We pursued our M&A strategy at year end thanks to new visibility.

2005/2006 amounts to “nought” if measured against revenue growth; is a mediocre year, if analyzed from the viewpoint of the operating profit obtained;and a great year if we consider net income…
In short, 2005/2006 has been a highly paradoxical year, which needs explaining, but which is, more importantly, filled with initiatives that require analysis to shed light on the future.

The stability of consolidated sales at constant exchange rate and group structure (-0.2%) conceals considerable differences between geographical markets. For example, despite an unfavorable €/$ exchange rate for exporters, revenues increased by 13% outside the Euro zone. This remarkable performance made up for the downtrend (-2.1%) experienced in the Euro zone where consumer spending lagged behind the rest of the
world, although it started rising at the end of the year.
Outside the Euro zone, East European countries, Balkans and South America confirmed their dynamic economies. Admittedly, the poor performance in the EU can be explained by strong pressure on prices to reboost consumption, and by our deliberate withdrawal from certain sectors that were not profitable (uncooked fresh vegetables in out-of-home catering) or not compliant with our strategy as pure player in vegetables (sale of the cooked pork meat business of the Rosporden plant).
Moreover, the strategic choices made in the previous years have started bearing fruits. Indeed, the fresh vegetable market remains very dynamic thanks to the win over of new consumers (+15% of penetration in France), and the breakthrough of innovations in packaging (easy bag and Tetra RecartTM) which have been very well received by caterers and consumers.

Operational profitability dipped slightly (€68 M or -2.2%), as it was affected by large non recurrent restructuring and reorganization expenses (4 million euros).
Indeed, in the agri-food industry, the Wanzleben plant in Eastern Germany has been shut down, and its activity successfully redeployed to the Straelen and Reutlingen sites.
In France, as announced in early 2005, the manufacturing facilities of the Flaucourt plant were transferred to Estrées and frozen foods to Gniewkowo.
Moreover, the vast reorganization operation decided and announced in the previous year, has been on a rather small scale.
Accordingly, in France, subsidiaries have been operating in a new structure since January, and the grouping of administrative services by geographic zone has started, with in France the closing of the headquarters of the former BPL subsidiary in Vaulx- Vraucourt and the combination at Villeneuve-d’Ascq of several accounting and sales administration accounts. The next stage of this plan will concern Germany: provisions have been set
aside for the costs of combining the Humburg headquarters (canned and frozen) and Reutlingen (fresh).
We were able to carry out these optimizations thanks to the complete upgrade of our information system, which now includes an integrated ERP software. We began overhauling the IT system in 2000 and expect to finish by the end of 2007, after an investment of 25 million euros and the strong mobilization of teams.
These critical measures resulted in a decline in permanent staff (- 147 at the end of June) carried out in anticipation of future trends. Although these measures are expensive in the short term, they will enhance overall efficiency and profitability.
Net income climbed 8% (40 million euros), mainly driven by the impact of stable financial results and net improvement in tax expenses.

Therefore, the group’s financial situation is sound, and the next financial years should allow us to reap the fruits of initiatives taken since the past two years, both in internal growth and profitability. The restored visibility enabled us to pursue mergers and acquisitions at the end of the year.
Therefore, in Spring, we seized the dual opportunity offered to us:
First of all, the acquisition of the residual activities of Unilever in frozen vegetables in Spain (Salto brand mainly), subcontracted by the group since 2001, allowed us to secure the work load of the Benimondo plant while improving our profitability.
More importantly, the gradual acquisition of equity stakes in Aliments Carrière, the Canadian leader of canned and frozen vegetables with forecast sales of 230 million euros (of which 30% in the United States) ex-works from our seven plants.
Considering the company’s earning capacity, this minority stake (25%) until summer 2007, will generate profits and give us a solid springboard for penetrating the North American market.
Indeed, given the rising awareness of the dangers of rampant obesity and the particular virtues of vegetables, combined with the current virtually inexistent vegetable offers, we believe we can successfully adapt many products developed in Europe to the North American market.
Obviously, this move is a critical milestone in the group’s globalization strategy as it helps us to consolidate our leadership, improve our risk spread and reinforce our long-term development.