Valuation Bel

INVESTMENT RESEARCH: FROMAGERIE BEL SA
Market Profile
Last Price
52W Price Range
Share Outstanding (M)
Dividend
Dividend Yield
5Yr Dividend Growth
311
265-314
6,872
6,25
2,01%
17,84%
Valuation Profile
EV/EBITDA TTM
EV/EBITDA 15
P/E
7.5X
6.8X
Saturday, July 25, 2015
We issue an overweight recommendation on FROMAGERIE Bel (FBEL

FP) with a one-year target price of 325 Euros using the Discounted
Cash Flow and Multiple Methods. Currently priced at 311 Euros, our
analysis suggest 8.5% potential upside. Due to its solid brand loyalty
position and its pure player profile FBEL is a solid cheese company
on the market with strong competitive advantages. The overall
international target strategy of the group will allow investors to
benefit from strong organic growth with key exposure on doubledigit growth areas.
Relative to its peers, the valuation is attractive with the pure player
profile of the group. At 6.80X the EV/EBITDA 15 and a 16.80X P/E 15,
the stock seems cheap.
We define BONGRAIN (BH FP) as the first competitor of FBEL due to
the nationality, and % of sales in the cheese industry (60%).
17.38X
P/E 15
16.8X
5 Yrs Average PE
13.26X
5 Yrs High PE
25.05X
5 Yrs Low PE
6.49X
Share Price YTD (%)

GLANBIA PLC
34.50
BONGRAIN
13.8
MONDELEZ
8.8
FBEL
6.2
EMMI SW
-9.9
Exhibit: Relative P/E 15 and EV/EBITDA 15 valuation to peers
18.6
20
14.4
15
EV/EBITDA 15 10
6.5
8
4.7
5
0
15
17
19
21
23
25
27
29
31
33
P/E 15
Source: Bloomberg and Author Estimates
300
250
200
150
FROMAGERIE BEL
EUROS TOXX 600 FOOD & BEVERAGE
100
39
81
39 5
89
39 2
96
40 9
04
40 6
12
40 3
20
40 0
27
40 7
35
40 4
43
40 1
50
40 8
58
40 5
66
40 2
73
40 9
81
40 6
89
40 3
97
41 0
04
41 7
12
41 4
20
41 1
27
41 8
35
41 5
43
41 2
50
41 9
58
41 6
66
41 3
74
41 0
81
41 7
89
41 4
97
42 1
04
42 8
12
5
50
Contents
Business Description................................................................................................................... 3
Industry Overview....................................................................................................................... 4
Competitive Positioning............................................................................................................. 5
Financial Statement Analysis.................................................................................................... 6
Valuation....................................................................................................................................... 7
Appendix 1: Multiple Valuation and Target Price.............................................................................9
Appendix 2: Discounted Cash-Flow (Bloomberg Template)...........................................................10
Appendix 3: Milk Price Estimation................................................................................................. 13
Appendix 4: COGS Analysis and Forecast...................................................................................... 14
Appendix 6: Shareholder Structure and Corporate Management..................................................15
Appendix 7: Historical Income Statement..................................................................................... 16
Appendix 8: Projected Income Statement..................................................................................... 17
Appendix 9: Historical Balance Sheet........................................................................................... 18
Appendix 10: Projected Balance Sheet......................................................................................... 19
Appendix 11: Financial Analysis Ratios......................................................................................... 20
Appendix 12 : Graphics (Bloomberg Terminal).............................................................................. 21
Appendix 13: Industry Valuation................................................................................................... 22
Appendix 14: Inflation and GDP Forecast Charts...........................................................................23
Appendix 15: Cheese Consumption by Region.............................................................................. 24
Business Description
Exhibit 1: 5 brands generate 70% of sales
FROMAGERIE BEL (FBEL) is a family group headed today by the 5 th family

generation and is a pure player in the cheese industry. Created in 1922, the
group today has strong brand identity and solid values. Based on 3 keys words
Audace, Bienveillence, Engagement, the group is a leader in the portion and
processed cheese market. The activity of the group is undertaken by the 28
factories around the world.
70% of revenues comes from 5 brand classified among the top cheese brand
worldwide (Below called Core 5). FBEL has more than 25 international brands
marketed in 130 countries.
Source: FBEL Annual Report
Company Strategies
The companys strategic direction focuses on the following points:
Exhibit 2: % from sales for R&D Expenditures

