50th Anniversary 2005 Annual Report 2 Contents 2005 ANNUAL REPORT Highlights 05 Message from the Chairman 06 Financial Group 09 Caja Laboral 12 Lagun-Aro 14 Seguros Lagun-Aro 15 Industrial Group 17 Automotive 21 Components 22 Construction 23 Industrial Equipment 24 Household Goods 25 Engineering and Capital Goods 26 Machine Tools 27 Industrial Systems 28 MCC Worldwide 29 Distribution Group 31 Distribution 32 Research, Training and Education 37 Research Centres 38 Training and Education Centres 41 Financial Statement and Trading Account 43 Sustainability Overview 49 Governance Structure 61 Corporate and Management Bodies 62 Companies Affiliated to MCC 65 33 Certificates and Awards 2005 ANNUAL REPORT As in previous years, several MCC businesses received out- 1 Finalist for the EFQM European Award obtained side endorsement in 2005 within the sphere of excellence by Fagor Cocción in business management: Ahizke-CIM (Language Centre, 1 European Environmental Award, won by Orkli Mondragón) and Politeknika Ikastegia Txorierri received the 6 Gold Q: Caja Laboral, CIM, Copreci, Gold Q from Euskalit, whereas Fagor Electrodomésticos Fagor Minidomésticos, Fagor Industrial and Politeknika Confort was awarded the Silver Q. Txorierri Ikastegia. 13 Silver Q: Eroski PGM, Fresh Produce Platform of the In addition, 4 Cooperatives were certified to the ISO Eroski Group, Fagor Electrodomésticos Confort, 14000 Environmental Standard, which means that MCC Fagor Electrodomésticos Lavado, Fagor Mueble, now has 42 certificates in this field. Likewise, 5 certificates Fagor Electrónica, Geyser Gastech, Lea Artibai were awarded for Systems for the Prevention of Industrial Ikastetxea, Mondragon Goi Eskola Politeknikoa, Orkli, Hazards, OHSAS, adding to the 3 obtained in 2004, the year in which this certification was first introduced. Seguros Lagun Aro, Soraluce and Ulma Packaging. 4 registered in EMAS: Danobat, Fagor Ederlan, Fagor At 31 December 2005, the roll of honour for endorsements, Electrodomésticos and Maier. certificates and awards for quality and business excellence 1 SA 8000 Certificate for Social Responsibility at MCC was as follows: awarded to Eroski. 42 ISO 14000 Environmental Certificates. 1 European Business Excellence Award, 8 OHSAS Certificates for Systems for the Prevention of won by Irizar. Industrial Hazards. I 4 Highlights at 31.12.2005 2005 ANNUAL REPORT (In million euros) BUSINESS PERFORMANCE 2004 2005 %VARIATION MCC Total Assets 18,593 22,977 23.6 MCC Equity 3,757 4,226 12.5 MCC Consolidated Earnings 502 545 8.5 Caja Laboral Customer Funds Managed 10,042 11,036 9.9 Lagun-Aro Endowment Fund 2,995 3,303 10.3 Total Turnover (Industrial and Distribution) 10,459 11,859 13.4 MCC Overall Investments 730 866 18.6 EMPLOYMENT MCC workforce at year-end 70,884 78,455 10.7 % members of cooperative workforce 81.1 81 _ % women members of cooperative workforce 41.7 41.9 0.5 Incident/accident rate for Industrial Group 62.3 58.3 -6.4 STAKEHOLDING Shareholder capital of worker members 1,846 2,010 8.9 No. worker members in Governing Bodies 826 835 1.1 SOLIDARITY Resources allocated to community schemes 25 33 32.0 No, students at MCC Educational Centres 8,154 7,642 -6.3 RESPONSIBLE ENVIRONMENTAL MANAGEMENT No. ISO 14000 Certificates in force 38 42 10.5 No. EMAS Certificates in force 4 4 _ LOOKING TO THE FUTURE % Resources allocated to R+D over Value Added (I.G.) 5.1 5.5 7.8 No. Technology Centres in MCC 10 11 10.0 5 Message from the Chairman 2005 ANNUAL REPORT Jesús Catania Cobo Chairman of the General Council Highlights in 2005 involved the events celebrating our 50th Anniversary, the adoption of a new organisational model for the Industrial Group and the positive trend in business ratios, which recorded a 13% increase in turnover, an 8,5% rise in earnings, investments amounting to €866m and 7,571 more people in the workforce, which ended the year with 78,000 jobs. The year was also characterised by a strengthening of positions in deployment abroad following the acquisition of the Brandt Group, the market leader in the household appliance sector in France. The snapshot for the history books was taken on 20 October 2005, the day upon which we paid homage to the founders of our Cooperative Experience, remembering that day 50 years ago when they subscribed the purchase of a small workshop in Vitoria for manufacturing “devices for household use”, and whose business would lead on to the creation of Ulgor, now Fagor Electrodomésticos, the embryo of MCC. Over these 50 years, guided by a participative and humanitarian approach to work, we have transformed our Corporation into the foremost experience worldwide in cooperative development, the leading business group in our homeland, the Basque Country, and the seventh in Spain. Insofar as the organisational sphere is concerned, special note should be taken of the IX Cooperative Congress, at which the decision was taken to adapt an industrial organisation dating back to 1991 to current requirements: