Grupo Los Grobo S.A Annual Report and Balance Sheet€¢ Annual Survey on client satisfaction •...

2005/06 Annual Report and Financial Statements �

Grupo Los Grobo S.A

Annual Report and Balance Sheet2005/2006

� Grupo Los Grobo S.A.


Grupo Los Grobo S.A.

Annual Report and Balance Sheet2005/2006

External enablement for social responsibility process: Inés García Fronti - Paula D’Onofrio


Facilitación externa proceso responsabilidad social: Inés García Fronti - Paula D’Onofrio


Grupo Los Grobo (GLG) is the first Argentine company in the food sector that uses the Global Reporting Initiative (GRI) Guidelines and is one of the six Argentine companies to do it and send its reports to GRI. You may have access to our report at: http://www.corporateregister.com/data/report.pl?num=�7300&r=0 The �005/06 Annual Report of GLG has obtained the “Content Index” (CI) qualification granted by the GRI. A “Content Index” report includes an index that quickly and easily shows readers where they can find information on the disclosures covered by the �00� GRI Guidelines. The GRI index of GLG is on page �3 of this report.

2005/06 Annual Report and Financial Statements 3

ANNUAL SUSTAINABILITY REPORT ON ECONOMIC, ENVIRONMENTAL AND SOCIAL PERFORMANCE2005/2006

1. VISION AND STRATEGY

1.1 Vision and Strategy Statement

Our activity is key for the development of an agricultural country like Argentina. For centuries, the economic model of our country has been sustained by food production, but as a responsible company, we do not limit our participation only to economic development. Grupo Los Grobo is socially responsible, always aiming at a balance between economic development, environmental protection and respect for individual rights.

Grupo Los Grobo aims at the realization of a sustainable development in its production and has a strong intergenerational commitment, promoting the satisfaction of current needs without compromising next generations. It has a strong environmental commitment both in its crops and products.

The goals we have in the strategic plan are the following:• Consolidation of the organization• Continuous improvement of processes

• Implementation of business intelligence• Development of talents and skills.

Increase of employability• Management maturity. Consolidation

of the performance evaluation model vertical Integration

• Consolidation of the milling area• Development of flour distribution in

Brazil• Wheat export to Brazil• Expansion of core businesses• Development and professionalization

of sales network• Infrastructure in new areas• Innovation in new and traditional

company businesses• Client’s year

The company manages the acquisition and analysis of information related to the demands of different interest groups through systematic activities:• Client Surveys (Web, tactics)• Annual Survey on client satisfaction• Customer Service Commissione• Work Environment Survey• Vendors Satisfaction Survey• Monitoring of vendors satisfaction

indicators (payment days)• Internal evaluations• Contact with clients


Bio

cere

s

Inp

uts

(23

M d

olla

rs)

Dis

trib

utio

n

Con

sum

ers

Ag

roin

put

Sup

plie

rs

Ag

roch

em.

Fert

ilize

rs

LG Stocking900,000 tn

CS Brokers110,000 tn

LG Services12 trucks

Transport(600)

LG Production115,000 has

Producers1500

Contractors 240 PyMEs (small and

medium-sized companies)

Agricultural Management (12)

260 direct employees1,500 small and medium-sized companies in the network (6000 people)

Forecasted Income: 165 M dollars per year

Processors

Export

Agroind.do Brasil

Plants 212,400

Mills 45,600 tn

LGComex

AVEX

GROCATEC

Insertion in the Value Chain of Grupo Los Grobo



One of the strategic challenges of Grupo Los Grobo is in the integration of the food value chain. We have been developing this strategy of a greater consolidation and integration for many years. Maybe, the best example is our participation in the whole wheat chain, from research to biotechnology development (BIOCERES), going through assays, seed plot, distribution, agro-inputs sale, production and coordination of tasks, logistics, stocking, brokerage, mill industrialization, and distribution to the final, domestic and foreign, consumer.

To participate in all links of the chain also allows us to capture quasi-rents and decrease transaction costs, have information from management itself and avoid its asymmetries. This information is key at the time of identifying and developing new businesses. As regards our relationship with AVEX (poultry company under construction), we have initiated the same path in protein chain.The General Manager and Directors monthly analyze the information about client requirements in the Meetings of the Board of Directors, with especially

prepared Management reports. Directors, thanks to their global vision of the whole commercial chain, take the necessary steps and design strategies to satisfy the needs of the final clients, communicating directions to management to comply with clients requirements.Los Grobo, as organizer, establishes working standards according to client requirements, and supervises their compliance in order to achieve client satisfaction.

Memoria y estados contables 2005/06 5

6 Grupo Los Grobo S.A.

1.2 Chairman’s Statement

Companies have to increasingly undergo an integration path, showing responsibility for the environment where they carry out their business and which is influenced by them on several aspects. Society expects that these companies lead the adaptation to changes in these turbulent times and that they have the capacity to generate wealth, employment and social welfare.We have undergone a period of great drought in part of the areas where we carry out our activity, in fact, agricultural production in our country fell more than 10%. However, our activity grew as never before thanks to our position towards clients and vendors. This position has been established with great

effort and knowledge, and above all, with a spirit of service that spreads throughout the organization. Withholdings persistence and costs increase have conditioned our results and capacity to invest more extensively in our interest areas. What it did not affect was our commitment to build a company based on clients that attempts at being better every day. Today, we are 256 people working in the company, we have a 120 million dollar income, we sow 115 thousand has, we sell 776 thousand tn in grains, we founded FRONTEC, a company to develop border technologies in the network, and we began to export flour from our mills to Brazil. All this growth is sustained by the qualitative growth of the organization. People have had access to 152 training courses, new processes have been

developed, ISO 9001 standards have been recertified in already developed processes. The conclusion of all these actions is that we have recommended ourselves for the Quality National Award. In order to offer you organized information on our economic, environmental and social development, we have followed the Guide for the Preparation of Annual Sustainability Reports of the Global Reporting Initiative (GRI, 2002 Guide).

