etex group 2010 annual report - ku leuvenp. 4 annual report 2010 etex group message to our...

Summary

Key figures 2010

A leading expert in building materials 1Message to our stakeholders 4Business activities worldwide 6Key facts of 2010 7

Activity Report 8European Building Materials Division 12Fire Protection and Insulation Division 16International Building Materials Division 20

Environmental Report 24Etex Group’s environmental policy 26Objectives on environmental performances 27Sustainable materials and systems 31

Social Report 32Etex Group’s social policy 34Health and Safety at Etex Group 36Involved in the community 39

Governance Report 40Executive Committee and Board of Directors 40Corporate Governance 41

Financial Report 42Consolidated Financial Statements 48Non Consolidated Accounts of Etex Group S.A. 108Glossary 110

GRI index 111Contact details

Annual Report 2010

Etex

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Roofing materials: 44%

Boards: 30%

Other materials: 17%

Revenue by activity

RevenueIn millions of EUR

Operating incomeIn millions of EUR

Floor & wall tiles: 9%

2,500

2,000

1,500

1,000

500

0

300

200

100

0

2006 2007 2008 2009

2006 2007 2008 2009

2010

2010

Rest of the world: 12%

Germany: 21%

France: 10%

United Kingdom: 9%

Benelux: 7%Other Europe: 16%

Chile: 10%

Revenue by geographical area

Operating cash flowIn millions of EUR

Personnel

Nigeria: 6%

Argentina: 5%

Peru: 4%

400

300

200

100

0

20,000

15,000

10,000

5,000

0

2006 2007 2008 2009

2006 2007 2008 2009

2010

2010

Key figures 2010

In millions of EUR 2006 2007 2008 2009 2010 %

Revenue 1,980 2,129 2,081 1,797 1,956 8.9%Recurring operating income

(REBIT)228 239 209 148 172 16.0%

% of revenue 11.5% 11.2% 10.1% 8.2% 8.8%Non recurring items 6 18 -11 -24 14

Operating cash flow (EBITDA) 325 345 288 246 303 22.9%Operating income (EBIT) 233 257 198 124 185 48.8%

% of revenue 11.8% 12.1% 9.5% 6.9% 9.5%Net profit (Group share) 141 162 110 38 114 196.9%

Capital expenditure 104 196 225 70 73 4.5%Net financial debt 296 404 522 393 337 -14.2%

Working capital 312 358 410 316 333 5.5%Capital employed 1,246 1,401 1,537 1,414 1,465 3.6%

Return on capital employed (ROCE)

18.7% 19.4% 13.5% 8.4% 12.9%

In EUR per share 2006 2007 2008 2009 2010 %

Net recurring profit (Group share)

1.74 1.93 1.57 0.75 1.31 74.7%

Net profit (Group share) 1.79 2.06 1.40 0.49 1.45 196.8%Gross dividend 0.224 0.250 0.250 0.250 0.290

Growth rate of dividend 15.5% 11.6% 0.0% 0.0% 16.0%Recurring distribution rate 12.9% 13.0% 15.9% 33.3% 22.1%

Personnel 13,459 14,422 14,639 13,512 13,351

Registered office

SA Etex Group NVAvenue de Tervueren 3611150 Brussels – Belgium

0400 454 404RPM Brussels RPR

Tel +32 2 778 12 11Fax +32 2 778 12 12

[email protected]

Photographs• Las Vegas Sands Corp• Marcel Van Coile• Sofie Van Hoof• Etex Group

Copies of the annual report in English can be obtained at the Group’s Communications Department upon simple request. This report can also be downloaded as a Portable Document Format (pdf) file from the website of Etex Group.

A leading expert in building materials

Meeting the needs of people

Etex Group is a privately owned Belgian industrial group that owns and manages a portfolio of 90 operating companies. They produce and market high-quality building materials and systems in 42 countries on all continents. Together they employ almost 13,500 people.

Through its subsidiaries the Group offers an extensive range of building products in four broad areas:• roofing, with fibre cement slates, concrete tiles, clay tiles, fibre cement corrugated sheets and metal profiled

sheeting;• cladding and building boards in fibre cement and plaster are used in general building applications like façade

cladding, internal partitions, ceilings, etc;• boards, sprays and intumescent materials are used in specialist areas like passive fire protection and high

performance insulation;• ceramic floor and wall tiles, for the interior finishing of kitchens, bathrooms and living rooms.

Etex Group companies are recognised names, with a reputation for quality products and services. Their leading market positions are based on continuous product development and advanced technological expertise. All seek to improve the well-being of the local populations by meeting their housing and infrastructure needs.

Etex Group is committed to growing its business, both in traditional and in newly-developing markets, through the competence of its people, operational excellence and partnership with its customers.

At the same time, Etex Group fully subscribes to the principles of sustainable development: respect for its employees, its surrounding communities and the environment lies at the very core of the Group’s activities.

Etex Group wants to make each construction project a success, wherever people build.

p. 2 Annual Report 2010 Etex Group

Future challenges and opportunities Etex Group is permanently looking for ways to improve its structure and operations while maintaining overall strategy continuity. With the vast experience and in-depth knowledge of its senior management, Etex Group is ready to meet new challenges and seize new opportunities, under its new CEO, Fons Peeters, who took over from Philippe Coens on 1 January 2011.

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p. 3Etex Group Annual Report 2010


Messageto our stakeholders

2010 proved a year of recovery. Growth was driven

by emerging markets.In Europe, fibre cement

cladding and building boards confirmed their

role as key value drivers. New competence centres

are leveraging existing expertise. Health and

safety remain key centres of management attention,

along with corporate culture and leadership style.

It is for me an honour and a pleasure as new CEO of Etex Group to report to you on the performance of our group in 2010. As my predecessor Philippe Coens mentioned in the annual report for 2009, we expected 2010 to be a year of modest recovery. However, the lack of market visibility, especially in Europe, together with the unresolved financial crisis required us to take a cautious management approach throughout the whole year. Nevertheless, the Group did not abandon its investments in promising growth segments. A new production line for calcium silicate boards in Belgium, a production line for corrugated sheets in Lithuania, and new flat sheet production capacity in Peru and China were all commissioned in 2010. During the year, the company Microtherm in Belgium joined the Etex Group as an important building block in the development of its high performance insulation segment.

Total sales of Etex Group have improved compared to last year. Almost all the growth, however, came from emerging markets, mostly Latin America.

The roofing market, mostly in Europe, remained very stable as well for the small roofing elements such as clay tiles, concrete tiles and slates as for the large roofing elements such as corrugated sheets and steel products. Renovation of residential and industrial buildings offer

major potential for our products. New regulations for insulation and the large demand for photovoltaic elements on roofs drive this renovation.

During 2010 fibre cement cladding and building boards confirmed their role as key value drivers as the Group pursues growing market positions in the insulation and affordable housing segments.

In Europe, this business is thriving on the vast growing demand for insulation both in new houses and in renovation work, as cladding systems with fibre cement decorative façade panels offer major improvements in building insulation. Better insulation both saves expenditure on energy for heating or cooling. It also reduces CO2 emissions substantially.

In fast-growing economies, fibre cement panels are increasingly used for durable, affordable housing. Many of our companies in Latin America, Africa and Asia offer a variety of modular solutions with metal or wood frame construction and fibre cement wall panels and roofing.

Next to product and geographic expansion, the second main focus for Etex Group remains improving its performance in various aspects of operational excellence.


By creating shared administrative competence centres serving several Etex Group companies in specific geographical areas, we are leveraging the expertise that exists in our large companies. Our technical competence centres for fibre cement and clay reduced factory production costs by focusing on energy consumption and on reducing production waste.

Operational excellence also embraces employee health and safety and a responsibility to limit our impact on the environment. Combined, these three elements are the basis of our approach to corporate social responsibility. We are convinced that an integrated approach will be an important driver for future innovation, growth and profit.

All over the world, Etex Group managers have continued to enforce health and safety programmes to guarantee their employees a safe environment to work in. We reached our accident frequency reduction target we set ourselves in 2007. Our managers have set even more ambitious targets for the coming years.

More than a decade ago, Etex Group took the right decision to fully ban all use of asbestos in the products it manufactures or sells. Unfortunately, asbestos as a raw material is still very much in use in major countries around the world. The Group strongly defends the ban of asbestos which is unnecessarily endangering lives.

The major dramatic event of the year was obviously the earthquake in Chile in February. Fortunately our local companies did not count any victims among their employees nor their families, but the Chilean people suffered severely with loss of life and major material damage. Our companies helped

smooth the pain by offering new homes to some of the hardest hit families.

All over the world, our employees are convinced that Etex Group can improve people’s lives by providing them with the well-designed housing they dream of. It is this conviction that powers our Group’s expansion and growth.

I particularly would like to thank my predecessor Philippe Coens who retired as CEO on 31 December 2010. Philippe Coens became CEO in 2003 and, with an entirely new Executive Committee, successfully managed Etex Group in times of strong economic growth as well as in the economic crisis of the last years. Philippe leaves us, despite the

crisis, a financially strong, well managed group with an excellent operational culture and a strong strategic positioning.

I would also like to thank Thomas Leysen who will resign from the board to focus on his new responsibilities. We very much appreciated his valuable contribution to shaping the group’s strategy.

Finally, I thank our employees for their motivation and continuing commitment to Etex Group, and our business partners and shareholders for their cooperation and confidence in the company. With this support, we look forward to 2011 with guarded optimism.

Message to the stakeholders Activity Report Environmental Report Social Report Financial Report

Philippe Coens

Former CEO and Chairmanof the Executive Committee

Jean-Louisde Cartier de Marchienne

Chairman ofthe Board of Directors

Fons Peeters

New CEO and Chairman of the Executive Committee


Business activities worldwide

Europeemployees: 6,458plants: 45

Americaemployees: 4,452plants: 21

Asia / Oceaniaemployees: 1,197plants: 7

Africaemployees: 1,244plants: 7


Key facts 2010

On April 15, the new production line for fibre cement flat sheets is officially inaugurated at Eternit in Peru, in presence of Alan García Pérez, President of the Republic.

Etex Group acquires the Belgian company Microtherm, a global leader in high performance insulation for the

building industry, industrial and domestic applications.

At the Promat International factory in Belgium, a new, fifth production line is launched, to produce mainly fire

protection materials for air ducts and tunnel linings.

The centre of Chile is hit by a major earthquake. Etex Group affiliate Empresas Pizarreño decides to build

and donate 21 permanent houses to the people of the town of Junquillar.

Etex Group brings together 150 of its managers from across the world for its 3-yearly manage-ment meeting where the future course of the Group is discussed.

February

April

August

September



Partnership Natura fibre cement boards were used for the outer skin of the new Colsubsidio building in Bogotá, Colombia. The Colombit sales and technical support teams worked very closely with the owner and contractors, to give technical assistance during installation. The final result is a façade that is both sustainable and pleasant to look at.

Carolina Suarez, Carlos Eduardo Bernal and Claudia Botero (Colombit)

‘

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ACtivity rEPOrt


Activity report

From its very origin, Etex Group has been present

in selected countries across the world. This longstanding

local presence has enabled the Group companies to de-velop products and systems

which cater perfectly to local market needs.

the Group’s scope of activities

Etex Group’s range of products is based on four groups of materi-als: fibre cement, calcium-silicate compounds, clay and plaster. These are used to produce a wide variety of products, including small and large roofing elements, cladding and building boards, passive fire protection systems, plaster boards and ceramic floor and wall tiles.

The focus on a limited number of materials and systems has al-lowed the Group to develop a very strong and in-depth know-how and a unique product knowl-edge. Combined with a thorough understanding of the markets in which the Group companies operate, this expertise gives added value to the solutions that Etex Group provides. The new products and solutions it creates reflect the local culture and customs of each market and are inspired by four guiding principles: ecology, afford-ability, innovation and comfort.

Continuously improving

Entrepreneurship, respect, loyalty and integrity are core values for Etex Group and its affiliated com-panies, developed over more than 100 years of existence. Its values and devolution of responsibilities are two elements that distinguish Etex Group in a highly competitive environment. Both elements have proven in the past to be funda-mental key success factors in the Group’s response to new and challenging situations, supported by the competence of its employ-ees, excellence in operations and partnership with its customers.

Following a consolidation phase after the split in 2003, Etex Group made targeted investments to strengthen its different core activ-ities. The recent economic setback forced Etex Group to slow down its investment programme and triggered the exercise of combin-ing local bottom line responsibili-ties and enhancing Group syner-gies on various levels. To achieve


these synergies between different entities, Etex Group has started to introduce regional shared compe-tence organisations, covering areas like human resources, fi-nance, legal and tax.

At the same time, Etex Group has pursued its strategy of making corporate social responsibility an integrated part of its daily man-agement. As a consequence, all Group companies have consider-ably improved their environmen-tal performances and made major efforts to provide healthy and safe working environments, which has led to a significant reduction in the number of accidents.

Looking forward

In 2010, a significant part of the Group’s operating income was earned outside Europe, in strong growth markets in Latin America, Asia and Africa. Most probably, this proportion will increase in the future as the underlying demand

for affordable houses and public buildings in these areas is sub-stantial. Etex Group will focus on the need for high quality building materials and follow demand by investing in more capacity and offering the market solutions that are adapted to local needs.

Etex Group successfully defended its strong market position in the mature markets in Western Europe, with considerable market shares and leading positions in most countries. Economic recovery in the building sector is expected to come, but in a slow and differ-entiated manner. The Group will continue to defend its positions by focusing on customer service and by completing the product mix, focusing on all market segments. In Europe, it will seek to respond rapidly to emerging market de-mands with new designs, colours and systems.

Message to the stakeholders Activity report Environmental Report Social Report Financial Report

Etex Group is an organisation in change, in search of operational excellence in different areas and adapting to new challenges. This evolution is driven by the Group’s communication culture, which is crucial in the decision making process.


European Building Materials Division2010 saw a limited

turnover increase for the European Building Materials

Division, with emphasis on renovation and product

innovation. From 2011 the Division will be split in two,

reflecting the different business patterns of the two

parts of Europe.

Mature Western European, expanding Eastern European markets

The wide geographical scope of the European Building Materials (EBM) Division means that it operates in markets with very different dynamics. The Benelux, Germany, France and the United Kingdom were the starting point for the Group’s development and remain very large contributors to its success. Together with Ireland, Spain and Scandinavia, these are mature markets for building materials with a strong shift of emphasis over the last decade from new-built to renovation. Growth in these markets comes from newly developed materials and innovation.

The large portfolio of roofing products offered by the EBM companies makes it ideally positioned to benefit from these changing markets. Supported by strong brands such as Eternit and Creaton, the Group successfully defended its market share in

2010 in most countries where it is present, consolidating its position as a prime supplier of roofing products in Europe.

Over the past years, the EBM companies have invested considerable resources in introducing innovative cementitious building boards which meet particular performance needs. Finding the correct market positioning for these products has been challenging, but the evolution of volumes sold in 2010 is very encouraging and indicates that the Division is on the right track.

Some ten years ago, positioning fibre cement cladding materials as an aesthetic, ecological and functional product was a real challenge for the Group. But since then, the Group has grown this business in a successful way. Thanks to the constant efforts of dedicated sales teams, this product is now a major success, a real third cornerstone for the Division’s business, next to


roofing materials and building boards. When combined with the right insulation materials, these systems are amongst the best performing insulation systems used in renovation, as an additional exterior cladding is by far the most efficient insulation method.

These three product families are also the key to the EBM Division’s success in Eastern Europe. In recent years, the Group has made

substantial investments to grow its presence in Eastern European markets, most of which have residential housing deficits. The Group has defined clear growth strategies in countries like Poland, Czech Republic, Slovakia, Romania, the Baltic States and Russia. By investing in local production facilities and creating sales offices in these countries, the Group wants to market itself as a local player.

Slightly increased sales, driven by renovation

Despite adverse weather conditions in the first quarter and last month of the year, the EBM Division was able to slightly increase its sales in Europe in 2010, following the economic downturn in 2008 and 2009. The Division’s operating income improved substantially, largely as a result of the earlier cost control and cash generation measures

Slates:12%

Rest of Europe: 8.6%

Corrugated sheets:22%

Germany:32.3%

Concrete tiles:8%

France: 16.7%Clay tiles:26%

United Kingdom: 16.8%

Other roofing:7% Benelux: 10.3%

Cladding boards:13%

Ireland: 3.9%

Building boards:3%

Poland: 4.5%

Other materials:9%

Sales by activity Sales by geographical area

Spain: 3.4%

Scandinavia: 3.5%

The companies in the EBM Division focus on three lines of business: pitched roofing, building boards and cladding. These companies are well known in their markets for their large portfolios of high quality, innovative and

ecological materials. Over the years, they have established a reputation of providing efficient solutions, systems and support which set them

apart from their competitors.


Creaton’s clay roof tile Optima in natural red was ideally suited to renovate the 1,500 m2 roof of the Cultural and Meeting Centre of the town of Bad Langensalza in Thüringen, Germany.


by the Division affiliates, the full impact of which was felt in 2010. In 2010, the Division remained very much focused on operational excellence, with among other things the further roll-out of Shared Competence Centres.

The Division’s overall strategy was confirmed: to improve its strong position in the mature markets in Western Europe through product innovation, and to invest in growing markets in Eastern Europe, where there is still a housing shortage.

As in 2009, renovation of existing buildings continued to be an important driver for the residential and non-residential building industry in Europe’s mature markets. In particular Germany and its surrounding markets have shown strong performance in all three business segments of the Division, whereas

the western, northern and eastern regions of Europe stabilised at the relatively low levels of 2009, especially in roofing.

The demand for corrugated sheets in Germany was driven by the roof refurbishment of asbestos roofs helped by a strong investment in solar power generation. In addition the good economic conditions in the agricultural sector triggered capacity expansion with new buildings being covered with corrugated sheets.

In the public sector the economic stimulus packages were targeted at the energy-conscious renovation of public buildings. This provided excellent business opportunities for ventilated cladding products.

One of the main challenges for the building trade in the

upcoming decade is to offer solutions to make the existing housing stock as energy-efficient as new built. Price and technical constraints restrict the choice of systems that meet this target. The strong growth of sales of fibre cement cladding in 2010 confirms the perfect fit between the products Etex Group offers and these very ambitious targets.

The reduced activity levels required the Division to take restructuring measures in 2008 and 2009 to maintain its competitive position. Over the last three years, these measures unfortunately often had a negative impact on employment. In each instance, the decision of local management to reduce staff was implemented in a fair and respectful manner.


A clear focus

In Lithuania, the Division launched a new factory for corrugated sheets, replacing the old factory. The first production results are very encouraging. This new factory gives the Group a much stronger footing in the Baltic States and in Central Europe.

To co-ordinate its cladding and building boards business on a European level, the Division has created a central department which will play a key role in approaching the various new markets in a professional manner. This department will focus on knowledge sharing

and developing key marketing messages. The Division has also started a Lightweight Construction Technical Center to gather expertise and to look for new, innovative applications for fibre cement boards.

To improve its customer focus, the Group implemented a CRM module in the different affiliates. In 2010, roll out within the EBM Division entered a final phase, providing better support for key target audiences, like architects, distributors and other professionals in taking into account the needs of the Group’s customers.

Eter-Color fibre cement façade boards give a finishing touch to the 42 brand new residential flats on an abandoned dockyard next to the River Scheldt in Temse, Belgium.

Outlook 2011: cautious outlookThe Division’s view on 2011 remains cautious. Germany proved a major contributor to the Division’s success in 2010. Whether the same dynamics will spread to other

European countries remains uncertain. Sovereign debt issues and their possible impact on the European financing system remain a major factor of volatility.

Where positive market performance points to structural trends rather than temporary blips, the Division will confirm its commitment to growth by investing in

local production. In December 2010, Etex Group decided to build a new factory for clay roofing tiles in Koscian in the west of Poland. The recent dynamic performance of the clay tile market in Europe as well as in Poland makes this plant necessary to

supply the market needs.

EBM becomes two DivisionsAs from 1 January 2011, the EBM Division will be split into two new organisations: EBM

West and EBM East. This dual structure will allow the Group to adopt a strategy that reflects the different growth dynamics in Western and Eastern Europe.



Fire Protection and insulation Division

Activity levels in the Fire Protection and Insulation

Division fell off as expected owing to budget cuts by

governments and investors. Cost reduction measures

were introduced, but without compromising

vital capital expenditure. Several attractive contracts

were won, and the acquisition of Belgian

company Microtherm offers innovative prospects in

high performance thermal insulation.

Market leadership backed by sustained research

Over the last four decades, the companies of the Fire Protection and Insulation (FPI) Division have established themselves as well-known brands and market leaders in their fields. Today, they offer tailored solutions for industrial and non-residential building projects in the passive fire protection and high performance insulation markets.

In the passive fire protection market, the Promat board systems are complemented by spray solutions and intumescent products. Supported by fully integrated systems and sustained research into new formulations, this wide product portfolio gives Promat a strong market position and a solid basis for future growth.

This drive into research and product innovation is also allowing the Group to grow its expertise in high performance insulation systems for limited spaces, extreme high and low temperatures, energy saving, acoustic insulation, etc.

Decline in non-residential markets...

Given the time span of project sales in this industry, Promat more or less expected activity levels in the non-residential market to slow down in 2010, affecting its sales of passive fire protection systems. These markets indeed showed a late but steady decline, with projects postponed, cancelled or safety requirements reduced, as budget cuts by governments and investors started to bite.


As a consequence, competition was fierce and market prices came under pressure, while raw materials, transport and other costs remaining stable or even rose. Some competitors also shifted from commodity materials into niche markets of high performance fire protection systems.

In addition, economies in important markets like the Middle East (i.e. Dubai) experienced serious setbacks. Last year the United Kingdom and Spain also showed a persistent weakness.

… does not halt new projects and investments

The Etex Group companies anticipated lower activity levels and took appropriate measures, which allowed them to counter the unfavourable market situation in 2010. Sales of high temperature insulation recovered more easily than expected.

With a vast product and application portfolio and in-depth expertise, based on years of advanced research, the Group companies of the Fire Protection and

Insulation Division (FPI) have a leading position in passive fire protection and high performance thermal insulation in the industrial and building markets.

Rest of Europe: 18.2%

Germany:26.8%

France: 12%

Asia & Oceania: 10.2%

Benelux: 11.2%Italy: 7.8%

Poland: 3.2%

Sales by geographical area

Spain: 4%

Rest of the world: 6.6%

Boards: 60%

Resale products:15%

Other materials:25%

Sales by activity


At a petrochemical installation in Quingdao, China, workers install slatted Microtherm panels onto distribution pipes to create a high performance insulation layer.


Expenditure was trimmed with a cost reduction programme. This included centralising administrative functions in shared competence centres (in Austria and Belgium), grouping testing programmes at the R&D centre and creating common marketing tools where possible (e.g. manuals as electronic documents).

Several important tunnel projects were won in Europe (Belgium and France) and Asia as well a nuclear power project in China. A notable fire protection project was the major Santosa Resort hotel project in Singapore.

In August, Etex Group acquired the Belgian company Microtherm that produces high performance thermal insulation systems and minimises heat transmission over a large temperature range. The thinness of its products gives Microtherm a strong competitive advantage in a large number of applications such as vacuum insulation panels (VIP), fuel cells, furnaces and storage heaters. This acquisition opens doors for new markets even in the normal building applications for insulation.

In April, Promat also established a joint venture partnership with US-based Industrial Insulation Group to produce and sell fire protective spray solutions in the North American market.

Etex Group also made an important investment in new capacity at its Belgian factory with the installation of a new line for the production of PROMATECT®-L type products. In China, investment was completed to increase CBM board production capacity at continuing high quality.


Outlook 2011: new opportunities in sluggish markets

The growth of the fire protection activity slowed down as a result of delayed projects. The Division therefore maintains a strict policy of cost-conscious spending based on

clear priorities, while opportunities in emerging markets are supported by adequate investments.

At the same time, new opportunities for the Division are arising in high performance insulation – acoustic, energy-saving, low temperature, etc. – for industrial

applications. Promat is keen to position itself as the expert address in these markets.


Etex Group supplied 500,000 m2n of PROMATECT®-H boards to guarantee up to 240 minutes fire protection at the Marina Bay Sands Hotel in Singapore. – Copyright © 2011 Las Vegas Sands Corp. All Rights Reserved.


international Building Materials DivisionThe International Building

Materials Division recorded strong results in all its core businesses. Sales

grew both in value and in volume, driven by favourable

economic environments, especially in Latin America

and Asia. Operating income improved significantly,

except for a small number of companies facing

strong competition and overcapacity situations.

High growth potential pro-ducts on three continents

A presence on three continents (Africa, South America and Asia) over many decades has allowed the International Building Materials (IBM) Division to develop a product portfolio and marketing strategy very much geared towards the specific needs of each local market. Over the past years, the Division has been very successful in positioning itself in high growth potential products. The Division’s intense development of both the ceramic floor and wall tile and fibre cement and plaster flat sheet businesses has proven to be a very good value driver. Promisingly for Etex Group, residential and non-residential new building in the IBM Division’s markets is relying increasingly on dry-construction methods, where flat sheets are a critical building material in the provision of affordable housing.