doing away with the middle ground of the Groupings, streamlining the business of the Divisions, approving Joint Stakeholders for channelling synergies between Cooperatives through temporary or permanent alliances and setting up the Industrial Council as a coordinating body. 6 Special mention should be made of the decision to create a Development Centre, which is to play a key role in supporting the development of new activities undertaken locally and in generating skilled employment with high value added, thereby responding to the needs of our social milieu. We are convinced that it will constitute an effective instrument for addressing those challenges that may be posed by the globalisation process. As for the actual data themselves, it should be stressed that the Financial Group had yet another excellent year, both in terms of business evolution and in profitability. Caja Laboral exceeded the figure of €11,000m in Customer Funds Managed, with a sharp increase in earnings. The Industrial Group, too, had an extremely positive year, recording a 20% increase in turnover, a figure that includes the contribution made by Brandt, which joined the Household Division in June, and the Electra Cooperative, which became part of the Construction Division. These new incorporations also boosted international sales, which accounted for 54% of the industrial total, as well production deployment abroad, with the year concluding with 57 subsidiaries in 16 countries. I should like to stress the strategic importance of the acquisition of the Brandt Group, which has enabled us to reposition ourselves in the European household appliance sector, with a market share approaching 6%. In turn, the Distribution Group continued to grow through the opening of new establishments and the ensuing job creation, at the same time as it provided greater diversification in emerging lines of business with sound growth expectations. 7 8 Financial Group 2005 ANNUAL REPORT Financial Group 2005 ANNUAL REPORT The financial sector’s trajectory in 2005 has been based on An External Customer Satisfaction Survey has been carried the same foundations as the prior year, with the persistence of out, as well as an Internal Customer Satisfaction Survey, low interest rates and the positive trend on the stock markets. with implementation of a system for colleting suggestions. Within this context, MCC’s Financial Group has once again The result of this entire process of customer-focus has been returned an extremely positive year, benefited by a lively the award of several external endorsements, with highlights demand for financing forthcoming from private customers being the excellent rating awarded to Caja Laboral by the and businesses alike, coupled with the positive contribution Stiga Survey on banking networks and the runners-up made by share portfolios, which together have led to a position awarded by Finalta in customer satisfaction, considerable improvement in end performance. One of the involving 29 European financial entities, for recording a year’s significant events has been the implementation of figure of 87% satisfaction, as opposed to an average of International Accounting Standards (IAS) by some of the 66%. companies within this Group, whereby it has also been necessary to adjust their figures for the prior year to the new As for Seguros Lagun Aro, it is worth noting the development criteria, so as to ensure comparison on a like-for-like basis. of a new website and the introduction of a Telephone The degree of fulfilment of Basic Corporate Objectives in Hotline for answering customer enquiries and providing a 2005 may be summarised as follows. platform for arranging policies and filing claims. CUSTOMER SATISFACTION PROFITABILITY Regarding its commercial business, Caja Laboral has Although low interest rates are detrimental to the brokerage continued applying the new Customer Management margin in the banking business, the rise in turnover, the Model, whereby it aims to cement the personal relations positive trend in results from financial operations and the between the entity’s managers and its customers. Progress moderation of general expenditure in terms of ordinary has also been made in the Personal Banking service, which revenues, as revealed by an excellent efficiency ratio of now has over 1500 customers and overall funds 41.5%, have meant an improved performance for the year, exceeding €450m. with a 31.5% rise in earnings before tax. In terms of business-customers, the barrier of 60,000 Likewise, note should be taken of the favourable trend in customers has been broken, with a twofold increase in the investment portfolio management recorded by Lagun-Aro, number of offices in the Expansion Network dedicated to which has returned net earnings of 8.8%, clearly up on business management. the technical interest rate (5.4%) and on the average Furthermore, new analytical modules have been introduced performance recorded by pension funds overall in the in CRM.