Family business valuation in emerging

economies: the arcor case

Florencia Roca

Introduction Florencia Roca is based at

the School of Business,
Looking at the future, passion, entrepreneurial spirit, and commitment will continue to be the
Universidad Francisco
essential development vector of Arcor Group for the next 70 years.
Marroquin, Guatemala City,
Guatemala.
–Luis Pagani, President of the Arcor Group[1]

As he prepared to receive the visit of the newspaper’s interviewer, on the 6th floor of his
Buenos Aires office, Luis Pagani felt the weight of the dilemma he had to face. It was February
2020. The last time he had spoken to the press, challenges were completely different.
The president of the Arcor Group was not used to giving interviews. “We have a Congress that
discusses a shelves law, a former president who says we have to sell in bulk, neighborhood
fairs. . . All this issue of lack of competitiveness and tax burden, all these projects do not help
the economy move forward. It is going back 50 years,” he assured, concerned about the state
of the local economy (Ortega & Radici, 2020). The company founded 70 years ago by his
grandfather had, in 2019, reported the greatest loss of the decade.
Luis became president at the end of 1990, after the death of his father, Fulvio Salvador
Pagani, in a car crash. After obtaining his CPA degree from the University of Co rdoba,
Argentina, he specialized in marketing at the New York University. To the pride of his family, Disclaimer. This case is written
Luis gained different recognitions for his work at Arcor: he received the Konex award and solely for educational purposes
and is not intended to represent
was also the first Latin American entrepreneur to enter the “Candy Hall of Fame,” the successful or unsuccessful
managerial decision-making.
highest distinction awarded by the National Confectionery Sales Association of the USA. The authors may have
While a professional manager and a strong leader, Luis Pagani knew he had to meet the disguised names; financial and
other recognisable information
expectations of the third generation of family members. to protect confidentiality. The
information presented in this
Characterized by a low profile –a style he shares with the rest of his family– Luis Pagani case was obtained solely from
knew that his words were going to be taken seriously by the market. His struggle was not public sources, on or prior to
August 14, 2020.
easy to hide: despite the poor results of 2018 and 2019, he had to pilot a company in a
turbulent environment as is Argentina, finance international growth to escape from the weak The author would like to
acknowledge the endless
economy, and at the same time fulfill the liquidity needs of the family. The negative results of encouragement and support
2018 and 2019 had excluded reinvestment as a financing option, and the issuance of received from Francisco
Marroquin University, in
corporate bonds, authorized for a limit of US$800m (Arcor S.A.I.C., 2020a, 2020b), clearly particular from the Dean of the
had a roof. Due to the issuance of corporate bonds (listed on the Buenos Aires Stock Business School Dr Helmuth
Chavez, as well as helpful
Exchange), Arcor already met the disclosure requirements of a public company. The suggestions and comments
dilemma was in front of him: was it time for an Initial Public Offer (IPO)? from Dr Szabolcs Blazsek. This
work was presented at the
Family Business in the Arab
The company World Conference in
partnership with the STEP
Project for Family Enterprising
In a small town called “Arroyito” (Little Creek), a quiet spot in the Argentine province of on the 5th of November 2020,
Cordoba, the Italian-born immigrant Amos Pagani envisioned a place to reside and flourish. receiving valuable feedback.

DOI 10.1108/EEMCS-02-2021-0057 VOL. 11 NO. 4 2021, pp. 1-52, © Emerald Publishing Limited, ISSN 2045-0621 j EMERALD EMERGING MARKETS CASE STUDIES j PAGE 1
 Soon after his arrival in 1924, Amos opened a bakery and acquired an understanding of the
food business, hence, he even progressed to trying some milk caramel recipes. Four years
later, Fulvio Salvador, the second of his five children, was born. At that time, neither of them
could have imagined that in such a remote place they would bring to life the largest candy
producer in the world: Arcor S.A.I.C. (Grupo Arcor, 2018).
Arcor was founded in 1951, by Fulvio Salvador Pagani and a small group of young
entrepreneurs. True to its origins, and maintaining a signature experience of high quality,
Arcor ships candy to a wide range of countries and has also expanded to agribusiness and
to the packaging market. Arcor continues to bear the names of the town and province that
rdoba), respectively.
witnessed its birth: “Ar” (Arroyito), “cor” (Co
Only 4,000 inhabitants lived in Arroyito at the time Arcor opened its first plant. In the town,
the electricity used to be cut from midnight until 6 in the morning, which forced production
to stop. Many of the candy boxes were put together by candlelight in the homes of the
founding families. Thus, Mario Seveso, the mechanic of the young entrepreneurs,
ensembled an electric generator from the engine of a harvesting machine, one of the many
pioneering ideas, to enable energy production around the clock. Today, the company has
its own “Mario Seveso” Thermoelectric Power Plant (Grupo Arcor, 2018).
The Pagani family keeps the tradition of meeting once a year, for Easter or Christmas, in
Arroyito town. Various members of the third generation are being trained to assume larger
responsibilities in the firm, including Luis Pagani’s daughter, Andrea, who studied
administration and also has a Master in Finance.
As of the end of 2019, Arcor remained a family-owned private company. Luis A. Pagani and
his brothers kept control of the firm’s decisions, and different family members were part of
the board. In total, 70 years of history as a private company demonstrated the willingness of
the family to keep control of the firm decisions. Of course, the market recognized Arcor’s
trajectory and, from time to time, called out for an IPO.
“We would never make an opportunistic IPO,” expressed Luis Pagani, chief executive officer
(CEO) and president of Arcor, on the company’s plans to find a strategic partner and open its
capital. “We would only do so by looking at the future, as a way to expand to other markets
outside of Latin America, most likely Asia, where half the world’s population lives” (Clarin, 2017).
A long-term valuation of the company began, in late 2019, to become a necessity. Measuring
returns in private equity is a notoriously difficult task, as these types of investments are illiquid,
long-term and not necessarily transparent. Valuing IPOs, on the other hand, also has countless
complexities. However, unlike high-growth start-ups, which have no assets or reliable data to
base projections, Arcor had an impressive history of pioneers in its favor, reliable numbers and
an acceptable degree of stability, all of which made it very attractive to value.
By then, the company had 47 industrial plants in Latin America (37 of them in Argentina), as
well as commercial offices in Brazil, the USA, Canada and Spain. In total, 62% of Arcor’s
19,700 employees were in Argentina, 20% in Brazil and the remaining 18% in other countries
(Arcor S.A.I.C., 2020a, 2020b). Recognized brand names of the company were, for example,
Aguila, Bon o bon, Butter Toffees, Cereal Mix, Chocolinas, Cofler, Criollitas, La Campagnola,
Presto Pronta, Rocklets, Rumba, Tofi. After being labeled by Forbes (2017) as “the leading
global producer of hard candy,” there were two natural steps the market was waiting for Arcor
to achieve: its expansion to China, and the placing of its shares on the stock market.

