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AGTHIA
November 8, 2010 Price: AED 2.12

NEUTRAL

CURRENT BUSINESSES PRICED IN, VALUATION SENSITIVE TO NEW PRODUCTS; INITIATE WITH NEUTRAL
• Our DCF valuation of AED2.22/share, which is 4.9% above the current share price, suggests that the current business lines are fully priced into the stock. We assign a P/BV of 1.5x to the estimated investment cost of AED120 million for Agthia’s new products to arrive at AED0.10/share. Our fair value (FV) of AED2.32/share is 9.6% above the stock price; hence we initiate with a Neutral. Upside potential depends on the new business lines, which have yet to start. We expect the new business lines to need time to ramp up capacity and will require aggressive marketing expenses to achieve decent market share. Our valuation for Agthia is highly sensitive to long-term wheat price forecasts; a 5% change in long-term wheat prices results in an 8.4% movement in our FV in the opposite direction. The flour and feed segment contributes 63% of the group’s profitability during our forecast horizon despite the expected growth in the other divisions (i.e., water and beverages and processed fruits and vegetables). The flour and feed segment also exposes Agthia to quarterly earnings volatility. We think Agthia can increase the pace of earnings growth, expected to peak in 2012, and defy its strong reliance on B2B sales and the Abu Dhabi market through the acquisition of a strong consumer franchise. We believe the spectrum for possible acquisitions include businesses related and unrelated to Agthia’s current operations. Agthia enjoys ample borrowing capacity to finance inorganic growth.

United Arab Emirates [Packaged Foods & Meats]
Bloomberg: [AGTHIA UH] Market Cap: USD 346.33 m Outstanding Shares: 600.00 m Six Month Avg. Daily Trading Vol. (USD m): 0.26 52 Week High/Low: AED 2.48 / AED 1.54
EMEA Sales Team John Burge Head of Global Client Relations jburge@agco.com 212-453-3528 Charlie Gushee Head of Global Equity Sales cgushee@agco.com 212-453-3511 Alexander Doncov adoncov@agco.com 212-453-3509 Michael Daoud mdaoud@agco.com 212-453-3586 Ugur Sarman usarman@agco.com 212-453-3589 Zoran Milojevic zmilojevic@agco.com 212-453-3563 Ailsa Carpenter acarpenter@agco.com 212-453-3507 Simon Mandel smandel@agco.com 212-453-3571 Thomas Furda tfurda@agco.com 212-453-3585 Kate Korolkevich kkorolkevich@agco.com 212-453-3585 EMEA Trading 212-557-4444 Garth Ballantyne Head of Trading gballantyne@agco.com Sarkis Iliozer siliozer@agco.com Steve Pollicino spollicino@agco.com Harold Warren Russian Trading hwarren@agco.com

Revenues (AED m) 2012E 2011E 2010E 2009A 2008A 1,141.00 1,078.00 1,004.00 921.00 854.00

EBITDA (AED m) 175.10 155.60 145.50 138.80 92.50

Net Profit (AED m) 138.00 121.00 111.00 106.00 74.00

EPS (AED) 0.23 0.20 0.18 0.18 0.12

PER (X) 9.20 10.50 11.50 12.00 N.A.

EV/EBITDA (X) 6.90 7.70 8.30 8.70 N.A.

Div. Yield (%) 3.10 2.70 2.80 2.40 N.A.

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This report has been prepared by our correspondent named above on the date set forth above. This report was not prepared by Auerbach Grayson & Company and the correspondent named above is not an associated person of Auerbach Grayson & Company. The correspondent named above and its research analysts are not members of the Financial Industry Regulatory Authority and are not subject to the FINRA Rules on Research Analysts and Research Reports and the attendant restrictions and required disclosures required by that rule.[If the report is to be distributed to more than major U. S. Institutional Investors Auerbach Grayson & Company accepts responsibility for the contents of this report as provided for in SEC Releases and SEC staff no-action letters.] All persons receiving this report and wishing to buy or sell any of the securities discussed herein should do so through a representative of Auerbach Grayson & Company. Auerbach Grayson & Company and its affiliates do not own one per cent (1%) or more of any class of equity securities issued by any of the companies discussed in this report. Auerbach Grayson & Company and its affiliates have not received any investment banking compensation from any of the issuers discussed in this report in the past twelve months, and does not intend to seek or expect to receive investment banking compensation from any of the issuers discussed in this report in the next three (3) months. Auerbach Grayson & Company has not acted as manager or co-manager of any public offering of securities issued by any of the companies discussed in this report in the past three (3) years. Neither Auerbach Grayson & Company nor any of its officers own options, rights or warrants to purchase any of the securities of the issuers whose securities are discussed in this report. Auerbach Grayson & Company does not make a market in any of the securities discussed in this report, and it and its associated persons do not stand ready to buy from or sell to any customers, as principal, any of the securities discussed in this report.

agthia

rating

neutral

08 November 2010

Current Businesses Priced In, Valuation Sensitive to New Products; Initiate with Neutral
initiation of coverage consumer goods │ uae
Ahmed Gad, CFA +971 4 364 1904 agad@efg-hermes.com Gigi Tharian Varghese +968 24760023 gvarghese@efg-hermes.com STOCK DATA Price Fair Value
Last Div. / Ex Date Mkt. Cap / Shares (mn) Av. Mthly Liqdty (mn) 52-Week High / Low Bloomberg / Reuters Est. Free Float

Fair Value of AED2.32/Share; Initiate with Neutral Our DCF valuation of AED2.22/share, which is 4.9% above the current share price, suggests that the current business lines are fully priced into the stock. We assign a P/BV of 1.5x to the estimated investment cost of AED120 million for Agthia’s new products to arrive at AED0.10/share. Our fair value (FV) of AED2.32/share is 9.6% above the stock price; hence we initiate with a Neutral. Upside potential depends on the new business lines, which have yet to start. We expect the new business lines to need time to ramp up capacity and will require aggressive marketing expenses to achieve decent market share. A Commodity Play Despite Diversification Plans Our valuation for Agthia is highly sensitive to long-term wheat price forecasts; a 5% change in long-term wheat prices results in an 8.4% movement in our FV in the opposite direction. The flour and feed segment contributes 63% of the group’s profitability during our forecast horizon despite the expected growth in the other divisions (i.e., water and beverages and processed fruits and vegetables). The flour and feed segment also exposes Agthia to quarterly earnings volatility. Acquisition of Strong Consumer Franchise Could Change Positioning We think Agthia can increase the pace of earnings growth, expected to peak in 2012, and defy its strong reliance on B2B sales and the Abu Dhabi market through the acquisition of a strong consumer franchise. We believe the spectrum for possible acquisitions include businesses related and unrelated to Agthia’s current operations. Agthia enjoys ample borrowing capacity to finance inorganic growth.

