JUFO IoC EFG Jul10

juhayna food industries rating buy 29 July 2010
Get Ready, Get Set... Grow
initiation of coverage food and beverage │ egypt Wafaa Baddour, CFA

+ 20 2 3535 6163
wbaddour@efg-hermes.com
Initiating Coverage on Juhayna with a Buy Rating
We initiate coverage on Juhayna, the leading dairy and juice producer in Egypt, with a Nour Farrag, CFA
fair value (FV) of EGP5.85 per share (27% upside potential) and a Buy rating. Juhayna is + 20 2 3535 6156
set to benefit from: i) a strong growth in consumption of packaged products, ii) the nfarrag@efg-hermes.com
launch of low-end and new varieties of high-end products, and iii) a strong balance
Nada Amin
sheet after its IPO in June with proceeds of EGP999 million. The proceeds will finance
+ 20 2 3535 8985
expansion or acquisitions in dairy and agricultural farms, as well as in existing or new
namin@efg-hermes.com
food and beverage categories. We have not included these projects in our forecasts and
valuation as they are in the feasibility study phase. Juhayna trades below its peers on an
estimated 2011 P/E of 9.8x (versus 13.6x) and an 2011 EV/EBITDA of 6.5x (versus 8.5x). STOCK DATA
A Pioneer in the Egyptian Packaged Dairy and Juice Industry Price EGP4.59*
Juhayna started operations in 1987 and has since grown its capacity to c3,600
Fair Value EGP5.85
tonnes/day and built the most recognised packaged dairy and juice brands in Egypt with
Last Div. / Ex Date N/R
an unmatched distribution platform. In 2008-2009, it started a plan to vertically
Mkt. Cap / Shares (mn) EGP3,334 / 726
integrate its business, with new management building on solid FMCG expertise. Juhayna
Av. Mthly Liqdty (mn) 136
produces dairy (58% of revenue), yogurt (23%) and juice (18%), and satisfies 69% of
High / Low since IPO (15 Jun 10) EGP4.92 / 4.00
plain packaged milk consumption, 31% of spoonable yogurt, and 15% of juice.
Bloomberg / Reuters JUFO:EY / JUFO.CA
Est. Free Float 35.5%
Positive Outlook on Earnings Expansion
We forecast a 2010-2015 attributable net profit (ex. capital gains) CAGR of 32%, driven
by a revenue CAGR of 20% and interest income on the IPO proceeds. We expect the SHARE PRICE PERFORMANCE RELATIVE TO
EBITDA margin will narrow to 19% by 2015 from 2009’s high, which was partly due to HFI REBASED
a fall in input costs. We expect 2010 reported net profit will grow 26% on revenue Price (EGP)
HFI (Rebased)
growth of 13% (slower than in later years on a fire in the yogurt plant) and low interest 5.10
expense. We expect a jump in attributable profit after 2009’s special appropriations. 4.90
4.70
Valuation Sensitivities to Our Main Forecast Assumptions 4.50
4.30
Our assumptions include: i) Egypt’s conversion rate to packaged milk, ii) Juhayna’s
4.10
ability to maintain its market share as competition intensifies (we expect its share in 3.90
milk and yogurt markets to contract, but in juice to expand), and iii) Juhayna’s ability to 3.70
pass on inflationary pressures to consumers and retain its 2009 strong margins. 3.50
15-Jun-10
22-Jun-10
29-Jun-10
13-Jul-10
20-Jul-10
27-Jul-10
6-Jul-10
KEY FINANCIAL HIGHLIGHTS
December Year End (EGP mn) 2009a 2010e 2011e 2012e

Revenue 1,578 1,782 2,289 2,847
EBITDA 393 404 503 603
Net Income ( Attributable) 147 233 342 414
EPS (EGP) Attributable 0.39 0.37 0.47 0.57
DPS (EGP) N/R 0.00 0.00 0.23
Net Debt (Cash) 967 (230) (552) (788)
P/E* (x) 11.8 12.5 9.8 8.1
Dividend Yield N/R 0% 0% 5%
EV/EBITDA (x) 8.4 8.1 6.5 5.5
RoAE 35.6% 19.9% 17.7% 18.6%
*Prices as at 28 July 2010
Source: Juhayna Food Industries (Historic), EFG Hermes estimates
1 / 66 pages
juhayna food industries 29 July 2010
food and beverage │ egypt
CONTENTS
.
I. EXECUTIVE SUMMARY 3
INITIATING COVERAGE WITH A BUY RATING 3
JUHAYNA GOES PUBLIC 3
JUHAYNA, A LEADING DAIRY AND JUICE PRODUCER IN EGYPT 4
STRONG GROWTH IN THE EGYPTIAN PACKAGED MARKET… 5
…ATTRACTING NEW PLAYERS, INTENSIFYING COMPETITION 6
JUHAYNA DEVISES ITS NEW GROWTH-ORIENTED STRATEGY 6
EXPECT SOLID GROWTH IN NET PROFIT AND FCF 7
ASSUMPTION RISKS AND VALUATION SENSITIVITIES 9
II. VALUATION 10
A. DISCOUNTED CASH FLOW 10
B. UPSIDE AND DOWNSIDE RISKS 11
C. VALUATION SENSITIVITIES TO MAIN FORECAST ASSUMPTIONS 12
D. COMPARABLE VALUATION 14
III. PROFILE AND STRATEGY 19
BACKGROUND 19
EXPANSION STRATEGY 19
BUSINESS LINES AND SUPPORT FUNCTIONS 20
IV. FINANCIAL ANALYSIS AND FORECASTS 29
A. SUMMARY OF HISTORICAL FINANCIAL PERFORMANCE 29
B. REVENUE ANALYSIS AND FORECASTS 33
C. SEGMENTAL ANALYSIS OF REVENUE AND GROSS MARGIN 41
FINANCIAL STATEMENTS 47
V. INDUSTRY ANALYSIS 49
EGYPT’S DAIRY & JUICE MARKET 49
DAIRY AND JUICE INDUSTRY MARGINS 56
FACTORS AFFECTING CONSUMPTION OF PACKAGED DAIRY PRODUCTS 57
RAW MILK 60
VI. INDUSTRY CONSOLIDATION AND RECENT DEVELOPMENTS 64
2 / 66 pages
[
I. EXECUTIVE SUMMARY
INITIATING COVERAGE WITH A BUY RATING

We initiate coverage on Juhayna Food Industries (Juhayna) with a fair value (FV) of EGP5.85
per share based on a five-year DCF valuation, implying an upside potential of 27%. We assign
a Buy rating to Juhayna. The company is set to benefit from: i) a strong growth in
consumption of packaged products, ii) the launch of low-end products and new varieties of
high-end products, and iii) a strong balance sheet (2010 estimated net cash position of
EGP230 million) following the IPO in June, with gross proceeds of EGP999 million scheduled to
finance expansion or acquisitions in dairy and agricultural farms, as well as in existing or new
food and beverage categories. The company will allocate approximately two-thirds of the IPO
proceeds to the farms. These projects are in the feasibility study phase and accordingly, we
have not included them in our forecasts and valuation. Juhayna trades below its peers on an
estimated 2011 P/E of 9.8x (versus 13.6x) and an estimated 2011 EV/EBITDA of 6.5x (versus
8.5x).
JUHAYNA GOES PUBLIC

IPO proceeds injected Juhayna was established in 1984 by Safwan Thabet (Chairman and CEO) and other founders as
into the company the first private sector producer of packaged dairy products in Egypt. In June 2010, Juhayna
pursued an initial public offering (IPO); the founding shareholders (led by the Thabet family)
sold c206 million shares. Of the shares sold, 80% were allocated in a private placement to
institutions at a price of EGP4.90 per share and 20% to retail investors at a price of EGP4.66
per share. All IPO proceeds (EGP999 million) were injected into the company to fund a rights
issue, with new shares dedicated to the selling shareholders, at a price of EGP4.85 per share
(the weighted average price of the institution and retail tranches’ prices).
A free float of 49.25% Following the IPO and the rights issue, Juhayna’s number of shares increased to 726.4 million
post lock-up duration from 520.4 million shares and its shareholding structure became: 50.75% Pharon Investment
Limited (owned mostly by the Thabet family), 20.9% other old shareholders, and 28.35% new
shareholders. Some 90% of shares owned by old shareholders are locked up for a period of 180
days following the start of trading (15 June) of the shares. Accordingly, we estimate Juhayna’s
free float at 35.51% during the lock-up period and 49.25% afterwards. EFG Hermes
Investment Banking was the global co-ordinator and sole book runner of the IPO.
3 / 66 pages
FIGURE 1: POST-IPO SHAREHOLDING STRUCTURE FIGURE 2: PRE-IPO SHAREHOLDING STRUCTURE*
Other Old Ahmed Amin

Shareholders 9.4%
20.9% Mohamed
Doghym
Lock-Up (49.25%)
9.6%
Free Float Post

Thabet Family Youssef Ali
Pharon 6.4%
51.2%
Investment*
50.8%
New
Others
Shareholders
28.4% 23.4%
*Pharon Investment Limited is owned mostly by the Thabet family. *As at 27 May 2010
Source: Juhayna Food Industries (Historic) Source: Juhayna Food Industries (Historic)
Proceeds will finance The IPO proceeds will be used in: i) completing the purchase of and accelerating the pace of
expansions and enhance investment of c10,000 feddans (10,380 acres), of which it owns 2,500 feddans, to cultivate the
the capital structure majority of concentrate factories’ needs for fruits and the dairy farm’s needs of cattle feed, ii)
establishing or acquiring dairy farms (fully owned) to own12,000 milking cows over three to
four years to ensure an uninterrupted raw milk supply (currently Juhayna owns 40% of the
dairy farm, Milkes, which will have 1,600 milking cows by the end of 2010), iii) tapping into
new food and beverage segments, iv) introducing innovative products that cater for varying
consumer needs, and v) enhancing operations in export markets such as Libya, Jordan and
Lebanon. Juhayna also seeks to optimise its capital structure by reducing its financial leverage.
Longer term, Juhayna plans to evolve into a regional food and beverage manufacturer.
JUHAYNA, A LEADING DAIRY AND JUICE PRODUCER IN EGYPT