23.5%
23.0%
Innovation to boosts mature market demand and improve developed

market growth Innovation is a strong spirit among the group. Created with all
the team members, it is driven by 5 keys points:
22.9%
22.5%
22.5%
21.9%
22.0%
21.4%
21.5%
21.1%
21.4%
21.0%
20.5%
20.0%
2009
2010
2011
2012
2013
2014
Source: Bloomberg
Exhibit 3: Geographical Breakdown of Sales (As %

of total)
70%
60%
50%
West Europe
East Europe
40%
30%
20%
Rest of the World
America
Regularly create and launch new products or new series in order to

catch all the demand evolution. FBEL targets specific consumption
trend based on lifestyle dynamics
Develop the supply and availability of products to the customers
Create a unique moment during the consumption through innovative
marketing packaging and product taste
Follow the nutritional consumer trend with continuous updating of
products components
Product range growth, three main markets: cheese spread, slices and
snacks.
The development and creation of new products benefit the group through
revenue sales growth and scale economy through operational leverage.
Specific snacks products have higher market price premium than classical
cheese. Nevertheless, we flag some inconsistence between the management
discussion part from the annual report and the actual level of expenditures for
R&D.
10%
0%
2009
2010
2011
2012
2013
2014
Exhibit 4: Geographical Breakdown of EBIT (As % of

total)
100%
80%
60%
West Europe
20%
Rest of the World
America
-20%
2009
2010
Source : Bloomberg
2011
Human Capital Development With more than 11 000 team members,

FBEL promotes wellness of FBEL contributors. The team spirit and working
engagement is in the main strategy for skills development.
East Europe
40%
0%
Improvement of production process and marketing innovation for the

Core 5 FBEL 70% of revenue comes from only 5 brands. The group has for
long term strategy the development and the improvement of the strength of
Core 5. Classified on the top cheese brand worldwide, this strong brand identity
generate pricing power for the group.
2012
2013
2014
International expansion FBEL, has a strong strategy to catch developing

market growth with solid and dynamic international expansion.
The last figures revenues breakdown shows that Europe continue to sluggish
but FBEL succeeded to revert the overall trend on total sales by being strongly
positioned in the driven countries of growth cheese market. Due to the recent
expansion in America and Asia, we believe the group will generate strong
revenue growth in the medium term by being implanted in developing market.
Further, we strongly expect that the group will continue to counterbalance the
actual situation in Europe with dynamic growth found elsewhere, especially in
The Middle East.

Production process and marketing optimization FBEL is actually
working on new production process mainly for developed market such as
Western Europe. We expect the group to create new innovative products and
production process which will provide higher pricing power from Europe and
reduce downside pressure on margin with higher raw products prices.
Industry Overview
Exhibit 1: European Cheese Consumption Growth
Source: Bloomberg
Exhibit 2: North America Cheese Consumption

Growth
Source: Bloomberg
Exhibit 3: Middle East and Africa Cheese

Consumption Growth
Total cheese consumption worldwide is really contrasted between mature region

