GRUPO FERTIBERIA

The Chemical and Fertilizer Division of Grupo Villar Mir, Grupo Fertiberia, is composed of Fertiberia and its subsidiaries in Spain, ADP Fertilizantes in Portugal and the Algerian company, Fertial, in which Grupo Villar Mir has a 66% interest.

Grupo Fertiberia, which was created in 1995 when Fertiberia joined Grupo Villar Mir, is the leading fertilizer producer in the European Union and the Mediterranean Arch.

International expansion, diversification and R&D&i are the foundations on which the Group has based its growth.

Grupo Fertiberia is composed of:

FERTIBERIA

- Química del Estroncio, S.A.

- Agralia Fertilizantes, S.L.

- Incro, S.A.

- Fertiberia Andalucía, S.A.

- Fertiberia la Mancha, S.L.

- ADP Fertilizantes, S.A., the Group's most recent acquisition and Portuguese fertilizer market leader, which, through its subsidiary in Brazil, has enabled the company to enter the Latin American fertilizer market.

- El Bahia Fertilizer, a company in which Fertiberia has a 51% interest and the Algerian company Sonatrach has a 49% holding, the purpose of which is the construction of what is to be the largest ammonia plant in the world, with an annual production capacity of 1.1 million tons.

FERTIAL, a company that combines the fertilizer and ammonia sectors in Algeria.

• The Group has an industrial structure composed of eleven production centres: seven in Spain, two in Algeria and two in Portugal, with a production capacity of nine million tons, between intermediate and end products.

• The seven production units in Spain are located in Huelva, Palos de la Frontera, Puertollano, Sagunto and Avilés. The Agralia, S.L. plant is located in Altorricón (Huesca), while Química del Estroncio, 100% owned by Fertiberia, has a production centre in Cartagena.

• The ADP Fertilizantes production centres are located in Alverca and Setúbal. The new ammonia production plant at El Bahia Fertilizer was built in Arzew, whereas the Fertial production centres are located in Annaba and Arzew.
 
• The Group produces a complete range of intermediate and end products, manufacturing solid and liquid simple and complex fertilizers, thus covering all the needs of today's farmers, providing them with fertilizers for large-scale unirrigated crops and crops using traditional and drip irrigation methods, regardless of their weather and soil conditions.

• In turn, diversification, one of the mainstays of the Group's policy, has also enabled Grupo Fertiberia to grow in recent years in other non-agricultural chemical sectors, with an ever-increasing presence in the manufacturing and trading of industrial chemical products, making it, at present, one of the main operators in the world in the ammonia and derivatives market.

• Grupo Fertiberia has adopted progressively stringent programmes and commitments to guarantee and ensure the physical and chemical quality of the products it manufactures. Fertiberia's centres in Spain, Algeria and Portugal have received the Quality Certificate in accordance with UNE-EN-ISO-9001:2000 international standards and the Environmental Certificate as per ISO standard 14001:2004. More recently, the Spanish factories have received the OHSAS 18001:2008 Occupational Hazard Certificate.
 
• Grupo Fertiberia employs 3,300 people.

The main financial magnitudes of the Fertilizer Division

FERTIBERIA

Fertiberia, the head of what is now the Chemical and Fertilizer Division of Grupo Villar Mir, is the second largest company in the chemical sector in Spain, a leader in the fertilizer industry in the European Union and one of the main operators in the world in the ammonia sector. The company is modern, profitable, competitive and fully committed to sustainability.
 
This leadership position is the result of the actions and investments made in the different areas of the company since it became part of Grupo Villar Mir. Through Fertiberia S.A., based on internationalisation, diversification of business activities and continually fostering research, the foundations were laid for what is now Grupo Fertiberia.

Fertiberia also leads in promoting sustainable agriculture. The company's Agricultural Service performs an essential task in informing about the best fertilizing practices, and conducts nearly 10,000 soil, plant and water analyses per year, free of charge.