Background/context
Investing in an emerging market
Not many financing options were available for Arcor. Finding private equity investors, in an
emerging market like Argentina, did not seem entirely possible. Argentina was undergoing
a period of economic instability and changing political dynamics. The new government,

PAGE 2 j EMERALD EMERGING MARKETS CASE STUDIES j VOL. 11 NO. 4 2021

which won the primary elections in August 2019, meant a shift against a market economy.
The country was experiencing the highest inflation rate in Latin America after Venezuela,
and the tax burden was unbearable. In a study published by the World Bank and Price
Waterhouse Coopers (2018), the estimated effective corporate tax rate in Argentina in 2018
was an incredible number of 106%. In other words, the earnings of all companies in the
country were not enough to satiate the voracity of the state, which ended up confiscating
part of the stock of capital.
Constant regulatory changes did not help either: companies needed to face frequent changes
in norms, with the corresponding expenses. There were incentives for companies to become,
in many cases, “label” adopters of economic regulations, instead of real adopters. The market
was aware of this fact, and thus even well-intended regulations sometimes did not produce the
desired effect. For example, the adoption of International Financing Reporting Standards
(IFRS), departing from the local GAAP, which was mandatory for all public companies since
January 2012, did not translate into higher value relevance of accounting information (Roca,
2021). In this context, international investors were more likely to choose other growing
developing economies like Chile, Mexico or Brazil, to enter the Latin American market.

Capital controls and exchange rates

Argentina had gone through an economic crisis in the past half of 2018 and all of 2019. The
capital controls established in 2019 by the Argentine Government, and the strong rejection
of citizens toward the local currency (the Argentine “peso”, ARS) due to high inflation,
caused the emergence of more than 15 different exchange rates for the US dollar. At least
three of them were important at the time as follows:

1. The official exchange rate, which most companies could not access, as this was only a
“label” exchange rate;
2. The black market dollar, also called “blue,” popular among tourists and local
businessmen but of course not allowed in accounting books; and
3. The exchange rate resulting from the comparison between the price of ADRs or
Government Bonds abroad against the same price in the local financial market
(“contado con liqui” or CCL).

In Argentina, as in other developing economies with high inflation, the expression of the
financial statements in nominal terms significantly affected the conclusions of the ratio
analysis. Most local companies used to restate their financial statements in real terms,
selecting the exchange rate they considered most appropriate.
Exhibits 1–4 present arcor’s original financial statements expressed in local currency (ARS).
Exhibits 5–8 show historical financial statements converted to the official exchange rate
between ARS and the US dollar (US$ BN). Exhibits 9–12 show historical financial
statements converted to the financial market dollar (US$ CCL) at each period’s closing date

The decision
On December 31, 2019, in a context of a weak currency and an economic situation that left
Argentina out of international markets, Arcor recorded in its financial statements the largest
loss of the decade. The need for growth at the international level became urgent. Increasing
revenue in the local market did not seem a strategic move for any Argentinean company, let
alone a firm with Arcor’s prospects.
The expansion plans presented a dilemma to Arcor’s president, Luis Pagani. He had to
meet the liquidity needs to finance growth, pay the usual cash dividends to the family, and
serve the long-term interests of the firm.

VOL. 11 NO. 4 2021 j EMERALD EMERGING MARKETS CASE STUDIES j PAGE 3

 As is the case with other private companies, Arcor was expected to generate a steady
income for family members. In 2018, the Board approved a cash dividend of ARS 250m
(Arcor S.A.I.C., 2019, p. 45), despite reporting a Net Loss in the Income Statement. The
2019 results were not better than those obtained the previous year, complicating the
possibility of making cash payments to shareholders. It became clear that the company was
not producing enough cash to both keep the family happy and reinvest for future
expansion. Was an IPO the answer to Luis Pagani’s dilemma?
However, before deciding whether or not to take the company public, a thorough valuation of
the firm’s operations was necessary. A reference price had to be established for Arcor shares.
For the IPO to take place, a big question rested on Luis Pagani’s shoulders: With the
information available as of December 31, 2019, what was the minimum offering price for the
company’s shares?
To answer this question, at least four estimations were needed as follows:

1. A fundamental analysis of the company’s financial statements;

2. The computation of the Weighted Average Cost of Capital (WACC);

3. The preparation of forecasted financial statements; and

4. The application of a valuation method.

Fundamental analysis
The financial statements of a company tell the story of a firm in numbers. Looking over the financial
statements of the past decade, when available, is an important step to make informed forecasts.
Arcor’s stability, as well as its long history, provides a solid base for the valuation process. In a
case like this, a deep historical financial analysis is inescapable for quality projections.
The financial dashboard with a summary of the fundamental analysis is presented below,
Exhibit 13 shows the dashboard for financial statements expressed in ARS, Exhibit 14 presents
the dashboard for financial statements converted to US$ CCL, and Exhibit 15 displays the
dashboard for financial statements converted to US$ BN. The details of the fundamental
analysis of the past 8 years (expressed in US$ CCL) are presented in Exhibits 16 and 17. The
same analysis, converted to the other two exchange rates, is included in the Excel spreadsheet
that accompanies the case. By modifying cell A1 of the “Summary” sheet, it is possible to vary
the exchange rate in the fundamental analysis model, obtaining results for the same set of tests,
but expressed in different exchange rates (ARS, BN and CCL). Historical data covers the
period from 2012 until 2019. Financial statements prior to 2012 are not comparable, due to the
change in accounting standards from local norms to IFRS, effective from January 1, 2012.

The weighted average cost of capital

The macroeconomic situation in Argentina drove the country-risk to 1,744 basis points at the
end of 2019 (Ámbito, 2020), a level that represents a barrier to making investments in the
country. The country risk (CR), however, is a diversifiable risk. At the valuation date, Arcor
operated in most of Latin America, parts of Europe, Canada and the USA. Thus, the
company was not strictly tied to Argentine risk. The extent of how much Arcor could
separate itself from Argentine risk dramatically affected the minimum required return.
Investors could determine a range for the company returns between two extremes: the
situation of being able to completely detach from the Argentine risk and the situation of
being 100% subject to the mismanagement of local politics.
As of the valuation date in late 2019, the yield of a 10-year Treasury Bond was about 1.8% per
year. Historically, considering a data series from 1928 to 2019, the geometric average risk
premium of the S&P500 over 10-year Treasury Bonds had been 4.83% per year (Damodaran,
2020). Food-processing unlevered betas in the USA were 0.68 (Damodaran, 2020), the marginal

