Company News

Basel, 10 May 2022

Geopolitical Situation in Eastern Europe

Dear business partner,

Jungbunzlauer continues to monitor the development of the war in Ukraine. This communication is dated 10 May 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.

Jungbunzlauer’s operations are running. There is no immediate shortness of energy supply or raw materials and we have also no information or even confirmation that this will change any time soon. We are in very close contact with our energy providers and industry experts but predictions on the availability of natural gas continue to range from preparation for allocations to falling spot prices. In a scenario of a severe lack of availability of natural gas, the European Union has regulated the allocation in the Energy Emergency Powers Act. This means that the EU member states have a responsibility to discuss on cross-border allocation patterns with the other member states and have to decide on local emergency plans as well.

Jungbunzlauer’s production sites have a dependency on Natural Gas availability. The amount of Natural Gas available to us certainly influences our ability to produce. While a reduction will have no impact on the quality of the material that we produce, it will definitely reduce our total production capacity and drive cost of the material we produce further up. In our opinion, such potential reduction in Natural Gas flow constitutes a classical force majeure situation that would require us to limit supply to all our customers on proportional basis. Please note that this is currently only one of several scenarios; we believe that it should be communicated in a transparent way.

As a producer of essential goods, we work on the assumption that our business qualifies for receiving natural gas allocations even during emergencies. We need to highlight that this is only an assumption. We have no knowledge on Natural Gas supply in general and/or on availability of Natural Gas to selected producers including ourselves beyond the information provided in the public domain.

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. While we remain optimistic to be able to keep our volume commitments, we have currently no scenarios in which this ability can be maintained in a cost neutral way.

Jungbunzlauer has business continuity plans in place. However, due to the very tight market situation, caused by world-wide logistics problems and availability issues from Asia, coupled with a strong market demand, we currently operate with very low stock levels and prolonged lead times. It is unlikely that this situation is going to change any time soon. The additional disruption due to the war in Ukraine is certainly not helping to improve this situation.

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