Grana y Montero S.A.A.
Annual Report 2010

Plain-text annual report

BUILDS TALENT ANNUAL REPORT 2010 1 BUILDS TALENT ANNUAL REPORT 2010 3 CONTENTS RESULTS FOR THE FISCAL YEAR Main figures Thousands of Nuevos Soles Constant values As of December 2009 (Projected) Activity Billing Gross Profit Profit before taxes Net profit EBITDA Professionals 2007 2008 2009 2010 Growth % Equivalent Thousands USD 1,529,818 1,439,974 299,027 207,199 129,900 286,607 1,705 1,887,723 1,827,710 399,490 232,985 147,189 372,696 1,947 2,183,233 2,001,475 329,551 227,549 134,401 339,397 2,143 2’660,398 2’502,461 455,584 418,067 273,542 548,451 2,816 21.86% 25.03% 38.24% 83.73% 103.5% 61.60% 31.04% 947,098 890,872 162,187 148,831 97,131 195,248 5. Results for the fiscal year 42. Social responsibility EBITDA by Company 2010 (In thousands of S/.) 6. Letter to the shareholders 64 Historical summary 8 . Strategic development 68. Corporate governance 16. Organization 84. Analysis of results GyM GMP Concessions GMH CONCAR LARCOMAR GMD GMV GMI Total 206,079 122,612 66,053 54,560 31,803 3,727 23,961 27,469 12,187 548,451 37.57% 22.36% 12.04% 9.95% 5.80% 0.68% 4.37% 5.01% 2.22% 100.00% Backlog (In millions of US$ Dollars) 1,883 1,281 720 830 2007 2008 2009 2010 5 LETTER TO THE SHAREHOLDERS JOSÉ GRAÑA MIRÓ QUESADA and MARIO ALVARADO PFLUCKER Dear Shareholders: This is the type of development that we expect in Latin America, However, we are aware that the success achieved and future Similarly, in recognition of the importance we give to our relation- We are pleased to present the Annual Report for the year 2010, tion technology. They are more sophisticated, on-going enginee- of the great team we have formed, especially the more than 2,000 Stock Exchange Key, which is the distinction given by that entity to which shows the best results in our 77 year long history. ring services that add to the shorter-term contracts that we are now engineers. executing abroad, such as the supervision of the Hotel Meliá in the company with the highest score on Good Corporate Governan- ce practices, and we have also been incorporated in the Compa- Last year Peru grew almost 9%, our Group’s activity increased 22%, Playa del Carmen in Mexico or the Pueblo Viejo mining project in In the coming years, research and the development of knowledge nies Circle, a group sponsored by the IFC and composed of the 19 EBITDA 66% and profit grew 103%. the Dominican Republic where we currently have more than 600 within the Group and in relation with the community will be funda- companies with the highest corporate governance in sectors that have great potential, such as energy and informa- growth are based on the professional and personal development ship with our shareholders, in the year 2010 we obtained the Lima Sales closed at the equivalent of 947 million dollars and net pro- provided to our employees and more than 280,000 hours have been fits of 97 million dollars. This level of results had never been seen In Peru, the activity continues to grow rapidly in increasingly large provided to the communities related to our projects. Lastly, we would especially like to thank our customers and emplo- before, even if the extraordinary earnings of 25 million dollars on and complex projects. We have begun the Antapacay and Bambas yees who have made the success achieved possible. Peruvian workers. mental. For this reason, over 209,000 hours of training have been standards in Latin America. the sale of the Larcomar Entertainment Center and the payment large-scale mining projects in a joint venture with Bechtel, we have With a desire to share and foster knowledge in the community received for the expropriation of the company Logística de Hydro- completed the Inter-oceanic Highway, and now we are executing of Peruvian engineers, this year we have created an engineering carbons Boliviana were excluded. the mass-transportation system (Electric Train) project in Lima in a portal that already has more than 10,000 engineers registered and The most important occurrence for the Group in the year 2010 was del Agustino social housing project with 3,200 living units and we search that was awarded for the first time on our 77th anniversary. consortium with Odebrecht. We have delivered the large Parques we have instituted the Graña y Montero award for Engineering Re- the decision to acquire two engineering service firms that will be are beginning the Parques de Comas project to build 9,000 units. the beginning of stable, continuous development in other Latin We have completed the Bayóvar Phosphate Plant, we are building Due to constant concern for our employees’ development, this year American countries. The company TSD was purchased from Tele- the Machu Picchu and Huanza hydroelectric plants, and we have the Graña y Montero Group, composed of its six main companies, fónica and will reinforce the leadership of GMD in digital services recently been awarded the concession for the La Chira Waste has been recognized as a Great Place to Work among large Peru- and its regional development in Latin America. It was also agreed Water Treatment Plant. vian companies where over two thirds of their employees consider to acquire the company CAM from the Endesa Group. CAM, a to be a great place to work. company that specializes in service for the electricity sector, has These projects have increased our portfolio of contracts to be exe- operations in Chile, Peru, Colombia and Brazil, with over 300 mi- cuted by over 47% to the record figure of 1.883 billion dollars, which llion dollars in revenues for the year 2010. enables us to forecast solid growth for the coming years. José Graña Miró Quesada Mario Alvarado Pflucker Chairman Chief Executive Office 7 STRATEGIC DEVELOPMENT 9 DIVERSIFICATION This year it was decided to acquire two companies: TSD, which specializes in the digitization of images, and the Chilean company CAM, which specializes in services for the electricity sector. Additionally, during the year the Larcomar Entertainment Center was sold. These decisions are aligned with our strategy to diversify within our specialty of Engineering Services and now we are developing more steadily in other Latin American countries. Today, what was once a construction company has become a group of 21 companies grouped in 6 operating companies and one infrastructure concessions division GMD, the information technology Services company that has a Technological Operations Center (TOC) for tecnology outsourcing services and has recently acquired the company TSD, which specializes in digitalization of images. GyM is the original construction company that had three divisions: Electromechanics, Civil Works and Buildings. This year it has formed the Mining Services Division split from the Civil Works Division. GMV, the real estate development company that acquired control of Inmobiliaria Almonte this year and launched the GyM Viva brand for its specialization in low-income housing. GMI, the engineering consulting firm that has a subsidiary that specializes in environmental engineering, called ECOTEC. GMP, which is the petroleum services company that drills wells, operates two petroleum lots in northern Peru, operates a natural gas fractionation plant in Talara and has incorporated the Consorcio Terminales with Oiltanking of Germany for the operation of fuel terminals in Peru. CONCAR is the company specialized in the maintenance and operation of highways under concession that operates the Norvial, Survial, IIRSA Norte and Canchaque concessions. 11 CONCESSIONS In recent years we have been successful in our objective of ensuring the stability of the Group based on the strategy of obtaining long-term contracts and building capacities to design, build, finance and operate infrastructure concessions. At the end of the year, the company was awarded the concession for the La Chira Waste Water Treatment Plant south of Lima, with which we currently have interest in the following concession companies: Norvial is the company Survial is the company Concesionaria IIRSA Norte Canchaque is the company that has the concession for that has the concession for S.A is the company that has that has the concession Red Vial, which connects the 1st phase of the 750 the concession contract for the Buenos Aires- Ancón with Pativilca in the km Interoceanic Highway for the 980 Km Paita- Canchaque highway. north of Lima. was completed in the first Yurimaguas highway. months of 2010. CONIRSA, is building TGP (Transportadora Consorcio Terminales, a Consorcio La Chira, in sections 2 and 3 of the Inter- de Gas del Peru), is the consortium with Oiltanking a joint venture with the oceanic Highhway to Brazil. contract award winner for of Germany to operate fuel Spanish company, Acciona Camisea construction and storage terminals in Peru, Agua, was awarded the gas transportstion. the Camisea loading dock concession or the La Chira in Pisco and the Nash Waste Water Treatment Plant warehouse and dispatch in south Lima toward the facilities at the Port of end of the year 2010. Matarani. 13 INTERNATIONAL DEVELOPMENT At the end of the year 2010, a fundamental step was taken in our internationalization process with the purchase of the Chilean-based company CAM, which has operations in Colombia, Peru and Brazil, a step that will expand and make more permanent our development abroad. With these operations, the group will have operations in 6 Latin American countries in addition to Peru, through its subsidiaries. GyM is the main contractor for the Pueblo Viejo mining project in the Dominican Republic where over 600 Peruvian technicians and engineers are currently working and recently it was awarded the contract for the management of the Pataquillas mining project in Panama in a joint venture with Canada’s SNC Lavalin. PUEBLO VIEJO MINING PROJECT IN THE DOMINICAN REPUBLIC GMI is supervising the construction of the new Meliá hotel in Playa del Carmen in Mexico. GMD is providing SAP technological support services for the international operations of the EBEL group and help desk services at the regional level for the mining company Barrick and for Unique. CAM, the company specializing in services for the electricity sector, reported revenues of 300 million dollars annually in Chile, Peru, Colombia and Brazil. 