Climate Change Data

Environmental Metrics

Environmental Challenges

• Lack of commercial credit to support customers' production schedules.
• Customers assessing Reko as a high-risk supplier due to operating losses.
• Slower than anticipated economic recovery or deterioration of economic conditions.
• Potential bankruptcy of major customers and disruption of the automotive supply chain.
• Costs associated with rationalization and downsizing of operations.
• Inability to diversify sales beyond three major customers.
• Competition from suppliers in developing markets with lower operating costs.
• Significant long-term fluctuations in relative currency values.
• Pricing pressures and pressure to absorb additional costs.
• Cyclical nature of the global automotive industry and its dependence on general economic conditions.
• Weakened financial stability of the supplier base.
• Pressure from customers to launch new awards without adequate design support.
• Pressure from customers to absorb their traditional overhead costs.
• Outsourcing and in-sourcing trends.
• Changes in consumer demand for specific vehicles.
• Shifting market shares among vehicle manufacturers.
• Adverse change in worldwide economic demand for energy-efficient locomotive engines.
• Failure to identify and develop new technologies.
• Failure of major financial institutions affecting credit availability.
• Dependence upon key personnel.
• Inability to utilize tax losses.
• Potential impairment charges in the future.
• Failure to successfully identify, complete, and integrate acquisitions.
• Significant changes in law, government regulations, or accounting regulations.
• Environmental laws and regulations.
• Continued listing review by the TSX.

Mitigation Strategies

• Cost reduction strategy including rationalization of operating facilities.
• Working to turn around financially underperforming divisions.
• Attempting to further diversify customer base to European and Asian manufacturers.
• Expanding manufacturing sources to take advantage of lower cost countries.
• Hedging program to minimize exposure to foreign exchange rate changes.
• Key man insurance on several members of the management team and active succession planning.
• Tax planning strategies to realize future tax assets.

Supply Chain Management

Climate-Related Risks & Opportunities

Reporting Standards

Frameworks Used: Canadian GAAP

Environmental Metrics

Social Achievements

• Employee head count rationalization as part of business transformation project.

Climate Goals & Targets

Environmental Challenges

• Reduced revenues and significant operating losses in prior years due to decline in capital equipment markets and global recession.
• Operating under reduced financial covenants with primary lender.
• Pricing pressure and pressure to absorb additional costs.
• Dependence on consumer spending and general economic conditions in the automotive industry.
• Financial instability of the supplier base.
• Pressure from customers to launch new awards without adequate design support.
• Pressure from customers to absorb traditional overhead costs.
• Changes in consumer demand for specific vehicles.
• Shifting market shares among vehicle manufacturers.
• Decrease in world’s energy reduction programs.
• Decrease in demand after locomotive engine emission standards are changed.
• Failure to identify and develop new technologies.
• Dependence upon key personnel.
• Inability to utilize tax losses.
• Potential for future impairment charges.
• Failure to successfully identify, complete, and integrate acquisitions.
• Risks associated with natural disasters at manufacturing facilities.
• Significant changes in law, government regulations or accounting regulations.
• Potential volatility of Reko’s share prices.
• Conflict of interest between majority and minority shareholders.

Mitigation Strategies

• Business transformation project: enhanced competitive position, reduced fixed costs, eliminated capacity in plastic injection mold building operations, closure of 7 manufacturing plants, reduction of employees.
• Proactive and open relationship with primary lender, involving timely and frequent dialogue and a strategy of analyzing the Company based on rolling six month intervals.
• Focus on strengths, adjusting to strategic changes, and gaining market share.
• Investment in new TOS horizontal boring mill to better serve existing and expand customer base.
• Sales and marketing efforts focused on strongest offerings.
• Debt reduction through sale of non-strategic assets.

