Initiation of Coverage - pharosholding.com · edita in a Nutshell edita is a leading Egyptian...

edita in a Nutshell

edita is a leading Egyptian producer of packaged snacks, namely 1) cakes, 2) croissants, 3) rusks, 4)

wafers, and 5) selected confectionary/candy products. The firm was founded in 1997 as a joint venture

between the Berzi family and Chipita, a Greek snack food manufacturer and a global industry leader in

the production of packaged baked snacks. In March 2015, two of the firm’s partners partially exited by

selling a combined 30.0% stake through a secondary offering that valued the firm’s common equity at

EGP 6,709.6m or a 2014 PE multiple of 25.2x. The firm currently trades at a 2014 PE multiple of cc

40x, in what we view as reflective of its DCF-based valuation plus the value of 1) the organic capacity

expansion option and the value of the 2) potential M&A transactions.

Solid Growth Story with an Embedded Growth and Acquisition Premiums

A series of capacity expansions has pushed revenue CAGR north of 20.0% from 2009 until 2014. By

end 2014, the firm operated four production facilities across Egypt and 21 production lines, up from

one facility and one line in 1997. During 2015, the firm will complete the installation of additional 5

production lines with an estimated combined capacity of 38,900 tons/annum, out of which 3 have been

already installed in Q1-15. Given capacity constraints in the existing four facilities, the firm acquired a

55,000 sqm land plot in 6th of October city in mid 2015 to construct its fifth production facility by end

2016. While we set 2019 as the end of capacity expansion programs due to visibility constraints, we

believe further expansions beyond 2019 is a material upside risk to valuation.

Most importantly, we view the firm as exceptionally well positioned for value-accretive M&A

transactions, whether as a buyer (as per management guidance) or as an acquisition target. In our

view, edita is a prime acquisition target for international snack majors seeking to expand in high-growth

markets, such as Egypt. Industry giant Kellogg’s has already entered Egypt in early 2015 through

acquiring Bisco Misr and other regional giants, such as Turkish Ulker, are aggressively seeking growth

opportunities in Egypt and selected other MENA region countries, such as Saudi Arabia. Within this

context, we believe edita’s dominant market share in the cakes and croissants segments and the firm’s

successful shift in distribution policy towards retail clients as highly-valued intangible assets.

DCF Says HOLD, Embedded Options Say BUY

Our DCF FV estimate is based on 1) a revenue CAGR of cc 18.5% until 2020, 2) an average GPM of

cc 40.0% and 3) an annual SG&A/sales ratio of cc 17.5%. While these assumptions yield a HOLD

recommendation, we believe the share price can justifiably trade at a premium to account for the

aforementioned capacity expansion and M&A options.

edita – Initiation of CoverageDCF Says HOLD, Embedded Options Say BUY

Neveen Mohamed

[email protected]

28 June 2015

Hany Genena, CFA

[email protected]

FV, EGP/Share 27.4

Recommendation HOLD

Last Closing Price, EGP/Share 29.44

Valuation Gap -6.9%

Reuters/Bloomberg EFID.CA EFID EY

S/O, m 362.7

MCAP, EGP m 10,677.3

Free Float, % 30.0%

ADTV, EGP m 13.0

H-L, EGP/Share 30.5 – 20.5

Return, since IPO +37.0%

EGX30 Return, 3M/1Y -8.6%/+4.0%

Main Shareholders

Berco Limited 42.0%

Africa Samba BV 15.0%

Exoder Limited 13.0%

2Source: Company financials, Prospectus, Pharos Research.

Summary Fundamental and Valuation Metrics

EGP m, unless o/w indicated 2014A 2015P 2016P 2017P 2018P 2019P 2020P

Total Sales, Tons 101,194 127,824 141,882 169,141 200,341 211,141 211,141

Average Price, EGP/Ton 18,959.6 19,644 20,882 22,020 23,293 24,417 25,202

Revenues 1,918.6 2,510.9 2,962.8 3,724.5 4,666.5 5,155.4 5,321.2

Gross Profit 720.8 986.6 1,226.4 1,518.4 1,902.2 2,060.3 2,038.4

GPM 37.6% 39.3% 41.4% 40.8% 40.8% 40.0% 38.3%

EBIT 394.4 553.6 715.6 878.0 1,106.3 1,169.1 1,110.0

EBIT Margin 20.6% 22.0% 24.2% 23.6% 23.7% 22.7% 20.9%

EBITDA 458.3 624.8 806.3 981.4 1,227.4 1,315.1 1,270.8

EBITDA Margin 23.9% 24.9% 27.2% 26.3% 26.3% 25.5% 23.9%

Net Profit 265.9 427.9 557.8 689.0 871.0 924.2 890.8

Net Profit Margin 13.9% 17.0% 18.8% 18.5% 18.7% 17.9% 16.7%

Net Debt 245.2 89.8 (138.4) (389.9) (638.1) (897.6) (1,078.1)

Equity 825.8 1,253.7 1,661.7 2,155.5 2,785.3 3,274.1 3,471.7

* Based on IFRS statements

I. Introduction

II. Industry Dynamics

III. Financial Analysis

IV. Valuation

V. Risks

Annex: Financial Statements

3

Contents

I. Introduction



IV. Valuation

V. Risks


4

Contents

5

I. IntroductionCompany Profile

edita is a leading Egyptian producer of packaged snacks, namely 1) cakes, 2) croissants, 3) rusks, 4) wafers, and 5) selected

confectionary/candy products. The firm was founded in 1997 as a joint venture between the Berzi family and Chipita, a Greek snack

food manufacturer and a global industry leader in the production of packaged baked snacks. In March 2015, edita concluded a

secondary offering of 30% of the company’s existing ordinary shares owned by Africa Samba B.V., an indirect subsidiary of private equity

firm Actis, and Exoder Limited, an SPV that is indirectly wholly owned by Chipita. Berco Limited, the investment vehicle of the Berzi

family, retained its 41.8% ownership stake. By end 2014, the total combined production capacity of the five product lines stood at

101,100 tons/annum, out of which 91,700 tons/annum represented the combined capacity of cakes and croissants. The breakdown of

capacity by product line is depicted below.

edita Capacity by Product Line, End 2014

* Based on 298 operating days, as per management guidance.

