07 annual report 07 annual report summary INDEX LETTER FROM THE CHAIRMAN 4 MAIN FIGURES AND MILESTONES FOR THE YEAR 9 Main Figures 10 Milestones reached in 2007 12 GOVERNING BODIES 14 Board of Directors 16 Committees 17 Company Structure 18 FINANCIAL INFORMATION AND BUSINESS ACTIVITIES 19 Evolution of Results 20 Business Activities 23 3 STOCK MARKET INFORMATION 27 ACTIVITIES OF THE BUSINESS LINES 31 Duro Felguera Energía 32 Mompresa 34 Opemasa 35 Duro Felguera Plantas Industriales 36 Felguera Montajes y Mantenimiento 38 Feresa 40 Felguera Calderería Pesada 41 Felguera Melt 42 Felguera Rail 43 Tedesa 44 Felguera Construcciones Mecánicas 45 Felguera - IHI 46 Montajes Eléctricos Industriales 47 Duro Felguera around the world 48 CORPORATE RESPONSIBILITY REPORT 49 DIRECTORY 65 CORPORATE GOVERNANCE REPORT 69 ECONOMIC AND FINANCIAL REPORT 93 Consolidated Annual Accounts and 94 07 ANNUAL REPORT ANNUAL 07 Directors’ Report for 2007 Duro Felguera, S.A. Annual Accounts and 151 Directors’ Report for 2007 DURO FELGUERA DURO 2 © Duro Felguera, S.A. 2008 Design, desktop publishing and production: Gráfik Estudio, Multiplicamos las Ideas Printers: Eujoa Artes Gráficas. INDEX LETTER FROM THE CHAIRMAN 4 MAIN FIGURES AND MILESTONES FOR THE YEAR 9 Main Figures 10 Milestones reached in 2007 12 GOVERNING BODIES 14 Board of Directors 16 Committees 17 Company Structure 18 FINANCIAL INFORMATION AND BUSINESS ACTIVITIES 19 Evolution of Results 20 Business Activities 23 3 STOCK MARKET INFORMATION 27 ACTIVITIES OF THE BUSINESS LINES 31 Duro Felguera Energía 32 Mompresa 34 Opemasa 35 Duro Felguera Plantas Industriales 36 Felguera Montajes y Mantenimiento 38 Feresa 40 Felguera Calderería Pesada 41 Felguera Melt 42 Felguera Rail 43 Tedesa 44 Felguera Construcciones Mecánicas 45 Felguera - IHI 46 Montajes Eléctricos Industriales 47 Duro Felguera around the world 48 CORPORATE RESPONSIBILITY REPORT 49 DIRECTORY 65 07 ANNUAL REPORT ANNUAL 07 DURO FELGUERA DURO LETTER FROM THE CHAIRMAN Putting our vision 1into practice has also Dear shareholder: made one of our ambitious objectives It has been five years since I took on the possible, though it had not been exposed responsibility of presiding over Duro previously so as not to create expectations Felguera. Enough time for a large number that would have been difficult to fulfil: to of the ideas that make up our vision of overcome the 1,000 million-euro barrier the company to have consolidated and, in order intake, an undoubtedly significant above all, for these ideas to be reflected milestone and which places our company in the balances and income statements on another level. of the company. Going over the most noteworthy data Throughout all this time we have tried for the year, you will see that turnover to build a company that would be different has gone from 566 million euros in 2006 in its essence, that would respond to the to 850 in 2007, representing a 50% 4 substantial changes happening in the times increase. With reference to profits before we live in and, coherently, would leave tax, the 40 million euros of the previous behind the core business that once was year have become 60 million, with the the manufacture of capital goods same percentage increase, and the equipment, putting all its strengths into EBITDA for the group is situated at 63 play to become an engineering and million euros in comparison to the 44 of integrated management company for large the previous year. projects. The taxable income has been expended This task was, more than necessary, vital. meaning that tax rates this year have gone We haveturned The accelerated worldwide economic up to 25.8% in comparison to last year’s into an changes with the entry of countries with 10.5%, signifying that, in absolute figures, engineering lower manpower costs onto the net profits after tax have gone from 34 andintegrated international business scene meant that million euros in 2006 to 42.5 million in management we had to design a company model that 2007, with a rise of 25%. company for would be competitive on a global scale, that would foster the “exportable” Personnel costs have risen by 10%, in largeprojects business activities and that would give us comparison to the above mentioned 50% a more international dimension, which increase in turnover and pre-tax profit meant that it was imperative that our and so the percentage of personnel costs fixed assets and production means should over sales has fallen from 17.7% to 13%. fade into the background to allow our This corroborates our move to another professionals and their knowledge to type of business. LETTER FROM THE CHAIRMAN LETTER FROM become the focal point of the company’s capabilities. Order intake for the year was 1,003 million euros which situates backlog as of So, I believe that the 2007 financial year 31 