Annual Report Sustainable Development Report … uk... · Annual Report Profile, ... Though...

Annual Report Sustainable Development Report

Summary

2005|

05|

Annual ReportProfile, Key figures_01 • Chairman's message_02

Financial information_04 • Stockmarket information_08Corporate governance_10 • A Changing sector_12

International expansion_14 • Marketing strategy_18 Being competitive_22

Sustainable Development ReportPrinciples_28 • Corporate responsibility_29

Shareholder relations_30 • Client and Supplier relations_31Civic commitment_32 • Environment_33

Priorities_34 • Sharing income_36Management bodies_37

Ope rati n g marg i n s t a b l e€2,463million

S a l e s + 7 . 6 %

€262million

14,400Em ploye es worl dw i de 3 1 . 1 2 . 0 5

N et i n c om e – 2 1 %

€103million

€419millionFi nan c ial de bt 3 1 . 1 2 . 0 5

Present in French homes for more than 50 years, we have gradually extended our sphere of action around the world.

With a rich portfolio of powerful brands

and the market's most extensive product offer,

Groupe SEB is today world leader in small domestic equipment.

Our success is due chiefly to our ability to innovate

and invent for your day-to-day life in tomorrow's world.

Your world is our world

STRATEGIC BUSINESS AREAS

COOKWARE: frying pans, saucepans, casseroles, bakeware, oven dishes, pressure cookers, low-pressure steam pots, kitchen utensils...ELECTRICAL COOKING: deep fryers, table-top ovens, barbecues, informal meal appliances, waffle makers, meat grills, toasters, steam cookers...FOOD AND BEVERAGE PREPARATION: food processors, beaters, mixers, blenders, centrifugal juice extractors and small preparation equipment,

coffee makers (pod, filter and espresso), electric kettles...PERSONAL CARE: hair-care equipment, depilators, bathroom scales, foot massage appliances...

LINEN CARE: irons and steam generators, garment steam brushes, semi-automatic washing machines...FLOOR CARE AND HOME COMFORT: vacuum cleaners (upright or canister, with and without dust bag, compact and cordless),

fans, heaters and air purifiers...

WORLD RANKING

N° 1Cookware • Pressure cookers • Steam irons and steam generators

Kettles • Steam cookers • Food-preparation equipment • Toasters • Electric fryers • Informal meal appliances

N° 2Table-top ovens • Electric barbecues and grills

N° 3Filter and espresso coffee makers

Profile, Key figures

|01

While trading was very favourable

in America and Asia in 2005, your Group faced difficulty

in Europe, and saw contrasting performance which reflected

the general economic climate.

Although Group business suffered badly from continued falling

prices in European markets – still undergoing structural

change – our international operations and recent takeovers

helped us to achieve growth in sales and maintain our

operating margin. In this context, our results are satisfactory.

We continued to differentiate our brands throughout 2005

– a process begun in 2004 – notably with the re-launch of

Krups. In line with our innovation strategy, we launched 180 new

products and models. Group logistics in France were

streamlined to better serve our retail clients. We also went

ahead with adapting our industrial base in Germany and Spain.

Finally, the Group completed its coverage of the cookware

market with the acquisition of Lagostina in the top-range

segment and Panex in Brazil.

All these steps will go on yielding results in 2006, notably with

continued international expansion and active development of

our recent acquisitions: we plan to launch the Lagostina brand

in 26 countries and will expand the Panex product portfolio.

In the current context of undifferentiated products and falling

prices, we are more than ever determined to focus on

innovation by regrouping and reinforcing our centres

of expertise for products and technologies. Over 200 new

products and models will be launched in 2006, giving each

of our brands a complete offer tailored to each type of market.

In this way, the Group's presence is assured in all market

segments. However, it cannot make all these products in France,

in particular certain everyday articles such as kettles, filter

coffee makers and toasters.

|02

Annual Report 05

With consumer behaviour changing

in mature markets such as Europe, and with the gaining

strength of low-cost producer countries, the Group must

continue to adapt in order to guarantee its long-term future

and maintain its position as world market leader.

In consequence, a restructuring plan involving four factories

was announced in January. The plan will affect 890 of the

Group's 7,200 jobs in France. Though painful, this adjustment

to the market is vital for our long-term future. Loyal to the

Group's corporate values, we intend to carry out this plan in the

best possible conditions from a social and human point of view.

The plan will be spread over two years to allow time to find a

solution for every person involved.

There will be no outright redundancies.

The Group is optimistic about its future: it is well armed

to meet the needs of emerging markets where the level of

equipment is still low, and where there is a demand for a better

class of product.

It is also ready to re-launch sales growth in mature markets

with its rich brand portfolio and diversified product offer.

Our optimism is built above all on the outstanding

commitment of Groupe SEB employees and shareholders –

to whom I express my warmest thanks.

Thierry de La Tour d’ArtaiseEcully, 25 February 2006

|03

Chairman's message

Confidentin the future of the Group

|04

financial overview

South America 8%

NAFTA countries 14%

Breakdown of salesby geographic zone

France 24%

Asia and Other territories 26%

Other EU countries* 28%

* Based on 15-member European Union

Net financial debt and gearing

Debt at 31.12 (€ millions)Gearing: debt-to-equity ratioIFRS

404

2001

327

2002

189

2003

331

2004

331

2004IFRS

0.8 0.6 0.3 0.5 0.5419

2005IFRS

0.5

468

2001

497

2002

506

2003

597

2004

596

2004IFRS

15.8 23.7 29.3 20.6 21.9689

2005IFRS

14.9

Return on shareholders' equity

Shareholders' equity at 1 January (€ millions)Return on shareholders' equity (%)IFRS

|05

Financial information

Group consolidated resultsCONSOLIDATED INCOME STATEMENTAt 31 December

(in € millions)

Revenue

Operating expenses

OPERATING MARGIN

Discretionary and non-discretionary profit-sharing

RECURRING OPERATING PROFIT

Other operating income and expense

OPERATING PROFIT

Finance costs

Other financial income and expense

Share of profits (losses) of associates

PROFIT BEFORE TAX

Income tax expense

Minority interests

PROFIT ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT

2005

IFRS

2,462.9

(2,200.7)

262.2

(29.3)

232.9

(49.2)

183.7

(17.6)

(7.6)

(1.1)

157.4

(54.6)

(0.1)

102.7

2004

IFRS

2,288.7

(2,027.8)

260.9

(34.2)

226.7

(40.0)

186.7

(8.1)

(4.4)

-

174.2

(40.9)

(2.5)

130.8

CONSOLIDATED BALANCE SHEETAt 31 December

ASSETS(in € millions)

NON-CURRENT ASSETS

Inventories

Trade receivables

Current tax assets and other receivables

Cash, cash equivalents and derivative instruments

CURRENT ASSETS

TOTAL ASSETS

2005

IFRS

848.6

449.8

630.3

86.6

53.5

1,220.2

2,068.8

2004

IFRS

750.5

386.0

552.0

52.0

40.4

1,030.4

1,780.9

EQUITY AND LIABILITIES (in € millions)

EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT

MINORITY INTERESTS

EQUITY

Long-term borrowings

Provisions and other non-current liabilities

NON-CURRENT LIABILITIES

Short-term borrowings and derivative instruments

Trade payables

Other provisions and current liabilities

CURRENT LIABILITIES

TOTAL EQUITY AND LIABILITIES

2005

IFRS

801.3

1.2

802.5

104.3

228.1

332.4

368.0

303.7

262.2

933.9

2,068.8

2004

IFRS

686.4

2.4

688.8

18.6

180.7

199.3

352.3

298.3

242.2

892.8

1,780.9

Comments on the financial statements

SalesGroupe SEB sales for 2005 amounted to

€ 2,463 million, up 7.6% at current exchange rates and by 4.9%

at constant parity. These figures include a €102 million

contribution from recently acquired companies (All-Clad for

12 months – against 5 in 2004 – Lagostina for 8 months and

Panex for 7 months), as well as a positive exchange effect

of €58 million (after three years negative) and 0.6% organic

growth (for constant structure and exchange rates).

The Group saw sharp contrasts in the overall trading

environment in 2005. In Europe, sales were affected by the

rising influx of very cheap products from Asia, which led to

increased pressure on prices and margins. However, in North

and South America and in the other countries, Groupe SEB

made rapid progress thanks to its strategy of international

expansion and reinforcement of its presence in existing

markets. Meanwhile, we returned to growth in the United

States after three difficult years, while we continued to make

inroads in Latin America, bolster our positions in the CIS

countries, Japan, South Korea, Central Europe and Australia,

and accelerate our expansion in new markets such as Thailand,

China and Singapore.

Trading resultsThe 2005 operating margin (based on IFR Standards)

stood at €262 million – virtually the same level as in 2004.

