million and $52.2 million, respectively. The net change in the total valuation allowance was an increase of $8.7 million during year ended December 31, 2022 out of which $19.7 million was recognized in the consolidated statement of income and $11.0 million was reversed in the consolidated statement of other comprehensive income ($24.5 million during year ended December 31, 2021 out of which $18.7 million was recognized in the consolidated statement of income and $5.8 million was recognized in the consolidated statement of other comprehensive income).

As of December 31, 2022, the Group did not have net operating loss carryforwards for Federal income tax purposes. The Group has net operating loss carryforwards for state income tax purposes of $26.8 million, which are available to offset future state taxable income, if any for indefinite period. Deferred tax asset amounting to $0.5 million was recognized on this state net operating loss carryforwards.

In addition, the Group has foreign jurisdiction net operating losses of $66.3 million, of which an amount of $0.1 million are available to offset future taxable income, if any, through 2023, $0.1 million are available to offset future taxable income, if any, through 2025 and the balance amount of $66.1 million is available for indefinite period. For such losses, the Group has deferred tax assets of Nil being carried net of valuation allowances of $21.6 million as at December 31, 2022.

As of December 31, 2021, the Group does not have net operating loss carryforwards for Federal income tax purposes. The Group has net operating loss carryforwards for state income tax purposes of $26.8 million, which are available to offset future state taxable income, if any. These losses have carryforward period of 20 years from the year of generation. Deferred tax asset amounting to $0.5 million was recognized on this state net operating loss carryforwards. In addition to the above, $5.7 million state net operating losses relating to Tax year 2000 had expired during the previous year.

In addition, the Group has foreign jurisdiction net operating losses of $38.4 million, of which an amount of $0.5 million are available to offset future taxable income, if any, through 2023, $0.1 million are available to offset future taxable income, if any, through 2025 and the balance amount of $37.8 million is available for indefinite period. For such losses, the Group has deferred tax assets of $5.5 million being carried net of valuation allowances of $6.1 million as at December 31, 2021.

As of December 31, 2022, and 2021, the Group has net capital loss carryforwards for Federal Income tax purposes of Nil and $0.3 million, respectively.

Rain Carbon GmbH, Germany and Severtar Holding Ltd, Cyprus have planned fixed dividends from its foreign subsidiaries in future years contingent on the future earnings of its respective subsidiaries. Based on above, the Group has provided Deferred Tax Liability of $0.7 million and $2.8 million on the estimated future dividends as at December 31, 2022 and December 31, 2021, respectively.

Subject to above, the Company intends to indefinitely reinvest other earnings, as well as future earnings from our foreign subsidiaries within the respective subsidiary's operations. In addition, they expect future U.S. cash generation will be sufficient to meet future U.S. cash needs.

The Company and its U.S. subsidiaries (collectively known as U.S. Group) executed tax-sharing agreements with Rain Commodities (USA) Inc. ("RCUSA"), an entity under common control and the ultimate holding company in The United States of America, and files its tax return on a consolidated basis and accounts for income tax expense using the separate return method.

RCUSA has filed its 2021 U.S. tax return on due date October 17, 2022 where total tax for that year stood to be $ 5.4 million.

Net Income tax payments by the U.S. Group to RCUSA for the year ended December 31 2022 were $ 17.9 million, of which $ 5.9 million relates to Tax Year 2021 and $ 12.0 million relates to estimated payments for Tax Year 2022 and tax payments for the year ended December 2021 were $ 3.9 million of which $ 1.9 million relates to Tax Year 2020 and $ 2.0 million relates to estimated payments for Tax Year 2021.

U.S Group portion of outstanding amount to be received from RCUSA as at December 31, 2022 and 2021 classified under current tax receivable is $4.0 million and $4.0 million, respectively.

Certain group companies in Germany have entered into a profit and loss transfer agreement and have created a fiscal unity for the purpose of paying corporate income taxes in Germany. The German fiscal unity contains Rain Carbon GmbH ("RCGmbH") as controlling entity and other German group companies as controlled entities within the fiscal unity. The fiscal income as per local GAAP of these controlled entities are fully allocated to RCGmbH and income tax expense or benefit is recognized at that level.

The Group is subject to several income tax examinations by taxing authorities in various jurisdictions within which it operates. As of December 31, 2022, management does not anticipate the outcome of these examinations to result in a material change to its financial position.

11. Debt and Credit Facilities

Debt consists of the following borrowings as of December 31, 2022 and December 31, 2021:

(in millions of dollars)	Reference	2022	2021
Senior secured notes, interest payable at 7.25%, principal due April 2025	(i)	$ 529.8	$ 545.5
Term loan from Bank, interest payable at EURIBOR plus 3%, principal due January 2025	(ii)	415.3	441.2
Revolving credit facility, interest payable at floating rate SOFR plus 2.5% for USD borrowings and EURIBOR plus 2.5% for EUR borrowings	(iii)	112.3	46.0
Other credit facilities	(iv)	39.2	25.3
		1,096.6	1,058.0
Less: Deferred Financing cost, net of amortisation		5.8	8.8
Less: Short-term debt		151.5	71.3
		$ 939.3	$ 977.9

The scheduled principal payments on the short-term and long-term debt for each of the next five years are as follows:

(in millions of dollars)	2022
2023	$ 151.5
2024	-
2025	-
2026	945.1
2027	-
Thereafter	-
	$ 1,096.6

(i) On March 31, 2017, one of the Group companies in United States issued $550.0 million of 7.25% senior secured notes due April 2025 (the "2025 Notes"). The net proceeds were used to redeem all of the outstanding 2018 Notes and tendered for $115.0 million of 2021 Notes. The Company has become the issuer of notes in pursuance of agreement entered. The 2025 Notes contain covenants and conditions that limit the Group's ability to, among other things, pay cash dividends, incur indebtedness and make investments. The Group may redeem some or all of the 2025 Notes at any time on or after April 1, 2020 up to March 31, 2023 at specified redemption prices. The 2025 Notes are secured by substantially all of the assets of the Company and are guaranteed by the Company's subsidiaries incorporated in United States on a joint and several basis. The Group has redeemed notes amounting to $15.7 million during the year 2022 ($4.6 million during the year 2021) at a redemption gain of $0.5 million (redemption loss of $0.1 million for 2021).

(ii) On January 16, 2018 the Group repaid its erstwhile 2021 Notes financed by a new Term Loan B of € 390 million ("TLB") borrowed by Rain Carbon GmbH, a Wholly Owned Subsidiary in Germany. Interest rate on the TLB is EURIBOR (subject to a 0.0% floor) plus 3%. The TLB is First Lien Debt having priority over 2025 Notes. The TLB contain covenants and conditions that limit the Group's ability to, among other things, pay cash dividends, incur indebtedness and make investments. The TLB is secured by substantially all of the assets of the Company and its subsidiaries except subsidiaries incorporated in India and Russia on a joint and several basis. The TLB will mature in 7 years after the closing date i.e. in January 2025. The TLB is repayable after December 31, 2019 in the manner specified under the provisions for mandatory and voluntary prepayment in the credit agreement. The prepayment is determined at the percentage on excess cash flows at specified financial leverages in the credit agreement. Balance as at December 31, 2022 is $ 415.3 million (€ 390 million) and $ 441.2 million (€ 390 million) as at December 31, 2021.

