MANAGEMENT BOARD REPORT ON ACTIVITIES OF THE CIECH GROUP AND CIECH S.A. IN 2020 We are providing a courtesy English translation of our Management Board Report on activities of the CIECH Group and CIECH S.A. which was originally written in Polish. We take no responsibility for the accuracy of our translation. For an accurate reading of our Management Board Report on activities of the CIECH Group and CIECH S.A., please refer to the Polish language version of our Management Board Report on activities of the CIECH Group and CIECH S.A. MANAGEMENT BOARD REPORT ON ACTIVITIES OF THE CIECH GROUP AND CIECH S.A. IN 2020 LETTER FROM THE PRESIDENT OF THE MANAGEMENT BOARD OF CIECH S.A. Dear Sir or Madam, Summing up 2020, on behalf of all Employees and the Management Board of the CIECH Group, I can proudly state that we overcame the challenges we faced in the previous 12 months. None of us expected to be faced with such a scale of economic uncertainty, sudden decisions to cease economic operations on a scale that had not been observed in modern history, or disruptions in global supply chains. Many of us had serious concerns for the health and life of our loved ones. Therefore, before I go on to present our achievements, I would like to express my appreciation and sincere gratitude to the employees of our Group. In this difficult period, also in personal terms for many of us, our team showed commitment and responsibility. Despite the complica- Dawid Jakubowicz tions and obstacles, we managed to complete or achieve significant progress in the implemen- President of the Manage- tation of our strategic projects and ventures. The fruit of this hard work will be shown in the ment Board of CIECH S.A. financial and non-financial results of the CIECH Group in the near future. Our financial results in this difficult year prove the fundamental strengths of our business: • Net profit amounted to PLN 128 million and increased by approx. 17% compared to the previous year, • (Adj.) EBITDA reached the level of PLN 613 million (from continuing operations, excluding the result of CIECH Soda Romania), slightly more than last year, despite unprecedented disturbances in the global economy for most of the year, • In terms of expenditure response, we managed to maintain the (Adj.) EBITDA margin at last year's level of above 20%. We reduced our operating expenses by PLN 90 million or 12% compared to the previous year. We assume that some of these savings will be permanent. • We managed to maintain high cash efficiency of our business – in 2020, cash flow from operating activities exceeded PLN 767 million, i.e. increased by PLN 232 million compared to 2019. This entails that we were able to finance almost all of our investments from the 2020 current operations. • We managed to maintain the level of debt, calculated according to the definition under loan agreements, at a safe level of 2.45 times EBITDA. Achievement of such good results was possible due to our consistently implemented development strategy and business flexibility, as well as the decisive measures taken by us in the extraordinary circumstances of 2020. In the first place, we took care of the health of our employees, by introducing safe operating procedures in our production plants and equipping our employees with personal protective equipment. We manufactured some of such equipment ourselves - such as disinfecting fluid from our plant in Nowa Sarzyna or protective masks whose production began in Bydgoszcz at the end of the year. With the principles introduced by us we were able to maintain business continuity in each area, and despite the occurrence of infections, our production plants themselves did not become “infection hotspots”. At the same time, we took care of the financial stability of the Group and the quality of our results. Analysing the detailed information about our operating segments, you can observe healthy foundations that enabled us to achieve very good results in 2020, the foundations that constitute a solid basis for the growth of our business and the company's value in the near future. In the soda segment, despite the very challenging market, we managed to maintain the sales level of our key product - our revenues from soda ash sales decreased only by approx. 2% year-on-year, which confirms our market position and the strength of our customer portfolio, in particular, if we compare this result with the sales volumes generated by our competi- tors. Our revenues from the sale of sodium bicarbonate increased by 16% year-on-year, to PLN 193 million. This is mainly the result of the production from our new Stassfurt installation. Already on a full scale, in Stassfurt we produce the highest-quality pharmaceutical grade sodium bicarbonate, whose purity and other chemical and physical parameters have been confirmed, among others, by the GMP API certification. The salt business saw a particularly difficult year behind it, due to the problems of the HoReCa industry, which is one of its main recipients. Sales in this business fell by 7% year-on-year, to approx. 184 million. However, the most important activity in this area was the construction of an effective, modern and automated evaporated salt plant in Stassfurt. It is our largest investment in history and one of the largest foreign investments of Polish companies in general. In spite of successive lock- downs, cross-border transfer difficulties and lengthened administrative procedures, we were able to continue construction work. When you read these words, the construction phase is being completed and individual installations are being commis- sioned. Any moment soon, we will obtain the first lump of high-quality salt from the production line. After full production 2 MANAGEMENT BOARD REPORT ON ACTIVITIES OF THE CIECH GROUP AND CIECH S.A. IN 2020 capacity has been reached and all products have been launched for sale, including salt for pharmaceutical applications, the plant should generate an EBITDA of approximately EUR 25 million per annum. In the segment of plant protection product sales, we recognised record increases. Revenues in this segment increased by almost 25% year-on-year, to approx. PLN 366 million, and (Adj.) EBITDA by as much as 37%, i.e. to PLN 41 million. This is the result of consistently introduced changes in the organisation and management of this segment, as well as better adaptation of our product offer to market requirements. At last, the sale of plant protection products is realising its potential and we hope for a further increase in its contribution to the Group's results. We continuously carry out intensive research work to ensure that our products respond to customer needs and regulatory trends. This gave rise, among others, to the development of an innovative and patented substance under the technical name of BGT®, which maintains effectiveness comparable to the most commonly used products, while reducing the dose of the active substance. We are continuously changing and modernising the market of plant protection products, digitising it and introducing automated solutions that facilitate collab- oration with our distributors and users of our products. These activities are carried out with a view to improving the efficiency of planning and managing the availability of our products, which translates into maximising the generated results and our ability to take advantage of business opportunities, as well as improving communication with our end customers. Our other businesses also had a successful period. EBITDA of the Foam business increased by over 22% y/y, to over PLN 37 million, while EBITDA of the Silicates remained at last year's level of PLN 26 million, and in Packaging it increased by 23%, to PLN 22 million. The sale of CIECH Resins should also be mentioned here - in the middle of 2020, we executed an agreement to sell this business to a Polish industry investor for around PLN 160 million and with an EV/EBITDA multiplier of 7.6. We finalised this transaction in the first quarter of 2021, and its finalisation is an element of our strategy that assumes building the Group's value through changes in its asset portfolio and focusing on businesses with the best prospects and a leading market position. As one of the challenges for the future lying in the foreground, we see the need to accelerate the path to decarbonisation. The chemical industry we are a part of emits large volumes of greenhouse gases for technological reasons; thus we feel responsible to future generations to slow down and ultimately stop climate changes. We intend to reduce our CO2 emissions by approx. one-third over the next five years - the details of our commitments and the ways in which we plan to achieve them will be presented in the second quarter of 2021. We are optimistic about the coming quarters. Although the global situation continues to be uncertain and some risks persist, we can see that our hard work from 2020 and previous years is paying off. The situation on the soda ash market is stable, and we expect growth along with the upward movement of the value chain, especially in the area of sodium bicarbonate, where the new installation will be operating all year round. The will begin the sale of the salt from the new plant, although of course, we will not be able to achieve the full scale of the contribution until next year. We continue to develop the plant protection product (PPP) business and we intend to continue harvesting the fruit of its optimisation and expansion, both in terms of products and geography. We observe favourable trends on the polyurethane foams market that will enable us to achieve record financial results.