CREMONINI Hold CRM.MI/CRM IM Market Capitalisation: EUR 317M Food & Beverage

ITALIAN SMALL & MID CAPS SELECTION

EUR 2.23 CREMONINI Hold CRM.MI/CRM IM Market capitalisation: EUR 317m Food & Beverage

EUR 12/05 12/06e 12/07e 12/08e Profile: Cremonini Group is involved in distribution, meat processing and catering. According to FY-05 Sales (m) 2,128.9 2,241.8 2,376.3 2,471.3 results, its subsidiary Marr (distribution) accounts for ca. 62.9% of EBIT and 41.4% of total sales. MARR is EBITDA (m) 117.1 116.8 121.8 124.7 the Italian market leader in the sale and distribution of food products to Hotels, Restaurants, and Catering EBITDA margin 5.5% 5.2% 5.1% 5.0% (Ho.Re.Ca – see the reference page in this stock guide). It went public in June 2005, leading to a cash-in for EBIT (m) 71.5 68.1 73.1 75.9 the Group of EUR 38m (10% sold at EUR 6.65 per share). Currently, the Group holds 57.4% of MARR. EBIT margin 3.4% 3.0% 3.1% 3.1% Cremonini is also widely known – especially through its Montana brand - as one of the most important Italian Net profit (reported) (m) 40.6 10.8 12.8 13.6 producers of beef and processed meat products (beef and cured meat & snacks). The meat division Net profit (adj.) (m) 14.4 10.8 12.8 13.6 currently represents 47.2% of net sales, while the restaurant activities and the inter-company weight for the Cash flow (m) 98.1 72.3 75.1 76.9 remaining 14.2% and -3.2% respectively. The Group’s main market is Italy (80% of net sales), followed by Net debt (Cash) (m) 512.1 522.6 534.8 543.5 Debt/Equity (gearing) 140.7% 143.8% 147.2% 149.5% the European Union (13%) and Extra European Union (7%). Debt/EBITDA 4.4 4.5 4.4 4.4 SWOT Analysis Interest cov er 5.6 5.6 6.0 6.3 STRENGTHS WEAKNESSES ROCE 3.6% 3.4% 3.6% 3.7% Market leader in beef production and distribution Very poor profitability (1.6% EBIT margin in ROCE / WACC 0.5x 0.5x 0.5x 0.5x to foodservice. Sole player in the Italian on-board 2005) and returns on the beef production EV / Sales 0.52 0.49 0.47 0.46 train service and co-European leader together High working capital requirements on both beef EV / EBITDA 9.48 9.49 9.21 9.09 with Compass. production and distribution (app. 15%-20%) EV / CE 1.1x 1.1x 1.1x 1.1x OPPORTUNITIES THREATS P/E (adj.) 20.8 26.7 22.6 21.3 P/CF 3.82 5.32 5.15 5.09 Consolidation in both the beef and the Concerns regarding reputation following P/BV 1.10 1.06 1.05 1.05 distribution sectors and new concessions on the journalists investigation on meet quality OpFCF yield 7.6% 2.4% 2.4% 4.6% commercial catering business; Concessions fees increasingly more expensive Div idend y ield 3.1% 3.8% 4.3% 4.3% Profitability recovery in the beef production. in the catering business EPS (adj.) 0.11 0.08 0.10 0.10 Investment issues: Cremonini reported H1-06 sales at EUR 1095.5m increasing by +8.6% yoy, beating EPS (adj.) growth 24.4% -24.9% 17.9% 6.3% our forecast by around 3%. Meat production sales reached EUR 507.5m and were up 4.4% y/y. Foodservice CFPS 0.61 0.42 0.43 0.44 (Marr) sales were at EUR 465.7m and grew by 14.1%. Sales in the catering division amounted to EUR BVPS 2.11 2.12 2.12 2.12 152.9m vs. EUR 143.6m of H1 05, up 6.5% y/y. DPS 0.07 0.09 0.10 0.10 Abs. Performances(12m,6m,3m,1m): 3.9% 4.9% 6.7% 2.4% H1-06 EBITDA reached EUR 59.1m, advancing by 7.5% vs. the same period of last year. EBITDA margin 12 month High/low: EUR2.51 / 2.00 Av g. Daily nb traded shares:242,700 was at 5.4%, in line with our expectations. In the meat production Cremonini was able to deliver an H1-06 EBITDA margin of 4.1% improving from Q1 06, where EBITDA margin reached 3.8%. Foodservice division Main shareholders: Cremonini Family 56.2%; Free float 43.8%; EBITDA (Marr) was up by 18.3%. Catering division EBITDA margin was at 8.3%, showing a healthy increase of around 20bp vs. H1 05.In H1 06 Cremonini reported a net profit of EUR 2.3m: we remind that H1 05 net profit of EUR 29.1m included the extraordinary (net) income deriving from the Marr IPO of around EUR Adj.: excluding goodwill and extraordinaries. All share prices at 21/09/06. 20.6m.

Recommendation: We keep our estimates unchanged. We fine-tune our target price to EUR 2.27 (based PRICE (SHORT & LONG AVERAGE) FINANCIAL CALENDAR on SOP valuation) after the recent good performance of Marr. We reiterate our neutral view on the stock.

