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People Engagement

It’s been nine months since the acquisition of Scholz was completed. The Chiho Environmental Group is showing growth momentum with the addition of Scholz. Certain Scholz colleagues have been interviewed to express their views and suggestions on the integration and the way forward.

1. Please introduce yourself.

Gerd: I’m Dr. Gerd Hähne, CEO of Germany/Poland Division.

2. Since end of 2016, Chiho has come in as the sole shareholder and put forward the “New Scholz Strategy” with relevant restructuring measures. By far, what kind of positives have emerged in Scholz under the new strategy? And what are the major differences between the restructuring this time and those from years ago.

Gerd: Scholz has been obsessed with insolvency issues for years since around 2010 due to the declining market, indebtedness and its very expansive operational model. The company of more than 100-year history suffered constantly the risk of survival, and had gone through rounds of restructuring.

3. We noted that Scholz’s business performance has gradually improved since the start of 2017. What do you think was the main driving force?

Gerd: The market environment has clearly improved since the beginning of the year. This is currently felt by all companies in the industry. For Scholz, of course, the entrance of Chiho has helped Scholz regain internal peace.

4. Do you think the insecurity sentiment of employees from the past has gone or not? Do you think our employees are happy or not with our current improvements that have been achieved?

Gerd: That’s right. The difficult financial situation has, of course, led to some uncertainty, but at the same time has also fueled the commitment and the creativity of the employees to keep the suppliers with a good service at Scholz. Of course, the improved financial situation is a significant relief for employees, as they do not have to apologize for late payments. I think our employees have a strong focus on their business. We should ensure that this remains the case and is not affected by an overarching reporting system.

5. Chiho’s intention is not to become a financial investor, but is fully committed to be an industrial investor and to further explore the global recycling industry. With the integration with Scholz, Chiho wants to achieve synergy effects. From your point of view, do you feel such intention of Chiho? What benefits do you think Chiho has already brought to Scholz? And what more Chiho can bring? From your point of view, do you think the above mindset of CEG is perceivable or not? What do you think for the past year CEG has brought to Scholz? What else you would envisage for future from CEG to Scholz?

Gerd: I have understood the actions that Chiho wants to be involved in the recycling business in the long term. With Scholz, Chiho has acquired a recycling company that covers the entire spectrum of the disposal and processing of metallic secondary raw materials and the associated service. The business extends from the disposal of large industrial enterprises to the purchase of small quantities (individual suppliers). Chiho is a company that specializes in the preparation of electric motors and buys them all over the world (Chiho is regarded as market leader in the preparation of electric motors). From this constellation, no major synergies are to be expected at first, apart from the fact that a certain purchase price control can be implemented in the respective markets. To use Scholz’s experience in the disposal and processing of the Chinese market is another option. For Scholz it is safe to have a direct connection to the Chinese market.

6. There are cultural differences between China and Germany. What do you think of these cultural and behavioral differences? Have you ever felt any cultural differences when interacting with your Chinese colleagues? Do you think those differences are manageable?

Gerd: Of course, there are cultural differences, which is good. I have been in China for many years and can say that I have always been respected. I see no problem in working with each other when our cooperation is characterized by mutual respect and respect. We have a common goal – to be successful. We can only be successful if we work together and develop ideas to improve our work. My experience tells me that cultural differences are not important.

7. About our vision, “to be the leader in global recycling business”, do you think you and the team around you share our vision? What could be done in your perspective, from shareholder side and from your scope of responsibility, to push forward the vision?

Gerd: To offer large industrial companies to take over their disposal of scrap worldwide, a good thing must be made possible through a corresponding network of storage yards. Storing yards is, as we know, not a cheap affair and getting good staff for it is also difficult. Our history shows that it does not necessarily have to lead to success to be the world’s largest scrap recycling company.

8. Are you confident in the Group’s future, are you confident in the recycling business?

Gerd: I’ve been working in the recycling business for 35 years and still find it very exciting. Once the reserves of natural resources on our planet are exhausted, the scraps, are the raw materials. The fact itself can only generate confidence in the recycling business. The business will change over time, as it has already changed over the past 35 years, but it will continue, it is certain. I am confident for the group and the recycling business.

1. Please introduce yourself.

Mike: I’m Mike Greulich, Chief Operation Officer and Chief Trading Officer of Scholz-Group. Responsible for International Key Account Management and for identifying synergies with Chiho Environmental Group.