(iii) On January 16, 2018, the Company and certain group companies Rain CII Carbon LLC, Rain Carbon Canada Inc., Rain Carbon GmbH, Rain Carbon Germany GmbH and Rain Carbon BVBA entered into a Revolver Credit Facility (RCF). The agreement provides for a $200.0 million (December 31, 2021: $150.0 million) RCF loan commitment of which $55.0 million (December 31, 2021: $40.0 million) were separated in an Ancillary facility for documentary business needs for the aforesaid companies. Allocation of limit for the Ancillary facility between the aforesaid companies is flexible. The facility is available till October 2024. The interest rates are variable and depend on currency of the borrowing. Before February 7, 2022, the Group's Revolving Credit agreement for USD borrowings were based on the London Interbank Offered Rate (LIBOR). On February 7, 2022, the Company modified its Revolving Credit agreement to be based on the Secured Overnight Financing Rate ("SOFR") instead of LIBOR. At December 31, 2022 rate for USD borrowings is SOFR plus 250 basis points and for EUR borrowings is EURIBOR plus 250 basis points.

The RCF is secured by substantially all of the assets of the Company and its subsidiaries except subsidiaries incorporated in India and Russia on a joint and several basis.

At December 31, 2022 cash drawings outstanding under the RCF aggregated to $112.3 of which $20.0 million by Rain Carbon Inc., $ 92.3 million (€86.7 million) by Rain Carbon Germany GmbH. Variable interest rate depends on the type of borrowing.

At December 31, 2021 cash drawings outstanding under the RCF aggregated to $46.0 million of which $20.0 million by Rain Carbon Canada Inc. and $26.0 million (€23.0 million) by Rain Carbon Germany GmbH. Variable interest rate depends on the type of borrowing.

At December 31, 2022, letters of credit outstanding aggregated $10.1 million under the North-America facility and $26.1 million under the European Ancillary facility.

At December 31, 2021, letters of credit outstanding aggregated $5.0 million under the North-America facility and $13.3 million under the European Ancillary facility.

Available limit under both the facilities amounts to $51.5 million and $85.7 million as at December 31, 2022 and December 31, 2021 respectively.

(iv) Other Credit facilities:

a. During 2013, the Group Company incorporated in India, entered into agreements with two banks for an aggregated facility amount of $69.5 million (December 31, 2021: $60.9 million) which can be utilised for issuance of letter of credits, bank guarantees, suppliers credit facility and cash drawings. Outstanding letters of credit issued under these facilities are subject to a fee of 0.75% per annum. The company is not obliged to pay commitment fee on unused portion of the working capital line of credit under this facility. Cash drawings under these facilities are subject to interest rate of SOFR plus 100 basis points (December 31, 2021: LIBOR plus 120 basis points) and SOFR plus 135 basis points (December 31, 2021: LIBOR plus 150 basis points) per annum for each bank.

These facilities are secured by pari-passu first charge over current assets comprising of all inventories and book debts both present and future of the said company.

At December 31, 2022, cash drawings outstanding under the facility aggregated to $31.0 million, of which $18.5 million were towards packing credit foreign currency loan and $ 12.5 million were towards supplier's credit facility.

At December 31, 2021, cash drawings outstanding under the facility aggregated to $18.2 million, of which $7.7 million were towards packing credit foreign currency loan and $ 10.5 million were towards supplier's credit facility.

At December 31, 2022, letters of credit outstanding were $ 14.9 million and bank guarantees outstanding was $0.4 million under the facility

At December 31, 2021, bank guarantees outstanding were $0.3 million under the facility.

Available limit under both facilities amounts to $23.2 million and $42.4 million as at December 31, 2022 and December 31, 2021 respectively.

b. During 2013, the Group Company incorporated in India, entered into an agreement with two banks for an aggregated cash credit facility of $34.3 million (December 31, 2021: $10.9 million)

Outstanding letters of credit issued under these facilities are subject to a fee of 0.75% per annum. The Group Company is not obliged to pay a commitment fee on the unused portion of the working capital line of credit under this facility. Cash drawings under the above said facility are subjected to interest rate of SOFR plus 50 basis points (December 31, 2021: LIBOR plus 120 basis points) per annum.

These facilities are secured by pari-passu first charge over current assets comprising of all inventories and book debts both present and future of the said company.

At December 31, 2022, cash drawings outstanding under the facility aggregated to $8.2 million, which is towards packing credit foreign currency loan.

At December 31, 2021, cash drawings outstanding under the facility aggregated to $7.1 million, which is towards packing credit foreign currency loan.

As of December 31, 2022, bank guarantees outstanding under the facility aggregated to $1.9 million.

As of December 31, 2021, bank guarantees outstanding under the facility aggregated to $3.0 million.

Available limits under the facility were $24.2 million and $0.8 million as at December 31, 2022 and December 31, 2021 respectively.

c. In April 2020, the Company and one of its subsidiaries in the United States of America, received a $6.2 million loan from the U.S. Small Business Administration ("SBA") under the Paycheck Protection Program (PPP). All or a portion of the loan is forgivable if the Company and the aforesaid subsidiary meets specified requirements regarding the use of these funds over the designated period following the receipt of loan proceeds. The forgiveness was subject to verification by the SBA. Pending such verification, the amount received was carried as a debt as at December 31, 2020 and the interest was accrued at a fixed rate of 1% interest for the year ended December 31, 2020.

During the previous year SBA communicated its formal forgiveness after completion of its verification. Accordingly, the forgiveness was recorded as a government grant, included in "Other income, net" in the consolidated statement of income in accordance with ASC 470.

12. Capital Structure

The capital structure of the Company as of December 31, 2022 and December 31, 2021 is as follows:

		Shares
	Par value	Authorized	Issued and Outstanding
Common stock - Voting	$ 0.00001	5,000	1

The outstanding common shares of the Company are wholly owned by RCUSA, a direct wholly owned subsidiary of Rain Industries Limited.

13. Post-retirement Benefits

The Group complies with the U.S. GAAP around Compensation-Retirement Benefits, which requires an employer that sponsors a single-employer defined benefit plan to (a) recognize the overfunded or underfunded status of a benefit plan in its statement of financial position, (b) recognize as a component of other comprehensive income, net of tax, the gains or losses and prior service costs or credits that arise during the period but are not recognized as components of net periodic benefit cost pursuant to ASC 715 - "Compensation - Retirement Benefits", (c) measure defined benefit plan assets and obligations as of the date of the employer's fiscal yearend, and (d) disclose in the notes to financial statements additional information about certain effects on net periodic benefit cost for the next fiscal year that arise from delayed recognition of the gains or losses, prior service costs or credits, and transition assets or obligations.

Pension and other post-retirement benefits are accounted for in accordance with the provisions of ASC 715 and are funded to at least meet the minimum funding requirements as required by law. Prior service costs are amortized to net periodic costs on the straight-line basis over the average remaining service period of employees expected to receive pension benefits. The estimated cost of post-retirement benefits other than pensions is accrued during the employee's active service period.

