Cimpor Afi Final

1 CFA Institute Research Challenge

CIMENTOS DE PORTUGAL SGPS SA 1

Source (Reuters)

Source (Reuters)

Source (Reuters)

Business Summary

CIMPOR - Cimentos de Portugal SGPS SA is a Portugal-based holding company primarily engaged in the production and sale of construction materials, such as cement, concrete, mortar and aggregates. The Company is active in Portugal, Spain, Morocco, Tunisia, Egypt, Turkey, Brazil, Peru, Mozambique, South Africa, China, India and Cape Verde. The Company’s investments are held essentially through two subsidiaries: Cimpor Portugal SGPS SA, which holds the investments in companies dedicated to the production of cement, concrete, aggregates and mortar in Portugal, and Cimpor Inversiones SA, which holds the investments in companies operating abroad.

Performance

Price(€): 3.35 52 Week High: 5.70 Currency: EUR Volume(millions): 0.1 52 Week Low: 2.93 Stock performance vs. the Market (Jan 04=100%)

Financial Summary

BRIEF: For the six months ended 30 June 2012, CIMPOR - Cimentos de Portugal SGPS SA revenues decreased 7% to EUR1.11B. Net loss totaled EUR204.8M vs. income of EUR132.2M. Revenues reflect Portugal segment decrease of 22% to EUR134.4M, Spain segment decrease of 26% to EUR93.1M, China segment decrease of 38% increase from EUR2.5M to EUR298.6M. It is the component of PSI INDUSTRIALS Index (weighting 44.27%), and it was once the component of PSI-20 Index. It is now weighting 4.49% of PSI ALL-SHARE Index.

P/E 16.91 DividendYield 5.08% Beta: 0.91 Shares Outstanding(Mil.) 672.00 Market Cap(Mil.) 2,197.44 Institutional Holdings 1.06% Price to Book 1.33 Debt to Equity 119.72% Return on Equity 7.27

*Source: Reuters

Sales

Net Profit

Ticker: Recommendation:BUY

Price: €3.35 Price Target: €4.30

CIMPOR CIMENTOS DE PORTUGAL SGPS SA

Cimpor Cimentos de Portugal SGPS SA

Rua Alexandre Herculano, 35, Sao LISBOA 1250-009 Portugal



Key Milestones:

1976:CIMPOR created.

1983:Replacing fuel oil with coal in all plants.

1985:Last wet production line transformed to dry

process

1991:Company goes public.

1994:”Jump Project” sets up

1998:In Portugal, the production exceeds 100

millions tones.

2001:Best Performing Companies Over 1 Year

Award.

2002:International acquisition begins.

2012: Camargo Corrêa group became Cimpor’s

majority shareholder with 72.9% of the share capital.

Source (Company document)

Business Description A worldwide leader of cement manufacturing

Cimpor, which has its headquarters in Portugal, is one of the world’s top ten cement groups. Portugal, Spain, Cape Verde, Brazil, Morocco, Tunisia, Egypt, Turkey, Mozambique, South Africa, China and India are the 12 countries where Cimpor operates and where it employs almost 8,250 people of 33 different nationalities. Cimpor’s main business is the manufacture and sale of cement. Its 26 plants and 16 grinding mills currently have an installed production capacity of 36.5 million tons of cement per year using its own clinker. Cimpor group also produces and sells ready-mix concrete, aggregates and dry mortars with the aim of ensuring the vertical integration of its businesses

The company reported sales of 2.28 billion Euro (US$3.00 billion) for the year ending December of 2011. This represents a very small increase of 1.6% versus 2010, when the company's sales were 2.24 billion Euro. Sales of Others saw an increase that was more than double the company's growth rate: sales were up 16.2% in 2011, from 113.49 million Euro to 131.86 million Euro. CIMPOR - Cimentos de Portugal SGPS SA also saw significant increases in sales in Concrete and Aggregates (up 14.6% to 492.39 million Euro) .