The largest packaged milk Juhayna started operations in 1987 as the first private sector producer of packaged dairy
producer in Egypt products in Egypt. Its operations include long-life dairy products such as milk, cream and
cheese (58% of revenue, 69% share of the plain milk market in 2009), spoonable and drinkable
yogurt (23% of revenue, 31% share of the spoonable market), and fruit juice (18% of revenue,
15% market share). Juhayna also exports dairy and juice products (11% of revenue), primarily
to Libya and the Middle East. The company sells its products under its main brand name
“Juhayna” as well as under other brand names such as “Bekhero”, which are also marketed
under the Juhayna brand umbrella. Juhayna has the largest nationwide distribution network
amongst its peers and delivers its products to over 75,000 retail outlets in Egypt. In addition, it
has been expanding its upstream business since 2008; it now produces juice concentrates, it
owns 40% of a dairy farm that will own a 3,000 herd (of which c1,600 are milking cows) by
the end of 2010, and it has recently bought arable land on which it will cultivate fruits and
animal feed.
Over the past two years, Juhayna doubled its capacity to gear up for strong market growth,
reaching 1,710 tonnes/day for dairy and c670 tonnes/day for juice. According to management,
there is room to add more capacity in existing factories. Additionally, the company is setting
up a new yogurt factory with an initial capacity of 400 tonnes/day to replace its main yogurt
factory (that had a capacity of 350 tonnes/ day) it had lost in a recent fire incident in April
2010, with operations expected to start in 1Q2011. The replacement cost of the old factory
4 / 66 pages
[
will be covered by insurance proceeds, according to management. Until the new factory
becomes operational, the company is temporarily operating alternative yogurt capacities (old
and new machines) in other dairy factories (with capacity expected to increase from 70
tonnes/day in May to 300 tonnes/day in August 2010 and 350 tonnes/day by early 2011). Due
to seasonality, juice and yogurt capacity utilisation is usually higher during Ramadan and the
summer months. Yogurt is the most seasonal product with its capacity utilisation reaching
over 85% during Ramadan. Additionally, milk utilisation is higher in the winter because cow
yields are higher than in the summer.
FIGURE 3: JUHAYNA’S MAIN OPERATIONAL INDICATORS BY SEGMENT (2009)

Gross
Market Capacity Production Revenue % of 2 % of Gross Profit EBITDA
Segment 1 Utilisation Profit
Share (Tonnes/Year) (Tonnes/Year) (EGP mn) Total Total Margin Margin
(EGP mn)
Dairy 496 158 32% 907 58% 328 55% 36% 23%
3
o/w Milk 69% 479 150 31% 798 51% 283 47% 35%
o/w Cream4 N/A N/A 5 N/A 84 5% 43 7% 51%
o/w Cheese 7% 17 3 17% 25 2% 2 0% 8%
Yogurt3 31% 102 42 42% 364 23% 157 26% 43% 26%
Juice 15% 194 49 25% 287 18% 115 19% 40% 27%
1
Annual capacity is calculated based on 290 days to adjust for use of machines in producing different types of products (i.e. flavoured products).
2
Excluding depreciation from costs and before adding the export rebate.
3
Market share is for plain milk and plain spoonable yogurt, which represents the majority of packaged consumption in Egypt. Juhayna’s yogurt factory was subject to a
fire in April 2010 and is expected to be replaced by new capacity of 400 tonnes/day versus 350 tonnes/day of the old factory.
4
Cream is a by-product of milk and has no specific capacity of its own.
Source: Juhayna Food Industries (Historic), MEMRB, EFG Hermes estimates
STRONG GROWTH IN THE EGYPTIAN PACKAGED MARKET…

The packaged dairy industry effectively began in the 1980s with the entrance of the private
sector, with several major producers coming onto the scene. However, the industry has not yet
reached maturity as loose products are still widely consumed. We expect that the packaged
dairy and juice market will grow at double-digit rates over the medium term, driven by: i) a
strong demographic profile: a large and young population with a high growth rate, ii) room for
consumption per capita to grow from its relatively low levels, and, most importantly, iii)
increased penetration as a result of a growing consumer trend away from loose products and
towards healthier, packaged products.
Packaged products’ contribution to milk consumption is low at 12%. It is expected to increase

as dairy producers launch new brands for the lower-end range of the market and partner with
the Ministry of Health (MoH) to educate the public on the health risks associated with loose
milk. Industrial-packaged yogurt comprises a larger proportion of yogurt consumption at 50%
as it has been growing at a faster rate than milk. This growth was encouraged by the similarity
in price with loose (primitively packaged) yogurt as well as the entrance of international
players (Danone and Lactel-Nestlé) who launched several advertising campaigns (to encourage
yogurt consumption, which benefited the market at large) and brought new products to the
market. Our forecasts assume a faster market conversion to packaged milk (from 12% to 32%)
over our forecast period than yogurt (from 50% to 63%).
5 / 66 pages
FIGURE 4: MILK MARKET BREAKDOWN FIGURE 5: YOGURT MARKET BREAKDOWN

In million tonnes, unless otherwise stated In thousand tonnes, unless otherwise stated
Packaged Milk Loose Milk
2.5 Loose Yogurt Packaged Yogurt
600
2.00 490
2.0 1.83 1.91 500
1.68 1.75 430
1.61 28% 32%
1.5 1.42 1.47 1.54 14% 17% 20% 24% 400 374
11% 11% 14%
322 63%
300 275 61%
1.0 233 59%
203 57%
200 55%
89% 89% 88% 86% 83% 80% 76% 72% 68% 147 171 50% 49%
0.5 40% 41%
100 41% 39% 37%
60% 59% 50% 51% 45% 43%
0.0 0
2010e
2011e
2012e
2013e
2014e
2015e
2010e
2011e
2012e
2013e
2014e
2015e
2007
2008
2009
2007
2008
2009
Source: National Council for Production and Economic Source: MEMRB (Historic), EFG Hermes estimates
Affairs (Historic), MEMRB (Historic), EFG Hermes estimates
…ATTRACTING NEW PLAYERS, INTENSIFYING COMPETITION

Egypt’s potential for growth in packaged food consumption has attracted several international
and regional players in recent years such as Danone and Lactalis (mostly yogurt) and Almarai
(dairy products), as well as new local players. This was accompanied by some consolidation
(including acquisitions by private equity funds) and vertical integration to secure raw materials
(raw milk, fruits and animal feed), and control and expansion of distribution channels. Two of
Juhayna’s main local competitors were acquired and are undergoing restructuring: i) Enjoy was
acquired by Citadel’s Gozour in June 2009 and benefits from access to farming resources
through its sister company, Dina Farms, Egypt’s largest dairy farm, and ii) Beyti was acquired
by an Almarai and PepsiCo’s joint venture in October 2009, providing it with access to
expertise and capital.
JUHAYNA DEVISES ITS NEW GROWTH-ORIENTED STRATEGY

Seizing opportunities in local Juhayna has formulated a strategy to evolve into a wider food and beverage producer in Egypt
and possibly regional and possibly other regional countries and, accordingly, to maintain a high growth rate, in both
markets top and bottom lines. In 2006-2009, it hired a new commercially-focused management team
with regional expertise in the fast-moving consumer goods (FMCG) sector to better navigate
the new competitive landscape. This strategy will be executed through broadening the product
offering in existing categories in the Egyptian market and, with the use of the IPO proceeds,
expanding upstream in dairy and agriculture farms, as well as expanding in other food and
beverage segments (including new dairy products).
In the Egyptian market, Juhayna is leveraging several of its competitive advantages to support
its market position, namely: i) its brand, which is one of the most widely recognised in Egypt,
as per a study by AC Nielsen in 2009, ii) its strong track record and knowledge of the Egyptian
market, iii) its unmatched distribution network that is costly to replicate, and iv) its focus on
several product categories, allowing it to benefit from production and distribution synergies.
Juhayna plans to compete at all levels in its existing dairy and juice categories to capture
growth in the highest growing segments, meet increased competition and defend its market
share. This will be achieved through: i) adding new value-added products (new flavours,
digestive, etc.) in the milk and yogurt categories (2010-2011), ii) launching a low-tier milk
6 / 66 pages
[
brand “Halibo” to benefit from the expected acceleration of consumer conversion to packaged
milk (May 2010), and iii) introducing juice drinks (that include 10% fruit concentrate) (end-
2009-2010), which account for 41% of packaged juice consumption, instead of only focusing
on juice nectars (that include at least 25% fruit concentrate) and pure juices (100% fruit
concentrate). Additionally, the company is studying expanding into the fresh product segment,
targeting the high-end consumer and selling only to large retailers who are equipped to sell
fresh products. The fresh product segment is highly untapped in the Egyptian market.
EXPECT SOLID GROWTH IN NET PROFIT AND FCF

The company achieved a double-digit CAGR in revenue in 2008-2009 of 22%, driven by
consumption growth in packaged milk, yogurt and juice, and price increases in 2008 that
Juhayna applied to pass on rises in input costs. The EBITDA margin recovered significantly in
2009 to 25% from depressed levels in 2007 and 2008 as a result of a decline in raw material
costs from their 2008 peak levels that was not passed onto consumers and savings from
Juhayna’s 2008-2009 restructuring programme and resultant factory specialisation.
Attributable net profit, accordingly, surged to EGP147 million (EGP119 million, excluding a
one-off capital gain) from EGP37 million in 2007 and no profit in 2008.
Strong top and bottom line In 2010-2015, we forecast a total revenue CAGR of 20%, with a slower rate of 13% in 2010 to
growth… account for a decline in yogurt revenue. We conservatively assume that the EBITDA margin
will gradually contract to 19.1% in 2015 from 24.9% in 2009, although we assume it will
remain well above 2007-2008 levels of 12.1% and 8.7%, respectively. Our assumptions reflect
our conviction that 2009 margins were higher than industry norms due to a sharp decline in
raw material costs and a negative impact from competitive pressures on future margins. Our
assumptions do not include any positive impact from the planned upstream expansion in dairy
and agriculture farms, as these expansions are not yet included in our forecasts. In 2010, our
attributable net profit (excluding 2009-2010’s one-off capital gains) surges 84% on lower net
finance charges and appropriations (2009 included exceptional payments to employees and its
board of directors - BoD). In 2011-2015, we forecast attributable net profit will grow at a 24%
CAGR that is mainly driven by core operations (+21% CAGR in net operating profit), but also
as interest income expands (on IPO proceeds).
Once Juhayna starts to use the IPO proceeds, this will result in a decline in interest income.
Accordingly, our net profit estimates in earlier forecast years will be adjusted downward until
new expansions start paying off.
7 / 66 pages
FIGURE 6: TOTAL REVENUE, EBITDA AND EBITDA MARGIN FIGURE 7: CONTRIBUTION TO REVENUE
In EGP million, unless otherwise stated
5,000 Revenue EBITDA EBITDA Margin 30% Concentrate Juice Yogurt Dairy
4,500 100%
25% 1% 1%
4,000 90% 18% 18% 20% 20% 21%
21% 22% 22%
3,500 20% 80%
3,000 70% 18% 23% 18% 21% 22% 22% 21% 21%
2,500 15% 60%
2,000 50%
1,500 10% 40%
1,000 30% 63% 57% 60% 59% 58% 58% 57% 56%
5%
500 20%
0 0% 10%
0%
2007a
2008a
2009a
2010e
2011e
2012e
2013e
2014e
2015e
2008a 2009a 2010e 2011e 2012e 2013e 2014e 2015e
Source: Juhayna Food Industries (Historic), EFG Hermes estimates Source: Juhayna Food Industries (Historic), EFG Hermes estimates
FIGURE 8: ADJUSTED ATTRIBUTABLE NET PROFIT AND MARGIN FIGURE 9: ROAE AND ROAIC
Adj. Attributable Net Profit Margin 40% ROAE ROAIC

