Belfield Capital

Investment Case- Yusuf Samad 20th July 2020

Price €18.56

Executive Summary Ebro Foods is a steady business in a dominant market position and a strong balance sheet. Historically strong return on capital is suppressed by a three-year capex program to enhance productivity leading to EBITDA growth from 2021. Management has a credible long-term track record in allocating capital and is well aligned with a large stake. Meanwhile, the business has been uplifted by Covid 19; the stock yields 4% that could be significantly enhanced with a special dividend from disposals.

Investment Thesis • Dominant market position in the essential food sector.

EBRO Foods is a Spanish food producer. It is the global leader in production and distribution of , rice-based products and complementary food products and the second largest pasta manufacturer.

• Steady business with a strong balance sheet-a Survivor

As a producer of staple products with several well-known brands like Tilda rice, Ebro has defensive characteristics like other food sector players such as Nestle and Unilever. It has had steady low single digit revenue growth (4.6% p.a. from 2016 to 2019). The balance sheet has grown to finance acquisitions, capex and higher working capital but is robust with Net Debt to EBITDA of 2.9 times. The leverage should decline as capex peaks in 2020 and debt is reduced with large disposals.

• Boost from COVID 19 COVID 19 has boosted sales and profits in 1H driven by stockpiling and cooking at home offset by the loss of food service operations such as corporate canteens and restaurants. We expect full year sales and EBITDA to grow 14% even though the exceptional sales growth in the first half will taper off in the second half of the year. Full year Adjusted EBITDA projected at €400m up from €343m.

• Potential for margin improvement Over last three years, Ebro has spent €408m on capex and made the key acquisitions of Tilda in 2019, a premium rice brand and Bertagni, a filled pasta and fresh pasta specialist in Italy in 2018. The capex has been directed towards the overhaul of its instant rice and fresh pasta productive capacity and a significant effort to expand the market for its frozen cereal and rice products. A major expenditure is to move from the current factory that is now part of urban Seville to La Rincondada, located 30 miles away. The new plant, to be ready in 2021 will produce microwave and convenience products. It will enhance cost efficiency. It will not be ready till 2H 2021.

• Founder owned business with skin in the game The sell side is somewhat sceptical of the capex programme especially since the results in terms of EBITDA margin improvements have not been visible while debt has risen and the Return on Capital Employed has declined. However, management believes in investing for the long-term and has done so successfully under the leadership of Anthonio Hernandez Callejas, the current Chairman and CEO since 2005. The track record of allocating capital such as timely exits from the sugar business, divestment of the dairy business and purchase of Tilda is impressive. It is helpful for shareholders that management is strongly aligned with a family stake of ~16%. Another 34% of the company is held by three established Spanish families.

• Paid to wait

Given the family owned nature of the business, Ebro has a consistent dividend policy. It is currently trading at a yield of 3.04%%. The proceeds of any disposals are also likely to be paid out partially as dividends. Ebro has announced the sale of its US pasta business and six parties are believed to be pursuing it. We estimate the sale proceeds to be €340m that would allow reduction in debt and payment of a dividend ~€1 per share.

Risks and Mitigants • Productivity improvements fail to materialise despite the capex

The pay-off from the capex program is expected in 2H 2021 when the new factory starts operations. This should reflect in higher EBITDA margins, towards 14% as it boosts production of faster growing and higher margin products. The key mitigant is that the management team is very experienced in the rice and pasta production business with a good track record.

• Increase in raw material prices for rice or durum wheat that cannot be passed on. For 2020, Ebro has built up inventories of raw materials before prices increased. Also, with strong brands and for premium products, it is able to pass on the costs albeit with a lag.

• Strength of Euro vs. USD Profits generated in US Dollar are exposed to the risk of euro appreciation.

• Competition from private label

Market share in the US pasta business has been hurt by competition from private labels. This business is now being sold. Ebro can protect itself also by innovating new formats and products. Also, it is helpful to have recognised brands as consumers start to purchase directly on-line.

Business EBRO Foods is a Spanish food producer. It is the global leader in production and distribution of rice, rice-based products and complementary food products and the second largest pasta manufacturer.

