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Bekaert
Indy - Industrial, Diversified / Belgium

Company results

Target Price EUR 250.00 Expected performance (12 mth) 49.8% BUY EUR 166.90 (Closing price 30-Jul-10)

Estimates and target price raised by c. 50%
2 Au gust 2010 Analyst: Maarten Bakker ABN AMRO Bank N.V. Tel: +31 20 343 54 12 Email: maarten.bakker @nl.abnamro.com

1H10 improves our view of sustainable profitability – EPS raised by >50%

Opinion on qualitative criteria
Accounting Qual ity of track record Solvency Currency risk Risk of asset wr ite-off IFRS 01/01/2004 High High High Neutral

Bekaert reported blowout 1H10 results, with EBITE of EUR 262m (+205%) significantly beating our forecast (EUR 195m) and the consensus (EUR 185m). Predominantly driven by a strong pick up in volume, the results improved across the board, with an impressive recovery of profitability for the mature EMEA and North America divisions and ongoing strong growth for the Asia Pacific division. Also worth noting is the good quality of the results, with only a EUR 20m contribution from windfall gains on inventories. The strong results are not an incident, but rather the fruits of a well-executed strategy focused on innovation, emerging markets and fast growing industries, implemented already since the beginning of this decade. The 1H10 results have changed our view of a sustainable level of profitability for Bekaert for the better, particularly in respect of the EMEA and North America divisions. It prompted us to upgrade our EPS forecasts for 2010 through 2012 by EUR 7.27/6.62/6.52 (or c. 50-60%) to EUR 19.34/19.60/20.01 (the muted EPS growth in the coming years is due to our assumption of a return to a normalised tax rate by 2012).
Target price raised to EUR 250 (implying 12.9x P/E 2010) – BUY reiterated

Share price performance/EPS revision (EUR) Price
170 160 150 140 130 120 110 100 90 80 Aug Oct Dec Feb Apr Jun

ABN AMRO EPS est. 2010
13.0 12.5 12.0 11.5 11.0 10.5 10.0 9.5 9.0 8.5

Based on our raised estimates for 2010, Bekaert trades at a valuation of only 8.6x P/E and 4.6x EV/EBITDA, which does not do justice to the attractive growth profile (>70 of sales in emerging markets), the solid balance sheet and strong track record. Consistent with the earnings upgrade, we raised our returns-based target price from EUR 173 to EUR 250, which implies a realistic 2010 valuation of 12.9x P/E. We expect continuing share price momentum. BUY rating reiterated.
Year to December Sales (EUR m) EBITDA (EUR m) Net pr ofi t excl. extr. & amort. (EUR m) Net pr ofi t (EUR m) EBITDA margin (% ) ROCE (incl. goodwill) (%) Net gear ing (%) EPS before extr. & amort. (EUR) EPS (EUR) DPS (EUR) % change sales % change EPS (excl . extr . & amort.) EV/Sales EV/EBITDA P/E (excl. extr. & amor t.) P/E PE/growth (excl. extr.) Free cash flow yi eld (% ) 2008 2,662.4 412.2 209.9 174.1 15.5 11.2 59.5 10.64 8.83 2.80 22.5 35.7 0.49 3.2 8.3 10.0 0.5 (2.5) 2009 2,437.3 385.7 165.4 151.8 15.8 9.9 36.9 8.38 7.69 2.94 (8.5) (21.3) 0.95 6.0 9.0 9.8 22.9 18.4 2010e 3,189.5 706.1 395.6 383.6 22.1 19.5 28.7 19.94 19.34 6.77 30.9 138.0 1.05 4.8 8.4 8.6 0.2 7.4 2011e 3,417.0 722.1 388.7 388.7 21.1 16.9 15.0 19.60 19.60 6.86 7.1 (1.7) 0.94 4.4 8.5 8.5 0.1 8.5 2012e 3,630.3 729.2 396.8 396.8 20.1 16.1 3.6 20.01 20.01 7.00 6.2 2.1 0.83 4.1 8.3 8.3 4.9 9.1

Source: FactSet, ABN AMRO Equity Research
Market capitalisati on (EUR m) No. of shares (m) Free float 1/3/12 mth perf. (% ) High/low 52 weeks (EUR) Next results due Pr ice/book v alue (x) Volatili ty (ß) (5yrs/) Reuters sy mbol Bloomberg sy mbol Websi te 3,310.4 19.8 62.0% 21.5/23.4/97.6 166.90/85.22 10 November 2010 2.1 BEKB.BR BEKB BB www.bekaert .com