2. Since end of 2016, Chiho has come in as the sole shareholder and put forward the “New Scholz Strategy” with relevant restructuring measures. By far, what kind of positives have emerged in Scholz under the new strategy? And what are the major differences between the restructuring this time and those from years ago.

Mike: Of course and first of all most positive is the solid finance of Scholz-Group since Chiho became the sole shareholder of Scholz. In the years before all of our employees were focused on survival and the management of the tight cash situation. Since Chiho entered Scholz as the sole shareholder, Scholz has been focusing on its core business of scrap metal recycling and trading, to gain back market share and to position itself for further growth. All this goes along with measures to leverage synergies within the Scholz-Group but as well with Chiho. Namely the shift to an operational holding to make better use of the market size of the combined group of companies and to gain cost savings. The focus of our employees is now on efficiency and top-line growth.

3. We noted that Scholz’s business performance has gradually improved since the start of 2017. What do you think was the main driving force?

Mike: Fortunately the steel and metal industry have recovered from the doldrums of the last () 7 years and since end of 2016 the demand for steel and metal scrap has recovered significantly. It seems like that the “pig cycle” has been overcome and hopefully we will have some strong years to come in our industry. The restructuring in the recent 7 years had made Scholz more lean and efficient and we can leverage from these efforts to turn around with much better business performance. But in my personal view, the most important success factor is our employees who have been very loyal in the past difficult times. Our people are very experienced, well-educated and highly committed to our company. This makes the difference.

4. Do you think the insecurity sentiment of employees from the past has gone or not? Do you think our employees are happy or not with our current improvements that have been achieved?

Mike: The sentiment of our employees has definitely changed in a positive manner as the fragile financial situation is gone. Our people are very happy with the completed financial restructuring and this situation obviously helps them to focus on their daily work.

5. Chiho’s intention is not to become a financial investor, but is fully committed to be an industrial investor and to further explore the global recycling industry. With the integration with Scholz, Chiho wants to achieve synergy effects. From your point of view, do you feel such intention of Chiho? What benefits do you think Chiho has already brought to Scholz? And what more Chiho can bring? From your point of view, do you think the above mindset of CEG is perceivable or not? What do you think for the past year CEG has brought to Scholz? What else you would envisage for future from CEG to Scholz?

Mike: Yes, we feel that Chiho is committed to be an industrial investor and to leverage the synergies of the combined group. Chiho has helped Scholz to get a deeper penetration of the Chinese market – the biggest and fastest growing market in the world for steel and metals. However, I feel that we have still room for substantial improvement to cooperate closer on the market strategy with Chiho. Currently Scholz doesn’t have advantages over its competitors in Europe and North America in the Chinese market.

Furthermore, we see a substantial change in China’s scrap industry – it’s scrap generation has grown significantly and this will shift China from a net importer to a net exporter of scrap metals. China needs to build up infrastructure and recycling centers in order to be able to process the fast growing domestic scrap generation. Chiho can leverage on the experience and technology of Scholz to build up successfully a recycling infrastructure in China for the benefit of the combined group of companies.

6. There are cultural differences between China and Germany. What do you think of these cultural and behavioral differences? Have you ever felt any cultural differences when interacting with your Chinese colleagues? Do you think those differences are manageable?

Mike: German and Chinese people are similar regarding many aspects but obviously there are also cultural differences. The differences may lead from time to time to some tension and irritation on both sides.

I believe these differences are manageable and we can use them to our advantage. We need to understand, respect and learn from each other. We should not try to change the culture of our colleagues but rather seek strength in the differences. But in general our dealings with each other are characterized by respect, acknowledgement and fairness.

7. In what ways do you think we can capitalize on the Group’s enhanced strength now?

Mike: The combined group of Chiho and Scholz has a very unique global positioning with operations in Central Europe, North America and China.

The recycling markets in Central Europe and USA are very mature whereas China is still a fast growing economy with a recycling industry still at its early stage of development. A lot of our industrial clients are global operating OEM’s, automotive suppliers and other well-known blue-ship companies with sites in our core markets in Europe, North America and especially China. Scholz has had established business relationship with most of these clients for decades and they recognize Scholz as a very reliable, trusted and professional partner.

