01 Report from the Chairman

We are still living in turbulent times. Just as the coronavirus crisis seems to be retreating, we are confronted with another crisis; the war between Russia and Ukraine. This has led to the European market, which was always stable and predictable, becoming less steady. There is uncertainty. But one thing remains: the demand for sufficient, nutritious food.

HZPC has been able to weather the coronavirus pandemic reasonably well. Now that the worst is behind us, we are doing all we can to catch up. Coronavirus meant that we had to take a substantial step back in terms of turnover and gross margin and, in turn, our operating result. Our long-term plan and the corresponding growth scenario was put on ice. Whereas we had estimated growth of a few percent per year, the rate of growth during coronavirus reduced to zero. We are now back to the old level, from before the coronavirus pandemic, and growth is continuing. We will not, however, recover those two years of missed growth.

The coronavirus pandemic was somewhat intangible; it was hard to substantiate the various scenarios. This is not the case, however, with the war between Russia and Ukraine we have no idea how it will turn out but we are much more able to consider possible scenarios and detail the consequences for HZPC. We may well have to deal with supplementary European or Russian sanctions and transport restrictions. If tensions increase, we might even have to cope with the nationalisation of our Russian branch. In this case, our biggest concern would be having to transfer our intellectual property.

The unrest which comes with a war is being translated into shifts in the market. Grain prices and fuel costs have increased to record levels, leading to growers in some countries using their potato acreage to grow grain. This is a logical choice as it requires less effort and input and can earn the farmer the same or sometimes even more. This means that the supply of potatoes is reduced. And whereas globalisation has been the order of the day for the past few decades, we are now seeing movement in the opposite direction. If food supplies are jeopardised, countries that have the capacity to do so will move to producing more of their own foods.

What the past few years have taught us is that HZPC is an exceptionally resilient business. We can weather the storms and move with a market that is constantly changing in a world full of surprises. One of our biggest strengths is that we are not based on one continent but are a potato breeder and trading house operating on a global scale. Although instability is facing Europe and some of the Middle East, there are numerous opportunities in growth markets such as India, China and Africa.

When it comes to Research & Development, we also are taking significant steps. With an eye on the future, we are developing varieties that are resistant to the challenges with respect to resistances, climate change, soil quality and available resources. Thanks to marker-driven breeding, we are able to accelerate and improve regular tetraploid breeding. Many promising new varieties will emerge in the short term. We realised great results with diploid breeding at the end of 2021. We are thus on track to introduce the first hybrid potato varieties to the African and Asian markets in 2025. This is a revolutionary development and HZPC is leading the field by a considerable margin.

The Association HZPC will remain 100% committed to the concept of providing a significant contribution to global food supplies. This framework can also accommodate the continued supply of seed potatoes - as long as this remains possible - to Ukraine and Russia. We have always supplied to both parties in conflict areas and will continue to do so. It is my personal belief that conflicts cannot be resolved if populations are going hungry.

I have considerable faith in this resilience and mission in terms of our customers, growers, employees and partners. This confidence is vital if we are to regard the future with a sense of reassurance, despite the uncertainties that sometimes come our way. Of this I am sure.

This annual report covers financial years 2021-2022. I hope you read it with great attention and pleasure.

Egbert de Vries

Chair Association HZPC