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edita in a Nutshell
edita is a leading Egyptian producer of packaged snacks, namely 1) cakes, 2) croissants, 3) rusks, 4)
wafers, and 5) selected confectionary/candy products. The firm was founded in 1997 as a joint venture
between the Berzi family and Chipita, a Greek snack food manufacturer and a global industry leader in
the production of packaged baked snacks. In March 2015, two of the firm’s partners partially exited by
selling a combined 30.0% stake through a secondary offering that valued the firm’s common equity at
EGP 6,709.6m or a 2014 PE multiple of 25.2x. The firm currently trades at a 2014 PE multiple of cc
40x, in what we view as reflective of its DCF-based valuation plus the value of 1) the organic capacity
expansion option and the value of the 2) potential M&A transactions.
Solid Growth Story with an Embedded Growth and Acquisition Premiums
A series of capacity expansions has pushed revenue CAGR north of 20.0% from 2009 until 2014. By
end 2014, the firm operated four production facilities across Egypt and 21 production lines, up from
one facility and one line in 1997. During 2015, the firm will complete the installation of additional 5
production lines with an estimated combined capacity of 38,900 tons/annum, out of which 3 have been
already installed in Q1-15. Given capacity constraints in the existing four facilities, the firm acquired a
55,000 sqm land plot in 6th of October city in mid 2015 to construct its fifth production facility by end
2016. While we set 2019 as the end of capacity expansion programs due to visibility constraints, we
believe further expansions beyond 2019 is a material upside risk to valuation.
Most importantly, we view the firm as exceptionally well positioned for value-accretive M&A
transactions, whether as a buyer (as per management guidance) or as an acquisition target. In our
view, edita is a prime acquisition target for international snack majors seeking to expand in high-growth
markets, such as Egypt. Industry giant Kellogg’s has already entered Egypt in early 2015 through
acquiring Bisco Misr and other regional giants, such as Turkish Ulker, are aggressively seeking growth
opportunities in Egypt and selected other MENA region countries, such as Saudi Arabia. Within this
context, we believe edita’s dominant market share in the cakes and croissants segments and the firm’s
successful shift in distribution policy towards retail clients as highly-valued intangible assets.
DCF Says HOLD, Embedded Options Say BUY
Our DCF FV estimate is based on 1) a revenue CAGR of cc 18.5% until 2020, 2) an average GPM of
cc 40.0% and 3) an annual SG&A/sales ratio of cc 17.5%. While these assumptions yield a HOLD
recommendation, we believe the share price can justifiably trade at a premium to account for the
aforementioned capacity expansion and M&A options.
edita – Initiation of CoverageDCF Says HOLD, Embedded Options Say BUY
Neveen Mohamed
neveen.mohamed@pharosholding.com
28 June 2015
Hany Genena, CFA
hany.genena@pharosholding.com
FV, EGP/Share 27.4
Recommendation HOLD
Last Closing Price, EGP/Share 29.44
Valuation Gap -6.9%
Reuters/Bloomberg EFID.CA EFID EY
S/O, m 362.7
MCAP, EGP m 10,677.3
Free Float, % 30.0%
ADTV, EGP m 13.0
H-L, EGP/Share 30.5 – 20.5
Return, since IPO +37.0%
EGX30 Return, 3M/1Y -8.6%/+4.0%
Main Shareholders
Berco Limited 42.0%
Africa Samba BV 15.0%
Exoder Limited 13.0%
2Source: Company financials, Prospectus, Pharos Research.
Summary Fundamental and Valuation Metrics
EGP m, unless o/w indicated 2014A 2015P 2016P 2017P 2018P 2019P 2020P
Total Sales, Tons 101,194 127,824 141,882 169,141 200,341 211,141 211,141
Average Price, EGP/Ton 18,959.6 19,644 20,882 22,020 23,293 24,417 25,202
Revenues 1,918.6 2,510.9 2,962.8 3,724.5 4,666.5 5,155.4 5,321.2
Gross Profit 720.8 986.6 1,226.4 1,518.4 1,902.2 2,060.3 2,038.4
GPM 37.6% 39.3% 41.4% 40.8% 40.8% 40.0% 38.3%
EBIT 394.4 553.6 715.6 878.0 1,106.3 1,169.1 1,110.0
EBIT Margin 20.6% 22.0% 24.2% 23.6% 23.7% 22.7% 20.9%
EBITDA 458.3 624.8 806.3 981.4 1,227.4 1,315.1 1,270.8
EBITDA Margin 23.9% 24.9% 27.2% 26.3% 26.3% 25.5% 23.9%
Net Profit 265.9 427.9 557.8 689.0 871.0 924.2 890.8
Net Profit Margin 13.9% 17.0% 18.8% 18.5% 18.7% 17.9% 16.7%
Net Debt 245.2 89.8 (138.4) (389.9) (638.1) (897.6) (1,078.1)
Equity 825.8 1,253.7 1,661.7 2,155.5 2,785.3 3,274.1 3,471.7
* Based on IFRS statements
I. Introduction
II. Industry Dynamics
III. Financial Analysis
IV. Valuation
V. Risks
Annex: Financial Statements
3
Contents
I. Introduction
II. Industry Dynamics
III. Financial Analysis
IV. Valuation
V. Risks
Annex: Financial Statements
4
Contents
5
I. IntroductionCompany Profile
edita is a leading Egyptian producer of packaged snacks, namely 1) cakes, 2) croissants, 3) rusks, 4) wafers, and 5) selected
confectionary/candy products. The firm was founded in 1997 as a joint venture between the Berzi family and Chipita, a Greek snack
food manufacturer and a global industry leader in the production of packaged baked snacks. In March 2015, edita concluded a
secondary offering of 30% of the company’s existing ordinary shares owned by Africa Samba B.V., an indirect subsidiary of private equity
firm Actis, and Exoder Limited, an SPV that is indirectly wholly owned by Chipita. Berco Limited, the investment vehicle of the Berzi
family, retained its 41.8% ownership stake. By end 2014, the total combined production capacity of the five product lines stood at
101,100 tons/annum, out of which 91,700 tons/annum represented the combined capacity of cakes and croissants. The breakdown of
capacity by product line is depicted below.
edita Capacity by Product Line, End 2014
* Based on 298 operating days, as per management guidance.