The Group records annual amounts relating to its pension and post-retirement plans based on calculations that incorporate various actuarial and other assumptions, including discount rates, mortality, assumed rates of return, compensation increases, turnover rates, and healthcare cost trend rates. The Group reviews its assumptions on an annual basis and makes modifications to the assumptions based on current rates and trends when it is appropriate to do so. The effect of modifications to those assumptions is recorded in accumulated other comprehensive income and amortized to net periodic cost on the straight-line basis over the average remaining service period of employees expected to receive pension benefits. The Group believes that the assumptions utilized in recording its obligations under its plans are reasonable based on its experience and market conditions.

The Group follows the disclosure provisions of ASC 715, which standardizes the disclosures for pensions and other post-retirement benefit plans.

Pension and Gratuity

The Group sponsors the following defined benefit plans:

a. The Group has a non-contributory defined benefit pension plan covering hourly employee in the United States. Benefits under the hourly employees' plan are based on years of service and age. The Group's funding policy is to contribute amounts to meet minimum funding requirements, plus additional amounts as the Group may determine to be appropriate.

b. In respect of subsidiary companies in Germany, Belgium, and Canada, the Group has defined benefit retirement plans covering its employees. Pension provisions are recognized for obligations due to benefit plans for old age, invalidity, and surviving dependents' benefits. Benefits vary according to the legal, tax, and economic circumstances prevailing in each relevant country. Benefits are usually based on the length of service and final salary of employees.

c. In respect of the subsidiary company in India, the Group has defined benefit gratuity plan covering all its employees. Gratuity provisions are recognized based on the years of service and age. The Group's funding policy is to contribute amounts to meet minimum funding requirements, plus additional amounts as the Group may determine to be appropriate.

The projected benefit obligation is the present value of benefits earned to date by plan participants. Plan assets are measured at fair value. Changes in projected benefit obligations and plan assets, and the funded status of the pension and gratuity plans were as follows for the years ended December 31, 2022 and 2021:

(in millions of dollars)	2022	2021
Change in projected benefit obligation
Benefit obligation at beginning of year	$ 211.1	$ 249.4
Service cost	8.4	12.7
Interest cost	2.5	1.0
Amendments	-	0.4
Plan participant contributions	0.9	1.1
Actuarial (Gain)/loss	(74.4)	(33.9)
Administrative expenses and premiums paid	(0.6)	(0.6)
Benefits paid	(3.7)	(3.4)
Foreign currency exchange rate changes	(12.1)	(15.6)
Benefit obligation at end of year (A)	132.1	211.1
Changes in plan assets
Fair value of plan assets at beginning of year	$ 59.5	$ 56.4
Actual return on plan assets	(5.8)	3.9
Employer contributions	2.4	2.8
Plan participant contributions	1.6	1.7
Benefits paid	(3.7)	(3.4)
Administrative expenses and premiums paid	(0.4)	(0.5)
Foreign currency exchange rate changes	(2.9)	(1.4)
Fair value of plan assets at end of year (B)	50.7	59.5
Net obligation at end of year (A-B)	$ 81.4	$ 151.6

Amounts recognized in the consolidated balance sheets consist of:

(in millions of dollars)	2022	2021
Accrued post-retirement benefits (non-current)	(81.4)	(151.6)
Net amount recognized	$ (81.4)	$ (151.6)

The net periodic cost for the defined benefit pension and gratuity plans was $9.9 million and $10.4 million for the years ended December 31, 2022 and 2021, respectively.

The amount recognized in other comprehensive income was $69.0 million and $39.2 million for the years ended December 31, 2022 and 2021, respectively.

The following represents projected benefit obligation, accumulated benefit obligation, and fair value of plan assets for the years ended December 31, 2022 and 2021:

(in millions of dollars)	2022	2021
Projected benefit obligation	$ 132.1	$ 211.1
Accumulated benefit obligation	120.8	199.6
Fair value of plan assets	50.7	59.5

The weighted average assumptions used to determine benefit obligations and net periodic benefit cost were as follows:

	2022	2021
Benefit obligations
Discount rate	3.77% - 7.75%	0.98% - 6.95%
Net periodic benefit cost
Discount rate	0.98% - 7.75%	0.34% - 6.95%
Expected return on assets	2.20% - 7.00%	2.20% - 7.00%
Rate of compensation increase	3.14% - 7.00%	0.00% - 7.00%

The Group's pension and gratuity plans weighted-average asset allocations by asset category were as follows:

	2022	2021
Asset category
Equity securities	43%	39%
Debt securities	54%	60%
Others	3%	1%
	100%	100%

As of December 31, 2022, the long-term rate of return reflects the defined benefit pension and gratuity plans' current assets mix with assumed average annual returns of approximately 1.30% to 6.00% for debt securities and 4.90% to 12.00% for equity securities and 6.00% to 8.00% for others.

The defined benefit pension and gratuity plans investment portfolio is adjusted periodically to maintain the current ratios of debt securities and equity securities. Additional consideration is given to the plan's historical returns as well as future long-range projections of investment returns for each asset category.

The total net loss and prior service cost that will be reversed from accumulated other comprehensive income into net periodic benefit cost over the next fiscal year is $2.3 million.

The Group expects to contribute $3.5 million to the defined benefit pension and gratuity plans during the year ending December 31, 2023.

The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid:

(in millions of dollars) Fiscal Years Ending	Expected Benefit Payments
2023	$ 4.6
2024	4.6
2025	4.5
2026	5.7
2027	6.2
2028-2032	39.1

Other post-retirement benefits

One of the subsidiaries in Canada has non-pension post-employment benefit plans for the purpose of providing medical and dental benefits for retirees and eligible dependents and life insurance for retirees. The subsidiary sponsors the plans by contributing cash as benefits are paid. No assets have been segregated and restricted to provide for the plan.

Changes in projected benefit obligations and plan assets, and the funded status of the Group's post-retirement plan were as follows for the years ended December 31, 2022 and 2021:

(in millions of dollars)	2022	2021
Change in projected benefit obligation
Benefit obligation at beginning of year	$ 7.1	$ 7.5
Service cost	0.4	0.5
Interest cost	0.2	0.2
Actuarial gain	(1.8)	(0.8)
Benefits paid	(0.2)	(0.2)
Foreign currency exchange rate changes	(0.4)	(0.1)
Benefit obligation at end of year (A)	5.3	7.1
Changes in plan assets
Fair value of plan assets at end of year (B)	-	-
Net obligation at end of year (A-B)	$ 5.3	$ 7.1

Amounts recognized in the consolidated balance sheet consist of:

(in millions of dollars)	2022	2021
Accrued benefit liability	$ (5.3)	$ (7.1)
Net amount recognized	$ (5.3)	$ (7.1)

The net periodic benefit cost for the defined benefit post-retirement plan was $0.6 million and $0.7 million for the years ended December 31, 2022 and 2021, respectively.

The amount recognized in other comprehensive income was $1.8 million and $0.7 million for the years ended December 31, 2022 and 2021, respectively.

