Complete Annual Report - Uralita

Annual Report
2005
CORPORATE SPIRIT
TRANSPARENCY
OPENNESS TO CHANGE
SELF-ACHIEVEMENT MINDSET
AMBITION FOR EXCELLENT RESULTS
RESPECT AND CONTINUOUS DEVELOPMENT FOR PEOPLE
SOCIAL RESPONSIBILITY AND COMMITMENT

Uralita Group
Key Figures
2001 2002 2003 2004 (1) 2005
Total Sales (Million euros) 1,120.4 1,172.1 1,314.6 1,314.1 1,104.6
% Sales outside Spain 37.9% 41.3% 49.4% 47.7% 49.0%
EBITDA (Million euros) 142.7 146.3 162.0 189.7 150.5
EBITDA margin 12.7% 12.5% 12.3% 14.4% 13.6%
Net Income att. to the controlling company 22.0 16.7 (41.9) 45.2 35.2
Attributable net income per share (euros) 0.14 0.09 (0.22) 0.23 0.18
ROIC (2) 6.1% 4.8% 4.6% 7.1% 6.5%
Net Debt at year-end (Million euros) 317.8 472.3 451.1 292.0 140.1
Capital expenditure
(Million euros) 125.2 103.3 80.1 79.5 81.7
Dividends accrued (euros/share) 0.08 0.04 0.00 0.17 0.11 (3)
Year-end workforce 5,456 7,166 6,326 6,205 4,340
(1) Figures adjusted to meet International Financial Reporting Standards
(2) ROIC = NOPLAT/Average capital employed
(3) Proposed distribution, pending approval
Map of production plants
Russia
Belgium
Germany
Poland
France
Slovenia
Hungary
HUNGARY
Portugal
4 plants
Italy
Spain
23 plants*
* Does not include the Coverings factory, which was divested in January 2006
Sales by geographical area (1)
REST OF EUROPE
10.8%
REST OF THE
WORLD 1.3%
Market positioning
by business
Iberian Peninsula
Europe
REST OF
EUROPEAN
UNION
37.1%
Sales by Product (1)
PIPES
16.6%
SPAIN
50.8%
Insulation
Glass wool 2 nd 2 nd
XPS Leader 2 nd
Gypsum
Plasterboard
Powdered gypsum
Roofing
Roof Tiles
Leader
2 nd
Leader
ROOFING
18.5%
INSULATION
44.6%
Pipes
Plastic pipes and pieces
Leader
GYPSUM
20.3%
(1)
Includes only building materials

Uralita Group
Mejía Lequerica, 10
28004 Madrid
Spain
Telephone: +34.91.594.9000
Investors and Financial Analysts Relation: +34.91.594.9039
Individual Shareholders Relation: +34.91.594.9036
Corporative Web: www.uralita.com

Contents
Letter from the Chairman 2
Overview of the Uralita Group 5
Board of Directors 6
Relevant information about the Uralita Group 8
The Uralita Group in 2005 15
Economic and market context 16
Lines of action in 2005 18
Completion of the divestment process 18
Efficiency improvements in the core businesses 20
Adaptation of the organizational model 21
Progress in instilling the Group Culture 22
2005 Results of the Uralita Group 25
Strategic priorities for 2006 26
Increase the efficiency of current businesses 26
Profitable growth 26
Management Report by Business 29
Insulation Business 30
Gypsum Business 36
Roofing Business 42
Pipes Business 48
The Uralita Group on the Stock Market 55
Corporate Governance Report 61
Introduction 62
Share Capital Structure 63
Management structure of the Company 65
Related Party Transactions 81
Risk Management Systems 82
General Shareholders’ Meeting 84
Degree of compliance with Corporate Governance Recommendations 87
Corporate Social Responsibility 97
Corporate Social Responsibility at Uralita 98
Responsibility for Economic Value Creation 98
Responsibility for the Environment 100
Responsibility for Society 101
Commitment to Employees 103
Responsibility for the Construction Materials Sector 109
Commitment to the Community 110
Financial Information 113
Auditors' Report and Consolidated Annual Financial Statements 114
Management Report 162

Letter from the Chairman
Dear Shareholders,
The highlights of reporting year 2005 include
completion of non-core business divestments (a
process that was started in 2003), achievement of
the Group's second-highest profit in the last
decade and a significant reduction in debt, which
allows us to envisage a new phase of growth.
2005 Results
Results in 2005 were marked by the divestment of
non-core businesses and a complex
macroeconomic situation.
Disposal of non-core business lines
The sale of six non-core business lines completed
our divestment of non-core activities and allowed
us to consolidate our portfolio, which now
contains Insulation, Gypsum, Roofing and Pipes.
We defined these as our four core business lines in
2003 and we will use them as a platform for
future growth.
The divestments reduced our 2005 income – due
to the loss of sales and earnings from the divested
businesses – but at the same time, they have
improved the Group's situation, both in financial
terms, by significantly cutting debt, and at
operational level, by enabling Uralita to focus on
businesses where it is competitive due to its size,
capacity and positioning.
The divestment of the Chemical Business to
Ercros had a particularly strong impact, as it had
contributed 305 million euros in Sales, €30
million in EBITDA and €10 million in Net Income
in 2004.
Today the Uralita Group is more focused and more
profitable than in 2002 when I was appointed
Chairman of the Group: the number of business
lines has been streamlined from 17 to 4, and the
number of plants from 70 to 38.
The economic climate
The Group’s activities in 2005 were carried out in a
complex environment as regards both the
performance of the markets in which Uralita is
present and the rise in cost of crude and its
derivatives.
On a market-by-market basis, Spain and Eastern
Europe performed very well whilst the German
and Portuguese markets, which are extremely
important to the Group, fared worse with a
marked decrease in construction activity.
The construction sector in Spain, where the Group
carried out 51% of its business in 2005, once again
performed strongly with 730,000 housing starts, a
6.2% increase compared to the previous year and
3.4% above GDP growth in 2005.
With regards to costs, results for the year 2005
were affected by the rise in crude prices and its
effect on the prices of gas and electricity, used in
our production processes, on transport costs and
on the price of some of our key raw materials such
as polystyrene and PVC.
This macroeconomic situation especially affected
the Insulation Business both because of the
situation in the German market which accounts
for around 20% of the business, and the
temporary difficulties in transferring the increases
in energy and raw material costs to the market.
Likewise, the Roofing Business was affected by the
situation in Portugal, a market which accounts for
around one third of total activity and where
construction activity has fallen for the last fourth
year.
Lines of strategy
In order to deal with these situations, the Uralita
Group introduced a number of measures in 2005
aimed at strengthening the competitive position
of our businesses:
• Review of the industrial structure and reduction
of fixed overhead costs in the Insulation and
Roofing Businesses.
• In-depth restructuring of the Pipes Business to
guarantee adequate future profitability.
2

• Implementation of measures to boost industrial
output in Gypsum and commercial initiatives
aimed at increasing the penetration of Pladur®.
• Simplification of our product range and review of
the Group’s branding policy with the launch of
the new roof tile (Cobert®) and powdered
gypsum (Algíss®) brands.
• Increased capacity in high growth markets, most
notably Eastern Europe.
We also implemented in-depth organizational
restructuring based on three linchpins:
• Significant streamlining of the corporate centre
aimed at adapting it to the simpler Group
structure and thereby cutting costs.
• Grouping together of the Gypsum, Roofing and
Pipes Businesses in order to optimise common
functions and carry out an integrated
commercial and industrial management.
• Relocation of the Insulation Business
headquarters to Madrid.
All of these measures have made the Group more
efficient operatively and less exposed to everchanging
external variables.
Financial results and share performance
Despite the smaller business scope mentioned
above, Uralita’s Net Income attributable to the
controlling company totalled €35.2 million, the
second highest result for the past 10 years, and the
Group slashed its debt by 52% to €140 million.
Results by Business area were varied: whilst sales
and profitability continued to grow in the Gypsum
Business, the Insulation and Roofing Businesses
performed worse than 2004 due to the reasons
mentioned above. Finally, profits at the Pipes
Business improved slightly, although these still fell
short of expectations.
Uralita’s shares traded at an average of €4.10
throughout 2005, although the share price fell 8%
during the year, closing at a low of €3.42/share.
• It slashed its debt by 52%, which will enable it to
study the possibility of growing through new
acquisitions.
• It simplified its business portfolio and shed nonstrategic
businesses.
• It acted on many operating fronts in its
businesses and at Group level in order to offset
the unfavourable economic environment and be
more competitive in the future.
Shareholder remuneration
In accordance with our policy of ensuring
adequate remuneration for our shareholders, we
intend to propose at the General Shareholders’
Meeting an ordinary dividend of €0,11 per share
from 2005 profits. This would imply a 61% pay-out
(ratio of dividend over Net Income attributable to
the controlling company), notably higher than the
established 30%-40% pay-out policy.
With this payment we aim to ensure attractive
remuneration for our shareholders in a year when
disposals have led to a lower result, but have
enabled the Group to improve its operating and
financial position.
Priorities for 2006
Now that the disposals process is finished, the
Group intends to increase profitability in 2006 so
that, with a lower sales volume, we can record net
income in line with 2005 levels. Although we look
forward to seeing some markets recover
(particularly Germany), improvements will stem
mainly from initiatives implemented in 2005.
In addition, the Group’s sound financial situation
means that we can consider further growth via
acquisitions or increasing capacity.
Finally, I would like once again to thank you, on my
own behalf and on behalf of the Board, for the
confidence you have placed in us, and I would also
like to renew our commitment to continue
generating value for all of you and to making
Uralita Group an European standard-bearer for
profitability in the construction materials sector.
Summary
In 2005, the Group achieved some important
targets:
• It posted its second highest income for the past
10 years (€35.2 million).
Javier Serratosa Luján
Chairman
Uralita Group
3

Uralita Group
Overview
of the
Uralita Group

BOARD OF DIRECTORS
Javier Serratosa Luján
(Executive Board Member)
President of the Board of Uralita, S.A. since 2002.
Graduate in Economics and Business from the University of
Valencia and M.B.A. from Boston University (USA). He is also
CEO of Nefinsa, S.A., and a member of the Boards of Air
Nostrum Líneas Aéreas del Mediterráneo, S.A. and of the
Valencia Business Confederation.
Pablo Serratosa Luján
(representing Nefinsa, S.A.)
Member of the Board of Uralita, S.A. since 2002.
Graduate in Economics and Business from the University of
Valencia and M.B.A. from Babson College (USA). Among other
positions, he is the General Manager and a Director of Nefinsa,
S.A., Vice Chairman of Air Nostrum Líneas Aéreas del
Mediterráneo, S.A. and Member of the Executive Board of the
Valencia Chamber of Commerce.
Julio Fermoso García
(representing Caja de Ahorros de Salamanca y Soria
“Caja Duero”)
Member of the Board of Uralita S.A. since 2004.
Graduate in Medicine. Executive Chairman of Caja Duero.
Tenured Professor at the University of Salamanca. He was
formerly the Rector of the University of Salamanca.
José María Bueno Lidón
(representing Atalaya Inversiones, S.R.L.)
Member of the Board of Uralita, S.A. since 2005.
Doctorate in Industrial Engineering and Tenured Professor of
Business Organisation. Currently Chairman of El Monte Caja de
Ahorros de Huelva y Sevilla. He is a Member of the Boards of
Persan, Metrovacesa, SOS Cuétara and Isolux. He is also a
Trustee of FUNCAS (the Economic and Social Investigation
division of the Savings Bank Foundation) and a Member of the
CECA (Savings Bank Foundation) Control Committee.
Javier Echenique Landiríbar
(External independent Board Member)
Member of the Board of Uralita S.A. since 2003.
Economics graduate. Was previously General Manager and
Board Member of Allianz-Ercros and Eurovida, General
Manager of BBV and General Manager of Grupo BBVA in 2001,
with responsibility for Wholesale Banking, which included
Investment Banking and the Industrial Group. He is currently a
Director of Telefónica Móviles, S.A. and ACS representing
Imverlin Patrimonio, S.L., among others.
José Manuel Serra Peris
(External independent Board Member)
Member of the Board of Uralita S.A. since 2003.
Law Graduate and Public Attorney. He was previously Secretary
of State for the Ministry of Industry and Energy. He was
Chairman of the Spanish Patents and Trademarks Office,
Chairman of the Spanish Centre for Industrial Technological
Development (CDTI) and the Spanish Institute for Energy
Diversification and Saving (IDAE), and a member of the Board
of the Spanish state holding company, SEPI, and of Iberia and
Endesa. His other positions include Directorships of Grupo
Ence, Red Eléctrica de España, S.A. and of Natraceutical, S.A.
6

From left to right: Mr. Javier Echenique, Mr. J. Ignacio Olleros, Mr. Jesús Quintanal, Mr. Julio Fermoso, Mr. Javier Serratosa, Mr. Pablo Serratosa,
Mr. José Antonio Carrascosa, Mr. José Manuel Serra, Mr. Javier González, Mr. Álvaro Rodríguez-Solano, Mr. José María Bueno.
Jesús Quintanal San Emeterio
(External independent Board Member)
Member of the Board of Uralita S.A. since 2003.
Economics graduate. He was previously General Manager at
Banco de Granada and Chief Executive of Aseguradora Galicia,
S.A. Currently he is Chief Executive at Grupo AEGON and a
member of the International Board of AEGON, NV. He is also
Vice President of the Board of Directors of Mediterráneo Vida
(Insurance company 50% owned by AEGON and Caja de
Ahorros del Mediterráneo) and Vice President of CAM-AEGON
Holding Financiero. He is also a Director of the Spanish
Insurance Sector Research Body, the ICEA, a Member of the
National Reinsurance Board and a Director of Naviera Elcano, S.A.
José Antonio Carrascosa Ruiz
(Non-executive director appointed by Nefinsa, S.A.)
Member of the Board of Uralita, S.A. since 2002.
He has a BA in Business Administration and a Masters in
Financial Management from the Financial and Stock Market
Studies Foundation in Valencia. He was formerly
Administration Manager at Grupo Valenciana de Cementos
and Chief Financial Officer of Uralita Group. He is currently the
Chief Financial Officer at Nefinsa, S.A.
Javier González Ochoa
(Non-executive director appointed by Nefinsa, S.A.)
Member of the Board of Uralita, S.A. since 2002.
A Law graduate, with a Masters in Legal Consultancy from the
Madrid Business Institute and in Stock Market and Financial
Management from the Financial and Stock Market Studies
Foundation in Valencia. He has also been Secretary to the Board
of Uralita, S.A. and General Manager of Legal Advisory Services
for Uralita Group. He is currently head of Legal Advisory
Services and Human Resources at Nefinsa, S.A.
José Ignacio Olleros Piñero
(Executive Director)
Member of the Board of Uralita, S.A. since 2002.
Since 1 February 2004 he has been Chief Financial Officer of the
Uralita Group. Economics graduate and Registered Auditor. He
was previously a partner with Arthur Andersen and carried out
business consultancy work at the firm, Gestión Alternativa, as
one of its founding partners.
Álvaro Rodríguez-Solano Romero
(Executive Director)
Member and Secretary of the Board of Uralita, S.A.
since 2004.
He has also been Legal Advisory Manager for the Uralita Group
since January 2004. Lawyer and M.B.A. from IESE-PADE.
Previously General Secretary of the Aragonesas Group Board.
7

Relevant information
about the Uralita Group
Management Committee
Chairman & CEO
Javier Serratosa
Head of Planning
and Corporate
Development
Jorge Alarcón
Corporate
Chief Financial
Officer
J. Ignacio Olleros
Head of
Corporate
IS & P
Juan Sánchez
General
Counsel
Álvaro Rodríguez-Solano
Head of
Management
Development
Luis Meseguer
General Manager
URSA
Daniel Llinás
• Insulation
General Manager
Uralita Iberia
José Luis Pozo
• Gypsum
• Roofing
• Pipes
8

Overview of the Uralita Group
Uralita Group
holds a leading
position in the
Building Materials
sector in the
Iberian Peninsula
The Uralita Group is a Spanish building materials multinational enterprise with
nearly 100 years of history. Uralita is the leader in the markets and sectors where it is
present. Uralita’s strategic vision entails the development of its construction
materials businesses across Europe through its core Insulation, Gypsum, Roofing and
Pipes activities.
Sales in 2005 totalled €1,104 million, of which 49% were made outside of Spain in
more than 75 countries. The Uralita Group’s corporate offices are located in Madrid,
Spain. Its workforce as of 31 December 2005 totalled some 4,340 employees with 39
production plants throughout Europe.
Uralita holds a leading position in Spain and Portugal in the Building Materials
sector and is the third largest manufacturer of Insulation materials in Europe.
9

History of the Uralita Group
1907 20’s-40’s
50’s-60’s
70’s-80’s
90’s
2003-2005
Foundation
First
products
• Fibre cement:
- Coverings
- Pipes
New
materials
• Plastics
• Expansion of
commercial
network
Diversification
• Concrete and
ceramic Roof tiles
• Pladur®
Plasterboard
Internationalisation
• Poliglas and
Pfleiderer
(Insulation)
Restructuring
and profitable
growth
• Arrival of Nefinsa
(Dec. 2002)
• Strategic Plan
2004-2006
2007 will be the
Uralita Group’s
centenary year
Uralita began its life at the start of the twentieth century, when in 1907, it is one of
the first European companies to introduce a new building material that was to
revolutionise the construction industry, fibre cement. The versatility of fibre cement
permitted the development of a wide range of products: corrugated coverings,
ornamental applications and piping.
The explosion of plastics in the late 1950s led to the introduction of this material into
construction techniques. New versions of Uralita’s traditional pipes and coverings
were produced and marketed in every corner of Spain through the Group’s excellent
sales network.
In the seventies Uralita began to turn itself into a “Group” of companies, capable of
supplying the construction market with whatever it needed to complete a project.
In 1974 it began producing concrete roof tiles, a business complemented from 1985
by ceramic roof tiles and agreements with UK producer Redland (now part of Lafarge
Group).
In 1977 the Group introduced Spain to a new interior wall system that was already
consolidated in the US, plasterboard, creating a market in which Uralita Group,
through its Pladur® brand, remains the Iberian leader to this day. The seventies also
saw Uralita breaking into sectors that it has now retreated from, such as paints,
plastic containers, sanitary ware and ceramic roof tiles.
10

In the late 1980s and the 1990s, Uralita’s major strategic move was
internationalisation. This process began with the presence of the Group’s flagship
products in Portugal (both on an industrial and commercial level) and the
strengthening of the export of all ceramic materials (tiles, roof tiles).
In 1988 it acquired Poliglas, an Insulation Business, through which it has invested
heavily in countries such as Germany, Hungary, France and Italy.
In 2002 Uralita acquired the Insulation Business of the German company Pfleiderer
AG. This purchase afforded Uralita a leading position in Russia, Poland, Hungary and
Slovenia, the last three of which recently joined the European Union, making Uralita
Europe’s number three producer of insulators while simultaneously opening up a
route for expansion into Eastern Europe.
With Nefinsa’s
arrival in
December 2002,
a new era of
restructuring
and profitable
growth began
At the end of 2002, the Nefinsa Group, owned by the Serratosa family, acquired
45.7% of the company. The arrival of the new main shareholder led to launch of the
Strategic Plan for 2004-2006, designed to significantly increase profitability. The
plan’s target was to identify those businesses with better future prospects in terms
of growth and profitability on which the Uralita Group should focus. Four main
businesses were identified which today are the Group’s backbone: Insulation,
Gypsum, Roofing and Pipes. The other business not included in these categories
were disposed of between 2003 and 2005.
11

Products and services
The main products and services manufactured and marketed by the Group are:
• Insulation: Glass wool and extruded
polystyrene (XPS) under the brand name
Ursa®.
• Gypsum: Pladur® plasterboard solutions (dry
wall partitions) and powdered gypsum,
Algíss® (traditional or wet plaster partitions).
• Roofing: Roof Tiles (concrete, mixed and
curved ceramic), under the brand name
Cobert®, roofing accessories and bricks.
• Pipes: manufacture of piping and accessories
for building and civil engineering industries,
under the brand name Uralita Sistemas de
Tuberías.
Sales by geographical area
Includes building materials only
REST OF EUROPE
10.8%
REST OF THE WORLD
1.3%
REST OF EU
37.1%
SPAIN
50.8%
12

Main markets
The Group
embarked on
international
expansion and
has seen sales
outside of
Spain increase
from 32% in 1998
to 49% in 2005
The bulk of Uralita’s strategic building materials activity is in Europe where it made
approximately 99% of its sales in 2005. The share of the Group’s sales outside its
Spanish home market has grown over the years from 32% in 1998 to 49% in 2005.
Thanks to its international and product diversification, Uralita has strong potential
for future growth based on four fundamental sources:
• Geographical expansion of its current products and services into new European
markets via new plants or company acquisitions in new markets.
• Increased penetration of existing solutions in current markets.
• Development of new construction solutions within its areas of activity (e.g.
insulation or gypsum new applications or products).
• Adding new categories of construction materials to its range in which to
implant the Uralita Group management system.
Increasing geographical diversification coupled with the possibility of increasing
penetration of the two main Group product areas, Insulation and Gypsum, in the
Spanish market should offset the predictable slowdown in new housing
construction in Spain. The introduction in Spain of a new Technical Building Code,
bringing it into line with other more advanced European countries, should raise the
quality bar for new buildings and the requirements for thermal and acoustic
insulation, significantly increasing demand for insulation products. Meanwhile, the
rising penetration of plasterboard as wall partition solution, towards the levels seen
elsewhere in Europe, should allow growth in Gypsum Business volume sales in
Spain, offsetting the projected falloff in levels of new building.
Finally, the advantageous position of the Uralita Group’s sales network in Spain is an
extra asset that should ease the transition to the future as new building increasingly
gives way to renovation work, in line with the experience of other European
countries, thus maintaining the Group’s sales and profitability.
13

Uralita Group
The Uralita Group
in 2005

The Uralita Group
in 2005
ECONOMIC AND MARKET CONTEXT
Once again in 2005 Spanish economic growth outpaced the European Union average
and thus continued to close the gap with regard to the more developed countries in
its environment. Gross Domestic Product increased by 3.4% (80 basis points higher
than in 2004), although this growth stemmed mainly from gains in private and
public consumption rather than from improvement in gross investment or
competitiveness, which in the long run are the growth drivers of the economy.
Spain’s rapid rise in GDP generated a 3.7% inflation rate which was higher than the
rate in earlier years as well as the average rate for European Union countries. As a
consequence the price differential between Spain and the eurozone increased,
undermining the competitiveness of our industry.
The euro’s strength vs. the dollar declined from the highs seen earlier in the year,
finishing 2005 at 1.19 euros/dollar. This situation, together with a stable exchange
rate, favoured the Uralita Group given its exposure to the Russian rouble which is
closely linked to the US dollar.
The building
sector in Spain
remained strong
in 2005
Housing construction in Spain continued to be strong in 2005 with a year-on-year
rise in housing starts and in construction completion certifications of 6.2% and 5.6%,
respectively, according to the Ministerio de Fomento. The fundamental reasons for
this growth are the increase in migratory flows, the demand for second homes
among Spanish nationals and foreigners and the trend towards smaller family units
as the Spanish socio-cultural environment adapts to European standards.
16

The situation
in some markets
and higher crude
prices affected
Group margins
The European construction market in 2005 presented a very different picture. In
Germany the number of homes constructed fell for the fifth straight year, dropping
to approximately 215,000 building permits per year, which represents the same level
of housing construction as in the 1940s. This decline had a significant impact on
insulation sales in this region and, consequently, on the profitability of the business.
Portugal’s construction market also performed poorly: another year passed without
signs of a recovery and there was no indication of a turnaround in the immediate
future.
Nonetheless, other countries of key importance to the Uralita Group such as Russia,
posted double-digit growth in housing permits, resulting in a highly satisfactory
level of demand for insulation in those markets.
Along with the slump in the Central European construction market, the external
factor that most affected the Uralita Group was the rise in oil and oil-based raw
materials prices. This increase has a significant impact on the Group in the short
term since it is major energy consumer due to the type of production processes that
it carries out and the fact that some of the main raw materials used are derived from
oil, most notably plastics. The rise in the costs of these materials increases
manufacturing unit costs, but, due to the competitive dynamics of the sectors in
which the Group operates, it is unable to pass these added costs on to the final
customers with the necessary ease and speed. One insulating product, XPS, was
especially impacted. Its main raw material, polystyrene, accounts for more than 50%
of the total cost of the product, and the price of this raw material increased
significantly in 2005.
Furthermore, the increase in fuel prices had a major impact on transport costs, an
important factor when we consider that the Uralita Group moves approximately 900
lorries of finished goods daily.
17

Macroeconomic indicators and construction activity in Uralita Group’s core markets
New
construction:
Renovation:
2005 Spain Germany France Russia Poland Portugal
Population (millions) 43.8 82.5 60.2 142.9 38.2 10.5
GDP (% annual change) 3.4 0.9 1.4 5.9 3.2 0.3
CPI (% annual change) 3.7 2.1 1.8 11.0 0.8 2.5
Housing starts (thousands) 729.7 (1) 215.0 (2) 398.0 440.0 (3) 100.0 67.5 (2)
Building (% annual change) 4.0 -7.9 6.5 15.9 5.5 -5.7
Residential (% annual change) 4.8 -9.8 10.3 15.5 2.5 -7.5
Non-residential (% annual change) 2.2 -4.9 1.2 16.0 5.1 -2.5
Civil work (% annual change) 6.9 -8.0 1.1 13.8 16.4 2.0
Building (% annual change) 3.7 -1.3 1.5 9.6 3.5 1.9
Residential (% annual change) 4.4 -1.4 1.5 6.7 4.0 2.0
Non-residential (% annual change) 2.4 -1.0 1.5 10.1 3.1 1.5
Civil work (% annual change) 4.2 -3.6 1.5 5.1 4.5 2.0
Source: INE; BBVA; Federal Statistical Office Germany; EC; ISTAT; Bank of Portugal; Euroconstruct, CIA
(1) Source: Ministerio de Fomento (2) Figures given are for building permits due to the lack of figures for housing starts (3) Completed housing
LINES OF ACTION IN 2005
During 2005
the Group
concentrated
on four lines
of action in
order to respond
to the economic
situation
In response to the complex macroeconomic conditions in which it operates, the
Uralita Group focused primarily on four lines of action in 2005: completing the
divestment process, improving the business operating efficiency, redesigning the
organisational structure and continuing to establish a common culture of execution
in the Group.
1. Completion of the divestment process
The divestment process laid out in the 2004-2006 Strategic Plan was divided into
two phases:
i) Immediate disposal of non-core businesses which had negative profitability
and which, upon analysis, were identified as having no potential for recovering
profitability in the medium term. This phase of the process was executed in
2003 with the sale of six businesses and the closure of two others.
18

ii) Unlocking of value of those non-core businesses for which an increase in
profitability and subsequent disposal was seen as viable by the Group. Most of
the disposals took place in this phase, since a series of action levers were
identified in the Strategic Plan which enabled the Group to capture more value
from the sale of these non-strategic assets. This phase was carried out over the
years 2004-2005 and resulted in the sale of seven businesses (last one in
January 2006).
With the sale of
seven non-core
businesses, the
Group has now
concluded the
disposal of its
non-core activities
In 2005, six non-core businesses were disposed of, most notably the Chemicals
Business (Aragonesas Group) which was sold to the Ercros Group in May 2005 for
€180 million free of debt.
In the wake of the disposals in 2005 and the others in 2003-2004, only those
businesses earmarked as strategic and which will be springboards for future growth
remain within the Group’s scope.
Income resulting from the sale of the non-strategic assets amounted to €263
million which, together with the cash flow from operating income allowed
significant reductions in the Uralita Group’s debt.
Businesses
Disposal Date
Sanitary Ware 01/03
Insulation EPS:
Barberá del Vallés 11/03
Alcalá de Guadaira 12/03
Tapolca (Hungary) 12/03
Stone Wool 12/03
Flat Ceramic 12/03
Promat 03/04
Cerámicas Estructurales 01/05
Lusofane 04/05
Tejas Brasil 05/05
Uracan 05/05
Aragonesas 06/05
Teczone 11/05
Coverings 01/06
EV/EBITDA
average
x6.8
19

Now that all the divestments are complete and the balance sheet is in sound
condition, the Uralita Group is well positioned to undertake the next phase of the
Strategic Plan: profitable growth.
2. Efficiency improvements in the core businesses
In 2005 all
core businesses
introduced
efficiency
improvement
programmes
In 2005 further measures were implemented to boost efficiency at core businesses.
While the Management Report on each business provides a more detailed
description of the various initiatives, the main actions undertaken in 2005 are
summarised below:
Insulation Business
Due to the unfavourable economic environment confronting the Insulation Business,
a number of actions were undertaken with the aim of restoring the Business to
expected levels of profitability. On the industrial side, it was decided to close the
Wesel plant (Germany) and concentrate the production of piping insulation in Ursa’s
Hungary plant; in addition, production began on the second line of our Moscow
plant in the high-growth Russian market. Among the sales initiatives undertaken
were withdrawal from the industrial insulation market as well as discontinuance of
the marketing of third-party products, a situation which had prevented our sales
force from focusing on our main products. Operating units were concentrated in
order to simplify business structure, and a plan was devised to relocate the
headquarters from Frankfurt to Madrid.
Gypsum Business
The Gypsum Business continues to focus on profitable growth. Efforts were
concentrated on boosting penetration of Pladur® compared to traditional dry wall
partitions by means of promotions for groups of prescribers and distributional
development. In addition, our Pladur® plant in Valdemoro is continually working on
improving efficiency through systems of industrial management and on increasing
production through improved industrial ratios.
In our Algíss® powdered gypsum business, measures were aimed at broadening the
offering to customers through higher added-value products such as mechanically
applied gypsum with perlite, and by promoting the use of silos.
20

Roofing Business
In 2005, the Roofing Business focused mainly on simplifying its structure to enable it
to compete in this mature market in the future. Commercially, it consolidated all its
brands into one under the name Cobert® and simplified its product portfolio in order
to market its products in a more user-friendly and effective manner. This
simplification also had an impact on the industrial measures implemented, in that
the production of curved ceramic roof tiles in Spain was concentrated in Alfaro,
cutting production costs, and that of mixed ceramic roof tiles in Alicante, Toledo and
Outeiro (Portugal).
Pipes Business
The Pipes Business implemented a series of radical measures in 2005 to achieve an
appropriate level of profitability. It disposed businesses and activities with low
profitability for the Uralita Group or whose competitive position was weak,
concentrating its workforce on the promotion of higher-margin products. On the
industrial side, plants were specialised in order to optimise production costs. As for
overhead costs, headcount was reduced in line with the reduction in the scope of the
Pipes Business.
3. Adaptation of the organizational model
The more
simplified Group
structure following
the disposals
prompted an
organizational
restructuring
In the second half of 2005, the Group reviewed its organizational structure and that
of its businesses, in a bid to:
• Reduce the complexity of the Uralita Group after three years of boosting corebusinesses’
efficiency and shedding non-core businesses.
• Reduce the resources that the corporate centre needs to plough into supporting
the businesses, having established a management culture and processes
common to them all.
• Seek operating synergies between businesses, once Uralita had managed to
implement those Group’s common platforms synergies.
• Focus the corporate centre on the Group’s strategic development, particularly
through acquisitions.
21

