Letter of the President of the Management Board

Year 2022, similarly as the few recent years, was a great challenge to Grupa KĘTY S.A. The multitude and scale of problems faced by companies in that time (the COVID-19 pandemic, the war in Ukraine and its aftermath, the supply chain disruptions, volatile material prices, and finally the energy crisis, inflation, and economic downturn) were unprecedented and hugely affected the global economy.

It is, therefore, a great satisfaction to be able to share with you the positive information on Grupa KĘTY S.A. results in 2022, which were significantly higher than the original financial assumptions. The consolidated sales revenue amounted to PLN 5,931 million (+29% y/y), EBITDA exceeded PLN 1,031 million (+15% y/y), and net profit attributable to owners of the parent reached PLN 678 million (+14%). The financial results achieved in 2022 were the highest in the history of Grupa KĘTY S.A.

Sharing the good financial results with you, I would like to warmly thank all the employees of the companies of the Capital Group of Grupa KĘTY S.A. for their work and involvement in building the value of our Company, and congratulate them on their professional successes.

I would also like to thank all my colleagues for being able and willing to show their heart to our Ukrainian workers and their families, as well as the Ukrainian refugees during these difficult times. Sympathising with Ukraine, we have been helping the refugees since the first days of the war. In the hottest period, with the support of our employees-volunteers, more than a hundred people received the necessary financial aid and homes, as well as hope, thanks to finding employment and the opportunity to educate and bring up their children far from the atrocities of war. In 2022 we assigned the total of nearly PLN 1.7 million on aid and intend to continue our efforts.

Owing to the absolutely different market conditions in the first and second halves of the year, the discussion of the annual financial results will reflect seemingly opposing descriptions of the year.

The first six months were exceptionally good for the Company. Paradoxically, the outbreak of war in Ukraine caused an unusually high uncertainty, nearly on the verge of panic, which – coupled with our ability to quickly react to unforeseen situations – translated into an increase in orders and the opportunity to generate high margins.

In the second half of the year, the situation changed dramatically. The third quarter brought about a substantial economic downturn, the energy crisis took hold, inflation rose month by month and orders fell. The slowdown in the second half of 2022 was evident both in the operating and financial results, as well as in the investment projects implementation schedules – we decided to postpone some works for several months, without, however, abandoning the planned development activities. In effect, in the Extruded Products Segment, the commissioning of the 20 MN press will take place by the end of the first quarter of 2023 and the 40 MN press in late 2023 and early 2024. With regard to the construction of the new plant in Złotów under the Aluprof BIS project, the construction work will be completed by the end of 2023.

In 2022, all operating segments recorded very good results.

The Extruded Products Segment, with its strong position in the European aluminium processing industry, sold roughly 85,000 tons of products in 2022, responding to the high market demand. Sales revenue reached PLN 2,451 million (+35% y/y), including PLN 1,263 million from foreign sales (+46% y/y), mainly on the German and Italian markets, as well as in Central and Eastern Europe. Revenue growth was based on increases in product sales on the main markets, the optimisation of the customer portfolio and strengthening of the position of foreign companies. The Segment also took measures aimed at effectiveness improvement and extension of processed products manufacturing, which is related to developing projects in the automotive industry, including the production of aluminium components for American-brand electric cars, among others.

The Aluminium Systems Segment represented by Aluprof S.A. increased its sales revenue to PLN 2,440 million (+22% y/y), including PLN 975 million from exports (+22% y/y). Thus, Aluprof strengthened its position as one of the leaders in the aluminium systems industry in Europe, following the path of dynamic development in every area of its business (not only related to manufacturing and products, but also to customers and marketing). Worth mentioning is the fact that for many years, Aluprof has been an organiser of the prestigious ‘Aluprof Systems Building of the Year’ competition, gathering an outstanding group of architects, constructors, developers and contractors from all over Europe, as well as a regular participant of the PLGBC Green Building Summit conference (the most recognisable and opinion-forming event in the Polish real estate, construction and architecture sectors – a symbol of green progress).

The Flexible Packaging Segment generated revenue at the level of PLN 1,517 million (+30% y/y), including PLN 836 million of revenue on foreign sales (+34% y/y) and improved its position among the largest manufactures of BOPP films and flexible packaging in Europe. Launched at the turn of 2016 and 2017, the investment in the production of BOPP film proved to be extremely well-timed and well executed – it enabled the company to gain a share of around 6% in the European BOPP film market within a short period of time, and its share of sales in the FPS product basket exceeded 50% at certain times.

Year 2022 was generous for Grupa KĘTY S.A. as regards prizes and awards, which is a token of esteem for the financial achievements of the Company and the Capital Group. We took the second position in the main ranking of the 23rd edition of the ‘The Stock Exchange Company of the Year’, organised by Puls Biznesu. One of the fund managers called Grupa KĘTY S.A. the ‘Aluminium Apple’. That comparison to an American high-tech company was undoubtedly a compliment and, at the same time, an external recognition of the quality of the Group Capital management, skilful operating activities, creation of ideas and value building… as if in American style.

Further, the Institute of Accountancy and Taxes, organising ‘The Best Annual Report’ competition for the seventeenth time, honoured Grupa KĘTY S.A. for its debut in the ‘Integrated Report’ category, which in practice means that we have joined the elite club of companies communicating with the market following the best global models.

We are all aware of the fact that the modern world invariably poses great challenges with regard to environmental protection, effective use of natural resources, or impact on the climate. The challenges refer to all, however, the business and production companies have the most to say. In the 2022 report we present updated sustainable development goals, in a progressive trend, which comprise the impact on the environment, safety and development of the Company employees, responsibility within the supply chain and engagement in local communities.

We have entered 2023 with great concerns. Successive weeks have been bringing conflicting information about the economic situation. The situation of the particular business segments differs depending on the industry they are connected to and the companies they cooperate with most strongly.

Nevertheless, we believe that, as always, we will cope with any difficulties, and the Capital Group will follow the road set out in the sustainable development strategy. The adopted business objectives for 2023 strictly follow the 2025 Strategy assumptions. The ambition of the segments is to maintain sales growth in the conditions of economic downturn. The Capital Group also hopes to increase the production capacity of its assets and attract new customers within a short-term perspective. At the same time, there are pending numerous projects aimed at efficiency improvement as well as activities involving costs reduction and looking for savings.

As the Management Board of Grupa KĘTY S.A., we believe that the current economic slowdown is temporary and we treat it as a correction in the long-term growth trend in our business area. The long-term prospects are not threatened in our opinion, and we want to use the year 2023 to strengthen our potential and competences that will allow for even more dynamic growth of the Group in the near future.

In 2023, we celebrate 70 years of Grupa KĘTY S.A. ‘Strong Business – Sustainable Development’ is our anniversary slogan, which reflects both our efforts to build a strong business and prospects and challenges faced in the area of sustainable development, which are a signpost for the future of the Capital Group, including carbon footprint reduction by way of developing a range of easily recyclable, homogeneous packaging, innovative aluminium semi-products for the electro mobility sector and energy-efficient, passive architectural systems promoting the idea of green building.