Dear shareholder,
Last year saw the end of the 2009 to 2011 strategic period, which we called “Be ONE” and which had a clear objective: to strengthen our leadership, mainly by making use of the economies of scale that the Viscofan Group had acquired through its active role in the acquisition and consolidation of companies that further promoted our international profile. Today, Viscofan products are present in more than 100 countries worldwide.
During these years the Viscofan Group underwent a major transformation, significantly improving our production technologies and achieving greater solidity in our international operations.
Proof of the success of this plan is shown in the accumulated earnings. At end of this period, 2011 revenues reached €667 million, 21% more than the revenues obtained in 2008, EBITDA was €162 million, 1.5 times the 2008 figure and, for the first time, net profit was in excess of €100 million, doubling the net profit obtained in 2008 despite being in a globally adverse economic situation, both due to the weakness of the world economy and the strong upward pressure on raw materials and energy resources.
Specifically during 2011, growth in consolidated profit benefited from the positive contribution from both the casings division and vegetable foods. Casings grew by 5% in terms of revenue and 25% in net profit for the year while the IAN Group saw a 7% increase in sales and 7% increase in net profit, in particularly complex circumstances.
In recent years we have kept up intensive activity with major challenges for our workforce and in this respect it is useful to highlight some examples carried in 2011:
• Collagen capacity in continental Europe was increased in our centres in Germany with new “superfast” technology machinery and in Spain where start-up of the production capacity went ahead before schedule, reflecting the Viscofan Group's commitment and capacity for meeting an increase in demand.
• Furthermore, in 2011 we completed the transfer of non-edible collagen capacity from Germany to Serbia, a double challenge if we consider the fact that it took place in a period of high demand, with the resulting pressure on deadlines and start-up. This transfer of production capacity was the culmination of a long term industrial redevelopment process, which began in 2005 with the acquisition of Koteks, and which has been significantly accelerated over the last two years, with investments in facilities, training and machinery which enable the Viscofan Group to have the best non-edible collagen technology in Serbia today.
• It is a great satisfaction that, one year after opening the converting plant in China we are already working with new shifts to increase the production capacity of this plant, and also carrying out activities for the opening of a new collagen extrusion plant in 2013.
• We have also increased fibrous capacity in the United States, a product family where we have a smaller market share but in which we are also exploiting growth opportunities.
• Also, in the IAN Group, the acquisition of the remaining 50% of our China subsidiary has been completed, which will allow us improved access to raw materials and greater flexibility in decision-making.
These are the most visible examples, but alongside them are general improvements in the industrial facilities. A work of great intangible value which has led us to be better prepared today to rise up to the growth challenges in the coming years. This preparation is key because our sector is immersed in a historic opportunity for growth, promoted by the impetus of increased globalisation in consumption patterns and the industrialisation of meat processors. Our customers have seen artificial casings as a means to improve productivity and consumer satisfaction in a period marked by major competitive difficulties.
This is why we have set up the “Be MORE” strategy for 2012-2015. A strategy that involves a natural development of the successes achieved in “Be ONE” to move forward in our global leadership of the casings market. “Be MORE” means Market growth, Optimisation, Return for interest groups and Excellence.
It is a strategy that places our customers at the heart of our activities and includes ambitious expansion projects, such as the new edible collagen casing extrusion centres in China and Latin America, areas where we expect major market growth in the next few years. We also have increased capacity in cellulose, fibrous and plastic, which help consolidate our position as global leaders.
Our plans are not risk free. They coexist with a harsh economic climate, characterised by weak GDP performance in the world’s main economies and the difficulties our customers are experiencing in accessing financing.
Particularly in this context, we have to be a source of solutions for our customers in their challenges to reduce production costs, while at the same time dealing with the pressure of the rising costs of our main raw materials and energy.
We are talking about intense activity over the next few years, which will require the knowledge and commitment of the excellent workforce of the Viscofan Group. At present there are more than 4,000 of us working in our establishments in 13 countries, split between sales offices and production centres; a multicultural richness that is bearing fruit thanks to continuous communication and interaction, our ability to improve and through commitment to competitiveness and customer service. This formidable workforce is undoubtedly the best guarantee for the future success of Viscofan; this is why we continue to develop policies for managing and encouraging talent to allow us to maintain this great competitive advantage.
Together we are working towards a more leading and sustainable Viscofan Group, with safer working environments and focus on reducing the impact of our activities on the environment.
We are faced with a future we can look forward to, reflected in the profit forecasts communicated to the market for 2012, where we expect, with regard to 2011, a 9% to 11% increase in revenues, a 9% to 12% increase in EBITDA and a 4% to 7% increase in net profit.
These plans would not be possible without a solid financial position that allows us to accelerate investment plans and set up in new countries, with a level of debt that does not jeopardise the sustainability of the future growth of Viscofan in a highly restricted market, as well as the flexibility required to make the most of the opportunities for inorganic growth that could arise during this period of expansion.
The strength of our operations allows us to look to the future with hope and pay our shareholders according to our profit growth. For this reason, the Board of Directors has proposed for approval by the General Shareholders' Meeting a total payout of €1.00 per share as an interim dividend, additional dividend and meeting attendance bonus. This remuneration is 25% higher than that approved the previous year and it is double the payout to shareholders in 2008, just before we started the “Be ONE” period. During the same period the share price also doubled.
As usual, I would like to end this letter by thanking you for your support and trust, reiterating my commitment to growth and long term creation of value, as well as that of the Board of Directors, the management and the rest of the Viscofan workers.
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Your faithfully,
José Domingo de Ampuero y Osma