Dear Partners,    

You are customers, colleagues, suppliers, bankers, shareholders.

To all of you, who are the stake-holders of the company, I wish you the best for the year to come.

2009 has been a challenging year. Like most industrial groups, we experienced a strong downturn in demand. We could not escape the crisis but our group has been able to “weather the storm”.

We are finishing the year with an EBITDA on sales of more than 12%, a positive cash-flow, and a lower debt.

We have been able to cut fixed costs, monitor working capital, drive down inventory and reduce receivables drastically at a very difficult time when payment deadlines are longer and cash short thanks to our committed teams, of whom we are extremely proud.

Beyond our teams, all the stake-holders have showed continuous commitment to our endeavour.

Customers have more than ever faithfully appreciated the commitment of our sales and technical support teams and the high quality of our products. Suppliers have provided us with innovative solutions.

Bankers and shareholders have showed their continuous support and understanding of the situation. Their acknowledgement of the performance of the group in this difficult time is a strong support for the management.

What can we expect for 2010?

Slightly growing or stable final demand but less inventory reduction in all stages of industry and distribution should lead to a reasonable growth, between 10 and 15% in volume.

Emerging countries paved the way for growth in 2009. In 2010 we should expect Western Europe, Eastern Europe and North America to follow progressively.

Our group will see in 2010 the start of production in our Russian plant in Kurgan (see photo). The Russian market was sluggish in 2009 but has lately been showing signs of recovery.

With this new plant we will be able to capture new segments of this market.

Innovation will also be a keyword, a key priority for 2010.

We expect to double R&D efforts in both steel abrasive and diamond tools divisions.

For Diamond Tools our target will be to increase performance and efficiency for wire and multi-wire products.

For Steel Abrasive we will keep on innovating with a brand new product for our foundry customers as well as the development of alloyed shots and grits in our innovation center near Prague in the Czech Republic; we have invested 3 M€ in a tool that can produce tailored steel abrasive.

As you can see we are committed to work on the long term to prepare our company for the future:

> To accelerate our growth in emerging countries

> To increase the added value for our products and solutions thanks to innovation

> To find energy savings in the whole production chain to reduce our costs and help protect the environment.

To all of you I wish a very Happy and Prosperous New Year.

Yves Barraquand