For constant structure (excluding a €6 million contribution

from recent acquisitions), the figure would have been

€256 million. This is explained by eroded profits on our

European sales due to downward pressure on prices caused

by growing competition from cheap Asian products (especially

in certain banalised ranges) and the gaining strength and

geographic spread of discount chains promoting cut-price

products.

|06

CHANGE IN THE OPERATING MARGIN (OM)(€ millions)

2004 OM

261

2005 OM

262

+ 20

Volumesales

Productmix and

price

Purchasecost

- 18

- 10- 6

+ 6+ 9

Overheads Acqui-sitions

Currencyimpact

On the other hand, a €10 million rise in purchasing costs linked

to higher prices for some raw materials was almost wholly

offset by a €9 million exchange gain.

Operating profit before financial expense stood at

€184 million, down by 1.6%. A €5 million drop in bonus and

profit-sharing was cancelled out by a €9 million rise in 'Other

income and expense'. The latter included €60 million in

restructuring charges (mainly concerning Germany and Spain),

as well as provisions for depreciation of fixed assets related to

the announced 2006-2007 French industrial restructuring plan.

At €103 million, Group net income fell back from

its level of €131 million in 2004 (IFRS). This drop was due to

a twofold rise in net financial expense (€-25 million in 2005,

against €-12 in 2004) linked to the recent acquisitions, and to

a higher tax level because the Group did not benefit from

tax-loss carryforwards as in previous years.

In the balance sheet, Group shareholders' equity

at the end of 2005 stood at €802 million, and the level of debt

was €419 million. The €88 million year-on-year rise in debt was

due mainly to the 2005 acquisitions of Lagostina and Panex,

and to a lesser extent to a higher working capital requirement.

With a ratio of net debt to shareholders' equity at 0.52 (0.48

at the end of 2004), the financial situation of the Group

is healthy and solid.

|07

Financial information

AcquisitionsA year after the acquisition of the American company All-Clad, Groupe SEB added to its fund of expertise and reinforced

its position in the cookware market by taking over Lagostina in Italy and Panex in Brazil.

Lagostina is Italy's market leader in mid-range and top-range cookware (including saucepans, casseroles, frying pans

and pressure cookers) and is known for its industrial expertise in bonded and stainless steel. A front-rank cookware

brand in France, Canada, the Benelux countries and Taiwan, this company is currently expanding in China, Hong Kong

and Japan.

The takeover of Lagostina makes Groupe SEB world leader in premium quality cookware.

Founded in 1948, Panex is Brazil's market leader in cookware, and sells locally-made frying pans, casseroles, saucepans

and pressure cookers. The takeover of Panex establishes the Group in Brazil's cookware market and opens an

opportunity to expand in the other Mercosur countries.

With Arno and Panex, Groupe SEB is now a major force in the small domestic equipment market in South America.

Seb share overview

|08

Breakdown of capital

at 31 December 2005

Foreign investors 13.5%

FFP 5.1%Employees 4.2%

French institutional investors 23.1%

Founder group* 43.2%

Treasury stock 4.4%

French private shareholders 6.5%

Renewal of the shareholder agreementIn November 2005, the family shareholders making up the Founder group of SEB SA signed a new shareholder

agreement, which replaced the previous one (signed on 7 November 1992 and renewed in November 1997).

In this agreement, they confirmed their intention to support the company in its long-term development and ensure

the stability of the Groupe SEB shareholder base.

The four-year agreement, renewable for identical periods, is organized around two usufruct shareholder companies

which jointly make up the reference shareholder group: FÉDÉRACTIVE, a shareholder investment company,

and VENELLE INVESTISSEMENT (formerly ACTIREF) a family shareholder company.

* Joint reference shareholders: FÉDÉRACTIVE (a shareholder investment company) and its members for 22.86%, and VENELLE INVESTISSEMENT (a family shareholder company) and its members for 20.38%.

Breakdown of voting rights

at 31 December 2005

* Joint reference shareholders: FÉDÉRACTIVE (a shareholder investment company) and its members for 31.49%, and VENELLE INVESTISSEMENT (a family shareholder company) and its members for 28.37%.

Foreign investors 9.6%

FFP 3.6%

Employees 5.0%

Founder group* 59.9%

French private shareholders 5.6%

French institutional investors 16.3%

|09

Stockmarket information

Average daily share transactions in 2005

For the second successive year, the SEB share

performance varied both in price and volume traded.

It nonetheless maintained its upward trend in 2005: +9% in

the first six months and +16% over the whole year (closing at

€92 on 31 December 2005). Publication of satisfactory sales

figures and increased results for 2004 helped to raise the

share price in the first quarter. In the second quarter, a dull

economic context put markets on hold, and the SEB share

remained in line with the CAC 40 index.

In the second half of 2005, the share recovered

gradually to reach a closing high of €92.55 on 23 and

27 December. This recovery was helped by the announcement

of half-year and nine-month sales.

Early in 2006, publication of sales figures for 2005

hoisted the share to a new peak of €98.15, before falling back

at the end of January after the Group's announcement

on 24 January of its plan to restructure its industrial base

in France. Since then, the share has stabilized at around €89.

Stockmarket capitalization at 31.12.2005: €1,562 million

Diluted net income per share and distributed dividend (€)

Net income per share

Net dividend

2001

4.59

1.82

2002

7.25

1.96

2003

9.06

2.27

2004

published

7.57

2.40

2004

IFRS

8.02

2.40

2005

IFRS

6.27

2.40*

50,000

45,000

40,000

35,000

30,000

25,000

20,000

15,000

10,000

5,000

0

4,500

4,000

3,500

3,000

2,500

2,000

1,500

1,000

500

0J|2005 F M A M J J A S O N D J|2006

SEB share price

110

105

100

95

90

85

80

75

70

65

6028.02.2006First quarter 2005 Second quarter 2005 Third quarter 2005 Fourth quarter 2005

* Dividend proposed to the AGM of 11 May 2006.

CAC 40 adjustedSEB share (€)

Average volumeAverage capital

(€ thousands)

27,6162,308

19,9071,733

21,7311,835

28,5442,320

21,5821,799

22,4991,946

26,3702,209

18,6471,627

17,0431,535

21,2921,870

15,1151,331

19,7111,790

43,9884,042

|10

Thierry de La Tour d’Artaise

Founder group – Aged 51

Chairman and Chief Executive Officer of SEB SA since 2000

Number of SEB shares held: 14,821

Tristan Boiteux(a)

Founder group, member of FÉDÉRACTIVE – Aged 43

Member of FÉDÉRACTIVE Advisory Board


Damarys Braida

Founder group, member of VENELLE INVESTISSEMENT

Aged 38 – Joint Manager of VENELLE INVESTISSEMENT


Pascal Castres Saint Martin

Independent Director – Aged 70

Number of SEB shares held: 385

Norbert Dentressangle(a)



Philippe Desmarescaux(a)



FÉDÉRACTIVE(a) (b)

Shareholder investment company created in 2005, represented

by its Chairman, Pascal Girardot (aged 50) member of the

Founder group.

Number of shares held: 3,096,074

Hubert Fèvre


Member of FÉDÉRACTIVE Advisory Board


FFP (société Foncière, Financière et de Participations)

A holding company listed on the Paris stock exchange

and majority-held by the Peugeot family, represented

by Christian Peugeot (aged 52)


Jacques Gairard

Founder group, member of VENELLE INVESTISSEMENT – Aged 66

Chairman and Chief Executive Officer of Groupe SEB from

1990 to 2000.

Member of the Management Board of VENELLE INVESTISSEMENT


Philippe Lenain


Number of SEB shares held: 550

Antoine Lescure



Frédéric Lescure



VENELLE INVESTISSEMENT

Founder group – A family shareholder company (formerly ACTIREF)

represented by Olivier Roclore (aged 51)

Number of SEB shares held: 1,988,156

Jérôme Wittlin

Founder group, member of VENELLE INVESTISSEMENT – Aged 46

Joint Manager of VENELLE INVESTISSEMENT


(a) Renewal to be proposed at the AGM of 11 May 2006.(b) Co-option to be ratified by the AGM of 11 May 2006.

Each Board member is required to hold a number of shares in the SEB SA nominal share register equivalent to about two years

of attendance fees.

Groupe SEB Board of directors

|11

Corporate governance

Real powers of controlGroupe SEB has long applied a system of corporate

governance which respects the interests of its shareholders.

The methods and functioning of the Board ensure

management transparency and real powers of control.

A collective body, the Board of Directors represents all the

shareholders and acts solely in the interests of the company.

On the proposal of the Chairman and Chief Executive

Officer, the Board of Directors decides on Group strategy and

capital expenditure, and deliberates on Group management

structures and acquisitions. To ensure the interests of

shareholders, Groupe SEB Board includes four independent

directors. The Board conducts an annual review of its

functioning.

Organization and functioning of the Board

To assist it in specialist matters, the Board operates

two committees drawn from its members:

The Audit Committee This committee comprises three members, Pascal

Castres Saint Martin as Chairman, Norbert Dentressangle and

Jérôme Wittlin (two of the three members including its

chairman are independent directors).

The committee informs the Board on the identification,

evaluation and handling of the main financial risks to which

the Group may be exposed. It is concerned in particular with

ensuring the conformity of financial reporting methods.

