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    SONI   PTS3P0AM0025

SONAE INDUSTRIA, SGPS, SA

(SONI)
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Sonae Industria SGPS : Separate and Consolidated Financial Statements - 2020

03/30/2021 | 03:51am EST

SONAE INDÚSTRIA, SGPS, S.A.

Registered Office: Lugar do Espido, Via Norte, Maia, Portugal

Registered at the Commercial Registry of Maia Registry and Tax Identification No. 506 035 034

Share Capital: EUR 253 319 797.26

Publicly Traded Company

ANNUAL REPORT

SEPARATE AND CONSOLIDATED FINANCIAL STATEMENTS

2020

26 MARCH 2021

Table of contents

Management Report

Appendices to the Management Report and Qualified Shareholdings

Appendix regarding Article 447 of Companies Law

Qualified Shareholdings

Statement issued under the terms and for the purpose of sub-paragraph c) of nr. 1 of Article 245 of the Portuguese Securities Code

Corporate Governance Report Separate Financial Statements

Separate Statement of Financial Position Separate Income Statement

Separate Statement of Comprehensive Income Separate Statement of Changes in Shareholders' Funds Separate Statement of Cash Flows

Notes to the Separate Financial Statements

Consolidated Financial Statements

Consolidated Statement of Financial Position Consolidated Income Statement

Consolidated Statement of Comprehensive Income Consolidated Statement of Changes in Shareholders' Funds Consolidated Statement of Cash Flows

Notes to the Consolidated Financial statements

Statutory External Auditor Report and Statutory Audit Board Report

Statutory External Auditor Report on separate and consolidated information Statutory Audit Board Report

2020

MANAGEMENT REPORT

26 March 2021

CONTENTS

Key Indicators (statutory figures) ............................................................................................................................................................ 3

Chairman's message ................................................................................................................................................................................ 4

1. Sector review ....................................................................................................................................................................................... 7

2. Business Review ................................................................................................................................................................................. 10

2.1. Turnover & Recurrent EBITDA .................................................................................................................................................... 10

2.2. Consolidated financial performance ........................................................................................................................................... 11

2.2.1. Consolidated Income Statement ............................................................................................................................................. 11

2.2.2. Capex ....................................................................................................................................................................................... 12

2.2.3. Consolidated Statement of Financial Position ......................................................................................................................... 13

2.3. Individual Results of Sonae Indústria, SGPS, S.A ......................................................................................................................... 14

2.4. Proposed Allocation of Results ................................................................................................................................................... 14

2.5. Proportional Indicators (Unaudited) ........................................................................................................................................... 14

2.6. Covid-19 ...................................................................................................................................................................................... 16

2.7. Outlook for 2021 ......................................................................................................................................................................... 18

2.8. Information on Shareholdings and Share Performance ............................................................................................................. 18

2.8.1. Efanor Tender Offer ................................................................................................................................................................. 19

2.8.2 Share Performance ................................................................................................................................................................... 19

2.9. Transactions With Own Shares ................................................................................................................................................... 20

2.10. Transactions Between the Company and its Directors ............................................................................................................. 20

2.11. Dividend policy ......................................................................................................................................................................... 20

2.12. Subsequent Events ................................................................................................................................................................... 21

3. Risk Management .............................................................................................................................................................................. 21

3.1. Credit Risk Management Policy .................................................................................................................................................. 21

3.2. Market Risks ............................................................................................................................................................................... 22

3.3. Legal Risks ................................................................................................................................................................................... 23

3.4. Operational Risks ........................................................................................................................................................................ 23

4. Non-Financial Information ................................................................................................................................................................. 23

4.1. About Sonae Indústria ................................................................................................................................................................ 24

4.1.1. Business ................................................................................................................................................................................... 24

4.1.2. History ..................................................................................................................................................................................... 25

4.1.3. Products ................................................................................................................................................................................... 26

4.1.4. Strategy .................................................................................................................................................................................... 30

4.1.5. 2020 Key Corporate Events ..................................................................................................................................................... 32

4.1.6. Awards and Innovative Projects .............................................................................................................................................. 32

4.1.7. Improving our Work (IOW) ...................................................................................................................................................... 34

4.2. Social and Employee-Related Matters ........................................................................................................................................ 35

4.3. Respect For Human Rights .......................................................................................................................................................... 60

4.4. Anti-Corruption and Bribery Matters ......................................................................................................................................... 61

4.5. Environmental and Forestry Matters .......................................................................................................................................... 63

4.6. Management Systems ................................................................................................................................................................ 78

5. Closing Remarks and Acknowledgements ......................................................................................................................................... 82

Appendices to the Management Report and Qualified Shareholdings ................................................................................................. 83

Glossary of Terms .................................................................................................................................................................................. 87

KEY INDICATORS (STATUTORY FIGURES)

TURNOVER BY MARKET 2019

Others

UK

1%1%

TURNOVER BY MARKET 2020

Others 1%

UK1%

TURNOVER MILLION EUROS

200

RECURRENT EBITDA AND % TURNOVER MILLION EUROS

220

230

150

100

50

0

0

30

28

27

26

25

35.0%

30.0%

25.0%

20

20.0%

15

15.0%

10

10.0%

5

5.0%

0.0%

2018

2019

2020

2018 2019Recurrent EBITDA

2020Recurrent EBITDA %

WORKING CAPITAL MILLION EUROSNET DEBT AND NET DEBT TO RECURRENT EBITDA MILLION EUROS

14

12

13

10

8

6

4

2

200 150 100 50

0

0

2018

2019

2020

2018Net Debt

2019

2020

Net Debt to Rec. EBITDA

9.0 x

8.5 x

8.0 x

7.5 x

7.0 x

6.5 x

CHAIRMAN'S MESSAGE

One year ago, the final words of my 2019 Chairman Message addressed the exceptional situation the world was beginning to face in the initial stages of the Covid-19 pandemic. Since then, the pandemic has caused vast health, social and economic damage to people all around the world and has disrupted many industries and businesses of all sizes.

At Sonae Indústria we have also faced significant challenges throughout the year although, after a particularly difficult period between March and May, our businesses have shown surprising resilience and recovered well during the second half of 2020. Our teams have worked relentlessly to ensure the safety of our people and to protect our businesses under difficult circumstances while preparing them for a future in the face of much uncertainty.

The work done on the implementation of precautionary health and safety measures at all Sonae Indústria offices and industrial sites since the beginning of the pandemic, was clearly important to preserve the safety of our people. Until the end of December 2020, the number of confirmed Covid-19 cases within our people, considering our fully owned businesses and also Sonae Arauco, was still quite low at 96. Unfortunately, in January 2021, one of our employees in South Africa has passed away due to Covid-19.

As previously reported, Sonae Indústria's turnover and profitability levels were significantly affected by the Covid-19 pandemic in the first half of 2020, as a result of the sudden contraction of economic activity, particularly in the second quarter of the year and in the countries where more severe lockdown measures were implemented.

In order to offset, as much as possible, the negative effects of the pandemic on turnover and profitability, we implemented significant measures at different levels, including adjusting production levels and costs (optimizing fixed costs, implementing governments support measures, layoff and short work schemes, notably in 2Q20) and revisiting investment plans in order to protect liquidity.

In the second half of 2020, under a context of generally less restrictive extraordinary pandemic containment measures imposed by governments, we witnessed a stronger than expected recovery in customer demand and activity levels both in our North American and Sonae Arauco businesses. For North America and Sonae Arauco, Turnover in the 2H20 was respectively circa 100% and 102% of 2H19 levels which compares with the 79% and 77% in the first half of 2020.

Accordingly, after a difficult first half of the year with a net loss of -7.2 million euros, the second half of 2020 was marked by positive Net Results of circa +1.3 million euros with improved contributions from North America and Sonae Arauco, leading to a negative Net Result of circa -6.0 million euros in 2020 at Sonae Indústria.

Notwithstanding the overall lower activity levels compared to the previous year, Proportional Recurrent EBITDA reached 63.9 million euros, slightly higher than in 2019 with an improved margin of 11.9% versus 10.5% in the previous year, benefiting from the actions taken but also by the pandemic related employment protection schemes and subsidies across a number of our businesses. Proportional Senior Net Debt reached 299 million euros at the end of 2020, implying an increase of circa 16 million euros during the year, that reflected the investment effort started before the pandemic. The resulting proportional senior leverage ratio stood at circa 4.7x, up from 4.4x in 2019.

In relation to our North American business, I am pleased to highlight the significant achievements of the team that under adverse circumstances was able to complete successfully two strategic investments while delivering improved financial results in the year. In the first half of 2020 we completed the full refurbishment of one of our particleboard production lines which is now allowing us to produce better quality panels for our customers with increased efficiency and competitiveness. We also completed the investment in our brand new hot coating plantand already in 2021 started producing High Gloss and Perfect Matt decorative panels under our new LUMMIA brand. With the new LUMMIA high end products, we will further reinforce our already leading position as a decorative solutions provider. In addition to these major business developments and despite the pandemic's negative impact on activity levels in the year, our North American business improved its Recurrent EBITDA result when compared with 2019.

For our Laminates business, 2020 was also marked by the adverse effects of the pandemic on top line which prevented achieving the targeted improvement in profitability. As announced, in December 2020 we closed the industrial activities at our Horn site in Germany and concentrated all Surforma Laminates production in our plant in Maia, Portugal. Intensive work is being done by Surforma's team to develop new business models adapted to the current reality. In relation to the Components business, we took the decision to close down this operation given that we found no way of turning around this business that had consistently generated negative results and negative free cash over many years. As with other inactive sites, we will keep working to monetize the assets of the Horn and Vilela sites and further reduce their running costs.

At Sonae Arauco, despite the very adverse circumstances in the first half of the year as reported throughout 2020, the second half showed a marked recovery and as a result we were still able to achieve a positive, although marginal, Net Profit. This an encouraging sign of the resilience of the business model we have been implementing over the past years.

During the year and notwithstanding the challenges faced by the pandemic, at Sonae Arauco we continued with the implementation of strategic investments aiming at improving our competitive position and the sustainability of our business. We completed the investment in a new particleboard continuous press in Beeskow, that started production in 3Q20, replacing the last day-light presses in Sonae Arauco industrial portfolio. We also continued to invest and to streamline our supply chain processes, in line with our objective of improving customer service levels and to, fully deliver on time and on quality. Additional progress was also made on the digitalization of operations, namely through the use of sensors in equipment and real-time data analysis prompting automatic corrective actions.

As regards Sonae Indústria's Balance Sheet, in 2020 we saw a reduction in Shareholders' Funds resulting from the negative results of the year and from the foreign exchange accounting impacts, but also due to the increase in Net Debt which was mainly driven by the strategic investments in North America which had started in 2019. In the face of continued pressure from an undercapitalised balance sheet, in January 2021 the Board of Directors approved a share capital increase of up to 55 million euros in order to improve the companies' capital structure, through the reinforcement of its equity base, and consequently, to enable Sonae Indústria to reduce the level of indebtedness and to pursue its strategic plans within an environment of continued uncertainty due to the pandemic. The capital increase process is ongoing and is expected to be concluded in the second quarter of 2021.

Looking forward, we will continue to face a period of unusually high uncertainty. The recovery in activity levels during the second half of 2020 seems to have been driven primarily by an increased focus of consumers on home improvements, as they spent a significantly higher share of time at home and freed up a higher share of the household budget for home-related spending in a context of limitations to travelling and other leisure activities. The lack of visibility on the evolution of the pandemic crisis including the implementation of vaccinations and treatments for an ever evolving virus, makes it difficult to evaluate the impacts on the demand drivers of our business (namely residential and office segments), and on the general economic conditions and on potential structural changes in customer behaviour. However, we are confident that appropriate measures have been taken to enable our businesses to see this crisis through.

As a final word, I would like to highlight the resilience, adaptability and commitment that our teams have demonstrated throughout such a difficult year. They were able to quickly adapt to the new reality of remote working, adhere to the safeguarding measures that were promptly defined and understand the rationale for the implementation of the tough measures that were required during some phases of the pandemic situation. I wouldalso like to thank the contribution of Sonae Indústria Statutory Boards and to thank all our stakeholders for their continued support of and confidence in our company.

Paulo Azevedo

Chairman, Sonae Indústria

1. SECTOR REVIEW

MACROECONOMIC CONTEXT1

2020 was marked by the worldwide propagation of the Covid-19 virus and by the related containment measures, which are causing material negative economic impacts and led to an expected global GDP2 contraction of circa 4.2% (vs. circa +2.7% in 2019).

However, in 2021 and 2022, a recovery is expected with estimated global GDP growth rates of 4.2% and 3.7%, respectively, mainly supported in the short term by private consumption. These estimates have a high level of uncertainty, as they depend on the successful containment of new virus outbreaks, on the progress of the vaccination process and on supportive fiscal policies to support demand.

The economic contraction in 2020 was also registered in the Euro area, with an expected GDP reduction of -7.5% (vs. circa +1.3% in 2019). On a quarterly basis, economic growth was unequal throughout 2020 with the second quarter being particularly affected by the lockdowns to contain the pandemic followed by a third quarter marked by a material economic recovery as containment measures were eased, and finally a fourth quarter again affected by new containment measures being applied in most countries. The labour market in the Euro Area is under pressure and the trend of reduction of the unemployment rate was interrupted in 2020 (an increase of circa 0.6 p.p when compared to 2019, despite the relevant employment support public measures). The levels of private consumption and investment were affected by the uncertainty and by the reduction of consumer confidence. Tourism sector in particular was severely impacted by the Covid-19 pandemic. Consumer prices growth reduced from 1.2%, in 2019, to 0.3% in 2020, mainly driven by energy prices, but also by services prices. However, from a trade perspective, Euro area presented again a surplus in the current account balance and the credit conditions remained favourable (short-term interest rates for the Euro area continue to be negative). In 2021 and 2022 an economic recovery in the Euro Area is expected, with an estimated GDP growth of 3.6% and 3.3%, respectively. The Trade and Cooperation Agreement (TCA) formalized in December 2020 between the European Comission and the United Kindgom (UK) is estimated to partially offset the negative effects from the exit of the UK from the European Union.

As regards the US economy, the expected GDP rate in 2020 is -3.7% (vs. circa +2.2% in 2019) and the expected economic growth in 2021 and 2022 is circa 3.2% and 3.5%, respectively, benefiting from an assumed additional fiscal package in early 2021. The positive trend of last years in unemployment rates was reversed with an increase of the unemployment rate of 4.4 p.p in 2020 when compared to 2019. The dinamycs of the economic relations between US and China, that have been markey by tensions, can be modified with the election of the 46th president.

Brief analysis by main regions where Sonae Indústria Group is present:

  • After sixth consecutive years of growth,

in 2020 the Iberian Peninsula was significantly affected by the Covid-19 pandemic and related strict confinement measures. The expected GDP rates in 2020 are -11.6% in Spain and -8.4% in Portugal. In the next two years a recovery is expected supported mainly in the short term by demand, with an estimated growth rate in 2021 and 2022 of 5.0% and circa 4.0% in Spain, respectively, and of 1.7% and circa 1.9% in Portugal, respectively. Despite the government supportive measures, the continuous

GDP Growth Rates (%)

(Source: OECD, December 2020)

-12.00

-9.00

-6.00

-3.00

0.00

3.00

6.00

Poland

Portugal

Spain

Germany

UK

Canada

USA

South Africa

reduction of the unemployment rates (that remained high particularly in Spain) in the last years was reversed in 2020, with an increase of circa 1.7 p.p. and 0.9 p.p. in Spain and Portugal, respectively, which

  • 1 Source: OECD, Economic Outlook, December 2020.

  • 2 GDP: Gross Domestic Product.

contributed to a reduction of private consumption and investment levels. The consumer prices variation was negative in 2020 (-0.3% in Spain and -0.01% in Portugal), impacted by the significant reduction of consumer confidence and the overall prices pressure, including the reduction of oil price. From a trade perspective, Spain registered a surplus in the current account balance, but Portugal registered a deficit in the current account balance for the second consecutive year. The positive trend registered in the last years

  • in the residential construction sector, which is fairly correlated with the economic environment, remained

  • in Portugal but at a much slower pace, as indicated by the building permits y.o.y. increase of 2.0%3. However

  • in Spain the evolution of the residential construction sector in 2020 was negative, with a building permits y.o.y. decrease of circa 20.1%4.

  • In Germany the expected GDP reduction in 2020 is of 5.5% (vs. circa +0.6% in 2019), affected by the Covid-19 pandemic leading to a reduction of private consumption, investment levels and exports. However, a GDP growth of 2.8% and 3.3% in 2021 and 2022, respectively, is expected. The performance of the labour market in 2020 was supported by short-time work schemes and public supporting measures, leading to a moderate increase of the unemployment rate of circa 1.1 p.p.. The consumer prices growth reduced from 1.4%, in 2019, to 0.5% in 2020, affected by a reduction in demand, energy prices and VAT rates. The current account balance in 2020 presented again a surplus. Despite the macroeconomic environment, affected by the pandemic, the residential construction sector registered a growth, as evidenced by the y.o.y increase in the number of building permits in 2020 (up by circa 4.8%5).

  • In relation to North America, a GDP fall of circa 3.7% (vs. circa +2.2% in 2019) and 5.4% (vs. circa +1.7% in 2019) is expected for the US and Canadian economies, respectively, due to the pandemic negative economic effects in the first half of the year, as the second half already showed signs of recovery. For 2021 and 2022, it is estimated a GDP growth for the US economy of circa 3.2% and 3.5%, respectively, and for the Canadian economy of circa 3.5% and 2.0%, respectively. The performance of labour market in 2020 was significantly affected by the pandemic in both countries, with a material increase of the unemployment rates (+4.4. p.p. in the US economy and +3.9 p.p. in the Canadian economy). It should also be noted the material reduction of private consumption and investment levels in 2020. The long term and short term interest rates reduced significantly in 2020, leading to a recovery of the housing investment levels. Despite the negative macroeconomic environment, the housing starts increased by circa 8.4%6 y.o.y in Canada and by 3.5%7 y.o.y in the USA.

  • For South Africa, OECD estimates a negative GDP rate of 8.1% in 2020 (vs. circa +0.2% in 2019) and a recovery in 2021 and 2022, with an expected GDP growth rate of circa 3.1% and 2.5%, respectively. The unemployment levels, that were already very high (circa 28.7% in 2019), increased circa 3.3 p.p. in 2020. The macroeconomic environmental led to a weaker performance in the residential construction sector, as evidenced a y.o.y. decrease of circa 31.9%8 in the number of residential building permits.

WOOD BASED PANELS

NORTH AMERICA (TAFISA CANADA)

Demand by Product

During 2020 particleboard demand in North America weakened in 2Q20 and early 3Q20 due to the Covid-19 pandemic. However, from late 3Q20 through year end demand strengthened measurably due to the increase in expenditures for residential improvement and furniture. This demand recovery is extending into 2021. Considering

  • 3 Source: Instituto Nacional de Estatística, February 2021 ("Nova habitação residencial", cumulative 12 months evolution until December 2020).

  • 4 Source: Ministerio de Fomento, January 2021 (Total "New Housing", cumulative 11 months evolution until November 2020).

  • 5 Source: German Federal Statistics Office, February 2021 ("Permits for new construction, dwelling", cumulative 11 months evolution until November

    2020).

    6 Source: Canada Mortgage and Housing Corporation, February 2021 ("Building permits (units)", cumulative 12 months evolution until December

    2020).

  • 7 Source: United States Census Bureau, January 2021 ("Housing units started", cumulative 12 months evolution until December 2020).

  • 8 Source: Statistics South Africa, February 2021 ("Building plans for residential buildings (number)", cumulative 11 months evolution until November

2020).

the published estimates from the Composite Panel Association (CPA), North American particleboard industry shipments reduced 6% when compared to 2019.

Supply information

Main closures and investments by key industry players in North America announced:

  • Arauco closed the Moncure (North Carolina, USA) particleboard plant in the first half of 2020. This romeved a 262 thousand m3 of capacity from the North American industry;

  • Egger started production in the new particleboard plant in North Carolina (USA) in the fall of 2020. This plant represents an investment of USD 500 million for particleboard production, with an expected capacity of 600 thousand m3, and melamine faced particleboard production.

During 2020, the market was still absorbing the contraction of capacity from 2019 and early 2020. Egger's new plant had little overall impact on the demand-supply balance in 2020.

EUROPE (SONAE ARAUCO)

Demand by product9

In 2020, the wood based panels consumption was globally impacted by the Covid-19 pandemic crisis. Most macroeconomic indicators report historical declines in economic activity and construction and furniture industries, that are not expected to be fully recovered in 2021. As one of the exceptions to this trend, it should be mentioned that the construction in Portugal in 2020 is expected to have kept the same level of 2019 activity.

Across several regions production sites and commercial companies closed temporarily their activities due to containment measures imposed by local governments, which affected the wood based panels industry and its direct customers.

During 2020 particleboard consumption is expected to have decresead by circa 4% in European Union 27 (EU-27).

MDF consumption, in EU-27 is also expected to have decreased by circa 4% in 2020.

In what concerns OSB, consumption in EU-27 is expected to have increased in 2020, by circa 3%.

Supply information10

The overall EU-27 particleboard (PB) production capacity is expected to have increased in 2020 by 2%. Particleboard capacity in the Iberian Peninsula is estimated to have increased by circa 3% in 2020 and to represent approximately 3.9 million m3. For 2021, is expected again an increase of circa 0.1 million m3. It should be mentioned the Sonae Arauco investment to replace the two single day light particleboard presses by a new continuous press with state-of-the-art technology at our Beeskow (Germany) plant and the start up in September 2020 of Klaipedos Mediena (VMG) new particleboard plant in Akmene (Northern Lithuania), with an annual capacity of 600 thousand m3.

MDF production capacity in EU-27 is expected to have decreased by 2% in 2020, mainly driven by Germany. In Iberian Peninsula, no increases in MDF available capacity are estimated to have occurred during 2020. In Germany, the MDF production capacity is expected to have decreased in 2020, mainly due to the closure of Laminate Park operations (Sonae Arauco and Tarkett joint venture) at the Eiweiler site, by the end of 2019.

Total EU-27 OSB production capacity is expected to have increased in 2020 by around 3% (circa +0.2 million m3).

  • 9 Sources: FAOSTAT: Food and Agriculture Organization Statistics and Sonae Arauco internal estimates.

  • 10 Sources: Sonae Arauco internal estimates and competitor's public information.

2. BUSINESS REVIEW

2.1. TURNOVER & RECURRENT EBITDA

TURNOVER and RECURRENT EBITDA

MILLION EUROS

250

35.0%

230

35.0%

30.0%

30.0%

200

25.0%

25.0%

20.0%

150

20.0%

15.0%

100

15.0%

10.0%

10.0%

5.0%

0.0%

50 0

5.0%

0.0%

1H19*

2H19*

1H20*

2H20*

2019

2020

TurnoverRecurrent EBITDA %

Turnover

Recurrent EBITDA %

*Half year information unaudited.

Consolidated Turnover reached 201.8 million euros in 2020, a reduction of 12.2% vs. last year (circa -28.2 million euros), driven essentially by our North American business with lower sales volumes (in local currency but also affected by circa EUR -5.5M effect from the depreciation of the Canadian dollar vs. the EUR). The evolution of the consolidated turnover was clearly impacted by the Covid-19 outbreak, with significant negative impacts particularly in 2Q20 (circa -32% vs. 2Q19), followed by a gradual recovery in 3Q20 and specially in 4Q20 (-15% and +4%, respectively, vs. 3Q19 and 4Q19). For the second half of the year, Consolidated turnover reached 106.9 million euros, which represents a decrease of 6.7 million when compared to 2H19 mostly due to a circa 6.0 million euros effect from the depreciation of the Canadian dollar vs. the EUR, but an increase of circa 12.0 million euros when compared to 1H20.

Variable costs per cubic meter decreased both in local currency and in euros in 2020, when compared to the previous year, with a decrease in input costs, and in euros also benefiting from the depreciation of the Canadian dollar. For the second half of the year, variable costs per cubic meter also decreased when compared to 2H19 and 1H20.

Recurrent EBITDA in 2020 reached 28.0 million euros, an increase of circa 1.6 million euros vs. 2019, explained by a reduction in variable and fixed costs, which more than offset the reduction in Consolidated turnover. In the second half of the year, Recurrent EBITDA stood at 17.7 million euros, an increase of circa 4.3 million euros and 7.4 million euros, when compared to 2H19 and 1H20, respectively. The 2H20 Recurrent EBITDA margin reached circa 16.6%, up by circa 4.8 p.p. and 5.7 p.p. vs. 2H19 and 1H20, respectively.

Consolidated EBITDA in 2020 reached circa 26.7 million euros, an increase of 0.9 million euros vs. 2019. In the second half of the year, Consolidated EBITDA stood at 16.4 million euros, an increase of circa 3.2 million euros and 6.1 million euros, when compared to 2H19 and 1H20, respectively. The evolution in Consolidated EBITDA is mainly explained by the aforementioned performance of Recurrent EBITDA.

2.2. CONSOLIDATED FINANCIAL PERFORMANCE

2.2.1. CONSOLIDATED INCOME STATEMENT

CONSOLIDATED INCOME STATEMENT

MILLION EUROS

Turnover

230.0

201.8

(12.2%)

113.6

94.9

106.9

(5.9%)

12.6%

Recurrent EBITDA

26.5

28.0

5.9%

13.4

10.3

17.7

31.9%

71.3%

Operational profit (EBIT)

4.4

11.0

-

(0.2)

1.7

9.2

-

-

Profit before taxes (EBT)

(10.0)

(2.9)

71.1%

(14.3)

(6.8)

3.9

127.5%

-

Consolidated net profit/(loss) for the period

(13.4)

(6.0)

55.4%

(15.8)

(7.2)

1.3

108.0%

117.4%

2019

2020

Other operational income

4.1

8.8

115.3%

2.1

4.8

4.0

EBITDA

25.8

26.7

3.5%

13.2

10.3

16.4

Non recurrent items

(0.7)

(1.4)

(90.9%)

(0.2)

(0.1)

(1.3)

Recurrent EBITDA Margin %

11.5%

13.9%

2.4 pp

11.8%

10.9%

16.6%

Depreciation and amortisation

(15.9)

(15.7)

1.2%

(8.1)

(7.9)

(7.8)

Provisions and impairment Losses

(5.4)

0.0

100.5%

(5.4)

(0.6)

0.6

Net financial charges

(11.5)

(10.8)

5.9%

(5.7)

(5.7)

(5.1)

o.w. Net interest and other charges

(9.8)

(9.4)

4.5%

(4.9)

(5.0)

(4.4)

o.w. Net exchange differences

(0.0)

(0.0)

(73.1%)

(0.0)

(0.1)

0.1

o.w. Net financial discounts

(1.6)

(1.4)

15.3%

(0.8)

(0.6)

(0.8)

Gains and losses in Joint-Ventures - Net Results

0.7

0.1

77.7%

(4.7)

(2.8)

2.9

Gains and losses in Joint-Ventures - Other

(3.7)

(3.2)

12.2%

(3.7)

(0.1)

(3.1)

Taxes

(3.3)

(3.1)

8.1%

(1.5)

(0.4)

(2.7)

o.w. Current tax

(3.3)

(1.3)

60.9%

(1.0)

(1.5)

0.2

o.w. Deferred tax

(0.0)

(1.8)

-

(0.4)

1.1

(2.9)

2020/ 2H19 1H20 2H20

2H20/

2H20/

2019 Unaudited Unaudited Unaudited

2H19

1H20

12.6%

87.3%

(17.7%)

23.9%

59.6%

-

-

71.3%

4.8 pp

5.7 pp

2.8%

1.1%

111.9%

-

11.4%

11.4%

10.7%

13.1%

-

-

1.6%

(40.7%)

-

-

14.5%

-

(81.1%)

-

117.8%

112.4%

-

-

117.4%

Total fixed costs in 2020 represented circa 16.8% of turnover, a reduction of circa 0.6 p.p. vs. 2019, due to the reduction of fixed costs. It should be noted that fixed costs in 2Q20 and 3Q20 include positive impacts of layoff and short work schemes implemented aiming to partially offset the material reduction of turnover due to the Covid-19 pandemic. For the second half of the year, total fixed costs as a percentage of turnover reduced by 1.8 p.p. and 1.7 p.p. when compared to 2H19 and 1H20, respectively.