Cakes Croissants Rusks Wafers Candy Total

Number of Production Lines 10 5 2 1 3 21

Capacity, ‘000 Packs Per Day 7,384 2,217 415 466 298 10,780

Capacity, ‘000 Packs Per Annum* 2,200,432 660,666 123,670 138,868 88,804 3,212,440

Annual Production, ‘000 Packs 2,245,555 689,801 110,997 86,935 56,079 3,189,367

Capacity, ‘000 Tons Per Annum 63.8 27.9 3.7 2.6 3.1 101.1

Sales, ‘000 Tons 64.0 28.9 3.6 2.4 2.3 101.2

Utilization Rate 100.3% 103.5% 98.0% 92.3% 73.8% 100.1%

Source: Prospectus, Pharos Research.

* Management noted that the two remaining production lines scheduled to be installed in late-2015 will be fully operational in early 2016. In addition, management noted that the effective capacity of the five additional lines may exceed the announced 38,900 tons/annum. 6

By end 2014, the firm operated four production facilities (E06, E07, E10 and E15) and 21 production lines, up from one facility

and one line in 1997. In 2015, edita started production out of Hall B, an extension to its E07 factory in 6th of October city. In Q1-15, the

firm installed three production lines in Hall B and is expected to add another 2 lines before the end of 2015 to push total combined

production capacity to cc 140,000* tons/annum. As per the figure below, 19 out of the 26 production lines installed by end-2015 will be

devoted to the production of cakes and croissants, which are the strongholds of the firm in terms of market share (cc 70% in both

segments) and profitability. Following the entry of capacity additions in 2015, edita would have doubled the number of its production lines

over the course of seven years. In May 2015, the firm acquired a 55,000 sqm land plot near its E07 factory to expand production

capacity beyond 2015. As per management guidance, the construction of the factory that will be built on the new land should be

completed by end-2016. We assume that the new land plot can accommodate 10-11 production lines, as is the case with the similarly

sized E07 factory.

Evolution of edita’s Production Lines and Facilities Up to End 2015

1 2 2 2 3 3 3 3 3 4 5 58

00

46

7 8 9 9 910

10 10

11

01

1

1

22

2 2 2

22 2

3

0

0

0

0

00

0 03

33 3

3

13

79

1213

14 14

17

2021 21

26

199

7

200

0

200

3

200

6

200

7

200

8

200

9

201

0

201

1

201

2

201

3

201

4

201

5E

Croissant Cakes Rusks Wafer Candy Total

6th of October

plant opening

10th of Ramadan plant opening

Beni Suef plant opening

Polaris Industrial

Park plant opening

edita HQ and

logistics hub

I. IntroductionEvolution of Production Capacity

Source: IR Presentation, Pharos Research.

7

I. IntroductionThe Value-added Chain

Croissant Production Flow Chart

The production of croissants, cakes, wafer, and rusks is ultimately based on the preparation of dough or batter. The key

ingredients of the dough/batter are flour (imported or local), sugar, eggs, and cooking oil, which - alongside packaging costs - represent

roughly 80.0% of direct production costs. After the key ingredients are added, the mix is 1) molded or shaped to take the form of the final

product, 2) baked, 3) cooled, 4) flavored, and 5) packaged. The footprint of each production line and the duration of the production

process of each batch varies by product from about 2 to 7 hours. On average, around 40 direct employees operate a production line in

one shift and capacity is calculated based on three 8-hour shifts per day, 298 days a year. The croissant production process involves two

additional preparatory steps before baking, namely 1) laminating the dough, in order to give it a flaky texture, and 2) placing the dough in a

fermentation room for three and half hours to allow it to rise. Below we depict the croissant production flow chart as an example.

Dough

PreparationLamination Fermentation Baking Cooling Flavoring Packaging

25 minutes 115 minutes 3.5 hours 16 minutes 15 minutes1 hour

Flour/water

/yeast/salt/

sugar/milk

Dough is poured to be

mixed with butter. The

mix is then flattened

and repetitively folded

to generate the flaky

texture. Finally, it is

sliced to be rolled into

crescent-shaped

croissants.

Laminated

croissants are

stored in trays at

room temperature

and high humidity

level to trigger the

fermentation

process. The

fermented

croissants are

more than double

their size before

fermentation.

Source: Factory visit, Pharos Research.

Laminated

croissants are

then conveyed on

rolling plates

through an oven

to be baked.

After cooling, baked

croissants are injected

with flavors, such as

chocolate or strawberry.

The final product

is automatically

wrapped and

manually sorted

in packs for

distribution.

Butter is mixed

with dough

Folding

By end-2014, edita operated an extensive sales and distribution network that managed to reach 63,000 retail and wholesale

customer through 1) 16 distribution centers, 2) a fleet of 515 distribution vehicles, and 3) a salesforce of 1,098 employees. The

firm sells its products to wholesalers as well as directly to supermarket chains and retail kiosks. Management is gradually reducing sales

to wholesalers to increase its control over the market, as evidenced by the jump in the share of direct sales to revenues from cc 20% in

2010 to cc 36% in 2014 and as evidenced by the management’s plan to boost this ratio to the 50% mark by 2018. It is important to note

that export sales accounted for an insignificant 5.8% of total sales in 2014. Accordingly, cross-border distribution efforts are currently

immaterial.

8

I. IntroductionDistribution

2012 2013 2014

Distribution Centers 13 15 16

Distribution Vehicles 369 425 515

Total Sales Force 790 909 1,098

Total Retail Customers 41,323 49,614 57,950

Total Wholesale Customers 4,300 5,500 5,150

Gross Revenue, EGP m 1,403.2 1,725.9 2,011.2

Wholesale, EGP m 901.0 1,096.0 1,206.0

Traditional Retail, EGP m 347.0 469.0 629.0

Other, EGP m 155.0 161.0 176.0

Retails as Percent of Gross Sales 24.7% 27.2% 31.3%

edita’s Distribution Network – Key Metrics


9

I. IntroductionPricing Policy

Historic Average Price Per Ton by Product Line

In 2014, edita sold approximately 3.2bn snack packages at prices of around EGP 1.0/pack range. Since small denomination coins

are not in wide circulation in Egypt, price increases can only be effectively made in increments of EGP 0.50, which represents a significant

percentage increase over the average product price point for edita. As such, and given the price-sensitivity of the Egyptian mass

consumer, edita and its peers posses very limited direct pricing power and instead turn to covert pricing policies. In 2014, edita managed

to increase the average price per ton of its cake and croissant products slightly through migration to higher priced SKUs, and that of the

rusks and wafer products more prominently through the reduction of the average weight per pack. Going forward, edita plans to increase

its average price through the introduction of 1) new products in its existing segments (e.g. strudel in the croissants segment), 2) premium

products, and 3) higher prices for disproportionately higher package sizes (SKU upsizing).

