For the Algar Group, the year 2011 was marked by challenges that we managed to overcome, accomplishments, positive results and broadening horizons, and therefore it surely merits its place in the Group’s history. In spite of the adverse economic situation in the international arena that urged for cautionary measures, Brazil experienced the strengthening of the domestic economy, with low unemployment rates, real increase in the average income of employees, and consumption boosted by increased credit supply. Within this positive environment, all of the Algar companies, without exception, were prepared to seize the opportunities, which corroborate our vision of future and cohesion between the speech and execution of our strategic plan.
Guided by a strict and well structured corporate governance policy, coupled with the beliefs inherited from the Group’s founder, Alexandrino Garcia, we achieved very positive results in all four business segments in which we operate – IT/Telecom, Agribusiness, Services and Tourism – and recorded a consolidated net operating revenue in the amount of R$3.1 billion, representing a 15.8% year-over-year growth. EBITDA, an important indicator that reflects the operating result performance, came to R$512 million, and the shareholders’ equity amounted to R$1,159 million.
In the IT/Telecom segment, the main challenge and also the main achievement in 2011 was the start-up expansion of retail services provided in the Band H market for the State of Minas Gerais, the last frequency band available in Brazil for 3G telecom services, which was acquired at an auction held in the previous year. In November, after overcoming all operational challenges, we entered into 19 new municipalities, in places bordering the concession area in which Algar Telecom had already been entitled to provide voice and data communication services. Denominated “Expansão Minas” (State of Minas Gerais Expansion), this expansion plan of Band H represents an excellent opportunity to increase our retail services over the next years.
Another highlight on the performance of the IT/Telecom segment was the remarkable evolution attained in the corporate segment of the Company’s authorization area. Voice and data solutions for medium-sized and large companies grew sharply once more, closing the year with 32.9% higher revenues. Moreover, the renowned rating agency Standard & Poor’s upgraded the Company for the second consecutive year. In 2011, the Company’s rating was upgraded from “brA+” to “brAA-”.
In the Agribusiness segment, the volume of soybean originated reached 1.3 million tons, a record volume in the history of Algar Agro. We have also kept the exports sales on the rise, which accounted for US$307 million worth in operations of both soybeans and soy meal. Moreover, in 2011 we invested R$23 million in the construction of the Porto Franco Unit, in the State of Maranhão, expected to be concluded during in the first half of 2012. With a further investment of over R$25 million, the new refinery will allow for increasing penetration of the ABC de Minas soybean oil into the Northern/Northeastern regions. This product is already the market leader in the Triângulo Mineiro region.
In the Services segment, in view of the booming domestic market for executive aviation and the emerging opportunities in the Chartering segment, Algar Aviation invested R$11.5 million in the purchase of the new Italian aircraft Piaggio P180 Avanti II, thus enlarging its fleet to eight airplanes. Moreover, it became an exclusive representative of that brand, in charge of both sales and services in Brazil. Investments in the following year will be earmarked for the inauguration of two new hangars in the State of Minas Gerais, which will allow for further expansion of the aircraft maintenance services.
Another important achievement in 2011 was the delivery of a new hotel, Rio Quente Resorts, exclusively dedicated to the Vacation Ownership segment, specifically for the use of the Rio Quente Vacation Club’s clients. This hotel was built under high quality standards and is the first hotel in Brazil that is 100% aimed at this type of commercialization. Our strategy to direct investments towards the Vacation Ownership segment is based on our clients’ loyalty, which was earned thanks to the quality of our services, coupled with our own way of being and relating, which is a feature that permeates the entire Algar Group.
All the above-mentioned accomplishments, plus the others that are presented throughout this Annual Report, reflect the Company’s vision of future and are effected based upon the foundations of our commitment to sustainability, diffused across all spheres within our Organization.
The Algar Group is a family-run organization, with professionalized management, and involved in diversified segments of operations. Nevertheless, we aim at a very clear and well-defined target. Our model turned into a case study – in 2011 alone, we made 12 presentations in Brazil and abroad – and we follow a unique management model, which provides both autonomy and responsibility, totally suitable to the execution of the Group’s diversified portfolio operations. Following the approval of the budgets by the Board of Directors, the Algar companies are free to carry out their plans and strategies, which allows for greater focus and promptness regarding the decision making process.
Our stringent efforts to ensure the use of best corporate governance practices have enabled us to take part in the Companies Circle, a select group of 19 Latin American companies formed with the purpose of studying and disseminating the knowledge on how to enhance the best practices in the region.
Another important cornerstone of our success consists in the people that make up the Algar Group. In 2011, our team of professionals surpassed the number of 21,000 associates. We believe that professionals are not resources, but human talents. Therefore we focus on human appreciation and education, aimed at providing them with personal and professional development opportunities, as well as on the dissemination of the Company’s beliefs and values. To that end, we hold a corporate university named UniAlgar. In 2011, we invested nearly R$15.1 million in over 548,000 class/hours.
The Algar Group’s vision of future also embraces the commitment to both the environment and the society. In 2011, the joint efforts undertaken by all Algar companies contributed to a 17% reduction in Greenhouse Gas Emissions (GGE). From the simpler initiatives, such as the Clube de Carona (Hitching Club) performed by the Algar Telecom’s associates, to the more complex actions, such as the enhancement in the energy matrix of the Algar Agro’s refineries, those initiatives altogether make the difference and contribute to building a better world. The same principle guides our social programs, developed by the Algar Institute and is geared to the development of educators and children attending public schools located in the communities that neighbor our operations. In 2011, the Algar companies’ investments in social programs came to R$4 million. Moreover, through incentive laws, our companies use part of their taxes payable to fund projects connected to culture and sports.
We remain confident of Brazil’s conserving resilience and emerging business opportunities, and we are sure to count on all the necessary means to continue growing. We also reiterate our commitment to honor the Algar brand by means of sustainable management regarding all our operations. We would like to take this opportunity to express our gratitude and recognition to all who have been contributing to Algar Group’s sustainable future: shareholders, clients, suppliers, the community, the government, of special note to all of our associates distributed across the five regions of the country, as well as to all who have each day contributed to ensure the actual fulfillment of our vision “People serving People”.
Luiz Alberto Garcia
Chairman of the Board of Directors
Luiz Alexandre Garcia
CEO of Algar Group