The number of employees of Sonae Indústria was 473 FTE's, at the end of December 2020, excluding Sonae Arauco and trainees, which compares with 503 and 506 FTE's at the end of June 2020 and December 2019, respectively.

The reduction in FTE's is explained by the closure of the Components plant (in Portugal) in the 2H20.

Depreciation and amortization charges during 2020 were 15.7 million euros, a reduction of circa 0.2 million euros when compared to 2019. In 2H20, the depreciation and amortization charges reached 7.8 million euros, a reduction of 0.2 million euros and circa 0.1 million euros when compared to 2H19 and 1H20, respectively.

Provisions and impairment losses in 2020 were 0.02 million euros, which compares with a charge of 5.4 million euros in 2019, which included the recognition of Provisions related with the closure of all industrial activities at Horn site in Germany by the end of 2020, that were mostly used in 2H20. Pursuant to the agreement with Arauco these costs related with the Horn site are the responsibility of Sonae Indústria hence, in addition to the 50% considered at Sonae Arauco level as explained below, Sonae Indústria considers directly the remaining 50% in its accounts.

Net financial charges during 2020 were 10.8 million euros, a reduction of circa 0.7 million euros when compared to 2019, mainly explained by a reduction of 0.4 million euros in net interest and other charges (benefiting from lower base rates in Canada debt since the beginning of the pandemic and despite higher average consolidated gross debt in 2020 when compared with 2019) and of circa 0.3 million euros in net financial discounts due to lower activity levels.

Gains and losses in Joint-Ventures - Net Results refers to 50% of the net results of Sonae Arauco in the period. This amounted to 0.1 million euros in 2020, a reduction of 0.5 million euros when compared to 2019. In 2020, Sonae Arauco Recurrent EBITDA (considering the 50% contribution) was circa 1.5 million euros lower than in 2019, affected by the significant impact of the Covid-19 pandemic in 2Q20. The second half of the year was marked by a material recovery of Sonae Arauco Recurrent EBITDA level leading to positive 2.9 million euros Gains and Losses in Joint-Ventures - Net Results in 2H20 which compares with negative circa 2.8 million euros in 1H20. It should be noted that in 2020 Sonae Arauco booked non recurrent expenses of 4.5 million euros in relation to the closure of all industrial activities at Horn site (Germany), but these were fully offset by the use of Provisions recognized in 2019 for that purpose, therefore without material effect in the net results.

Gains and losses in Joint-Ventures - Other amounted to -3.2 million euros in 2020, essentially explained by Sonae Arauco's expenses and contingent liabilities that, pursuant to the agreement with Arauco, are the responsibility of Sonae Indústria and that, accordingly, Sonae Indústria compensates Sonae Arauco via cash contributions to Sonae Arauco for the full amounts paid or incurred. During 2020 Sonae Indústria paid circa 6.9 million euros to Sonae Arauco under this concept. Since 50% of these expenses were already reflected in Sonae Indústria's income statement through the net results of Sonae Arauco, the remaining 50% (circa 3.4 million euros) are reflected through Gains and Losses in Joint-Ventures - Other.

Current tax charges and Deferred tax charges are mostly related with our North American business and reduced by circa 0.3 million euros on an combined basis when compared with 2019 (the reduction in Current tax charges and the increase in Deferred tax charges in North America is related with the depreciation tax rates applicable in some of the investments made).

Net results in 2020 were negative of circa 6.0 million euros which compare with the negative 13.4 million euros net results in 2019. The main drivers for the lower net losses in 2020 when compared to 2019 are the aforementioned improvements in Recurrent EBITDA and the significantly better figure for Provisions and impairment losses. It should be noted that for the second half of 2020, the net results were positive of circa 1.3 million euros, an improvement of circa 8.5 million euros when compared to the first half of 2020, driven mainly by the significant improvements in the EBITDA of the fully owned businesses (essentially Canada) and in Gains and losses in Joint-Ventures - Net Results (improved results at Sonae Arauco level).

2.2.2. CAPEX

CAPEX

MILLION EUROS

24.0

21.6

22.5

21.0

19.5

18.0

16.5

15.0

13.5

12.0

10.5

9.0

7.5

6.0

4.5

3.0

1.5

0.0

2019

2020

Additions to Gross Tangible Fixed Assets11 reached 21.6 million euros in 2020, essentially explained by investments in our North American business (21.1 million euros), including the investment in a new High Gloss and Perfect Matt lacquering plant in Lac Mégantic and the complete refurbishment of a particleboard production line.

11 Excluding the effect from the IFRS 16.

2.2.3. CONSOLIDATED STATEMENT OF FINANCIAL POSITION

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

MILLION EUROS

2019

1H20

2020

Unaudited

Non current assets

370.0

363.2

362.2

Tangible assets

153.6

154.0

145.3

Investments in joint ventures

209.1

201.9

210.1

Other non current assets

7.3

7.3

6.7

Current assets

50.6

45.0

44.3

Inventories

22.0

20.1

21.4

Trade debtors

14.1

14.1

14.0

Cash and cash equivalents

7.1

4.7

3.0

Other current assets

7.5

6.2

5.9

Non-current assets classified as available for sale

0.1

0.1

1.6

Total assets

420.7

408.3

408.1

Shareholders' Funds

127.3

112.4

112.6

Equity holders

127.3

112.4

112.6

Liabilities

293.4

295.9

295.5

Subordinated bonds loan

50.0

49.9

49.9

Senior interest bearing debt

166.0

171.0

174.1

Non current

157.6

162.0

164.2

Current

8.4

9.0

9.9

Trade creditors

26.0

20.8

22.3

Other liabilities

51.4

54.2

49.1

Total Shareholders'Funds and liabilities

420.7

408.3

408.1

Senior Net Debt

158.9

166.3

171.1

Total Net Debt

208.9

216.3

221.1

Working Capital

10.0

13.4

13.0

Tangible assets reached 145.3 million euros at the end of December 2020, a reduction of 8.3 million euros vs. December 2019, explained primarily by the depreciation of the Canadian dollar vs. the EUR and by the impairments booked in 2020 (related with the closure of the Components plant), which more than offset the positive effect from the investments in our North American business (refurbishment of one of the two particleboard production lines and the ongoing investment in a new High Gloss and Perfect Matt lacquering plant in Lac Mégantic).

Investments in Joint-Ventures (50% shareholding in Sonae Arauco) reached 210.1 million euros, which represents an increase of 1.0 million euros when compared to the book value of this investment at the end of December 2019, essentially due to the positive effects of 3.4 million euros from 50% of the cash contributions made by Sonae Indústria to Sonae Arauco in 2020 and of 0.1 million euros from our share of Sonae Arauco's net results, which more than offset an unfavourable exchange rate effect of 3.0 million euros (mainly explained by the South African Rand).

Consolidated Working Capital reached 13.0 million euros, an increase of 3.0 million euros when compared to December 2019, explained by the decrease in trade creditors, which more than offset the decrease in inventories and in trade debtors.

Senior Net Debt stood at 171.1 million euros at the end of December 2020, representing an increase of circa 12.2 million euros and 4.8 million euros, when compared to December 2019 and June 2020, respectively (debt variation in 2020 includes among other effects, the cash contribution made by Sonae Indústria to Sonae Arauco of circa 6.9 million euros during 2H20 and material payments for the strategic investments in Canada). Note: Senior Net Debt does not include the Subordinated Bonds12 issued during 4Q19 which are however included in Total Net Debt.

12 Subordinated Bonds of 50 million euros (with book value, including amortised cost effect, of 49.9 million euros).

Total Shareholders' Funds, at the end of December 2020, totaled circa 112.6 million euros, which represents a decrease of 14.7 million euros when compared to December 2019, mainly explained by the negative impacts from the net results and from unfavourable exchange rate effects of 7.3 million euros (essentially related with the exchange rate evolution of the Canadian Dollar and the South African Rand vs. the Euro).

2.3. INDIVIDUAL RESULTS OF SONAE INDÚSTRIA, SGPS, S.A.

In 2020, Sonae Indústria, SGPS, SA, as the holding company of the Group, generated on its individual accounts a negative Net Result of 12,418,475.54 euros.

This Net Result is explained by net financial charges of -7.0 million euros, results related with investments in subsidiaries and joint ventures of circa -2.3 million euros (explained by impairments in financial investments of - 6.2 million euros and despite the positive effect of dividends from Megantic BV of circa 4.0 million euros) and operational results of -3.1 million euros (which include provisions and impairment losses of -3.7 million euros).

2.4. PROPOSED ALLOCATION OF RESULTS

In accordance with applicable legal and statutory terms, the Board of Directors proposes to the Shareholders'

General Meeting that the negative results of 12,418,475.54 euros in Sonae Indústria, SGPS, SA 2020 individual accounts be transferred to retained earnings.

It also proposes that the referred amount of -12,418,475.54 euros is fully covered by free reserves.

2.5. PROPORTIONAL INDICATORS (UNAUDITED)

EXPLANATORY COMMENTS ON PROPORTIONAL INDICATORS

Due to the fact that in the audited accounts, one of Sonae Indústria's main assets (its 50% shareholding in Sonae

Arauco) is accounted by the equity method, unaudited Proportional Indicators are also presented.

These Proportional Indicators consider the full contribution of our wholly owned businesses and the proportional consolidation of the 50% contribution from Sonae Arauco.

Proportional Indicators are not audited. In respect of Proportional Indicators, Sonae Indústria external auditors have carried out an analysis of the consistency of the assumptions and of the figures considered by Sonae Indústria in the calculation of those Proportional Indicators.

PROPORTIONAL FINANCIAL INDICATORS

(UNAUDITED)

2019

2020

Proportional Turnover

606

537

Proportional Rec. EBITDA

64

64

Proportional Rec. EBITDA margin

10.5%

11.9%

LEVERAGE

Proportional Senior Net Debt (excluding Subordinated Bonds)

283

299

Proportional Senior Leverage (Senior Net Debt / LTM Rec. EBITDA)

4.4 x

4.7 x

Proportional Total Net Debt

333

349

Proportional Total Leverage (Total Net Debt / LTM Rec. EBITDA)

5.2 x

5.5 x

In 2020, Senior Net Debt to Recurrent EBITDA (proportional) stood at circa 4.7x, which represents an increase of 0.2x vs. 2019. Proportional Senior Net Debt excludes Subordinated Bonds (50 million euros issued during 4Q19).

PROPORTIONAL TURNOVER BY DESTINATION MARKET 2019

PROPORTIONAL TURNOVER BY DESTINATION MARKET 2020

United States 16.9%United States 16.0%

PROPORTIONAL TURNOVER and RECURRENT EBITDA (unaudited)

MILLION EUROS

316

300

250

200

150

100

50

0

700

30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 0.0%

30.0%

606

600

25.0%

500

20.0%

400

15.0%

300

10.0%

200

100

5.0%

0

0.0%

1H19

2H19

1H20

2H20

2019

2020

TurnoverRecurrent EBITDA %

Turnover

Recurrent EBITDA %

Proportional Turnover in 2020 was significantly affected by the Covid-19 pandemic, particularly in 2Q20, resulting in a reduction of circa 68.6 million euros in the year, when compared to 2019. This evolution was mainly driven by a lower contribution from Sonae Arauco (-40.4 million euros), affected specially by a reduction in total sales volumes in all regions, but also from Sonae Indústria (-28.2 million euros), essentially due to our North American business with lower sales volumes (in local currency but also affected by circa EUR -5.5M effect from the depreciation of the Canadian dollar vs. the EUR). However, the second half of the year was marked by a material recovery in activity, with an increase in Proportional Turnover of 38.3 million euros when compared to 1H20 and a reduction of circa 1.7 million euros when compared to 2H19.

Proportional Recurrent EBITDA in 2020 reached 63.9 milion euros, circa 0.1 million euros higher than in 2019, driven by our fully owned businesses (circa +1.6 million euros), that benefited from a reduction in variable and fixed costs, which more than offset the reduction in turnover levels. Sonae Arauco contribution was lower than in 2019, materially affected by the the Covid-19 pandemic, particularly due to its effects in turnover levels with subsequent impacts on profitability. However, the material improvement in the Proportional turnover in 2H20 allowed an improvement of the Proportional Recurrent EBITDA of circa 15.7 million euros and 11.9 million euros when compared to 1H20 and 2H19, respectively, due to Sonae Arauco and our fully owned businesses.

The average unitary variable costs (per m3) decreased y.o.y. in Canada (in local currency and in euros) and in Sonae Arauco.

The number of employees of Sonae Indústria, at the end of December 2020, was 3,063 FTEs13 including 100% of Sonae Arauco operations.

13 FTEs excluding Trainees and Externals.

2.6. COVID-19

The worldwide propagation of Covid-19 in 2020 has caused vast negative human, social, economic and financial impacts.

The Covid-19 pandemic and the extraordinary pandemic containment measures imposed by the authorities in the several regions have also had a significant impact not only on daily lives of people but also on all types of businesses, and Sonae Indústria was no exception.

The impacts in Sonae Indústria businesses in the several regions where Sonae Indústria operates (namely Europe, North America and South Africa) were particularly felt between mid March and end of May. The intensity of the negative impacts of the pandemic in Sonae Indústria during this period differed by business and by region but there was a common denominator in its main driver which was the significant decrease in turnover levels.

The extraordinarily abrupt reduction in economic activity in most geographies where Sonae Indústria operates due to the pandemic (including Covid-19 related lockdown restrictions since late March and until May in general) caused a material reduction in demand from our customers which reduced significantly their orders severely impacting our sales volumes as a consequence. In some cases our production facilities were temporarily closed either due to lockdown restrictions or to reduced order levels.

In the most critical period from a business perspective (mid March to end of May 2020) the most significant impacts of Covid-19 were the following:

  • North American business: partial shutdown in the last days of March due to government lockdown restrictions (not only in Quebec but also in other Canadian provinces and in the USA). Accordingly in that period, we operated the largest of the two particleboard lines and two or three of the five MFC surfacing lines. Lockdown restrictions in Quebec started to be gradually eased on 20 April (residential construction) and all construction and manufacturing restarting (with restrictions) on 11 May. Similar situations occurred in other regions of Canada and in the US.

  • Laminates and Components: the Laminates plants in Maia and Horn kept operating during the months of March and April. The Components plant in Vilela operated during the month of March and part of April until a confirmed Covid-19 case led to the temporary stoppage of the plant during two weeks. In Maia a reduction in activity (partial layoff) was implemented during May. The Horn plant also operated at a lower level in May.

  • Sonae Arauco: industrial sites in Spain and South Africa were stopped due to strict temporary lockdown measures implemented by the respective national authorities to fight the Covid-19 crisis. The reduction in demand from several customer segments in all regions caused by this crisis, also led to having to curtail production in other sites and activity in the offices. When possible layoff or short work schemes were implemented, according to the countries'

    legislations, to minimize fixed costs and preserve available cash and financing facilities. Sonae Arauco monitored demand in the markets and adjusted production accordingly.

The impacts on sales volumes were particularly significant in the months of April and May and especially in the countries where more severe lockdown measures were implemented and where the impacts in economic activity were stronger such as in the case of Spain, South Africa and Portugal (with Sonae Arauco being present in all these geographies and accordingly being particularly affected).

May 2020/

June 2020/

Turnover (as % of previous year)

March 2019

April 2019

May 2019

June 2019

Sonae Indústria (fully owned businesses)

81%

56%

66%

84%

Tafisa Canada

79%

57%

63%

84%

Laminates & Components

110%

52%

100%

92%

Sonae Arauco

88%

55%

53%

85%

March 2020/ April 2020/

The reduction in turnover levels in the period from mid March to May caused a material negative impact in the profitability of Sonae Indústria businesses given that some of the important items in its cost structure are either fixed, such as depreciation (material in a highly capital intensive industry), or at least not susceptible of being fully adjusted downwards when activity reduces, particularly in short periods of time such as some personnel and overhead expenses.

In order to offset as much as possible the negative effects of the pandemic, during the most critical period but also in the remaining of the year, management teams put into place effective actions at different levels of all businesses, including adjusting production levels (according to demand), costs (optimizing fixed costs) and investment plans in order to protect liquidity and safeguard the future. Whenever possible and adequate, we also used the governments support measures that were created to partially offset the negative effects of the pandemic in the businesses.

Other potential Covid-19 related concerns, such as disruptions on the supply of materials and services, shortages on workforce availability due to health and safety issues and problems with credit management, collection of trade receivables, and lower levels of credit insurance, did not have significant negative impacts in operational performance and results during 2020, particularly when compared to the above described impacts on turnover.

With the gradual easing of the pandemic containment measures and despite the overall economic uncertainties in all regions, demand and turnover picked up materially from June onwards.

In the second half of the year there were no material impacts on activity and on turnover levels of our businesses derived from lockdown measures affecting directly our businesses or our direct customers as it had happened during 1H20.

Therefore, in the second half of 2020 there was a material improvement in the turnover levels of our two main businesses (nevertheless turnover was still materially below 2019 levels on a full year basis):

Turnover (as % of previous year)

1H20/ 1H19

2H20/ 2H19

2020/ 2019

Sonae Indústria (fully owned businesses)

82%

94%

88%

Tafisa Canada

79%

100%

89%

Laminates & Components

94%

95%

95%

Sonae Arauco

77%

102%

89%

Accordingly profitability also improved materially in the second half of 2020 when compared with the previous year. Sonae Indústria consolidated Recurrent EBITDA increased from 10.3 million euros in the first half of 2020 to 17.7 million euros in the second half of the year. At Sonae Arauco, Recurrent EBITDA contribution (considering a 50% contribution to Sonae Indústria) increased from 13.8 million euros in 1H20 to 22.1 million euros in 2H20. The main driver for the disparity between the results in the first half of 2020 and the second half of 2020 was the contrast in the impact from Covid-19 on activity and turnover levels driven particularly by increased demand from home renovation sector.

Regarding the effects of Covid-19 on liquidity and financing, close communication was kept with bank creditors in different regions throughout 2020 in order to keep them informed of the actual situation as we went through the pandemic crisis. Considering the significant refinancings concluded between December 2019 and March 2020, Sonae Indústria scheduled debt repayments in 2020 were reduced to circa 8 million euros. It should be mentioned that the amounts of debt repayments scheduled for 2020 that were postponed as a result of the application of legal moratoria related with the pandemic represent less than 1% of the total debt of Sonae Indústria.

As at the 31 December 2020 financial covenants in existing financial agreements were either satisfied or remedied.

Available liquidity, calculated as the undrawn committed facilities plus cash and cash equivalents, at Sonae Indústria at the end of December 2020 totalled circa 46.5 million euros, of which 29.4 million euros in Canada.

COVID-19 | PEOPLE

The health and safety of our people is a foremost concern and accordingly, since the very beginning of the pandemic in March, Sonae Indústria implemented important measures to protect the health of our people at the workplace (plants and offices) under the context of the Covid-19 pandemic.

Until the 31 December 2020, the number of confirmed cases of Covid-19 within our people, considering our fully owned businesses and also Sonae Arauco, was still quite low at 96. Unfortunately, already in 2021 we regret the passing away of one of our employees in South Africa.

We will continue to focus on the health and safety of our people as the end of the sanitary crisis cannot be predicted, making individual and collective responsibility remain fundamental to contain the pandemic.

COVID-19 | RISKS AND OUTLOOK

The recovery in activity levels during the second half of 2020 seems to have been driven primarily by an increased focus of consumers on home improvements and second home refurbishments , as they spent a significantly higher share of time at home and freed up a higher share of the household budget for home-related spending in a context of limitations to travelling and other leisure activities.

There is extreme uncertainty on the evolution of the pandemic crisis itself including the implementation of vaccinations and treatments for an ever evolving virus, makes it difficult to evaluate the impacts on Sonae Indústria operations, on the demand drivers of our business (namely residential and office segments), on the general economic conditions and on potential structural changes in customer behaviour.

Due to these uncertainties Sonae Indústria is unable to estimate future impacts on the company's results with accuracy or assurance.

The effects of the pandemic can still be significant over the next quarters particularly in the event of further significant virus waves and of new lockdowns being imposed until an effective solution for the health crisis is available.

The risk that the economies fail to recover significantly and swiftly from the adverse economic consequences already caused by the pandemic namely on employment, available income and consumer and investor confidence levels, all with impact on the demand for durable goods which are important drivers of market demand for our products, may also cause a material impact in Sonae Indústria businesses.

Despite the uncertainties created by Covid-19 crisis, the measures taken by management; the general government support measures; and the material recovery experienced by our businesses in the second half of 2020, set out a framework for Sonae Indústria to overcome the important challenges raised by the pandemic.

2.7. OUTLOOK FOR 2021

The outlook for 2021 is still uncertain and particularly dependent on the developments of Covid-19 pandemic and on its direct and indirect impacts on Sonae Indústria businesses, as described in the previous section.

Despite the extraordinary circumstances, we will keep working to achieve of our strategic objectives to the full extent that external conditions permit.

2.8. INFORMATION ON SHAREHOLDINGS AND SHARE PERFORMANCE

Sonae Indústria, SGPS, SA is a company listed in the NYSE Euronext Lisbon, with a majority shareholder - EFANOR Investimentos, SGPS, SA - that currently controls directly or indirectly, approximately 86.2% of the share capital.

2.8.1. EFANOR TENDER OFFER

On the 31 July 2020, Sonae Indústria received a notification from Efanor Investimentos, SGPS, SA regarding the

Preliminary Announcement of a Public, General and Voluntary Tender Offer ("Offer") over Sonae Indústria SGPS,

SA shares, at a price of 1.14 euros per share.

On the 27 August 2020, Sonae Indústria's Board of Directors issued its Report on the opportunity and conditions of the Offer(https://www.sonaeindustria.com/fileManager/comunicados/pdf_en_347.pdf).

The Offer period occurred between 7 and 27 October 2020 and the process was concluded on the 28 October 2020, with the disclosure of the Offer results.

As a result of the public tender offer, Efanor Investimentos, SGPS, S.A. increased its shareholding (direct and indirect) in Sonae Industria, from circa 68.61% of the total number of shares and voting rights (before the Offer

Preliminary Announcement) to 86.22% ("free float" accordingly reduced from 31.39% to 13.78%).

2.8.2 SHARE PERFORMANCE14

Share Capital

Total number of shares

253,319,797.26 45,403,029

  • 45,403,029 45,403,029

  • ISIN Code

    PTS3P0AM0025

    (Until 28/07/2017: ISIN Code PTS3P0AM0017)

    Bloomberg Code

    SONI

    Reuters Code

    SONI.LS

    2018 253,319,797.26

    2017

    2019 253,319,797.26

    2020

    253,319,797.26 45,403,029

    Net Results

    15,265,731

  • 11,028,470 -13,369,349

-5,969,033

Net Results per share Dividends per share Prices

0.336

0.000

0.243 0.000

-0.294-0.131

0.0000.000

Year High Year Low Year Average

3.6590 1.4000 2.2956

4.1400 1.3750 2.7039

1.66501.1400

0.87000.5560

1.20860.8687

Share price as at 31-Dec

Market Capitalization as at 31-Dec Average trading volumes

3.5010 158,956,005 57,761

1.4600 66,288,422 50,477

0.8700 39,500,635 28,554

0.9520 43,223,684 46,806

14 Please note that market share prices considered in this section are market close prices.

31/12/2019

12/01/2020

24/01/2020

05/02/2020

17/02/2020

29/02/2020

12/03/2020

24/03/2020

05/04/2020

17/04/2020

29/04/2020

11/05/2020

23/05/2020

04/06/2020

16/06/2020

28/06/2020

10/07/2020

22/07/2020

03/08/2020

15/08/2020

27/08/2020

08/09/2020

20/09/2020

02/10/2020

14/10/2020

26/10/2020

07/11/2020

19/11/2020

01/12/2020

13/12/2020

25/12/2020

Volume

Sonae Indústria

PSI 20

Sonae Indústria's share price performance is dependent on the business cycles, which are correlated with the residential construction and furniture industries. As such, the share price evolution of Sonae Indústria has been historically impacted by economic and business cycles.

During 2020, Sonae Indústria's share price increased by 9%, contrasting with PSI 20 share price that decreased 6%.

Sonae Indústria's share price reduced 24% from the end of 2019 until 31 July 2020 (date of Efanor Investimentos,

SGPS, SA preliminary announcement of the Offer) which compares with PSI 20 reduction of 18%. The share price then appreciated by circa 73% in the period from 31 July until 27 October (date of the end of the Offer period). This appreciation of circa 73% contrasts with PSI 20 evolution of -7% in the same period.

Sonae Indústria's share price then reduced by 16% from 27 October until the end of 2020 (contrasting with PSI 20 appreciation of 23%).

The highest daily trading volume of Sonae Indústria shares was registered on 11 September (782,324 shares).

The minimum share price during 2020 was registered on 27 March (0.556 euros). On the other hand, the maximum share price of 1.14 euros was achieved on 21 January and also in 28 sessions in a period between 11 September and 27 October.

Regarding liquidity, Sonae Indústria's share had, during 2020, an average turnover of 46,806 shares per day.

2.9. TRANSACTIONS WITH OWN SHARES

Sonae Indústria, SGPS, S.A. did not acquire or sell any own shares during the year and, as at 31 December 2020, the company did not hold any own shares.

2.10. TRANSACTIONS BETWEEN THE COMPANY AND ITS DIRECTORS

During 2020, no transactions were carried out between Sonae Indústria, SGPS and its Directors.

2.11. DIVIDEND POLICY

The Board of Directors has set a target to distribute to its shareholders 50% of the company's yearly profits.

The actual dividend pay-out ratio is proposed by the Board of Directors each year, taking into consideration the sustainability of the company's capital structure and the available financing sources, as well as the current investment plans.

2.12. SUBSEQUENT EVENTS

On the 28 January 2021, Sonae Indústria's Board of Directors approved a share capital increase of up to 55 million euros with a subscription price of each new share of 1.14 euros. The decision to approve the capital increase takes into consideration the need to reinforce the company's shareholders' funds in order to improve Sonae Indústria capital structure, reducing its overall cost of debt and enable the company to pursue its strategic plans within an environment of highly increased uncertainty due to the pandemic.