As a consequence, the organisational change consisted of the following:
• Downsizing the corporate centre, adapting its costs to a sector that imposes
ever greater competitiveness and focusing the corporate centre’s efforts on
growth through acquisitions
• Transferring to the businesses the functions developed or overseen by the
corporate centre over the last three years, especially in the areas closest to
operations (purchasing, information systems, human resources, legal, etc.).
• Setting up two General Managements for the Uralita Group, one for the
Insulation Business (Ursa) and another that groups together the Gypsum,
Roofing and Pipes Businesses (Uralita Iberia).
• Ursa’s operating units were restructured and their total number was reduced,
thus cutting overhead costs. In addition, the decision was made to relocate the
Frankfurt headquarters to Madrid to ensure that the Group’s values and culture
were solidly implanted and to achieve the highest possible degree of synergies
among Uralita’s various businesses.
• At Uralita Iberia, overhead costs were reduced through the organisational
consolidation of its three Businesses: Gypsum, Roofing and Pipes. This new
situation will also allow the sharing of industrial best practices and an ongoing
analysis of joint commercial opportunities.
4. Progress in instilling the Group Culture
The culture of the
Uralita Group
consists of seven
values that
constitute the
basis for the
growth in our
project
The culture of the Uralita Group consists of seven values that constitute the basis for
the growth in our project at both company and personal level. In 2005, the Group
worked in the development of each one of its values:
Corporate spirit
In line with the objective of becoming an increasingly solid Group, the creation of
the General Management of Uralita Iberia, which groups together the Gypsum,
Roofing and Pipes Businesses, and the transfer of Ursa’s headquarters from
Frankfurt to Madrid will undoubtedly promote the Corporate spirit and culture and
the consolidation of our values.
22

Transparency
Increasing transparency is an ongoing objective in the Uralita Group. To this end, in
2005 the Board of Directors incorporated all best practices in relation to Corporate
Governance likely to generate value by increasing transparency and enhancing the
information available to all stakeholders: shareholders, workers, suppliers,
customers, markets, and the financial community in general. Moreover, the Group
promoted two-way, direct communication with its shareholders and institutional
investors through the Investor Relations Department and through the corporate
website and also strengthened internal communication channels through shared
information areas and the corporate intranet.
Openness to change
The Group
continues to work
to ensure that its
values are fully
implemented
throughout the
organization
The Uralita Group is open to rethinking the business model at any time in order to
be a leading force for change in our environment. In 2005, the Insulation and Roofing
Businesses made an in-depth study of their industrial structure and the Pipes
Business completely restructured its business.
Self-achievement mindset
This value, which is the driver of any professional or personal project undertaken, is
represented in the Uralita Group by all the people making up its human capital and
who through the motivation which they demonstrate in their work day in day out,
promote the growth of our company. In 2005, Uralita implemented policies for
improving human resources, quality, the environment and technology, with the
objective of enhancing efficiency every day in every one of the processes we
undertake.
Ambition for excellent results
One of the priorities of the Uralita Group is to achieve profitable and durable growth
that maximises long-term value for our shareholders. In 2005 the Group completed
the process of disposing of non-core business and consolidated its portfolio with the
four core businesses defined in 2003 – Insulation, Gypsum, Roofing and Pipes. These
divestments improved the Group’s financial situation by significantly cutting debt,
and boosted the operating situation by focusing on businesses in which the Group
can compete thanks to its scale, abilities and competitive position.
23

Respect for and continuous development of people
Our employees are the key to making Uralita a leading Group. In 2005, Uralita took
measures to enhance the job quality, working conditions and health of all the
Group’s employees. During the year the Group continued the Human Resources
Development and Training Plans initiated in earlier years which aim to provide the
necessary tools and management skills to help staff to better perform their jobs and
achieve their personal and professional objectives, thereby positively affecting the
Company’s results.
Social responsibility and commitment
In 2005 the Uralita Group, in collaboration with all of its employees, took part in
various activities to make a reality of this value to which we all subscribe. Among the
actions undertaken were: the Urality Aid Project (helping the victims of the Asian
tsunami), the “Donate your Mobile” Campaign (the proceeds of which were spent on
education and integration projects for the most needy), cooperation with Intermón
Oxfam and the NGO Tierra de Hombres, etc.
24

2005 RESULTS OF THE URALITA GROUP
2005 saw
the Group’s
second highest
results in the last
ten years with a
significant
reduction of debt
The main figures for 2005 are as follows:
Figures in millions of euros 2005 2004 2003
Sales 1,104.6 1,314.1 1,314.6
EBITDA 150.5 189.7 162.0
EBITDA margin 13.6% 14.4% 12.3%
Net profit 53.6 60.8 -26.4
Net profit margin 4.9% 4.6% -2.0%
Net Income attr. to cont. company 35.2 45.2 -41.9
Free cash flow 188.4 185.6 83.8
Net financial debt 140.1 292.0 451.1
Consolidated sales totalled €1,104 million, with sales made outside of Spain
accounting for 49% of the total. This figure includes the Chemicals Business’s first
five months of the year. The sales of its core businesses grew 0.6% compared with
2004.
Consolidated EBITDA for 2005 stood at €150.5 million. The decline compared with
2004 is due primarily to the smaller profit from the non-core businesses that were
sold and the fall in EBITDA in the Insulation Business, caused by the weak German
market and the rise in raw material prices. The Uralita Group reported an EBITDA
margin of 13.6% in 2005, versus 14.4% recorded in 2004.
Despite the results from the Insulation Business and the reduction of the Group’s
scope, net profit amounted to €53.6 million, with a margin over sales of 4.9%, up
0.3pp on 2004.
Net profit attributed to the controlling group in 2005 totalled at €35.2 million, the
Group’s second highest profit in the last ten years.
The operating profit achieved, together with the disposals carried out, enabled the
Group to maintain its investment programme, generating free cash flow of €188.4
million and slashing Group net debt to €140.1 million (from €292 million at the end
of 2004).
25

STRATEGIC PRIORITIES FOR 2006
Increase the efficiency of current businesses
One of the Uralita Group’s priorities for 2006 is to boost business profitability. In
pursuit of this objective the Group will benefit from the improvements made in 2005
(which in many cases will bear fruit in 2006) and other initiatives to be implemented
in 2006.
The Insulation Business is continuing with an aggressive cost-cutting plan at all
levels, optimising its production capacity and implementing price increase initiatives
to pass on rising raw material and energy costs to the end customer.
The Group will
benefit from the
improvements
introduced
in 2005 and
others to be
carried out
in 2006
The Pladur® Business is continuing to work to reduce the unitary manufacturing
cost, whilst the powdered gypsum business, Algíss®, is developing products with
higher added value, both of which measures are aimed at boosting profitability.
The Roofing Business has undergone major restructuring and is investing to hone
the technology used in its production processes with the aim of supplying a better
quality product.
Finally, the Pipes Business underwent a major restructuring process in 2005 to
become an efficient producer in the market in which it operates, with the aim of
recovering margins lost as a consequence of the increase in raw material prices,
competitive pressure and the slowdown in public works contracts.
The Company also simplified the structure of its central offices in 2005 to adapt it to
its new business portfolio. This will also help improve the profitability of the Uralita
Group as a whole.
Profitable growth
The Uralita Group has completed the process of restructuring its business portfolio
by disposing of all non-core businesses, and it is now ready to tackle the next stage
of its Strategic Plan: Growth. It has the necessary assets and has defined the
priorities that will drive this growth.
26

The Group has the
assets and has
defined the
priorities which
will drive growth
With regard to assets, the Group has:
• A sound financial structure with a Debt/EBITDA ratio of 0.9 at the end of 2005.
Assuming normal debt levels in the sector, the Group will be able to incur
significant further debt for significant investments.
• A corporate centre that, following the reduction and transfer of operating
functions to businesses, is focused on growth.
• A focused and simplified organisation, thanks to the new structure with Ursa
and Uralita Iberia, able to unlock resources for the integration of new
acquisitions.
• Proven management and integration processes.
The growth priorities for each business take into account a series of internal features
(strategic position of the business, internal management capacity) and external
characteristics (expected market performance, production capacity and utilisation,
competitive dynamics, etc.).
Business-by-business priorities are therefore as follows:
• In our Insulation Business the objective is to increase our market share in the
countries in which we are already present and to explore growth opportunities
in other European markets.
• In Pladur®, our aim is to maintain our market leadership of plasterboard, which
means our production structure must be able to meet projected future growth
in demand.
• In Powdered Gypsum, Algíss®, our aim is to improve our market share in the
Iberian Peninsular, consolidating our position as a market leader.
• In Roofing, the Uralita Group will seek to consolidate its leadership position in
the Iberian tiles market through its Cobert® brand.
• Finally, the Pipes Business is expected to maintain its leadership position in
Spain. Once the desired level of profitability had been achieved for the business
it will be possible to consider growth opportunities in new international
markets.
27

Uralita Group
Management
Report by
Business

30
A complex macroeconomic
situation in a high
potential business

Annual Report 2005
Uralita Group
Insulation
BUSINESS DESCRIPTION
Uralita Group’s Insulation Business, Ursa, manufactures and sells insulation solutions,
principally to the construction industry. The Business manufactures two kinds of
materials: Glass wool and extruded polystyrene (XPS). The Business also makes
technical glass wool products for use in pipe insulation.
Sales by product type
Sales by geographical area
OTHER 2.5%
REST OF THE WORLD 1.1%
SPAIN
10.6%
XPS
25.3%
REST OF EUROPE
24.0%
FRANCE
19.1%
GLASS
WOOL
72.2%
REST OF EU
29.0%
GERMANY
16.2%
Competitive positioning and market structure
Uralita Group
is the third
largest producer
of insulation
in Europe
Uralita Group is the third largest producer of insulation in Europe. The material that
competes most directly with glass wool is another mineral wool, stone wool. The
main products to compete directly with XPS are other foam products such as EPS
(expanded polystyrene) and PUR/PIR (polyurethane/polyisocyanurate)
Ursa’s business scope encompasses Europe and Russia, being the second largest
producer of glass wool and XPS and the third largest manufacturer of all insulation
materials. Ursa is market leader in many Eastern European countries and in Russia.
Ursa currently has nine glass wool and four XPS plants in Spain (2), France (2),
Belgium, Italy, Germany (2), Slovenia, Hungary, Poland and Russia (2).
Due to the high entry barriers, the European mineral wools market is highly
concentrated, with five major players present in most markets. The market for XPS
and for foam products in general is significantly more fragmented, especially in
Southern Europe, where there are an increasing number of producers.
31

Ursa sells both
glass wool and
XPS to a large
percentage of
its customers
There are four main sales channels for insulation materials:
• General distributors of construction materials.
• Specialist distributors in a specific segment, where insulation materials are part
of their product offering.
• Large DIY (“Do it yourself”) stores.
• Direct sale to manufacturers.
Ursa sells both glass wool and XPS to a large percentage of its customers, as this
combined offering of complementary insulation materials is one of its main
competitive strengths. Ursa is the only company which manufactures and sells both
materials and which is a leader in both.
Map of plant facilities
GLASS WOOL
XPS
32

BUSINESS PERFORMANCE IN 2005
Market growth
In Western and Central Europe, growth was fairly uneven in the different markets.
Among the growth markets, Spain, France and the UK are worth a particular
mention. Among the markets where growth was negative, we would highlight
Poland and Germany (consumption of insulation materials was closely related to the
negative general performance of the construction sector in the latter country). In
Eastern Europe and Russia the performance was boosted by the increase in
construction activity and the penetration of insulation materials.
Main initiatives of the Uralita Group
Given the
situation of
the market,
Ursa revised
its Strategic
Plan in 2005
Given the situation of the market, whose performance did not match the business
plan’s forecasts, Ursa revised its Strategic Plan in 2005. In August the Group
implemented an ambitious restructuring plan whose strategic objectives were,
firstly, to focus activity on the core construction business, secondly, to tailor existing
production capacity to demand, especially in Western Europe, and, thirdly, to
implement an ambitious plan to cut costs and reduce the complexity of the
business, thereby increasing its profitability. The initiatives carried out were as
follows:
• Closure of the Wesel glass wool plant in Germany.
• A significant cutback in industrial insulation activities.
• Withdrawal from sale of third-party products.
33

• Closure of the pipe insulation line in Novo Mesto (Slovenia), concentration of
production at the Salgotarjan plant (Hungary) and concentration of sales in
more profitable markets.
• Rationalisation of the product portfolio
• Personnel downsizing at all levels and structural cost cuts.
• Drafting of a plan to reduce the number of operating units (to be implemented
in 2006).
Finally, the decision was made to relocate the headquarters from Frankfurt to
Madrid to consolidate the culture of the Group and increase synergies with the
Group’s corporate centre and other businesses.
2005 Results
The Insulation Business reported sales of €440 million in 2005, up 1.1% on 2004,
thanks to the growth of Eastern European markets, which offset the decline in
activity in Germany.
EBITDA in the Insulation Business came to €55.4 million, 25.3% down on 2004. The
EBITDA margin fell from 17.1% in 2004 to 12.6% in 2005. This setback in profitability
was due primarily to the situation of construction markets in Central Europe, mainly
Germany, and secondly to the increase in the cost of energy and oil-derived raw
materials, with the temporary difficulty of passing on the entire increase in these
costs to the market at present.
34

Financial highlights
Million euros
2001 2002 2003 2004 2005
Sales* 195.2 258.4 434.5 434.4 440.0
EBITDA 18.5 27.1 72.1 74.2 55.4
EBITDA margin 9.5% 10.5% 16.6% 17.1% 12.6%
Capital expenditure 23.3 14.1 36.0 43.9 54.8
Year-end workforce 827 2,275 2,239 2,239 2,188
* Business sales include intra-group sales
MILESTONES FOR 2006
In 2006 the Group will focus on stabilising and increasing the profitability of its
current core businesses and seeking growth opportunities.
• Continuing to reduce costs and improve industrial and logistics efficiency.
• Completing the reduction of the number of operating units and the transfer of
the headquarters to Madrid.
• Identifying and assessing new growth projects, especially in Eastern Europe.
35

36
Increased penetration
of plasterboard and
higher value-added gypsum
products are boosting
profitability

Annual Report 2005
Uralita Group
Gypsum
BUSINESS DESCRIPTION
The Gypsum Business manufactures and sells building products and interior partition
solutions for all segments of the building construction sector (residential and nonresidential
construction, refurbishing and reforms). It has two business lines:
• Pladur® plasterboard systems: dry wall partition solutions
• Powdered gypsum under the Algíss® brand: traditional or wet plaster partition
solutions
Sales by geographical region
REST OF THE WORLD 1.8%
REST OF EUROPE
7.4%
SPAIN
90.8%
Competitive positioning and market structure
PLADUR®
Pladur®
has now
become the
widely accepted
term for
plasterboard in
Spain and
Portugal
Pladur® construction systems, comprising plasterboard and other items required for
its assembly, lead the Iberian market where the Pladur® brand name has virtually
become the generic term for plasterboard. Plasterboard systems are quicker and
easier to assemble than traditional partition solutions, and are therefore cheaper to
install. They also have better finishes and provide better thermal and acoustic
insulation. In addition, some products in the plasterboard system range have
waterproof and fire-resistant properties, among others.
Pladur® production is carried out at the Valdemoro plant, which supplies the
company’s markets in the Iberian peninsular and abroad.
The Iberian plasterboard market is an established market, with three multinationals
companies as competitors and it has registered high growth in recent years.
37

Pladur® is mostly sold through distributors, a sector that has registered significant
growth in recent years. The second most important channel is direct installation,
with slower growth rates. Other less important channels are large retail outlets and
manufacturers of other products, which use the board as a raw or semi-finished
material.
Plasterboard is
perfect for the
needs of the
refurbishment
and reform
segment which
is envisaged to
grow as new
building works
decline
With regard to applications, Pladur® systems are used both in new constructions
(residential and non-residential) and in refurbishing and reforms. In recent years
Pladur® has focused largely on new residential construction as this segment
accounts for approximately 60% of the faceboards (partition walls, structural walls
and roofing) built in Spain and currently has the lowest penetration for plasterboard.
Campaigns have been directed at promoters and constructors to explain the
advantages of Pladur® construction systems over traditional solutions. Also,
although it is the smallest segment in the faceboards market, refurbishing and
reforms has magnificent future prospects as it will be the fastest growing segment
when new residential construction declines, and plasterboard fits perfectly with the
construction needs of this segment.
ALGÍSS®
2005 saw the launch of the Uralita Group’s new powdered gypsum brand: Algíss®
The choice of this brand was inspired by the Mozarabic term for gypsum and the
inspiration for the logo is derived from the “desert rose”, which is a shape into which
gypsum mineral crystallises.
Although Algíss® ranks second in the Iberian market in volume terms, it is the sector
leader in terms of product range and quality. Algíss® continues to promote higher
value-added gypsum products by stressing their advantages in terms of profitability
and quality compared to other more traditional products such as manually applied
plaster. In addition, Algíss® is the producer with the greatest focus on customer
service, promoting its gypsum silos offer and developing new services such as SMS
shipping notification.
Four plants, located in mainland Spain, serve the various domestic markets for
Algíss®.
38

Unlike the plasterboard market, the powdered gypsum market is strongly regional
due to the different construction methods in each region and the high cost of
transport. Therefore the relative weighting of the two main distribution channels,
applicator and general distributor, vary according to the regional market.
The product preferences of each market also differ: markets such as northern Spain
consume more added value gypsum products, while manually applied plaster still
has a larger market share in the country’s north-east.
Map of plant facilities
MAÑERU
(NAVARRA)
BEUDA
(GERONA)
VALDEMORO
(MADRID)
POWDERED GYPSUM (ALGÍSS®)
ALICANTE
PLASTERBOARD (PLADUR®)
BUSINESS PERFORMANCE IN 2005
Market growth
Increased use of
plasterboard is
due to its
advantages
compared to
traditional
partition walling
solutions and
to Pladur®’s
marketing policy
The building sector in Spain, which accounts for most of the Gypsum Business’s
activity, remained buoyant in 2005 with 730,000 housing starts. The penetration of
plasterboard in Spain, measured as the percentage of square metres of interior
board over total partitions constructed, continued to increase and stood at 15% in
2005, though there is still huge potential compared with neighbouring countries.
This is due to the advantages of Pladur® construction systems over traditional
solutions, as well as to the commercial policy implemented by Pladur®.
The powdered gypsum market also performed well due to the change in product
mix, headed by Algíss®, and the high level of construction activity.
Main initiatives carried out by Uralita
PLADUR®
Pladur® increased its profitability in 2005 as a result both of commercial (market
development and product range) and industrial improvements.
39

In terms of market development, the
Business focused on increasing the
penetration of Pladur® construction
systems over traditional solutions
through:
• Promotional campaigns with decision
making groups: developers (direct
marketing campaigns), architects
(Pladur® prize), installers (construction
references on the website) and endusers
of the system (possibility of hiring
an installer via the website).
• Development of distribution by
attracting new customers: extension of
use of e-commerce, joint advertising.
• Loyalty plans for indirect clients
Pladur®’s
margins
improved thanks
to the market’s
development,
the launch of
new products
and
improvements
in industrial
efficiency
With regard to the product range, the most important event was the launch of the
new Pladur Fon® range for soundproofed ceilings.
Finally, as regards industrial plans, the most important was the implementation of
the Valdemoro management plan, which enabled the Business to achieve a new
record for plasterboard production and to reduce unit production costs with
measures such as:
• Improving the plant’s efficiency, introducing industrial management systems
such as TPM (Total Productive Maintenance) and OOC (Organisation, Order and
Cleaning), etc.
• Boosting output via initiatives to improve industrial ratios, thereby maximising
available capacity.
• Reducing industrial costs: reducing the weight of board, improvements in
dosage, adaptation of the workforce, etc.
ALGÍSS®
The efficiency of the Powdered Gypsum business was also enhanced by:
• Improving the mix through promotions of applied gypsum with perlite and
promoting the use of gypsum for silos which has advantages in terms of speed,
productivity and application quality.
• Improving the industrial process both in terms of technology used and by
implementing a single total management quality system, which has served as a
platform for the transfer of knowledge and best practices.
40

2005 Results
In 2005 the
Gypsum
Business posted
a record EBITDA
margin of 29.3%
The Gypsum Business reported excellent results in 2005, with turnover close to €200
million and EBITDA of €58.5 million.
Both businesses contributed to the 9.5% sales growth compared to the previous
year, higher than the average for the construction activity in Spain.
The business as a whole reported a record EBITDA margin of 29.3%, up 0.7% on 2004,
thanks to the industrial efficiency programmes, comfortably offsetting the increase
in energy and transport costs.
Financial highlights
Million euros
2001 2002 2003 2004 2005
Sales* 136.0 146.5 164.7 182.2 199.6
EBITDA 30.7 35.8 45.6 52.2 58.5
EBITDA margin 22.6% 24.4% 27.7% 28.6% 29.3%
Capital expenditure 17.8 20.8 7.1 11.0 12.9
Year-end workforce 494 525 531 509 492
* Business sales include intra-group sales
MILESTONES FOR 2006
In 2006 the Business will focus on continuing to improve sales and profitability,
maintaining its leadership position.
• Continuing with the programme of initiatives to increase penetration of
Pladur® systems.
• Establishing the Algíss® brand as a benchmark for powdered gypsum.
• Consolidating the industrial and commercial presence of Algíss® in the Iberian
Peninsula.
• Designing new management systems to enhance our customer relations.
• Improving the supply chain, thereby further increasing the level of service and
reducing logistics and industrial costs.
41

42
Disposal of non-core activities
and improvements
at the core businesses
of Tejas España and
Tejas Portugal

Annual Report 2005
Uralita Group
Roofing
BUSINESS DESCRIPTION
The Roofing Business is centred on Spain and Portugal. In Spain, Uralita manufactures
and sells concrete tiles, mixed and curved ceramic tiles, special pieces and integral
roofing solutions. In Portugal, Uralita’s business focuses on bricks, mixed ceramic roof
tiles and special ceramic pieces.
Following the
disposals,
the Business is
now made up of
the core
activities of
Tejas (Roof tiles)
España and
Tejas (Roof tiles)
Portugal
In 2005 and the first quarter of 2006, as part of the disposal process for non-core
businesses set forth in 2004-2006 Strategic Plan, the Group sold the Roofing
Business’s remaining non-core businesses: the Brazil business (roof tiles and bricks),
Caolita and Uralusa (works), Profiles and Panelling in 2005, and Coverings in January
2006.
Sales by product type
COVERINGS
23.8%
PROFILES AND
PANELLING
15.3%
URALUSA
1.3%
ROOF TILES
(CONCRETE,
MIXED AND CURVED
CERAMIC)
37.2%
Sales by geographical region
OTHER 3.5%
NORTH AMERICA 0.5%
CENTRAL AND SOUTH
AMERICA 2.1%
PORTUGAL
17.2%
BRAZIL 1.7%
OTHER
STRATEGIC
9.4%
CONC. AND CER. PIECES 7.2%
BRICKS 4.1%
SPAIN
76.7%
Competitive positioning and market structure
Uralita remains the leader in the production and sale of roof tiles in the Iberian
market and occupies a prominent position in concrete roof tiles. It is also market
leader in ceramic roof tiles. The Iberian market is fragmented. The introduction in
recent years of new ceramic roof tile plants have resulted in excess supply, affecting
the dynamics of the sector. Uralita has focused on consolidating its industrial
capacity and promoting products with a better competitive position and projected
margins.
43

Uralita’s main distribution channels are stockists and installers; the latter channel, in
which Uralita is participating with joint developments of integral solutions for roofs,
is gaining strength. Uralita remains present in major retail outlets and wholesale
centres, though these account for a small percentage of its business at present.
Uralita serves customers through a large and experienced sales force, the largest in
the Iberian peninsula by coverage and capillarity. The sales team focuses both on key
agents and on working with customers, participating in the design of custom-made
solutions; Uralita has a special centre where products are on display and training
courses are available.
It also has a large number of industrial facilities, each specialising in a specific
product, throughout Spain and Portugal.
Map of plant facilities
ZAMBRANA
ALFARO
MONJOS
BUSTOS
SANCHIDRIÁN
ARÉVALO
VALDETORRES
SAN FRANCISCO
TOLEDO
OUTEIRO
RAMALHAL
ALICANTE
CERAMIC ROOF TILES
BRICKS
CONCRETE ROOF TILES
SEVILLA
SPECIAL CERAMIC PIECES
SPECIAL CONCRETE PIECES
44

BUSINESS PERFORMANCE IN 2005
Market growth
The performance of Uralita’s core businesses in Spain and Portugal has been uneven
due to the different situation of the construction market in each country. In Spain,
the positive performance in recent years continued. The record for the number of
housing construction permits was broken again. The situation remained difficult in
Portugal, where the market showed no signs of recovery in 2005, declining for the
fourth consecutive year.
Main initiatives carried out by Uralita
The launch of
the Cobert®
single brand
name will lead
to a clearer and
more efficient
market
approach
Against this backdrop, and in line with the 2004-2006 Strategic Plan, which included
a disposal process for non-core businesses, the main initiatives in 2005 were as
follows:
• Disposal of the Brazilian business, Caolita and Uralusa and the Profiles and
Panelling Businesses, which were regarded as non-strategic. Following the sale
of the Coverings business (fibre-cement sheeting) in January 2006, the Roofing
Business comprised just two core businesses: Tejas (Roof tiles) España and Tejas
(Roof tiles) Portugal.
• The launch in April of a new brand in Spain (Cobert®) gave us a stronger and
more efficient market foothold by unifying the four previous brands under a
single umbrella.
• Further simplification of the product range by unifying previous product ranges.
45

• Closure of brick production facilities in northern Portugal that failed to achieve
projected profit targets and concentration of production at the Outeiro plant.
• Concentration of production of ceramic roof tiles in the Alfaro factory, ceasing
this activity elsewhere (Cervelló and Alicante) and freeing capacity for mixed
ceramic roof tile production in Alicante.
• Continuing to implement the same total quality management system at all our
plants in Spain and Portugal, providing a platform for sharing best practices and
specific know-how.
2005 Results
Lower sales
compared to
2004 due
mainly to the
disposals
carried out
Sales totalled €182.6 million in 2005, 21% down on the previous year. This slide is due
primarily to the reduction in the consolidation scope as a result of the disposals
carried out.
The strategic Roofing business in Spain and
Portugal reported sales of €108.2 million in 2005,
6% down on 2004. The EBITDA margin of the
strategic businesses was 14.8%, with very
different dynamics in both countries: in Spain,
where the construction growth trend seen in
recent years continued, sales were 2% higher
than in 2004, whilst in Portugal, where
construction activity slowed for the fourth
consecutive year, sales were 20% lower.
46

Financial highlights
Million euros
2001 2002 2003 2004 2005
Sales* 305.6 274.6 260.8 230.3 182.6
EBITDA 54.6 38.6 33.3 32.3 21.8
EBITDA margin 17.9% 14.1% 12.8% 14.0% 11.9%
Capital expenditure 29.6 23.8 10.5 7.0 6.8
Year-end workforce 1,730 1,807 1,568 1,529 921
* Business sales include intra-group sales.
MILESTONES FOR 2006
Our target for
2006 is to
improve
profitability
thanks to
increased
industrial
efficiency and
processes and
solid commercial
positioning
In 2006 the main objective is to improve the profitability of our businesses by
boosting industrial efficiency and improving our internal operational processes, as
well as maintaining a solid commercial position in Spain and Portugal.
• To seek to innovate by launching new products and services that permit us to
strengthen our leadership image.
• To make significant investments to ensure the technological competitiveness of
our industrial facilities and achieve cost efficiency.
• To continue to progressively increase sales of roofing components.
47

48
Restructuring to achieve
adequate and sustainable
profitability

Annual Report 2005
Uralita Group
Pipes
BUSINESS DESCRIPTION
The Pipes Business manufactures and sells pipes and accessories made of plastic
(mainly PVC and polyester reinforced with glass fibre) for infrastructure and building
works in Spain, Portugal and France. For infrastructure works it provides integral
solutions for networks that supply irrigation and drinking water, sanitary networks
and land drainage. For buildings, the Business offers a wide range of drainage
products.
Sales by product type
Sales by geographical region
OTHER 12.8%
REST OF THE WORLD 1.9%
PORTUGAL 3.1%
FRANCE 13.9%
PIECES
17.9%
POLYESTER
PIPES 8.8%
PVC PIPES
60.5%
SPAIN
81.1%
Competitive positioning and market structure
Uralita is
present in the
infrastructure
and building
markets
The Pipes Business operates in a market worth an estimated total of €1.52 billion, of
which 60% corresponds to infrastructure works and 40% to building. Uralita
controls approximately 9% of the general market and 20% of the PVC pipe market.
Infrastructure sales, a segment in which Uralita is present in Spain and Portugal, are
distributed among two market segments: water infrastructure and sanitary
infrastructure, with seven types of products, of which three (corrugated pipes, PVC
pressure pipes and polyester pipes) account for close to 80% of sales. The Building
Business is active in the drainage segments in Spain, Portugal and France, and to a
lesser extent in sanitary networks in France. It has six product types, of which two
(co-extruded drainage pipes and accessories) account for 84% of total sales.
49

The breakdown of sales by customer is very different in each business. Whilst the
most important customers in infrastructure works are construction companies (both
national and local) and hydraulic works installers, in construction sales are
concentrated in distribution.
Commercially, Uralita’s Pipes Business enjoys a high level of confidence and has a
solid presence in infrastructure requirements. It also maintains a buoyant
competitive position in the building market and is well positioned in the channel,
both in Spain and in France.
Map of plant facilities
ALOVERA
(GUADALAJARA)
GETAFE
(MADRID)
ALCÁZAR
(CIUDAD REAL)
SAN VICENTE
DEL RASPEIG
(ALICANTE)
CERDANYOLA
(BARCELONA)
PVC PIPES
POLYESTER PIPES
PIECES (MAINLY PVC)
ANTEQUERA
(MÁLAGA)
50

