CEO Communication to Employees

Scanzorosciate, 29 August 2022

Dear All,

As widely expected, the post-holiday period is shaping up to be very concerning from a socio-economic perspective.

Families and businesses are being forced to endure a steady erosion of their purchasing power due to high inflation and dramatically increased energy costs, with no sign of interruption. The autumn season will therefore bring a truly historic rise in prices that each of us will have to pay in order to maintain our daily lives, resulting in the need to give up many expenses that will no longer be affordable, as priorities will necessarily shift.

First and foremost, essential goods—including energy and gas, as well as food and clothing—must be covered. Rent and mortgage payments must be met, along with transportation costs, whether for cars or public transit, and so on.

In short, we return from the holidays facing very serious challenges within a European context marked by a war on its own soil and all the negative consequences this entails for us, our families, and Europe as a whole.

I feel it is my duty to alert and inform you about what may happen in the short to medium term. We may need to halt some production plants for products that are no longer marketable due to costs exceeding their market prices. Competitors from China, Korea, the United States, Mexico, Turkey, or Indonesia are entering Europe with prices lower than our raw material costs, not to mention the burden of gas prices—while they still pay around 30 dollars, we are paying around 300 dollars.

Under these conditions, we can hold on for a few weeks, but we will inevitably have to stop and wait for the market to return to some level of normality. At this stage, political action is essentially doing nothing to limit and reduce the impact of rising costs on our operations. There is much talk but no concrete action, and I expect this to continue until after the elections and beyond, as a new government must first be established and an action plan defined, which is unlikely before late autumn.

We will therefore implement an extraordinary action plan to reduce the company’s economic losses during this phase (Europe recorded a negative result in August, meaning losses). The experience gained from the crises of 2009 and 2013 will help us navigate this situation, although this crisis appears even more severe, as it impacts Europe more heavily, whereas previous crises were global.

The most critical impact will fall on our customers, particularly in Italy and Spain, many of whom are small- to medium-sized businesses, often family-run, which may not withstand the extraordinary cost pressures and may be forced to cease operations. This could have devastating effects on invoice payments, with consequences for our cash flow that I would rather not imagine.

In this context, while hoping that the crisis will be resolved as soon as possible and that the war will end quickly, we will inform and coordinate with trade union representatives on the action plan and provide updates as the weeks go by on how to proceed to minimize any possible disruption.

At the same time, I encourage all employees to take action to support energy-saving measures, both at work and at home, through simple and responsible behaviors—such as turning off unnecessary lights or minimizing gas consumption for cooking or charging devices.

We may be entering a long and difficult period of austerity, so I believe it is important to be prepared and to prepare our families as well.

Naturally, I hope—and wish for all of us—that this communication will be contradicted by a rapid improvement in the situation and that we may all return to living better and more peacefully. In the meantime, however, I felt it was important and my duty to inform you. I trust that it is understood that we are all doing our best for the common good, which remains our work and our Company.

Kind regards,
Rosario Valido
President and CEO, Polynt Group

CEO Communication – 29.08.2022