December at 1,266 million, a figure reflects these basic ideas using all terms that allows us to consolidate the current and parameters to measure management: turnover for at least the next three years. large projects have represented 56% of the EBITDA of the group and 80.5% of In terms of balance, cash corresponding turnover. This segment of activity also to advances received for major orders contributed 82% of order intake and has continued to increase: cash and 92.3% of backlog. temporary financial investments as of 31 “Over the last few years our company has made a scale change in size” December totalled 314 million euros; Other especially noteworthy milestones long-term bank debts were at 35.4 million, are that the Power sub-segment signified whilst short-term debt was at 34.8 million more than half of the total turnover for euros. the group, 55% to be exact, as well as 55% of order intake and 59% of backlog as of 31 December. In addition, the Industrial Plants sub-segment almost reached half of the total figure for orders from abroad - 46.3% - and Storage obtained a notable profit in terms of EBITDA over sales of 16.4%. These are the main figures that sum up, coldly but also in our opinion, very positively, the management results for the 5 group. However, it goes without saying that behind these figures lays an enormous collective effort. Anyone who has followed the performance of this company in the last few years will see that a scale change in size has occurred. In five years we have multiplied order intake by three, profits before tax by six and backlog, the measure for our security in the future, was If we compare competitiveness of Duro multiplied by three and a half. Felguera with the average for engineering companies in the Spanish sector using as Order intake from abroad reached 328 reference the data from the business million euros, contributing to an organisation SERCOBE for the last five international backlog of 528.2 million years, we can see that this sector increased euros and therefore assuring a future of order intake by 63% whilst our company growing international activity. During increased by 222%; sector turnover rose 2007 we entered two new markets in by 35%, compared to 148% at Duro Latin America: Chile and Brazil, thereby Felguera. These increases were achieved reinforcing our presence in a geographical by a rise of 21% in manpower in the zone that is a priority for us and where sector whilst our company reduced the we already had ongoing activities thanks employment figure by 22%. to the contracts being executed in Mexico, Venezuela, Peru and Argentina. With regard to the activities of the business lines, there are some especially In Europe, where our presence was significant main figures. The most important centred on Italy, we were able to get into is that all of the business lines have made new markets with contracts in the services a major contribution to the final results. area especially for the power sector in REPORT ANNUAL 07 And not only that, but also, as a clear-cut the UK and France. And so, Duro Felguera example, the manufacturing line -our currently has live projects in a dozen workshops- has doubled its EBITDA in countries and in the main areas of the the last year going from 8.7 million to 18 group’s activity related to the construction million euros. of industrial and power generation facilities. DURO FELGUERA DURO LETTER FROM THE CHAIRMAN1 We also thought that is was vital to open no doubt will have to be international, up a business centre in the USA, where given the volumes with which we work. the key OEM’s, customers, associates and suppliers are located to aid our Reality continues to confirm our business Globalization has development in Latin America. We have focus. The sectors of activity which we already opened up a commercial office have concentrated on in the last few years encouraged in Florida which will reinforce our are precisely the basic industries that the commercial activities in this area. globalisation effect has most encouraged: the sectors gas, power, oil and minerals. And, at the which we have been It is evident that the percentages of growth same time, the change from manufacturer concentrating on:power, that we have achieved in the last few to integrator has been made without gas, oil and financial years are very difficult to maintain major learning costs. over large periods of time. A company minerals that sustains its business on its capacity But we are running a race that has no 6 to transmit confidence to its customers finishing line. That is why, far from being as a consequence of the efficiency and satisfied, we know that backlog must be quality it offers must take firm and sound more stable, business with recurring profits steps even if they are not spectacular.