We are proud to present our first Annual Sustainability Report. Since its beginnings more than three decades ago Algar Agro has cultivated the beliefs and values of Comendador Alexandrino Garcia, the founder of Grupo Algar. We are a Minas Gerais Company that believes in Brazil and its people, and does not spare efforts in building lasting relationships. We view this report as a further step in strengthening our relationship with our stakeholders. Algar Agro is a closed capital company with no duty to publish periodic information. Nevertheless, we have decided to prepare our first report according to the international norms of the Global Reporting Iniciative (GRI), version G3 - Level C, to reinfore transparency, one of the pillars of good governance practice, according to the commitments stated in our Vision, “People serving People”.
2011 was a year of accomplishments for Algar Agro, starting with a record origination of soybean, repeating the performance of recent years. With a very competitive structure, both in strategically placed assets and personnel, which share the company’s attitudes and vision, the volume of soybean originated reached 1.3 million tons in the three regions Minas Gerais; Mato Grosso and Goiás; and in MAPITOPA, which encompasses the States of Maranhão, Piauí, Tocantins, Pará and part of Mato Grosso.
In the Triângulo Mineiro Region (Uberlândia unit) where crushing and refining operations are long-established, be best news comes from the retail sector. Once again, ABC de Minas soybean oil kept ahead of competition, with a market share of 28%, a fact which greatly honours us and motivates us to invest in the other products (olive oil, vegetable oil, tomato paste and sauce) which have been added to the ABC de Minas brand in recent years.
The Porto Franco/MA unit, inaugurated in 2007, is still showing strong growth in operations, which were highly satisfactory in the past year. We doubled the production of soybean meal in the unit, reaching 148 thousand tons in the year. Production of degummed soybean oil grew even more in percentage terms, from 18 thousand to 36 thousand tons.
The Maranhão unit increased its share in the Company’s results and received, in the past year, most of the investments of Algar Agro. Construction began of a new refining and packaging plant, which will start operations in the first half of 2012. It will produce ABC de Minas soybean oil, with the aim of increasing penetration into the Northern/Northeastern regions, which now absorb 10% of the production of the Minas Gerais unit. An ambitious marketing plan will be put into place, transmitting the Algar Agro culture to the local sales force. Our challenge, more than selling, is to establish long term ties with local consumers. We aim to be the consumers’ first choice, as happens in the Minas Gerais market.
The year was also marked by good export performace. The increase in world population, and increasing demand for industrialized food products, benefitted the exports of soybeans, as well as soybean meal, which is used in animal feed. This product shows very strong domestic demand – after all Brazil is one of the worlds largest exporters of poultry, pork and beef - and our exports are also very competitive. International sales reached US$250 million for soybeans, and US$57 million for soybean meal.
Exports were affected by high price volatility in the commodities as well as the forex markets throughout last year. In this scenario, Algar Agro showed very effective risk management within its business. As an ongoing practice, during 2011 the risks facing the company were once more assessed, resulting in a new and stronger risk management plan, which will be put into action in the next year, increasing the safety of our operations.
Fast and efficient execution of growth strategies, and all the objectives which were reached or surpassed during the year show the the efficacity of our own management model which, year after year, has contributed to the growth of the company. The best indicator of company growth is the volume of originated and commercialized soybean, which increased by 14% year-on-year. Algar Agro’s net sales during 2011 totalled R$1.1 billion, an increase of 24%, explained by an increase in volumes. EBITDA, an important operational performance indicator, fell by 15% to R$ 53.6 million, which can be explained by higher costs associated with a larger organizational structure necessary for the expansion plan. |It is important to stress that EBITDA results includes hedging, forex variations and financial items.
Algar Agro’s operational and economic growth has been accomplished by adopting best practice in company governance, including a Human Talents policy aimed at associates, through professional development and personal satisfaction. As is the case with other companies in the Group, our personnel policy is merit-based, rewarding dedication and good performance, and we do believe in the personal and professional improvement of our associates. After all, such improvement contributes significantly to company performance.
Algar Agro is also pleased to have decided, after ground-breaking research, to substitute the fuel used in our units from oil-based to environmentally sustainable biomass. In Uberlândia, where the boiler fuel has been switched from oil-based to biomass, this has already happened. In Maranhão, conversion will happen in 2012 and will use wood from re-forestation.
Concern with human capital, innovative environmental iniciatives and social projects envolving the community are proof that human development and education are, for us, as important objectives as operational and financial results.
We take the opportunity as we present this first annual report to thank all those who, in their everyday activities, have helped us build the history of Algar Agro: producers, clients and consumers, suppliers, shareholders and specially, our associates. The motivation of these professionals gives us the certainty that we are ready for the challenges not only of 2012 but all the future before us.
LUIZ ALBERTO GARCIA
Chairman of the Board of Directors of Algar Agro
LEONARDO FREITAS
CEO of Algar Agro