AED2.12* AED2.32
AED0.05 on 29 April 2010 AED1,272 / 600 AED 27.8 AED2.36 / AED1.58 AGTHIA UH /AGTH.AD 44.00%

SHARE PRICE PERFORMANCE RELATIVE TO ADI REBASED
Price (AED) ADI (Rebased)

2.4

2.0

1.6

1.2 07-Nov-09 07-Aug-10

KEY FINANCIAL HIGHLIGHTS December Year End (AED mn) Revenue EBITDA EBITDA Margin Net Profit EPS (AED) DPS (AED) Net Debt (Cash) P/E* (Attrib.) (x) EV / EBITDA (x) P/BV* (x) P/CF* (x) Div. Yield
*Price as at 07 November 2010 Source: EFG Hermes estimates

2009a 921 139 15.1% 106 0.18 0.05 (95) 12.0 8.7 1.6 5.1 2.4%

2010e 1,004 146 14.5% 111 0.18 0.06 (65) 11.5 8.3 1.4 10.5 2.8%

2011e 1,078 156 14.4% 121 0.20 0.06 (133) 10.5 7.7 1.3 8.5 2.7%

2012e 1,141 175 15.3% 138 0.23 0.07 (200) 9.2 6.9 1.2 8.1 3.1%

CONTENTS
I. VALUATION AND RECOMMENDATION II. INVESTMENT THESIS III. BUSINESS MODEL AND STRATEGY V. WATER AND BEVERAGE – DIVERSIFICATION IS PAYING OFF VII. FINANCIAL STATEMENTS 2 4 7

IV. FLOUR AND FEED - THE KEY SEGMENT 10 15 20

VI. PROCESSED FRUITS AND VEGETABLES 18

1 / 23 pages

kindly refer to the important disclosures and disclaimers on back page

07-May-10

07-Nov-10

07-Feb-10

This yields an additional value of AED60 million (net of required capex).1% 332 978 1.9% .9% above the current share price..10 PER SHARE FOR NEW PRODUCTS We apply a P/BV ratio of 1.8%. We do not include the new investments in our forecasts since we cannot assess the possible market share gains for Agthia in the respective markets at the moment. dairy and processing of fresh fruits and vegetables).5% 11.12 4. VALUATION AND RECOMMENDATION DCF VALUE OF AED2. in line with the P/BV of the current businesses implied by our DCF value (1. of Shares (mn) DCF Value (AED) Current Price (AED) Upside / Downside Source: EFG Hermes estimates 2011e 156 (47) (15) 94 83 2012e 174 (49) (27) 99 78 2013e 181 (38) (30) 112 80 2014e 183 (40) (15) 128 82 145 (88) (28) 7 7 1.22 PER SHARE FOR THE CURRENT OPERATIONS. 2 / 23 pages . unless otherwise stated 2010e COPAT Capex Change in Working Capital Free Cash Flow Discounted Free Cash Flow Terminal Value Perpetual Growth Rate WACC PV of Cash Flows 2010e-2014e PV of Perpetuity Total Firm Value Net (Debt) / Cash Equity Value No.309 25 1.agthia 08 November 2010 consumer goods │ uae I. We value Agthia’s existing operations using a DCF approach at AED2.5% to account for possible expansion in the current business lines.22 2. AND AED0. especially in the scalable beverages division.5x to the estimated investment cost (cAED120 million) of the new products (frozen bakery.000 per day over the last six months)..44x).. This ERP is 50 bps above the higher end of the range that we apply to our consumer sector coverage in Saudi Arabia to account for market and liquidity risks (Agthia traded on average USD260..519 2. FIGURE 1: DCF VALUATION In AED million. or AED0.22 per share. 4. We assign a perpetual growth rate of 2.334 600 2. We use a cost of equity of 11.1 per share. implying an equity risk premium (ERP) of 8% above the current yield on the Abu Dhabi Government USD-denominated bond maturing in 2019.

Rating: Neutral).39 2.58 2. depends on the success of the new product initiatives.85 1. This highlights our opinion that Agthia remains exposed to commodity risk despite the growing significance of the other segments during our forecast horizon. INITIATE WITH NEUTRAL We initiate coverage on Agthia with a fair value (FV) of AED2. representing 54% of the cost of the new product initiatives.0x and 8.21 2. and initiate coverage with a Neutral rating. The penetration of these new markets needs time and requires significant spending on marketing and advertising. As a result. which have yet to be proven. in our view.03 1.85. in our opinion.4% movement in our FV in the opposite direction. Fair Value: SAR219.44 2.23 2. fresh fruits and vegetables processing.0x and 11. SENSITIVITY TO LONG-TERM WHEAT PRICES We run a sensitivity analysis for our FV to our assumptions for long-term US wheat prices and cost of equity. a 5% change in long-term wheat prices results in an 8.93 1.0x. Our FV implies estimated 2010 and 2011 P/E multiples of 12.03 1. A rise in wheat prices negatively impacts Aghtia’s margins and thus its valuation. and are almost at parity with Juhayna’s (Price: EGP5. 9.86 2. in our view. to a lesser extent. Our valuation.02 2. as our long-term base case price assumption. Forward integration into the frozen bakery segment.32 2. Rating: Neutral) despite the latter’s strong earnings potential and non-exposure to the lower margin flour business.6% above the current share price. respectively. This price is c7% below the current wheat price. respectively. Fair Value: EGP5. and vice versa.3% 12.80 2. 3 / 23 pages Cost of Equity .8% 12. The current share price reflects the existing operations. which enjoys an unrivalled business-to-consumer (B2C) platform and product mix in the GCC region.8% Source: EFG Hermes estimates Our analysis reveals that our valuation for Agthia is highly sensitive to wheat prices.8% 11. the stock’s trading multiples should be capped. We use the Bloomberg consensus forecast for 2013 US wheat prices. as well as the long-term stock performance. However.8%.11 5% 2.13 2.65 2.46 -5% 2.53.4x.13 2.36 2. at USD270 per tonne.32 per share. Our estimated 2010 and 2011 implied EV/EBITDA multiples also stand at 9.28 0% 2.agthia 08 November 2010 consumer goods │ uae VALUATION SENSITIVE TO NEW PRODUCTS.94 10% 2. These multiples are at a discount to Almarai (Price: SAR215. unless otherwise stated Change in Long-term US Wheat Price Assumption -10% 3. We examine our FV sensitivity in 5% increments to our base case assumptions. Agthia would face well-established competition in dairy and.3% 11.77 10. in our opinion.51 2.58 2. in our view.71 2. could come together with the current product mix faster than the other products due to Agthia’s leading position in the flour market and its knowledge of its client base. FIGURE 2: FV SENSITIVITY TO WHEAT PRICES AND COST OF EQUITY In AED per share. assuming a base case cost of equity of 11.