15 ORGANIZATION 17 THE GMD TEAM 1,073 employees We are pleased to present the annual report for the year 2010, which shows the best results obtained in our 26 years of operations. In the year 2010, GMD was able to consolidate its leading position in outsourcing solutions for the corporate market by increasing its activity IT Infrastructure Outsourcing (ITO), Business Process Out- sourcing (BPO) and Help Desk outsourcing. The company’s total activity for the year was US$ 50.28 million, which represents growth of 38% com- pared to the year 2009. Net profits for the year amounted to US$ 2.52 million, with EBITDA of US$ 8.53 million, which represents 73% growth compared to the preceding year. The strategy of seeking business with stable flows has made it possible to consolidate our position and lay the groundwork for solid, steady growth. The revenue from Business Process Outsourcing, IT Infrastructure Outsourcing, Help Desk Outsourcing and Application Outsourcing amounted to US$ 31.51 million, which accounts for 64% of the total activity and represents growth of 35%. The solid results of 2010 have allowed us to invest US$ 8.35 million, of which US$ 3.6 million were for the acquisition of TSD, the company dedicated to the business of digitizing and automating banking processes, and US$ 4.74 million in assets for new Business Process Outsourcing and IT Infrastructure Outsourcing projects for which contracts were awarded to us during the year. As a result of these investments, the backlog increased 99% in relation with the year 2009, reaching US$ 68 million. 19 Undoubtedly, the main reasons we have obtained thee good results the Middle Management Training Program and the creation of are, above all, our employees’ team work and the systemization communities for the purpose of exchanging experiences and infor- of our processes, both of which enabled us to fulfill our contrac- mation, thereby fostering the cultural change necessary to support tual commitments, improve customer satisfaction and, therefore, the knowledge management strategy. increase the company’s activity and profitability. Human resource management was geared toward strengthening the working climate and building skills among middle manage- ment, as well as restoring trust and cooperation between the sup- port and project areas, in both commercial and project execution processes. Part of this plan consisted of launching The following are the main projects on which GMD has worked. INDUSTRY AND COMMERCE SECTOR Minera Barrick: Help Desk Outsourcing at the regional level, 4 countries EBEL: SAP IT Outsourcing and Integrated Commercial System worldwide. Avícola San Fernando: IT Outsourcing of Oracle and Oracle Suite support BACKUS: Outsourcing of Network Equipment Technology REPSOL: Outsourcing of the billing and collection process nationwide, Fuel service and dispatch monitoring, Outsourcing of the Sealing Process ACCENTURE: Outsourcing of Application Development and Maintenance for Telefónica del Peru GOVERNMENT SECTOR ONP (Pension Administration Office): Software Factory Outsourcing, Technological Infrastructure and Help Desk Outsourcing, Document Management and Filing Outsourcing ONPE: Outsourcing of Technological Infrastructure for Municipal and Regional elections at the national level OSINERGMIN: Outsourcing of Supervision of Grievances and Complaints BANKING AND FINANCE AFP Integra: Software Factory Outsourcing AFP Horizonte: Application Development and Maintenance Outsourcing BBVA Continental: Help Desk Outsourcing at the national level, Outsourcing of Classification of checks and promissory notes, and Document Digitation Outsourcing Compañía de Seguros Pacífico: Help Desk Outsourcing at the national level TALENT AT GMD HUGO GONZALEZ JUAN SOTOMAYOR Ingeniero I had the opportunity to join GMD in August 1997 as an intern. At Graña I’ve gained experience and confidence, experiences that have enabled me to be with my family and give them the peace of mind they need. The happiest time of my life was my wedding and then the birth of my child. It really is a new front, a new way of looking at things, really every step I’ve taken has helped me to gain experience and to become the person I am. 21 THE GMI TEAM 687 employees Following the worldwide crisis of 2008-2009, 2010 was a good year for our country’s economy. GDP reached 9%, maintaining its growth trend. Consequently, GMI was able to achieve 33 % growth in rela- tion with 2009, with 33.9 MMUS$ in sales and EBITDA of 4.33 MMUS$. This year GMI signed framework contracts in mining with SHOUGANG and Antamina, in order to provide support on their expansion and on petroleum and gas with COGA (Cía. Operadora de Gas del Amazonas). Shortly before the end of the year, GMI was awarded a framework mining contract with Minera Yanacocha for its investments in 2011, which only confirms our leadership in both sectors. Internationally, we resumed our commercial relationship with Meliá and began supervising work on the Hotel Paradisus Playa del Carmen in Mexico. At GMI we are aware of our employees’ role and that of the use of technology in the execution of our servi ces. For this reason, this year 13,375 hours of internal training have been provided, as well as 8,500 hours of research and application of technologies that have enabled us to work in 3D, incorporat- ing content management to ensure better products in our engineering designs. The success of our growth is based on knowledge management, which is why we will continue op- erating according to our strategy of strengthening our work culture, in which our employees share, socialize, study, conduct research and apply what they learn, seeking to be an organization that GEN- ERATES VALUE for our customers. 23 IN THE YEAR 2010 THE FOLLOWING PROJECTS WERE CARRIED OUT: • Urban Resettlement of the • Supervisory services City of Morococha Project HYDROCARBONS continued on section 5 of for Minera Chinalco. • Supervisory services the Peru – Brazil Southern • Revision of detail, civil remediation at the La OSITRAN continued on environmental Inter-oceanic Highway for MINING SECTOR and mechanical engineering Pampilla Refinery and its • In the mining sector, on the continuation of PAD sales plant for Petroperú • Supervision of works to we continued providing vv vvvvvvv and Horizontal S.A. services under the Extension of Phase III, improve the Line 9, Magnetic Plant for Shougang Hierro Engineering Framework among others for Sociedad • Detail Engineering under Peru S.A.A. Contract with Cía Minera Minera Cerro Verde S.A.A. the Framework Contract Antamina (continuous on RELAPASA investment • Supervision and civil service for over 10 years). • Framework Contract de projects for the La Pampilla and electromechanical • In the mining sector, MINERA YANACOCHA Servicios de ingeniería para Refinery installation, Line 9 San Nicolás Magnetic Plant for we also continued S.R.L. • Under the Engineering Shougang Hierro Peru S.A.A. providing services under Framework Contract, the Topography Framework • Topography inspection of investment projects at the • Supervision of shutdown Contract with Cía Minera works for AKER SOLUTIONS Pisco and Malvinas plants of construction of Ball Antamina(continuous service for over 6 years). BUILDINGS AND INDUSTRY for PLUSPETROL PERU Mill base of substation 9 CORPORATION and electromechanical installation – Line 9-A, San • Detail engineering on Nicolás Magnetic Plant for • Detail engineering on the • 4 years of continuous the construction of two Shougang Hierro Peru S.A.A. Antamina Seepage System industrial cleaning and drilling rigs in Lot 126 for waste management services PETROMINERALES S.A. • Detail engineering on the for Cementos Andino S.A. • Supervision of structures, system for supplying fresh through our subsidiary, • Framework Contract on silos and belts. Shougang water to Yanacancha Ecotec S.A. Engineering Services for Hierro Peru S.A.A. (Antamina) Compañía Operadora de • Detail engineering on the the Peruplast S.A. • Supervision of the container plant for Gas del Amazonas - COGA • Supervisión of change of S.A. magnetic separators for fine grinding at San Nicolás for Debottlenecking Project Center for Distribution INFRASTRUCTURE AND Shougang Hierro Peru S.A.A. in the 3D platform and Warehousing of TRANSPORTATION forSociedad Minera Cerro Miscellaneous Products for • Supervision of work to • Supervision of crusher Verde (SMCV) Supermercados Peruanos improve the Ica-Palpa- maintenance works for S.A. Nazca Highway, Sector Km Shougang Hierro Peru S.A.A. • Detail engineering on the 388- 290 - km 449-+000 Relocation of Tailings • Project Management Cyclones project in the 3D on the remodeling of • Supervision of the • Supervision of repair of laborers’ quarters in San platform for SMCV TELEFONICA DEL PERU construction of the Santa Juan Shougang for Hierro • Detail engineering on the Ica for the Ministry of Health S.A.A. facilities in Surquillo María del Socorro Hospital in Peru S.A.A. Jacking Header Extension • Supervision of the Hotel Project Phase III Paradisus Playa del Carmen in Mexico • Detail engineering on the water recovery system for the Antamina expansion project • Supervision of closure of fabrication, assembly and maintenance work on San Nicolás water tanks for Shougang Hierro TALENT AT GMI DONATO RIVERO JUAN SOTOMAYOR Ingeniero Working at Graña has been a very interesting experience in my life and, throughout my career, it has been most enriching, it can be said, because at Graña you do all kinds of things. Those who work for Graña could work for any transnational company. That is an advantage of working for GMI, especially. What is important to me is being with my daughters, spending time together, having lunch together, going out with them, giving them quality more than quantity of time. Your values should be first in your life; that is the most important thing I can leave my daughters as an example. 25 THE GyM TEAM 11,880 employees In the year 2010, GyM continued its solid growth in the construction market. A new sales record was attained, reaching a total of 621 million dollars that represents 18% growth compared to 2009, as well as record after-tax profits of 36 million dollars, which is a 48% increase in comparison with 2009. These results are based on improvement in our efficiency, having obtained a gross margin greater than 12%, closing the year with a backlog of 1.05 billion dollars, which guarantees the company’s development in the coming years. In the mining area, the obtention of the contract with Xtrata del Peru on the new Antapaccay Concentra- tor Plant should be noted. This project will be carried out in a joint venture with the North American company, Bechtel. During the year, we have continued the works on the Pueblo Viejo mining project in the Dominican Republic and we have begun the preliminary works for our customer, the Conga mine located in Cajamarca. In December, we signed an engineering, procurement and construction contract with Xtrata for the development of the new Fuerabamba settlement, which is the beginning of the Las Bambas mining project. In the energy sector, we are currently executing projects to expand the Machu Picchu Hydroelectric Plant and the Huanza Hydroelectric Plant and in December we signed an EPC contract with Calidda on the construction of 40 additional kilometers of pipeline for transporting gas within the city of Lima. 27 In the building sector, we have had very significant growth; in the Aware that knowledge is the pillar that has enabled GyM to thrive first months of 2011 we will complete the new over time, consolidating its position as the leading construction Banco de Crédito building in Chorrillos and the Westin Lima Hotel. company in the sector, during the year 2010 the decision was Over