700 16% 35%
600 14% 30%
500 12% 25%
400 10% 20%
8% 15%
300
CAGR 2010-15 6% 10%
200 4%
32% 5%
100 2%
0 0%
0%
(100) -2% -5%
2008a
2009a
2010e
2011e
2012e
2013e
2014e
2015e
2008a
2009a
2010e
2011e
2012e
2013e
2014e
2015e
*Adjusted to exclude one-off capital gains.

… and positive FCF Juhayna reported positive FCF of EGP194 million in 2009, after it had completed setting up its
new juice and concentrates factories. We expect FCF will remain positive over our forecast
horizon, as our forecasts do not include the impact of any expansion that will be financed from
the IPO proceeds. We expect that the FCF-to-sales ratio will average 11.4% over 2010-2015.
An acceleration of capex spending on new projects using the IPO proceeds would result in
lower (and in some years negative) FCF in the earlier years of our forecast period compared to
what we currently assume.
8 / 66 pages
[
FIGURE 10: COPAT, WORKING CAPITAL, CAPEX AND FCF

Copat Working Capital Capex FCF

700
600
500
400 365 392
300 280 323 314 329
200 194
100
0
(100)
(200)
(300)
(400)
(500)
(600) (583)
(700)
2008 2009 2010e 2011e 2012e 2013e 2014e 2015e
ASSUMPTION RISKS AND VALUATION SENSITIVITIES

The main variables affecting our forecasts and valuation that could represent risks both to the
upside and the downside are:
i) Consumer conversion to packaged products, particularly in the milk segment, which is

affected by consumer dietary habits and affordability. A 6% decrease/increase to our current
packaged/total milk consumption ratio for each forecast year (implying packaged/total milk
consumption terminal range of 26-38% compared to 12% in 2009 and our terminal forecast
of 32%) yields an equity valuation range of EGP5.15-EGP6.56 per share.
ii) Juhayna’s ability to maintain its market share with the entrance of new competitors. After
applying a 10% decrease/increase to our implied milk market share assumption for each
forecast year (implying a terminal market share range of 41-61% compared to 62% in 2009
and our terminal forecast of 51%), our sensitivity analysis yields an equity valuation range of
EGP5.39-EGP6.32 per share.
iii) Margin sustainability. Our assumptions were based on the financial history of only three
years that included: sharp fluctuations in commodity prices and a firm-wide restructuring. We
assumed margins will decline from 2009 levels, which appear, in our opinion, higher than
industry norms. The changes in the company’s strategy and market dynamics towards
increased profitability may prove us wrong, and perhaps margins will remain at their current
high levels. One could argue, however, that these high margins will eventually decrease as
competition decides to forgo some profit to gain market share. Based on our terminal growth
rate assumption of 5%, a 300 bps contraction/expansion to our terminal EBITDA margin
forecast of 19% yields a per share equity valuation range of EGP4.62-EGP7.09.
9 / 66 pages
II. VALUATION
Our DCF valuation yields a FV Our fair value for Juhayna stands at EGP5.85 per share, using a five-year discounted cash flow
of EGP5.85/share (DCF) valuation. Additionally, we examine dairy and juice comparables in emerging and
developed markets. The blended peer group trades on an average estimated 2010 P/E multiple
of 15.1x and 2011 P/E multiple of 13.6x, and on an average estimated 2010 EV/EBITDA
multiple of 9.5x and 2011 EV/EBITDA multiple of 8.5x. Juhayna trades lower than its peers on
an estimated 2011 P/E of 9.8x and an estimated 2011 EV/EBITDA of 6.5x.
Our DCF fair value estimate is based on the existing business and does not account for any
expansion using the IPO proceeds (i.e. vertical integration upstream and expansion in
existing/new food and beverage products). We believe this may underestimate the value of the
company as it does not take into account the value of any expansion and/or acquisitions
Juhayna may undertake.
A. DISCOUNTED CASH FLOW
We use a five-year DCF valuation to arrive at an equity value of EGP4.3 billion. Our DCF
assumptions are as follows: i) a risk-free rate of 10% reflecting the T-bill yield, adjusted for tax
and discretionary duration premium, ii) an equity risk premium (ERP) of 6.0% (we use 5.5-
6.0% for our consumer companies), iii) a terminal debt-to-equity ratio of 1:1; and iv) a
terminal growth rate (TGR) of 5.0%.
FIGURE 11: SUMMARY OF DCF VALUATION

2011e 2012e 2013e 2014e 2015e

COPAT 483 526 587 656 748
Working Capital (56) (70) (98) (108) (110)
Capex (104) (91) (175) (219) (246)
Net Cash Flow 323 365 314 329 392
PV of NCF 290 292 223 208 225
PV of Terminal Value 2,748
Terminal WACC 12.0%

Terminal Growth Rate 5.0%
EV 3,985
2010e Net Debt (cash) (230)
Equity Value of Consolidated Activities 4,214
Milkes BV 36
Total Equity Value 4,250
Shares Outstanding (mn) 726
Fair Value per Share (EGP) 5.85
Source: EFG Hermes estimates
10 / 66 pages
[
FIGURE 12: VALUATION SENSITIVITY TO OUR COST OF EQUITY, TGR ASSUMPTIONS

In EGP, unless otherwise stated
Cost of Equity
15.0% 15.5% 16.0% 16.5% 17.0%

Terminal Growth
4.0% 5.65 5.49 5.35 5.21 5.08

4.5% 5.92 5.75 5.58 5.43 5.28
5.0% 6.24 6.04 5.85 5.68 5.52
5.5% 6.61 6.38 6.16 5.96 5.78
6.0% 7.04 6.77 6.52 6.30 6.09
B. UPSIDE AND DOWNSIDE RISKS
Upside Risks
- Use of the proceeds in investments that result in improved margins and/or returns.
- A faster-than-expected consumer shift to packaged food and beverage products, particularly

milk that enlarges the market.
- Stability or expansion in Juhayna’s market shares, which comes in better than our forecast, as
the company better utilises its new, commercially-oriented management team and benefits
from more active R&D and marketing activities and the expansion of its product offerings to
include a wider range of low-tier brands and fresh products.
- A faster development of the retail sector to become more industrialised, which will
encourage dairy and juice companies to expand into fresh products on a large scale.
Downside Risks
- Deterioration of economic conditions that negatively affects demand for dairy and juice
products or slows consumer shift from loose to packaged food consumption.
- Slow development of the retail industry, which may hold back a wide expansion into
industrial-packaged fresh dairy and juice products.
- Loss of market share to competitors as a result of limited revisions of product offerings to

reflect changes in customer preferences or overcapacity if competitors decide to aggressively
expand their capacities.
- Rising costs that are not matched with price increases. This includes a success of dairy farms
lobbying to increase raw milk prices, increases in milk powder prices, and higher packaging
costs. Increases in energy prices (in July 2010), set by the government, have a minor impact on
margins since dairy and juice are non-energy intensive industries.
11 / 66 pages
Risks to Margin Assumptions

Although Juhayna has a long history and a reputable track record in the Egyptian consumer
market, our assumptions were based on financial history of only three years that included: i)
sharp fluctuations in commodity prices in 2008 and 2009 that had a considerable impact on
input costs, with rises in costs mostly passed onto consumers while gains on declines in costs
were retained by the company (and the consumer sector at large), ii) a firm-wide restructuring
and cost rationalisation programme that included the discontinuation of low-margin sales and
realignment/expansion of production lines to produce each product category in a specialised
factory with ample capacity, and iii) a significant increase in debt levels, particularly in 2008,
to finance expansions. This has resulted in significant fluctuations in margins and profitability,
with an impressive performance in 2009 and 1Q2010.
In our forecasts we assumed margins will decline from 2009 and 1Q2010 levels, which appear,
in our opinion, higher than industry norms, but will remain well above 2007 and 2008
depressed levels. The changes in the company’s strategy and market dynamics may prove us
wrong and perhaps margins will remain at their high levels as Juhayna, and the consumer
industry at large, take these margins and profitability as a base for a new, more profitable era.
One could argue, however, that these high margins will eventually decrease, particularly with
increased competition that may decide to forgo some profits to gain market share.
C. VALUATION SENSITIVITIES TO MAIN FORECAST ASSUMPTIONS
The main variables affecting our forecasts and valuation include: i) the pace of shift by
consumers to packaged products, particularly in the milk segment as it currently has a low
contribution to milk consumption, mostly caused by consumer dietary habits and affordability,
ii) Juhayna’s ability to maintain its market share with the entrance of new competitors,
particularly in the packaged milk segment where it had a dominant market share of 69% in
2009, and iii) margin sustainability.
In the following tables we present the impact on our valuation from: i) the speed of conversion
to packaged milk, and changes in Juhayna’s share of the milk market, and ii) changes in the
company’s terminal EBITDA margin.
Implied Market Share and Packaged/Total Milk Consumption (Conversion Rate)

After applying a 10% decrease/increase to our implied market share assumption for each
forecast year (implying a market share range of 41-61% by our terminal year), our sensitivity
analysis yields an equity valuation range of EGP5.39-EGP6.32 per share. Using the same
methodology, a 6% decrease/increase to our current packaged/total milk consumption ratio
for each forecast year (implying packaged/total milk consumption range of 26-38% by 2014)
yields an equity valuation range of EGP5.15-EGP6.56 per share.
12 / 66 pages
[
FIGURE 13: DCF* SENSITIVITY TO IMPLIED MILK MARKET SHARE AND CONVERSION RATIO
Implied Market Share