The offer and the admission to trading in the regulated market of the new shares to be issued are conditional to the approval and publication of the respective prospectus by the Portuguese Securities Market Commission

("CMVM") and to the disclosure of the notice for the exercise of subscription rights, in accordance to the law. The capital increase process is ongoing and is expected to be concluded in the second quarter of 2021.

3. RISK MANAGEMENT

3.1. CREDIT RISK MANAGEMENT POLICY

a) Receivables (Customers)

Sonae Indústria credit risk derives mainly from account receivables items associated with its operating activity.

The main objective of Sonae Indústria Credit Risk Management policy is to guarantee the effective collection of its operating receivables, according to the most commercially adequate reduced payment terms, while maintaining the level of debtors' impairments as low as possible.

In order to mitigate credit risk related with potential customers defaulting on payment of outstanding receivables, Group companies have:

  • established Credit Risk Committees to analyse and monitor credit risks and customers payment behaviours. These Committees are also an opportunity to foster the sharing of experiences, the alignment of procedures and practices and to ensure the enforcement of sound controlling rules and are held once each two months at Sonae Arauco and in the Laminates business and on a quarterly basis in our North American business;

  • detailed monthly reports hilighting the full picture of the customers balances and pending orders with a special focus on exposure and overdue situations;

  • implemented common proactive and preventive credit management procedures and processes, supported by IT systems;

  • established appropriate risk coverage mechanisms (for example, credit insurance, letters of credit, bank guarantees).

At Sonae Arauco and to foster the sharing of experiences, the alignment of procedures and practices and to ensure the enforcement of sound controlling rules, a "Customer's Credit Risk Management Forum" is promoted, which was held twice during 2020, engaging all Credit Control, Management Control, Internal Audit and Information Technology involved parties. Often, external stakeholders such as credit insurance companies and insurance brokers, also attend to share best practices and get to know our status and internal processes. Since April 2020, a reduction of credit insurance levels (mainly in Spain) driven by the Covid-19 pandemic crisis, led Sonae Arauco to enhance internal controls and establish even more accurate process to follow-up the credit risk. As the level of turnover has strongly recovered in the second half of the year the credit risk covered by credit insurance showed some reduction, even if not conditioning the commercial activity for the majority of our customers.

Within the context of the Covid-19 pandemic and its effects in the business background, the Group has increased the frequency of the follow-up of the customer credit situations (in terms of credit risk and collections) with formal monthly credit reports and weekly thorough checks of customers positions.

For Sonae Indústria Group, in terms of collections, it was a year where even if some delays were experienced in the first half of the year due to the lockdown government decisions, no default situation occurred due to Covid-19 and consequently the level of impairments on customers and the level of provisions is positive or without expression, respectively.

Sonae Indústria is constantly assessing the current exposure to credit risk and the possible impact of future economic forecasts, and have concluded that the impact of Covid-19 in this matter was reduced or nil and it is expected to evolve following the same trend.

b) Financial assets other than trade debtors

In addition to its operating activities and the related trade debtor balances, Group companies have other financial assets, which are mainly associated with its cash management activities and with deposits in financial institutions.

As a result of these bank movements and balances, credit risk arises from the potential counterparty default by the applicable financial institutions. This risk is, nevertheless, considered as very low due to the limited duration and amounts typically involved in bank deposits and to the credit profile of the financial institutions used by Group companies.

3.2. MARKET RISKS

a) Interest Rate Risk

Due to the significant proportion of floating rate debt and the consequent cash flows related to interest payments, the company is exposed to interest rate risk.

As a general rule, Sonae Indústria does not hedge its exposure to floating interest rates. This approach is based on the principle of the existence of a positive correlation between the interest rate levels and the "operating cash flow before net interest charges", which creates a natural hedge on the "operating cash flow after net interest charges" for Sonae Indústria.

As an exception to this general rule, Sonae Indústria may engage in certain interest rates derivatives, solely aimed at hedging existing risk exposures and only to the extent that the risks and valuation of such derivatives can be accurately assessed by the company. Sonae Indústria subsidiaries do not engage in interest rate derivatives for trading, speculative or profit making purposes.

b) Foreign Exchange Risk

As a geographically diversified Group, present in three different continents, Sonae Indústria is exposed to foreign exchange risk. Consolidated Statements of Financial Position and Profit and Loss are exposed to foreign exchange translation risk and Sonae Indústria subsidiaries are exposed to foreign exchange risk of both translation and transaction type.

As a Group rule, whenever possible and economically viable, subsidiaries aim to offset assets and liabilities denominated in the same foreign currency, thus mitigating exchange risks.

Also as a rule, in situations where relevant exchange risk arises from trade in a currency other than that of the subsidiary, exchange risk should be mitigated through the use of short term forward exchange rate agreements contracted by the subsidiary exposed to such risk. Sonae Indústria subsidiaries do not engage in forward exchange rate agreements for trading, speculative or profit making purposes.

As a policy, translation risk in connection with the conversion of the equity investments in foreign non-euro subsidiaries is not hedged, as these are considered long-term investments. Also, it is assumed that hedging transactions would not add value in the long term. Gains and losses related to the translation at different exchange rates of assets and liabilities of foreign non-euro subsidiaries are accounted as equity under the "Other Accumulated Comprehensive Income".

c) Liquidity Risk

Liquidity risk management in Sonae Indústria aims to ensure that the company can obtain, on a timely basis, the financing required to properly carry on its business activities, implement its strategy and meet its payment obligations when due, under the most favourable terms and conditions.

For this purpose, liquidity management at the Group comprises:

  • consistent financial planning and cash flow forecasting at country and consolidated levels with different time horizons (weekly, monthly, annual and business plan);

  • diversification of financing sources;

  • diversification of debt maturities issued in order to avoid excessive concentration of debt repayments in short periods of time;

  • negotiation of (committed and uncommitted) credit facilities, commercial paper programmes and other facilities with relationship banks to ensure the right balance between satisfactory liquidity and adequate commitment fees;

  • active access and management of subsidiaries cash positions and cash flows taking into account the

    Group's objectives on liquidity.

3.3. LEGAL RISKS

Sonae Indústria and its affiliates and subsidiaries are subject and actively promote the respect for applicable laws in countries and regions where they operate. Changes in these legal environments can result in changes or restrictions to the present conditions of exploitation and can lead to increased costs.

Sonae Indústria, SGPS, S.A. is and intends to continue being recognised by the way it abides by the rules and values of competition based on merit, the force of free markets and unrestricted respect for the consumer. In order to achieve that goal, measures are in place to reinforce the promotion and dissemination of the existing compliance initiatives within the Group. Such measures include training for employees in order to ensure that all parts of our organisation, across all geographies, have a deeper and more complete awareness and a more rigorous respect for their legal obligations.

3.4. OPERATIONAL RISKS

Industrial manufacturing of wood-based panels encompasses a wide range of operational and process related risks, namely fire and explosion incidents. To maintain these risks within acceptable levels operational risk management is active in the implementation of standards and selection of new systems to reduce the likelihood and consequences of an industrial incident.

For a detailed description of these risks and the initiatives undertaken to mitigate them, please refer to section 4. and to the Corporate Governance Report.

4. NON-FINANCIAL INFORMATION

This reporting of non-financial information, which refers to the year ended on 31 December 2020, has been prepared in line with the requirements established in Portuguese law by Decree-Law No 89/2017 of 28 July, which modifies the Companies Code, in matters of non financial information.

In accordance with the referred legislation, the non-financial information status is part of this Management Report.

In this context, through the non-financial information statement, the Sonae Indústria Group aims to inform on environmental, social and employee related matters, on respect for human rights, fight against corruption andbribery, gender equality and non-discrimination, as well as other information for the company that has been defined as relevant in the execution of its own business activities.

For the elaboration of this report, those matters that have a high degree of relevance in environmental, social and economic social character, and that may affect the ability of Sonae Indústria Group to create value in the short, medium and long term, have been taken into account.

In order to identify which of the commented topics are material and must be reported, we have considered a number of variables, being the main ones:

  • The relevance of such matters or indicators, both internally for the company and externally for its stakeholders and target audiences;

  • The sector of activity in which the company operates; and

  • The sensitivity of the information.

4.1. ABOUT SONAE INDÚSTRIA

4.1.1. BUSINESS

Strategic partnership with Arauco

On 31 May 2016, a strategic partnership between Sonae Indústria SGPS and Inversiones Arauco Internacional, Limitada (Arauco) was completed through "Sonae Arauco", a 50/50 joint-venture involving the European and South African wood based panels and related operations of Sonae Indústria, namely the production facilities of wood based panels, chemicals and paper impregnation. This partnership aims to build a stronger company in the

European and South African markets and reinforce Sonae Indústria's long term growth commitment in the wood based panels industry.

Fully owned businesses

In addition to the 50% shareholding in Sonae Arauco, Sonae Indústria holds full ownership of the wood based panels business in North America and of the Laminates business, together with some real estate assets in Europe.

Sonae Indústria currently operates a total of thirteen plants located in five countries on three continents, of which two plants are fully owned businesses and the remaining eleven are part of the Sonae Arauco partnership,totalling 3,063 employees15 at the end of 2020. Considering only the fully owned businesses (i.e. without Sonae Arauco contribution) turnover reached 201.8 million euros in 2020.

Under the terms of article 66 of the Portuguese Commercial Companies Code, Sonae Indústria SGPS informs that it has no branches.

Wood based panels

Wood-based panels are valuable alternatives to solid wood with some clear advantages, namely in terms of efficiency in the use of raw materials. Another particular advantage is their dimensional flexibility, which (in contrast to solid wood) allows for the production of tailor-made sizes, which can be adapted to the clients requirements. Hence, today wood-based panels are replacing solid wood in an increasing number of applications.

Compared to other construction materials such as steel and concrete, wood has significantly lower adverse environmental impacts when used as a building material. In what regards to the climate change, wood-based panels have a positive effect through improved energy efficiency, which enables homeowners to significantly reduce energy spent. Additionally, when used for construction purposes, wood-based panels function as carbon stores, thereby helping to mitigate CO2 emissions. At the end of their useful life, wood-based panels can be recycled and transformed into new products, in this way re-entering a continuous recycling process. The demand for wood and wood-based panels in the construction industry is therefore expected to steadily increase over time.

In times where extreme climate events like floods and droughts signal that climate change is much more than a theoretical scientific discussion, societies in general - and businesses in particular - are increasingly looking for ways on how to fight these new climate scenarios and realities.

Wood-based products have an important role to play in this reality. Sonae Indústria believes using more wood is a strong contribution to fight climate change, as it reduces CO2 sources and assures CO2 sinks and the storage of carbon. The reduction of CO2 sources results from the fact that wood is a material that stores energy and that it can replace other materials, in several applications, that require more energy - and emissions - in their production. Wood use can also increase CO2 sinks and storage of carbon, as the forest itself is a unique player in carbon sequestration from the atmosphere: as forests grow, they absorb more CO2 while forest products keep the carbon stored during their service life. Using wood products encourages further forest growth, and an effective market for wood products provides a financial incentive to invest in active forest management. Additionally, when wood products are reused or recycled, carbon storage is extended during another service life, avoiding CO2 emissions into the atmosphere.

4.1.2. HISTORY

SONAE was founded in 1959 at the site of its present location in Maia. Its first activity was the production of high pressure decorative laminates.

SONAE's expansion and diversification began in 1971 when it took control of Novopan, a particleboard company, located in Rebordosa, near Oporto. At the same time, the first melamine surfacing production line was installed and the components production for the furniture and interior decoration industries also started.

Throughout the 1990s and until 2007, Sonae Indústria made acquisitions and invested significantly in Greenfield projects in Brazil, Canada, South Africa, Portugal, Spain, and the United Kingdom. It is also important to highlight the spin-off, in 2005, from Sonae SGPS, S.A., which had been the shareholder until then.

Between 2008 and 2015, following the global economic and financial crisis, Sonae Indústria went through a restructuring process which led to a significant reduction in installed capacity through assets sales and plant closures, which culminated in the current perimeter, with industrial operations in Portugal, Spain, Germany, Canada and South Africa.

In May 2016, a strategic partnership between Sonae Indústria SGPS and Inversiones Arauco Internacional, Limitada (Arauco) was completed through a 50/50 joint-venture, "Sonae Arauco", involving the European and South African

15 Number of Employees: FTEs excluding Trainees and Externals.

wood based panels, chemicals and paper impregnation activities of Sonae Indústria. The creation of a new brand and corporate image for Sonae Arauco was completed in 2017.

In August 2018, Sonae Indústria launched a new brand for its laminates and compacts business, Surforma® intended for the construction, furniture and interior design industries.

In 2019, Laminate Park operations at Eiweiler site (Germany) were closed. Laminate Park was a joint venture between Sonae Arauco and Tarkett for the manufacturing and sale of MDF/HDF laminate flooring. Also in 2019, GHP GmbH, a subsidiary of Sonae Arauco, reached an agreement to sell its biomass power plant in the Horn site16, in Germany.

In 2020, the continued loss making activities of laminates and worktops at Horn site in Germany, and of furniture components Vilela plant, in Portugal, were closed.

In 2020 Tafisa Canada launched the new Melamine Face Chipboard (MFC) collection Karisma and concluded the investment in a new lacquering plant in Lac-Mégantic, to supply to the market the new LUMMIA panels, Perfect Matt and High Gloss decorative surfaces.

4.1.3. PRODUCTS

Raw and technical products

Sonae Indústria "raw and technical products" are comprised of:

  • Particleboard (PB), a very versatile product, suitable for all general uses in furniture and construction industries;

  • Medium density fibreboard (MDF), an excellent substitute for solid wood and ideal for furniture, flooring and the building industry;

  • Oriented strand board (OSB) a product which is highly resistant and suitable for structural and non-structural applications in the construction industry.

More than 50% of the "raw board" production is then transformed into value added products such as melamine faced board (MFC), accoustic panels and others. These are used in a great variety of applications, such as home and office furniture, kitchen and bath cabinets shelving, doors, wall paneling, packaging and interior decoration.

Laminates and Compacts

Thin laminates ensure high quality application, where design, quality and durability come together. They are versatile materials and have great surface features, such as abrasion resistance. Besides, they are the ideal solution for any successful design. Laminates create unique bold environments, while combining quality, versatility and exclusivity.

Compact solutions can withstand high impacts, thus ensuring reliability and safety. They can be used in the harshest of environments and unstable conditions, such as high wear and tear or humidity levels. Compacts are the perfect ally, thanks to their structural stability and high resistance.

16 The economic interest of Horn laminates and worktops plant and real estate belongs to Sonae Indústria (according to the agreement between Sonae Indústria and Arauco) despite the fact that this asset is held by GHP GmbH.

Sonae Arauco - The new Core&Technical brand and Ecoboard Concept

In Sonae Arauco, 2020 was marked by the launch of a new brand for the raw products. The new Core&Technical brand intends to give a more broaden view of the technical products offer, according to the intended application: from Particleboard (PB), a versatile product range that covers all major international standards and formaldehyde emission levels; MDF, made with the best fibers selection; to OSB, a product with the highest mechanical performance in the market.

Core&Technical products, in specific PB and MDF, can also count with additional properties, such as fire retardant (Fire X) and moisture resistance (Hydro X), complying with the strictest environment requirements in what regards to formaldehyde emissions. If the intended application is for lacquering or milling, then MDF Superlac and Novolac respectively could be the perfect alternative, as they offer great mechanical performance, ensuring the best application result.

In an era of a sustainability concerns, Sonae Arauco promoted Ecoboard concept. The first and single company in the market to present a formaldehyde free glued range of products in PB, MDF and OSB. A comprehensive range, available in PB, MDF and OSB. Reduced formaldehyde contributes to improved air quality, sustainability and environment respect.

DECORATIVE PRODUCTS

DECORATIVE PRODUCTS IN NORTH AMERICA

In 2020, Tafisa Canada product development and commercialization focus was on LUMMIA, a new lacquered panel offering a Perfect Matt and High Gloss decorative surface. This is the first plant in North America to offer this technology to the market.

In early 2020, the Tafisa Canada started the construction of its new plant in Lac-Mégantic dedicated to the production of LUMMIA panels. In parallel, Tafisa Canada finalized its product line to include 19 inspirational décors that fit well with this technology. The LUMMIA line will be formally launched with initial product sales in early 2021.

Tafisa Canada also launched this year a new MFC (Melamine Faced Chipboard) collection called Karisma, as part of the its Prélude series. This new collection features a new lineal rift-cut texture along with six oak and three concrete décors. The décors are truly contemporary and lifelike. This collection was launched to the market in 4Q20, with strong reception from customers, architects and designers. Karisma is available in both MFC panels and SURFORMA® HPL (High Pressure Laminates) sheets.

To complement the MFC panels and Surforma HPL sheets, Tafisa Canada developed an extensive complementary products program to support LUMMIA and Karisma. This program includes edge banding, 3 DL film, door and accessory mouldings. New processes and technology were deployed thus enabling excellent complementary product matches in terms of look and texture.

The Covid-19 pandemic had a major impact on how new products could be launched. Thus, a series of short, punchy videos were produced to help launch the new products to customers, architects, designers and consumers. These videos are housed on the Tafisa Canada website conveniently ready for the customer to view. Tafisa Canada deployed a proactive social media strategy to draw attention to these digital developments.

In 2020 Tafisa Canada also made a significant investment in rebranding its logo, product imagery and development of effective digital communication and marketing tools. Its website,www.tafisa.ca,was completely revamped and is now more user-friendly.

Following these launches in 2020, Tafisa Canada continues to consolidate its position as a design leader, with a complete line of decorative surfaces both in TFL (melamine faced chipboard) and Surforma® HPL available in more than 120 standard colour and texture combinations between the EIR

Sommet Series® and the renowned Prelude Series®. And, now the new and highly anticipated LUMMIA line of Perfect Matt and High Gloss panels.

More information at www.tafisa.ca

Innovus - The perfect match with life

Innovus is the brand of decorative products that offers versatile solutions, turning ideas into innovative projects. Totally renewed in 2019, the new Innovus collection proposes a set of contemporary decors and brand new finishes with distinctive colours, appealing patterns and attractive textures. The new collection was inspired by our everyday lives, the places we live and work in and that we visit, which become part of who we are. When it comes to different needs, Innovus has the solution: a perfect match for different projects and creations. In 2020 the

Innovus Collection has spread in the market, despite the pandemic situation.

Besides its wide offer of wood, fantasies and unicolours decors, Innovus also includes a comprehensive range of special products, such as:

Innovus Coloured MDF, a product that combines the strength and technical properties of the Medium Density Fibreboard (MDF) with the visual appeal of a versatile range of colours. Innovus Coloured MDF can also be combined with the trendy Innovus melamine decors, which results in a unique and truly distinctive decorative solution.

Innovus Essence, a product range using double-sided embossed in-register (EIR) technology to obtain decorative panels with the look and feel of real wood in a melamine surfaced panel. Innovus Essence, with its two structures - Rustic and Authentic - and nine wood shades was developed with a variety of applications in mind such as doors, living room furniture and wall panelling, in applications that really value the natural effect of wood.

Innovus Magnetic, a range of laminates that can be used for sticking magnets or to write on with markers or chalk. This functional and decorative solution is ideal for partitions and wall coverings for shops, offices, schools and nurseries and even at home.

Innovus Lamifloor, a range of laminates with very high abrasion resistance, ideal for access flooring application.

Innovus Metallic, a range of laminates with real metal as a decorative element, that can be used for interior fittings.

As a demonstration that the Innovus collection is always up to date with market trends, a new marketing material was produced for office remodeling projects - The New Normal with Innovus: Solutions for office refurbishments. At a time when the home office increasingly appears as a new way of working, Innovus presents itself as the ideal solution for remodeling domestic and business offices, since it has modern, safe decorative solutions, prepared for multiple applications and adapted to any context. During 2021, several flyers of this series will be released, focusing several spaces of home.

In 2020 we took a further step and Innovus has now certified its anti-bacterial property (bacterial efficacy verified by tests performed in external laboratories). Innovus prevents the development and spread of bacteria (such as Staphylococus Aureus or E. Coli) and is particularly useful in critical surfaces like table tops, kitchen worktops, reception counters and many other situations in particular in public areas. The Innovus Collection, certified for its antibacterial properties, has more than 200 decors and 5 new finishes and asserts itself as an increasingly complete and comprehensive solution in terms of applications.

2020 also marks the year that Sonae Arauco was present at Euroshop, one of the most relevant events for Retail, that took place in Dusseldorf (Germany) on February. In its own stand Sonae Arauco presented the new Innovus Coloured MDF Deep Black, a deeper and more solid black when compared to the existent one.

During the year, and despite of the Covid-19 pandemic limitations, Sonae Arauco was present in some other events, such as Architect at Work Germany and Denmark and in Face to Face in Spain.

The comunication tone was also adapted due to the Covid-19 pandemic. During the first lockdown, in March and April, the social media and email marketing plan were revised to go along with the current context.

More information atwww.sonaearauco.com

SURFORMA® - LAMINATES & COMPACTS

Surforma® Laminates and Compacts are an excellent material for indoor and outdoor surfaces. Laminates can be used either applied to suitable substrates and compacts as self-supporting compact sheets. Surforma® products meet the stringent requirements forhygiene, fire and humidity resistance and mechanical properties and are available in a variety of colors, patterns and surface textures, providing extensive options for architects and designers. Their surfaces are hard and resistant to wear, impact and scratching, making them long lasting, easy to clean and largely resistant to vandalism.

2020 the year of consolidation of Surforma brand. The Surforma collection proposes a set of contemporary decors and new finishes with distinctive colours, appealing patterns and attractive textures.

This collections is a complete and innovative proposals for decorative laminates and offers versatile solutions, enhancing the high features of laminates and bringing to customers the possibility of find the right colour, the ideal finish and the perfect pattern, to create innovative and successful projects.

Surforma collection has the perfect finish for each décor:

ULTRA SMOOTH is an elegant and warm to the touch finish with anti-fingerprint proprieties.

STUCCO is a texture with a concrete, ceramic touch. Its development was inspired by industrial and urban moods and its highly tactile surface.

COSMOS is an exclusive finish that represents the next level in stone and cement structures.

SPIRIT is an expressive finish full of movement and contrasts, which provides the true spirit of real wood, resulting in a top quality product.

FLOW is a unique finish with gentle cross lines, creating subtle waves that give the surface a very natural and spontaneous look.

FUSION is a wood textured surface that provides a warm natural touch, by recreating the look of handcrafted wood.

More information at www.surforma.com

4.1.4. STRATEGY

The way in which Sonae Indústria views itself as a company, acts and interacts with others and with the surroundings represents a corporate culture that promotes continuous improvement - always challenging ourselves to perform better - and is sustained by the company's Mission, Vision and Values.

VISION:

To be recognised as a sustainable world leader in the wood-based panels industry, consistently providing our customers with the best value products, upholding the highest standards of service and promoting responsible business and environmental practices.

MISSION:

Our aim is to deliver the full potential of wood-based panels for the benefit of our customers, shareholders, employees, and society.

We base our operations on sound corporate governance, continuously improving the efficiency of our operations, actively promoting innovation and providing a motivated, safe and fair working environment.

VALUES & PRINCIPLES

Sonae Indústria's values represent the foundation stone on which we build our business and they serve to guide our behaviour. Our value system is focused on four main principles: Ambitious, Innovative, Authentic and Responsible, which can then be sub-divided in the values and capabilities illustrated in the picture below.

STRATEGIC GUIDELINES:

  • 1. North America:

    • Continue to improve the product offering, product mix and customer service levels.

    • Strengthen our decorative solutions with the launch of new melamine colors and finishings.

    • Leverage on the investment in a new lacquering plant to introduce new surface finishings and explore investments on new decorative products, including the new LUMMIA panels, Perfect Matt and High Gloss decorative surfaces.

    • Enhance supplier partnerships for complementary products to our decorative collections, including matching HPL (High Pressure Laminates) supplied from our Laminates business in Portugal.

    • Investment in production improvements.

    • Strengthen and increase specification efforts.

      2. Laminates:

    • Improve profitability by looking for growth opportunities with existing and new customers and with new and innovative products.

    • Enhance the partnerships with Tafisa Canada and Sonae Arauco for the provision of matching

      Laminates.

    • Develop ongoing initiatives to materially reduce Laminates manufacturing costs.

    • Develop partnerships to help the growing of Laminates business.

  • 3. Support Sonae Arauco in achieving its strategic objectives by building a more competitive and sustainable business, investing in productivity and flexibility; improving its sales mix, namely through its decorative solutions, and improving product quality and service level offered to our customers.

  • 4. Seek a more balanced and flexible capital structure in order to finance the future growth of the business.

4.1.5. 2020 KEY CORPORATE EVENTS

31 March 2020

FY19 consolidated results announced

30 April 2020

Announcement on resolutions taken by the Shareholder's Annual General Meeting

6 May 2020

1Q20 consolidated results announced

6 May 2020

Announcement on decision to cease disclosure of quarterly financial information

30 July 2020

1H20 consolidated results announced

31 July 2020

Notification received from Efanor Investimentos SGPS, SA regarding the Preliminary Announcement of the Public, General and Voluntary Tender Offer over Sonae Indústria shares

27 August 2020

Report of the Board of Directors on the opportunity and conditions of the Tender Offer

14 September 2020

Release of Sonae Indústria Plan for Gender Equality 2021

28 October 2020

Results of Efanor Investimentos SGPS, SA Tender Offer over Sonae Indústria shares

4.1.6. AWARDS AND INNOVATIVE PROJECTS

Tafisa Canada - Safety Achievement Award

In 2020 the Composite Panel Association (CPA) honored Tafisa Canada with the Safety Achievement Award for operating from 2017 to 2019 at more than 50% below the average of Recordable Incident Rate (RIR) for Class II.

Every Spring, the Composite Panel Association (CPA), which represents the North American composite panel and decorative surfacing industries, recognizes participating plants that have exemplary safety records including acknowledgment for long-term and annual safety improvement and safety achievement awards.

Awards are given to plants with low worker-hours (Class I), and high worker hours (Class II). Historically, the number of worker-hours has been shown to have an impact on incident rate so two different bases are used. In 2020, plants in Class I reported employee hours below 290,000 and Class II plants reported hours higher than 290,000.

Normally the award would have been presented at the 2020 CPA Spring Meeting, but due to the Covid-19 pandemic the meeting was held virtually.

SONAE ARAUCO - bronze award in internal communication category

Sonae Arauco second edition of Wood Made Stories magazine has been awarded bronze in the Internal Communication category at the Prémios Lusófonos da Criatividade (Portuguese-speaking Awards for creativity).

In this project Sonae Arauco was looking for a publication that would contribute to bring employees closer, regardless of geographic location, and foster the sense of belonging to an international group that has in the People its top priority, simultaneously reinforcing the positioning of the brand, in a differentiating support.

In the second edition, while maintaining the high quality standards in terms of content and the aesthetics of the publication, the recent changes in Sonae Arauco's strategy, which is going to focus even more on sustainability, deserved a special highlight.

SONAE ARAUCO - DOCOMOMO Award

The Valladolid College of Architects (COAVA) has given the DOCOMOMO plaque to the building of Sonae Arauco's industrial unit in Valladolid as a recognition for its patrimonial value. The building was designed in the 1960's by the architects Antonio Vallejo and Santiago de la Fuente.