the course of the year, we obtained very important contracts, made to maximize knowledge management, fostering the “Learn such as the execution of the Gran Teatro Nacional (theater), the to Grow” program as the Key to Future Growth. expansion of the San Felipe Clinic, and an institutional building for Universidad del GyM’s great team, which now comprises 921 engineers and more Pacífico. During the year, construction was completed on 3,200 than 11,000 laborers. Due to their dedication, commitment and ef- housing units in the Los Parques del Agustino project and con- fort, we have been able to execute a great diversity of projects, both struction began on the shopping center for the same project. Con- in Peru and abroad, with great success. It would not have been possilble to obtain these results without struction also began on the Los Parques de Carabayllo and Los Paqrues de Comas social housing projects with 1,200 and 9,000 units respectively. MAJOR PROJECTS INFRASTRUCTURE AND HOTEL IBIS ExPLOSIVE STORAGE 2010 INDUSTRY Electric Train Hotel with 250 guestrooms Magazines Phase 1 in Miraflores Installation of the electronic Construction of the Electric GRAN TEATRO NACIONAL security system for 07 of MINING Train, Villa El Salvador - Av. First multifunctional theater: the army’s ammunition PUEBLO VIEJO Grau stretch to put Peru on the map magazines Project in the Dominican of major performing arts Republic. Civil works: AREQUIPA presentations. ENERGY, GAS AND 40,000 m3 of concrete in the Potable Water Treatment 1500-person capacity PETROLEUM concentrador, assembly of Plant Intake, 11 km pipeline Egemsa the north zone and primary and 1.5 m3/s potable water CLARO CORPORATE Expansion of the Machu crusher treatment plant BUILDING Picchu 99 MW Hydroelectric New 7-story, 5,549 m2 Plant ANTAPACAY PARIACHI headquarters building in Earth movement and Expansion and improvement Santa Catalina, La Victoria EMPRESA DE concentrator plant of the potable water and GENERACIóN HUANzA sewer system Esquema TELECOMUNICACIONES S.A. SHOUGANG - MARCONA Pariachi, La Gloria, San CETAC Servicios Huanza - 90.6 MW Renewal of the mining Juan, Horacio Zevallos Construction, equipping Hydroelectric Plant contract CONGA Access roads and camps and annexes. 9,500 and commissioning of potable water and sewer the army’s Centro de connections Entrenamiento Táctico y Computarizado (CETAC) BUILDINGS training center ANTAMINA Hotel Westin Libertador Electromechanical assembly Hotel with 303 guestrooms for the concentrator in San Isidro expansion TALENT AT GyM MAGGIE MATSUDA JUAN SOTOMAYOR Ingeniero I joined the Group through GML, which was the construction company in Lima. I think that working in a group to seek solutions is best and I think that Graña is always willing to listen to you. Sometimes we go on family outings and other times I accompany my husband in the auto racing activities that he likes; I’m his co-pilot. Life has its problems; it also brings joy, but you have to know how to land on your feet, especially emotionally. 29 THE GMP TEAM 406 employees The year 2010 was the year that GMP S.A. had the best results in its 26 years of history. These results were possible due to the recovery of international crude prices, increased domestic fuel consumption, the sale of energy to Ecuador during the summer and the extraordinary income from payment for the expropriation of the company Logística de Hydrocarbons Boliviana. It should be noted that 2010 was a year in which many of our company’s records were broken with regard to the volume of crude produced, development wells drilled in our lots and volume of products dispatched from the fuel terminals. At the beginning of 2010, in a joint venture with Oiltanking of Germany, we renewed the contract on the operation of the Camisea Marine Terminal for 5 more years and we obtained the contract for the opera- tion and maintenance of the Pure Biofuels 600,000-barrel capacity fuel terminal located in Ventanilla. In the month of December we received payment for the expropriation of the company Logística de Hydrocarbons Boliviana following nearly 5 years of negotiations with the Bolivian government. In line with the knowledge management that the group fosters, we have invested 21,832 hours of train- ing in our personnel, which is 55 hours per person, and we obtained a 73% satisfaction level among our workers on the annual Great Place to Work survey. 31 TALENT AT GMP AYDA CASTRO JUAN SOTOMAYOR Ingeniero Exploration / Production Talara Gas Plant Oiltanking Andina Oiltanking Andina S.A.C Thirteen development wells The gas plant in Pariñas Services In the operations At the Pure Biofuels were drilled in Lots I and processed 10.8 BSCF of of the Terminal, 159.3 thousand V with an investment of natural gas, equivalent Camisea Marine Terminal barrels of diesel were almost US$ 9.5 MM, and to an average of 29.66 (Pisco), 118 ships were dispatched during the year 436,493 barrels of crude MMSCFD and production of loaded with a total of 2,723 2010. When I joined GyM, I went to work at a construction site where the Santa Rosa housing project was underway. It was quite an experience, but I got used to it gradually. New companies were formed and I began working for GMP. I think I turn into a housewife when it comes to gardening. I love plants. On the weekends, I get away from Lima; we have a small house in Lunahuanà and we always have company there. were produced, which is the liquids was 423,827 thousand tons of propane highest annual production barrels (75% GLP and 25% (C3), butane (C4), low-sulfur level in the history of GMP HAS - saturated acyclic diesel (MDBS) and Nafta. S.A.. as well as 8 MMSCF of hydrocarbons) natural gas. Logística de Químicos del Consorcio Terminales Sur Drilling The consortium comprised At the Químicos Terminal in Thirty-six oil and gas wells of GMP and Oiltanking Matarani, 11 ships arrived were drilled in northeastern dispatched an average of and 27.9 thousand tons of Peru with a total depth of 70,154 barrels per day of sodium hydrosulfide (NaSH) 171,600 feet and 2 water products from its 9 terminals were dispatched in 996 injection wells were drilled in and the storage volume tankers. the jungle. rented by our users was 1.907 MM barrels. 33 THE GMV TEAM 81 employees Macroeconomic stability and easy access to mortgage loans during the year 2010 created a very healthy framework for the development of the real estate business in the country. During 2010 we maintained our strategy of developing projects geared toward the most neglected segments, while taking full advantage of the synergies between GyM and us, achieving advantages in terms of cost, speed and quality. During 2010, our projects geared toward high-end segments continued through our GMV brand, while projects in social sectors were executed through our Viva brand. At GMV, sales and handovers con- tinued in relation with Golf Millenium, Javier Prado 200 and Neo 10. In Viva, sales and handovers con- tinued in relation with Los Parques de El Agustino, reaching a sales record of 250 units in the month of March. In Parque Central Club Residencial, in the year 2010, 500 apartments were sold and 293 units were sold in Parque Garezón. A total of 2,021 units were handed over in all of our projects during 2010, resulting in total activity of US$ 89.8 million dollars and 48% growth in relation with 2009. In line with the strategy outlined for GMV, during 2010 we bought large areas of land for the purpose of consolidating our position in the market as the leading company in the real estate market. In the month of July, in a public call for tenders, we were awarded the contract on the sale of land that was part of the San Martín army base in Miraflores. On this 68,000 m² piece of land, we plan to carry out a world 35 class project for combined use. The project will have housing unit, Additionally, during 2010 offices, a shopping center, a 5-star hotel and a convention center. our Social Accompaniment Program continued successfully with Following several months of arduous work, the purchase of the our customers in Los Parques de El Agustino and with our cus- land where the former Collique airport was located took place. tomers in Parque Central Club Residencial, obtaining a TTB rating This project, Los Parques de Comas, will be executed on 32 Ha of (total number of workers benefited) of 80% in a satisfaction survey land and will have 9,880 apartments. taken among our customers. In Carabayllo we have purchased a 9.5 Ha piece of land where we will build 1,200 apartments and, lastly, in Villa el Salvador Lastly, in relation with our Learn to Grow program, throughout the 23,700 m² of land was purchased for a 670-apartment project. year 2010 a large number of professionals have participated in internal training sessions, external training, internal teaching, the With all of these lands, we have a total of 15,000 real estate units knowledge portal, the Real Estate Management Manual, etc. to develop in the coming years. Additionally, in the year 2010 we obtained a controlling interest in Inmobiliaria Almonte, a company that owns more than 1000 Ha in Lurín and San Bartolo, with our long-term development in mind. TALENT AT GMV ERIKA PASTOR JUAN SOTOMAYOR Ingeniero I’ve worked for Graña for 13 years and I feel that it has greatly enriched my life in every sense. It has been with me throughout my growth process, the day to day struggle, so that the family progresses; achieving balance between family life and work, which is difficult. 37 THE GyM TEAM 1,964 employees The country’s growth over the past year generated greater investment in highway infrastructure, espe- cially in the task of recuperating and maintaining existing roads. Concar participated actively, increas- ing its billing by more than 70% and improving profits by 32% compared to the preceding year. Concar’s sales exceeded US$ 50 million dollars, mainly due to a contract award obtained early in the year for the preservation of the Bappo, La Merced, Sullana and Icapal roads in a call for tenders by the Ministry of Transportation for the purpose of maintaining these sections of roads for a 5-year period. Winning the contract on these new projects gave our organization the responsibility of keeping 1,300.78 Km of roads in perfect operating condition, in addition to the 3,125.56 Km that we already had, making a total of 4,426.34 km of highways under our responsibility in Peru. This gave rise to significant growth in the number of people composing the Concar team, which cur- rently includes over 1,900 workers. 39 TALENT AT CONCAR During the year, great efforts were made to implement the CAE For the year 2011, the Ministry of Transportation and Communi- (Emergency Service Switchboards) in all of our projects, devel- cation plans to outsource the maintenance of several stretches of oping an information system entirely designed by CONCAR that highways for 5 to 10 year periods, in which we intend to participate enables us to respond more quickly to emergencies on the road, actively. as well as to provide adequate management of information stored systematically, which in turn facilitates better decision making, with The following chart shows the highway operation and maintenance the objective of having a centralized system in our main office in projects on which we were working as of December 31, December Lima with which it is possible to monitor all of our operations. 