BUSINESS PERFORMANCE IN 2005
Market growth
The infrastructure market in Spain and Portugal
grew by 5% 1 compared with 2004. In building
construction, performance varied considerably in
different countries: Spain and France registered
growth of 5% and 10% respectively, whilst in
Portugal the market declined by around 7.5% 2 .
Main initiatives
Disposal of
non-core
businesses,
specialisation
of factories and
headcount
reductions
The Pipes Business continued to implement an
ambitious restructuring plan in 2005:
• Withdrawal from unprofitable businesses:
sale of filters, production and sale of cable
and gas piping.
• Disposal of businesses with a weak
competitive position: Lusofane (Portugal);
Uracan (Canary Islands); Aquatecnic (Spain)
and a joint venture with STF.
• Completion of specialisation process at all factories with the aim of optimising
production costs and maximising production capacity: Getafe (PVC for
drainage), Alcázar (polyester), Antequera (PVC for high-pressure pipes),
Cerdanyola (PVC for drainage) and Alovera and San Vicente (pieces).
• Finally, adaptation of the Pipes Business to the new organisational structure
entailed 76 job cuts in 2005 (excluding the staff of the businesses sold).
1
Euroconstruct figures including Energy and Hydroelectric works
2
New residential construction figures from Euroconstruct
51

2005 Results
Improved
EBITDA despite
the significant
reduction in
sales due to
disposals
The Pipes Business reported sales of €163.7 million in 2005, 23.1% below the 2004
figure. However, EBITDA rose to €3.6 million.
The significant decline in sales was due to the disposal of non-core assets, whilst the
withdrawal from unprofitable businesses and the implementation of restructuring
and reorganisational measures increased profitability. The challenging situation of
the polyester pipes market, where competitive pressure has triggered a sharp fall in
prices, meant that profits were lower than expected.
Financial highlights
Million euros
2001 2002 2003 2004 2005
Sales* 206.8 214.5 227.6 212.7 163.7
EBITDA 16.2 21.4 7.4 2.2 3.6
EBITDA margin 7.8% 10.0% 3.2% 1.0% 2.2%
Capital expenditure 4.9 4.8 6.7 7.3 5.0
Year-end workforce 835 849 970 793 585
* Business sales include intra-group sales.
52

MILESTONES FOR 2006
The main objective is to sustainably increase profitability to sector levels by focusing
on activities in which the business has a solid competitive position.
In pursuit of this aim the priorities are:
• To optimise industrial costs by making factories specialised with the aim of
increasing production capacity and reducing fixed unit costs.
• To improve the efficiency of logistics warehouses by increasing their sales of both
manufactured products and, especially, marketed products.
• To revise the sales model to optimise the current commercial networks for
infrastructure works and building works.
53

Uralita Group
The Uralita Group
on the
Stock Market

The Uralita Group
on the Stock Market
Share performance in 2005
Uralita, S.A., parent company of Uralita Group, is listed on the Spanish continuous stock markets in
Madrid, Barcelona and Valencia. At December 31, 2005, its share capital was made up of 197,499,807
shares, each with a nominal value of €0.72.
The Uralita share began the year on an upward trend, which it maintained through to the end of
September, outperforming the Ibex 35 and reaching its high for the year on August 11, when it closed
trading at €4.70. However, the share fell sharply in the last quarter following news about the results of
some sector companies and the Group own earnings, which were affected by the outlook for its
Insulation business. The share price stood at €3.42 on 31 December 2005, a low for the year, implying an
overall 8% loss in 2005.
Uralita’s market capitalisation at 31 December stood at €675.4 million.
56

H1 2003 H2 2003 H1 2004 H2 2004 H1 2005 H2 2005
Uralita share performance compared with Ibex 35 since 2003
240
+26% +52% -8% +29%
220
200
180
160
140
120
100
80
H1 2003 H2 2003 H1 2004 H2 2004 H1 2005 H2 2005 H1 2006
Uralita Ibex 35
Uralita share price performance versus other building materials groups
250
200
150
100
50
H1 2003 H2 2003 H1 2004 H2 2004 H1 2005 H2 2005 H1 2006
Uralita Saint Gobain Lafarge Wienerberger
57

Annual highs, lows and closing prices of Uralita Group shares
Share performance (euros per share)
High Low Close
2002 2.41 1.76 1.96
2003 2.49 1.66 2.46
2004 3.73 2.44 3.73
1Q 2005 4.38 3.65 4.22
2Q 2005 4.5 3.94 4.31
3Q 2005 4.7 4.03 4.47
4Q 2005 4.58 3.42 3.42
1Q 2006 4.39 3.48 4.34
Market capitalisation
Market capitalisation at the end of the year (million euros)
800
600
736.7
675.4
871.0
400
200
361.1
479.0
0
2002 2003 2004 2005 2006*
* At 28 April 2006 (at the time this annual report went to press)
Main Shareholders
Based on latest available information Uralita has three main shareholders:
Shareholder Number of % share
name direct shares capital
Nefinsa, S.A. 85,649,040 43.367
Caja de Ahorros de Salamanca y Soria (Caja Duero) 10,355,751 5.243
Atalaya Inversiones, S.R.L. 9,877,083 5.001
Free float 91,617,933 46.389
Own shares and share option Plans
Uralita held no own shares.
Uralita Group currently operates no share option schemes for employee or manager remuneration.
58

Shareholder remuneration
Shareholder remuneration is fundamental to Uralita Group’s policy of creating value for its
shareholders. The company has a general payout target of 30%-40%.
However, after a year like 2005, in which cash flow generation on the back of operations and disposals
enabled the Group to significantly reduce its debt, the Group is in a position to consider offering an even
more attractive payout to shareholders.
Hence, at the General Shareholders’ Meeting, the Board of Directors will propose a dividend of €0.11 per
share against 2005 earnings, representing a 61% payout.
The current low level of debt means payment of this dividend will jeopardise neither the current
financial structure of the Group nor future growth opportunities.
Stock market ratios
2001 2002 2003 2004 2005
Share price at December 31 (euros/share) 1.96 1.96 2.46 3.73 3.42
Annual change in share price (%) -3.4% -0.3% 25.7% 51.6% -8.3%
P/E 13.6 21.7 N/A 17.0 19.2
EV/EBITDA 5.5 6.5 6.3 5.9 5.2
EPS 0.14 0.09 -0.22 0.23 0.18
Price/Book value 0.96 0.98 1.40 2.08 1.76
Source: Uralita, JCF and Bloomberg
Dividend per share
0.2
0.18
0.16
0.14
0.12
0.1
0.08
0.06
0.04
0.02
0
0.17
0.08 (2)
0.11 (3)
0.08
0.09 (1) (1) Ordinary dividend
(2) Extraordinary dividend to compensate for
0.04
0.00
the absence of a dividend payment in 2003
(3) Proposal pending approval at the General
2001 2002 2003 2004 2005
Shareholders’ Meeting
(*) Dividend percentage as a proportion of Net Income attributable to the controlling company.
59

Uralita Group
Corporate
Governance
Annual Report

Uralita, S.A.
Corporate Governance Annual Report
for the Year Ended 31 December 2005
Approved by the Board of Directors on 27 March 2006
INTRODUCTION
The present Corporate Governance Annual Report, approved by the Board of Directors of Uralita, S.A.
(“Uralita”) at its Meeting of 27 March 2006, has been prepared in accordance with Law 26/2003 of 17
July, Ministerial Order ECO 3722/2003 dated 26 December and Circular 1/2004, of 17 March, issued by the
Comisión Nacional del Mercado de Valores (the Spanish securities regulator or the “CNMV”). These
regulations have been passed in recent years with the aim of reinforcing transparency at listed
companies.
This Report shall be presented to shareholders at the Ordinary General Meeting of Shareholders and will
be notified to the CNMV as a Significant Event. Also, this Report shall be available to shareholders on its
website, so satisfying the shareholders’ right to information as set out in articles 112 of the revised
Corporations Law and 117 of Securities Market Law 24/1988, dated 28 July. In this way, any interested
party can become acquainted with the Uralita Group’s corporate governance policies.
The Report’s content and structure have been adapted to comply with the CNMV’s Circular 1/2004 of 17
March regarding the annual corporate governance report of listed companies and other entities issuing
securities for trading on secondary official securities markets, and other information vehicles of listed
companies.
62

A. SHARE CAPITAL STRUCTURE
A.1. Share capital
Last modification date Share Capital Number of shares
26 May 2004 142,199,861.04€ 197,499,807
All shares belong to a single class and series and confer the same voting and economic rights.
The shares are recorded in book-entry form in the appropriate registers at IBERCLEAR.
All the shares making up the share capital of Uralita are listed for trading on the Stock Exchanges of
Madrid, Barcelona and Valencia and traded through SIBE.
A.2. Significant direct and indirect shareholders at year-end, excluding Directors.
Tax ID number Shareholder Number of Number of indirect % share
name direct shares shares capital
Cycladic Catalyst
Master Fund 2,050,868 0 1.038
Significant movements in the shareholder structure during the financial year
During the year 2005 there were not any significant changes in the shareholder structure.
63

A.3. At the time of writing, the members of the Board of Directors of Uralita have the following
shareholdings.
Tax ID Name or First Most recent Number of Number of % of total
number company of appointed appointment direct indirect share capital
the Director shares shares
A-48.069.181 NEFINSA, S.A. 10/12/2002 10/12/2002 85,649,040 0 43.366
G-37.244.191 Caja de Ahorros
de Salamanca y
Soria (Caja Duero) 15/07/2002 15/07/2002 10,355,751 0 5.243
B-82.718.206 Atalaya
Inversiones, SRL 19/06/2001 19/06/2001 9,877,083 0 5.001
15.768.843-C Mr. Javier
Echenique
Landiríbar 8/01/2003 8/01/2003 75,000 0 0.038
% TOTAL OF CAPITAL HELD BY BOARD OF DIRECTORS 53.65
Members of the Board of Directors with share options.
No Director has any options on shares in the Company.
A.4. Family, commercial, contractual or corporate relationships between significant shareholders.
The Company is not aware of any relationships of a commercial, contractual or corporate nature
between significant shareholders.
A.5. Relationships of a commercial, contractual or corporate nature between significant shareholders,
unless they are insignificant or derive from ordinary business activities.
There are no relationships of a commercial, contractual or corporate nature between significant
shareholders and the Company, with the exception of those mentioned in section C.1. of this report in
relation to related party transactions.
A.6. Shareholders’ agreements of which the Company has been notified.
The Company is unaware of the existence of any agreements between its shareholders.
Concerted actions between shareholders
The Company is unaware of the existence of any concerted actions between its shareholders.
A.7. Natural or corporate person who exercises, or can exercise, control over the company in accordance
with article 4 of the Securities Market Law.
There are no agreements of any kind among Uralita’s shareholders, nor between the Directors of the
Company, that would allow any of these to exert a control greater than that corresponding to their
share in the Company’s capital. As a consequence, no person controls Uralita in the sense defined by
article 4 of the Securities Market Law.
64

A.8. Own shares.
During the year 2005 Uralita has not made any operation with own shares.
A.9. Terms and conditions of the current authorisation granted at the General Meeting of Shareholders
to the Board of Directors for transactions involving own shares.
The General Meeting of Shareholders held on 18 May 2005 passed the following resolution: Sixth: to
authorise, in accordance with Article 75 of the Corporations Law, the derivative acquisition of shares of
Uralita S.A. within the limits set by law. The authorisation applies, with the increased limit, to
acquisitions made by the Subsidiary Companies of Uralita, S.A.
A.10. Restrictions on voting and the acquisition or transfer of holdings in the Company’s share capital.
Article 17 of the Articles of Association states that fifteen or more shares are required to attend General
Meetings, which must be registered in the appropriate accounting record at least five days prior to the
date on which the Meeting is to be held. Each fifteen shares shall confer one vote.
There are no restrictions on the acquisition and transfer of shares.
B. MANAGEMENT STRUCTURE OF THE COMPANY
B.1. Board of Directors
B.1.1. Maximum and minimum number of Directors as set out in the Articles of Association
Maximum number of Directors 20
Minimum number of Directors 3
65

B.1.2. Members of the Board
Tax ID Name or Representative Position on the First Most recent Appointment
number company Board appointed appointment procedure
of the Director
22.540.252-E Mr. Javier Chairman 10/12/2002 10/12/2002 Co-opted and
Serratosa Luján
ratified by the
General
Meeting of
Shareholders
A-48.069.181 NEFINSA, S.A. Mr. Pablo Director 10/12/2002 10/12/2002 Co-opted and
Serratosa Luján
ratified by the
General
Meeting of
Shareholders
G-37.244.191 Caja de Ahorros Mr. Julio Director 15/07/2002 15/07/2002 General
de Salamanca Fermoso García Meeting of
y Soria (Caja Duero)
Shareholders
B-82.718.206 Atalaya Inversiones, Mr. José María Director 19/06/2001 19/06/2001 General
SRL Bueno Lidón * Meeting of
Shareholders
15.768.843-C Mr. Javier Echenique Director 8/01/2003 8/01/2003 General
Landiríbar
Meeting of
Shareholders
22.674.311-Z Mr. José Manuel Director 8/01/2003 8/01/2003 General
Serra Peris
Meeting of
Shareholders
27.808.279-Z Mr. Jesús Quintanal Director 8/01/2003 8/01/2003 General
San Emeterio
Meeting of
Shareholders
19.831.991-B Mr. José Antonio Director 10/12/2002 10/12/2002 Co-opted and
Carrascosa Ruiz
ratified by the
General
Meeting of
Shareholders
General
29.159.722-T Mr. Javier González Ochoa Director 10/12/2002 10/12/2002 Co-opted and
ratified by the
General
Meeting of
Shareholders
8.098.784-R Mr. José Ignacio Olleros Piñero Director 8/01/2003 8/01/2003 General
Meeting of
Shareholders
1.342.266-D Mr. Álvaro
Rodríguez-Solano Romero Director and 26/05/2004 26/05/2004 General
Board Secretary
Meeting of
Shareholders
* Mr. José María Bueno Lidón was appointed proxy for Atalaya Inversiones, S.R.L.’s Board seat on 2 September, 2005, replacing Mr. Juan Pedro Álvarez
Giménez.
TOTAL NUMBER OF DIRECTORS 11
66

Resignations from the Board of Directors in 2005
Tax ID number Name or company name Date of resignation
03.093.587-H Mr. Íñigo Jodra Uriarte 23/11/2005
4025728945D (1) Mr. Frank Wojtalewicz * 11/10/2005
(1) Passport number
(*) Mr. Frank Wojtalewicz was appointed Board Director at the General Meeting of Shareholders held on 18 May, 2005.
B.1.3. Members of the Board of Directors
EXECUTIVE DIRECTORS
Tax ID Name or Committee which Position at the
number company name proposed their appointment Company
22.540.252-E Mr. Javier Serratosa Luján Nomination and Chairman
Remuneration 10/12/02
8.098.784-R Mr. José Ignacio Olleros Piñero Nomination and Chief
Remuneration 27/1/02 Financial Officer
1.342.266-D Mr. Álvaro Nomination and Head of Legal Services
Rodríguez-Solano Romero Remuneration 10/5/04 Secretary and Director
EXTERNAL REPRESENTATIVE DIRECTORS
Tax ID Name or Representative Committee which Significant
number company proposed shareholder
name appointment represented
A-48.069.181 NEFINSA, S.A. Mr. Pablo Board of NEFINSA, S.A.
Serratosa Luján Directors 10/12/2002
G-37.244.191 Caja de Ahorros Mr. Julio Fermoso Nomination and Caja de Ahorros
de Salamanca García Remuneration 31/05/2002 de Salamanca
y Soria (Caja Duero)
y Soria (Caja Duero)
B-82.718.206 Atalaya Mr. José María Nomination and Atalaya
Inversiones, S.R.L. Bueno Lidón Remuneration 18/06/2001 Inversiones, S.R.L.
19.831.991-B Mr. José Antonio Board of
Carrascosa Ruiz Directors 10/12/2002 NEFINSA, S.A.
29.159.722-T Mr. Javier González Board of
Ochoa Directors 10/12/2002 NEFINSA, S.A.
EXTERNAL INDEPENDENT DIRECTORS
Tax ID Name or company Profile* Committee which
number name proposed appointment
15.768.843-C Mr. Javier Echenique Landiríbar Board of Directors 8/01/2003
22.674.311-Z Mr. José Manuel Serra Peris Board of Directors 8/01/2003
27.808.279-Z Mr. Jesús Quintanal San Emeterio Board of Directors 8/01/2003
67

* Profile of Independent Directors
We briefly summarise below the academic careers and professional experience of the Independent
Directors on Uralita’s Board. All have a long professional track record:
Mr. Javier Echenique Landiríbar
Director of Uralita S.A. since January 2003.
Economics graduate. Previously General Manager and Director of Allianz-Ercos and Eurovida, General
Manager of BBV and General Manager of BBVA in 2001, with responsibility for wholesale banking, which
included investment banking and the industrial group. He is currently a Director of Telefónica Móviles,
S.A. and ACS representing Imverlin Patrimonio, S.L., among others.
Mr. José Manuel Serra Peris
Director of Uralita S.A. since January 2003.
Law graduate and public Attorney. He was previously Secretary of State for the Ministry of Industry and
Energy. He has served as Chairman of the Spanish Patents and Trademarks Office. Chairman of the
Spanish Centre for Industrial Technological Development (CDTI) and a Director of the Spanish state
holding company, SEPI, Iberia and Endesa. His other positions include Directorships of Grupo Ence, Red
Eléctrica de España, S.A. and of Natraceutical, S.A.
Mr. Jesús Quintanal San Emeterio
Director of Uralita S.A. since January 2003.
Economics graduate. He was previously General Manager at Banco de Granada and Chief Executive of
Aseguradora Galicia, S.A. Currently he is the Chief Executive of AEGON and a member of the
International Board of AEGON, NV. He is also a Director of the Spanish Insurance Sector Research Body,
the ICEA, Managing Director of the Spanish Union of Insurance and Reinsurance Companies (UNESPA)
and a member of the National Reinsurance Board and a Director of Naviera Elcano, S.A.
OTHER EXTERNAL DIRECTORS
There are no other external Directors.
Changes in the classification of Directors in 2005
During the year 2005 there were not any changes in the classification of Directors.
B.1.4. Uralita’s Directors are classified pursuant to the Rules of the Board
The Board of Directors, exercising its powers to make proposals to the General Meeting of Shareholders
and to co-opt to cover vacancies, in accordance with article 6.1 of the Rules of the Board of Directors, is
comprised of eight Non-Executive External Directors, and three Executive Directors.
B.1.5. Powers of the Chief Executive, if appropriate
There is no Chief Executive at present.
68

B.1.6. Directors who are also executives or Directors of other companies that form part of the Uralita
Group
Tax ID Name or company Name of Tax ID Position
number name of Director Group entity number
22.540.252-E Mr. Javier Serratosa Luján Ursa Ibérica Aislantes, S.A. A-28042679 Chairman
22.540.252-E Mr. Javier Serratosa Luján Ursa International, GmbH DE-813551197 Administrator
8.098.784-R Mr. José Ignacio Olleros Piñero Uralita Holding, BV 8137.29.300 Administrator
8.098.784-R Mr. José Ignacio Olleros Piñero Uralita, BV 8137.29.269 Administrator
1.342.266-D Mr. Álvaro Rodríguez-Solano
Romero Uralita Holding, BV 8137.29.300 Administrator
1.342.266-D Mr. Álvaro Rodríguez-Solano
Romero Uralita, BV 8137.29.269 Administrator
B.1.7. Uralita Directors who are members of the Board of Directors of other entities listed on official
securities markets in Spain, of which that Group has been notified
Tax ID number Name or company Listed entity Position
Director
name of Director
G-37.244.191 Caja de Ahorros de Salamanca y Soria Ebro Puleva, S.A. Board
(Caja Duero)
Member
15.768.843-C Mr. Javier Echenique Landiríbar Telefónica Móviles, S.A. Board
ACS (representing
Member
Imverlin Patrimonio, S.L.)
22.674.311-Z Mr. José Manuel Serra Peris Red Eléctrica de España, S.A. Board
Grupo Empresarial Ence, S.A. Member
Natraceutical, S.A.
B.1.8. Total joint remuneration of Directors accrued during the financial year
a) In the company featured in the present report:
Remuneration
Figures in thousands of euros
Fixed remuneration 1,034
Variable remuneration 0
Allowances 648
Attendance fees 0
Share options 0
Other 0
TOTAL 1,682
Other benefits
Figures in thousands of euros
Advances 0
Loans granted 0
Pension funds and schemes: contributions 0
Pension funds and schemes: obligations contracted 0
Life insurance premiums 0
Guarantees furnished by the company for Directors 0
69

) Remuneration received by Directors for being on other Boards and/or part of senior management at
Group companies:
Remuneration
Figures in thousands of euros
Fixed remuneration 0
Variable remuneration 0
Allowances 0
Attendance fees 0
Share options 0
Other 0
TOTAL 0
Other Benefits
Figures in thousands of euros
Advances 0
Loans granted 0
Pension funds and schemes: contributions 0
Pension funds and schemes: obligations contracted 0
Life insurance premiums 0
Guarantees furnished by the company for Directors 0
c) Remuneration received by type of Director:
Type of Director By the Company By the Group
Executive 1,226 0
External Representative 276 0
External Independent 180 0
Other external
TOTAL 1,682 0
d) Share received by members of the Board in the profit of the parent company:
Total Director remuneration (in thousands of euros) 1,682
Total Director remuneration
over attributed income 4.78%*
* The remuneration of the Board, excluding the salaries of Executive Directors, represents 1.84% of the
Company’s attributed income.
70

B.1.9. Remuneration of Senior Management who are not also executive Directors
Tax ID number Name or company name Position
5.277.406-X Mr. Jorge Alarcón Alejandre Head of Planning and
Corporate Development
5.238.187-Y Mr. Juan Sánchez Espinosa de los Monteros Head of
Corporate IS&P
40.514.835-J Mr. Daniel Llinás Sala General Manager Ursa
International, GmbH.
6.194.928-Q Mr. José Luis Pozo Palomares General Manager
Uralita Iberia, S.L.
2.492.906-M Mr. Gonzalo Valdés Dal-Re Head of Human
Resources
Total remuneration of Senior Management in thousands of euros 1,044
B.1.10. Golden handshake clauses for members of Senior Management, including Executive Directors, in
the event of redundancy or change of ownership
Not applicable.
B.1.11. Determination of the remuneration of Board members and relevant clauses of Articles of
Association, where appropriate
Uralita’s Article of Association 27 relating to the remuneration of the Board of Directors establishes the
procedure and form for Board member remuneration.
The aforementioned articles set the total remuneration for Directors at a fixed sum, the maximum
amount of which will be approved each business year at the General Meeting of Shareholders. In the
event that the amount is not set at the General Meeting of Shareholders in any financial year, the
maximum amount will be understood to be the same as that applied in the previous financial year.
In this sense, the Board of Directors decides on the annual amount within the limits set at the General
Meeting of Shareholders and determines distribution among the Company’s Directors as it sees fit.
The Articles of Association also provide for the possibility that Directors may be remunerated through
the granting of shares, share options or a similar system linked to the share price. The application of any
such system would need to be approved at the General Meeting of Shareholders, in accordance with
article 130 of the Corporations Law.
Article 27 of the Rules of the Board states that each Uralita Director is entitled to the remuneration set
by the Board in accordance with the Articles of Association, resolutions made at the Shareholders’
Meeting and in accordance with the recommendations of the Nomination and Remuneration
Committee.
71

B.1.12. Members of the Board who are members of the Boards or executives of companies holding
significant interests in the company and/or in companies in the same group
Tax ID Name or Tax ID Name or company Position
number company number of name of
Director name significant significant
shareholder
shareholder
22.540.252-E Mr. Javier Serratosa Luján A-48.069.181 NEFINSA, S.A. Chief Executive
22.648.681-Y Mr. Pablo Serratosa Luján A-48.069.181 NEFINSA, S.A. Director
Group General
Manager
9.668.354-M Mr. Julio Fermoso García G-37.244.191 Caja de Ahorros Chairman of
de Salamanca y Soria Caja Duero
(Caja Duero)
27.832.280-A Mr. José María Bueno Lidón B-82.718.206 Atalaya Representative of
Inversiones, S.R.L. Atalaya
Inversiones, S.R.L.
19.831.991-B Mr. José Antonio A-48.069.181 NEFINSA, S.A. Chief
Carrascosa Ruiz
Financial Officer
29.159.722-T Mr. Javier González Ochoa A-48.069.181 NEFINSA, S.A. Secretary of the Board.
Head of Legal
Department and
Human Resources
Significant relationships other than those contemplated in the previous section between members of
the Board and companies holding significant interests in the Company and/or companies in its group
The company has received no notification of significant relationships between members of the Board
and companies holding significant interests in the Company and/or companies in its group.
B.1.13. Modifications to the Rules of the Board made during the financial year 2005
There were no modifications to the Rules of the Board during 2005. However these are due to be
modified in 2006 by the Board of Directors in accordance with Law 19/2005 once the General Meeting of
Shareholders has approved the modification to the Company’s Articles of Association concerning the
mandate of Board Members.
B.1.14. Procedures for the appointment, re-appointment, assessment and removal of Directors.
Competent bodies, procedures to be followed and criteria to be employed in each of the
procedures
The Directors are appointed at the General Meeting of Shareholders or by the Board of Directors,
exercising its co-option right under the Corporations Law.
Proposals for the appointment or re-election of Directors submitted by the Board of Directors at the
General Meeting of Shareholders, as well as proposed appointments by the Board, must first be
proposed by the Nomination and Remuneration Committee, which assesses in advance the suitability of
the candidates, taking into consideration their academic and professional qualifications, professional
good name, and any incompatibilities, conflicts of interest or possible infringement of any stipulations
under law or the Articles of Association.
72

Both the aforementioned Committee and the Board seek to ensure that any Directors appointed, as well
as meeting all requirements under the law and Articles of Association, are persons whose skills,
experience and professional reputation are appropriate to the functions they exercise.
Director dismissals also fall under the auspices of the Shareholders’ Meeting. However, as with the
procedures for the appointment or reappointment of Directors, the Nomination and Remuneration
Committee can propose to the Board the dismissal of a Director on the grounds that he/she has failed
to fulfil his/her duties, in which case the Board, if it approves the proposal to dismiss the Director,
submits it to the Shareholders’ Meeting for approval.
B.1.15. Events under which Directors must tender their resignation
Under article 8.2 of the Rules of the Board, Directors must offer their resignation to the Board when:
a) They reach the age of 70.
b) They breach any of the criteria of incompatibility or prohibitions set down by law.
c) When they are severely reprimanded by the Nomination and Remuneration Committee for failing in
their duties as Director.
B.1.16. Does the current Chairman of the Board also act as the Company’s Chief Executive?
YES
The current Chairman of the Board also acts as the Company’s Chief Executive. The Board of Uralita is
the Company’s main decision-making body, notwithstanding its delegation of day-to-day management
of the Company to the executive bodies and the management team. The Board exercises in all
circumstances a general role of supervision and control over the actions of the management team.
The Rules of the Board remit to the Board all decisions on significant investments and disposals, as well
as decisions regarding the opening of new or closure of current lines of business. Uralita’s strategic plan
and annual budget must be approved by the Board of Directors. The Chief Executive therefore manages
the business in accordance with the strategic lines determined by the Board. The investment in or
disposal of any asset worth over €20 million also requires the Board’s approval.
The Board also has two sub-committees: the Audit Committee and the Nomination and Remuneration
Committee. Both are made up of Directors and exercise specific and exclusive responsibilities, set out in
the Rules of the Board and detailed below. These committees in themselves represent a bulwark against
the concentration of power in the same hands and act as a safeguard against possible risks. For
instance, one of the functions of the Nomination and Remuneration Committee is to approve the
annual remuneration of the management team consisting of the Chairman and other members of the
Uralita Group Management Committee.
73

B.1.17. Are special majorities required, differing from those stipulated by law, for any type of decision?
YES
The mandate of a member of the Audit Committee may only be revoked, assuming the person
concerned remains a Director, if two-thirds of the members of the Board approve the measure.
Adoption of resolutions by the Board of Directors:
Description of resolution Quorum Type of majority
Half plus one in first call
No quorum required in second call
Absolute majority of Directors present
Absolute majority of Directors present
B.1.18. Are there specific requirements, other than those established for Directors, that must be met to
be appointed Chairman?
NO
B.1.19. Does the Chairman have a casting vote?
YES
Matters for which a casting vote is necessary
All matters
B.1.20. Age limits for Directors established by the Articles of Association or Rules of the Board
70 years for all Directors including the Chairman of the Board
B.1.21. Do the Rules of the Board establish a limited term of office for Independent Directors
NO
B.1.22. Formal procedures for the delegation of votes at Board Meetings
Under article 24 of the Articles of Association any Director may delegate in writing another Director to
vote on his/her behalf. In practice, Directors only delegate their votes in writing for each Board Meeting
on a case by case basis.
B.1.23. Number of meetings held by the Board of Directors during the year, indicating how many times
the Board has met without the Chairman
Number of Board meetings 5
Number of Board meetings without the Chairman
None
74

Number of meetings of the different Board Committees during the year
Number of meetings of the Audit Committee 4
Number of meetings of the Nomination and Remuneration Committee 6
B.1.24. Are the individual and consolidated financial statements submitted to the Board for approval
previously certified?
NO
The Annual Accounts submitted to the Board are not previously certified by the Chairman and Chief
Financial Officer. However, the Annual Accounts are first approved by the Audit Committee.
B.1.25. Mechanisms established by the Board to avoid a qualified auditors’ report on the individual and
consolidated financial statements being laid before the General Shareholders’ Meeting
The procedures in place at Uralita to circumvent any such qualification are based on previous meetings
between the external auditors and the Audit Committee and with the Company’s Internal Audit
Department. All necessary information is facilitated by the Chief Financial Officer and other member of
the management team, as appropriate, at these meetings. The aim of these meetings is to formulate
the accounts in such as way as to obviate the need for a qualified report by the external auditor.
B.1.26. Measures adopted to ensure that the information disseminated to the stock markets is fair and
balanced
In accordance with article 30.1 of the Rules of the Board, the Board will inform the public immediately of:
a) Significant events that might significantly affect stock market prices.
b) Changes in the company structure, such as variations in significant interests, syndication agreements
and other forms of coalition of which it has been made aware.
c) Substantial changes to the company’s governance rules.
Section 2 of article 30 establishes that the Board will adopt the necessary measures to ensure that halfyearly,
quarterly and any other financial information deemed prudent to make available to the market
will be prepared in accordance with the principles, criteria and professional practices employed to
prepare the Annual Accounts, thus ensuring that this information is equally reliable.
The information disseminated to the stock market is submitted previously to the CNMV, having first
been approved by the Audit Committee and published on the Company’s website.
B.1.27. Is the Secretary of Uralita’s Board also a Director?
YES
75

