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Dear Shareholders,

On behalf of the board (the “Board”) of directors (the “Directors”) of Greenheart Group Limited (“Greenheart” or the “Company”), I am pleased to present the annual report and our audited financial statements of the Company and its subsidiaries (together the “Group”) for the year ended 31 December 2022.

2022 was a challenging year for the Group, as we continued to face market volatility and supply chain disruptions in New Zealand and Suriname. This resulted in a significant decrease in turnover of HK$156,216,000 and an increase in loss to HK$97,746,000 for the year (2021: HK$59,231,000). The primary reason for this was the adverse impact to the Group’s New Zealand business operations.

The revenue generated from our New Zealand division decreased by 53.2% compared to last year, mainly due to a decline in average free-on-board (“FOB”) sale prices by 19.4%. Faced with a weak market, the Group reduced its harvesting activities in order to preserve our wood reserve until the market recovers, resulting in sales dropping to 192,000m3, representing 56.6% of the volume sold in the previous year. In addition to these unfavorable market conditions, our New Zealand division faced higher fuel and operating costs driven by an elevated inflation rate. The combined effect of the weak market and higher operating costs have resulted in a fair value loss of HK$3,250,000 on plantation forest assets during the year (2021: a fair value gain of HK$26,630,000).

In Suriname, following a strong rebound in European economic activity after the pandemic-related downturn, the demand for tropical wood products increased. However, extreme and persistent heavy rain caused unprecedented country-wide flooding, damaging all major roads and exacerbating logistical disruptions. This flooding seriously affected our harvesting and product delivery capabilities, particularly in our west Suriname operation, which has the longest distance to the port among our concessions.

As a result, our Suriname division’s ability to meet market demand was restricted, despite the strong market recovery for tropical hardwood products. The revenue generated from our Suriname division decreased by 14.2%, reflecting a slight decrease in volume sold compared to last year.

Furthermore, our Suriname division is facing increasing uncertainty associated with the renewal of our concession licences. We have reviewed and accelerated the amortisation of our concession licences in order to reflect the shorter expected economic useful lives of these concessions.

Despite these difficulties, our Suriname division reduced its negative adjusted EBITDA by 28.9% to HK$8,913,000 this year.

Looking forward in 2023, the Group acknowledges the challenges and uncertainties presented by the current state of the global economy. While the Chinese government is making strides towards economic recovery by removing all COVID-related travel restrictions, the Group remains vigilant in our approach to managing high fuel prices, supply chain disruptions, inflation and other market uncertainties.

Despite an improvement in FOB prices of New Zealand radiata pine in January and February, the property sector in China remains challenging due to high levels of debts and lower buyer confidence in the first half of 2023. It is anticipated that the demand for our New Zealand radiata pine will remain under pressure. However, the Group expects that consumer confidence will slowly return as the economic backdrop improves after the Chinese government rolls out policy measures to support the property sector, including relaxing restrictions on property developer borrowing.

In addition to the plantation business, the Group is committed to exploring and investing in carbon farming opportunities in New Zealand. The carbon project not only provides a sustainable income stream for the Group but also contributes to the mitigation of climate change. The Group believes that the carbon project has the potential to significantly contribute to the Group’s growth and profitability in the long term.

In Suriname, we are gradually overcoming the challenges resulting from extreme weather and the pandemic, which caused supply chain disruptions for the past two years. Our Suriname division has maintained stable revenue while improving operational efficiency and reducing costs through outsourcing, and generating additional revenue through subcontracting the right to operate in our forest concession areas.

We will continue to be prudent in managing our business operations and financial resources and maximize our business potential during this challenging time.

In closing, on behalf of the board of directors of the Company, I would like to thank shareholders for their continued support and to extend my thanks to all of my fellow directors and all of our staff across Greenheart for their commitment and their invaluable contribution in what has been a challenging year for the business.



Cheng Chi-Him, Conrad
Non-executive Chairman
Hong Kong
29 March 2023



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