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Letter from the chairman
"In 2016 we laid down the first cornerstones upon which we will roll out our strategic plan “MORE TO BE”, which will transform our company into a genuine global leader in meat casings, a leader in service, a technological key player and a pioneer in costs."
Viscofan Chairman
Dear shareholder,
 
Throughout 2016 we undertook intensive activity driven by our passion and commitment to the team to transform the Viscofan Group into a better, stronger, leading company that meets the expectations of all those that interact with us, from our customers to our suppliers, from our collaborators to our shareholders, and, in short, the entire society in which we live.
 
Our commitment to this future means that we must continue to implement our sustainability initiatives, understood to be a management vision that enables the creation of value in a balanced way for our interest groups, thus allowing us to respond better to the challenges posed by world leadership in a company in the 21st century food sector. Meeting expectations also means that we need to gauge a deeper understanding of the concerns and needs of them all. For this reason, we are strengthening our dialogue with the different stakeholders and we have reinforced our commitments with them all with the signing of the United Nations Global Compact, whose 17 Sustainable Development Goals are the most discernible manifestation of this commitment.
 
In 2016 we laid down the first cornerstones upon which we will roll out our strategic plan “MORE TO BE”, which will transform our company into a genuine global leader, a leader in service, a technological key player and a pioneer in costs. An ambitious triple leadership that in 2020 will enable us to be the first or second world producer by market share in the main casings markets.
 
These cornerstones can be seen if we look at the work carried out in the construction of the new plant in Spain, in Cáseda, where fibrous casing production machinery will be installed throughout the second half of 2017. A project that also has special significance, as it is the same plant where the Viscofan Group started out in 1975. Far from conforming, we are working with the same enthusiasm as we did back then to install this new fibrous casing technology, which will improve our European customer service, and will also help us to keep improving our activity in the United States, where there will be a greater focus on the domestic market.
 
Viscofan is a unique company within our sector, as we have our own production technology in the main families of casings. This technological roll-out is our response to our vocation to offer the very best service to our customers, meeting all their needs. The results of this commitment have been all the initiatives that we have undertaken to strengthen our offer in plastics, where our presence in the market is lower than our potential.
 
These initiative include the implementation of the new plant in San Luis Potosí (Mexico), the construction of the Nanopack technology facility in Cáseda (Spain) and the improvement works in the Czech Republic and Brazil. But along with this, I would like to particularly mention the acquisition of the European and North American Vector companies. With this purchase we have made a qualitative and quantitative leap forward, both in our commercial reputation and in the range of products that make up our portfolio.
 
I would like to make the most of these lines to congratulate the excellent Vector team and their availability for quick integration, as well as the Viscofan team, which has moved to share know-how and to start working as soon as possible to get the very most out of the opportunities offered by the
Viscofan-Vector combination.
 
In collagen we have continued to grow in casings sales, and we have expanded the productive capacity of the Uruguay plant, reinforcing our leading position in Latin America, where we hope to continue to grow in the coming years.
 
All of these initiatives are some of the most shining examples, but there are many more. This dynamism would not have been possible without the commitment of the over 4,500 people that are currently working in the Viscofan Group in the 15 countries where we are present, and in the over 100 countries where we have business relationships. A Group that continues to grow and that generates a greater employment volume.
 
The growth of the team is accompanied by greater strengthening of safety, hygiene and environmental issues. In 2016 we obtained the ISO 14001 and OHSAS 18001 certifications in some of our centres of excellence and we are committed to achieving this certification across all the Group’s plants upon finalising the strategic plan. The results are already tangible, with less accidents occurring, but we must always remain on maximum alert in this issue.
 
Another example of the importance of safety and the risk management protocols was the quick action of the Viscofan team in Germany and the teams that were deployed in Weinheim to put out the fire in the auxiliary replacement pieces workshop last November, with no injuries occurring and with production re-starting within 48 hours, without affecting our customers’ service.
 
It was a very important year for the Viscofan Group, in which the financial results obtained fell below our initial expectations, affected by the strong drop in the Brazilian market and the weakness of currencies against the €. Revenue fell 1.3% to 731 million euros, and the EBITDA by 4.6% to 204 million euros. Without a doubt, these results had a negative influence on the share price development. Despite this market context, Viscofan strengthened its leading position in the industry and achieved a new historical record in net income with 125 million euros, some 4.1% more than in the previous year.
 
This creation of value is supported by a strong balance sheet that enables us to implement ambitious future projects and to offer you a new high in the distribution of results without compromising the company’s risk profile. Direct cash payouts rose to €1.45 per share, some 7.4% more than in the previous year, adding to a trajectory of over a decade of growing dividend.
 
Viscofan gained market share in a difficult year, but more importantly, today Viscofan is undoubtedly a better company. We are leaders in an industry with solid foundations for growth, and we have a team with the ambition to lead services, technology and costs. We are in a commendable position to embark upon new projects.
 
Growth projects that will be reflected in 2017 in an increase of revenue from 4% to 7%, from 3% to 7% in the EBITDA and a net result that will remain steady or will rise by 3% compared to 2016.
 
We are continuing to invest in our business, with around 85 million euros in 2017, to strengthen our company, to consolidate our leading position even further, and to be prepared to capitalise on opportunities that arise - and that are being given - in this market to all of us that have a future in mid and long-term sustainable investments.
 
In the name of the Board of Directors and all the team that makes up the Viscofan Group, we thank you for your trust.
 
Your faithfully,
José Domingo de Ampuero y Osma