Company Update

April 2022 Company Update Regarding Market Challenges

Published: 18/03/2022

Dear Valued Customer,

There have been some major changes in the past few weeks. Just when we have adjusted to live with COVID there comes upon us a major economic disruption caused by the outbreak of war in Europe.

The Ukrainian invasion has caused a rapid and unprecedented rise in oil, gas and electricity prices which has had an immediate and significant impact on the availability and cost of raw materials as well as increasing freight and shipping costs. One of the main areas affected is paper product where pulp prices continue to rise and the UPM strike in Finland has added further pressure to the supply of raw materials.

In normal circumstances where gas costs around £60/therm, the cost of energy is approximately 20% of the manufacturing cost per ton of recycled tissue production. Since September until mid-February the price has been between £150 and £450/therm with an average cost of around £200/therm. Prices this month have risen to £675/therm and continue to increase due to the ongoing situation in Ukraine where there is the threat by Russia that they will cut off gas supplies to Europe in retaliation for sanctions imposed by other countries.

In addition, decisions made by other paper mills across Europe to suspend production due to the high cost of energy and the uncertainty of pulp supply will have further consequences on available capacity. Shortage of wastepaper mixed with high energy-intensive production is forcing recycling mills to close further limiting the availability of recycled tissue and pushing prices higher. The rise in fuel costs has increased our cost of deliveries to you by over 20%, and packaging costs have also increased.

In the past few days, we have been hit with further rising costs of raw material at an unprecedented scale, all of which are double digit increases which we have no choice but to pass these through the supply chain. At this point, we do not know how much the impact of this will be as we are being hit with increases on a weekly basis.

HC Innovations Ltd has continued its best efforts to mitigate these challenges and maintain supply, but the continuing price escalation, which seems to be ramping up, forces us to raise our prices on most paper products and certain other lines from 1st April 2022. You will be able to view your new pricing via your online account (www.hcinnovations.co.uk) from the 1st April but should you have any further queries then please do not hesitate to contact our sales team for assistance.

We can assure you we are working hard to absorb what increases we can and keep any to a minimum whilst striving to maintain our proven high quality and service standards. With over 30 years of industry experience, we are well placed to deal with these challenges and have long-established supply partners to ensure we maintain supply commitments to our customers. We will do our utmost to ensure that customers are kept informed of any changes and we are committed to keep our selling prices aligned to our costs if they fall as well as if they increase.

We hope to face these extraordinary times together and thank you for your continued support and understanding.

Yours Sincerely,

Russell Davis | Business Development Director

HC Innovations Ltd. | Tel: +44 (0)1738 629839 | Email: sales@hcinnovations.co.uk

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