Message from the Chairman

If at the beginning of the year I had been able to choose a headline to describe the economy’s upcoming performance in 2009 I would have opted for something like “The global economy overcomes its obstacles and starts growing again”. That’s what I personally would have liked. Unfortunately, matters have turned out quite differently. The year has been characterised by a worsening of the economic recession that has proven to be the deepest and most widespread in the last 80 years, affecting almost all business sectors.

This global situation has been aggravated in Spain by the collapse of the property sector which, in conjunction with other factors, has accelerated the downturn in business and ushered in a scenario of hitherto unknown complexity.

All this has been compounded by a fairly profound crisis of values, with some clearly appearing to be in decline, such as responsibility, work-well done, endeavour, solidarity, collective advancement…, being replaced by more material ones that have taken hold amongst us and become part of the landscape of our everyday paradigms. If we add to this the lack of confidence in the markets and of trust in politicians and institutions, the outlook for the coming years is not all that promising. We must, however, overcome our circumstances and continue working tirelessly in the knowledge that the way out of this tunnel depends largely on our ability for self-sacrifice, hard work and creativity in our operations.

Experts are already forecasting a hesitant recovery for western economies throughout 2010. Indeed, some slight yet positive growth is already being recorded in certain countries, although we are still not sure how we will be able to drive this economic recovery when we consider that governments have already used up a large part of their funds.

Within this context, the performance of the MONDRAGON Corporation –the Corporation– has mirrored this period of particular difficulty, but it has also confirmed the robustness and consistency of our business model by returning positive overall earnings.

Total revenue has amounted to 14,780 million euros, with profits of 61 million euros, admittedly down on the prior year but to an extent that still enables us to maintain our position and market share regarding our competitors. One major achievement is the fact that we have seen our overall earnings fall by “only” 10 million euros on a year-on-year basis, when the fall in revenue for the same period has been 1,900 million euros. This performance ratifies the due nature of the adjustment measures applied throughout the year.

For their part, the investments made in the Industry Area amounted to 287 million euros, and the year saw the launch of five new activities. By areas of activity, the performance of the Corporation’s cooperatives has, generally speaking, reflected the impact the crisis has had on their respective sectors, being even more severe in certain specific segments, such as construction or durable consumer goods for the household, which have recorded a significant fall in demand.

It should be stressed that for MONDRAGON, this complex scenario has been one of the fiercest challenges we have ever had to face, as it has required major efforts to cope with the year’s demands whilst at the same time readying the Corporation to face the competitive requirements that lie in wait ahead.

Accordingly, 2009 has been a year that has witnessed the application of major adjustment measures, in terms of both structure and strategy, to improve the cooperatives’ competitiveness and their general health in order to come out of this downturn stronger and better prepared. This major effort has meant that the first green shoots have begun to appear, with a favourable impact on the Corporation’s positive overall trend, above all in the second half of the year.

Such efforts and measures have also provided clear proof that the principles and values that drive the Corporation’s development, especially in terms of solidarity and inter-cooperation, are being fully upheld and have been essential for the efficient management of this process of preparing for the future.

One of MONDRAGON’s key objectives in this process focuses on returning to the path of job creation, as a constant that has been observed practically since we first started operating and from which we have strayed for the first time this year, recording a job loss of 8.4% on a year-on-year basis, whereby the Corporation’s Average Headcount is 85,066 at the yearend, albeit with a recovery of employment in industry in the second half of the year.

The Corporation remains steadfastly committed to innovation and to the ongoing reinforcement of our internationalisation as the strategic motors that will continue to drive our projection and improve our competitive capacity. The highlights for 2009 include the opening of two production plants abroad, both of which are in India, bringing to 75 the number of facilities distributed over 16 countries and which provide employment for 13,400 people. In the field of R&D&i, MONDRAGON invested over 140 million euros in 2009, taking part in around 70 projects both in Spain and abroad, Likewise, special mention should be made of the fact that 20% of revenue in the Industry Area is provided by products and services that did not exist five years ago.

All these aspects are part of a process of adaptation and adjustment based on the principles of flexibility and solidarity that underpin our cooperative system. The promising signs that have begun to appear towards the end of the year suggest that the measures adopted, hand-in-hand with our differential values and the commitment of all those of us who are part of the MONDRAGON Corporation, will continue to reinforce our competitive advantages and enable us to face the future with even greater and renewed strength.