Protugal Egypt Mozambique Installed capacity 7.0 Installed capacity 4.0 Installed capacity 0.9 Cement Plants 3 Cement Plants 1 Cement Plants 1 Emploees 1210 Emploees 503 Emploees 584 Spain Morocco South Afica Installed capacity 3.2 Installed capacity 1.3 Installed capacity 1.6 Cement Plants 4 Cement Plants 1 Cement Plants 1 Emploees 967 Emploees 206 Emploees 483 Cape Verde Tunisia Protugal Installed capacity N/A Installed capacity 1.8 Installed capacity 1.2 Cement Plants 1 Cement Plants 1 Cement Plants 1 Emploees 118 Emploees 222 Emploees 481 Brazil Turkey China Installed capacity 6.6 Installed capacity 3.0 Installed capacity 6.0 Cement Plants 6 Cement Plants 4 Cement Plants 2 Emploees 1511 Emploees 817 Emploees 971

Cement Production Capacity:36.5Mton/year



A successful external growth strategy

Cimpor has over 10 years of experience in growing through acquisitions, Beginning in 1992 by acquiring the Spanish holding company CORPORACIÓN NOROESTE S.A, then, in 1994 the company Moçambique S.A. 2 years latter in 1994,the company acquired 55% of the Moroccan company ASMENT DE TÉMARA. In 1997, Cisafra and the cement business of Serrana's Group were acquired, leading to the creation of SOCIEDADE DE CIMENTOS DO BRASIL, S.A. To get its business in Tunisia, the company acquired Societé des Ciments de Jbel Oust. Two year latter, which is 1998, the company has strengthened its position in Brazil through the acquisition of the Brennand Group, including the following companies: Companhia de Cimentos Goiás, Companhia de Cimento Atol and Companhia de Cimento Portland.

At the beginning of 2000, Amreyah Cement Company joins the company’s portfolio and at this year alos,the Portuguese government sells the remaining 10% it still holds in the company. With the purchase of Natal Portland CementCompany (NPC) in 2002, the company expands his international presence. 2003, the purchase of two factories in Cordoba and Biebla allows the company continue to strengthen his absolute position in Spain. 2005, by purchasing Cimentos de Cabo Verde,the company gets enter the 8th foreign county .

Finally in 2007,by purchasing Shandong Liuyuan New Type Cement Development, the cmpany gets its business in the world’s fastest growing county-China, which is also the biggest consumer of cement and aggregate products because of its massive demand for infrastructure. By this acquisition, Cimpor gets the contract to be the only foreign supplier for parts of Chinese high-speed railway project. At the same year, Cimpor also gets into the market of Peru and Turkey.

In 2008, the acquisitions continue in China and Spain, and the also, the company gets into its 12th foreign market-India by acquiring Shree Digvijay.

In 2012, Public Tender for purchasing Cimpor shares through which InterCement begins to hold 94.11% of its capital stock. InterCement is a holding that gathers cement sector assets for the Camargo Corrêa Group, one of the biggest private business groups in Brazil, present in 17 countries and with nearly 60 thousand employees.

Research & Development

This area is led by Cimpor Tec, which is responsible for technical development and innovation worldwide and supporting the business units. The R&D projects underway, on which Cimpor has invested more than EUR 7 million in the last five years, include the reduction of CO2 emissions associated with the cement manufacturing process, the development of new hydraulic binders, the use of alternative fuels and raw materials and the design of new equipment for the cement industry. The R&D initiatives in partnership with universities and university institutes are directly steered by CIMPOR. In the specific case of one of these projects, the nano-engineering of CSH through a contract with the Massachusetts Institute of Technology (MIT), a provisional patent was registered in 2011, which could become definitive if the development of research over the year gives it support.



Source (Reuters)

Investment Summary Target Price of €4.3 twelve months from now: BUY recommendation.

We initiate coverage on Cimpor with a BUY rating and a 12-month price target of €4.3

Advantages:

Correlation with General economie: Cimpor is a leading company in the Cement & Aggregate sector, which is highly depended on the general economie. Not only for Cimpor but also his major competitors, the stock price is always highly correlated with the major index. Which gives as a good reason to establish our provision based on the GDP.

Presence in emerging market: Its presence in 3 BRIC (Brazil, Russia, India, China) counties gives a opportunity to get a high profit from these countries’ growth, however, those are the market with much more competitor from all over the world, which makes it difficult to get a high profit, and what’s more, is that, to manage the company in those emerging countries is far more different then in Europe, such as how to get his relationship with the local government and how to communicate with the local employee.

Disadvantages:

European debt crisis continues to influence company’s performance, as a company which has a D/E ratio more than 1 for the past 5 years (competitors gets this ratio around 60%). The situation becomes rather difficult for Cimpor to finance his operations and investments at a low cost.

