Guilherme Barros Renan Criscio A high quality stock with great - PowerPoint PPT Presentation

Company Reasons to Valuation & Risk Conclusion Overview BUY Financials Analysis Multiples Considering peer’s target mutiples… Avg Peer Target P/E UPSIDE Target Price 17.6x Market Price 21.1% BRL78.82 BRL65.10 EPS E13 BRL4.48

Company Reasons to Valuation & Risk Conclusion Overview BUY Financials Analysis UNMATCHED BUSINESS MODEL BUY  Sales Strategy  Innovation  Vertical Integration GROWTH OPPORTUNITIES  Consumer preferences  Northeast presence  New markets CONFIRMATIVE VALUATION  DCF  Multiples

Company Reasons to Valuation & Risk Conclusion Overview BUY Financials Analysis Investment risks Currency Commodities Tax Benefits M&A Execution Governance CADE Regulation Stocks Liquidity Competition Source: Team’s estimates.

Company Reasons to Valuation & Risk Conclusion Overview BUY Financials Analysis Commodities Raw Materials: 66% of COGS Wheat V. Shortening Others 32% 11% 23% Source: Company data and Team’s estimates. Gross Margin Wheat Price (BRL/ton) 60% 700 INVENTORIES 600 50% 500 40% WHEAT 400 30% HEDGE 300 20% 200 OTHER ICMS 10% 100 DISCOUNT PRODUCTS 0% 0 Source: Company data and Team’s estimates.

Company Reasons to Valuation & Risk Conclusion Overview BUY Financials Analysis Tax Benefits Income tax ICMS (VAT) END OF TAX BENEFITS? 300bps Effective I.T. of 16% of Gross Margin (from 34%) NE’s socioeconomic perspectives Contracts effective in the long run Partial Tax benefits maintenance (50% tax cut in terminal value)

Company Reasons to Valuation & Risk Conclusion Overview BUY Financials Analysis Monte Carlo simulation Variables • Inflation rate (Normal) • GDP growth (Normal) • Wheat prices (Lognormal) • Exchange rate (Lognormal) Distribution of estimated Target Prices SELL: 9.3% HOLD: 23.7% BUY: 67% 1200 1000 Frequency (x) 800 600 400 200 0 42 50 57 65 72 80 88 95 103 110 118 126 133 Target Price (BRL) Source: Company data, Central Bank of Brazil and Team’s estimates.

Company Reasons to Valuation & Risk Conclusion Overview BUY Financials Analysis “A high quality stock with great growth potential ” UNMATCHED BUSINESS MODEL BUY  Sales Strategy  Innovation  Vertical Integration GROWTH OPPORTUNITIES Upside  Consumer preferences  Northeast presence  New markets CONFIRMATIVE VALUATION 25.1%  DCF  Multiples

Thank You Bernardo Calvente Danilo Kamiji Danton Koga Guilherme Barros Renan Criscio 28/11/2012 3 4

Q&A Session 2 → Q&A Session 3 →→ Q&A Session 1 Valuation Company Data 1. Wheat Costs 1. Balance Sheet – 2010A-2015E – Assets 2. CAPEX 2. Balance Sheet – 2010A-2015E – Liabilities & Equity 3. Inflation and Currency 3. Balance Sheet – 2016E-2022E – Assets 4. Gross Margin 4. Balance Sheet – 2016E-2022E – Liabilities & Equity 5. EBITDA Margin 5. Income Statement – 2010A-2016E 6. Net Profit Margin 6. Income Statement – 2017E-2022E 7. ROIC 7. Cash-Flow Statement – 2010A-2015E 8. ROE 8. Cash-Flow Statement – 2015E-2022E 9. ROE – DuPont Analysis 9. FCFF 10. ROA 10. Vertical Integration 11. Net Debt/EBITDA 11. Creditors in BR 12. WACC Assumptions Industry Overview 13. Beta Calculation 1. Competition – Cookies Market 14. Tax Shield 2. Competition – Pasta Market 15. Expenses 3. Cookies Producer in Brazil 16. EPS 4. Cookie Consumption in Brazil Multiples 5. MDB vs. Cookies Market 1. Why P/E? 6. MDB vs. Pasta Market 2. P/E Multiples 3. P/E Target 4. EV Multiples 5. Target Prices

← Q&A Session 1 Q&A Session 3 → Q&A Session 2 Risks Static slides 1. Currency 1. Recommendation 2. Stocks Liquidity 2. Overview I 3. Corporate Governance – Stockholders 3. Overview II 4. Corporate Governance – Board of Directors 4. Past Performance I 5. Commodities – Historical Wheat Prices 5. Past Performance II 6. Commodities – Inventories Management 6. Sales Strategy I 7. Commodities – Plantation/Harvest 7. Sales Strategy II 8. Bullish Case – Result 8. Sales Strategy III 9. Bullish Case – Variables 9. Innovation I 10. Bullish Case – Acquisition Assumptions 10. Innovation II 11. Bearish Case – Result 11. Innovation III 12. Bearish Case – Variables 12. Vertical Integration 13. Sensitivity Analysis – g and WACC 13. Consumer preferences I 14. Montecarlo Simulation 14. Consumer preferences II 15. Northeast presence I Tax Benefits 16. Northeast presence II 1. ICMS 17. Northeast presence III 2. Income Tax 18. New markets I 3. Reasons to Maintain 19. Valuation I 4. Reasons to Remove 20. Valuation II 5. The ICMS Debate 21. Valuation III 6. Sensitivity Analysis – ICMS and I.T. 22. Valuation IV 23. Valuation V

← ← Q&A Session 1 ← Q&A Session 2 Q&A Session 3 Static slides Static slides 1. Recommendation 1. Multiples I 2. Overview I 2. Multiples II 3. Risks I 3. Overview II 4. Risks II 4. Past Performance I 5. Past Performance II 5. Risks III 6. Sales Strategy I 6. Conclusion 7. Sales Strategy II 8. Sales Strategy III 9. Innovation I 10. Innovation II 11. Innovation III 12. Vertical Integration 13. Consumer preferences I 14. Consumer preferences II 15. Northeast presence I 16. Northeast presence II 17. Northeast presence III 18. New markets I 19. Valuation I 20. Valuation II 21. Valuation III 22. Valuation IV 23. Valuation V