It assists the Board with observations or recommendations,

and participates in the preparatory procedure for appointing

statutory auditors.

The Audit Committee met on four occasions in 2005, with 92%

attendance.

The Nominations and Remuneration CommitteeThis committee comprises three members,

Pascal Girardot, permanent representative of FÉDÉRACTIVE,

as Chairman, Philippe Desmarescaux and Philippe Lenain

(two of the three members are independent directors).

The committee reports on its work to the Board of Directors

and makes recommendations on the makeup of the Board,

on the terms of office of directors, and on the Group's

organization and structures; it also makes proposals to the

Board on policy for the remuneration of executives, as well as

on the introduction of share subscription and purchase option

schemes, and on the terms and conditions applying to these.

This committee met on five occasions in 2005, with full

attendance.

Good practices – adherence to the Directors' Charter and Internal Rules;

– the presence of four independent directors on the Board in 2005;

– directors' term of office limited to four years;

– renewal of Board membership by rotation, to give more say to shareholders;

– high participation: ten Board meetings in 2005 with 89% attendance;

– information: each new Board member is given a full dossier on the Group, and regular detailed

information throughout the year.

Strategic overview ofthe small domestic equipment sector

Some facts about our industryAverage hourly rate in China €0.5

Average hourly rate in France €25

This is a ratio of 1-to-50.

A changing marketOver the last three years, our market has seen a rapid

and profound transformation, marked by three key features:

– convergence, reinforcement and globalization of retail chains;

– store shelves flooded with Asian products;

– a clear polarization of the market between entry-level

products and high-range products, with an equally sharp

divergence in prices.

This polarization of the market, which has already

been described and commented upon by the Group, sharpened

further recently. This was due largely to foreign exchange

parities, and resulted in significant changes to our trading

environment, now characterized by:

– the growing strength of extremely competitive Chinese

manufacturers who supply the entry-level segment;

– a weakening of producers who no longer command the

production chain and no longer design new products that

create added value;

– growth in top-end ranges, which has led to the emergence

of new rivals specialized in niche markets;

– acquisition opportunities for industry operators who pursue

a strategy of innovation, competitive performance, expansion

and good service.

Opportunities to be seized The still-fragmented small domestic equipment

sector has embarked on a phase of consolidation in which

Groupe SEB aims to play an active role. Its powerful brand

portfolio and vast product offer – both unrivalled in the

industry – combined with its global reach and diversity of retail

channels, give it exceptional stability and growth potential

which can be strategically exploited.

Chinese competition is today a structural reality in

our market. It is leading to a shake-up in our industry in which

it is likely that only the fittest will survive. Moreover, recent

market developments show that while the hard discount model

continued to spread in 2005, especially in Europe, it is also

reaching its limits. With prices stabilizing, some hard

discounters are now showing a renewed interest in more

worthwhile branded products to attract customers who

demand quality. Meanwhile, there is a rising demand for

top-range and even luxury products, helped by the growth

of selective distribution channels.

|12

World leader in small domestic equipment, Groupe SEB operates in two different,though complementary worlds: small electrical appliances and cookware.

Both of these worlds involve the deployment of similar expertise and skills.Both are concerned with the relevance and quality of products, brand management,

and a strong command of retail networks. Both bring the Group into close proximity with consumers.All our brands share in your day-to-day life... Your world is our world.

A Group well equipped to winLooking beyond the turbulence of a European market

which is undergoing radical change, Groupe SEB is well

equipped to pursue its long-term strategy while taking full

advantage of medium-term opportunities in the small domestic

equipment market. Its four key strategic priorities – product

leadership, geographic leadership, competitive performance

and client service – are built around a twofold approach:

Rapid and responsive action in taking up these challenges will guarantee the Group's future success

and strengthen its long-term market leadership.

|13

A changing sector

Continue to concentrate the sector and create valueManagement of ranges and brand development

InnovationAdaptation of industrial facilities in Europe and greater use of sourcing

Reduction of operating costsOptimization of client service

Acquisitions to concentrate the sector

Identify and develop new sources of valueExpansion in high-potential economies

Reinforcement of top rangesDevelopment in fast-growth product families

Diversification of distribution and use of alternative channelsCreation or exploitation of new key product categories

Acquisition or creation of new business and development of partnerships

Imports into the European Union from China

(2002-2004)

Hair dryers +42%

Coffee makers +14%

Toasters +50%

Food processors +52%

Meat grills +121%

Breakdown of 2005 sales, by activity

Home cleaning and other products 5%

Food and beverage preparation 25%

Linen care, personal care and home comfort 28%Electrical cooking 15%

Cookware 27%

Plurality Proximity

The 2005 trading year confirmed more than ever that its international dynamic is a key growth driver for Groupe SEB. This global deployment, begun almost 30 years ago,

has given us a solid grounding for our constant drive to reinforce existing positions and conquer new markets.

&

|14

Europe, and in particular France, is the historical home

of Groupe SEB. In today's Europe, we market five international

brands: Krups, Rowenta, Tefal, Moulinex and Lagostina, and

two regional brands, Calor and Seb. Most European countries

are mature markets and, apart from breakthrough inventions,

the Group's European business relies heavily on the product

replacement cycle.

In 2005, the Group's trading in Europe faced a difficult

context marked by slow consumer demand and rising

competition from low-priced entry-level articles promoted

by discount chains and certain hypermarkets. This led to

downward pressure on prices in virtually all European countries.

Europe, Groupe SEB's domestic marketAustria, Belgium, Denmark, Finland, France, Germany, Great Britain, Greece, Ireland, Italy, The Netherlands,Norway, Portugal, Spain, Sweden

• 12 factories (10 in France, 1 in Germany, 1 in Italy)• 22 marketing companies.

your world is

manifold

|15

International expansion

By contrast, growth was confirmed in the top-range segment,

which constitutes a new relay for the development of brands that

create added value. Groupe SEB aims to be a major player in this

segment, and will take full advantage of its expansion.

The BeerTender: a product victory in AustriaIn the wake of its enormous success in The Netherlands,

the BeerTender draught-beer machine took the Austrian

market by storm with 17,000 units sold in just a few weeks.

The BeerTender also helped the sales of other Krups

products, in particular its fully automatic espresso ranges.

As a result, Krups doubled its Austrian sales.

Operating in the United States since 1975 with T-Fal

nonstick cookware, the Group has gradually extended its field

of action over the years. Its long presence and experience gave

it an early insight into the American market, and the fact that

its future potential in the USA lay in strong promotion of

high-range products. Today, the Group has transformed this

potential into reality, with Rowenta as the uncontested leader

in top-range steam irons, Krups as a strong prestigious brand

in coffee appliances, and All-Clad as our specialist in premium

quality cookware. Trading performance in 2005 vindicated our

upmarket strategy in the United States.

Groupe SEB has also been long established in Mexico

where it holds strong positions in cookware and in certain

other product families (including steam irons, electric fryers

and blenders under the Moulinex and Tefal brands).

Trading in Mexico was sustained in 2005. In Canada, Group

sales were achieved mainly with the Tefal and Moulinex brands,

while the Krups brand is being progressively introduced.

North America, a revivalCanada, United States, Mexico

• 3 factories (2 in the USA, 1 in Mexico)• 4 marketing companies.

US

A

A presentation display of Krups and All-Clad collections.

The 2005 trading year once again demonstrated the

enormous potential of South American markets in the small

domestic equipment sector. The Group has been operating for

several years in these markets and is steadily reinforcing its

positions with a structured offer adapted to local needs. It sells

in these markets under three of its international brands, Tefal,

Moulinex and Rowenta, and under three well-known regional

brands, Arno and Panex in Brazil, and Samurai in Colombia and

the Andean Pact countries.

Brazil remains the Group's biggest market on this

continent (accounting for over 75% of its South American sales)

and local economic conditions in the country have been

favourable in the last three years. However, business in 2005

was affected by the revaluation of the Brazilian real, as this

opens the way to imports from Asia – despite customs duty

– and hinders exports. In this more difficult context, Arno

launched a dynamic new product drive backed by marketing

operations and powerful advertising campaigns.

Arno confirmed its leadership of the small domestic equipment

market in Brazil, where its total market share is estimated

at 30%. The year was also marked by the acquisition of Panex,

Brazil's leader in cookware. The integration of Panex is well

under way and the Group plans to quickly exploit synergies

with Arno to achieve new commercial momentum in this

market.

Argentina, Colombia and Venezuela proved by their

performance that they constitute a new springboard for the

Group, which continues to reinforce its positions and increase

its sales. In Chile, a market which is wide open to Asian imports,

and where distribution is highly concentrated, Group sales are

hamstrung by a difficult competitive context. However, future

prospects in this market are not discouraging.

South America, a new eldoradoArgentina, Brazil, Chile, Colombia, Peru, Venezuela

• 3 factories (2 in Brazil, 1 in Colombia)• 9 marketing companies.

|16

Bra

zil

Col

ombi

a

Food-preparation equipment factory in Colombia.