The Fundación para la Documentación y Conservación de la Arqui tectura y el Urbanismo del Movimiento Moderno (DOCOMOMO) - which is dedicated to the study of modern architecture in the twentieth century - was the entity chosen to place the plaque on Sonae Arauco's building. As a result of this distinction, the building now belongs to the heritage of the Modern Movement.

Smart Health 4 All project

Sonae Indústria has been developing an intense research and development activity with the aim of improving people's conditions and quality of life.

In this sense, through Surforma, the company will create furniture solutions with the objective of improving sleep quality, through the use of products with sensorization properties and monitoring of the environment of the space where it is integrated.

The company is part of the Smart Health 4 All project mobilized by Health Cluster Portugal and led by Siemens, which brings together 24 other institutions and aims to create innovative medical devices to improve the lives of people affected by chronic diseases and others related to the aging of the population.

The Smart Health 4 All project is funded by Portugal 2020 and will last for three years starting in November 2020.

DecoChrom Project

The DecoChrom Project is a 48 month project that has been initiated in January 2018. This project elevates printed graphics products to the age of interactivity, and empowers the creative industries with the tools and innovative advanced material sets to design and build aesthetically pleasing practical human interfaces to smart consumer goods and environments. The DecoChrom consortium, of which Surforma, S.A. is a member, develops printed electrochromics (EC) as the mass producible, print industry compatible, ultralow power interactive graphics solution for ambient intelligence. This project brings together a strong interdisciplinary consortium of 15 industry and research balanced partners, with state-of-the-art backgrounds in design, chemistry, printing, coatings and laminates, electronics system integration, and complete electrochromic solutions. This project was funded by the

European Union's Horizon 2020 research and innovation programme.

After three years of the execution of the project, the team is working on the scale up of fully integrated electrochromic devices in HPL (High Pressure Laminates) to produce industrial proof of concepts of furniture and a gym floor. The project was presented at the Interzum 2019 exhibition in Cologne, Germany.

More information atwww.decochrom.com

EU projects

Surforma, S.A. has been actively involved in the participation and submission of several European H2020 projects, mostly in the printing electronics and structural electronics, such as ULTIMATE and PVISEZ projects, submitted in 2020.

The Zero Defects 4.0 project

The Zero Defects 4.0 project started in January 2020. This project will have a direct impact on reducing the waste of raw materials and the energy consumption associated with the processes. Currently, the non-conformities of wood-based panels, solutions for application in kitchens, furniture, floors and interior decoration, lead to the waste of raw materials for the production of sub-optimal panels and constraints in the supply to increasingly demanding industrial customers.

The Zero Defects 4.0 project consortium, of which Sonae Arauco is a member, combines six entitities with backgrounds in production, industry, research and data analysis, information technology and project management. The consortium estimates that this project allows, in an initial phase of the project's start-up, a 10% reduction in quality non-conformities with gradual increase, by automatic learning of the implemented models, until the final view of zero defects. In addition, the project will result in productivity gains, leveraged by greater availability of the production line, resulting from the improvements generated by the data in the decision processes.

As the validation is successful, now being implemented in the Sonae Arauco industrial unit in Oliveira do Hospital, the commercialization and implementation are scheduled for 2021.

ACTIVAS Project - Spaces built for an active, safe and healthy life

ACTIVAS is a consortium project, of which Sonae Arauco is a member, composed of 20 Portuguese entities. This project, approved in 2020, intends to investigate, develop and demonstrate in real environment the use of a set of solutions for active and healthy life that together promote the availability to population of smart products and services to support the proximity care network.

Project ACTIVAS is divided into 6 Research and Development (R&D) strategic work lines to create new Products, Processes or Services (PPS), and Sonae Arauco is involved in PPS3.

The main objective of PPS3 is to develop solutions to create or rehabilitate living spaces or environments by the architectural design of the space focused on the accommodation of users and, at the same time, facilitate the transition or adaptation of this same space over time, in order to transform, shape and adjust the space carefully to the specific or evolving needs of users.

In this sense, PPS3 intends to find solutions for sensoring materials and surfaces, to allow the development of structural solutions and responsive furniture using materials that allow these transformations and adaptations over time.

This purpose is materialized in the study of different solutions for sensoring and functionalization of both, materials and furniture surfaces - focusing specifically on the new material 3DF of Sonae Arauco - and in the wood-based structures, in the context of modular constructive systems using materials included in Sonae Arauco AGEPAN system.

4.1.7. IMPROVING OUR WORK (IOW)

The IOW (Improving our Work) initiative is a pillar of Sonae companies culture and way of working. It is a powerful philosophy and methodology in search of productivity and quality, everyday, everywhere, by everyone, creating sustainable value for Sonae's stakeholders.

The IOW Model is a reference of good management practices that, when fully adopted by any business, accelerates the achievement of sustainable superior results.

In 2020 the IOW model has been revised and improved to be more fexible and more adapted to the business specific needs. The improved version of the IOW model is structured around 5 pillars:

  • Outstanding Results: IOW must above all be an accelerator of Results;

  • Strategic Deployment and Execution: to ensure total alignment between the initiatives and strategic objectives defined by the business and the work performed by all teams, on a daily basis, through a method of deployment, follow-up and review;

  • Daily Management: Daily Management is the axis through which teams measure and improve their performance every day and deliver results aligned with their mission and business strategy;

  • Operational Excellence: to promote the optimization of local and transversal processes that deliver quality products and services (Q), with excellent service levels (D), efficiently and profitably (C), through motivated (M) and happy employees;

  • Sustain & Share: to ensure the sharing of best practices that can be adopted by other teams, to assess the maturity of good management practice use, to help the business to sustain and strengthen its Continuous Improvement Culture.

Aware that our people are at the center of our success, a major focus has always been given to the training of the teams to provide them with the appropriate mindset, and the best continuous improvement tools. In 2020 the restrictions due to the pandemic situation has challenged our trainings processes.

The IOW Center of Expertise has quickly adapted to this situation to keep-up assuring the IOW trainings, through the creation of remote trainings and several IOW webinars sessions. The new training formats are a great success and the catalogue of training is being constantly adjusted to the business needs.

Our teams keep embracing the IOW way, continuously improving, in order to deliver outstanding Customer satisfaction and results.

4.2. SOCIAL AND EMPLOYEE-RELATED MATTERS

People

At Sonae Indústria, we believe that people are the key resource to drive change towards the future. We care for the safety and well-being of our employees and we strive to support their personal and professional development so that they fulfil their own career aspirations. We have expressed our commitment towards our people in the corporate values of Cooperation, Non-discrimination and Health and Safety.

Growing our business through acquisitions challenged us to continually respond to the different working cultures of the companies acquired. In many cases, this has also involved a need to respond to different geographical cultures, as acquisitions and greenfield projects take place in different parts of the world. While the integration of new people and cultures into the Sonae Indústria family provided valuable insight into different approaches to people management and invited the exchange of knowledge and best practices, it also challenged the companyto create a common framework for people management within the organization. Operating in a globalized and interconnected economy, we are in constant competition for skilled and experienced people. We realise that in today's business environment, careful attention to human resources management is a prerequisite for attracting and retaining the people we require to succeed.

Health and safety

The production of wood-based panels requires physical abilities, permanent attention and good health as employees work with heavy equipment and are regularly exposed to some levels of noise, sawdust and chemical emission during production. We therefore work to implement measures to minimize these effects in our people, as described in further detail below.

Unfortunately, the risk of accidents in our industry is real. Providing a healthy and safe environment for our people is an absolute priority and we never compromise in this area. Managing health and safety issues is integrated into our daily work, and we take a proactive and preventive approach. We maintain the commitment to do more than just legal compliance.

The safety and well-being of our employees during the performance of their daily tasks is of outmost importance in order to prevent any type of accident that can happen. Thus, this vision has been transformed into a target that can be only met with the contribution of all involved: achieve zero injuries and zero serious process related accidents.

Most common risks at Sonae Indústria

Every employee has the responsibility to guarantee the health and safety of their workplace, independently of their job location and job grade. For that to happen, it is necessary to understand the particularities of their work tasks and the respective environment in which they are carried out. If a worker has the ability to identify the potential hazards of working on a specific task with a specific equipment, there's a less probability/risk of some incident or accident to occur.

Sonae Indústria industrial activity is characterized by a number of situations, activities and places that constitute a threat to all of its employees and other contractors working daily in the sites.

This diverse set of operations, whether they are carried out by contractors or internal employees, originate multiple safety risks for all people involved. Each risk is analyzed through a risk assessment analysis that takes in consideration its impact, in terms of seriousness and probability of happening. Finally, and to guarantee that each risk is mitigated to its maximum, a set of rules, programs and guidelines is therefore implemented with the contribution of all people involved.

As previously referred, employees at Sonae Indústria may be exposed to various risks in the industrial environment, such as:

Trampling situations

At Sonae Indústria plants there are several daily movements of large industrial vehicles carrying raw materials, as well as heavy trucks that transport Sonae Indústria's products. This movement may cause potential life threatening situations since, in some cases, the drivers of these vehicles may have reduced visibility therefore putting in danger someone that is not on the identified secure paths.

Dust explosion

A dust explosion is the rapid combustion of fine particles suspended in the air (dust), often, but not always, in an enclosed location. Dust explosions can occur where the concentration of dust in air falls within the explosive limits and a source of ignition of the required energy for that dust cloud is present. A dust explosion can be prevented if one or preferably both of these conditions are avoided. Research shows that the woodworking industry accounts for 40% of all such events, being dust the primary source of fuel.

Industrial environment health risks

Another type of risk in an industrial environment is related with health. Sonae Indústria employees are exposed to noise and dust and in some cases, formaldehyde. According to the workplace risk analysis, personal protective equipment (PPE) is mandatory in some areas of the plants.

Hot work

Hot work refers to any temporary or permanent operation involving open flames or the production of heat and/or sparks with the capacity to ignite any combustible materials within the work area. At Sonae Indústria, there are a wide variety of hot works in the industrial plants, such as welding, grinding, oxyacetylene cutting and others. Recent studies carried out by leading insurance companies reported hot work related incidents as the third-leading cause of property damage events. Sonae Indústria uses the Hot Work Permit System as a primary measure to prevent fires due to non-routine open flame and high temperature work.

Hazardous material exposure

When visiting or working in a Sonae Indústria plant, visitors and employees may be exposed to a wide variety of hazardous materials, such as acids.

For everyone safety it is paramount that anyone within Sonae Indústria premises to follow basic rules and adopt behaviours to prevent risk situations, namely:

  • Always wear the minimum mandatory Personal Protective Equipment, PPE (e.g. safety footwear, safety glasses, helmet/ cap and high visibility vest). If required by the site, or in some specific areas, other PPE may be mandatory;

  • Always use the designated walking paths;

  • Always be aware and respect the safety signs displayed;

  • Do not enter the wood yard, warehouses or loading areas except through the designated entry points and only after complying with existing access protocols and when carrying a beeper;

  • Make sure they are aware of all the risks in the areas of work/visit;

  • When in doubt, always ask the local safety officer about emergency situations and other relevant aspects, such as meeting points or emergency exits.

Covid-19 pandemic exposure

A new worldwide risk has become reality in 2020, the Covid-19 has changed the way we think of health and safety in our work environments. The proximity of people combined with sanitary habits have become one of the great challenges of 2020.

TAFISA CANADA

Considering this risk several work environments, behaviours and measures have been implemented in Tafisa Canada after a risk assessement to minimize the risks of contamination for our employees and contractors and follow new health and safety regulations, namely:

  • Social distancing in work and rest areas;

  • Addition of physical barriers between work spaces (plexiglass);

  • Addition of cleaning routines at work stations by the employees before every shift;

  • Increase of personal hygiene measures when arriving at the plant and during work (mandatory hand washing and sanitizing);

  • A strict protocole to be observed for people with symptoms or in close contact with an infected individual;

  • Mandatory wear of procedural masks when social distancing is not possible;

  • Minimization of the number of people in a same space;

  • Addition of air purificators to increase ventilation;

  • Implementation of telework for the majority of office workers;

  • Communication to employees concerning the Covid-19 situation by using the IoW group meetings and virtual Employee Town Hall meetings conducted by the Chief Operating Officer;

  • Security Alert (awareness and information sent to employees).

The implementation of such measures required a lot of time and several interventions on the field from managers to ensure the respect of the measures.

SONAE ARAUCO

Sonae Arauco implemented different actions to ensure the safety of employees and operations. A Crisis Management Team was formed to support employees and operations in the different countries where Sonae Arauco is present.

Source: Sonae Arauco.

The main actions implemented are summarized below:

  • Screening of all cases in the company done in coordination with the Crisis Management Team to ensure uniform criteria and allow for actions to be taken in order to maintain industrial production;

  • Communication and awareness initiatives for Sonae Arauco employees;

  • For functions possible to be performed remotely, "home office" has been adopted. Equipment and technical support has been provided and awareness communications about cybersecurity and remote work security best practices have been reinforced. A dedicated internal digital area has been created for this purpose;

  • Business continuity measures have been put in place, including contingency plans for the supply of key materials and services and people backups for critical functions;

  • Communications to key stakeholders have been issued, including customers and suppliers;

  • Several rules and procedures have been implemented and equipment made available at the plants and offices to mitigate the infection risk, including:

    • o Social distance and mandatory use of face masks;

    • o Layout's adjustments to ensure distancing;

    • o Definition of "clean teams" and offset work schedules;

    • o Development of internal protocols to regulate different activities during pandemic situation;

    • o Cleaning and desinfection (including the use on surfaces of a long-lasting antiviral technology);

    • o Mitigation of airborne transmission in the offices (ventilation of working spaces, air-conditioning systems without air recirculation);

    • o Access conditions to plants and offices to internal and external employees (screening of potential cases of infection and body temperature control);

    • o Rules and recommendations on travels, trainings and meetings;

    • o Use of Covid-19 antigen rapid tests.

The recommendations of the World Health Organization and the local health organisations have been adopted in all plants and offices.

SURFORMA

In Surforma several actions were implemented to create health and safety conditions in order to minimize the risk of contamination at workplaces, namely:

  • Reorganization and implementation of guidelines, standards and best practices defined by the competent health authorities;

  • Definition of an isolation area for potential cases of infected employees and creation of a contingency plan;

  • Implementation of health and safety measures at work, such as physical distance, reinforcement of hygiene measures and daily cleaning of workspaces and the mandatory use of individual protective equipments;

  • Reinforcement of training and awareness for the employees about the procedures, rules and measures of the contingency plan.

How to deal with people and social matters

Employment

Sonae Indústria focus on constantly fostering good relationships with its employees, promoting open communication with all our people as well as training and education opportunities. We also prioritise career development and offer equal opportunities, despite the challenges on gender diversity due to the nature of our industry. Additionally, we support freedom of association wherever we operate.

Measures to attract and retain Talent

In Sonae Indústria, people are considered a key element to ensure the success of the company and to leverage our strategic projects. Hence we strive to attract qualified professionals that have the required skills to meet present and future challenges, and invest in continuous training and development initiatives to promote the retention and development of our people.

The Human Resources management for Sonae Indústria (except for Tafisa Canada) is handled by Sonae Arauco Human Resources specialized team.

At Tafisa Canada, in 2020, with the Covid-19 pandemic, we had to reduce some of our hiring initiatives.

Despite the situation, Tafisa Canada continued to enhance its appeal as an employer and foster the retention of the talent base by implementing initiatives such as:

  • Increasing the communication to our employees concerning the Covid-19 situation by using the IoW team meetings and virtual Employee Town Hall meetings conducted by the Chief Operating Officer;

  • Building relationships with universities by hiring trainees;

  • Promoting a progressive retirement program;

  • Post-graduation employment program;

  • Sponsoring community activities.

Through Sonae Arauco an investment was made in the implementation of a new platform to support HR Processes throughout all geographies, ensuring alignment in Talent Management initiatives. During 2020, we continued to ensure the roll-out of the strategic project of "4People", implementing the training module and using this platform as a means to leverage and disseminate key knowledge within the organization. This initiative was particularly critical given Covid-19 pandemic outbreak, allowing us to continue to foster our employee's development through eLearning offering leveraged in this Human Resources Platform.

Furthermore, aligned with the its mission and strategy and to ensure a higher focus on Competences Development, Sonae Arauco redesigned the Competences Model to better address and support employees individual development needs. In 2020 the first stage of this project addressed soft skills, proposing a new framework and assessment scale, that was implemented for the 2019 Performance Appraisal and Competences Development (PACD) for a pilot group to assess its applicability and gather feedback regarding the model. The 2020 PACD will consolidate this model and expect to roll-out for the remaining employees this competences framework throughout 2021.

Collective Agreements

In all geographies we are an active part of the negotiation process with the works councils, participating in regular meetings with the purpose of reaching sustainable agreements for all parties.

Additional details regarding each country are presented below:

  • Canada - Collective Agreement in place for the period 2016-2021. We had negotiations of the new union context for the new factory (Lacquered panels);

  • Spain - Collective Agreement in place for the period 2016-2020. This Collective Agreement includes a complete chapter covering Health & Safety topics, including the relationship between the company and the employees' representatives on this area;

  • Portugal - regular meetings with trade unions and participation in the negotiations for collective agreements;

  • Germany - there are Works Councils for each company, a General Works Council and a Group Company Works Council. Working conditions are regulated and negotiated on the basis of various collective agreements and company agreements. Several agreements have been negotiated or discussed during 2020, namely short time work, working time regulations, introduction and handling of techonoly tools and equipments, Wearing and handling of masks due to Covid-19;

  • South Africa - regular meetings with trade unions.

As evidenced previously, the Collective Agreements agreed with the Works Councils, usually include a complete chapter for Health & Safety topics.

Zero accidents is our top priority and main focus, and for that we:

  • have clear and strict rules regarding the use of equipment's in the plants;

  • have machine regulations for our equipments;

  • provide continuous training to our employees to develop them and create awareness towards safety behaviours.

Company rules on work breaks and resting periods

Sonae Indústria has collective agreements in place in the countries in which is present, covering the large majority of its employees. For those employees not covered by such agreements, the company takes into account the specific legislation of the countries where it is present and the labour market conditions.

In the existing collective agreements of Sonae Indústria companies, it is also considered important considerations to ensure sound Health & Safety practices, namely in what concerns breaks and mandatory resting periods, following local legislation and sometimes going beyond.

European Forum - Sonae Arauco

Sonae Arauco and its European affiliates believe that effective communication with all employees is essential for correct business performance. As such, the company permanently seeks ways to improve the efficacy of information and the exchange of opinions with all its employees.

With this objective in mind, an European Forum was created to ensure that Sonae Arauco employees in the region are kept informed about the major developments and have the opportunity to discuss all common affairs that could affect their interests.

The members of the forum are Sonae Arauco CCDO (Chief Corporate Development Officer), the national HR managers of each country and representatives of all workers of the European subsidiaries (at the moment only workers' representatives from Germany and Spain were designated). The forum is planned to occur once per year, however, in 2020 due to pandemic constraints it was not possible to organise.

Non-discrimination

Sonae Indústria adopted and develops a policy of non-discrimination. We are an equal opportunities employer and we do not accept any form of discrimination in the workplace be it related to age, gender, race, social background, religion, sexual orientation, or physical ability. Our career development and reward systems are based on merit.

The set of standards included in Sonae Indústria Code of Conduct and in Sonae Arauco Code of Ethics reinforce the implementation of these values.

The prohibition of arbitrary discrimination demeanours includes recruitment and hiring procedures, as well as employment terms and conditions, such as tasks to be carried out, training, wages, benefits, promotion, transfers, discipline and treatment. In addition, moral and sexual harassment conducts are especially rejected.

Different initiatives and procedures on this regard have been followed, some of them as a result of legal requirements in the different countries. For example, Sonae Indústria in Portugal and Sonae Arauco in Spain created, respectively, a Plan for Gender Equality17 and an Equal Opportunities Plan (with measures foreseen in 2020 and 2021), following as applicable the Portuguese and Spanish law. Other legal requirements are also

17 The Plan for Gender Equality is available in the company website, through the following link:https://www.sonaeindustria.com/en/sonae-industria/sustainability/equality-plans.

observed such as, in Portugal, the code of good conduct for anti-harassment prevention and a law entered in force (during 2019) regarding the equal remuneration between men and women on equal work functions.

In South Africa, an Employment Equity policy has been defined to regulate the conditions under which Sonae Arauco South Africa staff will be affected by Employment Equity practices. This policy is designed to comply with Employment Equity legislation of South Africa (The Employment Equity Act 55 of 1998 (EEA)) and its Regulations and Code of Conduct. This policy aims to: implement affirmative action measures; implement education, training and development strategies to provide and ensure equal opportunity to all employees in the workplace; develop a culture and practices that will prevent and readdress inequalities, imbalances, prejudices and injustice in the workplace; protect employees against unfair discrimination and harassment; make reasonable accommodation in the workplace for family responsibility and people with disability.

In Germany it is also regulated in a special law as well as in tariff contracts. During the onboarding there is a mandatory information to the employees about that.

General Equal Treatment Act (AGG) is a German federal law, which is also known colloquially as the Anti-Discrimination Act, came into force on August 18, 2006 and serves to implement EU anti-discrimination directives. The aim of the law is to prevent or eliminate discrimination on the grounds of race or ethnic origin, gender, religion or belief, disability, age or sexual identity. The main focus of the General Equal Treatment Act is, in accordance with the requirements of the EU Directives, protection against discrimination in employment and occupation.

In addition to a prohibition of discrimination under labour law and its exceptions, the measures and obligations of the employer to protect against discrimination in the workplace are also regulated here. The rights of employees, such as the right to complain and the right to refuse performance, and their claims in the event of violations of the prohibition of discrimination (claims for compensation and damages) are also explained.

During the last three years no communications have been received regarding discriminatory behaviours between employees.

Operational changes

The different organisational changes and significant events are officially communicated to the organization and its employees in compliance with the various legal provisions applicable in the countries and with the labour regulations. These notifications are mostly made via employee representatives, intranet, notices to interested parties or unions.

Training and education

Sonae Indústria recognizes the importance of people in the organization, and values the dissemination of knowledge within the company, as such, training and development are a key factor and priority in the company. Employees are expected to take advantage of all opportunities that are presented to them to achieve both personal and professional development and Sonae Indústria aims to provide the training and support necessary to achieve their full potential, by maximising their skills and motivation.

Tafisa Canada registered less training than usual due to the Covid-19 context, but revised all the job training programs in view of the TWI concept (Training Within Industry) with an internal trainer for the new employees. The company continued the training of key employees in technical and managerial fields. French language courses for foreign employees and English courses for non-union members continued to be provided. Tafisa Canada continued to support degree completion from secondary (high school) to Master's level programs.

Tafisa Canada continued to hire several interns and trainees (from universities and technical schools) and students (during the summer period) in order to provide them enriching work experiences and to prepare the company's potential future workforce.

Sonae Arauco has set up in 2018 a knowledge academy, with specific programmes to foster culture development and business knowledge.

SAKA

In 2018, Sonae Arauco has launched its academy of knowledge: SAKA.

This initiative was implemented to address the following challenges:

  • Eventual exit of skilled employees with deep business and specific operational knowledge;

  • Risk of losing additional key knowledge holders due to retirement in coming years;

  • In certain cases, knowledge mostly resides in key peoples' minds instead of a knowledge repository;

  • Difficulty in passing business specific knowledge to younger people because of lack of formal transfer programs.

SAKA aims to identify, collect and standardize Sonae Arauco core and critical knowledge, in order to retain and transmit it.

SAKA is structured around six pillars of knowledge:

Source: Sonae Arauco.

In each pillar, Sonae Arauco is collecting information and delivering training materials to increase the knowledge of its people.

Sonae Arauco expectation is that, once implemented, SAKA will directly impact on critical areas related with the company's knowledge.

In a near future, SAKA will not only be the most important repository of knowledge but will also perform a key role both on the company's training programs and on people's development.

In 2020, several online training courses continued to be implemented and made available in the "4 People" system.

Furthermore, given the critical dimension of Health & Safety, that was even more imperative given the pandemic outbreak and the need to adopt protective measures and guidelines to be followed by all employees, in 2020 was also created and made available a specific and customized online training to all Sonae Arauco employees. This allowed us to ensure a global awareness towards the pandemic and guarantee all internal procedures were known by our employees.

In 2020, SAKA has been chosen by The European Round Table for Industry (ERT) as one of the case studies to highlight Inclusion & Diversity within 20 of European industry's biggest and best known brands.

The success of SAKA lays on the development of an innovative training experience that takes on new learning formats, like gamification, allowing to cherish each age group and, above all, take advantage of the diversity that is increasingly more present in our company.

The ERT publication addresses various dimensions of Inclusion & Diversity, namely gender, age, disability, ethnic groups, LGBT+ or support to victims, with the goal of accommodating demographic diversity and cognitive diversity.

Taking me Further

Sonae Arauco started in 2018 the implementation of an initiative called "Taking me Further" with the ambition to develop a balanced, high performance and healthy work environment. This program promotes equilibrium between mind, emotions, body and health.

The program was implemented in Sonae Indústria and Sonae Arauco facilities in Maia and it was foreseen to be extended to other sites in 2020. Given the constrains the company had to endure throughout 2020, this initiative was put on hold, nonetheless, since it's the company recognizes the importance of employee wellbeing, it's on its agenda to think of possible initiatives adapted to the current new normal of the employees.

It should be highlighted that this program has a high commitment from the employees, as they are the monitors of the activities promoted. The fact that the program is built with internal resources (core & support teams) affected positively the engagement of all the participants.

Taking me Further initiative.

Source: Sonae Arauco.

Partnerships with Universities

With the objective of developing and improving the characteristics of our products we have developed partnerships with several Portuguese universities; Faculdade de Engenharia da Universidade do Porto (FEUP), Escola Superior Tecnológica de Viseu (ESTV), Universidade do Minho, Universidade de Aveiro (UA), Universidade Nova de Lisboa (UNL), Universidade de Coimbra (UC), Universidade de Trás os Montes e Alto Douro (UTAD), Instituto Superior Técnico (IST) and Instituto Superior de Engenharia do Porto (ISEP), as well as with research associations and consortiums - Associação Rede de Competência em Polímeros (ARCP), PrintoCent, Pólo de Inovação em Engenharia de Polímeros (PIEP), Centro de Nanotecnologia e Materiais Técnicos, Funcionais e Inteligentes (CENTI), TechMinho and Colab ForestWise - Laboratório Colaborativo para a Gestão Integrada da Floresta e do Fogo. These partnerships provide the basis for product and process innovation in the Group and encourage the proximity between our company and the academic community. At the moment, and within the defined competences framework, the main objectives of our research are as follows:

  • New polymers, fundamental investigation;

  • Resins - industrial control and monitoring;

  • Wood based panels - development of new products, analysis of physical and mechanical characteristics, and performance evaluation of gluing systems;

  • Impregnated papers and laminates - impregnation, performance characterization, development of new products / processes;

  • Emissions - analysis of VOC18 emissions;

18 Volatile organic compound emissions.

  • Forest and fires management;

  • Decrease the industrial footprint and contribute to circular economy;

  • Contribute to the health and well being in general and provide the safety of individuals or groups increasing the properties of involving materials;

  • Contribute to the area of integrated electronics, ubiquitous and interactive products.

With some of the above mentioned objectives in mind, Sonae Indústria, through its affiliates, has a series of facilities and equipment in the campus of the University of Porto.