Fertiberia manufactures a very wide range of fertilizers, covering all farmers' needs. At the same time, this diversification policy has enabled the company to be present in diverse industrial sectors as a supplier of raw materials for other industries, and currently, sales of industrial products, including ammonia, represent 35% of the company's revenue.

Its production capacity is over 5 million tons, representing approximately 80% of the Spanish fertilizer sector.

The five production units that comprise Fertiberia’s industrial structure are located in Huelva, Palos de la Frontera, Puertollano, Sagunto and Avilés. All of them are at the forefront of the sector, equipped with the most sophisticated technologies. In addition, this industrial structure also includes the plants at the Agralia subsidiaries in Altorricón, Huesca, engaged in producing liquid fertilizers for combined fertilizing-irrigation. Química del Estroncio, engaged in the production of strontium carbonate, is located in Cartagena.

TRENDS FOR THE YEAR

2010 can be divided into two radically different scenarios. During the first half of the year, the negative trends in the markets in which Fertiberia operates continued along the lines that started in the last quarter of 2008, when the financial crisis began to hit all the world economies and sectors, to varying degrees.

Trading of chemical fertilizers for agricultural use continued to be affected by the imbalance between production costs incurred by farmers and the prices attained for their produce, causing consumption of production resources, including fertilizers, to drop even further.

In the summer, a clear change in trends took place in light of forecasts of a decline in world agricultural production, which, together with some recovery in demand, enabled produce prices to begin a clear upward trend. Faced with the need to obtain higher yields, farmers were forced to fertilize more intensely, as the only way to increase profitability. Thus, with increased demand for fertilizers and the resulting price increase, the market began to show positive performance up to year-end.

The volume of fertilizers consumed in Spain was 4.5 million tons of fertilizers, compared to 3.3 million tons of products consumed the year before, 35% more, meaning a virtual recovery of the usual consumption rates prior to the successive declines in 2008 and 2009.

Consumption in the 27 countries of the European Union recovered significantly, up to 8% during the 2009-10 farming campaign. Nonetheless, we must bear in mind the 23% decline in the previous campaign.

Despite these movements in the farming and fertilizer markets, estimates by the FAO and other agencies have not changed for the long term, as world population growth by 2050 will be 35% more than the 2010 figure, and therefore the use of mineral fertilizers is the only possible means of increasing production.

In Spain, the weather conditions, with a very rainy winter and a dry spring, had a widely varying impact on herbaceous crops and on woody plants. Therefore, there were major differences between the grain harvests in the south, where the outcomes were quite negative, and those in the north, with acceptable yields. Here, there was also an enormous difference between correctly fertilized farming operations and incorrectly fertilized ones.

According to data provided by the Ministry for the Environment and Rural and Marine Environments, the increase in the Plant Production value was 4.6%, particularly due to the effect of the increase in grain prices, totalling 11.8%. In terms of volume, the production of olive oil, grain, and forage and industrial crops has increased, whereas that of fruit, vegetables and wine has decreased.

Agricultural Income came to 22,547 million euros, thus showing a 5.1% increase.

Regarding corporate issues, we should point out that 2010 was the first full year in which ADP Fertilizantes was a member of Grupo Fertiberia. The incorporation of this Portuguese company has been highly satisfactory, with both companies benefiting from the production and trade-related synergies created. ADP Fertilizantes' presence in Brazil has enabled Fertiberia to look into ambitious projects in a new market with tremendous potential.

The sales figure attained by Fertiberia came to 686.3 million Euros, 449.6 million of which pertained to the internal market, and 236.7 million to exports, representing a highly relevant 67% increase over the very negative figures from 2009, and this is a consequence of the 28% rise in the volume sold and, of course, the increase in prices.

The market share attained by Fertiberia on the domestic market remained at 34%, highlighting its importance presence in the simple nitrogenous fertilizer market, at 45%, its 68% share of the ammonium nitrate market and the increase achieved in the complex NPK subsector, rising to 20%.

