Grupo Villar Mir is set up as a sum of different companies with their own identity and great autonomy, with an extremely reduced corporate structure, to limit as much as possible the conditions of the Group and the horizontal relationships between companies in the daily running of each company.

The companies in Grupo Villar Mir are managed with maximum professionalism and decentralisation, with each subsidiary company wholly responsible for its statement of financial position and income statement. There are almost no horizontal or vertical conditions imposed the Group. Due to this, the holding activity is limited to the tasks of holding, coordination, management support, monitoring and control.

For management purposes and with the objective of respecting the individual and autonomous nature of each business area, the Group activity is carried out in accordance with the following management structure:

		HOLDING DIVISION
		• Holding and management of the holdings in the companies of the Group. • Financial planning and control. • Management of minor activities.
		ELECTROMETALLURGY DIVISION
		• Production and sale of ferroalloys and silicon metal. • Research and development. • Quartz mining.
		FERTILIZER AND BASIC CHEMICALS DIVISION
		• Production and sales of fertilizers and industrial chemical products. • Engineering and design of chemical plants.
		ENERGY DIVISION
		• Generation and sale of hidroelectric energy. • Marketing of electricity and gas.
		REAL ESTATE DIVISION
		• Real estate development activities.
		• Office rentals activities.
		CONSTRUCTION, CONCESSIONS AND SERVICES DIVISION
		• Infrastructure Development (Concessions) • Construction activities (civil engineering and building construction) in Spain and in other countries. • Industrial construction • Developments
		OTHER SUBSIDIARIES
		• Company engaged in the design, manufacturing and sale of reinforced and pre-stressed concrete structures.
		• Company that sells retail clothing and articles for children.
		• Company that markets, transports and distributes diesel oil and provides industrial cleaning and environmental enhancement services.

Once again, I have the pleasure of informing you of the developments at Grupo Villar Mir this year and of presenting the corresponding Annual Report.

In 2011, the Group has achieved results we consider to be excellent despite an economic enviroment that remains complex due to the financial crisis continuing to afflict the most developed countries and, in particular, Spain.

Economic situation

Worldwide, economic and financial performance in 2011 was severely affected by the delicate situation is facing Eurozone, a region that has become the main trouble spot for the global economy, which has led to a significant increase in risk aversion in international financial markets and a revision of global growth forecasts.

Furthermore the other developed economies have displayed varying levels of performance and thus, while 2011 has witnessed a number of positive indicators from the US which would appear to distance this economy from the possibility of a double dip recession, the trends in the UK and Japan have given much more reason for concern.

Among the emerging economies, the trend has been for a controlled slowdown, although forecasts are somewhat more sombre for Eastern European countries due to their closer connection to the Eurozone.

In turn, there was a general moderation in the growth of inflation in 2011, both in developed economies and in some emerging areas, which has enabled monetary policy to continue along an extraordinarily expansive path in the advanced economies and has facilitated the implementation of the unconventional measures announced previously, although we cannot rule out further stimulus measures if the lethargic economic activity persists.

In foreign exchange markets, the dollar served as an active safe-haven and appreciated against the main global currencies, both of developed and emerging economies, and in particular against the Euro, peaking at an exchange rate of USD 1.30 per Euro.

It is important to highlight here that during 2011 wholesale bank funding tensions increased for the main currencies, particularly in the Eurozone where, while the peripheral countries are finding it increasingly difficult to access markets, the debt of Northern and Central European countries reached negative yields.

As a final point, it is worth noting that commodity prices have been subject to varying performance, as although metal prices have fallen due to the downturn in economic activity, oil prices have remained within the range of USD 105-115 per barrel of Brent crude oil.

By country, in the US the preliminary data appears to indicate that GDP grew by 1.6% in 2011, supported by domestic consumption, fixed investments and, most importantly, variations in inventory levels, with a negative contribution from public expenditure. Inflation, measured in terms of CPI, closed up 2011 with 3.0% annual growth, while the Federal Reserve maintained the target interest rate of federal funds within the range of 0% to 0.25%.

In Japan, GDP shrank by 1% during 2011 on the basis of the negative contributions of external demand and variations in inventory levels, which were partially offset by the positive contribution of domestic demand.