While the competition in the mature markets is fierce and the organic growth is limited, we can leverage these existing relationships and the existing outstanding reputation of Scholz for the growth of Chiho in China and Asia. Since Chiho became the sole shareholder of Scholz, we have got already inquiries from these big industrial clients as to whether we can serve them in China for their scrap disposal.

Further, we have ongoing discussions with Chiho’s operations in Oss, Netherlands. Both Chiho Netherland and Scholz are operating in the European market. There is a high synergy potential to grow the top-line because both operations have complementary sourcing markets and scrap products.

8. About our vision, “to be the leader in global recycling business”, do you think you and the team around you share our vision? What could be done in your perspective, from shareholder side and from your scope of responsibility, to push forward the vision?

I believe all group-members understand the desire and support the vision to be the leader in the global recycling business. To push forward the vision it will be essential that the shareholder and the Board of Scholz create and communicate a clear structure and strategy for the way forward as to how we want to accomplish this vision. Strong leadership is required. The strategy needs to address the limits of mature markets and the chances of our combined group in the Chinese and Asian market. To gain support for the vision from our employees, the strategy needs to be operationalized with stretched but achievable targets. The key is to make the structure, vision and strategy tangible and visible for our employees.

To be the leader in the global recycling business does not only mean size and market share. We are ruled by the dynamics of a commodity market, with high volatilities in volumes and prices, full price transparency and limited product differentiation. To outperform as a global leader means also to provide outstanding service to our clients and stakeholders, to design new concepts, being faster than other market participants and to set new standards for the industry. To create a competitive edge, the ambitious goal must be to become the preferred business partner of our customers and suppliers, the preferred employer and an active and responsible corporate civilian to the community.

9. Are you confident in the Group’s future, are you confident in the recycling business?

Mike: I feel very confident with the relative sound financial situation of Scholz since Chiho became the sole shareholder. The scrap metal recycling market is still consolidating and the steel and metal industry is faced with substantial changes and challenges in the near future. The mere fact that China will shift from a net importer to a net exporter of scrap will change the dynamics of the entire scrap recycling industry. It is the responsibility of the top management of Chiho and Scholz to respond to these challenges with the right strategy in order to meet our vision and to participate successfully in the consolidation.

The cyclicality of our industry requires a sound finance and equity ratio in order to survive unscathed upcoming pig cycles. We need to learn from our recent history not to finance intensive growth mainly with debt. A solid financial foundation based on profitable cash flows, equity and reasonable loan facilities will be the key for future growth.

I believe in the recycling industry. Scrap metal recycling is sustainable. It helps to reduce the burden on landfills, CO2 emissions and the exploitation of non-renewable resources and it also helps save energy.
For the near future China is again the driving force in our industry. China’s “One Belt One Road” mega project has the potential for a huge growth cycle of economic development and especially for the steel and metal industry. With Chiho and its routes (roots?) in China we are ideally positioned to participate in the growth.

Therefore, I am very confident in the recycling industry and the group’s future if growth is financed with a sound equity portion.

1. Please introduce yourself.

Raimund: I’m Raimund Doneit, Head of Purchasing and Sales

2. Since end of 2016, Chiho has come in as the sole shareholder and put forward the “New Scholz Strategy” with relevant restructuring measures. By far, what kind of positives have emerged in Scholz under the new strategy? And what are the major differences between the restructuring this time and those from years ago.

Raimund: The business relationships with customers and suppliers and the trust have improved significantly. Furthermore, the financial situation. The difference is the number of business consultants compared to earlier.

3. We noted that Scholz’s business performance has gradually improved since the start of 2017. What do you think was the main driving force?

Raimund: General economic situation – responsibility of employees – Trust of customers and suppliers.

4. Do you think the insecurity sentiment of employees from the past has gone or not? Do you think our employees are happy or not with our current improvements that have been achieved?

Raimund: The employees are definitely motivated again with the current improvement of the financial situation and the ensuring of the workplaces.

5. Chiho’s intention is not to become a financial investor, but is fully committed to be an industrial investor and to further explore the global recycling industry. With the integration with Scholz, Chiho wants to achieve synergy effects. From your point of view, do you feel such intention of Chiho? What benefits do you think Chiho has already brought to Scholz? And what more Chiho can bring? From your point of view, do you think the above mindset of CEG is perceivable or not? What do you think for the past year CEG has brought to Scholz? What else you would envisage for future from CEG to Scholz?