Adolfo GrobocopatelChairman of Grupo Los Grobo

6 Grupo Los Grobo S.A.


2. PROFILE

2.1 Organization’s Profile

In Agriculture we continue to develop production alternatives, and for that, we have launched the Los Grobo II Trust, for a total of USD 12 million, with Public Bid and Risk Rating. This Trust for 45,000 has. is inside a global Trust program, which allows us to expand ourselves as producers with a tool open to capital markets. The Los Grobo II Trust exceeded its offering quotas, due to the subscription of Institutional Investors. (Retirement and Pension Funds Administrators (AFJPs), Insurance Companies, etc.)Like in the previous year, we keep increasing our proportion in the sowing, storage and Agronomy market, our result being slightly lower than during 2004-2005 year, specially affected by the drought in the Southwest area, remaining, however, within the levels expected in our forecasts.

Within the development framework of our activity, and with the idea of increasing our participation in agricultural business, our company has established the idea to consolidate ourselves as Grain Brokers, thus, strongly investing in new plants in Monte and Saladillo, for a total investment of 4 million dollars.These investments are aligned with the policy of our Board of Directors to

consolidate ourselves as the main primary product originator through the offer of services integrated to the network.The sale level of the company reached a 12% increase compared to the previous year. This year the total sales were u$s 120.334.332,88 with a net profit of u$s 3.995.799,68 and with an EBITDA of u$s 7.348.569,31.

0100002000030000400005000060000700008000090000

100000110000120000130000140000150000160000170000180000

Forecasted 144000 160000 180000Barley 0 0 0 0 0 695 352 682 2000Rape 50 661 0 0 0 0 0 0Sorghum 2 0 1465 0 0 0 0 0 0Sorghum 1 1586 1191 1234 1259 482 1333 540 750 1000Soybean 2 3449 5962 3610 8779 9628 11504 9718 13300 18000Soybean 1 5803 4984 17738 24374 17637 22417 24157 32400 38000Sunflower 14869 12285 4542 4268 7277 5915 9792 14000 16000Pizing. Corn 0 0 227 0 0 0 0 0Corn 5490 6964 6496 7727 8353 7244 9292 7467 10000Wheat 9393 13196 9645 18231 19923 21127 26457 28250 32000

Has 98/99 Has 99/00 Has 00/01 Has 01/02 Has 02/03 Has 03/04 Has 04/05 Has 05/06 Has 06/07 Has 07/08 Has 08/09 Has 09/10

Figure: Evolution of historical and forecasted hectares 2006-2007 with trust

760.

000

775.

000

790.

000

795.

000

815.

000

830.

757

190.

604

750.

072

713.

401

504.

992

343.

000

202.

953

134.

000

271.

616

213.

517

0

100.000

200.000

300.000

400.000

500.000

600.000

700.000

800.000

900.000

Janu

ary

Febr

uary

Mar

ch

April

May

June July

Augu

st

Sept

embe

r

Octo

ber

Nove

mbe

r

Dece

mbe

r

Harvest 99/00

Harvest 03/04

Harvest 00/01

Harvest 04/05

Harvest01/02

Harvest 05/06

Harvest 02/03

Figure: Stored Tons 2000 – 2006


One of the key factors for the company’s success lays in our capacity to forecast and interpret client’s expectations and quickly answer them. Our commercial network is characterized by a deep territorial knowledge, consequence of our settlement in multiple locations.Each of our branches constitutes an integral service center that imitates the head office, using common units that provide service and support. They buy grains, through Stocking and Brokerage; sell Inputs; coordinate Logistics and Management; finance and promote clients through SGR (Reciprocal Guarantee Company); are responsible for collections; participate in projects of the Foundation and Corporate Volunteering; organize events and training courses; among other activities. Market opportunities detection is an activity that requires constant attention to fundamental and technical variables of the local and foreign market.These actions are achieved by means of the team work of Brokerage, Business Units Managers, key informants that we have in ROFEX and Bahía Blanca, our operators in the MAT in Buenos Aires, from the relations of managers and brokers

with other business operators; and the information available through online systems (Reuters, Open-Net; MAT On-Line), independent consultants and information from international operators.The advantages of multiple locations, multiplicity of products and services, and the flexibility in business development for the identification of Clients make each branch to achieve permanent relationship with them. This phenomenon is what we call Territorial Knowledge.

2.2 Scope of the Annual Report

• The contact person for topics related to the Annual Report is Paula Marra, Executive Director of Grupo Los Grobo SA ([email protected], http://www.losgrobo.com.ar)

• The year covered by this annual report is between 05/0�/�005 and 0�/30/�006; subsequent relevant information has also been included.

• The activity developed by Grupo Los Grobo SA and captured in this annual report includes territories in Argentina.

Total Input Sales (Clients and LGA)

Evolution of Input Sales

0

5.000.000

10.000.000

15.000.000

20.000.000

25.000.000

02/03 03/04 04/05 05/06

usd

LG Clientes

Statement of Changes in Shareholders’ Equity 02-03 to 05-06

SH GLG Evolution

0

10.000.000

20.000.000

30.000.000

40.000.000

50.000.000

60.000.000

70.000.000

80.000.000

02/03 03/04 04/05 05/06

$



1) Carlos Casares�.�) Quiroga�.�) Roberts�.3) Carlos Tejedor�.�) Pehuajó�.5) Francisco Madero

2) Salliqueló�.�) 30 de Agosto�.�) América�.3) Gral. Pico�.�) Trenque Lauquen

3) Guaminí3.�) Bonifacio3.�) Carhué

4.1) Pigüé�.�) Saavedra�.3) Darregueira�.�) Gral. Lamadrid�.5) Cnel. Pringles. �.6) Tornquist�.7) Bahía Blanca

5) Chivilcoy

6) Saladillo25 de Mayo, Roque Pérez6.�) Saladillo

7) San Miguel del Monte7.�) Las Flores

8) San Pedro

9) Capital Federal

10) Armstrong y Cañada de Gómez

Casares

Saavedra

Guaminí

Pehuajó Saladillo

Monte

Ruta Nº 5

Ruta Nº 33

Chacabuco

San Pedro

Firmat

Cnel. Dorrego

Cnel. Pringles

Bajo Hondo

Lartigau

Magdala

Madero

Chivilcoy

1

2.32.2

3.2

3.1

1.21.3

1.41.52.4

6.1

7

10

9

4.3

4.1

4.2

4.4

4.5

2.17.12

3

4.6

4.7

M

8

1.1

6

5

Commercial Net

Memoria y estados contables 2005/06 �

�0 Grupo Los Grobo S.A.

