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2
Indice
Principales
Cifras
Carta del
Presidente
2
4
Estrategia
Programa de
Diversificación
Concesiones
Desarrollo
Internacional
8
Experiencia
GMD
10
GMI
12
GMP
GyM
CONCAR
16
18
20
22
24
Responsabilidad
Responsabilidad
Social
Gobierno
Corporativo
28
38
Cumplimiento
de Normas
Gobierno
Corporativo
46
Análisis de la
Administración
80
Solidez
Estados
Financieros
Consolidados
Estados
Financieros
Informe
Especial de
los Plazos
86
128
156
Graña y Montero Group
Constant Values at December 2005
Activity
Billing
Gross Income
Income Before Taxes
Net Income
EBITDA
Professional Staff
2002
2003
2004
2005
US$ Equiv.
692,020
688,291
93,621
-12,596
-25,954
101,883
495
93,621
291,574
807,571
811,200
124,290
24,461
8,034
135,540
643
124,290
238,469
840,974
833,731
141,991
47,460
17,515
147,502
984
141,991
262,888
915,217
894,005
174,599
71,465
32,724
173,611
1,286
174,074
517,077
266,749
260,566
50,889
20,829
9,538
50,601
43250
272,439
Graña y Montero is a group of 5 companies that provide engineering and infrastructure services in 4 Latin-American countries.
It has a professional staff composed of more than
1,200 employees.
Its mission is solving its clients’ needs related to engineering and infrastructure services beyond the contractual obligations,
working in an environment that promotes and develops its personnel’s skills, honoring the environment in harmony with the
communities where it operates and ensuring return for its shareholders.
Its vision is being the most responsible Latin-American group of engineering and infrastructure services.
To the Shareholders,
2005 ANNUAL REPORT
We are pleased to submit to you the 2005 Annual Report of Graña y Montero S.A.A. This is
the annual report corresponding to year 72 since the foundation of the company, which was
organized as a construction company in 1933 and has become an engineering services group
that has diversified its activity and now is also engaged in other activities such as oil,
information technology and infrastructure concessions.
We are very pleased with this year results, which are reflected in a net income of 9.5 million
dollars, which is 80% more than last year, with a 8.8% growth in the activity and a 23% growth
in the gross income.
These excellent results have allowed us achieving the financial and strategic soundness set
for the year. With an EBITDA of 50.1 million dollars, we have been able to reduce the debt by
10.6 million dollars and at the same time, have made investments for 15 million dollars.
2005 has been a year of consolidation of the Group in all respects:
(cid:131) Financial Consolidation, since a coverage over 5.8 times the financial expenses
and a well-structured debt have been achieved.
(cid:131) Strategic Consolidation, since more than 50% of the generated cash of the Group
comes from businesses other than construction and, in addition, cash generation,
only from concession businesses, covers in excess the general and financial
expenses of the whole Group.
(cid:131) Technological Consolidation, since international standards that have made us
develop 61.61% of our activity in the energy and mines sector have been set.
This strategy has been strengthened by important contracts entered into in year 2005. We
have been entrusted with the construction and assembly of the San Cristóbal Mine in Bolivia
for Apex Minerals from USA and the engineering of San José Mine in the Patagonia in
Argentina, which is a recognition of the international working standards established by the
Group. During the year we have formed part of the international consortiums that were given
stretches 2 and 3 of the Interoceanic Highway and the IIRSA Norte Highway connecting Peru
and Brazil in concession, showing not only our capacity to build, but also to design, fund,
operate and maintain large infrastructure projects. Contracts such as this ratify that our
strategy, which has allowed us developing a valuable experience and knowledge about the
engineering activities that have more development opportunities in the region, is right.
This is reflected in the portfolio of contracts pending execution (backlog), which, at December
31, 2005, make a total of 517 million dollars, ensuring a significant growth for the coming
years.
Success has been possible thanks to a professional staff composed of 1,286 employees and
to more than 10,000 persons working with the group. We are one of the main employers in the
country and are aware of our responsibility with our workers, clients and shareholders and
with the communities where we work. Being aware of this responsibility made us undertake
this year two ambitious programs on corporate government and social responsibility, which
are detailed in two special reports included in this annual report, reflecting our commitment to
all those persons.
Finally, we should like to thank you our clients and workers for helping us to achieve success.
Sincerely yours,
José Graña
President
Mario Alvarado Pflucker
General Manager
3
1.
STRATEGY: Guiding the company to become an Engineering and Infrastructure
Services Group
Diversification
A COMPANY THAT USED TO BE A CONSTRUCTION COMPANY HAS NOW BECOME A
GROUP OF 17 COMPANIES WORKING THROUGH 5 OPERATING COMPANIES.
More than 20 years ago we adopted a diversification strategy to improve the stability of our
businesses, without getting away from our basic knowledge, and guided the company to
become an Engineering and Infrastructure Services Group. A company that used to be a
construction company has now become a Group of 17 companies working through 5
operating companies, thus making the new companies generate more than half the operating
income of the Group.
GMD, information technology services company that has a Technological Operations Center
(COT) for systems outsourcing services.
GMI, consulting engineering firm that has a subsidiary specialized in environmental
engineering named ECOTEC.
GMP, oil services company that drills oil wells for third parties, operates two oil areas in the
north of Peru and has formed Consorcio Terminales with Oiltanking from Germany for the
operation of fuel terminals in Peru and Bolivia.
GyM, original construction company that has four divisions: Electromechanics, Civil Works,
Buildings and Real Estate.
CONCAR, company specialized in the operation and maintenance of roads given in
concession.
4
Concessions
In the recent years we have succeeded in our goal to ensure the Group stability by
developing knowledge and abilities to design, build, fund and operate infrastructure
concessions, which is clearly the form how large projects will be carried out in the
future.
The Builder-Concessionaire model generates great synergies among the different lines of
business of the Group. As regards finance, concession cycles are long, sometimes 60
years, compared to construction contacts for 1 or 2 years. Finally, concessions generate
higher and very stable margins, but they are intensive as regards capital generated from
construction, which requires less capital. As regards operations, builder and concessionaire
promote and complement each other in the performance and maintenance tasks.
We presently have interests in the concession companies detailed below:
• CONCAR, concessionaire of the Arequipa-Matarani Highway and the Ovalo Gutiérrez
Parking Lot in Miraflores, and operator of the highway to Pativilca to the north of Lima.
• Consorcio Terminales, in association with Oiltanking from Germany, to operate the fuel
storage terminals in Peru and recently the Camisea Cargo Dock in Pisco.
• CLHB, logistic hydrocarbons company in Bolivia, operated by the same group of
Consorcio Terminales.
• Larcomar, concessionaire of Larcomar entertainment center in Miraflores.
• TGP (Transportadora de Gas del Perú), company that was awarded the contract for the
construction, transport and distribution of Camisea gas.
• Norvial, concessionaire of Road Network Nº 5, which is a highway north of Lima, from
Ancón to Pativilca.
• Concesionaria IIRSA Norte, company that in year 2005 executed a concession
agreement on the Paita-Yurimaguas Highway that is 980 Km. long.
• Concesionaria Interoceánica Sur, company that in year 2005 executed a concession
agreement on stretches 2 and 3 of the Interoceanic Highway connecting Peru and Brazil.
THE BUILDER-CONCESSIONAIRE MODEL GENERATES GREAT SYNERGIES AMONG
THE DIFFERENT LINES OF BUSINESS OF THE GROUP.
PHOTO 1 - Operation of the Camisea Cargo Dock in Pisco.
PHOTO 2 - Presidents Alejandro Toledo and Luis Ignacio Lula da Silva in the
inauguration of Iñapari Bridge on the Peru–Brazil border.
PHOTO 3 - Concession of the Lima-Pativilca Highway, north of Lima.
PHOTO 4- Concession of Larcomar Entertainment Center in Miraflores.
