Munro Sawmills Ltd.

Review of business The results for the year and the financial position of the company are set out in the financial statements attached. 2022 was a good year with strong sales and a healthy profit. Covid had a beneficial effect on our business as consumers were generally confined to their homes and spent more on garden improvements. In addition to this there were gales in the south east of England which further added to fence panel sales. This is reflected in full capacity production of our fencing products and increased production of WoodBlocX for our associate company WoodBlocX Ltd. WoodBlocX continues to excel in sales and market penetration in both the UK and Europe. Munro Harvesting Ltd continues to trade at a high level and whilst generating small profits it adds considerably to security of log supply for the sawmill and to inter-trading with other wood using industries locally. The directors consider the balance sheet to be strong with a healthy cash reserve position which will enable further growth in the future. Our products are niche products in a largely commodity based timber market and because of this we suffer less from market fluctuations than other sawn timber producers. Principal risks and uncertainties Management Succession Philip Blake is reaching retirement age but a succession plan is in operation to hand control of the business to Henry and Chris Blake who both have considerable management experience and expertise. Loss of major customers We could potentially lose a major customer and suffer a loss of sales as happened a few years ago when Grange fencing was bought and production moved to Poland. However the nature of fence panels meant that this effort to outsource UK supply failed after one year and production returned to the UK boosting our other UK customers. We have a large market share and highly efficient production which means that there are large barriers to competition in our niche market. Degradation of plant and equipment We are constantly monitoring the state of our production facility and strive to innovate new processes, new equipment and improvements to keep our plant in full operating condition. Loss of market We currently have two separate sawing lines. The lesser of these is being upgraded to quadruple production and increase product diversity in the event of a market slump for our main product, fencing slats. Future plans We will continue to adapt and upgrade our capital assets and introduce new products to ensure full capacity utilisation in the future.