Fromagerie Bel Analyse

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Market ProYile
52-week
Price Range
Average 3M
Daily Volume
265-314
228.4
Shares Outstanding (m)
6.82
Market Capitalization (m)
2 062
Free Float
4.4%
Unibel Holding
67.4%
Beta
0.41
Sources: Factset, Team estimates
Financials
2012
2013 2014E 2015E
EPS ()
18.7
18.5
13.9
21.4
6.25
7.91
DPS ()
6.25
6.25
Sales (m)
2 649
2 720 2 828 3 000
EBIT (m)
238
240
169
247
Net proSit (m) 129
126
94
146
7.0%
9.7%
0.2
-0.1
ROCE
11.4% 9.3%
Net debt/
EBITDA (x)
0.2
0.1

Valuation
metrics
2012
EV/EBIT (x)
5.5
7.8
11.7
8.0
EV/Sales (x)
0.5
0.7
0.8
0.7
2013 2014E 2015E
Valuation
DCF
Transac
Mult
Estimated Prices
373
442
432
Weights
60%
20%
20%
Target Price ()
399
Source: Team estimates
Alexandre RAVERDY
alexandre.raverdy@gmail.com
+33(0)6.19.25.79.26

Manon RICHARD
manonrichard_2@hotmail.fr
+33(0)6.16.95.32.54

Ran XU
cindyhit08@gmail.com
+33(0)6.98.13.06.40

Konan KOUASSI
kkrprive@yahoo.fr
+33(0)6.66.69.25.96

Maxime PARRA
maxime.parra@newtrading.fr
+33(0)6.47.61.90.40
BEL
Consumer Staples
Date: 12th January 2015 Ticker: FBEL

Exchange: E.N Paris
Price: 300
Recommendation: BUY
Target Price : 399 (+33%)
One Portion of Bel, One Giant Return for Shareholders

We issue a BUY recommendation with a target price of 399 based on a weighted
average of DCF, transaction and relative valuations. Our TP implies an upside
potential of 33%.

An EfYicient Business Model
Bel capitalizes on a simple and efSicient business model: a family business, pure player in premium
branded cheese production and products with a strong identity, backed by an expertise in
miniaturization.

Well-Positioned For Further Growth
We believe Bel is well-positioned for further growth (we expect 12% EPS CAGR 2013-18E), driven by
(1) international expansion led by the 5 core brands; (2) market share gains over the period
2014E-18E; and (3) an enviable strategic positioning, well exposed to the growth trend of on-the-go
and healthy consuming, while enjoying premium pricing power (reSlected in premium operating
margins). Besides, to seize potential external growth opportunities, management has fostered a strong
Sinancial discipline. As a result, Bels leverage is low (net debt/EBITDA close to zero), with acquisition
Sirepower estimated at more than 1bn in 2015E assuming leverage of 3x EBITDA.

A Defensive Stock To Own During Tough Times
Despite the stocks growth potential, we believe the defensive nature of the industry is a key asset:
Bels activity can provide investors with an attractive counter-cycle investment. Besides, the group has
a constant dividend policy, which makes it attractive for investors looking for constant dividends: the
dividend growth of 21% CAGR for 2013-2018E implies a dividend yield of 3% on average.

Despite An Attractive Risk-Reward ProYile, We Flag Some Risks
Bel trades at a discount to its peers that exceeds 25%, even adjusted for liquidity, providing strong
support to our BUY recommendation. We believe the discount is unjustiSied, as reSlected in our target
price which points to 33% upside potential. The main concerns we have on the stock are (1) its weak
liquidity; (2) the top-line and margin exposure to forex and volatile commodity prices; and (3) its
exposure to Europe (60% of sales), albeit decreasing.

Catalysts
(1) A QE announcement by the ECB given inSlation data in the Eurozone and the ongoing decline in oil
prices; (2) an acquisition announcement, provided Bel does not pay too much; (3) the creation of a
futures market for dairy raw materials by Euronext; (4) worldwide consumption trends toward
healthy eating (which includes cheese); and (5) increased share liquidity through, for example, the
disposal/placing of Lactalis 24% stake.

Bel Stock Price (100 at 31st Dec 2010)
%
TP: 399
250
200
150
100
50
Dec-10
Dec-11
STOXX 600 - Food & Beverage
Dec-12
UNIBEL
Dec-13
Dec-14
Fromageries Bel
Source: Factset

Figure 1: Bel sales estimates and forecasts
12th January 2015
Investment Summary

We based our target price on a weighted average of three valuation models (DCF, Transaction method
and Relative valuation). Despite its weak liquidity taken into account in each method we issue a
BUY recommendation on Bel with a target price of 399 (33% upside) relying on its international
expansion (attractive for investors given the signiSicant growth potential), its competitive advantage in
miniaturization and its acquisition Sirepower. From a valuation standpoint, Bel is currently trading at
an undeserved 28% discount to its peers on 2015E EV/EBIT and a 25% discount to 2015E EV/Sales,
both adjusted for liquidity, providing strong support to our BUY recommendation.
CAGR 2013-18E
Europe
2.7%
NME & Africa
9.9%
Americas - APAC
10.7%
World
5.9%

Figure 2: Bel market share estimates and
forecasts
12.0%
9.8%
10.0%
8.0%
6.0%
3.1%
4.0%
3.7%
1.3%
2.0%
0.0%
World
Europe
NME &
Africa
2013
2018E
Americas -
APAC

Figure 3: Net debt / cash evolution
400
350
300
250
200
150
100
50
0
-50
-100
-150
-200
Sources: Bel, Team estimates
International Expansion (Figures 1&2)

In 2013, Bel sales accounted for c.2.8% of world cheese market size (approximately 98bn), of which
62% came from Europe. The trends in the food industry provide attractive opportunities for Bel. With
the new Brookings production site in the US and further internationalization, we forecast a market
share of 3.1% by 2018E, which implies a CAGR 2013-18E sales of 6%.

Manufacturing Know-How in Miniaturization
Cheese portion format is one of Bel strong designs, and miniaturization stems from unique
manufacturing know-how. This is well-adapted to on-the-go consumption trend that is driving demand
worldwide.

A Sound Financial Structure
Strong free cash Slow generation and conservative capital allocation has led to a strong balance
sheet. This should also allow Bel to (1) continue to strongly invest in marketing (around 21%
between 2014E-18E) and R&D (1%); and (2) increase its payout ratio from 34% in 2013 to 50% in
2018E.
Since 2009, Bels Net Debt/EBITDA has decreased, reaching 0.07x in 2013. Due to the internal
operating improvements, the ratios downward trend should continue and allow Bel to show a net
cash position from 2015E (Figure 3), which provides acquisition headroom. Interestingly,
management has shown a selection skill and a strong integration capacity with past acquisitions
(16 local and international brands including Leerdammer and Boursin).

Possible Investment Risks
Potential investors must be aware of two main risks: corporate governance and market risks.
Corporate governance risk is due to the family-controlled structure. Some conSlicts of interest
might appear as the positions of CEO and Chairman are Silled by the same person (member of the
family shareholder).
Illiquidity may also have a possible adverse impact on investors returns. This market risk is
characterized by (1) a very low free Sloat (4.4%) and (2) an historical average bid-ask spread of
3%. An investor with a long-term investment horizon may be less affected by this risk.
In addition, Bel is subject to foreign exchange rate Sluctuations as a result of its international
operations and presence. Other risks (political, strategic, etc.) are explained in the Investment Risk
section.

Figure 4: Bel stock price & key events

300
5th November 2007

Acquisition of
Boursin
250
2nd July 2012

Announcement of a new
production site in the US
200
7th February 2013

Acquisition of
Tranchettes
150
100
50
18th June 2012

Appointement of Francis Le Cam as
Deputy General Manager
1st June 2006

Acquisition of
Gervais Brand
0
2006

Sources: FactSet, Bel
2007
14th May 2009

Appointment of Antoine Fievet as
CEO & Chairman
2008
2009
2010
2011
2012
2013
2014

Figure 5: Breakdown of activities
Business Description
12th January 2015

Bel is the 3rd largest branded cheese manufacturer worldwide. Operations started in 1865 for this
French family-held group when Jules Bel created a cheese ripening and trading business. After he died,
(Core market)
Lon Bel, his son, took over the business and set out for an industrial adventure by creating
Fromageries Bel in 1922, which produced the well-known Laughing Cow brand. The company then
B
Catering
grew Sirst through the construction of modern plants both domestically and internationally, and
E
(Bel Foodservices)
secondly by broadening its range of products. In particular, it launched the Sirst fat-free cheese in the
L
early 1930s, leading the way in healthy products.

Industry
Since then, the company has developed throughout the world. Today, the company is active in 5
(Bel Industries)
continents with 28 production plants and 30 subsidiaries (Appendix 9). Its portfolio comprises 5 core
brands (The Laughing Cow, Mini Babybel, Leerdammer, Kiri, Boursin) and 25 local brands. In 2013, the
NB: Bel does not provide the % of each activity
company employed 10,830 people.
Source: Bel

Its easy-to-carry and easy-to-keep cheeses also make Bel a leading company in on-the-go
consumption with three segments (3 S): Spread (soft spreadable cheese and product containing
Figure 6: Bel production 3 S
cheese), Snacks, and Slices (hard cheese) (Figure 6). To achieve its goals, Bel manufactures three types
of cheese, distributed in 120 countries: Processed cheese for which the group is a leader thanks to The
15%
Laughing Cow (Bels oldest brand), Pressed cheese (e.g. Mini Babybel and Leerdammer) and Fresh &
Spreadable cheese (e.g. Kiri, Boursin).

25%
60%
Current strategy of the company can be described with the following 3 pillars:

Industrial Expertise and Innovation Leadership (Appendix 10).
With two R&D centers in Europe and R&D expenses (1% of sales) two times higher than its closest
peers, industrial expertise and innovation are the cornerstone of Bel and ensure it keeps a strong
Spread Snacks Slices
competitive advantage. Since the industry is mature, the group is changing its product mix (e.g. co-
Source: Bel
branding). This is why it aims at broadening the range of its brands as well as renewing its recipes (a
dedicated team is in charge of understanding the consumers needs). Besides, the company aims at
conquering Asia by developing new Slavors while respecting their culture and habits. Its industrial
Figure 7: Sales breakdown by region (m)
expertise will enable the group to increase its footprint in countries like Vietnam, Japan, China and
South Korea.
3 000

Internationalization And Strengthening of The 5 Core Brands
In 2013, the core brands accounted for 70% of total sales (vs. 32% in 2008), 4 of them among the
2 000
worlds 12 leading cheese brands (Appendix 11). The group aims at increasing its sales by building
new production plants in high potential regions. For instance, the new plant in Brookings (USA) will
produce 10 thousand tons of cheese each year to meet the growing demand for Mini Babybel. The
group thus plans to reach $1bn of sales in N. America by 2025 (x3 in 10 years).
1 000

Acquisition-Led Growth Focus On Premium Branded Cheeses
Acquisition-led growth gradually complements innovation-led growth. Indeed, since 1985, the
company has already acquired 16 brands (Figure 8 & Appendix 12) and puts a particular emphasis on
0
2010
2011
2012
2013
the quality of the brands it acquires.

The Laughing Cow
Mini Babybel
Boursin (400m)
Americas - APAC Africa - Middle East Europe Figure 8. Core brands
(1921)
(1977)
(2008)
development

Source: Bel

Brand Creation

Acquisition
Figure 9: Shareholder structure

Kiri
Leerdammer (190m)

Sources: Bel, FactSet
0.7%
(1966)
(2002)

4.4%

Bels Management, A Well-Functioned Network of Experts Fitting The Group Strategy
Antoine Fivet, representing the 5th generation of the shareholding family, became CEO and Chairman
24.1%
of the group in 2009. In the executive committee, the other three deputy general managers all have
extensive experience: Bruno Schoch (Finance, Legal and IT) has a strong knowledge in M&A
67.4%
transactions perfectly Sitting the group strategy; Francis le Cam (Operations) has substantial
3.5%
background in International Management; and Hubert Mayet is an expert in manufacturing and
technology (Appendix 13).

Unibel
Fivet/Bel Family
Shareholder Structure
SoSil SA (Lactalis Group)
Other public
Though Bel has been listed on the Paris Stock Exchange since 1946, it remains controlled by the
Treasury Stock
founding family. It is the major shareholder today with 71% of the shares (of which 67.4% is held by
Unibel, its listed family holding company). Lactalis, one of Bels competitors, holds 24% of the shares
Source: Bel
(Figure 9). Free Sloat is therefore very low (4.4%) but the stable shareholder structure allows an
effective long-term strategy. Free Sloat could increase should Lactalis dispose of its shares: it would
boost liquidity and attract interest from institutional and retail shareholders in the stock. A move
toward more visibility is witnessed by the availability of the annual report in English since 2013.