5
International Development
During the year, our Group worked in three other countries thanks to our efforts for some
years now to develop outside Peru in order to be competitive on an international basis and not
to concentrate on only one market.
Bolivia. GyM has been entrusted with the construction and assembly of the equipment of the
San Cristóbal Mining Polymetallic Project in Potosí.
Through an association between CLHB and Oiltanking, we are managing the operation of the
Bolivian fuel transport and storage system, including the operation and maintenance of pipes
in 1,600 kilometers and 19 fuel terminals.
Dominican Republic. GMI has completed the project of the 700-room Hotel Paradisus Palma
Real for Sol-Meliá Group. It is presently supervising the Ciudad Colonial Shopping Center,
also from the Sol Meliá Group, and has been recently retained to manage the 1800-room
hotel project of company Palace Resorts in Punta Cana.
Argentina. GMI has been retained to carry out the detailed engineering of San José Mining
Project in the province of Patagonia in Argentina.
6
2.
EXPERIENCE: We develop a valuable experience and knowledge about
engineering and infrastructure activities
GMD S.A.
In year 2005 GMD consolidated even more its leadership position to supply information
technology solutions for the corporate market by increasing its share in the Factory
Software and Outsourcing businesses.
The new strategy for the businesses with stable flows has allowed moving forward in
achieving a sound business structure for GMD. Income from the Factory Software and
Outsourcing businesses reached US$18.8 millions, which represents about 66.4% of the
company’s total activity, with a growth of 13% in respect of year 2004. This growth ratifies our
vision and confirms our leadership in this market segment.
The total activity of the company in the year was US$28.34 millions, generating an operating
income of US$2.6 millions and an EBITDA of US$4.8 millions. During the year, large
investments for US$3.8 millions (the second most important since the change of strategy in
2000) were made in order to support growth of the outsourcing businesses and stable flows.
Our clients and our strategic allies acknowledged GMD’s leadership in 2005. The Lima Stock
Exchange and CAVALI renewed their confidence to GMD to provide technology outsourcing
services. This relation has been kept for more than 14 uninterrupted years. In the same way,
according to the survey made by an independent firm, our main 70 clients rated us with 95%
satisfaction and as their main strategic partner. For two consecutive years now, GMD was
acknowledged by Cisco Systems as Best Performance Partner in Peru, by Microsoft as Best
Service Partner, and by Hewlett Packard as Best Partner of the Year. In addition, GMD was
acknowledged as the Best Peruvian Company of Year 2004 in the area of Information
Technology Services.
Success in year 2005 was achieved thanks to the more than 900 employees working at GMD.
Aware of this, in year 2004, we launched a professional development strategy to improve the
working environment, identify skills by job, evaluate performance and acknowledge the
fostering of values. As a result of this strategy, we were able to improve the working
environment by 22%, evaluate performance in the whole company, prepare the profile of the
GMD employee and simplify the organizational structure.
In year 2005 GMD ratified its commitment to quality management, renewing the ISO 9001
certification in all its processes and achieving a CMMi–2 standard in the factory software, thus
ensuring the reliability and quality of the software development and maintenance.
Below are the main projects in which GMD has worked during the year.
Industry and Trade Sector.
(cid:190) 22 companies of the Romero Group: Integral Technology Outsourcing and Basis
Support for SAP Systems.
(cid:190) 13 companies of Corporación EBEL: Integral Technology Outsourcing and Basis
Support for SAP Systems.
(cid:190) Avícola San Fernando: Integral Technology Outsourcing and Support for the Oracle
Suite Systems.
7
(cid:190) Backus: Outsourcing renewal for the communications system.
(cid:190) Antamina, Southern Peru, Romero Group, Corporación Backus, Belcorp: Microsoft
Services.
(cid:190) América TV: Strategic Technology Plan.
(cid:190) Agroindustria Chapi: Consulting Services for Process Optimization.
(cid:190) Firth: Consulting Services for Process Optimization.
Telecommunications Sector:
(cid:190) Telefónica: Factory Software for Systems: Commercial of Atis, collect calls, sale, post-
sale, Speedy Business billing and management, system for the allocation, installation
and failures of the wireless network. Solution of Differentiated Commissions TUPS
(Public Use Telephony). Project for the support of regulatory requirements.
(cid:190) Claro: Redesign and management of information technology processes.
Government Sector:
(cid:190) ONP (Pension Normalization Office): Outsourcing of the pension payment process.
Outsourcing of the process to grant bonds recognizing length of service for pension
purposes. Factory Software for all administrative support applications of this agency.
(cid:190) Ministry of Transport and Communications: Development and implementation of the
Integrated System for Land Communication, Communications System for the New
Facilities.
Banking and Finance:
(cid:190) AFP Integra: Factory Software for Multifund Systems, Commercial Datamart, Current
Account and Statements of Account of Members.
(cid:190) AFP Horizonte: Factory Software for the management and administration of this
pension fund manager.
(cid:190) Stock Exchange: Renewal of the integral technology outsourcing.
(cid:190) CAVALI: Renewal of the integral technology outsourcing.
(cid:190) Securities Deposit in Bolivia: Securities system.
PHOTO 1 – América TV. Strategic Technology Plan.
PHOTO 2 – Lima Stock Exchange. Integral Technology Outsourcing.
PHOTO 3 – Claro. Redesign of information technology processes.
8
GMI
For GMI, we have made progress in our consolidation strategy for the mining sector
and have entered into framework contracts with Cía. Minera Antamina, Minera Cerro
Verde and BHP Billiton Tintaya, as well as new contracts with former clients, such as
Cía. Minera Volcán and Minsur.
On an international basis, we should mention that we have successfully completed
supervision of Hotel Paradisus Palma Real for Meliá in Punta Cana, Dominican Republic, and
have supervised to date a total of 6,600 rooms. As regards exports of our services, they
increased by the end of the year and we have been retained by Meliá to supervise the future
Ciudad Colonial Shopping Center in Punta Cana, Dominican Republic, and by Mexican chain
Palace Resorts to manage the project of its first hotel in Punta Cana, Dominican Republic,
which will have 1875 rooms, thus making a total of 8,475 rooms.
It should be pointed out that we have been retained to perform by the end of this year the
detailed engineering of Minera Santa Cruz for the San José Project in Patagonia, Argentina,
which is a clear evidence of the high engineering standards achieved in the mining sector.
We made sales for US$6.3 millions and achieved 280,684 man hours in the projects
mentioned below.
Mining Sector:
a) Compañía Minera Antamina
About 60 projects were developed under the Framework Contract. The most important
were the following:
• Design of the conceptual engineering of the new Yanacancha Camp and the covering
•
•
•
of the Villanueva Channel.
In Geomática, topographic monitoring of slope stability in the access road to Antamina
and mine topography.
Support for the purchase and management of the construction project to expand the
exploitation capacity of the Molly Copper and Bismuth Plant.
F-100 Project: Engineering and supervision of construction, installation of Froth
chamber.
b) Sociedad Minera Cerro Verde S.A.A.
63 projects were developed under the Framework Engineering Contract, the main being:
• New electrical substation in the management building.
• Detailed engineering of the nave electrowinning ventilation system.
•
Improvement of the agglomeration drainage system – phase III.
• Detailed engineering: Replacement of phase 3 pipes.
•
Engineering of the new chemical lab for leaching and concentration plant.
c) BHP Billiton Tintaya
Under the Framework Services Contract.
Detailed engineering for the system to extract gases from the truck shop welding
processes.
d) Compañía Minera Volcán S.A.A.
•
•
•
•
Evaluation of the electrical system of Ticlio Mining Unit.
Expansion of Victoria Plant.
Adaptation of the crushing system of San Expedito Concentration Plant of Cerro de
Pasco Mining Unit.
Technical study of detailed engineering of the Paragsha Plant Projects.