The sales made by the internal market divisions of fertilizers, NPK and special products came to a total of 1.5 million tons, up by 32% from 2009, with revenues of 356 million Euros, 68% higher than in 2009, but still below rates that can be considered normal.

These Divisions sold 653,000 tons of ammonium and ammonium-calcium nitrates, compared to 542,000 tons sold in 2009 and also increased their ammonium nitrosulphate sales, which went from 36,000 tons to 72, 000 on the internal fertilizer market in 2010. Regarding complex fertilizers, the volume placed on the internal market was 311,000 tons, compared to 88,000 sold the previous year. Sales of ammonium phosphates, which had experienced a sharp decline in 2008 and 2009, recovered, reaching 114,000 tons.

However, the still negative market trends during the first six months of the year led to a lower volume of urea sales than the previous year, totalling 215,000 tons. The same was true for the nitrogenous solutions market, which had a volume of 109,000 tons, having reached 124,000 tons in 2009.

The external fertilizer and NPK market Division distributed 13% more product, 435,000 tons. 201,000 tons of ammonium-calcium nitrates, 116,000 tons of ammonium nitrosulphate, 59,000 of ammonium phosphates and 21,000 of phosphoric acid were exported. Overall, revenues for these products came to 100 million Euros, a 43% higher figure than that attained in 2009. Once again, the consolidation of Fertiberia's products on the ammonium-calcium nitrate and nitrosulphate markets in Ireland, the United Kingdom and France is worth noting.

Sales of industrial products, mainly industrial-grade urea, nitric acid, phosphoric acid, AdBlue and NOx gas abatement solutions, on both the internal and external markets, totalled 902,000 tons, compared to 690,000 sold in 2009, representing a 31% increase, with revenues of 231 million Euros, compared to 127 million registered the previous year. Exports in this division represented 47% of the volume of industrial product sales.

In 2010, more than 805,000 tons of ammonia were moved, compared to 745,000 handled in 2009, which represents an 8% increase. Since Fertial joined the Chemical and Fertilizer Division of Grupo Villar Mir in 2005, Grupo Fertiberia has become one of the main operators on the international ammonia market.

As a result of the addition of ADP Fertilizantes to Grupo Fertiberia in April 2009, the volume of ammonia for internal consumption grew, whereas purchases from third parties were quite limited due to the successful operation of the production plants.

Whereas the volume of ammonia handled rose by 8%, revenues rose 48%, reaching 214 million Euros, which weighted the price increase more than the volume handled. For example, the highest price reached in 2010 was USD 429.5, whereas, in 2009, it came to historically low levels, being listed at less than USD 200.
 
In accordance with the increasing levels of social awareness and legislative stringency on environmental issues, Fertiberia is becoming consolidated as a leader in Spain of the production and supply of reagents for NOx abatement, for both the automotive industry and other industries.

AdBlue, a reducing agent for NOx emissions for industrial vehicles, is traded through agreements with the main oil companies that operate in Spain, leading to a constant increase in sales on a market that is estimated to reach 300,000 tons in Spain. Fertiberia, as the only ammonia manufacturer in Spain, aims to become the benchmark supplier of reagents for NOx abatement at major fuel facilities

The manufacture of special products for combined fertilizing-irrigation was further fostered, in line with market trends, in light of the increase in land farmed using this technique, which now covers more than 1.62 million hectares.

The volume of special products placed on the market by Fertiberia, which came to 190,720 tons, was quite similar to the previous year's rate and did not vary significantly in application patterns. However, in terms of revenues, the turnover, 37.4 million Euros, increased by 3.8%.

The sum of ordinary investments authorised and undertaken at Fertiberia's plants in 2010 was 18.6 million Euros, and once again, those made in the areas of environment and safety are worth highlighting. At year- end, the sum of mature investments in plants and warehouses came to 7.9 million Euros.