EGP/Ton 2012 2013 2014 CAGR

Cakes 16,667 17,689 17,838 3.5%

Croissants 18,942 19,484 19,545 1.6%

Rusks 18,673 21,012 24,442 14.4%

Wafers 27,483 24,943 26,942 -1.0%

Candy 25,590 24,737 22,638 -5.9%

Weighted Average Price/Ton, EGP 17,442 18,636 18,960 4.3%

EGP/Pack Q1-15 Average

Cakes 0.86

Croissants 1.09

Rusks 1.00

Wafers 1.00

Candy 1.80

Q1-15 Average Price Per Pack

Source: Company financials, Prospectus, Pharos Research.

10

Along with its locally developed brands, edita produces and sells the Hostess brands HoHos, Twinkies, and Tiger Tail and also

Molto and Bake Rolz under license from Chipita. In 2003, edita acquired the factories producing HoHos, Twinkies and Tiger Tail (HTT

brands) cakes under license from Hostess Ltd in the 10th of Ramadan city. In April 2013, the firm fully-acquired the rights to those brands

in Egypt, Jordan, Libya and Palestine and has since stopped paying royalties in connection with those products. edita signed two

additional contracts with Hostess in 2015 that 1) extend the geographical scope of company's existing rights to the HTT brands HoHos,

Twinkies, and Tiger Tail and 2) add the right to manufacture and market 11 other Hostess products on a regional basis. Molto and Bake

Rolz are produced under an agreement with Chipita in which the latter collects 0.5% of the net sales of those produce as royalty, with a

maximum limit of Euro 150,000 annually, over the period of ten years commencing in January 2011. edita paid EGP 723,049 in royalties to

Chipita in 2014. Based on a non-compete agreement with Chipita, edita can only export Molto and Bake Rolz products to certain territories

in the MENA region.

TURKEY

SYRIA

IRAQ

SAUDI

ARABIA

YEMEN

OMAN

UAE

EGYPTLIBYA

ALGERIA

MOROCCO TUNISIA

WESTERN SAHARA

MAURITANIA

MALINIGER CHAD

SUDAN

GEORGIA

IRAN

TURKMENISTAN

INDIA

Geographical Scope of HTT Brands Rights, Pre- and Post-2015 Agreements

Based on the 2015 Agreement

Based on the 2013 Agreement

I. IntroductionHostess License


11

I. Introduction



IV. Valuation

V. Risks


Contents

12

II. Industry DynamicsThe Global Snack Industry is Dominated By a Few Large Players

The global packaged snack industry is dominated by a limited number of large players in the US, Europe and Turkey, which

implicitly renders edita as an acquisition target. According to research house Nielsen, the size of the global snack food industry (in

terms of annual turnover) is estimated at a little less than USD 400.0bn in 2014. Over three quarters of snack sales are in the US and

Europe. The predominant forms of snack meals are savory snacks, such as potato chips, and confectionaries, particularly chocolates.

The world’s largest producers of snacks include Pepsico, Kellogg’s, Mondelez, Nestle, and Turkish Yildiz. Most of these companies

expanded their product range and geographic reach via a series of acquisitions. In essence, these acquisitions were driven by a mix of 1)

slower growth at home markets (the US and Europe), 2) the will to venture into new product mixes to diversify revenue sources and 3), of

high relevance to edita, the will to acquire a local distribution network that has direct access to an otherwise unreachable customer base.

Examples of Recent Acquisitions in the Snack Industry

Date Transaction

November 2014 Mondelez acquired 80.0% of Vietnamese snack maker Kinh Do for USD 370.0m. According to Mondelez’s president of Asia-

Pacific, Eastern Europe, Middle East and Africa operations, the deal would allow the firm to expand its relatively small

Vietnamese business by using Kinh Do’s well-established distribution network, particularly in the country’s many kiosks and

traditional markets. Mr Cofer said it would also give Mondelez a chance to make inroads with the 60 percent of Vietnam’s 90m

citizens that are under the age of 30.

November 2014 Turkish Yildiz bought United Biscuits from private equity owners Blackstone Group and PAI Partners in a deal estimated to be

worth USD 3.2bn, which it said made it the world's third-biggest biscuit maker. The acquisition of the maker of McVitie's

biscuits, Jaffa Cakes and Jacob's crackers is the third and largest by Yildiz in recent years as it strives to become a global

name.

January 2015 US-based Kellogg’s completed its acquisition of an 86% stake in Bisco Misr, the largest packaged biscuit manufacturer in

Egypt. Kellogg acquired control of the Cairo-based company at a price of EGP 89.86 (USD 12.58) per share, or a total cost of

USD 125.0m.

Source: Online sources, Pharos Research.

13

EGP bn 2010 2011 2012 2013 2014 CAGR 2010-2014

Salty Snacks 3.1 3.5 5.0 5.1 5.8 16.4%

Biscuits, Gum and Chocolates 1.8 2.4 3.5 4.2 5.6 33.4%

Cakes 0.6 0.8 1.1 1.3 1.4 22.1%

Wafer 0.6 0.8 1.2 1.3 1.3 20.5%

Croissant 0.2 0.3 0.5 0.6 0.8 36.7%

Candy 0.3 0.3 0.5 0.6 0.6 23.3%

Total 6.7 8.1 11.7 13.1 15.5 23.6%

The size of the packaged snack industry in Egypt is small but growth prospects are exceptionally high due to favorable

demographics. According to Nielsen, both local and international snack producers compete in a market with a total estimated turnover of

EGP 15.5bn (cc USD 2.0bn) in 2014, or roughly 0.8% of GDP and 0.5% of the global snack market. The market encompasses a wide

range of products including chocolate, potato chips, biscuits, croissant, candy and gum, cakes, and wafers. Nonetheless, in addition to

packaged snacks, freshly-baked products are sold across the country in family-owned or government-owned bakeries. As depicted below

and in line with global industry dynamics discussed in the previous slide, savory snacks and chocolates accounted for three quarters of

total industry sales in 2014. In Egypt, among the key international players in these two product categories are Pepsico (Chipsy) and

Mondelez (Cadbury). In the cakes and croissants segments, which accounted for only 14.2% of total market size, edita is the leading

player with a market share of roughly 70% in each category.

Egypt’s Snack Food Market Estimated Sales by Segment

II. Industry DynamicsEgypt is a Small but Fast-Growing Market

Source: Company financials, Prospectus, Pharos Research.