Ag

roin

put

sPr

oduc

tion

Sup

por

t pro

cess

esSt

ocki

ng

Clie

nt

Clie

nt

Stoc

kin

g

Order for the Sale of goods

Crop planning

Evaluation and Selection of suppliers

Internal audits

P-ac015. Truck dispatch

P-ac-001 proposal for Purchase operation

P-ac-002. Shipping of Trucks to producers

P-ac-012. Client Registration of the mat

P-ac-016. PaymentOf freight charges

P-ac-013. OperationApplication by f&o

P-ac-007. ProposalFor sale operation.

P-ac-014.Truck dispatch

P-ac-011. Non-conforming products

P-ac-009.Sales contracts

P-ac-010.Invoicing of sales

P-ac-008. ShippingOf sold goods

P-ac-006. Pickup ofGoods from producers

P-ac-014.Entry to goods plant

P-ac-003. Reception of Goods sent by producer

P-ac-004.Deposit certific.

P-ac-005. PaymentOf purchases

Measurement And monitoring

Quality manual

Clients claimsAnd consults

Direction review Planning for continuousImprovement

Control of externalDocuments

Recruiting / integration of staff

TrainingAwareness

Quality recordsControl

Nonconformities /improvement action

PerformanceHarvest of

Special products

Fields approval

Invoice to client

Seeds stocking

Seeds Legalization

Invoice ReceptionGoods receptionOrder for the

Purchase of goods

Distribution

Figure: ISO 9.001 Standard Procedures

2.3 Profile of the Annual Report

In this Annual Report, Grupo Los Grobo SA applies some of the principles to prepare annual reports and/or content included in the Guide for the Preparation of Annual Sustainability Reports - Global Reporting Initiative (GRI, 2002 Guide) so that in our next annual reports we can gradually make progress in their use.Within policies and measures to

guarantee the accuracy, thoroughness and truthfulness of the information presented in the annual report, we have processes that make up a value chain and that are in line with legal rules, custom and practices in force. Said processes are certified under ISO 9001 Standards and are detailed in the following figure.

2005/06 Annual Report and Financial Statements ��

As methodology to ensure quality and improve the general performance, we must emphasize the performance review, the coexistence code, the safety and occupational health rules, the environmental principles, the food safety standards, the 3rd-party audits, the meetings between areas and the manager meetings.

In order to test and enhance processes executed by the organization, different activities are carried out:

With Clients • Coinnovation workshop• Participation in CREA and

AAPRESID Meetings

With Competitors • Visits to silo plants, mills and

companies

With Vendors• Purchasing Management

Workshop

Interest Groups:• Meetings with Technical Officers

according to AccountAbility 1000 (AA1000) guidelines that is a liability method that aims at assuring the quality of accountability, evaluations and disclosure of social and ethical aspects of corporate management. AA1000 is a procedure standard.

• Meeting with grower contractors to establish considerations and compensations.

• We receive the regular visit of several producers and businessmen from all over the world, where we can interact and search for “outside” information.

You may find more information about these economic, environmental and social aspects of our company’s activities at: www.losgrobo.com.

Memoria y estados contables 2005/06 ��

�� Grupo Los Grobo S.A.

3.1 Structure and Administration

The structure of Grupo Los Grobo was established with the assistance of external consultants, defining participation levels of the different interest groups that interact in the company’s administration. Grupo Los Grobo is a group of companies where shareholders, as a whole and in pre-established proportions, have original capital invested, and form a management unit, beyond their legal status, location or activity performed by each of these companies.

3.2 Commitment with Stakeholders

In Los Grobo we believe that trust, cornerstone of any association, optimizes the achievement of results, therefore:

• We are part of CREA groups, in which we share management experiences among group members.

• We form consortiums to add directed demands to the purchase of inputs, thus enhancing negotiating power.

• We become partners with clients in the creation of a company which industrializes products, such as the case of the Flour Mill in Bahía Blanca.

• We develop a strategic alliance with a Brazilian wheat importer, HARINANET, and founded a foreign organization called Agro negocios do Brasil for its distribution.

• We participate in the creation of a biotechnology company named BIOCERES that researches and develops seed genetics. The members of the Board of Directors are partners together with other 250 producers.

• We have launched two sowing trusts where we are operators and organizers, introducing agro-investors and investors belonging to other areas to the agricultural sector.

• We form a reciprocal guarantee company, “SGR”, where we are protecting members and invite our clients and service providers to subscribe as participating members in order to obtain the benefits that this kind of companies provide. With the support of Los Grobo, participating members can obtain better financing plans for capital assets and input purchase through the SGR.

3. Administration structure and management systems

Secretary

Executive Director

SAC P.C.G.