The following represents projected benefit obligation and accumulated benefit obligation for the years ended December 31, 2022 and 2021:

(in millions of dollars)	2022	2021
Projected benefit obligation	$ 5.3	$ 7.1
Accumulated benefit obligation	5.3	7.1

The weighted average assumptions used to determine benefit obligations and net periodic benefit costs were as follows:

	2022	2021
Discount rate - Benefit obligations	5.25%	3.20%
Discount rate - Net periodic benefit cost	3.20%	2.60%

The assumed health care costs trend rates were as follows:

	2022	2021
Initial trend rate	5.65%	5.65%
Ultimate trend rate	4.00%	4.00%
Year ultimate trend rate is reached	2040	2040

The total net loss and prior service cost for the defined benefit pension plans that will be amortized from accumulated other comprehensive income into net periodic benefit cost over the next fiscal year is $0.1 million.

The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid:

(in millions of dollars)	Expected Benefit
Fiscal Years Ending	Payments
2023	$ 0.2
2024	0.3
2025	0.3
2026	0.3
2027	0.3
2028-2030	1.9

Defined Contribution Plan

The Group has below contribution plans:

a. One of the subsidiary companies in the United States has established separate group savings plans for all hourly and salaried employees in the United States. The Group has plan contribution of dollar-for-dollar match up to 6%. The Group has made a contribution of $1.2 million and $1.1 million for the years ended December 31, 2022 and 2021, respectively, under this plan.

b. In respect of subsidiary companies in Belgium, Canada, India and the Netherlands, the Group has Superannuation and contribution plans covering its employees. The Group makes monthly contributions and has no further obligations under the plan beyond its contributions. The Group has made a contribution of $0.4 million and $0.4 million for the years ended December 31, 2022 and 2021, respectively, under this plan.

14. Segment Information

The Carbon and Advanced Materials best define the operating segments of the business that are reported separately. The factors used to identify these reportable segments are based on the nature of the products that are manufactured, traded, and distributed by each segment.

Carbon is comprised of Calcined Petroleum Coke (CPC), Green Petroleum Coke ("GPC"), Coal Tar Pitch ("CTP"), Energy produced through Waste-heat recovery and other derivatives of Coal Tar distillation including Creosote, Naphthalene Oil, Carbon Black Oil and Other Basic Aromatic Oils.

Advanced Materials represent the downstream operations of Coal Tar distillation and are comprised of Engineered Products, Petro Chemical Intermediaries, Naphthalene Derivatives and Resins.

These have been defined as the operating segments of the Group because they are the segments

(1) that engage in business activities from which revenue is earned and expenses are incurred;

(2) whose operating results are regularly reviewed by the Group's chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance; and

(3) for which discrete financial information is available.

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The Chief Executive Officer of the Group is responsible for allocating resources and assessing performance of the operating segments and accordingly is identified as the chief operating decision maker.

The Group evaluates performance and determines resource allocations based on a number of factors, the primary measure being operating income. Operating income does not include depreciation and amortization, impairment, interest, or income taxes. All inter segment transactions are accounted for at agreed upon rates based on transfer pricing agreements.

The accounting principles used in the preparation of the consolidated financial statements are consistently applied to record revenue and expenditures in individual segment, and are set out in significant accounting policies.

Certain items are not specifically allocable to individual segments as the underlying services are used interchangeably and accordingly the Group believes that it is not practical to provide segment disclosures relating to such items.

Results of segment operations are as follows:

(in millions of dollars)	2022	2021
Revenue from external customers:
Carbon	$ 1,971.4	$ 1,308.9
Advanced Materials	498.8	444.6
	2,470.2	1,753.5
Intersegment revenue:
Carbon	102.6	87.6
Advanced Materials	51.0	52.4
	153.6	140.0
Earnings before Interest, tax, impairment, Depreciation
and amortisation (EBITDA):
Carbon	424.7	270.7
Advanced Materials	9.1	15.2
	$ 433.8	$ 285.9

The following table reconciles income before income taxes to EBITDA on a consolidated basis as calculated by us for the years indicated below:

(in millions of dollars)	2022	2021
Income before income taxes	$ 273.0	$ 123.8
Interest expense (income), net	56.7	56.2
Depreciation and amortisation	98.3	103.7
Long-lived asset impairment loss	5.8	2.2
EBITDA	$ 433.8	$ 285.9

There is no single external customer that amounts to 10 percent or more of the Group's revenues.

Assets by segment: As certain assets of the Company are often deployed interchangeably between segments, it is impractical to allocate these assets and liabilities to each segment. Hence, the details for segment assets and liabilities have not been disclosed.

Revenue by geographic area is as follows:

(in millions of dollars)	2022	2021
United States	$ 436.4	$ 315.4
International	2 ,033.8	1,438.1
Total	$ 2,470.2	$ 1,753.5
International by region
North America excluding United States	$ 487.3	$ 264.3
South America	43.2	25.6
Europe including CIS	942.9	781.4
Middle East	100.7	60.4
Africa	113.7	57.6
Australia	6.3	1.4
Asia excluding Middle East	339.7	247.4
	$ 2,033.8	$ 1,438.1

Property, plant and equipment, net by geographic area are as follows:

(in millions of dollars)	2022	2021
United States	$ 151.3	$ 151.6
International	420.7	477.5
Total	$ 572.0	$ 629.1
International by region
North America excluding United States	$ 37.9	$ 37.7
Europe including CIS	299.6	341.7
Asia excluding Middle East	83.2	98.1
	$ 420.7	$ 477.5

15. Related Party Transactions

The Group has entered into transactions with the following related enterprises:

a. Rain Industries Limited ("RIL") - ultimate holding company incorporated in India

b. Rain Commodities (USA) Inc. ("RCUSA") - holding company incorporated in The United States of America

c. Rain Cements Limited ("RCL") - wholly owned subsidiary of RIL incorporated in India

d. OOO Rain Carbon LLC ("RCLLC") - wholly owned subsidiary of RIL incorporated in Russia

Related party transactions and balances are as follows:

(in millions of dollars)	2022	2021
Revenue
- RCL	$ 10.5	$ 2.4
Cost of goods sold
- RIL	0.8	1.0
- RCLLC	0.8	-
Dividend
- RCUSA	4.0	46.9
Interest Expense/(Income), net
- RCLLC	(0.2)	-
- RCUSA	(0.1)	(0.2)
Selling, general & administration expenses
- RIL	5.2	4.0
- RCUSA	0.1	0.9
Purchases
- RCL	11.3	0.3
Reimbursements from/(to)
- RCUSA	0.5	(1.8)
Loans given to affiliates
- RCLLC	1.6	-
- RCUSA	5.2	5.7
Loans repaid by affiliates
- RCLLC	(0.1)	-
- RCUSA	-	(8.1)
Proceeds from Capital Contribution
- RCUSA	-	20.0
Corporate Gaurantees given
- RIL	-	20.0
Corporate Gaurantees released
- RIL	-	(20.0)

	2022	2021
Due from affiliates
- RCUSA	6.5	0.8
- RCL	0.2	0.2
- RCLLC	3.5	-
Corporate Gaurantees given
- RIL	20.0	20.0
Due to affiliates
- RIL	1.3	1.0
- RCUSA (dividend payable)	-	7.2
- RCLLC	0.1	-
Loans given
- RCLLC	1.3	-

Refer note 7 for transactions of the Group with equity method investee.