IMPORTANT: PLEASE READ DISCLOSURES AND DISCLAIMERS BEGINNING ON PAGE 11

3% -49.0% (5) -1. 28. accelerating from EUR 694m (+24% y-o-y organically) in 1Q10 to EUR 841m (+34% y-o-y organically) in 2Q10.9% 50.931 269 19. Note that the y-o-y decline in .2% 34.3% -1.4% 36.3% 128 34.5% 17 0 (8) 44 2.4% 8.1% -566.4% 20 0 (10) 108 5.9% 50.5% Y-o-y chg. with EBITE of EUR 262m (+205%) significantly beating our forecast (EUR 195m) and the consensus (EUR 185m).9% 372. emerging markets and fast growing industries.9% 141. The results improved across the board.8% 286.2% 19 11.2 | Bekaert | 2 August 2010 ABN AMRO Results stem from well-executed strategy focused on innovation.3% 160. though.9% 22 5. that they are the fruits of a well-executed strategy focused on innovation (this year.4% 21.728 258 20.45 1H10 realised 526 313 144 552 1.1% 9 3.2% (7) 79 (31) 48 (13) 27. In 1H10.200 1. with an impressive recovery of profitability for the mature EMEA and North America divisions and ongoing strong growth for the Asia Pacific division.1% 81.6% 9.7% 8 5.9% (25) 86 7.7% 122. Bekaert’s results (EUR m) 1H09 realised EMEA North America Latin America Asia Pacific Consolidated sales Combined sales (incl.3% -48.3% 209.9% 9.7% 206 37.5% 19 0 (14) 181 9.3% 16 11.4% 60. It is encouraging that also the mature EMEA and North America division saw a strong pick up in revenue.2% 13.6% Revenue accelerated in 2Q10.7% 14 9. According to management. The results are so strong that we can imagine that they are looked at with some scepticism (“too good to be true” … “must go wrong”).2% 309.9% 10. the bulk of this was volume driven.615 152 12. while the impact of pricing (pass through of higher wire rod prices) was said to be less than 5%.9% 21.8% -362.409 1.24 2H09 realised 417 210 167 443 1. implemented already since the beginning of this decade. also for the mature EMEA and North America divisions Strong volume growth is the main driver behind profitability The main driver of the strong profitability was top-line growth.0% 54 10. Bekaert spends EUR 80m on R&D).535 2.0% 7.1% (30) 171 13.3% 21 6.73 Realised vs estimated 7.4% 160 36.5% 205.6% 59. The table below shows that the revenue trend was positive in 1H10.5% 6.9% 30.7% nmf 75.7% 59.3% 18. emerging markets and fast growing industries Blowout 1H10 results not an incident Bekaert reported (again) blowout 1H10 results.237 1.1% 30 6.6% 29.4% 33.6% 308.6% 66.3% (33) 262 17.7% (21) -5. One should realise. 100% JVs) EBITDAE margin EBITE EMEA margin EBITE North America margin EBITE Latin America margin EBITE Asia Pacific margin Other Total EBITE margin Non-recurring items EBIT Net financial charges EBT Taxes as % of EBT Share in results joint ventures Result discontinued operations Minority interests Net profit continuing operations EPS basic (EUR) Source: company data and ABN AMRO estimates 410 264 160 367 1.6% 27.3% (0) -0.9% 48.8% -9. consolidated revenue increased organically by 29% (combined revenue by 26%).7% -10.1% (19) 243 (16) 228 (51) 22.6% 169 33.8% (13) 183 (31) 152 (42) 28. which has a leveraged impact through a higher capacity utilisation rate.8% (17) 153 (35) 118 (21) 17.15 1H10E estimated 489 286 135 500 1.5% nmf -2.0% 19 0 (15) 113 5.9% (29) 195 13.113 368 24.

6% 243 139 329 242 953 16.6% -22. particularly in EMEA (where the main product is Dramix steel fibres used for concrete reinforcement).5% 71.5% -27.160 41.000 5.r.9% 51. Latin America % chg.5% 198 106 87 228 619 -16.0% 1.3% 3.4% 219 104 80 215 618 0.7% 197 105 326 229 857 -34. North America % chg.4% -27.500 2.4% 34.9% 49.000 2.2% -21.9% 11.4% 1.6% Combined sales: EMEA North America Latin America Asia Pacific Total EMEA % chg.437 -8.5% -34.3% -2.9% -21.1% -14. a trend that Bekaert sees continuing for the remainder of the year).7% 6. of which 65% is generated in emerging markets and 75% is characterised as being a replacement market).9% 48.2% -19. demand developed positively in all markets. which created a negative impact on revenue of EUR 52m (organic growth in revenue was 17% in 1H10).h.5% 6. Total % chg.9% -25.3% 7. Asia Pacific % chg.1% 200 122 79 207 608 -14.4% -12. Source: company data 209 139 280 160 788 -27.9% -16.9% -6. scal e Source: company data Source: Steel BB .5% -25. Bekaert’s sales growth accelerated in 2Q10 (EUR m) 1Q09 2Q09 3Q09 4Q09 2009 1Q10 2Q10 Consolidated sales: EMEA North America Latin America Asia Pacific Total % chg.7% 198 120 299 209 826 -38.6% 41.6% -16.6% -0.1% 823 469 1.5% 4.6% 5.2% 827 473 327 809 2.5% 244 141 67 242 694 17.6% 1.000 800 600 400 200 0 6.5% 51.0% 23.9% 3.5% -16.4% In the automotive sector (the largest segment accounting for 36% of combined revenue.0% 22.9% 40.6% -13.5% 5.4% 5.7% 8.9% 282 172 77 310 841 38.237 814 3.5% 77.500 3.9% -18. The construction segment (19% of revenue.5% -38.000 6 Feb 06 12 Mar 07 14 Apr 08 18 May 09 21 Jun 10 Nor th Ameri ca (in USD) Construction 19% Ener gy & Utili ties 21% 3 Jan 05 Europe (in EUR) China (in RMB) .4% 2.2% -0.2% -37.7% 85.9% 280 171 398 311 1.343 -28.0% 16.5% 20.3% 13. of which 60% is realised in Latin America) remained under pressure.8% 113.4% 32.ABN AMRO 2 August 2010 | Bekaert | 3 consolidated revenue of the Latin America division (-10%) is attributable to the shift to the parallel exchange rate of the Bolivar in Venezuela. Also the energy & utilities segment (21% of revenue) performed well.4% 219 105 332 216 871 -12.6% 84.400 1.500 5.9% 2.9% 6.4% -2.1% 17. North America % chg.8% -23.000 3.1% 20. Asia Pacific % chg.1% -38. Organic foreign exchange consolidation EMEA % chg.200 Automotive 36% 1.9% -29.5% 42.5% -25. 2009 breakdown Bekaert’s combined sales by sector Basic materials Equipment 4% Consumer 4% 8% Agriculture 8% Wire rod prices trended upwards in 1H10 1. Latin America % chg.0% -0.2% 23.500 4. driven by a host of new products that were developed in recent years.3% -26.7% 0.8% 22.000 4.1% -21.6% -28.2% 41.3% 10.9% -5.8% -21. 210 142 81 159 592 -0.2% 5.