14

Despite the small size of the cakes and croissants market in Egypt, edita managed to grow its sales by a CAGR of 20.7% from

2009 until 2014. In 2009, edita’s revenues stood at EGP 748m. By 2014, sales had grown organically by a CAGR of 20.7% to EGP

1,919m. When edita’s sales figure is compared to gross domestic income, the figures show that Egyptians spent a little less than EGP 1

out of every EGP 1,000 in income on edita products. Based on information provided by management on the numbers of packs and tons

sold, this figure translated into around 36 packs consumed per capita per annum or a rate of 1 pack purchased every 10 days. Obviously,

these figures are based on the size of the total population rather than the firm’s target market, which is heavily skewed towards younger

age groups. In the following slide, we compare these metrics with the metrics seen in EM peers, particularly Turkey.

Source: Prospectus, CBE, Pharos Research

edita Sales as a Percent of GDP

EGP 2009 2010 2011 2012 2013 2014

Revenues, EGP m 748 888 1,136 1,342 1,647 1,919

Sales, Billion Packs 2.4 2.8 3.2

Sales, Tons 76,863 88,408 101,194

Average Weight Per Pack, Grams 32.03 31.57 31.62

Average Price Per Pack, EGP 0.56 0.59 0.60

Nominal GDP, EGP bn 1,071.6 1,247.7 1,398.0 1,591.6 1,805.1 2,058.1

Population, m 76.9 78.7 80.4 82.4 84.7 86.7

GDP/Capita, EGP 13,931 15,849 17,388 19,315 21,312 23,738

edita Sales as a Percent of GDP 0.070% 0.071% 0.081% 0.084% 0.091% 0.093%

Packs Per Capita Per Annum 29 33 37

Days Between Purchases 13 11 10

II. Industry DynamicsEGP 1 out of Each EGP 1,000 Earned in Income is Spent on Snacks

15

edita is not far behind EM peers in terms of sales-to-GDP ratio. We looked at Turkey as an EM peer that is close to Egypt in terms of

demographics but significantly ahead in terms of purchasing power. In 2014, Turkey’s GDP was estimated at cc USD 820bn, which is

about 3.0x the size of Egypt’s economy. Specifically, we looked at the domestic sales of Ulker, the leading snack maker in Turkey which

captures a market share of roughly 50.0% in the biscuit and confectionary segments and a subsidiary of the world’s third largest biscuit

maker Yildiz Holding. As depicted below, the ratio of Ulker domestic sales-to-GDP has been roughly stable at around 0.12-0.13% from

2008 until 2014, versus edita’s 0.093% in 2014. However, when translated into USD terms, the size of Ulker domestic sales in 2014 is

roughly 4.3x the size of edita’s sales. Accordingly, we view edita’s growth story as a function of market size rather than convergence as is

the case in the pasteurized milk industry, as for example.

Turkey-based Ulker Domestic Sales as a Percent of GDP

2008 2009 2010 2011 2012 2013 2014

Net Sales, TRY m 1,412.2 1,551.5 1,523.5 1,798.8 2,340.6 2,748.4 2,891.2

Exports, TRY m 256.4 338.5 275.1 362.0 461.6 557.9 520.6

Domestic Sales, TRY m 1,155.8 1,213.0 1,248.4 1,436.7 1,879.0 2,190.4 2,370.6

Nominal GDP, TRY bn 950.5 952.6 1,098.8 1,297.7 1,416.8 1,567.3 1,749.8

Sales as a % of GDP 0.122% 0.127% 0.114% 0.111% 0.133% 0.140% 0.135%

II. Industry DynamicsNo Convergence Stories, Only Size of the Market Matters

Source: Ulker Annual Reports, Bloomberg, Pharos Research.

16

The potential growth in Egypt’s market size is already under the radar screen of most international players. In 2015, Kellogg’s

acquired Egypt snack maker Bisco Misr after an aggressive price war versus Abraj Capital in a deal worth USD 125.0m. Similarly, Turkish

snack maker Ulker has repeatedly highlighted Egypt and Saudi Arabia as its core expansion markets in the MENA region. In its latest

available investor presentation published in March 2015, the firm noted that it is “targeting to become a regional player in markets with

high growth potential, such as Saudi Arabia and Egypt”. Within this context, while we believe edita may face strong competitive headwinds

that could force it to increase its SG&A budget to defend its market share, the prospect of intense competition will automatically unlock the

value of cooperation through M&A. Based on these dynamics, we believe investors should assign a premium to DCF-based valuation to

account for a potential acquisition.

II. Industry DynamicsCompetitive Pressures Could Unlock the Value of Intangible Assets

17

I. Introduction



IV. Valuation

V. Risks


Contents

18

We base our revenue projections on the addition of 10 new production lines in edita’s fifth factory from 2016 until 2019. As noted

earlier, edita will install five new production lines in its 6th of October facility in 2015. In May 2015, the firm also bought a 55,000 sqm

industrial land plot to establish a fifth factory (E08) that can accommodate up to 10-11 new production lines. Management did not provide

detailed information on the product mix or capacity per line given that these decisions will be based on upcoming market studies.

Accordingly, as a starting point, we sourced information on the cost of each production line installed by the firm from 2012 until 2015. In

2015, management noted that the CAEPX budget will stand at cc EGP 351m, split into 1) EGP 215m channeled to the expansion of the

Polaris Industrial Park plant, 2) EGP 56m channeled to maintenance, and 3) EGP 80m allotted to the acquisition of an industrial land plot.

In April 2015, edita signed two intellectual property rights contracts with US company Hostess Brands LLC worth USD 12m. The Company

has already paid for cc 43% and 50% of the cost of the five new production lines and the construction of Hall B in the E07 factory,

respectively, during 2014.

Source: Management guidance, Pharos Research

EGP m, unless o/w stated 2014 2015E Total Cost Description

E07 Plant – Hub A 14.8 -

E07 Plant – Hub B 42.7 43.0

Total Production Facilities 57.5 43.0

E07 Molto XL Line – 2015 51.2 5.7 56.9 17,200 tons/annum

E07 Twinkies Line – 2015 31.2 3.5 34.7 3,200 tons/annum

E07 Mini Molto Line – 2015 47.2 5.2 52.4 7,200 tons/annum

E07 Bake Rolz Line – 2015 - 91.0 91.0 3,700 tons/annum

E07 Pate Line – 2015 - 66.1 66.1 7,600 tons/annum

Total Machinery 129.5 171.5

Total Expansion CAPEX 187.5 214.5

Total Maintenance CAPEX 63.2 56.0

Total Other CAPEX 4.4 80.0

Total CAPEX 254.7 350.5

Cost of the 2015 Expansion Program

III. Financial AnalysisRevenue Projections – Capacity Expansion

19

We expect edita to construct the new production lines according to the following schedule: 3 cake lines and 1 Molto XL line in

2017, 2 cake lines and 1 Molto XL and one Pate line in 2018, 1 cake line and 1 Pate line in 2019. Based on our schedule, the firm’s

total production capacity will more than double from 101,100 tons/annum in 2014 to 211,400 tons/annum in 2019. We assume that the

aforementioned new Hostess products will be produced using the new cake and croissant production lines and do not account for the

launch of new product categories.

