Colas : The year in review 2022

2022

Our action

Connecting communities and fostering exchanges for the world of today and tomorrow.

Our mission

Designing, building and maintaining sustainable transport infrastructure from our local roots, around the world.

Our ambition

Being the world leader in innovative, sustainable mobility solutions.

WE OPEN THE WAY

BY CARING		BY SHARING		BY DARING

Unless otherwise stated, all figures are for 2022.

Cover: Building a bike path in northern France using Vegecol, an innovative plant-based mix with a lower carbon impact.

04PROFILE

FOR THE PLANET

ACT 16

24 ACT

LOCALLY

FOR PEOPLE

ACT 32

38 GOVERNANCE AND PERFORMANCE

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INTERVIEW

Frédéric

Gardès

Chairman &

Chief Executive

Officer

2022 was marked by a challenging geopolitical and economic environment, driven by the war in Ukraine, rising energy and bitumen prices, soaring inflation, etc. How did Colas perform?

We actually performed pretty well.

It's true that the first six months were tough, but once we had incorporated rising costs into our prices, we made up lost ground and actually performed better in the second half of the year than we had done in 2021 over the same period. The Group's net profit was up 15% at the end of the year.

Some geographies suffered more than others, including Central Europe, for obvious reasons, and several parts of the USA. Today, Central Europe is the only one of our zones where business remains difficult.

Once again, we have shown ourselves to be resilient. As during the Covid pandemic, we have demonstrated our agility, our responsiveness and the relevance of our business model, strategy and transformation initiatives. If I were to take just one example, the creation of Continental Bitumen two years ago came at exactly the right time to cope with the explosion in bitumen prices and avoid shortages.

Beyond our capacity to weather this storm, we've continued to prepare for the future.

Having expanded into Finland at the end of 2021 via Destia Group, in October 2022 you bought the German railroad group, Hasselmann. Are you satisfied with these two external acquisitions?

Destia had a very good year. Its integration into the Group has been a huge success. No great surprises there given that we share the same businesses, the same vision, the same ambition and the same values.

Colas Rail's acquisition of Hasselmann also fits squarely with our targeted development strategy. In addition to the USA and Northern Europe, Germany is one of the countries where we'd like to develop. Until now, we had been absent from this European powerhouse and its considerable transport infrastructure needs.

And that didn't make any sense!

Developing your industrial activities

- especially quarries and bitumen -

is another one of your strategic priorities. What headway have you made?

2022 marked a major milestone for our quarry business, with the creation of Keystone, the Colas Rocks and Recycling Division, a cross-functional unit that steers the activity. We want to make this activity a business in its own right, with

the aim of becoming a major player in the sale and production of virgin and recycled aggregates in targeted development zones.

As for the bitumen business, it is set to enjoy a step change in 2023. We will shortly

be taking delivery of two bitumen tankers we ordered.

Another one of your strategic priorities

is to accelerate Colas' digital transformation. Can you give us a few examples?

The digital transformation and its acceleration contribute to the Group's performance and long-term future.

The roll-out of our global Copernic project, aimed at introducing new management and information systems and now nearing completion, is just one of the many advances we have made in this area. Another example is the development of tools like Chantier 360, a jobsite monitoring and reporting app that is already a huge success. And then there is the whole issue of protecting our Group against the risks associated

with cybercrimes: we've introduced a range of initiatives, including cybersecurity training for every employee.

Let's turn to Colas' low carbon strategy. Two years ago, you made a commitment to reduce both your direct emissions (Scopes 1 and 2) and your upstream indirect emissions (Scope 3a) by 30% each by 2030. Are you confident that Colas will be able to meet these ambitious objectives?

Three things to start with.

First of all, our targets have been validated

by the SBTi (Science-Based Targets initiatives), attesting to the fact that they are in line with the Paris Agreement.

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Secondly, I want to emphasize that we are the first in our business segment to commit to Scope 3a. We feel we have a duty, as the leading player, to "exert pressure" upstream in order to accelerate the overall decarbonization trend.

Thirdly, in order to measure our carbon footprint and its evolution in a satisfactory way, we need to make sure the calculation method we're using is as relevant and accurate as possible. In 2022, we overhauled our method. Our carbon accounting is now based on physical flows. That was already the case for Scopes 1

and 2. It is now the case for Scope 3a as well.