16. Commitments and Contingencies

The Group is involved in litigation and various proceedings that arise from time to time incidental to the normal conduct of business. There have been claims against the group towards various direct as well indirect taxes amounting to $ 19.7 million as at December 31, 2022 ($ 5.1 million as at December 31, 2021) which are not considered as probable. We recognize liabilities for contingencies and commitments when a loss is probable and estimable. The ultimate resolution of these contingencies is subject to uncertainty. It is possible that the Company may incur losses in connection with some of these matters in excess of accrued liabilities. Management does not anticipate that in the aggregate such losses would have a material adverse effect on the Company's financial position or liquidity; however, it is possible that the final outcomes could have a significant impact on the Company's reported results of operations in any given period.

Environmental matters

The Group is subject to federal, state, local, and foreign laws and regulations and potential liabilities relating to the protection of the environment and human health and safety including, among other things, the cleanup of contaminated sites, the treatment, storage, and disposal of wastes, the discharge of effluent into waterways, the emission of substances into the air, and various health and safety matters. The Group may also face governmental or third-party claims or otherwise incurs costs, relating to cleanup of or for injuries resulting from, contamination at sites associated with past and present operations. The Group accrues for environmental liabilities when a determination can be made that a liability is probable and reasonably estimable. Such liabilities are measured at the present value of the best estimate of the cost of remediation as per agreed remediation plans.

Changes in environmental liabilities for the years ended December 31, 2022 and 2021 were as follows:

(in millions of dollars)	2022	2021
Balance at beginning of year	$ 17.7	$ 17.4
Additional obligations incurred	4.6	4.3
Obligations settled during the year	(1.6)	(1.0)
Changes in estimates, including timing	(0.5)	-
Accretion expense	(0.7)	-
Unused amounts reversed during the year	(1.4)	(1.6)
Foreign currency exchange rate changes	(0.9)	(1.4)
Balance at end of the year	$ 17.2	$ 17.7

Of the above, environment liability of $ 3.9 million and $ 4.1 million are classified as current liabilities as of December 31, 2022 and December 31, 2021, respectively.

The equivalent un-discounted value of environment liability as of December 31, 2022 and 2021 is $17.8 million and $17.7 million, respectively, depending on the duration of the environmental liability management uses interest rates of 2.34% to 2.56% at December 31, 2022 and 0.00% to 0.59% at December 31, 2021, to measure the present value of the environment liability.

Legal Proceedings

a. During 2002, Group had disputed the order of Andhra Pradesh Electricity Regulatory Commission ('APERC') in respect of wheeling charges before the Honorable High Court of Andhra Pradesh, India. The Honorable High Court of Andhra Pradesh had set aside the order of APERC. Transmission Corporation of Andhra Pradesh ('AP Transco') filed a Special Leave Petition in the Honorable Supreme Court of India against the order of the Honorable High Court of Andhra Pradesh.

On November 29, 2019, the Honorable Supreme court pronounced its judgement ordering that the wheeling charges are to be levied as per the tariff order passed by APERC. Subsequently, Group received a claim from various distribution companies.

Group has disputed the aforesaid claim as the Management believes that the claim is not tenable based on the judgement given by the Supreme Court. Accordingly, it does not expect the outcome of these proceedings to have a material and adverse effect on its financial position and accordingly no adjustment in respect thereof is expected.

Further in respective of above, one of the Group's power customers may incur additional charges from the APSPDCL related to power purchased from it from January 2020 to March 2022. If the APSPDCL does levy the charges Group could be liable to reimburse the customer for these charges. The Group estimates the liability be to be capped at $ 3.6 million and has provided a corporate guarantee to the customer.

b. APERC introduced grid support charges in Tariff Order FY 2002-03, where in the charges were payable by Captive Power Plants ('CPP') for using the infrastructure of the Discoms. Based on this, the Company has received a claim from Eastern Power Distribution Company of A.P. Limited ("APEPDCL") toward Grid Support Charges.

Management believes that the grid support charges are not applicable to Group. Accordingly, it does not expect the outcome of these proceedings to have a material and adverse effect on its financial position and accordingly no adjustment in respect thereof is expected.

Other matters

Estimated committed amounts of contracts remaining to be executed on capital accounts, net of capital advances is $11.8 million and $14.7 million as of December 31, 2022 and 2021, respectively.

17. Concentrations

The Group maintains cash at banks, which at times may exceed federally insured limits. The group has not experienced any losses in such accounts and does not believe it is exposed to any significant risk from such accounts.

As of December 31, 2022, and 2021, two customers aggregated to approximately 19% and 27%, respectively, of the Group's trade accounts receivable. Revenue from two customers aggregated to approximately 9% and 14% of total revenue for the years ended December 31, 2022 and 2021, respectively. The group has not experienced any losses from transactions with such customers and does not believe it is exposed to any significant risk from such customers.

Raw material purchases from three suppliers aggregated approximately 25% and 28% of total raw materials purchases for the years ended December 31, 2022 and 2021, respectively. The group has not experienced any losses from transactions with such suppliers and does not believe it is exposed to any significant risk from such suppliers.

18. Disposal of subsidiaries

On April 27, 2022, the Group completed the sale of its Wholly Owned Subsidiary engaged in providing logistics services, OOO Rain Carbon LLC to RIL for an aggregate cash consideration of $4.2 million (gross of $0.3 million representing cash and cash equivalents available in the wholly owned subsidiary on the date of transfer) which resulted in a gain of $1.4 million. Since the transaction carried is within common control, the gain has been recognized in equity (retained earnings) for the year ended December 31, 2022.

On December 31, 2020, the Group completed the sale of its Wholly Owned Subsidiaries engaged in the manufacturing and distribution of Polynaphthalene Sulfonates, RUTGERS Polymers Limited and Handy Chemicals (U.S.A.) Limited, for an aggregate cash consideration of $87.93 million which resulted in a gain of $0.4 million and $0.5 million for the years ended December 31, 2022 and 2021 respectively.

19. Russian operations and related restructuring

Due to the global implications of the conflict between Russia and Ukraine that started in February 2022, there is an increase in volatility in the commodity prices, stock and foreign exchange markets. Given this geopolitical uncertainty resulting from this war and the likelihood that changes may occur rapidly or unexpectedly, management has carefully evaluated information that became available in this regard to assess its potential impact on the Group's activities such as supply chain disruption, closure / abandonment of operations / manufacturing facilities, travel restrictions, market volatility, recoverability of inter-company loan within group entities, repatriation of dividends between group entities, etc.

The Company, through its German subsidiary, owns the majority shares of Cypriot joint venture company that wholly-owns a Russian operating company. The Company's ownership of the Cypriot shares is not blocked or otherwise restricted by international trade sanctions. Moreover, neither the Cypriot company nor its Russian subsidiary are listed as sanctioned or blocked companies.

During the year, the Company's board took the decision to delegate the duties of all U.S. and E.U. persons with respect to its shareholder rights in the Cyprus company and its Russian subsidiary to Indian persons at its ultimate holding company RIL. The Company has also approved the transfer of its shares in the Cypriot company to another wholly-owned subsidiary of RIL outside of the US group. Until such restructuring is completed, the Company, through its foreign subsidiary, remains majority shareholder of the Cypriot company and has contractual rights pursuant to the Cypriot company's governing documents to exercise significant influence over the subsidiary. The Company has not transferred, assigned, surrendered, or otherwise restricted its rights with respect to above and accordingly has the power to revoke the delegation of authority and / or discontinue the restructuring plans.