9
e) Minsur
•
•
Structure of new chimney base, laying of foundations of hopper Nº 8.
Pilot plant of tin salts.
f) Fluor Canada
•
Project “Permanent Fresh Water Supply Engineering” of Cerro Verde Project.
g) Kvaerner Chemetics - Canada
•
“Sulfuric Acid Plant Nº 2” Project of the Ilo Smelter Project of Southern Peru Copper.
Buildings and Industry
a) Neptunia
• Management of the new warehouse project for empty containers in Callao.
b) Mitsui S.A.
• Design of maintenance shop expansion.
c) Cerámica San Lorenzo S.A.
• Design of tiles plant expansion.
Infrastructure and Transport
a) Ministry of Transport and Communications
•
Supervision of the rehabilitation and asphalt improvement in the Catac Chavin-San
Marcos Road, Kahuish Tunnel–San Marcos Stretch.
• Rehabilitation and asphalt improvement of the Chamaya Jaén San Ignacio Rio
Canchis Road, Tamborapa Tunnel-Puerto Ciruelo Access Road Stretch.
• Regular maintenance of the North Pan-American Highway, Chiclayo Stretch -
Bayovar-Piura Turning – First Stage.
Intermodal Transport Plan Study.
•
b) Tisur
•
Basic engineering for the receipt, storage and delivery system of ore concentrates in
the port of Matarani.
c) Cia. Minera Antamina
•
•
Project A-108 Supervision - Antamina SWMP II Gorge – Surface Waters System.
Engineering of regular maintenance works of Conococha Yanacancha Road.
d) Rio Tinto Mining and Exploration Sucursal del Perú
•
Logistic study for La Granja Mining Project.
e) Consorcio Terminales
• Detailed engineering for the construction of a terminal for the receipt, storage and
delivery of sodium hydrosulfide (NaHS) in the port of Matarani.
f) Kellogg Brown & Root Inc.
Studies on the port, road and camp.
•
• Conceptual design of the work camp for the LNG Project in Pampa Melchorita.
g) Montgomery Watson Peru
Supervision of seepage pump back system project.
•
• Mailing dam seepage remedial works engineering for Compañía Minera Antamina.
10
h) GyM
Engineering coordination for Lots 8 and 18 – Pluspetrol.
• Oxygen plant structures in Ilo.
•
• Detailed engineering for Pagoreni A and B.
• Geomática: Topography of La Quinua 6 - Yanacocha.
PHOTO 1 – Plant of Tin Salts for Finsur – Minsur.
PHOTO 2 – Framework Engineering Contract with Sociedad Minera Cerro Verde.
PHOTO 3 – Hotel Paradisus Palma Real in Santo Domingo.
A YEAR OF PROGRESS IN OUR CONSOLIDATION STRATEGY IN THE MINING SECTOR.
11
GMP S.A.
The behavior of international oil markets and production increase had a very favorable
impact on our activities, and GMP S.A. has obtained its bests results to date in year
2005, which was reflected in income equivalent to US$10’504, doubling last year figure.
Our company is not unaware of the changes that are taking place in the energy matrix of the
country, so our portfolio of new natural gas related projects has substantially increased, which
makes us expect that in the coming 2 years we will make substantial investments for the
development of natural gas related projects.
On the other hand, the development of the mining activity in 2005, which is the main
economic activity in the country, has allowed us undertake an investment project by the end of
the year, to build a sodium hydrosulfide terminal in the Port of Matarani. In this way we would
be making incursions in the management of chemical products in Peru, with the valuable
support and experience of our partners Oiltanking and Santa Sofía Puertos. Commencement
of receipt, storage and transport operations has been planned for early 2007.
With these projects we have made notable progress in the Group strategy to develop
businesses with stable flows and in the energy and mines sector, which we consider have a
huge potential in Peru.
DRILLING
15 wells with a total depth of 51,830 feet were drilled in the year. 3 of these wells were drilled
in Lot I in order to develop GMP S.A. reserves.
OIL AND GAS PRODUCTION
Oil production in Lots I and V in the northwest of Peru was 325,692 barrels, which is
equivalent to a 14% increase of the 2004 volume. This was achieved as a result of the
implementation of drilling programs and reworks in the area. The net income value of our
crude basket increased by 48.5% in respect of last year’s.
The sale of natural gas was equivalent to 988 MM PC, i.e., 25% more than the natural gas
sold in year 2004.
STORAGE AND DELIVERY
In year 2005, Consorcio Terminales (GMP-Oiltanking) delivered 49,966 barrels of byproducts
per day on average, at the 9 terminals operated in the country. The storage average retained
by our users was 1’652,000 barrels, which amount is 8% higher than last year’s.
It should be pointed out that during the year, diesel 2 was received, stored and transported on
the Ilo-La Paz route for YPFB Bolivia.
CAMISEA TERMINAL IN PISCO
During the year, 130 shipments of products such as propane, butane, Diesel 2 and naphtha
were made, with a total volume of 11,079,590 barrels for domestic and international markets.
FUEL TRANSPORT AND STORAGE IN BOLIVIA
In year 2005, our affiliate CLHB transported, using its polypipeline system (1,600 Km.), a total
of 5’656,353 barrels of hydrocarbon byproducts, while delivery in the 16 terminals operated in
Bolivia was 9’392,119 barrels.
PHOTO 1 – Fuel Storage Terminal in Pisco
PHOTO 2 – Pumping Unit in Lot V, Talara
PHOTO 3 – Fuel Terminal in Cuzco
GMP HAS OBTAINED ITS BEST RESULT TO DATE IN YEAR 2005, WHICH WAS
REFLECTED IN INCOME DOUBLING LAST YEAR FIGURE.
12
GyM
The most outstanding event in year 2005 for GyM was the 78% growth of the portfolio of
contracts pending execution (backlog), which by the end of the year reached the record figure
of 330 million dollars, doubling the invoicing in last months and securing growth and continuity
in the coming years.
The most relevant event during the year was that GyM formed part of international
consortiums that were awarded the concessions for the highways IIRSA Norte and
Interoceanic, which connects Peru and Brazil. These concessions will result in an important
activity volume in the coming 4 years and were achieved thanks to the Group strategy to
develop concession agreements in the long term.
In July we commenced the civil works and mechanical assembly of the San Cristóbal Mining
Project owned by Apex Silver and located in Bolivia. This contract confirms that our
specialization in mining allows us to internationalize and is a clear recognition of the
international standards achieved by GyM.
The leadership of our company in energy and mines projects should be pointed out, such as
our participation in the Cerro Verde Sulfide Plant for Phelps Dodge, the new Ilo smelter plant
for Southern Peru and important infrastructure works for Minera Yanacocha.
During year 2005, GyM increased its sales by 3%, reaching a volume close to US$190
millions. Like in the last four years, it improved its gross margins obtaining 13,9%, compared to
13% in year 2004.
Mining Sector
Energy Sector
Infrastructure Sector
Minas Buenaventura: 5 additional kilometers of tunnels in
Orcopampa.
Minera El Brocal: Open pit for a 3-year term.
Southern Peru: New smelter plant in Ilo.
Minera Yanacocha: Leaching pads.
Cerro Verde: Sulfide plant.
Minera San Cristóbal: Civil works and electromechanical
assembly.
Pluspetrol Norte: Maintenance of miscellaneous highways
and projects.
Pluspetrol: Construction of
exploitation wells.
Tractebel: Industrial gas distribution network in Lima.
Etevensa: Civil works for the expansion of combined cycle
plant.
Ministry of Energy and Minas: Small electrical systems in
Piura.
two new
locations
for gas
Norvial: Huacho – Pativilca Highway – Stretch from Km. 168
to Km. 184.
PARSSA: Sewage works in Chimbote
Sedapal: Maintenance of downtown Lima.
IIRSA Norte: Paita-Piura-Bagua Grande-Rioja-Tarapoto-
Yurimaguas:
IIRSA Sur: Stretch 2 Urcos-Ocongate-Quincemil-Inambari.
