Annual Report 2009

The worldwide economic and financial downturn has hit Tessenderlo Group hard in 2009. Revenue dropped by 24 %. Our minus 167 million EUR net result was the worst since the company was introduced onto the stock exchange in 1937, but only the second year of loss the company ever recorded over all these years.

Chemicals, which posted a record result in 2008, was worst affected. 
The volumes in potassium fertilisers dropped to 35 % of what is a normal year, as worldwide demand had collapsed in October 2008. The sale of animal feed phosphates was impacted to a lesser degree by the crisis, although this did not prevent profitability from going down in 2009. The chlor-alkali product group saw a steep decline in demand from its principal markets. PVC sales and margins in turn were significantly lower as the construction industry and public works sector slowed down worldwide.

The latter turn of events also had a negative impact on our 'Plastics Converting' activities. Both volumes and margins were affected.

'Organic Specialities' however stood its ground in 2009. The gelatin activity posted record results in 2009 thanks to the favourable prices of raw materials and finished products alike. As to Natural Derivatives, globally speaking 2009 emerged as a solid year, in spite of a fairly below-par first quarter. The only exception was the performance of the intermediate products for the pharmaceutical industry. In 2008, this activity lost significant volumes, and continued to suffer the ramifications thereof in 2009. In the meantime, ongoing efforts are being brought to bear to develop new intermediates, whilst simultaneously cost-cutting measures are being put in place.

Over the past year, Tessenderlo Kerley Inc. (TKI) recorded strong results by dint of the positive impact of the prices of sulphur and fertilisers for specialist crops during the first quarter and the significant growth effected by the crop protection products.

The 'Oxygen' cost-cutting programme which was implemented group-wide, brought in economies for a sum total of 40 million EUR, to which all departments contributed. In some cases, this meant the discontinuation of activities. The French plants for compounds in Strasbourg (Saplast) and PVC and plastic pipe systems in Quincieux (Sotra Seperef) were closed down over the course of 2009. In addition, it was decided to phase out the manufacturing of glycine in Tessenderlo, Belgium by the end of 2010.

In spite of the crisis, we do not see reasons to adapt our strategy. Our aim stands unchanged: the proportion of commodities in total turnover needs to drop below 30 %, whereas each business is required to effect a 12 %  return on capital employed ('roce').

With this aim in mind, we have put in place a number of major steps in 2009. For one thing, Tessenderlo Kerley (TKI) took over the Linuron product line from DuPont. This served to bolster TKI's portfolio in the area of specialist crop protection products, both in the United States and on the international markets. In Ham - Belgium, a production unit was set up for specialist liquid fertilisers, with a view to further developing the European market from Ham. In October, the foundation stone was laid for the brand new gelatin plant in Brazil. This will allow Tessenderlo Group to reinforce its position as the world's third largest gelatin manufacturer. In the field of Natural Derivatives, Akiolis took over the remaining 50 % in the Groupe Fiso joint venture (France). Consequently, we are now virtually serving the entire French market, and the French market leadership position is within reach of Akiolis. Finally, by withdrawing from the Zeoline joint venture, we have further rolled back the share of commodities. Even though 2009 has been a particularly trying year, Tessenderlo Group also managed to drastically reduce its debt.

In a nutshell, we are on the right track. What is more, 2010 looks like being more rose-tinted than 2009. Fertiliser sales are cautiously picking up again. A number of activities - such as TKI, Gelatin and Natural Derivatives - have proven themselves to be equal to the task of overcoming the crisis. Every single one of these activities is a growth pole for the future and we have every confidence they will continue to perform well. As to Plastics Converting, it is difficult to estimate when the tide is set to turn as this activity strongly depends on the recovery of the construction industry and the public works sector. In brief, it looks like 2010 will turn out to be a better year for us globally speaking, although there will be differences between the various activities we conduct.

Precisely because we are confident about our future prospects, the Board of Directors will propose the general meeting of shareholders to maintain the net dividend at 1,00 EUR per share.

Finally, on behalf of the Board of Directors, we would like to take this opportunity to thank all members of staff for their unrelenting dedication and efforts over the past year which has been one of exceptional adversity. We are confident that we may continue to rely on every member of staff so that, together, we may come out at the other end of this crisis all the stronger for it.

Frank Coenen, CEO
Gérard Marchand, Chairman of the Board of Directors

28 February 2010