Cakes Croissants Rusks Wafers Candy Total
Number of Production Lines 10 5 2 1 3 21
Capacity, ‘000 Packs Per Day 7,384 2,217 415 466 298 10,780
Capacity, ‘000 Packs Per Annum* 2,200,432 660,666 123,670 138,868 88,804 3,212,440
Annual Production, ‘000 Packs 2,245,555 689,801 110,997 86,935 56,079 3,189,367
Capacity, ‘000 Tons Per Annum 63.8 27.9 3.7 2.6 3.1 101.1
Sales, ‘000 Tons 64.0 28.9 3.6 2.4 2.3 101.2
Utilization Rate 100.3% 103.5% 98.0% 92.3% 73.8% 100.1%
Source: Prospectus, Pharos Research.
* Management noted that the two remaining production lines scheduled to be installed in late-2015 will be fully operational in early 2016. In addition, management noted that the effective capacity of the five additional lines may exceed the announced 38,900 tons/annum. 6
By end 2014, the firm operated four production facilities (E06, E07, E10 and E15) and 21 production lines, up from one facility
and one line in 1997. In 2015, edita started production out of Hall B, an extension to its E07 factory in 6th of October city. In Q1-15, the
firm installed three production lines in Hall B and is expected to add another 2 lines before the end of 2015 to push total combined
production capacity to cc 140,000* tons/annum. As per the figure below, 19 out of the 26 production lines installed by end-2015 will be
devoted to the production of cakes and croissants, which are the strongholds of the firm in terms of market share (cc 70% in both
segments) and profitability. Following the entry of capacity additions in 2015, edita would have doubled the number of its production lines
over the course of seven years. In May 2015, the firm acquired a 55,000 sqm land plot near its E07 factory to expand production
capacity beyond 2015. As per management guidance, the construction of the factory that will be built on the new land should be
completed by end-2016. We assume that the new land plot can accommodate 10-11 production lines, as is the case with the similarly
sized E07 factory.
Evolution of edita’s Production Lines and Facilities Up to End 2015
1 2 2 2 3 3 3 3 3 4 5 58
00
46
7 8 9 9 910
10 10
11
01
1
1
22
2 2 2
22 2
3
0
0
0
0
00
0 03
33 3
3
13
79
1213
14 14
17
2021 21
26
199
7
200
0
200
3
200
6
200
7
200
8
200
9
201
0
201
1
201
2
201
3
201
4
201
5E
Croissant Cakes Rusks Wafer Candy Total
6th of October
plant opening
10th of Ramadan plant opening
Beni Suef plant opening
Polaris Industrial
Park plant opening
edita HQ and
logistics hub
I. IntroductionEvolution of Production Capacity
Source: IR Presentation, Pharos Research.
7
I. IntroductionThe Value-added Chain
Croissant Production Flow Chart
The production of croissants, cakes, wafer, and rusks is ultimately based on the preparation of dough or batter. The key
ingredients of the dough/batter are flour (imported or local), sugar, eggs, and cooking oil, which - alongside packaging costs - represent
roughly 80.0% of direct production costs. After the key ingredients are added, the mix is 1) molded or shaped to take the form of the final
product, 2) baked, 3) cooled, 4) flavored, and 5) packaged. The footprint of each production line and the duration of the production
process of each batch varies by product from about 2 to 7 hours. On average, around 40 direct employees operate a production line in
one shift and capacity is calculated based on three 8-hour shifts per day, 298 days a year. The croissant production process involves two
additional preparatory steps before baking, namely 1) laminating the dough, in order to give it a flaky texture, and 2) placing the dough in a
fermentation room for three and half hours to allow it to rise. Below we depict the croissant production flow chart as an example.
Dough
PreparationLamination Fermentation Baking Cooling Flavoring Packaging
25 minutes 115 minutes 3.5 hours 16 minutes 15 minutes1 hour
Flour/water
/yeast/salt/
sugar/milk
Dough is poured to be
mixed with butter. The
mix is then flattened
and repetitively folded
to generate the flaky
texture. Finally, it is
sliced to be rolled into
crescent-shaped
croissants.
Laminated
croissants are
stored in trays at
room temperature
and high humidity
level to trigger the
fermentation
process. The
fermented
croissants are
more than double
their size before
fermentation.
Source: Factory visit, Pharos Research.
Laminated
croissants are
then conveyed on
rolling plates
through an oven
to be baked.
After cooling, baked
croissants are injected
with flavors, such as
chocolate or strawberry.
The final product
is automatically
wrapped and
manually sorted
in packs for
distribution.
Butter is mixed
with dough
Folding
By end-2014, edita operated an extensive sales and distribution network that managed to reach 63,000 retail and wholesale
customer through 1) 16 distribution centers, 2) a fleet of 515 distribution vehicles, and 3) a salesforce of 1,098 employees. The
firm sells its products to wholesalers as well as directly to supermarket chains and retail kiosks. Management is gradually reducing sales
to wholesalers to increase its control over the market, as evidenced by the jump in the share of direct sales to revenues from cc 20% in
2010 to cc 36% in 2014 and as evidenced by the management’s plan to boost this ratio to the 50% mark by 2018. It is important to note
that export sales accounted for an insignificant 5.8% of total sales in 2014. Accordingly, cross-border distribution efforts are currently
immaterial.
8
I. IntroductionDistribution
2012 2013 2014
Distribution Centers 13 15 16
Distribution Vehicles 369 425 515
Total Sales Force 790 909 1,098
Total Retail Customers 41,323 49,614 57,950
Total Wholesale Customers 4,300 5,500 5,150
Gross Revenue, EGP m 1,403.2 1,725.9 2,011.2
Wholesale, EGP m 901.0 1,096.0 1,206.0
Traditional Retail, EGP m 347.0 469.0 629.0
Other, EGP m 155.0 161.0 176.0
Retails as Percent of Gross Sales 24.7% 27.2% 31.3%
edita’s Distribution Network – Key Metrics
Source: Prospectus, Pharos Research.
9
I. IntroductionPricing Policy
Historic Average Price Per Ton by Product Line
In 2014, edita sold approximately 3.2bn snack packages at prices of around EGP 1.0/pack range. Since small denomination coins
are not in wide circulation in Egypt, price increases can only be effectively made in increments of EGP 0.50, which represents a significant
percentage increase over the average product price point for edita. As such, and given the price-sensitivity of the Egyptian mass
consumer, edita and its peers posses very limited direct pricing power and instead turn to covert pricing policies. In 2014, edita managed
to increase the average price per ton of its cake and croissant products slightly through migration to higher priced SKUs, and that of the
rusks and wafer products more prominently through the reduction of the average weight per pack. Going forward, edita plans to increase
its average price through the introduction of 1) new products in its existing segments (e.g. strudel in the croissants segment), 2) premium
products, and 3) higher prices for disproportionately higher package sizes (SKU upsizing).
