In spite of the economic context, 2009 was a good year for Abengoa. Revenues totaled €4,147 M, up 10 % on 2008; gross flows increased 46 %, to €916 M; EBITDA increased 39 %, to €750 M; and net profit rose 21 %, to €170 M.
For the fourteenth year in a row, that is, since Abengoa was listed on the stock exchange, we have achieved a profitable double-digit growth rate as a product of concentrating our efforts on high-growth businesses that offer innovative solutions for sustainability and our focus on geographical diversification. And we are convinced that we will manage to do this again in 2010 in light of the fact that we ended 2009 with our highest backlog ever, totaling €7,655 M, including the construction of solar power plants recently entered into the renewables registry in Spain.
This year we promoted, together with eleven other organizations, the creation of the Desertec Project, the goal of which is to meet 15 % of the demand for electrical power in Europe, as well as a substantial portion of northern Africa and the Middle East, through solar thermal plants and other renewable energy sources by the year 2050. We are also helping to enhance electrical power grid efficiency and security by improving generation, distribution and consumption control (Smart Grid).
Three high-growth businesses related to sustainable development – Solar, Bioenergy, and Water –, together with the main Industrial Engineering and Construction businesses, obtained substantial increases in revenue and profitability with respect to 2008. This has helped to compensate the weaker performance of businesses affected by the drop in industrial activity in Europe, fundamentally in Metal Recycling, and specific Industrial Construction activities in Spain:
By geographical location, we saw tremendous growth of our business in regions such as the United States, Latin America and, with the exception of Spain, Europe, drastically mitigating the moderate drop in the Spanish market. Consequently, in consolidated terms, Spain now represents only 31 % of Abengoa’s revenue, whereas the remaining activity is divided among Latin America, 28 %; the United States, 14 %; Europe (excluding Spain), 15 %; and other countries, 12 %.
Attainment of these results, in a year as difficult as 2009, represents, undoubtedly, a tremendous achievement. However, fulfillment of the strategic objectives that had been set for the period was even more important for Abengoa, and this has us positioned to continue growing in a profitable manner in the future:
1. We drove down our costs as planned, especially in Horizon 1 (mature) businesses, some of which have decreased their activity. This has enabled us to improve operating margins in practically all of our businesses, and lower comparable overall expenditure by 3 %. This is what we call “earning the right to grow”, by making sure that mature businesses continue to generate cash flow and profits that we may reinvest in other growing businesses.
2. We invested more than €2,000 M in 2009, primarily in Horizon 2 (growing) businesses, utilizing €1,200 M of non-recourse project debt and €800 M in corporate assets. This investment will enable us to grow by starting up projects currently under construction in 2010 and 2011.
3. We stepped up our R&D&I investment with a total of €90 M, up 7 % on 2008. As a result of this investment, Abengoa has applied for 54 new patents in its different businesses, which is a reflection of the success and potential of our new technologies and the importance we attach to Horizon 3 (future) businesses. Specifically, we believe that our forward-looking businesses (new solar technologies, new biofuels, hydrogen, emission management, energy efficiency, and new renewables) will afford us long-term growth.
4. We optimized our cash-flow management, which has enabled us to keep net debt at what we consider to be a reasonable level. Net debt, excluding non-recourse financing, at year-end 2009 totaled €1,257 M, 1.8 times our EBITDA. Total net (recourse and non-recourse) debt, excluding that which is tied to projects that have yet to go operational and which therefore still do not generate EBITDA, totals €1,818 M, 2.4 times our EBITDA.
5. We maintained investment in developing and training our team of professionals through over a million hours of training for the more than 24,000 members of our organization, which represents 11 % more than in 2008.
6. We continued our international scholarship program. In 2009, 575 grant holders have had interships in Abengoa’s business groups, which represents 7 % more than in 2008.
7. Following successful completion of our first greenhouse gas inventory, we continue working in this direction, progressively improving the quantification of our emissions and the implementation of our product labeling.
In addition, with the aim of continued assurance of the reliability of the financial information prepared by the company, we have continued to reinforce our internal control structure, voluntarily adapting it to the requirements specified under the U.S. Sarbanes Oxley (SOX) Act, which is helping us to grow with solvency and security. Once again this year, we sought to submit the internal control system of our entire group on a voluntary basis for independent assessment conducted by external auditors in accordance with the PCAOB Auditing Standard.
We also moved forward in our commitment to transparency and good governance practices; our annual report now includes six independent verification reviews prepared by external auditors on the following: Annual Accounts, SOX Internal Control System, Corporate Social Responsibility Report, Greeenhouse Gas Emissions Inventory, Corporate Governance Report, and Design of the Corporate Governance Report, and Design of the Company’s Risk Management System.
Finally, we continued to strengthen our commitment to the social and cultural development of the communities where we operate, paying particular attention to people with disabilities and the underprivileged. All of this takes place through the program of Corporate Social Responsibility we conduct through the Focus-Abengoa Foundation, where investment in this area in 2009 totaled more than €8 M, in addition to a €23 M investment in the Velazquez Center.
Our desire to share Abengoa’s culture and values with our stakeholders in a receptive and transparent manner and to integrate stakeholder perspectives into the company, has compelled us to develop a procedure enabling us to report on the performance in the realm of corporate social responsibility of the more than one hundred and fifty companies which, through their activity in seventy seven countries, make up Abengoa. This system brings together the company’s social, environmental and economic information. Furthermore, all data have been reviewed externally by an independent verifier with a reasonable level of assurance, which thereby authenticates the reliability of the information we disclose.
Our forecasts for 2010 are favorable. We expect to show growth in revenue and profitability in line with the results obtained in recent years. This will be made possible through the optimization of existing businesses, the rollout of investments initiated in the last few years, and start-up of several new projects:
Therefore, our biggest challenge in 2010 will not only be to maintain our activity and profitability, and to design projects geared towards growth, but also to finance the major projects Abengoa has generated. In markets with a tremendous potential, including solar power, biofuels, water and electrical infrastructure, each year we promote countless opportunities that have enabled us to invest billions in a profitable manner. Specifically, in 2009 we won tenders and culminated project promotion that will represent an investment of around €5,000 M, and most of this amount has not yet been reflected in the backlog figure. In 2010 we will thus continue to analyze and execute, assuming conditions are propitious, several financing options that will enable us to keep creating value through these new projects. As these projects are financed over 2010 and 2011, we shall secure profitable growth for the coming years.
For all of the reasons above, we recently issued two types of corporate bonds, thereby demonstrating that Abengoa can gain direct access to capital markets, and we signed partnership agreements to develop projects through joint initiatives undertaken with third parties. Fortunately, we have a considerable number of projects through which we may create value for our shareholders.
In conclusion, 2009 was a year of fulfilled objectives, and 2010 should be another year of profitable growth for Abengoa, even though the macroeconomic context and financial market situation have yet to add their contribution. Our objectives for the new year are straightforward: to continue optimizing mature Horizon 1 businesses (engineering and construction, recycling, information technologies, and first-generation biofuels), to implement new assets under construction, to finance some of the major new projects (primarily Horizon 2, including solar, water and second-generation biofuels), and to uphold our commitment to the future through R&D&I, the training and development of our people, and corporate social responsibility.
A balanced set of activities (2010 vision)