Further, there is lack of currency exchangeability owing to counter sanctions imposed by the Russian Federation that restrict the Russian subsidiary's ability to transfer funds to designated unfriendly countries, including Cyprus. However, considering its decision-making power was delegated to RIL, the Company's shareholder rights in the Cypriot company and, by extension the Russian subsidiary, have not been materially infringed regarding utilization of funds locally in Russia. Accordingly, this situation is expected to be temporary at this stage.

Based on the above assessment performed, the Company continues to control its shareholder rights in the Cypriot joint venture company and its Russian subsidiary and accordingly concluded that the consolidation of the Russian operations can be continued till the proposed restructuring get completed. Further, as the proposed restructuring would occur within the controlled group, it is considered as a transaction within common control. Accordingly, the asset held for sale presentation is not required to be made.

The management does not foresee any significant impact of the above events on its financial statement as the operations of its Russian subsidiary and the rest of the entities are largely independent of each other. Also, the Group has been in compliance with the various sanctions imposed. Since the impact assessment of such situation is a continuing process given the uncertainties associated with its nature and duration, the Group will continue to monitor any material changes to future economic conditions.

20. Subsequent event

The Group has performed an evaluation of subsequent events from the balance sheet date through March 16, 2023, the date at which consolidated financial statements were made available to be issued and determined that there are no items to disclose.

Management's Discussion and Analysis of Financial Condition and Results of Operations for the Quarter Ended December 31, 2022

Financial Highlights

―	Revenue of $608.6 million
―	Adjusted EBITDA of $74.6 million

Income Statement ($ Millions)	Q4 2022	Q3 2022	Q4 2021	FY 2022	FY 2021
Revenue	608.6	651.3	485.3	2,470.2	1,753.5
Cost of goods sold	512.9	518.2	412.7	1,944.3	1,406.6
Selling, general & administrative expenses	22.8	21.9	19.5	86.7	82.1
Depreciation and amortization	23.1	24.6	26.2	98.3	103.7
Impairment loss	-	5.8	2.2	5.8	2.2
Other operating income (expense)	3.9	0.1	4.5	3.9	10.8
Operating income (loss)	53.7	80.9	29.2	339.0	169.7
Interest expense, net	13.8	14.4	12.9	56.7	56.2
Loss (gain) on foreign currency transactions, net	5.8	(6.2)	(0.2)	10.0	(3.0)
Other (income) expense, net	0.4	0.8	(3.4)	(0.7)	(7.3)
Income (loss) before income taxes	33.7	71.9	19.9	273.0	123.8
Income tax expense (benefit), net	12.7	19.9	21.0	77.0	50.7
Net income (loss) before Non-controlling interest	21.0	52.0	(1.1)	196.0	73.1
Net income attributable to Non-controlling interests	7.1	7.1	4.4	27.9	19.5
Net income (loss) attributable to RCI stockholders	13.9	44.9	(5.5)	168.1	53.6

Balance Sheet data ($ Millions)	As of Dec 31, 2022	As of Dec 31, 2021
Total cash and cash equivalents ^*	173.3	167.7
Total assets	2,371.7	2,163.7
Total debt	1,090.8	1,049.2
Equity	785.0	585.8

^* Including restricted cash of $4.6 million (Dec. 31, 2021: $4.6 million)

Set forth below is a reconciliation of Rain Carbon Inc.'s consolidated EBITDA and Adjusted EBITDA to Net income before Non-controlling interests:

EBITDA ($ Millions)	Q4 2022	Q3 2022	Q4 2021	FY 2022	FY 2021
Net income (loss) before Non-controlling interest	21.0	52.0	(1.1)	196.0	73.1
Income tax expense (benefit), net	12.7	19.9	21.0	77.0	50.7
Interest expense, net	13.8	14.4	12.9	56.7	56.2
Depreciation and amortization	23.1	24.6	26.2	98.3	103.7
EBITDA	70.6	110.9	59.0	428.0	283.7
Adjustment for non-recurring items
- Reorganizational costs ^(a)	-	-	(0.5)	-	(1.4)
- Provision for exceptional items ^(b)	5.1	1.5	7.2	17.7	15.6
- Income adjustments ^(c)	(1.1)	-	(7.5)	(3.3)	(21.2)
- Impairment loss ^(d)	-	5.8	2.2	5.8	2.2
Adjusted EBITDA	74.6	118.2	60.4	448.2	278.9

(a) Reversals of reorganization costs provided in earlier periods as a result of closing of certain facilities in Europe

(b) Due to strategic projects and one-time expenses like restoration of a plant from hurricane damage, cleaning expenses related to a discontinued business and others

(c) Gain on re-purchase of senior secured notes, Loan forgiven by Government recognized as income, refund of import taxes paid in earlier years, gain on disposal of subsidiaries and assets.

(d) Impairment of equipment and write off net book value of equipment with no alternative use

Set forth below is selected segment information:

($ Millions except sales tons)	Q4 2022	Q3 2022	Q4 2021	FY 2022	FY 2021
Sales volume (000 tons)
Carbon
- Calcined Petroleum Coke	378	326	367	1,385	1,419
- Coal Tar Pitch	121	132	131	523	556
- Other Carbon Products	118	132	132	571	554
Total Carbon	617	590	630	2,479	2,529
Advanced Materials
- Engineered Products	11	20	16	65	96
- Chemical Intermediates	27	33	42	135	173
- Resins	18	27	27	110	116
Total Advanced Materials	56	80	85	310	385
(I) Revenue:
Carbon
- Calcined Petroleum Coke	273.4	249.3	181.3	957.0	567.3
- Coal Tar Pitch	162.1	176.5	113.0	634.4	423.4
- Other Carbon Products	73.1	86.8	76.4	349.9	285.6
- Energy	6.9	8.4	9.4	30.1	32.6
Total Carbon	515.5	521.0	380.1	1,971.4	1,308.9
Advanced Materials
- Engineered Products	18.8	34.9	19.9	105.4	100.3
- Chemical Intermediates	33.8	45.1	41.2	178.2	168.3
- Resins	40.5	50.3	44.1	215.2	176.0
Total Advanced Materials	93.1	130.3	105.2	498.8	444.6
Total	608.6	651.3	485.3	2,470.2	1,753.5
(II) Adjusted EBITDA:
Carbon	86.6	119.3	72.6	426.3	261.0
Advanced Materials	(12.0)	(1.1)	(12.2)	21.9	17.9
Total Adjusted EBITDA	74.6	118.2	60.4	448.2	278.9

Set forth below is the summary of Rain Carbon Inc.'s consolidated net debt position:

$ Millions	As of Dec 2022	As of Dec 2021
7.25% USD-denominated Senior Secured Notes ^*	529.8	545.5	Matures in April 2025
Euro-denominated Senior Secured Term Loan	415.2	441.2	Matures in January 2025
Gross Term Debt	945.0	986.7
Add: Working Capital Debt	151.5	71.3
Less: Deferred Finance Cost ^**	5.7	8.8
Total Debt	1,090.8	1,049.2
Less: Cash and cash equivalents	173.3	167.7
Net Debt	917.5	881.5

^* Reduction is on account of bonds repurchase during 2022.