In Latin America, the Division has a strong presence in Argentina, Chile, Colombia and Peru with three product families: fibre cement roofing, boards in fibre cement and plaster and ceramic floor and wall tiles. The Division’s operations in Nigeria and Indonesia concentrate on fibre cement roofing and flat sheets. China is fully focused on flat sheets. In certain markets, the Division’s product portfolio is complemented with concrete roofing tiles (South Africa, Chile, Nigeria and Argentina) and clay bricks (Chile). Strong housing and infrastruc-ture demand

Nearly all the countries in which the Division is present are experiencing strong population growth, leading to massive urbanisation and strong demand for housing and infrastructure. At the same time, increasing


purchasing power is triggering demand for high quality building materials.

After slowing in 2009, most of these markets picked up faster in 2010 than the more mature markets in Europe. In addition, the Division has gained market share by introducing upmarket product innovations, supported by knowledge exchange between Group companies on different continents.

With growing demand, the fibre cement flat sheet and plasterboard activity on the Division’s three continents performed very well and reinforced the Division’s market position. In Peru and Colombia, the demand for building materials continued its steep climb. While the plasterboard activities in Argentina and Chile produced very good results, the growth of Gyplac in Colombia was tempered by strong competition.

Recovery of ceramic tiles sales was slowed by strong competition from imported tiles. Nevertheless, the Group’s market presence in Colombia and Peru was further strengthened leading to the decision to build new capacity to satisfy local market demands.

In February 2010, Chile was hit by a major earthquake – fortunately with no casualties among Etex Group employees – producing a significant but temporary hike in

Rest of America: 13.9%

Peru: 12.2%

Chile:31%

Argentina: 16.2%Africa: 21.8%

Asia & Oceania: 4.9%

Sales by activity Sales by geographical area

Plaster products:14%

Fibre cement boards:26%Floors and Walls:

27%

Roofing:21%

Other materials:12%

The companies of the IBM Division are present in Latin America, Africa and Asia with a selection of building products adapted to local market needs.

Depending on the countries, the Division’s companies manufacture and sell fibre cement and plaster cladding and building boards, ceramic floor and

wall tiles, fibre cement roofing materials and concrete tiles. These durable materials fit a wide range of applications, from affordable housing

to high-end architectural solutions.


A new state-of-the-art production line was launched at Eternit in Peru in 2010. This will more than double the production capacity of fibre cement flat sheets, to meet the growing demand in Latin American markets.


demand for building materials. To satisfy the increased demand for emergency repair materials, the Division affiliates imported products from other Group companies in Europe. Etex Group expects that structural repair of earthquake damage will increase activity levels for the next couple of years.

The Division’s operations in Nigeria and South Africa faced difficult market conditions, due to a lack of purchasing power in the population. A restructuring and cost reduction programme was successfully carried out in Nigeria to improve operational results and efficiencies.

China and especially Indonesia showed good result in cement boards, with major increases in sales and results.

A commitment to investment and innovative products

Growth markets are a challenge on their own, requiring constant monitoring of production capacities to avoid shortages and bottlenecks. Where necessary, Group policy is to compensate shortages through imports from other affiliates, allowing time to examine, decide and implement investments in new capacity. In 2010, the Group confirmed its commitment to support these emerging markets by approving new capacity investments in China, Indonesia, Peru and Colombia.

In an environment where dry construction techniques are increasingly accepted, Etex Group differentiates itself by introducing new, sustainable materials and systems with specific

advantages, like through-coloured boards, and by demonstrating the possibilities offered by insulated and ventilated façades systems, acoustical and design plasterboard solutions, suspending ceiling solutions, and new possibilities in finishing.

As management tools for the Group’s activities in emerging markets, Etex Group also launched a pilot project roll-out of the Group’s ERP template at Eternit and Durlock in Argentina.


Outlook 2011: a resilient and growing contributor to Group results

While a degree of caution is needed in estimating future performance in emerging markets, where political and economic stability is more fragile and the danger of cost

inflation is real, the Division is confident that, in the foreseeable future, its presence in growth markets is going to increasingly support the Group’s results.

The growing popularity of dry construction methods will further stimulate the demand for high quality plasterboard systems and fibre cement flat sheets, in

residential and non-residential markets. Both activities are considered as key value drivers for the IBM Division in the coming years.


Durlock supplied more than 187,000 m2 of its Durlock plasterboard system for the Chateau Puerto Madero, a high class residential high rise building in Puerto Madero, Buenos Aires, Argentina.


Sustainability As part of its commitment to sustainability, Etex Group is constantly looking for new ways to improve the environmental performance of its production processes. At the Comais factory in Italy, a Heat-Power generator was installed to provide the factory much more efficiently with electricity and steam.

Marco Antonelli (Promat italy) and Alain Ennen (Comais)

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EnvirOnMEntAL rEPOrt


Environmental report

As part of its Corporate Social Responsibility,

Etex Group is committed to growing its business in a manner which also

takes into account the environmental impact of its

operations.

To apply this strategy, the Group has developed an Environmental Policy which applies to all its affiliated companies. This is based on a twofold approach: improving the environmental performance of its production processes and producing materials that permit sustainable building.

- As a manufacturer of building materials, Etex Group wants to reduce the environmental im-pact of its production processes by using less raw materials, by minimising waste, by reducing the use of energy and water and by avoiding pollution to air, water and soil. This applies to all Group companies and for each production site. Measurable objectives are set and closely monitored, based on a uniform reporting system. Standardised reporting ensures that all operat-ing companies reach the environ-mental targets set by the Group.

- Etex Group offers systems and solutions which contribute to a sustainable way of building. These high quality materials are part of full integrated solutions which allow architects and con-tractors to significantly improve the environmental performance of newly built or renovated build-ings. Backed up by research into new products and innovative ap-plications, Etex Group materials can make a difference in saving energy and reducing the emis-sion of carbon dioxide.

In other supporting business pro-cesses, like logistics, purchasing, office management and market-ing, the Group companies evalu-ate the position of their suppliers, giving preference to products and services that offer an improved environmental performance.

Etex Group’s environmental policy


Message to the stakeholders Activity Report Environmental report Social Report Financial Report

During the Etex Group Management Meeting in

September 2010, the Group’s updated environmental

policy was presented and discussed. This incorporates

four new targets: reducing the use of potable

water, reducing energy consumption, lowering

carbon dioxide emission levels, and maximising the

recycling of production waste. Last year, Etex Group spent almost € 12 million to

improve its environmental performances.

reducing the use of potable water

In the coming years and decades, growing demand for potable water will make water more expensive as a raw material. Today all Group affiliates closely monitor their use of water from various sources (potable, bore hole, canal, river or rainwater), based on a standardised yearly reporting. In the coming 5 years, all Group companies have to significantly reduce their use of potable water and show a further switch to other sources. Next to that, our companies also have to focus more on reducing the volume of discharged water.

The percentage of potable water is an important benchmark for Etex Group in tracking the Group’s progress in limiting the use of potable water for industrial applications (see pie chart 1 below).

About 25% of the water entering the manufacturing process is discharged again. The quality of this waste water is continuously monitored to be in line with legislation and where necessary a water treatment system is in place. In most cases the discharged water is in fact of better quality than its source (e.g. canal).

Objectives on environmental performances

Water consumption by sourcePie chart 1

Other water:28%

Potable water:23%

Borehole water: 49%


Total water consumption

5,000 m3

4,000 m3

3,000 m3

2,000 m3

1,000 m3

0 m3

2006 2007 2008 2009 2010

Consumed potable water compared to total water consumption.

25%

20%

15%

10%

0%2006 2007 2008 2009 2010

In spite of continued attention to reducing water consumption, total water consumption Group-wide increased in 2010 (graph 1). The main reasons were new plants becoming operational, other plants now working at full capacity and the growing economy in some parts of the world where the Group operates plants which consume relatively high quantities of water.

Graph 2 shows that potable water as a percentage of total water consumption increased between 2006 and 2009. In 2010, with the Group launching its long term policy which includes reducing the

use of potable water for industrial applications, this ratio slightly moved downwards. As this is a Group-wide target, Etex Group expects that this percentage will further decrease in the coming years.

reducing energy consumption

Every year, all Group companies strive to reduce as much as possible their energy consumption per unit produced. By 2015, Group-wide energy consumption has to reduce by 5% in absolute value compared to 2009, on a like-for-like basis.

Pie chart 2 breaks down Etex Group’s direct energy consumption by primary source. “Other energy” includes energy sources like coal, LPG, paraffin or propane.

Indirect energy consists almost 100 % of electricity. Today, two Group plants use electricity and steam in their production process which was generated by an on-site heat-power generator, providing a more efficient energy supply.

All sites within Etex Group are required to investigate how they can switch to renewable energy, in some cases by generating this on

At Eternit in Belgium, the autoclaves in production hall 5 are now connected to a newly installed autoclave. In this way steam can be recycled to clean other autoclaves and help bring them under pressure.

Graph 1Graph 2


Energy consumed per ton of raw material

1,000 kWh

750 kWh

500 kWh

250 kWh

0 kWh2006 2007 2008 2009 2010

their own factory premises (use of solar panels, etc.).

Despite increased activity the Group managed to keep its energy consumption at the 2009 level (graph 3). Etex Group will continue to investigate how it can further reduce energy consumption, similar to the reduction realised between 2006 and 2008.

Lowering CO2 emission levels

The emission of carbon dioxide is directly linked to energy consumption. By using less energy, the Group can reduce its carbon dioxide emissions. In addition,

wherever possible, the Group is in favour of switching to energy sources that emit less CO2.

An improved economic situation obviously translated into higher total energy consumption for the Group. As a consequence, total CO2 emissions were higher in 2010 than in 2009. However, thanks to improved production process efficiency, the Group was able to decrease its direct CO2 emission in kg per ton produced (graph 4). Reducing CO2 emissions remains the Group’s focus for the future, for example by switching towards more renewable energy.


CO2 emitted per ton produced

160 kg

120 kg

80 kg

40 kg

0 kg2006 2007 2008 2009 2010

Graph 3 Graph 4

Direct energy consumptionPie chart 2

Other energy: 34.2%

Fuel: 0.4%

Gas: 65.4%


Maximising the recycling of production waste

All production waste dumped is to be avoided in a world where resources efficiency is an absolute must. In 2010, Etex Group was able to reduce further its percentage of dumped waste per ton of raw material, as was the case in 2009 (graph 5).

In 2010, 245,911 tons of production waste were recycled, of which 147,098 tons internally, and only 65,851 tons of production waste had to be dumped, out of more than 5.1 million tons of raw

materials consumed. Etex Group plants generated a total of 3,368 tons of hazardous waste.

During 2010, no significant spills occurred at any of the Group plants and the fines paid for exceeding certain environmental limits were kept to € 4,114.

Production waste dumped per ton of raw material

2%

1.5%

1%

0.5%

0%2006 2007 2008 2009 2010

Originally built in the sixties, the Pestalozzi school in Edingen-Neckarhausen, Germany, was recently renovated with Natura fibre cement cladding panels to create an

insulated outer wall construction that significantly reduces energy and heat loss.

Graph 5


Sustainable materials and systems

Much of Europe’s ageing building stock is energy inefficient, consu-ming a great amount of expensive fuel and producing unwanted greenhouse gases. Today the Euro-pean Union is seeking to combat this by formulating new energy-saving requirements.

An especially high proportion of energy and heat loss – almost 35% – is due to facades that are poorly (or not at all) insulated. The remaining 60% is lost through uninsulated basements, poorly insulated roofs and old windows (mostly single-glazed).

A very effective way to save energy is to insulate the walls of old buildings in combination with an outer wall construction, using fibre cement cladding boards mounted on aluminium or wooden fixing systems. These light-weight cladding boards have no impact on the foundation of the building and this rainscreen method of construction is the optimal form of exterior wall insulation according to building physics criteria.

Rear-ventilated rainscreen clad-ding is especially durable and is proven to be long lasting.

The complete separation of the external skin from the thermal insulation and the fixing system provides lasting protection for the building and avoids moisture damage. It also allows insulation of any thickness to be used easily right up to ‘Passive House’ stan-dard.

For durable rainscreen cladding, Etex Group offers a full range of flexible non-combustible pro-ducts with a wide range of design options, for all types and heights of buildings.

Etex Group’s fibre cement facade panels add contemporary aesthe-tics to any building type. Some fibre cement panels are through coloured and offer an unpolished authentic look while other panels have colourful and smooth anti-graffiti protection coatings. The facade panels can be varied in size, texture and colour, resulting in endless aesthetic possibilities.


The Pestalozzi school was state-of-the-art at the time of its completion in 1965. This picture shows the building before renovation.



Involvement At its Burton-upon-Trent, U.K. site, Marley Eternit operates a very comprehensive training centre for internal staff, customers and professionals in general, covering roofing, cladding and profiled sheeting. The sessions make trainees more knowledgeable about Marley Eternit products, giving greater confidence to sell and promote them.

David Cassell, richard Bishop and Charlotte Hughes (Marley Eternit)

‘’


SOCiAL rEPOrt


Social report

Looking at its core values (respect, integrity, loyalty

and entrepreneurship), Etex Group believes

that improving specific supporting values will

help achieve closer cooperation between the

Group companies and individual employees.

These supporting values have been identified as Collaborative Spirit and

People Development.

the values and leadership style of Etex Group

Etex Group is convinced that a collaborative leadership style enhances the whole organisation. During the 3-yearly Management Meeting held in September 2010, all senior managers were therefore guided through the principles of Fair Process Leadership® by Professor Ludo Van der Heyden, Professor for Technological Innovation at INSEAD. The approach is based on open and honest communication and a feedback culture leading to more engagement and a people-oriented working environment.

Etex Group believes that its employees are its most important assets and the main source of its long-term competitive advantage. Etex Group is therefore keen to invest in people and their personal development. All Group companies organise a wide range

of training courses at local level to enhance the technical and other skills of their employees.

As part of Leadership Development, an Etex Vlerick Management Programme is organised every two years for Etex Group Professionals. The programme seeks to impart, to young professionals coming from different countries, divisions and educational backgrounds, a broad understanding of the fundamental principles of leadership and management, and to develop leadership skills, behaviours and abilities in line with Etex Group core values. A further aim is to create a global mindset, a shared corporate culture and a common awareness of Group strategies and objectives. Future managers are also exposed to the cultural diversity which is one of the major strengths of Etex Group.

Etex Group’s social policy


Message to the stakeholders Activity Report Environmental Report Social report Financial Report

Social parameters

Human capital management is an important building block in Etex Group’s continuous improvement process of its operational excellence. Etex Group believes that transparency in respect of human resource issues is a constituent element of its Corporate Social Responsibility.

An important tool to measure and understand the employees’ opinions, motivation and satisfaction, is to organise employee satisfaction surveys. Last year, 37 Group companies organised such a survey, the majority through independent agencies, with a frequency that varies between 1 to 4 years.

Based on the output of these surveys, actions are taken to improve the working environment.

The Group manages the performance of its employees through individual target setting, in line with the overall company strategy, and regular appraisals with the employee. The feedback is the basis of the further development of the employees to bring them to higher performance levels.

On average over the 13,351 employees in the Etex Group companies worldwide, 78% of the workforce has permanent employment contracts and 22% have temporary or interim

employment status. Most employees are between the age of 30 and 50 (see pie chart below).

In 2010, employee turnover, i.e. employees leaving the company as a percentage of the total workforce, within Etex Group was 15%. This turnover figure includes retirements, the end of temporary contracts, dismissals and resignations.

The Group companies have a policy to avoid any form of discrimination and no incidents were reported in 2010. Etex Group obviously sees to it that none of its companies uses child labour.

Employees by age

>60 years: 3%

<30 years: 19%

between 50 and 60 years: 16%

between 30 and 50 years: 62%


Number of accidents

700

600

500

400

300

200

100

02006 2007 2008 2009 2010

Health and Safety, a priority at Etex Group

Etex Group has an active policy for reducing the

number of accidents and protecting employee

health. This starts with full compliance with existing

local legislation, which the Group continuously strives

to outperform.

In 2007 the Group published its Health & Safety Policy with the principal aim of reducing the frequency and gravity of accidents in its factories. Key targets were set for the end of 2010: a Frequency Rate (FR) below 10 and a Gravity Rate (GR) below 0.3 (lost day = calendar day).

Since 2008, the Group has used a standardised system for all accident reporting in all Group companies. This is based on clearly defined definitions and includes both blue collar and white collar employees.

78% of all Group companies have established joint Health &

Safety Committees representing employees and employers. In these committees that meet at regular times, Occupational Health & Safety issues are discussed and input is given for continuous improvement in these areas. In May 2010 an EHS Charter was signed at the Etex European Workers Council covering the European affiliates. The Charter fosters to support exchange and debate on EHS matters through a permanent Working Group bringing together management and workforce representatives.

At the Colombit factory in Manizales, Colombia, workers listen attentively to a safety briefing before starting another production run.

Graph 1

(Number of accidents x 106)

Number of hours worked

(Number of lost days x 103)

Number of hours worked

FR =

GR =



2010: actual versus target

End-2010 was the deadline to reach the FR and GR targets set in 2007.

The frequency rate of 10 was achieved, with an actual rate for 2010 of 9.65 (graph 2). This represents a 56% reduction in accidents since 2007.

Despite this positive result, the Group fell short of its gravity rate target (graph 3). This is due to a small number of severe accidents resulting in a high number of lost days, and regrettably, in one

case, a fatal accident of an outside contractor in November 2010.

In 2010, 31 plants ended the year without accidents, a number of them for several years in a row. 1 in 3 plants were entirely accident-free, as against 1 in 4 in 2009.

Etex Group is working on introducing a forum for exchanging health and safety experience and best practice between different plants, aimed among other things at reducing the difference in the number and impact of accidents between geographic regions.

Gravity rate 2006-2010

0.6

0.4

0.2

02006 2007 2008 2009 2010

30

25

20

15

10

02006 2007 2008 2009 2010

Frequency rate 2006-2010Graph 2 Graph 3


OHSAS Certifications

70%

60%

50%

40%

30%

20%

10%

0%2006 2007 2008 2009 2010

In July 2010, more than 20 families in Junquillar received the keys of their new homes that were built after the earthquake earlier that year.

Health & Safety certifications and registrations

The main objective of the 2007-2010 H&S policy was for every factory to obtain OHSAS 18001 certification. This health and safety management system obliges each plant to perform risk assessments and identify areas for improvement. The change in culture and mentality that OHSAS produces is a key factor in reducing accidents.

In 2010, OHSAS 18001 was further implemented in Etex Group plants.

By the end of the year, 69 % of all Etex Group plants were certified (graph 4). This is still short of the ultimate target of 100 %, but the evolution from just 8 % at the end of 2006 to 69 % 4 years later is something Etex Group can be very proud of.

Etex Group further optimised its Workplace Air Monitoring Programme (WAMP) to guarantee a safe working environment for everyone working at our sites.

The Group has filed on time all the registrations required under

the European Commission’s REACH (Registration, Evaluation and Accreditation of Chemicals) regulation and CLP (Classification, Labelling and Packaging) regulations and taken all necessary measures to be fully compliant.

Graph 4


Joining forces to rebuild JunquillarOn February 27, 2010, a violent earthquake, measuring 8.8 on the Richter scale, hit the Maule region in the centre of Chile. The earthquake also caused a tsu-nami which severely affected the Chilean coastline. 795 people lost their lives and more than 500,000 homes were destroyed or seriously damaged.

Faced with the scale of this disas-ter, Etex Group’s Chilean subsidiary Empresas Pizarreño immediately decided to provide physical and material aid to families who had suffered the most. Pizarreño and the local construction company

Besalco agreed to build 21 perma-nent houses for the inhabitants of Junquillar, a community of 90 families some 12 km to the north of Constitución, one of the towns closest to the epicenter. Many of the houses destroyed there were adobe constructions, which are particularly vulnerable to seismic activity.

Most of the building materials for the construction of the 21 new houses were donated by Empresas Pizarreño, including fibre cement roofing and cladding boards, plas-terboard, ceramic tiles and plastic pipes. The houses each have two

bedrooms, a kitchen-dining room and a bathroom and comply with heat, acoustic and antiseismic standards.

At the end of July 2010, only five months after the earthquake, the houses were handed over to fami-lies in Junquillar.

Through direct, pragmatic aid to the victims of the disaster, these Chilean people got back their hope, comfort and above all, the roof that they had lost.


A large part of the materials used to build the new homes was provided by the Chilean Etex Group companies and installed by a partnering building contractor.


The members of the Executive Committee, from left to right (January 2011):André Hoste, José Manuel Martinez S., Axel vom Scheidt, J. Alfons Peeters,

Frédéric Deslypere, Jorge Bennett U., Karel De Wilde and Udo Sommerer.

Governance ReportExecutive CommitteePhilippe Coens Chief Executive Officer, Chairman of

the Executive Committee1

J. Alfons Peeters Chief Executive Officer, Chairman of

the Executive Committee2

Division Director1

Jorge Bennett U. Division Director

Frédéric Deslypere Finance Director

Karel De Wilde Company Secretary

André Hoste Division Director2

José Manuel Martinez S. Division Director

Udo Sommerer Division Director2

Axel vom Scheidt Division Director

Board of DirectorsJean-Louis de Cartier de Marchienne Chairman

Philippe Coens Managing Director1

J. Alfons Peeters Director3

Walter Emsens Director

Regnier Haegelsteen Director

Thomas Leysen Director

Marc Nolet de Brauwere Director

Teodoro Scalmani Director

Christian Simonard Director

Philippe Vlerick Director

Gaëtan Voortman Director

In 2010, the Board of Directors of Etex Group met six times in plenary sessions.

1 Untill 31 December 20102 As from 1 January 20113 As from 25 May 2011



Although not a listed company, Etex Group is committed to the principles of Corporate Governance. The Group structure and processes are designed to enhance the Group’s business performance, while managing its risks and exercising sufficient control.

The Group is managed by the Board of Directors and the Executive Committee.

The Board of Directors determines the Group’s overall strategy, decides major investments and monitors Etex Group’s affairs. The composition of the Board is carefully balanced between representatives of the shareholders, the management and independent directors.

The Board of Directors has created working committees with the objective of analysing more thoroughly specific issues and advising the Board accordingly. The Board has set up a Strategy Committee, a Financial Audit Committee and a Selection and Remuneration Committee.

The Strategy Committee makes recommendations to the Board of Directors on the strategic options and directions proposed by the Executive Committee. In addition,

the Strategy Committee reviews major projects which are proposed by the Executive Committee, such as acquisitions, divestments, geographical diversification. After thorough analysis, it makes recommendations to the Board with regard to the Group strategy and major investments.

The Selection and Remuneration Committee selects prospective board members and determines the overall remuneration and benefits granted to the members of the Executive Committee. In doing so, it verifies whether the compensation of the members of the Executive Committee is in line with market practice and whether its incentives are designed to achieve the Group’s strategic goals.

The Financial Audit Committee reviews the financial reporting process as well as the statutory audit of the annual accounts. In particular, the Committee reviews the consistency and reliability of the accounts and financial information supplied to the Board. The Audit Committee also monitors the company’s internal control and risk management systems.

The day-to-day management of the Group is entrusted to the CEO

and the Executive Committee. The latter is composed of the CEO, the directors of divisions, the company secretary and the CFO.

Strategy CommitteeJean-Louis de Cartier de Marchienne (Chairman)Philippe CoensWalter EmsensThomas LeysenJ. Alfons Peeters (as from 1 January 2011)Philippe VlerickSecretary: Karel De WildeThe Committee met four times in 2010.

Selection and remuneration CommitteeJean-Louis de Cartier de Marchienne (Chairman)Marc Nolet de BrauwerePhilippe VlerickSecretary: Myriam MacharisThe Committee met three times in 2010.

Financial Audit CommitteeMarc Nolet de Brauwere (Chairman)Regnier HaegelsteenGaëtan VoortmanSecretary: Karel De WildeThe Committee met three times in 2010.

Corporate Governance


Collaboration With operations across the world, reliable and up-to-date reporting is crucial for Etex Group. Financial staff throughout the Group collaborates closely to provide information that allows the Group to react swiftly to changing financial and economic trends. In 2010, this again proved to be a crucial success factor.

Juan Pablo Partarrieu, Aldo Orihuela and Juan Guillermo navarrete(Sociedad industrial Pizarreño and Etex Group)

‘’


FinAnCiALrEPOrt


Financial report

2010 was a year of bigger than ever contrasts

within the Group’s span of activities. With sales

evolution varying from one product and geographic

region to another between further decline and stronger than expected recovery, the

Group’s operating income increased substantially to € 185 million, a 49%

improvement compared to last year. Better

occupation of production lines combined with cost

structures, which have been brought into line with the

new levels of activity, are the main drivers for this positive

evolution.

The net financial debt of the Group was further reduced to € 337.2 million. The Net Financial Debt/Recurring EBITDA ratio of the Group stood at 1.19 x (banking covenant: 3 x), leaving a comfortable cushion to sustain further organic growth or for acquisitions which are in line with the Group’s overall strategic focus. Capital employed remained very much under control, helped by an improving non-cash working capital (from 17.6% on sales to 17.0%). Investments were limited to well-selected strategic growth projects.

In summary, as a result of the above trends, the Group returned to value creation mode just one year after facing the broadest and deepest macro-economic crisis of its existence. The ROCE of the Group significantly increased from 8.4% to 12.9%, well above its estimated cost of capital of 9.4%.

Changes in the scope of consolidation

In August, the Group acquired Microtherm, a Belgian company

active in the manufacturing and sales of high performance insulation products based on microporous silica. Microtherm reinforces the Group’s position in the high performance insulation sector and, in particular, opens new potential for insulation applications incorporating vacuum-insulated panels in the building industry.