Brazilian advertisingcampaign.

Arno – BrazilThe Brazilian factory makes mainly mixers,

blenders, fans, irons and semi-automatic washing

machines.

|17

International expansion

A very mixed geographic zone which covers both

distant developed countries and emerging markets, the Group's

'Other world territories' now account for over a quarter of total

consolidated sales, against less than 20% three years ago.

Apart from their current sales performance, these countries are

a rich source of medium-term and long-term growth potential.

For this reason, the Group is deploying a strategy of rapid

expansion in these markets, based on the power of its world

brands, on a product offer matched to local needs, on dedicated

sales teams with local links, and on the use of a variety of retail

channels. The Group intends to take full advantage of the

development of these promising territories – often first-time-

buyer or first product-renewal markets – and thus go on

putting down local roots around the world.

Dynamic contributions to the Group's sales growth in

2005 came from Asia (Japan, Korea, Hong Kong and Australia),

the CIS countries and Central Europe – with special mention for

Poland and the Czech Republic. Domestic trading (in local

currencies) remained buoyant in Turkey, while sales really took

off in China, even though they were far short of the targets for

this enormous market.

Other world territories, vast marketsAustralia and New Zealand, the CIS countries, Central Europe, Turkey, the Middle East, Japan, China,South Korea, Taiwan, Thailand

• 3 factories (1 in Iran, 1 in the CIS countries, 1 in China)• 23 marketing companies.

Japan, the strong link in 2005With sales of €75 million, Japan is today one of the ten biggest contributors to Groupe SEB revenues.

Our operations in this country are focused on four major product families:

– T-Fal nonstick cookware, in which Japan is the world's second-largest market in value;

– pressure cookers, where the Group's traditionally solid positions have gained strength in

the last two years following the bankruptcy of a main rival in this market, in value;

– steam irons, with more advances in 2005 and market-share gains;

– electric kettles, where the Group created a new market which literally exploded in 2005 with a virtual

quadrupling of sales.

Kay LIN, SSEAC Commercial Manager

The awakening of ChinaGrowing at a rate of between 14 and 17% a year, the small domestic equipment market in China is in boom. In the major

cities, rising living standards are accompanied by an increasing level of domestic equipment (hi-fi, home electrical

appliances, etc.), as people seek a “Western” lifestyle. This market has very high potential for us. Our priority is to

consolidate an efficient distribution network by, for example, penetrating new channels such as hypermarket chains and

specialist stores, while we continue to expand our operations in China's major cities. With this in mind, we restructured

and strengthened our sales force in 2005. This helped us to build up our relations with regional wholesalers and focus

on mass-retailer accounts and key electrical-goods specialists, while reinforcing our longstanding links with department

stores. This reorganization saw its first fruits in 2005, and sales growth is expected to continue in 2006.

Chi

na

Groupe SEB factory inShanghai.

Groupe SEB has exploited its outstanding brand assets for many years with a clear strategy of differentiation and complementary market positioning. These brands – each with its own personality – spearhead distinctive product

collections which are designed to respond to the multiple needs and aspirations of consumers around the world.

your world is

aspiring

|18

Brand values creation&

• Five world brands– Moulinex, Tefal, Rowenta, Krups and Lagostina.

• Regional brands – T-Fal and All-Clad (North America);– Arno, Panex and Samurai (South America);– Calor and Seb (France and Belgium).

• Two product worlds.

Ambassador brands

The Group deploys a strategy of specialist well-known

brands in each of its product worlds – the worlds of cookware

and small electrical appliances – by exploiting each brand's

complementary strengths. Tefal is the global brand and an

industry benchmark in cookware. An expert in nonstick

coating technology and renowned for the variety and

originality of its offer, it targets its collections on the middle

and upper segments. In addition, in the last two years,

the Group has propelled itself into the high-class cookware

market – first with the takeover of America's prestigious

All-Clad brand, and then, in 2005, Italy's star cookware brand,

Lagostina. With the acquisition of Panex, the Group won

leadership of Brazil's cookware market.

In the world of small electrical appliances, our four showcase

brands – Moulinex, Tefal, Rowenta and Krups – span the entire

market. Each brand's distinctive values appeal to a well-defined

constituency, and each brand's identity inspires its product

catalogue, advertising, design, and targeted positioning

through selected retail channels.

Krups – ‘Prep Expert’

|19

Marketing strategy

The Group uses innovation to demarcate itself from

increasingly bland competition. It raises market standards by

offering new functional features and well-designed collections

of products that stand out for their performance and aesthetic

appeal.

In entry-level products, the Group has won back

the initiative with Moulinex, building up a competitive offer

based on the brand's values: products that are easy-to-use,

rapid, affordable and imaginative. Called the Principio range,

this palette of 18 products has a distinctive and coherent

design identity. Other Group-wide projects are under way to

develop more of these distinctive and economically viable

products.

In middle ranges, the Group's traditional segment,

Moulinex and Tefal enjoy stronghold positions. Moulinex, with

its simple, easy-to-use and efficient appliances, is an expert in

food-preparation aids ranging from mixers, beaters, centrifugal

juice extractors and blenders to the new Adventio food

processor for simultaneous preparation of solids and liquids.

Tefal's targeted approach, which evokes ingenuity and shared

pleasure, is aimed at people who enjoy being involved in

the kitchen. It combines clever storage and bright ideas for

simplifying day-to-day tasks. Its Compact and Combino ranges

designed for modern living conditions have fold-away handles

for easy stacking. Its Color Click electric kettle has a clip-on

colour-change feature, adapting to consumer’s mood.

Its Pro Minute irons and steam generators are instantly at

hand for speedy ironing. Another clever idea is the Eat'N Go

electric plate with a printed-circuit heating element for people

who need to eat where they

happen to be.

In the mid-to-upper ranges, the Rowenta brand

conveys harmony, wellbeing and refinement. The Rowenta

customer demands high-performance products and places a

high value on the aesthetic. Thus, Rowenta's new Focus and

Advancer irons are an ultimate blend of ergonomics, elegance

and advanced technology. A soleplate with 400 micropores

and a special valve system ensure unrivalled steam power.

In floorcare, Rowenta highlights the technical prowess of its

vacuum cleaners: compacity, bagless technology, anti-allergy

and many other benefits. In personal care appliances,

improvements focus on wellbeing: hair dryers with an ionic

function or ceramic heating element for better hair protection,

revolving-head depilators, or digipressure foot-massage

appliances.

In top ranges, Krups – our flagship brand in this

segment – has returned in force to international markets with

truly outstanding products. A big 'coffee year' for Krups, 2005

saw it launch a whole raft of new coffee machines: these

included classic and pod espresso coffee makers and fully

automatic and combination pump machines. Moreover, Krups

plans to launch a new assortment of food-preparation

appliances in 2006. These include an advanced-function

kitchen machine, food processor and blender which are even

more powerful, silent and easy to use, with a weighing function

for certain models.

The Group's cookware offer was considerably

enriched and gained international strength with recent

acquisitions – in particular Lagostina in the top-range

segment, which plans an extensive launch programme in 2006

with four new international ranges aimed at 26 markets.

'Advancer' steam iron

Rowenta

Brands and innovation: a winning combination

Tefal – ’Combino’

Moulinex – ‘Principio’ range

|20

Together, these two modes of expression clearly state

brand values that marry tradition with modern sociocultural

trends.

The language of design – visual and tactile, direct and incisive –

gives the product its voice and its sensorial appeal. Instantly

perceived by the consumer, this affective dimension is a

powerful ally against the growing banality of the market offer.

External designers bring a distinctive approach to each brand.

Indeed, creative design is not just the prerogative of upper

ranges, as demonstrated by the Principio offer from Moulinex,

where design clearly spotlights product benefits.

Advertising and promotion also project the enduring

identity of each brand, while setting the scene for the brand's

product world.

The shape, the mood, the motto, the choice of materials are

the basic building blocks employed to get across the brand's

message. We also devote part of our budget to point-of-sale

promotion, with retail displays, demonstrations and product

stands. The Internet, easily accessible today, is another key

channel for product presentation and information, and is

increasingly appreciated by our customers.

Design and promotion: a coherent language

The Group encounters a wide variety of retail formats

in most of the countries where it operates. These range from

the small neighbourhood store to hypermarkets, mail order

houses, discount retailers and Internet websites. Today, we are

seeing a strong trend to concentration of the world's major

distributors, who have considerable negotiating power.

Meanwhile, we have adapted our distribution strategy to local

trading conditions with, for example, 130 Tefal franchise outlets

in Turkey, 11 Casa Lagostina boutiques spread over several

European countries, telesales operations in South Korea,

and TV “infomercial” programmes in the United States.

