Bri-Chem Corp. Letter to Shareholders

Executive Summary

• Bri‑Chem’s newly reconstituted board has launched a comprehensive strategic realignment focused on internal manufacturing, product portfolio optimization, and SG&A cost reductions.
• The company will exit the oil‑based mud business, close underperforming facilities in Canada and the U.S., and tighten its customer return policy to improve margins and working‑capital efficiency.
• Expected financial benefits include gross‑margin expansion and more than $1.6 million of annualized SG&A savings, positioning Bri‑Chem for a stronger, more resilient operating model in fiscal 2026.

Key Details

• Board transition brings >100 years combined experience in drilling chemicals, manufacturing, and operations.
• Shift from third‑party to internal manufacturing of select products to recapture margin and reduce supplier concentration risk.
• Product review to rationalize underperforming SKUs and introduce higher‑margin chemistries; private‑label manufacturing to become a core value proposition.
• Sales strategy realignment to engage operators/service companies earlier in well‑planning, aiming to improve product pull‑through and protect margins.
• Expansion into adjacent markets (cementing, frac chemicals, selected industrial applications) and international regions (Middle East, Far East, Caribbean, South America).
• Exit from oil‑based mud business; capital and inventory redeployed toward higher‑margin internally manufactured technologies.
• Revised customer return policy: returns limited to pre‑approved circumstances with discretionary restocking fees to curb inventory volatility and margin erosion.
• Facility closures in Canada and the United States (maintaining strategic presence in Houston) to generate SG&A savings.
• Workforce optimization, director compensation restructuring, and real‑estate consolidation in Alberta and Oklahoma contribute to cost reductions.
• Anticipated financial impact: > $1.6 million annualized SG&A savings; improved gross margin and reduced interest expense via better working‑capital discipline.

Notable Quotes

• “The actions underway in Fiscal 2026 lay the foundation for a stronger company and improved returns in the years ahead.” – Barry Hugghins, CEO, Bri‑Chem Corp.