The results of Microtherm are consolidated since 1 September 2010.

income Statement

European markets as a whole remained stable but with some important differences between countries. The sales of the European Building Materials division improved slightly (€ 969.1 million compared to € 949.6 million). This figure reflects contrasting performances in the different geographic areas. The western seaboard countries, in particular Ireland, Spain and Portugal, suffered further reduction in building activity. The rest of Europe was stable


(France and Benelux) or showed sustained demand (Germany and Poland). The UK markets were strong in the first half but weakened towards the end of the year under the impact of the new government’s austerity measures. Gross profit and overhead ratios on sales improved, reflecting the benefits of the restructuring efforts initiated since 2008. As a result, the Division’s recurring operating income strongly improved from € 58.2 million to €

€ 68.6 million (+ 18.9%).

For 2010, sales of the Fire Protection and Insulation Division were expected to decrease, with a weakening of the utility and office building industry. Like-for-like sales did indeed slightly decline (-0.4%) even though total sales (€ 329.6 million compared to € 319.0 million) progressed as a result of the incorporation of the results of the newly-acquired Microtherm group during the last 4 months of the year. The petrochemical business in the Middle East did not live up to expectations but should improve in 2011. The marine business underperformed as a result of slowing shipbuilding activity. The high temperature insulation markets recovered following a stronger decline in activity as a result of the crisis. Etex Group’s expertise in fire protection has allowed us to enter the Indian market. Margins to sales ratios remained stable. The recurring operating income of the Division reduced slightly to € 40.4 million (-1.2%).

Sales of the International Building Materials Division, active in emerging markets, rose 26.2% to reach € 650.7 million in 2010. Etex Group’s companies in Latin America all achieved significant growth, building on the Group’s strong presence on that continent since more than 80 years. The Group has further consolidated its position in the two Asian markets in which it is present with fibre cement boards. Activities in Indonesia have expanded rapidly for the past several years and will need the support of further investments to follow the evolution of the market. In China, an investment will be made in order to produce high-added value cladding elements. The Group’s presence in Africa is limited to Nigeria and South Africa. Both countries performed better than expected in terms of sales, generating together more than 10% of the Group’s operating income. The margins of the IBM Division increased, following improvements of price levels in several critical business segments. The overheads to sales ratio improved more than one percent, helped by the expanding business environment. The recurring operating income for the division increased by 34.9% to € 68.8 million, confirming the rapid recovery of the emerging markets in which the Group is present. The earthquake in Chile caused major material damage (€ 11.7 million), which was covered by insurance.

Total Etex Group sales have increased (+ 8.9%) but are still

lower then the record figure of 2007 (-8.1%). The Group may bridge that gap in 2011, leaving a group similar in size but with an increased emphasis on emerging countries. Foreign exchange effects on the evolution of sales amounted to + € 67.1 million. Gross profit amounted to € 606.0 million and increased by 11.1% compared to 2009. At 31.0%, the gross profit/sales ratio for the Group was almost back to pre-crisis levels (31.4% in 2007). Except for the International Building Materials Division, the overheads to sales ratios remain less favourable than in the Group’s record years. Further restructuring efforts will be necessary to align the cost structures to the new business environment. Operating income before non recurring items (REBIT) amounted to € 171.7 million, which represents 8.8% of sales. The lower activity levels required the Group to impair selected fixed assets for a total amount of € 28.0 million.

The appeals procedure relating to the competition fine imposed by the German Kartellamt has not started yet. According to our legal counsel, no decision is to be expected before the last quarter of 2011. The court case against a former managing director of Etex Group before the Court of First Instance in Turin (Italy) will probably be decided during the second half of this year. Etex Group has been sued in these proceedings by a large number of civil parties who have been exposed to asbestos at Eternit Genoa SpA, a company in which



Etex Group previously held a minority interest. On the basis of legal advice from outside counsels, Etex Group is convinced that the claims by the civil parties will be dismissed by the Italian court.

Operating income (EBIT) amounted to € 185.2 million, an increase of € 60.7 million over that of 2009, substantially influenced by the above-mentioned macro-economic, production and cost structure factors.

The net interest expenses of € 28.6 million decreased as a result of lower borrowing levels. In August 2010, the Group amended and extended its syndicated loan facility, adding one year to its maturity and substantially reducing the margins. The one-off costs for this re-financing are amortised as financial expenses over the duration of the loan. The profit before income tax amounts to € 158.8 million and the tax charge to € 34.6 million, giving a profit for the year of € 124.1 million. The effective tax rate was 22.0% compared to 52.4% in 2009. Unlike in 2009, low taxed countries such as Chile performed very well. In addition, most entities recording pre-tax losses in 2009 returned to profit in 2010. The share of the profit for the year attributable to the shareholders of Etex Group amounts to € 113.9 million, an increase of 196.9% over 2009.

The share of non-controlling interests in the profit for the year decreased in relative terms from

15.4% to 8.2% as a result of the comparatively better performance of the Group’s wholly-owned affiliates. Consolidated Statement of Financial Position (Balance Sheet)

Property, plant and equipment increased from € 896.6 (2009) to € 901.3 million at the end of 2010, an increase of € 4.7 million. Capital expenditure reached € 68.7 million, which is below depreciation (€ 82.8 million). The increase is therefore essentially the result of exchange rate movements (€ 38.0 million). In the last quarter of the year, the fifth press for calcium silicate products was successfully started in Belgium. Given the improvement and better visibility of the business environment, major investments were approved in the last quarter of 2010. They include the construction of new production lines in Indonesia (fibre cement flat sheets), Poland (clay tiles), Colombia, Peru (ceramic floor and wall tiles) and China (cladding elements). Capex levels in 2011 are expected to reach 1.8 times ordinary depreciation, well above 2009 and 2010 levels.Goodwill and intangible assets increased from € 176.3 million to € 205.9 million mainly as a result of the acquisition of Microtherm where goodwill (€ 14.8 million) and other intangibles (€ 15.9 million) were recognised.

Other non-current assets mainly consist of the 7.95% shareholding in Aliaxis. The fair value of this

investment has increased by € 8.5 million during the year.

Non-cash working capital amounted to € 333.1 million (17.0% of sales), an increase of € 17.5 million. Inventory levels increased as stocks were too low to support reviving levels of activity. Receivables to sales ratios deteriorated slightly, essentially in some Latin American countries.

Total equity attributable to shareholders of the Group increased from € 671.3 million at the end of 2009 to € 757.3 million at the end of 2010. Included in this movement is the profit after tax for the year of € 113.9 million less the dividend of € 19.6 million paid in 2010, and items which are directly recognised in equity.

Net financial debt at the end of 2010 amounted to € 337.2 million, a decrease of € 55.9 million over the debt at the end of 2009. Compared to its peak in 2008, the Group’s net financial debt has decreased by € 184.4 million. A better controlled non-cash working capital and resilient cash flows explain this significant achievement.

risk Profile

Etex Group is exposed to the normal range of general business risks, as are most businesses, and takes measures to cover these risks through insurance and internal policies. In particular, the Group created in 2010 an internal audit department to review the compliance with best practice


procedures and processes and to conduct a risk assessment exercise on a regular basis.

Typical risks are third party and product liability, property damage, business interruption and employer’s liability and, in certain instances, credit risk.

With the worldwide spread of its activities, Etex Group is exposed to the impact of currency fluctuations on revenues, costs, assets and liabilities arising outside the Euro zone. The policies put in place to address these risks remained unchanged.

Demand for building materials is driven essentially by rising populations, increasing prosperity and the evolution of macro-economic parameters such as the level of GDP growth, public spending, interest rates and government policies. Etex Group obtains risk diversification through its geographic spread of activities as well as being involved in residential, commercial and industrial building.

Etex Group uses a wide range of raw materials to produce its products. Cement is a key raw material for many products and is usually in ample supply from several suppliers. Textile fibres used to reinforce some roofing products are sourced from a limited number of companies in Japan and China, with whom the company has built up long-term relationships and contracts. For natural resources such as clay or gypsum, the raw material supplies

are either owned or secured through long-term contracts. Energy costs are significant, not only in the cost of manufacturing certain products (in particular ceramic roof, floor and wall tiles), but also in the production of the raw materials themselves by the Group’s suppliers. Measures to save energy consumption are under constant review.

Regrettably, some companies of Etex Group have used asbestos as a raw material in the past. They are now exposed to claims from people with asbestos-related diseases. The aim of Etex Group is to ensure that fair compensation is paid to those genuinely suffering an illness caused by the Group’s activities. The costs are met from state social security schemes, insurance and own resources. Given the long latency time of certain of those illnesses, the Group will remain exposed to this risk in the middle term future.

Subsequent events

No significant event took place after the balance sheet date that would have affected the financial position of Etex Group.

Prospects for 2011

In 2011, Etex Group will probably benefit from positive market evolutions in emerging markets. These markets have returned to pre-crisis activity levels well before the European markets, increasing the relative importance of their contribution to the Group’s results.

Europe is expected to experience mostly stable sales, with the exception of Ireland where the building sector remains in deep crisis. All potential for further improvements in operating income will therefore need to come from the various initiatives taken to increase the Group’s operating excellence.



Consolidated financial statementsConsolidated income statementin thousands of EUR Notes 2009 2010Revenue (1) 1,796,923 1,956,495Cost of sales (2) -1,251,333 -1,350,452GRoss pRofit 545,590 606,043Distribution expenses (2) -241,857 -247,474Administrative and general expenses (2) -133,373 -149,353Other operating charges (3) -53,082 -66,537Other operating income (3) 30,714 29,021opeRatinG income befoRe non RecuRRinG items 147,992 171,700Gain on disposal of assets and businesses (4) 404 17,342Other non recurring items (4) -23,906 -3,816opeRatinG income (ebit) 124,490 185,226Interest income (5) 53,948 60,996Interest expenses (5) -86,101 -89,563Other financial income (5) 4,274 7,152Other financial expense (5) -3,505 -6,654Share of profit in equity accounted investees (12) 1,059 1,624pRofit befoRe income tax 94,165 158,781Income tax expense (6) -48,802 -34,647pRofit foR the yeaR fRom continuinG opeRations 45,363 124,134Attributable to shareholders of Etex Group 38,366 113,905Attributable to non-controlling interests 6,997 10,229

in thousands of EUR 2009 2010pRofit foR the yeaR 45,363 124,134Changes in employee benefits reserves -43,745 -51,008

Income tax effect 13,726 13,762Changes in cash flow hedge reserves -20,754 -5,996

Income tax effect 760 4,055Changes in fair value of available-for-sale assets 6,593 8,548

Income tax effect - -Acquisition of non-controlling interests 942 49Changes in translation differences 4,375 33,067Others -374 -125

Income tax effect - -otheR compRehensive income, net of tax -38,477 2,352

total compRehensive income foR the peRiod, net of tax 6,886 126,486Attributable to shareholders of Etex Group -5,969 105,759Attributable to non-controlling interests 12,855 20,727

Consolidated statement of comprehensive income


Consolidated statement of financial positionin thousands of EUR Notes 2009 2010NoN-curreNt assets 1,247,011 1,314,792

Property, plant and equipment (7) 896,609 901,331

Goodwill and other intangible assets (8) (9) 176,252 205,897

Investment properties (10) 23,039 21,482

Assets held for sale (11) 2,103 3,274

Investments in equity accounted investees (12) 9,372 11,905

Other non-current assets (13) 90,812 98,200

Deferred tax assets (24) 45,703 67,867

Employee benefits assets (21) 3,121 4,836

curreNt assets 719,698 775,423

Inventories (15) 350,670 379,743

Trade and other receivables (14) 268,250 300,684

Other current assets (14) 8,838 13,339

Cash and cash equivalents (17) 91,940 81,657

totaL assets 1,966,709 2,090,215

totaL equity 761,989 859,864

Issued share capital 4,491 4,492

Share premium 3,657 3,724

Reserves and retained earnings 663,107 749,113

Attributable to the equity shareholders of Etex Group 671,255 757,329

Non-controlling interests 90,734 102,535

NoN-curreNt LiabiLities 765,671 672,469

Provisions (19) 141,815 141,823

Employee benefits liabilities (21) (22) 172,758 213,268

Loans and borrowings (23) 381,081 241,752

Deferred tax liabilities (24) 49,582 52,018

Other non-current liabilities (25) 20,435 23,608

curreNt LiabiLities 439,049 557,882

Provisions (19) 21,601 19,136

Current portion of loans and borrowings (23) 113,074 190,465

Trade and other liabilities (25) 304,374 348,281

totaL equity aND LiabiLities 1,966,709 2,090,215


Consolidated statement of cash flows

In thousands of EUR Notes 2009 2010Operating income (EBIT) 124,490 185,226

Depreciation, amortisation and impairment losses (26) 121,793 117,399

Losses (gains) on sale of intangible assets and property, plant and equipment (26) 679 -20,353

Income tax paid (26) -43,633 -51,308

Changes in working capital, provisions and employee benefits (26) 47,281 -19,870

Changes in other non-current assets/liabilities -6,152 -5,634

cash fLow from operatiNg activities 244,458 205,460

Proceeds from sale of intangible assets and property, plant and equipment (26) 2,858 28,939

Acquisition of business (net of cash) -6,717 -32,877

Disposal of business (net of cash) 15,722 -

Capital expenditure (26) -70,104 -73,415

Interest and dividend received (26) 5,606 5,142

Other -2,559 -274

cash fLow from iNvestiNg activities -55,194 -72,485

Capital increase 3,443 72

Proceeds (repayment) of borrowings -173,614 -64,856

Dividend paid (26) -27,818 -29,212

Interest paid -26,494 -29,781

Other -639 -665

cash fLow from fiNaNciNg activities -225,122 -124,442

Net iNcrease (Decrease) iN cash aND cash equivaLeNts -35,858 8,533

Cash and cash equivalents at the beginning of the year 87,102 56,161

Translation differences 3,424 6,233

Acquisition of non-controlling interests 1,493 -9,133

Net increase (decrease) in cash and cash equivalents -35,858 8,533

cash aND cash equivaLeNts at the eND of the year 56,161 61,794

Cash and cash equivalents 91,940 81,657

Bank overdrafts -35,779 -19,863


Consolidated statement of changes in equity

Attributable to the equity holders of Etex Group

in thousands of EUR

Issued share capital and share

premiums

Treasury shares

Post employment benefits reserves and financial instruments

Translation Other reserves and retained

earnings

Non-controlling

interests

Total Equity

at December 31, 2008 8,100 -17,678 35,298 -107,070 779,188 83,192 781,030

Total comprehensive income - - -43,420 -1,382 38,833 12,855 6,886

Capital increase 48 - - - - 3,395 3,443

Dividend - - - - -19,631 -8,708 -28,339

Treasury shares - -1,031 - - - - -1,031

at December 31, 2009 8,148 -18,709 -8,122 -108,452 798,390 90,734 761,989

Total comprehensive income - - -31,109 22,427 114,441 20,727 126,486

Capital increase 68 - - - - 4 72

Dividend - - - - -19,592 -8,930 -28,522

Treasury shares - -161 - - - - -161

at December 31, 2010 8,216 -18,870 -39,231 -86,025 893,239 102,535 859,864


Accounting policies– IFRIC 17 Distributions on Non-

cash Assets to Owners, effective 1 November 2009

– IFRIC 18 Transfers of Assets from Customers, effective 1 November 2009

– Improvements to IFRSs (Issued May 2008), effective 1 January 2010

– Improvements to IFRSs (Issued April 2009), effective 1 January 2010

– IFRS Practice Statement Management Commentary, effective 8 December 2010

When the adoption of the standard or interpretation is deemed to have an impact on the financial statements or the performance of the Group, its impact is described below:

IFRS 2 Share-based Payment – Group Cash-settled Share-based Payment ArrangementsThe amendment clarifies the scope and the accounting for group cash-settled share-based payment transactions. The Group has concluded that the amendment does not have an impact on the financial position or the performance of the Group.

IFRS 3 Business Combinations (Revised) and IAS 27 Consolidated and Separate Financial Statements (Amended)IFRS 3 (Revised) introduces significant changes in the accounting for business combinations occurring after this date. Changes affect the valuation of non-controlling interest, the accounting for transaction costs, the initial recognition and subsequent measurement of a contingent consideration and business combinations achieved in stages. These changes will impact the amount of goodwill recognised, the reported results in the period that an acquisition occurs and future reported results.

Etex Group S.A. (the “Company”) is a company domiciled in Belgium. The consolidated financial statements comprise the Company and its subsidiaries, interests in jointly controlled entities and equity accounted associates (together referred to as “the Group”) as at December 31 each year.

The financial statements have been authorised for issue by the Board of Directors on April 1, 2011.

Statement of complianceThe consolidated financial statements of Etex Group have been prepared in accordance with International Financial Reporting Standards (IFRS) and its interpretations issued by the International Accounting Standards Boards (IASB) as adopted by the European Union (EU).

The accounting policies adopted are consistent with those of the previous financial year, except as follows:

The Group has adopted the following new and amended IFRS and IFRIC interpretations as of 1 January 2010:

– IFRS 2 Share-based Payment – Group Cash-settled Share-based Payment Arrangements, effective 1 January 2010

– IFRS 3 Business Combinations (Revised) and IAS 27 Consolidated and Separate Financial Statements (Amended), effective 1 July 2009

– IAS 39 Financial Instruments: Recognition and Measurement – Eligible Hedged Items, effective 1 July 2009

– IFRIC 15 Agreements for the Construction of Real Estate, effective 1 January 2010

– IFRIC 16 Hedges of a Net Investment in a Foreign Operation, effective 1 July 2009

IAS 27 (Amended) requires that a change in the ownership interest of a subsidiary (without loss of control) is accounted for as a transaction with owners in their capacity as owners. Therefore, such transactions will no longer give rise to goodwill, nor will it give rise to a gain or loss. Furthermore, the amended standard changes the accounting for losses incurred by the subsidiary as well as the loss of control of a subsidiary. The changes by IFRS 3 (Revised) and IAS 27 (Amended) will be applied prospectively and will affect future business combinations or loss of control of subsidiaries and transactions with non-controlling interests.

IAS 39 Financial Instruments: Recognition and Measurement – Eligible Hedged ItemsThe amendment clarifies that an entity is permitted to designate a portion of the fair value changes or cash flow variability of a financial instrument as a hedged item. This also covers the designation of inflation as a hedged risk or portion in particular situations. The Group has concluded that the amendment does not have an impact on the financial position or the performance of the Group, as the Group has not entered into any such hedges.

IFRIC 15 Agreements for the Construction of Real EstateThe interpretation clarifies when and how revenue and related expenses from the sale of a real estate unit should be recognised if an agreement between a developer and a buyer is reached before the construction of the real estate is completed. Furthermore it provides guidance on how to determine whether an agreement is within the scope of IAS 11 or IAS 18. The adoption of this interpretation did not have any impact on the financial position or the performance of the Group.


concluded that the amendment does not have any impact on the financial position or the performance of the Group.

Improvements to IFRSs (Issued May 2008)In May 2008, the Board issued its first omnibus of amendments to its standards. All amendments issued are effective for Etex Group as at 31 December 2009, apart from the following:

– IFRS 5 Non-current Assets Held for Sale and Discontinued Operations: Clarifies when a subsidiary is classified as held for sale, all its assets and liabilities are classified as held for sale, even when the entity remains a non-controlling interest after the sale transaction. The amendment is applied prospectively and had no impact on the financial position nor financial performance of the Group.

Improvements to IFRSs (Issued April 2009)In April 2009, the IASB issued a second omnibus of amendments to its standards, primarily with a view to removing inconsistencies and clarifying wording. There are separate transitional provisions for each standard. The adoption of the following amendments resulted in changes to accounting policies but did not have any impact on the financial position or performance of the group.

– IFRS 5 Non-current Assets Held for Sale and Discontinued Operations: Clarifies that the disclosures required in respect of non-current assets and disposal groups classified as held for sale or discontinued operations are only those set out in IFRS 5. The disclosure requirements of other IFRSs only apply if specifically required for such non-current assets or discontinued

IFRIC 16 Hedges of a Net Investment in a Foreign OperationIFRIC 16 provides guidance on the accounting for a hedge of a net investment. As such it provides guidance on identifying the foreign currency risks that qualify for hedge accounting in the hedge of a net investment, where within the group the hedging instruments can be held in the hedge of a net investment and how an entity should determine the amount of foreign currency gain or loss, relating to both the net investment and the hedging instrument, to be recycled on disposal of the net investment. The adoption of this interpretation did not have an impact on the financial position or the performance of the Group.

IFRIC 17 Distributions on Non-cash Assets to OwnersThe Interpretation provides guidance on how to account for non-cash distributions to owners. It clarifies when to recognise a liability, how to measure it and the associated assets, and when to derecognise the asset and liability. The adoption of this interpretation did not have any impact on the financial position or the performance of the Group as the Group has not made non-cash distributions to shareholders in the past.

IFRIC 18 Transfers of Assets from CustomersIFRIC 18 applies to all entities that receive from customers an item of property, plant and equipment or cash for the acquisition or construction of such items. These assets are then be used to connect the customer to a network or to provide ongoing access to a supply of goods or services, or both. The interpretation provides guidance on when and how an entity should recognise such assets. The Group has

operations. No changes were required as a result of this amendment, because this information is not provided regularly to the chief operating decision maker.

– IFRS 8 Operating Segment Information: Clarifies that segment assets and liabilities need only be reported when those assets and liabilities are included in measures that are used by the chief operating decision maker. As the Group’s chief operating decision maker does not review segment assets and liabilities, the amendment does not have any impact on the disclosures of the Group.

– IAS 7 Statement of Cash Flows: Explicitly states that only expenditure that results in recognising an asset can be classified as a cash flow from investing activities. This amendment will impact the presentation in the statement of cash flows of the contingent consideration on the business combination completed in 2009 upon cash settlement.

– IAS 17 Leases: Removes the specific guidance on classifying land as an operating lease so that only the general lease classification guidance remains. The Group has concluded that the amendment does not have any impact on the financial position or the performance of the Group.

– IAS 36 Impairment of Assets: Clarifies that the largest unit permitted for allocating goodwill, acquired in a business combination, is the operating segment as defined in IFRS 8 before aggregation for reporting purposes. This amendment has no impact on the Group as the annual impairment test is performed before aggregation.

– IAS 38 Intangible Assets:

– Clarifies that if an intangible asset acquired in a business combination is identifiable only with another


– Clarifies that gains or losses on cash flow hedges of forecast transactions that subsequently results in the recognition of a financial instrument or on cash flow hedges of recognised financial instruments should be reclassified in the period that the hedged forecast cash flows affect profit or loss. The Group has concluded that the amendment does not have any impact on the financial position or the performance of the Group.

Other amendments resulting from Improvements to IFRSs to the following standards did not have any impact on the accounting policies, financial position or the performance of the Group:

– IFRS 2 Share-based Payment

– IAS 1 Presentation of Financial Statements

– IAS 18 Revenue

– IFRIC 9 Reassessment of Embedded Derivatives

– IFRIC 16 Hedges of a Net Investment in a Foreign Operation

A number of amendments and revisions to standards and interpretations issued but not yet effective up to the date of issuance of the Group’s financial statements has not been early adopted.

Basis of preparation

a - functional and presentation currency

The consolidated financial statements are presented in Euro, which is the Group’s functional and presentation currency. All values are rounded to the nearest thousand except when otherwise indicated.

b - basis of measurementThe consolidated financial statements are prepared on the historical cost basis except that the following assets

intangible asset, the acquirer may recognise the group of intangible assets as a single assets provided the individual assets have similar useful lives. The Group has concluded that the amendment does not have any impact on the financial position or the performance of the Group.

– Clarifies that valuation techniques presented for determining the fair value of intangible assets acquired in a business combination that are not traded in active markets are only examples and are not restrictive in the methods that can be used. The Group has concluded that the amendment does not have any impact on the financial position or the performance of the Group.

– IAS 39 Financial Instruments: Recognition and Measurement:

– Clarifies that a prepayment option is closely related to the host contract when the exercise price of a prepayment option reimburses the lender up to the approximate present value of lost interest for the remaining term of the host contract. The Group has concluded that the amendment does not have any impact on the financial position or the performance of the Group.

– Clarifies that the scope exemption for contracts between an acquirer and a vendor in a business combination to buy or sell an acquire at a future date, applies only to binding forward contracts, and not derivative contracts where further actions by either party are still to be taken. The Group has concluded that the amendment does not have any impact on the financial position or the performance of the Group.

are stated at their fair value: derivative financial instruments and financial instruments classified as available-for-sale. Also, the liabilities for cash-settled share based payment arrangements are measured at fair value. The consolidated financial statements have been prepared using the accrual basis for accounting, except for cash flow information.

c - use of judgements, estimates and assumptions

The preparation of financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the reported amounts of revenue, expenses, assets, liabilities and related disclosures at the date of the financial statements. These judgements, estimates and associated assumptions are based on management’s best knowledge at reporting date of current events and actions that the Group may undertake in the future. However, actual results could differ from those estimates, and could require adjustments to the carrying amount of the asset or liability affected in the future. The estimates and underlying assumptions are reviewed on an ongoing basis.

The significant estimates made by management concerning the future and other key sources of estimation uncertainty at the balance sheet date that have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities within the next financial year are discussed below:

Impairment of non-financial assetsThe recoverable amount of the cash-generated units tested for impairment is the higher of its fair value less


Recognition of deferred tax assets on tax losses carried forwardDeferred tax assets are recognised for all unused tax losses to the extent that it is probable that taxable profit will be available against which the losses can be utilised. Significant management judgment is required to determine the amount of the deferred tax assets that can be recognised, based upon the likely timing and the level of future taxable profits together with future tax planning strategies. The potential utilisation of tax losses carried forward is based on budgets and forecasts existing at reporting date. Actual results could differ from these budgets with an impact on the utilisation of tax losses carried forward.

