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To our shareholders

Dear Shareholders

Covid-19 rapidly spread across the globe in 2020, putting the world into a state of emergency. Precious Woods was affected in Gabon, Brazil, the Netherlands and also in Switzerland. We will look at this impact in detail in the annual report. The enhanced health protection measures, the reduced headcount for part of the year, two serious cases of illness resulting in death, as well as the restricted travel possibilities for our management, our foreign employees in Gabon, and our sales specialists demanded a great deal of flexibility, perseverance, and adaptability from all our employees – and also a steep learning curve in using digital communication to manage work across continents and languages. The fact that, despite the extraordinary situation, we managed the challenges in the manner outlined this year, is an outstanding achievement by our entire team. These operational successes make us optimistic for the years to come.

2020: A successful operational year

Across the Group as a whole, we increased sales, revenue, and production compared to the normalized values of the previous year. The revenue increases in Brazil are apparent, while the increases in Gabon are still concealed in the high inventory volumes. The extent of the infrastructure difficulties in Gabon was especially high this year and had an enormous impact on operations, our team, and liquidity. Overall, however development in the sawmills has been positive: in terms of technology, revenue, and volume. And we are making good and rapid strategic and operational decisions today. This is especially important in situations that cannot always be planned. The fact that we are reporting a net loss in 2020 is due to the special situation and the high interest burden as well as the poor result of our veneer plant TGI.

Good prospects for wood – and also for tropical wood

The worldwide demand for wood is increasing. In 2020, we suffered price losses due to high inventory volumes of our customers, market uncertainties due to the pandemic, and also restrictions imposed at individual producers. This situation will improve in 2021, and we expect rising prices and a recovery of demand. The challenge will be to use our versatile tropical woods also in the construction sector or in the sales channel of do-it-yourself markets. This requires additional investments in further processing and increased technical expertise from our teams.

Investing in the future and new partnerships

In Gabon, the new sawmill for hardwood was put into operation with a delay in spring 2020. Since the beginning of 2021, we have been working in two shifts, and we firmly believe that the investments will contribute to future revenue. At the same time, we are convinced that the new partnership we have found for our veneer production in Owendo (TGI) represents a sustainable solution for its successful further development. The new company, Compagnie des placages de la Lowé (CPL), has been active since 1 October 2020 and strengthens the competence of Precious Woods in several areas.

In Brazil, the smaller renewal and replacement investments we made during the reporting year resulted in increases in volume, productivity, and revenue as described in this report. Strategic investments continue to be necessary at our Brazil location as well. On the one hand, we intend to repurchase the shares in BK Energia so that we own 100% of this extended value creation. On the other hand, we hope to secure additional public or private concessions in order to expand our activities for the long term. «Use it or lose it» continues to be our declared goal with regard to the utility of the intact forest areas in this region.

Our credibility continues to be our greatest asset

Audits, such as for FSC or PEFC recertification, have been part of our third-party monitoring processes for years. We are now also examining other activities, such as, according to the criteria of the Forest 500 assessment, an initiative of Global Canopy. This includes an assessment of the contributions a company makes to minimize the risk of tropical deforestation. We are proud to have been ranked first among the world’s timber processors and eleventh overall out of 500 companies and financial institutions. We are equally proud of our SPOTT classification (Sustainability Policy Transparency Toolkit), an initiative of the ZSL (Zoological Society of London). Here, Precious Woods achieved second place out of 100 companies assessed.

Outlook and thanks

Infrastructural and institutional obstacles, along with the effects of the global pandemic, have again impacted our activities. With sales growth of 4.1 % and an EBITDA margin of 12.5 % (previous year: 13.2 %), we can nevertheless look back on a reasonably successful year 2020. Thanks to our investments, the current market situation, and our proven management with many years of experience, we are also optimistic for the coming year.

On behalf of the entire Board of Directors, I would like to take this opportunity to thank the management in Switzerland, Gabon, and Brazil for their flexibility, great dedication, and strong performance. The responsibilities and business conditions were especially demanding and challenging in 2020 – in sales, at the production sites, in management, and also in the provision of support services. And I would like to thank our more than 1 500 employees at Precious Woods for their solidarity and outstanding commitment. I would also like to thank Markus Brütsch for his extraordinary dedication, his nerves of steel, and transparent and reliable management and collaboration. And I thank my colleagues on the Board of Directors for their constructive and close collaboration at all times. I would not want to miss our monthly, virtual exchanges. Nevertheless, I hope that physical meetings will soon again be possible.

Last but not least, on behalf of the entire Board of Directors and all employees, I would like to express our gratitude to our shareholders. We would like to thank you for your loyalty and for continuing to support, accompany, and promote our activities and engagement.

We have again decided to hold this year’s General Meeting without the physical attendance of shareholders. We very much hope to be able to invite you to an event in the second half of 2021 and to use this opportunity to engage in valuable conversations.

Yours faithfully

WSGE_DP_GR_Unterschrift_Chairman

Katharina Lehmann

Chairwoman of the Board of Directors