^** Deferred Finance Cost is shown as a contra liability and amortized over the term of the loans.

The following discussion should be read in conjunction with the consolidated financial statements of Rain Carbon Inc. This discussion may contain forward-looking statements about the business and operations of Rain Carbon Inc. related to future events and future financial performance. These statements are based on current expectations and involve risks and uncertainties. Actual results may differ materially from those Rain Carbon Inc. currently anticipates. Furthermore, this document is governed by the confidentiality and non-disclosure agreement accepted by you pursuant to obtaining any information through Rain Carbon Inc.'s Bondholder website www.dfsvenue.com.

About Rain Carbon Inc.

We are a leading vertically integrated global producer of a diversified portfolio of carbon-based and advanced material products that are essential raw materials for staples of everyday life. We operate in two business segments: Carbon and Advanced Materials. Our Carbon business segment converts the by-products of oil refining and steel production into high-value carbon-based products that are critical raw materials for the aluminum, graphite, carbon black, wood preservation, titanium dioxide, refractory and several other global industries. Our Advanced Materials business segment extends the value chain of our carbon processing through the downstream refining of a portion of this output into high-value advanced material products that are critical raw materials for the specialty chemicals, coatings, construction, petroleum and several other global industries. We have longstanding relationships with most of our major customers, including several of the largest companies in the global aluminum, graphite and specialty chemicals industries, and with most of our major raw material suppliers, including several of the world's largest oil refiners and steel producers. Our scale and process sophistication provides the flexibility to capitalize on market opportunities by selecting from a wide range of raw materials, adjusting the composition of our product mix and producing products that meet exacting customer specifications, including several specialty products. Our production facility locations and integrated global logistics network also strategically position us to capitalize on market opportunities by addressing raw material supply and product demand on a global basis in both established and emerging markets.

Carbon Segment

Calcined Petroleum Coke (CPC)

We produce CPC from GPC (green petroleum coke), a porous black solid that is a by-product of the crude oil refining process. We also purchase CPC, which we blend with CPC we produce at our calcining facilities in India, to meet specifications of certain aluminum smelter customers in India and surrounding regions. As a by-product of the CPC production process, our Carbon business segment also produces co-generated energy from waste heat at five of our calcining facilities. We can generate approximately 131 MW of energy from waste gases, on a global basis, and most of the energy sold to external customers.

Coal Tar Pitch (CTP)

We produce CTP a primary extract from the distillation of coal tar, a liquid by-product derived from the conversion of coal into metallurgical coke used for pig iron and steel production. We sell most of our pitch products to the aluminum, graphite, construction and refractory industries in Europe, North America and Russia.

Other Carbon Products (OCP)

We produce OCP from the distillation of coal tar. The main OCP products we produce are carbon black oil, creosote oil and naphthalene oil. All our carbon black oil sales are to producers of carbon black, primarily in Europe; most of the carbon black oil we sell is used for applications in the rubber tire industry. All our creosote oil sales are to North American and European producers of wooden infrastructure, such as railway-tie sleepers and utility poles for electric and telephone cables. Most of our naphthalene oil production is further refined into certain downstream advanced materials.

Advanced Materials Segment

Engineered Products

Two of our primary engineered products are CARBORES ^® , a pitch binder system with a very low concentration of carcinogenic constituents, and LP Sealer Base, a petrochemical-based pavement sealer. Each of these is the only product of its kind currently produced commercially, and demand for these products is increasing due to their more environmentally friendly characteristics. We also produce PETRORES ^® , a specialty coating used in lithium-ion batteries, energy storage and other specialty applications.

Chemical Intermediates

Our main chemical intermediates are BTX products -- benzene, toluene and xylene -- and phthalic anhydride. BTX produced from the secondary distillation of crude benzene, a liquid by-product derived during the conversion of coal into metallurgical coke used for pig iron and steel production. Substantially all of the crude benzene we use as raw material is procured from third parties. Benzene, toluene and crude xylene are critical inputs for several chemical-based substances, including solvents for inks and paints. Our main naphthalene derivative product is phthalic anhydride (PA). PA is used in construction, plastics and as specialty chemicals in other industries.

Resins

We produce aromatic hydrocarbon resin and hydrogenated hydrocarbon resin products that are based on either petrochemical or coal tar distillate raw materials. Our petrochemical-based resins are used primarily for applications in adhesives and printing inks. Our coal tar-based resins are used primarily for applications in coatings, rubber tires and other end-user rubber products. We sell most of our petrochemical-based resins in the European, Asian and North American markets. We sell most of our coal tar-based resins products in the European market. We also sell certain by products produced from the resins production process.

Results of Operations

Three-Month Period Ended December 31, 2022, Compared to Three-Month Period Ended December 31, 2021

Revenue

Total revenue of $608.6 million for the quarter ended December 31, 2022, was an increase of $123.3 million, or 25.4%, compared to the quarter ended December 31, 2021. The increase was driven by the Carbon segment with $135.4 million, or 35.6%, offset with decrease in Advanced Material segment by $12.1 million, or 11.5%.

Carbon segment

Revenue from our Carbon segment was $515.5 million compared to $380.1 million for the quarter ended December 31, 2021, an increase of $135.4 million, or 35.6%. This was primarily due to a 38.5% increase in the average price (including a 10.8% depreciation of the Euro and a 9.7% depreciation of the INR against the USD) offset by a 2.1% decrease in sales volumes.

CPC revenue increased by 50.8% compared with the prior quarter due to an 46.4% increase in the average price (including a 9.7% depreciation of the INR against the USD) supplemented with an 3% increase in sales volumes. The price increases were driven by a continued increase in raw material prices and higher operating costs due to the macro inflationary environment.

Revenue from CTP increased by 43.5% compared to the prior quarter, with an increase in the average price of 55.3% (including a 10.8% depreciation of the Euro against the USD) offset by a decrease in volumes by 7.6%. The price increases were driven by increased raw material prices and operating costs. The lower volumes were driven by lower throughputs due to longer maintenance schedules during the quarter.

Revenue from OCP decreased by 4.3% compared to the prior quarter, primarily due to a 10.6% decrease in the volumes offset by a 7.0% increase in the average price (including a 10.8% depreciation of the Euro against the USD). The price increases were primarily driven by increased raw material costs and changes in fuel oil-related quotations. Lower volumes were driven by decreased throughputs during the quarter.

Energy revenue decreased by $2.5 million compared to prior quarter due to lower production.

Advanced Materials segment

Revenue from our Advanced Materials segment was $93.1 million, a decrease of $12.1 million, or 11.5%, compared to $105.2 million during the prior quarter. This decline was due to a decrease in the volumes by 34.1% offset by the increase in average price by 34.3% (including a 10.8% depreciation of the Euro against USD).

Within the Advanced Materials segment, revenue from engineered products decreased by 5.5% compared to the prior quarter. The average price increased by 37.4%, offset by a decrease in sales volume by 31.3%. The volume decrease was driven by lower demand from Asian markets and longer maintenance schedules during the quarter.