Main Menu Balance Sheet 2010A-2015E - Assets Balance Sheet 2010 2011 2012E 2013E 2014E 2015E (BRLmm) ASSETS Cash and Cash 54.4 95.3 200.4 388.9 691.0 1,037.7 Equivalents Receivable 359.9 436.1 524.6 567.2 645.0 729.7 Inventories 264.5 308.0 380.6 400.7 448.9 504.5 Other Current Assets 1.6 1.3 - - - - Total Current Assets 680.4 840.7 1,105.6 1,356.8 1,784.9 2,271.8 Net Fixed Assets 977.7 1,181.3 1,318.6 1,439.5 1,500.1 1,567.3 Intangible 557.4 861.2 897.4 861.5 827.0 793.9 Other Non Current 146.1 175.0 188.9 189.1 189.3 189.4 Assets Total Non Current 1,535.1 2,042.5 2,215.9 2,300.9 2,327.1 2,361.2 Assets Total Assets 2,215.5 2,883.2 3,321.6 3,657.7 4,112.0 4,633.1

Main Menu Balance Sheet 2010A-2015E – Liabilities & Equity Balance Sheet 2010 2011 2012E 2013E 2014E 2015E (BRLmm) LIABILITIES & EQUITY Suppliers 62.4 92.4 88.7 93.3 104.6 117.5 Short Term Debt 41.0 227.3 129.8 125.7 129.2 131.5 Other Current Liabilities 183.9 240.1 348.0 394.5 493.2 607.2 Total Current Liabilities 287.3 559.8 566.5 613.6 726.9 856.3 Long Term Debt 235.2 348.2 469.5 477.3 483.2 487.9 Other Non Current 78.7 144.4 200.7 200.7 200.7 200.7 Liabilities Total Non Current 313.8 492.6 670.2 678.0 683.8 688.6 Liabilities Capital Stock 746.5 777.8 801.3 801.3 801.3 801.3 Revaluation Account 123.2 122.0 122.0 122.0 122.0 122.0 Retained Earnings 890.8 1,105.9 1,350.5 1,632.0 1,967.2 2,354.3 Total Equity 1,760.5 2,005.8 2,273.8 2,555.3 2,890.6 3,277.6 Total Liabilities 2,361.6 3,058.2 3,510.5 3,846.8 4,301.3 4,822.5

Main Menu Balance Sheet 2016E-2022E - Assets Balance Sheet 2016E 2017E 2018E 2019E 2020E 2021E 2022E (BRLmm) ASSETS Cash and Cash 1,406.2 1,783.4 2,174.5 2,578.5 2,992.2 3,392.6 3,439.6 Equivalents Receivable 785.5 845.7 904.6 988.7 1,048.8 1,116.4 1,183.0 Inventories 543.7 585.5 626.2 684.4 725.9 772.8 840.1 Other Current - - - - - - - Assets Total Current 2,735.4 3,214.6 3,705.3 4,251.6 4,766.9 5,281.8 5,462.6 Assets Net Fixed Assets 1,643.3 1,727.2 1,818.4 1,916.9 2,022.7 2,135.7 2,345.4 Intangible 762.2 731.7 702.4 674.3 647.3 621.4 596.6 Other Non Current 189.6 189.9 190.1 190.3 190.4 190.6 190.8 Assets Total Non Current 2,405.5 2,458.9 2,520.8 2,591.2 2,670.0 2,757.1 2,942.0 Assets Total Assets 5,140.9 5,673.5 6,226.1 6,842.8 7,436.9 8,038.9 8,404.6

Main Menu Balance Sheet 2016E-2022E – Liabilities & Equity Balance Sheet 2016E 2017E 2018E 2019E 2020E 2021E 2022E (BRLmm) LIABILITIES & EQUITY Suppliers 126.7 136.4 145.9 159.4 169.1 180.0 195.7 Short Term Debt 134.2 134.3 135.3 138.4 140.8 142.0 144.0 Other Current Liabilities 691.6 786.7 889.3 1,029.8 1,150.2 1,281.6 1,255.7 Total Current Liabilities 952.5 1,057.4 1,170.4 1,327.6 1,460.1 1,603.6 1,595.4 Long Term Debt 495.4 503.7 511.9 518.5 525.1 531.5 538.0 Other Non Current 200.7 200.7 200.7 200.7 200.7 200.7 200.7 Liabilities Total Non Current 696.1 704.3 712.6 719.1 725.8 732.2 738.7 Liabilities Capital Stock 801.3 801.3 801.3 801.3 801.3 801.3 801.3 Revaluation Account 122.0 122.0 122.0 122.0 122.0 122.0 122.0 Retained Earnings 2,758.5 3,178.3 3,609.9 4,063.0 4,518.2 4,970.4 5,338.0 Total Equity 3,681.9 4,101.6 4,533.2 4,986.3 5,441.5 5,893.7 6,261.3 Balance Sheet (BRLmm) 5,330.5 5,863.3 6,416.2 7,033.1 7,627.3 8,229.5 8,595.4

Main Menu Income Statement 2010A-2016E Income Statement 2010 2011 2012E 2013E 2014E 2015E 2016E (BRLmn) Gross Revenue 2,887.5 3,436.3 4,164.3 4,819.2 5,480.9 6,200.3 6692.6 (-) Taxes and (443.5) (525.3) (643.5) (801.1) (911.1) (1,030.7) (1,112.5) Discounts Net Revenue 2,444.0 2,911.0 3,520.8 4,018.1 4,569.8 5,169.6 5,580.1 (-) Cost of Products (1,423.7) (1,812.5) (2,088.0) (2,342.7) (2,624.6) (2,949.4) (3,187.5) (=) Gross Profit 1,020.3 1,098.5 1,432.8 1,675.4 1,945.2 2,220.2 2,392.6 (-) Sales Expenses (452.6) (525.5) (649.2) (747.5) (850.2) (961.7) (1,038.1) (-) G&A (148.0) (150.1) (194.3) (238.2) (268.4) (292.1) (314.5) (-) Depreciation/Amortiz (12.7) (13.9) (41.2) (63.5) (63.5) (62.6) (61.9) ation (=) EBIT 406.9 409.0 548.0 626.2 763.2 903.8 978.1 (+) Financial Revenues 39.4 37.6 41.7 14.9 29.9 55.7 87.7 (-) Financial Expenses (55.2) (50.6) (57.8) (53.4) (53.9) (56.0) (63.3) (=) EBT 391.1 396.0 531.9 587.8 739.2 903.5 1,002.4 (-) Taxes (45.2) (36.1) (85.1) (94.0) (118.3) (144.6) (160.4) (=) Net Profit 345.8 359.9 446.8 493.7 620.9 758.9 842.0