EBRO’s origins are in the sugar business operating as Azucarera Ebro Agricoles. In 1989 it had acquired 60% of Herba Rice Mills In 2000, it merged with local dairy group, Puleva that had been in public ownership in Franco’s time and was privatised. The foundations of the rice and pasta business were laid with the acquisition of a 100% of Herba Rice in 2001, Panzani, the French leader in pasta and to sauces in 2005. In 2008, EBRO anticipating a change in regulation sold its sugar business, Azucarera.

In 2010, the dairy business, Puleva was sold to the French company, Lactalis due to the challenges of expanding the business geographically. Ebro had made the dairy business more profitable, modelling it after the sugar business. It focused on achieving higher EBITDA margins and ROCE and achieved greater efficiencies in the back office, consolidating manufacturing operations in five locations into two factories.

In selling the dairy business, Ebro recognised that dairy prospered better in Northern European countries and less so in Southern Europe where temperatures are higher. As in Italy and other Southern European countries a tradition of cooking had developed based on use of olive oil. The business model is now oriented towards this tradition.

Ebro has been shaped into the current model since 2005 by Antonio Hernandes Callejas who is currently the Chairman and the CEO. Antonio began his career in 1979 in Arrocerias Herba, a rice producer founded by the Hernandez family. In 2002, he was appointed Director, Vice-Chairman and member of the Executive Committee of Ebro Foods, S.A. and since then he has been a key figure in the transformation and international expansion. In 2004 he was appointed CEO of the Company and in 2005 he became Executive Chairman of the Ebro Group.

While listed, Ebro has the characteristics of a family owned business. Three established Spanish families hold nearly 50% of the stock alongside the Callejas family. The Alba family, also owner of Banca Marche, own 14%, the Damm family owns 11.7%, Callejas family owns 7.96% and has an associated interest in another 7.96%. The Spanish sovereign wealth fund SEPI owns 10.4%. The free float is 45% and includes ownership by Artemis Investment Management.

EBRO group had revenues of €2.8bn in 2019 and Operating Profit of €212m. The two main business segments are Rice and Pasta contributing 56% and 44% of revenues respectively and an equal share of operating profits. A small proportion of revenue (0.5%) is derived from other business activities., mainly from investment properties.

As shown below, only 6.3% of revenue is generated from customers in . The rest of Europe accounts for 50% and France represents nearly half of these revenues. The Americas represent 34% of revenue, most of which is from the US (28.4%).

Ebro Foods Spain Europe Americas RoW Total US France Segment Revenue €000 164,502 1,254,599 933,091 261,785 2,613,947 791,742 702,185 Segment Revenue 2018 % 6.3% 48.0% 35.7% 10.0% 100.0% 30.3% 26.9% Segment Revenue 2019 €000 181,295 1,412,700 955,702 263,601 2,813,298 798,684 690,528 Segment Revenue 2019 % 6.4% 50.2% 34.0% 9.4% 100.0% 28.4% 24.5% Growth 2018/19 % 10.2% 12.6% 2.4% 0.7% 7.6% 0.9% -1.7%

Business segments A. Rice businesses (56% of revenue and 63% of Operating Profit) 2018 Sales- Europe 41.4%, NA 37.5%, Spain 10%; EBITDA-NA 45.1%, , Spain 19.1% Europe 29.5% a. Herba Group The Ebro Group is the leading European player in rice retailing, the food service segment and in the supply of rice, rice derivatives and ingredients for industrial purposes. It follows a multi-brand strategy with several high profile brands including: SOS, La Fallera, La Cigala, Saludades, Rix fis, Lassie and Risella. It is the market share leader in Spain, Portugal and the Netherlands and second in Belgium.

In parallel, it supplies rice to Europe’s leading food sector players:

• Beverage Industries • Industrial rice companies • Baby Food: cereals, baby food, etc. • Pre-cooked dishes: non-refrigerated, dehydrated, frozen, etc. • Animal and pet food.

b. Tilda Group Acquired in August 2019 for €292m. The Tilda brands specialising in rice has global brand recognition. Tilda manufactures in the UK that also accounts for 60% of sales. It is the Number two brand with 14.7% share by volume and 19.3% by value. Also commands a 10% share in Ireland. c. Riviana Rice group Riviana Inc. is the largest rice company in the US with rice processing and production facilities in Tennessee, Texas and Arkansas. It has a 22.8% share by volume of the US retail rice market and boasts brands such as Mahatama and Minute, leaders in traditional, instant & microwaveable rice.