the FAF would keep Agthia’s earnings volatile. The expansion of the flour mill would the segment’s contribution to Agthia’s profitability at the current high levels. According to the agreement with the Abu Dhabi government. The business-to-business (B2B) FAF enjoy a combined 85% volume market share in Abu Dhabi and B2C FAF also enjoys a 75% volume market share in Abu Dhabi.400 per tonne).8% in 2009-2014. Additionally. despite its leadership position. The common factor of the new products is that they are all value-added products. We attribute this to Agthia’s focus on the Abu Dhabi market. Agthia is a price taker of its competitors’ pricing policy in the northern emirates. with the company’s market shares in Abu Dhabi exceeding those in the UAE across all of its product groups. as well as grow the beverage segment organically and successfully integrate the fruits and vegetables processing segment. YET COMMODITY RISK AND CLIENT CONCENTRATION PERSIST Agthia is a price taker in the flour market. Since then. ii) the penetration of the GCC region’s dairy market after signing an exclusive manufacturing and distribution agreement with Yoplait in August 2010. including in: i) a frozen bakery plant at an estimated cost of AED65 million. We consider the ongoing organic expansion in the flour and feed (FAF) segment and the beverage segment as the last episode of this turnaround. PHASE II OF THE TURNAROUND – FOCUS ON VALUE-ADDED PRODUCTS Agthia plans to invest cAED120 million in new business lines. 4 / 23 pages . management has been able to record market share gains in all the constituents of its product mix. set to be operational in 1Q2012. EARNINGS STILL SENSITIVE TO FAF SEGMENT We still expect the FAF segment to represent c63. although Agthia’s products are sold across the GCC region. due to the Abu Dhabi government’s flour subsidies. As a result. increased by 28% Y-o-Y to increase the division’s sales by 30% over the same period. which might dilute the current operating margin.agthia 08 November 2010 consumer goods │ uae II. Agthia is currently evaluating an investment in the poultry business. MORE FOCUS ON B2C We expect Agthia to address the B2C market with its new dairy and processed fruits and vegetables capacity. and iii) the processing of fresh fruits and vegetables under the processed fruits and vegetables division. such as sugar refinery. We also expect Agthia to attempt to add market share points outside of Abu Dhabi. to increase brand awareness. although we expect the water and beverage segment’s net profit to grow by an estimated CAGR of 12. Al-Ain Water enjoys a 41% volume market share in Abu Dhabi. This should provide Agthia with cross-selling opportunities to its current distribution network (estimated at more than 1. Abu Dhabi represents the main market for Agthia. The water and beverage segment’s 9M2010 SG&A expenses. On the flip side. INVESTMENT THESIS PHASE I OF THE TURNAROUND ACCOMPLISHED Agthia’s current management team was hired in 2005 to maximise the group’s profitability.000 clients). Agthia cannot raise flour prices at will and is compensated for the difference between flour prices in Abu Dhabi and the northern emirates on a quarterly basis. which could require it to increase its advertising budget and target lower margin key B2B contracts. flour prices are fixed at AED70 per 50-kg bag (AED1. Agthia does not plan to venture in less value-added activities. such as restaurants and airlines.5% of Agthia’s net profit before unallocated items on average during our forecast horizon.

but to negatively affect the division’s profitability in 1H2011. unless otherwise stated Capital Expenditure 250 200 150 100 50 0 FY10e FY11e FY12e FY13e FY14e Free Cash Flow Dividend End of Year Cash Balance Source: EFG Hermes estimates EARNINGS GROWTH TO PEAK IN 2012 We expect earnings to grow by 10% in 2011 due to both an estimated 17% growth in the water and beverage division and a sharp decline in losses by the processed fruits and vegetables division. Agthia reported free cash flow of AED172 million in FY2009 despite the expansion of the beverage segment and tomato paste factory in Egypt. due to low-cost inventory. In our opinion. FIGURE 3: CORE BUSINESS FUNNELLING CASH FOR EXPANSION In AED million. a 12.agthia 08 November 2010 consumer goods │ uae For instance. If we assume annual sales for the new products of AED120 million (EV/sales of 1x) by 2013 at a net profit of 15% (accounting for high advertising expenses required for the launch of the new products). 5 / 23 pages . a strong balance sheet with a net cash balance of AED67. According to management. We expect FCF will remain positive over our forecast horizon as our forecasts do not include expansion into dairy. frozen bakery and processed fresh fruits and vegetables) into our forecasts. CORE BUSINESS FUNNELLING CASH FOR FUTURE EXPANSION Agthia’s extensive product expansion plans require significant cash outlays.5% addition to our 2013 net profit forecast of AED144 million.5 million and strong FCF provides flexibility for future expansion both organically and through acquisitions. frozen bakery and poultry businesses in FY2011. we expect the recent rise in local flour prices to enhance the FAF segment profitability in 4Q2010. we would arrive at an additional net profit of AED18 million. which are supported by the two cash-generating businesses (FAF and Beverage). in our view. The addition of market share points should be challenging. It is worth noting that we do not incorporate the new products (dairy. The scale of the new investments (AED120 million) should not significantly affect our earnings forecasts during our forecast horizon. These back-of-the-envelope calculations assume a quick ramp-up of the new capacities and successful market penetration. Earnings growth would be muted beyond 2012 as we do not assume further capacity expansions. The ability to pass on cost increases and the time lag between the change in input and output prices should keep quarterly earnings volatile. the approximate capital expenditure required to expand into these businesses is AED120 million. We expect earnings growth to peak at 14% in 2012 as the new flour mill is fully operational and the processed fruits and vegetables division returns to profitability.

We believe that the spectrum for possible acquisitions is diverse. Only 10% of the debt is a term loan and the rest is short-term borrowing to finance working capital and the receivable on government compensation for flour subsidies. one could take place in a business related to Agthia’s current segments. Agthia enjoys ample borrowing capacity to finance acquisitive growth. Agthia enjoys a net cash balance of AED25 million and gross debt of AED192 million. in our view. 6 / 23 pages . such as bakery. or in unrelated businesses such as poultry.agthia 08 November 2010 consumer goods │ uae ACQUISITION OF STRONG CONSUMER FRANCHISE SHOULD ACCELERATE GROWTH We think that Agthia can increase the pace of earnings growth through the acquisition of a strong consumer franchise that would enrich Agthia’s product mix in the B2C market and provide Agthia with a growing footprint in the northern emirates and possibly the GCC region.

The bottled water and beverages segment contributed 22% of 2009 revenues and 24% of operating profit. The company’s key strategy has been margin management.190 *Thousand tonnes per annum **Million cartons per annum Sources: Agthia. Johnson & Johnson and Bunge.9% 115 17. which should enable it to reinvest and expand its product portfolio. is a leading manufacturer and supplier of flour and animal feed.8* 11 22.8% -4.9 N/A -3% -1. BUSINESS MODEL AND STRATEGY Agthia.5% 256 29. Abu Dhabi Pension Fund owns 5% of the company and the balance (44%) is free float.7% 139 15.8% ROA Assets % of Total Asset 60. the company diversified its product portfolio to include processed vegetables and tomato paste in the product mix. EFG Hermes estimates TURNAROUND AND SHAREHOLDER SUPPORT GHC brought in a new management team following the 2005 IPO to turn Agthia into a profitable and diversified consumer staple company. The current top level management brings notable experience from multinational consumer staples and agricultural development companies.6** 89 43. GHC offered 49% of the company to the public in 2005. unless otherwise stated BUSINESS SEGMENT Operating Subsidiary Revenue (2009) 669 % of Market Capacity Gross Gross Segment Operating % of Total EBITDA EBITDA Total Share Margin Profit Margin Operating Margin Operating Profit Profit Revenue 73% 43% 575* 154 22.agthia 08 November 2010 consumer goods │ uae III. including Gillette/P&G.9 -4. The processing of fruits and vegetables segment is the least contributor to revenues (5% in 2009) and the only segment with operational facility outside of the UAE (AlAin Foods and Beverages tomato paste factory in Egypt).2% 80% 132 19. The company fully owns four subsidiaries operating under three different segments. Management also organically grew the bottled water capacity and ventured into the five-gallon home and office delivery (HOD) niche market. Management has also adopted a product diversification strategy. The FAF segment contributed 73% of the group’s 2009 revenues and 80% of operating profit. mineral water. 7 / 23 pages . PepsiCo USA.9% Total 921 100% - - 250 27.8% 13.1% 1. an Abu Dhabi government-related entity. Over the last two years. GHC contributed in-kind assets worth AED590 million to raise Agthia’s capital to AED600 million in 2004.2% 35 16.2% Flour & Feed Grand Mills for Flour and Feed (GMFF) 19. Foreigners can hold up to 25% of the capital. FIGURE 4: SNAP SHOT OF CONTRIBUTION OF DIFFERENT BUSINESS SEGMENT In AED million.2% 108 11. formerly known as Emirates Foodstuff and Mineral Water Company. The start-up costs of the Egyptian subsidiary caused the division to generate operational losses in 2009.1% N/A 96 10. The company is 51% owned by the General Holding Corporation (GHC).8% 24% 34 16. tomato paste and nonalcoholic beverages in the UAE.8% 532 Water & Beverages Al Ain Mineral Water (AAMW) 206 22% 24% 29.0% Processed Fruits & Vegetables Al Ain Vegetable Processing and Canning (UAE) & Al Ain Food and Beverages (Egypt) 46 5% 12% 49.

