Société générale de financement du Québec tables its 2003 Annual Report
SGF resumes its development activities after a reorientation and transition year
Montréal, June 16, 2004 - The Société générale de financement du Québec has submitted its 2003 Annual Report to the Minister of Economic and Regional Development and Research, Michel Audet. After a refocusing and transition year, SGF is resuming its development activities in 2004.
"After receiving its new mandate in May 2003, SGF embarked on a major transformation process involving a detailed review of the content and management of its investment portfolio, and refocusing its mission to ensure that its future commitments will be more strategic, complementary and profitable for Québec and SGF. We are enthusiastic about resuming our development activities and preparing the next five-year development plan, which will be tabled in the fall", said Henri A. Roy, Chairman of the Board, President and General Manager.
Report on 2003
In the second half of 2003, SGF undertook a comprehensive and systematic review of its investment portfolio and implemented a program to straighten out the portfolio and improve its profitability. The need to rationalize and focus its activities was brought about by SGF’s accelerated investment pace in the last few years, the high risks associated with the number and variety of investments, the pressure on the public funds needed to sustain such a program, and the substantial losses incurred in 2001, 2002 and 2003.
SGF has completed a retrospective review of all its investments and put in place a continuous process to determine and track the fair market value (FMV) of each investment. New investment analysis and monitoring rules have been implemented. A realization plan for each investment has been drawn up so that SGF has a realistic self-financing strategy without additional financial contribution from its shareholder.
In collaboration with SECOR and Ernst & Young, SGF conducted a study on venture and development capital in Québec, then redefined its role, which is still essential but must focus on using SGF’s expertise and complement the roles of other public and private investment players in Québec.
SGF also revised its administrative policies and practices to tighten control of its activities and use of funds. It created a new position and recruited Director, Internal Audit in July 2003. Several audit reports were on completed aspects addressed in the Auditor General’s report released on June 8, 2004. SGF welcomed the report’s recommendations, some of which have already been implemented; others will be implemented in the coming months.
At the organizational level, in 2003 SGF consolidated ten subsidiaries into a single, more efficient, better coordinated organization. Operations have been divided into six business groups and the work force cut by 36%.
Despite all these changes, SGF continued its activities and completed direct investments totalling $386 million in the critical petrochemicals (Interquisa), metals (Alouette), forest products (Kruger Wayagamack), health and technology (DSM Biologics), and agri-food (Olymel) sectors.
On December 31, 2003, SGF had assets totalling $2.9 billion and shareholder’s equity of $1.8 billion. A net loss of $511 million was recorded in 2003.
Directions for 2004
SGF’s mission has been reoriented and strategic directions have been defined that will guide its investments in the coming years.
- Carry out major projects, especially with foreign partners.
- Support the growth of Québec-based mid-cap companies.
- Invest in regional development, especially in the agri-food, forest products and mining sectors, or in target business projects.
In the coming months SGF will complete its discussions with partners and its consultations and will table its new 2005-2009 five-year development plan in the fall.
Its senior management team has been strengthened by the addition of some new members, including a Vice-President and Chief Financial Officer, a Group Vice-President, Health, and a Group Vice-President, Technology.
"The changes we have made in the past year were made possible by the concerted effort, determination and commitment of the entire SGF team, all of whom will be involved in implementing the new strategic directions", said Roy.
Investments and profitability
"Our team is now in place. We really know our portfolio and have decided which sectors to target. Our control measures are in place and we have resumed our development activities. We are executing our 2004 operations plan, which calls for SGF to be self-financing, invest some $300-400 million, and reach the break-even point in 2004. Despite the restructuring of our investment portfolio, our objective remains the same: to achieve a return higher than the government’s cost of borrowing by 2006", Roy concluded.
For more information on the 2003 Annual Report, visit the Société générale de financement du Québec Web site at sgfqc.com.
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Director, Communications and Public Relations