such as Europe and North America where consumption is stable or decreasing
versus Middle East and South America where the consumption increase in YOY
Growth measure. Companies are experiencing double digit sales growth in this
region. In summary, we expect companies to shift their target or continue to define
South America and The Middle East regions as priority for growth in the short and
midterm.
Soft cheese drives growth in 2014
Accounting for 50% of value growth over 2013-2014, soft cheese is the fastest growing
category in cheese. Product innovation, distribution and higher market penetration in rapidly
growing regions such as Latin America, the Middle East and Africa are the main drivers of
growth.
25% of 2014 global cheese volume growth came from just two markets: Brazil and Africa.
As the largest global market for cheese, American consumers eat an average 11kg of cheese
per year. While volume growth may be low (just 1%), it still contributed to 10% of additional
volume sales in 2014. The biggest contribution however, came from Brazil with per capita
consumption of 6kg, making it a very interesting market as a further penetration can generate
substantial new sales as cheese becomes a more important food item in the Brazilian diet.
European Market: Strong consumption habits shadowed by high competition and
political uncertainties
Actual:
The economic context is hard in the region and the overall market trend is negative. High
advertising and distribution costs are necessary to generate moderate growth where the
competition is strong and price wars often occurs. Half of the revenues in this region comes
from France and Germany where the consumption per capita is the highest. Margin are under
pressure for all majors actors of the sector due to i/price war between brands; 2/ wholesales
supply brand taking more market shares and 3/high commodities price volatility. Some areas in
Europe, particularly Ukraine and Bulgaria, are not suitable for the consumption growth with
high inflation rates.
Inflation, GDP and consumption forecast:
Overall the European inflation will increase to 1.50% for 2017 from an actual value of 0.66%.
This upward trend is due mainly to above 2% inflation rate forecasted for Nordic European
Countries. In average, Western European countries are expected to reach 1.75% inflation rate
for 2017.
Eastern Europe will have serious inflation rates. For example, Ukraine is forecasted to have
29% inflation rate in 2015 and 12% in 2016. This situation is shared with Russia, obviously
lower at 15% for 2015 and 7.25% for 2016. An average 5.50% inflation rate across countries in
the Eastern Europe is expected. We believe the overall trend in Europe goes toward the
potential increase of consumption. We expect sales of dairy products to remain flat.
Source: Bloomberg
USA and South America: Slowing growth in the North counterbalanced by

strong Brazilian Demand
Exhibit 4: South America Cheese Consumption

Growth
Actual:
Our overall analysis reveals that USA cheese consumption is decreasing. Nevertheless, majors
actors such as Kraft Food experienced upward growth in US Cheese Sales, which we can
interpret that this trend is due to market share gain instead of total growth increase. On the
other side, South America experienced positive growth in the cheese consumption.
Inflation, GDP and consumption forecast:
Inflation is expected to increase to 1.70% in 2015 and 2.60% in 2016. South America inflation
is forecasted at 10% in 2015, but will decrease progressively in 2016-2017 to 6.10%. The GDP
on this area is expected to increase to 3% in 2017 from 0.59 forecasted in 2015.
We believe that South America is a key area growth driver that exporters need to target. With
a lower inflation expected in 2017, the downward dynamic of it and the positive growth trend
in GDP, the consumption will increase and dairy product such as cheese will benefit from
economic expansion.
Middle East and Africa

Actual:
The total cheese consumption is increasing after high peak and correction. By analysis the
recent dynamics of sales for Majors cheese makers such as FBEL AND BONGRAIN, we define
this region of being strongly dynamic with more than 15% average growth in the cheese
market.
Source: Bloomberg
Inflation, GDP and Consumption forecast:

With REAL GDP growth forecasted slightly above 3% for 2015 and 2016 and near 4% in 2017,
inflation rate of 4% in 2015 and 2016 decreasing to 3% in 2017, the consumption is expected
to be strong due to the economic positive dynamism and the purchase power (which is not
totally erased by inflation)
Exhibit 1: Q4 14 % cheese sales for major peers
8.20%
Competitive Positioning
Mondelez
The cheese industry is include into dairy industry products. The high number
of small companies makes this market very fragmented. We defined our
major peers for FBEL as MONDELEZ, KRAFT, AND BONGRAIN, (GLANBIA and
EMMI SG are used in our relative valuation due to the recent event with
Kraft, merger with Heinz)
24.91%
Kraft
59.50%
Bongrain
BEL
0%
20%
40%
60%
80%
100%
Source: Bloomberg
Exhibit 2: Revenue and Organic Growth (%)