Cash-settled share-based payment transaction The Group measures the cost of cash-settled transactions with employees by reference to the fair value of the equity instruments at each reporting date. Estimating fair value for share-based payment transactions requires determining the most appropriate valuation model, which is dependent on the terms and conditions of the grant. This estimate also requires determining the most appropriate inputs to the valuation model including the expected life of the share option, volatility and dividend yield and making assumptions about them. The assumptions and model used for estimating fair value for share-based payment transactions are disclosed in Note 22.

Financial instrumentsTo measure the fair value of financial assets that cannot be derived from active markets, management uses a valuation technique based on discounted future expected cash flows. The inputs of this model require

costs to sell and its value in use. Both calculations are based on a discounted cash-flow model. The cash flows are derived from the budget for the next five years. The recoverable amount is most sensitive to the discount rate used for the discounted cash flow model as well as the expected future cash inflows and the growth rate used for extrapolation purposes. The key assumptions used to determine the recoverable amount for the different cash-generating units, including a sensitivity analysis, are further explained in Note 8.

ProvisionsThe assumptions that have significant influence on the amount of the provisions are the estimated costs, the timing of the cash outflows and the discount rate. These assumptions are determined based on the most appropriate available information at reporting date. Further details about the assumptions used are given in Note 19.

Employee benefitsThe measurement of the employee benefits is based on actuarial assumptions. Management believes that the assumptions about discount rates, expected rates of return on assets, future salary increases, mortality rates and future pension increases used for these actuarial valuations are appropriate and justified. They are reviewed at each balance-sheet date. However, given the long-term nature of these benefits, any change in certain of these assumptions could have a significant impact on the measurement of the related obligations. Further details about assumptions used are given in Note 21.

determining a certain number of assumptions, including discount rate, liquidity risk and volatility, subject to uncertainty. Changes in these assumptions could have an impact on the measurement of the fair value. Further details are given in Note 16.

D - basis of consolidation

SubsidiariesSubsidiaries are entities that are controlled, directly or indirectly, by the Company. Control is considered the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. It is presumed to exist when the Group has an interest of more than half of the voting rights, unless such ownership does not constitute control. Subsidiaries are fully consolidated from the date on which the Group obtains control, and are no longer consolidated from the date that control ceases.

The financial statements of the subsidiaries are prepared for the same reporting year as the Company, using consistent accounting policies.

All inter-company transactions and balances, income and expenses and profits and losses resulting from intra-group transactions that are recognised in assets, are eliminated. Unrealised losses arising from transactions with subsidiaries are also eliminated, but only to the extent that there is no evidence of impairment.

The equity and net result attributable to non-controlling interests are shown separately in the statement of financial position and income statement, respectively.

Jointly controlled entities and equity accounted associatesA joint venture is a contractual arrangement whereby the Group and


other parties undertake, directly or indirectly, an economic activity that is subject to joint control, i.e. where the strategic financial and operating policy decisions require the unanimous consent of the parties sharing control. Equity accounted associates are entities over which the Group has a significant influence by participating in the financial and operating policy decisions of the entity without controlling or jointly controlling those entities. Equity accounted associates are companies over which the Group generally holds between 20 percent and 50 percent of the voting rights. The Group’s interest in jointly controlled entities or equity accounted associates is consolidated using the equity method. Equity accounting starts when joint control or significant influence is established until the date it ceases. When the Group’s share of losses exceeds its interest in an equity accounted associate, the carrying amount is reduced to nil and recognition of any further losses is discontinued, except to the extent that the Group has an obligation or has made payments on behalf of the

investees. The financial statements of these companies are prepared for the same reporting year as the Company, using consistent accounting policies. Adjustments are made to bring into line any dissimilar accounting policies that may exist. Unrealised gains arising from transactions with joint ventures and equity accounted associate are eliminated to the extent of the Group’s interest. Unrealised losses are eliminated the same way as unrealised gain but only to the extent that there is no evidence of impairment. The investments accounted for using the equity method include the carrying amount of any related goodwill.

e - foreign operationsThe individual financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (“the functional currency”). Income statements of foreign entities are translated into the Group’s reporting currency at average exchange rates for the year. Assets and liabilities, including

goodwill and fair value adjustments arising on consolidation are translated at exchange rates ruling on December 31. The exchange differences arising on the translation are taken directly to a separate component of equity. On disposal of a foreign entity, the cumulative amount recognised in equity relating to that particular foreign operation is released to the income statement.

f - transactions in foreign currencies

Foreign currency transactions are accounted for at the exchange rates prevailing at the date of the transactions. Gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies at exchange rates on December 31 are recognised in the income statement. Non-monetary assets and liabilities in a foreign currency are translated using the exchange rate at the date of the transaction.

g - exchange ratesThe following exchange rates against € have been used in preparing the financial statements:

2009 2010Average End of period Average End of period

Argentinean peso ARS 5.1994 5.4743 5.1855 5.3127

Chilean peso (000) CLP 0.7774 0.7305 0.6763 0.6254

Chinese yuan CNY 9.5181 9.7836 8.9805 8.7677

Colombian peso (000) COP 2.9894 2.9449 2.5180 2.5575

Danish krone DKK 7.4463 7.4418 7.4472 7.4535

Pound sterling GBP 0.8909 0.8881 0.8582 0.8608

Hungarian forint HUF 280.5313 270.4200 275.3564 277.9500

Indonesian rupiah (000) IDR 14.4493 13.6261 12.0554 12.0021

Nigerian naira NGN 208.0776 215.3900 200.2708 201.8300

Peruvian nuevo sol PEN 4.1871 4.1648 3.7493 3.7534

Polish zloty PLN 4.3294 4.1045 3.9950 3.9750

US dollar USD 1.3934 1.4406 1.3268 1.3362

South African rand ZAR 11.6866 10.6660 9.7135 8.8625


de-recognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the operating income in the year the asset is derecognised.

Subsequent expendituresThe Group recognises in the carrying amount of an item of property, plant and equipment the cost of replacing part of such an item when that cost is incurred if it is probable that the future economic benefits embodied with the item will flow to the Group and the costs of the item can be measured reliably. The carrying amount of the parts replaced is derecognised. All other costs are recognised in the income statement as an expense as incurred.

Assets held under finance leaseLeases of property, plant and equipment where the Group assumes substantially all the risks and rewards of ownership are classified as finance leases. Property, plant and equipment acquired through a finance lease is recognised at the commencement of the lease term at the lower of the fair value of the leased asset and the present value of minimum lease payments, each determined at the date of inception of the lease. Subsequently, such assets are measured consistently with owned property, plant and equipment, except that the useful life is limited by the lease term if the transfer of ownership at the end of the lease term is not reasonably certain. The corresponding lease liabilities are included in non-current and current financial liabilities.

DepreciationDepreciation starts when an asset is available for use and is charged to the income statement on a straight-line basis over the estimated useful life. The depreciable amount of each part

Significant accounting policiesThe accounting policies have been applied consistently to all periods presented in the consolidated financial statements, and have been applied consistently by all entities. Certain comparatives have been reclassified to conform to current year’s presentation.

a - property, plant and equipment

Property, plant and equipment are measured at acquisition or construction costs less accumulated depreciation and impairment loss (see Note E). The cost of property, plant and equipment acquired in a business combination is the fair value as at the date of acquisition. After recognition, the items of property, plant and equipment are carried at cost and not revaluated.

Costs include expenditures that are directly attributable to the acquisition of the asset; e.g. costs incurred to bring the asset to its working condition and location for its intended use. It includes the estimated costs of dismantling and removing the assets and restoring the sites, to the extent that the liability is also recognised as a provision. The costs of self-constructed assets include the cost of material, direct labour and an appropriate proportion of production overheads. Borrowing costs incurred and directly attributable to the acquisition or construction of an asset that takes a substantial period of time to get ready for its intended use, are capitalised as incurred. When all the activities necessary to prepare this asset are completed, borrowing costs cease to be capitalised.

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on

of property, plant and equipment with a cost that is significant in relation to the total cost of the asset is depreciated separately over its useful life on a straight-line basis. Costs of major inspections are depreciated separately over the period until the next major inspection. Temporarily idle assets continue to be depreciated.

Estimated useful lives of the major components of property, plant and equipment are as follows:

- Lands (excluding lands with mineral reserves): nil

- Lands with mineral reserves: exploitation lifetime

- Lands improvements and buildings: 10 - 40 years

- Plant, machinery and equipment: 5 - 30 years

- Furniture and vehicles: 3 - 10 years

Mineral reserves, which are presented as “lands” of property, plant and equipment, are valued at cost and are depreciated based on the physical unit-of-production method over the estimated tons of raw materials to be extracted from the reserves.

The residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each financial year-end.

b - intangible assetsIntangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a business combination is the fair value as at the date of acquisition. Following initial recognition, intangible assets are carried at cost less accumulated amortisation and accumulated impairment losses (see Note E).

Internally generated intangible assets are capitalised if the product or process


is technically and commercially feasible and the Group has sufficient resources to complete development. Expenditure capitalised include the costs of materials, direct labour and an appropriate portion of overheads.

The useful lives of intangible assets are assessed to be either finite or indefinite on the following bases:

- Patents, trademarks and similar rights: Indefinite

- Software ERP: 10 years

- Other software: 5 years

- Development costs: 5 years

- Customer lists: 3 - 10 years

- Brands: 20 years

- Technology and design: 20 years

- Rights to explore and extract mineral resources: usage

Intangible assets with finite lives are amortised over the useful economic life using the straight-line method. The estimated useful lives are reviewed at least at each reporting date. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are accounted for by changing the amortisation period or method, as appropriate, and treated as changes in accounting estimates by changing the amortisation charge for the current and future periods. The amortisation expense is recognised in the income statement in the expense category consistent with the function of the asset.

c - goodwillGoodwill represents the excess of the costs of a business combination over the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities of a subsidiary, equity accounted associates or joint venture at the date of acquisition. Goodwill on acquisitions of equity accounted associate or joint ventures is included in the carrying amount of the investments. Goodwill on the

acquisition of subsidiaries is presented separately, and is stated at cost less accumulated impairment losses (see Note E).

If the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities exceeds the cost of the business combination, this excess (frequently referred to as negative goodwill or badwill) is immediately recognised in the profit and loss statement, after a reassessment of the fair values.

Additional investments in subsidiaries in which the Company already has control are accounted for as equity transactions; any premium or discount on subsequent purchases of shares from minority interest are recognised directly in the Company’s shareholders equity.

D - investment propertyInvestment property is property held to earn rental income or for capital appreciation or for both and is valued at acquisition cost less accumulated depreciation and impairment loss. The carrying amount includes the cost of replacing part of an existing investment property at the time that cost is incurred if the recognition criteria are met. Investment property is depreciated similar to owned property (see Note A).

Investment properties are derecognised when either they have been disposed of or when the investment property is permanently withdrawn from use and no future economic benefit is expected from its disposal. Any gains or losses on the retirement or disposal of an investment property are recognised in the income statement in the year of retirement or disposal.

Transfers are made to investment property when there is a change in use, evidenced by ending of owner-occupation, commencement of an operating lease to another party or ending of construction or development. Transfers are made from investment

property when there is a change in use, evidenced by commencement of owner-occupation.

e - impairment of assetsAt each reporting date, the Group assesses whether there is any indication that an asset, other than inventories and deferred taxes, may be impaired. If any such indication exists, the recoverable amount of the asset (being the higher of its fair value less costs to sell and its value in use) is estimated. In assessing the value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects the current market assessments of the time value of money and the risks specific to the asset. Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the smallest cash-generating unit to which the asset belongs. If the recoverable amount of an asset or cash-generating unit is estimated to be less than its carrying amount, the carrying amount of the asset or cash-generating unit is reduced to its recoverable amount. Impairment losses are recognised in the income statement. Where an impairment loss subsequently reverses, the carrying amount of the asset or cash-generating unit is increased to the revised estimate of its recoverable amount. That increased amount cannot exceed the carrying amount that would have been determined had no impairment loss been recognised for that asset or cash-generating unit in prior periods. A reversal of an impairment loss is recognised immediately in the income statement apart from goodwill for which no such reversal is allowed.

Intangible assets with indefinite useful lives and intangible assets that are not yet available for use are tested for impairment annually either individually or at the cash-generating unit level. The useful life of an intangible asset with an indefinite


the income statement is the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in the income statement. The reversal of an impairment loss in respect of an investment in an equity instrument classified as available-for-sale, following an event occurring after the recognition of the impairment loss, is performed in equity. In the case of equity investments classified as available-for-sale, objective evidence would include a significant or prolonged decline in fair value of the investment below its cost.

f - investments in debt and equity securities

All purchases and sales of investments are recognised on trade date, which is the date that the Group commits to purchase or sell the asset.

Investments in equity securities are undertakings in which the Group does not have significant influence or control. These investments are designated as available-for-sale financial assets, as they are not held for trading purposes. At initial recognition they are measured at fair value unless the fair value cannot be measured reliably in which case they are measured at cost. The fair value is determined by reference to their quoted bid price at reporting date. Subsequent changes in fair value, except those related to impairment losses which are recognised in the income statement, are recognised directly in equity. On disposal of an investment, the cumulative gain or loss previously recognised in equity is recognised in the income statement.

g - government grantsGovernment grants are recognised where there is reasonable assurance that the grant will be received and all attaching conditions will be complied with. When the grant relates to an asset, the grant value is recognised as a deferred income and is released to the

life is reviewed annually to determine whether the indefinite life assessment continues to be adequate. If not, the change in the useful life assessment from indefinite to finite is made on a prospective basis.

Goodwill is tested annually for impairment, or more frequently if events or changes in circumstances indicate that the carrying value may be impaired. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group’s cash-generating units, or groups of cash-generating units, that are expected to benefit from the synergies of the combination.

Impairment is determined by assessing the recoverable amount of the cash-generating unit (or group of cash-generating units) to which the goodwill relates. Where the recoverable amount of the cash-generating unit (or group of cash-generating units) is less than the carrying amount, an impairment loss is recognised.

Where goodwill forms part of a cash-generating unit (or group of cash-generating units) and part of the operation within that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed of in this circumstance is measured based on the relative values of the operation disposed of and the portion of the cash-generating unit retained.

Financial assets: When a decline in the fair value of an available-for-sale financial asset has been recognised directly in equity and there is objective evidence that the asset is impaired, the cumulative loss that has been recognised directly in equity is recognised in the income statement even though the financial asset has not been derecognised. The amount of the cumulative loss that is recognised in

income statement as a reduction of the depreciation charge over the expected useful life of the relevant asset by equal annual instalments. When the grant relates to a compensation of an expense, it is recognised as income over the period necessary to match the grant on a systematic basis to the costs incurred.

Government grants that are expected to be released within twelve months after the reporting date are classified as other current liabilities. The other government grants are classified as non-current liabilities.

h - inventoriesInventories are measured at the lower of cost and net realisable value. The cost of inventories is assigned by using the weighted average cost method. The cost of inventories comprises all costs of purchases and other costs incurred in bringing the inventories to their present location and condition. For manufactured inventories, cost means full cost including all direct and indirect production costs required to bring the inventory items to the stage of completion at the reporting date. Allocation of indirect production costs is based on normal operating capacity. Borrowing costs are expensed as incurred. The costs of inventories may also include transfers from equity of any gain or loss on qualifying cash flow hedges on foreign currency purchases of inventory.

Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale.


i - trade and other receivables

Trade and other receivables are initially recognised at fair value which generally corresponds with the nominal value. Trade and other receivables are subsequently carried at amortised cost using the effective interest rate method. An impairment allowance is recognised for any uncollectible amounts when there is objective evidence that the Group will not be able to collect the outstanding amounts.

J - cash and cash equivalentsCash and cash equivalents are readily convertible into known amounts of cash. Cash and cash equivalents comprise cash at banks and on hand and other short-term highly liquid investments with original maturities of three months or less. Bank overdrafts are not included in cash and cash equivalents but classified as current financial liabilities. For the purpose of the consolidated statement of cash flows, cash and cash equivalents consist of cash and cash equivalents as defined above, net of outstanding bank overdrafts. Cash and cash equivalents are carried in the statement of financial position at amortised cost.

K - share capital

Ordinary sharesOrdinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares or share options are recognised as a deduction of equity, net of tax effects.

Treasury sharesOwn equity instruments (treasury shares) are deducted from equity. No gain or loss is recognised in profit or loss on the purchase, sale, issue or cancellation of the Group’s own equity instruments.

DividendsDividends are recognised as liabilities in the period in which they are declared.

L - provisionsA provision is recognised when the Group has a legal or constructive obligation arising from past events for which it is probable the settlement will require an outflow of resources embodying economic benefits and a reliable estimate can be made on the amount of the obligation. Where the effect of the time value of money is material, the amount of the provision is the present value of the expenditure expected to be required to settle the obligation. The result of the yearly discounting of the provision, if any, is accounted for as financial result.

Warranty provisionsThe Group recognises a provision to cover the costs arising from contractual obligation or established practice of repairing or replacing faulty or defective products sold on or before the reporting date. The estimate of warranty provision is based on past experience on the level of repairs, applied to past period sales that are still under warranty.

Restructuring provisionsRestructuring provisions are recognised when one of the following conditions is met:

- the decision to restructure is based on a detailed formal plan identifying at least: the business and the employees concerned, the expected expenditures and the expected date of implementation;

- there is a valid expectation that the plan will be carried out to those affected by it by the reporting date.

- the restructuring has either commenced or has been announced publicly.

Any restructuring provision only includes the direct expenditure arising from the restructuring which is necessarily incurred and is not associated with the ongoing activities of the Group.

Emission rightsThe initial allocation of emission rights granted is recognised at nominal amount (nil value) and is subsequently carried at cost. Where the Group has emitted CO2 in excess of the emission rights granted, it will recognise a provision for the shortfall based on the market price at that date. The emission rights are held for compliance purposes only and therefore the Group does not actively trade these in the market.

Other provisionsThese captions include provisions for claims and litigation with customers, suppliers, personnel, tax authorities and other third parties. It also includes provisions for onerous contracts, for guarantees given to secure debt and commitment of third parties when they will not fulfil their obligation and for site restoration costs.

A provision for onerous contracts is recognised when the expected benefits to be derived by the Group from a contract are lower than the unavoidable cost of meeting its obligations under the contract.

A provision for site restoration costs in respect of contaminated land is recognised whenever the Group has a legal obligation to clean the land or where there is an intention to sell the land.

Provisions that are expected to be settled within twelve months after the reporting date are classified as other current liabilities. The other provisions are classified as non-current liabilities.

m - contingenciesContingent liabilities are not recognised in the statement of financial position. They are disclosed in the notes to the financial statements, unless the possibility of an outflow of resources embodying economic benefits is remote. Contingent assets are not recognised in the financial statements but are disclosed if the inflow of economic benefits is probable.


benefits available in the form of refunds from the plan or reductions in future contributions to the plan and any unrecognised past service costs.

Gains or losses on the curtailment or settlement of pension benefits are recognised in the income statement when the curtailment or settlement occurs.

The expected return on plan assets (including interest, dividends and other income to be derived from plan assets and expected realised and unrealised losses from changes in their value) and interest costs, being the unwinding of the discount on the present value of the defined benefit obligation, are included in financial result.

Defined contributions plansIn addition to the defined benefits plans described above, some Group companies sponsor defined contributions plans based on local practices and regulations. The Group’s contributions to defined contributions plans are charged to the income statement in the period in which the contributions are due.

Other long term benefits plansOther long term obligations include the estimated costs of early retirement for which a constructive obligation exists at reporting date.

Short term benefitsShort term employee benefits are measured on an undiscounted basis and are expensed as the related service is provided. A provision is recognised for the amount expected to be paid under short term cash-bonus plans if the Group has a present and constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be measured reliably.

Termination benefitsTermination benefits are recognised as an expense when the Group is demonstrably committed without realistic possibility of withdrawal, to

N - post employment benefits and other long-term employee benefits

Defined benefits plansSome Group companies provide pension or medical plans for their employees which qualify as defined benefits plans. The net obligation resulting from these plans, which represents the amount of future benefits that employees have earned in return of their service in the current and prior periods, are determined separately for each plan by a qualified actuary using the projected unit credit method. The calculations are based on actuarial assumptions relating to mortality rates, rates of employee turnover, future salary levels and medical costs increase which reflect the economic conditions in each country or entity. Discount rates are determined by reference to the market yields at the reporting date on high quality corporate bonds or to the interest rates at the reporting date on government bonds where the currency and terms of the bonds are consistent with the currency and estimated terms of the defined benefit obligation. Actuarial gains and losses are recognised in equity in the period in which they occur.

Past service costs arising from improvements to the benefits of a plan are recognised on a straight-line basis over the average period until the amended benefits become vested. If the benefits are vested immediately following the introduction of, or changes to, a plan, the past service cost is recognised immediately in the income statement.

The defined benefit liability is the aggregate of the present value of the defined benefits obligation reduced by past service cost not yet recognised and the fair value of plan assets out of which the obligations are to be settled directly. If such aggregate is negative, a net pension asset is recorded only to the extent that it does not exceed the present value of any economic

a formal detailed plan to terminate employment before the normal retirement date.

o - employee benefits – share based payment transactions

The Group operates various share-based compensation plans which qualify as equity-settled transactions with a cash alternative. In addition to the shares options, beneficiaries receive put options which entitle them to a cash payment, and as management assumes that most of these put options will be exercised, the Company accounts for the grants as a cash-settled transaction. The services received and the liability incurred are measured initially at fair value at the grant date using the Black and Sholes method taking into account the terms and conditions upon which the instruments were granted. The initial fair value is expensed over the period until vesting. The fair value of the liability is re-measured at each reporting date up to and including the settlement. Any changes in fair value of the liability are recognised in the income statement.

p - financial liabilities

Bank loans and other borrowingsBank loans and other borrowings are recognised initially at the fair value of the consideration received, net of transactions costs incurred. In subsequent periods, bank loans and other borrowings are stated at amortised cost, with any difference between costs and redemption value being recognised in the income statement, using the effective interest rate method. Gains and losses are recognised in the income statement when the liabilities are derecognised as well as through the amortisation process.

These liabilities are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least twelve months after the reporting date.


Finance lease liabilitiesFinancial liabilities resulting from a finance lease are recognised, along with the related assets, at an amount equal to the fair value of the leased property or, if lower, the present value of the minimum lease payments. The minimum lease payments are apportioned between the finance charge and the reduction of the outstanding liability. The finance charge is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability. The lease payments due within twelve months are included in current financial liabilities.

q - trade and other payablesTrade and other payables are initially recognised at fair value which generally corresponds with the nominal value. They are subsequently carried at amortised cost using the effective interest rate method.

r - risk managementThe Group has exposure to the following risks from its business activities and use of financial instruments in running and managing its business:

A. Market risk

B. Credit risk

C. Liquidity risk

D. Capital risk

The Group’s risk management policies have been established to identify and analyse the risks faced by the Group, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly in the light of market conditions and changes in the Group’s activities.

a. Market riskMarket risk is the risk that changes in the market prices, such as foreign

exchange rates, interest rates and equity prices, will (positively or negatively) affect the Group’s income or expenses or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return on risk.

The Group creates financial assets and incurs financial liabilities in the ordinary course of business. It buys and sells derivatives in order to manage market risk. Generally, the Group seeks to apply hedge accounting to allow it to offset, at maturity, the gains or losses on the hedging contracts against the value of costs and revenue. Hedge accounting enables it to manage volatility in the income statement.

Currency riskIn its operations, the Group is exposed to currency risk on sales, purchases and borrowings.

The translation of local statements of financial position and income statements into the Group reporting currency leads to currency translation effects. If the Group hedges net investments in foreign entities with foreign currency borrowings or other instruments, the hedges of net investments are accounted for similarly to cash flow hedges. All foreign exchange gains or losses arising on translation are recognised in equity and included in cumulative translation differences.

Due to the nature of the Group’s business, a high proportion or revenues and costs is in local currency, thus transaction risk is limited. Where Group entities have expenditures and receipts in different currencies, they enter into derivative contracts themselves or through the Group’s coordination centre to hedge their foreign currency exposure over the following months (based on forecasted purchases and sales). These derivatives are designated either as cash

flow hedges, fair value hedges or non hedging derivatives.

Interest rate riskThe Group’s primary source of funding is floating rate bank debt. Therefore it is exposed to the risk of changes, beneficial or adverse, in market interest rates. The Group’s long-term borrowings have been raised by companies in Belgium, Chile, and Germany. To manage its interest costs, the Group has entered into interest rate swaps. The hedges ensure that the major part of the Group’s interest rate cost on borrowings is on a fixed rate basis. The timing of such hedges is managed so as to lock interest rates whenever possible.

Equities and securities riskEquity price risk arises from available-for-sale equity securities. In general, the Group does not acquire any shares or options on shares or other equity products, which are not directly related to the business of the Group.

b. Credit riskCredit risk is the risk of financial loss to the Group if a customer or finance counterparty to a deposit, lending or derivative instrument fails to meet its contractual obligations. It arises principally from the Group’s receivables from customers and from bank deposits and investment securities. It also includes the risk that a financial counterparty may fail to meet its obligation under a financial liability. The Group constantly monitors credit risk, and ensures that it has no excessive concentration of credit risk with any single counterparty or group of connected counterparties.