3
Consumers
Industry Overview and Competitive Positioning
Figure 10: Cheese versus GDP growth

6%
5%
4%
3%
2%
1%
-1% 2007 2008 2009 2010 2011 2012 2013 2014E
-2%
-3%
World GDP growth
Cheese production growth
Sources: World Bank, OECD

Figure 11: Market size and per capita
cheese consumption
30 bn
30
kg
25
25
20
20
15
15
10
10
Retail Value Sales 2014 (lhs)

Per Capita Total Consumption (rhs)
Sources: Euromonitor, IDF

Figure 12: Share of spending by the Global
Middle Class (2009 to 2030 forecasts)
100%
80%
60%
40%
20%
0%
2009
2020

The cheese industry offers attractive market dynamics while offering good resilience to economic
cycles. Product innovation, new social trends and increased penetration in rapidly growing
regions such as Latin America, the Middle East and Africa are the main drivers of growth.

A Defensive Industry BeneYitting From A Positive Macro Backdrop
The cheese industry is characterized by its defensive nature: it provides upside potential during
expansions and protection during downturns. For instance, over the period 2008-2009, while global
GDP growth fell by 2.9%, cheese production growth remained positive and went from 0.8% in 2008 to
0.3% in 2009 (Figure 10). As for Bel, its output increased by 0.2% in 2009.

Cheese consumption varies signiYicantly from one region to another (Figure 11). The global
cheese market is valued at around 100bn, dominated by Europe followed by North America and Latin
America. However, the global cheese market is expected to grow strongly going forward, spurred by
emerging countries, especially in Asia-PaciSic (China, Indonesia, Vietnam). The global cheese output
reached 19m tons last year (+19% 2005-13) and global demand is likely to continue to be strong.

Europe: Steady As It Goes
The EU-28 accounted for 48% of global output in 2013. With approximately 48% of the EU output
derived from Germany (27%) and France (21%), those countries are the two largest cheese producers
in Europe (Appendix 14). In Western Europe, cheese market is very mature, with annual per capita
consumption of 85. We thus expect a limited but steady value-led growth (0.5% growth pa, as
reSlected in our estimates).

Americas: A Growing Appetite
In 2013, a quarter of global total volume growth in cheese came from just Brazil and the US. American
consumers eat an average 15.4kg (Appendix 15), and sales of cheese are expected to increase as
additional cheese varieties are continuously introduced in the market. Brazil, with per capita
consumption of just 6kg, is a very interesting market: further penetration should generate substantial
new sales as cheese becomes a more important food item in the Brazilian diet.

Emerging Markets: The New Eldorado
Emerging markets offer higher growth potential as consumption levels are still low while the potential
consumer base is large. The two main growth drivers of consumption are (1) rising disposable incomes
and (2) urban population growth. Asia-PaciYic has the highest potential as cheese is still a very
nascent market. This goes hand-in-hand with demographic change and growth of middle classes
(whose global spending share should represent 59% in 2030E from 23% in 2009 (Figure 12), and
reSlects a more general trend of rising demand. In China for instance, where Bel has been active since
2007, per capita consumption is still low (40g) due to the sheer size of its population. The bright
outlook is reSlected by an expected CAGR consumption of 12% for the period 2014E-18E according to
Euromonitor. In Near Middle East (NME) and Africa, while there is a high-growth potential, the
region is constrained by an underdeveloped environment: the lack of a developed retail environment
with a limited cold chain infrastructure in place as an important factor holding back cheese sales.

Key Industry Trends
2030
APAC
Africa - Middle East
Americas
Europe
Source: World Bank

Figure 13: Nutrition Mapping (per 100g)
900
Calcium (mg)
700
600
Leerdammer
800
The Laughing
Cow
Mini Babybel
500
Cur de Lion
NRV*
Kiri
400
300
200
Philadelphia
100
Boursin
Ptit Louis Tartare
0
15
20
*Nutrient Reference Value
25
30
Fat (g)
Bel
12th January 2015
35
40
Competitors
Sources: Team research
Product Innovation
With penetration of cheese nearing saturation in developed regions such as Western Europe or
North America, value creation is key. Different usages of cheese thus offer opportunities, e.g.
cheese being promoted as a cooking product in addition to its conventional use. In emerging
countries, the product mix will change from the traditional types of cheese to new cheeses that suit
the demand (e.g. sweet cheese for Asia).
On-The-Go Consumption Is Likely To Strengthen
Cheese is gradually positioned as an on-the-go snack both for children and adults. This goes
together with the trend of new cheese eating occasions, where frequency of use is increasing (e.g.
breakfast + snacking or snacking + dinner).
Rising Interest in Healthier Products
Given mounting obesity concerns, people tend to move to reduced or fat-free products low fat
and salt but high calcium and vitamin D - following the inclination towards a healthier lifestyle. Bel
has been a pioneer in healthy products and keeps its advantage over its peers (Figure 13).
French Cheese Going Mainstream
As one of the largest cheese exporters worldwide, France has an outstanding reputation in cheese.
French cheese might thus be sold as a premium product, just like wine in some countries. In
addition, in many countries, there tends to be growing awareness of Western cuisine, including
French cuisine.
A Fragmented Industry
The global branded cheese production is divided in four main types of cheese manufacturers (Figure
14):
Major diversiYied competitors (e.g. Kraft, Mondelez) which hold competitive advantages through
better economies of scale and beneSit from a lower vulnerability to the cheese market thanks to
product diversiSication and strong bargaining power towards customers and suppliers.
Dairy specialized family-held businesses (e.g. Bongrain, Lactalis, Bel) with a portfolio of core
brands;
Small regional competitors (e.g. Arla Food, Dairy Crest) that control different stages of the supply
chain and beneSit from a strong presence, identity and substantial knowledge of their market;
Retail labels (e.g. ReSlets de France for Carrefour, Tesco brand), which are cheaper and belong to
retailers. They are the only direct substitutes to branded cheese.

Regulation: What Will Be The Impact of The Quota Abolition in Europe?
The EU introduced a national quota regime for milk production in 1984 to limit excess supply and
maintain farmer proSitability. This regime will come to an end in April 2015 as the EU moves the dairy
sector towards a more market-orientated future, but one that protects producer interests. We
therefore expect (1) an overall increase in production coupled with declining prices which would be
favorable to Bel, albeit a modest impact due to the soft landing provided by the EU; and (2) no
reduction in current price volatility after the end of quotas. For further information, please refer to
Appendices 16 & 17.

Figure 14: Company ranking*
1 Lactalis
2 Kraft
3 Fromageries Bel
4 Bongrain
5 Arla Food
6 Mondelez
*in terms of branded cheese sales

Source: Bel
Figure 15: Porters 5 Forces
Porters 5 Forces
Rivalry (4.5)
5
Threat of New
Entrants (1)
Bargaining
Power of
Customers (4)
Threat of
Substitutes (3)
12th January 2015
Bargaining
Power of
Suppliers (1.5)
NB: Since Bel derives 100% of its revenue from industrial cheese, we will exclusively focus on it
(Figure 15).

Rivalry: as more than 20% of the market is held by six companies competing Siercely, we consider
the branded cheese market as rather fragmented.
Bargaining power of customers: in most countries, the main customers are the retailers or
supermarket chains, which are likely to offer alternatives, such as retail labels. They thus have
signiSicant bargaining power.
Bargaining power of suppliers: suppliers have a low bargaining power since most inputs (milk,
butter, cream, cheddar) are commodities.
Threat of substitutes: the direct substitutes to industrial cheese are craft cheeses. There are also
indirect substitutes, such as yogurts.
Threat of new entrants: barriers to entry are high because of (1) substantial capital
requirements; and (2) the strength of the existing brands. Those features could deter potential
competitors from challenging the incumbents.

Bels competitive advantage relies on (Appendix 18):

Figure 16: Sales and margins trends
m
4 000
12%
3 500
10%
3 000
8%
2 500
6%
2 000
1 500
4%
1 000
2%
500
0%
Sales (rhs)
Net proSit margin
Sources: Bel, Team estimates
EBIT margin

A Long-Standing Expertise In Portion Format Meeting Industry Trends
Cheese becomes more and more commoditized. Yet Bel offers differentiated products that are small-
sized and easy to carry thanks to its expertise in miniaturization technology, backed by a strong R&D
(at 1% of sales, 2x higher than its closest peers). This historic know-how is in line with the new social
trends (on-the-go consumption, healthy diet, etc.).

A Pure Player Status
Bel is one of the few companies whose business is 100% focused on cheese. As such, Bel can achieve
better economies of scale on operating costs than its closest peers: Bels focused strategy and
concentrated core brand portfolio management allows leverage on R&D investment, product
innovation expenses and other marketing and promotional expenses.

Financial Analysis

Growing Sales
Bel has delivered revenue growth every year over the past 5 years, even in 2009 in the recession
though partly thanks to the acquisition of Boursin. In 2013, sales grew by 2.7% (+5.3% on a like-for-
like basis, i.e. excluding the impact of forex Sluctuations, Figure 17). Besides, Bel's revenues are more
and more geographically diversiSied, in line with the internationalization strategy of the core brands.

We analyzed and estimated Bel sales based on the cheese market size (per capita consumption and
population size) and the expected market share of Bel (Appendix 19).

In Europe, the Sive core brands allowed Bel to expend its market share (estimated at 3.3% in
2013) and sustain its growth, particularly in Eastern Europe with an effective marketing strategy.
We forecast a 2014E-18E CAGR of 2.8%, reSlecting continued market share gains in Eastern Europe
and a more limited value-led growth in Western Europe.

5

Figure 17: Sales growth bridge

10%
1.60%
9%
8%
7.30%
7%
6%
5%
4%
3%
2%
1%
0%
Figure 18: YoY EBIT margin by region

12%
10%
8%
6%
4%
2%
0%
Western
Europe
2010
Source: Bel
Americas Near and Greater

APAC Middle East Africa
2011
2012
2013
12th January 2015
In the Americas, Mini Babybel (+23% in the US last year) and the Laughing Cow drove revenue
growth. In Asia-PaciYic (APAC), the solid revenue growth driven by Mini Babybel and Belcube has
been offset by quality issues at Kiri in Japan. The expected 2014E-18E CAGR of 13.3% for the whole
region reSlects both the high growth potential of Mini Babybel in the US with the new production
plant in Brookings and the huge growth potential in APAC.
In Middle East and Africa, forex Sluctuations and political uncertainties hit revenues, despite a
favorable macro environment and a strong growth driven by Kiri and The Laughing Cow. The
2014E-18E CAGR of 9.9% will be led by the development of modern distribution channels.

8.90%

7.00% (2.50%)

5.30% (2.60%)

4.80%
1.40%
4.50%

3.40%

2.70%

Source: Bel

Uneven Margins To Stabilize
Bel achieves better EBIT margins (9% in 2013 and an historical average of 8.5%) compared to its
closest peers (7.4% on average). It is a pure player in the premium cheese industry which allows the
company to achieve superior economies of scale (with premium pricing). However, the major
diversiSied Sirms achieve even better economies of scales than Bel due to their size (and the implied
bargaining power) and the broadness of their brand portfolio.

Though Bel has a strong internal control to reduce costs, three external factors regularly hit operating
and net proSit margins: (1) raw materials prices volatility, (2) one-offs linked to political instabilities
mainly in Near and Middle East and (3) the currency exchange rate (Appendix 21).

More precisely, an analysis of EBIT margins by region (Figure 18) leads to the following conclusion:
stability in Western Europe has been offset by risks in the Near and Middle East. Between 2010 and
2013, EBIT margin in Western Europe averaged 10% (ranging from 8.1% to 11.2%) while that of Near
and Middle East averaged 7.3% (ranging from 2.8% to 9.8%). Moreover, the peak of commodity prices
reached in 2011 impacted all regions except Americas - APAC thanks to the US entities hedging policy.
The exchange rate largely explains the decrease in EBIT margin in 2013 in Americas APAC (due to the
fading off of the hedging effect). In Greater Africa, the operating margin is stable and reached 11% in
2013.

In the short-run, given the high volatility of raw materials and the unfavorable forex, we estimate an
operating margin of 6% in 2014E. However, in the midterm, we expect EBIT margin to recover from
2015E to reach 9.9% in 2018E, thanks to operating leverage (volume growth) and favorable input
pricing effects from (1) the end of quotas in Europe in 2015; (2) the increase of milk output worldwide;
and (3) the introduction of European dairy futures for skimmed milk powder, butter, etc. by Euronext
in early 2015.

Concerns about the exit of Greece from the Eurozone following the coming legislative elections, the
slowdown in inSlation mainly in Europe due to the ongoing decline in oil prices (versus superior
growth and imported inSlation in the US leading to an interest rate differential) and the likely response
from the ECB (QE announcement) are the cause of the substantial depreciation of the euro against the
dollar (from 1.39 EUR/USD in March 2014 to 1.18 at January 2015). We believe this situation should be
favorable on Bels margins.
6

Figure 19: ROCE decomposition
Capital
Turnover
NOPAT Margin
ROCE 11% 2012

ROCE 7% 2014E
ROCE 11% 2016E

Figure 20: Debt maturity proSile
m
600
500
400
300
200
100
0
Cash 2014 2015 2016 2017 2018 2019 2020 2023

on
hand
Loans & Borrowings
Bonds
Schuldschein
Source: Bel
Figure 21: Evolution of cash Slows
400
300
200
100
0
12th January 2015
ROCE vs. WACC

A comparison between the WACC and the ROCE shows the company employs its capital effectively
and generates shareholder value. Our estimated WACC is 5.5% and is based on no debt capital
structure.