The trade deficit has remained high due to weak exports, while the pace of the fall in CPI has slowed, reaching -0.2% yoy, although core inflation remained at -1.1%.

In the UK, GDP recorded an increase of 0.7% in 2011. The labour market situation continues to be delicate, with unemployment remaining at 8.4% of the active workforce, following the deterioration in economic activity experienced in the last part of 2011. Furthermore, inflation has continued to fall since the peak reached in September (5.2%), due to the impact of the VAT rate hike in January 2011, having closed at 4.2% at year-end 2011.

China has experienced a progressive economic slowdown this year, with year-on-year GDP growth being around 8.9%, a trend which appears set to continue in the coming months. Exports have stabilised, while imports have been notably subdued.

In the remaining emerging economies of Asia, the fourth quarter saw the continued moderation of year-on-year GDP growth (except for the Philippines and Indonesia), with the contraction of Thailand's GDP (-9% yoy), caused by the severe flooding there, being particularly worthy of note. Furthermore, the moderation of inflation rates in this geographical area continued during 2011, which has enabled some countries in the region to proceed to a gradual easing of monetary policy.

In Latin America, economic activity indicators point to stabilisation of growth in the fourth quarter of 2011, following the slowdown recorded in the previous quarter, the favourable trends in Brazil and Chile being worthy of note. The region's inflation rate closed the year at 7.1%, which exceeds the upper threshold of the established target range.

The return of capital inflows to Latin America has led to appreciatory pressures in the countries of the region. In this context, the central banks of Peru, Brazil and Colombia bought dollars on foreign exchange markets, while Argentina was able to continue to increase its foreign currency reserves, due in large part to the capital control and import restriction measures imposed.

According to Eurostat data, the economy of the EMU expanded 1.5% throughout 2011, despite the generalised contraction which took place during the final months of 2011, except in France, where GDP grew 0.2% on the back of strong investments and exports, while at the same time domestic consumption lagged.

There was a moderation of inflation in the Euro area in December, reaching 2.7%. This trend is explained in large part by the strong slowdown in the growth of energy prices, as well as in the rate of growth of the prices of food and non-energy industrial goods.

Sectors in which Grupo Villar Mir operates

Regarding the sectors in which Grupo Villar Mir focuses its activities, the trends in 2011 were as follows:

• The Electrometallurgy Division performed well in 2011, although there was a significant difference between its per- formance during the first and second halves of the year as a result of the impact of the worsening of the financial crisis, an uncertainty which has continued throughout the first half of 2012.

As planned, the first furnace at the Mangshi factory began to operate in May and although its operating margin throughout 2011 was negative, as is to be expected during a start-up period, in 2012 we expect revenues to increase, with an improvement in production costs enabling it to generate a positive EBITDA.

In 2011, an agreement was reached to acquire SamQuarz, a company which operates a quality quartz mine in South Africa. The incorporation of this company is aligned with Grupo FerroAtlántica's strategic objective of increasing its presence in those mining activities that are necessary to guarantee a stable supply of its main raw materials at a competitive price.

The total production of the Electrometallurgy Division this year amounted to more than one million tonnes, 11.8% more than that achieved in 2010.

In turn, the Electrometallurgy Division's revenues in 2011 reached EUR 1,217.1 million, an increase of 12.2% compared to 2010, mainly as a result of the positive trend in silicon metal, above all during the first part of the year. This has resulted in an EBITDA of EUR 219.1 million, an increase of 12.3% compared to 2010, while after-tax profits were EUR 95.0 million, below the EUR 102.4 million achieved in 2010, due to the increase in finance costs, amortisations and provisions and the tax rate applicable to the group in 2011.

Finally, I cannot conclude this section without mentioning that in October 2011 Mr. Pedro Larrea Paguaga joined the firm as Chief Executive Officer in order to lead the international consolidation and expansion project currently being implemented by the Group.

• The Fertilizers and Basic Chemicals Division obtained very positive results in 2011 on the basis of two fundamental factors: on the one hand, due to the structural increase in demand for fertilizers required to improve harvests in a setting of growing food demand, and on the other, due to the ever more prominent diversification of the product portfolio produced and commercialised by Grupo Fertiberia.