To manage the risk of customer default, the Group periodically assesses the financial reliability of customers, and establishes purchase limits for each customer. The Group establishes allowances for impairment that represent its estimate of incurred losses in respect of trade and other receivables


credit lines. Cash is maintained, where necessary, to guarantee the solvency and financial flexibility of the Group at all times.

d. Capital riskThe Group’s primary objective when managing capital is to ensure that it maintains healthy capital ratios in order to support its business and maximise shareholder value.

The Group manages its capital structure and makes adjustments to it, in the light of changes in economic situations.

The Group monitors capital using the gearing ratio, which is calculated by dividing net financial debt by the sum of net financial debt and equity attributable to the shareholders of Etex Group. Net financial debt includes the non-current loans and borrowings and the current portion of loans and borrowings less cash and cash equivalents and non-current and current financial assets. The Group’s policy is to keep the gearing ratio lower than 50%. The Group would consider exceeding this level for a short period in the case of an extraordinary event, such as a major acquisition.

s - Derivative financial instruments

The Group uses derivative financial instruments such as forward exchange contracts and interest rate swaps to hedge its risk associated with foreign currency and interest rate fluctuations. In accordance with its treasury policy, the Group does not hold derivative financial instruments for trading purposes. Derivative financial instruments that do not qualify for hedge accounting are accounted for as financial assets and liabilities at fair value through profit and loss.

Derivative financial instruments are initially recognised at fair value on the date a derivative contract is entered into. The fair value of

and investments. The main components of these allowances are a specific loss component that relates to individually significant exposures, and a collective loss component established for groups of similar assets in respect of losses that have been incurred but not yet identified. The collective loss allowance is determined based on historical data of payment statistics for similar financial assets.

Finance counterparties consist of a number of major financial institutions. The Group does not expect any counterparties to fail to meet their obligations, including their lending obligations, given their high credit risk ratings.

c. Funding and long term liquidity riskFunding risk is the risk that the Group will be unable to access the funds that it needs when it comes to refinance its debt or through the failure to meet the terms of its main syndicated credit facility. A summary of the terms of the facility are to be found in note 23 on financial debts. Refinancing risk is managed through developing and maintaining strong bank relationships with a group of financial institutions and through maintaining a strong and prudent financial position over time. The Group has successfully negotiated funding contracts that provide flexibility.

Long term liquidity risk is the risk that the Group will encounter difficulty in meeting obligations associated with financial liabilities as they fall due. The Group’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, and so avoid incurring unacceptable losses or risking damage to the Group’s reputation.

Short term liquidity risk is managed on a daily basis with funding needs being fully covered through the availability of

derivative financial instruments is either the quoted market price or is calculated using pricing models taking into account current market rates and current creditworthiness of the counterparties.

Subsequently to initial recognition, derivative financial instruments are stated at fair value at the reporting date. The fair value of forward exchange contracts is calculated by reference to current forward exchange rates for contracts with similar maturity profiles. The fair value of interest rate swap contracts is determined by reference to market values for similar instruments.

Derivative financial instruments are stated at cost if their fair value cannot be measured reliably.

Gains or losses on re-measurement to fair value are recognised immediately in the income statement unless the derivative qualifies for hedge accounting whereby recognition is dependent on the nature of the item being hedged. On the date a derivative contract is entered into, the Group designates certain derivatives either as:

- a hedge of a particular risk associated with a recognised asset or liability or highly probable forecasted transaction, such as variability in cash flows of future interest payments on a floating rate debt (cash flow hedge), or

- a hedge of a net investment in a foreign entity.

A derivative instrument is accounted for as a hedge, when:

- the hedging relationship is documented as of its inception,

- the hedging is highly effective in achieving its objective,

- the effectiveness can be reliably measured,

- for a cash flow hedge, the forecasted transaction which is the subject of the hedge must be highly probable.


Cash flow hedgeChanges in the fair value of derivatives that are designated and qualify as cash flow hedges and that are effective are recognised in equity. Where the firm commitment results in the recognition of a non-financial asset, for example property, plant equipment or inventory, or a non-financial liability, the gains or losses previously recognised in equity are transferred from equity and included in the initial measurement of the non-financial asset or liability. Otherwise, amounts recognised in equity are transferred to the income statement and classified as revenue or expense in the same periods during which the cash flows, such as interest payments, or hedged firm commitments, affect the income statement. Any ineffective portion is reported immediately in the income statement. When a hedging instrument is sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in equity at that time remains in equity and is recognised when the committed transaction ultimately is recognised in the income statement. However, if a committed transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is immediately transferred to the income statement.

Net investment hedgeForeign currency differences arising on the retranslation of a financial liability designated as a hedge of a net investment in a foreign operation that are effective are recognised in equity and included in cumulative translation differences. The amounts deferred in equity are transferred to the income statement on disposal of the foreign entity.

Certain derivative transactions, while providing effective economic hedges under the Group’s risk management policies, may not qualify for hedge accounting. Changes in the fair value

of any derivative instruments that do not qualify for hedge accounting are recognised immediately in the income statement. The changes in fair value that are recognised in profit and loss of the period are classified in operating result if the derivative relates to a non-financial asset and in financial result if the derivative relates to a financing transaction.

t - income taxesIncome taxes include current and deferred income taxes.

Current income taxesCurrent tax is the expected tax payable on taxable income for the year, and any adjustment to tax payable in respect of previous years. Current income tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted at the reporting date.

Additional income taxes that arise from the distribution of dividends are recognised at the same time as the liability to pay the related dividend.

Deferred income taxesDeferred income taxes are calculated, using the balance sheet liability method, on all temporary differences arising between the carrying amounts of assets and liabilities in the consolidated statement of financial position and their tax base. The amount of deferred tax provided is based on the expected manner of realisation of the carrying amount of assets and liabilities, using the tax rates enacted or substantially enacted at the reporting date.

Deferred tax liabilities are recognised, except:

- where the temporary differences arise from the initial recognition of goodwill or the initial recognition of

an asset or liability in a transaction that affects neither accounting profit nor taxable profit on that date.

- in respect of taxable temporary differences associated with investments in subsidiaries, equity accounted associates and interest in joint ventures, where the timing of the reversal of the temporary difference can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

Deferred tax assets are recognised only when it is probable that taxable profits will be available in the coming 3 years, against which the deductible temporary difference or the tax loss to be carried forward can be utilised, except:

- where the temporary differences arise from the initial recognition of an asset or liability in a transaction that affects neither accounting profit nor taxable profit on that date.

- in respect of deductible temporary differences associated with investments in subsidiaries, equity accounted associates and interest in joint ventures, deferred tax assets are recognised only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised.

Deferred tax assets are reviewed at each reporting date to assess the probability that sufficient taxable profit will be available to allow deferred taxes to be utilised.

Deferred tax is recognised in the income statement, except when it relates to items credited or charged directly to equity, in which case the deferred tax is treated accordingly.

Deferred tax assets and liabilities are offset, if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred taxes relate to the


same taxable entity and the same tax authority.

u - revenueRevenue is recognised when it is probable that the economic benefits associated with the transaction will flow to the enterprise and the amount of the revenue can be measured reliably.

Sale of productsRevenue from sales of goods is recognised in the income statement net of sales taxes and discounts when delivery has taken place and the transfer of risks and rewards of ownership has been completed.

Construction contractsA limited number of activities of the Group are construction contract driven. Consequently contract revenue and contract costs are recognised in the income statement on the percentage-of-completion method, with the stage of completion being measured by reference to actual work performed to date. When the outcome of a construction contract cannot be estimated reliably, contract revenue is recognised only to the extent of the contract expenses that are recoverable. In the period in which it is determined that a loss will result from the performance of a contract, the entire amount of the estimated ultimate loss is charged to the income statement.

Rental incomeRental income arising on investment properties is accounted for on a straight-line basis over the lease terms on ongoing leases.

Interest incomeInterest is recognised on a time proportion basis that reflects the effective yield on the asset.

DividendsDividends are recognised when the Group’s right to receive payment is established.

v - expenses

Operating lease paymentsPayments made under operating leases are recognised in the income statement on a straight-line basis over the term of the lease. Lease incentives received are recognised in the income statement as an integral part of the total lease expense.

Finance income and expenseFinance costs comprise:

- interest payable on borrowings calculated using the effective interest rate method,

- foreign exchange gains and losses on financial assets and liabilities,

- gains and losses on hedging instruments that are recognised in the income statement,

- the expected return on plan assets, and

- interest costs with respect to defined benefit obligations.

The interest expense component of finance lease payments is recognised in the income statement using the effective interest rate method.

w - Non-current assets held for sale and discontinued operations

Non-current assets (or disposal groups) are classified as held for sale and stated at the lower of carrying amount and fair value less costs to sell if their carrying amount is to be recovered principally through a sale transaction rather than through continuing use.

A discontinued operation is a component of the Group business that represents a separate major line of business or geographical area of operations or a subsidiary acquired exclusively with a view to resale. Classification as a discontinued operation occurs upon disposal or when the operations meet the criteria to be classified as held for sale, if earlier. A disposal group that is to be abandoned may also qualify.

X - future changes in accounting policies

New or amended standards and interpretations issued up to the date of issuance of the Group’s financial statements, but not yet effective for 2010 financial statements, which we believe are applicable to the Group are listed below:

– IFRS 7 Financial Instruments: Disclosures – Amendment to Disclosures, effective 1 July 2011, not yet endorsed by the EU

– IFRS 9 Financial Instruments, effective 1 January 2013, not yet endorsed by the EU

– IAS 12 Income Taxes – Recovery of Tax Assets, effective 1 January 2012, not yet endorsed by the EU

– IAS 24 Related Party Disclosures (Revised), effective 1 January 2011

– IAS 32 Financial Instruments: Presentation – Classification of Rights Issues, effective 1 February 2010

– IFRIC 14 – Prepayments of a Minimum Funding Requirement, effective 1 January 2011

– IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments, effective 1 July 2010

– Improvements to IFRSs (Issued May 2010), effective 1 January 2011, not yet endorsed by the EU.

The Group is currently assessing the impact of these new standards and amendments on the consolidated financial statements.


Explanatory notes

Note 1 - RevenueRevenue by activity

The majority of the Group’s revenue is generated by the sale of goods. Revenue arising from construction contracts amount to €32,701 thousand.


in thousands of EUR 2009 2010Roofing 848,259 868,196

Boards 499,269 585,145

Floors and walls 140,838 179,843

Others 308,557 323,311

totaL 1,796,923 1,956,495

in thousands of EUR 2009 2010Germany 375,354 401,356

France 202,781 201,435

United Kingdom 169,207 181,501

Benelux 144,436 136,410

Other Europe 334,138 319,759

Chile 151,638 201,864

Nigeria 113,445 119,463

Argentina 81,565 105,739

Peru 63,374 79,179

Rest of the World 160,985 209,789

totaL 1,796,923 1,956,495

Note 2 - Operating charges by natureThe Group’s major operating charges by function in 2010 are as follows:

in thousands of EURPersonnel &

temporaryDepreciation &

impairmentGoods &

materialsEnergy Transport

& travelOthers TOTAL

Cost of sales -242,804 -73,070 -605,387 -114,902 -131,777 -182,512 -1,350,452

Distribution expenses -133,449 -6,142 - -450 -13,730 -93,703 -247,474

Administrative and general expenses -90,260 -8,235 - -1,295 -5,106 -44,457 -149,353

Other operating charges -14,628 -26,136 - -82 -309 -25,382 -66,537

Non recurring charges - -3,816 - - - - -3,816

totaL -481,141 -117,399 -605,387 -116,729 -150,922 -346,054 -1,817,632


The Group’s major operating charges by function in 2009 are as follows:

The Group’s total personnel expenses, are made up of the following elements:

Note 3 - Other operating charges and income

in thousands of EURPersonnel &

temporaryDepreciation &

impairmentGoods &

materialsEnergy Transport

& travelOthers TOTAL

Cost of sales -228,144 -69,356 -530,002 -109,422 -114,512 -199,897 -1,251,333

Distribution expenses -128,971 -5,235 - -704 -12,629 -94,318 -241,857

Administrative and general expenses -76,522 -8,784 - -1,283 -3,724 -43,060 -133,373

Other operating charges -25,999 -16,814 - -89 -287 -9,893 -53,082

Non recurring charges -2,302 -21,604 - - - 404 -23,502

totaL -461,938 -121,793 -530,002 -111,498 -131,152 -346,764 -1,703,147

in thousands of EUR 2009 2010Wages and salaries -331,138 -353,040

Social security contributions -73,771 -71,392

Contributions to defined contribution plans -8,005 -7,353

Charges for defined benefit plans (service cost) -11,022 -16,526

Restructuring and termination charges -14,200 -4,216

Other employee benefits expenses -17,807 -18,970

totaL empLoyee beNefits eXpeNses -455,943 -471,497

2009 2010Production 8,539 8,661

Sales and marketing 3,045 2,987

Administration and research 1,928 1,703

average Number of persoNNeL 13,512 13,351

in thousands of EUR 2009 2010Research -7,583 -8,083

Restructuring charges -14,751 -7,562

Impairments -15,378 -24,164

Environmental remediation -1,101 -3,993

Other operating taxes -2,289 -2,178

Direct expenses arising from investment properties -1,151 -1,178

Loss on disposal of assets -1,241 -452

Miscellaneous -9,588 -18,927

totaL other operatiNg charges -53,082 -66,537


Note 4 - Non recurring items

in thousands of EUR 2009 2010Gain on disposal of assets - 17,126

Gain on disposal of businesses 404 216

totaL gaiN oN DisposaL of assets / busiNesses 404 17,342

Major restructuring costs -9,784 -3,816

Impairment of goodwill -14,122 -

totaL other NoN recurriNg items -23,906 -3,816

NoN recurriNg items -23,502 13,526

in thousands of EUR 2009 2010Income from investment property 1,042 1,526

Government grant amortisation 807 1,198

Royalties and license income 222 761

Amounts recovered from insurance companies 168 13,483

Gain on disposal of assets 745 1,480

Settlement / curtailment of pension plans 18,573 2,965

Miscellaneous 9,157 7,608

totaL other operatiNg iNcome 30,714 29,021

The Group pursues its policy of selling surplus land with items been disposed of in Widnes (United Kingdom), Pudahuel and Quilicura (Chile) recognising a total gain of €17,126 thousand.

In February 2009 the Group came to an agreement to sell Fademac (Brazil) recognising a gain of €404 thousand in 2009 and €216 thousand in 2010.

Only significant factory restructuring is disclosed under non recurring items. In 2009 the closure of the German clay tile production lines of Grossengottern and Winnenden lead to a restructuring charge of €9,784 thousand, including redundancy costs and impairment of assets. In 2010 the assets of Winnenden were further impaired for €3,816 thousand.

As detailed under Note 8 goodwill related to Umbelino (€6,640 thousand) and Marley (€7,482 thousand) have been impaired as part of the yearly assessment of goodwill in 2009.

Impairments include €1,601 thousands relating to the damages to the Group’s premises as a consequence of the February 2010 earthquake in Chile. Other charges resulting from this earthquake are included in miscellaneous (€10,069 thousands); these consist mainly of write-down of damaged inventory. The €13,265 thousands recovered from the insurance companies with respect to this are included in the relevant caption shown below:


Note 5 - Finance income and expense

Lower interest expense on financial liabilities measured at amortised cost reflects the decrease of the financial debt between 2009 and 2010. It includes the effect of interest rate derivative instruments hedging the Group’s interest rate risk: €11,474 thousand paid in 2010 (€7,851 thousand paid in 2009).

The other interest related charges mainly include upfront fee expenses (other than amounts included in determining the effective interest rate) for €3,114 thousand (€2,081 thousand in 2009) in connection with external financial debt which are amortised over the duration of the loan.

Foreign exchange gains and losses are presented net of the effect of foreign exchange derivative instruments. The exchange gain on Euro debt in Chilean subsidiaries for €12,045 thousand (€20,697 thousand in 2009) is partially offset by the exchange gain on cross currency interest rate swaps hedging the currency risk.

In thousands of EUR 2009 2010Interest income from receivables, deposits and cash and cash equivalents (loans and receivables) 3,248 2,348

Positive impact of change in discount rate of long term provisions - 332

Expected return from post employment benefits plan assets 50,700 57,989

Other interest related income - 327

iNterest iNcome 53,948 60,996

Interest expense on financial liabilities measured at amortised cost -29,336 -28,753

Interest expense on post employment liabilities -51,579 -54,526

Unwinding of discount long term provisions -2,216 -1,768

Negative impact of change in discount rate of long term provisions -287 -1,051

Negative fair value adjustments of interest rate contracts (held for trading at fair value through profit and loss) -191 -214

Other interest related charges -2,492 -3,251

iNterest eXpeNse -86,101 -89,563

Dividend income from shares in non consolidated companies (available-for-sale) 1,793 1,876

Net foreign exchange gains (liabilities at amortised cost) 1,362 3,785

Other finance income 1,119 1,491

other fiNaNce iNcome 4,274 7,152

Net foreign exchange losses (loans and receivables) -483 -4,998

Impairment of shares in non consolidated companies (available-for-sale) -1 -

Other finance expense -3,021 -1,656

other fiNaNce eXpeNse -3,505 -6,654

Net fiNaNce costs -31,384 -28,069


Note 6 - Income tax expense

The reconciliation between the effective income tax expense and the theoretical income tax expense is summarised below. The theoretical income tax expense is calculated by applying the domestic nominal tax rate of each Group entity to their contribution to the Group profit before income tax and before share of the profit in equity accounted investees.

Income tax recognised directly in equity is related to:

In thousands of EUR 2009 2010Current income tax charge for the year -43,426 -45,909

Adjustments to current income tax of previous years 1,158 108

curreNt iNcome taX eXpeNse -42,268 -45,801

Origination and reversal of temporary differences 4,580 5,039

Valuation allowances on deferred tax assets -11,257 6,248

Effect of changes in the nominal rates on deferred taxes 143 -133

DeferreD iNcome taX eXpeNse -6,534 11,154

totaL iNcome taX eXpeNse -48,802 -34,647

In thousands of EUR 2009 2010profit before iNcome taX aND before share of profit iN equity accouNteD iNvestees 93,106 157,157

Theoretical income tax expense (nominal rates) -31,930 -45,075

Weighted average nominal tax rate % 34.3% 28.7%

Tax impact ofNon deductible expenses -9,726 -3,575

Taxes on profit distribution inside the Group -4,643 -2,615

Tax savings from special status 6,604 -

Other tax deductions 3,544 10,997

Unrecognised deferred tax assets on current year losses -9,384 -7,758

Recognition of previously unrecognised deferred tax assets 3,640 16,339

Derecognition of previously recognised deferred tax assets -5,513 -2,333

Net effect on deferred tax of changes in tax rates 143 -133

Adjustments to prior year income tax 1,158 108

Other tax adjustments -2,695 -602

iNcome taX eXpeNse recogNiseD iN the iNcome statemeNt -48,802 -34,647

Effective tax rate % 52.4% 22.0%

In thousands of EUR 2009 2010Actuarial gains (losses) on post employment benefit plans 13,726 13,762

Gains (losses) on financial instruments - available-for-sale - -

Gains (losses) on financial instruments - cash flow hedging 760 4,055

totaL 14,486 17,817


Note 7 - Property, plant and equipment

Due to a tight cash control, limited major investment projects were initialised during 2009 and 2010.

The major additions for the year 2010 are the additional filter press in Tisselt (Belgium), the completion of the fibre cement line in Lima (Peru) and the completion of the fibre cement factory in Akmene (Lithuania).

Acquisitions through business combinations mainly relate to the acquisition of Microtherm in August 2010.

The disposal proceeds of property, plant and equipment in 2010 amount to €8,579 thousand, resulting in a net gain of €21,824 thousand (out of which €17,126 thousand were recorded as non recurrent, see note 4). In 2009, the proceeds amounted to €1,646 thousand with a net loss of €907 thousand.

The amount of assets fully depreciated but still included in the gross book value at the end of 2010 amounts to €398,677 thousand compared to €357,938 thousand at the end of 2009.

In thousands of EUR

Land and buildings

Plant, machinery, equipment

Furniture, vehicles

Other property, plant,

equipment

Under construction

Total

at December 31, 2008Gross book value 541,492 1,330,908 139,530 7,445 103,638 2,123,013Accumulated depreciation -238,665 -841,697 -115,944 -4,199 - -1,200,505Accumulated impairment loss -767 -9,106 -72 - - -9,945Net booK vaLue 302,060 480,105 23,514 3,246 103,638 912,563

Of which leased assets 2,910 15,060 847 - - 18,817

Additions 4,791 25,102 4,225 1,542 31,127 66,787Disposals -165 -1,606 -662 - -120 -2,553Acquisitions through business combinations - 50 - - - 50Changes in the scope of consolidation 532 -1,984 -244 1 -478 -2,173Transfer between captions 17,306 45,172 841 394 -62,995 718Depreciation for the year -11,790 -57,235 -8,768 -774 - -78,567Impairment loss of the year -6,141 -11,544 -19 - -5,320 -23,024Reversal impairment loss - 167 - - - 167Translation differences 7,242 13,213 353 31 1,802 22,641

at December 31, 2009Gross book value 566,963 1,411,131 136,164 9,583 72,974 2,196,815Accumulated depreciation -246,311 -900,030 -116,853 -5,143 - -1,268,337Accumulated impairment loss -6,817 -19,661 -71 - -5,320 -31,869Net booK vaLue 313,835 491,440 19,240 4,440 67,654 896,609

Of which leased assets 8,989 14,471 542 - - 24,002

Additions 6,450 33,003 7,879 2,957 18,452 68,741Disposals -7,366 -741 -436 -35 -1 -8,579Acquisitions through business combinations 9,388 6,756 332 101 - 16,577Transfer between captions 10,872 25,590 99 71 -38,661 -2,029Depreciation of the year -12,952 -60,429 -8,192 -904 - -82,477Impairment loss of the year -5,221 -13,238 -205 -7 -6,817 -25,488Reversal of impairment loss - 6 - - - 6Translation differences 12,462 22,376 660 174 2,299 37,971

at December 31, 2010Gross book value 593,783 1,530,884 140,267 13,439 55,063 2,333,436Accumulated depreciation -264,474 -999,332 -120,650 -6,642 - -1,391,098Accumulated impairment loss -1,841 -26,789 -240 - -12,137 -41,007Net booK vaLue 327,469 504,762 19,377 6,797 42,926 901,331

Of which leased assets 3,190 22,560 2,411 - - 28,161


Note 8 - Goodwill and Business combinations

8.1. reconciliation of the carrying amount of goodwill

The main components of the carrying amount of goodwill are the following:

in thousands of EUR 2009 2010Gross book value 164,448 164,984

Accumulated impairment losses -2,438 -17,629

Net booK vaLue at the begiNNiNg of the year 162,010 147,355

Additions through business combinations - 14,832

Adjustments purchase price allocations -1,045 -

Translation differences 512 6

Impairment loss of the year -14,122 -

Net booK vaLue at the eND of the year 147,355 162,193

Gross book value 164,984 180,061

Accumulated impairment losses -17,629 -17,868

in thousands of EUR 2009 2010Creaton, Germany (2005) 92,893 92,893

Cafco (2007) 16,199 16,199

Microtherm (2010) - 14,832

Projiso (2006) 11,196 11,196

Ivarsson, Denmark (2005) 8,542 8,529

Intumex (2000) 8,504 8,504

Others 10,021 10,040

totaL 147,355 162,193

Impairment testing

In December 2010, impairment reviews were performed for assets where impairment indicators arose. The carrying value of capital employed has been compared with the recoverable amount of the cash-generating unit. Impairments were recognised in Ireland, Germany and Chile.

The recoverable amount of the cash-generating units was determined based on a value in use calculation. The value in use was determined by discounting the future cash flows generated from the continuing use of the unit and was based on the following key assumptions:

- cash flows were projected based on actual operating results and the 3-10 year business plan,

- cash flows for further periods were extrapolated using a constant growth rate within a range of 0% to 3% per annum depending on the countries involved.

- cash flows are discounted using the weighted average cost of capital (WACC) in a range of 10.0% to 12.0% depending on the countries involved.

An increase of 1.0% in the rate used to discount the future cash flows would have led to an additional impairment of €3,539 thousand on operating assets.


8.2. business combinations

In August 2010, Promat International acquired Microtherm pursuing the diversification strategy of the Fire Protection and Insulation Division in terms of products and geographical spread. The Belgian manufacturer of High Temperature Insulation solutions has operations in Europe, Japan and the United States of America. The purchase price has been allocated to the property, plant, equipment, brand, technology, customer base and goodwill. Since the acquisition Microtherm reported a profit of €1,212 thousand. If Microtherm was acquired at the first of January 2010, the result would amount to €2,084 thousand.