Riviana also has a presence in markets with trade ties to the US, several Caribbean nations and the Middle East, the latter through the Abu Bint brand, which is the leading player in the par-boiled rice segment in Saudi Arabia.

B. Pasta business (44% of revenue and 42% of Operating Profit) a. Panzani Group: Leading player in the dry pasta, fresh products (fresh pasta, pan-fry products, risotto sauces, ready-to-eat fresh dishes and fresh potato based specialties), rice, pulses, semolina and sauce segments in France. Market share leader in dry pasta with 36.8% by volume and 34% by value. Sauce and fresh products is a premium proposition. Its brands, Panzani and Lustucru command 28.8% and 44% of the market by volume, respectively.

Acquired Roland Monterrat in 2015 specialising in fresh dishes, sandwiches, pate en croute and croque monsieurs.

Panzani sells rice under Lustucru (conventional and quick cook rice) and Taureau Aile (select premium quality rice). It has a leading market share of 20.2% by volume. It sells semolina products under the Regia and Ferrero brands.

It is a market leader in Belgium and Czech Republic with share of 6.8% and 12.6% by volume and exports pasta and semolina products to northern Africa and other French speaking markets. b. Bertagni Group Bertagni is the oldest pasta filled brand in Italy. It is an expert in production of fresh pasta in the premium segment. Ebro Group acquired 70% of the Group in March 2018 and has an option to purchase the remaining 30%. c. Garofalo Group Based in Gragnano near Naples, Garofalo specialises in the high-end dry pasta segment. It has an over two hundred year history and enjoys protective geographic indications. It has 5.5% share by volume and 7.5% by value of the Italian premium dry pasta segment. Its brands, Garofalo and Saint Lucia sell in most European markets, in Eastern Africa and the US. d. Riviana Pasta Group Riviana is the Group's leading unit in the dry pasta segment in the US (market share 18%) and Canada (30.5%). Manufacturing base in Montreal, Saint Louis and Winchester. It follows a multi-brand strategy comprising well entrenched brands in their local markets. Brands include Ronzoni, Skinner, Prince, American Beauty, San Giorgio, Creamette, No Yolks. In Canada- Catelli, Lancia and Ronzoni.

At the end of 2013, the Group acquired the Olivieri brand, a leader in fresh and filled pasta and gnocchi in Canada with a 46.5% share by volume.

C. Other business (4% of Operating Profit) Mainly an Asset management that manages the Group’s investment properties which is land and buildings at a carrying value of €21.6m and €1.7m respectively.

The business activities by geographic are as follows:

Spain Herba’s rice business and the Harinas de Santa Rita business Rest of Europe Businesses of Herba, Panzani (including Monterrat and Bertagni), Garofalo and Geovita US & Canada Mainly the Riviana (including RiceSelect) business in the US and the Cateli and Oliveri businesses in Canada; to a lesser extent, Panzani, Bertgani and Garofalo. RoW Essentially the rice business of Herba and some of the exports of Panzani, Bertagni, Riviana and Garofalo.

Financial Performance Over three years, 2016-19, Ebro Group revenue has grown 4.6% p.a. Adjusted EBITDA, excludes non- recurring items, was €343m in 2019, the same as 2016. Adjusted EBITDA margin has declined from 14% to 12%. Profitability dipped sharply in 2018 due to a $52m negative impact from US rice operations related to the Freeport factory in Texas and Hurricane Harvey. Costs increased due to absence of Texas crop and higher logistics costs driven by labour shortages in a tight economy. The costs could not be passed on immediately.

Major changes were made in 2019 including increase in prices to pass on higher costs, organisational changes to logistics and production structures, downsizing of the Freeport business eliminating unprofitable volumes and enhancing efficiency of Freeport and Memphis plants. Adjusted EBITDA has recovered 11.4% in 2019.

Operating Profit declined from €264m to €212m due to higher depreciation and amortisation charges resulting from a significant increase in capex (149, 139 and 121 million euros in 2017, 2018 and 2019 respectively).

Return on Capital Employed (ROCE) has dropped from 16.6% in 2016 to 11.2% in 2019 due to businesses acquired in 2019 and the significant increase in capital expenditures that has yet to have a significant impact in terms of return on assets.