Audit Department

RSE

RI y P

TalentSystems

LGI SGR

INDALAR LGSCS

PROSEMELOS GROBO

FOUNDATION

FFLGLGA

Executive Director Executive Director Executive Director

BOARD OF DIRECTORS

CHAIRMANExternal Director External Director

Industrial Division

Regional Division

Raw Material Division

ADP

TR

LGSP

CANEPA

AVEX

SHAREHOLDERS

Flow chart References. ADP: Agronegocios del Plata. CS: Chain Services. FFLG: Fideicomiso Financiero Los Grobo. LGA: Los Grobo Agropecuaria. LGI: Los Grobo Inversora. LGS: Los Grobo Servicios. LGSP: Los Grobo San Pedro. PCG: Planificación y Control de Gestión. RI y P: Relaciones Institucionales y Prensa. RSE: Responsabilidad Social Empresaria. SAC: Servicios Administrativos Corporativos. SGR: Sociedad de Garantía Recíproca. TR: Tierra Roja

Figure: Grupo Los Grobo – Flow Chart

2005/06 Annual Report and Financial Statements �3

4. Table of contentsThe following table of contents shows the chapters of this Report that comprise different requirements established by GRI. We have only included those requirements and indicators for which Grupo Los Grobo has relevant information.

Location Chapter

1. Vision and strategy

Vision and Strategy Statement 1.1Chairman’s Statement 1.2

2. Profile

Organization’s Profile 2.1Scope of the Annual Report 2.2Profile of the Annual Report 2.3

3. Administration structure and management systems

Structure and Administration 3.1Commitment with Stakeholders 3.2

4. Indice

5. Performance indicators

Economic Performance Indicators 5.1EC1 Clients 5.1 a y bEC3 Vendors 5.1 cEC5 Employees 5.1 dEC6 Capital Contributors 5.1 eEC7 Capital Contributors 5.1 fEC8 Public Sector Paid Taxes 5.1 g

Environmental Performance Indicators 5.2Energy 5.2 aWater 5.2 bBiodiversity 5.2 cEmissions, Spills and Waste 5.2 dProducts and services 5.2 e

Social Performance Indicators 5.3

WorkPracticesandDecentWork LA1 Employment 5.3 a y bLA 4 Company/workers Relations 5.3 cLA 7 Health and Safety 5.3 d y eLA 9 Training and Education 5.3 f, g y hLA 10 Diversity and Opportunity 5.3 iLA 11 Diversity and Opportunity 5.3 j

HumanRights Adherence to the Global Compact 5.3 k

Society SO 1 Community 5.3 lSO 2 Corruption 5.3 mSO 3 Political Contributions 5.3 n Ethical Code 5.3 o

ProductLiability PR 2 Products and services 5.3 p

OtherDataofInterestAward to the Socially Responsible Entrepreneur 5.3 q

Memoria y estados contables 2005/06 �3


5. Performance indicators

5.1 Economic Performance Indicators

a) Clients

30/04/2006 u$s 30/04/2005 u$s

Total Income from Sales ��0.33�.33�,�� 06.�5�.6�0,35

Shareholders’ Equity ��.66�.077,0� �0.�57.36�,0�

Profits of the Year 3.��5.7��,6� 5.�37.�30,��

Financial Results �.�7�.�0�,6� 3��.�76,��

Amortization of Fixed Assets ��7.5��,�� 5�0.00�,��

Provisions and Provision Recovery ��6.�6�,6� �3.�6�,3�

Income Tax �.��7.�55,0� �.5�0.�36,06

Operating Profit EBITDA 7.3��.56�,3� 7.�36.�06,63

Base Indexes EBITDA

Profit – Operating/Shareholders’ Equity ��,�0% 37,3�%

Profit – Operating/Total Sales 6,��% 7,3�%

b) Income for Sales and Services

Entry 2006 u$s

Sale of Cereals and Oil Seeds in Consignment 57.��.�7�,��

Sale of Cereals and Oil Seeds �0.�6�.��0,�0

Sale of Agro-inputs ��.�0�.�53,�3

Sale of products and byproducts - Flours 5.707.7�0,35

Service Income �.��3.0��,0�

Sale of Cattle �7�.�06,��

Income for Commissions �7�.757,�6

Export Reimbursement 3�.53�,0�

Total Income from Sales 120.334.332,88

Annual Forecasted Income: 165 M dollar per year



c) Vendors Cost of Goods, Sold Products and Services

Year 2006 u$s Year 2005 u$s

�0�.0��.757,36 ��.77�.606,��

d) Employees Total Salary Expenses

Item Year 2006 u$s Year 2005 u$sSalaries and Wages �.6�0.57�,70 �6�.��,0�

Social Security Contributions ��6.��6,53 ��7.7��,��

e) Capital Contributors Payables and Loans

Item Year 2006 u$s Year 2005 u$sTrade Payables ��.�5�.7�0,�� .363.��,�3

Loans �6.�36.57�,66 ��.��3.��,77

Tax Payables ��6.6��,35 �.��7.5�0,70

Other Payables �.00�.�03,�0 ��3.��7,5�

f) Increase/Decrease of Retained Earnings at Year End Profit for the Year

Year 2006 u$s Year 2005 u$s

3.��5.7��,6� 5.�37.��3,76

g) Public Sector Paid Taxes

Item Year 2006 u$s Year 2005 u$s

Taxes, fees and contributions �.375.�3�,�� .7��,37

Income Tax �.��7.�55,0� �.5�0.�36,07



We strongly believe that environmentally-friendly practices make our production sustainable, thus, we annually assess, since �00�, environmental impact through the use of Agro-Eco-Index. This environmental balance is performed in a segmented way for each agro-ecological area and, in general, through a company’s consolidated report.We measure the environmental impact of our practices using the Agro-Eco-Index system, developed by Ernesto Viglizzo, Agricultural Engineer of the Program of Agricultural and Environmental Management of the INTA (Argentine Agricultural Technology Institute), since we consider that the environment is the place were we develop, and this tool is essential to help us understand the environment.

a) EnergyIndicator �, Fossil energy consumption shows our consumption considering our silo plants. When we did not include such plants in the balance, the indicator was in the green area. Our intention is that the consumption of these plants changes, improving consumption, changing this energy source for a cleaner one.

b) Emissions, Spills and WasteIndicators � to 7 and �0-�� are related to Emissions, Spills and Waste Section.