With these partnerships, Sonae Indústria has privileged access to university, equipment and techniques, researchers' know-how, development of new technologies and methodologies in collaborative projects and a permanent access to high value technicians that could potentially be integrated in the company.

Involvement in Local Community

At Sonae Indústria, most of our people have a common inherent desire to improve the conditions of those in need in the local communities where we are present. In some specific situations, the employees are involved with social institutions or charities and the company encourages them to actively participate in these initiatives.

In the different countries where Sonae Indústria operates, the specific needs for help and contribution vary greatly depending on the communities' level of welfare, presence of social security systems as well as the culture and values of the local citizens. Therefore, the community-related activities are prioritized and managed at local level.

In 2020, in the light of Covid-19 pandemic, we did our best to respond to the nationwide effort to fight the pandemic during the most critical stage of the disease, by cooperating with independent associations to source and distribute medical and individual protection equipment. Together with other companies and institutions Sonae Indústria was able to raise funds to purchase circa 2.900 personal protective suits to be distributed to health workers. Moreover, these equipment was manufactured by a Portuguese company based in the north of the country, thus contributing to the support of local businesses.

We keep looking at opportunities to help overcome this situation and bring some comfort to the communities in need.

TAFISA CANADA

Tafisa Canada maintained its committment to support non-profits, charities and organizations that help make Lac-Mégantic and surrounding communities to prosper and thrive. Despite the impact of the Covid-19 pandemic on non-profits, fundraising events and other activities, which were either cancelled of postponed, Tafisa Canada distributed funds to programs in the areas of youth, education, technology, sports, health care research, community services, tourism, environment and arts.

Among the organisations Tafisa Canada has supported over the years, including 2020, is "Place aux jeunes du Granit". This organization promotes the migration, establishment and retention of young graduates and professionals aged 18 to 35 in the region, in collaboration with its partner-promoters and local, regional and national key players in business development, for the benefit of Lac-Mégantic and surrounding rural communities. By supporting this organization, the Company has had the privilege throughout the years of hiring young professionals willing to establish themselves in the region rather than seek employment in larger urban areas.

Another usual challenge in rural regions is the access to health care services. For the past 17 years, Tafisa Canada and its employees have committed to support the "Fondation du Centre de Santé et de Services Sociaux du Granit" (Health and Social Services Foundation) through voluntary donations, which are used to improve health care services for the entire population of Lac-Mégantic and surrounding communities.

Tafisa Canada always strives to support its employees in their community involvement endeavours and volunteer efforts. In 2020, several employees organized a food drive for Lac-Mégantic's local food bank run by the "Centre d'action bénévole du Granit". Tafisa Canada promoted the event and provided additional support through a monetary contribution.

Sonae Arauco

Sonae Arauco's social responsibility strategy is completely aligned with the company's vision, nature and purpose.

Considering that Sonae Arauco envisions to create wood-based solutions for a better life and planet, the company's social responsibility initiatives are guided by the following drivers: Forest & Environment, Education &

Wellbeing and Local Communities.

The year 2020 was deeply impacted by the Covid-19 pandemic. And, almost one year after the pandemic first hit Europe, Governments all around the world are facing the enormous task of finding a way to balance the need to protect people's health and the urgency of keeping economies functioning to prevent us from spiraling into one of the biggest social crisis ever lived.

At Sonae Arauco, it was clear, since the beginning, that the priority was to protect both the employees and the business' continuity. Thus, back in February, a Crisis Management Team was formed for what initially was foreseen to be a short period of time. Under its coordination, dozens of procedures were redefined or created - and to this day are adjusted whenever needed - to ensure that everyone can work safely, whether in the factories or remotely.

In this scenario and although Covid-19 didn't impact Sonae Arauco's Corporate Social Responsibility strategy - the company is still driven by the purpose of being a relevant player amongst the several communities, creating economic, social and environmental value - in fact, in 2020, the focus was to protect the internal stakeholder and the business sustainability, because it was the best way to ensure that, in the long run, Sonae Arauco would maintain its relevance for the different communities.

Thus, while Covid-19 forced us to delay some of our corporate social responsibility plans, there are several initiatives that were still possible and deserve a special highlight.

Since Covid-19's appearance, Sonae Arauco's corporate social responsibility has been particularly dedicated to support the regions where it has industrial units and, whenever possible, using the company's wood based solutions.

In this sense, the company has partnered with "Santa Casa da Misericórdia de Viseu" and "Santa Casa da

Misericórdia de Sines"- two portuguese charity institutions whose mission is to treat and support sick and disabled people - with the donation of coated Particle Board solutions, to be used both as separation screens and as platforms in the new spaces created to support the populations suddenly affected by this pandemic. In the case of "Santa Casa da Misericórdia de Sines", which was particularly impacted by a Covid-19 outbreak, the support of Sonae Arauco also included a financial donation.

Sonae Arauco has also cooperated with two hospitals, in the Oliveira do Hospital and Viseu regions, in Portugal, namely with the supply of Particle Board solutions to be used as separation screens in a Covid-19 Field hospital, and with the donation of OSB solutions that allowed the creation of a connection bridge to access a new hospital's area, entirely dedicated to screen Covid-19 new cases.

As usual and having the forest preservation as a priority, throughout the year, many were the donations made by Sonae Arauco for the volunteer fire brigades from different local communities, whether on Portugal or in Germany.

Considering this Forest axis, for the second year in a row Sonae Arauco, in a partnership with other Sonae companies, including Sonae Indústria, supported the Portuguese Government campaign "Portugal Chama" through the organization of different initiatives targeting both the internal and the external stakeholders: emails, muppies, media advertisements, digital banners and social media posts from the different companies. The campaign aims to educate and contribute to the adoption of safe behaviours related with fires.

In the Oliveira do Hospital industrial unit, the year was also marked by the plantation of more than 100 trees in the site's premises. The plantations in the different external areas of the factory aimed to raise the teams' spirit, to remember and recognize the difficulties lived in the 2017 fires and to improve the company's landscape.

Following the previous years, Sonae Arauco supported "STEM talent Girl", a partnership sponsored by the Valladolid industrial unit. This is a project of mentoring for the STEM talent development (Science, Technology,Engineering and Mathematics) and intends to promote scientific and technological vocations amongst women with the aim to inspire and empower the next generation of leading women in science and technology.

In South Africa, two scholarships were given to our employees' children. Resulting from this support, one student successfully completed a BBA (graduation course) in Marketing Management and the other did a successful year in Business Administration.

By the end of the year, and also considering by the negative impact of Covid-19 in the communities in which it is present, Sonae Arauco, together with its employees, joined a food collection initiative of "Banco Alimentar contra a Fome", a Portuguese institution which fights against hunger and food waste. With the involvement of all the industrial units, more than 2,500 kg of food were donated to several institutions reaching hundreds of families.

These initiatives were complemented by several smaller actions, coordinated by the different sites of Sonae Arauco, namely Nettgau, in Germany, that has supported the local football club of Parsau, the local kindergarten (Jübar), the theatre group, a youth movie camp (Arendsee), amongst other institutions, with the supply of several materials, specially OSB boards.

Occupational Health and Safety TAFISA CANADA

Tafisa Canada continued to provide induction training to all employees, visitors and contractors. The company has also a safety video that must be viewed annually and organized an annual exercise (simulation of real emergency cases with each shift) doing a postmortem analysis afterwards to continuously improve the safety system.

Regarding Tafisa Canada's objective of continuous improvement of the safety of its employees, in 2020 many actions were implemented despite the Covid-19 crisis, namely:

  • Training in health and safety (circa 1,340 hours);

  • Finalization phase of a project to improve the security of the wood yard. The access to the wood yard is even more restricted with new barriers with autorisation to access, a new road and parking lot have been added to almost eliminate cohabitation between loaders and other vehicules. Tafisa Canada also created a new wood yard plan for circulation wich includes a safe corridor for pedestrians. The project is at about 90% completed;

  • Increasing of the health and safety field support for the modernization of one particleboard press Line and for the construction of the new lacquered panel facility in Lac-Megantic;

  • Reduction of fall hazard by adding many guardrails at critical areas on the roof;

  • Creation of a housekeeping audit app available on tablet and smartphone and incorporated in supervisor's Gemba walk;

  • Increasing of the safety of one particleboard press line by adding many safety barriers and catwalks;

  • Intallation of a panel handling system at quality laboratory;

  • Creation of a multi-disciplinary committee to propose, decide and implement in a fast track way all the new sanitary rules;

  • Investment in an additional cafeteria, locker room, and sanitary equipement for social distancing and hygiene measures.

SONAE ARAUCO

Sonae Arauco Behavioural Safety Transformation project (BeST program), launched in 2017, drove the actions defined to improve the company's performance in Health and Safety and to achieve our goal: zero injuries and zero serious process related incidents. With this goal, we have defined clear safety policies & rules, created safer workspaces and have become more critical in identifying improvement opportunities.

In 2020 a reassement was done to all the improvements done and analysed what more could be done in order to further improve our safety performance.

It has been also defined a Safety Roadmap 2020-2024, to give continuity to all the work developed so far and structure the next steps, encompassing the BeST program objectives also within this project. The main objective was to consolidate, in a comprehensive plan, all initiatives to reduce the risk of accident while providing a common frame of reference to all stakeholders of Sonae Arauco.

Safety Roadmap 2020-2024

In relation to this Safety Roadmap, it should be mentioned that:

  • Sets out a rationale and describes a general approach based on standardization, training and coaching;

  • Establishes 3 main axis with 13 key focus areas and over 60 different processes to be deployed until 2024;

  • Processes are associated to the key focus areas with a timescale defined to ensure the evolution of the

    Roadmap;

  • Shared responsibility between Corporate and Local teams allows for accountability and realistic outcomes.

Source: Sonae Arauco.

With this approach Sonae Arauco aim to Implement simple and transparent rituals that develop our employee's participation on safety topics and Define the health and safety guidelines to ensure that all employees conduct their activities of production, maintenance, logistics, under the same health and safety guidelines.

The Risk Factor training

The Risk Factor consists of four modules intended for all Sonae Arauco employees, regardless of their role, allowing a better understanding of human motivational factors and subsequent impact on the decision-making process, as described below:

Source: Sonae Arauco.

Planed to be concluded in mid-2020 this program was significantly impacted by the Covid-19 pandemic that halted all trainings from March to September. As this is a training designed to work behaviour competences it is based on peoples interactions that simply could not be maintained.

Training resumed in September following new rules in terms of number of attendees and class dynamics and is expected to be completed in 2021.

Life-saving rules

At Sonae Arauco:

Sonae Arauco maintains a core set of rules - the Life Saving Rules.

The purpose of the Life-Saving Rules creation was to define the critical safety rules that, if not followed, have the potential to result in life changing injury or exposure to life threatening hazards. These apply to all employees (own and contractors) and are:

Safety interlock bypasses /machine protection removal

Safety interlocks shall not be bypassed or a machine which protection was removed cannot be operated without formal written authorisation at the proper management level and compensatory measures should be in place.

Isolation of energy sources (LOTO)

All energy sources (electrical, pressure, gravity, chemical or mechanical) shall be properly and completely locked out, isolated, drained or secured before personnel commence work as defined by an internal procedure, which included certain life-saving personal protective equipments (PPE) requirements and a check of the effectiveness of the lockout.

Work at height

Only properly trained personnel using proper fall protection equipment shall be authorised to carry out work at an elevated position as defined by internal procedure, which include certain including life-saving PPE requirements.

Hot work

Only properly trained, supervised and authorised personnel are entitled to perform hot work activities.

All hot work must be subject to a previous authorisation, given by an authorised Sonae Arauco employee, before it is undertaken as defined by a corporate procedure. As such, employees must:

  • Confirm with the supervisor or the person in charge of the work that there is an authorisation in place as defined by the internal procedure;

  • Initiate the work only after receiving the signed authorisation;

  • Check that all defined conditions and required precautions are met throughout the duration of the work.

Access to wood yard

Only authorized personnel are entitled access to the wood yard, according to the internal procedure, which includes certain PPE requirements.

Confined space entry

Only properly trained, supervised and authorised personnel shall enter a confined space as defined by an internal procedure. A work permit is required and an approved rescue plan should exist before any entry can commence.

Incidents classification, report and investigation

At Tafisa Canada , all material damages (including those caused by fires), near miss, first aid, medical treatment, lost workdays, or fatal accidents are registered and communicated. For major material damages or when a worker suffers an injury, the internal first aid team is called to the scene (internal sound signal) to provide help or organize the transportation of the injured person. The supervisor provides support to the worker, informs his superior and H&S counsellors, begins an investigation, implements an immediate solution to protect other employees and informs the management team and local authorities if requested. A report is written by the worker to complete the investigation. A permanent solution is implemented and the final report is presented to the management team.

At Sonae Arauco , all incidents should be reported and classified according to the impacts on the victim in a scale of six degrees of seriousness.

  • 1. Fatal Accident/Permanent disability, which is an incident that had fatal victims or that resulted in a permanent life-altering condition;

  • 2. Lost Workday Case (LWC), which is any work related injury that leads to, at least, one workday lost by the employee in addition to the shift in which the event occurred;

  • 3. Medical Treatment Case (MTC), which is any work related injury that requires medication or treatment that is typically administered by a healthcare professional, but does not result in any days lost or in work restrictions. After the medical treatment, the worker is able to return to work;

  • 4. First Aid Case (FAC), which represents an incident that required a simple treatment given to a person with a minor injury that is usually administered immediately after the injury occurs. It consists of an one-time and short-term treatment and requires little technology or training to administer.

  • 5. Near Miss, which is any unplanned and undesired event that did not result in injury, illness, or property/ environment damage but had the potential to do so. A near miss situation (when an event occurs) is, for example, a suspended load that falls next to a person, but not hitting him/her.

  • 6. Potential Risk Situation (PRS), which is a situation identified before the occurrence of an event that has the potential to cause one if not properly addressed. This includes unsafe conditions and risky/unsafe behaviours.

Identification and correction of potential risk situations (PRS) should not be considered or treated as a near miss but as an improvement opportunity.

Another relevant concept concerning the incidents classification is the Serious Injuries or Fatalities (SIF) concept. SIF is any fatal event, life-threatening injury, permanent disability or illnesses caused by exposure to conditions in the workplace that will lead to a life-altering condition. In addition, all events in which fundamental management controls19 are either absent, ineffective or not complied with, are to be considered as SIF.

All events recorded in Sonae Arauco are evaluated in terms of potential, which means that even a Near Miss could be logged as a Potential SIF if, after the analysis, it is understood that it could have led to the consequences described in a SIF. In such cases a comprehensive investigation is required to determine the root causes.

Serious Injuries or Fatalities (SIF).

Source: Sonae Arauco.

Although there was already an investigation protocol for accidents occurred in Sonae Arauco, this was revised in 2020 with the implementation of a new methodology to systematically review the investigation done to all relevant events.

19 Fundamental management controls: LoTo, Confined spaces, Work at height, Removing machine guarding or barricades, Hot work, Woodyard circulation and access protocol.

This methodology is a step by step approach with weekly meetings with involvement of a wider team that includes as permanent team a member of the ExCom, Industrial Director, Corporate Health and Safety (H&S) and country H&S plus the team where the incident occurred: Plant Manager, local H&S, local IoW and manager of the injured person. By leverage with a broader team it was possible to define more robust actions that address the root causes and effectively prevent recurrence of the incidents.

Key Employment Performance Indicators

The following sections considers information for Sonae Indústria and also for Sonae Arauco. Aggregate data consider 100% of Sonae Arauco figures.

Number of Employees20

Employees per country / region20

Sonae Indústria

Sonae Arauco

495 2,856

506 2,810

473 2,590

At the end of 2020, Sonae Indústria employed 473 employees (excluding trainees and externals) in three different countries, a reduction of 33 employees, when compared to the end of 2019, explained by the closure of the Componentes plant (in Portugal) in the 2H20. In our North American business the number of employees (excluding trainees and externals) increased 7, mainly due to the investment in a new High Gloss and Perfect Matt lacquering plant.

Considering Sonae Arauco, the number of employees reaches 2,590 people in eight different countries, 221 people less when comparing to the end of 2019, mainly due to the closure of Laminate Park operations and of all industrial operations at Horn site in Germany.

20 Number of Employees: FTEs excluding Trainees and Externals.

Productivity (Turnover/Number of Employees)21

Sonae Arauco

Sonae Indústria

Number of Employees

Productivity

Number of Employees

Productivity

600

BASE 100: 2018 114.0

3,000

2,856

2,810

BASE 100: 2018 122.0

400

200

0

2018

2,000

106.0

1,000

98.0

90.0

0

2019

2020

2020

108.0

94.0

80.0

2018

2019

Number of Employees

Productivity

Number of Employees

Productivity

Despite the decrease of the number of employees, in 2020, the productivity decreased in Sonae Indústria and Sonae Arauco, with a reduction in Turnover that was significantly affected by the Covid-19 pandemic.

Employee turnover22

Sonae Indústria

2019

2020

8.5%

14.8%

7.4%

11.9%

2018

2019

2020

0.2%

0.0%

0.4%

High Qualified Technicians and supervisors

0.6%

0.0%

0.8%

Adminstrative staff

2.0%

2.3%

0.6%

Manufacturing workers and non-qualified workers

8.0%

6.2%

13.0%

from 18 to 34 years

3.7%

2.3%

5.1%

from 35 to 44 years

2.1%

2.3%

1.2%

from 45 to 54 years

1.6%

1.3%

3.9%

from 55 to 65 years

2.3%

2.3%

3.3%

over 66 years old

1.0%

0.2%

1.4%

Sonae Arauco

Executives committee and managers

0.4%

0.3%

0.3%

High Qualified Technicians and supervisors

1.8%

0.8%

1.5%

Adminstrative staff

0.2%

1.3%

2.6%

Manufacturing workers and non-qualified workers

6.7%

5.0%

7.4%

from 18 to 34 years

2.8%

2.3%

3.0%

from 35 to 44 years

2.8%

1.5%

1.8%

from 45 to 54 years

1.6%

1.2%

2.3%

from 55 to 65 years

1.8%

2.2%

4.6%

over 66 years old

0.2%

0.2%

0.2%

Executives committee and managers

Employee turnover (%)

2018

Sonae Indústria 10.7%

Sonae Arauco 9.1%

Employee turnover rate

It should be noted that, in 2020, the Employee turnover rate increased in Sonae Indústria and Sonae Arauco due to the aforementioned closures.

  • 21 Number of Employees: FTEs excluding Trainees and Externals.

  • 22 Employee turnover (%) = total number of employees (headcount) that left during the year / average FTEs during the year (based on monthly average values).

Workforce by sex, age group and professional classifications (Total FTEs23)

2018

2019

2020

male

male

total

Sonae Industria

from 18 to 34 years

27

72

99

22

74

96

18

70

88

from 35 to 44 years

37

117

154

39

127

166

26

113

139

from 45 to 54 years

30

126

156

30

123

153

22

129

151

from 55 to 65 years

15

80

95

17

85

102

14

91

105

over 66 years old

0

0

0

0

0

0

0

1

1

Total

109

396

505

108

410

518

80

403

483

Executives committee and managers

5

21

26

5

22

27

4

23

27

High Qualified Technicians and supervisors

8

23

31

8

25

33

9

17

26

Adminstrative staff

45

51

95

44

54

98

47

55

102

Manufacturing workers and non-qualified workers

51

302

353

51

309

360

21

307

328

Total

109

396

505

108

410

518

81

402

483

Sonae Arauco

from 18 to 34 years

116

442

558

113

432

544

88

381

469

from 35 to 44 years

176

546

722

168

529

696

147

478

625

from 45 to 54 years

142

730

872

150

694

844

155

620

775

from 55 to 65 years

67

702

769

70

727

797

71

695

766

over 66 years old

2

4

6

3

5

8

2

3

5

Total

503

2,424

2,927

503

2,386

2,889

464

2,176

2,640

Executives committee and managers

23

111

134

14

66

80

15

59

74

High Qualified Technicians and supervisors

82

255

337

65

317

381

67

303

370

Adminstrative staff

249

338

587

312

256

568

274

216

490

Manufacturing workers and non-qualified workers

149

1,720

1,869

112

1,747

1,859

108

1,598

1,706

Total

503

2,424

2,927

503

2,386

2,889

464

2,176

2,640

female male total female

totalfemale

The most representative age groups at Sonae Indústria range between 35 and 54 years (corresponding to circa 60% of the total employees). It should also be noted that women represent circa 17% of the total workforce of the company.

Regarding Sonae Arauco, the most representative age group ranges between 45 and 65 years (corresponding to 58% of the total employees) and women represent circa 18% of the total workforce of Sonae Arauco.

23 FTEs including Trainees. For Canada these figures also include Externals.

Employees by type of contract (Labour Agreements) (Headcount24)

female

2018 male

totalfemale

Sonae Industria Permanent Temporary Total

92 12 104

  • 381 473

  • 9 21

  • 390 494

2019 male

totalfemale

102 3 105

  • 394 496

  • 9 12

  • 403 508

2020 male

total

75 2 77

  • 376 451

  • 18 20

  • 394 471

Sonae Arauco Permanent Temporary Total

472 53 525

  • 2,303 2,775

  • 176 229

  • 2,479 3,004

Employees by contract time (Headcount24)

2018

female male

Sonae Industria Full-time Part-time Total

totalfemale

476 42 518

  • 2,224 2,700

  • 181 223

  • 2,405 2,923

2019 male

totalfemale

455 22 477

104 0 104

  • 389 493

  • 1 1

  • 390 494

105 0 105

  • 402 507

  • 1 1

  • 403 508

  • 2,061 2,516

  • 127 149

  • 2,188 2,665

2020 male

total

77 0 77

  • 392 469

  • 2 2

  • 394 471

Sonae Arauco Full-time Part-time Total

511 2,470 2,981

14 9 23

525 2,479 3,004

Collective agreements and salary policies

471 47 518

  • 2,366 2,837

  • 39 86

  • 2,405 2,923

434 43 477

  • 2,158 2,592

  • 30 73

  • 2,188 2,665

In the table below we present the percentage of employees covered by collective bargaining agreements in Sonae Indústria and Sonae Arauco.

% of Employees

2018

2019

2020

Sonae Indústria

58.9%

58.7%

54.1%

Sonae Arauco

83.1%

84.9%

87.0%

24 Headcount including Trainees and excluding Externals.

Ratio of Standard Entry Level Wage (Shop Floor) by Gender Compared to Local Minimum Wage at significant locations of operations (Industrial Operations)25

female

male

Sonae Industria

Portugal

1.00

1.00

1.00

1.00

1.01

1.01

Canada

2.07

2.07

2.04

2.04

1.99

1.99

South Africa

-

-

2.12

2.12

2.49

2.49

Sonae Arauco

Portugal

1.08

1.08

1.04

1.04

1.10

1.10

Spain

1.55

1.55

1.29

1.29

1.27

1.27

Germany

1.70

1.70

1.30

1.30

1.40

1.40

South Africa

-

-

2.12

2.12

2.49

2.49

Gender Pay Gap26

2019 malefemale

2018

2020 malefemale

Provided below is information on the "Gender pay gap", regarding average remuneration by each gender group within each employee category.

2019

2020

Sonae Indústria

Management, supervisors and highly qualified technicians (%)

20.5%

29.6%

Adminstrative staff (%)

24.6%

20.8%

Manufacturing workers and non-qualified workers (%)

51.7%

22.3%

Manufacturing workers and non-qualified workers (%) - Canada

2.8%

0.7%

Manufacturing workers and non-qualified workers (%) - Others

18.2%

-4.0%

Sonae Arauco

Management, supervisors and highly qualified technicians (%)

18.2%

10.3%

Adminstrative staff (%)

24.4%

28.6%

Manufacturing workers and non-qualified workers (%)

10.7%

-2.3%

Parental Leave

Sonae Indústria complies with parental leave legislation in all the countries where it operates. The group encourages an equitable gender choice for both maternity and paternity leave, thus allowing employees to take leave and return to work in comparable positions with the other employees.

The table below indicates the number of parental leaves taken by Sonae Indústria and Sonae Arauco employees.

25 In South Africa the minimum wage only came into force on 1 May 2018. The figures reported for Spain and Germany in 2019 were revised due to a correction in the calculation method.

26 Gender pay gap = (Gross average annual base salaries of male employees - Gross average annual base salaries of female employees)/ Gross average annual base salaries of male employees *100

2020

Sonae

Indústria

2018

2019

2020

Maternity

Paternity

Maternity

Paternity

Maternity

Paternity

Sonae Indústria

Portugal

2

2

3

1

1

3

Canada

4

17

3

21

3

17

South Africa *

NA

NA

NA

NA

NA

NA

Sonae Arauco

Portugal

13

12

15

22

10

29

Spain

3

9

1

10

2

9

France

0

0

0

0

0

0

United Kingdom

0

0

0

0

0

0

Germany

8

21

11

10

9

13

Switzerland

0

0

0

0

0

0

South Africa *

NA

NA

NA

NA

NA

NA

Netherlands

0

0

0

0

0

0

* In South Africa there is no paternity leave concept but a family responsibility leave is available for the employees (e.g.: leave in case of children illness, loss of a family member, among others) with a limit of five days per employee per 12 month cycle.

Absenteeism rate (%)

In 2020, Absenteeism increased in Sonae indústria when compared to 2019, driven by the pandemic situation.

In Portugal the number of absence hours increased significantly due to Covid-19 prophylactic isolation and absences to look after young children when schools were closed.

The increase in Canada was observed in the short term absenteeism and was mainly due to voluntary/involuntary isolation of employees due to Covid-19. Regarding this issue Tafisa Canada continues to improve the follow-up procedures, when necessary provide lighter work to promote a quick return to work and encourage the employees and their families to use the employee assistance program.

In 2020, the absenteism in Sonae Arauco increased to a level that is similar to the level registered in 2018, mostly due to Covid-19 sick leave, prophylactic isolation and support to young children when schools were closed driven by a lockdown.

Total training hours and training hours by employee27

Total Training

Hours

Sonae Indústria

15.0

10.0

5.0

0.00.0

25.6

21.7

13

11

8.7

4

Training Hours per Employee 30.0

Total Training

Hours

Sonae Arauco

Training Hours per Employee

75.0

56.3

20.0

37.5

10.0

18.8

0.00.0

24.2

15.9

68

10.1

45

26

32.0

24.0

16.0

8.0

2018

2019

2020

2018

2019

2020

Total Training Hours ('000 hours)

Total Training Hours ('000 hours)

Training Hours per Employee (hours)

Training Hours per Employee (hours)

Recognising human capital as our most important asset, we are attentive to our professionals. We seek to ensure that they acquire the highest technical and managerial skills and that they are equipped to effectively and confidently address the continuous challenges. It is a priority to identify training needs in a structured way and then propose an adequate training offer. Training and development of our employees are also means to support their increased responsibility and commitment.

For Sonae Indústria and Sonae Arauco the number of training hours per employee reduced in 2020 due to the constraints caused by the pandemic.

For Sonae Indústria, in Portugal the training hours were mainly focused on legally required training sessions, some on job training actions and some participations in management/leadership programs developed by Sonae Academy.

For Tafisa Canada, the training hours were also mainly focused on legally required training sessions and job training actions. Following the Covid-19 restrictions, training hours reduced and we focused on giving more short and specific training online since shorter online training sessions are proven to be more efficient.