IIRSA Sur: Stretch 3
Maldonado-Iberia-Iñapari.
Inambari-Santa Rosa-Puerto
13
Buildings
Universidad Andina del Cuzco: Two classroom buildings.
Baltamar Residential Building in Miraflores.
Corporación Wong
Centro Comercial Plaza Lima Sur: Roofed area of 33,062 m2.
Central warehouse: Roofed area of 12,729 m2.
Various expansion and remodeling works.
Photo 1 – Cerro Verde Sulfide Plant in Arequipa
Photo 2 – Baltasar Building in Miraflores
Photo 3 – New Smelter Plant in Ilo
OUR SPECIALIZATION IN MINING ALLOWS US TO INTERNATIONALIZE AND THIS IS A
CLEAR RECOGNITION OF THE INTERNATIONAL STANDARDS.
14
CONCAR
Year 2005 has been of great significance for CONCAR and for the Group strategy to
develop the infrastructure concession business, which we believe will allow us
developing large projects in the future.
In year 2005 the Peruvian Government invited tenders for 5 road concession projects, and
thus the Graña y Montero Group formed part of consortiums that were awarded 3 of these
contracts, including the large projects of IIRSA Norte and the Interoceanic Highway that
connects Peru and Brazil.
The implementation of the IIRSA Norte Operation and Maintenance Project in 2006 will
result in a significant sales increase for CONCAR in respect of the previous year and
CONCAR will be in charge of the operation and maintenance of the longest stretch given in
concession in Latin America (986 km).
CONCAR is at present the concessionaire of the Arequipa-Matarani Highway and the Ovalo
Gutiérrez Parking Lot Concession, which is located on the border of San Isidro and Miraflores,
and provides operation and maintenance services to the Ancón-Huacho-Pativilca Highway,
given in concession to Norvial.
The equivalent of US$5.2 millions were billed in 2005, with a significant EBITDA generation of
US$2.5 millions.
Plans of the present government include for the first 2006 semester the award of contracts
on 5 important road projects: IIRSA Centro, Stretches 1 and 5 of the Interoceanic Highway on
the south and two projects of the Coast-Highlands Program. If the schedule is achieved, year
2006 will be another important year for the development of the country roads and CONCAR
strategy.
The above confirms that CONCAR is one of the companies with more growth opportunities to
strengthen the generation of stable flows of the Graña y Montero Group in the long term since
it has shown its abilities and leadership in a road concession business in Peru.
Below is a description of the operating projects.
Arequipa–Matarani Highway Concession
In year 2005, traffic income in this 100.7 km. long concession increased by about 10% in
respect of last year.
Operation and Maintenance of the Ancon–Huacho–Pativilca Highway
In year 2005, CONCAR successfully performed operation and maintenance works in this
182.66 Km. long highway, provided support to Norvial in procedures for technical solutions of
specific problems and implemented a program to improve customer service and relations with
customers.
Operation and Maintenance of the IIRSA Norte Paita–Yurimaguas Highway
In year 2005 CONCAR was awarded the Operation and Maintenance Contract on IIRSA Norte
Highway, which is about 955.1 Km. long and which commencement of operations has been
planned for early 2006.
Ovalo Gutierrez Parking Lot Concession
CONCAR has entered into a 30-year concession agreement on the underground parking lot
for 220 vehicles, built on an area of 8,200 m2 in Ovalo Gutierrez.
15
3.
RESPONSIBILITY: A socially responsible behavior
customers, shareholders, personnel and the community
towards
SOCIAL RESPONSIBILITY
Based on our corporate identity, vision, mission and values, this year Social Business
Responsibility was formally inserted in the development of our operations when the
Corporate Social Business Responsibility Policy was signed.
The Letter of Ethics, signed in 1995, the Risk Prevention Policy (1999) and the
Environmental Policy (1998) form part of this process and have established a clear behavior
standard for its customers, shareholders and personnel and the community.
In year 2004, Graña y Montero executed the World Agreement promoted by UN Secretary
General as an evidence of the company’s social and environmental commitment.
The main internal objective group of this socially responsible behavior is personnel and its
main external objective group are the various publics forming part of the community, the
shareholders and the customers with which it works in the development of its operations.
For this reason, the various companies forming part of the Corporation promoted in the year
specific actions in the following fields:
1. Human Resources working in the company are the main objective group of the
Social Business Responsibility policy and for this reason, personnel policies and
programs ensuring their development and welfare as a support of their good
performance and satisfaction are given priority.
In year 2005, a series of recommendations arising from studies on the organization of
companies GyM, GMD and GMP were implemented, with very satisfactory results.
These studies will be made on an annual basis in order to meet the proposed needs
and recommendations and thus improve the organizational climate of the Corporation
in all respects.
16
GRAÑA Y MONTERO
December 05
Statistics – Population
Organization
Corporate
Management
Main Office
Projects
Total
Male
Female
Total
Gender
Corporate
Management
Hierarchy
Corporate
Management
Top Management
Employees
Workers
Total
GyM GMD GMP GMI
Concar
Total
105
567
672
61
765
826
40
99
139
20
65
85
12
127
139
271
1,623
1,894
GyM GMD GMP GMI
Concar
Total
557
115
672
594
232
826
116
23
139
78
7
85
119
20
139
1,486
408
1,894
GyM GMD GMP GMI
Concar
Total
6
666
7,861
8,533
6
820
0
826
8
131
132
271
2
83
0
85
2
137
0
139
45
1,849
7,993
9,887
33
0
33
22
11
33
21
12
0
33
Among the so many results obtained from these organizational climate studies, it
should be pointed that 83.17% of our employees is proud of the achievements of the
companies where they work.
The main reasons to be satisfied with the work, according to the last Organizational
Climate Study, are the following:
Organizational Climate
Survey
%
Satisfaction
Working spirit
Relation with the
management
Working organization
(methods, tools)
72%
79%
71%
72%
In order to promote the personal welfare of the Group workers, which were more
than 9,200 in the year, the company has developed a sound Security and
Environmental Preventive Training Program.
17
Ages of Employees
Total Percentage
From 20 to 30 years
From 31 to 40 years
From 41 to 50 years
From 51 to 60 years
From 61 to 65 years
65 years and more
Total
632
708
344
179
17
14
1894
33%
38%
18%
9%
1%
1%
100.00%
GRAÑA Y MONTERO
December-05
Statistics – Training
Employees
Corporate
Management
GyM GMD GMP GMI
Concar
Total
Engineers with postgraduate studies
Other professionals with postgraduate studies
Professionals in engineering
Other professionals
Total Professionals
Technicians
Total Employees
10
5
3
12
30
3
33
37
4
390
101
532
140
672
24
10
407
120
561
265
826
11
2
43
18
74
65
139
7
3
51
7
68
17
85
2
0
8
11
21
118
139
91
24
902
269
1,286
608
1,894
Workers
Corporate
Management
GyM GMD GMP GMI
Concar
Total
Specialized workers
Non-specialized workers
Subcontractors
Total
0
0
0
1,203
4,018
2,640
7,861
0
0
0
132
0
132
0
0
0
0
0
0
1,335
4,018
2,640
7,993
Total Personnel
33
8,533
826
271
85
139
9,887
Trainees
Independent professionals
Total
0
0
0
32
9
41
40
16
56
3
1
2 151
5 152
2
0
2
78
178
256
Total General
33
8,574
882
276 237
141 10,143
2. Risk Prevention and Environment. Graña y Montero are committed to be leaders in
environmental performance and risk prevention through its Integrated Management
System in all sectors in which it is involved, which results in the creation of value for
its customers, personnel and shareholders and the adjacent communities.
18
It is a traditional principle of all employees of Corporación Graña y Montero to be
responsible with the environment and the health of its workers during the activities.