P&L 2016 2017 2016/2017 2018 2017/2018 2019 2019/2018 CAGR 2016-2019 Revenue €m 2,459 2,507 1.9% 2,614 4.3% 2,813 7.6% 4.6% Advertising €m - 100 - 93 -7.2% - 90 -3.7% - 91 2.0% -3.1% EBITDA_A €m 344 359 4.3% 307 -14.4% 343 11.5% -0.1% EBITDA_A Margin 14.0% 14.3% 11.8% 12.2% EBIT_A €m 267 279 4.5% 220 -21.2% 231 5.0% -4.7% Profit before tax €m 176 264 50.2% 212 -19.8% 198 -6.3% 4.1% As % of revenue 7.1% 10.5% 8.1% 7.1% Profit after tax €m 176 230 30.8% 149 -35.1% 150 0.7% -5.1% Financial position Equity €m 2,079 2,075 -0.2% 2,162.33 4.2% 2,262.20 4.6% Net debt €m 447 517 15.7% 705 36.4% 1,000 41.7% Average net debt €m 404 426 5.4% 627 47.3% 872 38.9% Leverage 19.4% 20.5% 29.0% 38.5% Total assets €m 3,646 3,663 0.5% 3,834 4.7% 4,374 14.1% Returns Average working capital €K 461,991 506,803 9.7% 588,403 16.1% 643,139 9.3% Average capital employed €K 1,611,272 1,678,670 4.2% 1,805,986 7.6% 2,080,166 15.2% ROCE-A 16.6% 16.6% 12.2% 11.1% Capex €K 107,725 120,671 12.0% 138,930 15.1% 148,705 7.0% Average headcount 6,195 6,344 2.4% 7,153 12.8% 7,522 5.2%

First Quarter 2020 Performance Sales grew 22.5% to €845.3m in 1Q20 consumers bought and stored rice and pasta as the Covid lockdowns hit. EBITDA rose 26.4% to €106.5m. In the last three years, Adjusted EBITDA has grown by 16.6% per annum. Net Profit increased by 29.6% to €47.9m, largely boosted by the incorporation of Tilda, returns on Capex investments in recent years and increased sales on the back of lockdown.

ROCE-A was 11.6% in Q120 as capital deployed continued to increase. Net debt at €985.5m was $14.3m less than at year end 2019 but working capital rose €43m from year end, due to the positions taken on raw materials. Capex slowed to €21m since the technical teams in Spain could not travel to the US but for 2020 as a whole capex will still be high at €140m.

Ebro is selling its pasta business in the US. The sale has been delayed by the Covid crisis but in the meantime, Ebro is happy to retain the business while sales are booming due to the Covid crisis. There are reported to be six suitors for the business. I expect a minimum sale price of 10x EBITDA . Assuming LTM EBITDA was $34m (normalised), the sale should generate proceeds of €340m which would reduce debt by €170m and a special dividend of €170m or €1.13 per share.

P&L Q1 2018 Dec-18 Q1 2019 Dec-19 Q1 2020 2019/2020 CAGR 2018/2020 Revenue €m 620,270 690,182 845,273 22.5% 16.7% Advertising €m 22,619 23,809 25,922 8.9% 7.1% EBITDA_A €m 78,354 84,274 106,483 26.4% 16.6% EBITDA_A Margin 12.6% 12.2% 12.6% -0.1% EBIT_A €m 58,996 58,589 76,737 31.0% 14.0% Operating profit €m 64,546 57,352 74,804 30.4% 7.7% Operating profit margin % 10.4% 8.3% 8.8% -7.8% Profit after tax €m 43,433 36,922 47,863 29.6% 5.0% Financial position Equity €m 2,076,970 2,162,334 2,226,171 2,262,203 2,302,937 1.8% 5.3% Net debt €m 610,104 704,621 792,930 999,849 985,502 -1.4% 17.3% Average net debt €m 455,007 627,350 686,137 871,658 925,550 6.2% 42.6% ND Leverage 29.4% 32.6% 35.6% 44.2% 42.8% AND Leverage 21 29.0% 30.8% 38.5% 40.2% x EBITDA-A (ND) 2.29 2.92 xEBITDA-A (AND) 2.04 2.54 Returns ROCE-A 14.9% 11.9% 11.6%

Trends in Business segments Rice Business Overall, the rice market is a little bit flat in Europe and growing at 2.5% p.a. in the US. Ebro is growing faster by focusing on growth sub-sectors such as premium quality rice, microwaveable rice and packaging it in new formats such as maxi cups, compact cups, etc.:

Revenue in the rice business increased sharply to €1.5bn in 2019 due to:

i. the acquisition of Tilda, which contributed €55.6m in four months and was buoyed by the application of new prices and promotions at the start of 2019. The integration of Tilda will continue to growth in revenues and EBITDA. ii. Sales of microwaveable rice is growing at double digit rates. The Group has expanded its microwaveable rice facilities at the Memphis factory and started work on a new factory in San Jose de la Rinconada to be ready by mid-2020. iii. Spanish market growing and Sabroz range for paella growing at double digit rates.

EBITDA-A in the rice business has been virtually flat around €192m since 2016 but grew 18.6% in 2019, recovering to the 2017 profitability (EBITDA_A €206m) after a dip in 2018. Profitability had dropped in 2018 in the US due to higher logistics and labour costs and a disruption in production. Also, Tilda made a strong contribution. The issues in the US continued to affect results in 2019 but have been addressed and the outlook has improved.

The non-US businesses excluding Tilda generated €88.6m EBITDA-A with Spain contributing 28.7%, Europe 59.3% and other countries 12%. Growth is flat. Productivity is expected to increase in Spain with the new factory in La Rinconada.

Capex has remained high (€52.9m, €74m and €71.8m in 2017, 2018 and 2019 respectively) for the new microwaveable cup factory in Spain, capacity expansion in the US and a new pulse-based ingredients factory.

Outlook In Q1 2020, rice sales rose 25% to €483.8m registering an average growth rate of over 18.2% for the past two year. Tilda contributed €49m to the consolidated sales. Rice sales spiked due to the coronavirus as demand increased for branded products especially in Spain, Italy and France, but not for industrial segments and food service (Horeca).

Outlook for Q2 is upbeat as April’s sales remain strong. Q2 Sales in North America may be more constrained due to shortage of stock. Sales momentum will taper off as the lockdowns ease.

EBITDA-A increased by 21.8% to €61.4m, with margins falling slightly by 30bps to 12.7% due to an increase in the cost of c. 35% rice as planted area was reduced in the 19/20 season as well as a 19% increase in advertising investment. Fall in € vs USD had a positive impact. Tilda contributed €7m.

Operating profit grew 22% to€48m.

Rice supply: Ebro has completed the main purchase agreements for raw materials in Europe at the start of the year, resulting in a cost increase of 6% compared to the previous harvest. Supply is therefore guaranteed until the start of the 20/21 harvest in October. Purchase of Basmati has been completed with a 10% y-o-y price reduction and Ebro has enough stock through to February 2021. The planting area in the US is expected to increase by 20%, so the new harvest in July should have better prices. Significant purchases of high quality, organic rice have been made from South America to export to Europe and the Middle East.

Other initiatives: Improving productivity in Freeport and Memphis. Production capacity for microwave lines was doubled in Memphis and instant rice lines productivity is being optimised.

Covid Uplift

• Q1 20 rice sales were 25% higher than Q1 19 due to the jump in sales from stockpiling and the contribution from Tilda. Excluding Tilda, the sales growth in Q1 was 13%. • The growth driven by Covid 19 stockpiling should start to taper off from May 20. • Excluding Tilda, rice sales in 2019 grew 7.2% from 2018. I am assuming the same underlying growth to continue in 2020. • Assume, 2020 sales ex Tilda to grow 13% in 1Q, 13% in April and May and down to 5.2% in June or average 10.4%; then 7.2% in the second half. So, first half average is 11.7% and second half is 7.2%.

Our outlook for full year 2020 revenue growth is 9.5% with EBITDA margins remaining steady.

Pasta business Ebro is increasing its share of revenue from the growth sub-sectors which are fresh and filled pasta, dry pasta with the quality of fresh pasta, premium fresh sauce ranges and meal solutions (pan-fried rice and pasta dishes, pizzas, etc.)

The Group is losing market share in the US where the competition from private label is strong. The US pasta business is being sold and should reduce the drag although there will be a €34m drop in annual EBITDA.

Revenue has grown 1.8% p.a. from €1.2bn in 2016 to €1.3bn in 2019. In 2019, revenue increased 3.6% aided by a full-year’s contribution by Bertagni of approximately €20m plus organic growth of €20m. A rising USD vs Euro has also helped but may reverse.