In the case of Indicators 3 (Nitrogen Balance) and � (Phosphorus Balance), they show an imbalance both for Nitrogen and Phosphorus; we try not to harm the environment with their excessive use but we have not achieved a neutral balance. We intend to adjust this parameter so that the multiannual balance is more balanced.

Indicator 7, Contamination risk by the use of plaguicides is in red. This is because of the use of organo-phosphorus pesticides to control

5.2 Environmental Performance Indicators



the soybean stem borer. While it is a commonly used and approved pesticide, our intention is to change it in the next period for another pesticide with a lower environmental impact.Indicator 11, Balance of greenhouse gases. This indicator is bad due to the feet lot effect, since the animal concentration makes urine and feces, measured as methane, increase this indicator. This only occurs in a field located in the central region.

c) WaterIndicator 8, The risk of Hydric and Hydraulic erosion has green light.

d) BiodiversityWe have long-term agreements, which allow us to apply crop rotation, direct sowing and nutrient multiannual balances. We perform an integrated plague control where beneficial fauna is respected, the impact of different herbicides is assessed and crop diseases are monitored. We promote and

encourage the use of conservationist practices such as direct sowing (AAPRESID – Argentine Association for Direct Sowing Producers).

e) Products and ServicesIn July 2004, we signed a master agreement with the Program for the Collection and Final Disposal of Agrochemical Containers named “Agrolimpio”. Grupo Los Grobo was the first company to join such program.The Agrolimpio Program is implemented by the Chamber of Agricultural Health and Fertilizers (CASEFE) and sponsored by INTA – ArgenINTA, SAGPyA, Provincial Governments, Municipalities, Producers Associations, NGOs, UATRE – OSPRERA Cooperatives and Professional Associations.The goal of the Agrolimpio Program is to collect all empty containers that have been rinsed three times and render them useless for reuse; they are stored in three stocking centers intended for such purpose: Guaminí (Ruta 33 and acceso

Guaminí), Francisco Madero Plant (Ruta 5 km 383) and Plant 2 (Carlos Casares, Prolongación Av. 9 de Julio). After storing, the program grinds those containers. Periodically, grinded containers are collected to be delivered to recycling centers.During the last year the Agrolimpio Program has collected 121 tons of containers: 9% (1350 TN) of the total plastic volume that the agrochemical industry consumes annually in our country. We have contributed with the collection of 4 tons of containers between July 2004 and April 2006.In the 2004/2006 period we have collected 75 TN of empty silo bags. They are used to store cereals in the fields. Once cereal is extracted, the silo bag is waste. To avoid future land contamination, they are collected and delivered to a vendor. These bags are cut in 1 x 2 meter strips, washed, dried and grinded to be reused in waste-type coils.

Facility Los Grobo Agrop.Owner LGYear of assessment 2004

Indicator 0

Indicator 1

Indicator 2

Indicator 3

Indicator 4

Indicator 5

Indicator 6

Indicator 7

Indicator 8

Indicator 9

Indicator 10

Indicator 11

Percentage of annual crops

Consumption of fossil energy

Use efficiency of fossil energy

Nitrogen BalanceIndicator 4

Phosphorus Balance

Contamination risk by Nitrogen

Contamination risk by Phosphorus

Contamination risk by plaguicides

Eolic and hydric erosion risk

Environment intervention risk

Carbon stock change

Greenhouse gases balance

%

Mj/ha/year

Mj EF/Mj Prod.

kg/ha/year

kg/ha/year

mg/l

mg/l

Relative Index

ton/ha/year

Relative Index

ton/ha/year

ton/ha/year

Phone 02395-459022Predominant Prod. AgriculturalAssessed Period 2005/2006

District CONSOLIDADOProvince Buenos AiresEcoregion Pampa Ondulada - Bs. As.

71.986

12.752.744

0.243

-1.184

-2.084

0.000

0.000

1.772.625

5.197

0.016

0.007

105.739

Figure: Agro-Eco-Index Indicator Results as of 2006

Agrolimpio Program

Collection in Argentina GLG Collection % GLG

�� tons � tons 3%


a) Average Number, Distribution, Sex and Age

Cantidad de Personas: 256Trabajadores Permanentes: 198Trabajadores Temporarios: 43Pasantes: 15

Distribución de las Personas:LG Agropecuaria: 163LG Servicios: 25Chain Service: 10LG Inversora: 57

Composición por Género:Mujeres: 25%Varones: 75%

Edad Promedio:34 años

b) Seniority

Seniority Average: 2 years

c) Company/workers RelationsThe organization encourages productive conversations and multiple ways for feedback. It adopts the VERO system, which proposes that conversations should be about veridical (V), specific (E), relevant (R) and opportune (O) facts. It individually assumes that everything is made by choice (not by imposition) and is totally committed to it.

d) Fatal VictimsThere have not been fatal victims

e) Safety and Health

Causes: 652Art (Occupational Risk Insurer): 113Diseases: 241Without justification: 58Examination leave: 18Maternity leave: 180Marriage leave: 30Working accident: 12

Lost Days

Art (Occupational Risk Insurer)DiseasesWithout justificationExamination leaveMaternity leaveMarriage leaveWorking accident

YearAccidents Type of accident Treatment Classification

Total With Leave Average Leave Days

% Leave - Without leave

Accid In Itinere Prof. illness In commission

Reaggravating cases.

Ambulatory Hosp. Minor Serious Moder.

�005 3 3 �� 00% 3 0 0 0 0 3 0 3 0 0

�006 � 7 �5 77,7�% � 0 0 0 0 � � 5 � �

Total 12 10 36 83,33% 12 0 0 0 0 11 1 8 1 2

5.3 Social Performance Indicators

Work Practices and Decent Work



YearAccidents Type of accident Treatment Classification

Total With Leave Average Leave Days

% Leave - Without leave

Accid In Itinere Prof. illness In commission

Reaggravating cases.

Ambulatory Hosp. Minor Serious Moder.