Main Menu Income Statement 2017E-2022E Income Statement (BRLmn) 2017E 2018E 2019E 2020E 2021E 2022E Gross Revenue 7185.6 7686.4 8401.2 8935.7 9486.1 10051.6 (-) Taxes and Discounts (1,194.5) (1,277.7) (1,396.5) (1,485.4) (1,576.9) (1,670.9) Net Revenue 5,991.2 6,408.7 7,004.7 7,450.4 7,909.3 8,380.8 (-) Cost of Products (3,423.0) (3,661.1) (4,001.3) (4,255.8) (4,518.1) (4,911.8) (=) Gross Profit 2,568.2 2,747.6 3,003.4 3,194.5 3,391.2 3,468.9 (-) Sales Expenses (1,114.6) (1,192.3) (1,303.1) (1,386.1) (1,471.4) (1,559.1) (-) G&A (337.0) (359.9) (383.4) (407.7) (432.9) (458.7) (-) Depreciation/Amortization (61.5) (61.2) (61.0) (61.0) (61.2) (61.6) (=) EBIT 1,055.1 1,134.3 1,255.8 1,339.7 1,425.7 1,389.5 (+) Financial Revenues 121.9 157.6 195.0 235.5 276.9 316.9 (-) Financial Expenses (66.6) (68.5) (67.7) (70.0) (71.2) (72.6) (=) EBT 1,110.4 1,223.4 1,383.1 1,505.2 1,631.4 1,633.8 (-) Taxes (177.7) (195.7) (221.3) (240.8) (261.0) (408.4) (=) Net Profit 932.7 1,027.6 1,161.8 1,264.3 1,370.4 1,225.3

Main Menu Cash-Flow Statement 2010A-2015E Cash flow statemennt (BRL mn) 2010 2011 2012E 2013E 2014E 2015E EBIT 406.9 409.0 548.0 626.2 763.2 903.8 Depriciation and amortization 53.6 65.6 95.1 115.0 120.8 123.1 (+/-) Working capital need (27.0) (62.0) (111.1) (45.8) (91.5) (101.6) Cash flow from activity 433.5 412.7 531.9 695.5 792.5 925.3 Financial result (15.9) (13.0) 0.5 (28.7) (16.8) 5.6 Other non-cash expenses (102.7) (50.3) 31.4 0.0 0.0 0.0 Net change in other current 2.1 2.7 (3.2) 0.0 0.0 0.0 liabilities and assets Income tax (45.2) (36.1) (129.3) (93.2) (116.3) (142.4) Cash flow from operating activities 271.8 315.9 431.3 573.5 659.4 788.4 Capital expenditure (240.7) (273.6) (208.7) (200.0) (147.0) (157.2) Cash flow from investing activities (240.7) (273.6) (208.7) (200.0) (147.0) (157.2) Net changes in debt (30.8) 78.6 (41.2) (6.3) 1.9 1.1 Net common stock issued 0.0 0.0 0.0 0.0 0.0 0.0 Dividends paid (76.3) (87.5) (84.2) (178.7) (212.3) (285.6) Cash flow from financing activities (107.0) (8.9) (125.4) (185.0) (210.4) (284.5) Total cash flow (75.9) 33.5 97.1 188.5 302.0 346.7 Initial cash 54.4 54.4 95.3 200.4 388.9 691.0 Final cash 95.3 95.3 200.4 388.9 691.0 1,037.7

Main Menu Cash-Flow Statement 2016E-2022E Cash flow statemennt (BRL mn) 2016 2017 2018 2019 2020 2021 2022 EBIT 978.1 1,055.1 1,134.3 1,255.8 1,339.7 1,425.7 1,389.5 Depriciation and amortization 125.8 129.1 132.9 137.2 142.0 147.3 153.0 (+/-) Working capital need (68.7) (73.8) (72.1) (103.0) (73.5) (82.8) (95.8) Cash flow from activity 1,035.1 1,110.4 1,195.1 1,290.0 1,408.2 1,490.1 1,446.7 Financial result 33.7 65.5 99.3 135.4 173.7 213.7 252.3 Other non-cash expenses 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Net change in other current 0.0 0.0 0.0 0.0 0.0 0.0 0.0 liabilities and assets Income tax (159.1) (176.2) (194.3) (219.2) (239.3) (259.3) (396.3) Cash flow from operating 909.7 999.7 1,100.1 1,206.2 1,342.6 1,444.5 1,302.7 activities Capital expenditure (170.1) (182.5) (194.9) (207.6) (220.8) (234.4) (337.8) Cash flow from investing activities (170.1) (182.5) (194.9) (207.6) (220.8) (234.4) (337.8) Net changes in debt 0.7 (2.2) (1.2) 1.4 0.6 (0.5) 0.2 Net common stock issued 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Dividends paid (371.9) (437.9) (513.0) (596.0) (708.7) (809.2) (918.1) Cash flow from financing activities (371.2) (440.0) (514.2) (594.7) (708.1) (809.7) (917.9) Total cash flow 368.4 377.2 391.1 404.0 413.7 400.4 46.9 Initial cash 1,037.8 1,406.2 1,783.4 2,174.5 2,578.5 2,992.2 3,392.6 Final cash 1,406.2 1,783.4 2,174.5 2,578.5 2,992.2 3,392.6 3,439.6