Raimund: In the current phase, I think that more synergistic effect is on the NE side. Advantage: the ensuring of short-term liquidity on the operational trading side. Further expansion of recycling activities in the Asian region.
In the short time imperceptible, but I think in the longer term, yes. CHIHO has achieved that there are no more negative headlines, and the image of Scholz has improved and Scholz is on a good way. Steady growth through synergies as well as clear policy and new acquisitions.

6. There are cultural differences between China and Germany. What do you think of these cultural and behavioral differences? Have you ever felt any cultural differences when interacting with your Chinese colleagues? Do you think those differences are manageable?

Raimund: Each culture has advantages and disadvantages, but if people can respect each other, and a company culture can be formed, it can be only the advantage for this company.

7. In what ways do you think we can capitalize on the Group’s enhanced strength now?

Raimund: Using of the existing contacts for worldwide extending.

8. About our vision, “to be the leader in global recycling business”, do you think you and the team around you share our vision? What could be done in your perspective, from shareholder side and from your scope of responsibility, to push forward the vision?

Raimund: In the long term, I share this vision under the conditions of the reasonable investment policy – Technological development – Strengthening of the operational trading / business. Appreciation of the operating units / trading or the freedom of decision-making leads to more motivation – annual meeting of the operating units.

9. Are you confident in the Group’s future, are you confident in the recycling business?

Raimund: I am confident for the future of the group and the recycling always.

1. Please introduce yourself.

Achim:My name is Achim Fetzer, Head of Corporate Audit. In this position I lead and manage a team of qualified internal auditors supplemented by guest auditors and occasional co-sourcing arrangements with external audit firms.

My team and I support the Board of Directors and the Audit Committee in fulfilling responsibilities, including oversight of financial reporting, operating and risk management controls, and the internal audit processes.

I am responsible for providing strategic and technical leadership to the independent internal audit function, and for providing advice on the company’s operations control environment and risk management practices to the management.

2. Since end of 2016, Chiho has come in as the sole shareholder and put forward the “New Scholz Strategy” with relevant restructuring measures. By far, what kind of positives have emerged in Scholz under the new strategy? And what are the major differences between the restructuring this time and those from years ago.

Achim:Since I joint Scholz in 2014 liquidity was a permanent bottleneck for the company because of the mentioned reasons. Enforcement of a long-lasting strategy was hardly not possible under these circumstances. CHIHO, as long-term strategic investor, restructured firstly the financials to get a solid capital structure and cash position. This was the starting point for boosting customers and employee’s confidence in our enterprise.

Focusing on our core competence, scrap metal recycling, and leveraging synergies between CHIHO and Scholz on an operational basis became meanwhile the day-to-day driving force.

3. We noted that Scholz’s business performance has gradually improved since the start of 2017. What do you think was the main driving force?

Achim:I mentioned the bull market before. For sure this helped to improve our performance because it was possible to generate some windfall profits. In addition, also our customers started to rebuild their trust into our financial situation. So we were able to recover some business volume.

4. Do you think the insecurity sentiment of employees from the past has gone or not? Do you think our employees are happy or not with our current improvements that have been achieved?

Achim:The feeling of insecurity has changed for the employees. On the one hand the successful restructuring activities helped us to overcome the fragile financial situations. On the other hand the cyclical raw material market turned into bull market in 2017 which helped us a lot to bring back the company on the right track. This was very important for the employees to rebuild confidence in the company.

Personally, I am very happy with this development and I assume my colleagues as well.

5. Chiho’s intention is not to become a financial investor, but is fully committed to be an industrial investor and to further explore the global recycling industry. With the integration with Scholz, Chiho wants to achieve synergy effects. From your point of view, do you feel such intention of Chiho? What benefits do you think Chiho has already brought to Scholz? And what more Chiho can bring? From your point of view, do you think the above mindset of CEG is perceivable or not? What do you think for the past year CEG has brought to Scholz? What else you would envisage for future from CEG to Scholz?

Achim:CHIHO is clearly perceived as a long-term industrial investor who is committed to create synergy effects.

Besides the needed and successfully realized financial restructuring, Scholz got a direct market access on the sales side, especially for non-ferrous products.