-30.0% -20.0% -10.0% 0.0% 10.0% 20.0%
-10.0% 3.89 4.15 4.41 4.67 4.94 5.20
-8.0% 4.00 4.30 4.61 4.91 5.21 5.52
-6.0% 4.11 4.46 4.80 5.15 5.49 5.83
Packaged / Total
-4.0% 4.23 4.61 5.00 5.38 5.77 6.15

-2.0% 4.34 4.77 5.19 5.62 6.04 6.47
0.0% 4.45 4.92 5.39 5.85 6.32 6.78
2.0% 4.57 5.07 5.58 6.09 6.59 7.10
4.0% 4.68 5.23 5.77 6.32 6.87 7.42
6.0% 4.79 5.38 5.97 6.56 7.15 7.73
8.0% 4.91 5.53 6.16 6.79 7.42 8.05
10.0% 5.02 5.69 6.36 7.03 7.70 8.37
*For the purpose of this exercise, DCF is based on a mid range cost of equity and terminal growth rate (as per Figure 13).
FIGURE 14: IMPLIED MILK MARKET SHARE*, FIGURE 15: PACKAGED/TOTAL MILK
BASE-CASE FORECAST CONSUMPTION, BASE-CASE FORECAST
65% 35% 32%

62% 62% 28%
63% 61% 30%
60% 24%
60% 25%
20%
57%
58% 20% 17%
14% 14% 14%
55% 54% 15% 12%
53% 51% 10%
50% 5%
2010e
2011e
2012e
2013e
2014e
2015e
2010e
2010e
2010e
2011e
2012e
2013e
2014e
2015e
2009a
2009a
*Implied market share is based on Juhayna’s production

volumes divided by total market consumption volumes.
Source: MEMRB (Historic market volumes), Juhayna Food Source: MEMRB (Historic), EFG Hermes estimates
Industries (Historic volumes), EFG Hermes estimates
Terminal EBITDA Margin and TGR

Based on a terminal growth rate assumption of 5%, a 300 bps contraction/expansion to our
terminal EBITDA margin forecast yields a fair value per share of EGP4.62-EGP7.09.
13 / 66 pages
FIGURE 16: DCF* SENSITIVITY TO EBITDA FIGURE 17: EBITDA MARGIN BASE-CASE
MARGIN FORECAST
Terminal EBITDA Margin

30%
13.1% 16.1% 19.1% 22.1% 25.1%
25%
25% 23% 22%
4.5% 3.27 4.43 5.58 6.74 7.89 21%
20% 19% 19%
20%
TGR
5.0% 3.38 4.62 5.85 7.09 8.32

15% 12%
5.5% 3.50 4.83 6.16 7.49 8.82
10% 9%
5%
2007a
2008a
2009a
2010e
2011e
2012e
2013e
2014e
2015e
*For the purpose of this exercise, DCF is based on a mid-
range cost of equity of 16%
Source: EFG Hermes estimates Source: Juhayna Food Industries (Historic),
EFG Hermes estimates
D. COMPARABLE VALUATION
The blended peer group Our peer group consists of 15 developed and emerging companies that have dairy and juice as
trades on an estimated 2010 main business lines. We note that: i) in terms of market choice, we include developed
P/E of 15.1x and 2011 P/E of comparables due to the limited number of listed comparables in emerging markets, or the lack
13.6x of consensus estimates for some of them, and ii) in terms of business lines, some comparables
may have business lines that differ from those of Juhayna. The blended peer group trades on
an average estimated 2010 P/E multiple of 15.1x and 2011 P/E multiple of 13.6x, and an
average estimated 2010 EV/EBITDA multiple of 9.5x and 2011 EV/EBITDA multiple of 8.5x.
Juhayna trades lower than both its emerging and developed peers on an estimated 2011 P/E of
9.8x and an estimated 2011 EV/EBITDA of 6.5x.
The emerging peer group trades on an average estimated 2010 P/E multiple of 15.9x and 2011
P/E multiple of 13.7x, and an average estimated 2010 EV/EBITDA multiple of 10.8x and 2011
EV/EBITDA multiple of 9.2x. On a P/E multiple basis, developing companies trade moderately
above developed companies in 2010, but on par in 2011 and 2012. They, however, trade at a
premium based on EV/EBITDA multiples.
There are only two comparable dairy and juice companies actively traded in the MENA region,
Almarai Company (estimated 2010 P/E multiple of 17.2x and 2011 P/E multiple of 15.1x) and
SADAFCO (estimated P/E of 8.4x in 2010 and 8.2x in 2011). Based on our estimates Almarai
trades on higher multiples than the peer group average, which is partly justified by its
expansion strategy, strong track record, high margins and high ROE.
14 / 66 pages
15 / 66 pages
FIGURE 18: COMPARABLE VALUATION
juhayna food industries

MCap EV/Sales (x) EV/EBITDA (x) P/E (x) EBITDA
EPS CAGR ROE
Company Country Price* Curr. (USD mn) Mgn
09-12e** 2010
09a 10e 11e 12e 09 10e 11e 12e 09 10e 11e 12e 2009a
Juhayna Egypt 4.59 EGP 589 2.09 1.85 1.44 1.16 8.4 8.1 6.5 5.5 11.8 12.1 9.8 8.1 14% 25% 20%
Juhayna (FV) Egypt 5.85 EGP 751 2.67 2.36 1.84 1.48 10.7 10.4 8.4 7.0 15.1 15.5 12.4 10.3 14% 25% 20%
Developed:
Nestlé SA Switzerland 52.6 CHF 182,350 2.0 2.0 1.9 1.8 11.4 11.9 11.2 10.2 16.9 16.4 14.9 13.7 7% 17% N/A
Danone SA France 44.4 EUR 37,122 2.3 2.1 1.9 1.7 11.9 11.1 10.2 9.3 17.9 17.1 15.3 13.8 9% 19% 7%
Saputo Inc. Canada 32.8 CAD 6,801 1.24 1.21 1.17 10.4 9.5 9.0 17.9 15.8 14.4 11% 12% 14%
Parmalat Spa Italy 1.9 EUR 4,547 0.5 0.5 0.5 0.4 5.3 5.3 5.1 4.8 6.4 16.1 17.5 14.8 -24% 9% 6%
Dean Foods US 11.7 USD 2,120 0.6 0.5 0.5 0.5 6.6 7.6 7.0 6.7 7.3 11.5 9.9 8.4 -4% 8% 14%
Morinaga Japan 339.0 JPY 929 0.3 0.3 0.3 0.3 5.8 5.9 6.0 5.9 10.7 10.9 11.3 10.9 -1% 6% 7%
Emmi AG Switzerland 159.8 CHF 812 0.4 0.4 0.4 0.4 5.6 6.0 5.8 5.6 11.3 11.6 10.8 10.4 3% 8% 9%
Developed Min 0.3 0.3 0.3 0.3 5.3 5.3 5.1 4.8 6.4 10.9 9.9 8.4
Developed Median 0.6 0.5 0.5 0.5 6.6 7.6 7.0 6.3 11.3 15.8 14.4 12.3
Developed Mean 1.0 1.0 1.0 0.9 8.1 8.2 7.7 7.1 12.6 14.2 13.5 12.0
Developed Max 2.3 2.1 1.9 1.8 11.9 11.9 11.2 10.2 17.9 17.1 17.5 14.8
Emerging:
Almarai KSA 196 SAR 6,003 4.6 3.9 3.4 2.9 16.3 13.9 12.2 10.7 19.7 17.2 15.1 13.2 14% 28% 23%
Mengniu China 24.9 CNY 6,327 1.5 1.2 1.1 0.9 19.3 15.6 12.6 11.3 36.6 30.4 24.7 22.0 18% 8% 10%
Nestlé
Malaysia 39.2 MYR 2,840 2.5 2.4 2.2 2.2 17.4 15.7 14.5 14.5 26.1 24.1 23.1 22.5 5% 15% 22%
Berhad
Wimm-Bill-
Russia 1,454 RUB 2,189 1.1 0.9 0.8 0.7 7.7 6.3 5.5 4.5 18.1 14.0 11.7 9.6 23% 15% 22%
Dann Foods
Vietnam