How ever, the takeover in june 2012 will get the company on some level the ability to go against the bad general economize of Europe .

Cimpor Stock Price and Major Events

6-May 29 2012

Intercement Austria Holding GmbH Updates on Obligatory Public Offering for Acquisition of Total of CIMPOR – Cimentos de Portugal SGPS SA's Ordinary Shares

5-June 5 2011

Protugeuse Election

4-Fer 11 2010

Camargo Corrêa, S.A. acquires a 6.5% qualyfying participation in CIMPOR.

3-Dec 18 2009

Announcement on 18 December of the launch of the takeover bid at the price of 5.75 euros, by the Brazil registered company Companhia Siderúrgica Nacional (CSN)

2-May 1 2009

09 1st quarter result announced

1-Apr 24 2008

08 1st quarter result announced



Industry Overview and Competitive Positioning

Currently, the cement industry has many features of globalization. The global cement industry is expected to grow at an annual rate of 3%, which is close to the speed of the development of the world economy, supposing the cement consumption has a steady growth, then the global cement production is estimated at about 22 million tons a year. As the cement consumption, Emerging Market is leading the row where China ranked first, followed by India. Some cement companies keen to build new plants and expand existing production capacity, which will allow the capacity to grow to more than 14 million tons a year.

It can be said that the cement in developing countries is still a sunrise industry, while with a periodicity in the developed countries. The focus of the cement industry is of course the environment and sustainable development issues, at the same time, the emerging market gets the intention of those big groups all around the world. People usually think that emerging markets are the Middle East / North Africa, Asia, Latin America and Eastern Europe, as well as parts of Africa.

Middle East / North Africa:Attracted by the considerable profits from the Middle East, the some of the world's cement giant, is expected to soon be stationed in the this market as more and more multinational companies stationed in Lebanon, as well as North Africa, Egypt, Morocco and Tunisia and other countries.

The Middle East accounted for 6% of the world's cement industry with an annual production of over 115 million tons, 77% of the production comes fore Egypt, Iran and Saudi Arabia. It is worth mentioning that the Gulf region's cement consumption has a more than 13% growth rate from 2000. Many people think that the annual per capita consumption of cement is the herald of prosperity and development. The Gulf region is one of the regions of the world where cement annual consumption per capita stays more than 1000kg. Most of the enterprises in the Gulf region is building new plants or upgrading their existing facilities.

Asia:Economics experts predict that China and India will soon become the leader of the world economy.

It is also said that, after the United States, China, the third largest economy in the Asia-Pacific region-India is going to replace Japan to become the world's third-largest economy in the next ten years. Economic development and demand for cement is highly correlated as we can see the relation between the cement consumption and a country’s GDP.

India's annual cement production in the past two years has increased from 64 million tons to 126 million tons, more than doubled than 10 years ago. Assuming that the growth rate of the cement consumption and the rate of economic growth are parallel, the Indian cement industry will need to increase its production capacity of ten million tons a year to twelve million tons a year. Those Cement projects currently under construction, will only increase the production capacity of 6 million tons in two years.

GDP forecasting

Source:IMF



Economic Environment

The international economic environment was marked by overall slower growth, with the emerging and developing countries increasingly becoming the motors of world economic development. The increasing tension in financial markets during 2011 and 2012, which has increased the intensity of deleveraging in some economies, with main focus on the euro area and the peripheral countries, in particular.Emerging countries have grown even more in importance in terms of cement demand, and they currently account for more than 90% of worldwide consumption, especially in Asian countries, which account for more than 70% of the total.

In terms of industry trends, there is a strengthening of cost cutting programmes as a way of tackling the consecutive price increases of various inputs, especially energy. The gradual increase in co-processing has assumed particular importance in these programmes, taking into account the environmental and economic advantages it provides. The rise in the world cement market of various groups from emerging countries, such as Russia, China and India, is also to be noted.

PESTEL Analysis:

As we can see from the analysis. Cimpor’s biggest advantage is the presence in the emerging markets, for a long point of view, we can see the value of Cimpor’s big investment in these countries. Considering the slow down of economy and debt crisis in Europe, investing more in Asia and other emerging markets becomes the main strategy of the group.

The takeover of the group also gives a great opportunity to get a higher growth in the future, for all of this and based on our evaluation, we believe the Cimpor is company worth investing.