�005 3 3 �� 00% 3 0 0 0 0 3 0 3 0 0

�006 � 7 �5 77,7�% � 0 0 0 0 � � 5 � �

Total 12 10 36 83,33% 12 0 0 0 0 11 1 8 1 2

Incidence with leave (*) Capita Months

Average(**) �,�3% �0� ��

Market Average (**) ��3�7 ��,��%

Exposed capitas �666

Nature of injury Incidence

(0�) Cutting injuries �,33%

(03) Internal trauma �6,67%

(0�) Twist and sprain �,33%

(05) Foreign body in eye �,33%

(06) Fractures �,33%

(07) Excoriations 0,00%

(0�) Stab wounds 0,00%

(0�) Burn injuries 0,00%

(�0) Other injuries 50,00%

Causing agent Incidence

A00 Building elements of the work environment

�,33%

B00 Comp. Inst. of work environment

66,67%

C00 Materials and/or Elements used at work

�5,00%

D00 Chemical or bilogical agents

0,00%

E00 Termhydrometric factors 0,00%

F00 Physical factors 0,00%

0%

10%

20%

30%

40%

50%

60%

(02) (03) (04) (05) (06) (07) (08) (09) (10)

Type of Injury

Inci

den

ce

0%

10%

20%

30%

40%

50%

60%

70%

A00 B00 C00 D00 E00 F00

Type of Agent

Inci

den

ce

Nature of injury

Spine and thorax 8,33%Spine 8,33%Neck 0%Thorax 0%

Abdomen and pelvis 8,33%Abdomen and pelvis 8,33%

Legs 41,67%Thigh 16,67%Leg 8,33%Foot 8,33%Knee 8,33%Ankle 0%

Head 8,33%Eyes 8,33%Skull and scalp 0%Face 0%

Arms 16,67%Shoulder 8,33%Arm and elbow 8,33%Forearm and wrist 0%Hand 0%Fingers 0%

Other 16,67%Other 16,67%Without classification 0%

(*) Incidence =

Accidents

Average exposed capitas.

(**) AAnnualized. Does not include reaggravating cases

Memoria y estados contables 2005/06 ��


f) Training Program

Number of Courses

Hours per person dedicated to Training (*)

Persons

u$s Invested (**)

1526437

18445.181,99

(*) Formed by Integration Workshop Hours, Inter-nal Workshops such as Oracle Discover for final users, Presentation of the Corporate Volunteering, Videoconference, Negotiation Workshop, Mana-gement Styles, among others.(**) It also includes other expenses, such as trai-ners’ travel expenses.



g) Training

Average Training Timeper Person 32 Hs.

In a general sense, the annual training plan meets the needs presented in the strategic plan. The administration of training courses is performed in the Grobo Management area: talent development, certified under ISO 9001/2000 Standard.

Training courses can be classified according to the specificity degree:• Personal Training: Encourage the

learning of new tools, methodologies and personal skills to add value to a position a person occupies, or to develop a new function (high specificity degree). And training courses that aim at developing skills and abilities. In the last category, the organization includes all persons regardless of their position. Among them, the development of skills such as team management, leadership, time management, etc.

• By business units or areas: Specific trainings in subjects related to the competence area for the whole work team. For example, courses with the Stocking Center about updates of legal, financial documents, reception etc. Or training courses in skills that we need to improve in a specific area, as detected in the performance review. For example, a business course for the stocking area, resulting from the 2005 review.

• To the entire company, network and open to the community: Trainings are organized to meet market needs, or to deal with topics of general interest, for instance, the agribusiness postgraduate course of FAUBA. This is the second consecutive year that this course is delivered in our offices of Carlos Casares, videoconferences with Harvard or with the Cardiovascular Institute, together with Fundación Emprendimientos Rurales Los Grobo.

We measure the impact of trainings by following a predetermined process in which the first step is when the manager informs course achievement expectations to Talent Management and to those people that will be trained.

In a second instance, after the training, people send us a report where they evaluate the course and the manager informs us the impact of the training on employees’ performance. This allows us to evaluate the quality of the training, the effectiveness of achievement expectations and the pertinence of repeating the course for other persons.Training courses are delivered by well-known consultant companies, educational centers, and different business units, for example, the stocking sector opens a course on futures and options to company members interested in such topic.

h) Training by Level

Mandos MediosGerentes y directivosResto del equipo

60%25%

15%

i) Talent ManagementOur commitment is to watch for the development of people and their environment, by offering them the best place, clear rules, transparency, personal development opportunities, etc. This is part of our RSE (Corporate Social Responsibility) strategy aimed at the welfare of people forming the company.The Ministry of Labor, Employment and Social Security of the Argentine Republic has selected Grupo Los Grobo SA as a model company for the generation of decent employment.

Staff Selection In Grupo Los Grobo, the selection process meet the growth needs established in the Strategic Plan for each of the business units and/or current needs, for example, breakdown of tasks for excessive labor or the growth of a sector. Talent Management, according to the certification of ISO 9001/2000 Standard, sets forth the recruitment

and integration of staff following four participative procedures that involve different members. They will decide by consensus and using different tools the incorporation and rotation of people in the presence of an actual need. Procedures are Recruiting, Selection, Interview and Hiring. During the recruiting process, the Manager of the business unit or area, together with Talent Management, define the position to be occupied and the profile and the Competence Map is weighted (18 common competences that meet the need of our business).After the profile has been designed, the Talent Management area is responsible to carry out the selection of applicants.Each person incorporated to the Organization attends the integration workshops, whose goal is to develop basic skills about the business environment, training talents through the analysis and discussion of the mission, values, history, culture and diversity of Grupo Los Grobo. Training courses are established through the “Annual Training Plan”, where we add specific training courses requested by managers for their teams, or by the staff own initiative, according to the technical skills or competence that people should learn. This way, Talent Management, aligned to the knowledge paradigm of society, defends constant and planned training according to market needs and the introduction of best practices, in order to look for the continuous improvement of people and the organization. As regards the education level of people, we have 42% of people with a university or college degree, and a high percentage of this group has postgraduate diplomas.