In addition to our geographic adaptation, we use a

differentiated approach to distribution channels. Thus, Krups

and All-Clad in the United States serve as flagship brands with

selective, top-quality retailers who are rapidly expanding

and who tend to demand exclusive brands and product

assortments. In hypermarkets, Moulinex, Tefal and Rowenta

position themselves in relation to a retail banner's price and

choice criteria in order to offer adapted ranges. We also pay

close attention to the rapid growth of so-called alternative

channels (i.e., other than the Group's usual outlets): telesales,

Internet shopping, and business-to-business sales.

A differentiated distribution strategy

Casa LagostinaBeing extended throughout Europe, these dedicated sales outlets will number 14 by the end of June 2006. Today, they exist

in France, Switzerland, Germany, Italy and Portugal. They accounted for more than 10% of Lagostina's total 2005 sales, which

was an increase of 30% on the previous year. Casa Lagostina stores attract a clientele that is demanding in terms of quality

and price. The chain is a powerful marketing tool because of its direct contact with the consumer, and the possibility

to demonstrate new concepts and create different product worlds. The Group will continue to open new Casa Lagostina

branches through which it will sell targeted ranges and other products and brands from its portfolio.

A Casa Lagostina sales outlet.

Lagostina – 'Academy'

|21

Marketing strategy

Tefal • Ingenuity and generosity • Design that spotlights functions • Warm colours

• Mass-consumer media • Innovative stance • Slogan: Ideas you can't live without!

‘SuperBlender’ TV spot

Moulinex• Ease-of-use and speed • Simple architecture, trendy, young • Splashes of bright colour • Affordable by all • High-spirited tone

• Quickly done and well done • Vivacious slogan: Its playtime!

'Espressaria' poster

Krups• Precision and perfectionism • Meticulous lines evoking expertise

• Proficiency and ritual

• Emphasis on press advertising • Flagship product • The delight of connoisseurs

• A stirring slogan: Beyond Reason.

'Lissima' TV spot

Rowenta• Refinement and intelligence • Aesthetic status objects • A world of harmony

• Graceful lines • Marriage of materials (mat, powder-coat or lacquer finish)

• Product benefit implied in the advertising message • Slogan: Intelligent Beauty.

'Thermosignal' press advert

Lagostina• Expert kitchen and elegant table

• Tradition and modernity in perfect harmony

• Choice materials and sensorial design • Italian lifestyle

• Art of living • The pleasure of being and being seen.

'Lagostina' press advert

As world market leader, Groupe SEB views its sector and its industry from a global standpoint.Faced with particularly aggressive competition, the Group is responding by adapting

its industrial strategy, structures and product innovation.

your world is

on the move

|22

AnticipationProgress&

Reorganizing,to ensure our long-term business

Unlike most of its rivals who have massively relocated

their production, Groupe SEB operates 12 factories in Europe,

thus showing its desire to maintain strong centres of expertise

in this region while concentrating on three strategic priorities:

– to adapt our industrial base in Europe so that we can remain

competitive in the long-term, by specializing factories to

generate synergy and economies of scale, and by strongly

defending our technological advantage over competitors;

– to expand our competitive multi-product plants, locally based

in international markets;

– to make greater use of sourcing for components or basic

products, so that we can concentrate on our strong point:

innovation.

Meanwhile, we continue to add to our wealth of expertise via

targeted takeovers which bring us mastery in new

technologies. This was the case in 2005 with our acquisition

of Lagostina in Italy and Panex in Brazil.

2005 R&D budget: €45 millionIndustrial patents budget: €7 million450 people, of which 20% in research

|23

Being competitive

Adapting, to face the future with confidence

The Group continued to rationalize its industrial base

in 2005.

In Germany, the Group refocused the Erbach site on mid-range

and top-range irons and simultaneously invested in measures

to improve productivity. In Spain, faced with a long lasting

sharp decline in workload at the Urnieta plant, the Group

decided to cease production and sell the factory to a Spanish

operator who undertook to re-employ part of the staff.

In January 2006, the Group announced a plan to streamline

its industrial base in France in an effort to stem a fall

in competitive performance in certain commonplace products.

This restructuring plan will involve:

– transfer of production of espresso coffee makers from

Fresnay (Sarthe) to Mayenne, some 50 kilometres away;

– the downsizing of the Vernon factory, specialized in home-

cleaning appliances;

– by 2008, termination of operations at the Dampierre (Jura)

and Syndicat (Vosges) plants which currently manufacture,

respectively, kettles and electrical cooking appliances.

This reorganization will allow us to refocus

and strengthen our centres of expertise in products

and components, grouping together R&D, industrialization

and production teams.

Groupe SEB will do everything necessary to support the

890 affected staff and find solutions for each of them by

encouraging internal mobility, by seeking new operators for the

three plants concerned, by supporting efforts to create new

jobs in the local communities, and by offering early retirement

when possible.

Innovating,to guarantee an attractive offer

In addition to industrial rationalization, which is vital

for our long-term future, innovation is a key factor of

development as it helps us to stand out from our competitors

while creating value for consumers and distributors alike.

This is why we pursue an active policy of Research and

Development, which is crucial if we are to stay ahead of rivals

in both industrial processes and products. The Group

distinguishes clearly between these two functions:

– Research dedicated to breakthrough technological

innovation and focused on some 15 key projects;

– Development, based at production sites, which transforms

these new technologies into new products.

With almost 180 new products and models launched

in 2005, Groupe SEB demonstrated once again its market

leader status by challenging its rivals with totally new

functional features and an increasingly attractive offer.

These innovations included a unique super-resistant 'Top Coat'

nonstick cookware coating, the world's first hydraulic control

function for Krups espresso machines, a new motor system for

the Expert food processors, and the protective casing on the

Protect steam generator. This approach to creating added value

guarantees the originality of Groupe SEB, helping it to make all

the difference in the face of an increasingly commonplace

market offer.

MayenneTest laboratory andproduction line for food-preparation equipment.

|24

Protecting inventions,to stay ahead of rivals

The Group pursues an active and interactive policy

of intellectual property protection, for which clear procedures

have been laid down jointly with the research, development

and marketing teams. This policy calls for strict discipline

in recording and centralizing all advances in research.

– Preliminary patent applications: this initial stage

in patent protection involves filing a set of technical

specifications with the French national patents office

(INPI*). This also enables detailed management

of knowledge and skills within the Group. In 2005,

Groupe SEB filed 340 preliminary patent applications.

– Full patent registration: with an annual average of

85 full patent registrations in the last three years,

the Group has documented its inventions and protected

its intellectual property.

The Group also takes active steps to prevent the

counterfeiting of its brands, models and registered patents

in order to guarantee the reliability and authenticity of its

products. In the last few years, the Group increased its efforts

in this area in China, where more than 50,000 articles were

seized in 2005.

* Institut National de la Propriété Industrielle

Controlling costs,to be more competitive

Rationalization of production processes also involves

strict management of costs. The Purchasing department

monitors suppliers and their conformity with the Group's

standards and demands. It has drawn up a panel of

381 suppliers (including 60 Chinese) which account for 85%

of our purchases. The reliability of panel members is regularly

reviewed. Close liaison with its suppliers, who are involved

at an early stage in projects, means that the Group can reap

substantial benefits in terms of quality, delivery deadlines,

rates and conditions of payment.

Despite the increased price of certain raw materials

in 2005, the Group performed well in this area, limiting to 1%

the year-on-year rise in its purchasing index, while it improved

its purchasing conditions in Europe and in low-cost countries.

Is-sur-Tille – Electric fryer test laboratory.

Increased use of sourcingIn recent years, Groupe SEB has been increasing its use of sourced components, sub-assemblies or finished products. This practice

of sourcing basic or low added-value products makes it possible for the Group to meet competition from low-priced products, while

it also frees the Group to concentrate on its strong point: high-tech innovation and the creation of value for the consumer.

In 2005, sourced products accounted for 25% of total Group sales, a rise on the previous year. The growing use of sourcing calls for

close liaison between the Group's research and development, industrial patents and purchasing teams. Together, they must

accurately define needs and monitor strict adherence to specifications by suppliers, while at the same time ensuring protection

of the Group's intellectual property.

Product Lifecycle Management

Idea u Research u Prototypes u Preliminary study u Detailed study u Market survey

|25

Being competitive

Efficient flow management, for qualityservice

In view of the demands of retail clients and

the practice of virtual just-in-time delivery, management

of logistics and information systems has become vitally

important. Groupe SEB’s specialization of logistics platforms

in France in 2006 responds to this need to constantly improve

the Group's organization and save on administrative and

transport costs by regrouping orders and deliveries as follows:

– Orléans: small electrical appliances;

– Rumilly: cookware;

– Mions: export orders.

This new organization will involve the closure of the Selongey

(Côte d'Or) platform in 2006.

The Group also continues to upgrade its information

architecture around the world. In 2005, the Information

Systems and Logistics department initiated a project called

“Skyway”, involving liaison between French and Asian working

teams, designed to speed up the delivery deadlines of our

Chinese suppliers by keeping them informed of our needs,

so that they can better adapt their delivery schedules.

Pont-Évêque Steam-iron production line.

Rumilly Nonstick cookware production line.