Supply Chain Management

Climate-Related Risks & Opportunities

Reporting Standards

Frameworks Used: IFRS

Third-party Assurance: PricewaterhouseCoopers LLP

Environmental Metrics

Social Achievements

• Continued reductions in wages and benefits as a result of the implementation of our business transformation project

Climate Goals & Targets

Environmental Challenges

• Current outsourcing and in-sourcing trends could materially impact our profitability and financial condition
• A shift away from technologies in which the Company is investing could have a material adverse effect on our profitability and financial condition
• Inability to diversify our sales could have an adverse effect on our profitability and financial condition
• Inability to successfully grow our sales to non-traditional customers could have an adverse effect on our profitability and financial condition
• We may not be able to successfully compete against suppliers with operations in developing markets, which could have an adverse effect on our profitability and financial condition
• The consequences of the automotive industry’s dependence on consumer spending and general economic conditions could materially impact our profitability and financial condition
• The financial viability of our supply base could materially impact our profitability and financial condition
• The increasing pressure from our customers to launch new awards without adequate design support could materially impact our profitability and financial condition
• Changes in consumer demand for specific vehicles could materially impact our profitability and financial condition
• The consequences of shifting market shares among vehicle or automobile manufacturers could materially impact our profitability and financial condition
• The consequences of a decrease in the world’s energy reduction programs could materially impact our profitability and financial condition
• Our dependence upon key personnel could materially impact our profitability and financial condition
• Our failure to successfully identify, complete, and integrate acquisitions could materially impact profitability and financial condition
• Our manufacturing facilities are subject to risks which could materially impact our profitability and financial condition
• Continued uncertain economic conditions could have a material adverse effect on our profitability and financial condition
• Europe’s sovereign debt crisis could have a material adverse effect on our profitability and financial condition
• The continuation or intensification of pricing pressures and pressure to absorb additional costs could have an adverse effect on our profitability
• The increasing pressure from our customers to absorb their traditional overhead costs, including program management and design feasibility, could materially impact our profitability and financial condition
• Continued support of our lenders could have a material impact on our profitability, financial condition and continued sustainability
• Significant long-term fluctuations in relative currency values could have an adverse effect on our profitability and financial condition
• The consequences of a decrease in demand after locomotive engine emission standards are changed could materially impact our profitability and financial condition
• We could record impairment charges in the future, which could materially impact our profitability and financial condition
• Our inability to utilize tax losses could materially impact our profitability and financial condition
• Potential volatility of Reko’s share prices could materially impact the financial returns earned by our shareholders
• Interest of the majority and minority shareholders may be in conflict with the interests of the Company
• Significant changes in law, government regulations or accounting regulations could materially impact our profitability and financial condition
• Environmental laws and regulations could materially impact our profitability and financial condition

Mitigation Strategies

• Refinanced its mortgage payable, decreasing annual debt service costs by $732
• Disposed of 2 redundant real estate properties, using net proceeds to reduce mortgage payable
• Recovered deferred tax asset, recording a $400 income tax recovery
• Maintains a forward foreign exchange hedging programme to minimize exposure to foreign exchange risks
• Uses LIBORs, bankers’ acceptances and its line-of-credit to reduce the exposure to interest rate changes

Supply Chain Management

Climate-Related Risks & Opportunities

Reporting Standards

Frameworks Used: IFRS

Third-party Assurance: PricewaterhouseCoopers LLP

Environmental Metrics

ESG Focus Areas

• Sustainable manufacturing and production

Climate Goals & Targets

Environmental Challenges

• Pricing pressures and pressure to absorb additional costs
• Continued uncertain economic conditions
• Significant long-term fluctuations in relative currency values
• COVID-19 pandemic
• Potential volatility of Reko’s share prices
• Interest of the majority and minority shareholders may be in conflict with the interests of the company
• Significant changes in law, government regulations, or accounting regulations
• The possibility of impairment charges in the future
• Our inability to utilize tax losses
• Operational risks (outsourcing trends, technological shifts, sales diversification, automotive industry dependence, supply base viability, reliance on key personnel, IT system security)

Mitigation Strategies

• Investments in machinery and new automation facility
• Development of innovative flexible automation equipment
• Focus on operational efficiencies
• Frequent review of project financial performance
• Forward foreign exchange programme (FFEC Programme)
• Implementation of several innovative recruitment and retention strategies
• Established and enhanced security controls and employee training to protect IT systems
• Adequate cybersecurity insurance coverage
• Continuous monitoring of system
• Diversification of customer base

Supply Chain Management

Climate-Related Risks & Opportunities