PAGE 4 j EMERALD EMERGING MARKETS CASE STUDIES j VOL. 11 NO. 4 2021

income tax rate in Argentina was 25%, and the cost of debt for Arcor was implicit in its last
corporate debt issuance, US$150m in 2019, placed at an interest rate of 6% per year
(Sanguinetti, 2020).
Arcor’s capital structure was that of a highly indebted company. As of December 31, 2019,
the firm’s assets were financed partly by suppliers (in other words, by a non-interest-bearing
liability), partly by equity and partly by corporate bonds and other forms of financial debt.
For present value calculations, Arcor used a WACC in a range from 5% to 12%, depending
on the industry, the country and the scale of the business (Arcor S.A.I.C., 2020a, 2020b).
The company’s financial statements did not provide detail to classify operations according
to the country of origin, but they serve as a range or reference point.
A different point of view for the cost of capital is provided from the value investing (VI)
approach. Unlike traditional investors, value investors do neither consider beta to be an
appropriate measure of risk nor they use risk-return models to determine the hurdle rate for
investments. The problem with the beta, according to Warren Buffett (1997, pp. II, C.), is that
it omits “a fundamental principle: it is better to be approximately right than precisely wrong.”
For these long-term investors, below-average returns are not attractive; as expressed by
Buffett and Clark (1997, ch. 16): “What Warren is looking for in a business is consistently
higher-than-average returns on equity. We are not talking about 12 or 13%, but, as we know,
a rate of return of 15% and above—the higher the better.” Greenwald, Kahn, Sonkin, & van
Biema (2001, ch. 6), in reference to WACC, states that “Because value investors are
attracted to companies that have steady and predictable income streams, it may be enough
to use the federal bond rate and add a percentage point or two.”
Between 1928 and 2019, the average return of the S&P500 was approximately 9.7% per
year (Damodaran, 2020). Such a high return on passive investments imposes a minimum to
be achieved for those who are active investors. Given the amount of time and resources that
must be devoted to actively selecting stocks: can it be enough for a professional investor to
obtain a return below a passive strategy? In other words, can it be enough to obtain less
than simply buying S&P500 and waiting?

Financial statements projections

Although in 2019 Arcor’s equity was private, its corporate bonds were publicly traded. Thus,
the company had to comply with the information requirements of public companies. At the
valuation date, the company had at least 10 years of audited financial statements, a solid
base for quality projections.
By 2019, Arcor was already a company with a long history, in a mature industry. Its sales
could reasonably be assumed to continue growing at the same rate as in the previous
eight years, at least for the short- and medium-term. Historical revenue growth rate,
computed with a regression of the logarithms of sales, was 0.46% per year (Exhibit 18). Due
to the type of industry, current assets could reasonably be assumed to vary in relation to
sales, as shown in Exhibit 19. It was clear, for example, that inventories and accounts
receivable (the two most relevant items within short-term assets) increased directly with
sales growth. Non-current assets, in turn, did not seem directly tied to sales. The company Keywords:
heavily increased CapEx in 2017 and 2018, significantly reducing capital turnover. Property, Value creation,
plant and equipment represented 66% of Total Assets (Exhibit 20), but after the 2018 Private equity,
financial crisis, the company was able to significantly cut the investment in fixed assets, Investment appraisal/return
on investment,
returning to a relationship between current and non-current assets like the one it had Family firms,
historically (Exhibit 21). As a reference, a list of comparable companies from the packaged Asset management/
goods industry is shown in Exhibit 22. valuation

VOL. 11 NO. 4 2021 j EMERALD EMERGING MARKETS CASE STUDIES j PAGE 5

 Notes
1. The words of Luis Pagani, included in his most recent interview, published by the newspaper “El
Cronista Comercial” (Ortega, Pagani, numero 1 de Arcor, en exclusiva con El Cronista: “El paı́s
necesita una plataforma de inversiones para exportar al mundo”, 2021).
2. EVAV is a registered trademark of Stern Stewart & Co.
R

V
R
3. EVA is a registered trademark of Stern Stewart & Co., NY, NY, USA.

References
rico. Retrieved From: www.ambito.com/contenidos/riesgo-pais-
Ámbito. (2020). Riesgo paı́s histo
historico.html
n financiera:
Arcor S.A.I.C. (2019). Memoria y estados financieros 2018. 12 March, from Informacio
Retrieved from www.arcor.com/ar/downloads/mef-arcor-2018.pdf (accessed 8 August 2020).
n financiera. Retrieved from Arcor: Retrieved from www.arcor.com/ar/
Arcor S.A.I.C. (2020a). Informacio
informacion-financiera
n Financiera:
Arcor S.A.I.C. (2020b). Memoria y estados financieros 2019. 9 March, from Informacio
Retrieved from www.arcor.com/ar/downloads/mef-arcor-2019.pdf (accessed 8 August 2020).
Buffett, W. E. (1997). The essays of warren buffett: lessons for corporate america, 3rd edition., Durham:
Carolina Academic Press.

Buffett, M. and Clark, D. (1997). Buffettology. Simon and Schuster, New York, NY, ISBN 0-684-83713-7;
0-684-84821-X (Pbk).
Clarin. (2017). Entrevista: Arcor busca un socio estratégico Para crecer fuera de américa latina. 7
November. from Cları́n Economı́a: Retrieved from www.clarin.com/economia/arcor-busca-socio-
estrategico-crecer-america-latina_0_S1Oh3HyyM.html (accessed 2 August 2020).
Damodaran, A. (2020). Data: Current. 5 January, from Damodaran Online: Retrieved from http://people.
stern.nyu.edu/adamodar/New_Home_Page/datacurrent.html#discrate (accessed 8 August 2020).
Grupo Arcor. (2018). Nuestra historia. from Grupo Arcor: Retrieved from www.arcor.com/ar/nuestra-
historia (accessed 2 August 2020).
ndolas es ir 50 años Para atra
Ortega, P. & Radici, F. (2020). La ley de go s. 21 February, from Apertura:
Retrieved from www.arcor.com/ar/institucional/las-100-mejores-en-imagen-ranking-exclusivo-2020
(accessed 12 may 2021).

Roca, F. (2021). The influence of mandatory adoption of IFRS in Argentina on value relevance of accounting
information. Journal of Applied Economics, 24(1), 154-172, doi: 10.1080/15140326.2021.1900695.
Sanguinetti, A. (2020). “Arcor inyecta fondos a sus filiales y sale a buscar hasta $2.500 millones para
apuntalar operaciones” 30 June, from iProfesional: Retrieved from www.iprofesional.com/negocios/
318714-arcor-busca-financiamiento-cuanto-quiere-obtener (accessed 9 August 2020).
Valleboni, C. (2017). El señor de las golosinas. 19 December, from Forbes: Retrieved from www.
forbesargentina.com/negocios/el-senor-golosinas-n112 (accessed 5 August 2020).