Main Menu FCFF FCFF 31/12/2012 31/12/2013 31/12/2014 31/12/2015 31/12/2016 EBIT 547,990 626,225 763,248 903,804 978,067 Tax -85,098 -94,069 -118,281 -144,558 -160,380 EBIAT 462,892 532,156 644,966 759,246 817,687 Depreciation & Amortization 95,079 115,010 120,827 123,088 125,794 Change in Working Capital -111,138 -45,775 -91,526 -101,621 -68,736 Capex (net of assets sale) -208,700 -200,000 -147,023 -157,168 -170,073 Free Cash Flow 238,133 401,392 527,245 623,545 704,672

Main Menu FCFF FCFF 31/12/2017 31/12/2018 31/12/2019 31/12/2020 31/12/2021 31/12/2022 EBIT 1,055,120 1,134,313 1,255,839 1,339,689 1,425,677 1,389,526 Tax -177,667 -195,741 -221,298 -240,826 -261,022 -408,442 EBIAT 877,453 938,572 1,034,541 1,098,863 1,164,656 981,084 Depreciation & 129,086 132,899 137,202 141,986 147,253 152,998 Amortization Change in Working -73,771 -72,126 -102,993 -73,509 -82,845 -95,834 Capital Capex (net of assets -182,475 -194,851 -207,571 -220,779 -234,376 -337,834 sale) Free Cash Flow 750,293 804,494 861,179 946,561 994,687 700,413

Main Menu Vertical Integration Company City EBITDA Margin Moinhos Cruzeiro do Sul (Rosa Branca) São Paulo/SP 6% Moinho Paulista (Nita) São Paulo/SP 7% Moinho do Nordeste Antônio Prado/RS 7% EBITDA Margin - % Depreciation – Tax rate Wheat flour Vertical integration – Year End estimates 18.6% 100% 26.9% 35.5% 38.3% 81.4% 73.1% 64.5% 61.7% 10 11 12E 13E 14E Own Wheat flour Third party Wheat flour Source : Company data and Team’s estimates.

Main Menu Creditors in BRL - 2011 Excluding Acquisitions contracts 57.70 20% 121.4 41% 95.3 32% 21.9 7% BNDES State funding BNB Others Source: Company data

Main Menu Debt in details - 1 Debt in BRL (millions) 2009 2010 2011 Index BRL BRL Interest YoY BRL BNDES – FINAME TJLP 29.0 16.0 1.97% 11.8 BNDES- PSI BRL 3.0 46.3 4.52% 94.8 BNDES - PSI URTJLP - - 6.11% 1.5 State funding (CE) TJLP 2.8 3.0 - 17.9 State funding (BA) TJLP 2.8 3.0 - 4.0 BNB - FNE - 91.9 95.6 10.0% 95.3 MODERMAQ - 0.2 - - - MODERMAQ (Pós) TJLP 4.0 2.7 1.03% 1.7 BNB – FNE – Working Capital - 2.9 1.2 - - Working Capital – Fixed rate - - - 18.49% 18.5 Working Capital - CDI - - - 4.49% 27.7 Source: Company data

Main Menu Debt in details - 2 Debt in BRL (millions) 2009 2010 2011 Index BRL BRL Interest YoY BRL PEC - BNDES - - - 6.47% 10.9 Guaranteed – Fixed rate - - - 23.46% 1.5 Guranteed - CDI - - - 4.58% 10.0 BNDES - Automatic TJLP 0.5 0.7 2.49% 0.5 BNDES – Automatic Floating 0.2 0.3 2.49% 0.2 Vitarella’s quotes instrument 100% CDI 293.1 90.1 - 100.4 Pilar’s quotes instrument 100% CDI - - - 22.7 Estrela’s quotes/stocks instrument 100% CDI - - - 140.3 TOTAL 444.3 271.8 559.7 Source: Company data

Main Menu Debt in details - 3 FX (millions) 2009 2010 2011 Index BRL BRL Interest YoY BRL Inputs imports USD 56.3 - 2.52% 11.3 Machinery and equipments USD - - 4.96% 0.6 Machinery and equipments CHF 5.3 4.4 LIBOR + 3.7 1.50% TOTAL 61.6 4.4 15.6 Source: Company data

Main Menu Competition – Cookies Market Cookies Market Company Brands Vitarella, Adria, Fortaleza, Isabela, M. Dias Branco Zabet, Pilar, Richester, Estrela Bono, Calipso, Classic, Negresco, Nestlé Passatempo, Tostines Kraft Foods Amandita, Oreo, Trakinas Pepsico Mirabel, Mabel Different Positioning J. Macêdo Águia in market Bauducco Bauducco, Torradas, Maxi, Gulosos 1. Chocolates 2. Dairy and Itamaraty Itamaraty, Fioretto, Saltita, Jumbolino Powdered Drink Marilan Marilan, Max, Pit Stop, Teens, Vitallitá A.C. - Alimentos & Condimentos Leve Supreme, Todeschini, Pica-Pau Piraquê Piraquê Arcor Aymoré, Danix, Triunfo Source: Company data.

Main Menu Competition – Pasta Market Pasta Market Strong Brands in MG Company Brands Vitarella, Adria, Fortaleza, Isabela, M. Dias Branco Basilar, Pilar, Richester Vilma Vilma, Bendita Terra, Oregon Santa Amália Santa Amália Selmi Renata, Galo J. Macêdo Dona Benta, Petybon, Brandini Barilla Barilla Piraquê Piraquê Cadore Cadore A.C. - Alimentos & Condimentos Leve Supreme, Todeschini Parati Grano Duro Emegê Alimentos Emegê Source: Company data.