2010. MARIA ALEJANDRA HUANQUI JUAN SOTOMAYOR Ingeniero Highway Section Ancon - Huacho – Pativilca Paita – Yurimaguas San Juan de Marcona – Urcos Tacna - La Concordia, Palca, Tarata, Pte Camiara, Ilo Ayacucho - Pte Sahuinto Limite Regional Lambayeque - Dv Bayovar, Olmos Dv Buenos Aires – Canchaque Dv Bayovar - Piura, Pto Bayovar – Piura Piura - Aguas Verdes, Sullana – Macara 1 2 3 4 5 6 7 8 9 10 Dv Las Vegas - Tarma - La Merced – Satipo 11 Ica - Palpa - Nazca – Atico  Total Length (Km) 285.66 955.00 758.00 399.00 384.50 261.66 78.00 253.00 437.74 234.00 379.78 4,426.34 I began working for the company in September of 2003. It was in Arequipa in the construction of the Arequipa – Matarani road. It is a company that has 4.000 km of roads. Knowing the context of each project or being in contact with the workers enables us to do a better job. I’m a bit of a mother hen taking care of her chicks. That is what fills me with pride, my children, seeing that they are good kids who want to get ahead like their parents. Despite everything, they are there with us pushing this little car that is our family. 41   SOCIAL RESPONSIBILITY 43 SOCIAL RESPONSIBILITY Our organization’s high level of growth along with the best outcomes in its history are the result of a recognized company history guided by its corporate values of quality, seriousness, reliability and efficiency. THE PORTAL ALSO MAKES IT POSSIBLE TO CARRY OUT DEVELOPMENT ACTIVITIES WITH THE CIP. In addition to the company’s “Learn to Grow” strategy that allows The “Espacio Azul” (Blue Space) civil association, a non-profit en- to gather, systematize and share knowledge that its employees tity pertaining to Graña y Montero, supports and assists with CSR generate in its operations, giving it considerable competitive ad- actions in companies in the Group and others of a philanthropic na- vantages, on the external front the organization now has its “Grow ture, in which employees participate as an organized group called and Share” strategy for the purpose of reaching beyond the organi- “Graña y Montero Volunteers”. zation itself, generating and sharing knowledge to fulfill the expec- tations of its different stake-holders and fostering the development These social responsibility actions and initiatives, as well as oth- of a new culture centered on knowledge. ers detailed in subsequent sections of this report, are included For this reason, in the year 2010 a new set of actions related to the been the subject of studies and recognition by institutions such as development and promotion of value-generating spaces and links Universidad del Pacífico, which included Graña y Montero’s CSR with the country’s engineering community have been added to the practices in its book “Experiencias Exitosas de RSE” (Successful in our annual report to the United Nations’ World Pact and have regular programs such as “Developing Job Skills in the Areas of In- CSR Experiences). fluence”. The development of the Engineering Portal, the Graña y Montero Award for Peruvian Engineering Research, the develop- Currently, the organization’s high level of local and international ment of special training programs for new engineering graduates growth, the professional and personal development of its more at the national level, the signing of agreements with the UNI (Na- than 16,000 employees including over 2,000 engineers, have be- tional Engineering University) on conducting applied engineering come a key focus of action for successfully taking on future chal- research are examples of a CSR policy aligned with education and lenges in its organizational development through human resource its strategic objective of Knowledge Management. management policies and programs geared toward the formation of highly motivated, high-performance teams, for their own benefit, as well as that of their families and the company. 45 HUMAN RESOURCE MANAGEMENT The Group’s considerable growth has entailed an increase in the number of employees, totaling 16,158; that is, an increase of 21.11 % compared to 31 /12/09. The group of professional employees has grown by 31.4 %, totaling 2,816, among which 2,061 engineers in different specialties stand out. This number has risen 31.02% in relation with 31.12.09. It is a young, professional organization in which 74.73% of its employees are 40 years of age or less. REPRESENTATIVES OF THE GRAÑA Y MONTERO GROUP WITH THE CERTIFICATE RECEIVED AT THE “GREAT PLACE TO WORK” AWARD CEREMONY This growth was accompanied by human resource management in line with the challenges posed by an organization growing domestically and internationally, facing growing standards of competitiveness and specialization, and creating greater opportunities for its employees’ personal and professional growth. In response, programs for the identification of talent as reference sources for the different business specialties, as well as coaching and mentoring programs for different groups of profession- als, have been implemented. Virtual knowledge forums have been established, and knowledge and professional development maps have been prepared and disseminated, among other actions. For these reasons, in the measurement of the working climate conducted in 2010 by the Great Place to Work Institute, the Graña y Montero Group, composed of its six main companies, was recognized among the large Peruvian companies that over two thirds of their employees consider to be a great place to work. Because we are an engineering service organization that has the valuable contribution of 2,061 engi- neers and knowledge management as a guiding principle of its strategic development, training activi- ties continued increasing in coordination with our Corporate Learning Center (CLC). 47 YEAR-END CELEBRATION In the different programs run by the CLC, 209,203 hours of training The promotion of employees’ artistic talent has been noted at differ- have been offered, which is an increase of 10.63% over the number ent gatherings to promote camaraderie that have been organized Educational statistics of hours recorded as of 12/31/09. The startup of the third internal in the companies, reflecting joy and identity in relation with them, No. of Individuals as of 12/31/10 G&M S.A.A. GyM GMV GMD GMP GMI CONCAR Total Specialization Program for Project Managers, taught jointly with which are key factors in continuing to face the challenges of growth the Universidad de Piura’s Senior Management Program (PAD), with enthusiasm and professional responsibility. in which 43 engineers from the different companies in the Group In conjuction with the human resource management of laborers, participate, merits special mention. a database including over 50,000 laborers was created and more than 10,000 laborers were recruited during the year 2010. Among the different activities carried out in order to achieve an organizational culture that promotes communication, creativity and integration, internal channels of communication have been in- creased through the use of a number of physical and virtual publi- cations and portals. A mid-year internal corporate communication campaign whose slogan was “Graña y Montero: Peruvians build- ing Peru”, established an emotional link of pride and identification between the projects executed by the company and employees’ personal and family achievements. Employees on Subsidiaries’ Payrolls Engineers / Architects with Master’s Degrees Other Professionals with Master’s Degrees Engineering / Architecture Professionals Other Professionals Total Professionals Technicians Total Employees on Subsidiaries’ Payrolls Laborers Skilled Laborers Non-skilled Laborers Subcontractors’ Laborers Total 25 20 5 11 61 6 67 - - - - 55 8 866 448 1,377 241 1,618 4,180 4,446 1,540 10,166 Total Personal 67 11,784 Interns Independent Professionals Total Grand Total - - - 90 6 96 67 11,880 10 1 21 18 50 21 71 - - - - 71 8 2 10 81 8 17 453 72 550 487 1,037 - - - - 20 3 81 33 137 259 396 - - - - 3 6 370 70 449 147 596 - 57 - 57 20 1 141 56 124 1,920 47 699 192 2,816 1,769 2,930 1,961 5,746 - - - - 4,180 4,503 1,540 10,223 1,037 396 653 1,961 15,969 36 - 36 9 1 10 1 33 34 3 - 3 147 42 189 1,073 406 687 1,964 16,158 49 Age Distribution No. of employees as of 31.12.10 G&M S.A.A. GyM GMV GMD GMP GMI CONCAR Under 20 From 20 to 30 From 31 to 40 From 41 to 50 From 51 to 60 From 61 to 65 Over 66 Total - 7 19 28 10 2 1 67 - 743 483 223 130 27 12 1,618 - 28 27 14 2 - - 71 - 430 488 90 28 - 1 1,037 - 82 83 90 107 27 7 396 2 198 217 95 62 12 10 25 773 689 339 120 13 2 Total 27 2,261 2,006 879 459 81 33 596 1,961 5,746 Population Statistics Hiring Scheme Statistics 2009 - 2010 No. of Individuals as of 31.12.10 G&M S.A.A. GyM GMV GMD GMP GMI CONCAR Total Organization Headquarters Projects Total Gender Male Female Total Herarchy Senior Management Employees interns Independent Professionals Laborers Total 67 - 67 49 18 67 37 30 - - - 67 367 1,251 1,618 1,252 366 1,618 7 1,611 90 6 10,166 11,880 43 28 71 33 38 71 - 71 8 2 - 81 196 841 1,037 736 301 1,037 3 1,034 36 - 69 327 396 357 39 396 5 391 9 1 - 1,073 406 294 302 596 507 89 596 6 590 1 33 57 687 31 1,930 1,961 1,776 185 1,961 1 1,960 3 - - 1,964 1,067 4,679 5,746 4,710 1,036 5,746 59 5,687 147 42 10,223 16,158 L A T O T . 0 1 2 1 1 3 . 1,213 4,533 No. of Individuals as of 31.12.10 . . . A A S M & G . 9 0 2 1 1 3 . Type of Employment Contract . . . A A S M & G . 0 1 2 1 1 3 . M y G . 9 0 2 1 1 3 . M y G . 0 1 2 1 1 3 . V M G . 9 0 2 1 1 3 . D M G V M G . 0 1 2 1 1 3 . . 9 0 2 1 1 3 . P M G D M G . 0 1 2 1 1 3 . . 9 0 2 1 1 3 . I M G P M G . 0 1 2 1 1 3 . . 9 0 2 1 1 3 . I M G . 0 1 2 1 1 3 . R A C N O C . 9 0 2 1 1 3 . L A T O T . 0 1 2 1 1 3 . R A C N O C . 