B.1.28. Mechanisms established by the Company to preserve the independence of the external auditor,
financial analysts, investment banks and rating agencies
The Audit Committee’s role includes supervising and maintaining relations with the external auditors so
as to remain informed about issues relating to the conduct of the audit of the Annual Accounts.
Uralita ensures the transparency and independence of the opinions of the professionals with which it
works. Uralita’s external auditor is DELOITTE & TOUCHE, ESPAÑA, S.L, a company with far-reaching
presence in Spain and internationally, for whom the fees paid by URALITA represent only a small
percentage of overall revenues.
In addition, the audit firm partner in charge of the audit team has to be changed every seven years.
Regarding financial analysts, Uralita has regular contact with the professional analysts that cover its
stock. They are all invited to the same meeting and the printed information that they are given is
submitted to the CNMV the same day and is also made available on Uralita’s website.
With regard to rating agencies, Uralita has not issued any securities which have been rated by any such
agency.
B.1.29. Does the firm of auditors do any other work for the Company and/or its Group other than
standard audit work?
YES
Company Group Total
Amount corresponding non-audit work (thousands of euros) 243.1 160.9 404.0
Amount corresponding non- audit work/total amount
billed by the auditing firm (%) 22.32% 14.77% 37.09%
B.1.30. Number of years in succession that the current firm of auditors has been auditing the financial
statements of the Company and/or its Group. Percentage corresponding to the number of years
audited by the current auditors in the total number of years that the annual accounts have been
audited.
Company
Group
Number of years in succession 15 15
Company
Group
No. of years audited by the current auditing firm/of years that the
Company has been audited (%) 100% 100%
76

B.1.31. Stakes held by members of the Company’s Board of Directors in the capital of companies engaged
in activities identical, similar or complementary to those of the Company and its Group, as far as
the Company has been notified. Positions held or duties performed in these undertakings
The Company has not been notified by any shareholder with significant interests in any companies
engaged in identical, similar or complementary activities to those of either Uralita S.A. or its Group.
B.1.32. Procedure for provision of external counselling to Directors
YES
Description of procedure
Article 26 of the Rules of the Board of Directors establishes that External Directors may, at the
Company’s cost and to assist in the performance of their duties, request assistance from accounting,
legal and financial advisers or other professionals.
B.1.33. Procedures by which Directors receive sufficiently in advance any information they may need to
prepare the meetings of the governing bodies
YES
Description of procedure
Under Article 25 of the Rules of Uralita’s Board of Directors, all Directors have the right to be fully
informed about any aspect of the Company, to see all legal and accounting documentation,
communicate with the Company’s auditors and executives and to visit the Company’s sites of operation.
The right to information also applies to Spanish and foreign subsidiary companies.
The right to information will be channelled through the Chairman or the Secretary of the Board of
Directors, who will deal with the Director’s requests by providing the information directly, putting the
Director in contact with an appropriate person within the organisation’s structure and taking measures
that permit the Director to carry out the examination or inspection requested on site.
B.1.34. Liability insurance for Company Directors
YES
77

B.2. Board Committees
B.2.1. Administrative bodies
Name of body No. of members Functions
Audit Committee 3 See points B.2.3. and B.2.4
Nomination and Remuneration Committee 3 See points B.2.3. and B.2.4.
B.2.2. Committees of the Board and members
Audit Committee
Tax ID number Name Position
22.674.311-Z Mr. José Manuel Serra Peris Chairman
22.648.681-Y Mr. Pablo Serratosa Luján Board Member
27.832.280-A Mr. José María Bueno Lidón Board Member
Nomination and Remuneration Committee
Tax ID number Name Position
15.768.843-C Mr. Javier Echenique Landiríbar Chairman
22.648.681-Y Mr. Pablo Serratosa Luján Board Member
9.668.354-M Mr. Julio Fermoso García Board Member
B.2.3. Rules of procedure and organisation attributed to each committee
Audit Committee
The Audit Committee comprises three Directors, appointed by the Board by majority vote of its
members. All Directors on the Committee are non-executive.
The mandates of Audit Committee members last four years, unless they leave the Board before the end
of this period. They may be re-appointed an indefinite number of times. The mandate of a member of
the Audit Committee may only be revoked, assuming the person concerned remains a Director, if twothirds
of the members of the Board approve the measure.
The Committee appoints a Chairman from among its members, who must be an independent Director.
The Chairman must be changed every four years and may be reappointed one year after the end of
his/her previous term. The Secretary of the Board may be appointed as Secretary of the Committee.
Audit Committee meetings are called by its Chairman and must be convened within 15 days of a written
request issued by two of its members.
In 2005 the Committee met four times and considered the matters falling within its remit, notably: the
review of regular information submitted to the CNMV, review of the Annual Accounts prepared by the
Board and review of its risk control systems.
78

Nomination and Remuneration Committee
The Nomination and Remuneration Committee comprises three Directors appointed in accordance with
the Rules, all of whom are External Directors.
The Committee appoints a Chairman from within its ranks, who must be an independent Director. The
Secretary of the Board may be appointed as Secretary to the Committee.
In 2005 the Committee met six times and considered the matters falling within its remit, notably: the
revision of the remuneration system for the Chairman and Management Committee for 2004 and
setting of 2005 targets for the performance-linked remuneration component; the proposed
appointment of a General Manager and Board Member, as well as professionals qualified to occupy
Senior Management positions in the Company following the organisational restructuring approved in
December 2005.
B.2.4. Committee counselling, consultation and, where appropriate, delegation functions
Audit Committee
The main task of the Audit Committee is to oversee the control systems operating within the Company
and its Group.
Specifically, the Committee is responsible for the following tasks:
• Answering questions raised by shareholders at the General Meeting of Shareholders concerning issues
falling within its remit.
• Proposing the appointment of external auditors to the Board, for submission at the General Meeting of
Shareholders.
• Overseeing the internal audit systems of the Company and the Group.
• Monitoring the Company’s procedures for disseminating financial information and its internal control
systems.
• Maintaining relations with the external auditors so as to remain informed of any issues that might
affect their independence and any other issues related to the auditing of the accounts, such as the
other information required by audit legislation and the code of audit practice.
• Supervising the regular financial information submitted to the CNMV and official stock exchanges.
• Informing the Board of transactions between the Company or Group companies and its significant
shareholders.
• Monitoring the Group’s environmental audits.
• Raising with the Board any issues that it deems to fall within the scope of its remit.
Nomination and Remuneration Committee
The Nomination and Remuneration Committee has the following responsibilities:
79

• Proposing to the Board the appointment, reappointment and, where appropriate, dismissal of
Directors.
• Proposing members to the Board for each of the Board sub-committees.
• Proposing to the Board the mechanisms and sums for remunerating the Directors.
• Approving all direct and indirect components of the annual remuneration paid to the Management
Team. The Management Team for these purposes comprises the Chairman, the Chief Executive (if the
roles are separated) and the other members of the Group’s Management Committee.
B.2.5. Regulations of the Board Committees, where they are available for consultation and any
modifications made during the year
As of 31 December 2005, the Committees had no internal regulations. Their association and operating
procedures are regulated by the Articles of Association and Rules of the Board.
Each Committee prepared a 2005 Report. These were approved by their respective Committees and
notified to the CNMV.
B.2.6. Degree of delegation and autonomy of the Executive Committee to adopt resolutions on the
administration and management of the Company
The Board of Directors of Uralita has no Executive Committee.
B.2.7. Indicate if the composition of the Executive Committee reflects the participation in the Board of
the different Directors based on its condition:
NO
B.2.8. Are all members of the Nomination Committee external Directors?
YES
80

C. RELATED PARTY TRANSACTIONS
C.1. Transactions involving transfer of resources or obligations between the Company and/or Group and
its significant shareholders.
Tax ID Name or Tax ID Name or Nature Type of Amount
number of company name number company of the transaction (thousands
significant of significant of the name of the relationship of euros)
shareholder shareholder company company
and/or and/or
Group Group
Syndicated
G-37244191 Caja de Ahorros loan 0
de Salamanca y
Syndicated
Soria (Caja Duero) A-28037091 Uralita, S.A. Ordinary credit interest 209
Credit line 50
Guarantees 5,464
C.2. Transactions involving a transfer of resources or obligations between the Company and/or Group
and the Directors or Executives of the Company.
There is no record of transactions involving a transfer of resources or obligations between the Company
and/or Group and the Directors or Executives of the Company in 2005.
C.3. Transactions with other companies in the same group (intra-company transactions) that are not
eliminated in the consolidated financial statements and do not relate to the company’s daily
business in terms of purpose or conditions.
There have been no transactions made by the Company with other companies in the same group (intracompany
transactions) that are not eliminated in the consolidated financial statements and do not
relate to the company’s daily business, in terms of purpose or conditions.
C.4. Director conflicts of interest, pursuant to article 127 of the Corporations Act.
None of the Company Directors has any conflict of interest pursuant to article 127 of the Corporations
Act.
C.5. Mechanisms established to detect and regulate possible conflicts of interest between the Company
and/or its Group and its Directors, executives or significant shareholders.
The Board of Directors is the body charged with regulating, resolving and taking measures to prevent
conflicts of interest.
The Rules of the Board and the Internal Code of conduct relating to Securities Markets contain
procedures regulating action to take when such conflicts arise. The Director must refrain from attending
or taking part in discussions that affect matters in which he/she has a personal interest. Also, anyone
who for any reason finds themselves involved in a conflict of interest must inform the Secretary of the
81

Board long enough in advance for the appropriate measures to be taken. The Secretary of the Board
brings the conflict of interest to the attention of the Chairman who commissions any relevant reports
he/she considers necessary and takes the necessary steps in response.
Under the Rules of the Board, Directors may not, directly or indirectly, conduct professional or
commercial transactions with the company without notifying the Board in advance of the conflict of
interest, and obtaining the Board’s approval, based on a report from the Nomination and Remuneration
Committee in relation to the transaction.
There were no conflicts of interest in 2005 involving Directors as defined in the Rules of the Board.
D. RISK MANAGEMENT SYSTEMS
D.1. General description of the risk policy employed by the Company and/or its Group, detailing and
assessing the risks covered by the system and justifying the suitability of the systems for the profile
of each type of risk
The Uralita Group has introduced a Risk Management System, with which the Audit Committee is
acquainted, to systematically monitor and manage the critical risks in each of the key business processes
detailed below.
D.2. Control systems to assess, mitigate or reduce the principal Company and Group risks
Risks are assessed and quantified both by the Company and at the Group level, resulting in a risk
portfolio that is updated annually. The Risk System is carried out by companies and businesses, with a
Risk Coordinator in each Business.
The effectiveness of the system is based on creating an appropriate framework for risk prevention,
encouraging active participation in the detection and prevention of risks in advance, notifying risks at
the appropriate decision-making level, and controlling risks through suitable procedures.
The Uralita Group has manuals and internal regulations, both in the corporate area and business
processes, to ensure the appropriate use of resources by employees in performing their business
activities and to guarantee the accuracy of the financial and accounting information disclosed to
investors and shareholders.
The main management tasks of the Risk Management System are:
• To make employees aware of possible risks.
• To detect risks and their causes in advance, assessing the likelihood of occurrence and their impact on
the organisation.
• To analyse the controls established to mitigate risks or develop and introduce controls when they are
lacking.
• To inform the organisation’s risk managers and mitigate risks by taking appropriate measures.
82

• To obtain the Risk Portfolio so as to determine in terms of impact and probability what the effect
would be on the organisation of each of the business risks identified.
D.3. Risk materialisation and where appropriate, the underlying circumstances and an analysis of the
control systems triggered
None of the risks that affect the Company or its Group materialised in 2005.
D.4. Bodies of the Company responsible for establishing and supervising the control systems and their
functions
Initial responsibility for establishing and monitoring risk control mechanisms rests with the Risk
Manager, a member of the Internal Audit Department of the Group, whose main functions are: to
centralise and notify all information received, monitor the system ensuring that targets are met and to
establish basic support tools.
The second level corresponds to the Risks Committee, comprising the Management of each Business. Its
main functions within the Risk System are: to support its introduction in the organisation, to analyse
and supervise information from the coordinator and the System, and to establish and introduce risk
mitigation measures.
The third level corresponds to the Global Risk Coordinator, a role performed by the Chief Financial
Officer. His/her main functions are: to make the Company aware of the importance of Risk
Management, to coordinate the different areas and those responsible for risk identification processes, to
introduce the necessary measures to mitigate risks and centralise and homogenise the information
from each area or process manager.
The final level comprises the Audit Committee of the Board of Directors, which bears ultimate
responsibility for the Risk Management process.
D.5. Identification and description of processes for compliance with the various regulations affecting
the Company and/or its Group
The basic mechanisms for ensuring compliance with the various regulations affecting the Group’s
companies are based on the controls carried out by the following corporate areas:
The Legal Services Department, which aims to ensure overall compliance with the legal requirements
affecting the Group by establishing legal guidelines to ensure that the organisational structure complies
with prevailing legislation at all times. Also, the Group’s new organisation model puts the Legal Services
Department in more direct contact with the businesses, thereby boosting the legal supervision of their
activities and strengthening the legal advice provided to the business units in their ordinary course of
activity.
The Internal Audit Department uses periodical reviews to monitor compliance with internal procedures
and ensure their adaptation to prevailing regulation. It is currently adapting the Risk Management
System to ensure that it complies with the various legal requirements.
83

E. GENERAL SHAREHOLDERS MEETING
E.1. Quorum for General Meetings established in the Articles of Association and differences in respect of
the minimums stipulated in the Corporations Act
The General Meeting of Shareholders is deemed to be duly constituted if attended by shareholders or
proxies representing at least 25% of the subscribed share capital.
However, any resolution to issue bonds, increase or reduce the Company’s capital, transform, merge,
split or dissolve the Company, or to otherwise amend the Articles of Association, requires, on first call,
votes representing at least 50 per cent of the subscribed capital, and, on second call, votes representing
at least 25 per cent of the capital.
Notwithstanding the above, an Ordinary or General Meeting of Shareholders may also be duly
constituted to deliberate on any matter if the whole of the share capital is represented and those
attending vote unanimously to hold the Meeting.
The quorums set in Uralita’s Articles of Association are in accordance with those prescribed by articles
102 and 103 of the revised Corporations Law.
E.2. Majorities required for adopting resolutions and differences in respect of those stipulated in the
Corporations Act
Article 19 of the Articles of Association establishes the majority required for the adoption of resolutions.
This is in accordance with articles 93 and 103 of the revised Corporations Act.
Each item on the agenda is voted on separately. Resolutions are adopted by majority vote of the shares
represented at the Meeting.
However, in the special circumstances referred to in article 103.2 of the revised Corporations Law, where
the meeting is held on second call with less than half of the share capital represented, resolutions can
only be effectively approved with an affirmative vote of two thirds of the shares represented at the
Meeting.
E.3. Shareholder rights in respect of General Meetings differing from those established in the
Corporations Act.
The Company has not granted shareholder rights other than those established in the Corporations Act
in respect of General Meetings.
E.4. Measures adopted, if any, to encourage the participation of shareholders at General Meetings
A) Article 28 of the Rules of the Board establishes that the Board of Directors will provide the
appropriate channels for shareholders’ proposals in relation to the management of the Company.
Uralita’s Board of Directors seeks to promote the informed participation of shareholders in the
General Meetings and will adopt whatever measures are deemed necessary to ensure that that the
General Meeting of Shareholders effectively exercises its competences in accordance with the law
and the Company’s Articles of Association.
84

In particular, the following measures will be adopted:
a) It will take steps to ensure that all shareholders prior to the meeting, have all the legally required
information and all information that, while not required by law, may be of interest to them and
reasonably supplied.
b) It will endeavour to respond to shareholders’ requests for information prior to the Meeting.
c) It will also endeavour to respond to shareholders’ questions that are put forward at the Meeting.
B) For its part, the Investor Relations Department: responds to individual and institutional investors who
request information about the Company. The home page of the Uralita website has a section called
“Investor Relations”, with a link to a personal contact (with telephone number, fax number and email
address), the quarterly and half-yearly reports and other financial and market information of interest.
E.5. Indicate if the Chairman of the General Meeting of Shareholders is also the Chairman of the Board
of Directors. If so, what measures are taken to guarantee the independence and proper functioning
of the General Meeting?
YES
The General Meeting of Shareholders held on 26 May 2004 approved by 100% of the shareholders
present the Board of Director’s proposal for the Rules of the General Meeting of Shareholders.
The Rules provide the shareholder with a framework that guarantees and facilitates the exercising of
their rights and is a reference tool for their informed participation at Shareholders’ Meetings.
Following its approval, the definitive text of the Rules was made public in a notification to the CNMV
and its entry in the Madrid Companies Register. The Rules are also available on the Company website.
E.6. Modifications, if any, made during the year to the Regulations of the General Meeting
The Rules of the General Meeting were not modified in 2005. However, a proposal will be presented to
the General Meeting of Shareholders to modify the Rules of the General Meeting in accordance with
Law 19/2005.
E.7. Attendance of General Meetings held during the year
Attendance
Date % attending % attending % voting by Total
in person by proxy correspondence
18/05/2005 48.83 16.23 0 65.06
85

E.8. Resolutions adopted at the General Meetings held during the year and percentage of votes with
which each was passed
The General Meeting of Shareholders held on 18 May 2005 passed, with the percentage of voters
indicated, the following resolutions:
First:
Second:
Third:
Fourth:
Fifth:
Sixth:
Seventh:
Approval of the Annual Accounts and Management Report for 2004. The resolution was
approved by the affirmative vote of 99.86% of the share capital represented.
Approval of the dividend payment. The resolution was approved by the affirmative vote of
99.864% of the share capital represented.
Appointment of DELOITTE ESPAÑA S.L. as external auditor. This resolution was approved by
the affirmative vote of 99.86% of the share capital represented.
Corporate Governance Report. This was not voted upon.
Appointment of Board Director. This resolution was approved by the affirmative vote of
99.19% of the share capital represented.
Authorisation for the derivative acquisition of shares of Uralita S.A. in accordance with article
75 of the Corporation Act. This resolution was approved by the affirmative vote of 99.86% of
the share capital represented.
To give full powers to all the members of the Board of Directors to strike agreements. This
resolution was approved by the affirmative vote of 99.88% of the share capital represented.
E.9. Number of shares required to attend General Meetings, indicating whether there are any
restrictions established in the Articles of Association
15
In accordance with article 17 of the Articles of Association: Fifteen or more shares are required to attend
General Meetings, which must be registered in the appropriate accounting record at least five days prior
to the date on which the Meeting is to be held.
E.10. Policies followed by the Company concerning the delegation of votes at the General Meeting of
Shareholders
In 2005 the Company delegated voting in accordance with article 106.1 of the Corporations Law, in
writing. Article 19 of the Corporations Law regulates the procedures to follow when delegating voting by
shareholders, including the delegation of postal voting.
E.11. Policies followed by institutional investors in relation to their participation or otherwise in
Company decisions
The Company is not aware of the policies of institutional investors.
86

E.12. Address and access to the corporate governance contents on the company’s website
The Company website (www.uralita.com) carries extensive and detailed information on financial and
equity market performance, General Meetings of Shareholders and corporate governance.
On corporate governance, the site’s home page has a clear, direct link to all the required sections so that
shareholders can exercise their information rights and the Company complies with its obligations to
disseminate relevant information pursuant to Ministerial Order ECO/3722/2003. Specifically, this section
of the website includes the Articles of Association, Rules of the Board, Internal Code of Conduct relating
to Securities Markets, information on General Meetings held over the course of the year, the
Department for Investor and Shareholder Relations, significant events notified to the CNMV, and this
Annual Report on Corporate Governance.
The current content of the website complies with the requirements of the above-mentioned Order and
its directives. The information is accessed via a link labelled “Legal information for shareholders”.
Investor Relations Department: This department responds to individual and institutional investors who
request information about the Company. The home page of the Uralita website has a section called
“Investor Relations”, with a link to a personal contact (with telephone number, fax number and email
address), the quarterly and half-yearly reports and other financial and market information of interest.
F. DEGREE OF COMPLIANCE WITH CORPORATE GOVERNANCE RECOMMENDATIONS
The extent of the Company’s compliance with existing corporate governance recommendations, or
otherwise
Traditionally Uralita has met all the legal requirements and recommendations established by the Codes
of Good Governance. Uralita has introduced corporate governance mechanisms aimed at complying
with each and every one of the regulations and recommendations contained in the aforementioned
texts.
The following are the Corporate Governance recommendations included in the Olivencia Code, which
have been updated by the Aldama Report and relate how Uralita has sought to comply with these
recommendations.
Recommendation 1. FUNCTIONS OF THE BOARD OF DIRECTORS
“The Board of Directors should expressly assume as a core part of its mission the general duty of
supervision, should exercise without delegation the responsibilities involved and establish a formal list of
matters reserved for its attention”.
Article 3 of the Rules of the Board defining the Board’s general functions states that it has non-delegable
responsibility for the general supervision and control over the management carried on by the delegated
bodies and the management of the Company and the Group.
Article 4 of the Rules of the Board lists the powers that are reserved to the Board. These consist
principally of taking decisions on significant investments and disposals and the general lines of strategy
pursued by the Uralita Group.
87

Recommendation 2. INDEPENDENT DIRECTORS
"The Board should include a reasonable number of Independent Directors, these being persons of sound
personal reputation with no connection to the management team or to the significant shareholders".
At the time of writing, three of the 11 members of the Uralita Board are independent. These were
appointed by the General Meeting of Shareholders on the Board’s proposal after due consideration was
given to their skills and suitability by the Nomination and Remuneration Committee. The prior
evaluation by the Committee was mainly aimed at establishing that the candidates had the experience
and reputation required of all Directors to carry out their duties. This allows the Board to draw on the
ideas, experience and opinions of professionals with a long professional track record in the business
world who are capable of defending the interests of minority shareholders.
Recommendation 3. COMPOSITION OF THE BOARD
“The Composition of the Board of Directors should ensure that the External Directors (Representative and
Independent Directors) are in a substantial majority over the executives and that the proportion of
Representative and Independent Directors takes into account the relative proportions of share capital
controlled by the significant and other shareholders”.
This recommendation was updated by the Aldama Report which states that there should be a substantial
majority of External Directors and, within this, a very significant proportion of Independent Directors,
taking into account the shareholder structure of the company and the capital represented on the Board.
At the time of writing, of the 11 members of the Board, three are Executive Directors and eight are
External. Five are appointed by the significant shareholders and three are Independent.
The Board therefore has a majority of External Directors, which includes a significant proportion of
Independent Directors relative to the share capital structure and, specifically, relative to the proportion
of the capital in the hands of minority shareholders.
Recommendation 4. SIZE OF THE BOARD
“The Board of Directors should be optimally sized for efficient and representative functioning. In principle,
the appropriate size should be between five and 15 members”.
The Aldama report abandoned the recommendation on maximum and minimum numbers of Directors,
and merely stated that the Board should have a reasonable number of members to ensure its effectiveness
and work for each Director.
Article of Association 20 states that the number of Directors may not be less than three or more than 20.
The number of Directors is decided at the General Meeting of Shareholders and is currently 11.
Recommendation 5. CHAIRMAN OF THE BOARD
“If the Board opts to combine the roles of Chairman and Chief Executive, it should take the necessary
precautionary measures to reduce the risks of concentrating these powers in a single person”.
The Chairman of the Board also acts as the Chief Executive of Uralita. Accordingly, the Board has
adopted appropriate measures to limit the risks of this concentration of powers and strengthen the
Board’s ability to exercise its supervisory duties. (See section B.1.16)
88

The delegation of exclusive powers to the Committees acts as an explicit check on the concentration of
powers in the hands of the Chairman/Chief Executive, as does the provision in the Rules of the Board for
a separate position of Chief Executive, although this has not in practice been invoked.
Recommendation 6. SECRETARY OF THE BOARD
“The Secretary of the Board should have a more substantial role, which strengthens his/her independence
and stability and emphasises his/her function of overseeing the formal and substantive legality of the
Board’s actions”.
Under article 14 of the Rules of the Board, the Secretary of the Board acts as Deputy Chairman, maintains
Company documents, takes minutes and signs the resolutions taken at Board Meetings. In general, the
Secretary’s principal function and importance is to oversee the formal and material legality of the
actions of the Board, ensuring compliance with its procedures and Corporate Governance Rules.
Appropriately, the position is filled by a professional lawyer.
The current Board Secretary is not limited to acting as secretary as he is also a Director on the Board. He
also acts as secretary to the Audit and Nomination and Remuneration Committees, which helps ensure
both the formal legality of their actions and the provision of the information and documents necessary
for the exercise of their functions.
The Secretary of the Board has the Board’s full support in carrying out his role with independence and
stability.
Recommendation 7. COMPOSITION OF THE EXECUTIVE MANAGEMENT COMMITTEE
“Where the Company has a Management Committee, it should reflect the same balance as the Board
between the different classes of Director, and the relations between the two bodies should be based on the
principle of transparency, such that the Board is kept fully informed of the matters dealt with and decisions
taken by the Committee”.
The Audit and Nomination and Remuneration Committees are the only Committees appointed by the
Board of Uralita to date.
Recommendation 8. DELEGATED CONTROL COMMITTEES
“The Board of Directors should create from among its members delegated control Committees, wholly
composed of External Directors, with responsibilities for information and accounting control (Audit); the
appointment of Directors and Senior Managers (Nomination); remuneration policy and its review
(Remuneration); and the evaluation of the Corporate Governance System (Compliance).”
The Uralita Board has an Audit Committee and a Nomination and Remuneration Committee to ensure
its enhanced and more effective functioning. The Rules of the Board set out the responsibilities of each
Committee and its composition and procedures. (See section B.2.3)
Recommendation 9. INFORMATION PROVIDED TO DIRECTORS
“Necessary steps should be taken to ensure that Directors are provided with adequate information,
prepared and designed for that specific purpose, long enough in advance of each Board Meeting for
adequate preparation. Nor should information be withheld on the grounds that it is confidential or
commercially sensitive except in exceptional circumstances”.
89

The Rules state that Board Meetings must be convened with at least three days notice. However, normal
practice is that the notice convening the Meeting and the corresponding information is sent five or six
days in advance. Directors are provided with all necessary documentation and any clarifications that
they may request relating to items on the agenda. An annual schedule for Board Meetings is drawn up
to facilitate the work of the Directors.
Recommendation 10. FUNCTIONING OF THE BOARD OF DIRECTORS
“To ensure the correct functioning of the Board, Meetings should be held sufficiently frequently to fulfil its
mission; the Chairman should promote contributions and the free expression of opinion by all Directors.
Special care should be taken in recording minutes. The quality and effectiveness of the Board’s work should
be evaluated at least once a year”.
A total of five Board Meetings were held in 2005, and minutes were duly taken for each Meeting.
The agenda for each of the Company’s Ordinary Meetings of Shareholders includes a vote on whether to
approve the Directors’ management, thus providing for annual scrutiny of the performance of their
duties.
Recommendation 11. DIRECTOR APPOINTMENT POLICY
“The Board’s role in appointing and reappointing its members should be conducted through a formal and
transparent process, initiated by a justified proposal from the Nomination Committee”.
The Nomination and Remuneration Committee, as stated in section B.2.4 of this report, compiles a
report giving reasons for their choice and justifying the suitability of the proposed Director, before the
proposal is submitted by the Board at the General Meeting of Shareholders.
Recommendation 12. TENURE OF EXTERNAL DIRECTORS
“Once the External Representatives or Independent Directors have been appointed at the General Meeting,
the Board should not propose their dismissal before the expiry of the statutory mandate for which they
were appointed, except for exceptional reasons, justified and approved by the Board subsequent to a report
by the Nomination Committee”.
Directors are appointed for a five-year mandate. However, they may be dismissed at the General
Meeting of Shareholders before this mandate has terminated. Except in exceptional circumstances or in
the event of conflicts of interest or where there are grounds for dismissal under the law or Articles of
Association, the Board does not propose the dismissal of an External Director before their mandate is up.
Notwithstanding the above, at the 2006 General Meeting of Shareholders a proposal will be presented
to extend the mandate of the Directors to six years in accordance with Law 19/2005.
Recommendation 13. RESIGNATION OF DIRECTORS
“Companies’ procedures should oblige Directors to resign if circumstances arise that could have a negative
impact on the functioning of the Board or the credit and reputation of the Company”.
The Rules of the Board state that Directors should offer their resignation to the Board if they are severely
reprimanded by the Nomination and Remuneration Committee for a breach of their obligations as
Directors.
90

Recommendation 14. AGE OF DIRECTORS
“An age limit should be set for Directors, which could be between 65 and 70 for Executive Directors and the
Chairman and somewhat more flexible for other Directors”.
The Aldama Report revised the Olivencia Report in this respect and sets no age limit, preferring merely to
state that the Company should have a policy on this matter, which should be set out clearly in its internal
procedures.
The Rules of the Board expressly state that Directors may not be appointed or reappointed if they are
over 70, nor may individuals over 70 represent legal entities. Also, Directors must offer their resignation
to the Board when they reach the age of 70.
Recommendation 15. INFORMATION FACILITIES PROVIDED TO DIRECTORS
“The right of any Director to collect and obtain all the information and advice they need to fulfil their
supervisory role should be explicitly acknowledged, and adequate channels should be made available for
the exercise of this right, including provisions for consulting external experts under special circumstances”.
Article 25 of the Rules of the Board of Directors grants each Director ample authority to keep him/herself
informed on any aspect of the Company’s affairs, to examine the books, registers, documents and
operations and establishes Directors’ rights to inspect all company premises. This right applies also to
the Group’s national and international subsidiaries.
This right is exercised through the Chairman or Secretary of the Board, who respond to requests from
the Directors either by providing the information directly, suggesting others who can provide the
information required or arranging for the Director to conduct the necessary investigations and
inspections on site. This right has mainly been exercised by the Chairmen of the Audit and Nomination
and Remuneration Committees, who are given all the information they need to keep themselves
informed on the matters falling within their remit.
Recommendation 16. REMUNERATION OF DIRECTORS
“The remuneration policy for Directors should be proposed, assessed and reviewed by the Remuneration
Committee, should be moderate, relate to the performance of the Company and the object of detailed and
individual reporting”.
The Rules of the Board state that each Director is entitled to receive the remuneration set by the Board
in accordance with the Articles of Association and in line with the recommendations of the Nomination
and Remuneration Committee. It is expressly stated that the Board must ensure that the remuneration
of the External Directors is moderate based on market requirements and must be set so as to offer
incentives for Directors to fulfil their role dutifully, without compromising their independence. All of
these steps are followed by the Board in deciding the remuneration of its members in accordance with
the Articles of Association and resolutions adopted at the General Meeting of Shareholders.
The Board, on the express recommendation of the Nomination and Remuneration Committee, has
assumed this criterion of moderation in remuneration.
91

