Dear Shareholders,
A sense of optimism could be felt in the HOCHDORF Group in the first half of 2021. The company was reorganised in line with the strategic foundations created the previous year and Bimbosan AG was successfully integrated into HOCHDORF Swiss Nutrition Ltd. Despite the restrictions caused by the coronavirus pandemic, new customers and markets were acquired and new products were successfully launched in Switzerland and abroad. Nevertheless, further measures are necessary to master the HOCHDORF Group's tight financial situation and to strengthen the balance sheet. The purchase price repayment from Pharmalys, which enables an immediate partial repayment of liabilities, is positive.

In the 2021 business year, the company management will continue to focus on creating a solid foundation for the HOCHDORF Group. The corporate structure introduced at the beginning of the year has further improved performance and efficiency within the company. We are much closer to achieving the goal of an agile, innovative and service-oriented HOCHDORF. Part of the ONE HOCHDORF project was the relocation of Bimbosan AG from Welschenrohr to Hochdorf and the subsequent merger of Bimbosan AG into HOCHDORF Swiss Nutrition Ltd. Both projects were successfully completed in the first half of the year.

The reorganisation required the commitment and flexibility of all employees, for which we would like to express our sincere thanks. Against the odds, a core group of more than 20 colleagues were able to take part in the Future 2030 process despite the Covid-19 pandemic and continue the project – first virtually and then again with a workshop in person towards the middle of the year. The task now is to communicate the content of the corporate purpose, vision, mission and values to all employees in a relevant way and to anchor it in their daily actions.

The agility of the HOCHDORF Group has also been evident beyond the Future 2030 initiative, particularly in new product launches and innovative customer projects:

• In Switzerland, Bimbosan launched an infant formula based on goat's milk. This alternative to products based on cow's milk started well above expectations and has already been integrated into our export business.
• The Bimbosan product family will be expanded this year with a second vegan cow's milk alternative in the FSMP area (food for special medical purposes). This innovative product will be available in specialist shops during the fourth quarter of 2021.
• Preparations are in full swing for the launch of our own brands Bimbosan and Babina in three new export markets in Asia, with the first deliveries expected in the second half of 2021.
• We also gained three new customers in Europe, the MENA region and Latin America in the private label sector: infant formula produced by HOCHDORF will be delivered for sale in the second half of the year.

The Covid-19 pandemic continues to hamper our fundamentally positive business development with new customers and new products. Projects are being postponed or progressing at a significantly slower pace due to the rapidly changing Covid-19 situation. The effects of Covid-19 were also palpable in the Swiss dairy market in the first half of the year, with a continued shortage of milk due to high domestic demand reflected in increasing milk and raw material prices. Meanwhile, we are seeing an upward trend in demand from our premium chocolate manufacturers in Switzerland.

The HOCHDORF Group processed 218.9 million kg of milk, whey and cream (liquid volume) in Switzerland in the first half of 2021 (PY: 187.9 million kg; +16.5%) and sold 32,356 tonnes of products (–30.2% compared to the previous year). After the divestments of parts of the company in the previous year, the year-on-year results on a comparable basis saw organic growth of 8%. Gross profit fell by around CHF 12 million due to lower volumes, a higher milk price (+11%), a deliberate build-up of inventories and a temporary shift in the sales mix with a higher share in the Food Solutions division, resulting in an EBIT of CHF –8.6 million (PY: CHF 1.2 million).

In relation to our largest Baby Care customer, Pharmalys Laboratories SA, we were able to agree the payment of the outstanding purchase price instalment of CHF 30 million and the signing of a long-term supply agreement until 2026 at the beginning of August. These are important steps for the further financial recovery of the company and for securing the utilisation of the production facilities in Sulgen. At the same time, numerous product launches are scheduled for the second half of the year, which will contribute to a better result than in the first six months.

The dossier for the brand registration in China has been with the "approval office" since October 2020. Unfortunately, we are currently unable to provide an estimate of when approval will be granted by the Chinese authorities. We are in regular contact with the authorities in Switzerland and China, with our Chinese advisor and with our client.

The OPTIMA programme to increase efficiency continues to achieve positive results. The six ongoing projects in the areas of facilities, buildings, production processes, logistics, administration and purchasing are pursuing the goal of saving a mid-single-digit million amount this year. In purchasing, however, the market situation has changed significantly and we are currently facing Covid-19 related price increases for raw materials and transport services for international trade.

As detailed in the Annual Report 2020, the Board of Directors and the Group Management are working intensely on various financial strategy options to stabilise the balance sheet and to support sustainable corporate growth and implement our new strategy. The first results have already been achieved with the final payment from Pharmalys and the suspension of the review of the syndicated loan covenants. We are continuing to examine further options as the current operating performance is not sufficient to put the balance sheet on a long-term healthy footing.

Ongoing delays and postponements of projects as a result of the Covid-19 impact make it impossible to estimate precise production volumes. Nevertheless, HOCHDORF expects a stronger second half-year, benefiting from higher order intake and better capacity utilisation in the Baby Care division, as well as a seasonal reduction in inventories. Accordingly, EBIT should improve significantly in the second half of the year and, as announced, result in a balanced result at EBIT level for the 2021 business year. The forecast for net sales revenue remains unchanged at CHF 260 to 300 million.

We thank you for your loyalty to the HOCHDORF Group and wish you good health and much success in these unfamiliar and challenging times for us all. We would also like to express special thanks to our employees, who work tirelessly for our customers every day in these difficult circumstances under the current protective and hygiene measures of the Covid-19 pandemic.

Kind regards 
HOCHDORF Holding Ltd