Board of Directors Address

Dear Shareholders and Investors,

During the passing year of 2024, our country, Europe and the world continued being strongly influenced by dynamic global changes and deepening crises. The economic and geopolitical situation globally can now be characterized by a very high degree of uncertainty. The EU business environment worsening, caused by the military conflicts in Ukraine and the Middle East, high energy price levels, over-regulation and lack of qualified labor resources continued to demotivate entrepreneurial activity and lead to an outflow of capital and a decrease in competitiveness. Europe significantly runs behind its main competitors - the USA and China, in terms of economic growth, innovation, high technologies and demographics. The largest European economy – a major trading partner and market for the companies in the group до Stara Planina Hold Plc – is expected to experience negative economic growth for the second year in a row.

On a national level, the ongoing political instability for the fourth year has deepened its negative impact not only on the economy, but also on all social systems in Bulgaria. The lack of real reforms and consistent state policies has put the second payment under the National Recovery and Resilience Plan at risk and, along with the decline in orders, 20 consecutive months of negative industrial production index, decline in exports, and high energy prices are a heavy blow to the country's industry. The sharply increasing risk of deepening the unsustainable fiscal spiral, threatening macroeconomic stability and medium- and long-term economic growth of Bulgaria, is taking it away from the strategic memberships - European Union and the OECD.

Against this background, the companies in the Group of Stara Planina Hold Plc report results that confirm our forecast expectations for a continued decline in sales revenue in 2024. The consolidated sales revenues of the Group for the first half of 2024 reached BGN 142.6 million and reported a decrease by 32.6 % compared to sales in the same period of 2023 and by 22.2 % compared to sales reported in the first half of 2022. The total consolidated profit of the Group after tax for the first half of 2024 amounted to BGN 7.02 million, which represents a decrease by 73.67 % compared to the reported consolidated profit after tax for the same period of the previous year and by 69.18 % compared to the profit for the first half of 2022. With the estimated revenues for the second half of 2024, we expect to report a decrease by approximately 27 % compared to the same period of the previous year and by approximately 37 % compared to the second half of 2022. On an annual basis, we expect the consolidated sales revenues of Stara Planina Hold Plc to reached BGN 263.4 million which would report a decrease by about 30% compared to the previous two years.

Investments of our companies reached BGN 27.1 million, intended mainly for ongoing technological renewal, introduction of highly profitable products and production, acquisition of assets, innovations for green and digital transition, increasing labor productivity and sustainable development. despite the continuing great uncertainty at the national and global level, we plan to increase investments by about 24% to 33.6 million leva, which will again be directed towards modernization and technological renewal, green and digital transition and sustainable development.

Along with the external and internal crises, 2024 outlined the lack of personnel and the training of that personnel as the main problem the Bulgarian economy faces - there is a lack of both highly and medium-qualified specialists and low-qualified personnel.

Under these conditions, for another consecutive year, a leading priority for us was to retain key specialists and attract new professionals to the companies. Labor productivity this year reported a decrease by 17.6 % with an average annual decrease in labor remunerations by 5 %. In 2025, we foresee a decrease in the number of employees by approximately 7 %, while we expect an increase in labor productivity by about 12.6 % with an increase in the average monthly salary by over 7%.

In the beginning of December, the market capitalization of the public companies in the group exceeded BGN 691.9 million. In 2024 again, Stara Planina Hold Plc continues being the only public holding company in Bulgaria that has distributed dividends for every year of its existence.

We anticipate the 2024 financial results of the group of Stara Planina Hold Plc to report a decrease by over 29 % compared to the levels achieved in 2023. The 2024 net profit of Stara Planina Hold Plc will exceed BGN 6.5 million which gives us confidence that for the 28th consecutive year, part of the profit will be distributed in the form of dividends to the shareholders of the holding.

This forecast is based on the results achieved in 2024, the 2025 business plans of the companies and the expectations for our main markets. It is directly dependent on the European economic prospects that continue being accompanied by great uncertainty and on the expectations of Bulgarian business for preservation or worsening of the economic indicators, rather than positive developments. The European Commission's forecast as of November 2024 shows that after a prolonged period of stagnation, the EU economy is returning to modest growth, with GDP growth expected to be 0.9% in the European Union and 0.8% in the euro area in 2024. Economic activity is expected to accelerate to 1.5% in the EU and 1.3% in the euro area in 2025 and to 1.8% in the EU and 1.6% in the euro area in 2026. For Bulgaria, the European Commission expects GDP growth to accelerate from 2.4% in 2024 to 2.9% and 3% in 2025 and 2026, respectively. At the same time, the European Commission points out that "the economic outlook for the EU remains highly uncertain and risks are largely on the downside." These include geopolitical risks related to the conflicts in Ukraine and the Middle East, as well as foreign trade risks related to possible "protectionist measures by trading partners", as well as the risks of weak productivity growth and large-scale natural disasters.

The forecasts of our partners in the country, Europe and the world remain pessimistic with reserved expectations for recovery in demand which does not give us reasons to expect results with higher values for the next financial year. Currently the Board of Directors of Stara Planina Hold Plc expects that sales revenues in the group in 2025 will be close to the levels reported in 2024. Factors that will continue influencing the operations of companies in the coming year are the market prices of raw materials and materials for production, the transport of supplies and production, the regional market price of labor, the prices of energy resources and the security of their supplies. The unstable political situation, financial policy, the country's macroeconomic development, as well as geopolitical factors are emerging as the most worrying circumstances that will impact business. Along with the threat to European and regional stability, the geopolitical situation puts at additional risk the supply of energy resources and the possibilities for sustainable growth of the economy. The effect of the measures taken at the European and national level, as well as the countermeasures imposed accordingly, will have an impact on the activities of the enterprises of the group and may lead to an adjustment of the expected business results.

In 2025 again we will be led by the purpose of achieving high level of quality, productivity and profitability of our business operations. Sustainable achievement of good financial results with the expected sales volumes will continue being the main task for ensuring the shareholders’ investments and their profitability.

Our success will continue being shared with all those involved in its achievement.

Sofia, December 20, 2024
Stara Planina Hold Plc
Board of Directors