Over the period 2009-2018E, ROCE is always higher than the companys cost of capital. The ROCE of
7% in 2014E is justiSied by the lower NOPAT margin due to high raw material costs and an unfavorable
forex (Figure 19).

Returns To Reach Low Teens
The decrease in ROE between 2013 and 2014E (from 11% to 7%) reSlects the expected decrease in net
income, which is not compensated by leverage (constant between 2013 and 2014E). With the growth
trends in ROA, thanks to a rising net proSit margin, the ROE should move towards the low teens. The
recovery should start at the end of 2014E and ROE is expected to be 13.5% in 2018E (Appendix 22).

Strong Credit Metrics
Bels Sinancial leverage expressed as Net Debt/EBITDA is very low and has been declining for 5 years,
driven both by operating improvement and a huge amount of cash (510m in 2013) with the issuance
of two bonds in 2012 and Schuldschein loans in 2013. The ratio has dropped from 1.3x in 2009 to
reach 0.07x in 2013. From 2015E, Bel should have a net cash position of 23m, implying a Net Debt/
EBITDA ratio of -0.07x, which reaches -0.4x in 2018E. Therefore (1) Bel can easily comply with its debt
covenants (Net Debt/EBITDA 3.5x); and (2) it leaves signiSicant room for external growth (leverage
of 3x Net Debt/EBITDA should provide an M&A treasury chest of close to 1bn on top of the companys
existing cash position, which should reach 509m in 2018E) without resorting to a capital increase.

Cash on the balance sheet (510m) is more than sufSicient to cover short-term debt (106m) as well as
debt maturing in 2018 and 2019 (Figure 20).

Cash Flows
Operating cash Slows have always been close to 200m pa, except in 2011 due to weak earnings and an
increase in NWC. We expect the OCF to reach a trough in 2014E due to the weak operating proSit, but it
should recover from 2015E (Figure 21).
Investing cash Slows increased year-on-year to reach 146m in 2013. We expect this trend to continue,
linked to strong capital expenditures. Capital expenditures reached a peak in 2013 at 149m due to the
construction of the Brookings production site (113m). Since Bel does not plan to build any new
factory, we expect growth CapEx to go back slowly toward a lower normalized level while maintenance
CapEx should be slightly higher compared to 2012. From 2016, Bel should have achieved its
investment plan, hence a steady CapEx/Sales ratio of 4%.

Valuation
( 100)
( 200)
( 300)
( 400)
Net Operating Cash Flow

Net Investing Cash Flow
Net Financing Cash Flow
Source: Bel
Figure 22: Sales forecasts
4 000
10%
Bel currently trades at 8.8x EV/EBIT 2015E, which is a 9.5% discount to its historical average. The
stock also trades on a 28% discount to its peers, despite showing stronger EBIT CAGR 2013-15E (8.2%
vs. 5.6% for its closest peers).
We valued Bel using a blend of DCF (60%), relative (20%) and transaction (20%) valuation. We took
liquidity into account in each method by applying a discount of 11% based on Damodaran synthetic
bid-ask spread method (Appendix 23).
We derived a target price of 399, which points to 33% upside potential, in full support of our BUY
recommendation.
By incorporating the company strategy over a longer period and giving an intrinsic value, the DCF
method appears quite appropriate for Bel, we thus gave it a 60% weighting. The transaction method
was given a weight of 20% because it represents the M&A trend in the Food & Beverages (F&B)
industry. Finally, we used relative valuation with a blend of peers multiples and a multiple factor
regression. We decided to give a weight of 20% to this method since this reSlects the markets current
value assessment of sector peers and, hence, of Bel itself.

I. Discounted Cash Flows

2 000
5%
0%
2014E 2015E 2016E 2017E 2018E
Americas - APAC
Europe
Sales growth
The DCF model captures the long-term potential of gaining market share in the smaller, but faster
growing emerging markets, which embodies Bel strategy. The DCF analysis gave us a target value of
373 (+24%) assuming a WACC of 5.5% (derived entirely from the cost of equity, which itself is
impacted by the stocks low beta of 0.4) and a liquidity discount of 11%.

A 6% Sales Growth Driven By Americas APAC

Bel strategy of further expansion of its core brands and an appropriate product mix should allow the
group to capture more market share in APAC. In the US, the new production plant will allow Bel to gain
more market share thanks to growing and sustainable demand. We therefore expect a 2013-18E CAGR
of 11% for the region (to 19% of group sales in 2018E).


Figure 23: WACC assumptions
Rf
0.8%
Beta
0.41
Market risk Premium (RMRF)
5.9%
SMB Premium
3.4%
HML Premium
-1.1%
Cost of equity
5.5%
Equity as a % of target capital structure
100%
WACC
5.5%
Sources: FactSet, Damodaran, Team

estimates
Figure 24: Sensitivity analysis
WACC
4%
5.5%
7%
Liquidity 6%
Discount 11%
465
393
341
440
373
323
16%
415
352
305

Figure 25: EV/Sales 15E vs. EBIT margin 15E
3.0
R = 0.81098
2.5
EV/Sales 15E
MDLZ
KRFT
2.0
GL9
1.5
DMND
LNCE
1.0
0.5
PLT
BH
0.0
0%
5%
BN
SAP
THS
FBEL
10%
15%
EBIT Margin 15E
Sources: FactSet, Team estimates

Figure 26: Regression inputs (2015E)
Intercept
1.0
Leverage
0.1
EPS growth rate
0.2
Payout
0.4
Beta
0.4
ln(Market Cap)
21.7
ROE
0.1
Amihud
0.0007
S50
fP/E
18
Sources: Thomson Reuters, Team

estimates
20%
12th January 2015
Western Europe: The Largest Region

Though it is a mature market, Western Europe should remain the core market for Bel with the highest
per capita consumption (86 per capita in 2013). We estimate a 2013-18E CAGR of 3% sales growth
in Europe (including Western, Northern and Eastern), which should represent approximately 53% of
Bel sales in 2018E.

Africa & Middle East: High Potential Future Engine But Underdeveloped Environment
We expect growth in Africa and Middle East to reach a CAGR 2013-18E of 10%, driven by the
development of modern distribution channels (especially in Egypt and Iran), strong population growth
(2% CAGR to 2018E) and an increase in per capita consumption of cheese (from 5 in 2013 to 7 per
capita in 2018E). Except for some countries in Asia, cheese is already part of the daily diet, but the
growth rate should strengthen as refrigeration becomes more widespread.

DeYining the WACC
We calculated the cost of equity based on the Fama-French multifactor model (FFM) using European
data since 2000. In fact, since Bel is a small-cap, the FFM appears more appropriate than the CAPM. The
beta of 0.4 was derived using Dimson-Scholes methodologies to take into account infrequent trading.
The current Frances 10-Year OAT was used as the risk-free rate (0.8% at 9th January 2015). Current
yield, reaching high-time lows, drives our WACC to very low levels. This is why we ran sensitivity
analyses as well as Monte Carlo simulation to study the impact of several inputs on the target price, of
which liquidity (Figure 24). Please see Appendices 23 to 29 for further information.

II. Transaction-based Valuation

We analyzed M&A deals (Appendices 30 to 32) executed over the last two years (except for Boursin
which took place in 2007-08) within the Food & Beverages sector (we did not identify any relevant
transaction in the Cheese sector). Only full ownership acquisitions were retained, and we deemed
relevant to include Bels acquisition of Boursin as it perfectly Sits the business proSile (international
brands) and reSlects transactions in the cheese sector. We used the Adj. Deal Value/Sales multiple to
compute the estimated price from which we subtracted a takeover premium of 29% (average premium
since 2011). We obtained a target value of 442 (pointing to 47% upside).

III. Relative Valuation

1. Peers Multiples
We derived a target price of 450 (50% upside) using EV/Sales and EV/EBIT multiples, both based on
12-month forward means and adjusted for liquidity (Appendix 33).

Why We Chose These Two Multiples
We favored using EV/Sales and EV/EBIT over other multiples because the relationship is more
signiSicant and seems more useful in predicting future performance (Figures 24 & 25). We treat both
multiples equally in our valuation as there is no evidence of predominance of one over the other.

Choice of Peers
Closest peers, with a core business as similar as possible to Bels (Bongrain, Parmalat, Glanbia).
High-growth small caps in the F&B sector, to reSlect Bels growth model (Saputo, Diamond Foods,
Synders-Lance, TreeHouse Foods).
Large diversiYied groups, as they are similar in terms of international strategy with their core
brands (Kraft Foods, Danone, Mondelez Int.).

Given the varying features of the three peer groups, we applied a different liquidity discount as well as
a different weight to compute liquidity-adjusted weighted average multiples (details provided in
Appendix 33).

2. Multiple Factor Regression
A broad sample of 200 Sirms was used to regress forward P/E against 7 variables: leverage (LT Debt/
Total Assets), EPS long-term growth rate (g), payout, beta, market capitalization (logarithm), return on
equity, illiquidity ratio (based on Amihuds research). The 5 last variables are dummies corresponding
to sub-sectors. (Figure 26 & Appendix 34).

LTDebt

fP / E = 0 + 1 (
) + 2g + 3payout + 4 beta + 5 ln(marketcap) + 6 ROE + 7 Amihud

TotalAssets

With an expected EPS 2015E of 21.4, we derived a target value of 415 (38% upside).

Combining both target prices with a 50-50 weighting, we obtained a target value of 432 (44%
upside) for relative valuation.
12th January 2015
Investment Risks

(Appendix 35)
Figure 27: 3-month bid-ask spread
10%
8%
LT Average: 3%
6%
4%
2%
0%
Oct. 14
Nov. 14
Dec. 14
Source: FactSet
Figure 28: Raw materials prices
5 000
$/t
4 000
3 000
2 000
1 000
0
Butter
Skim milk in pouder
Whole milk in pouder
Source: OECD
Figure 29: Eurozone HICP (% y/y)
5.0
4.0
3.0
2.0
Source: Eurostat
Dec-14
Dec-13
Dec-12
Dec-11
Dec-10
Dec-09
Dec-08
Dec-07
- 1.0
Dec-06
0.0
Dec-05
1.0
Governance Risk | Family-Held Business

The Bel/Fievet family directly and indirectly owns 70.9% of the shares. Besides, Antoine Fievet is
Chairman and CEO and thus has the decisive power both at the board level and at the management
level. In such a structure, conSlicts of interest between the family and other shareholders might arise.
This could compromise the interest of minority shareholders.

Governance Risk | Lactalis
Lactalis (Besnier family) was a Unibel shareholder until 2005. In 2005, the Bel/Fievet family chose to
reshape the group shareholder structure with a complex share repurchasing transaction. Lactalis
withdrew its 28.5% stake in Unibel but remained a shareholder of Fromageries Bel (24%).

Market Risk | Liquidity
Bel is a small-cap. Free Sloat is very low (4.4%) and its shares are characterized by an unusually wide
bid-ask spread (3% on average over the last 10 years). Such a proSile is likely to keep institutional
investors away from buying the shares (Figure 27). Clearly, raising free-Sloat by, for example, selling
Lactalis stake to the market, would have a positive impact on liquidity and, potentially, valuation
(narrowing of the liquidity discount).

Market Risk | Fluctuation of Raw Materials Prices
Volatility in raw materials prices (milk, powder, butter and cream) can be driven by supply and
demand Sluctuations, but also by weather conditions. Currently, there is a rise in dairy raw material
costs, which is driven by a robust demand in emerging countries (China particularly). Future prices are
not expected to reach 2007-08 peaks as well as those of 2011 and 2013 (Figure 28). On the contrary,
the abolition of dairy quotas in Europe in 2015 should drive milk production upward and put
downward pressure on prices. Despite this, we expect no signiSicant reduction in current price
volatility especially due to a reduction of price intervention in the EU.

Market Risk | Forex Headwinds
As the consolidated Sinancial statements are presented in euro, Bel is exposed to translation effect from
forex Sluctuations. This concerns more than 40 % of Bel total sales. Bel is also exposed to transactional
exchange rate risks, mainly due to commercial commitments carried out in currencies other than the
euro by its subsidiaries. Even if Bel aims at hedging the annual budgetary currency risk through
derivatives, it currently remains exposed to currency volatility. Besides, investments abroad, such as
the Brookings production plant, should act as a natural FX hedge.