EGP/Ton 2012 2013 2014 CAGR
Cakes 16,667 17,689 17,838 3.5%
Croissants 18,942 19,484 19,545 1.6%
Rusks 18,673 21,012 24,442 14.4%
Wafers 27,483 24,943 26,942 -1.0%
Candy 25,590 24,737 22,638 -5.9%
Weighted Average Price/Ton, EGP 17,442 18,636 18,960 4.3%
EGP/Pack Q1-15 Average
Cakes 0.86
Croissants 1.09
Rusks 1.00
Wafers 1.00
Candy 1.80
Q1-15 Average Price Per Pack
Source: Company financials, Prospectus, Pharos Research.
10
Along with its locally developed brands, edita produces and sells the Hostess brands HoHos, Twinkies, and Tiger Tail and also
Molto and Bake Rolz under license from Chipita. In 2003, edita acquired the factories producing HoHos, Twinkies and Tiger Tail (HTT
brands) cakes under license from Hostess Ltd in the 10th of Ramadan city. In April 2013, the firm fully-acquired the rights to those brands
in Egypt, Jordan, Libya and Palestine and has since stopped paying royalties in connection with those products. edita signed two
additional contracts with Hostess in 2015 that 1) extend the geographical scope of company's existing rights to the HTT brands HoHos,
Twinkies, and Tiger Tail and 2) add the right to manufacture and market 11 other Hostess products on a regional basis. Molto and Bake
Rolz are produced under an agreement with Chipita in which the latter collects 0.5% of the net sales of those produce as royalty, with a
maximum limit of Euro 150,000 annually, over the period of ten years commencing in January 2011. edita paid EGP 723,049 in royalties to
Chipita in 2014. Based on a non-compete agreement with Chipita, edita can only export Molto and Bake Rolz products to certain territories
in the MENA region.
TURKEY
SYRIA
IRAQ
SAUDI
ARABIA
YEMEN
OMAN
UAE
EGYPTLIBYA
ALGERIA
MOROCCO TUNISIA
WESTERN SAHARA
MAURITANIA
MALINIGER CHAD
SUDAN
GEORGIA
IRAN
TURKMENISTAN
INDIA
Geographical Scope of HTT Brands Rights, Pre- and Post-2015 Agreements
Based on the 2015 Agreement
Based on the 2013 Agreement
I. IntroductionHostess License
Source: Prospectus, Pharos Research.
11
I. Introduction
II. Industry Dynamics
III. Financial Analysis
IV. Valuation
V. Risks
Annex: Financial Statements
Contents
12
II. Industry DynamicsThe Global Snack Industry is Dominated By a Few Large Players
The global packaged snack industry is dominated by a limited number of large players in the US, Europe and Turkey, which
implicitly renders edita as an acquisition target. According to research house Nielsen, the size of the global snack food industry (in
terms of annual turnover) is estimated at a little less than USD 400.0bn in 2014. Over three quarters of snack sales are in the US and
Europe. The predominant forms of snack meals are savory snacks, such as potato chips, and confectionaries, particularly chocolates.
The world’s largest producers of snacks include Pepsico, Kellogg’s, Mondelez, Nestle, and Turkish Yildiz. Most of these companies
expanded their product range and geographic reach via a series of acquisitions. In essence, these acquisitions were driven by a mix of 1)
slower growth at home markets (the US and Europe), 2) the will to venture into new product mixes to diversify revenue sources and 3), of
high relevance to edita, the will to acquire a local distribution network that has direct access to an otherwise unreachable customer base.
Examples of Recent Acquisitions in the Snack Industry
Date Transaction
November 2014 Mondelez acquired 80.0% of Vietnamese snack maker Kinh Do for USD 370.0m. According to Mondelez’s president of Asia-
Pacific, Eastern Europe, Middle East and Africa operations, the deal would allow the firm to expand its relatively small
Vietnamese business by using Kinh Do’s well-established distribution network, particularly in the country’s many kiosks and
traditional markets. Mr Cofer said it would also give Mondelez a chance to make inroads with the 60 percent of Vietnam’s 90m
citizens that are under the age of 30.
November 2014 Turkish Yildiz bought United Biscuits from private equity owners Blackstone Group and PAI Partners in a deal estimated to be
worth USD 3.2bn, which it said made it the world's third-biggest biscuit maker. The acquisition of the maker of McVitie's
biscuits, Jaffa Cakes and Jacob's crackers is the third and largest by Yildiz in recent years as it strives to become a global
name.
January 2015 US-based Kellogg’s completed its acquisition of an 86% stake in Bisco Misr, the largest packaged biscuit manufacturer in
Egypt. Kellogg acquired control of the Cairo-based company at a price of EGP 89.86 (USD 12.58) per share, or a total cost of
USD 125.0m.
Source: Online sources, Pharos Research.
13
EGP bn 2010 2011 2012 2013 2014 CAGR 2010-2014
Salty Snacks 3.1 3.5 5.0 5.1 5.8 16.4%
Biscuits, Gum and Chocolates 1.8 2.4 3.5 4.2 5.6 33.4%
Cakes 0.6 0.8 1.1 1.3 1.4 22.1%
Wafer 0.6 0.8 1.2 1.3 1.3 20.5%
Croissant 0.2 0.3 0.5 0.6 0.8 36.7%
Candy 0.3 0.3 0.5 0.6 0.6 23.3%
Total 6.7 8.1 11.7 13.1 15.5 23.6%
The size of the packaged snack industry in Egypt is small but growth prospects are exceptionally high due to favorable
demographics. According to Nielsen, both local and international snack producers compete in a market with a total estimated turnover of
EGP 15.5bn (cc USD 2.0bn) in 2014, or roughly 0.8% of GDP and 0.5% of the global snack market. The market encompasses a wide
range of products including chocolate, potato chips, biscuits, croissant, candy and gum, cakes, and wafers. Nonetheless, in addition to
packaged snacks, freshly-baked products are sold across the country in family-owned or government-owned bakeries. As depicted below
and in line with global industry dynamics discussed in the previous slide, savory snacks and chocolates accounted for three quarters of
total industry sales in 2014. In Egypt, among the key international players in these two product categories are Pepsico (Chipsy) and
Mondelez (Cadbury). In the cakes and croissants segments, which accounted for only 14.2% of total market size, edita is the leading
player with a market share of roughly 70% in each category.
Egypt’s Snack Food Market Estimated Sales by Segment
II. Industry DynamicsEgypt is a Small but Fast-Growing Market
Source: Company financials, Prospectus, Pharos Research.