Our Risk Prevention and Environmental Policies are based on said principle.
To ensure compliance with this commitment, our organization has an integrated
management system for risk prevention and environment developed under the
guidelines of OHSAS 18001 and ISO 14001 Standards. This system is audited by the
IDB on an annual basis, which allows us to keep evidence of an effective and efficient
implementation.
In year 2005, Corporación Graña y Montero achieved 19’155,000 man hours as a
result of the work performed by about 7 thousand workers who made their best efforts
to develop their activities in compliance with the main principles of security integrated
to work and respect for the environment and complete the required number of hours
of training in risk prevention and environmental management, which make 377,613
hours. Our personnel’s commitment to the Corporation’s policies has allowed us
closing year 2005 with zero environmental incidents and a frequency index of 1.13,
which value is within optimal international parameters.
The investment made by our organization to secure the physical integrity and health
of its workers is reflected in the creation of a preventive culture and the protection of
workers against working risks and their resulting environmental impact. Thus, in year
2005, about 380 thousand hours have been invested to train and raise awareness in
our personnel on job risks, and about US$2,5 millions have been invested to acquire
personal and collective protection equipment.
These results have been appreciated by our customers during the year, who, in
exchange for our efforts, have renewed their contracts with us and executed new
ones, thus making our commercial relation longer.
3. Knowledge Management: One of the main guiding principles of the Group strategic
development is the commitment to train all members of the organization and manage
the Group’s knowledge. The responsibility for this task has been entrusted by the
Group to the Corporate Learning Center (CCA) created in 1998, which this year has
given 8,302 hours of classes in the Basic Program for Young Engineers, 18,008 hours
of classes in the Professional Development Program, 1,636 hours in the Collective
Memory Program and 16,862 hours of External Training.
19
Training
Man Hours
DESCRIPTION
GyM
GMI
GMP
GMD
CONCAR
TOTAL
Basic Program –
Young Engineers
Professional
Development
4,284
132
266
3,500 120
8,302
7,778
1,069
4,625
4,478 58
18,008
Collective Memory
1,597
39
- -
-
1,636
External Training
5,690
775
2,462
6,809 1,126
16,862
Total General
19,349
2,015
7,353
14,787 1,304
44,808
Monthly Average of
Employees
Ratio = Training
Hours / Employees
Risk Prevention and
Environmental
Management –
Workers
556
35
85
24
259
848 136
1,884
28
17
10
24
342,560
752
33,341
- 360
377,013
The total number of man hours invested in training, which is 44,808, should be
pointed out. In addition, man hours invested in training third parties in social
responsibility, which were 3,033, and the average number of training hours per
employee of all companies of the Corporation, which is 24 man hours per employee,
should also be stressed.
4. Relations with the Community: The relations with the community and, in particular,
the execution of projects, must be developed in a positive context of harmony and
mutual respect, within which the company promotes and performs activities
contributing to the sustainable development of the communities where it operates.
Based on our social responsibility practice, the Group companies make their best
efforts to help these communities. These efforts go beyond the project period and are
particularly aimed at directing these actions towards the areas of education,
community and environment. During the year, various actions were made in local
populations with an immediate influence on the projects undertaken, which are
detailed below.
20
COMMUNITY
SOCIAL INITIATIVE
Sanitary Installations
Training
Communities
in Native
OBJECTIVE
GROUP
Young People of
Human
Settlements
1360 hours.
Native
11,080 hours.
People,
–
PLACE
Chimbote
Loreto, Lot 1AB and Lot 8
SOCIAL INITIATIVE
Gifts and
for
children on Christmas
food
OBJECTIVE
GROUP
Children of Pérez
Aranibar
Childcare Center
Lima
PLACE
for
of
on
Collaboration
the
Christmas
children
the
Ministry of Energy
and Mines employees
for
Guided
students
the
National Engineering
University
Study
for
comprehensive
diagnosis of Organos
and Talara
visits
of
a
Collaboration
Christmas
for
Treatment
ambulances
medical personnel
with
and
Office materials and
others
for
Collaboration
various activities
Summer campaign –
transit
Sunday
reorganization
60
by
Service
of
policemen
the
National
Peruvian
Police
(highway
policemen and transit
policemen)
2 ambulances
Ministry of Energy
and Mines
Lima
the
Students of
National
Engineering
University
Pisco, Paracas and Talara
People
Organos
Talara
of
and
Talara
National
Volunteers Center
of Peru
Settlements
adjacent to Ancón
and Paraíso
Police Stations of
the
Peruvian
National Police
Lima
Ancón
Ancon, Huacho, Pativilca
Fire Corps
Chancay
and
Internal
external
population
Arequipa, Matarani
Arequipa, Matarani
Arequipa, Matarani
21
flags and
T-shirts,
highways
Trips to the beach for
poor children
Facilities
for annual
at
collection
Uchumayo Tollbooths
Rescue Police
Arequipa, Matarani
Circa
Arequipa
Ladies’
Association
the
Supporting
National Cancer
Institute
-
ADAINEN
Arequipa
SOCIAL INITIATIVE
OBJECTIVE
GROUP
PLACE
Customer-Partner
Workshop
Painting
and
posting of security
signals on areas near
highway
of
Christmas gatherings
to serve chocolate
Carriers
Arequipa
Municipality
Matarani
of
Arequipa
Municipalities of
and
Matarani
Uchumayo
Arequipa
EDUCATION
SOCIAL INITIATIVE
Family
planning/Transmitting
values to our children
Development
women engaged
fishery
of
in
Role of Cerro de
Pasco women
of
OBJECTIVE
GROUP
Mothers of
the
Colquijirca Dining
Room and Villa
de
Pasco
Peasant
Communities, 120
hours.
Mothers
peasant
communities:
Smelter, Villa de
Pasco,
Huaraucaca,
Santa Rosa and
Colquijirca,
165
hours.
Mothers of
peasant
community
of
Tinyahuarco, 180
hours.
the
PLACE
Cerro de Pasco
Cerro de Pasco
Cerro de Pasco
22
Community cleaning
Community
development project
40
the
Rosa
Mothers of
Santa
peasant
community,
hours.
Young
people
from
different
of
communities
Tinyahuarco, 180
hours.
Cerro de Pasco
Cerro de Pasco
SOCIAL INITIATIVE
Communication in the
family (family violence
self-esteem,
and
prostitution
and
alcoholism,
STDs,
organization of dining
rooms).
OBJECTIVE
GROUP
Mothers of
the
Nueva Esperanza
Dining Room at
Chilcaymarca
Community, 180
hours.
PLACE
Arequipa, Orcopampa
use
Rational
electric
Personal hygiene.
of
power.
Family planning
Women at present
and leadership.
Hygiene
for
children, 100 hours.
guidelines
school-age
from
People
form
Orcopampa and
Corococha, 270
hours.
People
Anaro, 27 hours
Mothers of
Glass
Program,
hours.
3rd
Elementary
grade students of
School Nº 4021
Alcides Carrión -
Pork
Ventanilla
Park, 100 hours.
the
of Milk
600
Arequipa, Orcopampa
Arequipa, Orcopampa
Ilo
Callao
Food and healthy
nutrition - Preparation
of school lunchboxes.
Mothers,
hours.
35
Callao (Twinza, Sarita Colonia – 1st and
2nd sectors), Villa Mercedes, Acapulco,
Alcides Carrión, Franciso Bolognesi
and Juan Pablo II
History
water
management
secondary
networks.
of water,
care,
of
water
High school 4th
and 5th grade
students
of
Jacques
School
120
Cousteau,
hours.
Lima
23
Elementary and
school
high
of
teachers
School Nº 4021
Alcides Carrión –
Ventanilla
Pork
Park, 63 hours.
Callao
EDUCATION
OBJECTIVE
GROUP
Parents of School
Niño Jesús de
in
Belen
53
Chorrillos,
hours.