Regarding industrial activities, production took place at levels considered normal, after a year in which low demand forced us to temporarily halt certain production centres. The recovery of the market in the second half of the year affected all the products: phosphate products, those based on P2O5, diammonium and monoammonium phosphate, and nitrogenous products. This recovery has prompted continual operation of the facilities, which have reached production ratios of nearly 100% of the amounts set forth in the Annual Operating Programme.
 
The permanent shutdown of the two phosphoric acid production lines at the Huelva plant should be noted, in compliance with the requirements imposed by the Directorate General for the Coastline, leading to a halt in gypsum dumping proceeding from these units in the concessions granted for such purpose. Consequently, the sulphuric acid production plant was also permanently shut down, as this product was needed for the manufacture of phosphoric acid. However, Fertiberia will continue manufacturing phosphate fertilizers, importing phosphoric acid and placing the same amount of end product on the market.

The success achieved in the last few years in the area of Occupational Hazard Prevention came to its high point with this year's achievement of the «Zero Accidents» target that had been set. While all the production centres broke their own records for «days without accidents», the figures accomplished at the Palos plant are worth noting, with 1,968 days without accidents by year-end, the Sagunto plant, with 1,026 days and the Huelva plant, which reached a total of 1,002 days. The utmost importance was given to training, once again, devoting 25,000 hours to this subject. The figures attained by Fertiberia in this aspect are the best in the Chemical Sector.

As regards quality, our aim is customer satisfaction through product quality, delivery deadlines and price. The number of customer complaints received company-wide showed a 68.7% drop from 1998 values (the first year with an ISO Quality Certificate). This positive trend is due, to a great extent, to the Quality Management System (S.G.C. in Spanish) designed and implemented internally. The external audit reports conducted by AENOR show this agency's confidence in the system implemented and highlight staff and management's participation and commitment to it.

Regarding environmental issues, the Designated National Authority of the Ministry for the Environment and Rural and Marine Environments approved the Jointly Implemented Projects in Spain for N2O emission reduction at the production centres in Puertollano, Avilés and Sagunto. These Fertiberia projects are the only flexibility mechanisms on the Kyoto Protocol that have been approved in Spain.
 
These projects have been funded entirely by Fertiberia, a forerunner in carrying out this type of actions, and their implementation will lead to a reduction of more than 80% of the greenhouse gas emissions in the nitric acid production processes.

After ceasing the dumping of phospho-gypsum,Fertiberia will continue to carry out the replanting tasks on the area covered by gypsum, thereby achieving the full environmental recovery of the area.

The shutdown of the phosphoric production lines involved a Labour Force Adjustment Plan negotiated and agreed upon with the workers' representatives, leading to the lay- off of 146 employees at the Huelva plant.

The permanent workforce at 31 December 2010 consisted of 939 employees.

The Strategic Planning Division continued drawing up reports on the setting in which Fertiberia operates in order to anticipate the situations that will affect its activities, thereby facilitating decision-making in other departments, always aiming to foster possible business opportunities.

In 2010, research activities increased, with 22 projects in progress, in collaboration with public research centres and universities.

The company actively participated in numerous forums, spreading the knowledge acquired about enhancing the rational use of fertilizers and the yields of crops and the quality of produce. In this field, the Agricultural Service held more than 50 expert seminars focused on fostering the correct use of fertilizers. In 2010 the final touches were placed on the new Fertilizer Diagnosis and Recommendation System (SIDDRA), which will make it possible to provide the best service.

Work was carried out on the creation of the new portal, grupofertiberia.com, in order to adapt to Grupo Fertiberia's new reality, incorporating all the companies composing the group onto the site.
 
RESULTS

The growth policy designed in past years, based on diversification, internationalisation and R&D&i, has allowed Grupo Fertiberia, and Fertiberia in particular, to place itself in an advantageous position compared to other producers in Western Europe, within both favourable and negative settings, in sectors and markets that, in and of themselves, are already quite cyclical.