9 0 2 1 1 3 . Total Empoyees 50 67 1,209 1,618 Laborers - Common System 50 67 278 433 9 26 251 288 228 237 38 92 64 70 - - 931 1,185 45 679 749 131 159 379 504 1,106 1,891 54 63 - - - 71 930 1,037 359 396 417 596 1,170 1,961 5,746 - - - - - - - - - - - - - - - - - - 56 57 - - 56 57 - - - - - - - - - - 1,151 1,215 5,580 7,468 6,731 8,683 - - - - - - - 1,095 1,158 - 5,580 7,468 - 6,675 8,626 Employees Permanent Employees Temporary Employees Permanent Laborers Temporary Laborers Special Civ. Cons. Sys. (Temporary) Total Laborers Total Employees and Laborers 50 67 7,884 10,244 63 71 930 1,037 359 396 473 653 1,170 1,961 10,929 14,429 51 PREVENTION AND ENVIRONMENT At Graña y Montero, the consolidation of an integrated management system for risk prevention and the environment has implied the development of a preventive culture supported daily by internal specialized training, proper tools and equipment and, fundamentally, continuous encouragement of safe conduct in our operations. During 2010, Behavior-Based Safety (BBS) has been incorporated Our performance indicators are unequivocal evidence that we are as a key tool in the Operating Risk Management System aimed at on the right path. Over the last two years, Frequency Index (FI) has turning unsafe behaviors into safe behaviors, identifying critical be- remained below 0.60 (OSHA), the number of hours of safety and haviors, designing safe conducts and monitoring our workers’ per- environmental training total 872,293, and the investment in person- formance on the job. The progress and results already obtained al and collective protection equipment is approximately US$ 6.5M. on works such as Poracota and Orcopampa, where it has been These results are objective support for the trust that our employees possible to increase safe behaviors 13% in rock clearing and sup- and customers place in us and they enable us to pursue the growth port activities, enable us to continue innovating and applying this of our operations with safety. methodology in other important works such as Lot 1AB (Andoas), Our preventive culture is a source of value and a sign of our unfail- Lot 8 (Trompeteros), the Marcona Mine, the National Theater and ing commitment to our employees, customers and society. structural assembly at Antamina. 53 KNOWLEDGE MANAGEMENT In the year 2010 the General Managers and their Human Resource In this manner, internal instructors become reference sources on Management teams consolidated Knowledge Management as a topics covered in the courses they teach. strategic line of action for the Group’s human resource develop- ment. As part of this process, they met in the month of August In the execution of the “Learn to Grow” strategy, 90.4 % of the ob- to evaluate the progress achieved on the implementation of the jectives established were achieved, among which the increase in model and to analyze the results of the qualitative study conducted motivation and commitment among professionals from the differ- Professional Development at each company on its employees’ perception of the training re- ent companies to the great cultural change that the development of ceived and its effect on working climate measurements. This ex- Knowledge Management entails stands out. ercise has made it posible to review and optimize the development of future training plans within the Knowledge Management model. Toward the end of the year, the Board of Directors approved the A total of 209,203 hours of training have been provided, which is ture of knowledge and its central role in the development and time- 15% more than the goal for the year, obtaining a ratio of 41.2 man ly allocation of professional talent demanded by the challenges hours per employee. The ratio is slightly lower than that of the presented by the growth of the companies in the Group. creation of CLC Management to foster the development of a cul- preceding year, due to the significant increase in personnel in the companies, which exceeded the number initially planned by 20%. In the exercise of internal teaching, the key activity for the devel- opment of knowledge in the organization, 41,117 hours have been taught, which is an increase of 69% of the total hours of internal training. Collective Memory External Training Grand Total Avg. Monthly Number of Employees Hours of Training / Employees Risk prevention and Environmental Management - Laborers OUR KNOWLEDGE MANAGEMENT APPROACH IS PERSONIFIED IN THESE INTERNAL INSTRUCTORS Training in the year 2010 Description Training Basic Program - Young Engineers G&M S.A.A. GyM GMV GMD GMP GMI CONCAR Total 22 19,517 - 3,508 2,211 114 903 26,275 224 277 523 12,128 1,132 28,970 61,747 612 140 3,931 4,683 14,686 1,418 18,798 38,410 12,680 2,906 17,797 7,690 255 13,774 21,933 56,136 104,156 7,171 2,945 75,827 64,210 209,203 60 1,383 68 980 587 379 1,622 5,078 8.7 44.7 69.4 39.2 30.3 57.6 39.6 41.2 775,253 38,199 15,141 29,016 43,700 872,293 55 COMMUNITY RELATIONS JOSÉ GRAÑA MIRÓ QUESADA BESTOWS THE FIRST AWARD FOR PERUVIAN ENGINEERING RESEARCH During 2010, the development and implementation of CSR plans in The consolidation of the “Capacities Building in the Areas of Influ- Reinforcing support for the professional engineering community, the different projects continued to be a line of action in the “Grow ence” program has continued. In the year 2010, more than 3,500 in the month of June the Engineering Portal (www.portaldeingenie- and Share” strategy that seeks to go beyond our own organization, residents of the areas surrounding the projects have been trained ria.com), was launched for the purpose of promoting the dissemi- generating and sharing knowledge in the different communities and the new “Program for Social Accompaniment in Social Hous- nation of knowledge and interaction among all members of the associated with our operation, driving the development of positive ing Projects” has been implemented. This program is aimed at community (companies, universities, research centers, industry leadership that generates welfare and the development of a culture promoting a new urban lifestyle respectful of people’s rights and associations, professional associations, etc.). This social/profes- of progress centered on knowledge. supportive of harmonious community relations. A total of 3,718 sional network now has over 10,000 registered users in its first 06 Our different CSR activities have benefited more than 116,000 ums and the Parque Central condominiums in downtown Lima communication capable of benefiting each user and contributing owners of real estate in the Los Parques del Agustino condomini- months of existence and is expected to be an interactive means of people in every region of the country and in our Pueblo Viejo proj- have been trained. ect in the Dominican Republic, offering 289,574 man hours in train- ing activities, which is 37.86% growth in comparison with the num- In relation with the scientific and university community, the “Graña to the development of a culture of cooperation in the community. ber of hours taught in the preceding year. y Montero Award for Peruvian Engineering Research” has been SURVIAL published a guide titled “Aventura 757: La Ruta SURVIAL” The team of professionals in charge of CSR activities has more 2010 and the immediate announcement of its second edition. With development of the route through tourism for the benefit of users than 40 members, including professionals in social sciences, such the Universidad Nacional de Ingeniería (National Engineering and communities in the area. An award was received for this ini- as anthropologists, sociologists, social communicators and social University) the agreements to support the development of applied tiative in the Communication category of the “Business Creativity institutionalized through the first awards ceremony held in June (Adventure 757: The SURVIAL Route) intended to foster economic workers. All of them work to develop and maintain positive rela- research in project engineering have continued and the study on 2010” contest. tions with the different communities with ties to our operations. self-construction in outlying areas was completed. The following is a summary of the most significant CSR actions carried out in the different geographic areas where the different companies in the Graña y Montero Group operate: Business Creativity Award 2010, in the Communication category 57 Social Responsibility Projects INITIATIVE Educational talks geared toward improving relationships parents and children, 517 hours of training Events and donations to celebrate Christmas in the communities of the different projects, 4,882 beneficiaries Support with philanthropic donations to the firefighters, educational entities, police entities, private entities, religious groups, NGO’s, the armed forces, Instituto de Trabajo y Familia (Work and Family Institute), local governments, suppliers, art and culture. Social welfare campaigns and good housing conditions for local residents Environmental awareness-raising campaign for Earth Day TARGET GROUP DIRECTLY BENEFITED PLACE Residents if the towns of Condorcocha and Carpapata Tarma - Junín Moquegua, Cusco, Abancay, Ayacucho, Piura and Lima Piura, Lima, Puno, Loreto, Ancash, Lambayeque, La Libertad, Ayacucho, Arequipa and Cajarmarca Pasco, Arequipa, Ayacucho and Piura Pasco, Piura and Loreto Children in the different communities where the projects are located Fire department, schools, “Sembrando” (Sowing) program, Peruvian National Police, symphonic orchestra, Peruvian Navy and related communities Local laborers and relatives living in the area of influence of the projects Community of Colquijirca, Tinyahuarco, Pasco; La Calera school, San Pablo, Negritos, Piura and residents of the town of Andoas, Loreto Training program for teachers to improve primary education Capacity-building program for insertion in the labor market - Direct training, 2878 beneficiaries and 132,518 man hours of training Waste water treatment for domestic use program Visits by students to see the operations of Consorcios Terminales Training related to developing self-esteem and identity Teachers at schools Arequipa located in the areas of influence of the petroleum storage terminals Local residents of the areas of influence of the projects Arequipa Ayacucho, Arequipa, Cusco, Lima, Pasco, Lambayeque, La Libertad and Lima Communities located in areas adjacent to the projects Piura and Ancash Grade school through high school studentnts in the areas near the petroleum storage terminals Ica, Arequipa, Lima, La Libertad and Chiclayo Arequipa, Junin, Lima High school seniors, parents and women of the communities located in the areas of influence of the projects 59 Training on safety and security Local residents of the areas of influence of the projects Piura, Pasco and Loreto Establishment of opportunities for dialogue with customers Local residents of the areas of influence of the projects Arequipa Developing job skills program in the areas of influence – Indirect training. 