Vietnam 91,500 VND 1,615 2.8 2.1 1.6 1.3 11.7 8.1 6.8 5.8 13.5 10.5 9.4 8.1 19% 24% 32%
Dairy
American
China 13.2 USD 294 1.2 1.1 1.1 0.9 26.2 9.3 7.0 16.3 11.0 8.1 7.1 32% 5% 13%
Dairy
SADAFCO KSA 37.6 SAR 325 0.9 0.9 0.8 N/A 5.6 6.0 8.4 8.2 7.8 -8% 16% N/A
Imlek Serbia 1,470 RSD 179 0.7 0.7 0.7 0.6 8.0 7.0 6.2 5.5 15.1 11.2 9.7 7.9 25% 9% 10%
Emerging Min 0.7 0.7 0.7 0.6 5.6 6.3 5.5 4.5 6.0 8.4 8.1 7.1
Emerging Median 1.3 1.2 1.1 0.9 14.0 9.3 7.0 8.2 17.2 12.6 10.7 8.9
Emerging Mean 1.9 1.6 1.5 1.4 14.0 10.8 9.2 8.7 18.9 15.9 13.7 12.3
Emerging Max 4.6 3.9 3.4 2.9 26.2 15.7 14.5 14.5 36.6 30.4 24.7 22.5
29 July 2010
Blended Min 0.3 0.3 0.3 0.3 5.3 5.3 5.1 4.5 6.0 8.4 8.1 7.1
Blended Median 1.2 1.1 1.1 0.9 10.4 8.7 7.0 6.3 16.3 14.0 11.7 10.7
Blended Mean 1.5 1.3 1.2 1.1 11.3 9.5 8.5 7.9 16.0 15.1 13.6 12.2
Blended Max 4.6 3.9 3.4 2.9 26.2 15.7 14.5 14.5 36.6 30.4 24.7 22.5
*Prices as at 28 July 2010
**EPS CAGR is calculated for years available between 2009-2012e.
Source: Bloomberg, Reuters, Zawya Dow Jones, and EFG Hermes estimates
A SNAPSHOT OF COMPARABLE COMPANIES
DEVELOPED MARKETS:
Nestlé SA (Switzerland) is the holding company of the Nestlé Group, which has subsidiaries
and joint ventures across the globe. Its main units are: i) food and beverages (75% of 2009
revenue), including dairy and confectionary products, powdered and liquid beverages, and
prepared dishes and cooking aids; ii) Nestlé Nutrition (9%); iii) Nestlé Waters (8%); and iv)
pharmaceutical operations (8%). Nestlé’s operations are international, with its North
American operations contributing 46% of 2009 revenue, while European operations
contributed 32%. Its operations in Africa, the Middle East and Asia contributed 23% to
revenue last year. The company plans to double its sales in the ten largest emerging market
countries by 2018. Some of its main consumer brands are Stouffer’s, Nescafe, Kit-Kat,
Carnation, Perrier, Vittel and Pure Life.
Danone SA (France) is a food processor that divides its activities into: i) fresh dairy; ii) water;
iii) baby nutrition; and iv) medical nutrition. Some of the company’s main brands include
Danone, Activia, Danacol, Evian, Volvic and Bledina. In 2009, the dairy products division
accounted for 57% of revenue, water 17%, baby nutrition 20% and medical nutrition 6%.
Europe contributed the largest proportion to 2009’s revenue with c60%, while Asia, its second
largest market, contributed 12.5%. The rest of the world contributed the remaining c28%. The
company is expanding its market reach into high-potential emerging countries, including
South Korea, China, Thailand, Mozambique, Syria, Lebanon, Colombia, Kazakhstan and Chile.
Saputo Inc. (Canada) divides its activities into two sectors: i) dairy products (97% of 2009
consolidated revenue); and ii) grocery products (3%). Its dairy operations are in Canada, the
United States, Europe and Argentina, while its grocery operations are in the US and include a
bakery division. Saputo is the largest dairy processor and snack-cake producer in Canada, the
third largest dairy processor in Argentina and is amongst the top three cheese producers in the
US.
Parmalat (Italy) is a major global producer and distributor of milk (58% of 2009 revenue),
dairy products (31%, including yogurt, cream-based white sauces, desserts and cheese) and
fruit-based drinks (8%). Its main markets include Canada (35% of 2009 revenue), Italy (25%),
Central and South America (15%), Australia (13%) and Africa (9%). Its main brands are
Parmalat and Santal, as well as Zymil, Fibresse, Omega3, and a number of local brands
produced through its subsidiaries.
Dean Foods Company (US) is one of the largest processors of milk and dairy products in the
US. Fresh milk comprised 71% of 2009 revenue, while ice cream accounted for 10%. It
operates through its two divisions: i) Fresh Dairy Direct, which processes and distributes milk
and other dairy products and sells under 50-plus local and regional brands and a number of
private labels; and ii) WhiteWave-Morningstar, which offers branded soybean-based beverages
and food products in Europe.
16 / 66 pages
[
Morinaga Milk Industry Co. Ltd (Japan) has two segments: i) food, which includes the
processing, manufacturing and selling of liquid milk (29% of 2009 revenue), powdered milk
(10%), yogurt (12%), ice cream and frozen products (10%), cheese and butter (9%), and
desserts (5%); and ii) other products (24% of revenue), which includes the purchase and sale
of animal feed, plant equipment design and construction, and real estate leasing. Its operations
are mainly in Japan, but through its subsidiaries and joint ventures Morinaga’s market extends
to China, France, Germany and the United States.
Emmi AG (Switzerland) produces a range of dairy and cream products, including milk, butter,
margarine, cream, yogurt, cheese, chilled coffee drinks, desserts and ice cream. Dairy products
accounted for 29% of 2009’s total revenue, while fresh products accounted for 22% and
cheese and other products accounted for 35%. The company derived 74% of its 2009 revenue
from Switzerland and, through its subsidiaries; it operates in the rest of Europe, the United
States and Canada.
EMERGING MARKETS:
Almarai Company (Saudi Arabia) is the GCC region’s largest producer of dairy products (c30%
market share) and a major manufacturer of juices, baked goods and poultry products. Its dairy
segment covers all supply chain activities (farming, processing and distribution). Almarai has a
JV with PepsiCo, where it holds 48%, that focuses on dairy and juice activities outside the GCC
region. The JV currently owns dairy and juice companies in Egypt (100% of Beyti) and Jordan
(75% of Teeba). In 2009, dairy accounted for 58% of sales, cheese and butter for 19%, juice
for 11%, baked goods for 11%, and poultry and agriculture for 1%.
Nestlé Berhad (Malaysia) is a subsidiary of the Nestlé Group. It produces a range of products,
including coffee, culinary aids/prepared foods, milk, liquid drinks, junior foods, breakfast
cereals, chilled dairy products, ice cream, chocolate and confectionery, healthcare nutrition,
performance nutrition. It exports its products mainly to South East Asia and the Middle East.
China Mengniu Dairy Company Limited (China) manufactures and distributes dairy products
in China through its subsidiaries. Products include ultra-high temperature milk (UHT) milk
(55% of 2009 revenue), milk beverages (24%), yogurt (8%), ice cream (11%), and milk powder
and other products (2%).
Wimm-Bill-Dann Foods OJSC (WBD) (Russia) manufactures dairy and juice products and
divides its operations into: i) dairy (74% of 2009 revenue); ii) beverages (17%); and iii) baby
nutrition (9%). The company has 37 manufacturing facilities in Russia, the Ukraine,
Kyrgyzstan, Uzbekistan and Georgia.
American Dairy, Inc (China) is mainly involved in the production and distribution of milk
powder, soybean milk powder, and related dairy products. Milk powder comprised 90% of
2009’s revenue and the company holds a 6.4% market share in China’s infant formula market.
Operations are mainly in China through subsidiaries that collectively own over 200 milk
collection stations, two dairy farms and seven production facilities. The company and its
subsidiaries has a daily milk powder production capacity of c1,234 tonnes.
17 / 66 pages
Vietnam Dairy Products Joint Stock Company (Vinamilk) (Vietnam) manufactures and
distributes a number of dairy products. Powdered milk and infant cereals (20% of 2009
revenue) are sold in Vietnam and exported to the Middle East, while condensed milk (25%) is
sold locally and exported to Cambodia and the Philippines. Liquid milk (35% of 2009 revenue)
is sold only to the local market, as is yogurt, ice-cream and cheese (17%), as well as fruit juice,
soybean milk, purified water and coffee (3%). The company purchases c60% of all cow milk
produced in Vietnam.
Saudi Arabian Dairy and Food Company (Sadafco) (Saudi Arabia) is a dairy and food
processor with subsidiaries across the GCC region and Jordan. Dairy products (c70% of 2009
revenue) include long-life milk, dry milk, cheese and cream. It also produces ice cream (8% of
2009 revenue), and other products (22%). Its flagship brand is “Saudia”. The company has a
c6% market share in the GCC region’s dairy products market.
Imlek (Serbia) is a dairy producer with products that include fresh and processed milk, butter,
white cheese, yogurt, cream, cheese spread, fruit beverages and desserts. Its main operations
are in Macedonia, Bosnia and Herzegovina, and Montenegro through a number of subsidiaries.
18 / 66 pages
[
III. PROFILE AND STRATEGY
BACKGROUND
The largest packaged Juhayna Food Industries (Juhayna) is a leading Egyptian packaged dairy and fruit juice
milk producer in Egypt… manufacturer and distributor. Production began in 1987, and today its operations include long-
life dairy products (58% of revenue), yogurt (23%), and fruit juice (18%). The company sells
under its main brand name “Juhayna” as well as under other brand names, such as “Bekhero”.
These other brands are marketed under the Juhayna brand umbrella, however, to build on
Juhayna’s brand equity. Juhayna has the largest nationwide distribution network amongst its
peers and delivers its products to over 75,000 retail outlets in Egypt. In addition, Juhayna has
been expanding its upstream business since 2008; it now produces juice concentrates, it owns
a dairy farm that will have a 3,000 herd (of which c1,600 are milking cows) by the end of
2010, and it has recently bought arable land on which it will cultivate fruits and animal feed.
…benefiting from first Selling over 150 SKUs (stock keeping units, different product types such as different flavours or
mover advantage sizes), Juhayna has a dominant 69% share of Egypt’s packaged plain milk market, 31% of the
spoonable yogurt market, and a 15% share of the fruit juice market, during 2009 through to
December. It also exports dairy and juice products (11% of revenue), primarily to Libya (73%)
and the Middle East. In the medium to long term, Juhayna plans to evolve from a local dairy
and juice manufacturer into a wider food and beverage manufacturer.
FIGURE 19: CONTRIBUTION TO REVENUE* FIGURE 20: NUMBER OF SKUS* FIGURE 21: MARKET SHARE BY SEGMENT
(2009) (2009)
100% 86%
Total Revenue = EGP1,578 million 80% 74%
Yogurt 46 69%
55%
60%
Dairy,
907 , 40% 31%
58% Juice 52 20%
20% 15% 7%
Concen- 0%
trates, Dairy 55 Cheese*
Drinkable
Spoonable
Nectar
Flavoured
Blended
Pure
Plain
20 , 1%
Juice, Yogurt,
287 , 364 , 40 45 50 55 60
18% 23%
Milk Yogurt Juice
*Dairy includes milk, soft white cheese and cream. *As at end-March 2010. *Soft white cheese.
Source: Juhayna Food Industries Source: Juhayna Food Industries Source: MEMRB
EXPANSION STRATEGY
Plans to evolve into an Egypt’s favourable demographics (young and growing population), combined with the under-
integrated food and penetration of the dairy and juice segment by organised producers, have attracted several
beverage producer international and regional players in recent years. This has changed the market’s competitive
landscape. Existing players have found their market share threatened, especially as they had
not been very active in the past in offering new products/flavours to the market.
19 / 66 pages
Juhayna is leveraging several of its competitive advantages to support its market position,
namely: i) its brand, which is one of the most widely recognised in Egypt, as per a study by AC
Nielsen in 2009, ii) its strong track record and knowledge of the Egyptian market, iii) its
unmatched distribution network that is costly to replicate, and iv) its focus on several product
categories, allowing it to benefit from production and distribution synergies.
The company has formulated a strategy to maintain a high growth rate that consists of the
following:
i) Improving its cost structure by a further vertical integration upstream (dairy and agricultural
farms) and downstream (distribution), as well as a further diversification of its supplier base.
ii) Thecompany is also considering tapping into other food categories in Egypt to leverage its
distribution network (under consideration).
iii) Expandingits product portfolio in its existing dairy and juice categories. Juhayna plans to
compete at all levels in its existing product categories to meet increased competition and
defend its market share. This includes expanding its product range (for example by adding new
flavours for milk and yogurt, or different types of packaging for juice) to cater to changing
consumer preferences, as well as broadening its coverage across all income brackets (for
example, by adding a new low-tier milk brand).
iv) Longer term, possibly expanding regionally by replicating its business model in other MENA
countries.
BUSINESS LINES AND SUPPORT FUNCTIONS