Further reading
Ortega, P. (2021). Pagani, numero 1 de arcor, en exclusiva con El cronista: “El paı́s necesita una
plataforma de inversiones Para exportar al mundo. 30 March, from Apertura, El Cronista: Retrieved from
www.cronista.com/apertura-negocio/empresas/pagani-numero-1-arcor-en-exclusiva-con-el-cronista-el-
pais-necesita-una-plataforma-de-inversiones-para-exportar-al-mundo/ (accessed 11 may 2021).
World Bank Group & Price Waterhouse Coopers. (2018). Paying taxes 2018. Retrieved from PWC Global:
Retrieved from www.pwc.com/gx/en/paying-taxes/pdf/pwc_paying_taxes_2018_full_report.pdf

PAGE 6 j EMERALD EMERGING MARKETS CASE STUDIES j VOL. 11 NO. 4 2021

 Table E1
Historical data 12/31/2012 12/31/2013 12/31/2014 12/31/2015 12/31/2016 12/31/2017 12/31/2018 12/31/2019

2 3 4 5 6 7 8 9
Exhibit 1. Income statement, ARS

Revenue 13,941,364 17,260,914 24,059,758 27,553,488 37,812,176 48,419,967 85,628,938 134,710,183

Cost of revenue 9,331,982 11,467,140 15,786,347 17,864,376 25,204,824 32,720,113 61,156,587 99,400,015
Gross profit 4,609,382 5,793,774 8,273,410 9,689,112 12,607,351 15,699,854 24,472,351 35,310,168
SG&A expenses 3,613,385 4,580,706 6,213,054 7,020,834 9,454,224 11,857,792 19,893,019 28,760,467
Operating income 995,997 1,213,068 2,060,356 2,668,278 3,153,127 3,842,061 4,579,333 6,549,701
Non-operating interest expenses 338,112 491,380 1,008,686 1,123,005 2,329,086 3,255,125 5,781,766 5,742,513
Non-operating income 133,126 205,852 372,493 579,249 1,060,255 816,990 (868,073) 405,118
Other income/(Expense) (173,626) (322,087) (392,767) (636,987) 41,050 257,789 194,311 1,739,873
EBT 617,384 605,452 1,031,396 1,487,535 1,925,346 1,661,716 (1,876,196) 2,952,179
Income tax provision 232,957 290,949 522,470 686,363 838,822 542,983 (865,308) 3,096,269
Net income, ordinary 384,427 314,503 508,926 801,172 1,086,524 1,118,733 (1,010,887) (144,090)
Extraordinary income/(Expense) 267,551 436,959 398,342 547,863 746,384 956,779 2,056,550 (396,359)
Net income 651,978 751,462 907,267 1,349,035 1,832,908 2,075,512 1,045,662 (540,449)
Ordinary non-controlling interest 117,412 159,836 272,249 473,860 632,383 731,908 809,162 1,324,989
Ordinary net income, common 267,015 154,667 236,677 327,313 454,141 386,825 (1,820,049) (1,469,079)
Non-controlling interest 153,764 233,095 335,577 577,158 763,102 883,772 1,146,834 1,303,865
Net income, common 498,214 518,367 571,690 771,877 1,069,806 1,191,740 (101,172) (1,844,314)

VOL. 11 NO. 4 2021

EPS (Common, Diluted) 0.00381 0.00221 0.00338 0.00468 0.00649 0.00553 0.02600 0.02099
Shares (Diluted, Weighted, Thousands) 70,000,000 70,000,000 70,000,000 70,000,000 70,000,000 70,000,000 70,000,000 70,000,000
Notes: Numbers in ARS (thousands) except per share values; EBT= earnings before tax; EPS = earnings per share

j EMERALD EMERGING MARKETS CASE STUDIES j PAGE 7

 Exhibit 2. Balance sheet, ARS

Table E2
Concept 12/31/2012 12/31/2013 12/31/2014 12/31/2015 12/31/2016 12/31/2017 12/31/2018 12/31/2019

Non-current assets
Property, plant, equipment (Net) 2,186,722 2,962,344 4,278,555 4,982,541 6,533,311 11,547,017 24,446,928 36,382,875
Intangible assets 130,740 133,593 158,675 172,449 210,300 459,013 1,083,163 1,778,148
Goodwill 248,747 250,529 252,288 255,113 258,978 365,212 2,757,055 4,234,466
Long-term investments 5,114 5,280 4,652 96,544 551,204 1,734,418 3,744,107 7,383,742
Long-term biological assets 81,850 62,419 87,741 60,717 78,155 386,052 488,911 694,342
Derivatives (Long-term) 0 79,389 75,451 287,290 0
Other receivables (Long-term) 214,942 500,359 405,343 964,576 893,638 1,128,618 1,278,772 2,021,473
Other long-term assets 128,902 232,164 288,053 375,450 391,762 571,654 1,897,350 3,026,652
Total non-current assets 2,997,015 4,146,689 5,475,307 6,907,391 8,996,736 16,267,434 35,983,575 55,521,698
Current assets
Biological assets 8,384 10,503 16,253 62,886 80,448 128,387 259,970 436,778
Inventory 2,527,002 3,424,707 4,092,789 4,646,749 6,630,502 8,322,905 17,324,715 21,740,320
Derivatives (Assets) 13,140 466 11,311 349,292 169,738 19,707 5,748 12,819
Other receivables 523,143 816,566 1,017,555 1,197,029 1,046,589 1,425,904 2,579,373 4,951,417
Receivables 2,348,897 2,628,115 3,139,369 3,903,446 5,690,923 7,658,321 13,458,717 18,444,014
Other short-term investments 40,443 1,672 4,936 14 13 14 15 12
Cash and short-term investments 403,390 866,597 1,191,473 2,033,482 2,233,597 2,663,860 4,840,332 9,967,093
Total current assets 5,864,398 7,748,626 9,473,686 12,192,898 15,851,810 20,219,098 38,468,870 55,552,453
Total assets 8,861,414 11,895,316 14,948,993 19,100,289 24,848,546 36,486,533 74,452,445 111,074,151
Note: Numbers in ARS (thousands) except per share values

PAGE 8 j EMERALD EMERGING MARKETS CASE STUDIES j VOL. 11 NO. 4 2021

Exhibit 3. Balance sheet, ARS (cont.)

Table E3
Shareholders’ equity 12/31/2012 12/31/2013 12/31/2014 12/31/2015 12/31/2016 12/31/2017 12/31/2018 12/31/2019
Additional paid-in capital 0 0 0 0 0 0 2,844,981 4,753,329
Common stock 700,000 700,000 700,000 700,000 700,000 700,000 700,000 700,000
Retained earnings 470,272 155,376 236,469 350,755 429,929 359,968 7,665,732 (1,695,095)
Treasury stock (70) (70) (70) (70) (70) (70) (780) (1,200)
Minority interest 780,862 1,011,746 1,291,191 1,846,572 2,467,010 2,938,748 6,265,650 10,789,816
Other equity 1,386,875 2,020,138 2,230,756 2,646,009 3,391,665 4,338,380 2,965,323 15,363,606
Shareholders equity (Total) 3,337,939 3,887,190 4,458,346 5,543,265 6,988,533 8,337,026 20,440,906 29,910,456
Non-current liabilities
Long-term debt 1,334,327 2,918,400 3,715,813 4,059,657 5,612,194 12,309,975 22,625,541 37,070,986
Long-term tax liability 12,098 39,315 53,845 8,875 18,226 673,032 1,440,147 1,762,676
Pension liabilities (long-term) 44,973 79,183 131,823 194,050 323,658 506,298 847,151 1,616,502
Accounts payable (long-term) 82,819 65,504 17,744 16,239 18,308 74,892 98,206 268,317
Other non-current liabilities 72,871 88,095 155,260 188,751 354,489 423,090 509,762 1,457,073
Total non-current liabilities 1,547,088 3,190,498 4,074,485 4,467,573 6,326,875 13,987,287 25,520,807 42,175,554
Current liabilities
Current part of debt 1,298,139 1,293,446 1,966,970 3,057,337 3,892,062 4,197,344 11,021,317 15,893,401
Derivatives 4,274 1,213 23,100 313 24,669 14,460 194,685 2,968
Current tax liabilities 78,639 80,461 168,797 311,990 225,404 189,837 444,151 733,082
Pension liabilities 16,150 20,552 32,238 41,013 51,014 69,519 118,947 248,904
Accounts payable 2,504,203 3,296,865 4,063,905 5,509,860 7,186,867 9,505,469 16,430,221 21,014,473
Other current liabilities 74,981 125,092 161,152 168,938 153,121 185,591 281,412 1,095,313
Total current liabilities 3,976,387 4,817,628 6,416,162 9,089,451 11,533,138 14,162,220 28,490,732 38,988,141
Total liabilities 5,523,475 8,008,126 10,490,647 13,557,023 17,860,013 28,149,506 54,011,539 81,163,695
Total equity and liabilities 8,861,414 11,895,316 14,948,993 19,100,289 24,848,546 36,486,533 74,452,445 111,074,151

