Basel I Switzerland

Geopolitical Situation in Eastern Europe

Dear business partner,

Jungbunzlauer continues to monitor the development of the war in Ukraine. This communication is dated 12 August 2022 and will be updated regularly. While many hope that this abysmal situation will improve quickly and peacefully, it remains completely uncertain how, at what pace, and with which outcome the situation will actually evolve.

We have no production facilities, sales offices, representative functions or own personnel in Russia, Belarus, Ukraine. Nonetheless, it is very difficult to provide exact predictions on the impact this war may have on our ability to continue with the production of our products or the cost impact we may be facing. We want to share all relevant information and will provide updates regularly from now on. We want to emphasize that what we witness in Ukraine deserves our strongest condemnation. We believe in democracy and the respect and freedom of the individual. Our communications in this geopolitical context will focus on our productivity indicators.

There is a direct link between the development of key economic factors, including but not limited to the availability of natural gas, energy, chemicals and grains like corn and the geopolitical crisis in Eastern Europe. This effects and will continue to effect businesses across Europe and, unfortunately, Jungbunzlauer is no exception.

Fortunately, Jungbunzlauer’s operations are able to continue to produce all our products. The news in Europe about limitation of Natural Gas supply continue to underline that this crisis situation is serious and unfortunately still not de-escalating. We are certainly concerned about this uncertainty and in order to manage your expectations we want to comment in more detail on the current situation at our European plants:

Austria (Citric Acid, TSC, Xanthan Gum and Gellan Gum):
- Currently no signs of restrictions on gas supply
- Relative high storage level of Natural Gas of 54% of the annual demand (>=6 months) and thus ahead of other European countries for this time of the year

Germany (Special Salts, Specialties):
- A complete fuel-switching program is under execution and the entire site should be able to run on heating oil if needed

France (Lactic Acid, Erythritol and Gluconates):
- Good underground storage level of Natural Gas and good LNG supply possibilities

It is our general understanding that the EU member states are working on a joint Natural Gas management in line with the Energy Emergency Powers Act. Member states with less dependency on Natural Gas from Russia would support those with higher dependency to manage the total needs in a solidary way. Jungbunzlauer is focusing on alternative means to close the eventual gap.

It is very important to us that we can deliver our customers according to our commitments and that the dialogue with our customers is open and transparent. In the current situation, we need to inform you that it has become an even bigger challenge for us to ensure that we have sufficient supply of energy, natural gas and corn.

We are exploring all possible alternatives and options to secure our input factors at most competitive rates. The projects to find alternatives to Natural Gas as Energy source have progressed very well. The remaining biggest risk, also as a function of total consumption of Natural Gas remains in Austria despite the generally high storage levels of Natural Gas. Projects to switch fuel for some of the boilers (Natural Gas to heat oil) are underway and respective burner equipment is already on order. By end of the year, the preparation of the line system should be ready and boiler equipment should be delivered. In parallel, we have already found ways to operate the plant at reduced gas consumption without major impact on productivity.
We also continue to look at increased production and use of biogas from own by-product streams. In summary, there is no immediate shortness of energy, or natural gas or raw materials supply.

It is important to point out that selected chemicals, especially ammonia, are critical for our operations and that we depend on the contingency measures of our suppliers. It is hard to predict how availability of these materials developed if energy supply further decreased or if demand from other industries for these materials decreased over time.

It is our priority to keep our volume commitments in 2022 and to be able to offer respective supply security also for 2023; we have currently no scenarios in which this can be achieved in a cost neutral way.

We would certainly prefer to send out a much more positive communication. The current circumstances, however, have turned the world upside down in many ways and we feel responsible to inform you about the potential risks, cost, and eventually limitations that may be in front of us.

Yours faithfully,
Jungbunzlauer International AG

Dr. Achim Hergel            Dr. Stephan Müller
VP Product Management         VP Sales


You might also be interested in

Jungbunzlauer is pleased to announce a significant expansion through the establishment of a new Biogums production facility at its site in Port…

Red Sea Situation Continued fully operational production