The positive market trends and the good operational functioning of the Group's installations have enabled it to generate consolidated revenues this year, including Fertial, of EUR 1,041.7 million, an EBITDA of EUR 315.2 million, and net profits of EUR 177.1 million, with a net bank debt at 31 December of EUR 176 million, slightly higher than at year-end 2010.

• 2011 was a year of consolidation for the Energy Division, since it was Energya VM's first full year within Grupo Villar Mir. This has led to turnover increasing to EUR 333.1 million, almost three times the amount achieved in 2010, with an EBITDA of EUR 44.5 million and Net Profit of EUR 23.0 million.

The most significant issue this year for the Energy Division was the low level of rainfall, which has led to the energy generation levels, and therefore, the turnover, of Grupo FerroAtlántica's hydropower plants being greatly below the average for the hydraulic year.

• Despite the fact that five years have elapsed since the crisis first hit the Spanish real estate sector, far from remitting, the crisis has actually worsened during 2011 due, among other reasons, to the deterioration of the financial and banking crisis in Spain.

In this sense, during the past year the real estate market failed to display any indicators that it is stabilising, quite the contrary in fact, as 2011 was one of the worst yet as regards prices, falling sales and the commencement of new construction projects. Thus, this year the sector sold 360,000 homes (20% less than the figure achieved in 2010) of which only 40% were newly built. Furthermore, it is important to highlight that a very significant percentage of these sales originated from mortgage foreclosures.From this viewpoint, the Group's Real Estate Division has reasonably met the targets laid out, having achieved revenues of EUR 62.2 million which, although 43% lower than the figure achieved in 2010, have enabled it to generate a positive EBITDA of EUR 12.8 million. The Net Attributable Result was a loss of EUR 18.2 million, the costs of financing Torre Espacio continuing to have a significant impact on the Division's net profits.

In turn, the Division closed 2011 with a level of debt of EUR 691 million, of which EUR 332 million, that is, almost half, correspond to the cost of financing Torre Espacio.

• Despite 2011 being a complicated year from a macroeconomic viewpoint, Grupo OHL has had an excellent year, managing growth of 23% in EBITDA and 14% in Net Profit, and procuring new international construction contracts for a total value of EUR 4,000 million.

From the point of view of funding, OHL undertook a bond issue in March 2011 for a total amount of EUR 425 million in 7-year bonds, thereby improving the maturity profile of its recourse debt, and also managed to raise EUR 350 million in non-recourse financing in OHL Concessions in September 2011, in order to return funds to the OHL parent company and thus reduce its net recourse debt. This has allowed the parent company to record a Net Recourse Debt/Recourse EBITDA ratio of 3, compared to the ratio of 3.5 in 2010.

In November 2011, an agreement was reached for the sale of Inima for an equity value of EUR 231 million.

Finally, we should highlight that at year-end 2011 Grupo OHL enjoyed a significant position of recourse liquidity (EUR 1,500 million), and has fully renewed its operating credit lines (EUR 1,100 million).

Grupo Villar Mir

Grupo Villar Mir's results in 2011 have been excellent, due to the positive performance of the majority of the Group companies, despite the difficulties facing the markets in which they normally operate.

Consolidated revenues in 2011 (including 100% of OHL) came to EUR 7,529.9 million, 7.2% higher than the previous year, showing recovery in all the sectors in which the Group operates except for the real estate and construction sectors in Spain.

EBITDA experienced 21% growth compared to 2010, reaching EUR 1,779.4 million, equal to 23.6% of revenues. Of this total EBITDA amount, EUR 1,219.3 million correspond to Grupo OHL. In addition, 80% of the Group's total EBITDA in 2011 was generated outside Spain, and this figure reached 89% in the case of OHL. This data is highly relevant, showing the Group's high degree of internationalisation, thanks to which the impact of the crisis on the Group has been quite moderate.

Net attributable profit (after tax) in 2011 came to EUR 378.4 million, 23% more than in 2010, as a result of the excellent performance of the Chemicals and Fertilizers Division and OHL's extremely positive evolution.

The Group's total consolidated assets at 31 December 2011 amounted to EUR 16,942.8 million, 26% more than at the close of the previous year, with OHL consolidated by means of the full consolidation method.