• new laws regarding sustainable development • new public construction projects

• evolution of energy costs • evolution of the crisis in mature markets • economic growth in emerging countries

• needs of human beings: habitation, trasportation and protection etc.

• polulation growth and accelerated urbanization

• reduction CO2 emissions • optimization of energy efficiency

• green house gases and raw material use • water pollution and solid waste

• health and safety law • employment law •antitrust law



Valuation

Our 12-month price target of €4.3 is a weighted average of our target prices under DCF and multiples-based valuation. We assigned a higher weight to multiples-based valuation than DCF valuation because of the similarity of those companies for all of them are ranked in 10 biggest companies in the industry, another reason is that, as a industry with a high periodicity like the economy, the assumption of DCF with steady growth in the future will give the valuation a big deviation.

Weights Price DCF 70% 3.82 Multiples 30% 5.01 Target Price 4.30

Our Target price is 28% above the company’s current price.

DCF Valuation

Growth, profitability and risk expectations are reflected in a discounted cash flows model (DCF). The key to this valuation is a reasonable forecast for the future performance of the company. As we said, the company is highly correlated with the general economy, we will estimate our forecast base on the GDP growth forecast form 2012 to 2017 by the IMF (International Monetary Fund).

As different countries will drive the company’s growth, for each country will have a GDP growth very different from the other, we will do the forecast for each country then sum together.

Then, we also need some other key features like:

The EBITDA margin is very different for each market, in countries with big initiative investments like

China and India, the EBITDA margin is around 7% and 12%, compare to 31.85% in Portugal. So we get the average information of EBITDA margin for each country in the past 5 years, then as 2012 is a year with negative net Income, we assume that for the mature market like Portugal, the EBITDA will recover in few years and stay steady for the future. For the emerging market like China, EBITDA will gets to the average level in 5 years.

Weighted Average Cost of Capital(WACC) is computed by considering both the cost of equity and the cost of Debt. As Cimpor is a highly leveraged company (Debt/Equity more than 1), getting the WACC is very important for our valuation.

Operating Free Cash Flows are computed on the basis of forecasts and are discounted with the WACC

Our DCF valuation employs a 5.92% WACC, calculated via an iterative process (between WACC, Enterprise Value, Equity Value) with the following key assumptions:

Risk-free rate: 1.43% (10 year German bund)

Equity market risk premium: 14.67%( Considering Ba3 credit spread of the country)

Beta : 0.95 (un-leveraged: 0.53)

Pre-tax cost of debt: 4% (as at dec 2012)

Effective tax-rate: 29.38%

Terminal growth rate: 3%

Target price in 12-mounth under DCF

€5.01



Relative valuation models Peer group comparison valuation

This valuation model results a target price of €3.82.

We elected five companies as a peer group and four ratios to assess the share price. The target price is the average of the four median price.

Forward P/E: current price / estimated EPS in one year MBR: market value/book value EV/Sales: enterprise value/estimated sales in one year EV/EBITDA: enterprise value/estimated EBITDA in one year

Company Forward P/E MBR EV/Sales1 EV/EBITDA Holcim 12.81 1.09 2.16 6.09 Heidelberg 12.73 0.63 1.05 5.84 Buzzi Unicem 23.78 0.75 0.58 3.32 Italcementi 90.20 0.27 1.63 10.87 Lafarge 13.51 0.77 2.05 9.07 Mean Price 11.32 1.82 2.49 4.44 Median Price 5.00 1.94 3.00 4.08

(source:Reuters)

Finacial Analysis Turnover and EBITDA

Cimpor’s revenue has grown 15.7% over the past five years, from €1.96bn in 2008 to €2.28bn in 2010, at a compounded annual growth rate of 2.96%. Cimpor’s revenue declined in 2009 is as a result of a global slowdown after the sub-prime mortgage crisis and the Europe debt crisis. but quickly rebounded 7.3% in 2010. During the period of 2007-2011, Cimpor’s EBITDA has lightly decreased from 30.9% in 2007 to 27.1% in 2011.

Net income

In 2007 which is the year before the global financial crisis, Cimpor gets a Net income of €304M, then in

2008, the year of the crisis , Net income, without doubt gets down to €219 , even four years after, in 2011 this number doesn’t recover to the level of 2007.

In 2012, which we have get the annual report, but we can already predict a negative Net income from the company’s poor quarter.



