FEERUM S.A. comment regarding changes to contracts with EPICENTR K LLC

On June 25, 2020, FEERUM S.A., a leading producer of comprehensive grain elevators in Poland, with a strong position on foreign markets, published two current reports regarding the last two contracts concluded with its strategic foreign client, the Ukrainian company EPICENTR K LLC.

To date, FEERUM has successfully completed two large contracts concluded in November 2018 for a Ukrainian company, for almost 50 million EUR. Currently FEERUM is performing a contract for EPICENTR K worth 3.1 million EUR, the implementation of which is in accordance with the schedule agreed by the parties.

The last two contracts with EPICENTR K concluded in December last year, amounting to respectively 26 million EUR and 8.9 million EUR, were another element of the contracting authority’s investment strategy. The deadline for their implementation, however, was during the difficult and unprecedented period of the COVID-19 coronavirus pandemic. The pandemic had a significant impact on the activities of the entire EPICENTR K capital group, of which one of the largest retail chains in Ukraine is an important part, and forced managers to temporarily limit ongoing investment processes. FEERUM approached this unique situation with understanding and – taking into account the long-term and strategic nature of cooperation with EPICENTR K – decided to accept the contracting authority’s proposal to reduce orders placed by approximately 16.2 million EUR. This proposal was implemented in such a way that the contracting authority reduced the amount of equipment purchased under the larger of the contracts – which reduced the contract amount from 26 million EUR to the amount of approximately 18.3 million EUR – and suspended the implementation of one of the facilities – which resulted in the termination 8.9 million EUR contract.

“We believe that in this undoubtedly unprecedented situation caused by the COVID-19 pandemic, consent to the proposal to reduce Ukrainian projects is a manifestation of responsibility and care for a strategic relationship with our Ukrainian partner. We believe that this decision will further strengthen our relationship, and the confidence gained in this way will pay off in the future with further projects. I am convinced that the agro sector is a very promising area of activity of EPICENTR K, and subsequent projects with the participation of FEERUM, which will increase our client’s storage capacity, are only a matter of time” – notes Daniel Janusz, CEO of FEERUM S.A.

The FEERUM management board does not perceive the decline in the value of Ukrainian orders as a factor destabilizing the company’s situation. The contract for EPICENTR K with a value of 18.3 million EUR together with contracts for domestic clients form a satisfying company portfolio of orders for the current year.

The reduction in the amount of contracts will require the introduction of relevant changes to the insurance policies issued by KUKE (Export Credit Insurance Corporation Joint Stock Company), which insures the receivables from all contracts concluded with EPICENTR K. Additionally, termination of the 8.9 million EUR contract has been conditioned by the consent of KUKE.

“Our experience to date shows that KUKE is a very flexible partner, whose priority is to support Polish exporters. That is why we are convinced that KUKE will approach the reduction of insured receivables with full understanding”– emphasizes Daniel Janusz, CEO of FEERUM S.A.

Details of changes related to contracts with EPICENTR K can be found in the Company’s current reports no. 21/2020 and 22/2020.