Parents of School
Niño Jesús de
in
Belen
Chorrillos,
23
horas.
Students of both
genders (between
15 and 18 years
old), schools José
Carlos Mariàtegui
and José María
in
Arguedas
Santa Anita, 150
hours.
Lima
Lima
Lima
Disaster management
and emergency plans.
SOCIAL INITIATIVE
Sexual health
Family welfare - "dad
and mom can give me
10 minutes of their
time".
Alcoholism and drug
addiction, gangs and
crime.
PLACE
Training
and environment
in security
Independent
drivers
Eten, Salaverry, Chimbote, Supe,
Pisco, Mollendo, Cusco, Juliaca and Ilo
thesis
to
Scholarships
to
prepare
obtain
the Title of
Geologist and Oil
Engineer
Beach
brochures
tourism
Leaflets
with
recommendations on
security-safe driving
3-day training for 100
drivers in coordination
with MAPFRE
National
Engineering
University
Arequipa
Chamber
Comerse
Users
Arequipa-
Uchumayo
Highway
of
Lima
of
Arequipa
the
Arequipa
Carriers
Arequipa
24
ENVIRONMENT
OBJECTIVE
GROUP
PLACE
Population
general
in
Ancón, Huacho, Pativilca.
Users in general Ancón, Huacho, Pativilca.
SOCIAL INITIATIVE
final
Modification of
disposal
waste
procedures
(non-
incineration)
Implementation
temporary
deposit systems
of
garbage
Garbage collection in
urban areas
Population
general
Participation
Ecological
clearing
adjacent
Uchumayo
Road and beaches
in
the
Patrol,
areas
the
Relief
to
of
Population
general
in
in
Ancón, Chancay and Supe
Uchumayo and beaches
Cleaning of beaches
Population
general
in
Eten and Salaverry, Chimbote, Supe,
Mollendo and Ilo
Environmental
remediation service
Neighboring
populations
Chimbote, Supe, Pisco, Mollendo and
Ilo
Expenses
for
environmental studies
Neighboring
populations
Eten, Salaverry, Chimbote, Supe,
Mollendo, Cusco, Juliaca and Ilo
25
Corporate Government
Important decisions have been adopted in year 2005 in order to implement the best
corporate government policies.
In year 1996 Graña y Montero decided to list in the Lima Stock Exchange and since
then, has complied with the main Corporate Government Standards as regards
transparence, representation and information to shareholders.
We presently have about 1000 shareholders and the company’s Board of Directors has a
majority of 5 external directors that are not officers of the company. In addition to the Annual
Report, we issue quarterly reports about the situation of the Group, inform the Stock
Exchange and CONASEV of any important events and have a web page with complete
information about the company.
In year 2005 we have adopted important decisions to establish the best Corporate
Government practices. The main measures adopted are described below. They were ratified
by the Shareholders’ Meeting held on May 31, 2005, where the amendments to the Bylaws
and the Organization and Operation Regulations of the Shareholders’ Meeting were approved,
including rules for the representation of the shareholders.
At a Board meeting held on May 31, 2005, the Regulations governing the Board of Directors
and the Board Committees were approved:
-
-
-
Audit and Process Committee
Human Resources and Remunerations Committee
Investment Committee
(cid:131) Three types of Directors were recognized:
External independent directors
External directors
Internal directors
-
-
-
(cid:131) The number of directors was increased to 9, resulting in a majority of external
directors (3 external, 2 external independent and 4 internal directors).
(cid:131) The Executive Committee in charge of the Group coordination was created with 4
internal directors and the 5 general managers of the Group’s operating companies.
(cid:131) External directors were incorporated in the boards of directors of the 5 operating
subsidiaries.
(cid:131) The Secretary’s Office of the Board of Directors was created.
(cid:131) The Shareholder Service Office was created.
Composition of the Board of Directors
As of December 2005, the Board of Directors was composed of the following members:
José Graña Miro Quesada
(cid:131)
Chairman
(cid:131) Carlos Montero Graña
Vice Chairman
(cid:131) Roberto Abusada Salah
External Independent Director
(cid:131) Augusto Baertl Montori
External Independent Director
(cid:131)
External Director
Jean-Louis Dupoirieux
(cid:131) Pyers Griffith Mostyn
External Director
(cid:131) Teodoro Harmsen Gómez de la Torre External Director
(cid:131) Mario Alvarado Pflucker
Internal Director
(cid:131) Hernando Graña Acuña
Internal Director
26
• José Graña Miró Quesada: Chairman of the Board of Directors. Architect. Also Chairman of
the Board of Directors of subsidiaries GyM, GMP, GMD and CONCAR. Vice Chairman of the
Board of Directors of GMI. Also Director of Empresa Editora El Comercio S.A. and EDEGEL
S.A.A.
• Carlos Montero Graña: Vice Chairman of the Board of Directors. Civil Engineer. Also Vice
Chairman of the Board of Directors of GyM and GMP and Director of GMD and GMI.
President of Ecotec and Director of CONCAR.
• Roberto Abusada Salah: Director. Doctor in Economy (Cornell, USA). Director of GMD,
CONCAR, Mauricio Hochschild y Cía. Ltda. S.A.C. and Instituto Peruano de Economía IPE.
• Augusto Baertl Montori: Mines Engineer. Executive President of Gestora de Negocios e
Inversiones S.A. and IMA Latin America Inc. Also Chairman of the Board of Directors of
Agrícola Chapi S.A. and Director of Interbank, GMP and FIMA.
• Jean-Louis Dupoirieux: Director. Civil Engineer. Project Director in Vince-Construction
Grands Projets (France) and also Director of Sociedad Concesionaria Puente de Chiloe
(Chile).
• Pyers Griffith Mostyn: Director. Licentiate in Languages from Durham University, United
Kingdom. Director of Corporate Finance and Advisory of HSBC Bank plc. Managing Director
of The Peru Privatization and Development Fund and Director of Refinería La Pampilla.
• Teodoro E. Harmsen Gómez de la Torre: Director. Civil Engineer. President of GMI S.A.
Director and professor of the MDI Master Program. Professor Emeritus of the School of
Science and Engineering of the Pontifical Catholic University of Peru. Also Honorary Member
of the American Concrete Institute in the USA and Honorary Member of the Peruvian
Engineering Academy and the Peruvian Engineers’ Association.
• Mario Alvarado Pflucker: Director. Civil Engineer and Master in Engineering Management
from George Washington University, USA. He is also presently director of GMD, GMI, GyM,
GMP, CONCAR, Larcomar, Norvial and América Leasing.
• Hernando Graña Acuña: Director. Industrial Engineer. Director of GMI, GMP, Ecotec S.A.
and CONCAR. Executive Vice President of GyM and President of Norvial S.A. Also Director
of CAPECO and TGP.
Committees
As of December 31, 2005, the Board Committees are composed as follows:
(cid:131) Audit and Process Committee: Members:
- Roberto Abusada Salah
-
- Pyers Griffith Mostyn
Jose Graña Miró Quesada
(cid:131) Human Resources and Remunerations Committee: Members:
- Augusto Baertl Montori
-
Jean-Louis Dupoirieux
- Carlos Montero Graña
(cid:131)
Investment Committee: Members:
-
José Graña Miró Quesada
- Hernando Graña Acuña
- Teodoro Harmsen Gómez de la Torre
27
Executive Commission
The Executive Commission is responsible for the Group coordination and is composed of the
4 internal directors and the 5 general managers of the Group’s companies.