EBITDA-A has increased 1.1% p.a. from €157m to €162m. Drivers are: a. It grew more strongly in 2019 by 6% fuelled by the contribution by Bertagni. b. The US pasta business also recovered from the inflation and infrastructure issues experienced in 2018. c. In France, Roland Monterrat’s core sandwich production and sale business faces severe competition as supermarket chains reduce the number of branded products they carry as they prioritize private label products. Monterrat had ~€2bn negative EBITDA contribution in 2019. d. Garofalo’s contribution declined due to various issues including spending for growth, an obligation imposed in Italy to indicate the origin of the durum wheat, upgrades to quality and warehouse issues derived from the expansion of production and warehousing capacity at the factory in Granniano.

EBITDA_A margin is 12.6% a slight improvement over 2018.

Capex (€53m, €74m and €72m in 2017, 2018 and 2019) respectively was directed towards: a. The new logistics warehouse for the pasta business in France b. The new dry pasta line and capacity expansion at the Garofalo factory c. Completion of the facilities for the new gnocchi production lines,

Outlook In Q1 20, Pasta sales were €381m, 19.3% higher than the previous year and an average growth rate of 15% for the past two year. Sales increased c.90% during March in Europe and Canada, with less impact in the US given that the lockdown was enforced somewhat later there. Sales remained strong through April but are expected to gradually level out from May onwards.

Roland Monterrat slowed down as the food service channel has been hurt by COVID-19. Fresh pasta had a slight increase in Europe and very strong upticks in North America. Consumption will pick up after the lock-down eases.

EBITDA -A grew 20.2% y-o-y to €47.9m, with a 12.6% margin, a 100bps improvement over 1Q 2019. Operating Profit grew by 35.9% to €29.6m.

Sales in Q1 were 19.3% higher as consumers stockpiled ahead of lockdowns. Assume sales stayed strong through May and then tapered off from June to a rate below the annual increase of 3.6% to 1.6%. Second half sales growth at 3.6%.

Our outlook is for sales to increase 14% in 2020 and EBITDA margins remaining flat to slightly down.

Valuation Our forecast for sales and EBITDA in 2020 and 2021 is as follows:

Year 2020 2021 Sales €m 3,210 3,223 Adjusted EBITDA €m 406 411 Underlying Adjusted EBITDA 12.7% 12.8% Margin %

These forecasts do not assume the sale of the US pasta business that has an EBITDA of ~€34m. Also, we assume no change in EBITDA margin.

The consensus EBITDA for 2020 and 2021 is €386m and €388m respectively. Using the consensus, Ebro is valued at EV/EBITDA multiple of 10 times. In comparison, European consumer food companies trade on an average multiple of 15.9x 2020 EBITDA and 14.9x 2021 EBITDA. Also, a selected peer group of food companies shown below trades at multiple ranging from 12x to 17.2x. Ebro trades at a wide discount of at least 16% to the peer group.

A discount is possibly justified by the diversified businesses of the peer group that include faster growing beauty products and beverages and operations in fast growing markets but perhaps a 16% discount appears too wide given the defensive characteristics and dividend yield. We believe that the multiple for Ebro should be around 11 to 12 times EV: EBITDA. Sales Sales EBITDA EBITDA ND/EBITDA Div EV/EBITDA Growth Growth Growth Growth Yield 2020 19/20 20/21 2020 2021 Nestle -5.8% 3.3% -3.5% 5.4% 1.4x 2.5% 17.2x Danone -3.3% 1.3% -13.3% 3.7% 2.8x 3.5% 12.0x Unilever -3.8% 4.4% -11.4% 9.8% 2.0x 3.4% 14.2x Ebro Foods 10.8% -1.8% 11.9% 0.5% 2.9x 3.07% 10.0x (consensus)

Assuming a 11.5x multiple, our valuation based on consensus earnings for 2020 is €22.4, an upside of 19%, a total return of 22% including regular dividends. Based on our forecast, the target price is €23.9.