Acquisitions performed in 2009 only related to the acquisition of the Pyrobor Fire Protection business from Foseco GmbH. The purchase price has been allocated to intellectual property, development costs and customer base.

in thousands of EUR 2009 Microtherm 2010NoN-curreNt assets 5,343 32,927 32,927

Property, plant and equipment 50 16,577 16,577

Intangible assets 5,293 15,946 15,946

Other non-current assets - 17 17

Deferred tax assets - 387 387

curreNt assets 157 9,796 9,796

Inventories 157 3,681 3,681

Trade and other receivables - 4,521 4,521

Cash and cash equivalents - 1,594 1,594

totaL assets 5,500 42,723 42,723

NoN-curreNt LiabiLities - 18,166 18,166

Employee benefits liabilities - 359 359

Loans and borrowings - 9,404 9,404

Deferred tax liabilities - 8,403 8,403

Other non-current liabilities - - -

curreNt LiabiLities - 7,371 7,371

Provisions - 14 14

Current portion of loans and borrowings - 1,323 1,323

Trade and other liabilities - 6,034 6,034

totaL LiabiLities - 25,537 25,537

Net iDeNtifiabLe assets aND LiabiLities 5,500 17,186 17,186

acquisitioN price satisfieD iN cash (group share) 5,500 32,018 32,018

Goodwill generated - 14,832 14,832


8.3. acquisitions of non-controlling interestsThe domination agreement between Creaton AG and its majority shareholder Etex Holdings GmbH in Germany (August 2007) stipulates that the preference shareholders, which have no voting rights, are entitled to either sell their shares at a fixed price of €28.17 or receive a guaranteed fixed dividend of €1.27 per share. In the course of 2010, shareholders of Creaton AG owning 6,790 shares (2009: 19,780 shares) have accepted the offer and the financial liability has been reduced accordingly.

Throughout the year several acquisitions of minorities took place representing all together a cash out payment of €17 thousand (€317 thousand in 2009). These acquisitions are recognised as equity transactions.

8.4. impairment testing of goodwillIn December 2010, impairment reviews were performed by comparing the carrying value of goodwill with the recoverable amount of the cash-generating unit to which goodwill has been allocated. Management determined that no impairment loss had to be recognised.

The recoverable amount of the cash-generating units was based on its value in use. The value in use was determined by discounting the future cash flows generated from the continuing use of the unit and was based on the following key assumptions:

- cash flows were projected based on actual operating results and the 3-year business plan,

- cash flows for further periods were extrapolated using a constant growth rate of 1% per annum (1% in 2009)

- cash flows are discounted using the weighted average cost of capital (WACC) of 9.4% (9.1% in 2009).

An increase of 1.0% in the rate used to discount the future cash flows would have led to an impairment on the goodwill of €19,170 thousand.


Note 9 - Intangible assets other than goodwill

in thousands of EURConcessions Software Brands Other

intangiblesTotal

at December 31, 2008

Gross book value 19,540 40,357 - 11,915 71,812

Accumulated amortisation -13,138 -24,240 - -8,433 -45,811

Accumulated impairment losses - - - - -

Net booK vaLue 6,402 16,117 - 3,482 26,001

Additions 700 2,236 - 376 3,312

Disposals - -341 - - -341

Acquisitions through business combinations - - 3,362 1,931 5,293

Transfer between captions 46 -14 - -128 -96

Amortisation for the year -695 -3,321 -934 -966 -5,916

Impairment loss of the year -1 -2 - - -3

Changes in the scope of consolidation -5 -14 - -7 -26

Translation differences 367 262 - 44 673


Gross book value 20,151 41,171 3,362 14,448 79,132

Accumulated amortisation -13,337 -26,248 -934 -9,716 -50,235


Net booK vaLue 6,814 14,923 2,428 4,732 28,897

Additions 1,408 1,555 - 1,693 4,656

Acquisitions through business combinations - 37 8,357 7,552 15,946

Transfer between captions - 307 - -162 145

Amortisation for the year -537 -3,594 -1,260 -1,203 -6,594

Impairment loss of the year - -37 - - -37

Translation differences 351 152 - 188 691


Gross book value 21,793 43,212 11,719 24,074 100,798

Accumulated amortisation -13,757 -29,869 -2,194 -11,274 -57,094


Net booK vaLue 8,036 13,343 9,525 12,800 43,704


Investment properties comprise several pieces of land and buildings, mainly in France, Germany, Italy and Colombia.

The fair value of the investment properties is estimated at €39,998 thousand (€40,441 thousand in 2009). Where external valuations were not available best estimates have been used.

Assets held for sale are lands and buildings that are not used in operations anymore and for which the Group is actively looking for a buyer.

Note 10 - Investment properties

Note 11 - Assets held for sale


Accumulated depreciation -22,565 -22,702

Accumulated impairment losses - -


Depreciation for the year -328 -348

Impairment loss - -2,461

Additions 5 18

Transfer between captions -772 980

Disposals -42 -7




Accumulated depreciation -22,702 -21,931

Accumulated impairment losses - -2,461


Accumulated impairment losses -21 -175


Impairment loss - -

Reversal of impairment loss - -

Disposals -602 -

Additions - -

Transfer between captions 150 904




Accumulated impairment losses -175 -165


Note 12 - Investments in equity accounted investees

Summarised financial information of investments in equity accounted investees (Group’s share):

Transactions between the Group and equity accounted investees can be summarised as follows:

in thousands of EUR 2009 2010at the begiNNiNg of the year 9,543 9,372

Result for the year 1,059 1,624

Dividend paid -573 -902

Change in the scope of consolidation -1,807 851

Translation differences 1,150 960

at the eND of the year 9,372 11,905

in thousands of EUR 2009 2010Property plant and equipment 5,103 5,959

Other non-current assets 5,853 5,885

Current assets 8,216 10,213

Non-current liabilities -1,333 -1,298

Current liabilities -4,225 -4,612

totaL Net assets 13,614 16,147

Revenue 21,299 28,006

Operating income 1,576 2,070

Profit after tax 1,059 1,624

in thousands of EUR 2009 2010traNsactioNs

Dividend received 573 902

outstaNDiNg baLaNces

Trade receivables 305 518

Other current receivables 400 37

Trade liabilities - 10


The non-current available-for-sale investments include investments in non consolidated companies that are not intended for disposal up until the preparation of the next financial statements:

- shares of Aliaxis S.A. (7.95%) representing an investment of €83,893 thousand (€75,344 thousand in 2009). The shares of Aliaxis S.A. are traded on a market that is not considered to be an active market. The fair value of the Group’s investment in Aliaxis S.A. is calculated by an external agency using valuation techniques based on relevant stock market ratios applied to the most recent consolidated results. This value is corrected with an illiquidity discount. However the calculated value can never be lower than the available market price. The increase in fair value of the Aliaxis shares held by the Group amounting to €8,549 thousand has been recognised in equity (increase of €6,593 thousand in 2009).

- listed equity instruments held to cover future obligations of the Group’s gratuity funds that are valued at market value of €93 thousand (€837 thousand in 2009).

- unquoted equity instruments that are measured at cost as their fair value cannot be measured reliably for €3,576 thousand (€3,331 thousand in 2009).

Note 13 - Other non-current assets

Note 14 - Trade and other receivables

Current trade and other receivables

in thousands of EUR 2009 2010Trade and other receivables 7,504 11,209

Impairment on trade and other receivables -688 -587

Net trade and other receivables 6,816 10,622

Derivative financial instruments with positive fair value 4,252 -

Available-for-sale investments 81,595 89,655

Impairment on available-for-sale investments -2,083 -2,093

Net available-for-sale investments 79,512 87,562

Deposits 232 16

totaL 90,812 98,200

in thousands of EUR 2009 2010Trade receivables 230,995 258,590

Impairment on trade receivables -16,380 -17,676

Trade receivables 214,615 240,914

Other receivables 53,635 59,770

totaL 268,250 300,684


Other receivables are mainly composed of:

Exposure to credit risk - impairment lossesThe ageing of trade and other receivables at reporting date was as follows:

Other current assets

The movement in the allowance for impairment of current trade and other receivables was as follows:

in thousands of EUR 2009 2010Income taxes recoverable 19,618 22,371

Other taxes recoverable 15,047 17,951

Derivative financial instruments with positive fair values 7,264 6,206

Prepaid charges and accrued income 4,414 4,990

Advances due from customers for contracts in progress 402 723

Advances to personnel 2,464 2,896

Others 4,426 4,633

totaL 53,635 59,770

in thousands of EUR 2009 2010Neither impaired nor past due at reporting date 205,785 234,646

Not impaired at reporting date and past due 62,465 66,038

Up to 30 days 39,117 43,471

Between 31 and 60 days 10,281 11,536

Between 61 and 90 days 3,514 3,452

Between 91 and 120 days 1,958 1,288

Between 121 and 150 days 1,908 583

More than 150 days 5,687 5,708

Net carryiNg amouNt at the eND of the year 268,250 300,684

in thousands of EUR 2009 2010aLLowaNces at the begiNNiNg of the year -14,521 -16,380

Additions -4,247 -3,792

Use 870 1,296

Reversal 1,371 1,294

Change in the scope of consolidation 147 -

aLLowaNces at the eND of the year -16,380 -17,582

in thousands of EUR 2009 2010Available-for-sale investments 4,127 4,202

Deposits 4,711 9,137

totaL 8,838 13,339


Note 16 - Risk management and financial derivatives

16.1 risk management

A. Market risk

Exposure to currency riskAround 51% of the Group’s revenue is generated by subsidiaries with a functional currency other than the Euro (47% in 2009). The Group mainly operates in the following foreign currencies: Argentinean peso, Chilean peso, Nigerian naira, Peruvian nuevo sol and Pound sterling.

Translation currency sensitivity analysisOn the basis of the volatility of these currencies against the Euro in 2010, the reasonably possible change of the exchange rate of these currencies against the Euro is estimated as follows:

In 2010, the Group recognised inventory write-downs to net realisable value of €2,344 thousand (€1,339 thousand in 2009) as an expense, including reversal of prior year write-downs amounting to €3,568 thousand (€6,268 thousand in 2009). The inventory write-off due to the Chilean earthquake amounted to €7,514 thousand.

Note 15 - InventoriesThe different types of inventories are detailed below:

in thousands of EUR 2009 2010Raw materials 85,311 100,679

Work in progress 27,536 33,295

Finished goods 181,628 182,085

Spare parts and consumables 51,342 54,558

Goods purchased for resale 27,655 33,714

Write-downs to net realisable value -22,802 -24,588

totaL 350,670 379,743

Rates used for sensitivity analysisClosing rate

December 31, 2010Average

rate 2010Possible volatility

of rates in %Range of possible closing rates

December 31, 2010Range of possible average

rates 2010

Argentinean peso 5.3127 5.1855 35 3.4533 - 7.1722 3.3706 - 7.0005

Chilean peso (000) 0.6254 0.6763 33 0.419 - 0.8317 0.4531 - 0.8994

Nigerian naira 201.8300 200.2708 24 153.3908 - 250.2692 152.2058 - 248.3358

Peruvian nuevo sol 3.7534 3.7493 34 2.4772 - 5.0295 2.4745 - 5.0241

Pound sterling 0.8608 0.8582 22 0.6714 - 1.0501 0.6694 - 1.0471


If the Euro had weakened or strengthened during 2010 by the above estimated possible changes against the listed currencies with all other variables held constant, the 2010 profit would have been €17,563 thousand (14%) higher or lower (€8,372 thousand or 18% in 2009) while equity would have been €53,918 thousand (6%) higher or lower (€41,573 thousand or 5% in 2009), as detailed below:

Interest rates sensitivity analysis€388,876 thousand or 90% of the Group’s interest bearing financial liabilities, before offset of any surplus cash, bear a variable interest rate (€430,743 thousand or 87% in 2009). This floating debt portion consists of debt instruments almost exclusively denominated in Euro apart from €35,662 thousand that is denominated in Chilean peso (€8,726 thousand in 2009), €14,617 thousand that is denominated in US dollar (€12,004 thousand in 2009) and €18,680 thousand denominated in other currencies (€21,409 thousand in 2009).

The total interest expense recognised in the 2010 income statement on the Group’s variable rate debt portion, net of the effect of interest rate derivative instruments, amounts to €25,989 thousand (€26,928 thousand in 2009). The total interest expense recognised on the fixed rate portion amounts to €2,726 thousand (€2,369 thousand in 2009).

The reasonably possible change of the market interest rates applicable to the Group’s floating rate debt after hedging is as follows:

Application of the reasonably possible fluctuations in the market interest rates mentioned above on the Group’s floating rate debt at December 31, 2010, with all other variables held constant and net of the effect of interest rate derivative instruments, would result in an increase (decrease) of the 2010 profit by €141 thousand (€793 thousand in 2009). Cash and cash equivalents in Euro of €36,974 thousand (€35,877 thousand in 2009), Chilean peso balances of €5,722 thousand (€9,053 thousand in 2009) and US dollars of €547 thousand (€521 thousand in 2009) generate interest that would partially offset any variations in interest payable. The fair value of the Group’s interest rate hedging contracts would, on basis of the above possible change in interest rates decrease (increase) by €5,771 thousand against an increase (decrease) of equity for that amount (€5,588 thousand in 2009).

In thousand of EUR2009 2010

Profit Equity Profit Equity

Argentinean peso 340 11,811 772 15,130

Chilean peso -527 -4,666 7,563 4,131

Nigerian naira 3,875 10,240 2,418 8,094

Peruvian nuevo sol 1,780 7,479 4,133 13,301

Pound sterling 2,904 16,709 2,677 13,262

totaL 8,372 41,573 17,563 53,918

Rates used for sensitivity analysisRates at December 31, 2009 Possible volatility of rates Possible rates at December 31, 2009

Euro 0.70% +/- 0.5% 0.20%-1.20%

Chilean peso 1.20% +/- 1.2% 0.00% - 2.40%

US dollars 0.60% +/- 0.5% 0.10%-1.10%

Rates used for sensitivity analysisRates at December 31, 2010 Possible volatility of rates Possible rates at December 31, 2010

Euro 1.01% - 0.25% + 0.5% 0.756% - 1.506%

Chilean peso 4.00% - 0.25% + 1.0% 3.75% - 5.00%

US dollars 0.30% - 0.15% + 0.5% 0.153% - 0.456%


B. Credit riskAt the reporting date the exposure to credit risk is represented by the carrying amount of each financial asset, including derivative financial instruments, in the statement of financial position (refer to note 13 for investments, note 14 for trade and other receivables, and note 17 for cash and cash equivalents).

C. Funding and long term liquidity risk

Maturity scheduleAt December 31, 2010 the contractual maturities of financial liabilities, including interest payments, are the following:

Bank loans are shown according to their contractual maturity date, rather than their interest and roll-over date.

At December 31, 2009 the contractual maturities of financial liabilities, including interest payments, were the following:

in thousands of EUR Carrying amount

Contractual cash flows

1 year or less 1-2 years 2-5 years More than 5 years

NoN-Derivative fiNaNciaL LiabiLities

Bank loans 380,263 388,484 147,933 32,828 205,754 1,969

Redeemable preference shares 8,409 8,409 4,205 4,204 - -

Other financial loans 30,657 31,456 26,819 2,250 1,206 1,181

Obligations under finance leases 12,888 13,603 6,061 7,276 216 50

Trade and other liabilities 346,798 346,798 338,655 2,080 1,785 4,278

Derivative fiNaNciaL LiabiLities

Interest rate swaps 17,581 17,971 8,133 5,571 4,315 -48

Cross currency interest rate swaps 5,291 5,291 5,291 - - -

Foreign exchange contracts 2,219 2,219 2,219 - - -

totaL 804,106 814,231 539,316 54,209 213,276 7,430


Contractual cash flows


NoN-Derivative fiNaNciaL LiabiLities

Bank loans 447,519 459,992 99,813 89,023 267,957 3,199

Redeemable preference shares 9,223 8,605 2,868 2,868 2,869 -

Other financial loans 11,611 11,519 8,702 484 1,921 412

Obligations under finance leases 25,802 34,305 5,053 9,516 3,644 16,092

Trade and other liabilities 311,343 311,334 300,602 2,044 4,077 4,611

Derivative fiNaNciaL LiabiLities

Interest rate swaps 11,240 11,679 7,303 3,897 -35 514

Foreign exchange contracts 2,226 2,224 2,150 74 - -

totaL 818,964 839,658 426,491 107,906 280,433 24,828


D. Capital risk The gearing ratios at December 31, 2010 and 2009 were as follows:

16.2 financial derivativesThe Group uses derivative financial instruments to hedge its exposure to currency and interest rate risk. In accordance with its treasury policy, the Group does not hold or issue derivative financial instruments for trading purposes.

The following table provides an overview of the outstanding derivative financial instruments at December 31:

The following table indicates in which caption of total comprehensive income, the changes in fair value of the derivative financial instruments outstanding at December 31, 2010, have been recognised:

in thousands of EUR 2009 2010Non-current loans and borrowings 381,081 241,752

Current portion of loans and borrowings 113,074 190,465

Non-current loans -232 -16

Current financial assets -8,838 -13,339

Cash and cash equivalents -91,940 -81,657

Net fiNaNciaL Debt 393,145 337,205

Total equity 761,989 859,864

totaL 1,155,134 1,197,069

geariNg ratio 34.03% 28.17%

in thousands of EUR

2009 2010Fair value Carrying

amountFair value Carrying

amountforeigN eXchaNge coNtractsAssets 7,971 7,971 6,206 6,206Liabilities -2,226 -2,226 -2,219 -2,219cross curreNcy iNterest rate swapsAssets 3,138 3,138 - -Liabilities - - -5,291 -5,291iNterest rate swapsAssets 408 408 - -Liabilities -11,240 -11,240 -17,581 -17,581totaL -1,949 -1,949 -18,885 -18,885

in thousands of EUR

Profit for the yearCost of

salesInterest expense

Other financial income

Other financial charges

Other comprehensive income

foreigN eXchaNge coNtracts

Assets -2,165 - - - 400

Liabilities 583 - - - -576

cross curreNcy iNterest rate swaps

Assets - - - -3,138 -

Liabilities - - -5,291 - -

iNterest rate swaps

Assets - - - - -408

Liabilities - - -214 - -5,412

totaL -1,582 - -5,505 -3,138 -5,996


A. Cash flow hedgesAt December 31, 2010, the Group holds forward exchange contracts designated as hedges of expected future raw material purchases from suppliers for purchases denominated in US Dollar and Japanese Yen, of expected future sales denominated in Polish Zloty, and of expected future purchases denominated in Euro by companies whose functional currency is the British Pound and Polish Zloty.

At December 31, 2010, the Group had interest rate swap agreements in place with a notional amount of €465,236 thousand of which €175,000 thousand have a delayed start (€449,472 thousand in 2009 of which €165,000 thousand had a delayed start) whereby it receives a variable interest rate based on Euribor three or six months, as the case may be, and pays a fixed rate on the notional amount. The swaps are being used to hedge the exposure to interest rate risk on its floating debt. The floating rate debt and the interest rate swaps have the same critical terms.

The Group did not recognize any ineffectiveness in 2009 and 2010.

The following tables indicate the period in which the undiscounted cash flows are or were expected to occur. This is the same period as the period in which the cash flows are expected to impact the income statement (cost of sales if relating to forward exchange contracts covering sales and purchases in foreign currencies and interest expense if concerning interest rate swaps):

At December 31, 2010

B. Derivatives without hedging relationshipCertain derivative transactions, while providing effective hedges under the Group’s risk management policy, may not qualify for hedge accounting due to the complexity of the instruments.

Some of the Group’s Chilean subsidiaries took out borrowings denominated in Euro and then entered into cross currency interest swaps to hedge the principal amounts and interest payments into their functional currency, the Chilean Peso. The cross currency interest rate swap payments mature on the same dates that the borrowings and interest are due for payment.

At December 31, 2009


Total expected cash flows


foreigN curreNcy

Foreign exchange contracts Assets 4,652 -16,592 -16,592 - - -Liabilities -1,260 7,035 7,035 - - -

iNterest rate

Interest rate swapsAssets - - - - - -

Liabilities -16,186 -16,870 -7,730 -5,237 -3,934 31


Total expected cash flows


foreigN curreNcy

Foreign exchange contracts Assets 4,251 -34,264 -25,706 -8,558 - -Liabilities -683 1,139 3,902 -2,763 - -

iNterest rate

Interest rate swapsAssets 408 281 - -197 -115 593

Liabilities -10,059 -10,498 -7,010 -3,670 182 -


The fair value of available-for-sale investments is determined by reference to their quoted bid price at reporting date. Unquoted equity instruments are measured either at fair value using a valuation technique or at cost. Further explanation is provided in note 13.

The fair value of trade and other receivables is estimated at the present value of future cash flows, discounted at the market interest rate at reporting date.

The fair value of forward exchange contracts is based on their listed market price, if available. If a listed market price is not available, then the fair value is estimated by discounting the difference between the contractual forward price and the current forward price for the residual maturity of the contract using a risk free interest rate (based on government bonds).

The fair value of interest rate swaps is calculated by discounting estimated future cash flows based on terms and maturity of each contract and using market interest rates for a similar instrument at reporting date.

The fair value of interest bearing loans and borrowings has been calculated by discounting the expected future cash flows (principal and interest cash flows) at prevailing interest rates at reporting date.

Fair values of the financial assets and liabilities are the same as their carrying amounts shown in the statement of financial position, at December 31:

16.3 financial instruments – fair values

in thousands of EUR 2009 2010assets 459,840 493,880

Other non-current assets 90,812 98,200

Trade and other receivables (loans and receivables) 6,816 10,622

Derivatives – not used for hedging (held for trading at fair value through profit and loss) 3,205 -

Derivatives – used for hedging (cash flow hedging) 1,047 -

Loans (loans and receivables) 232 16

Shares in non consolidated companies (available-for-sale) 79,309 87,522

Bonds (available-for-sale) 203 40

Trade and other receivables 268,250 300,684

Trade and other receivables (loans and receivables) 260,986 294,478

Derivatives – not used for hedging (held for trading at fair value through profit and loss) 3,653 1,555

Derivatives – used for hedging (cash flow hedging) 3,611 4,652

Other current assets 8,838 13,339

Current financial assets – deposits (loans and receivables) 4,711 9,137

Available-for-sale investments 4,127 4,202

Cash and cash equivalents (loans and receivables) 91,940 81,657

LiabiLities 818,964 804,106

Financial liabilities (liabilities at amortised cost) 381,081 241,752

Other non-current liabilities 20,435 23,608

Other non-current liabilities (liabilities at amortised cost) 10,732 8,141

Derivatives – not used for hedging (held for trading at fair value through profit and loss) 551 1,395


Current portion of financial liabilities (liabilities at amortised cost) 113,074 190,465

Trade and other liabilities 304,374 348,281

Trade and other payables (liabilities at amortised cost) 300,611 338,657

Derivatives – not used for hedging (held for trading at fair value through profit and loss) 2,173 6,250



Fair value hierarchyThe Group uses the following hierarchy to determine and disclose the fair value of financial instruments by valuation technique:

Level 1: Quoted (unadjusted) prices in active markets for identical assets or liabilities.

Level 2: Other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or indirectly.

Level 3: Techniques which use inputs which have a significant impact on the recorded fair value that are not based on observable market data.

During 2010 there were no transfers between Level 1 and Level 2 fair value measurements, and no transfers into and out of Level 3 fair value measurements.

Note 17 - Cash and cash equivalentsThe different types of cash and cash equivalents are detailed below:

in thousands of EUR Level 1 Level 2 Level 3assets measureD at fair vaLue

Derivatives – not used for hedging (held for trading at fair value through profit and loss) 1,555 - 1,555 -

Derivatives – used for hedging (cash flow hedging) 4,652 - 4,652 -

Shares in non consolidated companies (available-for-sale) 87,522 - 87,522 -

LiabiLities measureD at fair vaLue

Derivatives – not used for hedging (held for trading at fair value through profit and loss) 7,645 - 7,645 -

Derivatives – used for hedging (cash flow hedging) 17,446 - 17,446 -

in thousands of EUR 2009 2010Cash on hand and bank deposits 70,466 59,689

Short-term deposits (less than three months) 21,474 21,968

totaL 91,940 81,657

2010


treasury sharesAt December 31, 2010 the Group owns 4,472,305 ordinary shares representing 5.40% of the total number of ordinary shares.

DividendThe 2010 dividend will be proposed for approval at the General Shareholders’ Meeting of Etex Group S.A. on May 25, 2011 (after issuance of the financial statements) and will amount to €0.29 per share representing a total dividend of €22,726 thousand.

In 2010, a dividend of €19,592 thousand has been paid out based on the decision of the General Shareholders’ Meeting of Etex Group S.A. on May 26, 2010.

Note 18 - Equity

ordinary sharesThe issued share capital of Etex Group S.A. amounts to €4,491,277 and is represented by 82,837,819 fully paid ordinary shares without par value at December 31, 2010. The authorised capital amounts to €248,566.

Number of shares EUR/share Dividend in euroOrdinary shares 82,828,669 0.25 20,707,167

Treasury shares -4,458,855 0.25 -1,114,714

Dividend paid out 78,369,814 19,592,453

2009 2010at the begiNNiNg of the year 82,822,219 82,828,669

Issued in July on exercise of stock options (SOP2000) 6,450 9,150

Issued in October on exercise of stock options (SOP2000) - -

at the eND of the year 82,828,669 82,837,819

2009 2010at the begiNNiNg of the year 4,298,740 4,458,855

Exercise of put options (SOP2000) 10,115 13,450

Acquisition from third party 150,000 -

at the eND of the year 4,458,855 4,472,305


warranty provisionsThe provisions for warranty cost are estimates of subsequent payments relating to sales of goods based on historical data; it covers mainly roofing products activities in Europe where a long warranty period is granted to customers. Additions during the year are an estimate based on the probability of future product claims applied to the sales figures of the year and specific claims exceeding statistical estimates.

health claims provisionIn the past, various Etex Group subsidiaries used asbestos as a raw material in their industrial process. The use of asbestos has been banned in the entire Group for many years now, but some companies may still receive claims relating to past exposure to asbestos. The potential risk depends on the legal situation in the relevant country, its national social security system and the insurance cover of the relevant company.