14
Despite the small size of the cakes and croissants market in Egypt, edita managed to grow its sales by a CAGR of 20.7% from
2009 until 2014. In 2009, edita’s revenues stood at EGP 748m. By 2014, sales had grown organically by a CAGR of 20.7% to EGP
1,919m. When edita’s sales figure is compared to gross domestic income, the figures show that Egyptians spent a little less than EGP 1
out of every EGP 1,000 in income on edita products. Based on information provided by management on the numbers of packs and tons
sold, this figure translated into around 36 packs consumed per capita per annum or a rate of 1 pack purchased every 10 days. Obviously,
these figures are based on the size of the total population rather than the firm’s target market, which is heavily skewed towards younger
age groups. In the following slide, we compare these metrics with the metrics seen in EM peers, particularly Turkey.
Source: Prospectus, CBE, Pharos Research
edita Sales as a Percent of GDP
EGP 2009 2010 2011 2012 2013 2014
Revenues, EGP m 748 888 1,136 1,342 1,647 1,919
Sales, Billion Packs 2.4 2.8 3.2
Sales, Tons 76,863 88,408 101,194
Average Weight Per Pack, Grams 32.03 31.57 31.62
Average Price Per Pack, EGP 0.56 0.59 0.60
Nominal GDP, EGP bn 1,071.6 1,247.7 1,398.0 1,591.6 1,805.1 2,058.1
Population, m 76.9 78.7 80.4 82.4 84.7 86.7
GDP/Capita, EGP 13,931 15,849 17,388 19,315 21,312 23,738
edita Sales as a Percent of GDP 0.070% 0.071% 0.081% 0.084% 0.091% 0.093%
Packs Per Capita Per Annum 29 33 37
Days Between Purchases 13 11 10
II. Industry DynamicsEGP 1 out of Each EGP 1,000 Earned in Income is Spent on Snacks
15
edita is not far behind EM peers in terms of sales-to-GDP ratio. We looked at Turkey as an EM peer that is close to Egypt in terms of
demographics but significantly ahead in terms of purchasing power. In 2014, Turkey’s GDP was estimated at cc USD 820bn, which is
about 3.0x the size of Egypt’s economy. Specifically, we looked at the domestic sales of Ulker, the leading snack maker in Turkey which
captures a market share of roughly 50.0% in the biscuit and confectionary segments and a subsidiary of the world’s third largest biscuit
maker Yildiz Holding. As depicted below, the ratio of Ulker domestic sales-to-GDP has been roughly stable at around 0.12-0.13% from
2008 until 2014, versus edita’s 0.093% in 2014. However, when translated into USD terms, the size of Ulker domestic sales in 2014 is
roughly 4.3x the size of edita’s sales. Accordingly, we view edita’s growth story as a function of market size rather than convergence as is
the case in the pasteurized milk industry, as for example.
Turkey-based Ulker Domestic Sales as a Percent of GDP
2008 2009 2010 2011 2012 2013 2014
Net Sales, TRY m 1,412.2 1,551.5 1,523.5 1,798.8 2,340.6 2,748.4 2,891.2
Exports, TRY m 256.4 338.5 275.1 362.0 461.6 557.9 520.6
Domestic Sales, TRY m 1,155.8 1,213.0 1,248.4 1,436.7 1,879.0 2,190.4 2,370.6
Nominal GDP, TRY bn 950.5 952.6 1,098.8 1,297.7 1,416.8 1,567.3 1,749.8
Sales as a % of GDP 0.122% 0.127% 0.114% 0.111% 0.133% 0.140% 0.135%
II. Industry DynamicsNo Convergence Stories, Only Size of the Market Matters
Source: Ulker Annual Reports, Bloomberg, Pharos Research.
16
The potential growth in Egypt’s market size is already under the radar screen of most international players. In 2015, Kellogg’s
acquired Egypt snack maker Bisco Misr after an aggressive price war versus Abraj Capital in a deal worth USD 125.0m. Similarly, Turkish
snack maker Ulker has repeatedly highlighted Egypt and Saudi Arabia as its core expansion markets in the MENA region. In its latest
available investor presentation published in March 2015, the firm noted that it is “targeting to become a regional player in markets with
high growth potential, such as Saudi Arabia and Egypt”. Within this context, while we believe edita may face strong competitive headwinds
that could force it to increase its SG&A budget to defend its market share, the prospect of intense competition will automatically unlock the
value of cooperation through M&A. Based on these dynamics, we believe investors should assign a premium to DCF-based valuation to
account for a potential acquisition.
II. Industry DynamicsCompetitive Pressures Could Unlock the Value of Intangible Assets
17
I. Introduction
II. Industry Dynamics
III. Financial Analysis
IV. Valuation
V. Risks
Annex: Financial Statements
Contents
18
We base our revenue projections on the addition of 10 new production lines in edita’s fifth factory from 2016 until 2019. As noted
earlier, edita will install five new production lines in its 6th of October facility in 2015. In May 2015, the firm also bought a 55,000 sqm
industrial land plot to establish a fifth factory (E08) that can accommodate up to 10-11 new production lines. Management did not provide
detailed information on the product mix or capacity per line given that these decisions will be based on upcoming market studies.
Accordingly, as a starting point, we sourced information on the cost of each production line installed by the firm from 2012 until 2015. In
2015, management noted that the CAEPX budget will stand at cc EGP 351m, split into 1) EGP 215m channeled to the expansion of the
Polaris Industrial Park plant, 2) EGP 56m channeled to maintenance, and 3) EGP 80m allotted to the acquisition of an industrial land plot.
In April 2015, edita signed two intellectual property rights contracts with US company Hostess Brands LLC worth USD 12m. The Company
has already paid for cc 43% and 50% of the cost of the five new production lines and the construction of Hall B in the E07 factory,
respectively, during 2014.
Source: Management guidance, Pharos Research
EGP m, unless o/w stated 2014 2015E Total Cost Description
E07 Plant – Hub A 14.8 -
E07 Plant – Hub B 42.7 43.0
Total Production Facilities 57.5 43.0
E07 Molto XL Line – 2015 51.2 5.7 56.9 17,200 tons/annum
E07 Twinkies Line – 2015 31.2 3.5 34.7 3,200 tons/annum
E07 Mini Molto Line – 2015 47.2 5.2 52.4 7,200 tons/annum
E07 Bake Rolz Line – 2015 - 91.0 91.0 3,700 tons/annum
E07 Pate Line – 2015 - 66.1 66.1 7,600 tons/annum
Total Machinery 129.5 171.5
Total Expansion CAPEX 187.5 214.5
Total Maintenance CAPEX 63.2 56.0
Total Other CAPEX 4.4 80.0
Total CAPEX 254.7 350.5
Cost of the 2015 Expansion Program
III. Financial AnalysisRevenue Projections – Capacity Expansion
19
We expect edita to construct the new production lines according to the following schedule: 3 cake lines and 1 Molto XL line in
2017, 2 cake lines and 1 Molto XL and one Pate line in 2018, 1 cake line and 1 Pate line in 2019. Based on our schedule, the firm’s
total production capacity will more than double from 101,100 tons/annum in 2014 to 211,400 tons/annum in 2019. We assume that the
aforementioned new Hostess products will be produced using the new cake and croissant production lines and do not account for the
launch of new product categories.
