OPENING NEW HORIZONS is the theme of our annual report and a good reflection of our achievements in 2018. As a global, multi-material and multi-solution company in a constantly evolving world, we have extended our global leadership in the equipment insulation market and as a leading provider of engineered foams. 2018 was a year of significant investments and innovations – together opening new horizons – that have strengthened and are continuing to strengthen our business.

I am confident that our resilient, capital-efficient and customer-focused business model will continue to deliver sustainable growth in 2019 as it did in the year under review.

In the financial year ending 31 December 2018, we increased our net sales to €610.3 million from €600.3 million in 2017. Year-on-year, our adjusted EBITDA rose from €103.8 million to €106.0 million. This positive performance was achieved in the face of strong translational headwinds from a weakening US dollar, which over the year equated to around 4% of the top line, and of significantly inflated raw materials and transportation costs. Our business units performed well: Advanced Insulation EMEA recorded net sales of €210.4 million, Advanced Insulation AMERICAS of €157.8 million, Advanced Insulation APAC of €110.6 million and Engineered Foams of €131.5 million.

In 2018, we continued to significantly invest in the expansion of our production capacities and tech¬nologies, both in our Advanced Insulation and in our Engineered Foams businesses. A new continuous elastomeric production line was set up at our Florianópolis facility in Brazil as an industry first in South America. A third elastomeric production line was launched in Pune, India, and our elastomeric capacity in APAC expanded through a new production line in China (De Xu). In the USA, we implemented enhanced technology investments at our plants in Yukon, Oklahoma, and Spencer, West Virginia. These investments support our growth in all market segments, and we expect to see a significant payback from these investments as early as 2019.

As part of a consistent evolutionary process, our expansion-oriented investments were accompanied by market consolidation strategies in the AMERICAS. We consolidated our Brazilian production facilities and relocated our assets from Pindamonhangaba to Florianópolis. Similarly, we transferred our production assets from our US plant in South Holland, Illinois, into our plants in Yukon and Spencer, and our Saudi assets from Dammam to Bahrain. This allowed for a distinct and re-focused production, operating dedicated plants for Advanced Insulation and Engineered Foams respectively.

In 2018, we made innovative additions to our insulation solutions portfolio. ArmaGel, our next-generation aerogel blanket technology, extends the range of insulation solutions to cover applications from – 200° to up to + 650° C. The market response was overwhelming. ArmaGel HT, for example, received the Innovative Product of the Year Award in Mumbai, India. The launch of ArmaFlex LS set a new benchmark in flexible elastomeric pipe insulation for low-smoke emissions. This product’s performance properties improve both the visibility and respiration for safer evacuation from buildings in the event of a fire. In Engineered Foams, the PET team launched ArmaShape, a ready-to-use 3D PET foam core made from 100 % recycled PET, with its primary applications in the industrial sector. We are proud of the efforts that have fostered these innovations and of the financial contribution they are already making to our business.

On behalf of the Executive Management Team and Management Board, I would like to express our gratitude to our customers worldwide for the confidence they have continued to place in Armacell and its solutions. I also thank all our employees for their commitment to and passion for “making a difference around the world”. Finally, I would like to extend our special thanks to our majority shareholders, Blackstone and KIRKBI, and the members of the Supervisory Board for their valuable support and guidance throughout the year.

In 2019, we will continue to deliver on our global growth strategy through a mix of organic and external growth. Our growth plan stands firmly on multiple pillars and is driven by global megatrends, continuous innovation, demand generation, substitution of legacy materials as well as by the addition of external growth opportunities. We are growing our markets, growing our volume and value proposition in the markets we operate in and driving the adoption rates for intelligent energy-preserving solutions. The savings generated, and the additional safety Armacell solutions provide to customers allow us to make a difference around the world, every day and for all of us.

Yours sincerely,

Patrick Mathieu

President and CEO

Armacell Group