SelongeyPressure-cooker productionline.

u Purchasing u Industrialization u Marketing u Logistics u Waste processing/Recycling

Luc Dohan, Chief Technology Officer

Product Lifecycle Management at the heart of innovationThe creation of a new product is a response to an idea – a marketing, functional, technical

or structural idea – but, it is also the result of a collaborative and evolving process which is

increasingly decentralized geographically. Product Lifecycle Management (PLM) is a tool which

makes it possible to follow this entire process in real-time, from the initial concept to after-sales

service, and through all the intermediate stages of product design, industrialization and

manufacturing.

The PLM database enables instant information exchange and multi-format files linked to

the entire lifecycle of a product. Introduced on a trial basis some years ago, the system was

consolidated in 2005 and is now accessible worldwide to all those involved with a project.

In a globalized context, the PLM system facilitates open-ended collaboration between internal

and external teams working on a project, while it improves the efficiency of the Development

process and boosts our productivity.

Sustainable Development Report

05|

Principles_28 • Corporate responsibility_29Shareholder relations_30 • Client and Supplier relations_31

Civic commitment_32 • Environment_33Priorities_34 • Sharing income_36

Management bodies_37

Aware of the challenges of today,

let us innovate for a better future

Pledged to deep-rooted humanist values from its beginnings, Groupe SEB has grownsteadily to become world market leader in small domestic equipment. It has alwaysremained loyal to its principles in the conviction that no long-term corporate venture canthrive without responding to the needs of all the stakeholders in the company.

Groupe SEB must take up new challenges today to remain competitive in the long-term. These include changing patterns of consumer behaviour, with demandpolarized between low-priced products and premium quality ranges, along with publicpreference for ethical products; an ageing labour force in Europe and issues of health and safety at work; increasing obligations to protect the environment; the growingdemand of civil society for transparency and social accountability in corporate affairs;the need to reorganize production in globalized markets and its human and environmentalconsequences.

While it adapts its strategy, organization and operating methods to this new context,Groupe SEB is also integrating a determined approach to Sustainable Development.

Sustainable Development

|27

|28

Principles

EthicsCommitment

Groupe SEB pursues its development on the basis of values that are deeply rooted in its history.These values are enshrined in a corporate culture that combines high performance

and responsibility with the rules of good governance.

&

Shared valuesThe Group subscribes to values that have inspired it

since its foundation:

– high-quality work;

– team spirit;

– thoroughness;

– loyalty;

– mutual respect.

These values, and the management principles

that derive from them, are posted for all our employees

on the Groupe SEB Intranet site.

Groupe SEB's commitmentLoyal to its principles, Groupe SEB has joined

international and French partners in several initiatives

to promote sustainable development:

– the United Nations Global Compact, signed in December

2003;

– the Code of Conduct of the CECED (European Committee of

Domestic Equipment Manufacturers) signed in August 2005;

– the Diversity Charter, signed in France in October 2005.

Implementing commitmentsThe Global Compact and CECED principles are being

integrated into the Group's internal procedures. In 2005,

the Buyers' Code of Ethics was updated with a new clause on

the fair treatment of suppliers, and a clause on Sustainable

Development was added to the Group's general purchasing

conditions. Meanwhile, the internal control team drew up

a list of criteria based on the Global Compact principles,

to include in its internal audits. Indeed, Groupe SEB has long

applied a system of corporate governance which respects

the interests of its shareholders.

Groupe SEB Sustainable Developmentmanagement

The Group created a Sustainable Development

Division in 2004 to harmonize, direct and stimulate

a collective effort in this area which would involve all

employees. A Sustainable Development Steering Committee

was set up in 2005. This committee, which meets every two

months includes representatives of the main areas of Group

activity: production and design, commercial operations,

marketing, quality and the environment, human resources

and communications, audit and finance. The Steering

Committee defines priorities for action, examines master

plans for different projects and monitors their progress.

It serves as a source of ideas and an advocate for Sustainable

Development in-house and with external working partners.

Once a quarter, the Group Executive Committee agenda

features a progress report or discussion on aspects of

Sustainable Development.

Information and exchange toolsTwo new in-house media were created in 2005

specifically for Sustainable Development. The Globe News

electronic newsletter reviews developments in this field

around the world. A dedicated sustainable development forum

on the Group Intranet lets employees put questions and give

opinions.

|29

Corporate responsibility

&ChangeEquity

Groupe SEB relies on over 14,000 employees around the world for running its business.In a rapidly changing market, it develops the skills of its working teams

and is in constant dialogue with them.

Multicultural teams and equal treatment

Today, almost half of Groupe SEB employees

are based outside France. The Group is harmonizing its

management and human resources tools to ensure equality

of treatment for all staff, wherever they work. World-spanning

operations necessarily involve multicultural teams.

This diversity – which contributes to progress and dynamism

– is also to be found within many countries. In France, for

example, Groupe SEB signed the Diversity Charter in October

2005. A fair balance between men and women is also a key

Groupe SEB objective. As part of its Fair Process procedures,

the Group aims to spread management practices which

encourage participation and give priority to leading and

motivating working teams for better performance. Managers

also have the option to undergo a so-called 180° evaluation

of their management practices.

Intensive labour-relations dialogueGroupe SEB has always given a high priority

to labour-relations dialogue and respected freedom

of association. In most countries where it operates, its

companies have trade unions and staff representative bodies.

Labour dialogue was particularly intense in 2005 in view

of the Group's restructuring in Europe. Staff representatives

were also closely involved in reflection on the future of

the company. Several staff information and consultation

exercises on planned organizational changes were carried

out in France in 2005.

Industrial reorganization: planningahead and supporting staff

Early in 2006, the Group announced a plan to

reorganize its industrial base in France in order to remain

competitive in the face of rivalry from Asian manufacturers.

This restructuring will be spread over two years so that

everything possible can be done to find a solution for each

of the workers concerned. To ensure advance planning and

full support for the affected staff, these proposals were

drawn up in consultation with government agencies and local

authorities. Employees are being kept fully informed and

are consulted on the progress of the plan.

Health & safety at work: a thoroughoverhaul

Groupe SEB has for several years been introducing

steps to reduce work accidents and industrial illness, much

of which relates to repetitive strain injury. Improving health

and safety standards is particularly important in the French

factories, where an ageing workforce and longer working lives

make this even more necessary. At the end of 2005, a working

group made recommendations for a charter and practical

tools to put it into effect: these proposals will be discussed

more broadly with staff representatives during 2006.

Groupe SEB Academy trainingsession.

SSEAC – ChinaAn iron production line in Shanghai.

Groupe SEB Colombia Food-preparation equipment plant.

|30

Shareholder relations

ConfidenceLoyalty

Groupe SEB fosters confident and open relations with its shareholders,aware that they are its long-term partners, and that a stable,

well-balanced shareholder base is vital to its future.

&

A balanced shareholder baseFor Groupe SEB management, pursuing a long-term

strategy depends on the support of a well-balanced

shareholder base: this support comes from the family

founder Group, employees, French and foreign institutional

investors, and individual shareholders. While Groupe SEB is

in regular contact with financial analysts and investment

fund managers, it would also like to increase the proportion

of capital held by individual shareholders and mid-scale

investors. This is clearly signalled by the Group's decision to

join the French Federation of Investment Clubs (FFCI) in 2005.

Transparency and dialogueGroupe SEB keeps its shareholders regularly

informed on the progress of the company via a large number

of communications including Letters to Shareholders, Annual

and half-year reports, the Annual General Meeting (AGM)

notification, the Shareholder Guide and regular financial

press notices. These documents are available on request from

the Groupe SEB Financial Communications Department, and

can be downloaded from our corporate website. Groupe SEB

also gives pride of place to dialogue and direct contact with

its shareholders. Apart from the key annual event which is the

AGM, it arranges shareholder meetings in several French

cities (Tours, Nice, Bordeaux, Nancy, Lyon and Dijon in 2005),

and factory visits to enable shareholders to learn more about

the Group's working environment and business (two visits

to the Rumilly plant in 2005). The Group also meets its

shareholders at the Actionaria stockmarket fair held in Paris

in November.

Dedicated servicesAll individual shareholders are welcome to contact

the Shareholder Relations Department. The SEB Share

Service manages nominal shares, handles share purchase and

sale orders free of charge. It also handles dividend payments,

supply of tax forms, or share inheritance and donation

operations. Since 2005, nominal shareholders can have direct

real-time access to their account and follow up current

operations via the Internet.

Long-term dividend policyGroupe SEB adopts a long-term approach to

remunerating its shareholders, aiming to give them a fair and

regular dividend increase when trading results permit, and

holding it stable when economic and financial circumstances

oblige. This year, after four successive years of rising

dividends, the Board of Directors will propose, at the next

Annual General Meeting, to maintain the dividend at its 2005

level (paid in respect of 2004), being €2.40 per share.

The Group also pays a supplementary dividend, equal to 10%

of the basic dividend, for all shares held in the nominal

register for two years running. It also offers its individual

shareholders special conditions for buying the Group's

products.

