Letter from the CEO

Although the global economy began to recover from the pandemic in early 2022, it was again severely affected by the geopolitical shock of the Russian invasion of Ukraine. Supply chains were disrupted, energy prices and inflation rose sharply and with them the volatility of raw material and product prices, including in the markets in which PCC operates.

The fact that – despite these headwinds – we were able to significantly improve on the record results of the previous year is due to the extraordinary capabilities and commitment of our employees, combined with the diversification and resultant resilience of our business portfolio.

A sales figure in excess of € 1.3 billion meant the PCC Group had exceeded the billion mark for the first time, with EBITDA also 48 % above the previous year at € 292 million. Our operat- ing profit (EBIT) likewise increased significantly from € 125 million to € 217 million, while the pre-tax result (EBT) more than doubled from € 92 million to € 193 million. This represents an outstanding success for our company with its robust alignment to strategic growth, and I would like to express my sincere thanks on behalf of the management of PCC SE to all those who have contributed to it – our entire workforce, our investors and our business partners!

PCC’s billion-euro investments over the past ten years and consistent portfolio management have made our core business in particular highly efficient, innovative and therefore fit for the future. And indeed, in 2022, our business units in the chemicals segments, with our major affil- iates PCC Rokita SA and PCC Exol SA at the vanguard, were once again able to contribute the majority share to Group earnings.

Worthy of particular note is the Chlorine segment, which defied the surge in energy costs with its efficient and environmentally compatible membrane electrolyzers, almost doubling its sales and quadrupling its operating profit in the process. Similarly, the Surfactants & Derivatives segment achieved its best result to date with a further expanded product portfolio and an increase
in capacity. Both its EBITDA and EBIT totals from the previous year were exceeded by over 100 %, with an impressive performance posted by the US business of PCC Chemax, Inc. making a major contribution.

Our Polyols business, on the other hand, had to contend with a decline in earnings from the previous record level posted, due to high production costs, overall lower demand in Europe and increasing competitive pressure, particularly from Asia. Nevertheless, this segment closed with a remarkable operating profit figure of more than € 30 million, achieved with sales more or less flat at € 260 million.

The new Silicon & Derivatives segment got off to an excellent start in 2022, with the plant in Iceland having been further technically and operationally optimized to the top of its game. Prices for its output rose substantially due to pandemic-related availability bottlenecks in supplies from China. However, a significant increase in raw material costs and the resurgence of imports from the Far East reversed this effect in the course of the year, as a result of which the segment
ended the reporting period with annual sales at € 112 million and EBITDA at break-even.

At € 116 million, our investment volume in 2022 was once again up year on year. These future-aligned capital expenditures and the ongoing further development of our portfolio companies provide us with the basis for achieving our goal of a continuous and sustainable increase in enterprise value. As of the reporting date December 31, 2022, the valuation of our investment portfolio amounted to over € 1.1 billion, representing an increase of over 22 % compared to the previous year and thus a real success story!

The pursuit of sustainability continues to be a focus of our activities. Many of our research and development undertakings deal with environmental and climate protection projects, such as the use of climate-neutral raw materials, efficiency improvements in our production plants, products from the circular economy or the recovery of carbon dioxide from exhaust gas streams from our facilities for the production of e-fuels. However, we have to note that the willingness of our customers to accept additional costs for such sustainably produced – and therefore typi- cally more expensive – products is still limited.

This is particularly evident in the case of our silicon from Iceland, which is produced sustainably on the basis of exclusively renewable energy. In Europe, we are in direct competition with dumping imports from China, where this important intermediate product for the energy transition and e-mobility markets is produced with about four times the CO2 footprint and invariably on the basis of incomparable social, environmental and occupational health and safety standards.
Yet it is still purchased in large quantities in our home market. We also see similarly unfair competition in other industrial sectors, which is why we are calling on politicians and associations in various bodies to rethink the key points of European foreign trade policy.

In order to expand our core business, we will continue to focus our regional investment activities on Poland, Southeast Asia and the USA in the coming years. The new oxyalkylates plant of our joint venture with PETRONAS Chemicals Group in Kertih (Malaysia) is scheduled to come on stream in the third quarter of 2023, when it will begin producing surfactants and polyols on the basis of technology licenses from the PCC Group. This will extend the competitive supply of our quality products to our global customers in Southeast Asia. In Poland, too, the construction of further facilities for the production of modern ethoxylate and polyether products has already begun at our sites in Płock and Brzeg Dolny, with a doubling of our production capacities in these successful business areas envisaged by 2026.

In the USA, our newly established PCC Chemicals Corporation has already secured a plot of land on the Texas Gulf Coast which, due to its ideal raw material supply and logistics links, is excellently suited for the construction of a production site for our primary product lines. We already supply many customers in North America. The deep-seated knowledge of the markets that we have gained has enabled us to develop a detailed, experience-based concept for a successful start in the local production of oxyalkylate- and chlorine-based products, thus taking us another important step forward in steadily expanding our core business activities.

This planned expansion of our production capacities is to be closely accompanied by upscaled research and development activities, as exemplified by the construction of a new research center offering around 65,000 square feet of space at our largest site, that of PCC Rokita SA in Brzeg Dolny. The facility will be ready for occupancy in June 2023, with plans for the synthetization and testing of new products such as modern polyether polyols, ethoxylates and phosphorus compounds in application laboratories, and for the construction of various pilot
production units, e.g. for the manufacture of chlorosilanes. Moreover, our Group subsidiary PCC Thorion GmbH has commissioned a laboratory within the new Centre for Electrical Energy Storage operated by our cooperation partner Fraunhofer ISE in Freiburg, Germany, where our graphene-coated silicon nanoparticle compounds for battery anodes are being developed.

At PCC Intermodal SA, the development of three new transshipment terminals in Poland is proceeding largely according to schedule. The trend toward environmentally friendly intermodal container transport continues unabated, as underlined by the positive business performance of PCC Intermodal SA in fiscal 2022, which is likewise proceeding according to plan.

In all our endeavors to achieve sustainable, dynamic growth in our group of companies, we consistently ensure the strict management of risk in line with global political, social and economic developments. This fundamental principle of our business activity is of particular importance, given the turbulent environment that we are currently experiencing.

The development of PCC fills us with pride and confidence as we continue our successful journey, guided by our strong values, responsible practices, and exceptional spirit.

We are PCC!

Sincerely yours,

Peter Wenzel
Chief Executive Officer of PCC SE