Dear shareholder,
It is a pleasure for me to present our 2010 annual report. 2010 was an exceptional year for the Viscofan Group, not just in economic terms, where our results clearly demonstrate the health of the Group’s position, but also from an operational point of view, with historic landmarks achieved and many growth opportunities open to us.
Whilst it has been an excellent year, this does not mean that it has been by any means easy in today’s complex global financial situation.
The signs of growth are still very weak in the most advanced economies, and the imbalances which have still not been redressed in the financial system may cause difficulties for our customers’ expansion plans; as a result, we are continuing our policy of cost control and taking all the precautions we can to offset the risks inherent in the current economic volatility and lack of a clear outlook.
As I said in my letter last year, the Viscofan Group is involved in exciting projects for all of its operations, the success of which would to a great extent depend on volumes recovering in 2010. This recovery in volumes materialised in the second half of the year for all our families of casings; these growth rates have continued into 2011 and we expect them to continue in the coming years.
This growth has enabled us to exceed our 2010 targets: revenues increased by 9% to €634 million; EBITDA increased by 20% to €154 million; and net profit increased to a record of over €81 million, 27% up on 2009.
These results have been accompanied by intensive work within the Viscofan Group, where we have continued to drive forward key initiatives to improve our competitive position and our ability to generate value for our shareholders. Of these initiatives, I would like to highlight the following:
- The opening of a converting plant in China. This is an excellent example of Viscofan’s capacity to take on new challenges and carry them out successfully. Starting a new operation from scratch and getting it to the production testing stage in just 14 months is a historic achievement. This achievement was made possible by the dedication of the whole company, not just those who travelled to China, but also everyone who contributed in any way to the launch of Viscofan’s first production centre in Asia.
- Profits in our Serbia operation. Our Novi Sad production centre is being resized to achieve greater critical mass for non-edible collagen and to open up access to countries in the east of Europe and contribute to higher returns on the Group’s operations.
- In October we externalised one of our German pension fund with a value of nearly €15 million; whilst this represents a cash outflow, it will reduce the risks associated with the volatility of such liabilities.
These are just a few examples; however, our continuing efforts to improve our activities every day are even more significant. I would like to thank all members of the Viscofan Group’s team for their commitment to continuous improvement and achieving excellence. This has contributed to the Group being able to achieve historic levels of productive capacity just as demand is speeding up, and to undertake new improvement challenges, not only in terms of production and expansion of capacity, but also in innovation, in our systems, processes, products, commercial initiatives, cultural integration, attraction and retention of talent and in many other areas.
This acknowledgment to the Viscofan team would not be complete if I do not make a special mention of Juan Carlos García de la Rasilla, our General manager in Serbia who sadly passed away last year, and also to our other colleagues who are no longer with us.
The improvement in our activities was not just in our casings division; we also achieved new advances in our vegetable food division. In a market made particularly difficult by the contraction of consumption in Spain, and given the strong competition in the retail market, the IAN Group and, in particular, its Carretilla brand, has strengthened its competitive position gaining market share, increasing exports and boosting margins.
We are now facing an exciting future with many improvement projects underway and rapid growth in markets all over the world, particularly in China, but also in other emerging economies where the use of artificial casings are not yet more commonly used than natural gut.
This has led us to set ourselves financial targets for 2011 which once again exceed our results in the previous year, and also to accelerate investment projects which will enable growth and value creation over the coming years. Nevertheless, 2011 will not be an easy year either; there are still no clear signs of improvement in the economic and geopolitical situation, and the first consequences are starting to be seen in increases in commodity and energy prices this year.
A promising future which we are facing from a solid financial position, with the flexibility required to take advantage of the growth opportunities which arise in this market, and which at the same time enables us to offer remuneration to shareholders so that they can participate in the improvement in results. For this reason, the Board of Directors has agreed to submit a proposal for an additional dividend of €0.204 per share and a capital reimbursement of €0.29 per share for approval at the company’s shareholder meeting. These two shareholder payments plus the €0.30 per share interim dividend paid against 2010 profits and the AGM attendance bonus imply total shareholder remuneration of €0.80 per share, 28% more than the year before.
This remuneration is additional to the 59.7% increase in the share price in 2010. This growth is backed by a significant improvement in all of Viscofan’s operations and the confidence which you, our shareholders, have placed in us.
As a result, I would like to personally thank you for your support and encourage you to continue to trust in this company, which is at an exciting point, with significant opportunities for growth and value creation.
Your faithfully,
José Domingo de Ampuero y Osma