has helped increase profitability per tonne and balance and at times even outweigh the increasing profitability of the beverage segment. Agthia realised income of AED35 million following the transfer of Al-Ain Vegetables assets to Agthia in 2008. and iii) stable juices. to Agthia for free in 2008.agthia 08 November 2010 consumer goods │ uae Additionally. 8 / 23 pages . FIGURE 6: REVENUE BREAKDOWN FAF Beverages Fruits abd Vegetables Processing FIGURE 7: GROSS PROFIT BREAKDOWN FAF Beverages Fruits abd Vegetables Processing 100% 85% 70% 55% 40% 25% 10% -5% 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 2006 2007 2008 2009 1H2010 2006 2007 2008 2009 1H2010 Source: Agthia. Agthia signed a franchise agreement with Capri Sun. to cover the GCC region (excluding Saudi Arabia). the world’s third largest juice producer. including: i) fresh bakery under the FAF segment. coupled with efficiency gains in the milling operations. Finally. EFG Hermes Source: Agthia. GHC wrote back AED33 million in dues from Agthia in 2008. Agthia is assessing the addition of new products. a provider of refrigerated warehousing. Agthia largely remains a commodity play due to the high contribution from the FAF segment to revenues and operating profit. GHC also handed over Cold Stores. sports drinks and ready-to-drink (RTD) coffee and tea under the beverages segment. jams and ready-to-eat (RTE) meals under the fruits and vegetables segment. EFG Hermes GHC also supports Agthia by transferring assets at or below cost. FIGURE 5: PRODUCT MIX Flour and Feed Traditional and specialty Current Products flours Mixes and improvers Frozen bakery (4Q2011) Feed Lifecycle Program Ideal Protein Fresh bread and bakery Products under Evaluation Health protection feed Source: Agthia Water and Juice Bottled water HOD five-gallon Flavoured water Enhanced water Juice Fruits and Vegetables Tomato paste Tomato-based products Frozen vegetables Hot chilli paste Fruit puree Fresh fruits and vegetables (2011) Stable juices Jams RTE meals Energy drinks Sports drinks RTD coffee and tea However. The rise in grain prices especially wheat. ii) energy drinks.

Additionally. with the company’s market share in Abu Dhabi exceeding that in the UAE across all its product groups. The plant currently produces frozen French fries and red chilli paste. and 24-28% for the frozen bakery products. respectively. On the other hand. The new business lines include: i) a frozen bakery plant at an estimated cost of AED65 million. such as sugar refinery. ii) the penetration of the GCC region’s dairy market after signing an exclusive manufacturing and distribution agreement with Yoplait in August 2010. The drive to increase B2B business and gain market share has pressurised Agthia’s margins. CLIENT BASE Abu Dhabi represents the main market for Agthia. especially in the animal feed market. More importantly.agthia 08 November 2010 consumer goods │ uae FUTURE STRATEGY – FOCUS ON NEW BUSINESS SEGMENTS Agthia plans to invest cAED120 million in new business lines as well as continue spending on organic growth of its existing business lines.8% in 2009 as selling and marketing expenses soared by 62%. Al-Ain bottled water has even targeted lower margin B2B accounts. 9 / 23 pages .000 tonne-per-annum factory in Egypt. Agthia is evaluating an investment in the poultry business. although Agthia’s products are sold across the GCC region.1% in 2008 to 16. and has become the top-selling water brand in UAE eateries (14% volume market share) – all to increase the brand awareness amongst consumers. the segment’s EBIT margin declined from 18. Agthia does not plan to venture into less value-added activities. increasing brand awareness and expanding its distribution network. Using the beverages segment as a proxy. in line with the introduction of Capri Sun and the HOD five-gallon bottles to the product mix. and iii) the processing of fresh fruits and vegetables under the processed fruits and vegetables division. the otherwise profitable fruits and vegetables division has been experiencing losses since 4Q2009. The tomato crop in Egypt has also been significantly affected by a hot summer and pest disease. Capri Sun and Al-Ain tomato paste and frozen vegetables are Agthia’s main retail brands. that might dilute the current operating margin. such as Emirates Airlines. The fully owned subsidiary aims to benefit from year-round tomato cultivation in Egypt to produce tomato paste in bulk and export it to the MENA region. Management has been trying to increase its B2C business by introducing new brands. Agthia expects a gross margin of 45-50% for the dairy and fresh fruits and vegetables products.4% in 1Q2010 before recovering to 15. management plans to focus more on branded sales and move away from the low-margin private label export business. Al-Ain bottled water. set to be operational in 4Q2011. Consequently. The common factor of the new products is that they are all value-added products. INTERNATIONAL OPERATIONS Agthia ventured into tomato paste production outside the UAE by establishing a 30. Agthia introduced new products to counter the losses incurred by the Egyptian subsidiary. B2B flour and feed enjoy a combined 85% volume market share in Abu Dhabi versus 43% and 49% in the UAE.4% in 2Q2010. The subsidiary has been affected by a decline in international tomato paste prices driven by cheap Chinese imports. The segment’s EBIT margin reached a trough of 12. The FAF segment historically exposed Agthia to an institutional client base. Al-Ain Water enjoys a 41% volume market share in Abu Dhabi versus 24% in the UAE. B2C flour also enjoys a 75% volume market share in Abu Dhabi versus 38% in the UAE.

000 tonnes of flour at an estimated conversion rate of 75%. FLOUR AND FEED . set to be operational in 2H2011. paving the way for more market share gains for local producers. with Grand Mills and Al-Ghurair enjoying 76% of the market between them.agthia 08 November 2010 consumer goods │ uae IV. and poultry and cattle farms. To meet excess demand. The flour market is highly concentrated.000 tonnes of animal feed. while the UAE feed market size is estimated at USD222 million. Grand Mills’ sales volume has exceeded its capacity since 2006. Imports satisfy 10% of local consumption.000 tonnes of wheat to produce 200. Agthia is currently adding 100. We estimate that Grand Mills consumes c270. Grand Mills’ dominant market share in the feed business is unrivalled. Grand Mills outsources c40. The UAE flour market size is estimated at USD285 million. The capacity of Grand Mills is 200. growing at 7% per annum. Agthia enjoys a 49% market share of the UAE animal feed market (85% market share in Abu Dhabi). 10 / 23 pages . municipalities and the open market. Circa 80% of the flour and 100% of feed production are sold in Abu Dhabi. FIGURE 8: FLOUR CAPACITY UTILISATION In thousand tonnes (LHS) and In % (RHS) Sales Volume (LHS) Capacity Utilisation (RHS) 275 250 225 110% 200 175 150 FY06 Source: Agthia FIGURE 9: ANIMAL FEED CAPACITY UTILISATION In thousand tonnes (LHS) and In % (RHS) Sales Volume (LHS) Capacity Utilisation (RHS) 150% 130% 350 300 250 90% 80% 70% 60% 90% 70% FY07 FY08 FY09 200 150 FY06 Source: Agthia 50% 40% FY07 FY08 FY09 MARKET LEADER WITH STRONG B2B FRANCHISE Agthia enjoys a dominant market share in the UAE with a 43% volume market share of the B2B flour market and 38% of the B2C flour market. lifting capacity utilisation to 85% from 49%. with the rest of the market (51% market share) almost evenly split between three local companies. Agthia enjoys top market positions in all UAE feed segments: professional farms. Agthia’s market share in Abu Dhabi stands at 85% for the B2B flour market and 75% of the B2C flour market. Agthia’s main customer base is comprised of commercial bakeries.THE KEY SEGMENT DEMAND FOR FLOUR EXCEEDS CAPACITY The FAF business is the major driver of Agthia’s revenue and profitability. stores.000 tonnes of flour from competing mills.000 tonnes of flour milling capacity to Grand Mills.000 tonnes of flour and 370. while 20% of the flour production is sold in the northern emirates. growing at 6% per annum. Animal feed mill sales volume increased by a CAGR of 20% in 2006-2009.000-50.