In terms of how we're doing, we're ahead of our interim targets, particularly for Scopes 1 and 2. We're also making progress with Scope 3a, although it's more challenging because the change doesn't depend on us alone. It involves our entire supply chain. So we're working on these areas with all our partners and subcontractors. The reduction won't be linear: it will gather pace towards the end of the period, once all the companies upstream are onboard.

And regrettably, last year we had two fatal accidents. After analyzing the circumstances, it was determined that none of the Group's safety rules had been breached. However, losing one's life at work is absolutely unacceptable.

In terms of ethics and compliance, we further improved our systems, with, for example, the introduction of a dedicated platform for reporting incidents or behavior contrary to business ethics and managerial ethics. This whistleblowing system is open to Group employees around the world as well as third parties. We've also updated our body of rules and procedures governing the application of best practices relating to compliance.

And, of course, we're continuing our training initiatives, awareness-raising campaigns, etc.

The issue of ethics goes beyond merely complying with the law and regulations. It is a matter of personal and collective convictions, fairness in business, the protection of employees, and the company's attractiveness and long-term future.

Managerial excellence is central

to Colas' Human Resources commitment. What do you mean by this?

ACT, our corporate

CSR project, has been successfully rolled out and has exceeded my expectations.

Can you tell us a little bit about the roll-out of your ACT corporate project, dedicated to Corporate Social Responsibility (CSR)?

Last spring, in Montreux, we organized Colas in Motion, a CSR convention bringing together more than 700 managers from across the Colas map. As well as welcoming the opportunity

to get together again after the challenging Covid years, the goal was to get everyone "onboard" with the Group's commitments. The event was a resounding success.

ACT has been successfully rolled out and has exceeded my expectations. It is striking to see the extent to which employees all around the globe have embraced the project. Beyond the high expectations people have concerning CSR, I believe this enthusiasm is partly down to the freedom we've given to local entities to come up with their own initiatives. Priority areas have been defined for each commitment, but entities can decide what actions they want to put in place, depending on what makes the most sense for them locally. This success reflects the strength of our model.

Colas wants to consolidate an exemplary culture when it comes to safety and ethics. What were your safety results in 2022 and what initiatives were implemented in terms of ethics and compliance?

My ambition in both these areas is to make Colas the benchmark company in its sector.

In 2022, our safety results continued to improve significantly across almost all our geographies. The accident frequency rate dropped below 5 for the first time in our history. Our Goal Zero and One Safety programs appear to be paying off. But we must not be complacent. We are still a long way short of our objective of zero accidents!

Managerial excellence primarily relates to the way we attract and integrate talent, develop our employees' potential and create high-quality working environments. It is founded on our values of caring, sharing and daring. It requires our managers to adopt some basic behaviors, that we refer to as Colas Leadership Essentials.

It is also founded on listening to our people's expectations as expressed back to us via our annual in-house employee perception survey, Dialogue.

We carried out a lot of work in this area in 2022. In the very near future, we will be introducing a training offer available to all our managers at every level.

I want to see Colas recognized as much for its managerial excellence as it is for its operational excellence.

One last question to close the financial year that has just ended: which project in 2022 are you the most proud of?

I'm proud of all the projects we've successfully completed around the world, big and small, whether they have concerned maintenance and construction, roads, urban development, tramways, cycle paths, airport runways, etc.

And that is a feeling shared by all those who took part in them. I'd like to pay tribute to all these people here.

One of the most emblematic of these for me is the "Route de l'Est" in Côte d'Ivoire. This major project symbolizes both our expertise and our strong local roots. With financial arrangements put in place by us, it was carried out by Colas Africa and Colas Projects teams. More than 1,200 people were hired and trained on site, and numerous local initiatives, particularly related to safety awareness

and protecting the environment, were undertaken. Another source of satisfaction lies in the utility of this infrastructure, which will contribute to the region's economic development and help improve living conditions for local communities. And the icing on the cake is that the work went very smoothly.

I'd like to mention another project too, very different from this one but also a source of pride for Colas: the pollution remediation operations at the SRD refinery in Dunkirk. We approached the operations responsibly, using effective

and advanced technologies such as BIM. We could see more projects of this type in the future.

Now let's talk about 2023.

Is Colas' outlook promising?

We have a record, high-quality order backlog, across all our geographies, except for Central Europe as a result of the war in Ukraine.

Major contracts secured include the five-year extension of the South Rail Systems Alliance and the Birmingham tramway extension in the UK, major road and highway resurfacing projects in North America, and the construction of a section of line 4 of the Cairo metro in Egypt.