Note: Numbers in ARS (thousands) except per share values

Exhibit 4. Cash flow statement, ARS

Table E4
Concept 12/31/2012 12/31/2013 12/31/2014 12/31/2015 12/31/2016 12/31/2017 12/31/2018 12/31/2019

Depreciation and amortization 339,026 407,773 637,348 606,908 966,015 1,146,524 3,417,190 4,498,808
Operating cash flow 336,440 1,015,192 11,830,302 3,059,959 1,823,329 3,425,910 3,014,884 8,610,675
Capital expenditures 499,089 977,121 1,227,360 750,272 1,549,910 1,957,936 3,017,681 2,813,003
Net acquisitions (52,015) (31,119) (87,264) 555,971 (19,276) 2,830,703 (112,527) 764,018
Equity repurchase (Common, Net) 0 0 0 0 0 0 0 0
Dividends paid 123,489 220,421 307,680 314,271 387,664 778,972 1,015,673 1,878,373
Note: This table presents selected items of the Cash Flow Statement, expressed in local currency (ARS, thousands)

VOL. 11 NO. 4 2021 j EMERALD EMERGING MARKETS CASE STUDIES j PAGE 9

 PAGE 10
Table E5
Concept 12/31/2012 12/31/2013 12/31/2014 12/31/2015 12/31/2016 12/31/2017 12/31/2018 12/31/2019

Revenue 2,090,160 1,984,013 2,136,746 1,948,620 2,382,620 2,557,843 2,221,820 1,831,546

Cost of revenue 1,399,098 1,318,062 1,401,985 1,263,393 1,588,206 1,728,479 1,586,834 1,351,462
Gross profit 691,062 665,951 734,761 685,227 794,414 829,364 634,986 480,084
SG&A expenses 541,737 526,518 551,781 496,523 595,729 626,402 516,166 391,033
Operating income 149,325 139,433 182,980 188,704 198,685 202,962 118,820 89,051

j EMERALD EMERGING MARKETS CASE STUDIES j VOL. 11 NO. 4 2021

Non-operating interest expenses 50,691 56,480 89,581 79,420 146,760 171,956 150,020 78,076
Non-operating income 19,959 23,661 33,081 40,965 66,809 43,158 (22,524) 5,508
Other income/(Expense) (26,031) (37,021) (34,882) (45,049) 2,587 13,618 5,042 23,656
EBT 92,561 69,592 91,598 105,201 121,320 87,782 (48,682) 40,138
Income tax provision 34,926 33,442 46,401 48,541 52,856 28,684 (22,452) 42,097
Net income, ordinary 57,635 36,150 45,198 56,660 68,464 59,098 (26,230) (1,959)
Extraordinary income/(Expense) 40,113 50,225 35,377 38,746 47,031 50,543 53,361 (5,389)
Net income 97,748 86,375 80,574 95,406 115,495 109,641 27,132 (7,348)
Exhibit 5. Income statement, US$ CCL

Ordinary non-controlling interest 17,603 18,372 24,178 33,512 39,848 38,664 20,995 18,015
Ordinary net income, common 40,032 17,778 21,019 23,148 28,616 20,434 (47,225) (19,974)
Non-controlling interest 23,053 26,792 29,803 40,817 48,085 46,686 29,757 17,728
Net income, common 74,695 59,582 50,772 54,588 67,411 62,955 (2,625) (25,076)
EPS (Common, Diluted) 0.00057 0.00025 0.00030 0.00033 0.00041 0.00029 0.00067 0.00029
Shares (Diluted, Weighted, Thousands) 70,000,000 70,000,000 70,000,000 70,000,000 70,000,000 70,000,000 70,000,000 70,000,000
Note: Numbers in US$ CCL (thousands) except per share values
Exhibit 6. Balance sheet, US$ CCL

Table E6
Concept 12/31/2012 12/31/2013 12/31/2014 12/31/2015 12/31/2016 12/31/2017 12/31/2018 12/31/2019

Non-current assets
Property, plant, equipment (Net) 327,844 340,499 379,978 352,372 411,677 609,985 634,326 494,669
Intangible assets 19,601 15,356 14,092 12,196 13,251 24,248 28,105 24,176
Goodwill 37,293 28,796 22,406 18,042 16,319 19,293 71,537 57,573
Long-term investments 767 607 413 6,828 34,732 91,623 97,149 100,391
Long-term biological assets 12,271 7,175 7,792 4,294 4,925 20,394 12,686 9,440
Derivatives (Long-term) 0 0 0 0 5,002 3,986 7,454 0
Other receivables (Long-term) 32,225 57,513 35,999 68,216 56,310 59,621 33,180 27,484
Other long-term assets 19,326 26,686 25,582 26,552 24,686 30,198 49,231 41,151
Total non-current assets 449,328 476,631 486,262 488,500 566,902 859,347 933,668 754,884
Current assets
Biological assets 1,257 1,207 1,443 4,447 5,069 6,782 6,745 5,939
Inventory 378,861 393,645 363,480 328,624 417,801 439,667 449,526 295,586
Derivatives (Assets) 1,970 54 1,005 24,702 10,696 1,041 149 174
Other receivables 78,432 93,858 90,369 84,656 65,948 75,325 66,927 67,320
Receivables 352,158 302,082 278,807 276,057 358,596 404,560 349,214 250,768
Other short-term investments 6,063 192 438 1 1 1 0 0
Cash and short-term investments 60,478 99,609 105,815 143,811 140,743 140,722 125,592 135,515
Total current assets 879,220 890,647 841,358 862,298 998,854 1,068,098 998,154 755,302
Total assets 1,328,548 1,367,278 1,327,619 1,350,798 1,565,756 1,927,445 1,931,823 1,510,186
Note: Numbers in US$ CCL (thousands) except per share values

VOL. 11 NO. 4 2021 j EMERALD EMERGING MARKETS CASE STUDIES j PAGE 11

 Exhibit 7. Balance sheet, US$ CCL (cont.)