Projected Capacity Additions Until 2019
Source: Management guidance, Pharos Research
III. Financial AnalysisRevenue Projections – Capacity Expansion
2014A 2015P 2016P 2017P 2018P 2019P 2020P
Capacity Additions
Cakes 3,200 9,600 6,400 3,200
Croissants 32,000 17,200 24,800 7,600 -
XL 17,200 17,200 17,200
Mini 7,200
Strudel 7,600 7,600 7,600
Rusks 3,700
Wafers 2,600
Candy
Production Capacity, Tons 101,100 140,000 142,600 169,400 200,600 211,400 211,400
Cakes 63,800 67,000 67,000 76,600 83,000 86,200 86,200
Croissants 27,900 59,900 59,900 77,100 101,900 109,500 109,500
Rusks 3,700 7,400 7,400 7,400 7,400 7,400 7,400
Wafers 2,600 2,600 5,200 5,200 5,200 5,200 5,200
Candy 3,100 3,100 3,100 3,100 3,100 3,100 3,100
20
We estimate the cost of each production line in E08 by inflating the cost of the most-recently acquired similar line in the E07
factory by 15.0% per annum. We use the same method to estimate the cost of a wafer line to be added in 2016 in the available space in
Hall B of the E07 factory (edita had paid EGP 18.9m for a wafer line in 2012, we estimate the cost of the new line in 2016 at EGP 33.1m =
EGP 18.9 * (1.15)^4). Based on management guidance, we project maintenance CAPEX at 3% of revenues going forward. We note that
edita has started to replace fully depreciated machinery in its older factories (E06 and E10), which we assume is accounted for in our
model as part of the maintenance CAPEX. It is important to note that new lines have historically operated at near full capacity almost 3-5
months after installation. However, in Q1-15, the firm installed 3 additional lines and yet was able to operate at above full capacity within a
shorter lag period via overtime shifts. Accordingly, we expect utilization rates to hover near the 100.0% mark throughout our forecast
horizon.
EGP m 2016P 2017P 2018P 2019P 2020P
E08 Factory Construction 150.0
E07 Wafer Line 33.1
E08 Cake Lines (New Products) 158.3 121.4 69.8
E08 Molto Lines 86.5 99.5
E08 Pate Lines 115.6 133.0
Total Expansion CAPEX 183.1 244.9 336.5 202.7 0.0
% of Sales 6.2% 6.6% 7.2% 3.9% 0.0%
Maintenance 88.9 111.7 140.0 154.7 159.6
% of Sales 3.0% 3.0% 3.0% 3.0% 3.0%
Total CAPEX 271.9 356.6 476.5 357.4 159.6
Projected Cost of Capacity Additions Until 2019
Source: Pharos Research
III. Financial AnalysisRevenue Projections – Cost of the Expansion Program
21
Volumes Sold and Average Price/Ton
In line with history and given industry-related price limitations, we project edita’s weighted average price per ton to increase by
3.2% - 5.8% per annum over our forecast horizon. edita has historically resorted to covert product pricing methods such as reducing
the average weight per pack or migrating towards higher price point SKUs. Going forward, we believe the firm will be able to raise
average SKU prices through the introduction of “premium” products such as Strudel and new Hostess cake variations.
Source: Prospectus, Pharos Research.
III. Financial AnalysisRevenue Projections – Volume Sold and Average Price/Ton
2014A 2015P 2016P 2017P 2018P 2019P 2020P
Sales Volume, Tons 101,194 127,824 141,882 169,141 200,341 211,141 211,141
Cakes 64,025 67,000 67,000 76,600 83,000 86,200 86,200
Croissants 28,857 52,300 59,900 77,100 101,900 109,500 109,500
Rusks 3,623 3,626 7,252 7,400 7,400 7,400 7,400
Wafers 2,369 2,418 4,940 5,096 5,096 5,096 5,096
Candy 2,320 2,480 2,790 2,945 2,945 2,945 2,945
Average Selling Price, EGP/Ton 18,960 19,644 20,882 22,020 23,293 24,417 25,202
Cakes 17,838 18,373 19,292 20,449 21,676 22,760 23,557
Croissants 19,545 20,229 21,241 22,515 23,866 25,059 25,811
Rusks 24,442 25,175 26,056 27,359 28,727 30,164 31,672
Wafers 26,942 27,211 27,484 27,758 28,036 28,316 28,599
Candy 22,638 22,638 22,638 22,638 22,638 22,638 22,638
Total Revenues, EGP m 1,918.6 2,510.9 2,962.8 3,724.5 4,666.5 5,155.4 5,321.2
22
Based on our projections, edita’s sales-to-GDP ratio is projected to converge to levels seen in EM peers by 2020. As noted earlier,
the sales of edita’s peer in Turkey, Ulker, ranged between 0.11% to 0.14% of GDP from 2008 until 2014. In our model, the ratio of edita’s
sales-to-GDP is expected to peak at 0.13% in 2018 as depicted below.
edita Sales as a Percent of GDP
Source: Company financials, Prospectus, CBE, Pharos Research.
III. Financial AnalysisRevenue Projections – Model Closure
2014A 2015P 2016P 2017P 2018P 2019P 2020P
Revenue, EGP m 1,918.6 2,510.9 2,962.8 3,724.5 4,666.5 5,155.4 5,321.2
Sales, bn Packs 3.2 4.0 4.5 5.3 6.3 6.7 6.7
Sales, Tons 101,194 127,824 141,882 169,141 200,341 211,141 211,141
Average Weight Per Pack, Grams 31.6 31.62 31.62 31.62 31.62 31.62 31.62
Average Price Per Pack, EGP 0.6 0.62 0.66 0.70 0.74 0.77 0.80
Nominal GDP, EGP bn 2,058.1 2,364.7 2,727.4 3,151.5 3,650.7 4,222.6 4,885.6
Population, m 86.7 88.4 90.2 92.0 93.8 95.7 97.6
GDP/Capita, EGP 23,737.7 26,740 30,236 34,252 38,901 44,112 50,038
edita Sales as a Percent of GDP 0.09% 0.11% 0.11% 0.12% 0.13% 0.12% 0.11%
Packs Per Capita Per Annum 37 46 50 58 68 70 68
Days Between Purchases 10 8 7 6 5 5 5
23
III. Financial AnalysisCOGS Breakdown
On average, raw materials represent around 80.0% of edita’s direct costs and 50.0% of revenues. The raw materials line item
includes packaging and unidentified other costs. In 2014, 78% of the raw materials used by the company were sourced locally with the
remaining balance covered by imports, primarily from Europe, the UAE, the US and Malaysia. Labor expenses represent edita’s second
largest COGS item. As per IFRS reporting standards, the line item includes the profit share paid to production employees in addition to
their wages. By end-2014, edita had a headcount of 2,495 production employees, which translates into an average of 119 workers
assigned to each production line and an average employee productivity of 40.6 tons per annum. Finally, it is worth noting that edita’s utility
cost, although presently relatively small, has surged by 45.1% y/y in 2014, and is expected to continue to increase as per the Egyptian
government’s decision to gradually eliminate energy subsidies by 2018.