Generally speaking, we work in growth markets because our businesses address fundamental needs. The railroad sector is particularly dynamic: it fits well with long-term decarbonization objectives. Maintenance, which accounts for

a big share of our activities, is set to benefit from an acceleration in the resumption of previously delayed maintenance programs.

More specifically, we're expecting to see the effects of President Biden's recovery program in the USA, which began to bear fruit at the end of last year.

However, we remain vigilant. The last three financial years serve to remind us that company life is never plain sailing!

Will inflation and the soaring energy and bitumen prices last year have

a long-term impact?

It's too soon to say.

Concerning inflation, what had the biggest impact is the transition, i.e., moving from

a world where inflation was very low for more than thirty years to one where inflation is high.

If the level of inflation is high but stable the impact is not as great... except to say that sustained inflation may affect the investment capacity

of governments, local authorities and private customers. We're not at that stage yet.

As for the price of bitumen, again the challenge lies in managing the transition.

If prices become volatile once again, the effects will be amplified.

What do you see as the biggest challenges facing your businesses in the future?

And how are you addressing these challenges?

Firstly, in terms of HR, there is a shortage of manpower. Around the world, job markets are tight and under pressure. So, we're promoting the concrete actions we are taking in the area of CSR - and I must emphasize the word "concrete" - relating to aspects such as ethics, low carbon, the development of human potential, managerial excellence, well-being at work, the social climate, etc. We're also working on gender equality because women make up half of the world's population, so half of the world's talent and skills that could be of benefit to our businesses.

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Colas has solid fundamentals. We are agile, with longstanding

local roots and a strong commitment to our communities.

FROM

A BREAKTHROUGH INNOVATION…

Secondly, we need to focus on what has always existed and is not likely to disappear: the appeal of the construction business, and the sense of satisfaction derived from seeing the fruits of your hard work emerge from the ground. I should know!

The environment represents the biggest challenge of course. We may not be responsible for what is driven on roads in the broadest sense of the term. But we have the expertise to create infrastructures whose construction and maintenance are as low carbon as possible, using as few resources as possible. We have devoted substantial R&D resources to these areas for many years now, enabling us to offer our customers a broad range of low carbon or circular economy solutions. Unfortunately, it is still rare to see environmental performance as a selection criterion for public calls for bids, although things are beginning to change. And we're more than ready.

Are you confident about Colas' future?

I'm absolutely confident.

We have solid fundamentals and we're going to continue to benefit from the positive effects of our transformation plans.

We're agile and have longstanding roots in local communities.

We are well positioned, primarily in mature markets where most of our business is maintenance.

We address essential travel and transport needs, which have existed since the dawn of time.

We design and develop innovative and sustainable solutions for tomorrow's mobility.

We have committed employees. They are our driving force and our energy. And they're proud to do the job they do, connecting communities and facilitating exchange.

1922

A bitumen emulsion patent, Cold Spray, is filed in London. It was renamed Cold Asphalt in 1924, and the abbreviation gave the name Colas.

In terms of building the future of the road sector, what innovative and responsible solutions do you believe in the most?

I believe in the use of more environmentally- friendly methods, such as recycling, cold techniques, bio-based products, etc. I also believe in innovative solutions like the Flowell dynamic light-emitting signaling solution, which improves the way roads are shared for better traffic flow and increased safety. Wattway photovoltaic road surfacing, in the form of an autonomous local energy solution, is also set to be adopted

by more and more customers around the globe:

it addresses the issue of land pressure since it uses surfaces that have already been developed.

The future of the road is also, and above all, about maintenance. The current system of breaking everything down into batch contracts is inefficient. It is high time to promote global performance contracts with result objectives, opening up to alternatives, maintenance optimization services such as our Infracare offer, which uses surveying techniques based on artificial intelligence.

COLAS THROUGH

THE YEARS

Colas was created to rise to a new challenge: exploiting the Cold Asphalt bitumen emulsion patent, which revolutionized road techniques.

Over the decades, the Group has widened its business ranges, branching out into activities relating to its core roads business, mainly construction materials, and at the beginning of the 2000s, railways. Present since the 1930s in Europe and Africa,

then in North America in the 1960s, Colas has multiplied its locations until operating on every continent. Because we still think and act like pioneers, we are able to ceaselessly design new products, techniques, and innovative solutions. Today,

we continue to innovate to meet ever-growing,ever-changing mobility needs responsibly and sustainably.

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