Revenue from chemical intermediates decreased by 18.0% compared to the prior quarter due to lower volumes by 35.7%, driven by availability of feedstock and lower demand from related industries, offset by an increase in the average prices by 27.6%, which was driven by changes in oil-related quotations.

Revenue from the resins business decreased by 8.2% compared to the prior quarter, due to the decrease in the volumes by 33.3% offset by an increase in the average price by 37.8%. The increase in average prices were driven by increased raw material prices, energy prices, and changes in the product and customer mix. The decreased volumes were driven by the shutdown of a production unit.

Cost of Goods Sold

Cost of goods sold was $512.9 million, which was an increase of $100.2 million, or 24.3%, compared to $412.7 million during the prior quarter. This increase was primarily related to an increase in the average raw materials price by approximately 35.5% (including a 10.8% depreciation of the Euro and a 9.7% depreciation of the INR against the USD) offset by lower volumes of 3.5%. The lower volumes were driven by lower throughput due to longer maintenance schedules, raw material availability and lower demand for certain products. The increase in raw material cost was primarily driven by increases in the average prices of key raw materials due to increased market quotations. Cost of goods sold as a percentage of revenue was 84.3% in the current quarter compared to 85.0% in the prior quarter.

Our cost of goods sold also includes the costs associated with converting our raw materials into finished products. These conversion costs include labor and overhead expenses directly related to the manufacturing of our finished products. Our conversion costs increased by 10.0% compared to the prior quarter primarily driven by higher prices for natural gas in the European region and certain non-recurring expenses supplemented by a general increase in all operating costs (including a 10.8% depreciation of the Euro and a 9.7% depreciation of the INR against the USD).

Selling, General and Administrative Expenses

Selling, general and administrative expenses include operating expenses that are not included in conversion costs, such as compensation of corporate and professional employees, professional consultant costs and other general expenses. Selling, general and administrative expenses were $22.8 million compared to $19.5 million for the prior quarter, an increase of $3.3 million (including a 10.8% depreciation of the Euro and a 9.7% depreciation of the INR against the USD).

Depreciation and Amortization

Depreciation and amortization expenses include depreciation of property, plant and equipment related to our production facilities, amortization of intangible assets such as long-term product sales, raw material supply agreements, trademarks, and amortization of plant-turnaround costs. Depreciation and amortization expenses were $23.1 million compared to $26.2 million for the quarter ended December 31, 2021, a decrease of $3.1 million. The lower depreciation in the current quarter was primarily due to the fluctuations in exchange rates.

Other Operating Income (Expense)

Other operating income was $3.9 million in the current quarter majorly due to insurance claim proceeds during the quarter

Operating Income (Loss)

Operating income was $53.7 million compared to $29.2 million for the quarter ended December 31, 2021. The increase in operating income was primarily driven by opportunity margins offset by higher operating costs, primarily raw material and energy and certain non-recurring expenses.

Interest Expense, net

Net interest expense includes interest expense associated with outstanding debt and amortization of deferred financing costs, net of interest income. Net interest expense was $13.8 million compared to $12.9 million for the quarter ended December 31, 2021. The increase in interest expense was driven by higher utilization of working capital borrowings offset by fluctuations in exchange rates.

Loss (Gain) on Foreign Currency Transactions, net

Transactions in foreign currencies are recorded at the exchange rates prevailing on the date of the transactions, and monetary assets and liabilities denominated in foreign currency are restated at the prevailing quarter-end rates. The resultant gain or loss upon such restatement along with the realized gain or loss due to foreign currency transactions are accounted for in the consolidated statements of operations.

Other (Income) Expense, net

Other expense, net was $0.4 million in the current quarter.

Income Tax Expense (Benefit), net

The company recorded an income tax expense of $12.7 million compared to $21.0 million for the prior quarter. The effective tax rate on full year basis was in company's normal range

Liquidity and Capital Resources

Liquidity

Our liquidity requirements arise principally from our operating activities, plant turnaround costs, and maintenance and growth capital expenditures. Historically, our principal sources of funding have included cash generated from operations, bank borrowings and issuances of debt securities. With existing cash and cash equivalents and revolver credit facilities, we believe we have adequate liquidity to meet the company's operating needs.

The following table summarizes our cash flows from operating, investing and financing activities for the periods indicated.

Analysis of Cash Flows

Net cash provided by (used in) $ millions	FY 2022	FY 2021
Operating activities	26.2	5.1
Investing activities	(56.5)	(49.0)
Financing activities	43.3	(27.0)

Net cash provided by (used in) operating activities

Net cash provided by operating activities was $26.2 million for the year ended December 31, 2022. Cash generated during the period was offset using working capital due to increased commodity prices and building inventories.

Net cash provided by (used in) investing activities

Net cash used in investing activities was $56.5 million for the year ended December 31, 2022, primarily related to capital expenses.

Net cash provided by (used in) financing activities

Net cash provided by financing activities was $43.3 million for the year ended December 31, 2022, primarily driven by the proceeds from short-term debt offset with repayment of long-term debt and dividend payments.

Capital Expenditure

Capital expenditures of $54.2 million were made during the year ended December 31, 2022, of which $6.9 million was spent on our growth projects. Our capital expenditures are composed of growth capital and maintenance capital. Our growth capital relates primarily to expansion projects, including activities that increase production capacity and efficiencies. Our maintenance capital relates primarily to preserving the reliability of our production facilities and compliance with environmental, health and safety regulatory requirements.

Plant Turnaround Costs

In addition to capital expenditures, we incurred $15.1 million of costs related to plant turnarounds for the year ended December 31, 2022. Plant turnaround costs are expenses we incur as part of normal operations for planned major maintenance activities, which periodically shut down our calcining production facilities. We defer such expenses and amortize such costs over periods leading up to the next planned turnaround (generally 14 months).

Application of Critical Accounting Policies

The accompanying consolidated financial statements have been prepared in accordance with US GAAP. The preparation of the consolidated financial statements in conformity with US GAAP requires management to make significant estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and disclosure of contingent liabilities. On an ongoing basis, management evaluates its estimates and assumptions, and the effects of revisions are reflected in the financial statements in the period in which they are determined to be necessary.

Non-GAAP Financial Measures

EBITDA is defined as net income, plus income tax expense, plus interest expense, plus depreciation and amortization. Adjusted EBITDA is EBITDA, adjusted to exclude certain non-recurring and exceptional items that are not considered by management to be indicative of our ongoing operating performance.

EBITDA and Adjusted EBITDA are presented because we believe that they provide investors with important additional information to evaluate our performance, and these are frequently used by securities analysts, investors, and other interested parties in the evaluation of companies in industries such as the carbon and advanced material industries. In addition, we believe that investors, analysts, and rating agencies will consider EBITDA and Adjusted EBITDA useful in measuring our ability to meet our debt service obligations. However, EBITDA and Adjusted EBITDA have important limitations as analytical tools, and therefore they should not be considered in isolation or as substitutes for analysis of our results reported under US GAAP. EBITDA and Adjusted EBITDA are not recognized measurements under US GAAP, and when analyzing our performance, investors should use EBITDA and Adjusted EBITDA in addition to, and not as an alternative to, net income, operating income or any other performance measures derived in accordance with US GAAP.