At Sonae Arauco, during 2020, the pandemic situation had a major impact in the implementation of the training plan, constraining and in many situations making impossible to organize presential training sessions. Furthermore, due to circumstances such as countries lockdowns, layoff periods and forced remote work policies, the company was forced to delay, re-plan or cancel many of the training programs planned to take place in 2020, and refocus on critical issues namely Health safety recommendations amid the pandemic.

For this reason, the training hours represents a major focus on the health and safety training, technical training in the workplace, online trainings and "4People" training sessions, mainly to ensure the dissemination of guidelines and recommendations implemented for Sonae Arauco in the new context of Covid-19.

27 Number of Employees: FTEs excluding Trainees and Externals.

Key Health and Safety Performance Indicators

The chart below represents the Lost Workday Cases (LWC) rate28:

In 2020 the LWC for our North American operation and for our Laminates business registered an important improvement (circa 36% and 51% when compared to 2019, respectively). However the aggregated LWC for Sonae Industria registered an increase (2% compared to 2019), due to Sonae Arauco (circa 10% compared to 2019). Figures for these indicator do not consider the Components plant (in Portugal) that was closed in the 2H20.

As previously mentioned (in the Occupational Health and Safety topic), regarding our goal of continuous improvement of the safety of our employees, in 2020 Tafisa Canada implemented again many actions and, whitin the context of the Covid-19 crisis and investment in a new High Gloss and Super Matt lacquering plant in Canada, several work environments, behaviours and measures have been implemented and monitored to minimize the health and safety risks for our employees and contractors and follow new health and safety regulations.

At Sonae Arauco, in terms of number of work accidents there has been, in fact, an improvement in the company performance when compared with previous year as the total number of accidents reduced. This improvement is not translated in the LWC rate due to the reduction of hours worked in the year as a result of industrial activity stoppages due to Covid-19 pandemic. In 2020 it was done an assement of all the improvements done and analysed what actions should be done in order to further improve the safety performance.

It was also defined a Safety Roadmap 2020-2024, to give continuity to all the work developed so far and structure the next steps, encompassing the BeST program objectives also within this project. The main objective was to consolidate, in a comprehensive plan, all initiatives to reduce the risk of accident while providing a common frame of reference to all stakeholders.

Our Laminates business also implemented several actions during 2020 to improve the safety of our employees, namely: special focus on issues related to the Work Equipment Directive, (DL 50/2015); training sessions to all employees on firefighting; first aid, chemical hazard and other health and safety issues and ensuring that the forklifts are compliant and properly inspected.

Other actions have been done to further strength Sonae Indústria safety culture and promote the required awareness in this area of paramount importance.

28 Lost Workday Cases: fatality, any occupational injury or illness that prevents the employee from reporting to work on any subsequent scheduled shift. A death as result of occupational injuriy and illnesses is a LWC regardless of the time between injury and decease because of the illness.

LWC Rate = (Number of LWC x 200,000) / Number of hours worked calculated on a 200,000 employee-hour base (100 full-time employees working 50 weeks, 40 hours per week).

Sonae Arauco figures for LWC Rate include Horn laminates plant and real estate and 50% of Laminate Park figures.

In terms of the seriousness of the injuries, translated by the Severity Rate29, the aggregate figures also registered and increase when compared to the previous year (27%), in all main businesses, except the Laminates business that registered an improvement of 40% when compared to 2019. Figures for these indicator do not consider the Components plant (in Portugal) that was closed in the 2H20.

Regarding our Laminates Business, as in the last year, the improvement benefited from the more thorough multi-disciplinary work in the identification of occupational risks.

Regarding the Canadian operation, when compared to 2019 we registered an increase of 5% due to a reduction of the number of hours worked. In fact the lost workdays reduced and several of the lost workday cases in 2020 were less severe and for a shorter period than in the previous year.

In Sonae Arauco, in 2020, there was a deterioration when compared to the previous year (32%), despite no material serious accident with the company employees were registered in 2020. As mentioned above, the reduction of the hours worked in the year due to Covid-19 lockdowns, impacted the rate which explains its deterioration more than from the impact of the seriousness of the accidents occurred.

These results demonstrate the importance of focus on the commitment of Sonae Indústria with the Safety of all employees and contractors and the strategy defined, based on an improvement of the Safety Culture and Risk Awareness of individuals.

4.3. RESPECT FOR HUMAN RIGHTS

Respect for human rights is fundamental for Sonae Indústria and forms part of the way the organization works and acts.

Managing human rights

Sonae Indústria adheres to global principles set out under international law and international declarations on Human Rights. The populations and governments of the countries where we operate hold us accountable for adhering to internationally proclaimed human rights principles. We are committed to fully respect all applicable rules and regulations, such as, for example, to follow legislation on minimum wages and minimum age of workers and maximum working hours per day. By treating workers with dignity and rewarding them fairly for their work, we can motivate them to be more productive and enhance loyalty towards the company. A reputation for adhering to international human rights may also enable us to attract skilled and well-qualified people and to maintain good relations with local communities. By actively seeking to manage our human rights record, we can thus not only ensure good working conditions for our own people but also contribute to raising the level of adherence to human rights standards in countries where the enforcement of these rights may be insufficient.

However, it is not only our own performance that must live up to fundamental human rights standards. To protect our image, we must also ensure that our suppliers and contractors are in full compliance. Therefore, in our

29 Severity rate = Number of workdays lost due to LWC*1,000 / Number of hours worked. A fatality is considered by adding 7,500 days in the numerator.

Sonae Arauco figures for Severity Rate include Horn laminates plant and real estate and 50% of Laminate Park figures.

relationships with suppliers and contractors it will increasingly become a pre-requisite that those parties also ensure full compliance with fundamental human rights. To this end, we consider suppliers performance in this area when entering into working relationships.

How we deal with human rights

Sonae Indústria shares the principles of the UN Global Compact, including those on human rights, that have been an intrinsic part of our culture for a long time, governing the way we treat our people, work with suppliers and contractors, and guiding us in decisions about which new markets to enter. Our efforts to abide by international human rights have also been formalised in our Code of Conduct.

We are pleased that to date, no complaints have been filed against us for involvement in human rights abuses, and we are committed to continuing, and extending, our efforts in this area. We will do so by incorporating key sustainability issues, including human rights, into our risk management processes, thereby ensuring that we address these issues as a regular part of risk assessments at all our operations. We believe these initiatives will allow us to identify, and immediately address, any potential or actual gaps in our future performance in this area.

Suppliers and contractors

Assessing and ensuring that our suppliers comply with human rights issues is a real challenge for the company, as the total number of suppliers is of several thousand.

Tafisa Canada continued to implement an IT system (Cognibox) with its main suppliers. This system requires that the supplier proves that it complies with all the regulations, that it is in good standing with the authorities and that each of its employees has the skills to carry out the work requested. The supplier must declare any non-conformity.

Sonae Arauco aims to implement in the coming years a process to assess our suppliers and the implications of the relationship we establish with them (for example on human rights, site security issues, labour relations and other compliance issues), prioritising the major issues and risks in our relationships with them. Under the plan to implement a new tool to support globally Sonae Arauco purchasing processes, which will be implemented during 2021, suppliers will be required to sign a statement and provide all evidences, confirming they comply with Global Guiding Principles on Business and Human Rights, confirming terms such as the ones below:

  • The supplier has all the necessary business permits/licenses needed to perform the service, which are valid during the period of service execution;

  • Fiscal situation, social security and civil insurance of the supplier are in compliance with the law;

  • All the equipment to be used during the service are in accordance with and comply with the "CE" mark;

  • People allocated to the service are physically fit to perform the duties, and there's accident insurance for all employees, covering medical treatment for work;

  • There's no employees under the minimum legal age old and they are paid at least the legal minimum wage;

  • The supplier ensures that social security of the employees is in compliance with the law;

  • All the employees will use the mandatory PPE's according the designated areas.

This is another important step towards the enforcement of sound business processes, supporting Sonae Indústria's principles and respect for the human rights.

4.4. ANTI-CORRUPTION AND BRIBERY MATTERS

This chapter presents a brief description of Sonae Indústria's policies and instruments to fight corruption and bribery.

Code of Conduct and Communication of Irregularities

The Code of Conduct ("Code") contains a set of standards based on Sonae Indústria's shared values that govern the activities of the Sonae Indústria Group. It applies to everyone working in the Group, including members of the statutory governing bodies of Sonae Indústria, SGPS, S.A. and Group companies, managing directors, senior executives and all employees (including temporary staff).

The complete Code of Conduct can be found at the company website: https://www.sonaeindustria.com/en/corporate-governance/code-of-conduct

This code sets out guidance on matters of business ethics to be complied with by all employees when carrying out their professional duties. It has not been conceived to address every single possible situation, nor as a summary of all applicable laws and regulations. Following the Ethical Behaviour, one of the Sonae Indústria principles, our relationships with stakeholders are founded upon respect, transparency, honesty and integrity and we do not tolerate bribery or corruption in any shape or form. We strive to preserve our independence from political pressures in order to speak and act freely, first and foremost in the interests of the company.

Sonae Indústria's Code of Conduct sets out the main ethical behaviours that Sonae Indústria's employees must comply in their relations with:

  • Employees and service providers;

  • Shareholders and other investors;

  • Governments and local communities;

  • Business partners;

  • Competitors.

The Ethics Committee supports the enforcement of the Code of Conduct and it is its responsibility to:

  • Promote the values and behaviours encouraged by the Code;

  • Act as a consulting body;

  • Review employee's clarification request;

  • Receive any communication of irregularity;

  • Initiate and supervise the investigation of all alleged irregularities reported and ensure that appropriate disciplinary actions are taken.

It is important to highlight that as per its Code of Conduct, everyone at Sonae Indústria is legally bound to comply with all national and international legislation. If our internal standards are more rigorous than those imposed by local laws, Sonae Indústria goes beyond compliance with local legislation and adopts the most demanding standards.

In 2020 there were no reported corruption situations.

Antitrust Policy and Guidelines

"Antitrust" or "Competition" laws are applicable in the countries in which Sonae Indústria operates. The purpose of these laws is to ensure that businesses and markets operate competitively and provide the fairest outcome for the consumer. Competition laws are fundamentally premised upon the idea that, where free and open competition exists, markets will function efficiently, and consumers will benefit from lower prices, product variety and better quality products and services.

Sonae Indústria promotes and respects free competition as a healthy business practice and a fundamental principle, which must govern all aspects of its business dealings.

The management of Sonae Indústria is committed to complying with competition laws in all countries where operates and expects all employees to also do so. It is the belief of the management that compliance with such laws is on the best interest of Sonae Indústria, its shareholders, its employees and other stakeholders.

The Board of Directors of Sonae Indústria approved an antitrust policy.

Sonae Indústria promotes, on a regular basis, training actions on competition law for our staff with resposabilities in the sales, pruchasing and other areas and for the management team.

At Sonae Arauco an Antitrust Policy and Guidelines manual has been adopted and sets out the policy and rules by which all Sonae Arauco employees and management should conduct business from a competition standpoint. The content of this manual is regularly reassessed, and updated when necessary.

Third parties acting as agents of Sonae Indústria are also directed to comply with the same standards of conduct that apply to Sonae Indústria employees.

Prevention of Crimes

There are control practices and processes in the company's business activities, promoting an environment favourable to the prevention and detection of risks of crimes. The most relevant components to prevent and detect crimes are related with:

  • I. Code of Conduct - disclosed to all Employees and available in different locations.

  • II. Whistleblowing channel - a "whistle-blowing" channel is foreseen and explained in the Code of Conduct and managed by the Ethics Committee. Non-compliance situations related with criminal risks are managed by this Committee.

  • III. Disciplinary system - the applicable law in each country is the basis for the disciplinary actions in case of non-compliance issues on criminal risks.

  • IV. Financial resources system suited to crime prevention - policies and procedures regulating the management of financial resources, with the aim of preventing crimes (budget, investment approval, services purchasing process, travel expenses, among others).

4.5. ENVIRONMENTAL AND FORESTRY MATTERS

The industrial activity of Sonae Indústria impacts the environment through the sourcing of raw materials and generates waste water discharges, waste disposal, and emissions.

As a company we are conscious of the environmental footprints we leave behind and consider that the responsible management of environmental issues is critical to our business success. We are committed to sustainable sourcing of raw materials and actively respect these principles in all our business practices.

This chapter describes our key environmental issues and what we are doing to manage them.

To respect the environment is part of Sonae Indústria's nature

Sonae Indústria is committed to the concept of sustainable utilisation of raw materials and actively respects these principles in all its business practices.

Sonae Indústria believes that efficient value chains are able to stimulate investment and the active management of forests. In this context, wood-based panels contribute to the sustainable use of forest resources.

The wood-based panels present diverse advantages, namely:

  • An interesting alternative to solid wood;

  • Their dimensional flexibility allows made-to-measure products to be manufactured;

  • Compared to other building materials, like steel and concrete, it has considerably lower environmental impacts;

  • A positive effect on global warming due to improved energy efficiency;

  • Acting as carbon storage, helping reduce CO2 emissions;

  • At the end of their lifespan, they can be recycled and transformed into new products in a continuous recycling process.

    Source: Sonae Arauco

Main Environmental and Forestry Concerns

Respect for the environment is one of the main concerns at Sonae Indústria and all its businesses. As the activities at Canada and Sonae Arauco are heavily dependent on forest-based resources, the sustainable utilization of the forest-based resources is one of the company focus.

Tafisa Canada is an active member of the Composite Panel Association and of the Conseil de l'Industrie Forestière du Québec in order to keep updated on the issues of environmental matters and participate on several committees in relation to Environment, Product performance, Product emissions, Health and Indoor air Quality.

Sonae Arauco is an active member of the EPF (European Panel Federation) and has an active participation in several of its working groups and performs lobby efforts towards environmental and government institutions focusing on regulations such as:

  • Industrial emissions and its impact;

  • Reclassification of the risk of substances/chemical components (in the European context);

  • Forest management and forest-based raw material certifications (FSC® and PEFCTM);

  • CO2 emissions;

  • and Biomass and energy.

Industrial emissions regulations and its impact and implementation at Sonae Indústria

Industrial production processes account for a considerable share of the overall pollution in Europe due to the emissions of air pollutants, discharges of waste water and the generation of waste.

The Industrial Emissions Directive (IED) is the main European instrument that regulates the environmental impacts caused by industrial installations. The IED aims to achieve a high level of protection of the human health and the environment by reducing harmful industrial emissions across the EU, in particular through enforcing the application of Best Available Techniques (BAT).

Since 2010, the wood-based panels industry is included in the scope of the IED, setting permit conditions which include emission limit values for pollutants emitted in significant quantities. The main challenges arising for the sector are:

  • Dust emissions;

  • Dryers TVOC (total volatile organic compounds) emissions;

  • Emission limits defined for formaldehyde (mainly in the case of dryers and presses).

Since 2019 Sonae Arauco started further implementing the installation of state-of-the-art solutions, that enable to go beyond the compliance with emissions at the European sites. This project encompasses new systems as well as retrofitting of existing ones following the best available techniques available.

In Canada, most environmental issues are regulated by provincial acts and regulations. The Quebec Environment Quality Act (EQA) establishes a general structure to prevent pollution by issuing permits (Ministerial authorization). This law is also the basis of specific regulations for air, water, land protection and waste management. The Clean Air Regulation (CAR) is the main Quebec regulation for air pollution control. The main challenges arising are:

  • Dryers dust emissions;

  • Dryers and combustion equipment heavy metals emissions;

  • Formaldehyde emissions from production presses;

  • Fugitive particle emissions from the transfer, fall or handling of materials.

In 2020, a new regulation (REAFIE) was adopted to modernize the regulatory scheme applying to activities based on their environmental impacts. This regulates projects with moderate, low, or negligible environmental risks. This new regulation formalizes and improves the list of activities exempt from the Ministerial authorization scheme.

Among the benefits of the new regulation are reduced administrative requirements and shorter processing times for authorization applications and greater transparencey with a minister's public online register to give citizens better access to information.

In 2019, Tafisa Canada invested in a new emissions treatment system for its first particleboard production press to further reduce the company's environmental emissions. The system enabled us to reduce particulate emissions by 95%. In 2020, formaldehyde emissions measurement demonstrated a 50% reduction following the full start-up of this new emission treatment system.

In 2020, Tafisa Canada installed a captation system to redude fugitive dust emissions from an unloading station.

This year Tafisa Canada also completed a one year study of the air quality of the plant's surrounding. This study

was conducted in conjunction with the Quebec Ministry of Environment (MELCC) and the Eastern Townships Department of Public Health (DSP Estrie). The results will be made public in 2021.

Formaldehyde and its risk reclassification

Formaldehyde is naturally emitted by vegetation (leaves and wood). In 2015, formaldehyde was reclassified as a carcinogenicity category 1B substance when it is present above certain values, which results in new challenges for the wood-based products industry. This reclassification triggered new obligations under various European and national legislations.

The reclassification focused on the risks for workers and consumers, resulting in new regulations for workplace exposure and a new standard for product emissions' analysis, with its method resulting in the reduction of the emissions limit of formaldehyde to half.

Following these results, Sonae Arauco acts in accordance to ensure proper work conditions to all its employees and after a comprehensive product development, Sonae Arauco was able to achieve the new product emissions standard and produce boards with very low formaldehyde emissions, that are highly demanded by the market.

Formaldehyde is also a matter related to the air emissions from our production sites and we have been striving to achieve all limitations imposed towards emissions concentration limits in our plants.

Also worth mentioning that in Germany , the implementation of the new "E05" emission regulation on the level of formaldehyde emissions from wood-based products had impacts in the production costs which had to be dealt with. This new emission regulation is required since 1 january 2020.

In Canada, in 2019, the Environmental Protection Agency (EPA) implemented a national wide formaldehyde emission standard to which Tafisa Canada has been adhering to with no non-compliant lots in 2019 and 2020. In 2019 Tafisa Canada has received a Composite Panel Association (CPA) certification stating compliance with the limit for formaldehyde emissions defined by EPA, that was automatically renewed in 2020.

As for our Laminates business it should be noted that our Laminates are REACH30 compliant. It should also be highlighted that during 2020, our Laminates Business obtained the Greenguard® certification of its product, further attesting the low chemical emissions and overall contribution to improve the indoor air quality where our products are used.

Forest management and forest- based raw material certifications (FSC® and PEFCTM)

Wood is a natural and renewable material, being absolutely necessary to have both responsible forestry and responsible use of forest resources to guarantee the sustainable use of wood.

To ensure this, Sonae Indústria promotes sustainable forestry management in the regions in which it operates, by actively participating in sustainable forest management standardisation and certification initiatives both at national and international level, as well promoting initiatives to increase the forest management certification along the value chain.

In order to do so, Sonae Arauco and Laminates business are certified by two of the largest forest management and responsibility chain certification systems: the FSC® (Forest Stewardship Council® - FSC-C-013589) and the PEFCTM (Program for the Endorsement of Forest Certification schemes) and Tafisa Canada is certified by the FSC® (Forest Stewardship Council® - FSC-C-013589).

Forest Stewardship Council Certification (FSC®)

FSC® confirms that the forest is being managed in a way that preserves the natural ecosystem and benefits the life of local people and workers, while ensuring it sustains economic viability. To secure this certification, FSC® members have agreed upon a set of criteria that forest managers and owners have to meet:

  • Maintain areas of environmental and social value, helping protect people, plants and animal species that live in these areas;

  • Process to achieve forest management certification, achieved by passing an assessment carried out by a FSC®-accredited certification body, with forest management conformity assessed against the FSC® principles and criteria;

  • Supplying controlled wood, since to gain this certification, forest owners and managers who supply controlled wood must meet the FSC® controlled wood standard. Meeting this standard means that the

30 European registration, evaluation, authorisation and restriction of chemicals.

material sourced has not been harvested illegally, in violation of traditional or civil rights, or in a way that threatens high conservation value (HCV) areas.

Sonae Arauco is now a member of the Forest Stewardship Council (FSC®) International, taking another important step in its mission of creating a sustainable forest value chain. The company, which is one of the largest wood- based solutions' players in the world, joins a group of more than 1,000 members that integrate this international non-profit organization, dedicated to promoting the responsible management of the world's forests.

Programme for the Endorsement of Forest Certification (PEFC TM)

PEFCTM is an international non-profit non-governmental organisation dedicated to promoting Sustainable Forest Management (SFM) through an independent third-party certification. As such, PEFCTM is the world's largest forest certification system and the certification system of choice for small and non-industrial private forests, with hundreds of thousands of family forest owners certified and who comply with the PEFCTM Sustainability Benchmark.

PEFCTM sets the highest standards for forest certification and sustainable forest management in line with society's ever evolving expectations. Obtaining a PEFCTM Sustainable Forest Management certification demonstrates that management practices meet the requirements for best practice in SFM.

Eco-Certified Composite Grademark Program (ECC)

In 2020, Tafisa Canada panels were again granted Eco-Certified Composite Grademark Program (ECC) Certification by the Composite Panel Association (CPA), demonstrating an exemplary commitment to the sustainable use of wood fiber and to environmental stewardship. Tafisa Canada's particleboards meet or exceed the following five requirements:

  • Carbon Footprint - The plant shall demonstrate that the panel's carbon store offsets its cradle-to-gate carbon footprint as determined in kg-CO2 equivalents of greenhouse gas (GHG) emissions;

  • Local and Renewable Resource - At least 85% of total annual wood fibre used shall be sourced within 402 km of the manufacturing plant;

  • Recycled/Recovered - Use a minimum of 75% recycled or recovered fiber; or at least 50% recycled or recovered fiber and a minimum of 5% post-consumer fiber. Percentages shall be calculated on a weight basis as measured in bone dry tons (bdt);

  • Sustainability - The plant shall document that greater than 97% fiber furnish brought on-site to manufacture panels is either converted into panels or other non-waste products;

  • Wood Sourcing - The plant shall hold a valid assessment and certificate from a certifying agency recognized by CPA such as the Forest Stewardship Council (FSC-Controlled Wood Standard or Chain of Custody Standard) or the Sustainable Forestry Initiative (SFI-Fiber Sourcing Standard).

LEED® credits (Leadership in Energy and Environment Design 2009)

Tafisa Canada's panels qualify for LEED® credits (Leadership in Energy and Environment Design) under the US Green Building Rating System.

LEED is an internationally recognized green building certification system, providing third-party verification that a building or community was designed and built using strategies aimed at improving performance across all the metrics that matter most: energy savings, water efficiency, CO2 emissions reduction, improved indoor environmental quality, and stewardship of resources and sensitivity to their impacts. To be awarded a LEED certification, a building project must be granted a minimum number of credits from an independent audit throughthe independent Green Building Certification Institute (GBCI.org) which classifies its rating as certified, silver, gold or platinum.

In order to help its customers to obtain LEED V4.1 credits, Tafisa Canada granted in 2020 a mandate to the certification experts of Vertima to develop official documents to demonstrate its product conformity to the LEED credit requirements. As a result, Environmental Product Declarations (EPD), Health Product Declarations (HPD) and Environmental Data Sheets (EDS) will be available in 2021 .

CO2 emissions31

As responsible citizens of the local communities where we operate, the company is committed to manage the energy consumption in a responsible way to reduce CO2 emissions as far as possible.

By using the non-reusable and non-recyclable materials generated during production as fuel we are able to supplement our energy consumption in the form of heat and power through sources of renewable "fossil-free"

energy. As a general rule, for the board producing facilities, the process heat needs are supplied locally using integrated thermal energy facilities. The final balance between CO2 emissions during combustion of biomass-based materials and CO2 sequestration during tree growth is estimated as neutral.

In addition, one of the major environmental focus, in what concerns Sonae Arauco, is related to successfully managing the carbon emissions allowed within the European Union Emissions Trading Scheme (ETS), ensuring the respect for the environment and the will to reduce CO2 emissions.

In 2020, as the result of developing efforts on reduction CO2 emissions, Sonae Arauco decided to sell an important amount of its exceeding allowances accumulated during the latest years, still not having to buy any allowances from the grid.

Tafisa Canada operation is not subject to Carbon tax considering the low values of CO2 emisions. The Quebec cap-and-trade system for greenhouse gas emission allowances considers an emitter: an enterprise who produces annual greenhouse gas emissions in a quantity equal to or greater than 25,000 metric tonnes of CO2, excluding the emissions attributable to the combustion or use of biomass and biomass fuels. Since Tafisa Canada mainly uses biomass fuels such as bark and wood dust, the quantity of CO2 emitted is much lower than 25,000 metric tonnes.

Biomass and energy

In several regions of the world, facilities to produce energy (mainly electricity) from biomass have been developed and these are largely funded by national programs that focus on the mitigation of climate changes.

These incentives are based on the assumption that replacing fossil fuels by renewable alternative fuels - such as biomass - represents a positive contribution in mitigating CO2 emissions in the long term. This has increased the usage of biomass in co-combustion processes, mainly in production units covered by the regulations on greenhouse gas emissions (e.g. facilities covered by the European Directive on Emissions Trading). Thereby, biomass contributes to the achievement of these plants' goals to reduce their CO2 emissions from fossil fuels.

Within this scope, the production of pellets has been strongly encouraged as an essential activity to facilitate long distance transport of biomass fuel, increasing the wood price.

For this reason we have been arguing that energy producers who also use biomass as fuel should be obliged to demonstrate that:

  • The replacement of fossil fuels by biomass maintains a carbon-positive balance, even when considering the CO2 emissions associated with the shipping process and supply logistics;

  • The biomass is produced from sustainable managed sources and that the principles of the circular economy and of the waste hierarchy are fulfilled.

31 Our Components business plant had no meaningful air emissions namely CO and NOx (there was a burning boiler for the elimination of wood particles residues with the energy being used to heat the site, through a system of coils and water).

This demonstration can be easily integrated into a compulsory annual verification of greenhouse gas emissions which in most situations already exists.

With this initiative Sonae Arauco expects to contribute to restoring wood procurement competitiveness, via a rearrangement of national incentives, and to improve the total supply of wood as a raw material.

At the beginning of January 2020, the Horn biomass power plant was sold. In contrast, new investments on improvements of the energy performance of some equipment, as well as a change on a combustion system in one of Sonae Arauco sites, are setting Sonae Arauco in the direction of lower energy consumption.

Climate change

The company is committed to manage the energy consumption in a responsible way to reduce CO2 emissions (the most important element of "greenhouse effect" generated in its industrial processes) as far as possible.

One of the key environmental focus of the company is related to a successful management of the carbon emissions rights that are granted within the European Union Emissions Trading Scheme (ETS), ensuring the respect for the environment and the will to reduce CO2 emissions.

In global terms industrial production processes account for a considerable share of the overall pollution in Europe due to their emissions of air pollutants, discharges of waste water and the generation of waste.

Our products, when used for building purposes, act as carbon storage, helping to reduce CO2 emissions and to carbon storage extension and all of its products, at the end of their lifespan can be recycled and transformed into new products in a continuous recycling process.

Having in mind the above commitments, in 2020, Sonae Arauco focused on continuous development of initiatives to optimize the energy consumptions in all industrial plants, aimed to reduce the CO2 emissions and to mitigate the negative impacts in terms of "Climate change".

