Last year has a special importance, as we celebrated the 50th anniversary of the Group, which implies five decades of continuous learning, consolidation, and high dynamism, as well as strong innovation and the ability to adapt to internal and global changes. This journey has given rise to a diversified, sustainable business model that is well positioned for present and future challenges.

Throughout this time, we have forged a solid reputation in the market, strengthening the trust of our shareholders, strategic partners, suppliers, customers, collaborators, and the communities with which we coexist, which will continue to be a cornerstone for KUO's sustainable growth.

During 2023, we continued to navigate a highly interconnected global environment, which brought advantages and challenges to our business portfolio.

In recent years, several global players in the petrochemical and Pork Meat industries have significantly increased their capacity and product offerings, largely destined for the Chinese market. Excess capacity, coupled with weaker demand from the Chinese economy in the first place, and from Europe to a lesser extent, caused imbalances between international supply and demand in some of our main products and markets.

This generated mixed results in the different businesses of the Group, the global imbalance had a negative effect in the Chemical sector, where there was a significant decrease in the level of prices and volume, given the downward price curve in the industry, as well as the global oversupply of Asian products. Despite the above, during the year we maintained our focus on value-added applications and sustainable solutions.

The Pork Meat business experienced high raw material costs during the first half of 2023, along with increased price pressure. However, during the last months of the year, we observed a change in trend and a clear recovery in EBITDA due to a decrease in costs and expenses, as well as the consolidation of operating efficiencies.

In the Herdez Del Fuerte business, consumers continued to show a preference for our brands' products, especially tomato puree, sauces, and guacamole, which led us to obtain solid results in both Mexico and the United States.

The Automotive sector business showed a high level of dynamism; the investment in technology made in recent years has paid off with the great acceptance of the DCT transmission in the Transmissions business and has been the catalyst for the next variations in this technology. It is worth highlighting the strong performance of the Aftermarket business, which reached historical figures in terms of both Revenues and EBITDA, with a significant demand for the main products, coupled with operating efficiencies.

These results show the viability of having a diversified business portfolio in industries, regions, currencies, and supply chains, which has allowed us to maintain a positive balance even in challenging times, which, together with a professional team of close to 25,000 collaborators, highly committed to the institutional values of teamwork and innovation, has given the Group the flexibility and resilience to face any circumstance.

SUSTAINABILITY STRATEGY
‍To strengthen our sustainability strategy, aimed at mitigating risks in the three dimensions of Environmental, Social and Governance ("ESG"), as well as guaranteeing the operational continuity and growth of the portfolio's businesses, we have maintained our focus on strengthening the lines of action of each of the cornerstones that make up our Sustainability Model.

During the year, we carried out a strict monitoring of the key indicators or"scorecard", both at the individual level in each of the businesses, as well as at the corporate level, to provide adequate follow-up of their evolution, based on industry best practices.

During 2023, KUO's materiality analysis was updated, with a much broader scope, in accordance with current standards, to obtain a more representative sample of the most relevant issues that are on the agenda of all our stakeholders. Thus, we will seek to unify initiatives and projects, so that they continue to be aligned with the corporate strategy.

Likewise, during this period we conducted an inventory of emissions from scopes 1, 2 and 3 of all our operations, to integrate and strengthen projects aimed at reducing the carbon footprint of the entire Group.

In addition, we conducted an analysis of climate change risks and opportunities to mitigate current and future risks, as well as to take advantage of opportunities in this regard to enhance our competitive advantages.

During the year, we intensified collaboration between internal interdisciplinary teams to review and quantify the ESG characteristics of all ongoing projects, as well as future projects, to ensure their viability, and to continue working towards better disclosure of dual materiality.

OPERATIONAL
AND FINANCIAL HIGHLIGHTS
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‍During 2023, pro forma consolidated Revenues reached $54,886 million, which represented a 14% decrease compared to the previous year, mainly explained by the lower performance of the Chemical sector businesses, lower sales in the Pork Meat business, as well as lower sales in the Transmissions business in Mexican pesos.

This was partially offset by higher demand for Herdez Del Fuerte's main categories, especially tomato puree, mole, vegetables, sauces, and ketchup in Mexico, as well as sauces and guacamole in the United States, together with a greater displacement of the brakes, engine, and powertrain lines in the Aftermarket business.

It is worth nothing that throughout the year, we observed a significant appreciation of the Mexican peso exchange rate against the US dollar, which had a negative impact on KUO's results, both in terms of Revenues and EBITDA.

This, combined with lower prices and volume in the Chemicals sector business, as well as higher raw material costs in the Pork Meat business during the first quarters of the year, resulted in a 29% decrease in pro forma consolidated EBITDA, which reached $4,278 million.

The Consumer sector accounted for 51% of the Group's total Revenue, followed by the Automotive sector with 27% and Chemical with 21%, while the percentage of exports to total Revenue was 52%.

In the Consumer sector, Revenues registered a slight variation compared to the previous year, which is explained by lower volume and price in the Pork Meat business during the second half of the year, which was offset by the higher demand in Herdez Del Fuerte in the main categories. At EBITDA level, there was a 3% contraction due to higher corn and soybean paste costs in the Pork Meat business during the first half of the year, which was offset by amore favorable mix, as well as lower raw material costs in Herdez Del Fuerte.

The Chemical sector businesses had a decrease in Revenue due to lower prices and volume in applications in both businesses, because of the downward price curve in the industry, a global oversupply of Asian products, combined with a negative effect from the appreciation of the Mexican peso against the US dollar. At the EBITDA level, the decrease was due to the drop in sales, coupled with a negative impact from the devaluation of inventories caused by the decrease in prices of the main raw materials, butadiene, and styrene.

The Automotive sector recorded a slight decrease in Revenue due to lower sales in the Transmissions business in Mexican pesos, caused by the negative effect of the appreciation of the Mexican peso against the US dollar during the period, which was partially offset by higher demand for brake, engine, and powertrain parts in the Aftermarket business. EBITDA grew year-over-year due to a better product mix, coupled with operating efficiencies.

Maintaining our focus on our short- and long-term growth strategy, we ended 2023 with a strong Balance Sheet. During the year, we carried out amortizations and debt payments of approximately US $61 million, while achieving significant working capital efficiencies.

We will continue to leverage Mexico's geographic position within the North American block, so that our businesses remain an optimal vehicle for driving "Nearshoring" opportunities, growing our export capacity. We will continue to strive for cutting-edge technology, to establish high standards of sustainability and to offer the best quality in our products.

We will be ready to adapt to the changes demanded by globalization, with the support of each of the people who make up the KUO team.

We would like to thank each of the employees that make up our human capital, for their commitment and professionalism, they are the cornerstone that allows us to foresee a promising future. We would also like to express our gratitude to our shareholders and strategic partners, who have placed their trust in KUO for more than 50 years. We are convinced that together we will continue to tell a story of success for our Group and for our country.