Economic Risk | World GDP Growth Slowdown
While European growth forecasts remain weak, deSlation haunts Bels core market (62% of 2013 sales)
and may trigger a vicious circle driving household consumption down. The FED progressive
withdrawal also sows the seeds of doubt on dollar-addicted emerging markets.

Economic Risk | DeYlation Risk
Euro area inSlation has been falling steadily for three years, and slipped into negative territory in
December (-0.2% y/y) for the Sirst time since 2009 (Figure 29). If the situation lasts, there may be
demand-deSicient deSlation , also known as bad deSlation in the Eurozone because consumers
may delay the purchase of goods and services in the expectation that prices will fall. However, this
situation might lead to the intervention of the ECB (QE announcement), offsetting this risk.

Political Risk | Threats of Geopolitical Events
Bels activities are subject to geopolitical events such as an embargo and political crisis. Depending on
the market importance for Bel, those may hit Bels operating margin. In some cases like in Middle East,
Bel has been forced to reconsider its distribution channel.

Strategic Risk | Lack of Aggressiveness
Bel strategy is to innovate through prudent acquisition of new brands. The lack of aggressiveness is
reinforced by a family member as CEO and may deter potential investors from buying the shares.

Operating Risk | Unplanned Breakdown of Production Site
Due to the group strategy, some of the products are manufactured in a limited number of sites or even
in a single site. If an important site is totally or partially damaged, it may have a signiSicant impact on
the manufactured products. Though the group has set up prevention plans and business continuity
plans, the groups operating proSit could be signiSicantly affected.

12th January 2015
Operating Risk | Contamination Risk

As a food manufacturing company, food safety is always a key concern. The risk exists at every stage of
the production cycle: upstream risks (chemical and physical) may inSluence raw materials and input
packaging; downstream risks (bacteriological) for cheese. Any claimed or proven contamination of Bel
products may harm its reputation, business activity and results.

Responsible Corporate Citizen

In 2013, Bel issued publicly its CSR report for the Sirst time. It shows high performance results in using
the Ecovadis Rating tools. Bel is rated with 65/100 in 2013 which has achieved the Gold Status (Figure
30 and Appendix 36).
Suppliers

Environmental
70/100
Bel has been striving to improve its environmental performance. As a partner of WWF, Bel has
developed and complied with many internal and external reference standards (for both their
production sites and their suppliers) aimed at reducing water and energy production, reducing the
waste disposal and limiting greenhouse gas emissions. As a result, Bel has reduced its water
consumption by 11% with a sales growth of 23% from 2008-13.

Social
Subcontractors
As a signatory to the United Nations Global Compact since 2003, Bel has always focused on respecting

human rights. Since its establishment in 2008, Bel Foundation has not only taken action in the
interest of children, their well-being, but has also supported associations and other philanthropic
projects. Furthermore, training programs are taken to develop the skills and promote internal mobility,
43/100
as well as other measures to improve the working conditions.

Governance
Bel keeps an ongoing governance dialogue within the family, in pursuit of the most efSicient balance
between family and business forces. In accordance with AFEP/MEDEF and Middlenext Codes, Bel
Bel (Gold Status)
meets the independence requirement of board of directors. We do however highlight a conSlict of

interest as the CEO, Antoine Fievet (member of the family shareholder), is also the Chairman of the
Board of Directors. The establishment of different committees and existence of Internal Audit
65/100
Department ensures the continuous good functioning of the company. The compensation and beneSits
are publicly released and all their decisions are taken in the shareholders interest (Appendix 37).

Source: EcoVadis

Rating deYinitions:

total return greater than 6%
BUY
Forecast 12-month absolute

total return of +6% to -6%
HOLD
Forecast 12-month absolute

SELL
Forecast 12-month absolute total return less than -6%
Figure 30: 2013 EcoVadis rating
10
12th January 2015

Appendix Table of Contents

Appendix 1. Income Statement
Appendix 2. Balance Sheet
Appendix 3. Cash Flow Statement
Appendix 4. Vertical Common Size Income Statement
Appendix 5. Horizontal Common Size Income Statement
Appendix 6. Vertical Common Size Balance Sheet
Appendix 7. Horizontal Common Size Balance Sheet
Appendix 8. Key Ratios

Business Description
Appendix 9. Factories and R&D Centers Worldwide
Appendix 10. Industrial Expertise
Appendix 11. Five Core Brands
Appendix 12. Acquisitions
Appendix 13. Corporate Structure

Industry Overview
Appendix 14. EU-27 Cheese Production
Appendix 15. Cheese Consumption Worldwide
Appendix 16. EU Quota Regime
Appendix 17. PESTLE
Appendix 18. SWOT Analysis

Financial Analysis
Appendix 19. Sales Forecasts
Appendix 20. Financial Statements Forecasts Explanations
Appendix 21. Non Recurring Income and Expense
Appendix 22. DuPont Analysis

Valuation

Discounted Cash Flows
Appendix 23. Liquidity Discount Calculation
Appendix 24. Free Cash Flows
Appendix 25. Target Price Calculation
Appendix 26. Fama-French Model
Appendix 27. WACC Components
Appendix 28. Sensitivity Analyses
Appendix 29. Monte Carlo Simulation

Transactions
Appendix 30. Comparable Deals

Appendix 31. Deal Value/Sales Ratio of Comparable Deals
Appendix 32. Transaction-based Valuation Target Price

Relative Valuation
Appendix 33. Peers Multiples
Appendix 34. P/E Ratio Regression Model

Investment Risks
Appendix 35. Risk Matrix

Other Headings
Appendix 36. ESG
Appendix 37. Management Board

11
12th January 2015
Appendix 1. Income Statement
Back to content
Income Statement (m)
2009
2010
2011
2012
2013
2014E 2015E 2016E 2017E 2018E
Sales
2 221
2 418
2 527
2 649
2 720
2 828
3 000 3 187 3 392
3 619
Growth
0.2%
8.9%
4.5%
4.8%
2.7%
4.0%
6.1%
6.2%
6.4%
6.7%
Europe
1 472
1 517
1 597
1 612
1 670
1 711
1 759
1 809
1 859
1 911
--
561
549
618
633
696
766
841
924
1 014
Americas - APAC
--
340
381
419
417
421
475
537
609
693
Cost of Goods Sold

Gross Income
(1 445) (1 577) (1 727) (1 741) (1 821) (1 960) (2 010) (2 119) (2 239) (2 370)
776
841
800
Gross Income Margin
34.9%
34.8%
31.7%
34.3% 33.1%
SG&A Expense
(509)
(544)
(531)
(581)
267
297
269
327
12.0%
12.3%
10.6%
Depreciation & Amortization Expense
(72)
(86)
(82)
(89)
(77)
(91)
(98)
(102)
(106)
(110)
EBIT
195
211
187
238
240
169
247
281
318
360
EBIT margin
8.8%
8.7%
7.4%
9.0%
8.8%
6.0%
8.2%
8.8%
9.4%
9.9%
Nonoperating Income - Net
(4)
(6)
(6)
(2)
Interest Expense
(24)
(19)
(21)
(17)
(20)
(9)
(9)
(9)
(9)
(9)
Unusual Expense - Net
(42)
(11)
(16)
(26)
(5)
(20)
(20)
(20)
(20)
(20)
EBT
125
175
144
193
220
145
222
256
293
335
Income Taxes
(37)
(57)
(47)
(63)
(88)
(48)
(74)
(85)
(98)
(112)
Consolidated Net Income
88
118
97
130
131
96
148
171
196
223
Minority Interest
(3)
(1)
(1)
(2)
(6)
(2)
(2)
(2)
(2)
(2)
Net Income
85
117
96
129
126
94
146
169
194
221
EPS (basic)
12.40
16.98
14.07
18.65
18.45
13.85
21.37
24.70
28.38
32.46
EPS (diluted)
12.40
16.98
14.07
18.65
18.45
13.85
21.37
24.70
28.38
32.46
Total Shares Outstanding
6.86
6.86
6.84
6.89
6.82
6.82
6.82
6.82
6.82
6.82
DPS
6.00
5.00
6.25
6.25
6.25
6.25
7.91
10.00
12.65
16.00
48.4%
29.4%
44.4%
EBITDA
EBITDA margin
Payout Ratio (%)
NB: Forecasts calculations are explained in Appendix 20.

12
908
899
1 068 1 153
1 248
30.7%
33.0% 33.5% 34.0%
34.5%
(582)
(608)
(645)
(685)
(729)
(778)
317
260
345
382
424
470
12.4% 11.7%
868
9.2%
990
11.5% 12.0% 12.5%
13.0%
33.5% 33.9% 45.1% 37.0% 40.5% 44.6% 49.3%
12th January 2015
Back to content
Appendix 2. Balance Sheet

Balance Sheet (m)
2009
2010
2011
2012
2013
Cash & ST Investments
117
140
143
451
510
379
464
504
584
509
Short-Term Receivables
414
444
455
458
491
508
528
560
595
631
Inventories
179
224
244
237
259
239
249
264
280
308
Current Assets
709
809
841
1 126
1 240
1 328
1 460
1 447
Net PP&E
549
540
530
524
588
639
661
686
716
752
Net Goodwill
383
389
388
385
381
381
381
381
381
381
Net Other Intangible Assets
311
306
303
296
288
288
288
288
288
288
LT Investments
48
63
64
85
116
116
116
116
116
116
Other Assets
12
11
11
11
10
15
15
15
11
1 303
1 309
1 439
1 461
1 486
1 512
1 545
2 012
2 118
2 701
2 814
2 972
2 992
Non Current Assets

Total Assets
1 146 1 260
1 296 1 301 1 384

2 137 2 447 2 644
2014E 2015E 2016E 2017E 2018E

2 566
ST Debt & Current Portion LT Debt
63
56
78
144
153
47
47
47
47
47
Accounts Payable
275
333
359
368
413
404
442
454
479
508
Other Current Liabilities
143
158
158
156
182
182
199
205
216
236
Current Liabilities
482
547
595
669
748
633
688
706
742
792
Long-Term Debt
410
324
258
363
378
378
378
361
361
198
Provisions
45
49
51
52
78
78
78
78
78
78
Other Liabilities
154
169
172
197
213
198
186
196
210
226
Non Current Liabilities
609
543
481
612
668
654
642
635
649
502
1 090
1 090
1 287
1 330
1 341
1 391
1 293
Common Stock Par/Carry Value
10
10
10
10
10
10
10
10
10
10
Additional Paid-In Capital
22
22
22
22
22
22
22
22
22
22
Retained Earnings
106
135
113
145
1 248
1 300
1 392
1 492
1 599
1 716
Cumulative Translation Adjustment/

Unrealized For. Exch. Gain
(27)
(10)
(17)
(28)
(59)
(59)
(59)
(59)
(59)
(59)
Other Appropriated Reserves
789
852
923
1 018
--
--
--
--
--
--
Treasury Stock
(7)
(7)
(6)
(11)
(8)
(8)
(8)
(8)
(8)
(8)
Total Shareholders' Equity
892
1 002
1 264
1 356
1 457
1 564
1 680
31
26
15
16
17
18
19
923
1 027
1279
1372
1473
1581
1699
2 013
2 118
2566
2701
2814
2972
2992
Total Liabilities
Accumulated Minority Interest

Total Equity
Total Liabilities & Shareholders'
Equity
1 076 1 281 1 417
1 045 1 155 1 213

16
11
14
1 061 1 166 1 227

2 137 2 447 2 644

13
12th January 2015
Appendix 3. Cash Flow Statement

Cash Flow Statement (m)
Back to content
2009
2010
2011
2012
2013
Earnings Before Taxes
125
175
144
193
220
145
222
256
293
335
Depreciation, Depletion & Amortization
122
92
79
93
77
91
98
102
106
110
Other Funds
(15)
(40)
(41)
(41)
(73)
(73)
(73)
(73)
(73)
(73)
Funds from Operations
231
227
182
245
224
162
247
285
326
373
Changes in Working Capital
(4)
(4)
(20)
12
(8)
(6)
(35)
(27)
(34)
Net Operating Cash Flow
227
223
162
257
216
156
255
250
300
338
Capital Expenditures
(79)
(64)
(75)
(81)
(149)
(141)
(120)
(127)
(136)
(145)
Maintenance CapEx
(122)
(92)
(79)
(93)
(77)
(91)
(98)
(102)
(106)
(110)
Growth CapEx
43
28
11
(72)
(51)
(22)
(26)
(30)
(34)
Net Assets from Acquisitions
(1)
(3)
(0)
(0)
Purchase/Sale of Investments
(0)
(1)
(1)
(0)
Other Funds
13
(0)
(66)
(65)
(74)
(80)
(146)
(138)
(117)
(124)
(133)
(142)
(24)
(40)
(48)
(41)
(52)
(43)
(54)
(68)
(86)
(109)
(7)
Issuance/Reduction of LT Debt, Net
(263)
(84)
(52)
178
26
(17)
(163)
Issuance/Reduction of ST Debt, Net
(106)
Other Funds
(7)
10
(2)
14
(286)
(131)
(91)
127
(12)
(148)
(54)
(85)
(86)
(272)
(2)
(0)
(8)
(127)
26
(1)
304
50
(131)
84
40
81
(76)
Sale of Fixed Assets & Businesses
Net Investing Cash Flow
Cash Dividends Paid

