Dear stakeholders:

As you all know, in 2013 we have started to see signs that we might be pulling out of the economic crisis that commenced in 2008. The recession in the eurozone is slowly remitting and the consumer confidence and industrial production indexes closed the year in positive figures, so although growth is still weak the climate is positive.

The situation is also favourable in the USA. Although household income has dropped, there has been a clear improvement in the economic figures (+1.9% annual GDP), including employment, confidence and housing sales.

But this does not mean that the changes observed in our consumers are about to disappear. Those changes appear to be firmly established and consumer streamlining is more than likely here to stay. In general, consumers buy less and more cheaply and are only willing to pay for things that give them a differential value. Consequently, the search for differentiation values is a key element in our company’s growth strategy and in this regard R+D+I was once again a fundamental tool for Ebro in 2013.

In the commodities area, there was an upturn on the grain markets as from July. The announcement of a surplus corn market and a good soft wheat harvest kept prices low up to the end of the year. Durum wheat, with a good harvest and healthy stock levels in Canada, which produces approximately 60% of the world trade of this cereal, also helped to keep prices low. Rice prices remained low with record world harvests and abundant world stock, attentive to the new attempts by Thailand to reduce its government stock. Within this global scenario there are a few especially important exceptions which have represented greater challenges for the Ebro Group during the year, namely the devastating drought in Texas, pressure on domestic prices in the USA, Basmati prices and the shortage of rice at competitive prices from Spain.

The rice division had a bittersweet year, since although the evolution of its brands was satisfactory in both Europe and the United States, with growth in market shares and excellent shelf positioning, it was hard hit by several external factors, as a result of which the satisfactory performance of its brands has not been reflected in its results. These factors were mainly the mass default of basmati supply contracts in India, continuation of the severe drought in Texas and the impaired profit margins in Morocco owing to large-scale smuggling of rice into the country. We have worked hard to implement measures that will help us to minimise the impact of these factors on our future business development.

The pasta division, in contrast, had a good year, with stable durum wheat prices and the first signs of benefits deriving from the change of strategy implemented in the United States in the second half of 2012. In Europe, in a scenario strongly influenced by the growth of private label brands and constant promotions by our rivals, our brands have managed to maintain both market shares and profitability. In the United States, margins have begun to pick up and new gluten-free products and sauces launched in Canada went down well with consumers.