10.0
9.0
8.0
7.0
6.0
5.0
4.0
3.0
2.0
1.0
0.0
2009
Revenue Growth %
2010
2011
O rganic Growth %
2012
2013
FBEL appears to be the only pure player listed company in the processed
cheese market.
Total cheese sales account for 100% of FBEL and except for Bongrain, total cheese
sales account for less than 25% in other groups.
Because the market is fragmented by a high number of private companies, we did not
have access to official market shares data. Instead we built our peer market share, and
compared each company sales in the cheese segment. We discover that KRAFT take up
some market share from the 3 others members of the group. BONGRAIN attracts our
attention and we define it as a serious competitor for FBEL. A recent press release
revealed that BONGRAIN is seriously engaged in internationalisation with its name
modification in order to gain foreign market shares. The total sales growth show a
cyclical and very volatile sector.
2014
Porters 5 Forces
Source: Bloomberg
Exhibit 3: Porters 5 forces model
Threat of new entrants
Bargaining Power of Suppliers
Bargaining power of buyers
Threat of substitute products
Source: Author Estimates
Competition in the industry
Threat of new entrants: barriers to entry are high in order to

compete with worldwide cheese makers
Bargaining power of suppliers: with approximatively 3500
different suppliers, their influence in bargain power is relatively low
Competition in the industry: On our peer group, we noticed
strong evidence that companies tend to shift their key strategy for
international growth. M&A activity is strong and acquisition of small
firms can transform a harmless peers into serious competitor
Threat of substitute products: Very high, each of Core5 brand is
available into low cost similar products
Bargaining power of buyers: Most of Bel clients are wholesale
distribution companies and have strong bargaining power with their
high volume of purchases
40.0%
1200.0%
35.0%
1000.0%
30.0%
800.0%
25.0%
600.0%
Growth
Total Growth
Bongrain EUR
BEL EUR
Kraft USD
20.0%
400.0%
15.0%
200.0%
10.0%
Q4
0.0%
11
20
Q2
Exhibit 1: FBEL Earnings Per Share since

2009
18.73 18.44
17.90
16.96
2010
2011
12
20
Q4
12
20
Q2
13
20
Q4
13
20
Q2
14
20
Q4
14
20
Financial Statement Analysis

Profitability:
14.01
12.32
2009
Mondelez
USD
Market Share
by Group
2012
2013
2014
Source: Company Data
Exhibit 2: Gross margin evolution and

forecast
32.00
31.00
Above Industry Norm EBITDA margin and Return On Equity margin

FBEL generates above industry average EBITDA margin. In comparison with gross profit
margin, the EBITDA margin decreased in a slower rhythm and thus could be a sign that
some improvement are effective in controlling operating costs, such as administrative and
labor force.
We expect the group to increase its EBITDA margin with better cost management.
Nevertheless, the gross profit margin will remain under pressure due to highly volatile raw
price and political uncertainties especially in Middle East and East Europe.
30.00
29.00
28.00
Activity Efficiency:
27.00
20
17
e
20
15
e
3
20
1
FY
20
11
FY
FY
20
09
26.00
Exhibit 3: EBITDA margin evolution and

forecast
Slowing cash collection but efficient cash outflow management

FBEL is experiencing since 2009 a decrease of its inventory and receivables turnover. The
management of cash outflow follows this trend and payables turnover decreased as well.
The impact of inventory turnover downtrend alone is negative in our view, for the
performance of the firm. In overall, with the decreasing payables turnover, the impact on
cash collection cycle is attenuated.
14.00
12.00
10.00
8.00
6.00
Solvency and Valuation ratios:
4.00
2.00
20
17
e
20
15
e
3
FY
20
1
20
11
FY
FY
20
09
0.00
Exhibit 4: ROE evolution and forecast