Change in Capital Stock
Net Financing Cash Flow
Exchange Rate Effect
Net Change in Cash

14
2014E 2015E 2016E 2017E 2018E
12th January 2015
Appendix 4. Vertical Common Size Income Statement

Vertical Common Size Income
Statement
Sales
2009
2010
Back to content
2011
2012
2013
2014E 2015E 2016E 2017E 2018E
100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of Goods Sold
65.1%
65.2%
Gross Income
34.9% 34.8% 31.7% 34.3% 33.1% 30.7% 33.0% 33.5% 34.0% 34.5%
SG&A Expense
22.9%
EBITDA
12.0% 12.3% 10.6% 12.4% 11.7%
22.5%
68.3% 65.7% 66.9% 69.3% 67.0% 66.5% 66.0% 65.5%
21.1% 21.9% 21.4% 19.8% 22.4% 22.4% 22.0% 22.0%

9.2% 11.5% 12.0% 12.5% 13.0%
Depreciation and Amortization
3.2%
3.6%
3.2%
3.4%
2.8%
3.2%
3.3%
3.2%
3.1%
3.1%
EBIT
8.8%
8.7%
7.4%
9.0%
8.8%
6.0%
8.2%
8.8%
9.4%
9.9%
EBT
5.6%
7.2%
5.7%
7.3%
8.1%
5.1%
7.4%
8.0%
8.6%
9.3%
Net Income
3.8%
4.8%
3.8%
4.9%
4.6%
3.3%
4.9%
5.3%
5.7%
6.1%
2011
2012
2013
2014E 2015E 2016E 2017E 2018E
Appendix 5. Horizontal Common Size Income Statement

Horizontal Common Size Income
Statement
2009
2010
Sales
100.0% 108.9% 113.8% 119.3% 122.5% 127.3% 135.1% 143.5% 152.8% 163.0%
Cost of Goods Sold
100.0% 109.1% 119.5% 120.5% 126.0% 135.6% 139.1% 146.7% 154.9% 164.0%
Gross Income
100.0% 108.4% 103.2% 117.0% 115.9% 111.9% 127.6% 137.6% 148.7% 160.9%
SG&A Expense
100.0% 107.0% 104.5% 114.2% 114.5% 119.5% 126.8% 134.7% 143.4% 153.0%
EBITDA
100.0% 111.1% 100.7% 122.5% 118.8% 97.4% 129.2% 143.2% 158.7% 176.1%
Depreciation and Amortization
100.0% 119.6% 113.3% 123.6% 107.0% 125.8% 136.6% 141.2% 146.7% 153.1%
EBIT
100.0% 107.9% 96.0% 122.2% 123.1% 86.9% 126.3% 143.8% 163.1% 184.5%
EBT
100.0% 140.4% 115.8% 155.1% 176.4% 116.2% 178.1% 205.4% 235.6% 269.2%
Net Income
100.0% 136.9% 113.1% 151.1% 148.0% 111.0% 171.4% 198.1% 227.6% 260.3%
15
12th January 2015
Appendix 6. Vertical Common Size Balance Sheet

Vertical Common Size Balance Sheet 2009
Current Assets
35.2%

Non Current Assets
64.8%

Total Assets
100.0%

Current Liabilities
44.2%

55.8%

Total Liabilities
54.2%

Shareholders Equity
44.3%

Total Equity
45.8%

Liabilities and Equity
100.0%
Back to content
2010 2011 2012 2013 2014E

38.2% 39.4% 46.8% 47.6% 43.9%

61.8% 60.6% 53.2% 52.4% 56.1%

100.0% 100.0% 100.0% 100.0% 100.0%

50.2% 55.3% 52.2% 52.8% 49.2%

49.8% 44.7% 47.8% 47.2% 50.8%

51.5% 50.3% 52.4% 53.6% 50.2%

47.3% 48.9% 47.2% 45.9% 49.3%

48.5% 49.7% 47.6% 46.4% 49.8%

100.0% 100.0% 100.0% 100.0% 100.0%
2015E 2016E 2017E 2018E

45.9% 47.2% 49.1% 48.4%
54.1%
52.8%
50.9%
51.6%
100.0% 100.0% 100.0% 100.0%

51.7%
52.7%
53.4%
61.2%
48.3%
47.3%
46.6%
38.8%
49.2% 47.7% 46.8% 43.2%

50.2%
51.8%
52.6%
56.2%
50.8% 52.3% 53.2% 56.8%

100.0% 100.0% 100.0% 100.0%
Appendix 7. Horizontal Common Size Balance Sheet

Horizontal Common
Size Balance Sheet
Current Assets
Non Current Assets
Total Assets
Current Liabilities
Total Liabilities
Shareholders Equity
Total Equity
Liabilities and Equity
2009
100.0%

100.0%

100.0%

100.0%

100.0%

100.0%

100.0%

100.0%

100.0%
2010
2011
2012
2013
2014E 2015E 2016E 2017E 2018E
114.1% 118.6% 161.6% 177.7% 158.9%

100.4% 99.4% 99.8% 106.2% 110.4%

105.2% 106.2% 121.6% 131.4% 127.5%

113.6% 123.5% 138.8% 155.3% 131.5%

89.2% 79.0% 100.6% 109.9% 107.4%

100.0% 98.7% 117.5% 129.9% 118.0%

112.3% 117.2% 129.5% 136.0% 141.7%

111.4% 115.0% 126.4% 133.0% 138.6%

105.2% 106.2% 121.6% 131.4% 127.5%
16
175.0% 187.3% 205.9% 204.2%

112.1% 114.1% 116.0% 118.5%
134.2% 139.9% 147.7% 148.7%
142.8% 146.6% 154.1% 164.3%
105.4% 104.3% 106.6% 82.4%
122.0% 123.0% 127.6% 118.6%
152.0% 163.3% 175.3% 188.4%
148.7% 159.7% 171.4% 184.2%
134.2% 139.8% 147.7% 148.7%
12th January 2015
Appendix 8. Key Ratios
Back to content
Key Ratios
Activity Ratios
1. Receivables Turnover
2. Days of Sales Outstanding (DSO)
3. Inventory Turnover
4. Days of Inventory on Hand (DOH)
5. Payables Turnover
6. Number of Days of Payables
7. Total Asset Turnover
8. Fixed Asset Turnover
9. Working Capital Turnover
10. WC/Sales
11. WCR/Sales
12. CapEx/Sales
2009

5.1
71.2
7.6
47.8
5.8
62.7
1.0
4.0
12.6
7.8%
14.3%
3.6%
2010

5.6
64.8
7.8
46.6
6.5
56.1
1.2
4.4
13.8
7.3%
13.8%
2.6%
2011

5.6
64.9
7.4
49.4
6.3
57.6
1.2
4.7
14.1
7.2%
13.4%
3.0%
2012

5.8
62.9
7.2
50.4
6.1
59.8
1.2
5.0
15.1
6.4%
12.3%
3.1%
Liquidity ratios
1. Current Ratio
2. Quick Ratio
3. Cash Ratio
4. Cash Conversion Cycle
5. ST Debt/Cash
6. CFO/Sales

1.5
1.1
0.2
56.3
0.5
10.2%

1.5
1.1
0.3
55.2
0.4
9.2%

1.4
1.0
0.2
56.7
0.5
6.4%

1.7
1.4
0.7
53.5
0.3
9.7%
Solvency ratios
1. Net Debt
2. Net Debt/Equity
3. Net Debt/EBITDA
4. Net Debt/EBITDA Minus CapEx
5. Total Debt/Total Assets
6. Total Debt/EBITDA
7. LT Debt/EBITDA
8. Asset/Equity
9. Interest Coverage
10. CFO/Interest Expense
11. EBITDA/Interest Expense

356.6
0.4
1.3
1.9
0.2
1.8
1.5
2.4
8.0
9.3
10.9

239.7
0.3
0.8
1.0
0.2
1.3
1.1
2.1
11.0
11.7
15.5

193.3
0.2
0.7
1.0
0.2
1.2
1.0
2.0
8.8
7.6
12.6

56.7
0.1
0.2
0.2
0.2
1.5
1.1
2.1
13.7
14.7
18.8
ProYitability ratios
1. Net ProSit Margin
2. Gross ProSit
3. EBITDA Margin
4. EBIT Margin
5. EBT Margin
6. ROA
7. Operating ROA
8. Return on Total Capital
9. ROE (Shareholder Equity)
10. ROCE (SH Equity + LT Debt)

3.8%
34.9%
12.0%
8.8%
5.6%
4.0%
9.1%
6.3%
9.5%
10.0%

4.8%
34.8%
12.3%
8.7%
7.2%
5.6%
10.2%
8.5%
11.9%
10.8%

3.8%
31.7%
10.6%
7.4%
5.7%
4.5%
8.8%
7.0%
9.2%
9.6%

4.9%
34.3%
12.4%
9.0%
7.3%
5.6%
10.4%
8.4%
11.5%
11.4%
1.1
0.9
1.1
1.0
-2.4
1.1
-2.8
5.7
1.1
6.1
DOL
DFL
DTL
17
2013

5.7
63.7
7.3
49.7
5.9
61.5
1.1
4.9
16.7
5.7%
12.4%
5.5%

1.7
1.3
0.7
51.8
0.3
7.9%

20.7
0.0
0.1
0.1
0.2
1.7
1.2
2.1
12.3
11.0
16.2

4.6%
33.1%
11.7%
8.8%
8.1%
4.9%
9.4%
7.4%
10.5%
9.3%

0.3
1.1
0.3
2014E

5.7
64.4
7.9
46.4
6.0
60.7
1.1
4.6
17.9
5.7%
12.1%
5.0%
2015E

5.8
63.0
8.2
44.3
5.9
61.8
1.1
4.6
20.2
4.5%
11.2%
4.0%
2016E

5.9
62.3
8.3
44.2
5.9
62.1
1.2
4.7
21.2
5.2%
11.6%
4.0%
2017E

5.9
62.1
8.2
44.4
6.0
61.2
1.2
4.8
19.6
5.3%
11.7%
4.0%
2018E

5.9
61.8
8.1
45.3
6.0
60.9
1.2
4.9
19.3
5.4%
11.9%
4.0%

1.8
1.4
0.6
50.2
0.1
5.5%

1.8
1.4
0.7
45.5
0.1
8.5%

1.9
1.5
0.7
44.3
0.1
7.8%

2.0
1.6
0.8
45.3
0.1
8.8%

1.8
1.4
0.6
46.2
0.1
9.4%

60.0
0.0
0.2
0.5
0.2
1.7
1.5
2.1
19.3
17.8
29.6

3.3%
30.7%
9.2%
6.0%
5.1%
3.6%
6.5%
5.5%
7.5%
7.0%

-23.4
0.0
-0.1
-0.1
0.2
1.3
1.1
2.0
28.0
29.0
39.2

-62.7
0.0
-0.2
-0.2
0.2
1.2
1.0
1.9
31.8
28.3
43.4

-142.4
-0.1
-0.3
-0.5
0.1
1.0
0.9
1.9
36.0
33.9
48.0

-65.6
0.0
-0.1
-0.2
0.1
0.9
0.8
1.8
40.6
38.2
53.1

4.9%
33.0%
11.5%
8.2%
7.4%
5.5%
9.4%
8.3%
11.0%
9.7%

5.3%
33.5%
12.0%
8.8%
8.0%
6.1%
10.2%
9.1%
11.8%
10.5%

5.7%
34.0%
12.5%
9.4%
8.6%
6.7%
11.0%
9.9%
12.7%
11.3%

6.1%
34.5%
13.0%
9.9%
9.3%
7.4%
12.1%
10.7%
13.5%
12.6%
-7.4
1.1
-7.8
7.5
1.0
7.7
2.2
1.0
2.3
2.1
1.0
2.1
2.0
1.0
2.0
12th January 2015
Appendix 9. Factories and R&D Centers Worldwide
Back to content
Legend:
Factories
R&D Centers
Bel Headquarters
Source: Bel
18
12th January 2015
Appendix 10. Industrial Expertise
Back to content
Mini Babybel
The curd grains are molded and will then be pressed. After an average resting period of 15 hours, the Mini Babybel cheeses
will be wrapped in a wax coating designed to protect and conserve them.
Kiri
The milk and cream are mixed and then pasteurized. Lactic ferments, dairy proteins, emulsifying salts, and a pinch of salt and
milk calcium are added to the mix. Kiri is cooked then hot molded in aluminum shells.
Source: Bel
19
12th January 2015
Appendix 11. Five Core Brands
Brand
Back to content
Ranking
Worldwide
# Countries
#4
136
Fresh & Spreadable

Cheese
#12
N/A
1977
Pressed Cheese
#6
76
2002
Pressed Cheese
#11
27
2008
Fresh & Spreadable