As numbers based on this segment reporting are only available from 2008 onwards. gross profit surged even by 91% to EUR 434m.3% in 1H10 (6. Bekaert explains that the healthy profitability in 1H10 has been achieved on the back of a high capacity utilisation level.3%. fuelled by a strong pick up in the automotive sector.6% was achieved in 1H08.8% in 2H09 and 18. Bekaert attributes the high margin to the very high capacity utilisation rate and a favourable product and geographic mix. which reflects a record high margin of 28. EMEA and North America operating margins back on track 1H10 shows that a 9-10% operating margin should be realistic for EMEA in coming years The EMEA division is back on track with an EBITE margin that recovered to 10. which Bekaert seeks to fend off through a policy of competitive pricing (as management believes that “when you let them in. In Latin America. investments in . EUR 5m for Asia Pacific and EUR 2-3m for North America and Latin America). Management replied that windfall gains on inventories amounted only to EUR 20m (EUR 10m for EMEA.4 | Bekaert | 2 August 2010 ABN AMRO The EMEA division saw its factories operate at high capacity utilisation levels.1% estimated). we can not really judge whether the 1H10 margin is exceptionally high in a historic context. This represents only 130bps of the gross profit margin.h. If we strip out the EUR 10m windfall profit on inventories.3% in 2H09 and -5. Yet. but the operations in Ecuador and Peru experienced robust sales growth. driven by a recovery of volumes in all segments except building products.9% in 1H09 (note that the prior-year period was impacted by the EUR 40m FIFO hit on inventories). Also the North America division experienced an improvement of capacity utilisation. In China.4%. compared with 24.0% in 1H09 (or around 0% when adjusted for the FIFO hit). Although the strong Brazilian real attracts competition from imported products. Bekaert also invests aggressively in expansion in non-tire cord products in China. this does not look to be the case. Gross profit (EUR m) and margin reached at record-high in 1H10 500 450 400 350 300 250 200 150 100 50 0 1H05 2H05 1H06 2H06 1H07 2H07 1H08 2H08 1H09 2H09 1H10 30% 25% 20% 15% 10% 5% 0% Record-high gross profit margin reflects high capacity utilisation and favourable product and geographic mix … Gross profit (EUR m) margin (r. we conclude that the quality of the profitability is good (not inflated by one offs). you do not get out again”). tire cord capacity is lifted from 350K tonnes to 400K tonnes by the end of this year. from 5. Record gross profit margin reflects high capacity utilisation (only limited contribution from windfall gains on inventories) In 1H10. market conditions are challenging in Venezuela. as a margin of 8. scale) Source: company data … while windfall gains on inventories contributed only EUR 20m The gross profit margin was so high that we raised the question whether it also reflected gains on inventory positions related to higher prices for the raw material wire rod (see chart on page 3). the 1H10 margin would still have been a healthy 8. driven by the automotive and energy related sectors and by ongoing expansion of capacity. As such. The Asia Pacific division continued on its path of strong growth. The joint venture operations in Brazil and Chile thrive well on the back of increased market demand.

9% in 1H09 and 36.7% in 1H10 (3. Xingda started the construction of a new factory (No. the much-anticipated erosion of profitability just did not set in jet. It lifts Xingda’s capacity from 345K tonnes at the end of 2009 to over 500K tonnes in 2012. This is an attractive market with an oligopolistic structure on the supply side. at least for the time being. In June of last year. if only it were for the fact that Bekaert is seeking to expand in (lower-margin) non-tyre cord products. It makes the often-heard concerns look somewhat overdone. This margin compares to a previous high of 7. representing a CAGR of 15%. In order to defend their market share. where Bekaert and main rival Xingda (listed on Hong Kong exchange) together control about 70% of the market (the third largest player with a c. In our model. 9) with potential capacity to produce 150K180K tonnes of tyre cord (the expansion is a phased approach to add about 50K tonnes of capacity per annum). Development divisional EBITE margins 40% 35% 30% 25% 20% 15% 10% 5% 0% -5% -10% 1H08 EMEA 2H08 North America 1H09 2H09 Latin America 1H10 Asi a Pacific Source: company data North America back on track The North America division saw its margin recover from a break even level in FY09 to 6. Bekaert announced the closure of the plant in Hemiksen (the steel wire activities are now concentrated in Zwevegem).3% in 1H10 (33.3% achieved in 1H08 (remember that we have no numbers available before 2008). we would expect the others to expand capacity at the same pace. we have modelled a divisional margin of 6. also for newly installed capacity. The market should be able to absorb this c. While the tyre cord market is still growing strongly. as the divisional EBITE margin actually showed a further improvement (from 34.ABN AMRO 2 August 2010 | Bekaert | 5 a shift of the mix towards products with higher added value (energy and utility sector) and the timely implementation of restructuring measures in Belgium1.5-7. we expect any margin erosion to be compensated by sales growth. driven by a higher capacity utilisation rate.1% in 2H09) to even 37.3% estimated). Capacity utilisation continues to be very high. making us count on a 910% margin for the EMEA division in the coming years. we do anticipate the margin of the Asia Pacific division to come down. 1 Further margin improvement Asia Pacific division makes often-heard concerns look overdone for time being . The most important activity is the production of tyre cord in China. 15% annual growth in capacity. As such.9% estimated). Management noted that a relatively high share of low-margin bead wire products in the mix had weighed somewhat on the divisional margin. But. 10% share is Shougang. this market structure should ensure a certain discipline against irrational (pricing) behaviour (there is cake for everyone). For the coming years.5% No. we do not believe that the very high margin of the Asia Pacific division is sustainable. Bekaert also started the reorganisation of the steel cord activities through the closure of the plant in Lanklaar. as automotive is a structural growth market in China (outpacing GDP growth) and there still is upside to the radialisation rate of tyres (currently only around 70% for truck tyres). All players have significant capacity expansion plans. But. Nonetheless. we assume that the operating margin deteriorates by 300-500bps in the coming 5 In December of 2008. we consider the 1H10 profitability sustainable. in which Bekaert holds a 13% stake).