José Graña Miró Quesada
Carlos Montero Graña
Hernando Graña Acuña
Mario Alvarado Pflucker
Juan Manuel Lambarri
Francisco Dulanto Swayne
Jaime Dasso Botto
Walter Silva Santisteban
Jaime Targarona Arata
Chairman
Vice Chairman
Director
Managing Director
GyM General Manager
GMP General Manager
GMD General Manager
GMI General Manager
CONCAR General Manager
Main Executives
Mario Alvarado Pflucker: Corporate General Manager since 1997, with more than 25
•
years in the Graña y Montero Group. He obtained the Degree of Bachelor in Civil Engineering
from the Ricardo Palma University and the Master Degree in Engineering Management, Major
in Construction Management, from George Washington University from the USA. He is
presently director of GMD, GMI, GyM, GMP and CONCAR as well as of Larcomar, Norvial
and America Leasing.
•
Juan Manuel Lambarri Hierro: General Manager of GyM since 2001. Civil Engineering
graduated from the Pontifical Catholic University of Peru and the Top Management Program
(PAD) of the University of Piura. He joined the Graña y Montero Group in year 1982 and is
also presently Director of GyM.
•
Hernando Graña Acuña: Director. Industrial Engineer. Director of GMI, GMP, Ecotec
S.A. and CONCAR. Executive Vice President of GyM and President of Norvial S.A. Also
Director of CAPECO and TGP. He has been working in the Graña y Montero Group since
1977.
•
Francisco Dulanto Swayne: General Manager of GMP S.A. since its foundation in
1984. Director since 1988. Studies at the National Engineering University, ESAN and
University of Piura (PAD). He has been working in the Graña y Montero Group since 1974.
Also Director of Consorcio Terminales and CLHB (Bolivia). He was President of SPE (Society
of Petroleum Engineers), Chapter Lima, in 1991, and Director of the National Society of
Mining and Oil and Energy in the 1993-1994 and 2005-2006 periods.
•
Jaime Dasso Botto: General Manager of GMD since 2000. Degree of Bachelor in
Electronic Engineering and Master Degree in Software Development from Stevens Institute of
Technology, USA. Commercial Manager of GMD from 1994 to 1999. Also Director of GMD.
•
Walter Silva Santisteban R.: General Manager from 1998 to 2005 and Managing
Director since 2006. Degree of Bachelor in Civil Engineering from the National Engineering
University. He is also presently Director of ECOTEC.
Jaime Targarona Arata: General Manager of CONCAR since August 2005. Civil
•
Engineer of the Autonomous University of Guadalajara and MBA from the San Ignacio de
Loyola University. He worked as Civil Engineer for different projects, Commercial Manager of
the Special Projects Division in GyM and General Manager of Graña y Montero Mexico.
•
Luis Díaz Olivero: Corporate Financial Manager since December 15, 2004. Industrial
Engineer with MBA from the University of Pittsburgh. He has been working in the Graña y
Montero Group since 1993. Financial Manager of GMP S.A. from 1998 to 2000 and Financial
Manager of GyM from 2001 to 2004.
•
César Neyra Rodriguez: Internal Audit and Management Process Manager. Bachelor
Degree in Accounting from the Federico Villarreal National University. Complete studies of the
Master in Management and Finance Program of the University of the Pacific. Studies on
quality improvement systems and graduated on Six Sigma Methodology from Caterpillar
University in Mexico and the USA.
28
•
Claudia Drago Morante: Corporate Legal Counsel since 2000. Lawyer from the
University of Lima. PADE studies on Corporate Law and Finance at ESAN. Legal Counsel to
GMD from 1997 to 2000. Secretary of the Board of Directors of Graña y Montero S.A.A.
Representative before the Stock Exchange and officer in charge of the Shareholder Service
Office.
Family Ties
José Graña Miró Quesada, Chairman of the Board of Directors, has a third degree blood
relationship with Yamile Brahim Graña, shareholder of the company, and a fourth degree
blood relationship with Director Hernando Graña Acuña. Teodoro Hans Harmsen Andress,
Director of GMP, has a first degree blood relationship with Teodoro Harmsen Gomez De La
Torre, Director of Graña y Montero S.A.A.
Capital
The company’s capital as of December 31, 2005 is S/.206’335,227.70 resulting from the
amortization of portfolio shares and a capital reduction agreed by the Board of Directors on
January 31, 2005, by delegation of the Shareholders’ Meeting held on December 22, 2003,
and from the capitalization and capital reduction approved at the Shareholders’ Meeting held
on May 31, 2005.
Main Shareholders
List of Shareholders as of December 31, 2005
SHAREHOLDER
31/12/2005
Graña Holdings
Vinci Construction
AFP INTEGRA
Carlos Montero Graña
Byron Development
AFP PROFUTURO
Genesis Smaller Companies
SICAV
Genesis Smaller Comp. Port
Hernando Graña Acuña
Francisco Dulanto Swayne
AFP HORIZONTE
Hugo Rangel Zavala
BWS (Vinci trust)
Yamile Brahim Graña
Bamas International
Investment Corp.
Ducktown Holdings S.A.
Corporación Cervesur S.A.
Emerging Sovereign Master
Fund Ltd.
62,417,287
42,356,031
18,901,213
18,691,715
16,450,600
15,136,961
11,766,571
10,000,000
8,703,182
6,799,779
4,822,933
4,993,790
4,706,226
4,342,189
3,907,971
3,784,888
3,509,146
21.18%
14.37%
6.41%
6.34%
5.58%
5.14%
3.99%
3.39%
2.95%
2.31%
1.64%
1.69%
1.60%
1.47%
1.33%
1.28%
1.19%
3,095,650
244,386,130
1.05%
82.91%
29
The main shareholders are Graña Holdings, represented by José Graña Miró Quesada,
Chairman of the Board of Directors, and Vinci Construction of the French group that is
presently the largest construction company in the world.
30
Brief Historical Outline
The Group was organized in the city of Lima in
1933 under the name of Gramonvel S.A.
Ingenieros.
In 1949, the company merged with Morris y
Montero, resulting in the creation of a new firm
Graña y Montero S.A.
Consortium Ingenieros Contratistas Generales
was created in 1964.
In 1980 Graña y Montero S.A. started a
diversification process as a result of the
creation of GMI, the engineering consulting
company, GMP, the oil services company, and
GMD, the information technology services
company.
Concar, the road operation and maintenance
company, was founded in 1994.
The holding company was created in 1996
and
in 1997 Graña y Montero S.A.A.
increased the capital stock through a public
offering of shares, thus becoming an open
corporation.
• Municipality of Miraflores
• Lima Maternity Hospital
• City of Talara
• Las Palmas and Talara Air Bases
• Nestlé Factory
• Southern Pan-American Highway
• Ministry of Economy and Finance
• Banco Wiese Ltdo.
• First National Bank
• Sears Roebuck del Perú
• Employee Hospital
• Chimbote Iron and Steel Factory
• Cañón del Pato Hydroelectrical Station
•
Jorge Chávez Airport
• Monterrico Racecourse
• Paseo de la República Avenue
• Sheraton Hotel
• Cuajone Mining Project
• Chavimochic Irrigation Project
• Banco Continental
• Machu Picchu Hydroelectrical Station
• Cuzco Hospital
• Drilling of 51 oil wells in Talara
• Outsourcing of the Lima Stock Exchange
• Project Management of Melía Hotel
in
Dominican Republic.
• Arequipa-Matarani Highway Concession
• Ventanilla Thermal Station
• Four Season Hotel in Mexico
• Sulfuric Acid Plant for Southern Peru
• Chinecas Irrigation
• Lima Cement Factory
Consorcio Terminales was created in 1998.
• Concession for fuel terminals in 9 ports of
Peru.
• Marriott Hotel in Lima
• Cerro Verde Mining Project
31
Norvial S.A., concessionaire of road network
N° 5, was created in 2002.
• Ralco Hydroelectrical Station in Chile
Ilo Smelter Plant
•
• San Cristóbal Mine in Bolivia
• Yanacocha Mining Project
• Camisea Gas Separation Plant in Pisco
• Cerro Verde Mining Project
• Operation of the Camisea Maritime
Terminal in Pisco
32
Management Analysis
IMPORTANT DECISIONS HAVE BEEN TAKEN IN 2005 TO ADOPT THE BEST
CORPORATE GOVERNMENT PRACTICES
SUMMARY
The consolidated activity grew by 8.8% in year 2005, reaching S/.915.2 MM.