The approach to accounting for these claims is to provide for the costs of resolution which are both probable and can be reliably estimated. The provision at December 31, 2010 for the cost of asbestos claims, comprises an amount of €22,011 thousand (€19,037 thousand in 2009) for the expected costs of settling notified claims and a discounted amount of €59,911 thousand (€67,623 thousand in 2009) in respect of losses arising from claims which have not yet been reported but which are both probable and can be reliably estimated. Future claims are discounted at 4.0% (3.72% in 2009).

Most of the Etex Group’s subsidiaries work with external counsel and, if applicable, insurance companies to review each asbestos claim. In those cases where a compensatory disease is proven and causation can be established, the settlement is for an amount that reflects the type of disease, the seriousness of the injury, the age of the claimant and the particular jurisdiction of the claim. In some cases, the claimants are unable to demonstrate that they have an asbestos related disease or that it is as a result of the company’s activities in which case their claim is resolved without payment.

The estimation of future claims is based on a 20-year cost estimate which takes into account the current level of claims as well as a reduction of claims over time as the number of claims is expected to decline. Whilst further claims are likely to arise after this 20-year period, the associated costs of resolution cannot be reliably estimated and no provision has been made to cover these possible liabilities. The estimate of future liabilities takes into account a large number of variables such as the number of employees exposed, the likely incidence, the disease mix, the mortality rates, the legislative environment and the expected insurance coverage. As these assumptions may change over time, there can be no guarantee that the provision for asbestos liabilities is an accurate prediction of the actual future costs. As a consequence, the provision may have to be revised in the future as additional information becomes available or trends change. The provision is reviewed at least once a year.

The number of new claims received during 2010 was 54 (63 in 2009). During 2010, 46 cases were settled and 38 resolved without cost. The number of outstanding cases, for which a provision has been made at December 31, 2010, was 161 (184 in 2009).

Based on the current level of claims and future expected trends, the Group does not expect that the liability and the costs associated with its subsidiaries’ asbestos claims will have a material adverse effect on its consolidated financial position, operational results or cash flows.

Note 19 - Provisions

In thousands of EUR Warranty Health claims Litigations Others Totalat December 31, 2009 35,794 86,659 26,282 14,681 163,416

Additional provisions made 15,772 16,039 1,916 3,905 37,632

Amounts utilised during the year -8,621 -3,313 -673 -5,833 -18,440

Unused amounts reversed -858 -20,021 -1,767 -2,034 -24,680

Changes in the scope of consolidation -62 - 115 -101 -48

Translation differences 125 162 127 178 592

Discount rate adjustment - 2,396 - 91 2,487

at December 31, 2010 42,150 81,922 26,000 10,887 160,959

Non-current at the end of the period 32,164 76,990 24,231 8,438 141,823

Current at the end of the period 9,986 4,932 1,769 2,449 19,136


Litigation provisionsLitigation provisions mainly include estimated future outflows concerning competition fine provision, various direct and indirect tax litigations, litigations with customers, former employees, suppliers and other parties.

Our German clay tiles subsidiaries, Creaton AG and Pfleiderer, received in December 2008 a notification from the German Bundeskartellamt imposing fines totalling €94,000 thousand in relation to an alleged price fixing arrangement in 2006. The procedure was part of a sector wide investigation against various clay tile manufacturers in Germany.

In February 2009, the Bundeskartellamt imposed an additional fine of €18,000 thousand against Etex Holding GmbH for not having sufficiently supervised its subsidiaries Creaton and Pfleiderer. Based on advice from external counsel, a provision of €20,160 thousand has been set up in respect of the above decisions in 2008.

Creaton, Pfleiderer and Etex Holding filed an appeal against the decisions of the Bundeskartellamt. The German Court will ultimately have to decide the case. A fine will only be due after a final decision of the court. No decision was reached during 2010.

Internal Group guidelines expressly forbid behaviour which is contrary to competition law. Compliance with these guidelines is a constant point of attention for the Group’s management.

other provisionsOther provisions include mainly estimated future outflows for environmental obligations and restructuring.

The Group meets all obligations imposed by relevant laws with respect to land decontamination and site restoration. Where requested, necessary expenses are made and provision for future estimated costs set-up. At December 31, 2010, these provisions amount to €6,511 thousand and have been incremented by €1,648 thousand.

Restructuring provisions relate mainly to restructuring of companies in Germany, United Kingdom and Ireland.

Note 20 - Commitments and contingencies

health claims There has been a history of bodily injury claims resulting from exposure to asbestos being lodged against subsidiaries of the Group for a number of years. The Group’s approach is to provide for the costs of resolution which are both probable and reliably estimable (refer to note 19 on provisions). At present the provision for the costs which are both probable and can be reliably estimated cover 20 years of estimated gross costs. Whilst further claims are likely to be resolved beyond this timeframe, the associated costs of resolution are not able to be reliably estimated and no provision has been made to cover these possible liabilities, which are considered contingent.

Legal claimsIn the ordinary course of business, the Group is involved in lawsuits, claims, investigations and proceedings, including product liability, commercial, environment and health and safety matters, etc. The Group operates in countries where political, economic, social and legal developments could have an impact on the Group’s operations. The Group is required to assess the likelihood of any adverse judgments or outcomes to these matters, as well as potential ranges of probable losses. The effects of such risks which arise in the normal course of business are not foreseeable and are therefore not included in the accompanying consolidated financial statements.

eternit genoa spa caseIn November 2009 Etex Group was sued by a large number of civil parties in a criminal case in Turin, Italy. The case relates to the working conditions in the factories of Eternit Genoa SpA where many people have allegedly been exposed to asbestos. In this case, two individuals, i.e. Mr. Stephan Schmidheiny and Mr. Louis de Cartier, are charged with having, in their capacity of de facto managers of the Italian company Eternit Genoa, omitted to take preventive measures to avoid employees and people living around the factory from being exposed to asbestos dust. Etex Group has been sued as civilly liable for the acts of Mr. de Cartier.

Etex Group considers the allegations against Mr. de Cartier unfounded. The role of Mr. L. de Cartier in Eternit Genoa SpA, in which Etex Group held only a minority interest, was very limited. He was a non executive director for a short period of four years, i.e. 1971 to 1975. In this capacity, he was never involved in the day to day running of the company and the allegation that he was “effectively responsible” for the management of the company is entirely unfounded. Moreover, Mr. de Cartier exercised his position at the board of directors of Eternit Genoa SpA in his own name, not as a representative of Etex Group S.A. We have full confidence in the Italian justice and, on the basis of the advice from our lawyers, trust that the Court will dismiss the charges against Mr. de Cartier.


As a result, based on the information from our lawyers and our current assessment, management is of the opinion that it is not probable that an outflow of resources will be required to settle the obligation of the above mentioned case.

guaranteesAt December 31, the Group issued the following guarantees to third parties:

commitmentsIn the ordinary course of business, the Group enters into purchase commitments for goods and services and capital expenditures, buys and sells investments and Group companies or portions thereof. At December 31, 2010 the Etex Group had purchase commitments of €13,505 thousand (€ 5,729 thousand in 2009). Commitments are related to construction of new plants in Colombia (ceramics) and in Poland (clay tiles).

Note 21 - Employee benefits

Defined contribution plansFor defined contribution plans Group companies pay contributions to pensions funds or insurance companies. Once contributions have been paid, the Group companies have no further payment obligation. Contributions constitute an expense for the year in which they are due. In 2010, the defined contribution plan expenses for the Group amounted to € 7,353 thousand (€ 8,005 thousand in 2009).

Defined benefit plansSome Group companies provide defined benefit pension plans to their employees as well as defined benefit medical plans and early retirement plans.

in thousands of EUR 2009 2010Guarantees issued after business disposals 152,573 157,421

Guarantees issued by the Group to cover the fulfilment of Group companies obligations - -

Guarantees issued by Third Parties to cover fulfilment of the Group companies obligations 575 575

Secured debt 19,724 23,690


Funded pension plans have been established in the United Kingdom, Germany, Ireland, Belgium and the Netherlands. They are all closed for new employees.

In 2010 the Tegral Pension Fund (Ireland) has been modified in order to stop future accruals for active members as of December 2010. This limitation of the plan has been recognised as a curtailment of € 2,836 thousand in the income statement. A curtailment of €18,573 was recognised in 2009 related to curtailment of Marley pension Scheme (UK) and Eternit Pension Fund (UK).

Eternit UK Pension Fund has liabilities that are not fully covered. The employer increased his contribution to the fund on a 10-year horizon.

Unfunded pension plans exist mainly in Germany and Chile.

Other post employment benefits such as medical plans, early retirement plans and gratuity plans are granted in Belgium, the United Kingdom, South Africa, the Netherlands, France, Italy and Nigeria.

Other long term benefits consist mainly of “Jubileum” premiums in Germany and Austria.

Termination benefit plans consist of specific early retirement plans in Germany and Spain.

Stock options plans are detailed in Note 22.

The following tables reconcile the funded and unfunded status of defined benefit plans to the amounts recognised in the statement of financial position:

in thousands of EUR 2009 2010Present value of funded obligations 889,693 995,947

Fair value of plan assets 878,538 927,212

Plan (surplus) deficit of funded obligations 11,155 68,735

Present value of unfunded obligations 121,908 122,266

Unrecognised plan assets 25,222 -

Net LiabiLity from fuNDeD aND uNfuNDeD pLaNs 158,285 191,001

Other long term benefits 3,284 3,926

Termination benefits 6,163 6,338

Stock option plans 1,905 7,167

Net empLoyee beNefits LiabiLity 169,637 208,432

Defined Benefit Obligation 1,022,953 1,135,644

Fair value of plan assets 878,538 927,212

Net LiabiLity at the eND of the year 144,415 208,432

Unrecognised plan assets 25,222 -

Net empLoyee beNefits LiabiLity (assets) 169,637 208,432

Employee benefits in the statement of financial position:

Liabilities 172,758 213,268

Assets -3,121 -4,836


The distribution of the defined benefit liability per country is as follows:

The changes in the present value of the defined benefit obligations are as follows:

The changes in the fair value of the plan assets are as follows:

In thousands of EUR 2009 2010United Kingdom 784,161 872,965

Germany 91,750 103,957

Ireland 73,782 73,622

Belgium 42,989 44,130

Others 30,271 40,970

DefiNeD beNefit obLigatioN per couNtry at the eND of the year 1,022,953 1,135,644

In thousands of EUR 2009 2010DefiNeD beNefit obLigatioN at the begiNNiNg of the year 830,213 1,022,953

Current service cost 11,022 16,526

Interest cost 51,579 54,526

Actuarial (gains) and losses 153,859 70,306

Benefits paid -49,976 -53,358

Plan participants contribution 1,831 821

Settlement/curtailment -18,632 -2,965

Changes in the scope of consolidation 173 359

Others -891 -


DefiNeD beNefit obLigatioN at the eND of year 1,022,953 1,135,644

In thousands of EUR 2009 2010fair vaLue of pLaN assets at the begiNNiNg of the year 719,417 878,538

Expected return 50,700 57,989

Actuarial gains and (losses) 81,942 -6,802

Employer contribution 15,777 13,359

Plan participants contribution 1,831 822

Settlement - -

Benefits paid -36,598 -41,020


fair vaLue of pLaN assets at the eND of the year 878,538 927,212


The expense recognised in the income statement is detailed as follows:

The main weighted assumptions used in measuring the employee benefit liabilities are the following:

The distribution of the plan assets is the following:

The historic information regarding actuarial gains and losses recognised in equity is the following:

The expected contributions to be paid in 2011 to defined benefit plans amount to €8,888 thousand.

In thousands of EUR 2009 2010Current service cost -11,022 -16,526

Interest cost -51,579 -54,526

Expected return on plan assets 50,700 57,989

Settlement 18,632 2,965

totaL empLoyee beNefit eXpeNse 6,731 -10,098

The employee benefit expense is included in the following line items of the income statement :

Operating income 7,610 -13,561

Financial result -879 3,463

2009 2010Discount rate 5.69% 5.17%

Expected return on plan assets 6.66% 4.96%

Future salary increases 4.08% 2.52%

Pension increase 3.03% 3.23%

Medical cost trend 7.00% 7.00%

2009 2010Equity instruments 74% 57%

Debt instruments 8% 6%

Real estate 9% 9%

Etex Group shares (290,190 shares) 0% 0%

Cash and fixed deposits 6% 25%

Insurance 3% 3%

totaL 100% 100%

In thousands of EUR 2007 2008 2009 2010Expected return on plan assets 76,190 66,964 50,700 57,989

Actuarial gains (losses) on plan assets -33,968 -255,552 81,942 -6,802

actuaL returN oN pLaN assets 42,222 -188,588 132,642 51,187

Cumulative actuarial gains (losses) recognised in equity

at the begiNNiNg of the year 119,124 187,282 41,169 -30,748

Actuarial gains (losses) on plan assets -33,968 -255,552 81,942 -6,802

Actuarial gains (losses) on defined benefit obligations 102,126 109,439 -153,859 -70,306

at the eND of the year 187,282 41,169 -30,748 -107,856


Note 22 - Share based paymentsOn June 23, 2004 the Board introduced a stock option plan to reward executives and senior staff. The plan authorises the issuance of a maximum of 3,500,000 options to be granted annually over a 5-year period. In each of the years 2004 to 2008 grants were made under this plan (SOP 2004, SOP 2005, SOP 2006, SOP 2007 and SOP 2008).

On July 7, 2009 the Board introduced a new stock option plan on similar terms. The plan authorises the issuance of a maximum of 3,000,000 options to be granted annually over a 5-year period. In 2009 and 2010 grants were made under this plan (SOP 2009 and SOP 2010).

Each option gives the beneficiary the right to buy one Etex Group S.A. share at an exercise price determined at grant date and is vested on a monthly basis over 4 years. Each beneficiary of an option is also granted a put option whereby the shares acquired under the stock option plan can be sold back to the Group at a price determined at each put exercise period, which is similar to the stock option plan exercise period. On April 21, 2009 the Board offered a 3-year extension of the exercise period of the SOP 2004 to SOP 2008 plans.

Fair value of the options granted during the periodThe fair value of the services received in return for share options is based on the fair value of the share options granted, measured using the Black and Scholes model with the following inputs:

The expected volatility is slightly lower than the industrial Belgian listed companies (25%), because the market ratios are fixed for the entire exercise period of the option.

Due to the increase of the fair value of the options granted, Etex Group recognised as share-based payment expense €5,387 thousand during the year (€2,814 thousand income in 2009). The total carrying amount of the liability related to the stock option plans amounts to €7,167 thousand (€1,905 thousand in 2009) and is disclosed under “Employee benefits liabilities” as described under Note 21.

2009 2010Expected volatility (% pa) 20 20

Risk-free interest rate (% pa) 2.93 2.18

Expected dividend increase (% pa) 10 10

Rate of post-vesting leaving (% pa) 1.7 1.7

Share Price (as estimated) 12.12 17.96

Expected early exercise of options 5-6 years 5-6 years

Fair value per granted instrument determined at grant date (€) 2.21 3.36


Details of the share options outstanding during the year

Stock option plans granted by the company

For share options exercised during the period, the weighted average share price was €15.48 (€15.32 in 2009).

Plan Contractual life of an option Exercise period Exercise price Number of options still to be exercised

SOP 2004 20.6.2014 Once a year as from 2008, between 1.6 and 20.6 8.74 5,500







totaL 2,738,654

2009 2010Number of share

optionsWeighted average

exercise priceNumber of share

optionsWeighted average

exercise price

outstaNDiNg at the begiNNiNg of the year 2,275,528 15.13 2,300,150 15.41

Granted during the year 577,500 12.12 489,000 17.96

Forfeited during the year - - -16,667 15.78

Exercised during the year -552,878 10.80 -33,829 11.79

outstaNDiNg at the eND of the year 2,300,150 15.41 2,738,654 15.91

Of which exercisable at the end of the year 117,150 10.78 687,857 13.31


The outstanding bank loans mainly consist of a syndicated loan for €500 million, of which €194 million has been drawn (€260 million in 2009), and a fully drawn term loan to Chilean subsidiaries for a total of €77,450 thousand (€95,227 thousand in 2009).

The €500 million loan was entered into on August 4, 2009, and renegotiated on July 29, 2010, the agreement being for a multi-currency committed 3-year syndicated credit facility, which is entirely revolving. The purpose of the facility was to refinance existing debt and for general corporate purposes. Utilisations may be in Euro or other freely available currencies, as agreed. The interest payable is calculated at the relevant interbank rate for the period of the utilisation that has been chosen by the borrower plus the applicable margin.

The credit facility contains a number of operating covenants, including restrictions on giving security to lenders, on the amount of external subsidiary borrowings and restrictions on the acquisition and the disposal of material assets. It also contains a number of financial covenants which include in particular required ratios of consolidated net debt to consolidated EBITDA of the Group and operating profit interest coverage.

Transaction costs of 2010 amounting to €2,026 thousand have been deducted from the loan. The existing un-amortised transaction costs of last year together with the transactions costs for the extension of the loan are being amortised over the life of the extended loan.

During 2006 the Chilean subsidiaries of the Group entered into an amortising 5-year term loan facilities of USD 75 million on April 25, 2006 and USD 77,890 thousand on July 15, 2006. The first of these loans was guaranteed by Etex Group S.A. and has terms and conditions that reflect those of the above €500 million syndicated loan, plus an additional covenant relating to the ratio of net debt to EBITDA in the Empresas Pizarreño Group. The loan was used to finance the purchase of the minority shares in the Empresas Pizarreño Group and to pay associated costs. The loan was drawn in Euro and a cross currency interest rate swap was entered into that exactly matched the capital and interest payments on the loan, so converting the interest and capital flows into Chilean Peso. The loan has a final maturity on April 24, 2011. During 2009 half of the cross currency swap on this loan was cancelled.

The loan for USD 77,890 thousand has been novated to various subsidiaries of the Empresas Pizarreño Group, each of which has entered into a joint and several cross-guarantees of the other borrowers. The loan is available for use for general corporate purposes. Covenants all relate to the Empresas Pizarreño Group and include the usual operating covenants (see above). Financial covenants include required ratios of consolidated net debt to consolidated EBITDA of the Group, the ratio of total debt to net income plus depreciation and of total debt to total equity. The loan was drawn in Euro and a cross currency interest rate swap was entered into that exactly matched the capital and interest payments on the loan, so converting the interest and capital flows into Chilean Peso. The loan has a final maturity on June 30, 2011.

The management of interest rate risk is described in Note 16.

in thousands of EUR 2009 2010Bank loans 60,056 134,121

Bank overdrafts 35,779 19,863

Other financial loans 12,778 30,855

Obligations under finance leases 4,461 5,626

totaL curreNt portioN of LoaNs aND borrowiNgs 113,074 190,465

in thousands of EUR 2009 2010Bank loans 351,684 226,279

Other financial loans 2,319 4,006

Obligations under finance leases 21,341 7,262

Redeemable preference shares 5,737 4,205

totaL NoN-curreNt fiNaNciaL LiabiLities 381,081 241,752

Note 23 - Loans and borrowings


The total expenses for operating leases recognised in the consolidated income statement for 2010 amount to €20,110 thousand (€18,467 thousand in 2009).

Note 24 - Deferred tax

Finance lease liabilitiesThe Group has finance leases for various items of plant, property and equipment. Future minimum lease payments, interest payments and present value of payments are as follows:

in thousands of EUR 2009 2010Minimum lease

paymentsInterest Present

valueMinimum lease

paymentsInterest Present

value

Less than 1 year 5,438 -977 4,461 6,110 -484 5,626

Between 1 and 5 years 12,775 -3,010 9,765 7,494 -282 7,212

More than 5 years 16,092 -4,516 11,576 50 - 50

totaL 34,305 -8,503 25,802 13,654 -766 12,888

In thousands of EUR Assets Liabilities NetNet carryiNg amouNt at December 31, 2009 45,703 49,582 -3,879

Translation differences 1,689 2,914 -1,225

Recognised in income statement 23,930 12,776 11,154

Recognised in equity - -17,817 17,817

Recognised through business combinations 385 8,403 -8,018

Netting -3,840 -3,840 -

Net carryiNg amouNt at December 31, 2010 67,867 52,018 15,849


Deferred taxes have not been recognised in respect of tax losses carried forward for an amount of €112,957 thousand (€115,966 thousand in 2009) and net deductible temporary differences for €2,578 thousand (€4,534 thousand in 2009) when it is not probable that future taxable profit will be available against which the Group can utilise the benefits there from.

The amount of deferred tax assets computed on tax losses carried forward is detailed below, before deduction of unrecognised deferred tax assets, by year in which tax losses will expire:

The amount of deferred tax assets and liabilities are attributable to the following items:

In thousands of EUR 2009 2010 2009 2010Assets Liabilities Assets Liabilities Net Net Variance

Property, plant and equipment 2,117 71,800 2,133 67,820 -69,683 -65,687 3,996

Intangible assets 3,771 1,504 3,377 6,846 2,267 -3,469 -5,736

Employee benefits assets 82 1,013 93 950 -931 -857 74

Inventories 4,406 2,429 4,018 1,597 1,977 2,421 444

Trade & other receivables 2,771 766 5,389 2,168 2,005 3,221 1,216

Other assets 3,583 898 3,814 1,818 2,685 1,996 -689

Provisions 21,432 3,750 20,832 4,249 17,682 16,583 -1,099

Employee benefits liabilities 23,120 48 32,659 - 23,072 32,659 9,587

Loans and borrowings 174 1,997 352 1,664 -1,823 -1,312 511

Other non-current liabilities 1 1,530 1 1,938 -1,529 -1,937 -408

Current liabilities 3,810 254 11,630 3,217 3,556 8,413 4,857

Tax losses carried forward 137,343 - 139,353 - 137,343 139,353 2,010

Unrecognised deferred tax assets -120,500 - -115,535 - -120,500 -115,535 4,965

Netting by taxable entity -36,407 -36,407 -40,249 -40,249 - - -

totaL 45,703 49,582 67,867 52,018 -3,879 15,849 19,728

Expiration year Deferred Tax Asset2011 258

2012 308

2013 70

2014 2,119

2015 or later 4,190

Without expiration date 132,408

totaL 139,353


The other current liabilities include:

Note 25 - Trade and other liabilities

Non-current liabilities

The Group has been awarded a number of government grants related to investments in property, plant and equipment. These government grants are recognised in the statement of financial position as deferred income for €7,340 thousand (€8,110 thousand in 2009) and amortised over the useful life of the assets. All conditions attached to these grants have been fulfilled.

Current liabilities

In thousands of EUR 2009 2010Deferred income - Government grants 8,110 7,340

Other liabilities 12,325 16,268

totaL 20,435 23,608

In thousands of EUR 2009 2010Trade liabilities 189,855 216,367

Other liabilities 114,519 131,914

totaL 304,374 348,281

In thousands of EUR 2009 2010Income taxes payable 26,024 28,746

Other taxes payable 18,874 14,055

Remuneration payable 36,508 42,987

Social security payable 13,365 16,278

Deferred income and accrued charges 6,331 8,074

Derivative financial instruments with negative fair values 3,763 9,624

Dividend payable 1,031 909

Amount due to customers for construction contracts in progress 169 171

Advances received on construction contracts not started yet 266 323

Current cash guarantees received 1,495 2,037

Other 6,693 8,710

totaL 114,519 131,914


Note 26 - Statement of cash flows details

(a) Depreciation, amortisation and impairment losses2010

2009

(b) Gains (losses) on sale and retirement of intangible assets and property, plant and equipment2010

2009

in thousands of EUR Property, plant, equipment Intangible assets Investment properties Assets held for sale Total(note 7) (note 9) (note 10) (note 11)

Depreciation 78,567 - 328 - 78,895

Amortisation - 5,916 - - 5,916

Impairment losses 22,857 14,125 - - 36,982

totaL 101,424 20,041 328 - 121,793

in thousands of EUR Property, plant , equipment Intangible assets Investment properties Assets held for sale Total(note 7) (note 9) (note 10) (note 11)

Depreciation 82,477 - 348 - 82,825

Amortisation - 6,594 - - 6,594

Impairment losses 25,482 37 2,461 - 27,980

totaL 107,959 6,631 2,809 - 117,399


Disposal proceeds 1,646 340 170 702 2,858

Net book value disposals -2,553 -341 -42 -601 -3,537

gaiNs (Losses) oN DisposaL -907 -1 128 101 -679

Losses on retirement - - - - -

totaL -907 -1 128 101 -679


Disposal proceeds 28,488 18 433 - 28,939

Net book value disposals -8,579 - -7 - -8,586

gaiNs (Losses) oN DisposaL 19,909 18 426 - 20,353

Losses on retirement - - - - -

totaL 19,909 18 426 - 20,353


(c) Capital expenditure

(d) Changes in working capital, provisions and employee benefits

(e) Interest and dividend received

(f) Reconciliation Income tax expense- income tax paid

(g) Dividend paid

in thousands of EUR 2009 2010Property, plant and equipment (note 7) 66,787 68,741

Intangibles assets (note 9) 3,312 4,656

Investment properties (note10) 5 18

Assets held for sale (note 11) - -

totaL 70,104 73,415

in thousands of EUR 2009 2010Inventories 101,930 -10,693

Trade and other receivables, trade and other liabilities -12,153 11,045

Provisions -1,977 -3,048

Employee benefits -40,519 -17,174

totaL 47,281 -19,870

in thousands of EUR 2009 2010Interest received 3,248 2,348

Dividend received 1,793 1,876

Dividend associates 565 918

totaL 5,606 5,142

in thousands of EUR 2009 2010Income tax expense -48,802 -34,647

Changes in deferred taxes 6,534 -11,154

Changes in income tax payables/receivables -1,365 -5,507

iNcome taX paiD -43,633 -51,308

in thousands of EUR 2009 2010Dividend Etex Group S.A. -19,631 -19,592

Dividend to non-controlling interests -8,640 -8,930

Changes dividend payable -396 -122

Exchange difference 849 -568

totaL DiviDeND paiD -27,818 -29,212


Note 27 - Transaction with related partiesTransactions between the Group and its subsidiaries, which are related parties, have been eliminated in the consolidation and are accordingly not included in the notes. Transactions with equity accounted investees and joint ventures are included in Note 12.