Recommendation 17. GENERAL DUTIES OF DIRECTORS
“The Company’s internal procedures should detail the obligations that derive from the general duties of
diligence and loyalty applying to Directors, with specific attention to conflicts of interest, the duty of
confidentiality, the exploitation of business opportunities and the use of Company assets”.
Chapter V of the Rules of the Board regarding the duties of Directors establishes, among others, the
following duties:
• Duty of confidentiality: Directors must keep confidential the discussions of the Board and any
delegate committees on which they serve and must not reveal any confidential information to which
they have access. This duty remains in force even when the person ceases to be a Director of the
Company.
• Diligence of a prudent businessman: Directors have a duty to act with the diligence of a prudent
businessman and loyal representative.
• Conflict of interests: Directors have a duty to notify any conflict of interest that arises and to refrain
from attending or taking part in discussions that affect matters in which they have a personal
interest or that affects members of their families or companies in which they occupy a management
position or in which they own a significant shareholding.
• Use of company assets: Directors may not make use of the Company’s assets or use their position in
the Company to obtain a personal benefit unless they have made the appropriate payment.
• Business opportunities: Directors may not take advantage of any business opportunities arising
through the Company or any Group company, either for their personal benefit or for that of an
associate, unless the opportunity has previously been offered to these companies and they have
decided not to exploit it and the Director has been authorised by the Board to take advantage of the
opportunity him/herself.
Directors are also subject to Uralita’s Internal Code of Conduct relating to Securities Markets which sets
out procedures for handling relevant, commercially sensitive and privileged information.
Recommendation 18. TRANSACTIONS WITH CORE SHAREHOLDERS
“The Board should promote the adoption of appropriate measures to broaden the duty of loyalty to include
significant shareholders, notably by establishing safeguards for transactions that take place between such
shareholders and the Company”.
The Rules of the Board formally require the Board’s approval for any Company transaction with a core
shareholder.
All transactions between Uralita and its core shareholders have been approved by the Board based on a
report submitted by the Audit Committee. Transactions were approved in consideration of the
Company’s interests and market conditions.
Recommendation 19. GENERAL MEETING OF SHAREHOLDERS
“On the occasion of the General Meeting of Shareholders, from the moment it is called, the Company must
publish the full text of all proposed resolutions to be submitted at the Meeting, using for this purpose the
company website, regardless of any other legal or voluntary procedures taken by the Company”.
92

Uralita’s Board of Directors seeks to promote the informed participation of shareholders in the General
Meetings. In particular, it takes proactive steps to ensure that all shareholders, prior to the Meeting,
have all the legally required information and all information of potential interest to the shareholder
even if not required by law . This information is published on the Company website.
The Board also responds diligently to shareholders’ requests for information in the run-up to the
General Meeting and any questions put forward during the meeting.
Recommendation 20. RULES OF THE GENERAL MEETING AND THE BOARD
“All companies should adopt a set of rules and principles of Corporate Governance including, as a
minimum, rules for the General Meeting and Board”.
The company has in the past published information annually on its Rules for Corporate Governance. This
effort was stepped up in 2003, with the implementation of the necessary procedures for compliance.
On 3 February 2003 the Board approved the Internal Rules of the Board. These rules, which supersede
the previous rules of October 1999, set principles for its organisation and functioning and set out a Code
of Conduct for Directors. Issues covered in these Rules include the composition of the Board, its
structure, remuneration and the rights and duties of Directors. In all cases these comply with current
regulations and recommendations for good Corporate Governance.
Also, in compliance with the terms of the fourth additional provision to Law 44/2002, of 22 November,
regarding Financial System Reform Law, the Uralita Board approved on 17 July 2003 the Internal Code of
Conduct for Securities Markets which updated and superseded the previous regulations effective from 1
January 1999. This Code specifically implements concrete measures to guarantee compliance with the
code of conduct envisaged by the Securities Market Law, basically relating to the notification of relevant
information, the handling of relevant and commercially sensitive information, situations involving
conflicts of interest, and transactions in the Company’s own shares.
Similarly, on 26 May 2004, the Ordinary General Meeting of Shareholders approved the Rules of the
General Meeting, which aim to increase and underpin the transparency of this corporate body and to
cement the procedures for the exercise of the shareholders’ fundamental voting rights, facilitating their
participation in the General Meeting based on their right to information and, in union with the other
partners, to enact the will of the Company.
As mentioned in previous paragraphs, the Board of Directors plans to present a proposal at the General
Meeting of Shareholders to modify the Rules of the General Meeting in accordance with Law 19/2005.
Recommendation 21. COMMUNICATION WITH SHAREHOLDERS
“Companies should take steps to increase the transparency surrounding the procedure for delegating votes
and strengthen communication with their shareholders, particularly institutional investors”.
The Rules of the Board create the procedures for publicly requesting the delegation of votes. Similarly,
the Board has created the necessary channels of communication for proposals put forward by
shareholders and procedures for the regular exchange of information with institutional shareholders.
93

Recommendation 22. TRANSPARENCY WITH THE MARKETS
“The Board of Directors, besides the obligations imposed on it by the regulations in force, is responsible for
providing the markets with timely, exact and reliable information, especially in matters concerning its
shareholder structure, significant changes to Corporate Governance Rules and particularly significant
transactions with related parties or involving the Company’s own shares”.
The Board of Directors makes public, as required by the Rules of the Board, all significant events likely to
significantly affect the share price, changes in shareholder structure, such as changes in significant
shareholdings or shareholders’ agreements and any major modifications to the corporate governance
rules. It also publishes financial information, including its accounts, and releases quarterly and halfyearly
reports to the market through its website.
The information disseminated to financial analysts is simultaneously submitted to the CNMV and made
available on the website.
Recommendation 23. INFORMATION ON CORPORATE GOVERNANCE
“Informational obligations regarding the structures and practices of each company, and, in general,
measures adopted to ensure the quality of information, should be unified in a single document for the
general information of shareholders and investors”.
As well as the financial and economic information made available to shareholders, investors and other
interested parties, the Board of Directors approves annually this Corporate Governance Report, after it
has been approved by the Audit Committee. This report is presented to the General Meeting of
Shareholders and is itself notified as a significant event to the CNMV and made available to
shareholders via the website.
Recommendation 24. FINANCIAL INFORMATION
“All regular financial information, as well as the annual information, provided to the market should be
prepared according to the same professional principles and practices as the annual accounts, and before
being disseminated should be verified by the Audit Committee”.
As required by article 30.2 of the Rules of the Board, financial information provided to the market is
prepared according to the same professional principles, criteria and practices as the annual accounts
and is similarly reliable.
To make sure of this, all such information is reconciled with the external auditor to eliminate
contradictions and check that the criteria used are consistent with those used for the externally audited
annual accounts.
Recommendation 25. INFORMATION VIA INTERNET
“Companies should maintain a website through which to inform shareholders, investors and the wider
market of economic facts and any other significant events that occur in relation to the company and to
help shareholders in the exercise of their right to information, and as the case may be, other company
rights. ”
94

In application of the policies of transparency and full information, the company’s website
(www.uralita.com) carries full and detailed information on all financial and market matters,
Shareholders’ Meetings and Corporate Governance issues as required to allow shareholders to exercise
their rights and satisfy the interests of potential investors or any other interested party.
The website also carries all necessary items to satisfy shareholders’ right to information and to
disseminate relevant information, in compliance with article 82.5 of the Securities Market Law and its
implementation by Order ECO/3722/2003. Namely, the Articles of Association, Rules of the Board,
Internal Code of Conduct relating to Securities Markets, information on General Meetings held in the
course of the year, the Department for Investor and Shareholder relations, significant events notified to
the CNMV and this Annual Report on Corporate Governance. The Company’s Rules of the Board of
Directors is also available on the website (www.uralita.com).
Recommendation 26. EXTERNAL AUDITORS
“The Board of Directors and Audit Committee should supervise any situations that may threaten the
independence of the Company’s external auditors and, specifically, should check the share of the Audit
firm’s receipts represented by the fees paid by the Company under all headings and should make public
which, if any, of these fees relate to professional services other than that of audit”.
The respect for the independence of the external auditors is laid down under the Rules of the Board
which state that relations with the auditor of the accounts shall be conducted through the Audit
Committee, which analyses all issues that could pose a risk to the independence of the auditors.
The fees paid to the auditors are set according to market criteria and at no time does their size represent
a threat to the auditors’ independence.
Recommendation 27. QUALITY OF ACCOUNTS
“The Board should seek to avoid the accounts they prepare being presented at the General Meeting of
Shareholders with reservations or qualifications in the Audit Report. Where this is not possible, both the
Board and the auditors should explain clearly to the shareholders and markets the nature and size of the
discrepancies”.
The Board, as part of its role in preparing the accounts, seeks, through the Audit Committee, to ensure
the accounts are presented without reservations or qualifications on the part of the auditor. This
includes holding meetings with the external auditors, careful analysis of documentation and the
accounts themselves, etc. In recent years the auditor’s reports on the Company and Consolidated Annual
Accounts have contained no qualifications and are available from the Madrid Companies Register and
from the CNMV.
Recommendation 28. CONSISTENCY
“The Board of Directors should include in its Annual Report information on its Rules of Corporate
Governance, explaining any that do not comply with the rules prescribed in this code”.
Uralita’s Board is required to prepare this Annual Report, which details the degree of compliance with
the Rules for Good Corporate Governance required by law and under current codes of best practice.
This Annual Corporate Governance Report has been approved by the Company’s Board of Directors at its
Meeting on 27 March 2006.
95

Uralita Group
Corporate
Social
Responsibility

Corporate
Social Responsibility
1. Corporate Social Responsibility at Uralita
Within the framework of the policy defined by the Nefinsa Group, Uralita conceives Corporate Social
Responsibility (CSR) as the voluntary assimilation by companies of the social and environmental
concerns affecting their commercial operations and relationships.
In 2004, the Group defined the content of its Corporate Social Responsibility policy, encouraging new
socially responsible projects and unifying the corporate criteria of the companies comprising the Nefinsa
Group.
From that moment, Uralita’s CSR policy has focused on three main areas: the environment, education
and specific initiatives with stakeholders.
At Uralita we are aware that our strategies, policies and decisions have an impact on the environment
and therefore our commitment goes beyond our mere legal obligations. We believe that compliance
with economic, social and environmental responsibilities, in addition to a transparent and efficient
management focus, plays an essential role in sustainable development.
In line with our policy of social responsibility and commitment, at Uralita we continue to support the
progress of the communities in which we are present through initiatives carried out in collaboration
with public and private entities, associations and NGOs.
2. Responsibility for Economic Value Creation
In its nearly 100 years of operation, the Uralita Group has constantly adapted to its competitive
environment. Accordingly, its activities have changed over the years. Uralita has stood out for the how
quickly it has adopted new technological advances; it demonstrated this in the 50s when plastic
materials were introduced, in the 70s with concrete tiles and plasterboard, in the 80s with ceramic tiles
and in the 90s by entering the insulation market and subsequently achieving an international presence.
The Uralita Group’s new focus on construction materials has enabled it to become leader in all its
98

products and markets. This privileged position is the result of a focused and socially responsible strategy
that aims to create value over the medium and long term.
Value generation is not considered solely from a financial perspective, but also from the standpoint of
profitable and sustainable development, meeting the needs of all our stakeholders and in this way
supporting the social progress of the communities in which we are present. We contribute to economic
and GDP growth in three ways: profits, investment and job creation.
• Throughout 2005 the Uralita Group continued to with its 2004-2006 Strategic Plan, successfully
completing the planned disposal of non-core assets. Six businesses were divested during the year,
which, on top of the seven sold in 2003 and 2004, leaves a portfolio of four core activities which will
be the platform for future growth. Despite these disposals, the Uralita Group reported profit
attributable to equity holders of the parent of €35.2 million in 2005 – its second best result in the last
decade.
• Additionally, management improvements and the disposals made during the course of 2005 allowed
the Uralita Group to reduce net debt by €151.9 million to €140.1 million. This low level of debt gives
the Group the economic wherewithal to embark on a new stage of profitable organic (investment in
new lines/plants) and inorganic (acquisitions) growth.
• In 2005, despite the significant restructuring effort made by the Group to adapt to the external
scenario, it has continued to focus on growing its business, as evidenced by the second glass wool line
brought on stream at the Serpuchov plant (Russia) in the first quarter of 2005.
99

3. Responsibility for the Environment
Care for our environment forms part of the social commitment included in the Uralita Group’s values,
reflecting its commitment to sustainable development. In 2005, the company’s commitment to
protecting the environment was underscored by three major projects:
1. Integrated pollution prevention and control.
2. Minimisation of environmental impact.
3. Climate Change.
3.1. Integrated pollution prevention and control (IPPC)
In compliance with the policies set down by the EU’s 5 th Environment Action Programme and in order to
implement effective pollution prevention and control, Directive 96/61/CE of the Council was passed on
24 September 1997 establishing measures to prevent, or at least reduce, emissions from activities which
can potentially pollute the atmosphere, water or soil (including waste). The Directive was transposed
into Law 16/2002 governing integrated pollution prevention and control dated 1 July.
To ensure effective pollution prevention and control, in 2005 the Uralita Group has taken steps to apply
for IPPC Authorisation for those of its plants falling under the jurisdiction of this Law as a result of their
business activities.
3.2. Minimising the environmental impact
In line with commitments made in previous years, the Uralita Group’s priority targets are still to
minimise the environmental impact of its activities through the following projects:
• Efficiency improvements and energy savings. Over the past few years, Uralita has implemented
various energy optimisation projects aimed at reducing consumption. For instance, at the Toledo
plant an external energy audit was carried out with the specific aim of optimising energy usage and
reducing consumption (e.g. furnace and tile drier).
• Water reuse. Uralita has incorporated water reuse systems into the manufacturing process of its
gypsum and roof tiles plants in order to recycle water, reduce consumption and prevent spillage.
• Installation of treatment systems for waste water. These systems allow a more efficient treatment of
industrial wastewater, thereby reducing pollution and dependence on other sources.
100

• Reduction of air emissions via the installation of filter systems.
• Reduction of waste production.
3.3. Climate Change
During 2005, Uralita’s plants complied with all the requirements established by the Kyoto protocol,
including:
• Efficiency improvements to reduce CO 2 emissions.
• Emissions monitoring and verification by AENOR.
• Submission of the verified report to the pertinent authority.
4. Responsibility for Society
The Uralita Group’s commitment to Society has been made possible by ongoing discussions with the
stakeholders involved in its activity, which permit us to learn about and do our utmost to satisfy their
requirements.
Only by fulfilling our commitments to all parties are we able to make the planned contribution of value
to society.
4.1. Commitment to shareholders
The Uralita Group has been a listed company since 1976. At the end of 2002 the Nefinsa Group became
its main shareholder and spearheaded a profound change in its organisation through its new strategic
plan. One of the cornerstones of this transformation was the commitment to transparency.
This is where corporate governance plays a significant role since it defines the way in which companies
operate, are monitored and interact, both with their shareholders and investors and with any other
party that forms part of its stakeholders, including all related groups or those with a current or potential
interest in the company and those it wishes to benefit with this policy of information and transparency.
The Uralita Group has followed closely the development of best practices in the area of Corporate
Governance, accepting all obligations imposed. To this end, the Board of Directors has sought to
incorporate all practices likely to generate value to the extent that these increase transparency and
improve information available to shareholders, workers, suppliers, customers, markets and the financial
community in general.
101

Uralita’s commitment to its shareholders not only encompasses transparency but also guarantees the
long-term viability and development of the business and shareholder remuneration in the form of
dividends in the short and medium term. The cornerstone of the Group’s relationship with its
shareholders is precisely this transparency of information, reflected in fluid communication and the
delivery of explicit commitments.
Specific targets have been set for 2006, including EBITDA of €144 million and profit attributable to
equity holders of the parent of €35 million.
Rewarding shareholders via dividends is the main way in which the Uralita Group creates value for its
shareholders. As in 2004, the Uralita Group obtained positive results in 2005. Therefore, if the motion is
approved at the Shareholders' General Meeting, shareholders will receive a dividend of €0.11 per share
against 2005 earnings, representing a payout of approximately 61% of net profit.
Uralita has an Investor Relations Department that promotes different communication channels both
with individual shareholders and institutional investors with the aim of facilitating access to all the
information they may require to assess the company’s financial position and future prospects.
4.2. Investor Relations Department
The Investor Relations Department enables two-way and direct communication with financial analysts
and institutional and private investors. In this way, the company offers all the support they require by
providing the necessary public information on the company and its share price for their analysis and
decision making, as well as clearing up any doubts surrounding key aspects of its business.
The Uralita Group publishes the mandatory financial reports and company presentations via this
Department on a quarterly and annual basis and also participates in forums for listed companies
organised by financial analysts in order to bring the company closer to market agents. All these
documents may be consulted on our website (www.uralita.com) or at the CNMV (Comisión Nacional del
Mercado de Valores).
4.3. Website (www.uralita.com)
Uralita’s corporate website is constantly updated with the following content:
• The Uralita Group on the Stock Market
• Investor’s Agenda
• Dividend information
102

• Articles of Association
• News and Relevant Facts
• Significant shareholdings
• Other Group websites
• Financial information: Quarterly and semester results
• Company presentations
• Annual Reports
• Corporate Governance Report
• Information on General Shareholders’ Meetings
• Important contacts at Uralita
Our pledge going forward is to maintain and develop this and other communication channels to ensure
that shareholders are fully informed and therefore involved in important future developments planned
by Uralita.
5. Commitment to Employees
In 2005, the Uralita Group upheld its commitment in the area of Human Resources, one of the main
focuses of Group Strategy.
These actions have focused on enhancing job quality, working conditions and the professional
development and health of all the Group’s employees:
5.1. Quality of employment
At December 2005 the Uralita Group had 4,340 employees in 22 countries.
60% of the workforce is employed on permanent contracts, demonstrating the company’s commitment
to stable, continuous employment.
More than 64% of the company’s workforce has been employed for more than five years and the Uralita
Group considers this to be a sign of loyalty.
5.2. Employment in developing areas
In accordance with its expansion and job creation policy, the Uralita Group continues to grow in
developing countries (e.g. Bosnia, Croatia, Estonia, Hungary, Kazakhstan, Poland, Rumania, Russia,
Slovakia, Slovenia, the Ukraine and Serbia & Montenegro).
103

5.3. Training
5.3.1. Human Resources Development and Training
The Dictionary of Competences compiled in 2004 has evolved from the Group’s values and sets out in a
structured manner the skills and qualities, in the form of competences, that have been deemed vital to
the Group’s success, thus enabling the company to carry out its mission and fulfil its future objectives.
85 participants, including managers, Department Heads, Sales People, Analysts and Technicians from all
Businesses and corporate areas of the Group have taken part. These courses have focused on developing,
strengthening and improving the Uralita Group’s competencies.
Training was offered through the following courses:
• Efficient Presentations: based on strengthening Communication competencies.
• Conflict Management: a combination of Negotiation and Communication competencies.
• Efficient Negotiation: also exploring Planning and Organisation as the basis of Negotiation.
• Change Management: focused on Strategic Vision and Information Management in situations
of uncertainty.
• Time and Project Management: reinforcing, among others, Team Work and Results Orientation.
• Human Development: based on strengthening Communication, Delegation and Motivation as
team management tools.
5.3.2. Management Programme
Twenty-six employees from different business lines and central services have taken part in the
Management Programme since it was created out of the evaluation process carried out in 2004 through
Development Centres. Its aim is to achieve the growth and profitability needed by the company,
delegation or area by achieving various objectives which are personally assigned to the employee’s area
of responsibility.
The programme, which had a duration of six months, lasted 100 hours and took place at the
Management School of the Instituto de Empresa.
104

The Programme’s objectives are:
• To prepare those people taking part, and who have been chosen for their high potential, to
achieve a greater professional development, whilst continuing with their usual work.
• To teach the fundamentals of some of the competences included in the Uralita Group’s
“Dictionary of Competences” and their practical application.
• To instil a general knowledge of the “Management Programme” which help employees view
the company as a complex and inter-related system.
• To put into the Programme content into practice through practical activities (workshops,
working groups, case studies).
5.3.3. Management Skills Development and Training Programme
Twenty-nine Group managers have taken part in this programme which aims to provide the necessary
tools and management skills to better carry out their jobs and facilitate the achievement of personal
and professional objectives thereby positively affecting the Company’s results. The modules include:
a) Global vision / Strategy:
• Develop the Group’s global vision/strategy by analysing the various components on which they
are based and identifying related competencies.
• Help identify and implement the most appropriate strategies in accordance with the Company’s
mission/vision statement.
• Analyse how decision-making affects the various areas of the Company and its impact on figures.
b) Leadership:
• Identifying different management styles, how these relate to the climate and the impact on
results.
• Adapting management styles to the different day-to-day situations we find ourselves in with
colleagues.
• Providing logical evaluation and colleague development processes adapted to the above.
• Communicating techniques and tools, identifying conduct and behaviour which can be included
in people management processes.
105

5.3.4. URSA invests in Human Resources Development
We at URSA are convinced that the development of Human Resources is a key factor in the Business’
success, as can be seen by the development of the following measures:
5.3.4.1. Functional Training – Marketing
“Functional Training – Marketing” has been specially designed by the St. Gallen Business School
(Switzerland), taking into consideration the marketing needs of URSA's Managers. The aim of this
programme was to create a marketing knowledge base for our headquarters and for the 20 marketing
managers of URSA’s operating units throughout Europe.
5.3.4.2. 360° Feedback Evaluation System
Based on the “Dictionary of Competences”, URSA has developed a 360° Feedback Evaluation System for
its 20 Managers. This system is based on obtaining behavioural feedback from evaluators, evaluees and
colleagues. The objective has been to promote the continued improvement of competences as defined
in the Individual Development Plans based on the results from this feedback.
5.3.5. Domus Programme
Aimed at factory supervisors, from centre general managers/heads to managers/shift managers. The
Domus Programme involves training initiatives whose main aim is to promote the Uralita Group’s new
culture and values. It is also a vehicle for the implementation of the new human resources model: “The
Supervisor as a people manager”. The project, which began in 2004 for production centre heads, carried
on in 2005 with the level directly below (Production heads, maintenance, shipping, etc), with a total of
79 people taking part.
5.4. Communication
In November 2004 the “Intralita” (corporate Intranet) was created, the result of collaboration between
all the Group’s General Areas and Businesses. This has progressed gradually during 2005 and has
become a cornerstone of the strengthened Corporate Culture defined by its values and the internal
communication between all its areas.
With the introduction of the personal functions "Mis Vacaciones" (Holidays) and "Nota de Gastos"
(Expenses) the Intranet has taken an important step forward in achieving one of the most important
objectives, namely unifying processes and making Group management processes easier.
106

As can be seen from the chart below, the number of visits remains satisfactory in this second phase of
the rollout:
35,000
30,000
25,000
20,000
15,000
10,000
5,000
0
957
778 788
674
23,006 29,479 27,993 28,268
MAR-05 JUN-05 SEP-05 DEC-05
1000
900
800
700
600
500
400
300
200
100
0 Visits
Visitors
5.5. Employee satisfaction
The “Ayúdanos a Mejorar” (Help Us to Improve) project continued in 2005, as we at the Uralita Group are
aware that a group which wants to become a leader must listen to its employees.
Employees answered a survey (online or hard copy, depending on their place of work), concerning their
work, working conditions and compensation, organisation and resources, customer orientation and
quality, communication and participation, leadership, teamwork and their general satisfaction. The
results have provided us with a base from which we have identified areas of improvement.
This Employee Satisfaction survey was conducted among two groups.
a) The Insulation business’ two factories in Spain with an overwhelming 86% participation rate.
We would highlight the following aspects of the overall rating:
• Confidence in the future of the Group.
• Pride in belonging .
• Product image and customer service.
• General Job satisfaction:
- Atmosphere at work.
- The work in itself.
- Definition of responsibilities.
107

) 477 employees from the Group Corporate Areas and Services departments in all the countries where
the Group operates took part with 65% participation.
We would highlight the following aspects of the overall rating:
• Pride in belonging.
• Confidence in the future of the Group.
• Confidence in superiors.
• Good atmosphere at work.
• Overall job satisfaction.
5.6. Health and Safety
During 2005, the Uralita Group’s Joint Prevention Service, which was established in 2004, carried out
various measures aimed at improving the health and safety conditions of employees working for the
Uralita Group in Spain.
As well as specific measures carried out at each centre, (advisory activities, training, evaluation,
monitoring and control), there have been a number of important measures introduced across the Group
on a worldwide basis. We would especially highlight the preparation and approval of procedures and
formats which make up the Uralita Group’s System for the Prevention of Accidents.
In 2005, as part of the specific objectives aimed at those disciplines which are less developed, various
studies have been carried out concerning ergonomics and applied physiology, in order to complement
safety activities, industrial hygiene and health monitoring.
Advances in the integration of accident prevention, together with the efforts of the Joint Prevention
Service of the Uralita Group, have helped us achieve the objectives set.
As part of the actions aimed at encouraging health and safety in our employees’ daily lives, and timed to
coincide with the European Health and Safety Week (24-28 October 2005), we launched a campaign
which included: the publication of news items, interviews and reports, widespread training, the display
of the winning poster submitted by the Uralita Group for the drawing competition during this Week,
and the presentation of a commemorative plaque to the factory which was awarded the prize for the
best initiative aimed at improving health and safety amongst the workers.
108

Considering the size of the Group, accident rates for 2005 have been favourable compared to the
previous year with 16% fewer accidents leading to sick leave.
Given the efforts made in implementing the Uralita Group’s System for the Prevention of Accidents, at
the end of 2005 it was decided to audit this programme externally. This process will take place during
the first half of 2006.
6. Responsibility for the Construction Materials Sector
Since its creation nearly 100 years ago, the Uralita Group has been a benchmark in construction
materials, with leadership positions in the products and markets in which it operates and offering the
information and products necessary to promote sustainable construction.
6.1. Awards for innovation
Once again, the Uralita Group has co-operated with various universities, always aware that these are a
source of innovation aimed at bringing the business and the academic worlds closer together.
Therefore, the context described below was celebrated for another year:
XV Iberian PLADUR® construction solutions contest
In 2005 the 15 th edition of the PLADUR® construction solutions contest was held. As in previous years,
the contest was aimed at students enrolled in the second cycle of Technical Colleges and Architecture
schools in Spain and Portugal.
This year the theme was “a Madrid underground station for 2012”. The aim was to encourage students
to think about architecture’s role as an information object and support for the flow of people’s activities.
Students were asked to present draft designs for a total makeover of a modern underground station, or
an area within one, making it a cultural and information meeting point with constant updates on
Madrid’s candidacy for the 2012 Olympics without architectural barriers. Through this project, PLADUR®
supported the city’s Olympic candidacy.
The aim is to stimulate and expand the knowledge of participating students about systems and
PLADUR® products.
109

6.2. Third-party training
The Uralita Group participates in various training projects, technical conferences and seminars with
organisations, local institutions and universities, contributing their knowledge and experience to society.
In 2005 the Uralita Group actively took part at the following events:
• Seminar on solutions for channelling water inside buildings: the Malaga School of Technicians and
Technical Engineers.
• Seminar on new technologies in channelling systems and their regulation: School for Public Works
Engineering.
• XXII National Irrigation Congress Conference entitled “Optimising the channelling and control of
irrigation water”.
• V Course on the Design and Installation of Pipes to Transport Water: held at the Higher Polytechnic
School of Ávila.
• Speeches: “Hydraulic Control Valves for Regulating Drinking Water Systems” and “URATOP class
500. Pipes of the future for channelling drinking water”.
Also, in 2005, in accordance with its ideal of bringing together the academic and business worlds, the
Uralita Group’s Roofing Business held courses in the engineering and architecture schools of the
following areas of Spain: Mallorca, Zaragoza, Valladolid, Seville, Toledo, Granada, Cantabria, Barcelona,
Córdoba, Zamora, Palencia, Salamanca, Burgos, Madrid, Logroño, Alcalá de Henares, Mérida, Murcia,
Ávila and León.
7. Commitment to the Community
7.1. Local
The Uralita Group has production plants in 22 countries which makes it possible for us to participate in
the social structure of all the communities in which we are present. In addition to the factors that
contribute to the economic development of these countries such as profits or the creation of
employment, Uralita’s social commitment to these communities is further enhanced by sponsoring
cultural and sports events.
7.2. Company
In 2005 the Uralita Group, in collaboration with all of its employees, took part in various activities aimed
at making our Corporate Values “Responsibility and Social Commitment” a reality. This shows that this
is something in which we really believe.
110

7.2.1. Uralita Aid Project: was another initiative proposed by employees following the Asian tsunami.
All donations from the Company and employees were handed over in Madrid to the Chairman of the
Spanish Red Cross.
7.2.2. “Donate your mobile” Campaign: to coincide with the Group’s change of mobile operator, a
recycling campaign was launched with old mobile phones being used to help society. The phones
donated generated money to be spent on education, integration and development projects for the most
needy. At the same time, employees are helping the environment as phones are disposed of in an
environment-friendly way.
7.2.3. Cooperation with Intermón Oxfam:
• A cooperation agreement has been signed with Intermón Oxfam whereby the Group will donate the
fees its managers receive for talks, conferences or other kinds of training initiatives.
• The Group's 2005 Christmas cards were bought from Intermón Oxfam in a move to make a profit due
to its co-operation with a solidarity initiative.
A saving was made and this amount was donated to Intermón Oxfam and will be used for its Ethiopia
Water Bank project.
7.2.4. Blood Donation Campaign: The Uralita Group is co-operating with the Madrid Autonomous
Community’s Blood Transfusion Centre in order to maintain stable and constant Blood Donation
campaigns in which Group employees participate.
7.2.5. Co-operation with Man’s Earth: The Uralita Group, along with the rest of the Nefinsa Group
companies, has co-operated with the NGO Fundación Tierra de Hombres (Man’s Earth Foundation) in its
“Viaje a la Vida” (Voyage of Life) project.
Company and individual donations have helped the NGO’s work of brining children from countries with
poor or inexistent sanitation infrastructures to Spain where they are able to receive the necessary
attention.
7.2.6. Uralita recycles: This campaign was launched to focus on improving the environment by
encouraging the recycling of paper and toners.
Containers have been placed in the work places for employees to deposit materials for recycling.
111

