Dear Sirs,

The year 2019 was very intensive for us. In February, we signed the largest agreement in the history of Śnieżka to acquire 80% of shares in Poli-Farbe Vegyipari Kft. - a company which is one of the market leaders in the sector of decorative paints in Hungary. Since May last year, that market has become the most important one for the Group following Poland. The first effects of integration - such as, for example, gaining access to less expensive raw materials by a Hungarian company - are already noticeable. Other synergies are to be achieved gradually within the next few years.

In the reporting period, we proceeded with the largest investment cycle in Śnieżka's history. The Group's expenditures for this purpose amounted to PLN 196.4 million in 2019. In addition to financing the purchase of shares in Poli-Farbe, a large portion of this amount was earmarked to modernize the machinery and update IT solutions. Last year we worked, inter alia on modernization (including automation) and extension of a production line for the production of colour paints at the facility in Lubzina and white paints in Pustków. The key implementation stages planned as part of the digital transformation have also been completed. The new software provides us with further competitive advantages in the field of up-to-date sales management methods and customer relations.

The accumulation of investments in 2019 contributed to increasing Śnieżka's liabilities, which is the result of raising bank loans for the implementation of the most capital intensive projects. The increase in external financing affected slightly the costs incurred by Śnieżka presented in the financial statements - and, consequently, on profits and profitability ratios, which are lower than in the record-breaking year 2018.

The 2019 bottom line was lower owing to costs incurred, including the transaction with Poli-Farbe and investment in digital transformation. Outlays on marketing communications were higher, which translated into an increase in our market share.

Simultaneously, it is worth noting that - despite the consolidation of Poli-Farbe - the Group's liquidity is currently stable and its profitability remains high compared to foreign competitors. Furthermore, after completing the investment cycle initiated some years ago, we are to reduce Śnieżka's debt to a conservative level of 1x EBITDA.

The year 2019 also focused on further development of collaboration with partners on the independent market and DIY stores. As part of our activities, we concentrated on supporting the development of our business partners by sharing knowledge. In February 2019 we launched a Leader program - dedicated to owners, managers and sales teams of DIY stores, which liaise with Śnieżka. We also took care of providing the owners and managers of independent paint stores with knowledge and inspirations. We had an opportunity to meet up with them at the “All about business” conferences hosted by us, during which we presented a new partner program called Business Partner.

The publication of our annual report falls on the period when all of us - including our shareholders and other stakeholders - are focused primarily on current events related to the on-going COVID-19 disease pandemic. Since the beginning of the global struggle with this disease, we have been painstakingly monitoring the situation and implementing solutions protecting our employees and our business against the potential effects of the pandemic.

Although the previous year required a lot of commitment and hard work, we commenced 2020 with motivation to further strengthen our position in Poland and beyond. At the same time, we are aware that perturbations in the currency and financial market as well as uncertainty in the global economy may also affect the Group. We will respond appropriately to all challenges related to this. As at the date of the report, our Group does not experience significant, negative, direct effects of the virus spread - except for necessity to temporarily reduce production at Śnieżka-Ukraina Sp. z o.o, about which we immediately informed our stakeholders in the current report.

An exceptional year ahead of us - but I believe that the preparations and organizational changes that we undertook immediately in our Group companies in connection with the COVID-19 disease pandemic will allow us to smoothly go through this difficult period for all of us in Poland and in the world.

I want to thank all of those who have been accompanying us for over 35 years in building a modern and invariably value-based organization, which is Śnieżka today.

Piotr Mikrut
President of the Management Board