The external perception and company’s image has improved which is already measurable regarding volume and customer recovery.

Furthermore, CHIHO intensively worked on the internal communication and was bringing together the different management teams of the whole group. So collaboration and cultural exchange was fostered. In mid-term this will be the basis to create a multinational career-platform for our employees.

On the other hand, CHIHO will benefit from the know-how, technology and skilled people of Scholz for the exploration of the Chinese scrap metal recycling market which will be a huge growth potential for our group in the next years.

6. There are cultural differences between China and Germany. What do you think of these cultural and behavioral differences? Have you ever felt any cultural differences when interacting with your Chinese colleagues? Do you think those differences are manageable?

Achim:When we treat each other with respect and take into account that there are certain cultural differences I am convinced that those are manageable. We should see these differences not as an obstacle rather as an opportunity so that cultural diversity itself can be a source of advantage. By focusing on the similarities rather than the differences a company culture will prosper.

7. In what ways do you think we can capitalize on the Group’s enhanced strength now?

Achim:Scholz has established oneself in the market for a very reliable, professional and high quality scrap metal recycling service partner with cutting edge technology. To further develop the recycling network in China, CHIHO can capitalize the Scholz experience and know how.

In addition, we are now able to provide our services to our global key accounts by our own operations in China, Europe and North America. This is very unique in our industry but not for our clients. Especially our major suppliers like OEM´s, automotive suppliers and other well-known companies have big footprint in China already.

8. About our vision, “to be the leader in global recycling business”, do you think you and the team around you share our vision? What could be done in your perspective, from shareholder side and from your scope of responsibility, to push forward the vision?

Achim:“To be the leader in global recycling business” can have various dimensions. Here we must differentiate. Scholz was hit very hard with the endeavor becoming largest scrap recycler in terms of tonnage and volume inter alia because of a very unfavorable leverage for a cyclist market.

In the next step we have to derive a concrete strategy to specify our vision. In my perspective the following aspects need to be considered:

  • Best-in-class employer for our people and young talents
  • Above average profitability and return on investment
  • Stable margin in the market cycle
  • Healthy capital structure and a strong capital management
  • Best-in-class operations and state-of-the-art technology
  • Optimized logistics to bring down freight charges
  • Systematic customer relationship management to grow market share and volume
  • Selective acquisitions and organic investments for healthy growth in market shares

9. Are you confident in the Group’s future, are you confident in the recycling business?

Achim:Definitive, yes! Our planet and society are facing resources scarcity as one of the current megatrends. Therefore, recycling is essential to counter this development. Especially scrap metal recycling reduces Co2 emission, energy consumption and the excavation of raw materials like iron ore, bauxite, copper, etc. This fact itself makes me confident for the future of the recycling business and the CHIHO Group.

1. Please introduce yourself.

Markus: I’m Markus König, CEO of Kovosrot Group CZ s.r.o., Czech division of Scholz Group.

2. Since end of 2016, Chiho has come in as the sole shareholder and put forward the “New Scholz Strategy” with relevant restructuring measures. By far, what kind of positives have emerged in Scholz under the new strategy? And what are the major differences between the restructuring this time and those from years ago.

Markus: The Czech operations have also been affected by the liquidity problems of the Scholz-group in the past, albeit the financing requirements have been sufficed independently in the local Czech banking market. Facing the year-long ongoing rumors in the market about the financial problems of the Scholz-group a great effort had to be spent by the whole Czech staff on convincing suppliers to continue business. Success factor in these difficult times thus have been loyal, dedicated and trustworthy employees.

Strategies have been discussed and decided upon also in the past. From a Czech perspective it is important that the new strategy, and now especially the business strategy, is not only discussed and decided upon, however, also realized and pushed further to show the Czech employees the commitment of the new shareholder. A first step has been made here in 2016 by catching up for the investment backlog of the Czech operations; it will be important to continue on this path.

3. We noted that Scholz’s business performance has gradually improved since the start of 2017. What do you think was the main driving force?

Markus: The recovery of the markets for secondary metal scrap commencing in HY1 2106 after a drought stretching from 2012 is a key factor. This was furnished by successful restructuring that has laid fundaments for sound and profitable growth.

4. Do you think the insecurity sentiment of employees from the past has gone or not? Do you think our employees are happy or not with our current improvements that have been achieved?