Uralita Group
Annual Financial
Statements

Translation of consolidated financial statements originally issued in Spanish and prepared in
accordance with IFRS. In the event of a discrepancy, the Spanish-language version prevails
Uralita Group
Consolidated Annual Financial Statements
for the year ended 31 december 2005
Consolidated Balance Sheets at 31 december
Thousands of euros 2005 2004
NON-CURRENT ASSETS 634,221 760,660
Goodwill 43,894 43,894
Intangible assets 16,468 11,785
Property, plant and equipment 433,051 584,188
Deferred tax assets 138,985 117,092
Other non-current assets 1,823 3,701
CURRENT ASSETS 334,093 483,920
Inventories 92,869 145,621
Trade and other receivables 99,549 151,472
Other current financial assets 129,975 173,839
Cash and cash equivalents 10,957 12,022
Other current assets 743 966
NON-CURRENT ASSETS HELD FOR SALE 57,014 7,854
TOTAL ASSETS 1,025,328 1,252,434
EQUITY 472,517 464,887
Issued capital 142,200 142,200
Share premium 59,518 112,027
Reserves attributable to equity holders of the parent 28,205 (31,603)
Reserves in consolidated companies 114,239 130,510
Profit for the year attributable to equity holders of the parent 35,184 45,231
Translation differences (4,443) (31,712)
Equity attributable to equity holders of the parent 374,903 366,653
Minority interests 97,614 98,234
NON-CURRENT LIABILITIES 176,416 309,339
Interest-bearing loans and borrowings 122,789 263,507
Provisions 15,607 18,563
Deferred income 11,488 14,063
Deferred tax liabilities 13,181 -
Other non-current liabilities 13,351 13,206
CURRENT LIABILITIES 376,395 478,208
Interest-bearing loans and borrowings 22,740 31,874
Other current financial liabilities 110,024 147,463
Trade payables 108,152 159,321
Other current liabilities 135,479 139,550
TOTAL EQUITY AND LIABILITIES 1,025,328 1,252,434
The accompanying Notes 1 to 24 are an integral part of the consolidated balance sheet at 31 December 2005.
116

Translation of consolidated financial statements originally issued in Spanish and prepared in
accordance with IFRS. In the event of a discrepancy, the Spanish-language version prevails
Consolidated income statement for the years ended 31 december 2005 and 2004
Thousands of euros 2005 2004
Revenue 1,104,610 1,314,087
Other operating income 8,023 7,922
Increase in inventories of finished products and work in process 1,541 10,639
Supplies (446,833) (560,227)
Employee benefits expense (206,432) (247,995)
Depreciation and amortisation (63,240) (77,996)
Other operating expenses (316,789) (347,636)
OPERATING PROFIT 80,880 98,794
Finance costs (13,509) (23,190)
Finance revenues 4,048 2,764
Net exchange gains (losses) 1,193 (83)
Share of profit (loss) of companies accounted for by the equity method 305 (180)
Gain on disposal and measurement of non-current assets 4,561 16,777
Net impairment losses (reversal) 4,085 (27,438)
Other gains and losses (5,680) 23,431
PROFIT BEFORE TAXES 75,883 90,875
Income tax expense (22,307) (30,078)
PROFIT FOR THE YEAR 53,576 60,797
Attributable to:
Equity holders of the parent 35,184 45,231
Minority interests 18,392 15,566
53,576 60,797
EARNINGS PER SHARE (euros)
Basic and diluted 0.18 0.23
The accompanying Notes 1 to 24 are an integral part of the consolidated income statement for the year ended 31 December 2005.
117

Translation of consolidated financial statements originally issued in Spanish and prepared in
accordance with IFRS. In the event of a discrepancy, the Spanish-language version prevails
Uralita Group
Consolidated statement of changes in equity
for the years ended 31 december 2005 and 2004
Thousands of euros
Issued Share Reserves Reserves Profit (loss) Translation Equity Minority EQUITY
capital premium attributable in for the year differences attributable interests
to equity consolidated attributable to equity
holders of companies to equity holders of
the parent holders of the parent
the parent
Balance at 1 January 2004 142,200 112,027 40,853 90,618 (41,931) (31,786) 311,981 92,593 404,574
Distribution of 2003 profit (80,733) 38,802 41,931 (7,770) (7,770)
Sale of treasury shares 8,277 8,277 8,277
Foreign currency translation 194 194 (174) 20
Changes in consolidation
scope and investments (1,854) (1,854)
Other 1,090 (120) 970 (127) 843
Profit for the year 2004 45,231 45,231 15,566 60,797
Balance at 31 December 2004 142,200 112,027 (31,603) 130,510 45,231 (31,712) 366,653 98,234 464,887
Distribution of 2004 profit 7,299 4,357 (45,231) (33,575) (14,409) (47,984)(*)
Foreign currency translation 7,598 7,598 272 7,870
Changes in consolidation
scope and investments (18,635) 19,669 1,034 (4,503) (3,469)
Other (460) 2 (458) (372) (830)
Offset (52,509) 52,509
Remeasurement of financial
instruments classified as hedges (1,533) (1,533) (1,533)
Profit for the year 2005 35,184 35,184 18,392 53,576
Balance at 31 December 2005 142,200 59,518 28,205 114,239 35,184 (4,443) 374,903 97,614 472,517
(*) Dividends paid by the parent company and by subsidiaries to minority interests
The accompanying Notes 1 to 24 are an integral part of the consolidated statement of changes in equity for the year ended 31 December 2005.
118

Translation of consolidated financial statements originally issued in Spanish and prepared in
accordance with IFRS. In the event of a discrepancy, the Spanish-language version prevails
Uralita Group
Consolidated cash flow statement for the years ended 31 december 2005 and 2004
Thousands of euros 2005 2004
CASH FLOWS FROM OPERATING ACTIVITIES
Profit before taxes 75,883 90,875
Adjustments:
Government grants used (1,669) (2,887)
Depreciation of property, plant and equipment and
amortisation of intangible assets 63,240 77,996
Deferred expenses recognised in income 776 5,571
Allocation / (Reversal) of current provisions, net 3,894 2,453
Net finance costs 7,492 20,509
Share of profit (loss) of companies accounted for by the equity method (305) 180
Loss on disposal and measurement of non-current assets (4,561) (16,777)
Net impairment loss/ (reversal) on assets (4,085) 27,438
Other gains and losses (9,735) (33,489)
Net cash flows from operating activities before changes in working capital 130,930 171,869
Increase / (Decrease) in inventories 2,297 (18,842)
Increase / (Decrease) in receivables and other financial assets 46,407 (14,434)
Increase / (Decrease) in payables (30,988) 13,385
Cash flows from operations 148,646 151,978
Income tax paid (28,821) (25,325)
NET CASH FLOWS FROM OPERATING ACTIVITIES 119,825 126,653
CASH FLOWS FROM INVESTING ACTIVITIES
Interest and dividends received 328 82
Investments:
· Property, plant and equipment and intangible assets (98,898) (94,960)
· Financial assets: (910) (785)
Disposals:
· Property, plant and equipment and intangible assets 26,774 42,157
· Financial assets 194,915 7,559
· Treasury shares - 8,277
· Other non-current assets 441 3,918
NET CASH FLOWS FROM / (USED IN) INVESTING ACTIVITIES 122,650 (33,752)
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid (47,984) (7,770)
Interest paid (7,999) (18,811)
Repayment of borrowings (187,557) (431,987)
Proceeds from bank loans - 233,232
Proceeds from bond and other debt issues - 123,483
NET CASH USED IN FINANCING ACTIVITIES (243,540) (101,853)
NET DECREASE IN CASH AND CASH EQUIVALENTS (1,065) (8,952)
Cash and cash equivalents at 1 January 12,022 20,974
CASH AND CASH EQUIVALENTS AT 31 DECEMBER 10,957 12,022
The accompanying Notes 1 to 24 are an integral part of the consolidated cash flow statement for the year ended 31 December 2005.
119

Translation of consolidated financial statements originally issued in Spanish and prepared in
accordance with IFRS. In the event of a discrepancy, the Spanish-language version prevails
Notes to the
Consolidated Financial Statements
For the year ended 31 December 2005
1. Corporate information
Uralita, S. A. ("the Company" or "the parent company") is parent company to a Group of companies
which, taken as a whole, engages in the manufacture and sale of construction industry products in the
broadest sense.
The Company was incorporated in Spain on 6 August 1920 in accordance with Spanish Corporation Law.
Its registered office is located at Mejía Lequerica nº 10.
Uralita, S.A. is required to prepare its own annual accounts and the consolidated annual accounts of the
Group.
The Group carries out its business through the companies detailed in Appendix I. Its main businesses,
which in accordance with IAS 14 the Group has determined to be its primary segment reporting format,
are the following:
• Insulation
• Gypsum
• Roofing
• Pipes
2. Basis of presentation and accounting principles
2.1. Basis of presentation
The consolidated annual accounts of the Uralita Group for 2005 have been prepared by the Directors of
the parent company at a meeting of its Board of Directors held 27 March 2006 from the Company’s
accounting records and those of the rest of the companies comprising the Group to give a true and fair
view of the Group’s net worth and financial situation at 31 December 2005 and the consolidated results
of its operations, changes in equity and cash flows for the year then ended.
The financial statements have been prepared applying the accounting principles included in the
International Financial Reporting Standards (IFRS) adopted by the European Union in accordance with
the provisions of Regulation (CE) no. 1606/2002 of the European Parliament and of the Council of 19 July.
In Spain, the obligation to present consolidated annual financial statements under EU-approved IFRS
was established in the Final Disposition No 11 of Law 62/2003, of December 30, on Fiscal, Administrative
120

and Social Measures. Note 4 sets out obligatory accounting principles and policies and measurement
bases applied and the alternatives legally permitted in this respect.
The Group’s annual consolidated accounts and the accounts of the companies comprising the Group for
2005 are pending approval at their respective General Shareholders' Meetings. The parent company’s
Board of Directors expects the annual accounts to be approved without significant changes. The
consolidated annual accounts for 2004, prepared in accordance with Spanish generally accepted
accounting principles (Spanish GAAP), were approved at the General Shareholders’ Meeting of Uralita,
S.A. held 19 May 2005.
First-time adoption of IFRS
The consolidated annual accounts of the Group for the year ended 31 December 2005 are its first
prepared in accordance with IFRS.
Among the alternatives provided for by IFRS 1 on the transition process and the remaining IFRSs
endorsed, the Uralita Group has elected to apply the following:
• Business combinations. Acquisitions of companies made prior to the transition date (1 January
2004) are stated at the carrying amounts at the acquisition date in accordance with Spanish GAAP.
• The Group measures property, plant and equipment at the lower of cost or market. The Group
maintains the revaluations made in Spain as an element of the acquisition cost of assets at the
transition date.
• Financial instruments: The Group has decided to apply IAS 32 and 39 at the 1 January 2004
transition date.
The financial information for 2004, included for comparative purposes, has been prepared from the
Group’s consolidated annual accounts approved at the General Shareholders’ Meeting and adapted to
IFRS bearing in mind the foregoing. Accordingly, the IFRS transition date is 1 January 2004.
In compliance with IAS 1 the information on 2004 contained in these notes is presented purely for the
purpose of comparison with 2005 and does not constitute the consolidated annual accounts of the
Group for 2004.
The principle effects of the transition to IFRS on equity at 1 January 2004 and 31 December 2004, as well
as profit for 2004 are explained below.
121

Equity at 1 January 2004
Attributable to equity Minority Equity
Thousands of euros holders of the parent interests
Equity at 1 January 2004 under
Spanish GAAP in force at that date (*) 339,708 95,508 435,216
· Elimination of deferred expenses and
other intangible assets (5,683) (454) (6,137)
· Provisions recorded for impairment of assets (39,188) (2,461) (41,649)
· Capitalisation of tax credits 22,302 - 22,302
· Recognition in reserves of negative goodwill 870 - 870
· Adjustment to reserves for shares in the
parent company held as treasury shares (6,028) - (6,028)
Total impact on equity (27,727) (2,915) (30,642)
Equity at 1 January 2004 under IFRS 311,981 92,593 404,574
(*) Obtained from the consolidated annual accounts at 31 December 2003 prepared in accordance with Spanish GAAP at that date
Income statement for the year ended 31 December 2004
Attributable to equity Minority Equity
Thousands of euros holders of the parent interests
Profit for 2004 under Spanish GAAP in
force at that date (*) 43,291 15,339 58,630
· Elimination of the amortisation of goodwill 2,384 - 2,384
· Elimination of deferred expenses and
the amortisation of other intangible assets 2,675 227 2,902
· Cancellation of recognition of
negative goodwill in income (870) - (870)
· Cancellation of proceeds from
disposal of treasury shares (2,249) - (2,249)
Total impact on profit for the year 1,940 227 2,167
Profit for the year 2004 under IFRS 45,231 15,566 60,797
(*) Obtained from the consolidated annual accounts at 31 December 2004 prepared in accordance with Spanish GAAP at that date
122

Equity at 31 December 2004
Attributable to equity Minority Equity
Thousands of euros holders of the parent interests
Equity at 31 December 2004 under
Spanish GAAP in force at that date (*) 384,163 100,923 485,086
· Elimination of deferred expenses and
other intangible assets (3,008) (228) (3,236)
· Provisions recorded for impairment of assets (39,188) (2,461) (41,649)
· Capitalisation of tax credits 22,302 - 22,302
· Goodwill 2,384 - 2,384
Total impact on equity (17,510) (2,689) (20,199)
Equity at 31 December 2004 under IFRS 366,653 98,234 464,887
(*) Obtained from the consolidated annual accounts at 31 December 2004 prepared in accordance with Spanish GAAP at that date
The main adjustments resulting from the conversion to IFRS are the following:
• Elimination of capitalised start-up expenses and deferred expenses for R&D, projects and other.
• Recording of provisions to recognise the impairment in value of certain Group businesses.
• Elimination of the amortisation of goodwill in 2004 carried out under Spanish GAAP.
• Capitalisation of tax assets from tax loss carryforwards and unused tax credits.
• Adjustment against reserves for shares in the parent company held as treasury shares at the
transition date and elimination of process from 2004 profit on the sale of treasury shares.
Functional currency
The Group’s consolidated financial statements are presented in euros. Foreign operations are recorded
applying the policies established in Note 4.18.
2.2. Consolidation principles
a. Subsidiaries
Subsidiaries are defined as any company included in the consolidation scope over which the Parent
Company, directly or indirectly, manages by virtue of ownership of a majority of the voting rights in their
representation and decision-making bodies or has the capacity to exercise control over. Under IAS 27,
control is understood as the ability to govern the financial and operating policy of an investee so as to
obtain benefits from its activities.
123

The annual accounts of subsidiaries are consolidated using the full consolidation method. Therefore, all
material balances and results of transactions carried out between consolidated companies have been
eliminated on consolidation.
If necessary, adjustments are made to the financial statements of subsidiaries to unify the accounting
policies used with those of the Group, one of the main ones being the capitalization of recoverable tax
credits not recorded in the subsidiaries.
Third party interests in Group equity and profit are presented in "Minority interests" on the consolidated
balance sheet and income statement, respectively.
Results of subsidiaries acquired or disposed of during the year are included in the consolidated income
statement from the effective date of acquisition or until the effective date of disposal, as appropriate.
Appendix I details the subsidiaries and related information (name, country of incorporation, percentage
ownership by the parent company).
b. Associates
Associates are entities over which the Company has significant influence and which are neither a
subsidiary nor a joint venture. Usually, this influence is evidenced by a direct or indirect holding of 20%
to 50% of the investee’s voting rights.
The Company’s investments in associates are accounted for in the consolidated annual accounts under
the equity method of accounting, i.e. at a value equivalent to the Group’s proportional share in their
capital after the deduction of dividends paid to the Group and other eliminations from equity. Gains or
losses from any transactions with associates are eliminated to the extent of the Group’s interest in the
relevant associate.
If an associate incurs losses to the extent that its equity becomes negative, it is recorded in the Group’s
consolidated balance sheet with a value of zero, since the Group has no obligation to support the
associate financially.
c. Translation differences
The various captions in the balance sheets and income statements of companies whose annual
accounts are presented in other currencies have been translated to euros using the following criteria:
• Assets and liabilities were translated at the official year-end exchange rates.
• Capital and reserves were translated at historical exchange rates.
• The income statements were translated at the average exchange rates for the year.
The differences arising from the application of these criteria have been included under “Equity -
Translation differences”. These differences are recognised in revenue or expenses in the period in which
the investment that gave rise to them was, totally or partially, realised or sold.
124

d. Changes in consolidation scope
In 2005, the Group sold its stake in the following companies:
• Aragonesas Industrias y Energía, S.A.
• Aiscondel, S.A.
• Aragonesas Derivados Electrolíticos Levante, S.A.
• Teczone Española, S.A.
• Lusofane, S.A.
• Uralita Comercial Canarias, S.A.
• Aquatecnic Sistemas, S.A.
• Uralita Industria y Comercio, Ltda.
• Cerámiques Estructurals del Penedés, S.A.
• Materiales y Cubiertas Caolita, S.A.
• Uralusa Instalaçoens e Montagens, S.L.
The detail of the equity of companies sold at the disposal date and at 31 December 2004 is the
following:
Thousands of Euros Date of sale 31 December 2004
Revenue 170,178 374,122
Property, plant and equipment 179,588 209,092
Other non-current assets 4,026 67,073
Current assets 195,065 134,905
Deferred income 2,802 2,777
Non-current liabilities 6,908 37,958
Current liabilities 112,392 97,560
Provisions 41,738 41,738
Total equity 214,839 231,037
Attributable to equity holders of the parent 211,509 227,691
Attributable to minority interests 3,330 3,346
Sale price received in 2005 193,746
Sale price deferred 1,169
Net sale price 194,915
Gain (loss) on disposal (16,594)
These sales form part of the Group’s strategy of disposing of non-core businesses begun a few years
ago.
125

The main disposals include:
• Shares in companies in the Group’s Chemicals Business. The operation was carried out in June 2005.
• The stake in Uralita Industria y Comercio, Ltda., included in the Roofing Business, which carried out its
business in Brazil and was disposed of in May 2005.
• The shareholding in Sociedad Teczone Española, S.A., sold in November 2005.
• Holdings in a number of companies included in the Pipes Business.
• The investment in Cerámiques Estructurals del Penedés, S.A.
The total sales price and overall results generated from these sales during the year are detailed in the
table above.
Results of operations of companies sold are included in the consolidated income statement for 2005 up
to the date of the disposal.
The combined impact of results of companies sold on Group results in 2005 and 2004 has been a gain of
€3,881 and €7,063 thousand, respectively.
In 2004, the Group sold its stake in Promat Ibérica, S.A. The impact on the accompanying financial
statements is not significant.
3. Distribution of parent company profit
Uralita, S.A. made a profit in 2005 of €31,559 thousand. The Company’s Board of Directors has proposed
the following distribution of 2005 profit for approval at the General Shareholders’ Meeting:
Thousands of Euros
Legal reserve 420
Unrestricted reserves 9,414
Dividends 21,725
31,559
The proposed dividend is subject to approval by shareholders at the Shareholders’ Meeting and is not
included as a liability in these financial statements.
126

4. Main accounting principles
The main accounting principles and measurement bases used in the preparation of the Group’s
consolidated annual accounts in compliance with the IFRS adopted by the European Union are as
follows:
4.1. Goodwill
Goodwill, which is only recognised when acquired in exchange for payment, entails the positive or
negative difference between the acquisition cost of a holding in a company and its underlying carrying
amount at acquisition date that could not be allocated to a specific asset.
Goodwill is not amortised. Until 1 January 2004, the IFRS transition date, goodwill was amortised on a
straight-line basis. Accordingly, goodwill on acquisitions before that date are recognised at the amounts
shown at the transition. The Group tests goodwill for impairment annually or whenever there are
indications that it may be impaired. An impairment is recognised when the recoverable amount is less
than the carrying amount. The loss is taken to the income statement.
For the purpose of impairment testing, goodwill is allocated to each of the Group’s cash-generating
units or groups of cash-generating units. A cash-generating unit’s recoverable amount is the higher of
value in use and potential net selling price.
4.2. Intangible assets
Intangible assets, which mainly relate to software and trademarks, are initially recognised at acquisition
or production cost and subsequently carried at cost less any accumulated amortization and any
accumulated impairment losses.
The Uralita Group considers that all its intangible assets have finite lives and amortizes them applying
similar criteria to those used in the depreciation of its property, plant and equipment, considering
estimated useful lives between three and five years.
4.3. Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation and any accumulated
impairment. In some cases, cost includes past revaluations made in accordance with various enabling
legislation, including Royal Decree-Law 7/1996 (see Note 11.4).
It also includes the values assigned in the acquisition of companies. At 31 December 2004 and 2005,
these amounted to €28,780 and €9,530 thousand, respectively.
The costs of expansion, modernisation or improvements leading to increased productivity, capacity or
efficiency or to a lengthening of the useful lives of the assets are capitalised as an increase in the cost of
the corresponding asset. Repairs and maintenance expenses are expensed currently.
Companies' own work on property, plant and equipment is recorded at the accumulated cost (external
costs, in-house costs determined on the basis of the warehouse materials consumed in-house and
manufacturing costs incurred).
127

Property, plant and equipment are depreciated on a straight-line basis at annual rates based on the
years of estimated useful life of the related assets. The rates used are the following:
Years of estimated useful life
Buildings 33 / 50
Plant 10 / 20
Machinery 10 / 20
Tools 5 / 8
Furniture and fittings 10 / 15
Data processing equipment 4
Transport equipment 6 / 7
Land is considered to have an indefinite useful life and therefore is not depreciated.
Assets acquired under financial leases are recorded under the asset item of the leased asset and
depreciated over the shorter of their estimated useful life using the same method as for the assets
owned or the relevant lease period. “Property, plant and equipment” at 31 December 2005 in the
consolidated balance sheet included €5,407 thousand of assets held under finance leases (see Note 7).
4.4. Non-current assets held for sale
Non-current assets classified as held for sale are carried at the lower of carrying amount and fair value
less costs to sell.
An item is classified as held for sale if its carrying amount will be recovered principally through a sale
transaction rather than through continuing use. This condition is deemed to have been met only when
disposal is highly probable, and the asset is available for immediate sale in its current state and this will
foreseeably be concluded in a period of one year from the date of classification.
4.5. Impairment of property, plant and equipment and intangible assets excluding goodwill
At each balance sheet date, the Group reviews the carrying values of its property, plant and equipment
and intangible assets to determine if there are indications that the assets have been impaired. If there
are indications of impairment, the recoverable amount of the assets is calculated to determine any
potential impairment loss. Where the asset does not generate cash inflows that are independent of
those from other assets, the Group estimates the recoverability of the cash-generating unit to which the
asset belongs.
An asset’s recoverable amount is the higher of its fair value less costs to sell and value in use. In
assessing value in use, the estimated future cash flows are discounted to their present value using a
pre-tax discount rate that reflects current market assessment of the time value of money and the risks
specific to the asset for which the future cash flow estimates have not been adjusted.
128

Where the carrying amount exceeds the recoverable amount of an asset (or cash-generating unit), the
asset (or cash-generating unit) is written down to its recoverable amount. An impairment loss is
immediately recognised as an expense, except where the asset is stated at revalued cost, in which case
the impairment loss is recognised as a decrease to the revaluation reserve.
When an impairment loss is subsequently reversed, the carrying amount of the assets (cash-generating
unit) is increased to the revised estimate of the recoverable amount. That increased amount cannot
exceed the carrying amount that would have been determined had no impairment loss been recognised
for the asset (cash-generating unit) in prior years. Such reversal is recognised in profit or loss unless the
asset is carried at revalued amount, in which case the reversal is treated as an increase in the
revaluation reserve.
4.6. Investments in associates and joint ventures
The amount of these investments in the consolidated balance sheet includes, where applicable, the
goodwill arising from the acquisition.
4.7. Leases
Finance leases are those that transfer to the lessee substantially all the risks and benefits incidental to
ownership of the leased asset. Other leasing arrangements are classified as operating leases.
Finance leases
When the consolidated companies act as lessee the cost of the leased assets is recognised in the
consolidated balance sheet under the appropriate item for the type of asset leased and a liability is
simultaneously recognised for the same amount (this amount is determined as the lower of the fair
value of the leased asset and the present value of all amounts due to the lessor plus, where relevant, the
exercise price of the call option). These assets are amortised on the same basis as property, plant and
equipment for own use.
In both cases, finance revenue and costs arising from the leases are credited or debited to the
consolidated income statement such that the yield remains constant over the life of the lease.
Operating leases
When the consolidated companies act as lessor, they recognise the acquisition cost of the leased assets
under “Property, plant and equipment.” These assets are amortised on the same basis as other similar
property, plant and equipment for own use and income from the leases is recognised in the income
statement by the straight-line method.
When consolidated companies act as lessees, leasing expenses, including any incentives granted by the
lessor, are taken to the consolidated income statement evenly throughout the lease period.
129

4.8. Inventories
Inventories of raw materials and other goods purchased from third parties are stated at the lower of
cost (average price) or market value.
Finished goods and work in progress are valued at the lower of production cost (average real cost),
including raw materials, direct labour costs and manufacturing overheads, and market value.
Obsolete, defective or slow-moving inventories are valued at their lowest realisable value.
4.9. Financial assets and liabilities
Trade receivables
Financial assets held by the Group basically relate to receivables generated by consolidated companies,
which are recognised in the accompanying consolidated balance sheet under “Trade and other accounts
receivable.” These assets are recognised at the nominal amount (considered to be equivalent to fair
value) less any provisions for possible insolvency risks.
Cash and cash equivalents
This item includes both cash and sight deposits. Other equivalent liquid assets are short-term
investments maturing in less than three months and which are not subject to a significant risk of
change in value.
Equity instruments
Capital and equity instruments issued by the Company are carried at the amount received in equity, net
of direct issuing costs.
Financial liabilities
• Bonds and other long-term marketable securities
These are measured at amortised cost using the effective interest rate method less any directly
attributable issue costs. Amortized cost is the amount initially recognised minus principal
repayments, plus or minus the cumulative amortisation of any difference between the initially
recognised amount and the maturity amount. Variations between the initial amount and the
maturity amount that do not derive from the repayment of principal are recognised in the
consolidated income statement for the year.
• Bank loans
Interest-bearing bank loans are recognised at the amount received less directly attributable
transaction costs. Financial expenses, including premiums payable on settlement or repayment and
direct issuing costs, are booked according to accrual criteria in the income statement using the
effective interest method and are incorporated to the carrying amount of the instrument if not paid
during the period in which they accrue.
130

• Trade and other payables
Trade payables are non-interest bearing and are recognised at nominal value.
Derivative financial instruments and hedge accounting
The Group’s activities primarily expose it to financial risks from fluctuations in foreign exchange rates
and interest rates. To hedge these risks, the Group uses currency swaps and interest-rate hedges. The
Group does not use derivative instruments for speculative purposes.
The use of derivatives is governed by the Group policies approved by the Board of Directors, which
publishes in writing these principles on the use of derivatives.
Fluctuations in the fair value of derivative instruments which have been conceived and shown to be
effective as cash flow hedges are recognised directly in equity, while the ineffective portion is recognised
directly in profit or loss. When the cash flow hedge of a firm commitment or forecast sale leads to the
recognition of a non-financial asset or liability, upon recognition the gains or losses on the hedging
instrument previously taken to equity are transferred to the initial carrying amount of the non-financial
asset or liability. However, for hedges where the asset or liability are not recognised, the amounts
previously recognised in equity are transferred to profit or loss in the same period in which the hedged
item affected net results.
For an effective hedge of the risk to variability in fair value, the hedged item is adjusted to fair values
attributable to the risk being hedged, with recognition in profit or loss. Gains or losses from the
remeasurement of the derivative, or of the carrying amount of the foreign currency item when it does
not involve derivatives, are recognised in profit or loss.
Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated or
exercised, or no longer meets hedge accounting criteria. Any accumulated gains or losses on the
hedging instrument remain in equity until the forecast transaction occurs. If the transaction is not
expected to occur, net cumulative gains and losses recorded in equity are transferred to profit or loss.
4.10. Classification of current and non-current
In the accompanying consolidated balance sheet, financial assets and liabilities are classified according
to their maturity. Those due to be settled in 12 months or less are classified as current and those due to
be settled after 12 months from the balance sheet date as non-current.
Loans repayable in the short term whose long-term financing is assured at the Company’s discretion via
available long-term credit facilities are classified as non-current liabilities.
4.11. Post-employment benefits
Uralita, S.A. and some of its Spanish subsidiaries have undertaken commitments in respect of
supplementary post-retirement benefits for certain groups of retired or disabled employees and under
other captions.
131

In 2004 and previous years, the companies arranged external coverage for these commitments with
non-Group Spanish insurance companies. These defined contribution contracts provide full payment of
the benefits at no additional cost to the companies, except, in the case of Uralita, S.A., expenses arising
from changes in estimated salary and social security pension variables.
For foreign subsidiaries, the amounts considered sufficient to meet the commitments accrued at 31
December 2005 are recorded on the liabilities side on the balance sheet at that date under “Provisions”.
The liabilities are estimated by actuarial valuation methods, with the gains and losses recognised as
income or expense in the year (see Note 12).
4.12. Termination indemnities
Under current labour legislation, employers are required to make indemnity payments to employees
terminated without just cause. The cost of these indemnities is recorded in the year in which the
termination of the employee’s contract is agreed on.
The Group’s policy is to record provisions for future payments arising from these plans at the time the
restructuring is approved by the Directors, publicly announced and communicated to employees based
on the best available estimates of the potential costs in accordance with the corresponding actuarial
studies.
At 31 December 2005 and 2004 liabilities relating to existing redundancy plans were recorded under
“Provisions” on the consolidated balance sheet at that date.
4.13. Provisions
The Group’s consolidated annual accounts contain all provisions that cover obligations existing at the
balance sheet date arising as a consequence of past events that could give undermine the companies’
equity, the nature of which is certain but the amount and timing of which cannot be determined. This
includes all provisions where the probability of having to cover the commitments is estimated to be
higher than the probability of not having to cover the commitments.
Provisions, which are estimated based on the best available information as to the consequences of the
events giving rise thereto and which are re-estimated at each reporting date, are applied to meet the
specific and probable risks for which they were initially recognised and are reversed, totally or partially,
whenever said risks disappear or diminish.
Unsettled claims and litigation
At year-end 2005 certain judicial proceedings and claims made against consolidated companies arising
in the ordinary course of business were still underway. The Group’s legal counsel and Directors estimate
that the resolution of these proceedings and claims will produce no material effect on the annual
accounts of the years in which they are resolved.
132