COGS Breakdown in 2013 and 2014
Source: Prospectus, Pharos Research.
EGP m Unless o/w Stated 2013A 2014A
Raw Materials 834.3 944.8
Labor 72.9 93.6
Utilities 16.2 23.5
Depreciation 27.8 36.2
Other 77.1 99.7
Total COGS 1,028.3 1,197.8
As a Percent of Total COGS
Raw Materials 81.1% 78.9%
Labor 7.1% 7.8%
Utilities 1.6% 2.0%
Depreciation 2.7% 3.0%
Other 7.5% 8.3%
24
III. Financial AnalysisCOGS Breakdown - Raw Materials
edita uses more than 100 ingredients in its products, most notably sugar, flour, cocoa, oil and fats, milk and eggs, which
together comprise more than 80% of edita’s total direct material requirements by value. A combination of persistently strong global
harvests, inventory pileup, and weak emerging market currencies have driven down international commodity prices over the past year and
are expected to continue to depress them over the near-term. The international prices of sugar, edita’s largest single ingredient accounting
for 12.6% of total raw material costs in 2014, have crashed since July 2014 with raw sugar (number 11) hitting a record low of 11.1 US
cents per pound on 19 June 2015. The prices of wheat, milk powder, and cooking oils have similarly softened, contributing to a decline in
raw material costs as a percent of revenues from 50.6% in 2013 to 49.2% in 2014. The diversity of raw materials needed allows edita to
introduce reformulations of its products to offset swings in commodity prices. Below, we depict the UN FAO Food Price Index, which is
currently hovering near lows seen post the global financial crisis.
UN FAO Food Price Index
150
160
170
180
190
200
210
220
230
240
250
Ma
y-0
9
Au
g-0
9
Nov-0
9
Fe
b-1
0
Ma
y-1
0
Au
g-1
0
Nov-1
0
Fe
b-1
1
Ma
y-1
1
Au
g-1
1
Nov-1
1
Fe
b-1
2
Ma
y-1
2
Au
g-1
2
Nov-1
2
Fe
b-1
3
Ma
y-1
3
Au
g-1
3
Nov-1
3
Fe
b-1
4
Ma
y-1
4
Au
g-1
4
Nov-1
4
Fe
b-1
5
Ma
y-1
5
Source: Bloomberg, Pharos Research.
25
III. Financial AnalysisCOGS Breakdown – Projection Methodology
Cost Item Projection Methodology
Raw Materials We project a 1% decline in raw material cost per ton in 2015 to account for the mixed impact of softer
international commodity prices, particularly of sugar, milk powder and cooking oils, and weaker EGP versus
the USD. From 2016 onwards, we assume a gradual increase in raw materials cost due to a soft recovery in
commodity prices and the continued devaluation of the EGP versus the USD, as per our views.
Labor Labor cost will be impacted by both 1) the addition of new production lines and 2) wage inflation. We project
labor productivity to increase from 40.6 tons/employee in 2014 to 71.9 tons/employee in 2020. We also project
the average wage per worker to increase by 20.0%/annum from 2015 until 2017 then at a rate of
10.0%/annum afterwards. The higher rate of wage adjustment until 2018 reflects the potential of exceptional
wage adjustments to compensate for the impact of energy subsidy removal on the cost of living. We also add
to direct wages 40.0% of employees’ profit share of the pervious year, which we project to hover around 8.0%
of net profit.
Utilities As per the government’s decision to gradually remove energy subsidies by FY-18, we inflate utility costs by
15% until 2017 and 10% in 2018 to account for the partial removal of subsidy in the first half of the year. We
assume that the annual increase in utility prices will soften to 5.0% in 2019 and 2020 in the complete absence
of subsidies.
Depreciation In line with history, we assume that the direct depreciation recorded in edita’s COGS represents 60% of the
firm’s total depreciation expense. Depreciation expense is based on the projected fixed assets schedule.
Other We inflate other costs of goods sold per ton by 10.0% per annum.
SG&A As per IFRS, the SG&A item includes around 60% of employee profit share and management’s remuneration.
Management’s remuneration partially reflects an agreement with the current chairman and CEO to receive up
to 5.0% of EBITDA as compensation.
Below we outline our projection methodology for each cost item and provide the detailed calculations in the following page.
Source: Pharos Research.
26
III. Financial AnalysisCOGS Projections
Source: Prospectus, Pharos Research.