13.00
12.00
11.00
10.00
9.00
8.00
7.00
20
17
e
20
15
e
20
13
FY
20
11
FY
FY
20
09
6.00
FBEL appears to be more independent that its peers, Leverage used is less risky
Solvency ratios are under or in line with the industry trend. FBEL financial leverage of 2.17
published in the last annual results is reasonable compared to BONGRAIN at 3.14.
We expect the group to decrease the financial leverage due to high cash flow generation
and only two bonds actually outstanding. The first matures in December 2018 with total
amount of 20 Million and actually offers 2.75% coupon. The second matures in December
2019, total amount of 140 Million and actually offers 3% coupon rate.
Actually both bonds are trading at premium, the 2.75% 2018 trades at 106.68% to par and
the 3% 2019 at 108.03%. This premium price exchange reflects the financial strength and
credit quality of the group.
Valuation
Exhibit 1: Average 5Yrs Revenue Growth by
Geo Areas
er
ic
a
Am
Eu
ro
pe
W
es
t
Eu
ro
pe
DCF Forecast Assumptions
Ea
st
14.0
12.0
10.0
8.0
6.0
4.0
2.0
0.0
-2.0
-4.0
-6.0
We used the DCF (Discounted Cash Flow) Method to evaluate the fair value of BEL
stocks. We used the Bloomberg DCF Model available with the Bloomberg Terminal
which we believe will increase the correct price estimation. Relative to our inputs
and assumptions, the DCF model and Multiples models reveal a target price of
EUR324, equivalent to a 7% upside from the last current price of EUR300.
Source: Bloomberg
Exhibit 2: CAPEX evolution and forecast
Revenue Growth
BELs core and only business deals with manufacturing and marketing of processed cheese.
Geographical exposition is well diversified accounting for 25% from Middle East and Africa
and 15% for America, we believe the exposure to geographical driver areas growth will
remain valid in the long term strategy due to the European fragmented and mature market.
The group will generate higher sales percentage at total in the short term from emerging
markets and America. The recent factory investment and development in South Dakota is a
strong sign that the group will switch Europe stagnation growth for North America high
volume and South America dynamic cheese sales (Industry Overview). We used the 5 years
average growth by region in order to forecast our total sales growth.
With our analysis, we expect the group to generate revenue growth geographical exposure
as follow:
190
Geographical Breakdown as % of total sales
170
150
70%
130
110
60%
90
70
50%
FY
FY
20
09
20
FY 10
20
FY 11
20
FY 12
20
FY 13
20
1
20 4
15
20 e
16
20 e
17
20 e
18
20 e
19
20 e
20
e
50
40%
West Europe
East Europe
Rest of the World
America
30%
20%
10%
Exhibit 3: WACC evolution and leverage,
FBEL and BH FP
0%
2009
2010
2011
2012
2013
2014
8.00
7.00
6.00
WACC BEL
WACC BO NGRAIN
With the revenue average growth, and with our forecast of future revenue source structure,
we find an average growth rate of 6.85%. Over the 2009-2014 periods, the computed CAGR
(Compound Annual Growth Rate) reach 4.85%. The differential coming from the higher
exposition in the double digit growth areas, such as America and The Middle East and Africa
(Rest of the World above).
5.00
Cost of Goods sold

4.00
Leverage BEL
Leverage Bongrain
3.00
On average and relative to our milk price forecast and analysis, BEL will generate 30.22%
gross profit margin for the period 2015-2020. We believe that the recent collapse of milk
price is a short term trend and a strong rebound will be effective this year.
Capital Expenditures
39
84
40 3
02
40 5
20
40 7
38
40 9
57
40 4
75
40 3
93
41 9
12
41 1
30
41 5
48
41 6
67
41 0
85
42 1
03
4
2.00
For our analysis we used for the capital expenditures the average of the ratio CAPEX/SALES
of 3%. Nevertheless, due to our assumption for growth capture in the developing countries,
we expect the group to build new factories, especially in south America where we believe
the demand will be high in the coming years. We expect the CAPEX in 2016 and 2020 to be
sensibly higher than 3% of Sales at 6%.
WACC
We used the published WACC from the annual report of 7%. The Bloomberg WACC is in our
view too low relative to the risk of the company at 3.7%.
Price Multiples
2015
e
2016
e
2017
e
EV/EBITDA
peers
11,2x
10,3x
9,4x
Discount
-40%
-37%
-35%
6,7x
6,5x
6,1x
378
309
392
607
561
887
545,15
612,92
644,86
2604
1955
2626
377
283
381
EV/EBITDA
EBITDA
Cash And ST
Inv
Debt
Value of Equity
Target
Price
We used both EV/EBITDA and PE ratio for FBEL relative valuation. Our peer list include
BONGRAIN, MONDELEZ, GLANBIA and EMMI. We purposely excluded KRAFT from our
universe due to the recent merging events. The inclusion of the last would create upward
effect on our multiples and distort the correct valuation of FBEL
Analysis of historical PE relative to STOXX 600 FOOD AND BEVERAGE and to our peer list
clearly shows that FBEL trades at discount on both PE and EV/EBITDA. We noticed strong
valuation similarities between our peer group and the SX3P index.
Expectation on earnings with FBEL was in line with the publication as show the P/E evolution
on BEL for 2014. EV/EBITDA historical profile appears flat relative to its peers and the
benchmark.
Radar chart analysis of PE and EV/EBITDA valuation indicates that FBEL trades at discount
and growth potential, is in our view, not integrated in the stock valuation. With the pure
player we believe the stock will be better valuated in the medium term.
Our method suggests a target price of 329EUR, computed from 50% EV/EBITDA multiples
and 50% from P/E multiples.
Exhibit 4: Historical PE Band, with peers and benchmark
Exhibit 5: Historical EV/EBITDA valuation, with peers and