Markus: Czech employees have always been loyal to the Scholz-group and have been willing to support the company also in difficult times evidenced in the cooperation and implementation of restructuring measures which have been necessary in the Czech operations, too. By now any negative sentiment from the past is gone, employees are looking positive into the future and want to be part of a success story in a key future industry, recycling.

5. Chiho’s intention is not to become a financial investor, but is fully committed to be an industrial investor and to further explore the global recycling industry. With the integration with Scholz, Chiho wants to achieve synergy effects. From your point of view, do you feel such intention of Chiho? What benefits do you think Chiho has already brought to Scholz? And what more Chiho can bring? From your point of view, do you think the above mindset of CEG is perceivable or not? What do you think for the past year CEG has brought to Scholz? What else you would envisage for future from CEG to Scholz?

Markus: Chiho is the world market leader in the recycling of electrical engines, and the core business of Scholz-group is the recycling of secondary metal scrap. Synergies can and will be achieved once the learning and educating from one side to the other is followed upon and supported; the China market offers extensive business opportunities that can be pursued with the knowledge and expertise of Scholz, whereas on the other hand drawing the right conclusions from the expected consumption of secondary metal scrap in China can detect business opportunities worldwide. A worldwide staff exchange program might be beneficial here.

So far Chiho has brought financial stability to Scholz; however, that was probably the easiest task. The difficult tasks, i.e. to develop the business in common under the new roof of Chiho and to make this partnership fruitful for all stakeholders are just laying before us.

6. There are cultural differences between China and Germany. What do you think of these cultural and behavioral differences? Have you ever felt any cultural differences when interacting with your Chinese colleagues? Do you think those differences are manageable?

Markus: For sure there are cultural differences. However, from what I have experienced so far those are not that big that they cannot be overcome to work for the common goal to develop the business successfully and profitably. To achieve this goal it will be essential to listen to and respect different thoughts and ideas, to discuss controversially but always respectfully and constructively.

7. In what ways do you think we can capitalize on the Group’s enhanced strength now?

Markus: It has to be strived for technology leadership! The combination of Chiho`s financial strength and Scholz`s recycling expertise is the basis for that. New trends in the metal recycling industry have to be detected through cooperation with research institutions and universities and a continuous dialogue with end consumers of metals to be close to their future (technological) needs. Investments into R+D will be crucial.

8. About our vision, “to be the leader in global recycling business”, do you think you and the team around you share our vision? What could be done in your perspective, from shareholder side and from your scope of responsibility, to push forward the vision?

Markus: The vision is shared and will be pursued further by Czech staff in aiming to become the leader in recycling business in its relevant Czech market.

Possible cross-border synergies, e.g. servicing multinational suppliers, have to be followed thoroughly to enhance awareness amongst staff that they are part of a key global recycling group.

9. Are you confident in the Group’s future, are you confident in the recycling business?

Markus: FOR SURE! The group is well prepared for the future and recycling business is one of the key future industries as our commodity “secondary metal scrap” will not only not cease to exist, however, will grow further.

1. Please introduce yourself.

Tom: My name is Tom Pietschmann and I am a Legal Counsel for the legal department at the Scholz Group in Essingen. The purpose of our department is to serve as a contact point for the management and for all group companies in regard to all legal matters which may arise. This includes support for any legal aspects related to the Scholz Group’s restructuring, general measures on corporate law and the drafting of investment contracts at the subsidiary level. Additionally, we keep an eye on current legislative developments and ensure that all the involved parties are informed as soon as any legal parameters in our field of business have changed.

2. Since end of 2016, Chiho has come in as the sole shareholder and put forward the “New Scholz Strategy” with relevant restructuring measures. By far, what kind of positives have emerged in Scholz under the new strategy? And what are the major differences between the restructuring this time and those from years ago.

Tom: Here, let us first take a look at the sustainable development of the company’s capital. Thanks to a broad array of measures introduced by the new shareholders, the Scholz Group has once again managed to establish a solid financial basis. By executing effective public advertising communications for these measures, we have been able to build trust for the Scholz Group by way of negotiations with the shareholders.

What is evident from the legal perspective is that we are currently dealing with an investor who is actively involved in reshaping the Scholz Group and who is bringing in financial resources as well as know-how. The integration of the Scholz within the Chiho Group is an essential component of the restructuring concept.