2% -97.0% 5. We believe that this assumption risks being on the conservative side.7% 19.0% -13.1% 0.6% 40 12.3% (67) 545 15.6% (5) -1.2% 106 10.200 -7.8% 152 12.9% 8. Non-recurring items EBIT Net financial charges EBT Taxes as % of EBT Share in results joint ventures Result discontinued operations Minority interests Net profit continuing operations % chg.86 35.3% 60.8% 496 18.0% 49 0 (31) 389 1.6% 6.7% -1.3% 2.654 33.1% (15) 536 (20) 516 (139) 27.2% 367 22.630 6.5% 6.1% 205.2% -2.7% (10) 259 (24) 235 (41) 17.0% 0. organic fx consolidation EBITDAE margin % chg.5% 19 0 (14) 181 309.0% 16 8.5% (15) 530 (36) 494 (124) 25.2% 735 23.0% -0.1% (5) -1.9% 5.8% -17.45 123.4% (0) -0.7% 66.83 15.2% -47.9% 8.437 -8.3% 114 10.0% 288 35.200 3.4% 287.237 -9.1% 6.4% 75.9% -20.3% nmf 21 6.189 30.458 3.5% 160 36.3% 2 0.9% 2H10E 536 317 154 648 1.7% 42 6. P&L Bekaert (EUR m) 2008 EMEA North America Latin America Asia Pacific 1.4% 5.3% 19 11.5% (68) 551 15.0% 51 7.1% 57.9% 410 16.0% (63) 294 11.0% 5.60 1.15 308.535 27.0% 6384.0% 744 20.0% (69) 532 16.0% (29) 503 (40) 463 (93) 20.7% -37.662 22.1% 7.5% 21 6.2% 28 8.3% -22.6% 415 31.0% 141.1% (30) 171 13.8% 68 5.00 21.0% 34.7% 30.1% (17) 153 (35) 118 (21) 17.7% (25) 232 (66) 167 (34) 20.6% 25 0 (16) 203 88.4% (21) -5.1% 20.69 -12.0% 22 5.3% (7) 79 (31) 48 (13) 27.9% (84) 210 (49) 161 (26) 15. EPS basic (EUR) % chg.417 7.3% 737 21.2% -113.9% 0.7% 2.2% 2H09 417 210 167 443 1.3% 6.3% 7.21 87.6% 0.9% 420 35.5% 17.5% -12.3% 368 24.5% -16.338 3.4% 20 0 (10) 108 124.8% 56 0 (18) 174 13.3% 2010E 1.0% 0.062 630 298 1.109 655 316 1.7% -121.0% -1.01 2.34 151.5% 17 0 (8) 44 -65.0% 120 10.2% 10.8% 1.8% 0.3% 52 9.2% 0. DPS (EUR) pay out Source: company data and ABN AMRO estimates .2% 6.2% 128 34.1% 214 33.2% (25) 86 7.0% (36) 270 16.7% 107.9% 0.2% (19) 243 (16) 228 (51) 22.7% 206 37.3% 47.1% 12.77 35.1% 2.8% 1.6% 45 6.1% -120.7% nmf 14 9.8% 30.0% 25 4.0% 2012E 1.24 -65.80 31.9% 20.0% -139.6% 9.0% 2011E 1. EBITE EMEA margin % chg EBITE North America margin % chg EBITE Latin America margin % chg EBITE Asia Pacific margin % chg Other Total EBITE margin % chg.9% 2.8% 1H09 410 264 160 367 1.0% 249 34.168 605 177 713 2.9% (33) 262 17.0% 15.7% 6.153 688 331 1.0% 46.0% -1.9% 29.4% 12.6% nmf 33 11.0% 52 0 (32) 397 2.8% 2009 827 473 327 809 2.4% 1H10 526 313 144 552 1.6% 1.9% 2.5% 5.0% 18.9% 30.6 | Bekaert | 2 August 2010 ABN AMRO years (and to 28% in 2012).94 38.0% 5.6% (55) 257 10.0% 44 0 (31) 384 152.0% Consolidated sales % chg.7% 38 12.7% 134.4% 38 0 (19) 152 -12.8% 54 10.8% 7.0% 408 28.9% 2.4% 1.9% 2.0% 258 20.6% 15.2% 42.5% 1.00 35.4% 8 5.2% 1.5% nmf 19 12.0% 79.4% -1.3% 19.2% -2.8% 0.3% 57.6% 59.

9% >10% EBITE margin target looks on the conservative side 15.8% 8. however.1%10. This (and the significant beat in 1H10) prompted us to raise our group EBITE forecasts by 35-40% for the coming years. making it impossible for them to say anything meaningful about the future.62/6.8% 8. We expect this strategy to continue to create value in the years ahead. The strong performance in recent years has led many to ask Bekaert whether or not the time has come to revise their long-term EBITE margin target of 7-9% (which was target introduced at the beginning of this decade). We do not see this as very ambitious nor inspiring. As a result.1% 6. irrespective of macro environment Cautious words in outlook merely reflect lack of macro visibility As usual.01.52 (or c.5% 8. being prudent for 2H10 in light of volatility of markets.6% 4.7% 15. management expressed its firm believe in the strategy focused on innovation and further expansion in emerging markets (c.2% 13.60/20. and we expect it to be amply exceeded in the years ahead (see chart below).1% Source: company data and ABN AMRO estimates EPS forecasts 2010-2012 upgraded by EUR 7. Note that the limited increase in EPS in 2011 and 2012 is due to our assumption of a return of the tax rate to a more normalised level (from 20% in 2010 to 27% in 2012) and also reflects our assumption of a considerable margin deterioration for the Asia Pacific division (which may prove to be on the conservative side).01 EPS estimates raised by >50% for 2010 and beyond The 1H10 results have changed our view of a sustainable level of profitability for Bekaert for the better.1% 8.27/6. 80% of the EUR 200m capex budget for 2010 is destined to emerging markets).ABN AMRO 2 August 2010 | Bekaert | 7 Words of caution for 2H10 merely reflect lack of visibility on the macro environment Focus on innovation and emerging markets seen creating further value. however. At the same time.60/20. however.34/19.52 (or 60/51/48%) to EUR 19. . as it has been achieved already since 2008 (even in the challenging year 2009).62/6.6% 11. Note that the cautiousness is not related to company specific issues. The company did comment. our EPS forecasts for 2010 through 2012 have been upgraded by EUR 7. exchange rates and raw materials prices. The company has responded by indicating now that they feel comfortable to raise the EBITE margin target to >10% for the coming three years. irrespective of economic circumstances. particularly in respect of the EMEA and North America divisions.6% 6.2% 11.34/19. Bekaert refrained from giving a concrete outlook for the remainder of the year.5% 16. Development group EBITE margin 18% 16% 14% 12% 10% 8% 6% 4% 2% 0% '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10E '11E '12E '13E '14E 6. We refer to the table on page 6 for the detail behind our forecasts. 50-60%) to EUR 19. Management explained at the analyst meeting that there is simply a lack of visibility on the macro economic front.27/6.