Financial Strength

Financial Strength looks at business risk. The stronger a company is from a financial standpoint, the less risky it is. The Quick Ratio compares cash and short-term investments (investments that could be converted to cash very quickly) .

As we can see, for Cimpor, the total Debt/Equity ratio is bigger then 1 in the last five years, as his competitors has this ratio at around 0.6.which means Cimpor gets a much high leverage then his competitors. Having a high leverage might be very risky, especially when the company has some problem to finance his day to day operation. While after the take over in 2012, the company’s leverage might be lower in the next 5 years.

Profitability

Again, we can see in 2008 the Company suffers the Global financial crisis with a decline in Gross Margin, then comparing the Gross Margin and Operating Margin from 20107 to 2011, As the Gross Margin remains the same, Operating Margin gets down to 0.16.

EPS

Cimpor’s EPS gets down after 2007 ,during 2009 and 2010, the EPS gets a little recovery and in 2011 gets down again.

Management Effectiveness

The ROE gets more than 50% decline in five years, which meanly because of the bad economic environment all over the world during this time.

Profitability 2007 2008 2009 2010 2011

Gross Margin 0.73 0.70 0.72 0.71 0.71 Operating Margin 0.22 0.19 0.18 0.18 0.16 Net Profit Margin 0.16 0.11 0.11 0.11 0.09 Interest Coverage 7.51 7.98 7.23 8.69 4.63

2007 2008 2009 2010 2011 EPS 0.45 0.33 0.36 0.36 0.30

2007 2008 2009 2010 2011

Quick Ratio 0.92 0.98 1.01 0.79 1.04 Current Ratio 1.15 1.54 1.45 1.09 1.44 LT Debt/Equity 0.80 1.27 0.93 0.61 0.82 Total Debt/Equity 1.13 1.39 1.16 1.03 1.09

2007 2008 2009 2010 2011 ROE 19.2% 12.2% 15.7% 13.2% 9.3%



Disclosures: Ownership and material conflicts of interest:

The author(s), or a member of their household, of this report does not hold a financial interest in the securities of this company. The author(s), or a member of their household, of this report does not know of the existence of any conflicts of interest that might bias the content or publication of this report.

Receipt of compensation: Compensation of the author(s) of this report is not based on investment banking revenue.

Position as an officer or director: The author(s), or a member of their household, does not serves as an officer, director or advisory board member of the subject company.

Market making: The author(s) does not act as a market maker in the subject company’s securities.

Ratings guide: Banks rate companies as either a BUY, HOLD or SELL. A BUY rating is given when the security is expected to deliver absolute returns of 15% or greater over the next twelve month period, and recommends that investors take a position above the security’s weight in the S&P 500, or any other relevant index. A SELL rating is given when the security is expected to deliver negative returns over the next twelve months, while a HOLD rating implies flat returns over the next twelve months.

Disclaimer: The information set forth herein has been obtained or derived from sources generally available to the public and believed by the author(s) to be reliable, but the author(s) does not make any representation or warranty, express or implied, as to its accuracy or completeness. The information is not intended to be used as the basis of any investment decisions by any person or entity. This information does not constitute investment advice, nor is it an offer or a solicitation of an offer to buy or sell any security. This report should not be considered to be a recommendation by any individual affiliated with [Society Name], CFA Institute or the CFA Institute Research Challenge with regard to this company’s stock.

Investment Risks

Default risk

According to S&P, Cimpor gets a BB rating for long term and B rating for short term which is relatively a low rating comparing to his competitors.

Management risk

Cimpor has some management problem in emerging markets like China, as top executive is not a local people, there are lots of problem of communication and adaptation, resulting a low efficiency.

Economic risk

As we said already, the economic growth is the key to the company’s development. But a recession will lead to a downside of the industry, just like 2008.

Currency risk

A multinational company must always take the exchange rate into account which may bring positive or negative impact to companies. To avoid this kind of risk, the company may get long term contract in the financial market to hedge.

Increasing energy cost

The production of cement requires a lot of energy, whereas the energy cost continues to rise in the recent years. The group participates in some R&D projects which may decrease the consumption of energy and optimize the energy efficiency.

Waste management cost

The protection of natural environment enforce a strict treatment of waste, which implies that a cost needs to be settled.

Political risk

Investing in some countries could be controlled by the local government. Successful localization requires not only cultural coherence, but also political harmony.