3. We noted that Scholz’s business performance has gradually improved since the start of 2017. What do you think was the main driving force?

Tom: Positive trends on the market have, of course, had a major impact on the positive developments at the Scholz Group. However, a company is only able to take advantage of such developments when all of its staff members are fully committed to ongoing business operations. By achieving financial stability at the Scholz Group, trust in the company has grown on the market, a development which staff and employees know how to utilise. Efforts to seek out and take advantage of new opportunities is one aspect which is worth mentioning here.

4. Do you think the insecurity sentiment of employees from the past has gone or not? Do you think our employees are happy or not with our current improvements that have been achieved?

Tom: Recently I have noticed that the Scholz Group’s financial situation is no longer a topic of discussion among the staff. This situation has changed quite a bit since I entered the company in 2015. For me, this has been a clear indication that any concerns about the threat of a pending insolvency have disappeared amount the staff.

In my day-to-day work, I have also noticed that the staff exhibit greater focus. Initially, the questions I received directly from the staff members almost exclusively had to do with the restructuring and, as such, with the past. This was evident in small matters (e.g. about limitation periods for claims). Today, however, the situation is quite different: the legal questions that are asked tend to be oriented to the future rather than to the past and they primarily involve the drafting of contracts with our business partners. In my view, this is a clear indication that our staff members are increasingly focusing on their work and are less concerned with issues related to the restructuring.

5. Chiho’s intention is not to become a financial investor, but is fully committed to be an industrial investor and to further explore the global recycling industry. With the integration with Scholz, Chiho wants to achieve synergy effects. From your point of view, do you feel such intention of Chiho? What benefits do you think Chiho has already brought to Scholz? And what more Chiho can bring? From your point of view, do you think the above mindset of CEG is perceivable or not? What do you think for the past year CEG has brought to Scholz? What else you would envisage for future from CEG to Scholz?

Tom: It is evident that Scholz’ integration within Chiho is an essential component and one which will allow for synergy effects to be identified and implemented. The measures which Chiho has so far carried out indicate that we are dealing with a strategic investor and not simply a financial investor. This begins with the intertwining of reporting and decision-making paths among the group companies, extending all of the way up to knowledge exchange at the level of daily business.

One crucial advantage which I experience in my own daily work is that views towards the business partners have changed. The staff were previously well aware of the fact that the name Scholz carries immense weight and enjoys recognition across various industries. Through its connections with Chiho (which is evident in the new corporate identity), Scholz has gained an even greater impact. The company has elevated its status further beyond its previous position as a globally active recycling enterprise from Baden-Württemberg Germany.

Additional advantages that the future will bring have to do with knowledge exchange among individual departments within the company. There is great potential for cooperation in this area to bear more fruit.

6. There are cultural differences between China and Germany. What do you think of these cultural and behavioral differences? Have you ever felt any cultural differences when interacting with your Chinese colleagues? Do you think those differences are manageable?

Tom: We are all aware of the fact that cultural differences exist. My experience up to now has, however, shown that this has not made itself apparent in the professional context. Training sessions for our staff members have been successful in making them aware of these cultural differences and becoming more sensitive to them.

Of course, we cannot exclude the possibility that these differences will become more apparent through additional integration and that they could present themselves as a problem. But I anticipate that we have the right tools to handle this situation. Particularly important in this regard is ensuring understanding for the respective cultural background on both sides, as well as knowledge about the allocation of roles. The decisive keyword here is communication. Communication is the only way to effectively resolve any cultural tensions that may arise between the Chinese and the German staff, without them ending in conflict.

7. In what ways do you think we can capitalize on the Group’s enhanced strength now?

Tom: The joint appearance of Chiho and Scholz as a single group has the potential to particularly strengthen our position within negotiations. Our enhanced degree of know-how can be applied to create variable and diverse solutions for any issue area. In other words: there is no longer only one Scholz solution or one Chiho solution to specific issues and the group can now act on the basis of an expanded knowledge base.

8. About our vision, “to be the leader in global recycling business”, do you think you and the team around you share our vision? What could be done in your perspective, from shareholder side and from your scope of responsibility, to push forward the vision?

Tom: I certainly share this feeling in terms of Group Legal. All of us (Dr. Matthias Weiss, Head of Group Legal, Martin Krissmer, Legal Counsel, and myself) are constantly striving to further optimise our processes and, through this, to generate optimum benefit for the group.