Tafisa Canada has been committed to using only 100% recovered and recycled fibres in the manufacturing of its panels. Tafisa's RewoodTM technology continued to play a key role in the company's commitment towards the preservation of the environment through the recycling of 244,000 tons of post-consumer wood fibre annually which are integrated into the company's panels thus saving millions of trees each year.

Our North American business used mainly biomass for energy and consumed a low amount of fossil fuels to meet very important energy needs in winter only. Although burning biomass releases carbon dioxide CO2, the wood that is the source of biomass for energy captures almost the same amount of CO2 through photosynthesis while growing as is released when biomass is burned, thus, biomass is considered a carbon-neutral energy source.

Tafisa Canada continued to work on developing initiatives to optimize its energy consumption.

How We Deal With These Concerns

Emissions

Sonae Indústria sites undertake thorough emission measurements and inspections are done to all the applicable discharge points (air, water or ground) to confirm compliance to their emission licenses in accordance with the countries were they operate.

External party audits (ISO management systems, IWAY system, among others) also act as catalysts to continuous improvement in terms of what can be done to reduce the environmental impacts of our operations.

This concern is imbedded in all investments, or changes that we do to the industrial process, and we constantly seek to optimize the existing solutions and simultaneously to prevent future problems.

Waste Management

On a broader sense, and less related with the specificities of the industrial process, waste separation is done, and enforced, in designated industrial sites as part of the certification requisites. Residues are collected and selectedby category (general, hazardous, plastic, paper and metals) and disposed of accordingly (hazardous disposed via an accredited contractor, general to municipal operators and other recycled by specific contractor). Monthly records are kept for each disposal.

During the industrial process a significant volume of non-reusable and non-recyclable material is generated which is used as fuel in the site's power plants to supplement the process energy consumption, both in the form of heat and electricity.

Sonae Indústria has, within its industrial sites, a 5-step waste hierarchy (see image below) for a more comprehensive and detailed waste prevention and management. This forces us as a company to constantly think of all materials and services entering or leaving our sites within a more holistic approach.

5-step waste hierarchy

Source: Sonae Arauco

Closing the loops on the life cycle of our products is part of our daily praxis. The following chart shows an overall, not detailed, image of the most relevant energy and waste flows within the life cycle of our products.

Main energy and waste flow within the life cycle of our products.

Source: Sonae Arauco

Sustainable use of resources Main raw materials

As mentioned above a significant part of the raw materials used by Sonae Indústria in the production process is derived directly from materials that would otherwise be treated as waste. We turn these materials into sustainable value-added products which may be recycled at the end of their respective lifecycle. There are few other industries can achieve similar rates of sustainability and circular bio economy business model. We are doing plans to increase the certified wood consumption, in order to ensure responsible forestry and responsible use of forest resources in accordance with our policies and social commitments, and with direct impact in biodiversity protection.

Sonae Arauco's advocacy role trough Centro Pinus (the Portuguese NGO that represents the pine value chain) was very active in 2020, with specific proposal's regarding the future forest investment support schemes, namely under the Green Deal and the Common Agricultural Policy. The knowledge transfer activity from Centro Pinus was also reinforced.

As previously referred in the "Involvement in Local Community" topic from point "4.2. Social and Employee-

Related Matters" of this report, in 2020 Sonae Arauco made donations to volunteer fire brigades and supported for the second year the "Portugal Chama" campaign, aiming to tackle the forest fires problem in Portugal, by raising awareness on forest risk behaviors contributing to a fire-free country.

As recent member of the Forest Stewardship Council (FSC®) International, Sonae Arauco was able to participate in several FSC consultation processes throughout the year regarding standardization, strategy development, among others. Sonae Arauco was also sponsor and speaker at the FSC Portugal Business Forum "Sustainable options for constructions and furniture".

In 2020, Sonae Arauco has organized a meeting with the largest Federation of Forest Owners Organization's in

Portugal, Forestis, held in the Mangualde Unit. The meeting, and visit to the site, allowed the company's presentation of our goals and strategy regarding forest management knowledge transfer and forest certification, aiming for future cooperation process.

Regarding our goal of increasing the certified wood consumption, because wood recycling extends the life of wood, reduce pressure on natural capital, allows the carbon to remain stored and prevents its burning and consequent release of CO2 to the atmosphere, Sonae Arauco has been actively advocating for the need to policy adjustments regarding circular bioeconomy. In 2020 Sonae Arauco participated in several public consultations process and Sonae Arauco's circular economy model was selected to be listed in the "Natural capital stories" as part of the "We Value Nature" campaign. "We Value Nature" is a campaign supporting businesses and the natural capital community to make valuing nature the new normal for businesses across Europe.

In 2020, Sonae Arauco started the Sonae Forests project, an offset joint initiative that gathers all the Sonae companies and were Sonae Arauco is responsible for all the forest related issues (licensing, plantation, certification, management, among others). This area will also be used as a ForestLAB to raise awareness among forest owners regarding good practices.

Sonae Arauco also started its first forest Research and Development project, the Gene Radiata Project. With the support of Arauco - which has developed a very successful program for improving the radiata pine - Sonae Arauco has started surveying the species' development in Portugal. Initial conclusions have revealed a lot of potential for growing this species in Portugal. Seeds from 130 radiata pine families, potentially more adapted to the country's soil and weather conditions and boasting high levels of productivity, have been planted in a forest nursery individually to ensure the traceability of each species, as part of a scientific project. This project is aimed at testing these species together with control plants: other sources of radiata pine and maritime pine from Portugal, Spain and France will also be tested. These are planned for placement in an area of 24 hectares, in 6 different locations in Portugal in 2021.

It should also be mentioned the collaborative efforts at ForestWISE - Collaborative Laboratory for Forest and Fire Integrated Management in Portugal (for research and development, innovation and transfer of knowledge and technology in order to preserve the sustainability of the forest resources), that has Sonae Arauco as one of the founding members, started to show some results. Besides the conclusion of the kick-off process, namely with the setting up of the team, several projects were approved including the RePLANT project. With a developing period of three years, RePLANT is supported by COMPETE2020. Sonae Arauco will be the leading company in one of its areas of activity - Forest and Fire Management -, assuming the global co-coordination of all actions in partnership with the Instituto Superior de Agronomia (ISA), School of Agriculture.

Since 2005, over 20 million dollars have been invested to develop in Tafisa Canada a unique technology, named RewoodTM, which enables Tafisa Canada to replace a portion of the post-industrial wood fibres in its panels with recycled post-consumer wood fibres. This innovative technology ensures a constant and renewable supply of raw material without compromising the environment for future generations.

The RewoodTM technology enables the recycling of 244,000 tons of post-consumer wood fibre annually, thus saving millions of trees. This approach extends a tree's useful life cycle; instead of ending up in a landfill site, post- consumer wood materials are recycled and integrated into the company's panels.

Source: Tafisa Canada

Key Performance Indicators

The following sections considers information for Sonae Indústria and also for Sonae Arauco. Most indicators are calculated for wood based panel businesses on the basis of specific consumption per cubic meter produced (concept not directly applicable to the Laminates business).

Wood consumption (dry ton/m3)32

Wood is Sonae Indústria's primary raw material, considering the business in Canada and Sonae Arauco. As a major user of this natural, renewable and recyclable material, we believe that using recycled wood and wood by-products in our production is part of our sustained contribution towards mitigating CO2 emissions and climate change.

The figures below consider the board businesses (aggregate figures of Canada and Sonae Arauco) and show the global evolution of the wood mix consumption and wood use efficiency figures.

Wood consumption by cubic meter produced

(dry ton/m3)

0.800

0.600

0.400

0.200

0.000

2016

2017

2018

2019

2020

In 2020, due to the Covid-19 pandemic, there was an overall decrease in production. The indicator of wood consumption is usually impacted by production mix.

For Sonae Arauco the decrease in wood consumption per cubic meter is partially explained by the higher decrease on MDF (Medium Density Fibreboard) production (which is a product with higher specific consumption of wood per m3 produced) and the slighter decrease on PB (Particleboard) production.

However, in Canada and compared to previous year, wood consumption per cubic meter produced was very stable despite a small decrease of production that was impacted by Covid-19.

32 Figures for wood consumption (dry ton/m3) consider, since 2018 inclusively, the total specific wood consumption and not only the specific wood consumption in wood raw lines as reported in the previous years.

Wood consumption by type

Canada

Sonae Arauco

RecycledBy productsRoundwood

In the year of 2020, the canadian operation maintained the level of incorporation of recycled and by products within the same values of 2019 (circa 26% and 74%, respectively).

Sonae Arauco's global mix of wood supply revealed a decline of circa 5 p.p. (to 28%) in the contribution of recycled materials, when compared to 2019, as a result of the scarcity and difficulty to source this raw material mainly in Iberia. The incorporation of by-products remained stable and the incorporation of roundwood increased by circa 5 p.p. (to 55%) to compensate the loss on recycled wood.

The increase of roundwood in Sonae Arauco, in 2020, is mainly explained by the ramp-up of a new Particleboard -Line in Germany and no wood recycling capabilities currently existing in the South African market, which led to an extensive use of wood from fire damaged plantations throughout 2020.

Water consumption (m3/m3)

Municipal, surface and underground water

Sonae Arauco

0.8

0.6

0.4

0.2

0.0

2018

2019

2020

2018

2019

2020

Below, we present the water consumption by source:

Water consumption (thousands, m3)

2018

2019

2020

Sonae Indústria

190.1

200.9

194.5

Canada (Municipal Water)

180.9

191.1

184.5

Laminates

9.2

9.8

10.0

Municipal Water

0.2

0.2

1.2

Underground Water

8.9

9.6

8.7

Sonae Arauco 1

1,679.4

1,784.9

1,776.2

Municipal Water

975.1

1,051.7

993.6

Surface Water

161.3

178.1

206.6

Underground Water

543.1

555.1

576.1

(1) Sonae Arauco figures include Horn laminates plant and real estate.

Sonae Indústria's industrial process requires water and, conscient of this impact, efforts are done to reduce the use of fresh water and to increase the reutilization of treated wastewater. These are common environmental objectives in several industrial sites.

At Sonae Indústria the specific water consumption decreased in 2020, when compared with 2019, due to our Canadian operation, affected by the complete refurbishment of one of our two particleboard production lines and lower production due to the Covid-19.

Our Laminates Business registered a slight increase in the water consumption in 2020 when compared to 2019, explained by an increase in production (water consumption per m2 has reduced).

At Sonae Arauco the water consumption, compared to 2019, decreased by circa 0.5%, due to municipal water consumption, as a result of closure of Laminate Park operations and the sale of Horn biomass power plant. Overall consumption in the active sites was impacted by plant stoppages due to Covid-19 and investments ongoing.

Waste generation (kg/m3)

Hazardous and non-hazardous waste

In 2020, this global indicator on specific waste generation reached the lowest value of the last three years.

In our North American business, due to our focus to reduce the production residues and by monitoring closely the related indicators, in 2020 we were able to decrease the production of recycled wood fines and wood dust. In 2020 we have also managed better our use of water to clean the air purification equipment to produce less sludge.

At Sonae Arauco the specific waste generation has been decreasing yearly over the last three years. It should be noted that, in 2018, the global indicator on specific waste generation increased significantly (when compared to previous year), as a result of the long reconstruction activities in the plants of Mangualde and Oliveira do Hospital,

Canada

Sonae Arauco

50.0

40.0

30.0

20.0

10.0

0.0

2018

2019

2020

2018

2019

2020

after significant damages suffered by the fires in October 2017. Thus, a decrease in this indicator was already expected in 2019 and 2020. It is important to notice that, in 2020, despite some construction works going on in some plants, the specific waste generation lowered in levels even below 2017, the last date before heavy construction works started. This is explained partially by an impact from the temporary stop of operations in industrial sites due to the Covid-19 pandemic, but mostly due to the achievements during the years of improvements in the production operations, that resulted in less waste generation per m³ produced.

Chemical Consumption (kgs/m3)

Together with wood, chemicals are one of the key raw materials used in the wood panels production process. As a downstream user, Sonae Indústria recognizes its obligations under REACH regulation and takes all necessary actions to ensure the continued supply of its products in accordance with this Regulation.

The figures below summarise the global evolution of the consumption of chemicals by our main businesses. This consumption registered a slight decrease at Sonae Arauco and a slight increase in the Canadian operation.

It should be mentioned that in Sonae Arauco operation the decrease of chemicals consumption per m3 produced and in absolute value in 2020, when compared to 2019, reflects a reduction in production volumes affected by the Covid-19 pandemic, but also some improvements in the glue systems introduced in 2019 and the mix of raw boards produced.

Chemicals consumption by cubic meter produced

(Kg/m3)

140

105

70

35

Energy use

Energy is a very relevant aspect of wood-based panel production. It is used in the day to day activities of the manufacturing processes, for example, in the drying of the wood particles, heating up the presses or driving equipment.

Sonae Indústria has a strong commitment with energy management, aiming to reduce the energy usage (by means of efficiency improvements) and, at the same time, to minimize the use of fossil fuels.

Electricity consumption by cubic meter produced

(kWh/m3)

230

115

173

In Sonae Arauco there was a decrease of the electricity specific consumption. The negative impacts from the stoppages due to the Covid-19 pandemic (supporting equipment and buildings have to be kept operating during production stoppages) were more than offsetted by the decommission of old equipment and investments done for energy efficiency throughout the company in the last years.

Our Canadian operation registered an increase in the electricity specific consumption in 2020, mainly explained by the conclusion of a complete refurbishment of one of our two particleboard production lines in Lac Mégantic, higher electricty consumption in one of the production lines due to use of recycled wood and the impact of the Covid-19 pandemic in production volumes.

Energy consumption (million, kWh)

2018

2019

2020

Laminates

1.8

1.8

1.6

In 2020, the energy consumption for our Laminates business registered a reduction when compared to 2018 and 2019.

Greenhouse gas emissions

The most relevant emissions of Sonae Indústria group come from the electricity consumptions of the company's several plants.

In 2020, the volumes of electricity consumed, in ton of CO2 by m3 of raw board produced, registered an increase in the Canadian operation and a slight decrease in Sonae Arauco, the latter due to the reduction of production levels, with the stoppages of the plants, due to the Covid-19 pandemic and the closure of an industrial site in Germany.

The increase in the Canadian operation is mainly explained by conclusion of a complete refurbishment of one of our two particleboard production lines in Lac Mégantic and the impact of the Covid-19 pandemic in production volumes.

The charts below shows the evolution of the ratio Intensity of Indirect greenhouse gas emissions (Scope 2 as per GHG33 Protocol34):

CO2 consumption Scope 2

(ton/m3)

In the Laminates business the figures for CO2 consumption are not material when compared to the other two main businesses (in 2020 CO2 consumption was of 0.4 thousands, ton).

Provisions and Impairments

The company monitors the environmental risks in a continuous way, and looks to make all necessary investments and take actions to comply with the requirements of legislation and specific regulation in necessary timings, thus looking to mitigate risks in a pro-active way.

Sonae Indústria has provisions for environmental liabilities of circa 1.2 million euros in its consolidated accounts.

4.6. MANAGEMENT SYSTEMS

Management systems are one of the core concerns of an organisation, since it allows to manage interrelated parts of the company's business, in order to achieve its objectives.

A risk-based thinking is the basis of the management system. Detecting the risks and opportunities in several contexts, drives the company to more focused and successful strategies. Being certified means, for example, that the organisation has a risk management system where work stations are systematically evaluated and actions are taken in order to eliminate or minimise those risks. With this, industrial activities stops can be avoided, the well-being of the employees is guaranteed and the absences due to illnesses or accidents are minimised.

In order to ensure this, Sonae Indústria holds several certifications:

  • ISO 9001 - Quality management system;

  • ISO 14001 - Environment management system;

  • OHSAS 18001 - Occupational health and safety management system;

  • ISO 45001 - Occupational health and safety management system (transition from OHSAS mandatory until 2021).

All Sonae Indústria factories are certified for Environmental Management, Quality Management and Occupational Health and Safety Management, in accordance with the ISO 9001, ISO 14001, OHSAS 18001 and ISO 45001 international standards. Most of Sonae Indústria factories are also certified for Energy Management, in accordance with the ISO 50001 international standard.

The wood used by Sonae Indústria comes from sustainably managed or responsible sources.

  • 33 GHG: Green House Gas.

  • 34 Energy indirect (Scope 2) GHG emissions: GHG emissions that result from the generation of purchased or acquired electricity, heating, cooling and steam consumed by an organization.

Sonae Indústria is also certified through two of the largest forest management and responsibility chain certification systems: the PEFC™ (Programme for the Endorsement of Forest Certification schemes) and the FSC® (Forest Stewardship Council®)

Management systems certifications.

Source: Sonae Arauco.

ISO 9001 - Quality management system

The adoption of this standard comes from a strategic decision of organisations to improve results and create a basis for sustainable growth.

The principles of this quality standard are the following:

  • Focus on customer;

  • Leadership;

  • Development of employees;

  • Continuous improvement of processes and products;

  • Organisation of processes;

  • Decisions based on evidence (facts and data);

  • Relationships management (stakeholders).

Being certified means that our plants are capable of delivering its products in a systematic and consistent manner, both at the level of performance and agreed quality level, always aiming at optimizing its processes and products, involving its employees and suppliers actively throughout the process and always keeping a risk mitigation mind-set. These processes are documented so that there is evidence (records) that the whole process is performed in accordance with the desired standard.

ISO 14001 - Environment management system

This standard aims at the voluntary commitment of organisations to study and minimise their environmental impact. For this purpose, the organisation develops improvement activities and integrates the "life-cycle"

perspective in its operations. It is a tool for organisations that want to achieve greater trust from customers, employees, the surrounding community and society in general.

The principles of this standard are the following:

  • Strategic objectives through the incorporation of environmental issues in the organisation's management agenda and the increase of the top management and employees' involvement;

  • Reduced probability of environmental risks;

  • Reduced costs by improving process efficiency (energy reduction);

  • Improvement of the organisation's environmental image and its acceptance by clients, employees and society;

  • Ensure alignment with all existing legislation that is applicable to the activity sector.

This certification demonstrates that the company is aware that its activity has an impact on the environment and that it actively and voluntarily seeks to minimise that impact.

OHSAS 18001 - Occupational health and safety management system

This standard regulates a systematic approach for the identification of risks and their elimination or minimisation.

The principles of this standard are the following:

  • Reduce risk in order to contribute to a healthier environment, prevent diseases and reduce the number of accidents;

  • Improve the well-being of employees by conducting wellness activities;

  • Several industries now require partners/suppliers of excellence in these areas and, in such cases, it is mandatory to have in place a risk management system;

  • Ensure compliance with all existing legislation applicable to the sector;

  • Raise awareness among all employees and among all those who, in a regular or sporadic way, carry out activities at the company's premises for the consequences of their actions, in terms of health and physical integrity.

ISO 45001- Occupational health and safety management system

This standard must replace all OHSAS18001 until end 2021 and it has, as major difference, the emphasis on improving health and safety performance by taking precautions in advance.

The other important principles of this standard are the following:

  • Subcontractors and suppliers in the organization are also within the scope of the management system;

  • More focus on risk management and continuous development;

  • Includes subcontractors, suppliers and contractors;

  • Performance evaluations are more frequently found in ISO 45001;

  • Brings new concepts such as Organizational Context, Leadership and Certified Knowledge.

Quality, Environmental and Health & Safety management systems are an important part of Sonae Indústria's standardised way of operating.

The situation of management systems certifications of Sonae Indústria affiliates and subsidiaries, at the end of 2020, was the following:

Quality

EnvironmentEnergyForest products chain-of-custodyHealth & Safety

ISO 9001

ISO 14001

ISO 50001

PEFC

FSC

OHSAS 18001

ISO 45001

Sonae Indústria

Maia*

Lac-Mégantic

Sonae Arauco

Mangualde

Oliveira do Hospital

Sines**

Castelo de Paiva***

Linares

Valladolid

Cuéllar ****

Meppen

Nettgau

Beeskow

Kaisersesch *****

White River

* HPL plant.

** Resins plant & paper impregnation. *** Wood venner plant.

**** Sawmill.

***** Paper impregnation plant.

Actions have been implemented to ensure the transition from the current OHSAS 18001 to ISO 45001 which will be completed in 2021. In 2020 all the activities in Iberian Peninsula achieved the new ISO 45001 certification.

5. CLOSING REMARKS AND ACKNOWLEDGEMENTS

Activity carried out by the Non-Executive Board Members

With the exception of the Chairman, all Non-Executive Board Members of Sonae Indústria are members of Board Committees (for a full description of composition and main tasks of each Committee please refer to the Corporate Governance Report). In this context, these Board Members analyse matters that are within the competence of the respective Committee, providing guidance to the company about them and making proposals to the Board of Directors.

Non-Executive Board Members actively participate in meetings of the Board of Directors, intervening in the discussions and questioning the decisions taken. According to their respective professional experience, Non-Executive Board Members also participate in the analysis of industrial optimisation projects, of restructuring and expansion projects and in the development of relevant international networking with possible partners and authorities in current and potential geographical areas of investment.

Acknowledgements

The Board of Directors would like to express its sincere gratitude towards all employees for their efforts, commitment and dedication demonstrated throughout such a difficult year.

The Board of Directors would also like to thank the shareholders, customers, suppliers, financial institutions and other business associates of Sonae Indústria for their continuing involvement and for the confidence that they have once more shown in the organisation.

26 March 2021,

The Board of Directors,

_________________________________

_________________________________

Paulo Azevedo

Carlos Moreira da Silva

_________________________________

_________________________________

Albrecht Ehlers

Berta Cunha

_________________________________

_________________________________

Isabel Barros

Javier Vega

_________________________________

_________________________________

José Romão de Sousa

Christopher Lawrie

_________________________________

Louis Brassard

APPENDICES TO THE MANAGEMENT REPORT AND QUALIFIED

SHAREHOLDINGS

APPENDIX REGARDING ARTICLE 447 OF THE COMPANIES LAW

Acquisitions

SalesPosition at 31.12.2020

Balance at 31.12.2020

Dateamount

€ average valueamount

€ average value

amount

Duarte Paulo Teixeira de Azevedo

Efanor Investimentos, SGPS, SA (1) Migracom, SA (2)

Carlos António Rocha Moreira da Silva

Efanor Investimentos, SGPS, SA (1)Minoritary Dominant

DirectorAcquisitions

SalesPosition at 31.12.2020

Balance at 31.12.2020

Dateamount

€ average valueamount

€ average value

amount

(1) Efanor Investimentos, SGPS, SA

Sonae Indústria, SGPS, SA (Shares)

27,416,997

03/08/2020

112,545 1.0864

04/08/2020

196,631 1.09

05/08/2020

19,683 1.09

10/08/2020

66,305 1.10

11/08/2020

1,998 1.10

12/08/2020

5,788 1.10

13/08/2020

3,777 1.10

28/08/2020

30,000 1.115

01/09/2020

78,962 1.128

02/09/2020

10,000 1.13

03/09/2020

25,881 1.127

04/09/2020

35,000 1.128

07/09/2020

23,276 1.13

08/09/2020

13,361 1.13

09/09/2020

13,334 1.13

10/09/2020

15,998 1.13

11/09/2020

778,437 1.138

14/09/2020

240,583 1.14

15/09/2020

68,015 1.14

16/09/2020

55,258 1.14

17/09/2020

72,993 1.14

18/09/2020

68,171 1.14

21/09/2020

109,219 1.14

22/09/2020

22,265 1.14

23/09/2020

128,510 1.14

24/09/2020

163,860 1.14

25/09/2020

69,519 1.14

28/09/2020

77,533 1.14

29/09/2020

67,576 1.14

07/10/2020

280,493 1.14

08/10/2020

205,498 1.14

09/10/2020

214,605 1.14

12/10/2020

103,976 1.14

13/10/2020

107,910 1.14

14/10/2020

20,370 1.14

15/10/2020

76,359 1.14

16/10/2020

91,587 1.14

19/10/2020

37,985 1.14

20/10/2020

71,598 1.14

21/10/2020

275,857 1.14

22/10/2020

38,656 1.14

23/10/2020

111,557 1.14

26/10/2020

283,031 1.14

27/10/2020

626,814 1.14

28/10/2020 2,925,674 1.14

Sonae Indústria, SGPS, SA (subordinated bonds) 0

21/06/2020

5,000 8,188.00

Pareuro, BV (3)

Dominant

(2) Migracom, SA

Sonae Indústria, SGPS, SA (shares) 0

28/10/2020

Imparfim, Investimentos e Participações Financeiras, SA (4)

(3) Pareuro, BV

Sonae Indústria, SGPS, SA (shares)

Sonae Indústria, SGPS, SA (subordinated bonds)

  • 21/06/2020 5,000

38,931 1.14

8,188.00

(4) Imparfin, Investimentos e Participações Financeiras, SA

Sonae Indústria, SGPS, SA (shares)

28/10/2020

132,355 1.14

Minoritary

11,730,752 5,000

0

QUALIFIED SHAREHOLDINGS

Complying with Article 8, nr.1, paragraph b) of the CMVM Regulation nr. 05/2008

Shareholder

No. of shares

% Share Capital

% Voting rights

Efanor Investimentos, SGPS, SA (1)

Directly

27,416,997

60.386%

60.386%

By Pareuro, BV ( controlled by Efanor Investimentos, SGPS, SA)

11,730,752

25.837%

25.837%

39,147,749

86.223%

86.223%

Total allocation

On 30 April 2018, TEAK Capital, SA informed Sonae Indústria of having signed a services agreement with the company Pareuro, BV, through which it was granted, by way of consideration, a call option over 2,000,000 shares representative of 4.40% of the share capital and voting rights of Sonae Indústria, SGPS, S.A., exercisable on 30 April 2021. This agreement replaces and revokes the previous agreement signed on 22 February 2016.

Teak Capital, SA also informed that 40% of its share capital is held by Carlos Moreira da Silva, 45% by his wife (under the regime of separation of people and property) Fernanda Arrepia and 15% by TPR, BV, the latter being jointly held by Carlos Moreira da Silva's three descendants, Tiago Moreira da Silva, Pedro Moreira da Silva and Raquel Moreira da Silva. Fernanda Arrepia and Tiago Moreira da Silva are also directors of TEAK.

(1) Efanor Investimentos, SGPS, SA ceased, with effect from 29 November 2017, to have a controlling shareholder, according with the terms and for the purpose of articles 20º and 21º of the Portuguese Securities Code.

STATEMENT ISSUED UNDER THE TERMS AND FOR THE PURPOSE OF SUB-PARAGRAPH C) OF NR. 1 OF ARTICLE 245 OF THE PORTUGUESE SECURITIES CODE

(Free translation from the original in Portuguese)

In terms of the order in sub-paragraph c), nr. 1, Article 245 of the Portuguese Securities Code, the Board members of Sonae Indústria, SGPS, S.A. hereby declare, to the best of our knowledge, that the:

a) Management Report, the annual accounts and further related documents requested by current law have been prepared according to the applicable accountancy norms, reflecting a true and appropriate image of assets and liabilities, the financial situation and results of both the company and other companies within its consolidation perimeter; and

b) Management Report duly states the evolution of the business, performance and financial position of both the company and other companies within its consolidation perimeter business and contains a description of the main risks and uncertainties they are confronted with.