Table E7
Shareholders’ equity 12/31/2012 12/31/2013 12/31/2014 12/31/2015 12/31/2016 12/31/2017 12/31/2018 12/31/2019
Additional paid-in capital 0 0 0 0 0 0 73,819 64,627
Common stock 104,948 80,460 62,167 49,505 44,108 36,978 18,163 9,517
Retained earnings 70,506 17,859 21,001 24,806 27,091 19,016 198,903 (23,047)
Treasury stock (11) (8) (6) (5) (4) (4) (20) (16)
Minority interest 117,071 116,293 114,671 130,592 155,451 155,243 162,575 146,700
Other equity 207,927 232,200 198,113 187,129 213,716 229,180 76,941 208,887
Shareholders equity (Total) 500,441 446,803 395,945 392,027 440,361 440,413 530,382 406,668
Non-current liabilities
Long-term debt 200,049 335,448 330,001 287,104 353,635 650,289 587,066 504,024
Long-term tax liability 1,814 4,519 4,782 628 1,148 35,554 37,368 23,966
Pension liabilities (Long-term) 6,743 9,102 11,707 13,723 20,394 26,746 21,981 21,978
Accounts payable (Long-term) 12,417 7,529 1,576 1,148 1,154 3,956 2,548 3,648
Other non-current liabilities 10,925 10,126 13,789 13,349 22,337 22,350 13,227 19,811
Total non-current liabilities 231,947 366,724 361,855 315,953 398,669 738,895 662,190 573,427
Current liabilities
Current part of debt 194,624 148,672 174,686 216,219 245,247 221,730 285,971 216,090
Derivatives 641 139 2,051 22 1,554 764 5,052 40
Current tax liabilities 11,790 9,248 14,991 22,064 14,203 10,028 11,524 9,967
Pension liabilities 2,421 2,362 2,863 2,900 3,215 3,672 3,086 3,384
Accounts payable 375,443 378,950 360,915 389,665 452,859 502,138 426,316 285,717
Other current liabilities 11,242 14,378 14,312 11,948 9,648 9,804 7,302 14,892
Total current liabilities 596,160 553,750 569,819 642,818 726,726 748,136 739,251 530,090
Total liabilities 828,107 920,474 931,674 958,771 1,125,395 1,487,031 1,401,441 1,103,517
Total equity and liabilities 1,328,548 1,367,278 1,327,619 1,350,798 1,565,756 1,927,445 1,931,823 1,510,186

Note: Numbers in US$ CCL (thousands) except per share values

Exhibit 8. Cash flow statement, US$ CCL

Table E8
Concept 12/31/2012 12/31/2013 12/31/2014 12/31/2015 12/31/2016 12/31/2017 12/31/2018 12/31/2019

Depreciation and amortization 50,828 46,870 56,603 42,921 60,870 60,566 88,666 61,167
Operating cash flow 50,441 116,689 1,050,648 216,404 114,892 180,978 78,227 117,072
Capital expenditures 74,826 112,313 109,002 53,060 97,663 103,430 78,300 38,246
Net Acquisitions (7,798) (3,577) (7,750) 39,319 (1,215) 149,535 (2,920) 10,388
Equity repurchase (Common, Net) 0 0 0 0 0 0 0 0
Dividends paid 18,514 25,336 27,325 22,226 24,427 41,150 26,354 25,539
ARS/CCL exchange rate 6.67 8.70 11.26 14.14 15.87 18.93 38.54 73.55
Note: This table presents selected items of the Cash Flow Statement, expressed in US$ (thousands), at the CCL exchange rate

PAGE 12 j EMERALD EMERGING MARKETS CASE STUDIES j VOL. 11 NO. 4 2021

 Table E9
Concept 12/31/2012 12/31/2013 12/31/2014 12/31/2015 12/31/2016 12/31/2017 12/31/2018 12/31/2019
Exhibit 9. Income statement, US$ BN

Revenue 2,833,611 2,647,379 2,843,943 2,129,327 2,385,626 2,600,428 2,274,341 2,250,045

Cost of revenue 1,896,744 1,758,764 1,865,999 1,380,555 1,590,210 1,757,256 1,624,345 1,660,264
Gross profit 936,866 888,616 977,944 748,772 795,416 843,172 649,996 589,781
SG&A expenses 734,428 702,562 734,404 542,568 596,481 636,831 528,367 480,382
Operating income 202,438 186,053 243,541 206,204 198,935 206,341 121,629 109,399
Non-operating interest expenses 68,722 75,365 119,230 86,786 146,945 174,819 153,566 95,916
Non-operating income 27,058 31,572 44,030 44,764 66,893 43,877 (23,056) 6,767
Other income/(Expense) (35,290) (49,400) (46,426) (49,226) 2,590 13,845 5,161 29,061
EBT 125,485 92,861 121,914 114,956 121,473 89,244 (49,833) 49,310
Income tax provision 47,349 44,624 61,758 53,042 52,923 29,161 (22,983) 51,717
Net income, ordinary 78,136 48,237 60,157 61,914 68,550 60,082 (26,850) (2,407)
Extraordinary income/(Expense) 54,380 67,018 47,085 42,339 47,090 51,385 54,623 (6,620)
Net income 132,516 115,255 107,242 104,253 115,641 111,467 27,773 (9,027)
Ordinary non-controlling interest 23,864 24,515 32,181 36,620 39,898 39,308 21,492 22,131
Ordinary net income, common 54,271 23,722 27,976 25,295 28,652 20,775 (48,341) (24,538)

VOL. 11 NO. 4 2021

Non-controlling interest 31,253 35,751 39,666 44,603 48,145 47,464 30,460 21,778
Net Income, common 101,263 79,504 67,576 59,650 67,496 64,003 (2,687) (30,805)
EPS (Common, Diluted) 0.00078 0.00034 0.00040 0.00036 0.00041 0.00030 0.00069 0.00035
Shares (Diluted, Weighted, Thousands) 70,000,000 70,000,000 70,000,000 70,000,000 70,000,000 70,000,000 70,000,000 70,000,000
Note: Numbers in US$ BN (thousands) except per share values

j EMERALD EMERGING MARKETS CASE STUDIES j PAGE 13

 Exhibit 10. Balance sheet, US$ BN

Table E10
Concept 12/31/2012 12/31/2013 12/31/2014 12/31/2015 12/31/2016 12/31/2017 12/31/2018 12/31/2019

