Message from the Chairman and the Chief Executive Officer - Bekaert Annual Report 2011

Message from the Chairman and the Chief Executive Officer

Bekaert-President and CEO

Dear reader,

2011 was a year with two faces. It began strongly, riding on a wave of growth that lasted the entire year of 2010. Yet it will be remembered as an inconceivably complex and difficult year, in which the world was awash with unexpected developments that cast a shadow over the global economy.

Also for Bekaert, 2011 started as a promising year with the best quarter ever, building further on the exceptional growth and performance of 2010. Business was solid in general and our successful operations linked to the solar industry reached a historical peak. Bekaert’s confidence showed in the continuation of expansion investments and in the distribution of a € 0.67 interim dividend following solid results in the first half of the year.

The global financial turbulence and economic uncertainty however impacted Bekaert’s activities as from mid-2011, with hefty demand effects following credit restrictions in China, volatility in raw materials prices and exchange rates, and – most notably – drastic business evolutions in the solar energy market that came as suddenly as unpredictably.

Substantial manufacturing overcapacity, huge inventories in the entire supply chain of the photovoltaic industry, increasingly aggressive competition and persistent low demand drove prices down month after month. And although we had anticipated and announced at several occasions a slowdown effect in this market, we could not have foreseen such a dramatic impact at such speed.

Continuing to build on three strategic pillars:
technological leadership – global market leadership – operational excellence

Even when compared with the exceptional year 2010, and under difficult conditions in the second half, Bekaert has achieved 5% organic growth in 2011.

In full support of our customers, we continued to extend our portfolio with product innovations, attaching particular importance to co-development and designated pilot testing to speed up the innovation process.

We further advanced the consolidation process in our Latin American activities and concluded strategic acquisitions in China. The divestment of the Specialty Films activities was a confirmation of Bekaert’s strategic focus on realizing sustainable profitable growth in activities related to our core technological competences. In the same context we also announced the sale of the Industrial Coatings division early 2012.

The dramatic impact of the sawing wire business collapse, and the overall margin pressure also in other markets, compelled the need to intervene urgently. Therefore, Bekaert took actions to rightsize its sawing wire manufacturing footprint in China in December 2011. Furthermore, the Board of Directors of Bekaert approved the realignment plans which were announced on 2 February 2012, including the intended downsizing in Belgium and an international program to reduce the company’s global cost structure. We regret that after years of intensive growth, Bekaert is forced to take decisions that affect jobs. However, we consider the announced measures necessary to secure Bekaert’s competitiveness as a Group and to restore Bekaert’s long-term profitability in view of continued sustainable growth.

Opportunities and challenges ahead

A solid strategy works in good and difficult times. Our geographic span, the mix of sectors we are active in with a wide range of innovative products, our technological edge and healthy financial basis, and our international team of motivated employees, have all together provided us with a foundation to take on economically difficult times.

The Board of Directors of Bekaert is confident that the company’s strategy will continue to safeguard the potential of our industrial Group. The effects of the global crisis will most likely continue in 2012, presenting specific challenges in the different parts of the world. At the same time, opportunities may arise and we are ready and motivated to seize them, true to our resilience and customer-oriented better together spirit that so accurately describes Bekaert’s overall approach. Bekaert’s Board of Directors, management team and employees are committed to weather these turbulent times successfully by realizing our ambition to restore the profit levels that we have achieved in the past, in support of all our valued stakeholders.

Bert De Graeve                   Baron Buysse CMG CBE
Chief Executive Officer       Chairman of the Board of Directors

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