The gross margin and the operating margin increased by 210 pbs. and 200 pbs.,
accordingly, reaching 19.1% in the first case and 13.3% in the other case.
The available income for year 2005 increased by 86.8%, reaching S/.32.7 MM
The accumulated EBITDA1 by the end of year 2005 was S/.173.6 MM, which is
equivalent to 18.9% of the Group activity and represents an improvement of 17.4% in
respect of the previous year.
In 2005 the financial debt decreased by S/.14.5 MM and consequently, the Group
leverage decreased from 2.15x to 2.01x.
The Group backlog at the end of the year was US$517 MM. From this amount, US$258.6
MM will be executed in year 2006.
PROFIT AND LOSS
The activity volumes of Graña y Montero Group for year 2005 were S/.915.2 MM, a
growth of 8.8% in respect of the previous year. This year the growth of the Group activity
was led by the increase in the oil business activity (+19.9%) and was seconded by growth in
the concessions operation (+8.5%),
infrastructure (+8.1%) and engineering (+6.1%)
businesses. The information technology business (+2.3%) grew in a more moderate way.
The oil business grew due to an increase in the activity of Lots I and V, which kept a combined
production higher than 900 barrels per day since August 2005. This production increase is in
turn strengthened by a high crude price that favors this line of business. On the other hand,
the activity of the fuel storage and delivery business, the activity related to the operation of the
Camisea Dock in Pisco and the well drilling service were within the expectations for this year,
thus consolidating this business.
The increase in the business of operation of road and parking lots concessions in respect of
the previous year is based on the heavier traffic in the Arequipa–Matarani Highway
Concession, which has even allowed to neutralize the effect of the blockades that took place
at the beginning of 2005. In turn, additional works for the operation of the Ancón–Huacho–
Pativilca Highway also allowed this activity to grow.
The growth of the infrastructure business in year 2005 is supported by the works performed
for the Cerro Verde Mining Project and the Sociedad Minera San Cristobal Mining Project in
Bolivia as well as the coming into effect of the strategic alliance with the Wong Group for the
remodeling of its “Metro” stores and the construction of its new “Eco“ store, which increased
the activity of its building division. It should be pointed out that in the fourth quarter, this
business achieved 41% of its year activity, which explains the important growth in the
consolidated activity of the Group shown in the graph at the end of this page. Likewise, this
volume of the fourth quarter will be kept stable during year 2006 to execute this year backlog,
as commented below in this report.
33
The growth of the engineering business in 2005 was based on the Framework Engineering
Agreement for the Cerro Verde Mining Project and on more service orders under the
Framework Engineering Agreement the company has entered into with Compañía Minera
Antamina S.A.
52% of the consolidated gross income comes from businesses not related to
construction. As explained in previous reports, the increase in the infrastructure business
activity recorded in the last quarter of the year leveled the origin of gross income, which had
been depending on the businesses not related to construction in the last quarters. In addition,
it should be pointed out that while the participation in the infrastructure business activity for
year 2005 has been kept at 70%, a figure similar to the previous year, the participation of the
gross income of the business not related to construction has increased by 300 pbs, reaching
52%.
The Group gross income increased by 220 Pbs., reaching 191% of the activity, which
represents S/.174.6MM. Gross income improvement in the oil business (+647 pbs) and the
infrastructure business (+94 pbs) explains this increase in profitability due to its important
participation in the consolidated activity of the Group. Gross margins of the businesses of
concessions operation (+633pbs), engineering (+370pbs) and information technology (+230
pbs) also grew significantly, thus consolidating the general improvement of the Group gross
income.
The gross income of the oil business added up to S/.59.8MM., based on better results in the
extraction and production line of Lots I and V as well as the good times undergone by the
crude price. In turn, gross income of fuel storage and delivery was kept at levels equivalent to
the previous year, both in Peru and Bolivia.
The growth of the infrastructure business gross margin is based on the higher profitability of
its civil works division and the increase in the profitability of its real estate division, which
benefited from the sale of the plot of land previously owned by COPRESA at Angamos
Avenue at the end of year 2005. It should be pointed out that the high activity level of the
construction company in the last quarter allowed obtaining a gross margin of 13.65% in that
same period.
The operating margin of year 2005 improved by 220 pbs. in respect of the previous
year, reaching 13.3% of the activity. The increase in the gross margin of the Group
businesses, explained above, as well as keeping the general expenses below 6% have
allowed the operating margin keep a positive trend, reaching S/.120.3 MM at the end of the
year.
The net financial expenses were reduced by 8.9% in respect of the end of the previous
year, reaching a total of S/.29.9 MM. A higher generation during the last quarter allowed
resuming the debt reduction program of the Group, which, combined with the lower financial
costs, has an impact on the decrease in the financial expenses for the year. Likewise, this
decrease in the financial expenses, combined with the EBITDA increase, which is commented
below, boosted coverage to 5.79x, which represents an improvement of 1.30x in respect of
the previous year.
The available income for year 2005 was increased by 86.8%, reaching S/.32.7 MM. The
improvement in the margins commented above, combined with the reduction in the financial
expenses, boosted the increase of the available income at the end of the year. In addition, it
should be stressed that the effect of the reduction in the item “other expenses” (-62.1%) was
neutralized by the effect of the exchange difference in the fourth quarter, generated by political
uncertainty, which prevented a higher increase in the final income.
34
The accumulated EBITDA2 at the end of year 2005 reached S/.173.6 MM, which
represents 18.9% of the Group activity as well as a growth of 17.4% in respect of the
previous year. Similarly to gross income, the recovery of the infrastructure business activity
in the last quarter increased its share in the Group EBITDA2, in comparison to the previous
quarters. However, this recovery did not prevent the other businesses not related to
construction to increase their share in the annual generation of the Group by more than 4%.
Finally, it should be pointed out that this year generation from the stable mid- and long-term
flows, such as concessions and outsourcing businesses, reached 53.6% of the EBITDA2
against 38% of the previous year.
BALANCE SHEET
The financial debt decreased during year 2005 by S/.14.5 MM and consequently, the
M
Group leverage decreased from 2.15x to 2.01x. Although the working capital needs have
M
pressured current liabilities by making them increase by 20.7%, the total financial debt has
$
reduced by 5.9%, which, together with the good results from year 2005, allowed the Group
S
close with a leverage index of 2.01x.
U
n
Current liquidity at the end of year 2005 was 1.21x. An increase in the working capital
e
needs of the infrastructure business related to the growth of the activity in the last quarter,
A
which reached its peak in December 2005, has negatively pressured this indicator. It is
D
expected that at the beginning of the year, this pressure decreases when the activity becomes
T
stable.
B
E
The Financial Debt / EBITDA1 decreased to 1.35x. The combined effect of the EBITDA
increase and the reduction of the financial debt allowed this ratio to decrease by 0.33x at the
end of the year. It should be pointed out that the Group has an average debt duration of 31
months, which is consistent with this ratio, notwithstanding the prepayment of Graña y
Montero S.A.A. corporate bonds, second issue, which were paid off in October 2005.
I
BACKLOG AND PERSPECTIVES
The Group backlog at the end of the year reached US$517 MM, equivalent to 1.94x of
the activity in the last 12 months. From this total, US$258.6 MM were executed in year
2006, US$121.6 MM in 2007 and the balance from 2008 and so forth.
As commented in the previous report, the activity recovery in the 2005 third and fourth
quarters will continue inert due to the backlog to be executed in 2006. Upon completion of this
report, the last one has reached 97% of the activity executed at the end of year 2005, which
allows ensuring that the Group will be able to easily overcome any economic nervousness
arising from the electoral process.