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Other investments
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1. Iberdrola
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(http://www.iberdrola.es)
Iberdrola is a major international player in the generation, distribution and commercialization of electricity and natural gas and is emerging as a global leader in renewable energy through its subsidiary Iberdrola Renovables. The group holds leading positions in Spain and Latin America and recently extended its activities to the United Kingdom and the United States through the acquisitions of Scottish Power (2007) and Energy East (2008) respectively.
In 2009, Iberdrola’s operating income rose despite a difficult economic environment in terms of both demand and commodity prices. EBITDA and EBIT increased by 6% from one year to the next, totalling EUR 6,815 million and EUR 4,509 million respectively.
These performances were driven by regulated activities and renewable energy and favourable effects of changes in group structure related to the integration of Energy East (acquired in September 2008 and renamed Iberdrola USA).
Net income, group share, at end 2009 came to EUR 2,824 million, a 1% decrease from 2008. This net profit was impacted by the higher financial expenses related to the increase in average financial debt over the year and by the absence of significant non-current elements.
Recurring profit, group share, rose by 7% to EUR 2,602 million.
Net financial debt at end 2009 amounted to EUR 29.2 billion (EUR 28.4 billion at end 2008), representing 100% of shareholders’ equity (110% in 2008).
The group will propose a dividend balance of EUR 0.184 per share to the General Meeting of shareholders, bringing the total dividend payout for 2009 to EUR 0.327 per share, stable compared with 2008. The contribution to GBL’s cash earnings for 2009 was EUR 8.6 million (EUR 7.5 million for 2008), or the equivalent of 1.3%.
As a reminder, during the first half of 2007, GBL acquired a 3% stake in Iberdrola at a cost of EUR 1.4 billion. This investment was partially divested at end 2007 and early 2008 at a sale price of more than EUR 1.3 billion, resulting in a cumulative capital gain of EUR 184 million over these two years. GBL’s residual investment in Iberdrola amounts to 0.6% of its capital and includes the EUR 13 million contributed to the group’s rights issue in June 2009 at the price of EUR 5.3 per share. This position was successively written down to market value at end 2008 and end March 2009, i.e. EUR 5.3 per share, leading to an impairment in its books of EUR 124 million, of which EUR 36 million in 2009. |
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2. Arkema
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(http://www.arkema.com)
Arkema group, created from the reorganization of Total’s Chemical business, operates in three business segments: Vinyl Products, Industrial Chemicals and Performance Products. It operates 80 industrial installations in Europe, North America and Asia, as well as commercial subsidiaries in every region of the world.
In an unprecedented economic context, Arkema’s turnover for 2009 decreased by 21% to EUR 4,444 million (EUR 5,633 million in 2008) under the double impact of lower volumes (- 13.9%) stemming from massive stock reductions by its customers and lower prices (- 7.7%) basically as a result of the evolution of the cost of raw materials and
of soda.
In this context, EBITDA totalled EUR 310 million (EUR 498 million in 2008) and profit margin reached 7.0% (8.8% in 2008), benefitting from a EUR 171 million reduction of fixed costs, over and above the initial target of EUR 110 million. Net income, group share, amounts to EUR - 172 million, resulting primarily from non-recurring restructuring costs.
Free cash flow generation of EUR 228 million over the year made it possible to reduce net financial debt to EUR 341 million (EUR 495 million at end 2008), i.e. 19% of shareholders’ equity (25% in 2008). Under these circumstances, the group proposes to pay a dividend of EUR 0.60 per share, unchanged from last year; its contribution to GBL’s cash earnings for 2009 comes to EUR 1.2 million. |
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3. PAI Europe III
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GBL has paid up around 95% of its 2001 investment commitment of EUR 40 million in PAI (out of a total of EUR 1.8 billion). The sale of investments has allowed PAI to pay out to GBL cumulative distributions of EUR 81 million.
During 2009, PAI concluded a debt refinancing agreement with FTE with a date of end 2011 and sold its investment in Saeco in July, a transaction that had no impact on GBL’s income.
At 31 December 2009, the portfolio comprised five investments: Yoplait, GruppoCoin, FTE, Chr Hansen and Compagnie Européenne de Prévoyance. |
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4. Sagard Private Equity Partners
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In 2002, GBL agreed to invest in the initial Sagard fund (Sagard I) in the amount of EUR 50 million, out of a total commitment of EUR 536 million. During financial year 2006, GBL took a stake in that fund’s successor, Sagard II, in the amount of EUR 150 million, out of total commitment of EUR 1,010 million.
The size of the latter was reduced by 20% in November 2009, translating in a drop of GBL’s commitment to EUR 120 million.
Situation of Sagard I fund
The amount paid out by GBL at the end of 2009 stands at EUR 46 million, virtually unchanged compared to end 2008. GBL’s cumulative distributions from Sagard I amount
to EUR 68 million.
During 2009 financial year, Sagard I disposed of the balance of its investment in Faiveley and made a further investment in RLD group within the framework of a bank renegotiation. Considering the uncertainty facing the hedge fund industry, an impairment was recorded on Olympia as a precautionary measure, of which GBL’s share is to EUR - 3 million.
After these transactions, the Sagard I portfolio comprises five investments: Hermes Metal Yudigar, Kiloutou, Souriau, Regie Linge Développement and Olympia.
Situation of Sagard II fund
At 31 December 2009, GBL had invested a total of EUR 50 million in this fund. On that date, the Sagard II portfolio comprises four investments: Corialis, Vivarte, SGD
and Fläkt Woods.
With the serious weakening of SGD’s situation in 2009, Sagard II was obliged to record a total impairment on the investment. The recession also affected the activity of Fläktwoods and Corialis. The total impairment on the portfolio resulted in a charge of EUR 17 million in GBL’s result. |
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5. Ergon Capital Partners (ECP)
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ECP is a private equity fund set up in February 2005 by GBL in partnership with Parcom Capital, an ING subsidiary. With the creation of its second fund in December 2006, ECP has a total investment capacity of EUR 500 million.
During financial year 2009, ECP analysed more than 100 potential investment projects. It decided not to invest in these projects, however, because their valuation was considered excessive or their risk profiles too high in an extremely volatile environment.
ECP’s portfolio, composed essentially of industrial and therefore cyclical investments, felt the effects of the unprecedented collapse in activity resulting from the global economic crisis. In these circumstances, recovery measures were put in place to cut costs and encourage cash generation. Cumulative indebtedness was reduced as a result. One of the investments had to undergo a difficult restructuring process, namely Seves, world leader in the manufacture of glass insulators.
ECP registered a consolidated book loss of EUR 16 million in 2009, with GBL’s share amounting to EUR - 7 million. The 2009 result is due primarily to the absence of capital gains and the change in the book valuation of the portfolio.
At end December 2009, ECP’s portfolio comprised seven investments valued at EUR 233 million: La Gardenia, Seves, Stroili, Corialis, Joris Ide, Farmabios and Nicotra-Gebhardt. |
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