Context

In 2018, the Viscofan Group has maintained an intense operational, investment and commercial activity in line with the initiatives promoted in the MORE TO BE strategic plan focused on achieving triple leadership in service, cost and technology.

Among these initiatives, the start-up of the new cellulose and fibrous plant in Caseda (Spain) stands out, with an accumulated investment of €71.2 million, of which €20.3 million was invested in 2018.

Production began in the new facilities in the first months of the year, and in less than twelve months, better ratios of productive speed, efficiency and product quality have been obtained compared to traditional technology, both in cellulose and fibrous casings.

The plant project continues to advance according to the plans in place, about one third of the project in cellulose has been completed and 80% of the total planned for fibrous, with the total capacity expected to be available in 2020.

In 2018, small-calibre collagen capacity was installed in the Novi Sad (Serbia) plant to respond to the growth of this technology and improve the level of service for our customers.

Together with these initiatives, the Viscofan Group is still immersed in its MORE TO BE strategy for the operational improvement of the Group's plants, which have achieved record productivity levels.

In February 2018, Transform Pack Inc. was acquired in Canada, a company specialised in the transfer of ingredients. The development of this technology makes it possible to provide spices, flavours, aromas, and colours from the casings.

In November 2018, Viscofan also acquired the Globus companies in Australia and New Zealand for AUD13.3 million, of which AUD8.7 million were disbursed at the end of 2018. The Group incorporates its main distributor in these countries. Globus has a long history as a supplier of casings, films and bags, among others, as well as having extensive knowledge in the sale of equipment for the food industry, which will improve Viscofan's proximity and service in this region that, with this acquisition, expands its presence to a new continent.

All this investment activity has been accompanied by a commercial activity that has sought to combine growth and price improvement amid higher costs of raw materials and energy.

The casings market grew in volumes of around 2% over year, in line with the growth obtained by the Viscofan Group. Commercially-speaking, it should be noted that all reporting areas grew in volumes during the year, and in the last quarter the expected rate of growth in the Group was regained thanks to the strength of the volumes in Latin America and the recovery in Asia.

Viscofan has reached a new historical high in its revenue figure, however, the weak performance in the third quarter and the increase in energy costs in the second half of the year has meant that the results are slightly below those shown in the initial guidance in terms of revenue and EBITDA.

In the other business divisions, it is worth mentioning the authorisation from the Spanish Agency for Medicines and Medical Devices to start carrying out the first clinical trials within the Cardiomesh project, a collagen film manufactured by Viscofan that is implanted in hearts to improve the cardiac activity of people with severe heart failure. The R&D activity for the development of collagen hydrolysates is very far along, expecting more significant commercialisation in 2019.

All of these activities have been accompanied by a high level of investments in the three years of the MORE TO BE strategic plan. However, the solidity of cash generation has allowed us to maintain the balance sheet strength with a net bank debt at the end of 2018 of 0.4 times EBITDA, and to continue to pay increasing amounts to our shareholders with the distribution of an ordinary dividend of €1.60 per share. The payment of an extraordinary dividend must be added to this payment, charged to the non-recurring results from the compensation for patent infringement of €0.13 per share, and the repurchase of shares worth €5.3 million.

The progress made in the MORE TO BE strategic plan, the positioning of Viscofan, the incorporation of the new companies and the development and implementation of the new technology place Viscofan in a privileged position to continue consolidating its leadership in the sector with new growth of revenues, EBITDA and recurring net profit expected for 2019.