Antonio
Hernández
Callejas

Dear stakeholders,
As you are all well aware, 2012 was another difficult year for the world economy. Economic activity was weak in Europe. The Euro or Sovereign Debt Crisis checked the growth of the large economies on the European continent and the year was once again marked by the loss of investor confidence and the lack of clear policies for the Member States to rebalance their economies, stabilise the structure of their government borrowing and reduce their external deficits. Meanwhile, the US economy experienced sluggish growth and the labour market and consumption did not pick up as well as had been expected at the beginning of the year, as the persistently high unemployment continued to weaken the desired economic recovery.

Against this difficult backdrop, which favoured the growth of private label brands, Ebro waged a tough battle and, as a result of its hard work, completed a highly satisfactory year, proving the cohesion of a business model that has again posted a turnover of over €2 billion and generated an EBITDA of the order of €300 million, similar to that obtained when we still owned the sugar and dairy businesses. At the same time, our net debt had a ratio at year end of less than 1xEBITDA, at €244.8 million, down €145 million year on year. This is even more important bearing in mind the negative effect of the dollar exchange rate and that we paid our shareholders €98 million in dividends during 2012.

One of the pillars for achieving these results was the fact that the company has continued to invest heavily in Marketing and Innovation, with which it has maintained a sound positioning of its brands and achieved a huge success with its latest launchings, both in the traditional rice and pasta businesses and in the recently opened related territories of potato and frozen foods.

Looking now at the performance of our divisions during the year, the evolution of the rice division was very positive, bolstered by the progression of both European and North American brands, the stabilisation of commodity prices and the incorporation of the SOS rice businesses, which will contribute €27 million to the total division EBITDA.

Things were not so easy for our pasta division. In Europe Panzani performed well, with a significant progression in all its business areas, but the US business suffered setbacks caused by three factors:

1. The shrinking of the pasta market (by around 6%)

2. The price war waged by many of our rivals

3. And the use of durum wheat stocks purchased at peak prices.

Towards the end of the year, in a more stable commodity situation and after implementing several corporate decisions, including a price adjustment and renewal of the management team, the yield of our subsidiary New World Pasta (NWP) finally started to pick up.

The performance of the EBRO share on the stock market has been reasonably stable, rising 5.5% compared to the 6.4% drop on Ibex 35 and 26.1% on Ibex Small. The only two indexes with a better performance were the Eurostoxx Food and Beverage, benchmark for European food securities, which rose 18.2% and Ibex Med, which was up 12.1%.

The end result is, as I mentioned earlier, that we have completed a good year, much to my satisfaction. Without much fuss, the company has grown, enjoyed stability (no mean feat in this day and age), improved its profitability parameters, managed to hold on to its market shares in many of the countries in which it operates, continued innovating and, therefore, by strengthening its leadership and differentiation from its rivals, it has also consolidated its financial position.

I invite you to consult on this USB the details of the company’s performance in all its areas of activity during 2012.

With a view to the future, we still have numerous options for growth, not only through acquisitions, but also for organic growth, extending the know-how of business segments in which we are leaders in some countries to others in which we do not yet operate those market niches, or even opening up new territories, as we did this year with frozen food and potato in the United States and France. There are some areas with a great deal of potential, we have excellent R+D+I support, strong brands recognised by consumers, we are creative and we have a good commercial team. In other words, we have very solid foundations for further progress and to be a benchmark in our business areas.