Projected Capacity Additions Until 2019

Source: Management guidance, Pharos Research

III. Financial AnalysisRevenue Projections – Capacity Expansion

2014A 2015P 2016P 2017P 2018P 2019P 2020P

Capacity Additions

Cakes 3,200 9,600 6,400 3,200

Croissants 32,000 17,200 24,800 7,600 -

XL 17,200 17,200 17,200

Mini 7,200

Strudel 7,600 7,600 7,600

Rusks 3,700

Wafers 2,600

Candy

Production Capacity, Tons 101,100 140,000 142,600 169,400 200,600 211,400 211,400

Cakes 63,800 67,000 67,000 76,600 83,000 86,200 86,200

Croissants 27,900 59,900 59,900 77,100 101,900 109,500 109,500

Rusks 3,700 7,400 7,400 7,400 7,400 7,400 7,400

Wafers 2,600 2,600 5,200 5,200 5,200 5,200 5,200

Candy 3,100 3,100 3,100 3,100 3,100 3,100 3,100

20

We estimate the cost of each production line in E08 by inflating the cost of the most-recently acquired similar line in the E07

factory by 15.0% per annum. We use the same method to estimate the cost of a wafer line to be added in 2016 in the available space in

Hall B of the E07 factory (edita had paid EGP 18.9m for a wafer line in 2012, we estimate the cost of the new line in 2016 at EGP 33.1m =

EGP 18.9 * (1.15)^4). Based on management guidance, we project maintenance CAPEX at 3% of revenues going forward. We note that

edita has started to replace fully depreciated machinery in its older factories (E06 and E10), which we assume is accounted for in our

model as part of the maintenance CAPEX. It is important to note that new lines have historically operated at near full capacity almost 3-5

months after installation. However, in Q1-15, the firm installed 3 additional lines and yet was able to operate at above full capacity within a

shorter lag period via overtime shifts. Accordingly, we expect utilization rates to hover near the 100.0% mark throughout our forecast

horizon.

EGP m 2016P 2017P 2018P 2019P 2020P

E08 Factory Construction 150.0

E07 Wafer Line 33.1

E08 Cake Lines (New Products) 158.3 121.4 69.8

E08 Molto Lines 86.5 99.5

E08 Pate Lines 115.6 133.0

Total Expansion CAPEX 183.1 244.9 336.5 202.7 0.0

% of Sales 6.2% 6.6% 7.2% 3.9% 0.0%

Maintenance 88.9 111.7 140.0 154.7 159.6

% of Sales 3.0% 3.0% 3.0% 3.0% 3.0%

Total CAPEX 271.9 356.6 476.5 357.4 159.6

Projected Cost of Capacity Additions Until 2019

Source: Pharos Research

III. Financial AnalysisRevenue Projections – Cost of the Expansion Program

21

Volumes Sold and Average Price/Ton

In line with history and given industry-related price limitations, we project edita’s weighted average price per ton to increase by

3.2% - 5.8% per annum over our forecast horizon. edita has historically resorted to covert product pricing methods such as reducing

the average weight per pack or migrating towards higher price point SKUs. Going forward, we believe the firm will be able to raise

average SKU prices through the introduction of “premium” products such as Strudel and new Hostess cake variations.


III. Financial AnalysisRevenue Projections – Volume Sold and Average Price/Ton

2014A 2015P 2016P 2017P 2018P 2019P 2020P

Sales Volume, Tons 101,194 127,824 141,882 169,141 200,341 211,141 211,141

Cakes 64,025 67,000 67,000 76,600 83,000 86,200 86,200

Croissants 28,857 52,300 59,900 77,100 101,900 109,500 109,500

Rusks 3,623 3,626 7,252 7,400 7,400 7,400 7,400

Wafers 2,369 2,418 4,940 5,096 5,096 5,096 5,096

Candy 2,320 2,480 2,790 2,945 2,945 2,945 2,945

Average Selling Price, EGP/Ton 18,960 19,644 20,882 22,020 23,293 24,417 25,202

Cakes 17,838 18,373 19,292 20,449 21,676 22,760 23,557

Croissants 19,545 20,229 21,241 22,515 23,866 25,059 25,811

Rusks 24,442 25,175 26,056 27,359 28,727 30,164 31,672

Wafers 26,942 27,211 27,484 27,758 28,036 28,316 28,599

Candy 22,638 22,638 22,638 22,638 22,638 22,638 22,638

Total Revenues, EGP m 1,918.6 2,510.9 2,962.8 3,724.5 4,666.5 5,155.4 5,321.2

22

Based on our projections, edita’s sales-to-GDP ratio is projected to converge to levels seen in EM peers by 2020. As noted earlier,

the sales of edita’s peer in Turkey, Ulker, ranged between 0.11% to 0.14% of GDP from 2008 until 2014. In our model, the ratio of edita’s

sales-to-GDP is expected to peak at 0.13% in 2018 as depicted below.

edita Sales as a Percent of GDP

Source: Company financials, Prospectus, CBE, Pharos Research.

III. Financial AnalysisRevenue Projections – Model Closure

2014A 2015P 2016P 2017P 2018P 2019P 2020P

Revenue, EGP m 1,918.6 2,510.9 2,962.8 3,724.5 4,666.5 5,155.4 5,321.2

Sales, bn Packs 3.2 4.0 4.5 5.3 6.3 6.7 6.7

Sales, Tons 101,194 127,824 141,882 169,141 200,341 211,141 211,141

Average Weight Per Pack, Grams 31.6 31.62 31.62 31.62 31.62 31.62 31.62

Average Price Per Pack, EGP 0.6 0.62 0.66 0.70 0.74 0.77 0.80

Nominal GDP, EGP bn 2,058.1 2,364.7 2,727.4 3,151.5 3,650.7 4,222.6 4,885.6

Population, m 86.7 88.4 90.2 92.0 93.8 95.7 97.6

GDP/Capita, EGP 23,737.7 26,740 30,236 34,252 38,901 44,112 50,038

edita Sales as a Percent of GDP 0.09% 0.11% 0.11% 0.12% 0.13% 0.12% 0.11%

Packs Per Capita Per Annum 37 46 50 58 68 70 68

Days Between Purchases 10 8 7 6 5 5 5

23

III. Financial AnalysisCOGS Breakdown

On average, raw materials represent around 80.0% of edita’s direct costs and 50.0% of revenues. The raw materials line item

includes packaging and unidentified other costs. In 2014, 78% of the raw materials used by the company were sourced locally with the

remaining balance covered by imports, primarily from Europe, the UAE, the US and Malaysia. Labor expenses represent edita’s second

largest COGS item. As per IFRS reporting standards, the line item includes the profit share paid to production employees in addition to

their wages. By end-2014, edita had a headcount of 2,495 production employees, which translates into an average of 119 workers

assigned to each production line and an average employee productivity of 40.6 tons per annum. Finally, it is worth noting that edita’s utility

cost, although presently relatively small, has surged by 45.1% y/y in 2014, and is expected to continue to increase as per the Egyptian

government’s decision to gradually eliminate energy subsidies by 2018.