Cheese
N/A
Year
Type of Cheese
Creation
1921
Processed Cheese
1966
Acquisition
Source: Bel
Appendix 12. Acquisitions

Date of
Completion
November-85
January-91
July-94
November-94
February-96
April-96
May-00
June-00
December-02
February-06
January-07
April-07
January-08
April-08
April-08
October-14
Target Name
Target Nation
% Acquired
Nestle Foods - Wispride Brand

Maredsous
Cademartori Introbio
Queserias Ibericas
Kaukauna Cheese Wisconsin
Grupo Lacto
Zeletavska Syrarna
Zempmilk
Leerdammer Co
Kars Karper Peynir ve Gida
Groupe Danone SA - Gervais Brand
Shostka City Milk Factory
Boursin
Jaromericka Mlekarna
J & R
Granja La Luz
United States
Belgium
Italy
Spain
United States
Portugal
Czech Republic
Slovak Rep
Netherlands
Turkey
Czech Republic
Ukraine
France
Czech Republic
Czech Republic
Spain
100%
100%
75%
83%
100%
100%
100%
51.1%
100%
-
100%
100%
100%
100%
71.5%
100%
Source: Thomson Reuters

20
12th January 2015
Appendix 13. Corporate Structure
Back to content
Board of Directors
Luc Luyten
James Lightburn
Philippe Deloffre
Fatine Layt
Michel Arnaud
Florian Sauvin
Pascal Vinot (UNIBEL)
Executive Committee
Bruno Schoch
Deputy General Manager in charge of
Finance, Legal affairs and IT systems
Antoine Fivet
CEO & Chairman
Francis Le Cam
Deputy General Manager
in charge of Operations
Hubert Mayet
General Manager in charge of Group
Manufacturing and Technical Division
Chantal Layuela
Vice-President Research and Innovation
Philippe Champlong
Vice-President Bel Asia-PaciSic
Etienne Lecomte
Vice-President Bel Western Europe
Eric de Poncins
Executive Vice-President Group
Strategy, Development and
Transformation
Guillaume Jouet
Vice-President Human Resources,
Communications and Corporate Social
Responsibility
Management Committee
Frdric Nalis
Vice-President Bel America
Joe Tayard
Vice-President Bel Near and Middle East
Robert Schlingensiepen
Vice-President Bel North East Europe
Source: Bel
21
Jennifer Marquet
Vice-President Marketing
Chakib Seddiki
Vice-President Bel Greater Africa
12th January 2015
Appendix 14. EU-27 Cheese Production (thousand tons)
Back to content
16
Slovenia
Cyprus
Latvia
Slovakia
Estonia
Bulgaria
Hungary
Portugal
Romania
Belgium
Sweden
Finland
Lithuania
Czech Rep.
Austria
Greece
Spain
Denmark
United Kingdom
Poland
Netherlands
Italy
France
Germany
20
33
33
44
68
68
70
70
79
2013
89
102
2007
113
118
158
187
315
325
349
732
793
1158
1936
2182
500
1000
1500
2000
2500
Source: Eurostat
Appendix 15. Cheese Consumption Worldwide (kg per capita)
China
South Africa
1.7
South Korea
2.2
U.K.
11.6
U.S.
15.4
Sweden
19.8
Austria
19.9
Lithuania
20.1
Italy
20.7
Switzerland
21.3
Estonia
21.7
Germany
24.3
Finaland
24.7
Iceland
25.2
France
25.9
0
10
15
Source: International Dairy Foundation
22
20
25
30
12th January 2015
Appendix 16. EU Quota Regime
Back to content
The EU introduced a national quota regime for milk production in 1984 to limit excess supply and maintain farmer proSitability.
This regime will come to an end in April 2015 as the EU moves the dairy sector towards a more market-orientated future, but one that
protects producer interests.

It is worth noting that the vast majority of European countries have produced materially below quota in recent years (except
Germany and the Netherlands), because the EU has been attempting a soft landing through the gradual increase of quota levels
(+1% per year from 2009 through 2013) and reduction of support levels.

Here is a summary of the main academic papers on the abolition of EU milk quotas (actual vs. baseline scenario in 2020):
Date
Source
Conclusions
2012
Prospects for agricultural markets and income in the EU 2012-2022,

European Commission, Agriculture and Rural Development, December
2012
The end of quotas will have a very

limited impact. Market forces rather
than regulatory changes will drive
production and pricing
2011
M. Kempen, H.P. Witzke, I. Prez Dominguez, T. Jansson, P.Sckokai,

Economic and environmental impacts of milk quota reform in Europe,
Journal of policy modeling, Volume 33: 29-52, 2011
Increase in milk production of 4.4%,

drop in raw milk prices of 10%
2008
H.P. Witzke, A. Tonini, Dairy reform scenarios with CAPSIM

acknowledging quota rent uncertainty, 12th Congress of the European
Association of the Agricultural Economics - EAAE, 2008

drop in raw milk prices of 7.5%.
2008
2008
V. Rquillart, Z. Bouamra-Mechemache, R. Jongeneel C. Penel, Economic

analysis of the effects of the expiry of the EU milk quota system, Institut
dconomie industrielle, March 2008

drop in raw milk prices of 11%.

2008
F. Chantreuil, T. Donnellan, M. van Leeuwen, P. Salamon, A. Tabeau, L.

Bartova, EU Dairy Quota Reform - AGMEMOD Scenario Analysis, 12th
Congress of the European Association of the Agricultural Economics -
EAAE, 2008


drop in raw milk prices of 7%.
We therefore expect:

1. An overall increase in production coupled with declining prices. We expect the impacts to be modest due to the soft
landing provided by the EU.

2. No reduction in current price volatility after the end of quotas.
23
12th January 2015
Appendix 17. PESTLE
P

E

S

T

L

E
Back to content
POLITICAL
Rise of protection barriers against consumption and manufactured goods
Geopolitical crisis
ECONOMIC
High volatility of forex and commodities exchange markets
Substantial growth in urbanization and Middle Class in emerging markets
SOCIAL
Current trends in consumption industry:

(1) On-the-go consumption
(2) Healthy food
(3) Gourmet snacking
TECHNOLOGICAL
Development of the product mix particularly focusing on the higher value added products in order to
be less reliant on low margin commodity product (miniaturization and new formula)
Involvement of genomic technology
LEGAL
Legal requirements relative to consumer staples

End of quota in Europe
ENVIRONMENTAL
Climate change adaptation
Ecological footprint
Appendix 18. SWOT Analysis

WEAKNESSES
STRENGTHS
Strong product identity: 5 core brands
Presence of Lactalis in shareholding structure
Portion format: Expertise in miniaturization
Lack of presence in South America
Room for acquisition (sound Sinancial structure)
Outsourcing of the packaging production.
OPPORTUNITIES
OPPORTUNITIES
SWOT
THREATS
Consumption trends (on-the-go, healthy and gourmet snacking)
Commodities and forex headwinds
Quotas abolition in Europe
Sanitary issues and reputation risks
Distribution channel development
Competition of retail label

Geopolitical risks in Middle East
24
12th January 2015
Appendix 19. Sales Forecasts
Back to content
To forecast Bel sales, we used a model based on the cheese market size (per capita consumption of cheese and population size) and
Bel market share. Due to the various degrees in the maturity of the cheese market, we based our model on the market size by region.
Since Bel changed its geographical breakdown in 2010, we lacked historical sales before that year.

To obtain the market size for the period 2014E-18E, we multiplied the population of each region (source: United Nations) by per
capita consumption in USD (source: Euromonitor). Then, we translated it in EUR with EUR/USD of 1.3391 at 1st August 2014
(release date of the Euromonitor report).

The biggest growth comes from Asia-PaciSic, followed by Near Middle East & Greater Africa and Latin America, which has pushed up
the sales of soft cheese in 2014 and should have a high potential in the future.

Table 1: Estimates of per capita cheese consumption
2014E
2018E
CAGR 2014E-18E
Europe
86
88
0.5%
6.0%
APAC
18.5%
Northern America
55
58
1.0%
Latin America
30
36
5.0%
Source: Euromonitor
We estimate that Bel global market share should reach 3.1% in 2018E from 2.8% in 2013. In Europe, the market share should grow
steadily to reach 3.7% in 2018E. In the rest of the world, the market share should grow more rapidly, and in 2018E, the market
share outside of Europe should reach 2.6%.
Table 2: Estimates of Bel market share

2014E
2018E
World
2.8%
3.1%
Europe
3.4%
3.7%
9.3%
9.8%
1%
1.3%
Americas - APAC
Sources: Team estimates, United Nations
Table 3: Estimates of Bel sales

bn
2014E
2018E
CAGR 2014E-18E
World
2 828
3 619
6.4%
Europe
1 711
1 911
2.8%
696
1 014
9.9%
Americas - APAC
421
693
13.3%

NB: Estimates are mid-point of a wider range of possible outcomes.
25
12th January 2015
Appendix 20. Financial Statements Forecasts Explanations

Income Statement
Sales / Revenue
COGS
SG&A Expense
Depreciation & Amortization Expense
Non-Operating Income - Net
Interest Expense
Other Financial Income and Expense
Unusual Expense - Net
Income Taxes
Minority Interest
Balance Sheet
Cash & ST Investments
Short-Term Receivables
Inventories
Net PP&E
Net Goodwill
Net Other Intangible Assets
LT Investments
Other Non Current Assets
ST Debt & Current Portion LT Debt
Accounts Payable
Other Current Liabilities
LT Debt
Provision for Risks & Charges
Other Liabilities
Common Stock Par/Carry Value
Additional paid-in capital/Capital Surplus
Retained Earnings
Back to content
Explanations
Based on our Sales forecasts (Appendix 19)
Diminishing proportion of sales
Historical trend
Historical median of DAn / PPE n-1
Constant
Interest Expense = Total Debtn * interest rate
Constant
Constant
Income Taxes = EBTn * effective tax rate
Historical average

Explanations
Cash & ST Inv.n = Cashn-1 + Net change in Cash
Historical median of Receivablesn / Salesn+1
Historical median of Inventoriesn/ Salesn+1

Net PPEn = Net PPEn-1 - DAn + CapExn
Constant
Constant
Constant
Historical trend

ST Debtn = ST Debtn-1 + Issuance or Reduction of ST Debtn
Historical median of ACC Payablen / (COGSn-1 + Inventoriesn)
Historical median of Other Current Liabsn / (COGSn-1 + Inventoriesn)

Bond reductions: 17m in 2016, 163m in 2018 / Constant the other years
Constant
Historical trend

Constant
Constant
Retained earningsn= Retained earningsn-1 + NIn -Dividend paidn
Cumulative Translation Adj/Unrealized For. Exch. Gain
None
Other Appropriated Reserves

Treasury Stock
Minority Interest
None
Constant
Constant percentage of sales
Cash Flow Statement

Consolidated Net Income
Depreciation, Depletion & Amortization
Others Funds
Changes in Working Capital
Explanations

Historical median of DAn / PPE n-1
Constant
WC=Inventories+Receivables-Payables

Capital Expenditures
Maintenance Capex
Growth Capex
Purchase/Sale of Inv.
Cash Dividends Paid
Change in Capital Stock
Issuance/Reduction of LT Debt, Net
Issuance/Reduction of ST Debt, Net
Other Funds
Exchange Rate Effect
Depreciation
Total CapEx Maintenance CapEx
Purchase/Sales of Inv.=LT Debtn-LT Debtn-1
Team estimates
None
Issuance or Reduction of LT Debt = LT debtn - LT Debt n-1
None
None
None

26
12th January 2015
Appendix 21. Non Recurring Income and Expense
50 000
Back to content
45 000
40 000
35 000
30 000
25 000
20 000
15 000
10 000
5 000
0
2009
2010
2011
2012
2013
Gains (losses) on the sales of Sixed assets
Gains (losses) on the sales of activities
Restructuring costs
Other non recurring income and expense
Year
Explanations
2009
Write-downs of goodwill in Ukraine, Turkey and the Czech Republic for 20.9m.
2010
Economic conditions in Ukraine led to a further depreciation of 9m of tangible assets.