Table of Exhibits

Basic information

Sales and services rendered…………..p12

EBITDA………………………………p12

DCF Valuation

WACC Calculation…………………..p13

GDP forecast………………………….p13

Sale growth forecast…………………..p14

EBITDA margin forecast…………….p14

Turnover forcast………………………p15

Financial Data

Balance Sheet………………………….p16

Income Statements……………………p18

Cash flows……………………………...p19



Sales and services rendered (€ million) 2004 2005 2006 2007 2008 2009 2010 2011 Portugal 560 577 532 563 547 449 438 378 Spain 347 373 431 471 359 329 272 250 Morocco 55 61 72 80 89 94 94 100 Tunisia 54 53 60 60 64 70 78 84 Egypt 67 104 128 121 161 241 227 166 Turkey - - - 163 156 108 155 166 Brazil 199 227 270 322 401 427 609 689 Mozambique 47 51 55 60 77 81 88 115 South Africa 88 116 120 130 138 153 145 149 China - - - 24 66 81 106 128 India - - - - 32 53 48 51 Others 0 13 18 31 43 32 31 32 1,416 1,574 1,684 2,024 2,133 2,116 2,292 2,305 Unallocated 74 128 130 134 142 101 195 261 Eliminations -124 -167 -175 -191 -186 -132 -247 -291 Consolidated 1,366 1,535 1,639 1,966 2,089 2,085 2,239 2,275

EBITDA (€ million) 2004 2005 2006 2007 2008 2009 2010 2011 Portugal 176 183 174 173 172 150 138 99 Spain 87 103 144 138 83 47 33 35 Morocco 26 26 34 35 41 42 42 41 Tunisia 16 15 18 19 17 20 23 24 Egypt 30 48 63 59 73 105 87 50 Turkey - - - 39 16 11 22 31 Brazil 78 63 61 74 102 123 191 210 Mozambique 6 7 8 12 14 12 11 24 South Africa 40 42 48 43 46 70 59 60 China - - - 2 6 5 9 18 India - - - - 3 10 4 3 Others 0 1 3 3 3 3 3 3 459 488 551 596 577 596 622 598 Unallocated -7 8 12 11 10 10 8 18 Consolidated 452 496 563 607 586 606 630 616



Calculation of WACC

GDP forecast-Source(IMF)

GDP forecast

2010 2011 2012 2013 2014 2015 2016 2017 Brazil 7.53% 2.73% 1.47% 3.95% 4.20% 4.20% 4.11% 4.14%

China 10.45% 9.24% 7.83% 8.23% 8.51% 8.54% 8.54% 8.50%

Egypt 5.15% 1.78% 1.96% 3.03% 4.51% 6.00% 6.49% 6.51%

India 10.09% 6.84% 4.86% 5.97% 6.39% 6.74% 6.89% 6.95%

Morocco 3.70% 4.85% 2.87% 5.54% 5.12% 5.27% 5.62% 5.95%

Mozambique 7.09% 7.32% 7.50% 8.40% 7.79% 7.85% 7.82% 7.78%

Portugal 1.40% -‐1.67% -‐3.01% -‐1.02% 1.20% 1.85% 1.89% 1.78%

South Africa 2.89% 3.12% 2.59% 3.03% 3.86% 4.15% 4.15% 4.15%

Spain -‐0.32% 0.42% -‐1.54% -‐1.32% 1.00% 1.55% 1.70% 1.73%

Tunisia 3.12% -‐1.80% 2.70% 3.31% 4.06% 5.31% 5.50% 6.01%

Turkey 9.16% 8.50% 2.97% 3.53% 4.00% 4.26% 4.41% 4.40%

Cost of Debt 4% (As at dec 12,2012) Beta 0.95 (Wiping off big event) Beta unleverage 0.54 Equity Risk premium

14.67% (Considering Ba3 credit spread of the Portugal)

Taxe 29.38% (Effectif) Risk free rate 1.43% (Ten year german Bund) Ke 9.30% (Using CAPM) D/E 1.09 (5 years average) E 1 Wacc 5.93%