9x P/E and 6.0% 42 6. the Bekaert stock trades at a valuation of only 8.5x net debt/EBITDA and 24% net gearing end 2010) and the strong track record.00 (0.6/4.8% (25) (59) (79) 26.19 (0.8x EV/EBITDA on 2010 earnings.5x P/E and 4. Development Bekaert’s valuation implied by ROCE/WACC ratio versus actual eoy share price (EUR) 250 200 150 100 50 0 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010E 2011E Price target raised to EUR 250 from EUR 173 Valuation implied by ROCE/WACC rat io Actual share pr ice (eoy) Source: ABN AMRO EUR 250 target pries implies a realistic valuation of 12.16 0.6/8.3% 32 11.7% (29) (40) (93) 20.6% 33 11.34 Change per share (EUR) 2.5% (63) 389 13.0% 44 0 (31) 384 19.06) 7.8 | Bekaert | 2 August 2010 ABN AMRO Sources of change in FY2010 estimates (EUR m) Previous estimates EBITE EMEA Margin EBITE North America margin EBITE Latin America margin EBITE Asia Pacific margin Other Total EBITE margin Non-recurring items Net financial charges Taxes as % of EBT Share in results joint ventures Result discontinued operations Minority interests Net profit continuing operations EPS basic (EUR) Source: ABN AMRO estimates 57 6.07 New estimates 106 10.27 Trading at a 2010 valuation of only 8.0% (69) 532 16.0% 19 3.00 (0. we raised our target price from EUR 173 to EUR 250.20) 1.68) 0. Consistent with the earnings upgrade.0% 43 0 (29) 239 12.45 1.9x P/E 2010 Our price target implies a valuation of 12.02 3.85 (0. These multiples do not do justice to the attractive growth profile (>70 of sales in emerging markets). as Bekaert’s historical share price development has tracked the outcome closely (see the chart below).6x P/E and 4.6x EV/EBITDA Compelling valuation on new estimates – target price raised Based on our raised estimates for 2010/2011.0% 420 35. which looks does not look far-fetched in view of Bekaert’s growth profile.29) 7. which is the outcome of a returns based valuation (where EV/CE = ROCE/WACC) on our 2010 forecasts.3x EV/EBITDA (EV adjusted for the estimated value of JVs). the strong balance sheet to continue to make value creating investments (0.8% 344 33. .03 0. Back-testing validates the returns-based valuation methodology.27 Change 49 23 0 76 (6) 143 (4) 20 (13) 1 0 (1) 144 7.