Juhayna separates its activities into four, 99.9% owned business lines: i) dairy products, ii)
yogurt products, iii) juice products, and iv) juice concentrates. These products are
manufactured in six factories located in the Sixth of October City. The company has
rearranged its production lines to allow each factory to become specialised in one product
segment. Additionally, Juhayna has two support functions: i) a wide distribution arm under the
name Tiba (99.9% owned), and ii) agriculture (99.9% owned) and dairy farming (40% owned)
activities.
20 / 66 pages
[
FIGURE 22: BUSINESS SEGMENTS*
Juhayna
Dairy Yogurt Juice Concentrates Support
Juhayna Food Int'l Co. for El Marwa Food Distribution Farming

Industries Egyptian Food Modern Food Industries Co. Activities Activities
Industries Co. Industries (99.9%)
(99.9%) (99.9%)
Masreya Dairy Tiba for Al Enmaa for
& Juice Co. Modern Trading & Agricultral
(99.9%) Concentrate Distribution Development
Co. (99.9%) (99.9%) (99.9%)
Milkes Dairy
Co. (40.0%)
*The Kamel family owns the remainder 60% of Milkes Dairy.

Source: Juhayna Food Industries
The timetable below summarises the important milestones in Juhayna’s history.
FIGURE 23: MILESTONES

1984-2002 2007 2008 2009 2010
Established 1984- Start Acquisition of El Setting up Modern Setting up El Enmaa for Increasing paid up
of operations 1987 Masreya 2005 Concentrate Agri. Dev. capital to EGP520
Strategic alliance with Setting up Tiba for Setting up Milkes Dairy million in 1Q2010
TetraPak 1985 Trading & Distribution and El Dawleya
Start of Exports 1988 Co. 2007 Acquisition of El Marwa IPO (June); increasing
Start of B2B activitiy Concentrate paid up capital to
1994 Conracting Combibloc EGP726 million
to supply juice
packaging
DAIRY PRODUCTS (58% OF REVENUE)

Dairy products include long-life milk (with a shelf life of six months), cream and soft cheese.
Production takes place at two factories, Juhayna and Masreya, with a capacity of 1,650
tonnes/day for milk and 60 tonnes/day for cheese. Juhayna splits its milk products into two
main types: plain milk and flavoured milk. Plain milk products include its top-tier “Juhayna”
brand and mid-tier “Bekhero” brand, with a combined market share of 69% in 2009. Bekhero
targets mid- to low-income consumers and accounts for almost 50% of the company’s plain
milk sales volume. Flavoured milk products include the brands “Mix” and the smaller-sized
pack “Jino”, both of which target children and had a combined market share of 74% in 2009.
Business-to-business (B2B) accounts for 10% of the company’s dairy product sales. B2B
customers include hotels, airlines, restaurants and fast food chains (including brands such as
McDonalds, Chili’s, Burger King and Starbucks). Exports account for 17% of the segment’s
revenue, of which 85% is from milk. Libya and the Middle East are the largest export markets.
Juhayna estimates its market share in the Libyan packaged milk market was approximately
20% in 2009.
21 / 66 pages
Becoming more active at the Juhayna recently introduced/plans to introduce three new milk products in the near future: i) a
lower end of the milk market low-tier plain milk brand, “Halibo” (May 2010), to target the large low-income bracket
population, which generally consumes “loose” milk - fresh, unpasteurised milk. This segment
has recently been tapped by other players offering products at prices close to loose milk prices,
ii) “Bekhero” skimmed milk, targeting the mid- to low-income consumers, and iii) honey and
sugar “Mix” flavoured milk, both of which are additions aimed at children’s consumption.
The company is also planning on becoming a more active player in the cheese market. In
addition, it is considering a possible entry into the fresh milk market segment, targeting the
high-end consumer. This will likely be sold only in hypermarkets and large supermarkets as
most of the retail sector in Egypt is dominated by individually owned stores, which are not
equipped to sell fresh dairy products.
FIGURE 24: DAIRY SEGMENT REVENUE FIGURE 25: DAIRY REVENUE BY DESTINATION
BREAKDOWN (2009) (2009)
Total Revenue: EGP907.3 million
Libya
12%
Cream
9% Exports
17% Middle
Milk East 3%
Cheese
88% 3% EU &
Local USA 1%
Market
83% Africa
1%
Source: Juhayna Food Industries Source: Juhayna Food Industries
YOGURT PRODUCTS (23% OF REVENUE)

Yogurt products include spoonable and drinkable yogurt, both of which have a short life span
of two weeks and are accordingly sold entirely to the local market. Spoonable yogurt accounts
for 71% of the segment’s revenue and had a 31% market share in 2009 through its Juhayna-
branded plain, light, and fruit yogurts. Foreign brands have recently entered the spoonable
yogurt market, with a variety of new value-added products (such as new flavours) and, as a
result, the market has expanded. To benefit from this expansion and to better compete with
foreign brands, Juhayna widened its product offering in 2009-2010 to include flavoured,
sweetened and digestive yogurt. Juhayna was the first to introduce drinkable yogurt products
to Egypt (known in the GCC region as Laban) in 1990. Drinkable yogurt is sold under the brand
names “Rayeb” (plain) and “Zabado” (fruit).
Successfully rebuilding Yogurt used to be produced at the Egyfood factory, which had a capacity of c350 tonnes/day.
its lost yogurt capacity Juhayna lost this factory in a fire in April 2010 and, accordingly, it is currently replacing it by
building a new factory that it anticipates will be operational in 1Q2011. The new factory will
have an initial capacity of 400 tonnes/day and the company estimates its capex at EGP275
million. According to the company, the old factory was fully insured with a value equivalent to
EGP299 million in case of total loss. The company estimates the replacement cost of the
factory at EGP240 million. Juhayna will finance the new factory’s capex through a bridge loan
of up to EGP300 million (withdrawn as needed) until it receives the insurance proceeds. Until
22 / 66 pages
[
the new factory starts operations, the company is operating yogurt production lines (old
machines, as well as new machines that will become operational between July 2010 and early
2011) at its Juhayna and Masreya factories. This has resulted in a combined yogurt capacity of
around 70 tonnes/day in May that will increase to 300 tonnes/day in August (c85% of the old
factory’s capacity) and will further grow to 350 tonnes/day by early 2011 (100% of the old
factory's capacity). The reduction in capacity will mean that Juhayna’s market share will
decline in 2010; we estimate to 25-26% from 31% in 2009.
FIGURE 26: YOGURT REVENUE BREAKDOWN (2009)
Total Revenue: EGP364 million
Drinkable
29%
Spoonable
71%
JUICE PRODUCTS (18% OF REVENUE)

In 2008, Juhayna established its El Dawleya factory to expand and centralise its juice
production in one factory. The factory has a filling capacity of 667 tonnes/day. Juice products
include: i) “Juhayna Nectar” (74% of juice revenue), which has a minimum fruit content of
25%, ii) “Juhayna Pure”, a premium product with 100% fruit content and no sugar added, iii)
“Bekhero” juice drink, which has a minimum fruit content of 10%, and iv) other juice drinks
under two recently introduced brands, “Jump” and “Tingo”.
Penetrating new segments to Although, Juhayna had a sizeable market share in the nectar (20%) and pure juice (55%)
enlarge market share categories in 2009, its blended market share in the packaged juice market was small at 15%.
This is because it previously mostly sold juice nectar, while juice drinks account for 41% of the
market. Additionally, it used to sell in carton packaging, while bottles and pouches account for
57% of the market. However, the company has recently launched its first bottled juice drink
brand, “Tingo” as well as “Jump” juice drink in carton. It is also considering entering into the
pouch market, which has significant potential in the low-income bracket. Additionally, to
expand sales of its higher margin “Juhayna Pure”, the company intends to add four new
flavours to its offering in 2010 (carrot and orange, mango, guava, and pineapple).
23 / 66 pages
FIGURE 27: JUICE REVENUE BY PRODUCT (2009) FIGURE 28: JUICE REVENUE BY MARKET (2009)
Total Revenue: EGP286 million

Export
Pure Market
7%
12%
Bekhero
Nectar 13%
73%
Jump
1% Local
Market
Tingo 93%
1%
Source: Juhayna Food Industries Source: Juhayna Food Industries
FIGURE 29: PRODUCTS

Type Package Launch Year Target Income Bracket
Milk
Juhayna Plain Carton 125 ml up to 1,500 ml 1987 Mid-High
Mix Flavoured Carton 200ml 1990s - New Mid-High
flavours 2010
Jino Flavoured Carton 125ml 2009 Mid-High
Bekhero Plain Pouches 1999 Low-Mid
Halibo Plain Pouches 2010 Low
Yogurt
Spoonable
Juhayna Plain Plastic Cups 1987 All
Juhayna Light Plastic Cups 2004 Mid-High
Juhayna Fruit Plastic Cups 2004 Mid-High
Juhayna Sweetened Plastic Cups 2009 Mid-High
Mix Flavoured Plastic Cups 2009 Low-Mid
Actilife Digestive Plastic Cups 2010 Mid-High
Drinkable
Rayeb Plain Carton 1990 Mid-High
Zabado Fruit Carton 2002 Mid-High
Juice
Juhayna 25% Fruit Carton 200ml up to 1,000 ml 1987 Mid-High
Nectar
Juhayna Pure 100% Fruit Carton 200ml up to 1,000 ml 2008 - new Mid-High
flavours 2010
Bekhero Drink 10% Fruit Carton 2006 - phase out Low-Mid
end-2010
Tingo 10% Fruit Bottle 2009 Mid-High
Jump 10% Fruit Carton 2009 Mid-High
24 / 66 pages
[
FIGURE 30: PRODUCTION PROCESS