COGS Breakdown in 2013 and 2014


EGP m Unless o/w Stated 2013A 2014A

Raw Materials 834.3 944.8

Labor 72.9 93.6

Utilities 16.2 23.5

Depreciation 27.8 36.2

Other 77.1 99.7

Total COGS 1,028.3 1,197.8

As a Percent of Total COGS

Raw Materials 81.1% 78.9%

Labor 7.1% 7.8%

Utilities 1.6% 2.0%

Depreciation 2.7% 3.0%

Other 7.5% 8.3%

24

III. Financial AnalysisCOGS Breakdown - Raw Materials

edita uses more than 100 ingredients in its products, most notably sugar, flour, cocoa, oil and fats, milk and eggs, which

together comprise more than 80% of edita’s total direct material requirements by value. A combination of persistently strong global

harvests, inventory pileup, and weak emerging market currencies have driven down international commodity prices over the past year and

are expected to continue to depress them over the near-term. The international prices of sugar, edita’s largest single ingredient accounting

for 12.6% of total raw material costs in 2014, have crashed since July 2014 with raw sugar (number 11) hitting a record low of 11.1 US

cents per pound on 19 June 2015. The prices of wheat, milk powder, and cooking oils have similarly softened, contributing to a decline in

raw material costs as a percent of revenues from 50.6% in 2013 to 49.2% in 2014. The diversity of raw materials needed allows edita to

introduce reformulations of its products to offset swings in commodity prices. Below, we depict the UN FAO Food Price Index, which is

currently hovering near lows seen post the global financial crisis.

UN FAO Food Price Index

150

160

170

180

190

200

210

220

230

240

250

Ma

y-0

9

Au

g-0

9

Nov-0

9

Fe

b-1

0

Ma

y-1

0

Au

g-1

0

Nov-1

0

Fe

b-1

1

Ma

y-1

1

Au

g-1

1

Nov-1

1

Fe

b-1

2

Ma

y-1

2

Au

g-1

2

Nov-1

2

Fe

b-1

3

Ma

y-1

3

Au

g-1

3

Nov-1

3

Fe

b-1

4

Ma

y-1

4

Au

g-1

4

Nov-1

4

Fe

b-1

5

Ma

y-1

5

Source: Bloomberg, Pharos Research.

25

III. Financial AnalysisCOGS Breakdown – Projection Methodology

Cost Item Projection Methodology

Raw Materials We project a 1% decline in raw material cost per ton in 2015 to account for the mixed impact of softer

international commodity prices, particularly of sugar, milk powder and cooking oils, and weaker EGP versus

the USD. From 2016 onwards, we assume a gradual increase in raw materials cost due to a soft recovery in

commodity prices and the continued devaluation of the EGP versus the USD, as per our views.

Labor Labor cost will be impacted by both 1) the addition of new production lines and 2) wage inflation. We project

labor productivity to increase from 40.6 tons/employee in 2014 to 71.9 tons/employee in 2020. We also project

the average wage per worker to increase by 20.0%/annum from 2015 until 2017 then at a rate of

10.0%/annum afterwards. The higher rate of wage adjustment until 2018 reflects the potential of exceptional

wage adjustments to compensate for the impact of energy subsidy removal on the cost of living. We also add

to direct wages 40.0% of employees’ profit share of the pervious year, which we project to hover around 8.0%

of net profit.

Utilities As per the government’s decision to gradually remove energy subsidies by FY-18, we inflate utility costs by

15% until 2017 and 10% in 2018 to account for the partial removal of subsidy in the first half of the year. We

assume that the annual increase in utility prices will soften to 5.0% in 2019 and 2020 in the complete absence

of subsidies.

Depreciation In line with history, we assume that the direct depreciation recorded in edita’s COGS represents 60% of the

firm’s total depreciation expense. Depreciation expense is based on the projected fixed assets schedule.

Other We inflate other costs of goods sold per ton by 10.0% per annum.

SG&A As per IFRS, the SG&A item includes around 60% of employee profit share and management’s remuneration.

Management’s remuneration partially reflects an agreement with the current chairman and CEO to receive up

to 5.0% of EBITDA as compensation.

Below we outline our projection methodology for each cost item and provide the detailed calculations in the following page.

Source: Pharos Research.

26

III. Financial AnalysisCOGS Projections


EGP m, unless o/w stated 2013A 2014A 2015P 2016P 2017P 2018P 2019P 2020P

Raw Materials 834.3 944.8 1,181.5 1,311.4 1,657.2 2,080.7 2,324.4 2,463.9

Raw Materials/Ton, EGP 9,436.9 9,336.5 9,243.2 9,243.2 9,797.7 10,385.6 11,008.7 11,669.3

Inflation Rate in Raw Materials/Ton -1.1% -1.0% 0.0% 6.0% 6.0% 6.0% 6.0%

Raw Materials/Revenues 50.6% 49.2% 47.1% 44.3% 44.5% 44.6% 45.1% 46.3%

Labor Expenses 72.9 93.6 127.5 157.8 205.3 244.1 261.9 263.6

Total Wages 67.3 86.4 119.0 144.1 187.5 222.0 234.0 234.0

Direct Employees 2,495 2,495 2,865 2,891 3,133 3,374 3,232 2,939

Employees/Production Line 119 119 110 107 101 96 87 79

Tons/Employee 35.4 40.6 44.6 49.1 54.0 59.4 65.3 71.9

Productivity Growth 14.5% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0%

Annual Wage/Employee, EGP 26,988.6 34,623.7 41,548.5 49,858.1 59,829.8 65,812.8 72,394.0 79,633.4