1 2008 2.1 (30.2 2009 105.6 2.4) (0.5 81.9 331.6) 722.9 2004 118.7 1.1) 0.1 (8.8 373.0 1.3 1.199.8) (161.9 0.6) (112.8 (22.0 (449.2 35.0) 0.2 4.9 1.7 28.2 1.4 545.0 (27.098.5 38.6 (3.9 6.0 422.0 86.142.8 322.9 598.0 (19.937.1 (8.9 0.219.7) 396.0) 68.0) 75.8 2006 262.219.7 1.175.0 (134.421.3 2012e 3.6) 494.3) 174.7) 136.2 (111.5 75.1) 0.189.0) 0.1) (2.6) 298.2) 17.3) 0.0 (30.023.5) 49.5) 118.8) 2011e 722.2 96.0 (566.9 2006 134.2) 172.3) (16.6) 151.1 (191.2 0.0 41.8 391.0 152.4 0.7 2.0 (13.330.4 61.9 29.8 373.1 253.4) (32.5 288.142.0 1.7 0.6 (35.3 385.7 13.2 63.2 (172.2 493.205.0 (9.2 (31.5 2.125.6 171.0 231.3) (52.2 (139.0) 262.6 1.127.4) 51.741.8 6.4 52.775.0 (5.4 274.5) 529.8 5.9) 2006 2.0 48.3 1.0) 114.3 1.0 (506.458.4 332.2 1.0 0.8 (25.9 1.8 (43.7) 462.4 222.8 391.7 0.5) 157.307.7) 151.7 (139.0 1.937.3 312.5) 514.3) 209.667.0 388.9) (41.9) 5.6) 32.4 298.9) 594.ABN AMRO 2 August 2010 | Bekaert | 9 P & L Statement (EUR m) Year to December Net sal es Other income Personnel cost s Other operating costs EBIT DA Depreciation EBIT A Reported provisions Amorti sat ion EBIT Net fi nanci als Pro fit Before Taxes (PBT) Taxes Income from associ ates Minorities Net p ro fit befo re extraordinaries Extr aordinary it ems Net r eported profi t % change in Sales % change in EBITDA % change in EBITA % change in PBT % change in Net profi t before extraordi naries 2003 1.1 357.1 2.3 245.173.0 0.0 (462.5 2.0 2005 125.0 88.5) 516.5) (151.0 (543.0 0.797.8 (31.312.0 (499.7) 178.914.3) (31.2 2.437.1 129.2) 161.0 535.3 627.2 (44.7 0.9) 0.0 250.0 3.3 1.336.0) (57.8 1.7) (62.6 30.8) 2010e 3.0 136.0 2012e 729.7) 152.110.864.1 (31.1) 385.5 75.130.6 187.8 0.8 (8.6 331.8 76.8 (8.9 (92.829.1 (141.) Net w or king capital Discounted value of leases Adj usted equity 2003 119.2 (33.7 247.6 (41.610.8 28.3 2.8 0.2) 0.1 410.2 1.969.7) 4.057.503.6 0.7 20.0 (72.9 83.0 39.7) 0.0) (25.312.5 2.0 311.7 60.6) 0.3 32.9 8.3) 111.8) 331.5 1.0 2005 1.3 2.610.4 218.1) 47.2 96.2 (139.7 (14.2 348.6 1.0 2.4) (212.6 0.9 (30.7 510.332.6) (31.1 22.6 1.827.1 (14.0 (203.7) 383.1 61.239.5 1.5 312.0 121.8 0.0 3.5 0.3) 0.8) (45.4 502.2 (12.5) (210.1) 292.2 37.2 2007 2.3) 39.5) 2007 298.2) 3.0 0.9 (16.8) 96.1 109.2) 0.4) (0.8) 142.2) 649.421.0 0.3 (92.5) (6.3 177.1 0.1 2012e 132.6 1.0 (57.7 2.6 131.0 383.4) 53.3 (3.8 0.4 799.3 0.407.0 Balance Sheet (EUR m) Net i nt angible fixed assets Net tangible fixed assets Financials fixed assets (FFA) Inventories Trade debtor s Other debtors Cash & securiti es Total Assets Shareholder's equity Other equity Minorities Pr ov isi ons Long-term interest beari ng debt Short-term interest beari ng debt Trade credi tors Other non-i nterest bear ing l iabili ties Total L iabilities & C apital Enter prise Value (EV) Net debt/(Net cash) Capi tal Empl oyed incl.6 303.3 1.8 604.302.7 (18.8 52.9 33.5 348.8 2.8 3.6) (105.2 44.041.6 (8.0 (35.4 2.0) 5.7 329.3 462.2 (162.2) 412.5 824.3 (15.5 1.5) 56.3) 56.0 20.6 2.2 13.0 (56.829.1 Cash Flow Statement (EUR m) EBIT DA Change i n provi sions excluding tax provisions Change i n net worki ng capi tal Gross operating cash flow Taxes pai d Capex Free cash flo w Net i nt erest recei ved Other Acquisi tions Divestments Share i ssues/buybacks Divi dend (adj.9) 246.5 (49.6 0.1 24.7 (31.9) (63.6) 5.9 3.5 253.6 123.3 2007 122.2 (110.6) 36.4) 276.8 59.2) 86.6 (19.9 0.4 1.2 460.4) 729.6 (33.3 (18.0 (20.220.5) 195.9) (172.4 1.2 523.3) ( 175.6 790.310.5) 0.7 2.1 227.0 0.3 0.7) 174.361.8 325.1 82.9 46.0 (58.5 2010e 706.7 81.5 ns ns 2004 1.6 191.6) 166.2 2.009.8 (24.2 880.0 176.0) 135.9) 217.0) 502.4 72.5 3.1 391.4 479.9 1.1 1.2 2.6 (0.8 0.0 37.305.7 73.9) 2008 412.1) 6.0 (589.0 3.2) 0.4 437.9 98.2 (65.4) 316.8) 23.0 0.5) 86.343.0 151.4 (7.1 (192.7 807.9 279.0) 139.6 0.8 2.1 73.2) (44.3 26.2 125.7 (19.221.347.9 (31.8 0.189.1) 52.9) 37.3 118.4 0.0 0.4 473.6 0.0 (13.7 0.0 (123.4 2.1 0.2 (193.6) (209.2) (18.4 1.3) 141.0 137.433.2 354.9 2.4 (15.175.9 (18.173.3 544.1 142.284.8 151.0 0.6 (39.8) 320.2) 0.7 7.251.4 45.630.0 396.5) (251.667.433.1 63.3) 121.0 242.1 151.3 0.4 1.0 (524.6 307.3) 255.2 1.7 (19.9 63.6 1.015.9 9.0 (35.1 (17.0 (472.7 1.6) 232.302.5 100.1 16.4 247.0 111.5 8.0 0.6) 148.5 (12.7 (3.5 0.5 (18.2 189.0 142.3 151.5 (24.3 0.662.8 1.2 1.5 757.7 322.4 (107.9) 247.8 100.6) 142.0 174.0 48.2 1.7 311. goodwill (avg.6 2011e 132.6 2.7 54.6 0.) Cumulativ e goodwill (as of 1991) Capi tal Empl oyed (avg.1) 388.6 (21.9) 257.0 (187.531.0 2.0 0.0 (252.0 411.6 195.0 51.0 (136.6 1.7 96.9 632.5) (0.3 1.4 288.0 (183.0 43.9 18.417.8) 245.9 1.6 1.6 (107.1 0.4 526.9 152.060.0) 672.4) 150.6 1.7 (2.189.6) 43.5 483.1 419.3 167.5) (118.8 0.4 378.3 361.6 (47.3 74.0 917.6 354.323.5) 145.1 2009 385.2 0.5 788.2 (25.0 (12.3 1.6 911.3 2.383.1 1.8) 210.8 156.6) 189.0 0.3 7.0 354.6 28.5) 24.4 2010e 133.2 1.961.6 36.8 151.9) 239.0 174.9 .2 26.3 909.2 1.9 32.9 2009 2.0 (5.0 48.1) (74.6 536.0 (450.2) (70.515.9) (199.2 1.7 (44.0) 133.1 672.6 368.4 791.1 0.6 1.3 176.9) 0.1) (173.2 2.3 2008 111.364.070.8 (18.5) (50.0 77.3 2.893.0 155.0 227.0 32.9 0.850.0 1.2) 0.5) 39.517.829.8 398.2) 33.4 (32.3 407.9 714.0 100.0 3.8) 42.7 2005 257.8 0.0 (4.6 303.5 455.7 45.4 226.706.9 (39. stock di vidend) Extr aordinary it ems (after tax) Change i n i nterest-bearing debt Change in cash & cash equivalents 2003 239.3 (12.4) 51.4 355.2 275.3 672.3 354.7 937.9 (12.7 85.239.0 529.1 (3.0 180.4 253.9 26.4) (42.4 76.8 1.0 (4.5 (16.8 2004 255.1 503.0 0.6 0.4 385.5 (7.7 2011e 3.1 (127.5) 535.3 0.4 3.6 (119.2 (165.6) 706.266.4 2.9 3.9 (123.7 358.

