MESSAGE FROM THE PRESIDENT
Eternit, in completing 70 years of existence, has established itself as the largest and most diversified industrial roofing company in Brazil. With gross sales and a market value of approximately R$ 1 billion, the Company is beginning a new cycle of expansion and diversification. The year 2010 was one of strong demand for the Company's products, fully justifying the investments made over the last three years. These results provide the credentials for Eternit to plan new investments and acquisitions, seeking to occupy space in various segments of operation in its sector.
The future will be one of expansion and diversification of the Company's businesses. Aware of the limitations of being a one-product company and the opportunities that the market presents with intense demand in various product segments, Eternit is expanding its portfolio. There are many reasons for this. The Company operates in a verticalized manner, with a 31% market, and leader in the Brazilian fibre cement market – already very well established and well known for the durability of its products.
In 2008, we carried out an important step with the implementation of the Structured Program for Expansion and Diversification, the goal of which to consolidate Eternit's position as a provider of products and solutions for the building industry and increase its gross sales from R$ 500 million to R$ 1 billion by the end of 2011. This target was reached the year ahead of schedule as a result of the efforts of the Company's employees, strong demand in the sector and the investments realised, among which of particular note was the acquisition of Tégula Soluções para Telhados Ltda., the leading company in the concrete tile segment. Having a portfolio of differentiated products in its segment, this company has a market share of around 35% in its segment, its sales being driven by a strong specification channel. Even with relatively little time in these markets, new products carrying the Eternit brand, particularly vitreous chinaware and lavatory seats, have already shown an outstanding performance. Lastly, the three new fibre cement production lines which were brought in to operation in the units at Goiânia, Colombo and Simões Filho have contributed to raising annual fibre cement production capacity from 650,000, to 1 million tons. The result reported in 2010 was the best in the Company's history.
The quality of Eternit's products is also present in its Corporate Governance. Since 2006, the Company has been part of the Novo Mercado, the highest level of Corporate Governance on BM&FBovespa. The strong commitment of the Company to transparency and equity has received positive assessments from the financial market and the academic world. For example, we cite the election of Eternit's Corporate Governance for the second year running as the best in Latin America, by IR Global Rankings.
The Eternit brand, as a result of its operation, and the quality of its products and services, has received various awards granted by a number of well-known entities in the retail market. Also the mining company SAMA, a subsidiary of Eternit, has received public recognition, not only for the quality of its environmental management and safety, but also for the management of its staff. The mining company was cited as being among the best companies to work for in Brazil, according to three polls carried out, the most important being that by Exame magazine, in which Eternit was classified among the top 150 companies in Brazil.
The Company seeks to adopt the best management practices, and in this regard carries the following certifications: ISO 9001 for quality, ISO 14,001 for environmental management and OHSAS 18,001 for occupational health and safety management, as well as emphasising its commitment to the Millennium Targets, and joining the United Nations Organisation Global Compact. These practices have transformed the Company into a benchmark reference in its segments of operation in Brazil and in other countries, particularly in the area of mining and the use of its principal raw material, chrysotile ore.
Eternit was one of the pioneers in opting for and implementing International Financial Reporting Standards (IFRS), without any significant impact on its results. With the objective of attaining more international visibility, in May 2010 the Company implemented its ADR Level 1 (American Depositary Receipts) program. In the first publication of its results, in compliance with the requirements of the ADR market, Eternit's press release was published through more than 200 communication vehicles focused on the world's financial markets. Despite the fact that as yet no ADRs have been issued, the resulting exposure has enabled Eternit to double the participation of foreign investors in its shareholding base in the Brazilian market, following the global financial crisis.
I must not fail to touch on two issues here: health and the legislation which regulates chrysotile ore mining activity in Brazil. With regard to health, an unprecedented nationwide research project has been carried out by well-known doctors linked to major Brazilian universities by an international consultancy, among the population that uses fibre cement products produced with chrysotile ore in their roofs. This research project, available for consultation from the Secretariat for Science and Technology of the State Government of Goiás, one of the sponsors, concluded that, in comparison with other studies, the concentrations observed in Brazil are similar to those encountered in major urban centres in the western hemisphere and are within the limits accepted by the World Health Organization and international agencies for the control of exposure. In addition to this, it was seen that among the inhabitants studied there were no clinical alterations or respiratory diseases found attributable to the inhalation of asbestos fibre in the atmosphere. In other words, there was found to be no risk in the use of fibre cement tiles containing asbestos as a roof covering material. On the occupational issue, the research reassessed the health of employees at the mining company SAMA and did not identify any alterations, or progression in pleural or intersticial aspects among employees joining the Company after 1980.
With regard to the legislation, it should be remembered that this activity in Brazil is regulated by Federal Law 9055/95, Decree 2350/97 and Ordinance 3124/78 – NR 15, and is also carried out in accordance with the terms of a Tripartite Agreement, established between employees, companies in the sector, union representatives and government bodies, all in alignment with federal law. Motivated by competition issues in the market and lack of knowledge of the peculiarity of Brazilian aspects with regard to chrysotile ore and its uses, four Brazilian states have taken the initiative to prohibit the use of this mineral within their territory. In two of these states, injunctions have been passed suspending the effects of these bans. The CNTI (National Confederation of Industry Workers) is questioning the constitutionality of these bans with the Supreme Court.
Eternit reaffirms its conviction that its products are safe for the population and that the carrying out of sustainable management at its units does not put the health of its employees at risk. It is also understood that the Supreme Court will consider the technical and scientific evidence in order to judge this issue on merit, not being susceptible to pressure groups in favour of banning the use of chrysotile ore based on the experience in Europe, where another type of mineral (amphibole asbestos) was used, without the necessary care, principally in spray applications.
We express our thanks to our shareholders, clients, suppliers, employees, and all those who have contributed to the Company's performance in 2010. Thus, Eternit reaffirms its commitment to Brazilian society in its quest for sustainable development through the appreciation of human resources and preservation of the environment, adding value for its shareholders.
Élio A. Martins
President and Investor Relations director of the Eternit Group