Thus, Fertiberia has attained the best possible performance from the positive market trends during the second half of the year, getting back on track in growth and profitability.

In this context, the following must be pointed out:

• EBITDA was 89.45 million Euros in 2010.

• EBIT was 67.12 million Euros in 2010.

• In 2010, net profit led to gains of 38.99 million euros.

• The total net bank debt for the company (not including cash on hand and IFTs) has reduced considerably, placing the net bank debt at a rate of 114.21 million Euros at 31 December 2010, compared to 189.38 million Euros at 31 December 2009.

Therefore, Fertiberia's balance structure is tremendously sound, reaching a guarantee ratio (Total assets/total receivables) of 1.85 times, whereas bank borrowings represented just 23% of the Company's total liabilities.
 
PROSPECTS FOR 2011
 
While 2011 will also be a difficult year for Spanish companies, Fertiberia expects to consolidate the positive results achieved in the previous year. The company has an excellent industrial structure, which produces the highest quality fertilizers and other chemicals for various industries.

During the early months of the present year, the trend that began mid-year 2010 has continued, at satisfactory demand levels and prices.

We will continue to boost the internationalisation and diversification agenda, consolidating our position as leading fertilizer producer in the European Union and the Mediterranean Arch and assessing the business alternatives in Brazil through the subsidiary, ADP Fertilizantes. Furthermore, the restraint and cost optimisation policy will also remain in place.
 
In this context, the first few months of 2011 have produced excellent results.

The increase in demand for food, along with demographic growth and the changes in eating habits among the population, make it necessary to increase crop productivity, and for this reason, in the medium and long term, the chemical fertilizer sector will be essential in facing the challenge of feeding the growing world population.

ADP FERTILIZANTES

2010 was the first full year in which ADP Fertilizantes was a member of Grupo Fertiberia, and its incorporation is progressing according to plan.

The agricultural and fertilizer market situation, described in detail above, has affected the company's progress in the same way as it has affected all the Western European producers, with a market that did not begin to recover until the summer months.

The change in market trends, along with the overall increase in agricultural product prices and the need to increase production, raised fertilizer demand and prices, a situation that prompted a significant recovery of trade margins, although insufficient to reach initial forecasts.
 
The incorporation of ADP Fertilizantes into Grupo Fertiberia enables us to make use of the synergies created and to reduce costs in several areas of the company.

The purchasing policy, now guaranteed for the most part by Fertiberia, which supplies raw materials and other products to ADP, enables the Portuguese subsidiary to benefit from the prices negotiated by the Group. Furthermore, part of the raw materials purchasing services have been transferred to Fertiberia, leading to a relevant cost reduction.

The sales area has been restructured, leading to the closure of four warehouses. Regarding the range of products placed on the market, in line with the new reality, the range has been standardised for the Spanish and Portuguese markets, leading to significant savings in the areas of production, logistics and storage. Likewise, the sales network has also been restructured, adapting it to the current market situation.

Exports have also benefited from the synergies with Fertiberia, which has aimed sales at foreign markets. ADP Fertilizantes maintained its relevance on the worldwide lime nitrate market, although price trends for this product were not as positive as expected.

With the aforementioned closure of four warehouses, the volume of complex NPKs sold in Spain increased, and they were transported mainly by sea due to the lack of good road connections at reasonable costs and the difficulty of using rail transport, especially for destinations far removed from the plants.

Regarding human resources, despite the logical restructuring that took place, an excellent corporate climate was maintained.

In the area of IT systems, Tecnología Fertiberia was implemented through implementation of the Gesindus System, a cutting edge technology tool worldwide. The start-up of the Implementation of the Environmental Management System must also be highlighted, which is expected to be complete by September of the present year.

Regarding safety issues, the actions related to the ATEX Directive continued. The utmost importance is being given to training, and the staff took courses on occupational hazards and tasks with major risks.
 