Loss of 2.5m for the disposal of the Czech entity.
2011
The group wrote down a further 9m on its Iranian entity based on impairment testing. Additionally, in Syria, the
group suspended its manufacturing activity in mid-July 2012 for safety reasons, and recorded a non-recurring expense
of 13.9m, including net provision charges.
2012
The group suspended its manufacturing activity in mid-July 2012 in Syria for safety reasons, and recorded a non-
recurring expense of 13.9m, including net provision charges. The group wrote down a further 7.5m on its Iranian
entity based on impairment testing.
2013
4.5m impairment loss write-down on local US brands. The write-down was offset by the reversal of provisions
totaling 4.2m for tangible and intangible assets and current assets belonging to the Syrian and Iranian entities.
Source: Bel
27
12th January 2015
Appendix 22. DuPont Analysis
2010
2013
2016E
Legend
2011
2014E
2017E
Back to content
2012
2015E
2018E
ROE
9.2%
7.5%
12.7%
11.9%
10.5%
11.8%
5.6%
4.9%
6.1%
4.8%
4.6%
5.3%
Net ProYit Margin

3.8%
3.3%
5.7%
ROA
4.5%
3.6%
6.7%
5.6%
5.5%
7.4%
4.9%
4.9%
6.1%
11.5%
11.0%
13.5%
211.8%
212.7%
193.5%
117.1%
212.7%
193.5%
Leverage
203.7%
207.7%
189.3%
Asset Turnover
118.8%
207.7%
189.3%
205.8%
198.3%
182.0%
115.6%
198.3%
182.0%
14%
3.0
12%
2.5
10%
2.0
8%
1.5
6%
1.0
4%
0.5
2%
0%
0.0
ROE
ROA
28
Leverage
12th January 2015
Appendix 23. Liquidity Discount Calculation
Back to content
1. Methodology: Synthetic bid-ask spread method

We used 11% as the liquidity discount for Bel, which is based on the synthetic bid-ask spread developed by Damodaran.

To calculate the illiquidity discount, A. Damodaran developed the synthetic bid-ask spread method, regressing the bid-ask spread
against annual revenues, a dummy variable for positive earnings (DERN), cash as a percent of Sirm value and trading volume, using
data from the end of 2000. The synthetic bid-ask spread is given by the following equation:

Cash
MonthlyTradingVolume
Spread = 0.145 - 0.0022ln(AnnualRevenues)- 0.015(DERN)- 0.016
- 0.11

FirmValue
FirmValue

Table 1. Liquidity discount of Bel

Bel
CoefYicient

Intercept
0.145

Annual Revenue (2013, m)
2 720
-0.0022

0.23
-0.016
Cash / Firm Value
DERN1
1
-0.015

2
0.0
-0.11
Monthly Trading Volume / FV
Liquidity Discount
11%

1 DERN = 1 if earnings are positive ; O if earnings are negative
2The Monthly trading volume of Bel is based on the company data in 2013.
Sources: Factset, Bel, Damodaran

2. Liquidity of peers

Each peer group has a different liquidity proSile. This is why we analyzed the liquidity of each company, looking at the daily average
volume in 2014.
Since the Large DiversiSied F&B peer group is highly liquid, we applied the 11% liquidity discount to adjust the multiples. However,
we did not apply any liquidity discount to the other two peer groups as they also have weak liquidity.
Figure: Daily average volume in 2014 (m)
m
7.92
8
7
6
5
4
2.65
1.64
2
1
0.00
0.00
0.30
0.68
0.47
Source: Bel
29
0.34
0.16
0.28
12th January 2015
Appendix 24. Free Cash Flows
Back to content
Year
EBIT
as a % of sales
2009
195
8.8%
2010
211
8.7%
2011
187
7.4%
2012
238
9.0%
2013
240
8.8%
2014E
169
6.0%
2015E
247
8.2%
2016E
281
8.8%
2017E
318
9.4%
2018E
360
9.9%
Tax
Tax rate
37
29.5%
57
32.6%
47
32.7%
63
32.6%
88
40.1%
48
33.3%
74
33.3%
85
33.3%
98
33.3%
112
33.3%
EBIT (1-t)
as a % of sales
158
7.1%
154
6.4%
140
5.5%
175
6.6%
152
5.6%
121
4.3%
173
5.8%
195
6.1%
220
6.5%
248
6.9%
Depreciation
as a % of sales
72
3.2%
86
3.6%
82
3.2%
89
3.4%
77
2.8%
91
3.2%
98
3.3%
102
3.2%
106
3.1%
110
3.1%
-4
-4
-20
12
-8
-6
-35
-27
-34
Capex
as a % of sales
79
3.6%
64
2.6%
75
3.0%
81
3.1%
149
5.5%
141
5.0%
120
4.0%
127
4.0%
136
4.0%
145
4.0%
Free Cash Flow (FCF)

Discounted FCF
TV
156

180

167

172

88

77

143
135
204
184
217
185
248
200
2 578
Change in NWC
To estimate terminal value in 2018E, we used a residual income model (Ohlson). This model suggests that g2018E (deSined as ROE x
Rentention Rate, RR) converges on a value implying a gradual decrease between ROCE and the WACC, using a persistence factor ().
Terminal value is therefore equal to the following:

1/
EBIT2019E (1/ t)
WACC

TV2018E = (NetPPE2018E + NWC2018E )
+
1+ WACC /
WACC
1+ WACC /

where:
EBIT2019E = EBIT2018E x (1+g2018E)
g2018E = ROE2018E x RR2018E = 7%
=1- ke= 0.945

Appendix 25. Target Value Calculation
Discounted Cash Flows
704
25%
Discounted Terminal Value
2 080
75%
Implied EV (2014E)
Net Debt (2014E)
Minorities (2014E)
2 783
60
15
Implied Equity (2014E)
2 709
Implied Equity (2015E)1
2 858
Number of Shares (2015E)
6.8
Implied Share Price (EUR)
419
Liquidity Discount
11%
Target Value (EUR)
373
1 Implied Equity (2014E) x(1+ k
Sources: Team estimates
e)
30
12th January 2015
Appendix 26. Fama-French Model
Back to content
Since Bel is a small-cap, we decided to use the Fama-French three-factor model (FFM) to compute the cost of equity, which appears to
be a better measure of market returns compared to the CAPM. In fact, research shows that two classes of stocks have tended to do
better than the market as a whole: (1) small-caps and (2) stocks with a low Price-to-Book ratio.

The three factors are:

RMRF, which is the equity risk premium as in the CAPM.
SMB (Small Minus Big), a size factor. It is the difference between small-cap and large-cap returns. It is thus a small-cap return
premium.
HML (High Minus Low), a value factor. It is the difference in returns between value and growth stocks.

The FFM estimate of the required rate of return is:

size
value
k e = rf + mkt RMRF
HML
+ SMB+

We regressed the excess return of Bel monthly stocks (since 2000) and Rf (Fama-French data) against the three FF factors (RMRF,
SMB, HML based on FF European data since 2000). The linear regression gives us an R-Squared of 21%.

We applied Dimson (1979) and Scholes (1977) methodology to obtain the beta. In fact, the true systematic risk (market beta) can be
obtained from security price data subject to infrequent trading. We thus ran a multiple regressions of security returns against lagged,
matching and leading market terms. A consistent estimate of beta is obtained by aggregating the slope coefSicients from this
regression (here, from variables RMRFT-2 to RMRFT+2). The same methodology has been used to obtain an estimate of SMB and HML
coefSicients. Below is a summary of the results of the regression:
Regression Statistics
0.45
0.21
0.13
6.06
Multiple R
R-Squared
Adjusted R-Squared
Standard Error
Observations
ANOVA
174

Regression
Residual
Total

Intercept
RMRF T-2
RMRF T-1
RMRF T
RMRF T+1
RMRF T+2
SMB T-2
SMB T-1
SMB T
SMB T+1
SMB T+2
HML T-2
HML T-1
HML T
HML T+1
HML T+2

df
15
158
173
CoefYicients
0.50
0.23
0.13
0.04
0.17
-0.15
-0.09
0.32
0.13
0.42
0.15
0.24
-0.47
-0.05
-0.05
0.02

SS
1512.48
5808.13
7320.61
Standard Error
0.51
0.10
0.10
0.09
0.10
0.09
0.25
0.24
0.22
0.25
0.26
0.22
0.22
0.20
0.23
0.21
Sources: Team estimates

31

MSS
100.83
36.76

t-Statistic
0.99
2.34
1.37
0.43
1.67
-1.66
-0.36
1.34
0.60
1.68
0.58
1.09
-2.13
-0.22
-0.21
0.12

F
2.74

SigniYicance F
8.9338E-04

Betas
0.41
0.94
-0.29
12th January 2015
Appendix 27. WACC Assumptions
Back to content
WACC Assumptions
Current Risk-free Rate
Beta
Market risk Premium (RMRF)
Premium for stock
Size beta
Size Premium (SMB)
Premium for stock
Value beta
Value Premium (HML)
Premium for stock
Cost of equity
Equity as a % of target capital structure
WACC
0.8%
0.41
5.9%
2.4%
0.94
3.6%
3.4%
-0.29
3.7%
-1.1%
5.5%
100%
5.5%
Explanations
France's 10-Year OAT (9 January 2015)
Fama-French (FF) and Dimson models
A.Damodaran: Total equity risk premium of France
-
Fama-French and Dimson-Scholes models
Median over the last 20 years in Europe (FF)
-
Fama-French and Dimson-Scholes models
Median over the last 20 years in Europe (FF)
-
Fama-French model
Team estimates
Team estimates
Appendix 28. Sensitivity Analyses
Analysis 1: Impact of liquidity discount and WACC on target price

Liquidity
discount
9.5%
10.0%
10.5%
11.0%
11.5%
12.0%
12.5%
4.0%
447
445
442
440
438
435
433
4.5%
423
420
418
416
413
411
409
5.0%
400
398
396
394
392
389
387
WACC
5.5%
379
377
375
373
371
369
367
6.0%
361
359
357
355
353
351
349
6.5%
344
342
340
339
337
335
333
7.0%
329
327
325
323
321
319
318
Analysis 2: Impact of French 10-year yield on the WACC
Date
Jan-10
Jan-11
Jan-12
Jan-13
Jan-14
Jan-15
Rf
3.6%
3.3%
3.3%
2.1%
2.4%
0.8%
WACC
8.3%
8.1%
8.0%
6.8%
7.1%
5.5%
32
12th January 2015
Appendix 29. Monte Carlo Simulation
Back to content
In addition to our sensitivity analyses, we performed a Monte Carlo simulation to analyze how the long-term growth rate (deSined as
ROE*RR) and the WACC may affect the target price. We added liquidity as well since it constitutes a key feature of the stock.

The results of the simulation gives support to our BUY recommendation.

Base assumptions are summarized in the table below:
Factor
Data range
g2018E
WACC
N = 5000
Parameters
Mean = 7%
= 1%
Mean = 5.5%
= 0.5%
Mean = 11%
= 0.5%
LIQ
Monte Carlo Results

250
DCF: 373
Frequency
200
150
100
50
SELL
HOLD
BUY
Statistics
Mean
339.6
Median
337.3
Max
501.3
Min
261.7
25th percentile
320.1
75th percentile
355.8
33
12th January 2015
Appendix 30. Comparable Deals
Back to content
Date Announced
Acquiror Name
Target Name
% of Shares
Acquired
Deal Value
($m)
November-07
Fromageries Bel SA
Boursin
100.00
579.21
December-13
Nuova Castelli SpA
Alival SpA
100.00
103.41
April-13
PAI Partners SAS
R&R Ice Cream PLC
100.00
1 218.58
Saputo Inc
Warrnambool Cheese &

Butter
100.00
459.72
October-13
NB: We used the deals of the last two years in the Food and Beverages sector (except for Boursin).
Acquiror Name
Country
Fromageries Bel
SA
FR
Nuova Castelli SpA
IT
PAI Partners SAS
FR
Saputo Inc
CA
Business description Target Name

Listed company which is
engaged in the processing
Boursin
and sale of branded
cheeses
Private company which
supplies and distributes
Alival SpA
dairy specialties and
canned Sish products.
Country
Business description
FR
Private company which manufactures

and supplies cheese products.
IT

and distributes cheese products.
R&R Ice Cream

PLC
UK

and sells ice creams, lollipops and other
frozen confectionery products.
Listed company which

produces, markets, and
distributes dairy and
Warrnambool
grocery products. The
Cheese & Butter
company operates its
business through Canada,
U.S.A. and International
AU
Listed company engages in the

manufacturing, processing and sale of
cheese, milk powder, butter, and cream.
Private equity Sirm
Source: FactSet
Appendix 31. Deal Value/Sales Ratio of Comparable Deals
Target Name
Deal Value/Sales
Adj. Deal Value/Sales*
Alival SpA
0.41
0.29
R&R Ice Cream PLC
2.14
1.51
Boursin
4.21
2.97
Warrnambool Cheese & Butter
1.06
0.75
Median
1.60
1.13
*Adj. Deal Value/Sales is equal to Deal Value/Sales less the transaction premium in the Food & Beverages sector observed over the
last two years (29%)
34
12th January 2015
Appendix 32. Transaction-based Valuation Target Price
Back to content
Transaction-based Valuation
Median Adj. Deal Value/Sales
1.13
Sales 2015E (m)
3 000
Deal Value (m)
3 385
Shares outstanding 2015 (m)
6.82
Implied Price ()
496
Liquidity discount
11%
Target Price ()
442
Appendix 33. Peers Multiples

Table 1: Valuation Table
Price
Mkt Cap
(9 January
EV
(bn)
2014)
EUR

2 007
723
4 318
3 730

EV/EBIT
(x)
EV/Sales
(x)
EBIT margin
(%)
2014E
2015E
2014E
2015E
2014E
2015E
2 235
1 421
3 439
4 208