Main Menu Cookies Producers in Brazil State Units State Units PB AC 1 51 PR AL 24 125 PE AP 1 94 PI AM 2 13 RJ BA 127 60 RN CE 51 91 RS DF 26 186 RO ES 29 9 RR GO 63 1 SC MA 12 139 SP MT 15 225 SE MS 10 13 TO MG 328 3 Total PA 15 1714 Source: ANIB

Main Menu Cookie Consumption in Brazil BA ES Others 3 rd Largest Market CE 6% 2% MA 12% in Brazil 7% 3% MG SP 11% 27% PA 2% PR 4% SC RJ PE 6% 13% 3% RS 4% Source: ANIB

Main Menu M. Dias Branco vs. Cookies Market CAGR COOKIES MARKET 2007 2008 2009 2010 2011 2007-2011 Production (1000 tonnes) 1,131 1,177 1,206 1,242 1,220 1.9% Growth rate 1.70% 4.10% 2.50% 3% -1.77% Per capita consumption (annual) 6 6.1 6.3 6.22 6.09 0.4% Sales (billions) 5.19 5.65 5.96 6.47 6.8 7.0% CAGR M. DIAS BRANCO 2007 2008 2009 2010 2011 2007-2011 Cookies vol 203.2 301.1 363.3 383.9 423.4 20.1% Cookies Gross revenue 939 1416.2 1506.3 1594.6 1883.6 19.0% Source: ANIB and Company Data

Main Menu M. Dias Branco vs. Pasta Market Pasta Market CAGR 2007- 2007 2008 2009 2010 2011 (1000 tones) 2011 Pasta vol 1275 1231 1227 1232 1195 -1.6% Sales (billions) 5157 5650 5879 5915 6119 4.4% CAGR 2007- M. Dias Branco 2007 2008 2009 2010 2011 2011 Pasta vol 194 232.6 256.9 244.8 277.4 9.4% Gross revenue 473.2 662.3 685.7 630.4 728.6 11.4% Source: ABIMA, A.C. Nielsen and Company Data CAGR Consumption of pasta (1000 tones) 2007 2008 2009 2010 2011 2007-2011 Dry Pasta 5.7 5.4 5.3 5.2 5 -3.2% Instant Pasta 0.8 0.9 0.9 0.9 1 5.7% Fresh Pasta 0.2 0.2 0.2 0.2 0.3 10.7% Total Pasta 6.7 6.5 6.4 6.4 6.2 -1.9% Population 188 190 191 191 192 0.5% Source: ABIMA and A.C. Nielsen

Main Menu Valuation: Wheat Costs • Wheat prices spikes: 2007- 2008; 2011’; mid - 2012’. • Wheat Futures contract prices until 2015. • Inflation adjusted by 2016. Wheat Prices 450 400 350 300 250 200 150 100 mar-06 jul-06 nov-06 mar-07 jul-07 nov-07 mar-08 jul-08 nov-08 mar-09 jul-09 nov-09 mar-10 jul-10 nov-10 mar-11 jul-11 nov-11 mar-12 jul-12 nov-12 mar-13 jul-13 nov-13 mar-14 jul-14 nov-14 mar-15 jul-15 nov-15 Source: CBOT & Team’s estimates

Main Menu Valuation: CAPEX • Company guidance • Facilities built already considering further expansion • Vertical Integration & maintenance. • Construction of Mills for full integraton. Pernambuco Mill Other Mills 200 157 147 143 140 135 120 70 33 2007A 2008A 2009A 2010A 2011A 2012E 2013E 2014E 2015E Source : Company data and Team’s estimates

Main Menu Valuation: Inflation and Currency • IPCA index from Futures contract. • Inflation target of 4.5% by 2016. • Currency from Futures contract. Inflation Currency 2,06 5,0% 4,9% 2,04 4,8% 2,02 4,7% Target: 4.5% 4,6% 2,00 4,5% 1,98 4,4% 4,3% 1,96 4,2% 1,94 4,1% 4,0% 1,92 2012E 2013E 2014E 2015E 2016E 2017E 2018E 2019E 2020E 2012E 2013E 2014E 2015E 2016E 2017E Source: Central Bank of Brazil and BMF Bovespa.

Main Menu Valuation: Margins – Gross Margin Historical 42,4% 41,7% 41,7% 37,7% 37,2% 37,4% 2007A 2008A 2009A 2010A 2011A 2S-2012A Historical and Projection 42,9% 42,9% 42,6% 42,4% 41,7% 41,7% 40,7% 37,7% 37,4% 2008A 2009A 2010A 2011A 2012E 2013E 2014E 2015E 2016E Source : Company data and Team’s estimates

Main Menu Valuation: Margins – EBITDA Margin Historical 20,0% 18,8% 18,6% 17,2% 16,3% 13,5% 2007A 2008A 2009A 2010A 2011A 2S-2012A Historical and Projection 20,0% 19,9% 19,8% 19,3% 18,8% 18,4% 18,3% 17,2% 16,3% 2008A 2009A 2010A 2011A 2012E 2013E 2014E 2015E 2016E Source : Company data and Team’s estimates

Main Menu Valuation: Margins – Net Profit Margin Historical 15,0% 14,1% 13,3% 12,4% 9,8% 5,3% 2007A 2008A 2009A 2010A 2011A 2S-2012A Historical and Projection 15,1% 15,0% 14,7% 14,1% 13,6% 12,7% 12,4% 12,3% 9,8% 2008A 2009A 2010A 2011A 2012E 2013E 2014E 2015E 2016E Source : Company data and Team’s estimates

Main Menu Valuation: Profitability – ROIC Historical 18,3% 17,8% 15,3% 14,4% 12,2% 4,4% 2007A 2008A 2009A 2010A 2011A 2S-2012A Historical and Projection 18,3% 17,8% 15,1% 14,7% 14,4% 13,6% 12,7% 12,2% 12,3% 2008A 2009A 2010A 2011A 2012E 2013E 2014E 2015E 2016E Source : Company data and Team’s estimates

Main Menu Valuation: Profitability – ROE Historical 23,6% 19,6% 19,1% 17,8% 17,9% 8,4% 2007A 2008A 2009A 2010A 2011A 2S-2012A Historical and Projection 23,6% 23,2% 22,9% 21,5% 19,6% 19,6% 19,3% 17,8% 17,9% 2008A 2009A 2010A 2011A 2012E 2013E 2014E 2015E 2016E Source : Company data and Team’s estimates