benchmark
30
20
18
25
16
14
20
AVERAGE EV/EBITDA PEERS
12
15
SX3P Index
Average PE Peers
FBEL EV EBITDA
10
FBEL PE
8
6
10
EV/EBITDA STOXX 600 FB
39
81
39 5
92
40 7
03
40 9
15
40 1
26
40 3
37
40 5
48
40 7
59
40 9
71
40 1
82
40 3
93
41 5
04
41 7
15
41 9
27
41 1
38
41 3
49
41 5
60
41 7
71
41 9
83
41 1
94
42 3
05
5
39
81
39 5
92
40 7
03
40 9
15
40 1
26
40 3
37
40 5
48
40 7
59
40 9
71
40 1
82
40 3
93
41 5
04
41 7
15
41 9
27
41 1
38
41 3
49
41 5
60
41 7
71
41 9
83
41 1
94
42 3
05
5
20.0X
18.6X
18.0X
16.0X
14.4X
13.2X
13.2X
14.0X
EV/EBITDA
13.4X
12.1X
12.0X
10.0X
5 Yr Average Valuation
4.0X
10.0X
8.0X
6.7X
6.5X
8.0X
6.0X
2015 ES T Valuation
5.6X
5.8X
15.0X
4.7X
20.0X
25.0X
30.0X
35.0X
PE
Exhibit 6: PE and EV/EBITDA, average and forward 15 radar chart
Appendix 1: Multiple Valuation and Target Price
10
Appendix 2: Discounted Cash-Flow (Bloomberg Template)
11
12
13
Appendix 3: Milk Price Estimation

Relative to the last annual report of the group, we noticed strong similarities between WAP and MILKCL1M INDEX.
Under this assumption, we used the last in order to predict the FBEL COGS relative to milk price variation.
We used Bloomberg data in order to draw milk price trend relative to global USDA demand and offer. We added a RSI
analysis which reflects that milk spot index is clearly oversold.
Exhibit 1: Technical analysis for Milk commodity
Source: Bloomberg
The chart clearly shows that MILKCL1M is oversold and will rebound quickly. Further analysis of the milk market cycle
reflects that a typical trend has an average length period of 3 years and never remains low during more than a year.
Classical correction of price never remains low for a long period. We performed the technical analysis of MILKCL1M
INDEX and extract the following conclusions:
Resistance at 24.62 often reached at RSI level above 70

Several supports appears, most recently at 18.05 (reminder actual price 18.39)
Long term strong growth demand and production
Actual oversold position
Rebound usually occurs in a year and is approximatively equal to 30% upside
14
Appendix 4: COGS Analysis and Forecast

With the previous analysis of milk price situation, we built a simple regression model with the following data from
average yearly milk price and FBEL COGS sold. The results are presented below.
2016
e
2017
e
2018
e
2013
23
188
6
25
196
9
27
205
3
32
226
3
1898
1974
1923
2009
2094
2308
2223
3,66
%
1,94%
6,9%
201
5
6,9%
210
4
4,9%
215
3
4,9%
237
3
3,5% 2,0%
225
5 2394
2010
2011
2012
2013
2014
15
18
22
20
22
26
1542
1688
1843
1774
1831
1517
1663
1808
1830
1,59% -1,48%
1,85%
3,14
%
MILK PRICES (USD)