Net bank debt at year-end, including recourse and non-recourse debt, came to EUR 6,923.3 million, an increase of 12.9% compared to the previous year's figure. Net recourse debt came to EUR 2,572.4 million and represents 15.2% of total assets, 2.9 times the recourse EBITDA.

The Consolidated Group's equity came to EUR 3,160.3 million, 18.7% of its assets, with a guarantee ratio of 1.2. Of this total equity, the shareholders' equity corresponding to Grupo Villar Mir comes to EUR 1,785.0 million, and the rest pertains to non-controlling interests, primarily OHL. If we exclude OHL's assets and liabilities, which have a comparably lower equity to total assets ratio due to the sectors in which it operates (construction and concessions), the rest of Grupo Villar Mir (i.e. consolidating OHL using the equity method) has a significantly higher rate of equity (37.5% of assets), and the guarantee ratio is also higher (1.7 times), both of which are satisfactory figures.

Prospects for 2012

During 2012, the Group plans to continue with the internationalisation and diversification strategy commenced a few years ago, the outlook being generally favourable. In line with the consolidated Budget, in 2012 the Group expects to generate revenues of approximately EUR 9,000 million, and to achieve after-tax profits of around EUR 380 million, similar to the figure achieved in 2011. By Division, the following are worth noting:

• In 2012, the Electrometallurgy Division's profits will be lower than in 2011 due to the fact that the financial crisis is affecting investment decisions around the world, which we expect to translate into a downturn in activity in the fer- roalloy and silicon metal sector. In this context, the Division has set itself a two-fold goal for 2011: on the one hand, to increase the profitability of the Yunnan factory in China once the investments set aside to upgrade it have been com- pleted; and on the other hand, to improve the management of the balance sheet by closely monitoring inventory levels and investments, while at the same time improving debt amortisation and liquidity profiles.

• In the fertilizer sector we expect 2012 to be similar to 2011, since cereal prices remain high due to increased demand and the fact that stocks are at an historical low. We can expect a slight variation in the per company contribution to the consolidated net profit, with Fertial's contribution being greater as a result of both the predicted increase in ammonia production and the evolution of the sales price thereof.

• For the Energy Division, the year is expected to be worse than the average hydraulic year since 2012 has already begun with low levels of rainfall and, therefore, it is highly unlikely that hydropower production will reach the levels forecast in the budget.

• The outlook for the Real Estate Division in 2012 remains pessimistic, due to the fact that the sharp recession in the residential market in Spain has been compounded by the crisis in the Spanish financial system and the high rate of un- employment.

The low level of investment in new housing projects should allow the already excessively high inventories of unsold properties to stabilise, and may even lead to their reduction if financial institutions display a willingness to clear the significant number of properties remaining on their balances, which is absolutely necessary if the sector is to recover in the medium to long term.

Lastly, in the construction and infrastructures development sector, as regards Spain, the rate of offers for tenders on civil engineering works is expected to remain very low, which will continue to have a highly adverse impact on busi- ness in this country.

Nonetheless, and fortunately for us, activities in Spain account for only about 11% of Grupo OHL's EBITDA, which means that the economic downturn in Spain will only very moderately impact its profits; and therefore, for 2012, the growth forecast for revenues, EBITDA and Net Profit is greater than 10%.

Furthermore, and from the viewpoint of the bottom line, the Group will continue to reduce it recourse debt with the aim of attaining a ratio of Net Recourse Debt to Recourse EBITDA of ≤ 2.

Finally, 2012 will see the completion of the business restructuring process deriving from the agreement of intent signed by OHL and Abertis Infraestructuras, S.A. ("Abertis") in April of this year.

The transaction will entail the absorption by Abertis of a spin-off unit comprising Partícipes en Brasil, S.L., SPI-Sociedade para Participaçoes em Infraestrutura, S.A. and certain liabilities linked to these companies, with OHL receiving as consideration for this restructuring a holding of 10% in Abertis' capital. The aforementioned liabilities are estimated at approximately EUR 530 million.

The agreement of intent also sets forth an additional transaction, fully independent of the above, involving Abertis' acquisition of OHL's concession assets in Chile for an amount in cash, the said assets having been appraised for the purposes of this transaction at approximately EUR 227 million.