Sales growth forecast

Sales growth 2013 2014 2015 2016 2017 Portugal -‐1.02% 1.20% 1.85% 1.89% 1.78% Spain -‐1.32% 1.00% 1.55% 1.70% 1.73% Morocco 5.54% 5.12% 5.27% 5.62% 5.95% Tunisia 3.31% 4.06% 5.31% 5.50% 6.01% Egypt 3.03% 4.51% 6.00% 6.49% 6.51% Turkey 5.29% 6.00% 6.39% 6.62% 6.60% Brazil 7.90% 8.39% 8.41% 8.22% 8.28% Mozambique 12.60% 11.69% 11.77% 11.74% 11.67% South Africa 6.05% 7.72% 8.30% 8.29% 8.29% China 24.69% 25.54% 25.63% 25.61% 25.50% India 11.94% 12.78% 13.49% 13.77% 13.89% Others 7.09% 8.00% 8.54% 8.68% 8.75%

Sales growth 2018 2019 2020 2021 2022 Total 5.50% 5.00% 3.80% 3.00% 2.70%

EBITDA margin forecast

EBITDA/Sales Historical average 2012 2013 2014 2015 2016 2017 Portugal 31.85% 20.69% 20.69% 23.00% 27.00% 31.00% 31.85% Spain 23.49% 4.08% 8.00% 15.00% 23.00% 22.00% 23.49% Morocco 45.01% 34.62% 34.62% 38.00% 40.00% 42.00% 45.01% Tunisia 28.99% 25.00% 25.00% 26.00% 27.00% 28.00% 28.99% Egypt 45.26% 31.11% 33.00% 37.00% 40.00% 42.00% 45.26% Turkey 14.54% 5.00% 16.00% 17.00% 14.54% 14.54% 14.54% Brazil 28.29% 31.64% 31.64% 32.00% 33.00% 35.00% 35.00% Mozambique 15.34% 16.00% 15.34% 15.34% 15.34% 15.34% 15.34% South Africa 39.31% 38.89% 38.89% 38.00% 39.00% 39.31% 40.00% China 7.87% -‐22.22% -‐18.50% -‐5.50% 4.50% 8.50% 15.00% India 12.50% 12.50% 12.50% 13.50% 17.50% 19.50% 22.50% Others 23.56% 14.29% 15.00% 16.00% 18.00% 19.00% 23.56%

EBITDA forecast

2018 2019 2020 2021 2022

Total 29% 28% 27% 26% 25%



Turnover forecast

Turnover (net of eliminations)

2011 2012 2013 2014 2015 2016 2017

Portugal 378.20 334.48 331.08 335.05 341.25 347.70 353.89 Spain 249.77 188.38 185.91 187.77 190.69 193.92 197.28 Morocco 99.65 99.96 105.50 110.90 116.75 123.31 130.65 Tunisia 83.59 76.89 79.44 82.67 87.05 91.84 97.36 Egypt 165.65 173.01 178.25 186.29 197.46 210.28 223.96 Turkey 165.65 76.89 80.96 85.82 91.30 97.35 103.77 Brazil 688.90 680.49 734.28 795.91 862.82 933.72 1011.00 Mozambique 114.65 96.11 108.23 120.87 135.10 150.95 168.58 South Africa 148.73 138.41 146.78 158.12 171.24 185.43 200.80 China 127.61 69.20 86.29 108.33 136.10 170.95 214.54 India 50.80 61.51 68.86 77.66 88.13 100.27 114.20 Others 32.12 26.91 28.82 31.13 33.79 36.72 39.93 Total Sales 2305.30 2022.25 1950.42 2063.39 2193.65 2334.51 2487.29

Sales (net of eliminations)

2018 2019 2020 2021 2022

Total Sales 2640.07 2785.28 2924.54 3035.67 3126.74



Balance Sheet-(Source: Company documents)

Balance Sheet (€ million) 2007 2008 2009 2010 2011 Non-current assets: Goodwill 1,284 1,277 1,352 1,445 1,359 Intangible assets 13 43 70 70 55 Tangible assets 1,895 2,008 2,128 2,188 2,214 Investments in associates 164 98 25 23 18 Other investments 164 131 10 13 28 Accounts receivable-other 12 11 12 12 12 Taxes recoverable 20 16 28 34 36 Other non-current assets 5 34 32 22 4 Deferred tax assets 123 103 107 129 140 Total non-current assets 3,680 3,721 3,764 3,938 3,867 Current assets: Inventories 231 328 294 362 337 Accounts receivable-trade 324 313 264 284 282 Accounts receivable-other 23 30 29 25 27 Taxes recoverable 30 43 53 60 62 Cash and cash equivalents 540 170 439 660 610 Other current assets 6 11 26 22 10 Non-current assets held for sale 0 0 58 34 41 Total current assets 1,154 895 1,163 1,447 1,370 Total assets 4,834 4,615 4,927 5,385 5,237 Shareholders' equity: Share capital 672 672 672 672 672 Treasury shares -20 -42 -40 -33 -29 Currency translation adjustments 184 -150 59 256 46 Reserves 272 283 287 281 274 Retained earnings 384 522 615 715 822 Net profit for the year 304 219 237 242 198 Equity before non-controlling interests