COGS Estimated (MEUR)
COGS Publicated
(MEUR)
2015
e
2009
Revenue Growth DCF

Adjustement Value
Average Adjustment
Value
2019
e
2020
E
30
34
217
9 2347
2394
-1,54%
Source: Author Estimates
We estimated the COGS by making a regression from COGS to Revenue for the period 2009-2014. Then we found than
in average, the COGS released by the group were 1.54% lower than our prevision. With our analysis of milk price
presented on the previous page, we estimated the milk price for the forecast period (2015-2020).
Then we applied our regression values to the estimated milk price, with an adjustment for our DCF revenue growth
assumption and with our error of -1.54%.
REGRESSION ANALYSIS COGS VS ROW PRICES

2500.00
2000.00
f(x) = 40.98x + 940.32

R = 0.92
1500.00
COGS FBEL
1000.00
500.00
0.00
10.00
12.00
14.00
16.00
18.00
20.00
22.00
24.00
26.00
28.00
MILKCL1M INDEX PRICES
15
Appendix 6: Shareholder Structure and Corporate Management

Shareholder Structure
The shareholder structure is represented mainly by UNIBEL, the holding of the company. With 67.44% of shares,
UNIBEL is the major shareholder in FBEL followed by SOFIL SAS with 24.06% of shares. FIEVET BEL represents 3.45% of
shares outstanding. The company FBEL is locked with its holding UNIBEL and a control of 67.44% of shares. Deeper
analysis shows that FIEVET family owns 80% of UNIBEL shares. The graph below reveals the recent decrease in
participation along with its potential negative insider message.
The free float of FBEL is only at 4.39% of total shares outstanding. Takeover is in this case absolutely impossible for the
moment. By comparison, the free float of BONGRAIN is 13.23%.
Exhibit 1: Historical position of FIEVET FAMILLY in the capital structure of UNIBEL
Source: Bloomberg
Corporate Management
Clearly, the coming back of Antoine Fievet in the management (replacing Gerard Boivin) gave dynamism and strong
upward trend in the stock price of the group. The stock price increased by 230% since 2009 when Sir FIEVET took his
functions as CEO and Chairman of the Board.
Exhibit 2: Stock price performance since Sir Fievet integrates top management
The board is composed by the following team:

-
Luc Luyten
James Lightburn
Michel Arnaud
Florian Sauvin
Fatine Layt
16
The composition of the board reflect the turning point of FBEL since 2009. The actual composition did not change since
2009 reflecting good performance and strategy.
Appendix 7: Historical Income Statement
Source: Bloomberg and Author estimates
17
Appendix 8: Projected Income Statement
Author Assumptions and Comments:

Revenues
We used the CAGR of revenue for the period 2009-2014.
Cost of Goods Sold

We carried out a milk price analysis and forecast in order to establish this income statement item. We realized a simple linear
regression between milk price and COGS and adjusted it with the past annual statement by a % of error. (Appendix 4)
18
Appendix 9: Historical Balance Sheet
Source: Bloomberg
19
Appendix 10: Projected Balance Sheet
Author Assumptions and Comments:

Inventories
We used the inventories geometrical mean growth during the last 5 years in order to forecast this balance sheet item.
differentiate two-growth rates, the first during expansion activity of 9% and the second during contraction time of -2%.
We
Accounts and Notes Receivables and Payable

During the period 2009-2014, FBEL made sales on credit for 14.65% of its total annual revenue and used facility of payment for 25%
of COGS. By analyzing this credit policy and considered it as being a stable trend for the group, we used 14.65% of projected sales for
receivables and 25% of projected COGS for payables in order to derive these projected balance sheet account
Short Term Investment

The short-term investment policy of the firm was volatile year over year. The last three years of activity nevertheless gave an upward
trend from EUR87Millions to EUR388Millions. We used the last 3 years average of short-term investments value of EUR345Millions
Cash and Near Cash Equivalent

We used the historical retention rate in order to adjust the net earnings from the previous year. Our forecast suggests strong cash
generation since 2018 to 2020.
Next Fixed Assets

We adjusted our projection of next fixed assets in order to minimize the inflation impact on the ROA due to stagnant level of assets.
We used the average growth over the last 5 years of 2% and forecasted a hypothetic investment on fixed assets.
Retained Earnings and Other Equity