EGP m, unless o/w stated 2013A 2014A 2015P 2016P 2017P 2018P 2019P 2020P
Raw Materials 834.3 944.8 1,181.5 1,311.4 1,657.2 2,080.7 2,324.4 2,463.9
Raw Materials/Ton, EGP 9,436.9 9,336.5 9,243.2 9,243.2 9,797.7 10,385.6 11,008.7 11,669.3
Inflation Rate in Raw Materials/Ton -1.1% -1.0% 0.0% 6.0% 6.0% 6.0% 6.0%
Raw Materials/Revenues 50.6% 49.2% 47.1% 44.3% 44.5% 44.6% 45.1% 46.3%
Labor Expenses 72.9 93.6 127.5 157.8 205.3 244.1 261.9 263.6
Total Wages 67.3 86.4 119.0 144.1 187.5 222.0 234.0 234.0
Direct Employees 2,495 2,495 2,865 2,891 3,133 3,374 3,232 2,939
Employees/Production Line 119 119 110 107 101 96 87 79
Tons/Employee 35.4 40.6 44.6 49.1 54.0 59.4 65.3 71.9
Productivity Growth 14.5% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0%
Annual Wage/Employee, EGP 26,988.6 34,623.7 41,548.5 49,858.1 59,829.8 65,812.8 72,394.0 79,633.4
Wage/Employee Inflation 28.3% 20.0% 20.0% 20.0% 10.0% 10.0% 10.0%
Profit Share of Direct Employees 5.6 7.2 8.5 13.7 17.8 22.0 27.9 29.6
Utilities 16.2 23.5 34.1 43.6 59.7 77.8 86.1 90.4
Utilities/Ton, EGP 183.2 232.2 267.1 307.1 353.2 388.5 407.9 428.3
Inflation in Utilities/Ton 26.7% 15.0% 15.0% 15.0% 10.0% 5.0% 5.0%
Depreciation 27.8 36.2 42.7 54.4 62.0 72.7 87.6 96.5
Direct Depreciation/Total Depreciation 74.5% 61.1% 60.0% 60.0% 60.0% 60.0% 60.0% 60.0%
Other Costs 77.1 99.7 138.5 169.1 221.8 289.0 335.0 368.5
Other Costs/Ton, EGP 872.1 985.2 1,083.8 1,192.1 1,311.3 1,442.5 1,586.7 1,745.4
Inflation in Other Costs/Ton 13.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0%
Total COGS 1,028.3 1,197.8 1,524.4 1,736.4 2,206.1 2,764.2 3,095.0 3,282.9
27
III. Financial AnalysisWorking Capital
edita operates on a quasi-cash basis given the high inventory and receivables turns. Given the perishable nature of the raw
materials used in the production process as well as the relatively short shelf life of the end product, the firm’s inventory days on hand has
historically hovered around 1 month. Moreover, the firm mostly operates on a cash basis, as cc 97% of 2014 revenues were paid for in
cash at the time of sale. In addition, the firm manages to secure favorable payment terms from suppliers due to the large scale of
purchases. During 2013 and 2014, the firm was able to collect its cash 16-17 days before settling its payable obligations. Going forward,
we project the cash conversion cycle to remain negative, which will be reflected in minimal borrowing requirements and interest expenses.
Working Capital Dynamics
Source: Company financials, Pharos Research.
EGP m, unless o/w stated 2014A 2015P 2016P 2017P 2018P 2019P 2020P
Working Capital (27.1) (34.4) (35.8) (46.8) (58.6) (67.9) (76.9)
Change in Working Capital (8.1) 7.3 1.4 11.0 11.8 9.3 9.0
CCC (17.1) (16.0) (16.0) (16.0) (16.0) (16.0) (16.0)
Inventory 112.5 125.3 142.7 181.3 227.2 254.4 269.8
COGS 1,197.8 1,524.4 1,736.4 2,206.1 2,764.2 3,095.0 3,282.9
DoH 30.0 30.0 30.0 30.0 30.0 30.0 30.0
Receivables 66.3 82.6 97.4 122.4 153.4 169.5 174.9
Revenues 1,918.6 2,510.9 2,962.8 3,724.5 4,666.5 5,155.4 5,321.2
DoH 12.6 12.0 12.0 12.0 12.0 12.0 12.0
Payables 205.9 242.2 275.9 350.6 439.2 491.8 521.7
COGS 1,197.8 1,524.4 1,736.4 2,206.1 2,764.2 3,095.0 3,282.9
DoH 59.6 58.0 58.0 58.0 58.0 58.0 58.0
28
III. Financial AnalysisDividend Policy
We expect edita to slash its dividend payout ratio to 35% during the high CAPEX years before gradually increasing it starting
2018 onwards. As discussed earlier, the bulk of the firm’s expansion CAPEX will be incurred from 2015 until 2019 and management had
indicated that roughly 50.0% of this CAPEX will be financed by debt and the rest by internally generated cash. We also project employees’
profit share of 8% of net income over our forecast horizon, in line with history. We remind readers that as per IFRS reporting standards,
distributions to employees are treated as an expense item in the income statement. This expense item is recorded in the first quarter of
the year, after the income appropriation statement of the preceding year has been approved. We record 40% of the total employee profit
share as part of the direct labor expense line in edita’s COGS and the remaining 60% as part of SG&A expenses. We assign 5% of the
net income as remuneration to the board of directors.
Statement of Income Appropriation
Source: Company financials, Pharos Research.
EGP m 2013A 2014A 2015P 2016P 2017P 2018P 2019P 2020P
Retained Earnings, BoP 519.5 618.7 720.1 1,126.7 1,506.8 1,966.1 2,552.4 2,994.9
Total Comprehensive Income 249.4 266.1 427.9 557.8 689.0 871.0 924.3 890.8
Dividends Distribution for Previous Year (150.2) (150.0) - (149.8) (195.2) (241.1) (435.5) (693.2)
Transfer to Legal Reserves (14.7) (21.4) (27.9) (34.5) (43.6) (46.2) (44.6)
Change in Retained Earnings 99.2 101.4 406.5 380.1 459.3 586.3 442.5 153.1
Retained Earnings, EoP 618.7 720.1 1,126.7 1,506.8 1,966.1 2,552.4 2,994.9 3,148.0
Dividend Payout 58.8% 0.0% 35.0% 35.0% 35.0% 50.0% 75.0% 80.0%
Legal Reserves - 5.5% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0%
Employee Bonus Payments 7% 8.0% 8.0% 8.0% 8.0% 8.0% 8.0% 8.0%
Total Employee Bonus Payments 17.47 21.3 34.2 44.6 55.1 69.7 73.9 71.3
29
I. Introduction
II. Industry Dynamics
III. Financial Analysis
IV. Valuation
V. Risks
Annex: Financial Statements
Contents
30
IV. ValuationDCF Assumptions
Source: Pharos Research.
2015P* 2016P 2017P 2018P 2019P 2020P
Risk Free Rate 9.8% 9.8% 9.8% 9.8% 9.8% 9.8%
Beta 0.85 0.85 0.85 0.85 0.85 0.85
Equity Risk Premium 7.0% 7.0% 7.0% 7.0% 7.0% 7.0%
COE 15.8% 15.8% 15.8% 15.8% 15.8% 15.8%
Perpetual Risk Free Rate 6.0% 6.0% 6.0% 6.0% 6.0% 6.0%
Perpetual Cost of Equity 13.0% 13.0% 13.0% 13.0% 13.0% 13.0%
Perpetual WACC 12.2% 12.2% 12.2% 12.2% 12.2% 12.2%
Perpetual Growth Rate 6.0% 6.0% 6.0% 6.0% 6.0% 6.0%
Terminal Beta 0.85 0.85 0.85 0.85 0.85 0.85
Cost of Debt 11.3% 11.3% 11.3% 11.3% 11.3% 11.3%
Effective Tax Rate 22.5% 22.5% 22.5% 22.5% 22.5% 22.5%
After Tax Cost of Debt 8.7% 8.7% 8.7% 8.7% 8.7% 8.7%
Time-Varying WACC* 13.9% 13.5% 14.2% 14.3% 14.3% 14.6%
31
IV. ValuationDCF
* Excluding Q1-15 free cash flow
Source: Pharos Research.
