º
OUTLOOK
PAPER IS THE START OF A DREAM
WHICH HAS COME TRUE.
WITH ITS NEW PAPER MILL,
THE PORTUCEL GROUP HAS PUT
PORTUGAL IN FIRST PLACE IN
THE EUROPEAN RANKING
OF UWF PAPER MANUFACTURERS.
OuTlOOk
Overall expectations for growth in the world economy in 2011 remain generally positive, although this growth is expected to be distinctly uneven. Strong growth is expected in Asia, driven by internal demand in these countries, which remains extremely robust, leading in turn to lively demand for commodities and sustaining the growth of export-oriented countries. Growth is also expected to be stronger in the USA than in Europe, with a clear divergence between the central and outlying countries in this region.
In the Euro zone, which is the Portucel group’s main market, forecasts point to moderate growth, spread unevenly through the region, whilst several factors of uncertainty could have a negative impact. These include the performance of the euro against other currencies, especially the US dollar, the impact of budgetary consolidation measures currently underway in many European countries, restrictions on banking finance for the economy and the financial crisis in outlying countries.
In contrast, economic indicators in the US have improved and growth is expected to be more robust, supported by stronger internal demand and a gradual recovery of the employment market. At the same time, the authorities remain committed to an expansionist economic policy and the financial and business sectors
are better prepared to support growth than in the Euro zone.
In this setting, expectations for the Group’s paper business over the coming months have to remain prudent. Budgetary consolidation measures, currently being applied across much of Europe, combined with the low or negative economic growth expected in the outlying countries of the Euro zone, which are important markets for the Portucel Group, could have a negative impact on consumption.
Continued high unemployment in Europe and the US also exerts significant downwards pressure on paper consumption, especially in the case of office stationery, a segment which accounts for more than 50% of the Group’s sales.
At the same time, the start-up of new production capacity in Asia could cause a degree of imbalance in the market, especially if the EUR/USD exchange rate moves in a direction unfavourable to European producers, undermining their competitiveness in overseas markets, especially in the Middle East and Northern Africa, which has been an important destination for European exports.
Finally, future trends in pulp prices, where high levels have served to sustain sales prices for paper, could have a significant impact on business.
The main source of uncertainty in the eucalyptus pulp market lies in the sustainability of demand from China. The slight slowdown in consumption in the Chinese
market, observed over nearly all of 2010, combined with resumed production by plant which had been temporarily closed down, has caused a measure of imbalance, resulting in price adjustments. In addition, expanding paper production capacity in Asia, especially in China, and the closure of obsolete plant currently underway in the country could help to sustain demand in the medium term. The recovery in Chinese imports in later 2010 offered a positive indicator of this tendency. It should nonetheless be stressed that the Group’s decision to move further along the value chain, significantly increasing its paper output, integrating an increasing quantity of pulp in paper and expanding its energy output, reduces Portucel Groups’ exposure to the volatility of the pulp market.
In the energy sector, with the start-up of the new steam turbine for the biomass-fuelled cogeneration plant at the Figueira da Foz industrial complex, the Group has completed its investment programme in this area, constituting a firm commitment to its own sustainable growth. With its newly augmented capacity, the Group will be able to generate approximately 5% of all power generated in Portugal, most of it obtained from renewable resources – forestry biomass and operating by-products.
As detailed above, the Group is also pressing ahead with analysis of possibilities for international expansion in the southern hemisphere, so as to be able to take the relevant decisions with the necessary degree of security.
ACknOwlEdGMEnTS
After concluding a series of major capital investments, the financial year of 2010 marked a turning point for the Portucel Group, which achieved a substantial increase in business, both in paper production and in power generation. The excellent performance recorded throughout the year would not have been possible without the great dedication and commitment of all
the Group’s employees, to whom the Directors wish to express their appreciation and thanks.
A word of thanks is also owed to all of Portucel’s external stakeholders, clients, suppliers, shareholder and other partners, for their interest and support,
Setúbal, 15 March 2011
Pedro Mendonça de Queiroz Pereira Chairman of the Board of Directors
José Alfredo de Almeida Honório Chief Executive Officer Manuel Soares Ferreira Regalado
Executive Director Adriano Augusto da Silva Silveira
Executive Director António José Pereira Redondo
Executive Director José Fernando Morais Carreira de Araújo
Executive Director luís Alberto Caldeira deslandes
Non-executive Director Manuel Maria Pimenta Gil Mata Non-executive Director Francisco José Melo e Castro Guedes Non-executive Director
dISTRIbuTIOn OF EARnInGS
As shown in the financial statements for 2010, consolidated net income stood at 210,588,080 euros, and net income on an individual basis at
210,814,731 euros. Considering that reserves totalling 120,037,000 euros were distributed in December 2010, the Board of Directors proposes that the amount available for distribution of profits be allocated in full to reserves, as follows:
- To the Legal Reserve: 10,540,737 euros - To Retained Earnings: 200,273,994 euros