To our shareholders

Markus Brütsch

Chairman of the BoD

Dear Shareholders

In the financial year 2025, we consistently pursued our strategic initiatives, thereby improving the profitability of Precious Woods while laying the foundation for projects that can be realized in the near future. However, the challenges we faced this year were more extensive than anticipated. The geopolitical environment remained tense, and the expected economic recovery did not materialize. In addition to ongoing logistical difficulties, increased political uncertainties at both locations weighed on business performance. As a result, revenues declined in the reporting year.

Positive operating result (EBITDA) – Decline in revenues

Net revenues in the financial year 2025 amounted to EUR 44.6 million, representing a decrease of 6.5 %. Market conditions did not recover as expected. However, disciplined production planning enabled us to reduce costs and thereby improve operating performance. Overall, we achieved a positive EBITDA of EUR 4.2 million, corresponding to a margin of 9.4 %. Although economic conditions remained largely unchanged throughout the year, we maintained a sufficient order backlog in both operations at all times. This was partly achieved by reducing harvesting volumes and focusing on commonly traded wood species. Price levels remained largely stable, with the product mix contributing to slightly higher average sawn timber prices. Projects outside our core business but within our area of expertise - namely the reforestation of degraded areas - also contributed positively. Such projects were carried out in both Gabon and Brazil, and we are working to further expand these service activities.

Tropical timber in the geopolitical environment

In 2025, global timber trade - and particularly the tropical timber sector - was significantly impacted by new regulatory hurdles and shifts in global trade flows. While the sector aims to grow as part of the bioeconomy, geopolitical tensions and stringent environmental regulations continue to constrain operations. For the tropical timber trade, 2025 represented a defining year in connection with the EU Deforestation Regulation (EUDR). Although the strict enforcement rules were postponed by one year at the end of 2025, preparations for implementation shaped the entire market. As a result, the sector remains in a phase of consolidation. Importers are now required to demonstrate full traceability, ensuring that timber does not originate from land deforested after 2020. Only companies with controlled supply chains and certified sources (FSC/PEFC) remain competitive in Western markets. Precious Woods clearly belongs to this group. However, consumer preferences have increasingly shifted toward locally sourced timber in order to reduce geopolitical supply chain risks. This development makes the acquisition of new customers more challenging. Fortunately, our existing customers continue to value both the properties of tropical timber and our reliability as a partner, providing us with a solid customer base. Nevertheless, further market expansion will be necessary to achieve our growth objectives.

UN climate conference COP30 in Brazil

The 30th United Nations Climate Change Conference (COP30) took place from November 10 to 21, 2025, in Belém, Brazil. Overall, the outcomes are considered ambiguous. While progress was made in climate adaptation and forest protection, a clear roadmap for phasing out fossil fuels was not established. A new rainforest fund, the Tropical Forests Forever Facility (TFFF), was launched to support the protection of tropical forests. It represents one of the most ambitious outcomes of the conference and introduces a novel financing model aimed at making forest conservation economically more attractive than deforestation. The TFFF is designed as a permanent investment fund based on capital investments rather than one-off donations, with a targeted volume of USD 125 billion. Initial commitments of more than USD 5.5 billion have already been secured. The fund is expected to generate annual returns of approximately 4–5 %, which will be distributed to countries that demonstrably protect their rainforests. Participating countries are expected to receive USD 4 per hectare of preserved forest annually. The fund targets approximately 70 tropical forest countries in the Global South, with at least 20 % of funds intended to be allocated directly to indigenous peoples and local communities. It is regrettable that sustainable forest management was once again not recognized as a key instrument for rainforest conservation. As a result, private sector participants are unlikely to benefit directly from these pay-outs. Indirectly, however, we may benefit from improved concession terms. Overall, it remains to be seen how the fund develops and how resources will be allocated.

Strong equity ratio

Following the capital increase at the end of 2024, the equity ratio stands at 90 % at holding level and at 58 % on a consolidated basis, which is a high figure even by international industry standards. As the economic recovery fell short of expectations, raising additional financing for working capital and smaller projects proved more challenging. In Brazil, loans were granted for replacement investments, albeit at relatively high cost. In Gabon, financing negotiations became more difficult due to the country’s high level of indebtedness and increased pressure on businesses resulting from government policies. We are working on raising new loans to finance our future investments.

Outlook and thanks

For the financial year 2026, we do not expect a significant market recovery given the prevailing geopolitical conditions. The markets we closely monitor remain at a low level. However, we see opportunities to increase revenues through a broader product range. Where possible, we will implement targeted productivity improvements and further cost reductions. Several projects are planned, although their financial impact is expected to materialize no earlier than 2027. Overall, we expect a positive operating result and a significantly improved net result for 2026. Due to the political and economic uncertainties, it is not possible to provide specific guidance. Precious Woods benefits from the long-standing commitment and dedication of its employees across the entire Group. They are the most important factor and a key pillar of our success. The demanding challenges faced by our company could not be met without the exceptional efforts of our teams, specialists and managers. On behalf of the Board of Directors, I would like to express my sincere thanks to all employees, as well as to local and Group management, for their outstanding commitment during these challenging times. I would also like to thank my fellow members of the Board of Directors for their professional, critical, and constructive contributions and discussions. On behalf of the entire Board of Directors and all employees, we would like to thank you, our shareholders, for your patience and commitment to our company, and for continuing to support, promote, and encourage our work and dedication.

Yours faithfully,

Markus Brütsch

Chairman of the Board of Directors