English - Siegfried

For 2006, the daughter company in Berlin-Kleinmachnowcontinues to work on a large contract, the facility’s developmentand production capacity as almost fully utilized.The Sidroga Division has reported pleasing growth ratesfor the past two years. The Board of Directors and ExecutiveManagement confirm that the investments in the Sidrogabrand and the development of innovative products havepaid off. The integration of the Valverde line is complete,and the products are enjoying notable success in the Swissmarket, with additional Valverde products to be launchedin Germany and Austria in the coming years. The foundingof a daughter company in Austria will enable us to marketour products in that country through our own organization,to strengthen our market leadership in medicinal teas, andsuccessively introduce Valverde products. The Division’srevenue growth is mostly due to increased sales in Germany,with sales in Switzerland stabilizing at a high level.The first-rate results of the Siegfried Group were possiblealso because of the unrelenting commitment of our peoplein both Divisions and at all our facilities. My sincere thanksgo to everyone for their terrific dedication and loyalty.I would also like to extend a special thank-you to our customers.Especially in the business of active pharmaceuticalingredients and the production of medications for genericscompanies, the partnership between the client andSiegfried is very close and based on a considerable levelof trust. That our customers have maintained this trustin Siegfried is especially gratifying, and we will continueto do every thing we can to meet their requirementsand wishes in the future.Our level of self-financing remains very high (64.5%) andgives the Siegfried Group the necessary entrepreneurialagility. The 10.9% growth in gross profits corresponds torevenue growth. Operating profits declined by 4.3%because of higher proceeds from real estate transactionsundertaken in 2005. Operating costs grew proportionalto revenue, including increased investments in marketingand development, and depreciation of unrealized genericprojects. These investments will contribute to the futuredevelopment of our company. Also, net profits declinedby 11.3%, as relatively high gains from currency exchangewere noted in 2005. Fortunately, operating cash flowfor 2006 was CHF 53.7 million. The capital expendituresof CHF 35.8 million, including completion of the firstconstruction phase of our new pharmaceutical productionfacility in Malta, and a complete upgrade of the crystallizationoperation in Zofingen was relatively high. As a supplierthat strives to meet the most stringent customer demands,6Chairman’s Letter