Main Menu ROE Improvements – DuPont Analysis 2011A 2012E 2013E 2014E 2015E 2016E Operational 14.1% 15.6% 15.6% 16.7% 17.5% 17.5% Margin Asset 0.95 1.00 1.04 1.06 1.07 1.05 Turnover Financial 1.52 1.54 1.51 1.49 1.47 1.45 Leverage Tax Burden 0.91 0.84 0.84 0.84 0.84 0.84 Interest 0.97 0.97 0.94 0.97 1.00 1.02 Burden ROE 17.9% 19.6% 19.3% 21.5% 23.2% 22.9% Source : Company data and Team’s estimates

Main Menu Valuation: Profitability – ROA Historical 16,2% 15,3% 13,2% 12,2% 11,0% 3,9% 2007A 2008A 2009A 2010A 2011A 2S-2012A Historical and Projection 16,2% 15,7% 15,8% 15,3% 14,4% 12,8% 12,7% 12,2% 11,0% 2008A 2009A 2010A 2011A 2012E 2013E 2014E 2015E 2016E Source : Company data and Team’s estimates

Main Menu Valuation: Debt Net Debt/EBITDA ratio 1,0 0,6 0,3 -0,1 -0,4 -0,7 2011A 2012E 2013E 2014E 2015E 2016E Source : Company data and Team’s estimates

Main Menu Valuation: EPS 3,17 3,10 3,05 1,87 0,70 2007A 2008A 2009A 2010A 2011A Source : Company data and Team’s estimates

Main Menu Valuation: EPS 3,17 3,10 3,05 1,87 0,70 2007A 2008A 2009A 2010A 2011A 7,42 Source : Company data and Team’s estimates 6,69 5,47 4,35 3,94 2012E 2013E 2014E 2015E 2016E

Main Menu WACC Assumptions WACC Calculation Beta 0.7 Risk-Free Rate 2.5% Market Risk Premium 5.0% Country Risk Premium 2.5% Inflation Rate US 2.0% Inflation Rate BR 4.5% • Cost of Debt: We took the weighted average rate Cost of Equity 11.0% paid on MDIAS most recent debt issued. After-tax Cost of Debt 6.0% • Tax rate: 16%, which is the current average tax E/D+E (%) 85.0% rate of M. Dias in the last 4 years. D/D+E (%) 15.0% WACC Assumptions: Perpetual Growth (%) 5.0% WACC (%) 10.4% Cost of Equity: Risk free rate (2.5%): geometric average of 1929-2011 returns of 10-years-T-Bond. • • Expected market return (5.0%): geometric average returns of S&P 500 since 1929. • Beta: we use the average unleveraged beta of MDB's peers in the global market and leveraged by the company capital structure. Country risk premium (2.5%): historical geometric average of Credit Default Swap of Brazil. • Inflation Differential (2.5%): BRL inflation (IPCA YoY%) over US$ inflation (CPI YoY%). •

Main Menu Beta Calculation From Comparable Peers: Unleveraged Beta from Industry 0,61 Source: Bloomberg M DIAS BRANCO Debt/Equity LF Tax Burden LF Beta:Y-2 17,65% 84,00% 0,7

Main Menu Tax Shield Assuming 16% in tax shield, we are being more conservative, because any number higher than 16% would increase our target price. Also, if we consider the low financial leverage of MDB, the changes in tax shield it wouldn’t affect our target price too much. Considering this question, we did a sensitive analysis for tax shield. Tax Shield Target Price 16% BRL 81.42 25% BRL 83.04 34% BRL 84.73

Main Menu Valuation: Expenses Sales Expenses • Economy of Scale: expansion and consolidation of acquisitions. • Branding: promotion and other expenses. 19,4% 18,6% 18,6% 18,5% 18,4% 18,1% 2008A 2009A 2010A 2011A 2012E 2013E G&A Expenses • Economy of Scale: expansion and consolidation of acquisitions. • Vertical Integration: expenses from operations of mills. 6,1% 5,5% 5,5% 5,2% 4,8% 4,6% 2008A 2009A 2010A 2011A 2012E 2013E

Main Menu Why P/E? EV/EBITDA P/E No tax benefits Tax Benefits and Net profits In our Investment case, Tax benefits are considered a competitive More than a advantage of MDB , given its strategic position in the NE. Therefore, Benefit Tax benefits should be taken into account when comparing to peers. Net Profit More relevant than EBITDA for shareholders’ return. Tax Benefits cannot be distributed as dividends Be Careful! Reinvestment ROIC 2012 = 14.6% > Cost of Equity = 11%

Main Menu P/E Multiples MDB’s EPS EPS EPS EPS Fair Multiple Company LTM 2012E 2013E Target E13 19.7x 18.2x M. Dias Branco 16.8x 16.5x 15.0x 18.1x MDB’s Fair Value 2012 Kraft Foods 16.5x 16.3x 17.1x 17.2x LTM EPS Nestlé 18.2x 18.1x 16.8x 19.9x BR Foods 49.9x 34.0x 18.5x 23.0x Bimbo 33.6x 28.4x 21.3x 15.2x Kellogg Company 16.1x 15.8x 14.6x 14.6x General Mills 15.5x 15.1x 13.9x 15.1x H.J. Heinz 16.8x 16.4x 15.2x Average 23.8x 20.6x 16.8x 17.6x Median 16.8x 16.4x 16.8x 17.2x Source: Bloomberg

Main Menu P/E Multiples (2012) P/E Comparables LTM* M. Dias Branco 16.8x Kraft 16.5x Nestlé 18.2x BR Foods** 34.0x Bimbo** 28.4x Kellogg Company 16.1x H.J. Heinz 16.8x General Mills 15.5x Average 20.8x ** P/E F12

Main Menu P/E Multiples (2013) P/E Comparables LTM* M. Dias Branco 16.8x Kraft 16.5x Nestlé 18.2x BR Foods** 18.6x Bimbo** 21.3x Kellogg Company 16.1x H.J. Heinz 16.8x General Mills 15.5x Average 17.5x ** P/E F13

Main Menu P/E Target Multiples Target EPS Target P/E Price (BRL) Comparables Dec - 13 2013 2013 M. Dias Branco 81.4 4.48 18.2x Kraft 48.6 2.69 18.1x Nestlé 63.2 3.67 17.2x BR Foods** 40.1 2.01 19.9x Bimbo** 33.4 1.45 23.0x Kellogg Company 55.7 3.65 15.2x H.J. Heinz 57.1 3.79 15.1x General Mills 42.2 2.89 14.6 Average 17.6x

