Annual Report 2006

2006 continued to be dominated by high raw material and energy prices.

Our businesses nevertheless benefited from a steady improvement of the economic situation during the year and made significant progress in the fourth quarter.
Against this background, the group recorded a 4 % increase in revenue and a 7 % increase in its recurring operating result.

The improvement was very marked in the Chemicals business group, thanks to increases in selling prices, which made it possible to offset raw material costs more effectively. This applies in particular to potassium sulphate and PVC, which returned to normal profitability in the fourth quarter.

There was an improvement in the results of the three Plastics Converting business units: profiles, plastic pipe systems and compounds.
In particular, the UK profiles sector, where we are very well-represented, recovered significantly in the second half of the year.
Our US subsidiary also made significant progress, despite the slowdown in the US construction sector at the end of the year.

The Specialities business group was particularly disappointing this year, with a fall in recurrent profit throughout the sector except for in the animal by-products business.
Gelatin, whose results remained generally favourable thanks to our US plants, had to face competition in Europe from imports from low-cost countries, which pushed down prices in Europe.
Organic chlorine derivatives remained under pressure because of competition from Asia and showed results that were particularly lacklustre.
The results of intermediates for the pharmaceutical industry also fell in relation to the good year of 2005, but this fall should only be temporary, since the prospects for 2007 are much better once again.

The year was dominated by the implementation of the cost reduction programme adopted at the end of 2005, the provisions for which weighed heavily on the year. The main measures entailed numerous negotiations, which culminated in agreements. Most of them have now been implemented, for example the closure of the fine chemicals site at Widnes in the UK and the Tessenderlo sulphate plant in Belgium.

The aim of reducing costs by 30 million EUR by 2007 will therefore be achieved and even exceeded.

In addition to simply reducing costs, this plan was also an opportunity to make fundamental changes to the group organisation, which will result in further improvements in results beyond 2007.

While this plan is being implemented, a strategic reflexion is currently under way in an attempt to adopt a more structural approach to the challenges arising from the emergence of Asia and globalisation affecting a number of our businesses.

Even though the group was very much focusing on its restructuring plan, a number of development activities was nevertheless carried out in 2006.
We built up our position in animal by-products by making an acquisition in south-western France, bringing us much closer to the leader in this sector.
We finally acquired a gelatin plant in China, which will give us access to this market and allow us to benefit from a low-cost production facility for exports. This operation is reinforcing our position among the three world leaders in the sector.

Despite a difficult year, group indebtedness fell slightly at the end of December, despite the acquisitions and the final payments for our substantial investment in the new electrolysis facility in Limburg, Belgium. It fell even further after the sale we made in the USA at the start of 2007.

In view of this situation, and despite the negative results due to provisions, your Board of Directors, confident in the improvement in results, will propose maintaining the dividend at its current level of 0,90 EUR net per share at the annual general meeting.

The Board would like to thank staff worldwide for their assistance in creating the conditions for the group's resurgence.

Gérard Marchand
CEO