Annual report 2010

HIGHLIGHTS 2010

Improved earnings and transformation of product portfolio

Growth of 28% for new products is the primary reason for the improved earnings relative to the year before. Growth of 14% was recorded for Q4 after a good end to the year in Latin America. The achieved results live up to the outlook previously announced.

• Auriga's revenue increased by 3% to DKK 5,604 million (DKK 5,437 million). Growth from the portfolio of new products totalled 28% after increasing growth over the year and very strong growth in Q4 driven by the Latin American markets.

   

• Operating profit before amortisation and depreciation (EBITDA) was up at DKK 409 million (DKK 197 million), corresponding to an EBITDA margin of 7.3% (3.6%). Operating profit (EBIT) was DKK 215 million (DKK 11 million), corresponding to an EBIT margin of 3.8% (0.2%).

   

• Higher foreign exchange rates meant that the group's capacity costs increased to DKK 1,236 million (DKK 1,221 million). At the same time, development costs of DKK 129 million were capitalised in 2010 in accordance with the changed recognition of these costs.

   

• Financial expenses were up at DKK 172 million (DKK 125 million), due to a higher average interest-bearing debt, currency impact and non-recurring expenses related to Stähler loan repayments.

   

• The working capital was reduced considerably, and a positive cash flow from operating activities of DKK 336 million (DKK 299 million) was posted.

   

• In accordance with the adopted dividend policy, the Board of Directors recommends to the annual general meeting on April 28, 2011 that dividend of DKK 2.40 per share be distributed, which is in line with the dividend distributed last year.

   

TRANSFORMATION OF PRODUCT PORTFOLIO

In the past three years, the product portfolio has been considerably transformed from being highly dependent on glyphosate to relying on a significantly more balanced product portfolio through the development of and growth from a number of new products. During this period, growth from new products has averaged more than 20% a year. Revenue from new products is thus up more than DKK 1 billion and accounts for more than 60% of the revenue. During the same period, revenue from glyphosate has been reduced by a similar amount, so that this product now accounts for 15% of revenue against 33% earlier. Earnings and value creation improved in 2010 relative to previous years, and the way has been paved for further improvements.

OUTLOOK

The transformation of the product portfolio will be completed in 2011. Glyphosate's share of revenue is expected to decline to approx. 10%, while growth from new products will continue. In 2011 and beyond, earnings and value creation will be improved through the following initiatives:

• Continued development of and growth from the portfolio of new products. A more balanced and differentiated product portfolio will contribute to improving contribution margins.

   

• Efficiency improvements and stringent cost control will contribute to cutting costs relative to revenue and to improving earnings considerably.

   

• Continued improvements in working capital will contribute to a positive cash flow, reduce the group's debt burden and lead to increased value creation.

   

Auriga is expecting revenue of approx. DKK 5,800 million for 2011 and an operating profit (EBIT) of approx. DKK 300-400 million as well as an improved cash flow from operating activities relative to 2010 (DKK 336 million).

The expectations depend i.a. on agricultural developments, climatic and market conditions as well as the development in the global economy.