Opportunities and risks: Navigating responsibly in a volatile environment

The risk management system of the MANN+HUMMEL Group is aligned with the recognized frameworks of COSO Enterprise Risk Management (COSO ERM) and ISO 31000:2018. Overall responsibility rests with executive management; operational responsibility is decentralized within the individual business units.

During fiscal year 2025, the governance structure of our risk management was substantially advanced: risk management has now been integrated into the newly created "Risk & Resilience" organization, which reports directly to the CEO. This organization brings together five interconnected core functions: Group Risk Management, Information Security, Data Protection, Business Continuity Management, and Crisis Management. This structure reflects MANN+HUMMEL's targeted response to heightened market volatility and an increasingly complex threat landscape.

Risks are identified, assessed, and managed group-wide through a structured, digitally supported process – decentrally by the business units, centrally aggregated, and presented to the executive management Risk Committee. Material risks and opportunities are grouped into five main categories: strategic, operational, financial, regulatory and compliance risks, as well as IT, cyber, and data risks. Risk assessment follows a consistent methodology: the magnitude of potential impact and the probability of occurrence determine whether a risk is managed at the business unit level or escalated directly to executive management. Risks with a potential EBIT impact of more than €5 million are included in central Group reporting.

Geopolitical tensions – particularly in Eastern Europe, the Middle East, and the Indo-Pacific – can disrupt energy and commodity flows, trigger sanctions, and block critical trade routes. Growing trade barriers, subsidy regimes, export controls, and localization requirements are fundamentally reshaping customer investment decisions as well as procurement and logistics structures. Adding to this are macroeconomic risks such as exchange rate volatility, potential reassessment of interest rate levels, and possible financial market turbulence.

Global supply chains remain vulnerable to geopolitical disruption, natural events, and trade policy interventions. Increasing dependence on individual regions and suppliers heightens the risk of supply shortages. MANN+HUMMEL addresses this through a deliberate regionalization strategy – including a new production facility in South Africa as a strategic hub for the sub-Saharan market, as well as local production capacities in the United States based on the "Local for Local" principle.

At the same time, ongoing restructuring measures tie up operational resources and present short-term risks. Over the medium to long term, however, they are designed to sustainably improve the global cost structure and site quality.

As a globally operating company, MANN+HUMMEL is continuously exposed to foreign exchange risk. During the reporting year, negative currency effects of €154.9 million weighed noticeably on Group revenue. Hyperinflation effects in Turkey and Argentina added a further burden of €4.8 million to the financial result, though significantly less than in the prior year (€14.7 million).

Interest rate developments, liquidity management, and tax expense – including loss carryforwards that could not be recognized – are additional financial risk factors the company actively monitors. At the same time, the significantly improved free cash flow strengthens the Group's financial flexibility and risk-bearing capacity.

Regulatory density is increasing across virtually all relevant markets – and with it the requirements placed on MANN+HUMMEL. Key areas of focus include the Corporate Sustainability Reporting Directive (CSRD) with its growing data requirements, the German Supply Chain Due Diligence Act (LkSG), and the regulatory restriction of PFAS (per- and polyfluoroalkyl substances) in filter products.

During the reporting year, MANN+HUMMEL transitioned nearly all wet-laid filter media in its air filtration business to materials free of intentionally added PFAS – an important step toward proactive compliance and, at the same time, a competitive advantage in an increasingly regulated environment.

What looks like a short-term risk is, over the medium and long term, one of the greatest opportunities for MANN+HUMMEL: the structural shift toward alternative drivetrains, cleaner air, and cleaner water is generating new and growing demand for innovative filtration solutions. Electric mobility, hydrogen technology, and fuel cells require highly advanced filtration components for thermal management, battery safety, and cathode air filtration – areas where MANN+HUMMEL is already delivering solutions in series production.

More than half of the 100-plus priority patent applications filed during the reporting year cover applications beyond combustion engine technology – a clear signal of the strategic direction of our innovation investments.

Data centers, cleanrooms, and semiconductor manufacturing are among the structural growth markets of our time, with sustained strong demand for the highest air purity standards. MANN+HUMMEL Air Filtration is already actively positioned in these segments and continues to expand its system solutions for cleanroom technology and industrial air filtration.

In the water market, global demand for treatment technologies is growing – driven by water scarcity, regulatory requirements, and investment in municipal and industrial infrastructure. MANN+HUMMEL Water & Membrane Solutions is strategically present in this growth market with its membrane and water filtration portfolio.

With the new Filtration Materials segment and the production facility in Marklkofen, MANN+HUMMEL is strengthening its independence in materials development. Proprietary filtration materials increase the pace of innovation, reduce external dependencies, and improve cost efficiency across the supply chain.

Digitalization and the use of AI open up additional efficiency potential: from data-driven costing and pricing to AI-supported production optimization and digital customer portals that make the aftermarket business more efficient and more customer-centric.

At MANN+HUMMEL, sustainability is not a reaction to regulatory pressure – it is a strategic growth lever. With the MANN-FILTER "Naturally Better" initiative and the consistent development of CO₂-reduced filter solutions made from renewable raw materials, we are reaching new customer groups and strengthening our market position in an increasingly ESG-driven procurement environment.

We also intensified our Decarbonization Strategy in 2025, targeting carbon-neutral production by 2035. Approximately 30% of our electricity needs were already covered by renewable sources during the reporting year. The development of a group-wide Product Carbon Footprint (PCF) creates transparency and positions us as a preferred supplier in industries where ESG ratings influence procurement decisions.

The overall risk profile of the MANN+HUMMEL Group has remained largely stable compared to the prior year, even as the global economic and geopolitical environment continues to be marked by high volatility. Key influencing factors remain the ongoing geopolitical tensions – particularly in Eastern Europe, the Middle East, and the Asia-Pacific region – which continue to put pressure on global supply chains. At the same time, the pace of structural technological change in the automotive sector is accelerating, accompanied by a significant increase in regulatory requirements around ESG compliance.

At the time of report preparation, no risks are identifiable that – either individually or in combination – could threaten the continued existence of the MANN+HUMMEL Group. Risk-bearing capacity is supported by a solid equity base and secured liquidity.

Three priority areas will receive particular attention in fiscal year 2026:

• Cyber and information security in the context of advancing digitalization projects and a heightened threat environment
• Supply chain resilience in the face of geopolitical disruption and protectionist interventions
• Regulatory compliance, particularly with respect to CSRD data requirements and the Supply Chain Due Diligence Act