Yusuf Samad CFA, CAIA, FSIP

Partner, Belfield Capital, LLP Financials

Profit & Loss

€m 2019 2018 2017 2016 Revenue 2,813.3 2,613.9 2,507.0 2,459.2 Change in inventories of finished goods and wip -7.6 17.6 23.9 16.2 Own work capitalized 1.9 1.3 0.7 1.1 Other operating income 17.6 18.5 20.2 34.6

Raw materials and consumables used and other external -1,518.0 -1,443.2 -1,331.0 -1,314.5 Employee benefit expenses -388.8 -354.0 -339.0 -331.4 Other operating expenses -594.3 -550.2 -531.0 -523.8 EBITDA 324.1 303.9 350.8 341.4 Depreciation and amortization -111.6 -87.3 -79.7 -76.8 Operating Profit (EBIT) 212.4 216.6 271.1 264.6

Finance income 25.0 23.1 35.5 28.7 Finance costs -40.5 -31.5 -46.6 -36.8 Impairment of goodwill -3.7 -1.4 -0.2 -0.2 Share of profit of associates 5.2 5.0 4.3 3.0 PBT 198.5 211.7 264.1 259.4 Income tax -64.2 -63.0 -34.2 -83.6 Profit from Continuing Operations 134.2 148.7 230.0 175.8 Profit after tax from discontinued operations 16.0 0.6 0.0 0.0 Group Profit for the Year 150.3 149.3 230.0 175.8 Attributable to: Equity holders of parent 141.8 141.6 220.6 169.7 Non controlling interests 8.5 7.7 9.4 6.1

Margin % 2019 2018 2017 2016 Revenue 100% 100% 100% 100% Change in inventories of finished goods and wip -0.3% 0.7% 1.0% 0.7% Own work capitalized Other operating income

Raw materials and consumables used and other external -54% -55% -53% -53% Employee benefit expenses -14% -14% -14% -13% Other operating expenses -21% -21% -21% -21% EBITDA 12% 12% 14% 14% Depreciation and amortization -4% -3% -3% -3% Operating Profit (EBIT) 8% 8% 11% 11%

Finance income 1% 1% 1% 1% Finance costs -1% -1% -2% -1% Impairment of goodwill 0% 0% 0% 0% Share of profit of associates 0% 0% 0% 0% PBT 7% 8% 11% 11% Income tax -2% -2% -1% -3% Profit from Continuing Operations 5% 6% 9% 7% Profit after tax from discontinued operations 1% 0% 0% 0% Group Profit for the Year 5% 6% 9% 7% Growth % 2019 2018 2017 2016 Revenue 7.6% 4.3% 1.9% 0 Change in inventories of finished goods and wip Own work capitalized Other operating income

Raw materials and consumables used and other external 5.2% 8.4% 1.3% 0 Employee benefit expenses 9.8% 4.4% 2.3% 0 Other operating expenses 8.0% 3.6% 1.4% 0 EBITDA 6.6% -13.4% 2.7% 0 Depreciation and amortization 27.8% 9.6% 3.7% 0 Operating Profit (EBIT) -1.9% -20.1% 2.4% 0

Finance income Finance costs Impairment of goodwill Share of profit of associates PBT -6.3% -19.8% 1.8% 0 Income tax 84.5% Profit from Continuing Operations -9.7% -35.3% 30.8% 0 Profit after tax from discontinued operations Group Profit for the Year 0.7% -35.1% 30.8% 0 Notes: EBITDA_A Reconciliation Operating Profit (EBIT) 212.4 216.6 271.1 264.6 Non recurring expenses 27.7 12.3 19.4 28.3 Non-recurring income -9.1 -8.7 -11.1 -25.6 EBIT -A 231.1 220.1 279.3 267.3 Depreciation and amortisation 111.6 87.3 79.7 76.8 EBITDA_A 342.7 307.5 359.0 344.1 EBITDA_A Margin % 12.2% 11.8% 14.3% 14.0%

Other Operating Income Government grants 0.9 0.8 0.7 0.7 Other operating income 7.6 9.0 8.3 8.2 Gains on disposal of fixed assets 2.9 7.2 1.5 0.2 Gains on disposal of investment properties 0.2 0.1 8.9 13.3 Gains on disposal of investees 4.9 0.0 0.0 9.0 Reversal of non-current asset impairments provisions 0.0 0.0 Other income 1.0 1.4 0.8 3.1 Other operating income 17.6 18.5 20.2 34.6