Wage/Employee Inflation 28.3% 20.0% 20.0% 20.0% 10.0% 10.0% 10.0%

Profit Share of Direct Employees 5.6 7.2 8.5 13.7 17.8 22.0 27.9 29.6

Utilities 16.2 23.5 34.1 43.6 59.7 77.8 86.1 90.4

Utilities/Ton, EGP 183.2 232.2 267.1 307.1 353.2 388.5 407.9 428.3

Inflation in Utilities/Ton 26.7% 15.0% 15.0% 15.0% 10.0% 5.0% 5.0%

Depreciation 27.8 36.2 42.7 54.4 62.0 72.7 87.6 96.5

Direct Depreciation/Total Depreciation 74.5% 61.1% 60.0% 60.0% 60.0% 60.0% 60.0% 60.0%

Other Costs 77.1 99.7 138.5 169.1 221.8 289.0 335.0 368.5

Other Costs/Ton, EGP 872.1 985.2 1,083.8 1,192.1 1,311.3 1,442.5 1,586.7 1,745.4

Inflation in Other Costs/Ton 13.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0%

Total COGS 1,028.3 1,197.8 1,524.4 1,736.4 2,206.1 2,764.2 3,095.0 3,282.9

27

III. Financial AnalysisWorking Capital

edita operates on a quasi-cash basis given the high inventory and receivables turns. Given the perishable nature of the raw

materials used in the production process as well as the relatively short shelf life of the end product, the firm’s inventory days on hand has

historically hovered around 1 month. Moreover, the firm mostly operates on a cash basis, as cc 97% of 2014 revenues were paid for in

cash at the time of sale. In addition, the firm manages to secure favorable payment terms from suppliers due to the large scale of

purchases. During 2013 and 2014, the firm was able to collect its cash 16-17 days before settling its payable obligations. Going forward,

we project the cash conversion cycle to remain negative, which will be reflected in minimal borrowing requirements and interest expenses.

Working Capital Dynamics

Source: Company financials, Pharos Research.

EGP m, unless o/w stated 2014A 2015P 2016P 2017P 2018P 2019P 2020P

Working Capital (27.1) (34.4) (35.8) (46.8) (58.6) (67.9) (76.9)

Change in Working Capital (8.1) 7.3 1.4 11.0 11.8 9.3 9.0

CCC (17.1) (16.0) (16.0) (16.0) (16.0) (16.0) (16.0)

Inventory 112.5 125.3 142.7 181.3 227.2 254.4 269.8

COGS 1,197.8 1,524.4 1,736.4 2,206.1 2,764.2 3,095.0 3,282.9

DoH 30.0 30.0 30.0 30.0 30.0 30.0 30.0

Receivables 66.3 82.6 97.4 122.4 153.4 169.5 174.9

Revenues 1,918.6 2,510.9 2,962.8 3,724.5 4,666.5 5,155.4 5,321.2

DoH 12.6 12.0 12.0 12.0 12.0 12.0 12.0

Payables 205.9 242.2 275.9 350.6 439.2 491.8 521.7

COGS 1,197.8 1,524.4 1,736.4 2,206.1 2,764.2 3,095.0 3,282.9

DoH 59.6 58.0 58.0 58.0 58.0 58.0 58.0

28

III. Financial AnalysisDividend Policy

We expect edita to slash its dividend payout ratio to 35% during the high CAPEX years before gradually increasing it starting

2018 onwards. As discussed earlier, the bulk of the firm’s expansion CAPEX will be incurred from 2015 until 2019 and management had

indicated that roughly 50.0% of this CAPEX will be financed by debt and the rest by internally generated cash. We also project employees’

profit share of 8% of net income over our forecast horizon, in line with history. We remind readers that as per IFRS reporting standards,

distributions to employees are treated as an expense item in the income statement. This expense item is recorded in the first quarter of

the year, after the income appropriation statement of the preceding year has been approved. We record 40% of the total employee profit

share as part of the direct labor expense line in edita’s COGS and the remaining 60% as part of SG&A expenses. We assign 5% of the

net income as remuneration to the board of directors.

Statement of Income Appropriation


EGP m 2013A 2014A 2015P 2016P 2017P 2018P 2019P 2020P

Retained Earnings, BoP 519.5 618.7 720.1 1,126.7 1,506.8 1,966.1 2,552.4 2,994.9

Total Comprehensive Income 249.4 266.1 427.9 557.8 689.0 871.0 924.3 890.8

Dividends Distribution for Previous Year (150.2) (150.0) - (149.8) (195.2) (241.1) (435.5) (693.2)

Transfer to Legal Reserves (14.7) (21.4) (27.9) (34.5) (43.6) (46.2) (44.6)

Change in Retained Earnings 99.2 101.4 406.5 380.1 459.3 586.3 442.5 153.1

Retained Earnings, EoP 618.7 720.1 1,126.7 1,506.8 1,966.1 2,552.4 2,994.9 3,148.0