9 2012e 1.6 2.05 2.9 4.8 40.4 10.5 2008 165.9 18.7 120.5 13.8 10.9 1.80 57.2 0. goodwi ll) (x) Share pr ice : High (EUR) Share pr ice : Low (EUR) Share pr ice : Av erage (EUR) Share pr ice : Year end (EUR) 2003 10.64 123.7 12.01 27.92 3.3 29.03 36.04 14.2 0. & amort.8 25.0 17.6 5.2 5.9 52.92 9.7 3.6 35.6 4.5 2.66 6.4 8.9 161.2 166.6 3.80 35.8 151.15 13.0 13.0 28.4 6.0 60.76 2006 21.5 35.1 12.60 135.7 5.1 22.77 27.15 60.9 6.9 14.9 47.9 20.00 2011e 19.3 56.3 1.5 1.6 87.00 107.90 166.5 2.3 15.1 4.4 3.4 1.46 2.1 2004 1.3 45.5 15.36 160.41 26.90 166.60 69.2 99.4 7.8 4.6 27.49 10.0 110.8 19.03 (5.63 13.38 59.5 10.1 1.7 1.5 13.7 2006 169.8 4.6 1.2 2010e 171.7 3.6 0.00 166.5 3.75 138.0 4.40 84.5 1.3 42.2 1.1 16.1 14.3 2.5 6.3 5.1 0.90 101.2 109.8 9.5 0.68 2008 19.18 86.9 53.4 22.8 6.06 2.46 11.83 19.8 19.9 3.49 11.8 43.73) 2012e 19.6 3.8 12.0 62.8 19.87 3.1 5.4 33.5 41. (EUR) Net pr ofi t before extr aordinaries (EUR) Cash Fl ow (EUR) Gross Dividend (EUR) Book value (EUR) Adj usted equity Free Cash Fl ow % change in EPS before extr.6 64.00 41.7 8.82 2.8 10.30 6. & amort.3 1.7 71.76 2.75 43.0 1.8 12.0 13.4 1.0 109.1 4.9 6.8 (0.9 52.5) 0.9 10.5 2011e 1.6 21.2 27.60 25.94 25.76 7.5 45.9 6.0 20.70 2007 12.85 (0.26) 2010e 19.2 34.22 5.0 109.0 78.0 72.15 112.7 16.68 2009 19.90 2011e 8.2) 0.27 11.02 20.46 98.9 59.6 1.2 29.84 7.83 41.7 19.0 1.59 47.3 2.6 50.4 2007 1.5 38.4 11.32 2009 9.11) 2007 20.3 10.1 9.3 8.00 49.67 10.88 75.94 64.2 10.4 5.9 13.5 14.5 6.0 16.92 79.0 6.9 42.9 27.60 6.0 11.47 14.0 5.30 6.06 3.8 38.2 44.89) 74.2 3.51 0.7 71.1 5.3 2.2 34.47 88.7 0.8 1.7 19.2 87.6 4.2 92.00 41.7 67. no.3 5.8 19.3 2.4 70.34 19.4 4.0 124.1 113.68 1.7 47.01 98. 2003 22.6 0.4 2006 1.60 19.7 52.01 29.5 33.92 (0.35 82.90 166.4 0.8 38.27 10.1 29.12 53.8 3.8 5.4 5.6 166.4 27.00 2008 8.90 6.1 8.25 48.13) 35.81 (21.9 4.83 7.) P/CF (x) P/Book (x) Divi dend yield (%) Free cash flow yi el d (% ) EV/Sal es (x) EV/EBITDA (x) EV/EBITA (x) EV/EBIT (x) EV/Capital Employed (x) EV/CE (incl.3 29.2 2009 1.86 6.9 47.50 2010e 8.8 20.70 19.9 152.3 9.1 1.70 31.3 6.0 6.8 38.47 108.40 50.90 12.01 20.5 5.9 8.5 21.4 4.81 5.34 29.38 7.1 Op eratin g Ef ficiency & Prof itability ratios Sales per FTE employee ('000s) Wage costs per FTE employee ('000s) EBIT per FTE employee ('000s) Gross margin (%) EBITDA margin (% ) Operati ng margin (% ) Net margin (% ) Tax rate (%) 2003 168.32 93.5 13.6 16.9 80.90 8.7 1.50 2004 7.93 6.0 0.5) 0.3 1.3 4.3 6.8 5.2 3.8 37.5 2008 1.87 15.9 21.9 22.4 2.4 145.32 108.25 12.64 16.0 12.7 141.1 55.4 59.64 8. no.7 71.8 6.4 35.2 38.0 19.3 15.0 9.8 15.5 2.4 15.0 0.0 20.8 10.05 37.0 66.50 50.5 1.33 4.1 15.2 9.06 5.7 1.1 22.77 81.3 2007 155.4 3.9 12.08 23.5 2004 161.0 35.62 12.7 28.6 7.61 54.38 ns 2004 21.9 2005 178.2 1.95 55.70 26.0 12.8 19.0 2011e 180.0 1.07 172.0 7.94 19.5 3.13 58.2 (2.9 2012e 188.17 78.91 6.4 11.08 1.8 19.29 6.68 81.51 12.9 7.69 15.6 160.0 9.75 35.76 8.4 36.9 21.1 10.2 9.0 9.8 19.4 4.71 88.6 2005 1.1 15. no.2 3.2 50.3 32.4 2012e 8.0 13.40 65.5 20.2 65.9 0.4 41.3 1.2 2.1 2009 139.5 25. & amor t.95 2006 11.8 116.6 4.4 4.3 4.1 3.6 10.1 10.6 23.4 26.18 94.86 94.90 Capital Efficiency/Solvability Sales/CE (incl.01 20.7 11.4 3.3 19.93 8.48 12.4 3.7 73.28 36.7 8.0 0.7 41.8 66.79 6.54 12.5 5.90 166.8 51.75 6.7 71. of shares (m) Eoy.7 2.7 69.44 11.54 1.50 50.10 | Bekaert | 2 August 2010 ABN AMRO Per Share Data (EUR) Av g.45 11.09 Valuatio n P/E (excl.9 169.88 2005 21.5 35.60 29. of shares fully diluted (m) Enter prise Value (EV) Net debt less FFA pl us mi nori ties Sales EBITDA EBITA EBIT Net pr ofi t before extr .1 7.9 92. of shares (m) Av g.8 7.9 2010e 1.0 7.81 1.90 6.7 5.75 2005 9.5 7.2 2.7 9.05 6.18 92.9 1.5 62.34 6.64 12.2 8.13 2.20 7. extr.1 6.4 0.23) 183.47 19.7 30.2 2.0 20.32 44.93 (1.8 38.0 (7.1 47.32 2.0 21.8 19.5 38.17 1.6 66.6 1.9 166.5 7.8 5.02 16.9 50.76 55. goodwil l) (average) (%) 2003 1.78 68.0 .71 7.4 67.59 (2.9 52.goodwill ) Sales/Fi xed assets (x) Sales/Net working capital (x) Inventories/Sal es (days) Trade debtor s/Sal es (days) Trade credi tors/Sal es (days) CAPEX/Depr eciation (% ) Equity/ Total assets (%) Net debt/Equity (% ) Interest cov er (x) Divi dend payout (%) ROCE (average) (% ) ROCE (i ncl.