605 beneficiaries and 28,654 man hours of training Local residents of the areas of influence of the projects Cajamarca, Arequipa, Ica, Pasco, Piura, Callao and Lima Training on environmental protection and the environmental impact of operations in the areas of incluence Several training sessions on health, psychological and sex education University students, schools, customers, relatives of employees and the community in general Ancash, Lima, Arequipa, Cusco, Junín, Loreto, Pasco, Piura and República Dominicana University students, schools, customers, relatives of employees and the community in general Ica, Ancash, Junín and Lima Continuous dialogue with local and communal authorities different areas of Influence Local residents of the areas of influence of the projects Ica, Arequipa, Lima and Pasco Orientation talks and description of projects Local residents of the areas of influence of the projects Piura Preparation and dissemination of Survial Guide to promote local tourism Communities neighboring the Survial highway concession Ayacucho - Cusco Programs and cleanup campaigns to protect the environment Hazardous material and substance management program Improvement in education infrastructure Improvement in infrastructure to support environmental protection and mitigate the impacts of the operations Environmental monitoring programs to prevent pollution Communities neighboring the Survial highway concession Cajamarca, Pasco, Arequipa, Piura, Lima and República Dominicana Local residents of the areas of influence of the projects Ica, Cusco, Lima and República Dominicana Schools located in the areas of influence of the projects Piura and Lima Communities adjacent to the areas of influence of the project Communities adjacent to the areas of influence of the projects Pasco, Piura, Arequipa and Ancash Pasco, Arequipa, Piura and Lima 61 Program for entrepreneurial women Vocational Orientation and Life Plan Program geared toward young people and adolescents Disaster prevention program; spill, earthquake, tsunami and flood drills Social Accompaniment Program: Leader training in order to form communities of healthy homes, 3,718 beneficiaries Traffic safety, civic and highway cleaning programs Waste Management Program: collection and elimination Women of the communities adjacent to the areas of influence of the projects Young people and adolescents living in the areas of influence of the projects Junín, Piura, Arequipa, Ica and Lima Lima and Piura Empoyees and commnities in the areas of influence of the projetcs Moquegua, Ica, La Libertad, Lima, Ancash, Chiclayo, Pasco Residents of the social housing condominium built by GMV Children and adolescents in the schools located in the areas near the highways maintained by Concar Communities located in the areas surrounding the projects El Agustino/Cercado - Lima Junín, Piura, Ayacucho, Cusco, Lima, Tarapoto, Amazonas and Pasco Pasco, Ica, Lima, Arequipa, Piura and the Dominican Republic Environmental programs and good environmental practices in the projects and offices Communities adjacent to the areas of influence of the projects Pasco, Ica, Ancash and Lima Health campaigns and programs Graña y Montero Volunteering Program: Christmas activities, cold weather relief campaign, pre-fabricated construction of PRONEI (non-formal early childhood education facility) in Lurín and tree planting at children’s shelter Piura, Lima and Arequipa Puno and Lima Children and adolescents in the schools located in the areas of influence of the projects Children of PRONEl Corazón Lima de Jesús, the Santa María Reyna school in Vila el Salvador the Padre Iluminato shelter communities high in the Andes with respiratory problems victims of the Haiti earthquake and Cusco floods Program to rescue endangered species, rescuing the Hualtaco Participation in hadicraft fairs in towns to support productive workshops in the La Arena project Communities near the areas of influence of the projects Talara - Piura Communities located in the areas adjacent to the La Arena project Sánchez Carrión - La Libertad 63 HISTORICAL SUMMARY 65 HISTORICAL SUMMARY Graña y Montero was founded 77 years ago on June 22, 1933 under the name of GRAMONVEL by engineers Carlos Graña Elizalde, Alejandro Graña Garland and Carlos Montero Bernales. It was a construction company until the year 1949 when it merged with Morris y Montero to acquire capacity for the execution of paving and earth moving works under the new name of Graña y Montero. 1937 - BAÑOS MUNICIPALES DE MIRAFLORES In those times it participated in the country’s major infrastructure In the 1990s, Graña y Montero participated actively in the Peruvian works, such as the Southern Pan-American Highway, El Pato Air privatization process as Telefónica’s local partner in Telefónica del Base for the United States government and the city of Talara, and Peru, as ENDESA’s partner in Empresa de Generación built some of Lima’s most emblematic buildings, such as the Min- Eléctrica de Lima, and REPSOL’s in the La Pampilla Refinery. istry of Economy and the Ministry of Labor. In the 1950s, it formed Consorcio de Ingenieros Contratistas Ge- ticipate in the infrastructure concession program, which has led nerales S.A. to execute more complex projects, such as the Cañón to participation in the majority of the contracts and the operation of del Pato Hydroelectric Plant, the Steel Mill in Chimbote and the over 4,000 Km of highways today through its subsidiary, CONCAR runway for Lima’s Jorge Chávez Airport. S.A. In recent years, Graña y Montero was the first company to par- Subsequently, it concentrated its growth on large-scale projects It has also led the expansion low income housing with the execu- such as the Cuajone and Cerro Verde mines, the Shell, Mobil and tion of megaprojects through its subsidiary, GMV, which began its Occidental petroleum projects, and the Chavimochic and Chin- operations on January 1, 2009. ecas irrigation projects. Upon the celebration of its 50th anniversary in 1983, the Strategic pany in its field listed on the Lima Stock Exchange, it is the clear Diversification Plan was launched, leading to the formation of GMP, leader in the country’s engineering and infrastructure sector and the petroleum service company; GMD, the information technology it has activities in 6 other Latin American countries in addition to Currently, the Group has 2,061 engineers, and it is the only com- service company; and GMI, the engineering consulting company. Peru. These companies were the origin of what is now the Graña y Mon- tero Group. 67 CORPORATE GOVERNANCE 69 CORPORATE GOVERNANCE Board of Directors The year 2010 was a very important year for Graña y Montero with regard to corporate governance. We not only obtained the Lima Stock Exchange Key for the second year in a row; we were also invited to join the Companies Circle, a select group of 19 Latin American companies with high corporate governance standards. The Companies Circle pertains to the Latin American Corporate Governance Roundtable, which was formed in May 2005 in Sao Paulo, Brazil, with support from the OECD, the International Finance Corporation (IFC) and the Global Governance Forum. The purpose of this group of companies is to share our experiences, as well as the benefits that incorporating good corporate governance practices has brought to our companies, and to promote their adoption by other private-sector companies in Latin America. José Graña Miró Quesada Chairman Carlos Montero Graña Vice-Chairman Hernando Graña Acuña Internal Director Mario Alvarado Pflucker Internal Director-CEO Chief Executive Officer Augusto Baertl Montori Independent External Director José Chlimper Ackerman Independent External Director Roberto Abusada Salah Independent External Director José Antonio Colomer Guiu Independent External Director Teodoro E. Harmsen Gómez de la Torre External Director 7171 Profile of the Board of Directors José Graña Miró Quesada José Antonio Colomer Guiu Chairman of the Board of Directors since August of 1996. Architect. Additionally, he is the Chairman of the Board of Directors of subsidiaries Director since March 2009. Certificate in Corporate Management IESE Business School, Universidad de Navarra. Certificate in Marketing GyM, GMP, GMD, GMV and CONCAR, as well as Vice Chairman of the Board of Directors of GMI. He is also a Director of Empresa Editora El from ESADE. Certificate in Quality and Strategic Marketing from AEDEM, Senior Management. Certificate in Leadership and Innovation IESE, Comercio S.A. and Relapasa. Carlos Montero Graña Universidad de Navarra. He is a Director of BBVA Banco Continental and Holding Continental, as well as MAPFRE Cataluña. Additionally, he is a Director of GMV. Vice Chairman of the Board of Directors since August of 1996. Civil Engineer. Additionally, he is the Vice Chairman of the Board of Directors of Teodoro E. Harmsen Gómez de la Torre GyM, Vice Chairman of the Board of Directors of GMP and Director of CONCAR Director since August of 1996. Civil Engineer. President of GMI S.A. He is a Director of Wagonlits and Director of MDI. Professor emeritus at the PUCP School of Science and Engineering. He is also and Honorary Member of the American Concrete Institute, among other distinctions. Roberto Abusada Salah Director since March 1998. PhD in Economics (Cornell, USA). He is a Director of GMD, CONCAR and the Instituto Peruano de Economía (IPE/ Mario Alvarado Pflucker Peruvian Institute of Economics). Augusto Baertl Montori Director since March 2003 and General Manager. Civil Engineer with a Master’s degree in Engineering Administration from George Washington University, USA. Currently, he is also a director of GMD, GMI, GyM, GMP, GMV, CONCAR, Norvial and América Leasing. Director since March 2005. Mining Engineer. He is the Executive President of Gestora de Negocios e Inversiones S.A. and Agrícola Chapi .S.A. Hernando Graña Acuña Additionally, he is a Director of Alturas Minerals, Norsemont, Golden Alliance, Interbank, FIMA, BISA and GMP. Director since August of 1996. Industrial Engineer with a master’s degree in Mining Engineering from the University of Minessota, USA. He is a Director of GyM, GMI, GMP, Ecotec S.A. and CONCAR. President of Norvial S.A. He is also a Director of CAPECO, AFIN and TGP. José Chlimper Ackerman Director since March 2006. Engineer with a Master’s degree in Economics and Business Administration from North Carolina State University, Chairman of the Board of Directors of Corporación Drokasa and Sociedad Agrícola Drokasa, of which he is also the CEO. Director of Maestro Peru S.A. and Banco Central de Reserva del Peru. Director of Aeropuertos del Peru S.A. Additionally, he is a Director of GyM. 73 Board of Directors Committees Auditing and Processes Committee Roberto Abusada Salah, Chairman José Chlimper Ackerman Teodoro E. Harmsen Gómez de la Torre This committee held two meetings during the year. Human Resource Management and Social Responsibility Committee Augusto Baertl Montori, Chairman José Chlimper Ackerman Roberto Abusada Salah This committee held three meetings during the year. Investment and Risk Committee José Graña Miró Quesada, Chairman Augusto Baertl Montori José Antonio Colomer Guiu This committee held four meetings during the year. Executive Commission Shareholder Service Office Self-Evaluation of the Board of Directors The Executive Commission responsible for coordination of the Group The Shareholder Service Office handled a total of 39 inquiries and The Board of Directors’ fifth Self-Evaluation Process took place at is composed of the 4 Executive Directors and the 6 General Managers meetings with investors and company shareholders during the year Graña y Montero S.A.A., as well as at our subsidiaries. On this occa- of the companies in the Group. 