is three times the world’s average. Africa Egypt USA UAE Source: FAO REVENUE GROWTH CAPPED BY ABU DHABI GOVERNMENT SUBSIDY Rising raw material prices.400 per tonne in 2007. The subsidy is calculated at the end of every quarter based on the flour price differential between Abu Dhabi and the northern emirates. 11 / 23 pages World . Future demand growth is expected to be driven by population growth and the UAE government’s plan to increase selfsufficiency in poultry production.B2B (Abu Dhabi) Feed (UAE) Source: Company Presentation Market Share 41% 39% 90% 47% STRONG MARKET FUNDAMENTALS The UAE’s per capita wheat consumption is the highest in the world. at 204 kg per capita. especially wheat.B2C (UAE) Flour. FIGURE 11: WHEAT CONSUMPTION PER CAPITA IN SELECTED COUNTRIES In Kg per capita per annum. unless otherwise stated 250 200 150 100 50 0 Argentina Australia France Kuwait Lebanon Pakistan India KSA Canada UK S. Agthia deducts this subsidy from its cost of goods sold.agthia 08 November 2010 consumer goods │ uae FIGURE 10: AGTHIA LEADS IN UAE B2B FLOUR MARKET: MORE ROOM FOR GROWTH IN THE B2C CATEGORY Category Flour. according to the United Nations’ Food and Agriculture Organisation (FAO). The UAE’s annual per capita wheat consumption. The Abu Dhabi government compensates Agthia through a subsidy system for quantities sold in Abu Dhabi. have little impact on Agthia’s flour revenue ever since the Abu Dhabi government capped the retail flour price at AED1.B2B (UAE) Flour.

unless otherwise stated 1. The company tends to increase inventory in the event of depressed wheat prices to benefit from the anomaly between wheat and flour prices. EFG Hermes 2Q10 Source: Agthia. the time lag between the change in wheat inventory costs and the change in flour price causes volatility in the segment’s earnings. EFG Hermes FY08 FY09 Animal feed prices have been declining since 2008.300 1. We note that the company has significantly benefited from these opportunistic windows since the start of the global financial crisis (1Q2009 in particular). On the flip side. PROFITABILITY DETERMINED BY COMMODITY PRICES Our analysis indicates that the FAF segment’s gross profit is a function of two variables: the carrying cost of wheat inventory and the premium of the flour selling price in the northern emirates over Abu Dhabi’s selling price.agthia 08 November 2010 consumer goods │ uae FIGURE 12: AVERAGE SELLING PRICE FOR FLOUR AND FEED In AED per tonne. FIGURE 14: INCREASED PROCUREMENT AT PRICE DIPS In days (LHS) and In AED per tonne (RHS) Inventory Days on Hand (LHS) 180 160 140 120 100 80 60 Wheat Price (RHS) 500 450 400 350 300 250 200 10% 0% 40% 30% 20% FIGURE 15: GROSS MARGIN VOLATILITY Gross Margin (LHS) Q-o-Q Wheat Price Change (RHS) Q-o-Q Flour Price Change ex-Abu Dhabi (RHS) 50% 40% 30% 20% 10% 0% -10% -20% -30% 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 Source: Agthia. They are not only affected by wheat prices. Agthia’s inventory management is influenced by the price of wheat. EFG Hermes 2Q10 12 / 23 pages .100 20% 0% -20% 900 700 FY06 Source: Agthia. Agthia procures wheat 45 days in advance on spot price. but also by other input prices (like barley and corn).500 Feed Flour FIGURE 13: LITTLE CORRELATION BETWEEN WHEAT PRICES AND FLOUR REVENUES Wheat Price % Change 80% 60% 40% Flour Revenue % Change 1. EFG Hermes -40% FY07 FY08 FY09 FY07 Source: Agthia.

should squeeze the division’s margins during 1H2011.100 1.Flour (RHS) Selling Price. We expect a mild recovery in the gross margin to 15.7% in 1H2010. in our opinion. We generally expect the FAF gross margin to drop from an estimated 18.200 1.400 1. FIGURE 16: EXPECTED SALES VOLUMES AND PRICES In thousand tonnes (LHS). We also expect volatile margins in 2011. unless otherwise stated Flour Revenue 900 800 700 600 500 400 300 200 100 0 Feed Revenue 400 300 200 100 0 1.000 900 325 313 305 314 317 320 320 348 356 373 383 417 444 448 FY10e FY11e FY12e FY13e FY08e FY09e FY10e FY11e FY12e FY13e Source: EFG Hermes estimates FY14e Source: EFG Hermes estimates SHORT-TERM VOLATILITY IN MARGINS We expect short-term volatility in the division’s gross and net margins.agthia 08 November 2010 consumer goods │ uae EXPANSION TO DRIVE REVENUE GROWTH IN THE LONG TERM The ongoing 50% expansion in the flour mill capacity is expected to enhance the FAF segment’s revenue growth outlook beyond 2011.300 1.Flour Mill (LHS) Volume Sales. We then expect margins to recover in 2H2011 as inventory costs slow down. We expect flour revenues to grow by an estimated CAGR of 9% in 2009-2012 due to the capacity expansion. down from 21.4%. The gross margin in 3Q2010 came in at 14. in our view.600 1. 13 / 23 pages FY14e FY08 FY09 . Feed revenue growth should be muted. Agthia’s current flour sales volume is affected by the capacity of third party mills used for outsourcing. The FAF segment also suffered from a drop in feed prices in 3Q2010.6% in 2011. amongst other inputs. In AED per tonne (RHS) Volume Sales.500 1.1% in 2010 to 17.0% in 4Q2010 as we expect a Q-o-Q recovery in flour volumes and prices. The rise in wheat inventory costs. due to a decrease in flour volumes as one of the lines was temporarily shut down in July. We do not expect the feed mill utilisation capacity to exceed 85%.Animal Feed (RHS) FIGURE 17: EXPECTED FAF REVENUE BREAKDOWN In AED million.Feed mill (LHS) Selling Price.

up from our estimate of 13.4% at the end of our forecast horizon. In % (RHS) Gross Profit (LHS) Net Profit (LHS) Gross Margin (RHS) Operating Margin (RHS) 180 160 140 120 100 80 60 40 20 0 FY08 FY09 25% 20% 15% 10% 5% 0% FY10e FY11e FY12e FY13e FY14e Source: EFG Hermes estimates 14 / 23 pages . we estimate a sustainable gross margin of 18-19% for the FAF segment. We estimate gross margin to increase in FY2012 and beyond to reflect the replacement of lowmargin outsourced sales by in-house production. We expect the FAF net margin to stabilise at 14.7% in 2010. FIGURE 18: FORECASTED PROFIT MARGINS In AED million (LHS).agthia 08 November 2010 consumer goods │ uae LONG-TERM NORMALISED GROSS MARGIN ESTIMATED AT 18-19% In the long-run.