3.2 tire 3.0 Hold rating confirmed. 2.8 2.6 Nov 14: Q3 06 results Target Price: EUR 2.27 2.4 2.2 2.0 1.8 1.6 1.4 Analyst(s) Banca Akros 1.2 1.0 Jun 03 Sep 03 Dec 03 Mar 04 Jun 04 Sep 04 Dec 04 Mar 05 Jun 05 Sep 05 Dec 05 Mar 06 Jun 06 Sep 06 Claudio Giacomiello, CFA +39 02 4344 4269 [email protected] Source : JCF

ITALIAN SMALL & MID CAPS SELECTION

This research has been prepared by Francesco Previtera, Pietro Gasparri (member of AIAF and associate member of SIAT and CIIA), Andrea Devita, Melania Grippo, Jacopo Majocchi, Claudio Giacomiello and Paola Saglietti (member of AIAF), who are financial analysts with Banca Akros SpA ("Banca Akros"), which is responsible for the preparation of the research. Banca Akros – which is also authorised to perform investment activities pursuant to the Bank of Italy’s ruling dated November 14, 1996, is registered with the Italian banking association under registration n. 5328, is part of the Bipiemme Banca Popolare di Milano Group (the “Group”) and is duly subject to the management and co-ordination of Banca Popolare di Milano (the “Parent Company”) – has prepared this research for its institutional clients only (“official stock brokers” pursuant to art. 31 of Consob Broker Regulations). This research is being distributed as of 25 September 2006. In compliance with arts. 69 “quater” and “quinquies” of Consob Regulations for Issuers (“notification to the public regarding interest and conflict of interest”) Banca Akros hereby declared that it has a personal interest in some of the companies examined in this research, specifically: 1) Autostrade, Fiera Milano and Impregilo (in which Banca Akros’ parent group holds more than 2%); 2) Bca Italease (in which Banca Akros’ parent group holds more than 2%; the Parent company is a member of Banca Italease’s syndicate pact); 3) Biesse, Cremonini, QF Investietico e Sogefi (for which the bank is a specialist); 4) Negri Bossi (the bank is a specialist and financial advisor for next capital increase); 5) Pierrel (for which the Bank is specialist, is a Listing Partner and has been a member of the consortium for the IPO in 2006); 6) Alitalia, Anima, Caleffi, Guala, Safilo and Unipol (the bank was a member of the pertinent share placement consortia in 2005); 7) Banca Ifis (the Bank is a specialist and was also Lead Manager in the share placement consortium in 2005); 8) Mediobanca (the Bank was Joint-Lead Manager in the placement consortium of the non-negotiable bonds in 2005); 9) Telecom Italia (the Bank was a member of the consortium for the placement of the non-negotiable bonds in 2005); 10) Ansaldo STS, EEMS, Marazzi, Nice, Piaggio and Saras (the Bank has been a member of the pertinent consortia for the IPO in 2006); 11) Pirelli Tyre (the Bank was acting as Co-Sponsor and partecipating to the underwriting in the IPO recently cancelled); 12) Bca Pop dell'Emilia and Bca Carige (the Bank has been a member of pertinent consortia for the placement of the non-negotiable bonds in 2006). Financial analysts Francesco Previtera, Pietro Gasparri (member of AIAF and associate member of SIAT and CIIA), Andrea Devita, Melania Grippo, Jacopo Majocchi, Claudio Giacomiello and Paola Saglietti (member of AIAF), who prepared this research, have gained considerable experience with Banca Akros and other authorised brokerage houses. Said financial analysts do not receive a bonus, salary or any other form of remuneration, whether directly or indirectly, from any earnings in any investment banking operation. Said financial analysts and their families do not hold financial instruments issued by the companies under examination nor are they directors, managers or advisors of the companies. Pursuant to Consob rulings to implement art. 14, paragraph 8 of Italian Legislative Decree 58/98 (TUF) and specifically art. 69 “quinquies”, paragraph 2 of the Issuers Regulation, Banca Akros hereby informs its clients that additional information is available at its web site (http://bancaakros.webank.it/akros/sito.nsf/homepage). The information and opinions given in this research are based on sources believed to be reliable. Banca Akros has done its best to check the source of said information and that it has already been made public. However, notwithstanding the said controls Banca Akros does not guarantee nor shall it be held liable if the information supplied herein or used to prepare this research is found to be inaccurate, incomplete, untrue or incorrect. This research is for information purposes only. It shall not be regarded as a proposal for a contract, an offer to sell nor as a solicitation to buy and/or sell financial products nor, in general, to invest. Nor shall it be regarded as advice on investment opportunities. Banca Akros does not guarantee that any of the forecasts and/or estimates supplied in this research are attainable. Moreover, Banca Akros shall not be held liable for any consequences and/or damage that may derive from the use of this research and/or the information contained herein. All the information or opinions contained in this research are subject to change without notice, without detriment to any legal or regulatory requirements. Unless specifically authorised, this research may not be reproduced and/or circulated, whether wholly or in part, directly or indirectly.