Annual Report 2013 9th financial year PARMALAT ANNUAL REPORT 2013 Mission NUTRITION AND WELLNESS ALL OVER THE WORLD 2 MISSION The Parmalat Group is a food-industry group with a multinational strategy that seeks to increase the well-being of consumers throughout the world. The ultimate purpose of the Group is to create value for its shareholders while adhering to ethical principles of business conduct, to perform a useful social function by fostering the professional development of its employees and associates, and to serve the communities in which it operates by contributing to their economic and social progress. We intend to establish Parmalat as one of the top players in the global market for functional foods with high value added, which deliver improved nutrition and wellness to consumers, and attain clear leadership in selected product categories and countries with high growth potential for the Group. Milk and dairy products and fruit beverages, foods that play an essential role in everyone’s daily diet, are key categories for the Group. 3 PARMALAT ANNUAL REPORT 2013 Countries of Operation 72 manufacturing facilities 3 research centres of excellence Castellaro (Parma, Italy) for milk, yoghurt and fruit beverages London (Ontario, Canada) for cheeses and dairy ingredients Buffalo (New York, USA) for cheeses more than 16,000 employees about 5.4 mld € net revenues 4 COUNTRIES OF OPERATION DIRECT PRESENCE Europe Italy, Portugal, Romania, Russia Rest of the World Australia, Bolivia, Botswana, Brazil, Canada, Colombia, Cuba, Ecuador, Mexico, Mozambique, Paraguay, Peru, South Africa, Swaziland, United States of America, Uruguay, Venezuela, Zambia PRESENCE THROUGH LICENSEES Brazil, Chile, China, Costa Rica, Dominican Republic, El Salvador, Guatemala, Honduras, Hungary, Mexico, Nicaragua, United States of America, Uruguay 5 PARMALAT ANNUAL REPORT 2013 Contents Mission ................................................................................................ 2 Countries of Operation ........................................................................ 4 Governance Bodies ........................................................................... 10 Human Resources ............................................................................. 11 A Letter from the Chief Executive Officer ............................................ 12 Financial Highlights ............................................................................ 14 REPORT ON OPERATIONS ...............................................18 The Global Dairy Market .................................................................... 20 Revenues and Profitability .................................................................. 22 Europe ...........................................................................................................................28 North America ................................................................................................................34 Latin America .................................................................................................................40 Africa ..............................................................................................................................46 Australia .........................................................................................................................51 Review of Operating and Financial Performance ................................ 54 Parmalat Group ..............................................................................................................56 Parmalat S.p.A. ..............................................................................................................60 Financial Performance ....................................................................... 66 Structure of the Net Financial Position of the Group and Its Main Companies .................66 Change in Net Financial Position.....................................................................................67 Managing Business Risks .................................................................. 68 Acquisitions ....................................................................................... 73 Balkis .............................................................................................................................73 LAG ................................................................................................................................73 Economic Effect of the Acquisitions on the Consolidated Financial Statements at December 31, 2013 ...................................................................................................75 Information about Parmalat’s Securities ............................................. 76 Performance of the Parmalat’s Stock ..............................................................................76 Stock Ownership Profile .................................................................................................77 Characteristics of the Securities ......................................................................................78 6 CONTENTS Human Resources ............................................................................. 80 Group Staffing ................................................................................................................80 Management and Development of Human Resources ....................................................80 Industrial Relations .........................................................................................................82 Corporate Social Responsibility ......................................................................................83 Capital Expenditures .......................................................................... 84 Research And Development .............................................................. 86 Other Information ............................................................................... 89 Corporate Governance ...................................................................... 91 Issuer’s Governance Structure and Profile.......................................................................91 Share Capital and Shareholders .....................................................................................93 Board of Directors ..........................................................................................................96 Handling of Corporate Information ................................................................................107 Establishment and rules of Operation of the Internal Committees of the Board of Directors ..............................................................................................108 Litigation Committee.....................................................................................................108 Nominating and Compensation Committee ..................................................................109 Compensation of Directors ...........................................................................................110 Internal Control, Risk Management and Corporate Governance Committee .................110 Committee for Related-party Transactions ....................................................................112 Internal Control and Risk Management System ............................................................113 Guidelines for Related-party Transactions .....................................................................119 Election of Statutory Auditors .......................................................................................120 Statutory Auditors.........................................................................................................122 Relationship with Shareholders .....................................................................................125 Shareholders’ Meeting ..................................................................................................125 Changes occurring since the end of the reporting year .................................................127 Information about compliance with the Code ................................................................128 Annex “A” .....................................................................................................................128 Annex “B” .....................................................................................................................129 Attestation pursuant to Article 37 of the Consob Market Regulation No. 16191/07 .............................. 130 Key Events of 2013 ......................................................................... 131 Events occurring after December 31, 2013 ...................................... 135 Business Outlook ............................................................................ 136 Motion Submitted by the Board of Directors to the Shareholders’ Meeting ........................................ 137 7 PARMALAT ANNUAL REPORT 2013 PARMALAT S.P.A. ............................................................138 Financial Statements at December 31, 2013 ................................... 138 Statement of Financial Position ..........................................................................................142 Income Statement .............................................................................................................144 Statement of Comprehensive Income ................................................................................145