Actionaria Stockmarket Fair - The Groupe SEB stand.

|31

Client and Supplier relations

Common interestSatisfaction

To satisfy its customers with innovative products and services, Groupe SEB relies on carefully chosen suppliers and on the retailers who bring its products to the market.

&

Consumers: information and servicesProduct instruction leaflets are an essential source

of information for the customer. In 2005, Groupe SEB

updated its leaflets to make them easy to read and

understand. Some have been produced in Braille for

the visually handicapped. The leaflets are also available on

our brand websites. The Group's consumer service centres

handle questions or claims relating to products. This service

is highly developed in France, where it is staffed by

17 customer advisors based in a “Welcome Centre”

(185,000 contacts in 2005 with 80% satisfied with how they

were received). Groupe SEB decided to review the structure

of its after-sales service to improve customer satisfaction

in this area. This process, begun in France and to be extended

throughout Europe, aims for improvement in three criteria:

the time taken, the cost and the quality of repairs.

Distributors: orders delivered in time,and on time

Quality of service is measured as a percentage rate

of orders dispatched in time from the Group's warehouses

and delivered on time to distributor depots. This rate was

maintained at around 90% in France last year, which is

an acceptable score when one considers the large number

of new products launched in the second half, and the growing

proportion of sourced products arriving from Asia on

schedules that are more difficult to control. Since 1 January

2005, French distributors deal with a single commercial entity

– Groupe SEB France – for all Groupe SEB products, whatever

the brand. This ensures simplified relations with distributors

and more personalized service. The new more-centralized

logistics organization decided upon in 2005, will rationalize

logistics flows and improve service to clients: fewer delivery

trucks to handle and less administration to do.

Suppliers: clearly-defined rules The Group's commitment to Sustainable

Development also applies to its purchasing policy. Measures

include qualitative goals specified in buyer guidelines,

a supplier awareness drive on the Group's adhesion to the

Global Compact and the CECED Code of Conduct,

a sustainable development clause added to our general

purchasing conditions, and the updating of the Buyers' Code

of Ethics. Beyond the strict selection process, Groupe SEB

requires its suppliers to abide by a number of written

undertakings, notably on the environment (an eco-statement

on non-use of hazardous substances forbidden under the

European RoHS Directive) and social conditions (a workers'

rights statement inspired by the SA 8000 international social

accountability standard). Independent compliance reviews

will be carried out in 2006 in both these areas.

ShanghaiCustomer advice on the sales-floor.

Berrod SAFrench Groupe SEB supplier.

|32

Civic commitment

World citizenSolidarity

Corporate sponsorship to combat social exclusion, close community links in the territories where it operates...Groupe SEB sets a high value on social responsibility.

&

Combating social exclusionIn keeping with its humanist values, Groupe SEB is

gradually developing its sponsorship policy around a central

theme: the combat against social exclusion. Its efforts in this

area are currently focused mainly on France and Brazil, but

the Group plans to extend these on a larger scale. This theme

covers three priority areas for action.

First priority: social integration through access to decent

housing.

This is an important precondition for the integration of those

who are deprived or at risk of losing their self-reliance.

This is a core concern of Habitat & Humanisme, a French aid

association with which Groupe SEB began working

in partnership in 2005. The association helps people

in difficulty to find decent housing and supports their

re-integration through, for instance, social activities

organized in the community where they live.

Second priority: re-insertion in the employment market.

In this area – again in France – Groupe SEB is an active

member of the 2nd Chance Foundation which gives a helping

hand to people in repeated difficulty who are motivated to

get off to a new start in employment. The Group is also a

shareholder in the France Active investment company, which

puts up priming funds for social integration enterprises.

Finally, it participates in the Rhône-Alpes regional enterprise

network which helps people to set up their own business.

Third priority: access to education and training for the

underprivileged.

In this area, Arno, the Group's Brazilian subsidiary, has been

running a dynamic and innovative scheme for several years.

More than 70 employee volunteers take part in various

projects around Sao Paulo and Rio de Janeiro, in cooperation

with public bodies, associations, schools and other

institutions.

Local community and employmentGroupe SEB companies around the world form close

links with the local communities in which they operate.

They organize open days and take part in local events

arranged by business partners, educational institutions and

associations. Group sites also help community, educational

and sporting projects. Aware of the importance of its role

in local economic life, Groupe SEB acts responsibly when it

must restructure or even close a factory in order to be more

competitive. When this must be done, the Group takes every

measure to limit the impact on jobs by, for example,

cooperating with all local agencies to anticipate the

consequences.

Arno – BrazilCorporate responsibility campaign.

Since 2003, Groupe SEB has been working inpartnership with IMS (Institut du Mécénat et de la Solidarité). This association supports companiesin four areas of social responsibility: corporatecitizenship, local community development, diversity in the workplace, and responsible trade practices.

Corporatesponsorshipschool project inBrazil.

|33

Environment

Our planetCaring

Groupe SEB takes account of the environment at every stage in the life of a product,from the time it is made in the factory until the end of its useful life.

&

More than half of Groupe SEB factoriesare certified ISO 14001

Since 2003, Groupe SEB has operated a worldwide

environment management system based on the ISO 14001

international standard. More than half of the Group's 35

industrial and logistic sites (77% of its French sites) were

ISO 14001 certified in 2005, and the objective is to reach a rate

of 100% by 2007. This certification process, followed up by

internal and external evaluations, includes a harmonized

data-collection system to monitor the Group's key environment

indicators and reduce pollution risk. The system was applied

worldwide in 2005.

All new products were eco-designed in 2005

Groupe SEB's concern for the environment is not

confined to the manufacturing process. It also seeks to

reduce the impact of the products themselves on the

environment by, for example, making them more recyclable

(over 70% recyclable in 2005), eliminating hazardous

substances (RoHS Directive) and bringing down power

consumption. These criteria are taken into account right from

the drawing-board. That is what Groupe SEB calls eco-design.

Already in 2003, the Group drew up eco-design guidelines

which it built into the specifications used by its design teams

around the world. Last year, all new product projects complied

with the eco-design process which is now a central feature of

the Group's environment management system.

Recycling end-of-use productsMost European countries ratified the European

Directive on disposal of Waste Electrical and Electronic

Equipment (WEEE) in 2005. Each country is now required

to collect end-of-use appliances, recycling 50% of their mass

and converting 20% to other uses including energy production.

The Group is involved in this process in Europe, and notably

in France where it played a leading role in the creation of the

eco-organization Eco-Systèmes, which is responsible, as from

Spring 2006, for the collection and processing of most of this

waste. Once it is officially accredited by the authorities,

Eco-Systèmes, in which the Group is a shareholder,

will coordinate the efforts of most producers and distributors

in this field.

Limiting the impact of transportIn the area of logistics, road haulage represents

a large proportion of total transport mileage. All the Group's

contracts with haulage companies include a clause on

Sustainable Development covering, for example, vehicle

engines, the recycling of oil and fuel consumption. The Group

also tries to ensure optimum loading levels: in 2005, loading

was maintained at 92% of capacity in France. The Group uses

rail and water transport as often as feasible, for example

between Marseille and Lyon. Water transport is used for most

intercontinental cargo.

The Krups Espresseria coffee maker,launched in 2005, is an example ofthe Groupe SEB approach to eco-design.– Less than 1.5 W power consumption

on stand-by.– 70% of its weight is potentially

recyclable.

|34

Priorities

Involvement of allemployees in the Group'sethical approach

Working objectives

Employee awareness of our commitments under the GlobalCompact, the CECED Code ofConduct and the Diversity Charter.

Apply these commitments in theGroup's day-to-day operations

Main achievements in 2005Staff informed via the Group'svarious in-house media.

Commitments included in purchasing conditions, and initialapplication of internal control procedures.

Next steps

To strengthen this awareness andmonitor its impact.To draw up a master document onthe Group's ethical approach.

To highlight these commitments inour internal control procedures.

Priorities and action plans for the next three years

ETHICAL

Improvement of health &safety at work

Promotion of diversity

Development of management methods inkeeping with our corporate values

Support for employeesaffected by industrialreorganization

Adopt a monthly reporting systemand define priorities for progress.

Draw up an action plan to cut workaccidents and industrial illness(repetetive strain injury).

Ensure greater diversity in working teams.

Introduce a Group-wide FairProcess management referenceframework.

Ensure that necessary job-cuts arecarried out with every consideration for the individualsconcerned.

Anticipate restructuring and usetraining to enhance futureemployability.

Reporting system introduced for the French sites.

Recommendations made by an ad hoc working Group.

France: Diversity Charter signed.Proposals for action drawn up bystaff representatives.

Fair Process awareness drive formanagement, and start of'180°–evaluations' for managers.

Spain: individual support given tostaff affected by the Barbastroand Urnieta plant closures. Re-useof the factories by new owners.

Group-wide quarterly reporting onfrequency and gravity of industrialaccidents, and reduction of theseby half.

To train and mobilize local management and implement our action plan.

To implement the DiversityCharter .