We used the retention rate in order to derive this item.
20
Appendix 11: Financial Analysis Ratios
21
Appendix 12 : Graphics (Bloomberg Terminal)
22
Appendix 13: Industry Valuation

3.71
5
31.64
1.34
1
-14
CAGR 4yr EBITDA MARGIN
0.24
8 10 12 14 16 18 20
-3
-5
-7
-9
-11
-10.3
EV/EBITDA 15
7.87
10
6.2
5
0
CAGR 4yr NET INCOME MARGIN
-5
1.1
8 10 12 14 16 18 20
-0.51
-10
-15
-16.75
-20
EV/EBITDA 15
20
18
16
18.6
14.4
14
12
P/E 15
10
8
6
6.5
4.7
4
2
0
15
17
19
21
23
25
27
29
31
33
EV/EBITDA 15
23
Appendix 14: Inflation and GDP Forecast Charts

Inflation Forecast by Region
GDP Forecast by Region
Source: Bloomberg
24
Appendix 15: Cheese Consumption by Region

North America cheese consumption, YoY
growth
Asia and Oceania cheese consumption, YoY

growth
European cheese consumption, YoY growth
South America cheese consumption, YoY

growth
Source: Bloomberg
25
26

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INVESTMENT RESEARCH: FROMAGERIE BEL SA

Saturday, July 25, 2015

We issue an overweight recommendation on FROMAGERIE Bel (FBEL

Share Price YTD (%)

Exhibit: Relative P/E 15 and EV/EBITDA 15 valuation to peers

Source: Bloomberg and Author Estimates

INVESTMENT RESEARCH: FROMAGERIE BEL SA

Saturday, July 25, 2015

EUROS TOXX 600 FOOD & BEVERAGE

INVESTMENT RESEARCH: FROMAGERIE BEL SA

Saturday, July 25, 2015

FROMAGERIE BEL (FBEL) is a family group headed today by the 5 th family

Source: FBEL Annual Report

Exhibit 2: % from sales for R&D Expenditures

Innovation to boosts mature market demand and improve developed

Exhibit 3: Geographical Breakdown of Sales (As %

Rest of the World

Regularly create and launch new products or new series in order to

Source: Bloomberg and Author Estimates

Exhibit 4: Geographical Breakdown of EBIT (As % of

Human Capital Development With more than 11 000 team members,

Improvement of production process and marketing innovation for the

International expansion FBEL, has a strong strategy to catch developing

INVESTMENT RESEARCH: FROMAGERIE BEL SA

Saturday, July 25, 2015

The Middle East.

Exhibit 2: North America Cheese Consumption

Exhibit 3: Middle East and Africa Cheese

Total cheese consumption worldwide is really contrasted between mature region

USA and South America: Slowing growth in the North counterbalanced by

Exhibit 4: South America Cheese Consumption

INVESTMENT RESEARCH: FROMAGERIE BEL SA

Saturday, July 25, 2015

Middle East and Africa

Inflation, GDP and Consumption forecast:

Exhibit 1: Q4 14 % cheese sales for major peers

Exhibit 2: Revenue and Organic Growth (%)

Exhibit 3: Porters 5 forces model

Threat of new entrants

Bargaining Power of Suppliers

Bargaining power of buyers

Threat of substitute products

Source: Author Estimates

Competition in the industry

Threat of new entrants: barriers to entry are high in order to

INVESTMENT RESEARCH: FROMAGERIE BEL SA

Saturday, July 25, 2015

Exhibit 1: FBEL Earnings Per Share since

Financial Statement Analysis

Source: Company Data

Exhibit 2: Gross margin evolution and

Above Industry Norm EBITDA margin and Return On Equity margin

Source: Bloomberg and Author Estimates

Exhibit 3: EBITDA margin evolution and

Slowing cash collection but efficient cash outflow management

INVESTMENT RESEARCH: FROMAGERIE BEL SA

Saturday, July 25, 2015

Solvency and Valuation ratios:

Source: Bloomberg and Author Estimates

Exhibit 4: ROE evolution and forecast

Source: Bloomberg and Author Estimates

DCF Forecast Assumptions

Exhibit 2: CAPEX evolution and forecast

INVESTMENT RESEARCH: FROMAGERIE BEL SA