Step 1 Step 2 Step 3 Step 4 Step 5 Step 6
1
Milk Raw Milk Reception Standardisation of Milk UHT Treatment2 Filling Palletising4
Yogurt Raw Milk Reception Mixing & Standardisation of Milk UHT Treatment2 Fermentation3 Filling Palletising4
Juice Raw Material Reception Mixing Process Filling Palletising4
5
Concentrate Fruit Reception Sorting & Cleaning Pressing & Cleaning Heat Treatment Concentration5 Filling
1
To control value ingredients and bacteria count in the milk.
2
Ultra-High Temperature; sterilisation before packaging, then filling into pre-sterilised containers in a sterile atmosphere. Milk is processed this way using temperatures
exceeding 135° C.
3
Yogurt is made by fermenting milk with friendly bacteria (Lactobacillus bulgaricus and Streptococcus thermophilus). Milk sugar (lactose) is fermented by these bacteria
to lactic acid, which causes the characteristic curd to form.
4
An automated system that maximises the stability of the pallets during transportation.
5
The pulp/juice is heat treated and then certain products are concentrated in an evaporator.
Source: Juhayna Food Industries, EFG Hermes estimates
SOURCING OF RAW MATERIALS - VERTICAL INTEGRATION

Raw material costs account for the bulk of Juhayna’s cost of goods sold, with raw milk and
milk powder making up 46% (of which 65% is for raw milk, 29% is for powdered milk and 6%
is for butter oil) and packaging 26%. Currently, Juhayna sources most of its needs from the
following external sources:
i) 93% of its raw milk needs come from local dairy farms (non-contractual) and Juhayna
closely supervises the farms to ensure quality and low bacterial count. Historically, Juhayna
used suppliers with an average herd size of at least 200 cows. Recently, the company adopted
a three-year plan to extend its supplier network, targeting up to 1,000 smaller herds (from 10
to 100 cows). In addition, Juhayna, in conjunction with the Ministry of Agriculture, and with
the support of Industrial Modernisation Centre in Egypt and Tetra Pak, is developing collection
centres to deal with a large number of smaller milk producers. This will allow the company to
meet anticipated future demand of raw milk, while diversifying its supplier mix to control
costs.
ii) milk powder, butter oil and milk protein come from Denmark and New Zealand;
iii) 24.4% of its juice concentrate needs come from international suppliers;
iv) fruits for the concentrate factories come from local farmers and dealers;
v) its packaging material needs come from local and global suppliers. The company has two
supply contracts with Sweden’s TetraPak (for dairy packaging) and Switzerland’s Combibloc
(for juice packaging).
25 / 66 pages
FIGURE 31: BREAKDOWN OF COSTS (2009)*
Packaging
26%
Raw milk &

powder
46%
Manufacturing
13%
Other
15%
*Raw milk and powder includes 65% raw milk, 29% powdered milk and 6% butter oil.
Moving upstream Juhayna has been taking major steps since 2008 to control the supply of its raw materials and
reduce costs, taking advantage of vertical integration possibilities:
i) It
entered into a JV to establish Milkes (located in Cairo-Alexandria Road), of which it owns
40%, to set up and operate a modern dairy farm. This took place in 2008 after the government
removed the ban on milking cow imports. The farm will have a 3,000 herd by the end of 2010
(of which c1,600 are milking cows with an average yield per cow of 35 litres/day), purchased
from Europe. Milkes currently covers 7% of Juhayna’s raw milk needs. In the medium term, the
company plans to be increasingly self sufficient in milk, sourcing about half of its raw milk
needs internally. To help it achieve this aim, Juhayna plans to develop a further 4,000 feddans
(4,152 acres) to expand its dairy farming activities. Management believes owning efficient
modern farms will allow it to source a greater proportion of its raw milk needs at cheaper
prices than the market averages. Egypt’s annual yield per cow is only c1,000-1,600 litres
compared with modern farms’ 9,000-12,000 litres (or 30-40 litres per day).
ii) It
now produces 76% of its juice concentrate needs, selling the excess production to third
parties, both local (such as Isis and Beyti) and export customers.
iii) It
has recently bought 2,500 feddans (2,595 acres, located in the Oasis) and plans to buy
another 7,500 feddans (7,785 acres) of arable land, which it will use to cultivate fruits for its
concentrate factories (with the excess sold to local and export markets) and animal feed for its
dairy farms.
In addition to the aforementioned upstream expansion, Juhayna has also been focusing on its
downstream processes to ensure that its products are distributed at a guaranteed quality to
consumers across Egypt.
DISTRIBUTION
A nationwide Juhayna has 20 distribution centres that are spread across Egypt, from Alexandria in the North
distribution network to Aswan in the South, and two key distributors. The distribution segment employs c43% of
Juhayna’s total workforce of 2,844 employees. It distributes to c25,000 outlets directly
through its fleet of 523 vans (294 vans adapted for dry goods and 229 for chilled goods - the
latter can carry dry goods as well), and to a further c50,000 outlets through sub-distributors. In
particular, the company uses four sub-distributors to reach remote areas. According to
MEMRB, Juhayna covers 94% of weighted retailers in the dairy segment, 75% in the yogurt
segment, and 44% in the juice segment. Major chains and large supermarkets account for
26 / 66 pages
[
about 18% of the company’s sales. With the exception of a small number of larger
supermarkets, Juhayna sales terms require cash payment by retailers at the time of delivery.
Juhayna is also setting up a mega-distribution centre on an area of 55,000 sqm beside its
factories in the Sixth of October City. This is expected to be completed by mid-2012 and will
act as a supplier to the existing smaller distribution centres. It will free up space in Juhayna’s
factories, thus enabling new product lines to be easily added in the future. The company
intends to acquire an additional two land plots for the same purpose (c33,000 sqm in Upper
Egypt and possibly another c30,000 sqm in Alexandria). Additionally, the company will
contract a further 100 small rural sub-distributors to reach deep rural areas and small villages.
FIGURE 32: DISTRIBUTION
27 / 66 pages
BOX 1: ORGANISATION STRUCTURE AND MANAGEMENT
In 2006-2009, Juhayna hired a new management team with strong experience in the
consumer sector to better handle expansion, marketing and commercial aspects and face
the new competitive environment.
FIGURE 33: ORGANISATION STRUCTURE AND MANAGEMENT
Chairman & CEO

Sawfan Thabet
Deputy CEO
Nabil Skaria
Commercial Manufacturing
Operations Finance Division Supply Chain Agricultral Admisitration
Division Division Sector Division
Division Ehab A. Hamid
Niels Thomson Ahmed Labib Hany Kamel Hisham Zaki
Nabil Skaria
28 / 66 pages
[
IV. FINANCIAL ANALYSIS AND FORECASTS
A. SUMMARY OF HISTORICAL FINANCIAL PERFORMANCE
Revenue
Juhayna’s revenue grew 38% in 2008 to EGP1.5 billion, driven by consumption growth in
packaged milk, yogurt and juice, and price increases that Juhayna applied to pass on rises in
input costs. Revenue growth decelerated in 2009 to 8%, mainly after Juhayna discontinued or
reduced sales of some low-margin businesses (for example milk school tenders). Its average
prices grew slightly, we believe, mainly on a better sales mix. The 2008-2009 revenue CAGR
was 22%.
Gross Profit
Juhayna almost maintained its gross profit margin (including export rebate) in 2008 at 25.4%
(versus 26.7% in 2007), after it increased prices to offset a rise in input costs, particularly raw
milk and packaging materials. Cost of production fell in 2009, mostly due to a decline in raw
milk prices as global commodity prices fell and, according to Juhayna’s management, partly
due to savings from the company’s 2008-2009 restructuring and resultant factory
specialisation. Juhayna, in line with the industry, refrained from cutting its prices, which
combined with its improved sales mix, has significantly improved its gross profit margin to
40%. Gross profit grew 31% in 2008 and 70% in 2009 to EGP631 million.
Juhayna reported export rebates, representing on average 10% of its total export revenues in
2007-2009. In 2008-2009, the rebate included a temporary increase that the government had
passed as part of a broader incentive scheme.
EBITDA
In 2007 and 2009, the SG&A expense to sales ratio was roughly stable at 14.6% and 15.1%,
respectively. In 2008, the ratio peaked at 16.7% mainly as a result of a one-off cost item
(excluding this EGP23 million one-off cost, SG&A expense/sales stood at 15.1%). Variable
costs account for approximately 70% of SG&A and fixed for 30%.
The 2008-2009 EBITDA CAGR was strong at 75%, with EBITDA reaching EGP393 million in
2009. The EBITDA margin also expanded strongly to 24.9% in 2009 from 12.1% in 2007 and
an exceptionally depressed 8.7% in 2008.
Net Profit
Reported net profit achieved a 2008-2009 CAGR of 108% to EGP185 million (from EGP5
million in 2008 and EGP43 million in 2007). Core operations drove most of 2009’s net profit
growth, although Juhayna also booked EGP35 million (gross) one-off gains from the sale of
50% of its stake in its real estate investment Bonian. Depreciation and interest expenses
meanwhile also surged 72% to EGP97 million and 144% to EGP125 million, respectively, in
2009, following the series of investments that Juhayna undertook in 2008 and 2009 that were
mostly debt financed.
It is worth pointing out that Juhayna’s effective tax rate is less than half of Egypt’s flat 20%
corporate tax rate at c7%, as a result of the tax exemptions that a number of its factories
currently enjoy. Some of these exemptions will expire in 2012 and the rest in 2018.
29 / 66 pages
FIGURE 34: TABLE SUMMARISING 2007-1Q2010 FINANCIAL HIGHLIGHTS

2007a 2008a 2009a 1Q09a 1Q10a
Income Statement
Revenue 1,061 1,463 1,578 313 405
Gross Profit 283 372 631 125 172
GPM 26.7% 25.4% 40.0% 39.8% 42.5%
SG&A / Sales* -14.6% -16.7% -15.1% -18.1% -18.0%
EBITDA 128 128 393 68 99
EBITDA Margin 12.1% 8.7% 24.9% 21.8% 24.6%
NOP 83 71 296 50 66
NOP Margin 7.8% 4.9% 18.8% 16.0% 16.3%
Finance Costs** (43) (63) (137) (35) (24)
Other 14 7 12 (0) 7
EBT & Minority Interest 54 15 171 15 49
Tax (11) (10) (14) 1 (3)
Minority Interest (0.0) 0.0 (0.1) (0.0) (0.0)
Exceptional Gains*** - - 28 - 14
Reported Net Profit 43 5 185 16 60
Balance Sheet
TA 1,009 1,893 1,894 1,883
Net Debt 527 1,164 967 918
SHE 259 252 573 610
Cash Flow
Copat 135 359
Working Capital -33 81
Capex (686) (246)
FCF (583) 194
Ratios
Net Debt / SHE 2.04 4.62 1.69
Net Debt / EBITDA 4.10 9.11 2.46
FCF / Sales -39.9% 12.3%
*Includes board allowance.
**Includes lease expense.
***Net of related tax expense in 2009 and 1Q10.
Source: Juhayna Food Industries, EFG Hermes
Working Capital, Capex and FCF