Dividend Payout 58.8% 0.0% 35.0% 35.0% 35.0% 50.0% 75.0% 80.0%

Legal Reserves - 5.5% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0%

Employee Bonus Payments 7% 8.0% 8.0% 8.0% 8.0% 8.0% 8.0% 8.0%

Total Employee Bonus Payments 17.47 21.3 34.2 44.6 55.1 69.7 73.9 71.3

29

I. Introduction



IV. Valuation

V. Risks


Contents

30

IV. ValuationDCF Assumptions


2015P* 2016P 2017P 2018P 2019P 2020P

Risk Free Rate 9.8% 9.8% 9.8% 9.8% 9.8% 9.8%

Beta 0.85 0.85 0.85 0.85 0.85 0.85

Equity Risk Premium 7.0% 7.0% 7.0% 7.0% 7.0% 7.0%

COE 15.8% 15.8% 15.8% 15.8% 15.8% 15.8%

Perpetual Risk Free Rate 6.0% 6.0% 6.0% 6.0% 6.0% 6.0%

Perpetual Cost of Equity 13.0% 13.0% 13.0% 13.0% 13.0% 13.0%

Perpetual WACC 12.2% 12.2% 12.2% 12.2% 12.2% 12.2%

Perpetual Growth Rate 6.0% 6.0% 6.0% 6.0% 6.0% 6.0%

Terminal Beta 0.85 0.85 0.85 0.85 0.85 0.85

Cost of Debt 11.3% 11.3% 11.3% 11.3% 11.3% 11.3%

Effective Tax Rate 22.5% 22.5% 22.5% 22.5% 22.5% 22.5%

After Tax Cost of Debt 8.7% 8.7% 8.7% 8.7% 8.7% 8.7%

Time-Varying WACC* 13.9% 13.5% 14.2% 14.3% 14.3% 14.6%

31

IV. ValuationDCF

* Excluding Q1-15 free cash flow


EGP m, unless o/w stated 2015P* 2016P 2017P 2018P 2019P 2020P 2021P

IFRS EBIT Less Taxes 359.5 554.6 680.4 857.4 906.1 860.2

EBIT 461.6 715.6 878.0 1,106.3 1,169.1 1,110.0

Taxes -102.1 -161.0 -197.5 -248.9 -263.1 -249.7

Reinvestment -154.4 -179.8 -242.2 -343.5 -202.1 10.1

Depreciation 54.4 90.7 103.4 121.1 146.0 160.8

Change in Working Capital 69.6 1.4 11.0 11.8 9.3 9.0

CAPEX -278.4 -271.9 -356.6 -476.5 -357.4 -159.6

Free Cash Flow to the Firm 205.1 374.8 438.2 513.9 704.0 870.3 922.6

DCF

Periods 0.75 1.75 2.75 3.75 4.75 5.75

Discount Factor 0.91 0.80 0.70 0.61 0.54 0.47

Discounted FCFF 186.0 299.5 306.6 314.6 377.0 406.9

Sum of Explicit Discounted FCFF 1,890.7

Terminal in T6 17,077

Terminal in T 7,983.5

Enterprise Value 9,874.2

Debt 256.9

Cash 318.4

Equity Value 9,935.7

S/O, m 362.7

FV Per Share 27.4

32

I. Introduction



IV. Valuation

V. Risks


Contents

33

Upside Risks

Stronger-than-expected pricing power during our forecast horizon, mainly through covert pricing strategies,

Weaker-than-expected competitive pressures, and accordingly, lower-than-expected SG&A expenses,

Potential M&A transactions

Downside Risks

Stiff competitive pressures imposed by international snack makers operating in Egypt, particularly Kellogg’s,

Delay in the execution of the capacity expansion plan of the E08 factory

V. Risks

34

I. Introduction



IV. Valuation

V. Risks


Contents

35

Annex: Financial StatementsIncome Statement


EGP m 2015P 2016P 2017P 2018P 2019P 2020P

Revenues 2,510.9 2,962.8 3,724.5 4,666.5 5,155.4 5,321.2

COGS (1,524.4) (1,736.4) (2,206.1) (2,764.2) (3,095.0) (3,282.9)

Gross Profit 986.6 1,226.4 1,518.4 1,902.2 2,060.3 2,038.4

SG&A (441.4) (519.3) (648.9) (804.4) (899.7) (936.9)

Other Items, Net 8.4 8.4 8.4 8.4 8.4 8.4

Operating Income 553.6 715.6 878.0 1,106.3 1,169.1 1,110.0

Finance Expenses/Income, Net (1.5) 4.1 11.0 17.6 23.4 39.5

EBT 552.2 719.7 889.0 1,123.9 1,192.6 1,149.5

Income Tax (124.2) (161.9) (200.0) (252.9) (268.3) (258.6)

Net Income 427.9 557.8 689.0 871.0 924.2 890.8

36

Annex: Financial StatementsBalance Sheet


EGP m 2015P 2016P 2017P 2018P 2019P 2020P

Cash and Equivalents 469.9 765.0 1,092.4 1,479.7 1,839.0 1,892.9

Net Operating Working Capital (34.4) (35.8) (46.8) (58.6) (67.9) (76.9)

Inventories 125.3 142.7 181.3 227.2 254.4 269.8

Trade and Other Receivables 82.6 97.4 122.4 153.4 169.5 174.9

Trade and Other Payables 242.2 275.9 350.6 439.2 491.8 521.7

Other ST Liabilities 92.5 92.5 92.5 54.4 27.2 -

Investment in LT Assets 1,364.4 1,545.6 1,798.8 2,154.2 2,365.6 2,364.5

Total Investment 1,707.4 2,182.3 2,751.9 3,520.9 4,109.5 4,180.4

Total Financing 1,707.4 2,182.3 2,751.9 3,520.9 4,109.5 4,180.5

Shareholders' Equity 1,253.7 1,661.7 2,155.5 2,785.3 3,274.1 3,471.7

Debt and LT Liabilities 453.7 520.6 596.5 735.6 835.4 708.7

LT Debt and Liabilities 313.2 404.0 470.7 584.0 631.4 457.0

ST Debt 140.5 116.6 125.8 151.5 204.0 251.7

37

Annex: Financial StatementsCash Flow Statement


EGP m 2015P 2016P 2017P 2018P 2019P 2020P

EBT 552.2 719.7 889.0 1,123.9 1,192.6 1,149.5

Adjustments for

Depreciation 71.1 90.7 103.4 121.1 146.0 160.8

Tax Settlements (39.7) (66.9) (27.2) (27.2)

Change in WC

Inventory (12.8) (17.4) (38.6) (45.9) (27.2) (15.4)

Accounts and Notes Receivable (16.2) (14.9) (25.0) (31.0) (16.1) (5.5)

Trade and Other Payables 36.3 33.7 74.6 88.7 52.6 29.9

Other Items, Net (18.9) (10.9)

Income Tax Paid (124.2) (161.9) (200.0) (252.9) (268.3) (258.6)

CFO 506.3 649.9 744.8 926.1 1,052.3 1,033.4

Purchase of Fixed Assets (351.0) (271.9) (356.6) (476.5) (357.4) (159.6)

CFI (351.0) (271.9) (356.6) (476.5) (357.4) (159.6)

Dividends Paid to Shareholders - (149.8) (195.2) (241.1) (435.5) (693.2)

Proceeds/Repayment of Borrowings/Notes Payables (24.8) 66.9 134.5 178.8 99.9 (126.7)

CFF (24.8) (82.9) (60.7) (62.3) (335.6) (819.9)

Cash, BoP 233.3 363.9 659.0 986.4 1,373.7 1,733.0

Change in Cash 130.6 295.1 327.4 387.3 359.3 53.9

Cash, EoP 363.9 659.0 986.4 1,373.7 1,733.0 1,786.8

38

Disclaimer

This Report is compiled and furnished solely for informative purposes to be considered by the intended

recipients who have the knowledge to assess the information contained herein. Pharos Research

('Pharos') makes no representation or warranty, whether expressed or implied, as to the accuracy

and/or completeness of the information contained herein or any other information that may be based on

the data/ information enclosed. Furthermore, Pharos hereby disclaims any and all liabilities of any

nature relating to or resulting from the use of the contents of this Report. This Report shall not be

approached as an investment solicitation nor shall it be considered as legal or tax advises. Pharos

highly recommends that those viewing this Report seek the advice of professional consultants. None of

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