People SatisfactionWe have measured consecutively for two years the satisfaction degree of employees through the Work Environment Poll, and during 2005 we performed it with Great place to work, an institution specialized in the measurement and analysis of work environment in companies. The global result showed a 73% of employee satisfaction.Consequently, to investigate critical indicators, the company generates


dialogue spaces in all its levels. All members of the company participate in them (presentation of the strategic plan, review of the company’s vision and mission, etc.), focus group techniques, where people talk about common problems and propose plans to improve. In the case of distant branches or stocking plants, such as auditing, systems and Talent Management, among others, they gather information and transfer Management tools to people for their implementation and for policy alignment.

All the information gathered and the possible action plans, proposed in the work environment poll, and in the analysis of critical variables, is used to generate specific plans that aim at a continuous improvement and enhancement of satisfaction and motivation standards of all people involved in the organization. For example, as regards internal

communication, spaces have been institutionalized to ensure managers can communicate or transmit the company’s short and long term guidelines. At the same time, thematic committees have been created (events, quality, corporate, etc.) that are formed by people of different business units or sectors.

j) Diversity and Opportunity

Executive directorsMale 2Female 2

Corporate managersMale 3Female 2

Operative managersMale 9Female 2

Juan Goyeneche

SAC P.C.G.

Auditoría

RSE

Rel. Instit.

TalentosSistemas

LGI INDSGR

LGSLGA

Fideic.

ProsemeCS

Andrea Grobo Gustavo Grobo Paula Marra

DIRECTORIO

PRESIDENTEAlejandro Stengel C. Echeverrygaray

Masculinos Femeninos

0

0,5

1

1,5

2

2,5

00,5

11,5

22,5

33,5

0

2

4

6

8

10

Directores ejecutivos

Gerentes corporativos

Gerentes operativos

Total women in executive or management positions

30%

70%

Masculinos Femeninos


Human Rights

The group has recently joined the Global Compact.http://www.unglobalcompact.org/ParticipantsAndStakeholders/search_participant.html

k) Adherence to the Global Compact

The value chain subscribes to the ten Principles of the Global Compact, which are explained below:

Human Rights Companies should:1. Support and respect the

protection of human rights2. Do not support abuses to rights

Working Conditions Companies are requested to:3. Support freedom principles for

trade unions and the right to collective bargaining

4. Eliminate compulsory and forced labor

5. Abolish any type of child labor6. Eliminate discrimination in

employment and labor

Environment Companies are requested to:7. Support the preventive approach

related to environmental challenges

8. Promote a greater environmental liability

9. Encourage the development and promotion of environmentally-friendly technologies

Corruption10. Companies should act against

corruption in all their forms, including extortion and bribery.



Society

l) CommunityActivities are carried out from Fundación Emprendimientos Rurales Los Grobo developing programs aiming at generating a social capital in towns of the interior of the country, aiming at articulating a network that comprises long-term commitments and the creation of dialogue spaces and collective construction, with public agencies, companies, NGOs and public organization. Today, four programs are under implementation: POTENCIAR, Corporate Volunteering “Solidarity and Responsibility”, Enterprise Incubator and we support the School for Young Entrepreneurs, today CEA No. 17 of Carlos Casares.

1. POTENCIAR Program: Tries to comprehensively deal with the problems of educational institutions of the province of Buenos Aires, established in towns with no more than 20,000 inhabitants. Admission is through a contest for institutional projects aimed at crystallizing and encouraging PEI (Institutional Educative Projects), therefore the program name. The Foundation contributes with financing, counseling and follow-up, technology support (PCs, Internet, audio and video), trainings. The awards include the painting donated by BASF Argentina to embellish the building, bibliography and training courses given by Editorial Troquel.

This program intends that selected institutions receive during one year the highest and best quality of contributions to improve in a centered and sustainable way the objective situation before having access to the program.

2. Enterprise Incubator: CDI schools, promoted through the CDI Foundation, work for the social inclusion of people with low income by means of their digital inclusion. People learn computing systems and citizenship by developing and implementing social, institutional or production projects, using the PC

as a tool. Therefore they learn to use available technologies and at the same time they generate a collective construction and dialogue space.

Through the CDI Foundation and Microsoft, the Foundation for Rural Entrepreneurship (Fundación Emprendimientos Rurales) will set up 3 schools: one in Carlos Casares, one in Saladillo and another one in the mill the company has in Chivilcoy. They are located within our Enterprise Incubator program, since after two years of support, the CDI centers should be self sustainable and self managed, becoming a mini PyME (small and medium-sized companies) of instructors and coordinators, who are also trained to professionally carry out their function.

3. School for Young Entrepreneurs: This school came up as a Foundation’s initiative; today, it is a public school. Its purpose is to foster the entrepreneur spirit of young people. Students attend voluntarily in a shift different from their formal studies and the duration of the course is 3 years. During this time, students learn to start productive, service, social or environmental entrepreneurships, and they put them into practice. This school is formed by Corporate Volunteering, since company specialists, for instance marketing, are the ones that give classes about product design, logo and trademark among others.

We wish to generate a space where young people may use their imagination and their desires to carry out their ideas, working in teams and with social commitment.

The Foundation has a procedure manual that includes the procedures performed during one year to manage their programs, communication and promotion policies, the strategy for alliances and participation, and improvement plans.

We measure our actions using a scale that allows us the selection of projects presented to the contest, and then we compare the results of their implementation. Criteria used: Social impact, innovation degree of projects to solve social problems, replicability

potential, sustainability and self management, budget, consideration and alliances or articulation.

4. “Corporate Volunteer Program: Solidarity and Responsibility”:

It aims at decentralizing the actions of the foundation, thus extending the action area and promoting that the members of the Network (employees, vendors, clients, family members, etc.) decide and involve directly in private social investment. Volunteers detect community needs, design and manage projects, put them into practice and they are the link between the Foundation and beneficiary institutions.