Al-Ain’s HOD market share is 7% given that Al-Ain started to offer this product only in 2008. The UAE water market size is estimated at USD235 million. The division also produces Capri Sun.5% of the still drinks subsector. The UAE still drink market has been growing at 4% per year. Capri Sun is the third largest seller in the still drink market. The bottled market has been growing at 10% per year. the segment’s asset turnover has increased from 0. Agthia added an annual capacity of 4 million units of HOD five-gallon capacity in 2008 and an annual capacity of 3. suggesting that the majority of sales occur in Abu Dhabi. WATER AND BEVERAGE – DIVERSIFICATION IS PAYING OFF PRODUCT MIX AND MARKET SHARE The water and beverage division sells bottled water under the Al-Ain brand and five-gallon HOD water under the Al-Ain and Ice Crystal brands. under licence in the GCC region (excluding Saudi Arabia). Al-Ain has been penetrating the B2B market in order to increase brand awareness and gain market share. USD163 million for bottled water and USD72 million for the HOD market.1% of the total UAE juice market and 9. Capri Sun’s current market share is 3. Al-Ain enjoys a leading volume market share in Abu Dhabi at 41%. Nevertheless. FIGURE 19: UAE BOTTLED WATER MARKET SHARES FIGURE 20: UAE JUICE MARKET SHARES Capri Sun 3% Others 31% Arwa (Coca Cola) 5% Aquafina (Pepsico) 8% Al Ain 24% Other Still Drinks 29% Massafi 32% Nectar and 100% Juice 68% Source: Agthia Source: Agthia STRONG COMMITTED INVESTMENT IN THE DIVISION The company continues to invest heavily in the beverage segment. while the HOD market has been growing at 5-7%. Al-Ain is the second largest market player in the bottled market with a 24% volume market share.5x in FY2006 to 0. The UAE’s total juice market is estimated at USD261 million. Additionally. The UAE enjoys the highest per capita consumption of bottled water worldwide at 280 litres per annum. of which the still drink market represents 32% (USD84 million).agthia 08 November 2010 consumer goods │ uae V. following the market leader Masafi with a 32% market share.8x in FY2006-2009. 15 / 23 pages . Al-Ain has just increased its bottled water capacity to 24 million cartons from 20 million cartons.2 million cartons of Capri Sun juice in 2009-2010. which is approximately 58% of the total group’s capital expenditure over that period. The company invested approximately AED108 million in in 2008-2009. Al-Ain is the top supplier of bottled water to UAE eateries with a 14% market share. Agthia ventured into the juice market in 1Q2009. and became the supplier for Emirates Airlines in 2010. Agthia broadened its product mix by offering value-added products such as flavoured water and enhanced water. the top selling juice worldwide.

9% in FY2009. this premium is wiped out by the high distribution and delivery costs associated with HOD sales. The division’s weight of net profit before unallocated items also increased to 34. We expect the gross margin to improve to 44% during our forecast horizon from 43% in 2010. especially Capri Sun. We expect the division’s net profit growth to peak in 2010 at 43%. is the cost of polyethylene terephtalate (PET) used in bottling.3% in FY2009. lifting the net margin to 18. Selling and marketing expenses associated with the new product launches. up from 24% in 2009.agthia 08 November 2010 consumer goods │ uae GROWING SIGNIFICANCE IN THE GROUP Following these investments. CAPACITY UTILISATION AND COST SAVINGS TO DRIVE SALES GROWTH We expect utilisation rates and cost savings associated with the hot fill line to drive profitability. PROFITABILITY AFFECTED BY PACKAGING AND ADVERTISING EXPENSES Agthia procures water from Al-Ain Municipality at a fixed cost. However.0% in 9M2010 from 23. the division’s revenues and net profit grew by 49% and 38%.3% in 9M2010 from 21. as well as the swing factor. at 17% in 2011 and 3% in 2012. The division contribution to the group’s revenue increased to 26.6% Y-o-Y.4% in 2Q2010 to the new hot fill line. 16 / 23 pages . determine the division’s net profit. PET represents the majority of the operating costs for bottled water. We do not factor in further capacity increases since current capacities are still running at below optimum levels and market share gains require strong spending on advertising and distribution. Agthia started trial production of a hot fill line in 3Q2010 to reduce PET requirements and save energy. Selling and marketing expenses in 9M2010 increased by 27. The marketing expenses associated with Capri Sun were responsible for c50% of the Y-o-Y increase in Agthia’s SG&A expenses for 9M2010. The major contributor to the operating costs. We attribute the division’s gross margin expansion to 47. Agthia procures the required PET from local producers at market prices.8% in 2009.5% in 2010 and 19% in 2011 from 16. The gross margin on HOD sales is typically higher than that for bottled water due to the lower cost of packaging. respectively. We also do not expect a major change in pricing policy. The division should contribute 35% to the group’s net profit before unallocated items by the end of our forecast horizon.8% in 3Q2010 from 42.

unless otherwise stated Mineral Water Capri Sun 350 300 250 200 150 100 50 0 122 0 36 179 199 204 212 212 74 60 76 78 78 HOD (5-Gallon) Other 100% 70% 40% 10% -20% 154 FY08 FY09 FY10e FY11e FY12e FY13e FY10e FY11e FY12e FY13e Source: EFG Hermes estimates FY14e Source: EFG Hermes estimates FIGURE 23: FORECASTED GROSS AND NET PROFIT In AED million(LHS). In % (RHS) Gross Profit (LHS) Gross Margin (RHS) 160 140 120 100 80 60 40 20 0 Opearting Profit (LHS) Operating Profit Margin (RHS) 50% 40% 30% 20% 10% FY10e FY11e FY12e FY13e Source: EFG Hermes estimates 17 / 23 pages FY14e FY08 FY09 FY14e FY08 FY09 .agthia 08 November 2010 consumer goods │ uae FIGURE 21: FORECASTED CAPACITY UTILISATION Caprisun Bottled Water HOD (5-Gallons Business) FIGURE 22: FORECASTED WATER AND BEVERAGES REVENUE BREAKDOWN In AED million.

Both markets are highly fragmented and there is strong room for market share gains.5% of 9M2010 revenues. 18 / 23 pages .000 tonnes are dedicated to tomato paste and the rest to frozen vegetables and fruit puree.agthia 08 November 2010 consumer goods │ uae VI. in the USD12 million UAE tomato paste market.7 million in the nine months between September 2009 and June 2010. Losses in 2008 and 9M2009 were attributed to the aggressive marketing campaign required to increase market share. slightly above that of its two direct competitors. of which 24. the Egyptian operations wiped out the improvement in the UAE operations.000 tonnes of capacity. The division reported lower losses of AED1.6%. The division experienced a cumulative loss of AED13. extra virgin olive oil. The UAE operations were also affected by the absence of government-subsidised tomatoes from the local market. Agthia has since diversified this segment’s product portfolio into frozen vegetables. Al-Ain is the fifth largest seller in the USD26 million UAE frozen vegetables market with a market share of 6%. The selling prices of tomato paste were also hurt by stiff competition from China. The segment contributed 5.000 tonnes of tomato paste. The Egyptian subsidiary targets the export of bulk tomato paste to the MENA region. Al-Ain Vegetable owns a factory in the UAE with c15. private label export business. and its flagship product: tomato paste. pasta sauces. albeit at the cost of squeezed margins. The Egyptian plant currently produces frozen French fries and red chilli paste. Starting in 4Q2009. The leading producer has a market share of 11%.000 tonnes.5 million in 3Q2010 as Agthia introduced new products to counter the losses incurred by the Egyptian subsidiary. soup mix. The market share stands at 19% in Abu Dhabi. More importantly. Tomato prices increased significantly in Egypt as the harvest dropped by c50% Y-o-Y in 2010 due to a hot summer and pest disease. management plans to focus more on branded sales and move away from the low-margin. although it has been mostly loss-making since its inception with the exception of a few quarters. PROCESSED FRUITS AND VEGETABLES AT A BUDDING STAGE Agthia entered the processed fruits and vegetables segment with the acquisition of Al-Ain Vegetable factory in 2008 from the parent company GHC. LEADING MARKET SHARE IN A FRAGMENTED MARKET Al-Ain Vegetables enjoys a leading market share of 14. Agthia established Al-Ain Egypt in 2009 with a capacity of 30. LOSS-MAKING ON ACCOUNT OF EGYPT OPERATIONS This segment is a very small contributor to revenue and gross margins. including 5.