Provisions for guarantees
Provisions for the cost of guarantees provided are recognised at the date of sale of the related products
based on the Directors’ best estimate of the expense and the amount necessary to settle the Group’s
liability.
4.14. Government grants
Non-repayable capital grants are measured at the amount given and taken to profit or loss under “Other
operating income” in proportion to the periodic depreciation of the subsidised assets, except in the case
of non-depreciable assets, the subsidies for which are recognised in income in the year in which the
related assets are disposed of or derecognised.
These grants are recognised in "Deferred income" on the liabilities side of the accompanying
consolidated balance sheet.
4.15. Revenue recognition
Sales of goods are recognised when the significant risks and rewards of ownership of the goods have
passed to the buyer. This normally coincides with delivery of the good sold.
Revenue is calculated at the fair value of the payment to be received and represents the amounts
receivable for the goods delivered and the services provided as part of the company’s ordinary course of
business, less discounts, VAT, and other sales taxes.
Interest income is recognised as interest accrued on a time basis according to the outstanding principal
and the effective interest rate charged, which is the rate that exactly discounts estimated future cash
receipts over the life of the financial asset from the net carrying amount of the asset.
Dividend revenue from investments is recognised when the rights of the shareholders to receive the
dividend payment have been established.
4.16. Income tax; deferred tax assets and liabilities
The expense for income tax for each year is calculated on the basis of the accounting profit before taxes,
increased or decreased, as appropriate, by the permanent differences from taxable income.
Uralita S.A. files a consolidated tax statement with the Spanish subsidiaries in which it holds more than
75% of the share capital. The remaining Group companies file individual statements.
The Group’s policy is to recognise the tax credit from the future offset and use of loss carryforwards and
deductions to the extent allowed by its estimates of future earnings for both the companies comprising
the consolidated tax group and those that file taxes individually. The tax credit is recognised under “Use
of tax credits” in the accompanying consolidated income statement.
133

In addition, “Deferred tax assets” and “Deferred tax liabilities” in the consolidated balance sheets reflect
the impact of temporary differences identified on tax items that are expected to be either payable or
recoverable arising from differences between the carrying amounts of the assets and liabilities in the
financial statements and the corresponding tax bases. These amounts are measured by applying to the
temporary differences the tax rate that is expected to apply when the asset is realised or the liability is
settled.
Deferred tax liabilities are recognised for all taxable temporary differences except where the temporary
difference arises from the initial recognition of goodwill, whose amortization is not deductible, or the
initial recognition or an asset or liability in a transaction that is not a business combination and affects
neither the accounting profit nor taxable profit or loss.
Deferred income tax assets are recognised for all identified temporary differences to the extent that it is
probable that consolidated companies will have taxable profit available against which the deductible
temporary differences can be utilised expect where this relates to the initial recognition of an asset or
liability in a transaction that is not a business combination and that affects neither the accounting
profit nor taxable profit or loss.
Deferred tax assets and liabilities are reviewed at each balance sheet to verify they remain in force, with
the appropriate corrections being made in accordance with the results of the review.
4.17. Earnings per share
Basic earnings per share amounts are calculated by dividing net profit for the year attributable to
ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding
during the year, excluding the number of parent company shares held as treasury shares by Group
companies. As there are no potential ordinary shares that could dilute earnings for the Group, basic and
diluted earnings per share for 2005 and 2004 are the same.
4.18. Foreign currency transactions
Transactions in foreign currency, i.e. currency other than the euro, which is the Company’s functional
currency, are initially recorded at the euro rate ruling at the date of the transaction. Exchange gains or
losses arising on the settlement of foreign currency transaction balances are recognised in the
consolidated income statement when they arise.
Receivables and payables in foreign currency at the balance sheet date are recorded in euros at the yearend
exchange rate or the hedged exchange rate. Differences are taken to profit or loss for the year.
The Group uses forward currency contracts and options to hedge its exposure to foreign currency risk
(see Note 4.9 on the Group’s policy with respect to recognising derivative financial instruments).
134

4.19. Consolidated cash flow statements
The consolidated cash flow statements are prepared using the indirect method and the terms used are
defined as follows:
• Cash flows: inflows and outflows of cash and cash equivalents; cash equivalents are short-term
investments that are highly liquid and have low risk that their value will change.
• Operating activities: activities typically carried out by the Company and any others that cannot be
classified as investing or financing activities.
• Investing activities: the acquisition, disposal or use by other means of non-current assets and other
investments not included in cash and cash equivalents.
• Financing activities: activities that result in changes in the size and composition of equity and
liabilities that are not generated by operating activities.
4.20. CO 2 emission rights
CO 2 emission rights granted by governments freely to consolidated companies, in line with the
international environmental agreements reached with the Kyoto Protocol, are measured at the market
value at which they were granted (1 January 2005) and recognised in “Intangible assets” on the
consolidated balance sheet at 31 December 2005. At that date, the value of the rights used and pending
use, respectively, are recognised in “Provisions” and “Deferred income” in the balance sheet at that date.
The use of emission rights is recognised as a period expense in “Other operating expenses” in the
consolidated income statement for the year ended 31 December 2005. The recognition of the deferred
income is included in “Other operating revenues.”
4.21. Environmental matters
The consolidated companies treat as an expense of an environmental nature the payments made to
personnel occupied exclusively with environmental tasks and the goods and purchases necessary for
activity in this area, as well as the disposal of waste from operational activities. The remaining amounts
related to environmental activities are considered investments.
The consolidated companies also establish provisions for any responsibilities or obligations likely to arise
relating to activities that affect the environment and whose amount can be estimated.
4.22. Accounting judgments and estimates
The information included in the accompanying consolidated annual accounts is the responsibility of the
Group’s Directors.
In the preparation of the consolidated financial statements for 2005 and 2004 estimates made by the
Directors of the Group have been used to measure certain assets, liabilities, revenues, expenses and
commitments recognised therein. These estimates relate primarily to:
135

• The estimate of the potential losses due to the impairment of certain assets,
• The useful life of property, plant and equipment and of intangible assets,
• The measurement of goodwill.
These estimates were made on the basis of the best information available at 31 December 2005 and
2004. However, it is feasible that future events could oblige the company to modify these amounts
(upwards or downwards) prospectively in the coming years, taking the effects of said changes to the
corresponding consolidated income statements, pursuant to IAS 8.
4.23. Changes in estimates and accounting principles and correction of material errors
The impact of any change in estimates is recognised in the same entry of the income statement that
includes the previously estimated expense or revenue. Material errors are applied retrospectively, with
changes to the information affected by the errors.
5. Goodwill
Goodwill at 31 December 2005 and 2004 arose from the acquisition of equity investments in the
following subsidiaries.
Thousands of euros
OAO URSA Chudovo 23,767
URSA Dämmsysteme Austria GmbH 10,296
URSA Salgotarjan Rt. 9,831
TOTAL 43,894
Goodwill acquired prior to 1 January 2004 is stated at the net amount recognised at that date (see Note
4.1). There were no movements in this caption in 2005.
The Group’s directors have implemented a procedure to be followed annually to identify potential
capital losses on the cost recorded with respect to the recoverable value of such losses. The procedure
for performing this “impairment test” is the following:
• The Directors of each business unit prepares an annual business plan by market and business activity
for each cash-generating unit for the following five years. The plan mainly includes:
• Profit and loss forecasts
• Investment and working capital forecasts
The forecasts are prepared for each business unit based on recent performance and the best estimates
of Group management regarding the future performance of the main internal and external economic
variables.
136

• The business plans prepared are reviewed and subsequently approved by the Group’s Management
Committee.
• The main variables that influence these projections are:
• The discount rate to be applied, defined as the weighted average cost of capital, with the cost
associated with liabilities and the specific risks related to assets being the primary variables that
influence its calculation.
• The cash flow growth rate used to extrapolate projected cash flows for periods of time that extend
beyond the period covered by budgets and forecasts. This growth rate is between 0% and 1% for
mature markets and between 1% and 2% for emerging markets.
The recoverable amounts are calculated for each cash-generating unit based on assumptions for the
following five years on profit and loss, investment and working capital. The discount rate used was 7.5%
for both 2005 and 2004. The growth rate used to extrapolate forecasts was 1% for both years.
Based on the results of this analysis, the Group has decided that it was not necessary to make any
adjustments to the amounts recorded for goodwill at 31 December 2005 and 2004.
6. Intangible assets
The detail of this heading in the consolidated balance sheets at 31 December 2005 and 2004 is the
following:
31 December 2005 31 December 2004
Cost Accumulated Cost Accumulated
Thousands of euros amortization amortization
Development costs 3,063 2,949 8,865 8,623
Concessions, patents, licenses,
trademarks, etc. 9,326 4,545 14,584 8,042
Software and other intangible assets 29,517 17,944 31,992 26,991
TOTAL 41,906 25,438 55,441 43,656
The movement in “Intangible assets” in 2005 and 2004 is the following:
Thousands of euros 2005 2004
OPENING BALANCE 11,785 10,375
Changes in consolidation scope (174) (16)
Increases 9,419 6,115
Sales (616) (446)
Accumulated amortization (4,295) (4,763)
Translation differences (5) -
Other movements 354 520
CLOSING BALANCE 16,468 11,785
137

Additions include CO 2 emission rights received for an amount of €2,122 thousand.
At 31 December 2005, there were no internal costs included in intangible assets. At 31 December 2004,
the amount for this item was €311 thousand.
All the Group’s intangible assets have a finite useful life and are amortised using the criteria explained
in Note 4.2.
As of 31 December 2004 and 2005, the Group estimates that there was no impairment in its intangible
assets that led to a lower recoverable value of the assets than their net carrying amount.
Research and development costs recognised as an expense in the consolidated income statements for
2005 and 2004 amount to €1,057 and €1,816 thousand, respectively.
7. Property, plant and equipment
The detail of this heading in the consolidated balance sheets at 31 December 2005 and 2004 is the
following:
31 December 2005 31 December 2004
Cost Accumulated Net Cost Accumulated Net
Thousands of euros depreciation depreciation
Land and buildings 200,476 58,614 141,862 290,962 86,568 204,394
Plant and machinery 613,613 330,489 283,124 1,034,331 634,433 399,898
Other installations,
tools and furniture 54,102 36,124 17,978 56,953 40,379 16,574
Advances and work in process 38,740 - 38,740 50,414 - 50,414
Other property,
plant and equipment 19,963 16,785 3,178 34,600 30,178 4,422
926,894 442,012 484,882 1,467,260 791,558 675,702
Impairment provision (51,831) (91,514)
Net 433,051 584,188
138

The movement in this heading in the years ended 31 December 2005 and 2004 is the following:
Thousands of euros 2005 2004
OPENING BALANCE 584,188 635,638
Changes in consolidation scope (Note 2.2) (166,101) (36)
Additions 90,640 87,377
Disposals (16,318) (25,157)
Accumulated depreciation (58,945) (73,233)
Reassignment of the asset value of the Coverings Business (25,890) -
Application of impairment provision 19,750 -
Allocation to impairment provision - (27,438)
Reversal of impairment provision 4,085 -
Translation differences 7,255 -
Transfer to non-current assets held for sale (Note 8) (9,042) (7,854)
Other movements 3,429 (5,109)
CLOSING BALANCE 433,051 584,188
The main additions relate to the construction of new production plants and the introduction of new
manufacturing technologies, principally in the Insulation Business.
All items of property, plant and equipment are for the Group’s own use and none are granted under
operating leases.
Advances on work in progress at 31 December 2005 and 2004 amounted to €14,723 thousand and
€4,441 thousand, respectively.
Fully depreciated property, plant and equipment items at 31 December 2005 and 2004 amount to
€101,500 and €374,000 thousand. The amounts of temporarily idle items of property, plant and
equipment and derecognised items of property, plant and equipment at 31 December 2005 and 2004 are
not material.
The Group has taken out insurance policies to cover possible risks to which various items of property,
plant and equipment are subject and possible lawsuits which may be filed against the Group during the
ordinary course of its business. It considers these policies sufficiently cover these risks.
The net carrying amounts at 31 December 2005 and 2004 of assets acquired under finance leases are
€5,407 and €7,375 thousand, respectively.
There are no restrictions to the ownership of the items of property, plant and equipment at 31 December
2005.
Property, plant and equipment located outside Spain are all used for the operations of the Group’s
consolidated foreign subsidiaries. The carrying amount of these assets at 31 December 2005 is €227,537
million.
At 31 December 2005, the Company has no material contractual commitments to acquire property, plant
and equipment.
139

Impairment losses
The market value of certain cash-generating units has been impaired mainly due to surplus capacity,
which has had a material impact on the future economic benefits expected from their use.
The Group assesses the impact of this on its financial statements for 2005 and 2004 through the
preparation of projections and businesses plans based on similar criteria to that used for the
impairment tests of goodwill (see Note 5).
It also recognises the negative impact on equity at 31 December 2004 of the impairment loss of certain
cash-generating units disposed of in 2005. The estimation of the recoverable amount was made based
on the sale amount less costs to sell.
The movements that gave rise to impairment losses in these items in 2005 and 2004 are the following:
Thousands of euros
Insulation Concrete Roof tiles Heat-resistant Coverings Chemicals TOTAL
Western Roof tiles Brazil clay tiles
Europe
Balance at
1 January 2004 40,017 8,056 14,300 - 1,703 - 64,076
Provision - - - 3,596 - 23,842 27,438
Balance at 31
December 2004 40,017 8,056 14,300 3,596 1,703 23,842 91,514
Reassignment of
asset value - - - - 25,890 - 25,890
Applications due to sales
or plant closures (13,275) (4,746) - - (1,729) - (19,750)
Sale of
cash-generating units - - (14,300) (3,596) - (23,842) (41,738)
Reversal (4,085) - - - - - (4,085)
Balance at
31 December 2005 22,657 3,310 - - 25,864 - 51,831
140

The sale of cash-generating units relates to disposals of holdings in the companies that comprised the
Group’s Chemicals Business, in Uralita Industria y Comercio, Ltda. and Ceramiques Estructurals del
Penedés, S.A., as detailed in Note 2.2.
Provisions in 2004 and reversals in 2005 have been included in the consolidated income statements of
those years under “Net impairment losses”.
In 2005 the Group made a series of write-offs and sales of plants, mostly to adapt capacity to market
demand.
In addition, in December 2005 the Group signed an agreement to sell the business of Fibrocementos NT,
S.A., not including the land on which the business was conducted. The agreement was carried out in
2006.
After the agreement was signed, the impairment provision initially made for the unit (net of the
realisable value of the land) was reassigned, leaving the value of the business of Fibrocementos NT, S.A.
at its market value (with a provision recorded of €25,890 thousand) and reassigning the value of the
assets and liabilities that are not included in the contract.
The resulting value of the land is included under “Non-current assets held for sale” in the consolidated
balance sheet at 31 December 2005 (see Note 8).
The Company’s Directors are currently negotiating the sale of the land and estimate that the amount of
the sale will be higher than the carrying amount at 31 December 2005.
8. Non-current assets held for sale
This heading mainly relates to land and buildings not used for business that the Group intends to sell.
The movement in this heading in 2005 and 2004 is the following:
Thousands of euros 2005 2004
OPENING BALANCE 7,854 -
Transfers of property, plant and equipment 9,042 7,854
Disposals (3,042) -
Reassignment of the value of the land of
Fibrocementos NT, S.A. (Note 7) and other 43,160 -
CLOSING BALANCE 57,014 7,854
141

9. Inventories
The detail of this heading at 31 December 2005 and 2004 is the following:
Thousands of euros 2005 2004
Commercial inventories 9,114 12,310
Raw materials and other supplies 33,652 50,893
Finished goods and work in process 50,103 82,418
TOTAL 92,869 145,621
10. Trade and other receivables
At 31 December 2005 and 2004, a number of consolidated companies had signed a contract with “GC
Compass Spain 1, Asset Securitization Fund”, managed by Gestcaixa and authorised by the Spanish
Securities Exchange Commission, for the assignment of collection rights. The Group has a contract with
this entity to administer the rights until final settlement to collection from customers. Pursuant to this
contract, Group companies transfer each month the rights to collection from customers that meet
certain requirements. Collection rights transferred in 2005 and 2004 amounted to €703 and €494
million, respectively, of which €130 and €174 million correspond to unmatured receivables at the end of
each period, recognised under “Other current financial assets” in the consolidated balance sheets.
The accounts transferred may be settled in cash by the financial entity except for an amount withheld
as a guarantee against bad debts, dilution and other items. The €110,024 and €147,463 thousand
financed at 31 December 2005 and 2004, respectively, are included under “Other current financial
liabilities” in the consolidated balance sheets.
The average credit period in the sale of goods and services is approximately 80 days. Interest is not
generally charged on accounts receivable. The Group has recorded a provision for estimated
uncollectible amounts from the sale of goods for €2,229 and €2,798 thousand in 2005 and 2004,
respectively. The provision was determined based on the Group’s experience and on an account-byaccount
analysis of the main receivables.
11. Equity
11.1. Issued capital
At Uralita S.A.’s General Shareholders’ Meeting held on May 26, 2004, shareholders agreed to reduce the
par value of the shares comprising the issued capital by splitting each €2.16 share into three new shares
with a par value of €0.72 each.
142

At 31 December 2005, the parent company’s share capital amounts to €142,199,861.04 and consists of
197,499,807 shares with a par value of €0.72 each. All the shares are fully subscribed and paid up and
admitted to trading on the Spanish continuous market.
The only shareholder with a stake of more than 10% is Nefinsa, S.A., which at 31 December 2005 and
2004 effectively controlled 43.37% of the share capital.
11.2. Share premium
The revised Spanish Corporation Law expressly allows the share premium balance to be used to increase
capital and establishes no restriction as to its use.
At its meeting of 27 March 2006, the Company’s Board of Directors agreed to offset loss carryforwards
with voluntary reserves up to the amount of these reserves available, and offset the remaining losses
(€52,509 thousand) with a charge to the share premium.
11.3. Reserves attributable to equity holders of the parent
The detail of this heading in the consolidated balance sheets at 31 December 2005 and 2004 is the
following:
31 December
Thousands of euros 2005 2004
Legal reserve 28,020 23,707
Reserve for restatement of share capital to euros 185 185
Retained earnings - (55,495)
TOTAL 28,205 (31,603)
Legal reserve
Under the revised Corporation Law, 10% of profit for each year must be transferred to the legal reserve
until the balance of this reserve reaches at least 20% of share capital.
The legal reserve can be used to increase capital provided that the remaining reserve balance does not
fall below 10% of increased share capital. With the exception of the above, until the legal reserve
exceeds 20% of share capital, it can only be used to offset losses provided other reserves are insufficient
for this purpose.
Following approval of the proposed distribution of profit of 2005 at the General Shareholders’ Meeting
(see Note 3), Uralita, S.A. will have fully funded its legal reserve.
11.4. Reserves at consolidated companies
The detail of reserves contributed and foreign exchange differences recognised in equity attributable to
equity holders of the parent in the consolidation process is as follows:
143

31 December 2005 31 December 2004
Reserves Translation Reserves Translation
Thousands of euros differences differences
Yesos Ibéricos, S.A. 35,401 - 36,012 -
OAO Ursa Chudovo 15,694 (1,361) 7,950 (5,065)
Fibrocementos NT, S.A. 6,373 - 8,186 -
OOO Ursa Serpuchov 5,317 (618) 2,516 (2,442)
Ursa Salgotarjan, Rt. 4,967 719 2,990 764
URSA Dämmsysteme Austria GmbH 3,454 (3,081) 2,955 (3,426)
Ursa Benelux BVBA (1,336) - (1,621) -
Electroquímica Andaluza, S.A. (4,748) - (4,109) -
Uralita Sistemas de Tuberías, S.A. (7,123) - (3,900) -
Ursa Internacional GmbH (12,228) - (11,052) -
Uralita Iberia, S.L. (15,871) - 39,074 (21,525)
Ursa Ibérica Aislantes, S.A. (44,538) - (39,188) (30)
Cerámicas Sanitarias Reunidas, S.A. (53,940) - (54,114) -
Aiscondel, S.A. - - 31,549 -
Aragonesas Industrias y Energía, S.A. - - 18,856 -
Teczone Española, S.A. - - 8,241 -
Aragonesas Derivados Electroquímicos Levante, S.A. - - 5,393 -
Other companies with positive or
negative amounts of less than one million euros 13 (102) 360 12
Consolidation adjustments at the parent company 182,804 80,412 -
TOTAL 114,239 (4,443) 130,510 (31,712)
Of total “Reserves at consolidated companies” at 31 December 2005, €40,423 thousand were restricted
reserves, before taking into account consolidation adjustments. Of this amount, €9,461 thousand relates
to the revaluation reserve pursuant to Royal Decree-Law 7/1996. Once the tax authorities have reviewed
and approved the balance of the reserve (or the three-year period for review has expired), the balance is
available, free of tax, to offset tax losses. From 1 January 2007, the balance can be taken to unrestricted
reserves, provided that the monetary surplus has been realized. The surplus will be deemed to have been
realised in respect of the portion on which depreciation has been applied for accounting purposes or
when the revalued assets have been transferred or retired from the accounting records. If this balance is
used in a manner other than that provided for in Royal Decree-Law 7/1996, it would be subject to tax.
Translation differences arise from the conversion to euros of balances of consolidated subsidiaries
whose functional currency is not the euro (see Note 4.18).
11.5. Profit (loss) for the year attributable to equity holders of the parent
The detail of the contribution by company to profit attributable to equity holders of the parent in 2005
and 2004 is the following:
144

Thousands of euros 2005 2004
Uralita, S.A. 30,423 66,289
Yesos Ibéricos, S.A. 23,745 17,589
Ursa Salgotarjan, Rt. 9,386 1,976
OAO Ursa Chudovo 6,652 7,745
Fibrocementos NT, S.A. 6,445 (1,813)
OOO Ursa Serpuchov 3,794 2,801
Uralita BV 1,163 (4)
Uralita Iberia, S.L. (3,691) (35,085)
Ursa Eurasia LLC (5,703) (412)
Ursa Ibérica Aislantes, S.A. (10,506) (5,325)
Ursa Internacional GmbH (11,912) (1,171)
Uralita Sistemas de Tuberías, S.A. (14,103) (3,223)
Teczone Española, S.A. - 2,603
Aragonesas Derivados Electroquímicos Levante, S.A. - (3,593)
Aragonesas Industrias y Energía, S.A. - (4,199)
Other companies with positive or negative amounts
of less than one million euros (509) 1,053
TOTAL 35,184 45,231
11.6. Minority interests
The detail by company of the movement in “Minority interests” in the consolidated balance sheets at 31
December 2005 and 2004 is as follows:
Thousands of euros
Yesos Uralita OAO Ursa Aiscondel, S.A. Uralita Promat TOTAL
Ibéricos, S.A. Tejados, S.A. Chudovo Sistemas de Ibérica, S.A.
Tuberías, S.A.
Balance at 1 January 2004 42,629 43,443 3,396 1,551 344 1,230 92,593
2003 dividend (5,362) (2,194) - (214) - - (7,770)
Foreign currency translation
of financial statements - 13 (187) - - - (174)
Changes in consolidation
scope and holdings - 493 (1,041) - - (1,306) (1,854)
Other movements 6 (133) 1 (1) - - (127)
Profit for the year 2004 12,070 2,051 764 604 1 76 15,566
Balance at 31 December 2004 49,343 43,673 2,933 1,940 345 - 98,234
2004 dividend (12,486) (1,923) - - - - (14,409)
Foreign currency translation
of financial statements - 68 204 - - - 272
Changes in consolidation
scope and holdings - (643) (1,173) (2,398) (289) - (4,503)
Other movements - (371) (1) - - - (372)
Profit (loss) for the year 2005 16,233 1,396 361 458 (56) - 18,392
Balance at 31 December 2005 53,090 42,200 2,324 - - - 97,614
145

12. Provisions
The detail of movements in this heading in the consolidated balance sheets at 31 December 2005 and
2004 is the following:
Taxes Post-employment Other TOTAL
Thousands of euros benefits liabilities
Balance at 1 January 2004 3,495 5,902 5,674 15,071
Allocation - 193 9,974 10,167
Amounts applied - (5,591) (976) (6,567)
Reversal to profit or loss (463) (144) (468) (1,075)
Reclassifications and other (1,506) 681 1,792 967
Balance at 31 December 2004 1,526 1,041 15,996 18,563
Change in consolidation scope (194) - (1,673) (1,867)
Allocation - 1,447 6,205 7,652
Amounts applied - (367) (4,239) (4,606)
Reversal to profit or loss - (204) (3,185) (3,389)
Translation differences - - (323) (323)
Reclassifications and other - 1,349 (1,772) (423)
Balance at 31 December 2005 1,332 3,266 11,009 15,607
“Other liabilities” mainly relate to provisions deemed necessary for ongoing procedures against the
Group and other commitments assumed with investees that have been disposed of or wound up. It also
includes €1,166 thousand for CO 2 emission rights used in 2005 in accordance with the accounting
principle described in Note 4.20.
The provision for post-employment benefits includes amounts considered sufficient to meet the
commitments accrued at that date by certain consolidated foreign subsidiaries (see Note 4.11).
13. Interest-bearing loans and borrowings
13.1. Bonds and other marketable securities
The detail of the balance of this heading in the consolidated balance sheets at 31 December 2005 and
2004 is the following:
31 December 2005 31 December 2004
Thousands of euros Non-current Current Non-current Current
2004 private bond placement 123,484 - 123,484 -
Uralita, S.A. 1955 debenture issue 20 19 38 17
Less: Issue costs (944) - (1,081) -
Total 122,560 19 122,441 17
146

The private bond placement was held in November 2004 among US institutional investors and
comprised two tranches, a €104.8 million tranche maturing in 7 years and an €18.7 million tranche
maturing in 10 years (euro equivalent of an exchange rate hedge).
The placement was denominated in dollars and at US market fixed interest rates. Interest and exchange
rate risk were hedged through appropriate instruments to create a floating coupon tied to the Euribor
with a fixed exchange rate for the exchange of notional values at maturity. The exchange rate was set
at 1.231%.
The bonds were issued by consolidated subsidiary Uralita BV, headquartered in the Netherlands. The
placement involves covenants usual in this type of financing, such as meeting certain financial and
profitability targets. The Group’s Directors believe that the likelihood of meeting these targets is such
that no significant change in the original conditions of the transaction is expected to occur.
Uralita, S.A.'s 1955 issue of non-convertible bonds was for an original amount of €300 thousand, paying
annual interest of 6.75%. The issue is secured by the Company’s assets and the amount outstanding at
2005 year-end matures in equal annual instalments through 2007.
13.2. Bank loans
Balances of “Bank loans” at 31 December 2005 and 2004 are the following:
Thousands of euros 31 December 2005 31 December 2004
DRAWN DOWN
UNDRAWN
LIMIT Long term Short term LIMIT Long term Short term
Syndicated loan 170,000 - - 170,000 140,000 -
Other loans and
credit facilities 75,912 229 22,721 70,054 1,066 31,183
Un-matured
discounted bills - - - - - 674
TOTAL 245,912 229 22,721 240,054 141,066 31,857
The syndicated loan (revolving credit line) was arranged in November 2004 with a number of leading
Spanish and foreign credit entities through a 5-year €170 million credit line, of which €140 million had
been drawn down at 31 December 2004. No drawdowns were made in 2005. This facility accrues a
floating interest rate tied to Euribor.
The terms of the syndicated loan involve the covenants usual in this type of financing, such as meeting
certain financial and profitability targets. The Group’s Directors estimate that given the degree of
compliance to date and the prospects of meeting these targets, no material changes are likely to be
made to the original conditions of the transaction.
147

Other current loans and credit facilities pay interest rates indexed to the Euribor. All debts are
guaranteed under the personal guarantee of the individual companies.
The main loans and credit facilities are granted in euros.
14. Other financial liabilities
“Trade payables” mainly include amounts owed on commercial purchases and related costs. The average
payment period in the purchase of goods and services is approximately 86 days.
15.Deferred income
The detail of the movement in this heading at 31 December 2005 and 2004 is the following:
Thousands of euros Government grants Other deferred income TOTAL
Balance at 1 January 2004 14,194 842 15,036
Increases 1,107 1,426 2,533
Recognition in income (2,887) (125) (3,012)
Reclassifications and other (1,065) 571 (494)
Balance at 31 December 2004 11,349 2,714 14,063
Change in consolidation scope (2,769) - (2,769)
Increases 381 2,318 2,699
Recognition in income (1,669) (2,631) (4,300)
Reclassifications and other 66 1,729 1,795
Balance at 31 December 2005 7,358 4,130 11,488
The main increases in 2005 relate to CO 2 emission rights received free by Group companies (see Note
4.20 for recognition of these rights). The amount of rights used and recognised in revenue in 2005 totals
€1,166 thousand.
148

16. Guarantees
As of 31 December 2005, consolidated companies had received bank guarantees amounting to €46,329
thousand. Of this amount, €5,752 thousand derives from Uralita, S.A.’s being head of the consolidated
tax group; €4,773 thousand to various transactions related to the businesses of consolidated
subsidiaries; and the remainder to ongoing lawsuits against Uralita, S.A. and subsidiaries, for which the
necessary provisions have been recorded.
The Group's directors estimate that the operations described in this note will not give rise to material
additional liabilities than those recorded on the accompanying consolidated balance sheet.
17. Revenue and expenses
17.1. Revenue
The detail of this heading in 2005 and 2004 is the following:
Thousands of euros 2005 2004
Sales of goods and services 1,105,692 1,315,889
Financial discounts on sales (1,498) (1,899)
Other revenues 416 97
TOTAL 1,104,610 1,314,087
17.2. Other operating income
The detail of “Other operating income” in 2005 and 2004 is as follows:
Thousands of euros 2005 2004
Ancillary income 2,967 4,108
Operating grants 214 283
Government grants transferred to
profit (loss) for the year (Note 4.14) 1,669 2,887
Capitalized expenses of in-house work on assets 1,333 171
Consumption of free CO 2 emission rights 1,166 -
Other 674 473
TOTAL 8,023 7,922
149