• Alliance strategy, collective construction of social capital and participation in dialogue spaces and knowledge exchange:

We foster participation in discussion forums, corporate organizations, universities, programs and projects of other civil society organizations and in the design and implementation of public policies.

Alliances with other civil society organizations, companies and the public sector:

• HSBC (Support to the School of Young Entrepreneurs), BASF Argentina, CDI Foundation, Banco Galicia Foundation, Editorial Troquel, Hermanos Roca Foundation (Joint development of the Potenciar Program).

• Ministry of Education, Culture and Labor.

• Social Universal Forum – Members of Foundation Groups – Argentine Contacts –

• Series of videoconferences with the University of Harvard, and about health and prevention with the Cardiovascular Institute.

Gustavo Grobocopatel is Director of the following institutions: AAPRESID – ASAGIR – FAUBA – AEA -UTDT – Bioceres – AACREA – IDEA – INDEAR.At a local level, shareholders have a recognized participation in institutions such as the Rotary Club and the Israelite Society of Carlos Casares.

2005/06 Annual Report and Financial Statements �5 Memoria y estados contables 2005/06 �5


m) CorruptionThe hiring policy is established in the ISO processes that we have certified, since we categorize them according to their critical and alternative nature and they have a quality Standard and a follow-up process.It makes a special emphasis on training courses to different vendors in order to help them to formalize their organizations. As of this year, they are informed about and sign the Global Compact form. Furthermore, they are audited not to digress from the principles..

n) Political ContributionsIt actively contributes with the Center for the Implementation of Public Policies for Equity and Growth (CIPPEC). Such institution establishes measures to improve the state of the educational, health, fiscal, political, judicial and public administration systems, detecting needs, opportunities and obstacles to implement better public policies. It also provides counseling to the government and promotes the best practices, directly participates in the design and implementation of new public policies that contribute to a better performance by the Government.

o)Ethical Code (Intended for to employees, collaborators and network members)We are economically sustainable; we generate profitability based on the lowest costs, using state-of-the-art technology and the best business proposals, and through the development of long-term relationships.We are environmentally responsible; we take care of the planet by using and promoting production systems that provide the best performance and increase land value and its productive capacity.We have Corporate Ethics of social responsibility. An open company to an open society.We are clear and honor our obligations.

We respect labor and workers, both material and intellectual work, because it dignifies people and it constitutes a means to satisfy their needs.We always have in mind that workers are the most valuable resource of the company, inclined towards the improvement of their intellectual level, enhancement of their living standards and family group.We are discrete based on a conduct standard, about all our operations related to their professional exercise, unless we have authorization from the parties involved to disclose information.We hold those positions for which we are properly trained and we try that results translate into benefits for those of us who provide services and that such benefit has an effect on the society where we live.We generate a reasonable work environment, watching for the health and safety of our staff.We respect rules in forces (fiscal, labor and commercial rules)We actively participate in the development of local communities where we act.We train people in our network, increasing their “employability”.We promote innovative forms of association with clients, vendors and institutions. This allows us to develop individual capabilities for the benefit of the group. Los Grobo and their network members have grown together through innovation and cooperation.We have high quality standards.We generate fluent communication and consistent information, and we develop environments of knowledge generation for our interest groups.We are aware that we are going through a common path that we all share, providing to the network all our capacity and knowledge, trying to obtain the best results. (Network Manual of Grupo Los Grobo)Self-evaluation and continuous improvement of the commitment arise from management processes. Especially from internal audits of Talent

Management processes and from the possibility to participate in different awards that expose our company to external opinions and comparisons.

Product Liability

p) Products and Services The activity that we perform and that entails the labeling of products is the production of seeds, and we comply with the dispositions of INASE (Argentine Seed Institute). Certification process: The National Certification of INASE is a system that consists in an official control process either direct, or, through agreements with other provinces or public institutions and also through the accreditation of technical trained inspectors granted to agricultural professional experts with a university degree, that exercise their profession within a private scope. Said process starts by checking the origin of the seed to be sown, continues with the inspection of production lots; of the harvest and ends with the conditioning; packaging and labeling of the final product, i.e. the supervised seed. This type of seed is visually distinguished from the identified seed, due to the presence of the packaging, an official label or stamp adhered to the particular label that states that the content of said package belongs to the indicated type of seed. The final recipient of such type of seed, generally, is the Argentine agricultural producer. Furthermore, supervised farms and seedbeds perform deliveries to other national supervised seedbeds, that carry on with the multiplication scheme of different categories and that, at the end of the process, arrive to producers as main input for their production. On the other hand, pursuant to market demand, export seed operations are also performed; such seeds are certified under this system.


Other Data of Interest

q) Award to the Socially Responsible Entrepreneur (1)

On October 18, 2006 Grupo Los Grobo received an award, with other 10 companies and based on 83 works presented, in the fifth Award to the Socially Responsible Entrepreneur organized by the Social Universal Forum.The Forum is a civil non-profitable association, presided by an internationally known personality, the French theologian and political scientist, Jean-Yves Calvez. In addition, it is formed by recognized NGOs leaders, company managers and members of different religious orders, focused on a common subject: Corporate Social Responsibility. The work presented to the contest was called “Path to the Fourth Sector” and outlines the integrated strategy of the RSE of the company, on topics such as relation with the community and local development improvement, environmental sustainability, knowledge management, programs to foster the value chain and personal skills, among others. The Program wants to align RSE actions with the purpose of Grupo Los Grobo to become a social and competitive company that is proactive in the development of the Argentine fourth sector, incorporating in a conscious and planned way the best practices of the RSE in all their processes, sectors and business units. (1) For more information: http://www.foroecumenico.com.ar/premio06.html



Rute 5 Km. 309. Carlos CasaresProvince of Buenos Aires, ArgentinaPhone: 02395-459000 rollover [email protected]

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