The required substances under the new European regulation, REACH, were registered in compliance with legal deadlines, a task undertaken jointly with Fertiberia.

From an industrial activity viewpoint, production levels increased in line with the positive market trends during the second half of the year. Operations at the Alverca and Setúbal facilities increased by 10% and 251%, respectively, although this unusual increase is due to the fact that, in 2009, in light of the market situation, it was necessary to temporarily halt superphosphate production.

Regarding investments, ADP applied the spending restraint policy, undertaking only those investments necessary to keep operations at the production facilities running properly and comply with Portuguese legislation in terms of environmental and safety issues.

The cost reduction involved in ADP's incorporation into Grupo Fertiberia, together with the increase in fertilizer prices and the increase in its market share, have allowed for favourable prospects for 2011, exceeding the results attained in the previous year.

FERTIAL

In 2010, progress continued on the improvement plan in all the areas of the company. This plan was implemented after this Algerian company joined Grupo Villar Mir in 2005. These improvements have made Fertial a modern, competitive and profitable company at the present time.

The amounts corresponding to the investments that should have been incurred according to the Investment Plan set forth in the agreements reached with the Algerian government have been exceeded by far. Still, investments continue to be made in different areas of the company in order to remain at the forefront of the sector and operate on international markets. Investments recognised in 2010 came to a total of 34.2 million Euros, in addition to the 98 million already invested in previous years, leading to an accumulated amount of 132.2 million Euros since 2005.

Fertial received the certification from the Algerian Tax Authority verifying the investments made for a total of 163.5 million USD. Fertial submitted this document to ANDI (Agence Nationale du Développement de l’Investissement) in order to be eligible for the operating advantages guaranteed by the authorities in such country.

2010 was a profitable year for Fertial. Ammonia prices gradually recovered and by December 2010 the price was 408.66 dollars per ton, whereas the price at year-end 2009 was 294 dollars.

Regarding quality, Fertial successfully passed the audits conducted by the international certification agency, Bureau Veritas, which certified that the company had complied with all the requirements under ISO quality standard 9001/ 2008 and environmental standard 14001/2004. The next goal is to implement an ambitious Excellence Plan through EFQM certification by 2013.

From a business viewpoint, Fertial achieved a 69% market share in Algeria, one point higher than the preceding year's share. The volume of products sold was 207,461 tons, compared to 172,568 placed on the market in 2009, representing a 20.2% increase, in spite of greater pressure from imports.

Major enhancements have been implemented in productivity, which are clearly evidenced in the tons of ammonia produced per worker ratio, which has continued to improve since 2005. During this time, the figure has gone from 378 tons to 513 tons, a 35.7% increase.

Once again, the management team and its collaborators devoted more efforts to industrial safety than to any other area. This effort received its reward in the form of the lowest accident rates in history, specifically, 0.027%, quite a bit lower than the company's rate for 2005, which was 5.3%. The Arzew plant, with more than 500 days without accidents, has accomplished a historic record and expects to achieve the «Zero Accidents» goal in 2011. Intense work is being done this period to obtain the prestigious OHSAS 18001 certification.
 
Total ammonia production came to 726,876 tons, the largest amount since 2005, surpassing the planned goal, and 15% higher than the amount recorded in 2009.

• The Annaba plant, where there was a 55-day scheduled stoppage, produced 265,336 tons, almost xxx points better than the planned goal.
• The Arzew plant produced 461,540 tons, a 31% increase.

From a financial viewpoint, Fertial attained more than satisfactory results:

• Net profits of 81.4 million Euros.
• Debt at the lowest levels in its history: 10.4 million Euros in 2010 compared to 148.5 million Euros in 2005.
• Sales for the period: 283.9 million Euros.

In addition to these results, Fertial will continue to carry out the investments needed in all the areas of the company, strengthening its strategic role on a daily basis in Grupo Fertiberia and in Grupo Villar Mir.