Non-current assets
Property, plant, equipment (Net) 444,456 454,347 505,739 385,050 412,196 620,141 649,321 607,698
Intangible assets 26,573 20,490 18,756 13,327 13,268 24,652 28,769 29,700
Goodwill 50,558 38,425 29,821 19,715 16,339 19,614 73,229 70,728
Long-term investments 1,039 810 550 7,461 34,776 93,148 99,445 123,330
Long-term biological assets 16,636 9,573 10,371 4,692 4,931 20,733 12,986 11,597
Derivatives (Long-term) 0 0 0 0 5,009 4,052 7,631 0
Other receivables (Long-term) 43,687 76,742 47,913 74,542 56,381 60,613 33,965 33,764
Other long-term assets 26,200 35,608 34,049 29,015 24,717 30,701 50,394 50,554
Total non-current assets 609,149 635,995 647,199 533,801 567,617 873,654 955,739 927,371
Current assets
Biological assets 1,704 1,611 1,921 4,860 5,076 6,895 6,905 7,295
Inventory 513,618 525,262 483,781 359,100 418,328 446,987 460,152 363,125
Derivatives (Assets) 2,671 71 1,337 26,993 10,709 1,058 153 214
Other receivables 106,330 125,240 120,278 92,506 66,031 76,579 68,509 82,703
Receivables 477,418 403,085 371,084 301,657 359,049 411,295 357,469 308,068
Other short-term investments 8,220 256 583 1 1 1 0 0
Cash and short-term investments 81,990 132,914 140,836 157,147 140,921 143,064 128,561 166,479
Total current assets 1,191,951 1,188,440 1,119,821 942,264 1,000,114 1,085,881 1,021,750 927,885
Total assets 1,801,100 1,824,435 1,767,020 1,476,066 1,567,732 1,959,535 1,977,489 1,855,256
Note: Numbers in US$ BN (thousands) except per share values

PAGE 14 j EMERALD EMERGING MARKETS CASE STUDIES j VOL. 11 NO. 4 2021

Exhibit 11. Balance sheet, US$ BN (cont.)

Table E11
Shareholders’ equity 12/31/2012 12/31/2013 12/31/2014 12/31/2015 12/31/2016 12/31/2017 12/31/2018 12/31/2019
Additional paid-in capital 0 0 0 0 0 0 0 0
Common stock 142,276 107,362 82,742 54,096 44,164 37,594 18,592 11,692
Retained earnings 95,584 23,831 27,951 27,106 27,125 19,332 203,605 (28,313)
Treasury stock (14) (11) (8) (5) (4) (4) (21) (20)
Minority interest 158,712 155,176 152,623 142,703 155,647 157,828 166,418 180,221
Other equity 281,885 309,837 263,683 204,483 213,985 232,996 78,760 256,616
Shareholders equity (Total) 678,443 596,195 526,991 428,382 440,917 447,746 542,919 499,590
Non-current liabilities
Long-term debt 271,205 447,607 439,221 313,729 354,082 661,116 600,944 619,191
Long-term tax liability 2,459 6,030 6,365 686 1,150 36,146 38,251 29,442
Pension liabilities (Long-term) 9,141 12,145 15,582 14,996 20,420 27,191 22,501 27,000
Accounts payable (Long-term) 16,833 10,047 2,097 1,255 1,155 4,022 2,608 4,482
Other non-current liabilities 14,811 13,511 18,352 14,587 22,365 22,722 13,539 24,337
Total non-current liabilities 314,449 489,340 481,618 345,253 399,172 751,197 677,843 704,452
Current liabilities
Current part of debt 263,849 198,381 232,502 236,270 245,556 225,421 292,731 265,465
Derivatives 869 186 2,730 24 1,556 777 5,171 50
Current tax liabilities 15,984 12,341 19,952 24,111 14,221 10,195 11,797 12,245
Pension liabilities 3,283 3,152 3,811 3,169 3,219 3,734 3,159 4,157
Accounts payable 508,984 505,654 480,367 425,801 453,430 510,498 436,394 351,002
Other current liabilities 15,240 19,186 19,049 13,055 9,661 9,967 7,474 18,295
Total current liabilities 808,209 738,900 758,412 702,430 727,643 760,592 756,726 651,213
Total liabilities 1,122,657 1,228,240 1,240,029 1,047,683 1,126,815 1,511,789 1,434,569 1,355,666
Total equity and liabilities 1,801,100 1,824,435 1,767,020 1,476,066 1,567,732 1,959,535 1,977,489 1,855,256

Note: Numbers in US$ BN (thousands) except per share values

Exhibit 12. Cash flow statement, US$ BN

Table E12
Concept 12/31/2012 12/31/2013 12/31/2014 12/31/2015 12/31/2016 12/31/2017 12/31/2018 12/31/2019

Depreciation and amortization 68,908 62,542 75,337 46,902 60,947 61,575 90,762 75,143
Operating cash flow 68,382 155,704 1,398,381 236,473 115,037 183,991 80,077 143,823
Capital expenditures 101,441 149,865 145,078 57,981 97,786 105,152 80,151 46,985
Net acquisitions (10,572) (4,773) (10,315) 42,965 (1,216) 152,025 (2,989) 12,761
Equity repurchase (Common, Net) 0 0 0 0 0 0 0 0
Dividends paid 25,099 33,807 36,369 24,287 24,458 41,835 26,977 31,374
ARS/BN exchange rate 4.92 6.52 8.46 12.94 15.85 18.62 37.65 59.87
Note: This table presents selected items of the cash flow statement, expressed in US$ (Thousands), at the BN exchange rate

VOL. 11 NO. 4 2021 j EMERALD EMERGING MARKETS CASE STUDIES j PAGE 15

 Exhibit 13. Fundamental Analysis, US$ ARS

Figure E1

PAGE 16 j EMERALD EMERGING MARKETS CASE STUDIES j VOL. 11 NO. 4 2021

Exhibit 14. Fundamental analysis, US$ CCL

Figure E2

VOL. 11 NO. 4 2021 j EMERALD EMERGING MARKETS CASE STUDIES j PAGE 17

 Exhibit 15. Fundamental analysis, US$ BN

Figure E3

PAGE 18 j EMERALD EMERGING MARKETS CASE STUDIES j VOL. 11 NO. 4 2021

 Table E13
12/31/2012 12/31/2013 12/31/2014 12/31/2015 12/31/2016 12/31/2017 12/31/2018 12/31/2019
Concept 2,012 2,013 2,014 2,015 2,016 2,017 2,018 2,019 Test Target OK test?

1 Revenue growth 6.32 6.30 6.33 6.29 6.38 6.41 6.35 6.26 0% 50% YES
2 Gross margin 33% 34% 34% 35% 33% 32% 29% 26% 32% 40% NO
3 Operating margin 7% 7% 9% 10% 8% 8% 5% 5% 0% 0 NO
4 Net margin 2% 1% 1% 1% 1% 1% 2% 1% 0% 20% NO
Exhibit 16. Fundamental analysis US$ CCL

5 Income tax rate 38% 48% 51% 46% 44% 33% 46% 105% 51% 33% NO
6 Interest expense/EBIT 34% 41% 49% 42% 74% 85% 126% 88% 0.67 15% NO
7 Consistency of EPS 0.00 0.00 0.00 0.00 0.00 0.00 (0.00) (0.00) (0.00) 0% NO
8 Current ratio 1.47 1.61 1.48 1.34 1.37 1.43 1.35 1.42 1.42 1 YES
9 Debt/equity 0.90 1.21 1.44 1.45 1.53 2.24 1.84 2.01 2.01 1 NO
10 Non-current liabilities/ 22.14 35.00 34.53 30.15 38.05 70.51 63.19 54.72 54.72 5 NO
average net income
11 Inventory turnover 5.52 5.04 5.88 5.93 5.70 5.82 4.94 6.20 0.05 0 YES
12 Working capital turnover 4.78 4.82 5.71 5.93 5.88 6.02 4.98 5.48 0.08 0 YES
13 PP&E turnover 6.38 5.83 5.62 5.53 5.79 4.19 3.50 3.70 (0.41) 0 NO
14 Total assets turnover 1.57 1.45 1.61 1.44 1.52 1.33 1.15 1.21 (0.06) 0 NO
15 Net-net value 51,113 (29,828) (90,316) (96,473) (126,541) (418,933) (403,287) (348,215) (348,215) 0 NO
Total assets 1,328,548 1,367,278 1,327,619 1,350,798 1,565,756 1,927,445 1,931,823 1,510,186