A gross margin of 7.4% in 2014. EFG Hermes A TURNAROUND IN THE MAKING We expect the division to record a narrow loss of AED1 million in 2011 and to return to profitability in 2012 on recovery in gross margins and rationalisation of overhead expenses.agthia 08 November 2010 consumer goods │ uae FIGURE 24: RISING TOMATO PRICES AND COMPETITION LEAD TO LOSSES In AED million (LHS). The significance of the segment to the group will stem from the swing from losses to profits rather than from its absolute profitability. unless otherwise stated Tomato Paste 150 20 FIGURE 26: FORECASTED MARGI In AED million (LHS). Our forecasts are more sensitive to our assumptions for SG&A expenses. FIGURE 25: FORECASTED REVENUE BREAKDOWN In AED million.9% was witnessed in 3Q2010 despite the rise in tomato prices during the same period. We expect the contribution of the segment to the group’s net profit before unallocated items to peak at 3. In % (RHS) Revenue 20 15 10 5 0 (5) (10) Gross Profit Operating Profit Gross Margin (RHS) 40% 30% 20% 10% 0% -10% -20% -30% 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 Source: Agthia. In % (RHS) Gross Profit Net Profit Gross Margin (RHS) Net Margin (RHS) Frozen Vegetables 3Q10 40% 20% 0% -20% -40% 120 90 40 60 30 0 FY08 FY09 FY10e FY11e FY12e FY13e FY14e 42 41 31 45 54 64 77 10 0 (10) (20) 7 36 8 38 17 41 FY10e FY11e FY12e FY13e Source: EFG Hermes estimates Source: EFG Hermes estimates 19 / 23 pages FY14e FY08 FY09 .

391 218.8 15.5 328.4% 46.3 93.9 727.0 25.5 0 107.6 0.3 20 / 23 pages .0 1.4 93.0 1.8 340.20 2012e 1.9 974.2% (4) (146) 138.5 193. FINANCIAL STATEMENTS INCOME STATEMENT (DECEMBER YEAR END) In AED million.0 1.0 264.0 899.5 129.0 454.2 265.18 2010e 1.agthia 08 November 2010 consumer goods │ uae VII.3 250.9% 671 250.0 242.1 1. EFG Hermes estimates 2009a 190.1 266.0 795.3% 815 263.4 121 0.3 27.0 523.12 BALANCE SHEET (DECEMBER YEAR END) In AED million.2 (1.6 266.8 231.0 138.061 2012e 200.8 11.1) 73.190 89.1 173.5% 44.4 299.7 558.1 765.315 134.23 854 47.004 9.3 12.5 2011e 200.3% 48.2 0 108.8) 106. unless otherwise stated 2008a Cash & Liquid Assets Net Accounts Receivable Other Current Assets Total Current Assets Net Plant Goodwill Other Assets Total Assets Due to Banks CPLTD Total Payables Other Current liabilities Total Current Liabilities Long -term Loans Minority Interest Other Liabilities Total Liabilities and Provisions Shareholder Equity Source: Agthia.4 699.060 121. EFG Hermes estimates 2009a 921 7.0% (12) (146) 145.1 355.4 0 77.0 1.7 110.1% 42.3 274.6 6.5 20.7 74 0.7 106 0.5 1.6 0 132.18 2011e 1.3 24.5 10.7 218.348 67.4% (2) (150) 155.6% 675 178.1 15.8 14.8 0.8 284.1 12.8 287.0 93.6 0 115.159 40.6 291.2 162.6 532.0% 764 240.5 14.141 5.9 93.0 207.8% 854 287.2 111 0.0 2010e 200. unless otherwise stated 2008a Revenue % Growth COGS Gross Profit Gross Profit Margin Other Operating Expenses / (Income) SG and A EBITDA EBITDA Margin Depreciation Amortization Net Operating Profit Net Interest Income / Expense Minority Interest Earnings before Taxes Taxes Net Profit EPS (AED) Source: Agthia.0 1.2% (2) (156) 175.078 7.6 527.4 0.8 24.4 93.4 6.0 121.7 138 0.8 232.0 409.8% 38.7 2.7 12.0 232.2 220.1 3.6 14.0 643.5 14.8 (4.9% (13) (114) 92.

EFG Hermes estimates 2009a 140 252 79 173 173 (22) 150 2010e 149 121 108 13 13 (3) 10 2011e 164 149 47 102 102 (102) - 2012e 183 156 49 107 107 (107) 0. unless otherwise stated 2008a Cash Operating Profit after Tax Cash Flow after Change in Working Capital Capital Expenditure Free Cash Flow Non-operating Cash Flow Cash Flow before Financing Net Financing Change in Cash Source: Agthia.agthia [ 08 November 2010 consumer goods │ uae CASH FLOW STATEMENT (DECEMBER YEAR END) In AED million.1 107 (33) 109 (142) (8) (150) 85 (64) 21 / 23 pages .

