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's activity report 2022

Puumerkki AS is a subsidiary of the Finnish company Puumerkki Oy, with long-term experience in the timber and sheet material market. The companies of Puumerkki are collectively referred to as Puumerkki Group. The main activity of the company is the wholesale and project sale of various sawn timber, processed wood products and sheet materials to industries and resellers. The company markets the products of internationally known manufacturers operating both in Estonia and abroad to ensure better service. Recognizing our environmental responsibility and ecological values, Puumerkki AS has FSC and PEFC supply chain certificates.

The company started more active operations in the Republic of Latvia in the fourth quarter of 2022. The main goal is to provide services based on the Puumerkki Group concept also to Latvian partners. The company registered a branch in the Republic of Latvia in 2022, thereby assuming accounting obligations to the Republic of Latvia. The Puumerkki Group company Puumerkki SIA has rented a warehouse terminal and sales office and has hired additional relevant employees. Puumerkki SIA sells the sales service of the Latvian market to Puumerkki AS's Latvian branch.

The company is somewhat affected by the seasonality of business. About 60% of the company's turnover is realized during the second and third quarters, about 40% of the turnover during the first and fourth quarters. To balance this situation, it is customary for the company to employ somewhat more workers and/or summer helpers in the warehouses during the second and third quarters. We continuously pay attention to supplementing the product range and cooperating with partners to balance the impact of the company's seasonality.

The sales revenue of Puumerkki AS for the financial year was 28,916 thousand euros (2021: 25,627 thousand euros) and the profit for the financial year was 1,507 thousand euros (2021: 1,575 thousand euros).

The average number of employees of the company in 2022 was 32 (2021: 35 employees) and the wage cost together with social taxes was 1,142 thousand euros (2021: 1,052 thousand euros).

The increase in sales revenues compared to the previous year is again mainly due to the very complicated availability of goods that started in the first quarter of 2022, which led to a strong increase in the unit price of wood and wood-based products on the world market. Compared to 2021, 2022 was significantly different in structure due to the complicated availability of goods caused by the Russia-Ukraine military conflict. In the first half of the year, there was a very aggressive price increase for wood and wood-based products, demand growth, and the main goal of the sales team was to ensure fair and operational pricing of products and the distribution of sales volumes by customer product groups and coordination of cooperation. The company's goal is primarily to ensure the necessary volume of products for long-term and loyal partners as much as possible, even in difficult times. In the second half of the year, the availability of goods improved, world market prices fell, demand decreased significantly, and goods had to be sold from the warehouse below the cost price to ensure circulation. The cessation of timber imports from Russia from 07.2022 significantly affected the balance of markets both in the Baltic States and in Europe as a whole. Since Puumerkki did not sell large volumes of timber of Russian origin earlier, this import ban did not significantly affect the company's results directly, but certainly indirectly.

In 2022, the credit sales risk remained at a high level similar to 2021. With continuous work and daily monitoring, it was possible in 2022.

to keep the proportion of written-off bad debts at an acceptable level (2022: 23 thousand euros).

Transactions with customers and suppliers are made in euros, therefore fluctuations in exchange rates do not affect the company's economic activity.

Investments in fixed assets were made in 2022 in the amount of 46 thousand euros (2021: 25 thousand euros). The growth of fixed asset investments is mainly due to the improvement of the company's working conditions and environmental impact.

Main ratios: 2022 2021

Operating profit net profit /sales revenue*100 5.21% 6.15%

Return on assets net profit /asset balance*100 16.41% 19.31% (sales revenue - goods, raw materials, materials and services)

Sales revenue margin 11.25% 10.94% / goods, raw materials, materials and services 2023. The activity plan for the year 2023. The beginning of 2023 has been unpredictable due to the Russia-Ukraine military conflict, and the goal is to maintain the company's sales volume (m³) and service quality through the reliability of goods supply and to maintain profitability through sustainable business process management.

The main challenges are related to the volatile pricing of wood and wood-based products on the world market and the lack of a clear future vision in society as a whole. The company must be ready for operational decisions and changes if significant unexpected changes occur in the economy/society.