VOL. 11 NO. 4 2021

() Cash 60,478 99,609 105,815 143,811 140,743 140,722 125,592 135,515
() Investments 6,830 799 852 6,829 34,733 91,623 97,149 100,391
() Goodwill 37,293 28,796 22,406 18,042 16,319 19,293 71,537 57,573
() Payables 375,443 378,950 360,915 389,665 452,859 502,138 426,316 285,717
(=) Capital 848,503 859,123 837,632 792,452 921,102 1,173,669 1,211,228 930,991
Net investment 10,620 (21,491) (45,180) 128,650 252,567 37,558 (280,237)
Net operating profit after 92,980 72,429 90,289 101,634 112,123 136,642 64,020 (4,346)
tax (NOPAT) = EBIT  (1  t)
Notes: EBIT = Earnings before interest and taxes; PP&E = property, plant & equipment

j EMERALD EMERGING MARKETS CASE STUDIES j PAGE 19

 PAGE 20
Table E14
Concept 12/31/2012 12/31/2013 12/31/2014 12/31/2015 12/31/2016 12/31/2017 12/31/2018 12/31/2019 Test Target OK test?

2,012 2,013 2,014 2,015 2,016 2,017 2,018 2,019

j EMERALD EMERGING MARKETS CASE STUDIES j VOL. 11 NO. 4 2021

16 Return on Invested 11% 8% 11% 13% 12% 12% 5% 0% 9% 12% NO
Capital (ROIC) = NOPAT/Capital
17 EVA = Capital  (ROIC -WACC) (9,955) (31,795) (11,328) 5,499 380 (5,741) (82,919) (117,289) (31,373) 0 NO
18 FCFF = NOPAT - Net Investment 82,360 93,920 135,468 (27,015) (140,444) 99,083 344,257 97,810 0 YES
19 EVA/Revenue 0% 2% 1% 0% 0% 0% 4% 6% 2% 0 NO
#year 7 6 5 4 3 2 1 –
Capitalization factor 2.23 1.99 1.77 1.58 1.41 1.26 1.12 1.00
20 Low acquisitions 5% 3% 4% 21% 1% 74% 2% 12% 11% 33% YES
21 Low Capex 50% 81% 60% 28% 49% 51% 66% 43% 53% 33% NO
22 Stock buybacks – – – – – – – – 0 0 NO
23 Low depreciation 7% 7% 8% 6% 8% 7% 14% 13% 9% 7% NO
24 Operating CF/operating income 34% 84% 574% 115% 58% 89% 66% 131% 144% 20% YES
25 Beneish M-Score (2.98) (3.07) (2.76) (2.74) (2.70) (2.96) (3.17) 2.22 YES
Exhibit 17. Fundamental analysis US$ CCL (cont.)

26 Du Pont’s value drivers:

COGS/sales 0.67 0.66 0.66 0.65 0.67 0.68 0.71 0.74
SG&A/sales 0.26 0.27 0.26 0.25 0.25 0.24 0.23 0.21
Sales/working capital 4.78 4.82 5.71 5.93 5.88 6.02 4.98 5.48
Sales/fixed capital 5.08 4.44 4.61 4.20 4.62 3.42 2.90 3.07
(1- Income tax rate) 0.62 0.52 0.49 0.54 0.56 0.67 0.54  0.05
Du Pont’s ROIC 11% 8% 11% 13% 12% 12% 5% 0%
Notes: Financial statement’s numbers is US$ CCL (thousands); COGS = cost of goods sold
Exhibit 18. Revenue growth rate

Figure E4

3,000,000

H F
2,500,000
USD CCL, thousands

2,000,000

1,500,000
0.46% 0.46% 0.00%
1,000,000

500,000

Revenue

Notes: Historical revenue growth rate, computed with a regression of the logarithm of sales.
the forecasted growth rate is subjective, but can reasonably be assumed equal to what the
company achieved in the past (at least in the short- and medium-term)

Exhibit 19. Balance sheet assumptions

Figure E5

3,000,000

Balance Sheet Assumptions

2,500,000

Current Assets are

2,000,000 forecasted as a
USD CCL, thousands

percentage of Sales

1,500,000

1,000,000

Fixed assets are

assumed constant
500,000

-
2,012 2,013 2,014 2,015 2,016 2,017 2,018 2,019

Fixed Capital Total Current Assets Revenue

VOL. 11 NO. 4 2021 j EMERALD EMERGING MARKETS CASE STUDIES j PAGE 21

 Exhibit 20. Non-current assets

Figure E6

2,500,000

Non-current Assets
PP&E
2,000,000 represents
66% of Total
Assets
USD CCL, thousands 1,500,000
1,068,098 998,154

755,302
998,854
1,000,000
879,220 890,647 841,358 862,298

24,248 28,105
500,000 24,176
14,092 13,251
19,601 15,356 12,196 634,326
609,985
411,677 494,669
327,844 340,499 379,978 352,372

-
2,012 2,013 2,014 2,015 2,016 2,017 2,018 2,019

Property, Plant, Equipment (Net) Intangible Assets Other Long Term Assets Long Term Investments Total Current Assets

Exhibit 21. CapEx and working capital

Figure E7

1,600,000

1,400,000

1,200,000
USD CCL, thousands

1,000,000
571,838
565,960
800,000
469,585
545,995
600,000 503,777 511,697 480,442
472,634

400,000
607,709 639,389
200,000 461,406
344,726 347,427 357,190 319,819 375,107

-
2012 2013 2014 2015 2016 2017 2018 2019

Fixed Capital Working Capital Non-operang assets

PAGE 22 j EMERALD EMERGING MARKETS CASE STUDIES j VOL. 11 NO. 4 2021

Exhibit 22. Comparable companies

Table E15
Industry: Packaged foods
Company Ticker Price/earnings Price/sales Price/book value Price/cash flow Enterprise value/EBIT

The Hershey Co. HSY 25.07 4.19 15.46 17.07 21.06

Mondelez International Inc. MDLZ 23.43 3.27 3.21 19.32 24.94
General Mills Inc. GIS 15.30 2.10 4.33 10.48 13.98
Tootsie Roll Industries Inc. TR 37.45 4.63 2.82 29.06 11.95
Notes: This table presents a list of companies that have been identified as Arcor’s comparable. For each company, a selection of
valuation ratios is also included

Corresponding author
Florencia Roca can be contacted at: mflorencia@ufm.edu

VOL. 11 NO. 4 2021 j EMERALD EMERGING MARKETS CASE STUDIES j PAGE 23