_________________________________

_________________________________

Paulo Azevedo

Carlos Moreira da Silva

_________________________________

_________________________________

Albrecht Ehlers

Berta Cunha

_________________________________

_________________________________

Isabel Barros

Javier Vega

_________________________________

_________________________________

José Romão de Sousa

Christopher Lawrie

______________________________________

Louis Brassard

GLOSSARY OF TERMS

Investment in Tangible Fixed Assets

Earnings Before Interests and Taxes + Depreciations and Amortizations + (Provisions and

impairment losses - Impairment losses in trade receivables + Reversion of impairment losses in trade receivables)

Full Time Equivalent; the equivalent of one person working full time, according to the working

schedule of each country where Sonae Indústria has operations

Overheads + Personnel costs (internal and external); management accounts concept

Bank loans + Subordinated bonds + Other bonds + Obligations under finance leases + other

Proportional Senior Net Debt / Proportional LTM Recurrent EBITDA

loans + Loans from related parties

Last Twelve Months

Proportional Senior Net Debt considers the full contribution of the Senior Net Debt of the

wholly owned businesses and the proportional consolidation of the 50% contribution from Sonae Arauco Net Debt

Proportional Turnover and Proportional Recurrent EBITDA consider, in what regards to Turnover and Recurrent EBITDA, the full contribution of the wholly owned businesses and the proportional consolidation of the 50% contribution from Sonae Arauco.

EBITDA excluding non-recurrent operational income / costs

Recurrent EBITDA / Turnover

Total Gross Debt - Subordinated Bonds - Cash and cash equivalents

Total Gross Debt - Cash and cash equivalents

Inventories + Trade Debtors - Trade Creditors

2020

CORPORATE GOVERNANCE REPORT

26 March 2021

2020

Sonae

CORPORATE GOVERNANCE REPORT

Indústria

CONTENTS

PART I - MANDATORY INFORMATION ON SHAREHOLDER STRUCTURE, ORGANISATION AND CORPORATE GOVERNANCE

3

A. SHAREHOLDER STRUCTURE

3

I. CAPITAL STRUCTURE

3

II. SHAREHOLDINGS AND BONDS HELD

4

B. GOVERNING BODIES AND COMMITTEES

6

I. GENERAL MEETING

6

  • a) Composition of the Board of the General Meeting

  • b) Exercise of Voting Rights

  • II. MANAGEMENT AND SUPERVISION

    • a) Composition

    • b) Functioning

    • c) Committees within the Management or Supervisory Bodies and Managing Directors

  • III. SUPERVISION

    • a) Composition

    • b) Functioning

    • c) Responsibilities and Functions

  • IV. STATUTORY EXTERNAL AUDITOR

  • V. EXTERNAL AUDITOR

  • C. INTERNAL ORGANISATION

    • I. ARTICLES OF ASSOCIATION

    • II. REPORTING OF IRREGULARITIES

    • III. INTERNAL CONTROL AND RISK MANAGEMENT

    • IV. INVESTOR RELATIONS

    • V. WEBSITE

  • D. REMUNERATIONS

    • I. COMPETENCIES FOR APPROVAL OF REMUNERATIONS

    • II. REMUNERATIONS COMMITTEE

    • III. REMUNERATION STRUCTURE

    • IV. DISCLOSURE OF REMUNERATION

    • V. AGREEMENTS WITH IMPACT ON REMUNERATION

    • VI. SHARE PLANS OR STOCK OPTIONS PLANS

  • E. TRANSACTIONS WITH RELATED PARTIES

    • I. CONTROL MECHANISMS AND PROCEDURES

    • II. INFORMATION CONCERNING TRANSACTIONS

  • F. DIVERSITY POLICY IN MANAGEMENT AND SUPERVISORY BODIES

  • G. INTERNAL POLICY ON RELATED PARTY TRANSACTIONS

  • H. REPORT ON REMUNERATIONS

PART II - ASSESSMENT OF THE CORPORATE GOVERNANCE

  • 1. Identification of the corporate governance code adopted

  • 2. Analysis of compliance with the Corporate Governance Code adopted

66 8 813 16 20 20 22 23

25

26

27

27

27

29

42

43

45

45

45

46

52

54

54

55

55

56

56

57

62

65 65 65

PART I - MANDATORY INFORMATION ON SHAREHOLDER STRUCTURE, ORGANISATION AND CORPORATE GOVERNANCE

A. SHAREHOLDER STRUCTURE

I. CAPITAL STRUCTURE

1. Capital structure (share capital, number of shares, capital distribution, etc.), including information regarding shares not admitted to trading on a regulated market, different categories of shares, rights and duties incurred and share capital percentage by category (Article 245-A, number 1, paragraph a))

Sonae Indústria's share capital amounts to 253,319,797.26 euros and is represented by 45,403,029 ordinary nominative shares without nominal value. All shares are admitted to trading on the Euronext Lisbon.

Sonae Indústria´s share capital is distributed according to the illustration below (the qualified shareholding attributed to Efanor shown below is explained in item 7 of this report):

2. Restrictions to the transfer of shares, such as clauses of consent on sale of shares, or restriction on ownership of shares (Article 245-A, number 1, paragraph b))

There are no restrictions in place regarding the transfer or sale of the company's shares.

3. Number of own shares, corresponding percentage of share capital and voting rights (Article 245-A, number 1, paragraph a))

As at 31 December 2020, the company did not own any own shares.

4. Relevant agreements to which the company is a party and that come into effect, are amended or are terminated in the event of a change in the control of the company after a takeover bid, including the respective effects, unless their disclosure is materially adverse to the company; this exception does not apply where the company is specifically required to disclose said information pursuant to other legal requirements (Article 245-A/1/j)).

The company did not adopt any measure which impose payments or the acceptance of charges in the event of a change in the composition of its management body.

As at 31 December 2020, the amount of debt in loans which grant to the respective creditors the option to consider the amount of debt due in the event of a change of control (i.e. shareholder ownership) was circa 160 million euros (approximately 73% of the value of the consolidated net debt).

Million € 1

No. Contracts

Total

160

10

1) Debt value (nominal).

The Shareholders' Agreement subscribed by Sonae Indústria and Inversiones Arauco International, Ltda, (Arauco) in relation to Sonae Arauco, SA, confers Arauco the right to exercise a call option over the full amount of Sonae Arauco shares owned by Sonae Indústria, in the event of a change of control of Sonae Indústria, as well as it confers a call option to Sonae Indústria in the event of a change of control of Arauco.

The agreements mentioned above do not restrict the free transfer of company shares, not even the free appraisal of the Board of Directors' performance by shareholders, as they reflect the interest of the corporate purpose, aiming to guarantee the long term business sustainability in the framework of market conditions.

5. Regime applicable to the renewal or revocation of defensive measures, in particular those that foresee the limitation of the number of votes susceptible of being detained or exercised by only one shareholder, in an individual way or in cooperation with other shareholders

There are no statutory constraints regarding the number of votes that may be cast by a single shareholder.

6. Shareholders' agreements known to the company that may result in restrictions to the transfer of shares or voting rights (Article 245-A, number 1, paragraph g))

The company is unaware of the existence of a shareholders' agreement, which may restrict the transfer of its securities or voting rights.

II. SHAREHOLDINGS AND BONDS HELD

7. Identification of the individuals or companies that, directly or indirectly, hold a qualified shareholding

(Article 245-A, number 1, paragraphs c) and d) and Article 16), indicating, in detail, the percentage of share capital and voting rights entitled, as well as the source and causes of such entitlement

Shareholder

Number of shares

% Share Capital

% Voting Rights

Efanor Investimentos, SGPS, S.A (1)

Directly

27,416,997

60.386%

60.386%

By Pareuro, BV (controlled by Efanor Investimentos, SGPS, SA)

11,730,752

25.837%

25.837%

39,147,749

86.223%

86.223%

On 30 April 2018, TEAK Capital, SA informed Sonae Indústria having signed a services agreement with the company Pareuro, BV, through which it was granted, by way of consideration, a call option over 2,000,000 shares representative of 4.40% of the share capital and voting rights of Sonae Indústria, SGPS, S.A., exercisable on 30 April 2021. This agreement replaces and revokes the previous agreement signed on 22 February 2016. Futher informed the referred to company that 40% of its share capital is held by Carlos Moreira da Silva, 45% by his wife (under the regime of separation of people and property) Fernanda Arrepia and 15% by TPR, B.V., the latter being jointly held by Carlos Moreira da Silva's three descendants, Tiago Moreira da Silva, Pedro Moreira da Silva and Raquel Moreira da Silva. Fernanda Arrepia and Tiago Moreira da Siva are also directors of TEAK.

(1) Efanor Investimentos, SGPS, SA ceased, with effects from 29 November 2017, to have a controlling shareholder, according with the terms and for the effects of articles 20º and 21º of the Portuguese Securities Code.

8.

Indication of the number of shares and bonds held by members of the Management and Supervisory Boards

Sonae Indústria's Directors held the following company shares as at 31 December 2020:

Acquisitions

SalesPosition at 31.12.2020

Balance at 31.12.2020

Date

amount

€ average valueamount

€ average value

amount

Duarte Paulo Teixeira de Azevedo

Efanor Investimentos, SGPS, SA (1) Migracom, SA (2)

Carlos António Rocha Moreira da Silva

Efanor Investimentos, SGPS, SA (1)Minoritary Dominant

Director

Acquisitions

SalesPosition at 31.12.2020

Balance at 31.12.2020

Date

amount

€ average valueamount

€ average value

amount

(1) Efanor Investimentos, SGPS, SA

Sonae Indústria, SGPS, SA (Shares)

27,416,997

03/08/2020

112,545 1.0864

04/08/2020

196,631 1.09

05/08/2020

19,683 1.09

10/08/2020

66,305 1.10

11/08/2020

1,998 1.10

12/08/2020

5,788 1.10

13/08/2020

3,777 1.10

28/08/2020

30,000 1.115

01/09/2020

78,962 1.128

02/09/2020

10,000 1.13

03/09/2020

25,881 1.127

04/09/2020

35,000 1.128

07/09/2020

23,276 1.13

08/09/2020

13,361 1.13

09/09/2020

13,334 1.13

10/09/2020

15,998 1.13

11/09/2020

778,437 1.138

14/09/2020

240,583 1.14

15/09/2020

68,015 1.14

16/09/2020

55,258 1.14

17/09/2020

72,993 1.14

18/09/2020

68,171 1.14

21/09/2020

109,219 1.14

22/09/2020

22,265 1.14

23/09/2020

128,510 1.14

24/09/2020

163,860 1.14

25/09/2020

69,519 1.14

28/09/2020

77,533 1.14

29/09/2020

67,576 1.14

07/10/2020

280,493 1.14

08/10/2020

205,498 1.14

09/10/2020

214,605 1.14

12/10/2020

103,976 1.14

13/10/2020

107,910 1.14

14/10/2020

20,370 1.14

15/10/2020

76,359 1.14

16/10/2020

91,587 1.14

19/10/2020

37,985 1.14

20/10/2020

71,598 1.14

21/10/2020

275,857 1.14

22/10/2020

38,656 1.14

23/10/2020

111,557 1.14

26/10/2020

283,031 1.14

27/10/2020

626,814 1.14

28/10/2020 2,925,674 1.14

Sonae Indústria, SGPS, SA (subordinated bonds) 0

21/06/2020

5,000 8,188.00

Pareuro, BV (3)

Dominant

(2) Migracom, SA

Sonae Indústria, SGPS, SA (shares) 0

28/10/2020

Imparfim, Investimentos e Participações Financeiras, SA (4)

(3) Pareuro, BV

Sonae Indústria, SGPS, SA (shares)

Sonae Indústria, SGPS, SA (subordinated bonds)

  • 21/06/2020 5,000

38,931 1.14

8,188.00

Minoritary

11,730,752 5,000

(4) Imparfin, Investimentos e Participações Financeiras, SA

Sonae Indústria, SGPS, SA (shares)

0

28/10/2020

132,355 1.14

9. Special powers of the managing bodies, namely in respect of resolutions concerning share capital increase

(Article 245-A, number 1, paragraph i)), indicating the date these powers were attributed, the date these competencies expire, the maximum quantitative limit of the share capital increase, the amount issued in accordance with the attribution of powers and the means for accomplishment of the attributed powers

The Board of Directors of Sonae Indústria may decide to increase the company's share capital up to the amount of three hundred fifty million euros, one or more times, through cash injections under the terms established by the law. These powers were granted at the General Meeting held on 29 April 2019 and may be exercised over a period of five years from that date, notwithstanding the General Meeting decision to renew them.

10. Information regarding the existence of relevant relationships of commercial nature between the owners of qualified shareholdings and the company

There are no significant commercial relationships between the owners of the qualified shareholdings and the company.

In December 2019, Efanor Investimentos, SGPS, SA, the majority shareholder of Sonae Indústria, subscribed the first tranche of a subordinated bond loan issued by Sonae Indústria in the amount of € 50,000,000, with the duration of 10 years and a fixed interest rate of 7%.

B. GOVERNING BODIES AND COMMITTEES

I. GENERAL MEETING

a) Composition of the Board of the General Meeting

11. Identification and role of the members of the Board of the Shareholders' General Meeting and respective mandate

The Board of the Shareholders' General Meeting was elected at the Shareholders' Annual General Meeting of Sonae Indústria held on 9 May 2018, for the mandate 2018-2020 and is composed by:

  • Carlos Manuel de Brito do Nascimento Lucena - Chairman

  • Maria Daniela Farto Baptista Passos - Secretary

b) Exercise of Voting Rights

12. Restrictions in terms of voting rights such as limitations to vote depending on the ownership of a number or percentage of shares, deadlines to exercise the voting right, or systems that highlight rights of asset contents (Article 245-A, number 1, paragraph f))

According to Sonae Indústria's Articles of Association, the Shareholders' General Meeting is composed only of shareholders with voting rights who provide evidence of their ownership, according to the terms established by the law.

Article 23º-C of the Securities Code sets out that, who is entitled to participate, discuss and vote in the

Shareholders' General Meeting, are shareholders who, at the record date, which corresponds to 0 hours of

the 5th trading day prior to the date of the meeting, hold at least one vote, according to the law and the company statutes.

According to Sonae Indústria's Articles of Association, shareholders may be represented at Shareholders'

General Meetings under the terms established by the law and by the respective notice of the meeting.

Under the terms of Sonae Indústria's Articles of Association, Shareholders' General Meetings can meet at the first session, as long as shareholders representing over fifty percent of the company's share capital are present or represented.

The company's Articles of Association stipulate that, as the company is regarded as a listed and "publicly traded company", shareholders are allowed to vote by post in relation to all items in the agenda of the Shareholders' General Meeting, following the rules for the exercise of voting by post. The company's Articles of Association establish that postal votes can only be considered when sent to the company's headquarters by registered post with notice of receipt addressed to the Chairman of the Board of the Shareholders' General

Meeting. These votes should be received at least three days before the date of the General Meeting and are subject to the normal rules regarding evidence of share ownership. Postal votes are considered negative votes in relation to any proposals presented after the date on which they were issued. A standard form for postal voting is available at Sonae Indústria's corporate website,www.sonaeindustria.com, and at the company's head office.

Sonae Indústria Articles of Association stipulate that postal voting may be exercised by electronic means if this medium is made available to shareholders and is included in the notice of the meeting. This possibility was made available to shareholders for the Shareholder's Annual General Meetings held in the last five years up to 2020 and was only used by one shareholder at the Shareholder's Annual General Meeting in 2017. At the Annual General Meeting held in 2020, due to the Covid-19 pandemic, postal voting was used by more than one shareholder.

Sonae Indústria's Articles of Association comprise the possibility of General Meetings to be held by telematic means as long as the respective means, the authenticity of the statements and the security of communications are protected. The Annual General Meeting 2020 was held exclusively by telematic means due to the Covid-19 pandemic. It should be noted that only one shareholder used telematic means, as all remainder shareholders used postal voting by electronic means.

The preliminary information for the General Meeting and the proposals submitted by the Board of Directors are made available at the time of disclosure of the notice of meeting.

The company has not adopted any mechanism that causes a time lag between the right to receive dividends or the subscription of new securities and the right to vote of each share.

13. Indication of the maximum percentage of voting rights that may be exercised by a single shareholder or by shareholders that are related to him according to Article 20, number 1

Each share corresponds to one vote, with no limitation.

14. Identification of the shareholders' resolutions that, under the terms of the company´s Articles of

Association, can only be approved by qualified majority, apart from the legal ones, and description of those majorities

The decisions are taken by simple majority, except when the law stipulates otherwise.

II. MANAGEMENT AND SUPERVISION

a) Composition

15. Identification of the governance model adopted

Sonae Indústria's Articles of Association define a corporate governance model of the company composed by a Board of Directors, a Statutory Audit Board and a Statutory External Auditor.

The Board of Directors examines annually the advantages and possible disadvantages of adopting this model.

The Board of Directors believes that the model favours the interests of the company and its shareholders, being effective and having not faced any constraints to its operation.

16. Statutory rules concerning procedural and material requirements applicable to the appointment and replacement of the members of the Board of Directors (Article 245-A, number 1, paragraph h))

Under the terms of the Articles of Association, the Board of Directors may consist of an even or odd number of members, with a minimum of five and a maximum of nine, elected by the Shareholders' General Meeting for three-year mandates.

Members of the Board of Directors are elected by the Shareholders' General Meeting. Groups of shareholders representing between 10% and 20% of the company's share capital may submit a stand-alone proposal to nominate a Director, in advance of the Shareholders' General Meeting. Such shareholder cannot support more than one list of Directors and each list must identify at least two eligible persons to fill each position on the Board. If lists are submitted by more than one group of shareholders, the voting will be based on all of these lists.

In the event of death, resignation or temporary or permanent inability of any of the Directors, the Board of Directors is responsible for his or her replacement. If the Director in question was nominated by minority shareholders, a new separate election must be held.

The profiles of the new members of the corporate bodies must comply with the criteria and requirements set out by the company, in respect to academic qualifications, competences in industrial areas, professional skills, knowledge of the Group businesses, integrity, cultural and gender diversification.

17. Composition of the Board of Directors, indicating the minimum and maximum number of members according to the company statutes, duration of the mandate, number of effective members, date of the first appointment and date of the end of the mandate of each member

On 31 December 2020, Sonae Indústria's Board of Directors comprised nine Directors. All its members were elected at the Annual General Meeting held on 9 May 2018 for the 2018-2020 mandate.

Date of the Sonae Indústria's current Directors first appointment:

  • - Duarte Paulo Teixeira de Azevedo - 15 December 2005;

  • - Carlos António da Rocha Moreira da Silva - 12 November 2014;

  • - Albrecht Olof Lothar Ehlers - 8 September 2011;

  • - Berta Maria Nogueira Dias da Cunha - 9 May 2018;

  • - Isabel Sofia Bragança Simões de Barros - 9 May 2018;

  • - Javier Vega de Seoane Azpilicueta - 29 March 2012;

  • - José Joaquim Romão de Sousa - 31 March 2015;

  • - George Christopher Lawrie - 12 April 2013;

  • - Louis Brassard - initially appointed on 15 December 2005, resigned on 28 April 2009 and was co-opted on

    8 June 2016.

On 31 December 2020, the Board of Directors of Sonae Indústria comprised:

  • - Duarte Paulo Teixeira de Azevedo - Chairman (Non-Executive)

  • - Carlos António da Rocha Moreira da Silva - Vice-Chairman (Non-Executive)

  • - Albrecht Olof Lothar Ehlers (Non-Executive and Independent)

  • - Berta Maria Nogueira Dias da Cunha (Non-Executive and Independent)

  • - Isabel Sofia Bragança Simões de Barros (Non-Executive)

  • - Javier Vega de Seoane Azpilicueta (Non-Executive and Independent)

  • - José Joaquim Romão de Sousa (Non-Executive and Independent)

  • - George Christopher Lawrie (Managing Director)

  • - Louis Brassard (Managing Director)

The Board of Directors appointed Javier Vega as lead independent director.

18. Distinction between executive and non-executive members of the Board of Directors and, in relation to non-executive members, identification of the members that may be considered as independent

Of the nine (9) Directors, two (2) are Managing Directors and seven (7) are non-executive members, as indicated in the previous paragraph.

It is Sonae Indústria's understanding that the number of non-executive Directors is adequate in relation to the size of the company, its shareholding structure and the level of complexity of the risks inherent to the company's activity, thus allowing the effective supervision and appraisal of the Managing Directors performance.

Among the non-executive Directors, four (4) are independent, as they comply with the independence criteria set out either by recommendation III.4 of the Corporate Governance Code released by IPCG or by Regulation 4/2013 of CMVM.

19. Professional qualifications and other relevant curricular information of each member of the Board of

Directors

Paulo Azevedo (Chairman of the Board of Directors): holds a degree in Chemical Engineering from theLausanne Polytechnic School (Switzerland) and a post-graduation in Business Studies (MBA) from the OportoBusiness School (ex-EGP). He was CEO of Optimus - Telecomunicações S.A. between 1998 and 2000; CEO ofSonaecom, SGPS, S.A., between 2000 and 2007; CEO of Sonae SGPS, S.A. between May 2007 and April 2015;Chairman of the Board of Directors of Sonae SGPS, S.A. since April 2015 and co-CEO of Sonae SGPS up to April2019. He holds a number of managerial and directorship roles in Efanor/Sonae Group. Chairman of the Boardof Directors of BA Glass I- Serviços de Gestão e Investimentos, SA since February 2020.

Carlos Moreira da Silva (Vice-Chairman of the Board of Directors): degree in Mechanical Engineering -University of Porto, MSc in Management Sci. and Operational Research (University of Warwick - UK) and PhDin Management Sciences (University of Warwick - UK). He held several positions in companies of SonaeGroup / Sonae Indústria Group between September 1988 and January 2000. In 2003, he was CEO of SonaeIndústria, SGPS, SA until April 2005, also holding other positions in other companies of Sonae Indústria Group.He was member of Advisory Board of 3i Spain (2005-2012), member of the Supervisory Board of JerónimoMartins Dystrybucja, SA (from 2009 to 2012), Chairman of the Board of Directors of La Seda de Barcelona(2010-2014) and Chairman of BA Group (1998-2020). Currently, he is a member of the Board of Directors ofEfanor Investimentos, SGPS, SA and of Sonae SGPS, SA.

Albrecht Ehlers (Independent): degree in Law from the University of Münster (Germany). From 1987 to 2000,he held various positions in the legal and human resources departments of Glunz AG, having been appointedin 1995 to join the Executive Board (Vorstand) of that company, with responsibilities in areas including humanresources and legal departments. Between 2000 and 2004, he was senior vice-president of Hochtief AG(Germany) with particular responsibility in the areas of human resources and corporate services. From 2004until 2009, he joined the Executive Board (Vorstand) of that company. Since 2010, he is Chancellor at theTechnical University of Dortmund (Germany).

Berta Cunha (Independent): holds a degree in Economics by the University of Coimbra. She held variouspositions in Banco Português de Investimento, in the areas of Mergers and Acquisitions and CorporateFinance. Between 2002 and 2005, she was director of F. Turismo-Capital de Risco, SA. Between 2002 and2018, she was director of Cosec - Companhia de Seguros de Crédito, SA.

Isabel Barros: holds a degree in Psychology by the University of Porto and an MBA by the EADA BusinessSchool Barcelona and Nagoya International School, Japan. Between 2007 and 2010, she was Senior Managerof Korn Ferry Hay Group; from 2011 to 2015 she was Talent Management & Development Director at Sonae;between 2016 and 2017, she was Human Resources Director at Sonae MC and, since 2017, she is Chief HumanResources Officer of Sonae MC.

Javier Vega (Independent): holds a degree in Mining Engineering by the Escuela Técnica Superior deIngenieros de Minas of Madrid and a degree in Business Management from Glasgow Business School (UK).He was a member of the Board of Directors of several companies such as Robert Bosch, Red Eléctrica deEspaña, SEAT and Grupo Ferrovial. Currently he is director of Sonae Arauco, SA and Chairman of the Board ofDirectors of DKV Seguros, Gestlink, SA and Vedegane, SA. He also currently holds other Board positions inother companies.

José Romão de Sousa (Independent): holds a BSc in Chemical and Industrial Engineering by IST, University ofLisbon (Portugal) and a PhD in Chemical Engineering by the Imperial College, London (UK). He has largeindustrial experience, particularly in chemical products (formaldehyde resins, adhesives and water-borneemulsion resins) and plastics industries (extrusion and calendaring of PVC, ABS and polyolefins). He heldseveral management functions in the ProHolding Group (currently Promotor) and is the Non-ExecutiveChairman of several group companies and associated companies, including a new venture into biologicfungicides. He has experience in the financial sector, namely in private equity, portfolio management andbrokerage. Currently, he is Chairman of the Board of Directors of Promotor SGPS, SA, among othercompanies.

Christopher Lawrie (Managing Director): he has a BA (Honours) Degree in Business Studies and Finance atGreenwich University (UK). He has broad experience in investment banking, having worked with Schroders,BZW and Credit Suisse where he was Director of the Corporate Finance Division covering specifically SouthernEuropean Telecoms markets. In 2001, he joined Sonae/Efanor Group as CFO of Sonaecom and, in 2009, hewas appointed CEO of Sonae Retail Properties. In 2013, he was appointed CFO of Sonae Indústria SGPS, SA,and is currently Managing Director and Chairman of the Management Committee.

Louis Brassard (Managing Director): has a degree in Industrial Engineering by the Montreal PolytechnicSchool (Quebec, Canada). MBA in Finance and Marketing - University of Montreal. Since 1994, he heldvarious positions in Sonae Indústria's Group, and, currently, he is COO of Tafisa Canada and member of the

Management Committee.

20. Significant family, professional or commercial relationships between members of the Board of Directors and qualified shareholders with more than 2% of the voting rights

Paulo Azevedo is a Director and shareholder of Efanor Investimentos SGPS, SA, to whom the control of the majority of the voting rights in Sonae Indústria is attributed. Carlos Moreira da Silva is a Director of Efanor Investimentos SGPS, SA.

21. Organisational charts with distribution of competencies of the various statutory bodies, committees and/or departments of the company, including information regarding delegation of competencies, particularly in what concerns the delegation of day-to-day company business

The responsibilities of the different governing bodies and committees of the company are distributed as follows:

Disclaimer

Sonae Indústria SGPS SA published this content on 29 March 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 30 March 2021 07:50:04 UTC.


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Financials
Sales 2020 204 M 231 M 231 M
Net income 2020 -5,97 M -6,77 M -6,77 M
Net Debt 2020 221 M 251 M 251 M
P/E ratio 2020 -7,24x
Yield 2020 -
Capitalization 107 M 127 M 121 M
EV / Sales 2019 1,07x
EV / Sales 2020 1,30x
Nbr of Employees 470
Free-Float 7,74%
Chart SONAE INDUSTRIA, SGPS, SA
Duration : Period :
Sonae Industria, SGPS, SA Technical Analysis Chart | MarketScreener
Full-screen chart
Income Statement Evolution
Managers and Directors
Duarte Paulo Teixeira de Azevedo Non-Executive Chairman
Albrecht Olof Lothar Ehlers Director
Javier Vega de Seoane Azpilicueta Independent Non-Executive Director
José Joaquim Romão de Sousa Independent Non-Executive Director
Berta Maria Nogueira Dias da Cunha Independent Non-Executive Director
Sector and Competitors