17.3. Operating expenses
Supplies
The detail of this heading is the following:
Thousands of euros 2005 2004
Purchases 432,438 551,665
Change in commercial inventories,
raw materials and other supplies 3,724 (9,699)
Work carried out for other companies 10,671 18,261
TOTAL 446,833 560,227
Employee benefits expense
The detail of this heading is the following:
Thousands of euros 2005 2004
Wages and salaries 151,469 179,122
Social security 37,726 45,013
Restructuring costs 8,065 14,027
Other employee welfare expenses 9,172 9,833
TOTAL 206,432 247,995
The average number of employees of the Group in 2005 and 2004 by professional category is as follows:
2005 2004
Managers 123 142
Graduates, line personnel and supervisors 936 992
Sales personnel 614 674
Administrative staff 865 996
Manual workers 2,679 3,524
TOTAL 5,217 6,328
Capitalized staff costs in 2005 and 2004 relating to projects involving properties are not material.
150

Other operating expenses
The detail of this heading is the following:
Thousands of euros 2005 2004
Transport 100,223 112,283
Supplies 59,867 61,895
Repairs and maintenance 35,598 44,216
Leases 20,640 20,967
Advertising 16,510 18,971
Communication 6,525 6,465
Taxes other than income taxes 5,774 5,400
Insurance premiums 3,999 6,035
Allocation to provision for current assets 3,894 2,453
Consumption of CO 2 emission rights (Note 20) 1,166 -
R&D costs 1,057 1,816
Other expenses 61,536 67,135
TOTAL 316,789 347,636
Certain buildings used in the business are leased to tenants not belonging to the Group. Some of the
leases may not be cancelled before maturity without compensation. The outstanding lease payments of
these contracts at 31 December 2005 amount to approximately €11,777 thousand.
Other expenses include fees paid for the audit of accounts of the companies comprising the Group by
the main auditor and other associated auditors. These fees amounted to €685 and €900 thousand in
2005 and 2004, respectively.
Fees for non-audit services provided to the various Group companies by the principal auditor and other
associated auditors in 2005 and 2004 amounted to €404 and €339 thousand, respectively. The
Corporate Governance statement includes a description of the Audit Committee’s remit, along with an
explanation of how the objectivity and independence of the auditor is guaranteed in the provision of
non-audit services.
Fees for financial audit services in 2005 provided to the various companies comprising the Colonial
Group by other auditors amounted to €63 thousand and fees for non-audit services by other auditors to
€5 thousand.
17.4. Finance costs
The detail of this heading is the following:
Thousands of euros 2005 2004
Interest on loans and debt issues 7,189 16,323
Interest on finance leases 378 506
Other finance costs 5,942 6,361
TOTAL 13,509 23,190
151

17.5. Gain (loss) on disposal and measurement of non-current assets
The detail of this heading is the following:
Thousands of euros 2005 2004
Disposal of property, plant and
equipment and intangible assets 21,336 15,357
Sale of holdings in consolidated companies (16,594) 5,949
Sale of other financial assets (167) -
Remeasurement of assets available for sale to fair value - (4,240)
Write-down of investments in non-consolidated companies (14) (289)
TOTAL 4,561 16,777
Sales of property, plant and equipment and intangible assets were made to non-Group companies. Total
transactions carried out in 2005 amount to nearly €27,000 thousand, of which all had been collected by
31 December 2005.
Note 2.2 details the sales of equity shareholdings.
17.6. Other gains and losses
The detail of this heading is the following:
Thousands of euros 2005 2004
Payments and allocations to provisions for litigation (5,482) (7,970)
Repayment of deferred loan arrangement expenses - (6,839)
Write-off of goodwill - (27,319)
Other (198) (5,061)
TOTAL (5,680) (47,189)
18. Segment information
The primary segment reporting format is determined to be business segments. Secondary information is
reported geographically.
Primary segments - business
The business segments described below were determined based on the Group’s organisational structure
at year-end 2005 bearing in mind the nature of the products and services offered and the customers
they target.
In 2005, the Group organised its business into five large business lines:
• Insulation
• Gypsum
• Roofing
152

• Pipes
• Chemicals
The business segments are basically defined by the products involved.
The companies comprising the Group’s Chemicals Business were sold in 2005 (see Note 2.2). Information
for 2005 on this segment refers to transactions carried out up to the sale date.
Revenue and expenses that cannot be specifically attributed to a business line because of decisions
adopted for the overall Group or other reasons are attributed to a “Corporate Unit” to which the
necessary consolidation adjustments and eliminations are attributed in order to draw up consolidated
financial statements for the Group from the aggregate of the businesses.
Costs of the parent company identified as arising from services provided to subsidiaries are passed on to
them and are recognised in the profit and loss of the various businesses. The remaining transactions of
the parent company are included in the “Corporate Unit”.
Secondary segments – geographic
The Group conducts business in:
• Spain
• Rest of the EU
• Other countries
Basis and methodology for business segment reporting
The segment information provided below is based on monthly reports prepared by the various bus and
generated from the accounts and other records of the companies comprising the businesses in the
same way as the information used to prepared the accompanying consolidated financial statements.
The structure of this information is designed as if each business were an independent business arising
from the consolidation or combination of the companies that comprise it and had its own resources.
Segment information by business is presented below.
153

Thousands of euros
INSULATION PIPES ROOFING GYPSUM CHEMICALS CORPORATE GROUP TOTAL
UNIT
2005 2004 2005 2004 2005 2004 2005 2004 2005 2004 2005 2004 2005 2004
External sales 439,510 433,793 161,544 210,045 169,922 213,895 198,868 179,762 134,360 276,496 406 96 1,104,610 1,314,087
Inter-segment sales 494 618 2,194 2,645 12,659 16,418 768 2,393 9,917 28,360 (26,032) (50,434)
NET REVENUES 440,004 434,411 163,738 212,690 182,581 230,313 199,636 182,155 144,277 304,856 (25,626) (50,338) 1,104,610 1,314,087
Depreciation and
amortisation 34,602 35,655 4,962 5,693 10,063 15,426 4,873 6,346 6,886 17,365 1,854 (2,489) 63,240 77,996
OPERATING
PROFIT (LOSS) 20,809 37,664 (1,365) (3,705) 11,742 16,219 53,645 45,760 9,473 12,414 (13,424) (9,558) 80,880 98,794
ORDINARY
PROFIT (LOSS) 16,808 30,350 (2,933) (5,965) 10,870 11,958 55,617 46,490 9,519 11,913 (16,964) (16,641) 72,917 78,105
PROFIT (LOSS)
BEFORE TAXES 16,444 20,048 (4,155) (9,131) 47,609 (26,271) 59,259 45,735 9,629 10,364 (52,903) 50,130 75,883 90,875
PROFIT (LOSS)
FOR THE YEAR 9,471 11,655 (7,613) (9,329) 24,659 (32,498) 40,410 29,820 6,885 10,364 (20,236) 50,785 53,576 60,797
Attributable to:
Equity holders of
the parent 9,094 10,890 (7,556) (9,330) 23,486 (34,320) 23,969 17,673 6,427 9,760 (20,236) 50,558 35,184 45,231
Minority interests 377 765 (57) 1 1,173 1,822 16,441 12,147 458 604 227 18,392 15,566
Goodwill 43,894 43,894 43,894 43,894
Property, plant
and equipment 237,513 232,607 45,526 49,797 91,872 144,898 86,089 81,310 161,714 (27,949) (86,138) 433,051 584,188
Intangible assets 14,683 14,073 137 862 604 2,209 772 1,757 28 272 (7,144) 16,468 11,785
Other non-current
assets 28,547 489 406 735 (1,046) 405 406 275 566 169,509 126,177 197,822 128,647
Current assets 118,741 127,896 37,865 46,762 42,626 83,629 21,149 16,040 60,406 113,712 149,187 334,093 483,920
ASSETS 443,378 418,959 83,934 98,156 134,056 231,141 108,416 99,382 222,714 255,544 182,082 1,025,328 1,252,434
Financing from /(to)
the Group 115,183 120,460 13,888 9,936 (56,664) 41,645 (81,389) (72,591) (53,827) 8,982 (45,623)
Non-current
liabilities 14,757 16,251 2,537 4,579 8,875 20,499 4,161 5,298 4,375 146,086 258,337 176,416 309,339
Current liabilities 97,066 86,498 47,198 48,873 42,586 64,264 55,169 45,409 59,583 134,376 173,581 376,395 478,208
LIABILITIES 227,006 223,209 63,623 63,388 (5,203) 126,408 (22,059) (21,884) 10,131 289,444 386,295 552,811 787,547
TOTAL NET ASSETS 216,372 195,750 20,311 34,768 139,259 104,733 130,475 121,266 212,583 (33,900) (204,213) 472,517 464,887
Inter-segment sales are made at current market prices.
Information by geographical segments
The following table provides the detail of certain Group balances in accordance with the geographical
distribution of the companies that produce them:
154

Revenues Profit (loss) before taxes Total assets
Thousands of euros 2005 2004 2005 2004 2005 2004
Spain 563,055 687,692 101,464 87,103 587,897 775,099
Rest of EU 406,689 474,703 (36,554) (10,137) 345,738 372,870
RoW 134,866 151,692 10,973 13,909 91,693 104,465
TOTAL 1,104,610 1,314,087 75,883 90,875 1,025,328 1,252,434
19. Tax matters
19.1. Consolidated tax group
In accordance with prevailing legislation, the consolidated tax group includes Uralita, S.A., as parent
company, and Spanish companies that comply with legislation governing taxation on the consolidated
profit of Group companies as subsidiaries.
The remaining subsidiaries file individual taxes in accordance with the tax regulations prevailing in each
country.
19.2. Years open to inspection
At 31 December 2005, the consolidated tax group was open to inspection for all the main taxes
applicable for 2001, 2002, 2003, 2004 and 2005. In general, consolidated companies are open to
inspection for the main taxes applicable for the last four years.
At 31 December 2005, the consolidated tax group had tax assessments signed in disagreement, for
which it has filed the associated claims and appeals. Considering the related provisions recorded by the
Group, the directors estimate that any potential liabilities arising as a result of the tax assessments will
not have a material impact on the consolidated annual accounts for 2005.
Because of the possible different interpretations of tax regulations, any tax audits that the authorities
may carry out in future in respect of the years currently open for inspection could give rise to tax
liabilities that cannot be quantified objectively. However, the Group’s tax advisors and directors believe
that the chances of material liabilities arising as a result are remote.
19.3. Income taxes recognised in profit and loss
Income taxes recognised in the consolidated income statements for the years ended 31 December 2005
and 2004 are the following:
155

Thousands of euros 2005 2004
Income tax for the Spanish consolidated tax group (1,810) (107)
Income tax for other Spanish subsidiaries 24,642 19,747
Income tax on foreign operations 8,187 8,877
Deferred tax, net (8,712) 1,561
TOTAL 22,307 30,078
Spanish companies are taxed by applying a 35% rate to the estimated tax base less any deductions or
rebates.
Taxes in other jurisdictions are calculated in accordance with the prevailing rates.
Of the local income tax charge in 2005, approximately €3,507 thousand (€84 thousand in 2004)
correspond to subsidiaries disposed of during the year. These disposals did not produce any tax assets or
liabilities.
19.4. Deferred tax
Under prevailing tax legislation in the various countries where consolidated companies are located, at 31
December 2005 tax assets / liabilities rose from the differences between accounting principles and tax
criteria applied and the temporary differences between the recognition of revenue and expenses. An
unused tax credit is also recognised as the Company considers that its recoverability is reasonably
assured.
The detail of movements in “Deferred tax assets” and “Deferred tax liabilities” recognised by the Group
at 31 December 2005 and 2005 is the following:
Thousands of euros ASSETS LIABILITIES
Tax loss carryforwards Temporary differences
and deductions
Consolidated Other Tax Deferred tax from
tax group companies impact reassignment of
of adoption Other TOTAL value of land of
of IFRS
Fibrocemento NT,
S.A. (Note 7)
Balance at 1 January 2004 - 12,592 25,731 9,710 48,033 -
Increases 70,620 - - - 70,620 -
Reversal to profit or loss - - (1,561) - (1,561) -
Balance at 31 December 2004 70,620 12,592 24,170 9,710 117,092 -
Increases 31,268 13,676 13,181 - 58,125 13,181
Reversal to profit or loss (2,846) (483) (23,193) (9,710) (36,232) -
Balance at 31 December 2005 99,042 25,785 14,158 - 138,985 13,181
The balance at 1 January 2004 was recognised in the transition to IFRS (see Note 2.1).
156

In 2004, as profit estimates by the companies included in the consolidated tax group guarantee the
unused tax credits at 31 December 2004, the Group decided to recognise the tax effect of the future
offset and application of tax loss carryforwards and deductions available at that date.
20. Earnings per share
20.1. Basic earnings per share
Basic earnings per share amounts are calculated by dividing net profit for the year attributable to
ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding
during the year, excluding the average number of parent company shares held as treasury shares in the
year.
Basic earnings per share is therefore determined as follows:
2005 2004
Profit (loss) for the year attributable to equity holders
of the parent (thousands of euros) 35,184 45,231
Average number of ordinary shares outstanding (thousand) 197,500 196,162
Basic earnings per share (euros) 0.18 0.23
This calculation takes into account the stock split which reduced the par value of the shares on 1 January
2004 (see Note 11.1), which does not alter the shareholder structure.
20.2. Diluted earnings per share
Diluted earnings per share amounts are calculated by dividing the net profit attributable to ordinary
equity holders of the parent (adjusted by the effect attributable to dilutive potential ordinary shares)
and the weighted average number of ordinary shares outstanding during the year plus the weighted
average number of ordinary shares that would be issued on the conversion of all the dilutive potential
ordinary shares into ordinary shares of the company. Conversion is considered to take place at the
beginning of the period or at the time of the issue of the potential ordinary shares if these were issued
during the year.
In 2005 and 2004, diluted earnings per share coincided with basic earnings per share.
157

21. Related party transactions
Caja de Ahorros de Salamanca y Soria, a related party by virtue of its equity investment in Uralita, S.A.,
has granted Group companies credit lines at 31 December 2005 at market rates with a combined limit of
€10,500 thousand, of which €50 thousand had been drawn down at that date. Interest payable on these
facilities in 2005 totalled €209 thousand. In addition, at 31 December 2005, this entity had granted
guarantees to Group companies for an amount of €5,464 thousand.
22. Compensation and other information
In 2005 the members of the Board of Directors of Uralita, S.A. were paid total compensation of €1,034
thousand (€1,256 thousand in 2004) in salaries and compensation in kind and €648 thousand (€507
thousand in 2004) in attendance fees, with the following detail:
2005 Board of Nomination Audit TOTAL
Directors and Remuneration Committee
Thousands of euros
Committee
Nefinsa 48 9 9 66
Caja Duero 48 9 - 57
Atalaya Inversiones 48 - 9 57
Mr. Javier Serratosa Luján 96 - - 96
Mr. Javier Echenique Landíribar 48 18 - 66
Mr. José M. Serra Peris 48 - 18 66
Mr. Jesús Quintanal S. Emeterio 48 - - 48
Mr. José I. Olleros Piñero 48 - - 48
Mr. José A. Carrascosa Ruiz 48 - - 48
Mr. Javier González Ochoa 48 - - 48
Mr. Álvaro Rodríguez-Solano Romero 48 - - 48
TOTAL 576 36 36 648
158

2004 Board of Nomination Audit TOTAL
Directors and Remuneration Committee
Thousands of euros
Committee
Nefinsa 36 6 6 48
Caja Duero 36 6 - 42
Atalaya Inversiones 36 - 6 42
Mr. Javier Serratosa Luján 72 - - 72
Mr. Javier Echenique Landíribar 36 12 6 54
Mr. José M. Serra Peris 36 - 6 42
Mr. Jesús Quintanal S. Emeterio 36 - - 36
Mr. José I. Olleros Piñero 36 - - 36
Mr. Íñigo Jodra Uriarte 36 - - 36
Mr. José A. Carrascosa Ruiz 36 - - 36
Mr. Javier González Ochoa 36 - - 36
Mr. Álvaro Rodríguez-Solano Romero 27 - - 27
TOTAL 459 24 24 507
The Group has no commitments for pensions or insurance premiums for members of the Board of
Directors. Nor has it granted board members any advances, loans or guarantees.
Compensation paid to senior managers (excluding those who are members of the Board of Directors,
whose compensation is described previously) amounted to €1,044 thousand (5 managers) in 2005 and
€1,633 thousand (seven managers) in 2004.
In accordance with the terms of Law 26/2003 the Group defines its main activity as described in Note 1.
In accordance with the information of Uralita, S.A. directors, there is no situation described in Law
26/2003 with respect to the ownership by members of the Board of Uralita, S.A. of equity stakes in
companies with the same, similar or complementary business to the Group’s main activity. Similarly,
these members have not carried and do not carry out on their own behalf or on the behalf of a third
party, an activity which is similar or complementary to Company’s main activity.
The detail of members of the Board of Directors of Uralita, S.A. who are directors in other companies
with the same, similar or complementary business to the Company’s main activity is as follows:
• Mr. Javier Serratosa Luján
- Ursa Ibérica Aislantes, S.A.
- Ursa International, GmbH
• Mr. José Ignacio Olleros Piñero
- Uralita BV
- Uralita Holding BV
• Mr. Álvaro Rodríguez-Solano Romero
- Uralita BV
- Uralita Holding BV
159

All these companies are subsidiaries of Uralita, S.A.
In all cases, members of the management teams of all subsidiaries represent Urallita, S.A., as the main
shareholder, with the exception of certain subsidiaries, belonging mainly to the Gypsum and Roofing
businesses, whose management teams include representatives of minority shareholder Grupo Lafarge,
which carries out similar activities to those carried out by Uralita Group. Representatives of the Uralita
and Lafarge groups on these management teams do not hold stakes in the share capital of companies
which carry out the same, similar or complementary business activities to those carried out by the
companies making up the Uralita Group’s core business, nor do they hold positions of responsibility in
other companies not belonging to the Group, which carry out a similar business activity.
23. Contingent assets and liabilities
At 31 December 2005, there are no contingent assets or liabilities that could have a material impact on
the financial position and equity reflected in the accompanying consolidated financial statements.
24. Environmental Information
Some of the consolidated companies are required to comply with a series of legal provisions relating to
the prevention and reduction of emissions, recovery of zones and the protection and improvement of
the environment, and this has given rise to a series of investments and expenses.
The net carrying values at 31 December 2005 of systems, equipment and facilities included in property,
plant and equipment designed to protect and improve the environment amount to €4,935 thousand.
Costs incurred in 2005 for environmental protection and improvement came to €1,037 thousand. All of
these were ordinary expenses and mostly comprised wages paid to personnel who carry out
environmental services, waste collection and treatment, environmental audits and similar certifications.
At year-end 2005 no provisions were recorded for environmental actions, with €50 thousand having
been used for cleaning tasks and waste collection resulting from the discontinuation of all production
processes using asbestos in previous years.
The follow-up of environmental contingencies is mainly undertaken by specialised personnel, while third
parties are charged with carrying out environmental audits and waste management and collection. The
evaluation of these contingencies has not indicated any eventual effects on the companies’ assets and
results, nor are any additional contingencies of an environmental nature expected to arise from their
activity.
Environment-related subsidies and compensation obtained in 2005 amounted to €51 thousand.
160

APPENDIX 1 - Subsidiaries - 2005
By business segment Location Direct Group Carrying Assets Liabilities Equity Profit (loss) Unrealised
Thousands of euros holding (%) holding amount for the year capital gain
INSULATION
Ursa Ibérica Aislantes, S.A. Barcelona 100.00% 100.00% 35,271 144,375 115,459 28,916 (5,933) 6,355
Ursa Italia S.R.L. Italy 100.00% 100.00% 201 25,616 21,331 4,285 (668)
Ursa France, S.A. France 100.00% 100.00% 0 73,206 78,590 (5,384) 4,648
Ursa Saint-Avold, S.A. France 100.00% 100.00% 0 46,808 58,881 (12,073) (9,159)
Ursa U.K. LTD. UK 100.00% 100.00% 15 3,909 2,412 1,497 1,379
Ursa International GmbH Germany 100.00% 100.00% 18,212 33,906 4,747 29,159 (6,168) 5,016
Ursa Eslovenija, d.o.o. Slovenia 100.00% 100.00% 29,000 46,053 5,368 40,685 (2,322)
Ursa Novoterm Sarajevo d.o.o. Bosnia 100.00% 100.00% 13 26 9 17 4
Ursa Beograd d.o.o. Yugoslavia 100.00% 100.00% 15 79 72 7 (1)
Ursa Novoterm Zagreb d.o.o. Croatia 100.00% 100.00% 140 1,517 1,298 219 94
Ursa Dämmsysteme Austria GmbH Austria 100.00% 100.00% 46,249 51,265 11,193 40,072 442 10,751
Ursa CZ s.r.o. The Czech Republic 100.00% 100.00% 846 2,144 1,299 845 590 1
Ursa SK s.r.o. Slovak Republic 100.00% 100.00% 0 621 406 215 168
Ursa Benelux BVBA Belgium 100.00% 100.00% 2,740 33,059 37,174 (4,115) (693) 6,855
Ursa Deutschland GmbH Germany 100.00% 100.00% 27,048 73,488 74,753 (1,265) (28,678)
Ursa Salgótarjáni Üveggyapot RT. Hungary 100.00% 100.00% 22,883 43,284 7,859 35,425 11,436 9,831
TOO Ursa Kazakhstan Kazakhstan 100.00% 95.02% 0 12 27 (15) 0
OOO Ursa Serpuchov Russia 100.00% 99.75% 13,507 50,496 28,530 21,966 3,552
OAO Ursa Chudovo Russia 95.02% 95.02% 35,482 37,609 (9,067) 46,676 7,255 23,785
Ursa Industry Germany 100.00% 100.00% 29 618 1,471 (853) (878)
Ursa Nordic Sweden 100.00% 100.00% 12 34 19 15 5
Ursa Enterprise Ukraine 100.00% 100.00% 0 1,327 1,286 41 532
Ursa Eurasia LLC Russia 100.00% 100.00% 0 23,221 29,493 (6,272) (5,703)
Ursa Polska Sp. z.o.o. Poland 100.00% 100.00% 7,917 22,238 10,743 11,495 4,171
Ursa Romania SRL Romania 100.00% 100.00% 3 1,272 794 478 432
Ursa Swiss GmbH Switzerland 100.00% 100.00% 16 105 91 14 (2)
GYPSUM
Yesos Ibéricos, S.A. Madrid 59.31% 59.31% 25,752 210,551 80,437 130,114 39,482
Episa, S.L. Portugal 100.00% 60.94% 2 259 137 122 (9)
ROOFING
Uralita Iberia Madrid 100.00% 100.00% 1,497 3,883 2,386 1,497 (21,978)
Uralita Tejados, S.A. Madrid 53.00% 53.00% 47,584 110,634 24,985 85,649 3,884
Lusoceram Empreendimentos
Cerámicos, S.A. Portugal 0.01% 0.01% 1 30,732 22,328 8,404 (8,701)
Fibrocementos NT, S.A. Madrid 100.00% 100.00% 34,814 65,735 55,400 10,335 (33,175) 37,660
Rocmat, E.U.R.L. France 100.00% 100.00% 113 1,106 1,277 (171) (283)
PIPES
Uralita Sistemas de Tuberías, S.A. Madrid 100.00% 100.00% 20,312 85,891 65,640 20,311 (12,964)
Epe France, S.A.R.L. France 100.00% 100.00% 1,427 1,623 135 1,488 61
OTHER SUBSIDIARIES
Uralita Holding BV Netherlands 100.00% 100.00% 1,324 1,370 20 1,350 29
Uralita BV Netherlands 100.00% 100.00% 1,136 125,395 124,168 1,227 170
Electroquímica Andaluza, S.A. Madrid 75.49% 75.49% 0 0 5,627 (5,627) (896)
Cerámicas Sanitarias Reunidas, S.A. Barcelona 100.00% 100.00% 648 794 146 648 (57)
161

The Uralita Group
Management Report 2005
1. Results
Throughout 2005 the Uralita Group continued to implement its 2004-2006 Strategic Plan, successfully
completing the planned disposal of non-core assets one year ahead of schedule. We highlight the
disposal of the group's Chemicals Business –Aragonesas– in May for €180 million, free of debt. Despite
these disposals, Net Income attributable to the controlling company was €35.2 million, the second best
result reported in the last decade. Furthermore, gains on disposals carried out during the year, coupled
with improved management of cash flow from operating activities allowed the Group to reduce net
debt by 52% to €140.1 million.
Consolidated sales totalled €1,104.6 billion, with foreign operations accounting for 49% of the total. This
figure includes the first five months of the year for the Chemicals Business. Consolidated sales at the
Group’s core businesses grew 0.6% vs. the same period last year. Performances varied between Uralita’s
geographical markets in 2005. The Spanish business performed well once again, with 730,000 housing
starts in 2005 (+6.2% vs. 2004), while the construction market -particularly housing construction- in
Portugal remained depressed, and even more so in Germany. The Eastern European markets continue to
show strong growth, in line with previous years.
Consolidated EBITDA for 2005 stood at €150.5 million, with an EBITDA margin of 13.6% vs. 14.4% in 2004.
The decline is due primarily to lower income from the non-core businesses that were sold and the fall in
EBITDA in the Insulation Business, caused by the weak German market and the rise in raw material
prices.
Despite the unfavourable backdrop and the disposals carried out, Net Income for the year was €53.6
million, with a margin of 4.9%, 0.3pp higher than in 2004. Net Income attributable to the controlling
company was €35.2 million.
The Group generated free cash flow of €188.4 million in 2005, allowing it to reduce net debt to €140.1
million from €292 million at year-end 2004. This significant reduction in debt was made possible by the
proceeds of the non-core asset disposals carried out during the year, and operating income from core
businesses and the active management of its investments in property, plant and equipment and
working capital.
2. Results by business
External conditions for the Insulation Business were extremely unfavourable throughout 2005, due
largely to the decline in construction activity in Germany and the rise in polystyrene prices (the main raw
material for XPS), which could not be passed onto the final customer. Sales stood at €440 million, up
1.3% vs. 2004 while the EBITDA margin contracted from 17.1% in 2004 to 12.6% in 2005, due largely to the
factors mentioned above.
Despite the margin erosion in 2005 (measures have already been implemented to address this issue) the
Insulation Business still has a strong competitive position in Europe, and is the leader in Eastern Europe,
where the Uralita Group has invested in a second glass wool line at its Serpuchov plant in Russia,
brought on stream in the first quarter of 2005.
162

Results at the Gypsum Business showed a sharp improvement in 2005, with sales of around €200
million and an EBITDA margin of 29.3%, making this the Group’s most profitable activity. Sales increased
by 9.5% vs. 2004, outstripping the increase by the building sector in Spain, and due largely to the
increased penetration of Pladur® and the development and promotion of higher added value products in
the powdered gypsum segment.
The Roofing Business was the most affected by the disposals carried out in 2005, as these included
Thermo-clay blocks (Cerámicas Estructurales) and Profiles and Panelling (Teczone). Sales fell 20.7% to
€182.6 million as a result of these disposals, with an EBITDA margin of 11.9%. The two core businesses,
Tejas España and Tejas Portugal, showed widely different performances: In Spain, the construction
growth trend seen over the past two years continued, while in Portugal construction activity slowed for
the fourth consecutive year. The core businesses reported combined sales of €108 million in 2005, -6.0%
vs. 2004, with an EBITDA margin of 14.8%.
The performance of the Pipes Business was worse than expected throughout 2005. Sales fell by 23% vs.
2004 due mainly to the disposal of non-core assets and the closure of non profitable activities. The
Business was negatively impacted by unfavourable polyester pipe prices and higher PVC prices on the
international markets. EBITDA was €3.6 million, with an EBITDA margin of 2.2%, still a long way off the
Uralita Group’s targets. The Pipes Business was fully restructured during 2005 and a series of measures
implemented designed to boost profitability. The impact of these measures should start to be felt in
2006.
3. Research and Development
In 2005 the Group earmarked €1.1 million to R&D projects.
4. Risk Management
Uralita’s exposure to financial risk is mitigated by an appropriate framework for the detection and
prevention of risk which forms part of the Group’s Risk Management System. Therefore, all price, credit,
liquidity and cash flow risk is periodically evaluated, monitored and controlled by the company.
The effectiveness of the system is based on creating an appropriate framework for risk prevention,
encouraging active participation in the detection and prevention of risks in advance, notifying risks at
the appropriate decision-making level, and controlling risks through suitable procedures.
5. Treasury Stock
At 31 December 2005 no shares in the parent company were held as treasury stock and no transactions
involving treasury stock were carried out in 2005.
6. Subsequent events
No subsequent events have taken place between the close of the consolidated financial statements and
the date of which they were prepared.
7. Outlook
The company’s Management forecasts a good outlook for its activities over the next few years.
163

The Uralita Group
Summary of Financial Data
RESULTS
Thousands of euros 2005 % 2004 % 2003 %
Net sales 1,104,610 100.0 1,314,087 100.0 1,314,556 100.0
Gross margin 659,318 59.7 764,499 58.2 765,753 58.3
EBITDA 150,516 13.6 189,708 14.4 162,054 12.3
EBIT 87,581 7.9 111,532 8.5 65,589 5.0
PBT 75,883 6.9 90,875 6.9 (1,548) (0.1)
Net income 53,576 4.9 60,797 4.6 (26,389) (2.0)
Net income attrib. to the controlling company 35,184 45,231 (41,931)
BALANCE SHEET 2005 2004 2003
Fixed assets 433,051 584,188 694,758
Financial assets 1,823 3,701 10,246
Other assets 256,361 180,625 105,388
Working capital 97,835 297,747 375,347
Total investment 789,070 1,066,261 1,185,739
Shareholders’ equity 374,903 366,653 339,708
Minority interests 97,614 98,234 95,508
Other funds 176,416 309,339 299,382
Net debt 140,137 292,035 451,141
Total resources 789,070 1,066,261 1,185,739
Capital employed 612,654 756,922 886,357
Working capital with third parties
· Value 31,331 72,356 176,962
· % of net sales 2.8 5.5 13.5
RATIOS 2005 2004 2003
Earnings per Share, euros 0.18 0.23 (0.64)
R.O.C.E. 14.2% 14.8% 8.1%
R.O.I.C. 6.5% 7.1% 4.6%
Interest Coverage 10.6 5.4 2.0
Assets Turnover 1.8 1.7 1.5
Gearing 37.4% 79.6% 132.8%
Current Ratio 0.9 1.0 0.8
164

Mejía Lequerica, 10
28004 Madrid (Spain)
www.uralita.com