In total, the business units and assets subject to the transactions described above represent 24.02% of the Group's total turnover, 23.33% of its total assets and 37.45% of its EBITDA, all at OHL's consolidated group level at year-end 2011.

With this being the basis on which the new year will commence, in 2012 Grupo Villar Mir should attain levels of business and consolidated profits similar to those achieved in 2011, which will demonstrate for another year running that the impact of the global financial crisis on Grupo Villar Mir is quite moderate.

Once again, on behalf of the Board of Directors, I would like to take this opportunity to express my appreciation for the confidence shown by our customers, suppliers and supporting financial institutions in the different Companies forming the Group, and to thank all our staff for their efforts and dedication.

Juan-Miguel Villar Mir
Chairman of the Board of Directors

Balance Sheet and Income Evolution

The basic data for the different divisions in the Group, and for the consolidated Group, for 2011 are the following:

Group revenues (consolidating OHL using the full consolidation method) have reached a total of EUR 7,529.9 million, 7.2% more than the previous year. Revenues, with OHL consolidated using the equity method, and therefore not including Grupo OHL revenues, came to EUR 2,670.9 million, 18.1% more than in 2010.

Trends in the revenues figures for the different divisions in the Group are as follows:



The main business activity in terms of turnover volume continues to be, by far, construction, which represents 38.1% of the Group's income figure, followed by infrastructure developments, with 21.9%, and the electrometallurgy activities, with 16.2%. The fertilizer business activities are highlighted below. Lastly, and at a greater distance as regards revenues volumes, the activities in services, real estate and the generation of electric energy can be cited.

65.8% of all the Group's sales in 2011 were made in countries other than Spain.

Grupo VILLAR MIR closed 2011 with excellent results, especially if they are viewed within the difficult macroeconomic context. The Parent Company's year-end consolidated profits reached EUR 378.4 million, which represents a 23.4% increase over profits from the previous year.

Per division contributions to 2011 profits and a comparison with the previous period is as follows:



Trends in net attributable profit for the different divisions in the Group are as follows:



The consolidated EBITDA came to EUR 1,779.4 million (equal to +23.6% of revenue), with a +22.1% increase over the same figure from the previous year.

Trends in EBITDA for the different divisions in the Group are as follows:



Net cash flow (attributable profit + depreciation) in 2011 comes to EUR 999 million, for a 14.4% increase over the previous year's figure.

Regarding the consolidated statement of financial position, the Group's total assets come to a total of EUR 16,942.8 million at 31 December 2011, +2.6% growth over the previous year's figure. Trends in total assets for the different divisions in the Group are as follows:



The shareholder equity which finances these assets, or in other words the Villar Mir Group shareholder equity plus the sha- reholder equity of external shareholders, primarily from OHL (Equity), amounted to EUR 3,160.3 million, equivalent to 18.7% of total assets.

The Villar Mir Group shareholder equity (not including external shareholders), that is, the Equity Attributed to the Parent Company, comes to EUR 1,785.0 million.



The consolidated net bank debt comes to EUR 6,923.3 million (40.9% of assets). Of the total bank debt amount, EUR 4,351.0 million correspond to non-recourse debt.

The bank debt is equal to 3.9 times the EBITDA generated in 2011. However, regarding this ratio, it must be taken into account that a part of this debt corresponds to financing of investments (mainly of motorway concessions under construction) that have not yet begun to generate EBITDA.

Net bank debt figures for the different Group activities are as follows:





The Permanent Sources of Financing (non-callable funds plus those that are callable in the long-term) reached EUR 11,125.2 million at 31 December 2011, representing 65.7% of consolidated assets (consolidating OHL by full consolidation).

Returns on shareholder equity in 2011 totalled 21.7%, calculated on the basis of the average consolidated shareholder equity figure, which is a very satisfactory ratio.



At 31 December 2011, the group had 29,993 employees, of which 23,374 corresponded to Grupo OHL. Average turnover per employee in 2011 was EUR 251.1 thousand.

At 31 December 2011, 73% of OHL's employees and 70% of Grupo VILLAR MIR's employees as a whole (including OHL) worked outside of Spain, which is evidence of how highly internationalised the Group is.

Internationalisation of Grupo Villar Mir

GRUPO VILLAR MIR SIGNIFICANT DATA EVOLUTION