Main Menu EV Multiples Sales Sales Sales EBITDA EBITDA EBITDA EBIT EBIT EBIT Company LTM 2012E 2013E LTM 2012E 2013E LTM 2012E 2013E M. Dias Branco 2.4x 2.2x 1.7x 13.6x 12.2x 10.6x 16.5x 14.8x 12.6x Kraft Foods 1.5x 1.5x 1.4x 8.4x 8.0x 8.1x 9.4x 9.3x 9.3x Nestlé 2.4x 2.3x 2.2x 13.5x 12.3x 11.3x 15.0x 15.4x 14.1x BR Foods 1.5x 1.4x 1.3x 16.2x 14.5x 10.3x 26.2x 23.8x 14.8x Bimbo 1.3x 1.1x 1.1x 12.4x 12.7x 10.4x 17.9x 18.9x 14.6x Kellogg Company 2.0x 1.9x 1.8x 11.9x 11.4x 10.5x 14.3x 13.7x 12.6x General Mills 2.0x 1.9x 1.8x 9.9x 9.6x 9.1x 11.9x 10.4x 10.8x H.J. Heinz 2.0x 1.9x 1.9x 12.3x 10.9x 10.3x 15.2x 13.0x 12.2x Average 1.8x 1.7x 1.6x 12.1x 11.3x 10.0x 15.7x 14.9x 12.6x Median 2.0x 1.9x 1.8x 12.3x 11.4x 10.3x 15.0x 13.7x 12.6x Source: Bloomberg

Main Menu Target Price MDB’s Current Price EV/EBITDA EV/Sales EV/EBIT Target P/E P/E 40,00 50,00 60,00 70,00 80,00 90,00 100,00 110,00 Kraft Nestlé BR Foods Bimbo Kellogg Company H.J. Heinz General Mills Average

Main Menu Currency Risk Commodities are imported mostly from United States, Argentina and Canada Company commonly finances these imports for a 1 Credit constraint risk year period and FX-Debt risk FX Debt due to Inputs imports fully hedged with Swap Contracts (Currency for CDI) Debt (millions) in BRL and FX Inputs in USD 41 6% Debt in BRL Debt in FX 591.2 44.3 93% 7% Equipments in CHF 3.3 1% Source: Company’s Latest Press -release (3Q12)

Main Menu Average Daily Treaded Volume (BRL mn) 2011 2012 +58% BRL 4.03 BRL 10.38 23.2 * Block Trade 19.2 13.8 11.6 11.6 10.9 8.7 7.4 7 4 3.3 4.1 5 4.1 4.9 5.9 4.4 3.3 2.7 4.3 4.1 3.2 2.2 1.8 0.9 1.5 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12

Main Menu Corporate Governance – Stockholders MDB's Stockholders Free Float – Novo Mercado 25% Dibra Fundo de Others Investimentos 12% 63% Source: Company Data

Main Menu Corporate Governance – Board of Directors BOARD OF DIRECTORS Name Position Short Bio Years at MDB Francisco Ivens President - Son of Manuel Dias Branco, founder of 60 de Sá Dias Branco MDB. Director of MBD since April 2006. Maria Das Graças Counselor - Director of MDB since 2006. 12 Dias Branco Maria Regina Counselor - Vice President of Adm. & Development 32 Dias Branco of MDB Fabio Alperowitch Independent - Independent member of the board (CFA) 13 Counselor Affonso Celso Independent - In post since April 2011. A former Pastore Counselor President of Central Bank of Brazil. 1 Source: Company Data

Main Menu Commodities – Historical Wheat Prices 500 450 Worst US drought in 400 last 25 350 years 300 250 200 150 100 abr/06 jul/06 abr/07 jul/07 abr/08 jul/08 abr/09 jul/09 abr/10 jul/10 abr/11 jul/11 abr/12 jul/12 jan/06 out/06 jan/07 out/07 jan/08 out/08 jan/09 out/09 jan/10 out/10 jan/11 out/11 jan/12 out/12 Source: CBOT Wheat Prices (USD/ton) Climatic Drought in China, Western problems in Europe (Ukraine), European Russia, U.S. and Union, Canada and Australia Western Europe

Main Menu Inventories Management 1. MDB operates with 4 months of storage capacity 2. Average MDB price reduction: 6.32% for wheat and 9.37% for oils Soy oil - BRL/ton Wheat - US$/ton 3.500 450 400 3.000 350 2.500 300 250 2.000 200 1.500 150 100 1.000 Mar-06 Oct-06 May-07 Dec-07 Jul-08 Feb-09 Sep-09 Apr-10 Nov-10 Jun-11 Jan-12 Aug-12 Mar-06 Oct-06 May-07 Dec-07 Jul-08 Feb-09 Sep-09 Apr-10 Nov-10 Jun-11 Jan-12 Aug-12 Wheat (%) Gross Margin Market Price 1Q06-2Q08 112% -4.1% MDB's average inventory acquisition price 2Q11-4Q09 39% -4.9% Source: Company Data

Main Menu Commodities Risk – Wheat Plantation/Harvest Jan. Feb. Mar. Apr. May Jun. Jul. Aug. Sep. Oct. Nov. Dec. Country o o x x United Winter States x x o o Spring x x o o Canada o o x x European Union o o x x Winter Russia x x o o Spring o o x x Winter China x x o o Spring o o o x x x India x x x o o o Australia o x x x o o Argentina x x x o o o o Brazil Source: Company Data o: Harvest x : Plantation

Main Menu Bullish Case: Result Bullish Case BRL101.96 BRL 100 Market Price Target Price BRL65.10 80 BRL81.42 60 40 Bearish Case BRL49.96 20 0 Oct-06 Dec-07 Mar-09 May-10 Jul-11 Oct-12 Dec-13 Market Price UPSIDE BUY BRL65.10 +56.6% Bullish Case BRL101.96

Main Menu Bullish Case: Variables • Company which will be acquired has the same Margin EBITDA of average industry and in four years will be at the same level of MDIAS. � Bullis h Cas e (Bull) Bull Target Price Size of the future acquisitions: cash available, past • 101.96 (BRL) acquisitions and potential targets. Bull Ups ide 56.6% Ass umptions Impact Four companies , BRL330mn on average • Tax Benefits Maintenance contracts are fully of margins renewed Acquisitions offer an upside of 10% of our base case • Well executed Increase in fair value. acquisitions earnings � MDB will continue to have the tax benefits that it is • receiving today, and this assumption offers additional 21.5% of upside.