13.2
7.3
11.8
20.8
13.3
(1%)
9.1
6.8
10.5
18.7
12.0
(25%)
0.8
0.3
0.7
1.5
0.8
(2%)
0.7
0.2
0.6
1.4
0.8
(1%)
6.0%
3.6%
5.5%
7.2%
5.4%
10%
8.2%
3.5%
5.8%
7.6%
5.6%
46%
Fromageries Bel
Bongrain
Parmalat
Glanbia
Closest Peers - Mean
Premimum / (Discount) to mean
FBEL
BH
PLT
GL9

300.0
51.5
2.4
12.6

Kraft Foods Group

Danone
Mondelez Intl A
Large DiversiYied (F&B) - Mean
KRFT
BN
MDLZ

53.9
53.2
31.5

31 736 38 927
34 263 39 983
52 834 65 727

13.5
14.1
18.4
15.3
(14%)
12.0
13.3
16.6
13.9
(35%)
2.2
1.9
2.2
2.1
(62%)
2.2
1.8
2.1
2.0
(63%)
16.6%
13.4%
11.8%
13.9%
(57%)
18.2%
13.5%
12.6%
14.7%
(44%)
Saputo
Diamond Foods
Snyder's-Lance
TreeHouse Foods
High-Growth Small Caps (F&B) - Mean
SAP
DMND
LNCE
THS

24.7
22.9
25.2
77.1

9 648
720
1 774
3 262

14.7
21.3
17.5
15.2
17.2
(23%)
13.4
16.6
14.9
12.5
14.4
(37%)
1.4
1.7
1.4
1.4
1.5
(47%)
1.3
1.5
1.3
1.2
1.3
(45%)
9.5%
7.9%
8.1%
9.4%
8.7%
(31%)
9.5%
9.3%
8.9%
9.9%
9.4%
(13%)
11 092
1 237
2 041
4 475

Figures: EV/Sales 15E vs. EBIT margin 15E and EV/EBIT 15E vs. EBIT CAGR 13-15E
3.0
21
R = 0.81098
2.5
KRFT
2.0
DMND
1.5
LNCE
1.0
BN
SAP
THS
LNCE
15 SAP
KRFT
DMND
MDLZ
17
EV/EBIT 15E
EV/Sales 15E
MDLZ
GL9
GL9
19
R = 0.18641
BN
13
THS
11
PLT
FBEL
9
0.5
PLT
BH
0.0
0%
5%
FBEL
BH
10%
15%
(20%)
20%
EBIT Margin 15E
(10%)
5
0%
10%
20%
EBIT CAGR 13-15E

35
30%
40%
12th January 2015
Back to content
Table 2: Liquidity-adjusted Multiples

Weight
EV/EBIT (x)
Applied discount
Liquidity-adj. EV/EBIT (x)
Closest Peers
70%
12.0
0%
12.0
Large DiversiSied (F&B)
10%
13.9
11%
12.6
High-Growth Small Caps (F&B)
20%
14.4
0%
14.4
Weighted Average
12.5
Weight
EV/Sales (x)
Applied discount
Liquidity-adj. EV/Sales (x)
Closest Peers
70%
0.8
0%
0.8
Large DiversiSied (F&B)
10%
2.0
11%
1.8
High-Growth Small Caps (F&B)
20%
1.3
0%
1.3
Weighted Average
1.0
Table 3: Target Price Calculation
EV/Sales
EV/EBIT
Weighted avg liq. adj. 2015E EV/EBIT (x)
EBIT 2015E (m)
Enterprise Value 2015E (m)
12.5
Weighted avg liq. adj. 2015E EV/Sales (x)
247
Sales 2015E (m)
3 000
Enterprise Value 2015E (m)
2 996
3 090
Net Debt 2015E (m)
-23
Net Debt 2015E (m)
Minority Interest 2015E (m)
16
Minority Interest 2015E (m)
1.0
-23
16
Equity Value 2015E (m)
3 132
Equity Value 2015E (m)
3 003
Nb shares outstanding (m)
6.82
Nb shares outstanding (m)
6.82
Target Value ()
459
Target Value ()
440
Table 4: Multiple weight

EV/EBIT (x)
Weight
EV/Sales (x)
50%
50%
36
Target Value ()
450
12th January 2015
Appendix 34. P/E Regression Model
Back to content
Below are the results of the P/E regression model used to compute the estimated forward P/E. The 7 variables used are: leverage,
EPS long-term growth rate (g), payout, beta, market capitalization (logarithm), return on equity, illiquidity ratio (based on Amihuds
research).
Regression Statistics
Multiple R
R-Squared
Adjusted R-Squared
Standard Error
Observations
0.81
0.65
0.62
8.11
200
ANOVA

df
16
183
199
Regression
Residual
Total

SS
22239.67
12033.00
34272.67
MSS
1389.98
65.75

CoefYicients
Standard Error
t-Statistic
Intercept
-33.33
8.50
-3.92
Leverage
19.30
4.75
4.06
EPS growth rate
37.79
2.31
16.36
Payout
0.39
2.07
0.19
Beta
-8.90
1.83
-4.87
LMV
2.12
0.38
5.51
ROE
6.68
4.54
1.47
-1292.07
3522.17
-0.37
S10
-6.08
5.00
-1.22
S15
-2.40
4.13
-0.58
S20
1.72
3.62
0.47
S25
1.46
3.69
0.39
S30
-1.26
3.93
-0.32
S35
1.71
3.96
0.43
S40
1.01
3.66
0.28
S45
-0.92
3.79
-0.24
S50
2.33
5.80
0.40
Amihud
F
21.14
SigniYicance F
1.84801E-33
NB: S10 to S50 are dummy variables corresponding to the sub-sectors of the companies (S30 for Bel).
BEL
Estimated P/E
18
EPS 2015E
21.4
Target Value (EUR)
415
37
12th January 2015
Appendix 35. Risk Matrix
Back to content
Liquidity Risk
Raw Material
Price Volatility
Governance Risk
I
M
P
A
C
T

World GDP
Growth
Slowdown
Forex
Headwinds
Lack of
Aggressiveness
Unplanned
Breakdown of a
Production Site
DeSlation
Risk
Threats of
Geopolitical
Events
Contamination
Risk
PROBABILITY
Governance Risk
Market Risk
Economic Risk
Strategic Risk
38
Political Risk
Operational Risk
12th January 2015
Appendix 36. ESG
Back to content
Social

2013 : EcoVadis , GOLD statut obtained
2014: "Aressy Award (for CSR (corporate Social
Responsibility) communication)
2014 : CR Reporting Awards 2014 Sinalists
2013 : CSR trophy was given to the Lebanese team to
reward the Happiness Heroes initiative, led by the
Picon brand
2013 : "The Best and Brightest Companies to Work
For" awards

2003 : membership to the United Nations Global
Compact
2008 : creation of Bel Foundation (children)
"Responsible Purchasing Charter"
"Purchasing Ethics Charter for buyers"
2013 : join the "Supply Chain Initiative" (to promote
balanced relationships throughout the food supply
chain)
2013: creation of the Sharing Cities program
Partnership with SOS Childrens Villages, Le rire
mdecin, Comic Relief and Arcenciel association
The Groups Health and Safety manual and policy
Environmental
Gouvernance
Rewards
2012 : " Lean & Green Award " (for reducing CO2
emission)
Ranked between the top 5 of GAIA index (120
enterprises)( reward its CSR policy)
2013 : Little Chute site in the US
was awarded the title of Dairy plant of the year by
industry magazine Dairy Foods

2012: "Lombard & CIE" award (French Family

Business for combining tradition and innovation)
2013 : "Lynx Awards" - Gold prize in "the branded
content and entertainment" category and - Bronze prize
in the "corporate reputation section of public relations"
category
2014 : Finance Leaders - Gold prize
Internal Rules and membership

"Sustainable Purchasing Charter"
AFEP MEDEF's & code
WASABEL (Water Saving At BEL)
MiddleNext Code
ESABEL (Energy Saving At BEL)
Annual Audits each year
2012 : a three-year partnership agreement with WWF Code of Best Business Practices (in 17 languages)
Life Carbon dairy
Responsible Communications Charter
CSR Packaging Passport
Group procedure with regard to the processing
2013 : member of EUROPEN
of the personal data of consumers
Crisis management manual and procedures

CertiYications
OHSAS 18001 for occupational health and safety
ISO 14001 for environmental management
management
Leerdammer products certiSied by the Forest
Global Food Safety Initiative standards : 82% of their Stewardship Council (FSC)
"Best livestock farming practices charter" : 100% of
products are manufactured on sites certiSied
their producers have signed in France & "The Cow
Compass" in Netherland
Source: Company

ISO 9001 for quality management

ISO 26000, which is the benchmark international
standard for corporate social responsibility

Source: Bel
Appendix 37. Management Board
Name
Start Current Postion

in BEL
term
Previous experiences
Start Current Position in

Remuneration
Age
Note
term
Unibel SA
(2013)
Antoine
Chairman and 2001-2009 Director of Board in Bel and a managing
2009
Fivet
CEO
partner of Unibel SA
2005
Chairman of the
51
Management Board
1 161 219
Paid by
Unibel
Deputy CEO 2003-2008 Financial Director, and then Director of

responsible for Strategy and Development at Unibel SA
Sinancial and
Bruno
2008 legal affairs and Before 2003 Several posts in auditing (Deloitte) and
Schoch
information M&A (Chase Manhattan Bank, Swiss Bank
Schweizerischer Bankverein)
systems
2005
Member of the
50
Management Board
763 096
Paid by
Unibel
781 332
Paid by
Bel
1995-2003 CEO of Bel France, and then Vice-Chairman

for Western Europe zone
Deputy CEO
Francis
2012 responsible for Before 1995 Various experiences (P&G, Danone) of mass NONE
Le Cam
operations consumption goods (marketing, sales etc.) in
international companies
Source: Bel
39
NONE
67
Disclosures:
Ownership and material conflicts of interest:

The author(s), or a member of their household, of this report does not hold a financial interest in the securities of
this company.
The author(s), or a member of their household, of this report does not know of the existence of any conflicts of
interest that might bias the content or publication of this report.
Receipt of compensation:
Compensation of the author(s) of this report is not based on investment banking revenue.
Position as a officer or director:
The author(s), or a member of their household, does not serve as an officer, director or advisory board member of
the subject company.
Market making:
The author(s) does not act as a market maker in the subject companys securities.
Disclaimer:
The information set forth herein has been obtained or derived from sources generally available to the public and
believed by the author(s) to be reliable, but the author(s) does not make any representation or warranty, express
or implied, as to its accuracy or completeness. The information is not intended to be used as the basis of any
investment decisions by any person or entity. This information does not constitute investment advice, nor is it an
offer or a solicitation of an offer to buy or sell any security. This report should not be considered to be a
recommendation by any individual affiliated with CFA France, CFA Institute or the CFA Institute Research
Challenge with regard to this companys stock.

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CFA Institute Research Challenge

[Universit Lille 2/SKEMA] Student Research

Shares Outstanding (m)

Market Capitalization (m)

Sources: Factset, Team estimates

2013 2014E 2015E

2 720 2 828 3 000

Net proSit (m) 129

Sources: Factset, Team estimates

2013 2014E 2015E

Sources: Factset, Team estimates

Source: Team estimates

Date: 12th January 2015 Ticker: FBEL

One Portion of Bel, One Giant Return for Shareholders

STOXX 600 - Food & Beverage

CFA Institute Research Challenge

12th January 2015

NME & Africa

Source: Team estimates

Source: Team estimates

Sources: Bel, Team estimates

International Expansion (Figures 1&2)

Figure 4: Bel stock price & key events

5th November 2007

2nd July 2012

7th February 2013

18th June 2012

1st June 2006

14th May 2009

CFA Institute Research Challenge

12th January 2015

CFA Institute Research Challenge

Industry Overview and Competitive Positioning

Figure 10: Cheese versus GDP growth

Sources: World Bank, OECD

Retail Value Sales 2014 (lhs)

Sources: Euromonitor, IDF

Key Industry Trends

Africa - Middle East

Source: World Bank

Ptit Louis Tartare

*Nutrient Reference Value

12th January 2015

Sources: Team research

CFA Institute Research Challenge

Figure 14: Company ranking*

12th January 2015

Source: Team estimates

Bels competitive advantage relies on (Appendix 18):

Sources: Bel, Team estimates

CFA Institute Research Challenge

Figure 17: Sales growth bridge

Figure 18: YoY EBIT margin by region

Americas Near and Greater

12th January 2015

CFA Institute Research Challenge

ROCE 11% 2012

Source: Team estimates

Cash 2014 2015 2016 2017 2018 2019 2020 2023

12th January 2015

ROCE vs. WACC

Net Operating Cash Flow

I. Discounted Cash Flows

Source: Team estimates