V. ABN AMRO Bank N. While the outlook is uncertain. independent.Equity Research Analy st Analysts' compensati on i s determined based upon activities and services intended to benefit the clients of ABN AMRO Bank N.V. Expect ed perfor mance: > -5%. including information barrier s. or will be. and affiliates equity research ratings distribution (primary covered stocks) Category ABN AMRO Rating Definition % companies under coverage with this rating % companies for which ABN AMRO has provided Investment Banking services 56% BUY BUY The stock belongs to the favourites of the local ABN AMRO Bank N. The investment case is not appealing for t he time being. is.90 ABN AMRO Bank N. management or disclosure of conflicts of i nterest in connection wi th the production of research. analysts receive compensation that is impacted by overall ABN AMRO Bank N. and its affiliates. Expected performance: > + 5% . l oca universe. Expected performance: > + 15% The stock does not bel ong to the current favour ites. univ erse.V. clear and not misleading. Howev er. In par ticular the Policy i dentifies policies intended to promote the integrity of research i ncluding those desi gned to ensure the identification and avoidance. < + 10% The i nv estment case is definiti vely negative. which includes revenues from other business units.V. t he stock does not deserve an outright Sel l. directly or indirectly. Investors should sell the stock at any condi tions.V . all of the views expressed in the r esearch report accur ately r eflect t he personal v iew s of t he authors about the subject financial inst ruments and issuer s. Expected performance: negativ e ABN AMRO Bank N.BR Price (EUR) 166.V . Maarten Bakker . Analyst certification The persons named as t he authors of thi s resear ch repor t certify that: 1. it's worth to keep the stock. Primary Eq uity Research Coverage: 95 56% HOLD HOLD 39% 33% REDUCE 3% 6% SELL SELL 2% 6% 2 August 2010 . and 2. Like all ABN AMRO and affiliate employees. related to the specific recommendations or v iews expressed in the research report.ABN AMRO 2 August 2010 | Bekaert | 11 Important disclosures Issuer Bekaert Ticker BEKB. pr ofit abil ity. adopt ed a Resear ch Policy for the purpose of ensuring that r esearch produced by its analysts is impartial. no part of their compensation was. fair .V. < +20% The stock belongs to the less attractiv e ones within the ABN AMRO Bank N.

12 | Bekaert | 2 August 2010 ABN AMRO Historical equity recommendations and target price for Bekaert (EUR) 180 160 140 120 100 80 60 40 20 Jun 07 BUY Sep 07 Dec 07 Mar 08 HOLD Jun 08 Sep 08 REDUCE Dec 08 Mar 09 SELL Jun 09 Sep 09 Dec 09 UNDER REVIEW Mar 10 Jun 10 Sep 10 07/04 08/05 56. FactSet .00 EUR 172.00 EUR 75.00 EUR 75.00 Source: ABN AMRO Equity Research.00 EUR 125.00 History of Recommendation s Date 8/5/2009 5/8/2009 4/7/2009 Recommendation BUY HOLD BUY Target Price EUR 112.00 EUR 112.00 EUR 75.54 77.00 EUR 127.00 EUR 134.40 History of Target Prices Date 7/26/2010 7/23/2010 6/2/2010 5/12/2010 3/9/2010 1/7/2010 11/17/2009 11/16/2009 8/5/2009 4/7/2009 Recommendation BUY BUY BUY BUY BUY BUY BUY BUY BUY BUY Target Price EUR 173.00 EUR 155.33 05/08 87.00 EUR 166.00 EUR 165.

investments objectives and financial situati on and.S. trademarks. investment objecti ves and financial si tuation or needs. the "financial instrument(s) concerned" and/or the "issuer(s) concerned") are based on reli abl e sources. and/or other mater ial that is protected by copyri ghts. Neither ABN AMRO nor any of i ts group compani es (i ncluding any subsidiary.com . or intended for di stri buti on to. and 2) no part of his or her compensation w as. as all Dutch banks. To check t he occurrence of possi ble (confli cts of) interests please send an emai l to: equiti es. and i s not i ntended as a personal recommendation to i nv est in the financial instrument(s) concerned. Before making an investment decision on the basi s of thi s document. It is not directed to.O. Thi s document has not been di scl osed t o the issuer(s) concerned pr ior to its di sseminati on by ABN AMRO. di rectly or i ndi rectly . except in the event of wilful misconduct or gross negligence on thei r par t. purchase or subscription of any financial instr ument i n any jurisdiction. claims. damages. logos. text. has a full banking License from the Dutch National Bank (DNB) and is ov erseen. that i s not r egistered as a U.abnamro.nl@nl. So urces and disclosure ABN AMRO bel ieves that the i nformation and/or the i nterpretat ions. Thi s document can be di stri buted (i ) by an affil iate of ABN AMRO Bank N. incl udi ng any consequential loss. br oker -deal er to maj or U. the owner of that content. di rectors.. Investments i n the fi nanci al i nstrument(s) to w hi ch this document r elates may involve significant r isks. any person or enti ty who i s a ci tizen or resi dent of or i ncorporated or located in any jurisdi cti on where such distr ibution w ould be contrary to local l aw or regulation and/or wher e ABN AMRO would infringe any regi stration or licensing r equirement wi thi n such jurisdi cti on. This document has been provided t you for y our personal use only and shoul d not be communicated to any other person wi thout the pri or written consent of ABN AMRO. AFM) and DNB Copyright Thi s document contains i nformation. published or used i n any way by any person for any purpose without t he prior wri tten consent of ABN AMRO or i n the ca of t hi rd party materials. or i ncome from. 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