Main Menu Bullish Case – Acquisition Assumptions Impact of Revenue per year (R$ M) Vitarella 369,30 • Multiple of the impact of acquisition in Pilar 107,50 net revenue, based on the acquisitions Es trela 190,60 since IPO. Moinho San ta Lú cia 88,10 Impact of Revenue per Cos t of Acquis ition per year Vitarella 0,62 • Net Revenue of each company /Cost of Pilar 1,54 acquisition. Es trela 0,79 Moinho San ta Lú cia 0,98 Average Weighted by Value 0,76 Cos t of Acquis ition (R$ M) • Weighted average of this multiple, Vitarella 595,50 considering the size of the company. Pilar 69,90 Es trela 240,00 Moinho San ta Lú cia 90,00

Main Menu Bearish Case: Result Bullish Case BRL101.96 BRL 100 Market Price Target Price BRL65.10 80 BRL81.42 60 Bearish Case 40 BRL49.96 20 0 Oct-06 Dec-07 Mar-09 May-10 Jul-11 Oct-12 Dec-13 Market Price DOWNSIDE SELL BRL65.10 -23.2% Bearish Case BRL49.96

Main Menu Bearish Case: Variables Bearish Case. � Bearis • Complete end of tax benefits in h Cas e (Bear) the perpetuity and as they expired Bear Target Price 49.96 throughout the first ten years of (BRL) Bear Downs ide 23.2% our model. As s umptions Impact Decrease in • We also consider the incapacity of Tax Benefits margin and MDB, due the competition, in pass- contracts are not increase in renewed through the prices to consumer in income tax cookies and pasta, penalizing Fiercer competition Decrease in s cenario margins. margins � • BRL49.96, with 23.2% downside

Main Menu Sensitivity Analysis – g and WACC TARGET PRICE Perpetual Growth (%) 4.0% 4.5% 5.0% 5.5% 6.0% 9.6% 84.2 89.0 94.7 101.9 111.1 WACC (%) 10.0% 78.9 82.8 87.5 93.3 100.6 10.4% 74.2 77.5 81.4 86.2 92.0 10.8% 70.2 73.1 76.4 80.4 85.2 11.2% 66.7 69.2 72.0 75.4 79.4

Main Menu Bearish Case vs. Base Case Bearish Case. The difference of 25.1% of upside and 23.1% of downside is explain by 24% due to the end of renews in contracts of tax benefits and 24.2% due to the deterioration in the margins of MDB. Average Margins of 2013- Base Bearish 2021 Case Case Gross Margin 42.7% 40.5% EBITDA Margin 19.6% 17.6% Net Profit Margin 15.3% 11.3%

Main Menu Monte Carlo simulation Variables • Inflation rate (Normal) • GDP growth (Normal) • Wheat prices (Lognormal) • Exchange rate (Lognormal) Distribution of estimated Target Prices SELL: 9.3% HOLD: 23.7% BUY: 67% 1200 1000 Frequency (x) 800 600 400 200 0 42 50 57 65 72 80 88 95 103 110 118 126 133 Target Price (BRL) Source: Company data, Central Bank of Brazil and Team’s estimates.

Main Menu Monte Carlo simulation Geometric Brownian Motion (GBM) Normal and Lognormal distributions     Variables Distribution  2         σ  i - t t        2    S S e Wheat Prices Lognormal T 0 Inflation rate Normal Price GDP growth Normal Exchange rate Lognormal Probab. • 10,000 iterations • Mean: BRL84.27 • St. Dev: BRL15.85 P 0 • Median: BRL82.85 • Interval (95%): [57.30;114.20] Time

Main Menu Tax Benefits ICMS Tax Reduction Fiscal Incentive Expiration (ICMS) DESENVOLVE – Bahia 81% over all operations Nov/2015 63,75% over wheat PROVIN – Ceara operations and 56,25% over Nov/2024 M&F operations 74,25% over wheat PROADI – Rio Grande do Norte Aug/2020 operations FAIN – Paraíba 81% over wheat operations Dec/2032 PRODEPE – Pernambuco 75% over wheat operations Mar/2024 Source: Company Data

Main Menu Tax Benefits: Income Tax Income Tax Industrial Units Expiration Reduction (%) Cookie and Pasta Factory (Eusébio - CE) 75% Dec. 2016 Wheat Mill (Fortaleza – CE) 75% Dec. 2019 Shortening and Margarine Factory (Fortaleza – CE) 75% Dec. 2012 Wheat Mill and Pasta Factory (Natal – RN) 12.5% Dec. 2013 Wheat Mill (Salvador - BA) 75% Dec. 2013 Cookie and Pasta Factory (Salvador - BA) 75% Dec. 2016 Wheat Mill and Pasta Factory (Cabedelo – PB) 75% Dec. 2016 Wheat Mill and Pasta Factory (Cabedelo - PB) 75% Dec. 2020 Pasta Factory (Recife - PE ) 12.5% Dec. 2013 Cookies Factory (Recife – PE) 75% Dec. 2012 Cookies and Pasta Factory (Jabotao dos Guararapes – PE) 75% Dec. 2018 Cakes and Snaks Factory (Maracanau – CE)) 75% Dec. 2013 Cakes Factory (Maracanau – CE) 75% Dec. 2016 Cookies Factory ( Maracanau - CE) 12.5% Dec. 2016 Pasta Factory (Maracanau - CE) 37.5% to 12.5% Dec. 2013 Pasta Factory (Maracanau - CE) 75% Dec. 2015 Source: Company Data