Transactions with members of the Board of Directors and Executive Committee:

in thousands of EUR 2009 2010Board of Directors:

Short term employee benefits 334 382

Executive Committee:Short term employee benefits 3,170 3,552

Post employment benefits 963 997

Share based payment 281 398

Number of stock options granted during the year 127,000 118,500

Transactions with companies in which members of the Board of Directors are active, reflect third party conditions and are immaterial in scope.

Note 28 - Remuneration of statutory auditorThe world-wide audit remuneration for the statutory auditor totalled €2,087 thousand (€1,656 thousand in 2009). The fees paid to the statutory auditor for assistance and advice amounted to €239 thousand (€113 thousand in 2009) for other attestation assignments and €100 thousand (€158 thousand in 2009) for tax advice.


Note 29 - Etex Group companiesThe major companies included in the consolidated financial statements are listed below. An exhaustive list of the Group companies with their registered office will be filed at the Belgian National Bank together with the consolidated financial statements.

% equity interest2009 2010

europeAustria Creaton GmbH 99.98% 99.98%

Esser’s Flachdach Bauelemente VTGS.mbH 75% 75%bip GmbH 100% 100%Promat GmbH 100% 100%

Belgium Comptoir du Bâtiment N.V. 100% 100%Etergyp S.A. 100% 100%Eternit N.V. 100% 100%Etex Group S.A. 100% 100%Etexco S.A. 100% 100%Euro Panels Overseas N.V. 100% 100%International Building Materials S.A. 100% 100%Manasco N.V. 100% 100%Microtherm Engineered Solutions N.V. - 100%Microtherm N.V. - 100%Promat International N.V. 100% 100%Promat Research and Technology Center N.V. 100% 100%Redco N.V. 100% 100%

Czech Republic Intumex s.r.o. 100% 100%Promat s.r.o. 100% 100%Promat Servis s.r.o. 100% 100%

Denmark Ivarsson & Co. A/S 100% 100%Opticolor Holding A/S 100% 100%Promat ApS 100% 100%

France Batiroc S.A.S. 100% 100%Etermat S.A.S. 100% 100%ECCF - Eternit Competence Center France S.A.S.U. 100% 100%Eternit Commercial S.A.S.U. - 100%Ciments Renforcés Industries S.A.S.U. - 100%Etex Materiaux de Construction S.A.S. 100% 100%Nidaplast-Honeycombs S.A.S. 100% 100%Promat S.A.S. 100% 100%Société d'Exploitation des Adhésifs S.A.S. 100% 100%

Germany Baupro GmbH 100% 100%Creaton AG 99.98% 99.98%Creaton Kera-Dach GmbH & Co.KG 99.98% 99.98%Eternit AG 100% 100%Eternit Flachdach GmbH 100% 100%Eternit Management Holding GmbH 100% 100%Etex Holding GmbH 100% 100%Pfleiderer Dachziegel GmbH 100% 100%Promat GmbH 100% 100%Wanit Fulgurit GmbH 100% 100%

Hungary Creaton Hungary Kft. 100% 100%Italy Comais S.r.l. 100% 100%

Edilit S.r.l. 100% 100%Immogit S.r.l 100% 100%Promat S.p.A. 100% 100%

Ireland Tegral Building Products Ltd. 100% 100%Tegral Holdings Ltd. 100% 100%Tegral Metal Forming Ltd. 100% 100%



Lithuania Eternit Baltic BI UAB 51% 51%Luxemburg Cafco International S.A. 100% 100%

EASA S.A. 100% 100%Eterlux S.A. 100% 100%Eternit Investment Sarl 100% 100%Eternit Services S.A. 100% 100%Financière Eternit S.A. 100% 100%Maretex S.A. 100% 100%Marley Tile S.A. 100% 100%Merilux Sarl 100% 100%Poly Ré S.A. 100% 100%Team S.A. 100% 100%

Netherlands Eternit B.V. 100% 100%Eternit Holding B.V. 100% 100%Etex Roofing B.V. 100% 100%Nefibouw B.V. 100% 100%Preventieve Brandbeveiliging Nederland (PBN) B.V. 100% 100%Promat B.V. 100% 100%

Poland Etex Building Materials Poland Sp. z o.o. 100% 100%Creaton Polska Sp.z o.o. 100% 100%Euronit Sp.z o.o. 100% 100%Promat TOP Sp. z o.o. 100% 100%

Portugal EBM Portugal SGPS S.A. 100% 100%Umbelino Monteiro S.A. 100% 100%

Romania Promat Best Insulating Performance Srl 100% 100%Wanit Fulgurit Srl 100% 100%

Russia Eternit Kaluga OOO 100% 100%Promat Russia OOO 100% 100%

Slovakia EBM sro 100% 100%Slovenia Promat d.o.o. 100% 100%Spain Euronit Fachadas y Cubiertas S.L. 100% 100%

Immo Roofing S.L. 100% 100%Projiso España PCI S.A. 100% 100%Promat Ibérica S.A. 100% 100%Promat Inversiones S.L. 100% 100%

Switzerland Polyfibre S.A. 50% 50%United Kingdom Bracknell Roofing Co. Ltd. 100% 100%

EM Holdings UK Ltd. 100% 100%Eternit UK Ltd. 100% 100%Marley Eternit Ltd. 100% 100%Marley International Ltd. 100% 100%Marley Ltd. 100% 100%Marley (UK) Ltd. 100% 100%Promat Glasgow Ltd. 100% 100%Promat UK Ltd. 100% 100%

LatiN americaArgentina Ceramica San Lorenzo I.C.S.A. 81.66% 81.66%

Durlock S.A. 60% 60%Eternit Argentina S.A. 99.44% 99.44%

Chile Cordillera Commercial S.A. - 99.23%Empresas Pizarreño S.A. 99.77% 99.77%

Etersol S.A. 99.77% 99.77%

Etex Latinamerica S.A. 100% 100%

Industrias Princesa Ltda. 99.77% 99.77%

Inversiones El Bosque S.A. 99.77% 99.77%

Inversiones Etex Chile Ltda. 100% 100%



Chile Inversiones San Lorenzo S.A. 99.80% 99.80%Inversiones San Lorenzo Chile S.A. 99.77% 99.77%Sociedad Industrial Romeral S.A. 59.86% 59.86%Sociedad Industrial Pizarreño S.A. 99.77% 99.23%Sociedad Industrial Tejas de Chena S.A. 99.77% 99.77%Sociedad Industrial Tuboplast S.A. 59.86% 59.86%Vinilit S.A. 59.86% 59.86%

Colombia Ceramica San Lorenzo Colombia S.A. 99.90% 99.90%Ceramica San Lorenzo Industrial de Colombia S.A. 99.90% 99.90%Colombit S.A. 100% 100%Gyplac Commercial de Colombia S.A. 53.95% 53.95%Gyplac S.A. 51% 51%

Mexico Ceramica San Lorenzo de Mexico S.A. de C.V. 99.80% 99.80%Compañia Mineria Tarapaca S.A. de C.V. 99.80% 99.80%Servicios Atacama S.A. de C.V. 99.80% 99.80%Servicios de Gestion S.A. de C.V. 100% 100%

Peru Ceramica San Lorenzo S.A.C. 99.90% 99.90%Etex Peru S.A.C. 100% 100%Fabrica Peruana Eternit S.A. 88.06% 88.06%

Uruguay Eternit Uruguaya S.A. 97.50% 97.50%africa, asia, oceaNia, North americaAustralia Promat Australia Pty Ltd. 100% 100%China Eternit Guangzhou Building Systems Co. Ltd. 66.65% 66.65%

Promat China Ltd. 100% 100%Promat International Asia Pacific Ltd. 100% 100%Promat Shanghai Ltd. 100% 100%Qingdao Best Performance Insulation Material Co. Ltd. 60% 60%

Indonesia PT Eternit Gresik 82.43% 82.43%Japan Nippon Microtherm Ltd. - 100%Malaysia Promat (Malaysia) Sdn. Bhd 100% 100%Nigeria Emenite Ltd. 51% 51%

Eternit Ltd. 60% 60%Giwarite Ltd. 98% 98%Laborem Ventures Ltd. 51% 51%Nigerite Ltd. 56.85% 56.85%Nigietem Integrated Ventures Ltd. 60.85% 60.85%

Singapore Promat Building System Pte Ltd. 100% 100%South Africa Marley SA (Pty) Ltd. 100% 100%United Arab Emirates Cafco International LLC 100% 100%

Promat Fire Protection LLC 100% 100%United States of America Ceramica San Lorenzo U.S.A. Inc. 99.80% 99.80%

Microtherm Inc. - 100%Neil Holdings Inc. 100% 100%

equity accouNteD iNvestees


Belgium RBB N.V. 50% 50%Brazil Gipsita S.A. 40% 40%

Lafarge Gypsum S.A. 40% 40%Colombia Pulverizar S.A. 50% 50%Germany Lichtensteiner Brandschutzglas GmbH & Co. KG 50% 50%

Oberlausitzer Tonbergbau GmbH 49.99% 49.99%Switzerland Promat AG 26% 26%United States of America Promat Firetemp LLC - 50%Thailand Rothenburg FAR Co Ltd. 50% 50%


Ernst & Young

Reviseurs d’Entreprises

Bedrijfsrevisoren

De Kleetlaan, 2

B-1831 Diegem

Tel: +32 (0)2 774 91 11

Fax: +32 (0)2 774 90 90

www.ey.com/be

STATUTORY AUDITOR’S REPORT TO THE GENERAL MEETING OF SHAREHOLDERS OF ETEX GROUP SA ON THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2010

In accordance with the legal requirements, we report to you on the performance of our mandate of statutory auditor. This report contains our opinion on the consolidated financial statements as well as the required additional comments.

Unqualified audit opinion on the consolidated financial statementsWe have audited the consolidated financial statements of Etex Group SA (“the Company”) and its subsidiaries (collectively referred to as ‘the Group’) for the year ended 31 December 2010, prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union, and with the legal and regulatory requirements applicable in Belgium. These consolidated financial statements comprise the consolidated balance sheet as at 31 December 2010, and the consolidated statements of income, changes in equity and cash flows for the year then ended, as well as the summary of significant accounting policies and other explanatory notes. The consolidated balance sheet shows total assets of €2,090,215 (’000) and the consolidated statement of income shows a profit for the year, share of the Group, of €113,905 (’000).

Responsibility of the board of directors for the preparation and fair presentation of the consolidated financial statementsThe board of directors of the Company is responsible for the preparation and fair presentation of the consolidated financial statements. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

Responsibility of the statutory auditorOur responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with the legal requirements and the auditing standards applicable in Belgium, as issued by the Institute of Registered Auditors (Institut des Reviseurs d’Entreprises/Instituut van de Bedrijfsrevisoren). Those standards require that we plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement.

In accordance with these standards, we have performed procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, we have considered internal control relevant to the Group’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control. We have evaluated the appropriateness of accounting policies used, the reasonableness of significant accounting estimates made by the Group and the presentation of the consolidated financial statements, taken as a whole. Finally, we have obtained from the board of directors and the Group’s officials the


explanations and information necessary for executing our audit procedures. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

OpinionIn our opinion, the consolidated financial statements for the year ended 31 December 2010 give a true and fair view of the Group’s net worth and financial position as at 31 December 2010 and of the results of its operations and its cash flows for the year then ended in accordance with IFRS as adopted by the European Union, and with the legal and regulatory requirements applicable in Belgium.

Additional commentsThe preparation and the assessment of the information that should be included in the directors’ report on the consolidated financial statements are the responsibility of the board of directors.

Our responsibility is to include in our report the following additional comments, which do not modify the scope of our opinion on the consolidated financial statements:

- The directors’ report on the consolidated financial statements deals with the information required by law and is consistent with the consolidated financial statements. We are, however, unable to comment on the description of the principal risks and uncertainties which the entities included in the consolidation are facing, and on their financial situation, their foreseeable evolution or the significant influence of certain facts on their future development. We can nevertheless confirm that the matters disclosed do not present any obvious inconsistencies with the information that we became aware of during the performance of our mandate.

Diegem, 1 April 2011

Ernst & Young Reviseurs d’Entreprises SCCRL

Statutory auditor

represented by

Eric Golenvaux

Partner

11/EG/0048


Non consolidated accounts of Etex Group S.A.

Summarised balance sheet

The annual accounts of Etex Group S.A. are presented below in a summarised form.

In accordance with the Belgian Company Code, the annual accounts of Etex Group S.A., together with the management report and the auditor’s report, will be registered at the National Bank of Belgium.

These documents are also available upon request at:

Etex Group S.A. Group Finance Department Avenue de Tervueren 361 1150 Brussels

The auditors have expressed an unqualified opinion on the annual statutory accounts of Etex Group S.A.

in thousands of EUR 2009 2010fiXeD assets 1,284,019 1,202,585

Tangible and intangible assets 4,032 3,842

Financial assets 1,279,987 1,198,743

curreNt assets 2,959 4,317

totaL assets 1,286,978 1,206,902

capitaL aND reserves 1,080,176 1,168,121

Capital 4,491 4,491

Share premium 3,657 3,724

Reserves 1,072,019 1,159,900

Profit carried forward 9 6

provisioNs 689 609

creDitors 206,113 38,172

totaL equity aND LiabiLities 1,286,978 1,206,902


profit distributionThe Board of Directors will propose at the General Shareholders’ Meeting on May 25, 2011 a net dividend of €0.2175 per share. The proposed gross dividend is €0.29 per share.

The dividend will be paid on July 1, 2011 against the return of the coupon n°8 at the following premises:

- BNP Paribas Fortis

- Dexia Bank

- Bank Degroof

- Crédit Agricole Luxemburg

Appropriation account

Summarised income statement

in thousands of EUR 2009 2010Operating income 9,934 9,716

Operating charges -13,403 -13,989

operatiNg Loss -3,469 -4,273

Financial result 149,517 109,277

Extraordinary result -1,073 5,745

profit before taXes 144,975 110,748

Income taxes -639 1,152

profit for the year 144,336 111,900

Release of tax free reserves - -

Profit for the year to be appropriated 144,336 111,900

in thousands of EUR 2009 2010profit to be appropriateD 144,346 111,909

Profit for the year to be appropriated 144,336 111,900

Profit brought forward 10 9

appropriatioN of the profit 144,346 111,909

Transfer to reserve -123,960 -87,880

Profit carried forward -9 -6

Profit to be distributed -20,707 -24,023

statutory nominationsThe terms of office of Mr. Th. Leysen and Mr. Ph. Vlerick will expire at the General Shareholders’ Meeting on May 25, 2011. The Board proposes to renew the term of office of Mr. Ph. Vlerick for a period of three years. The Board of Directors wishes to thank Mr. Th. Leysen for his services and advice to the company during the past three years.


GlossaryDefinitions below relate to non-IFRS performance indicators.

Capital employedNon-cash working capital plus property, plant and equipment, goodwill and intangible assets, investment properties and non-current assets held for sale.

Capital expenditureAcquisition of property, plant and equipment, intangible assets and investment properties, excluding acquisitions through business combination.

Effective income tax rateIncome tax expense divided by the profit before income tax and before share of result in investments accounted for using the equity method, expressed as a percentage.

Free Cash FlowFree cash flow is the sum of the cash flow from operating activities, interest paid and received, dividend received less capital expenditure.

Net financial debtCurrent and non-current financial liabilities, including capital leases, less deposits, current investments and cash or cash equivalents.

Net recurring profit (Group Share)Net profit for the year before non recurring items, attributable to the shareholders of the Group.

Non recurring itemsIncome statement items that relate to significant restructuring measures, impairment of goodwill and other income or expenses arising from disposal of non productive assets.

Operating income or EBIT (earnings before interest and taxes)Income from operations, before financial charges and income, share of result in investments accounted for using the equity method and in-come tax expenses.

Operating cash flow or EBITDA (earnings before interest, taxes, depreciation and amortisation)Operating income before charges of depreciation, impairment or amortisation on tangible and intangible fixed assets.

Net profit (Group share)Profit for the year attributable to the shareholders of the Group.

Recurring distribution rateGross dividend per share divided by the net recurring profit (Group share) per share, expressed as a percentage.

Recurring operating income (REBIT)Income from operations, before non recurring items and before financial charges and income, share of result in investments accounted for using the equity method and income tax expenses.

Return on capital employed (ROCE)Operating income divided by the average capital employed (at the beginning of the year plus at the end of the year divided by two), expressed as a percentage.

RevenueIncludes the goods delivered and services provided by the Group during the period, invoiced or to be invoiced, net of discounts, rebates and allowances.

Theoretical income tax expenses Country-based nominal tax rate applied to the profit before taxes of each entity.

Weighted average nominal tax rate Country-based nominal tax rate applied to the profit before taxes of each entity divided by the Group’s profit before income tax and before share of result in investments accounted for using the equity method, expressed as a percentage.

Weighted average number of sharesNumber of issued shares at the beginning of the period adjusted for the number of shares cancelled or issued during the period multiplied by a time-weighting factor.


GRI IndexFor the first time, Etex Group has used the G3 Sustainability Reporting Guidelines as developed by the Global Reporting Initiative (GRI) to report on its economic, environmental and social performance. This confirms Etex Group’s intention to evolve towards better sustainability reporting practices.

Reference Description Reported Cross-reference / direct answer1. strategy aND aNaLysis

1.1 Statement from the most senior decision-maker of the organisation. Fully Page 4 and 5, page 11

2. orgaNisatioNaL profiLe

2.1 Name of the organisation. Fully Inside of back cover2.2 Primary brands, products, and/or services. Fully Page 1, 13, 17 and 212.3 Operational structure of the organisation. Fully Page 12, 16 and 202.4 Location of organization's headquarters. Fully Inside of back cover2.5 Number of countries where the organisation operates. Fully Page 1 and 62.6 Nature of ownership and legal form. Fully Page 12.7 Markets served Fully Page 6, 13, 17 and 212.8 Scale of the reporting organisation. Fully Key Figures on the inside of the front cover2.9 Significant changes during the reporting period Fully Page 4, 7 and 44

2.10 Awards received in the reporting period. Fully None

3. report parameters

3.1 Reporting period for information provided. Fully Page 523.2 Date of most recent previous report. Fully 1-avr-103.3 Reporting cycle. Fully Page 52, annual cycle3.4 Contact point. Fully Inside of back cover

3.5 Process for defining report content. PartiallyPage 52 to 65; The content is assembled by an internal committee; the content is prepared and approved by all members of the Executive Committee.

3.6 Boundary of the report. Fully Page 55 and 103 to 105

3.7 Specific limitations on the scope or boundary of the report. Fully No limitations

3.8 Basis for reporting. Fully Page 4, 7, 44, 55 and 103

3.10 Re-statements of information provided in earlier reports. Fully Not applicable

3.11 Significant changes from previous reporting periods. Fully Not applicable3.12 Location of the Standard Disclosures in the report. Fully Page 111 and 112.

4. goverNaNce, commitmeNts, aND eNgagemeNt

4.1 Governance structure of the organisation. Fully Page 41

4.3 Independent and/or non-executive members. FullyBased on the code corporate governance in Belgium (the former Code Lippens), three members of the Board of Directors are independent.

4.4 Mechanisms to provide recommendations to the highest governance body. Fully Page 36


Reference Description Reported Cross-reference / direct answerecoNomic performaNce iNDicator

ec1 Direct economic value generated and distributed. Fully Pages 48, 51, 66 to 70, 100, 101 and 109

ec3 Coverage of the organisation's defined benefit plan obligations. Fully Pages 90 to 93

ec4 Significant financial assistance received from government. Fully Page 68 and 99

eNviroNmeNtaL performaNce iNDicators

materialseN1 Materials used by weight or volume. Fully Page 30

eN2 Percentage of materials used that are recycled input materials. Fully Page 30

energyeN3 Direct energy consumption by primary energy source. Fully Page 29eN4 Indirect energy consumption by primary source. Fully Page 28

eN5 Energy saved due to conservation and efficiency improvements. Fully Page 24, 28 and 29

emissions, effluents and waste

eN16 Total direct and indirect greenhouse gas emissions by weight. Partially Page 29

eN18 Initiatives to reduce greenhouse gas emissions. Fully Page 24, 28 and 29eN22 Total weight of waste by type and disposal method. Fully Page 30eN23 Total number and volume of significant spills. Fully Page 30eN24 Waste deemed hazardous. Fully Page 30

complianceeN28 Fines for non-compliance with environmental laws Fully Page 30

overall

eN30 Total environmental protection expenditures and investments. Fully Page 27

sociaL performaNce iNDicators: Labour practices aND DeceNt worK

employmentLa1 Total workforce Partially Page 6 and 35La2 Total number and rate of employee turnover Partially Page 35

occupational health and safetyLa7 Health and Safety Partially Page 36 and 37

training and educationLa12 Performance and career development reviews. Partially Page 35

sociaL performaNce iNDicators: humaN rights

Non-discriminationhr4 Total number of incidents of discrimination Fully Page 35

child labourhr6 Risk for incidents of child labour Fully Page 35

Roofing materials: 44%

Boards: 30%

Other materials: 17%

Revenue by activity

RevenueIn millions of EUR

Operating incomeIn millions of EUR

Floor & wall tiles: 9%

2,500

2,000

1,500

1,000

500

0

300

200

100

0

2006 2007 2008 2009

2006 2007 2008 2009

2010

2010

Rest of the world: 12%

Germany: 21%

France: 10%

United Kingdom: 9%

Benelux: 7%Other Europe: 16%

Chile: 10%


Operating cash flowIn millions of EUR

Personnel

Nigeria: 6%

Argentina: 5%

Peru: 4%

400

300

200

100

0

20,000

15,000

10,000

5,000

0

2006 2007 2008 2009

2006 2007 2008 2009

2010

2010

Key figures 2010

In millions of EUR 2006 2007 2008 2009 2010 %

Revenue 1,980 2,129 2,081 1,797 1,956 8.9%Recurring operating income

(REBIT)228 239 209 148 172 16.0%

% of revenue 11.5% 11.2% 10.1% 8.2% 8.8%Non recurring items 6 18 -11 -24 14

Operating cash flow (EBITDA) 325 345 288 246 303 22.9%Operating income (EBIT) 233 257 198 124 185 48.8%

% of revenue 11.8% 12.1% 9.5% 6.9% 9.5%Net profit (Group share) 141 162 110 38 114 196.9%

Capital expenditure 104 196 225 70 73 4.5%Net financial debt 296 404 522 393 337 -14.2%

Working capital 312 358 410 316 333 5.5%Capital employed 1,246 1,401 1,537 1,414 1,465 3.6%

Return on capital employed (ROCE)

18.7% 19.4% 13.5% 8.4% 12.9%

In EUR per share 2006 2007 2008 2009 2010 %

Net recurring profit (Group share)

1.74 1.93 1.57 0.75 1.31 74.7%

Net profit (Group share) 1.79 2.06 1.40 0.49 1.45 196.8%Gross dividend 0.224 0.250 0.250 0.250 0.290

Growth rate of dividend 15.5% 11.6% 0.0% 0.0% 16.0%Recurring distribution rate 12.9% 13.0% 15.9% 33.3% 22.1%

Personnel 13,459 14,422 14,639 13,512 13,351

Registered office

SA Etex Group NVAvenue de Tervueren 3611150 Brussels – Belgium

0400 454 404RPM Brussels RPR

Tel +32 2 778 12 11Fax +32 2 778 12 12

[email protected]

Photographs• Las Vegas Sands Corp• Marcel Van Coile• Sofie Van Hoof• Etex Group

Copies of the annual report in English can be obtained at the Group’s Communications Department upon simple request. This report can also be downloaded as a Portable Document Format (pdf) file from the website of Etex Group.

Summary

Key figures 2010

A leading expert in building materials 1Message to our stakeholders 4Business activities worldwide 6Key facts of 2010 7

Activity Report 8European Building Materials Division 12Fire Protection and Insulation Division 16International Building Materials Division 20

Environmental Report 24Etex Group’s environmental policy 26Objectives on environmental performances 27Sustainable materials and systems 31

Social Report 32Etex Group’s social policy 34Health and Safety at Etex Group 36Involved in the community 39

Governance Report 40Executive Committee and Board of Directors 40Corporate Governance 41

Financial Report 42Consolidated Financial Statements 48Non Consolidated Accounts of Etex Group S.A. 108Glossary 110

GRI index 111Contact details

Annual Report 2010

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etex group 2010 annual report - ku leuvenp. 4 annual report 2010 etex group message to our...

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