Other Operating Expenses External services (458) (432) (403) (380) Advertising expenditure (91) (90) (93) (100) Research and development costs (2) (2) (1) (1) Taxes/levies other than corporate income tax (15) (14) (14) (14) Loss on sale, derecognition or impairmentof PPE (4) (3) (2) (4) Provision for impairment if intangible assets (2) (9) (8) Other provisions and charges recognized (22) (10) (8) (17) Other operating expenses (594) (550) (531) (524) €m 2019 2018 2017 2016 Cash 252 171 269 291 Other financial assets 7 4 9 5 Receivables 441 402 378 375 Inventories 621 595 559 489 Current tax assets 24 23 38 26 Taxes receivable 39 35 32 33 Derivatives 1 0 0 4 Other current assets 11 10 8 11 Current Assets 1,395 1,241 1,293 1,235 PPE 942 856 764 737 Right of use assets 88 2 Investment properties 23 23 24 26 Financial assets 21 24 32 34 Associates 42 40 37 37 Deferred tax assets 57 53 50 83 Intangible assets 538 439 432 464 Goodwill 1,267 1,155 1,032 1,029 Non-Current Assets 2,979 2,593 2,370 2,411 Total Assets 4,374 3,834 3,663 3,646 Accounts payable 448 424 425 394 Other financial liabilities 425 343 310 242 Current tax liabilities 9 12 14 13 Taxes payable 16 18 15 14 Other current liabilities 3 5 3 1 Derivatives 1 0 4 1 Current liabilities 901 802 771 665 Financial liabilities 827 534 472 495 Deferred tax liabilities 285 238 222 300 Deferred income 7 4 4 5 Provisions for pensions 47 43 51 57 Other provisions 15 23 21 18 Non-Current Liabilities 1,181 842 770 875 Share capital 92 92 92 92 Share premium Retained earnings 2,044 2,000 1,953 1,821 Restricted parent reserves 22 22 22 22 Translation differences 104 48 8 145 Shareholders equity 2,262 2,162 2,075 2,079 Minority interests 29 28 47 27 Total Equity & Liabilities 4,374 3,834 3,663 3,646

Notes Intangible Assets Patents & Trademarks 529 432 425 455 PPE Land 131 111 110 107 Buildings 256 227 192 200 PPE 457 409 365 359 PP&E UnderConstruction 65 83 72 50 Other 32 28 25 22 Carrying Amount 942 856 764 737

Goodwill (key Items) Panzani Group (France) 433 449 449 440 Riviana Group (US) 350 343 329 303 Tilda Group (UK) 121 0 Bertagni (Italy) 115 115 0 Riviana Group (Canada) 74 69 72 NWP Group (Canada) 76 NWP Group (US) 69 Garofalo (Italy) 57 57 57 57 Sub-Total 1,149 1,033 907 945 Net Carrying Amount 1,267 1,155 1,032 1,030

Inventories Goods held for resale 13 21 15 11 Raw materials 269 231 237 230 Consumables and replacement parts 11 10 9 7 Containers 37 39 30 31 WIP 31 32 22 20 Finished goods 226 212 196 167 By-products and waste 4 5 5 4

Prepayments to suppliers 35 50 49 25 Gross Carrying Amount 627 601 563 496 Impairment Provision (6) (6) Inventories 621 595 563 496

Current Financial Assets Loans to third parties 6 3 8 4 Deposits & guarantees 1 1 1 2 Derivatives 1 0 Total 7 5 9 5

Non-Current Financial Assets

Loans to third parties 17 21 28 30 Deposits & guarantees 3 2 3 2 Shares in group companies 1 1 Assets Held for sale 1 1 Total 21 24 32 34 Financial Liabilities Bank Borrowings 411 341 308 240 Borrowings - Other sources 3 2 1 1 Lease liabilities 11 0 1 1 Deposits & Guarantees 0 0 0 0 Current Debt 425 343 310 242

Bank Borrowings 579 364 365 407 Borrowings - Other sources 3 4 4 5 Lease liabilities 79 0 Deposits & Guarantees 0 0 0 0 Vendor put options 165 161 102 81 Contingents 4 2 2 Long term debt 827 534 472 495 Derivatives Liabilities 0 (0) 4 1 Total Debt 1,252 877 787 739 Total Net Debt 999.946 705.521 517.429 447.214 Deposits Payable (0) (0) (0) (0) Total Net Debt 999.849 705.424 517.331 447.116