9. Are you confident in the Group’s future, are you confident in the recycling business?

Tom: From my perspective, the recycling business keeps gaining in importance. Especially in the future when resources become scarcer and the climate-related developments have to be stopped, humanity will have to rely on modern recycling enterprises. Considering this, it doesn’t matter which recycling sector we speak of (e.g. paper, scrap metal) as each one carries immense importance and will become even more so in the future. I therefore have a very high level of confidence in the recycling business itself.

And I share equal confidence in regards to the future of the group. We have the foundation, the size and the knowledge to assume an important position within this highly competitive industry. Even if the number of market players continues to shrink, I am in no way concerned by this. On the contrary, I believe that our group will survive any such developments. With this in mind, it is important for us to successfully implement our stated vision – to be the globe’s leading recycling company.

1. Please introduce yourself.

Janine:I´m Janine Feist, Head of Human Resources Department for different companies in the German/Poland Unit.

2. Since end of 2016, Chiho has come in as the sole shareholder and put forward the “New Scholz Strategy” with relevant restructuring measures. By far, what kind of positives have emerged in Scholz under the new strategy? And what are the major differences between the restructuring this time and those from years ago.

Janine:All processes are checked for efficiency and every single business for profitability. Lost confidence in customers and suppliers relationship in the past can now be regained. For the customers our know-how is again in the foreground and not our financial position.

3. We noted that Scholz’s business performance has gradually improved since the start of 2017. What do you think was the main driving force?

Janine: The industry in Germany is currently very strong and still growing. Scholz participates in this development. It is enormously important to have the strategic investor Chiho at the side.

4. Do you think the insecurity sentiment of employees from the past has gone or not? Do you think our employees are happy or not with our current improvements that have been achieved?

Janine:It is true that the financial insecurity that has existed in the past and the resulting insolvency risk has posed a particular challenge to employees. Particularly in the operative area, in dealing with the suppliers and their trust in our company. Especially these employees in the operational area and their customer proximity have also contributed to the survival of the company. The employees in the back office (such as finance, controlling, accounting, et cetera) fought together in mutual trust for our customers. Because of Chiho the uncertainty was taken. Now it is important to take the employees along by opening new perspectives and development opportunities and to bind them to the company.

5. Chiho’s intention is not to become a financial investor, but is fully committed to be an industrial investor and to further explore the global recycling industry. With the integration with Scholz, Chiho wants to achieve synergy effects. From your point of view, do you feel such intention of Chiho? What benefits do you think Chiho has already brought to Scholz? And what more Chiho can bring? From your point of view, do you think the above mindset of CEG is perceivable or not? What do you think for the past year CEG has brought to Scholz? What else you would envisage for future from CEG to Scholz?

Janine:Chiho allows Scholz, in addition to the financial background, a significantly better access to the Chinese market. We hope that evolves. Likewise, through Scholz, Chiho has direct access to European and American markets as well as to Scholz technologies and the know-how of the employees. This strengthens the competitiveness of the Chiho / Scholz Group and makes them sustainable.

6. There are cultural differences between China and Germany. What do you think of these cultural and behavioral differences? Have you ever felt any cultural differences when interacting with your Chinese colleagues? Do you think those differences are manageable?

Janine:Precision and speed are not inconsistent. On the contrary, in their unity they lead to a high competitiveness.

7. In what ways do you think we can capitalize on the Group’s enhanced strength now?

Janine:Unite, develop and adapt the know-how of all employees to the constantly changing market conditions.

8. About our vision, “to be the leader in global recycling business”, do you think you and the team around you share our vision? What could be done in your perspective, from shareholder side and from your scope of responsibility, to push forward the vision?

Janine:Becoming the world’s leading recycling company means being efficient and profitable. The further development of know-how through appropriate training of our employees and tying our employees to the company through appropriate reward systems, these are parts of the HR department’s vision.

9. Are you confident in the Group’s future, are you confident in the recycling business?

Janine:The sum of all resources on our planet is constant. Primary raw materials are used to make products that become secondary raw materials at the end of their lives. Recovering these resources for the economic cycle is an existential requirement for the future of humanity. Therefore, we are convinced that the recycling business will become increasingly important in the future. Our group is well-positioned to unite global approaches.