EGP m, unless o/w stated 2015P* 2016P 2017P 2018P 2019P 2020P 2021P
IFRS EBIT Less Taxes 359.5 554.6 680.4 857.4 906.1 860.2
EBIT 461.6 715.6 878.0 1,106.3 1,169.1 1,110.0
Taxes -102.1 -161.0 -197.5 -248.9 -263.1 -249.7
Reinvestment -154.4 -179.8 -242.2 -343.5 -202.1 10.1
Depreciation 54.4 90.7 103.4 121.1 146.0 160.8
Change in Working Capital 69.6 1.4 11.0 11.8 9.3 9.0
CAPEX -278.4 -271.9 -356.6 -476.5 -357.4 -159.6
Free Cash Flow to the Firm 205.1 374.8 438.2 513.9 704.0 870.3 922.6
DCF
Periods 0.75 1.75 2.75 3.75 4.75 5.75
Discount Factor 0.91 0.80 0.70 0.61 0.54 0.47
Discounted FCFF 186.0 299.5 306.6 314.6 377.0 406.9
Sum of Explicit Discounted FCFF 1,890.7
Terminal in T6 17,077
Terminal in T 7,983.5
Enterprise Value 9,874.2
Debt 256.9
Cash 318.4
Equity Value 9,935.7
S/O, m 362.7
FV Per Share 27.4
32
I. Introduction
II. Industry Dynamics
III. Financial Analysis
IV. Valuation
V. Risks
Annex: Financial Statements
Contents
33
Upside Risks
Stronger-than-expected pricing power during our forecast horizon, mainly through covert pricing strategies,
Weaker-than-expected competitive pressures, and accordingly, lower-than-expected SG&A expenses,
Potential M&A transactions
Downside Risks
Stiff competitive pressures imposed by international snack makers operating in Egypt, particularly Kellogg’s,
Delay in the execution of the capacity expansion plan of the E08 factory
V. Risks
34
I. Introduction
II. Industry Dynamics
III. Financial Analysis
IV. Valuation
V. Risks
Annex: Financial Statements
Contents
35
Annex: Financial StatementsIncome Statement
Source: Company financials, Pharos Research.
EGP m 2015P 2016P 2017P 2018P 2019P 2020P
Revenues 2,510.9 2,962.8 3,724.5 4,666.5 5,155.4 5,321.2
COGS (1,524.4) (1,736.4) (2,206.1) (2,764.2) (3,095.0) (3,282.9)
Gross Profit 986.6 1,226.4 1,518.4 1,902.2 2,060.3 2,038.4
SG&A (441.4) (519.3) (648.9) (804.4) (899.7) (936.9)
Other Items, Net 8.4 8.4 8.4 8.4 8.4 8.4
Operating Income 553.6 715.6 878.0 1,106.3 1,169.1 1,110.0
Finance Expenses/Income, Net (1.5) 4.1 11.0 17.6 23.4 39.5
EBT 552.2 719.7 889.0 1,123.9 1,192.6 1,149.5
Income Tax (124.2) (161.9) (200.0) (252.9) (268.3) (258.6)
Net Income 427.9 557.8 689.0 871.0 924.2 890.8
36
Annex: Financial StatementsBalance Sheet
Source: Company financials, Pharos Research.
EGP m 2015P 2016P 2017P 2018P 2019P 2020P
Cash and Equivalents 469.9 765.0 1,092.4 1,479.7 1,839.0 1,892.9
Net Operating Working Capital (34.4) (35.8) (46.8) (58.6) (67.9) (76.9)
Inventories 125.3 142.7 181.3 227.2 254.4 269.8
Trade and Other Receivables 82.6 97.4 122.4 153.4 169.5 174.9
Trade and Other Payables 242.2 275.9 350.6 439.2 491.8 521.7
Other ST Liabilities 92.5 92.5 92.5 54.4 27.2 -
Investment in LT Assets 1,364.4 1,545.6 1,798.8 2,154.2 2,365.6 2,364.5
Total Investment 1,707.4 2,182.3 2,751.9 3,520.9 4,109.5 4,180.4
Total Financing 1,707.4 2,182.3 2,751.9 3,520.9 4,109.5 4,180.5
Shareholders' Equity 1,253.7 1,661.7 2,155.5 2,785.3 3,274.1 3,471.7
Debt and LT Liabilities 453.7 520.6 596.5 735.6 835.4 708.7
LT Debt and Liabilities 313.2 404.0 470.7 584.0 631.4 457.0
ST Debt 140.5 116.6 125.8 151.5 204.0 251.7
37
Annex: Financial StatementsCash Flow Statement
Source: Company financials, Pharos Research.
EGP m 2015P 2016P 2017P 2018P 2019P 2020P
EBT 552.2 719.7 889.0 1,123.9 1,192.6 1,149.5
Adjustments for
Depreciation 71.1 90.7 103.4 121.1 146.0 160.8
Tax Settlements (39.7) (66.9) (27.2) (27.2)
Change in WC
Inventory (12.8) (17.4) (38.6) (45.9) (27.2) (15.4)
Accounts and Notes Receivable (16.2) (14.9) (25.0) (31.0) (16.1) (5.5)
Trade and Other Payables 36.3 33.7 74.6 88.7 52.6 29.9
Other Items, Net (18.9) (10.9)
Income Tax Paid (124.2) (161.9) (200.0) (252.9) (268.3) (258.6)
CFO 506.3 649.9 744.8 926.1 1,052.3 1,033.4
Purchase of Fixed Assets (351.0) (271.9) (356.6) (476.5) (357.4) (159.6)
CFI (351.0) (271.9) (356.6) (476.5) (357.4) (159.6)
Dividends Paid to Shareholders - (149.8) (195.2) (241.1) (435.5) (693.2)
Proceeds/Repayment of Borrowings/Notes Payables (24.8) 66.9 134.5 178.8 99.9 (126.7)
CFF (24.8) (82.9) (60.7) (62.3) (335.6) (819.9)
Cash, BoP 233.3 363.9 659.0 986.4 1,373.7 1,733.0
Change in Cash 130.6 295.1 327.4 387.3 359.3 53.9
Cash, EoP 363.9 659.0 986.4 1,373.7 1,733.0 1,786.8
38
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