2010 and participated in 4 international meetings with investors in Co- sion, the self-evaluation consisted of offering points for improvement lombia, Chile, London and New York, where 41 meetings were held. in the way Board of Directors meetings are run, improving committee José Graña Miró Quesada Chainman Carlos Montero Graña Hernando Graña Acuña Mario Alvarado Pflucker Juan Manuel Lámbarri Vice Chainman Director Chief Executive Officer General Manager GyM Francisco Dulanto Swayne General Manager GMP Jaime Dasso Botto General Manager GMD Walter Silva Santisteban Requejo General Manager GMI Jaime Targarona Arata General Manager CONCAR Rolando Ponce Vergara General Manager GMV The Executive Commission held 4 meetings during the year 2010. meeting times. Continuing visits to projects, the Directors visited the Commuter Rail (Electric Train) project and, in Arequipa, they visited the Cementos Yura Plant Expansion project and the Cerro Verde Potable Water Treatment Plant project. 75 Main Executives Mario Alvarado Pflucker Jaime Dasso Botto Chief Executive Officer since 1997. He obtained a Bachelor’s degre in Civil Engineering from Universidad Ricardo Palma and a Master’s degree in General Manager of GMD from 2000 to the present. He obtained a bachelor’s degree in Electronic Engineering and a Master’s degree in Engineering Administration with specialization in Construction Management from George Washington University, USA. Currently, he is a director Software Development from Stevens Institute of Technology, U.S.A. He was the Commercial Manager of GMD from 1994 to1999. Currently, he of GMD, GMI, GyM, GMP, CONCAR, Norvial and América Leasing. Juan Manuel Lámbarri Hierro is also a director of GMD. Walter Silva Santisteban Requejo General Manager of GyM since 2001. Civil Engineer, graduat of Pontificia Universidad Católica del Peru and the Universidad de Piura Senior General Manager of GMI from 1998 to 2005 and Managing Director from 2006 to the present. He obtained a bachelor’s degree in Civil Enginee- Management Program (PAD). He joined Graña y Montero in the year 1982 and currently, he is also a Director of GyM, GMV and GMI. ring from Universidad Nacional de Ingeniería (National Engineering University). Currently, he is also a director of ECOTEC. Hernando Graña Acuña Jaime Targarona Arata Director and Executive at GyM. Industrial Engineer with a master’s degree in Mining Engineering from the Univerity of Minessota, USA. He is a General Manager of CONCAR since August of 2005. Civil Engineer graduated from Universidad Autónoma de Guadalajara, with an MBA from Director of GyM, GMI, GMP, Ecotec S.A. and CONCAR. President of Norvial S.A. He is also a Director of CAPECO and TGP. Universidad San Ignacio de Loyola. He has also held the position of Civil Engineer on different projects, Commercial Manager of the GyM Special Francisco Dulanto Swayne General Manager of GMP S.A. since the company was founded in 1984. Director since 1988. He attended Universidad Nacional de Ingeniería, Rolando Ponce Vergara Projects Division and General Manager of Graña y Montero Mexico. ESAN, and Universidad de Piura (PAD). He has worked for the Graña y Montero Group since 1974. He is also he is a Director of Consorcio General Manager of GMV since October of 2008. Previously, he held the position of Manager of the Real Estate Division. He has worked for Terminales. He was the President of the SPE (Society of Petroleum Engineers), Lima Section in 1991 and Director of the Sociedad Nacional de the Group since the year 1993. He is a Civil Engineer by profession, with a degree from Universidad Ricardo Palma and a Master’s degree in Minería y Petróleo y Energía in 1993-1994 and 2005-2006. Construction and Real Estate Business Management from Pontificia Universidad Católica de Chile-Politécnica de Madrid. Currently es also Director of GMV Mónica Miloslavich Hart Chief Financial Officer July 1, 2009. Economist. Graduate of Universidad de Lima. She has been with the Group since 1993. She was the Finance Manager of GME S.A from1998 to 2004 and Finance Manager of GyM from 2004 to 2009. 77 César Neyra Rodriguez Manager of Internal Auditing and Management Processes since 2003. He has a Bachelor’s degree in Accounting from Universidad Nacional Federico Villarreal and a Master’s degree in Business Administration and Finance from Universidad del Pacífico. He has also studied Quality Improvement Systems and graduated from the Six Sigma Methodology program at Caterpillar University in Mexico and the U.S.A Kinship Mr. José Graña Miró Quesada, Chairman of the Board of Directors, Capital The capital of the company as of December 31, 2010 amounted to has third degree kinship with Ms. Yamile Brahim Graña, shareholder S/.390,798,933.00 represented by 558,284,190 shares with a nominal of the company, and fourth degree kinship with the director, Mr. Her- value of S/.0.70 each. Claudia Drago Morante Corporate Legal Manager from 2000 to the present. Attorney graduated from the University of Lima. PADE in Finance and Corporate Law from ESAN. She was the Legal Advisor to GMD from 1997 to 2000. Currently, she is also the Stock Exchange Representative. Juan José Arrieta Ocampo Manager of Human Resources Management and Social Responsibility since November of 2007. Bachelor’s degree in Sociology from Pontificia Universidad Católica. PADE in Business Administration from ESAN. He was the Human Resources Manager at GyM from 1999 through October 2007. nando Graña Acuña. Lastly, Mr. Teodoro Hans Harmsen Andress, a director of GMP, has first degree kinship with Mr. Teodoro Harmsen Gomez De La Torre, a director of the company. Legal Denomination In a corporate split-off from Inversiones Graña y Montero S.A., Graña y Montero S.A.A. was incorporated by means of a public document on August 12, 1996 and registered on card 131617 and electronic record 11028652 in the Registry of Juridical Persons of Lima. 79 List of Main Shareholders as of 12/31/2010 As of December 31, 2010, we had 1077 shareholders, of which approximately 13.58% own less than 1% of the capital stock and nearly 21.44% SHAREHOLDING NUMBER OF SHAREHOLDERS INTEREST PERCENTAGE AS OF 31/12/2010 have from 1 to 5%. The main shareholder is the GH Holding Group, represented by José Graña Miró Quesada, Chairman of the Board of Directors. Main Partnership List al 31.12.2010 Less than 1% From 1% - 5% From 5% - 10% Other 10% Total 1,061 10 3 3 1,077 13.58% 21.44% 20.14% 44.84% 100.00% NUMBER OF SHARES INTEREST (%) NATIONALITY FULL NAME GH Holding Group AFP Integra (ING GROUP)* Prima AFP (Grupo Crédito) * AFP Horizonte (Grupo BBVA)* Bethel Enterprises S.A. Profuturo AFP (Scotiabank Group)* Byron Development S.A. 117,538,203.00 66,925,007.00 65,872,707.00   47,214,243.00  33,785,285.00 31,414,443.00 22,432,223.00 CTM6 Cartica Corporate Governance Fund, L.P. 16,144,748.00 Subtotal Other Shareholders Total * Sum of Funds 1, 2 and 3 189,900,459.00 368,383,731.00 558,284,190.00 Panama Peru Peru Peru Panama Peru Panama EE.UU. 21.05% 11.99% 11.80% 8.46% 6.05% 5.63% 4.02% 2.89% 71.89% 28.11% 100.00% Dividend Policy The company’s Dividend Policy in effect in the year 2010 is to distribute 20% of the available profits as dividends. Corporate Purpose The company’s main purpose is to dedicate its efforts toward investments and mercantile operations in general, as well as engineering services, management consultancy, real estate investments, and the acquisition, transfer and negotiation of shares of companies and other securities. CIIU - 6719 Duration of the Company Graña y Montero S.A.A. was incorporated for an indefinite period of time. 81 Changes in Shares Volume traded GRAMONC 1 Vol. Traded US$ Closing Price The share price quoted at year end was S/. 6.65. Average liquidity during the year was 97.61 % and the volume traded during the year amounted to S/. 437,277,661.60. Lastly, the IGBVL (general index) recovered 64.99% and the ISBVL (selective index) recovered 42.86%. It should be noted that the variation in GRAMONC shares was 134.98% (including the effect of the issuance of stock dividends) MONTHLY SHARE QUOTES ISIN CODE MNEMONIC Year - Month Opening S/. Closing S/. Max. S/. Min. S/. Quotes 2010 PEP736581005 GRAMONC1 PEP736581005 GRAMONC1 PEP736581005 GRAMONC1 PEP736581005 GRAMONC1 PEP736581005 GRAMONC1 PEP736581005 GRAMONC1 PEP736581005 GRAMONC1 PEP736581005 GRAMONC1 PEP736581005 GRAMONC1 PEP736581005 GRAMONC1 PEP736581005 GRAMONC1 PEP736581005 GRAMONC1 2010-01 2010-02 2010-03 2010-04 2010-05 2010-06 2010-07 2010-08 2010-09 2010-10 2010-11 2010-12 2.85 3.07 3.00 3.70 4.40 4.25 4.35 4.40 4.55 5.60 6.37 7.15 3.07 3.00 3.70 4.40 4.30 4.40 4.36 4.55 5.60 6.37 7.15 6.65 3.50 3.14 3.70 4.50 4.50 4.41 4.36 4.61 5.60 6.50 7.35 7.15 2.85 2.95 3.00 3.70 4.05 4.14 4.19 4.40 4.45 5.60 6.37 6.50 Price Avg. S/. 3.16 3.01 3.34 4.17 2.51 2.44 2.37 2.51 2.87 2.99 2.81 2.96 25,000,000 20,000,000 15,000,000 10,000,000 5,000,000 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 8.00 7.00 6.00 5.00 4.00 3.00 2.00 1.00 0.00 83 ANALYSIS OF RESULTS 85 ANALYSIS OF RESULTS As of December 31, 2010 (Audited figures) Summary • The activity as of the 2010 year-end closing increased 21.86% (in nuevos soles) compared to the end of the year 2009, totaling S/. 2’660.4MM (US$ 947.0 MM, 25.4% growth in dollars). • Available Net Income at the end of 2010 amounted to S/. 273.5 MM (US$ 97.3 MM), which represents 10.2% of the activity and an increase of 110.8% compared to the year 2009. This increase is due to the profit on the sale of the Larcomar Entertainment Center, the profit resulting from recovery of the investment in Compañía Logística de Hydrocarbons Boliviana (CLHB), and greater profit in the construction business, as well as the petroleum business. The growth in Available Earnings, without considering the effect of the sale of Larcomar and the income from payment of the investment in CLHB would be 52.2%. • EBITDA (1) at the end of the year 2010 amounted to S/. 548.4 MM (US$ 195.2 MM) which represents 20.6% of the activity and an increase of 61.6% compared to the end of 2009. The increase in EBITDA without the effect of the sale of Larcomar would be 49.6%. • The consolidated Backlog at the end of the year 2010 totaled S/. 5,289.7 MM (US$ 1,883.1 MM), which is an increase of 46.8% compared to year end 2009. Of this Backlog, S/. 2,731.1 (US$ 972.2 MM) will be executed during the 2011 fiscal year, S/. 1,316.7 MM (US$ 468.7 MM) in 2012, and the balance from 2013 on. Consolidated Figures (in thousands of nuevos soles) Activity Billing Gross Profit Operating Profit Net Income Available Net Income EBITDA (1) 2,183,233 2,001,475 329,551 224,019 207,550 134,401 339,397 2009 100.0% 91.7% 15.1% 10.3% 9.5% 6.2% 15.5% 2,660,398 2,502,461 455,584 414,616 418,067 273,542 548,451 2010 100.0% 94.0% 17.1% 15.6% 15.4% 10.2% 20.6% 2010 / 2009 21.8% 25.0% 38.2% 85.1% 101.4% 103.5% 61.6% (1) Operating Profit + Depreciation + Amortization 87 Note: Reference to the infrastructure business corresponds to highway concessions and not to construction, as mentioned in preceding reports. The construction business is referred to as such in this report. Profit and Loss • The consolidated activity of the Graña y Montero Group closed the year 2010 with 21.86% growth compared to the year 2009, totaling S/. The activity in the highway infrastructure operation and maintenance business as of the end of the year 2010 totaled S/. 