1,796 1,505 1,831 2,133 1,983

Non-controlling interests 103 111 92 97 101 Total shareholders' equity 1,899 1,616 1,923 2,230 2,084 Non-current liabilities:



Deferred tax liabilities 198 197 234 273 265 Employee benefits 17 17 20 19 19 Provisions 191 152 154 171 198 Loans 1,324 1,911 1,637 1,253 1,635 Obligations under finance leases 6 5 5 3 17 Accounts payable-other 21 20 28 26 20 Taxes payable 2 1 1 1 0 Other non-current liabilities 169 115 122 80 45 Total non-current liabilities 1,929 2,418 2,201 1,826 2,198 Current liabilities: Employee benefits 2 5 5 4 5 Provisions 3 2 1 1 1 Loans 623 202 454 935 554 Obligations under finance leases 2 2 3 3 3 Accounts payable-trade 196 207 183 199 192 Accounts payable-other 73 59 61 74 73 Taxes payable 45 41 37 44 68 Other current liabilities 61 63 61 68 59 Total current liabilities 1,006 581 803 1,329 955 Total liabilities 2,935 2,999 3,004 3,155 3,153 liabilities and shareholders' equity 4,834 4,615 4,927 5,385 5,237



Income Statements-(Source: Company documents)

Income Statements (€ million) 2007 2008 2009 2010 2011 Operating income: Sales and services rendered 1,966 2,089 2,085 2,239 2,275 Other operating income 48 66 63 76 83 Total operating income 2,014 2,154 2,148 2,316 2,358 Operating expenses: Cost of goods sold and material used in production -539 -631 -579 -643 -660 Changes in inventories of finished goods and work in progress 7 27 -2 15 -8 Supplies and services -642 -709 -677 -758 -770 Payroll costs -207 -225 -250 -260 -266 Depreciation, amortisation and impairment losses on goodwill, tangible and intangible assets -165 -185 -226 -216 -226 Provisions -4 -9 -3 -4 -17 Other operating expenses -25 -31 -35 -40 -39 Total operating expenses -1,575 -1,762 -1,772 -1,907 -1,985 Net operating income 438 393 377 409 373 Net financial expenses -58 -49 -52 -47 -81 Share of profits of associates 8 -87 0 -1 -1 Other investment income 2 2 -11 -13 1 Profit before income tax 390 258 314 348 292 Income tax -69 -25 -68 -97 -86 Net profit for the year 321 233 246 252 206



Cash folws-(Source: Company documents)

Consolidated Cash Flow (€ Million) 2009 2010 2011 Cash flows from operating activities (1) 615 511 520 Investing activities:

Receipts relating to: Changes in consolidation perimeter 5 0 0 Investments 129 0 1 Tangible assets 6 17 11 Investment subsidies 3 1 0 Interest and similar income 14 36 39 Dividends 0 1 1 Others 1 0 0

158 55 52 Payments relating to:

Changes in consolidation perimeter -4 -7 -28 Investments -11 -20 -17 Tangible assets -237 -170 -243 Intangible assets -8 -6 -7 Others 0 0 0

-259 -204 -295 Cash flows from investing activities (2) -101 -149 -243 Financing activities:

Receipts relating to: Loans obtained 320 558 930 Sale of treasury shares 2 4 2 Others 3 1 3 324 564 935

Payments relating to: Loans obtained -362 -510 -943 Interest and similar costs -91 -87 -148 Dividends -123 -133 -136 Others -14 -17 -12

-590 -746 -1,240 Cash flows from financing activities (3) -266 -183 -305 Variation in cash and cash equivalents (4) = (1) + (2) + (3) 249 179 -27 Effect of currency translation and other non monetary transactions

6 19 4

Cash and cash equivalents at the beginning of the period* 126 381 579 Cash and cash equivalents at the end of the period* 381 579 556

Documents

Cimpor Afi Final