All opinions and estimates included in this report constitute our judgment as of this date and are subject to change without notice. directly or indirectly. EFG Hermes does not represent or warrant.com UAE SALES TEAM call center +971 4 306 9333 uaerequests@efg-hermes. Although the information in this report has been obtained from sources that EFG Hermes believes to be reliable. The authors of this report may own shares in funds open to the public that invest in the securities mentioned in this report as part of a diversified portfolio over which they have no discretion. EFG Hermes may own shares in one or more of the aforementioned funds or in funds managed by third parties.com RESEARCH MANAGEMENT Cairo General + 20 2 35 35 6140 UAE General + 971 4 363 4000 efgresearch@efg-hermes. either expressly or implied. EFG Hermes Holding SAE hereby certifies that neither it nor any of its subsidiaries owns any of the securities that are the subject of this report.com DISCLOSURES We.com Local Institutional Sales Amr El Khamissy +20 2 35 35 6045 amrk@efghermes.com Gulf HNW Sales Chahir Hosni +971 4 363 4090 chosni@efg-hermes. Our investment recommendations take into account both risk and expected return.com RiyadhTraders@efg-hermes.com Head of Research Wael Ziada +20 2 35 35 6154 wziada@efg-hermes. fair value estimates and statements regarding future prospects may not be realized. Al-Bihlal +9661 279 8670 kalbihlal@efg-hermes. It is not intended as an offer or solicitation or advice with respect to the purchase or sale of any security.com Head of Western Institutional Sales Mohamed Ebeid +20 2 35 35 6054 mebeid@efg-hermes. Readers should understand that financial projections. from any use of such information or opinions or otherwise arising in connection therewith. .com Head of Publ. after having taken perceived risk into consideration. and Distribution Rasha Samir +20 2 35 35 6142 rsamir@efg-hermes. It is not tailored to the specific investment objectives.com Client Relationship Khalid S. We have conducted extensive research to arrive at our investment recommendations and fair value estimates for the company or companies mentioned in this report. This Research must not be considered as advice nor be acted upon by you unless you have considered it in conjunction with additional advice from an EFG Hermes entity with which you have a client agreement. We also certify that neither I nor my spouse or dependants (if relevant) hold a beneficial interest in the securities that are traded in the UAE Stock Exchanges. hereby certify that the views expressed in this document accurately reflect our personal views about the securities and companies that are the subject of this report. We strongly advise potential investors to seek financial guidance when determining whether an investment is appropriate to their needs.com UAE Retail Sales Reham Tawfik +971 4 306 9418 rtawfik@efg-hermes. We base our long-term fair value estimate on a fundamental analysis of the company's future prospects. The Investment Banking division of EFG Hermes may be in the process of soliciting or executing fee earning mandates for companies that are either the subject of this report or are mentioned in this report.com KSA SALES TEAM call center +800 123 4566 RiyadhCallCenter@efg-hermes.com Western Institutional Sales Julian Bruce +971 4 363 4092 jbruce@efg-hermes. Ahmed Gad and Gigi Varghese. This research report is prepared for general circulation to the clients of EFG Hermes and is intended for general information purposes only. Funds managed by EFG Hermes Holding SAE and its subsidiaries (together and separately.EGYPT SALES TEAM Local call center 16900 cc-hsb@efg-hermes.com Head of GCC Institutional Sales Amro Diab +971 4 363 4086 adiab@efg-hermes.com Director of Client Relationship Mazen Matraji +9661 279 8640 mmatraji@EFG-HERMES. we have not independently verified such information and it may not be accurate or complete. the accuracy or completeness of the information or opinions contained within this report and no liability whatsoever is accepted by EFG Hermes or any other person for any loss howsoever arising. "EFG Hermes") for third parties may own the securities that are the subject of this report. financial situation or needs of any specific person that may receive this report. DISCLAIMER This Research has been sent to you as a client of one of the entities in the EFG Hermes group.

Egypt 12311. the general economic outlook. Building No. as well as the country and regional economic environment.hfidom efghermes. B129. Dubai. In such cases. the analyst will not necessarily need to adjust the rating for the stock immediately. DIFC.hfismcap . The information within this research report must not be disclosed to any other person if and until EFG Hermes has made the information publicly available. or any other changes which could impact the analyst’s outlook or rating for the company. the sectors that they are exposed to.000. Effective 16 December 2009.hrms . For the 12-month long-term ratings for any investment covered in our research.GUIDE TO ANALYSIS EFG Hermes investment research is based on fundamental analysis of companies and stocks. EFG Hermes changed its investment rating approach to a three-tier. the analyst will be encouraged to review the rating. EFG Hermes may assign a rating for a stock that is different from the one indicated by the 12-month expected return relative to the corresponding fair value.320.efgs . However. CONTACTS AND STATEMENTS Background research prepared by EFG Hermes Holding UAE Limited. which is regulated by the DFSA and has its address at Level 6. Share price volatility may cause a stock to move outside of the longer-term rating range to which the original rating was applied.939. The Gate. Tel +20 2 35 35 6140 | Fax +20 2 35 37 0939 which has an issued capital of EGP 1.efgi . COPYRIGHT AND CONFIDENTIALITY No part of this document may be reproduced without the written permission of EFG Hermes. and EFG Hermes UAE Limited. In special situations. Cairo-Alexandria Desert Road. the sector outlook. Smart Village. Reviewed and approved by EFG Hermes KSA (closed Joint Stock Company) which is commercially registered in Riyadh with Commercial Registration number 1010226534. the ratings are defined by the following ranges in percentage terms: Rating Buy Neutral Sell Potential Upside (Downside) % Above 15% (10%) and 15% Below (10%) EFG Hermes policy is to update research reports when appropriate based on material changes in a company’s financial performance. bloomberg efgh reuters pages .com . Report prepared by EFG Hermes Holding SAE (main office). If you are not an institutional investor you must not act on it. long-term rating approach. taking total return potential together with any applicable dividend yield into consideration. Phase 3. if a stock has been outside of its longer-term investment rating range consistently for 30 days or more. UAE. KM 28. The information in this document is directed only at institutional investors.

Information Technology Isaac Matzner.com (212) 453-3520 acarpenter@agco.com (212)453-3509 africke@agco. South Asian Sales Johan Lundin. Asia Trading Sarkis Iliozer. Auerbach David S. Turkish Sales Zoran Milojevic. EMEA Trading Steve Pollicino. Austrian & German Sales Thomas Furda.com (212) 453-3511 jburge@agco.com (212) 453-3518 .com Trading: Operations: Jonathan L. Global Operations (212) 557-4444 (212) 557-4478 (212) 453-3535 (212) 453-3553 cgushee@agco.com (212) 453-3571 slueck@agco.com (212) 557-4444 ggimber@agco.com (212)453-3507 adoncov@agco. EMEA Sales Trading: Anthony Santostefano. EMEA Trading Selim Sari. Asian Trading Information Systems & Research Services: Ismael Sadek.com (212) 557-4444 ssari@agco.com (212) 453-3563 asantostefano@agco. Russian Sales Ugur Sarman.com (212) 453-3549 rross@agco.com (212) 557-4444 isadek@agco.com (212) 557-4444 dsimon@agco. U.Auerbach Grayson & Company Incorporated 25West 45th Street New York. Head of Global Client Relationships Abhijit Kukreja. Western European Sales Kate Korolkevich. LATAM Trading John Geron. Russian Trading Humberto Cruz. GEM Sales Alexander Doncov. European Trading Geoffrey Gimber.com (212) 557-4444 hwarren@agco. Asia Sales Anshuman Ray.com (212) 453-3546 jlundin@agco.com Info@agco.S.com (212) 453-3562 mdaoud@agco. Trading Mike LoPiano.com (212) 453-3526 rkim@agco. EMEA Sales Stephan Lueck.com (212) 557-4444 mlopiano@agco.com (212) 453-3585 usarman@agco. Urainian Sales Michael Daoud.com (212) 453-3528 akukreja@agco. Trading David Sweet. EMEA Sales Alice Fricke. Swiss Sales Richard Kim.com (212) 557-4444 spollicino@agco.com (212) 453-3510 roenema@agco.com (212) 453-3543 smandel@agco.com (212) 453-3508 siliozer@agco. MENA Sales Oskar Rundolf. NY 10036 Telephone: (212) 557-4444 800 31-WORLD facsimile (212) 557-9066 www. Asian Trading Harold Warren. Trading Garth Ballantyne.com (212) 557-4444 hcruz@agco. Western European Sales Rene Saner. South Korean Sales Simon Mandel. South Asian Sales Ailsa Carpenter. Technical Research Operations: Frank Muller.com (212)453-3531 kkorolkevich@agco. Western European Sales Reitze Oenema. Grayson Sales: Charlie Gushee.com (212) 453-3574 rsaner@agco.com (212) 557-4444 gballantyne@agco.agco.com (212) 557-4444 jgeron@agco. Research Coordinator Richard Ross.com (212) 453-3538 tfurda@agco.com (212) 453-3589 zmilojevic@agco.com (212) 453-3586 orundolf@agco.com (212) 453-3575 fmuller@agco.com (212) 557-4444 dsweet@agco. Trading Danielle Simon.com (212) 453-3561 aray@agco.com (212) 453-3512 imatzner@agco. Head of Global Equity Sales John Burge.

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