258.6 (US$. 92.1), which 2,660.4 MM. The growth in the activity is mainly due to growth in the construction business, which grew S/. 221.9 MM (+14.6%), in the infrastruc- is an increase of 60.4% compared to the year 2009. This increase is due to the Paita-Yurimaguas Highway Operation Contracts, the Contract on ture business which grew S/. 97.4 MM (+60.4%), in the petroleum business which grew S/. 40.9 (+22.2%), and in the real estate business which the Operation and Maintenance of Road Network 5 for Norvial, the Highway Maintenance Contract on Inter-oceanic Highway Southern Section grew S/. 76.9 MM (+43.9%), taking into account that this company just began its operations in the year 2009. 1 for Survial, and contracts on state-owned highways to Tacna, Lambayeque, La Merced, Sullana and Ayacucho, among others. The activity in the construction business amounted to S/. 1,743.3 MM (US$ 620.6 MM). The major contracts executed in the year 2010 In the information technology business, the activity as of the end of the year 2010 totaled S/. 141.2 MM (US$ 50.3 MM), which represents growth by the Electromechanical Division were the Plant and Workshops for the Bayovar Mine, the Electrical Works and Instrumentation for Peru LNG, of 30.2% compared to year-end 2009. This growth was mainly due to Software Factory and Technology Outsourcing. and the assembly work for the Pueblo Viejo Mine in the Dominican Republic, while the major contracts for the Civil Works Division were the Inter- oceanic Highway Section 1, the mining service contracts for the El Brocal and Shougang mines, and the Commuter Rail (Electric Train) works. The Building Division’s major contracts executed were Hotel El Libertador, the Banco de Crédito IT Center, and the Santa Rosa Tunnel. Activity in the real estate business amounted to S/. 252.3MM (US$ 89.8 MM). The majority of the revenue reported in the year corresponds to the handover of housing units in the following projects: Parques del Agustino, Javier Prado 200 in Magdalena, Parque Central, Malecón Cisneros in Miraflores and Golf Millenium in San Isidro. Activity in the petroleum business closed the year 2010 at S/. 225.9 MM (US$ 80.4), which is an increase of 22.2% compared to the year 2009. This increase is mainly due to an increase in the number of barrels produced per day from 1,100 to 1,300 on average, in addition to an increase in the price of petroleum, as well as a higher number of cubic feet processed by the gas plant. Activity in the engineering business amounted to S/. 95.3 MM (US$ 33.9 MM), which represents an increase of 29.0% compared to the figure at the end of the year 2009. The sectors that drove the growth of this business are energy, mining, industry and building construction. The major contracts executed during the year 2010 were engineering for the Consorcio Alto Cayma Water Treatment Plant, the Engineering Framework Contract with Antamina, engineering for the New City of Morococha for Chinalco, Engineering for the El Sol Highway for Consorcio Hidalgo Hidalgo, engineering studies for access roads to Las Bambas for Bechtel, the contract on the Supervision of Construction at Anglo American’s 2.600 2,200 1,800 1,400 1,000 600 200 1,321 1,530 932 2,660 2,182 1,888 Michiquillay Mine and the Supervision of the construction of the Inter-oceanic Highway Section 5. 2005 2006 2007 2008 2009 2010 89 • 47.4% of the consolidate Gross Profit came from the construction business: Although 63.7% of the activity was in the construction business, Gross Profit from the construction business rose 28.9% compared to the preceding year. This increase is due to a higher level of activity in the the percentage of Gross Profit fom this business is lower; 52.6% of Gross Profit was from business unrelated to construction, in line with the three divisions, as explained previously, as well as an improvement in the gross margin from one year to the next. Group’s diversification strategy. Utilidad bruta produced at the gas plant, as explained before. Gross Profit from the petroleum business rose 43.6% compared to the preceding year. The increase in Gross Profit from this line of business is due to a greater number of barrels of petroleum produced per day, in addition to the higher price of oil, as well as a greater volume of gas Construction Reals Estate Enginnering Highway Infrast/ Oper and Maint Information Technology Petroleum Services Lacromar 63.7% 9.2% 3.5% 9.6% 5.2% 8.3% 0.6% Construction Other 47.42% 52.58 Gross Profit from the highway infrastructure operation and maintenance business totaled S/. 88.5 MM (US$ 31.5 MM), which represents 60.0% growth compared to the preceding year, mainly due to the Norvial highway concession and the aforementioned highway operation and mainte- nance contracts. Gross Profit from the real estate business totaled S/. 30.9 MM (US$. 11.0 MM), which was 89.3% higher than that of the preceding year due to the delivery of housing units in the Parque Central project and the Malecón Cisneros project in Miraflores. Gross Profit from the engineering business amounted to S/. 25.3 MM (US$ 9.0 MM), which represents 42.8% growth in relation with the year 2009. • Gross Profit amounted to S/. 455.6 MM (US$ 162.2 MM), which represents 17.1% of the activity and an increase of 38.3% compared to year- Gross Profit from the information technology business rose 49.2%, totaling S/. 26.4 MM (US$. 9.4 MM). end closing 2009. Gross Profit for 2010 is due to Gross Profit from the construction business, which amounted to S/. 215.0 MM (US$ 76.5 MM), Gross Profit from the petroleum business totaling S/. 83.4 MM (US$ 29.7 MM), Gross Profit from the infrastructure business and highway opera- • Operating Profit was S/. 414.6MM (US$ 147.6 MM) which represents an Operating Margin of 15.6% and an increase of 85.1% compared to tion and maintenance amounting to S/. 88.5 (US$ 31.5 MM) and Gross Profit from the real estate business amounting to S/. 30.9 MM (US$ 11.0 the year 2009. The increase in Operating Profit compared to the preceding year is mainly due to profit on the sale of the Larcomar Entertainment MM). The other lines of business accounted for the remaining balance of Gross Profit. Center, as well as payment for the investment of CLHB from the Bolivian government. Additionally, general expenses amounted to 4.4% of the activity, which is a lower percentage that that of the year 2009. 91 • Net financial expenses totaled S/. 19.0 MM (US$ 6.8 MM), which represents a decrease of 54.6% compared to the figure at the end of the • Cumulative EBITDA(1) at the end of the year 2010 amounted to S/. 548.5 MM (US$ 195.2 MM), which represents 20.6% of the activity and an year 2009, due to reduction of the financial debt and lower rates obtained in the financial system. As of the 2009 year-end closing, coverage of increase of 66.3% compared to the preceding year. This growth is due to greater Operating Profit, as explained before, and higher depreciation financial expenses was 28.9x. and amortization of investments as of the end of the year 2010. • The cumulative effect of devaluation at the end of 2010 represents income of S/. 8.2 MM, compared to S/. 19.9 MM for 2009. Slight apprecia- UAIPIDA por negocio tion of the nuevo sol in relation with 2009 produced an exchange gain due to the lower value of liabilities in foreign currency. • Available Income amounted to S/. 273.5 MM (US$ 97.4 MM), which represents an increase of 103.5%. Greater Available Earnings are the result of higher Operating Profit which, as explained previously, includes the sale of the Larcomar Entertainment Center, payment of the investment in CLHB in Bolivia, lower financial expenses, and the positive effect of the currency exchange difference. Construction Real Estate Highway Infrast/ Oper and Maint Petroleum Services Information Technology Engineering Holding 36.77% 4.87% 17.17% 21.77% 4.27% 2.16% 12.98% Stable long-term flows from the highway infrastructure operation and maintenance business, the petroleum service business and the outsourc- ing business accounted for 56.2% of EBITDA(1), resulting in 2.07x coverage of the Group’s total financial expenses plus general expenses not specifically related to these lines of business. Additionally, it is assumed that these will not decrease in the event of a total losss of activity. 93 Balance Sheet Backlog and Perspectives • Financial leverage decreased from 0.42x to 0.33x, while total leverage decreased from 1.59x to1.44x. The cash levels generated by the end of • The Group’s Backlog increaed 46.8% compared to the year 2009, amounting to S/. 5,289.7 MM (US$ 1,883.1 MM), which represents 1.97x the the year 2009 and during 2010 have made it possible to reduce financial debt during 2010, including prepayment of the Asset-Backed Securities activity over the last 12 months. Of this Backlog, S/. 2,731.1 (US$ 972.2 MM) will be executed during the 2011 fiscal year, S/. 1,316.7 MM (US$ that would have matured in 2011, due to which the leverage ratios have improved compared to the year 2009. The net cash flow deficit is not 468.7 MM) in 2012 and the balance from 2013 on. Once again, the highest level of Backlog has been obtained, after surpassing the previous considered in the calculation of these ratios, but rather the gross debt. record in September 2010. • Current liquidity at the end of the year 2010 was 1.45x. It was higher than at the end of 2009 as a result of higher cash levels, an increase in inventories and lower short-term liabilities. Backlog (In millions of US$ Dollars) • Financial debt / EBITDA(1) amounted to 0.32x at the end of 2010. The increase in EBITDA combined with a reduction in financial debt resulted in a 0.19x improvement in this indicator compared to the preceding year. • The average Return on Equity at year-end closing for 2010 was 27.7% while the Return on Assets was 11.4%. The Return on Equity is higher than that obtained by the year-end closing for 2009 as a result of the increase in Available Earnings at the end of 2010. There was a similar effect on the Return on Assets compared to that obtained in the preceding year. 1,883 1,281 720 830 2007 2008 2009 2010 • The group’s capital investments totalled S/. 287.6 MM (US$ 102.4 MM) during the year 2010. Of the total investments, S/. 25.2 MM (US$ 8.9 MM) correspond to investments in the infrastructure structure, S/. 36.9 (US$. 13.1) in the hydrocarbons sector and S/. 62.8 (US$ 22.4) in the mining sector. Additionally, S/. 90.8 (US$. 32.3) corresponds to investments in the replacement of equipment for the Group’s different lines of business, and lands for the real estate business for S/. 118.9 (US$ 42.3). This capital investment total includes divestitures due to the sale of the Larcomar Entertainment Center and the sale of equipment and other assets for S/. 63.2 (US$ 22.5) 95 

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