Adoption of Fair Process by managers worldwide and integration into annual evaluationinterviews.

To use every possible means to limit the social impact of restructuring.

CORPORATE

SOCIAL

Structuring the Group'ssponsorship strategy

Combat social exclusion withprojects in harmony with the Group's values and workingcontext.

France: partnership with theHabitat et Humanisme aid association.

Brazil: new community educationproject for the unemployed indeprived areas (Arno).

To build up existing socialpartnerships and create new ones.

To initiate new projects,particularly in training andeducation.

To explore a Group sponsorshipstructure.

|35

CLIENTS/SUPPLIERS

Priorities

ENVIRONMENT

Reducing the impact ofour products on the environment (eco-design)

Ensuring that all theGroup sites respect theenvironment (eco-production)

Reducing carbon dioxideemissions from transport(eco-logistics)

Disposal of end-of-useproducts

Apply eco-design procedures.

Make products more easily recyclable and repairable.

Reduce product powerconsumption during use and onstand-by.

Aim for 100% ISO 14001certification of all the Group'sfactories around the world.

Use environment performanceindicators.

Better control of carbon dioxideemissions.

Explore non-road transport alternatives and aim for optimumloading rates for road haulage.

Contribute to the collection andrecycling of end-of-use domesticelectrical products.

Eco-design rules applied to 100%of product development projects.

Recycling rate of over 70% achieved for new products.75% of products repairable.

Average power used by new products in stand-by mode: lessthan 3 W .

51% of factories ISO 14001certified.

Objective achieved.

Reflections on the environmentwith the Club Demeter think tank.

France: 92% loading for road haulage.

Helped to set up eco-organizationsin Europe, notably Eco-Systèmes inFrance.

100% of products eco-designed.

75% of new products potentiallyrecyclable.Maintenance of repairable rate.

Greater energy efficiency,and stand-by power under 2 W.

ISO 14001 certification for all factories acquired more than threeyears ago.

To define environment objectivesfactory-by-factory.

To define effective eco-logisticsindicators.

To aim for worldwide application of criteria for alternatives to road haulage.To maintain the road haulage loading rate at over 90% .Follow-up of eco-organizations inEurope.

Priorities

Involvement of itssuppliers in the GroupeSEB SustainableDevelopment effort

Satisfying clients andcustomers

Working objectives

Keep suppliers fully informed onthe Groupe SEB sustainable development effort.

Meet targets for progress inprotecting the environment.

Meet our commitments in the areaof working conditions.

Improve our services to consumers.

Ensure the best possible servicefor our retail clients.

Main achievements in 2005Letters sent to all the Groupsupplier panel explaining theGlobal Compact and the CECEDCode of Conduct.

Sustainable development criteriaadded to the Group's purchasingconditions.

Introduction of an “EnvironmentDeclaration”.

20% of the supplier panel certifiedISO 14001.

Eco-statement on non-use ofhazardous substances signed by 96% of our suppliers.

SA 8000 social accountabilitystandard covered 91% of purchasesin Asia.

Product instruction leaflets standardized and improved.

France: 90% service-satisfactionrate.Logistics structure streamlined.

Next steps

To follow through and verify sustainable development commitments by suppliers.

70% response rate by end 2008.

60% ISO 14001 certification ofsupplier panel by end 2008.

100% of environment statementssigned.Strengthen follow-up inspections.

SA 8000 coverage of all purchasesin Asia and 80% in South America.Strengthen follow-up inspections.

Improving our customer welcomeservice and after-sales service inEurope.

95% service-satisfaction rate inFrance and extend this qualityworldwide.

Wealth CreationSharing&

Reserved funds: €177.7 millionFunds reserved in 2006 amount to €177.7 million, of which:– €106.0 million for refinancing

investments– €9.3 million in variations of provisions linked

to business risks– €62.4 million transferred to reserves.

Banks and bondholders: €25.2 millionFinancial expenses relating to interest on loans concerned mainly banking institutionsand amounted to €25.2 million in 2005.

State and local authorities: €95.8 millionThe contribution of Groupe SEB in the countries where it operates amounted to €95.8 million, broken down as follows:• corporation tax €54.6 million;• local taxes €41.2 million.

Shareholders: €40.4 million*

• Groupe SEB paid €40.4 million in dividends to its shareholders.* paid in 2005 in respect of the 2004 trading year.

Employees: €525.6 million• Groupe SEB paid €525.6 million to 14,396 employees (67% total salary, 33% social

charges). In 2006 it will pay out €29.3* million in bonus and profit-sharing schemes in respect of 2005.

* Estimated in 2005, paid in 2006.

Suppliers: €1,598.3 million• Including 2,060 direct industrial suppliers.

85% of purchases were made from a panel of 381 suppliers.

Clients: €2,463 million• Groupe SEB recorded sales of €2,463 million in 2005 (including All-Clad).

Income from operations was €183.7 million and net income €102.8 million.– Breakdown of sales:

• 52% in Europe (24% in France);• 14% in North America; • 8% in South America;• 26% in Asia and other territories.

– Sourced products represented 25% of sales.

u

u

u u u u u

NB: The 2005 figures given on this page are calculated in compliance

with the new European accounting standards: IFRS.

Groupe SEB

|36

Sharing income

Management bodies

GROUP EXECUTIVE COMMITTEE

Thierry de La Tour d'ArtaiseChairman and CEO

Jacques AlexandreExecutive Vice-President,Strategy and SBAs

Rémi DescosseExecutive Vice-President,Industrial Operations

François DuleyExecutive Vice-President,Continental Structures

Jean-Pierre LacExecutive Vice-President,Finance

Harry TouretExecutive Vice-President,Human Resources

The Group Executive Committee defines andimplements overall Group strategy. Meetingtwice each month, it decides on consolidatedobjectives, oversees strategic projects, definespriorities and allocates resources to themanagement structures in charge of StrategicBusiness Areas (SBAs), Continents and CorporateFunctions.

The Group Management Board is made up ofthe members of the Group Executive Committee,the General Managers of the SBAs andContinental Structures and the Chief TechnologyOfficer. It meets on average every two months tomonitor the Group's performance and resultsand, if necessary, make adjustments tocommercial or industrial strategy. Serving as aforum for exchange and reflection, theManagement Board has a consultative role andoversees the proper functioning of the Group.

There are four Strategic Business Area (SBA)structures, which define worldwide strategy fortheir respective product families. They are incharge of new product development, from thedesign stage to industrial strategy (capitalinvestment, location of production, etc.), andworldwide marketing (including ranges, pricing,advertising resources and distribution channels).

The Continental General Management Structuresare responsible for developing the Group'smarketing positions in their respectiveterritories. Since 2005, the Group has sixterritorial management structures: France,Western Europe, Northern & Central Europe,North America, South America, and Asia andother territories. These ensure that SBA salesand marketing strategies are implemented, andthat distribution networks ensure front-rankmarket positions for the Group in their respective territories.

The SBAs and Continental Structures aresupported by Group-wide corporate functions.Reporting to the Executive Vice-Presidents, thesefunctions include Human Resources, Finance,Strategy, Brands, Manufacturing, Technology,Sustainable Development, Information Systems &Logistics, Quality, Purchasing, and Legal Affairs.Functioning as centres of expertise, thesestructures ensure the execution of Group-wideprojects and effective overall Group organization.

STRATEGIC BUSINESS AREAS (SBAs)Philippe Crevoisier President, Electrical cooking

Jean-Pierre Lefèvre President, Linen and Personal care,

Home comfort and Home cleaning

Christian Ringuet President, Cookware

François Sydorowicz President, Food and beverage preparation

CONTINENTAL GENERAL MANAGEMENTMarcio Cuñha President, South America

François Duley President, Asia and other territories

Alain Grimm-Hecker President, France

Alain Gautier President, North America

Volker Lixfeld President, Northern & Central Europe

Frédéric Verwaerde President, Western Europe

Luc Dohan Chief Technology Officer

Les 4M - Chemin du Petit Bois - BP 17269134 Ecully Cedex - France

Tel.: (+33) (0)4 72 18 18 18 - Fax: (+33) (0)4 72 18 16 55

Shareholder Relations: (+33) (0)4 72 18 16 01Corporate Communications: (+33) (0)4 72 18 16 40

http://www.groupeseb.com actif

inco

mm

unic

atio

nfin

anci

ère

(33)

(0)1

56

88 1

1 11

- P

hoto

s: J

ean-

Mic

hel T

urpi

n -

Cot

é C

our,

Rol

and

Gou

y P

aill

ier,

Pat

rick

For

esti

er, V

éron

ique

Ved

renn

e, G

roup

e SE

B p

hoto

grap

hic

arch

ives

, Gra

phic

obse

ssio

n, B

anan

aSto

ck, D

R -

Tra

nsla

tion:

ang

lodo

c.co

m

Annual Report Sustainable Development Report … uk... · Annual Report Profile, ... Though...

Documents

Transcript of Annual Report Sustainable Development Report … uk... · Annual Report Profile, ... Though...