To support its operations, Between its start of operations in 1987 and 2008, Juhayna’s total production capacity
Juhayna has grown through a (excluding concentrate) grew from 35 tonnes/day to 2,730 tons/day (3,610 tons/day,
series of capacity additions and including its juice concentrate capacity). This was achieved through both organic growth and a
a number of acquisitions series of acquisitions.
In 2008, Juhayna spent significant capex of just below EGP700 million, most of which to build
its new state-of-the-art juice factory (El Dawleya) and associated concentrate plants.
30 / 66 pages
[
FCF turned to a positive EGP194 million in 2009 from a negative EGP583 million in 2008,
helped by a lower capex bill and a decline in working capital requirement after input costs fell.
FIGURE 35: PRODUCTION CAPACITY ADDITIONS SINCE THE BEGINNING OF OPERATIONS

In tonnes/day, unless otherwise stated
3,000
2,720
2,500
2,000
1,700
1,500
1,200
1,000
600
500
35 120
0
1987 1991 2000 2001 2005 2008
Source: Juhayna Food Industries, EFG Hermes
Capitalisation and Financial Leverage

Juhayna’s expansions were debt financed, although recently it has deleveraged its balance
sheet by raising cEGP247 million from old and new shareholders (paid-in capital increased
from EGP131 million in 2007 to EGP520 million in 1Q2010 through both a cash injection and
a transfer from retained earnings, dividends reinvested in the firm and reserves). Newly
injected funds helped reduce Juhayna’s net debt balance to EGP967 million in 2009 from
EGP1,164 million in 2008, and the net debt-to-equity ratio to 1.7x in 2009 (1.5x in 1Q2010)
from 4.6x in 2008. The strong expansion in 2009’s operating margins has also helped improve
the net debt-to-EBITDA ratio significantly to 2.5x in 2009 from 9.1x in 2008.
1Q2010
The company’s 1Q2010 (January-March 2010) results continued staging a strong
performance. Revenue grew 29% Y-o-Y to EGP405 million. Net profit grew more than three-
fold to EGP60 million (from EGP16 million in 1Q2009), including EGP14 million in one-off net
gain on the sale of a land plot.
Compared to FY2009 levels, the gross profit margin further improved to 42.5%, despite a
slight recovery in raw milk cost, offsetting a c300 bps expansion in the SG&A expense-to-sales
ratio to 18.0%. The EBITDA margin was therefore stable versus 2009 at 24.6%. Normalised net
profit margin (excluding capital gains and related tax) expanded to around 11.3% from around
9.9% in 2009.
2Q2010 Preview
We estimate Juhayna’s 2Q2010 net profit at EGP41 million (comparable figures for 2Q2009
were not provided by the company in the IPO prospectus). Excluding a EGP14 million capital
gain booked in 1Q2010, our net profit estimate is 11% lower Q-o-Q. Although in the dairy
and juice industry revenue should come higher in the second quarter than in the first quarter
backed by seasonality effects, we estimate revenue will come in almost flat Q-o-Q. We expect
2Q2010 revenue growth will be held back by the temporary ceasing of yogurt operations in
end-April/ early-May and lower capacity afterwards (due to the yogurt factory’s fire).
31 / 66 pages
Management indicated that export revenue declined Y-o-Y in 1H2010, but expects 2H2010
exports to show Y-o-Y (and H-o-H) growth. We expect strong (double-digit) growth in local
milk and juice sales. The EBITDA margin is forecast to come under pressure at 22.3% versus
24.3% in 1Q2010, partly due to the use of higher-cost alternative yogurt production lines in
other dairy factories.
Management indicated that the yogurt factory loss will be recorded in 2Q2010 income
statement, but it will be completely netted against part of the insurance proceeds.
FIGURE 36: SUMMARY OF INCOME STATEMENT

Income Statement 1Q10a 2Q10e Q-o-Q

Revenue 405.0 414.5 2%
EBITDA 98.6 92.2 -6%
EBITDA Margin 24.3% 22.3%
Net Operating Profit 66.2 62.2 -6%
NOP (EBIT) Margin 16.3% 15.0%
Net Profit before Unusual Items 45.9 40.7 -11%
Unusual Gain (Loss) 14.4 -
Net Profit 60.3 40.7 -32%
Source: Juhayna Food Industries (historic), EFG Hermes estimates
Seasonality
Sales of dairy and juice products peak during the summer season, and whatever period that
coincides with Ramadan. In 2007-2009, Juhayna generated on average 57% of its annual
revenue during the second half of the year. Within Juhayna’s product range, yogurt is the most
seasonal, with approximately 45 days of production for Ramadan traditionally representing
more than 30% of Juhayna’s annual yogurt production volume.
FIGURE 37: QUARTERS' CONTRIBUTION TO FY REVENUE
35%
30% 29% 30% 29%
30% 27%
25% 25% 24%
25% 23%
20% 20%
20% 18%
15%
10%
1Q07
2Q07
3Q07
4Q07
1Q08
2Q08
3Q08
4Q08
1Q09
2Q09
3Q09
4Q09
32 / 66 pages
[
B. REVENUE ANALYSIS AND FORECASTS
REVENUE AND GROSS PROFIT MARGIN

Revenue and Market Share
Volumes to grow; market shares In 2010-2015, we forecast a total revenue CAGR of 20%. In 2010, we project a decline in
to eventually decline on increased yogurt revenue, but expect strong growth from milk and juice to more than compensate, and
competition that Juhayna’s total 2010 revenue will actually grow 13% to EGP1.8 billion. Juhayna has
indicated that its milk and juice sales volumes have increased significantly shortly after the fire
in the yogurt factory, after it distributed the two products’ SKUs using yogurts’
specialised/chilled fleet.
We, meanwhile, expect the revenue contribution from milk and juice exports to decline over
our forecast period, as Juhayna directs its production capacity to meet the high-growth and
more profitable domestic demand.
FIGURE 38: HISTORICAL AND PROJECTED REVENUE CAGR BY SEGMENT
2008a-2009a 2010e-2015e
45% 41%
40%
35%
30% 24%
25% 22% 20%
20% 19%
20% 16% 17%
15%
10%
5%
0%
Dairy Yogurt Juice Total
Source: Juhayna Food Industries (historic), EFG Hermes estimates
We assume Juhayna’s volumes growth will be supported by a solid dairy and juice
consumption growth outlook, and more importantly, by consumers’ anticipated conversion to
packaged products, particularly milk. We expect Juhayna will grow at a lower rate than the
packaged market, especially in our later forecast years, for milk and yogurt, on increased
competition. We, meanwhile, assume that Juhayna’s juice market share will expand, owing to
the company’s strategy of taping into new, sizable market segments, which it already started
implementing in January 2010.
Our forecasts assume a faster conversion to packaged milk (from 12% to 32%) over our
forecast period than yogurt (from 50% to 63%), as industrialised packaged yogurt’s
contribution to yogurt consumption had a steep increase in recent years. Additionally,
packaged milk growth should be boosted by milk producers and the Ministry of Health efforts
to encourage packaged milk consumption through educational campaigns and the launching
of new low-tier brands.
33 / 66 pages
FIGURE 39: MILK VOLUME CAGR FIGURE 40: YOGURT VOLUME CAGR FIGURE 41: JUICE VOLUME CAGR
Packaged Market Juhayna Packaged Market Juhayna Packaged Market Juhayna
25% 23% 35% 31% 25%

30% 19%
20% 24% 20% 17% 17%
16% 25% 20%
15% 13% 15%
20% 14% 10%
10% 15% 10%
5% 10%
5% 5%
5%
0% 0% 0%
2008a-2009a 2010e-2015e 2008a-2009a 2010e-2015e 2008a-2009a 2010e-2015e
Source: Juhayna Food Industries (Historic), Source: Juhayna Food Industries (Historic), Source: Juhayna Food Industries (Historic),
EFG Hermes estimates EFG Hermes estimates EFG Hermes estimates
Revenue mix
We expect dairy’s (mostly milk) revenue contribution to remain the group’s largest at 56% by
2015. We expect the contribution from yogurt to contract to 21% from 23%, while the
contribution from juice should expand to 22% from 18%.
FIGURE 42: REVENUE AND CAGR FIGURE 43: PRODUCT CONTRIBUTION TO REVENUE
Concentrate Juice Yogurt Dairy Concentrate Juice Yogurt Dairy

4,500
100% 1% 1%
4,000 90% 18% 18% 21% 20% 20% 21% 22% 22%
3,500 20% 10e-15e 80%
CAGR 70% 18% 23% 18% 21% 22% 22%
3,000 21% 21%
60%
2,500 50%
2,000 22% 08a-09a 40%
CAGR 30% 63% 57% 60% 59% 58% 58% 57% 56%
1,500
20%
1,000 10%
500 0%
2008a 2009a 2010e 2011e 2012e 2013e 2014e 2015e 2008a 2009a 2010e 2011e 2012e 2013e 2014e 2015e
Source: Juhayna Food Industries (historic), EFG Hermes estimates Source: Juhayna Food Industries (historic), EFG Hermes estimates
Pricing
Juhayna’s ability to pass rising production costs onto consumers has been generally intact. We
nonetheless assume a relatively moderate annual price increase of 4-5% for milk, yogurt, and
juice, which means that our revenue growth forecast is mostly volume driven.
Our conservative price increase is slightly dented by the scheduled introduction of low-end
products, mainly for milk and juice, and, for 2010 only, by the absence of high value-added
yogurt production for few months as a result of the fire incident.
34 / 66 pages
[
FIGURE 44: ANNUAL VOLUME GROWTH FORECAST FIGURE 45: ANNUAL PRICE GROWTH FORECAST
2010e 2011e 2012e 2013e 2014e 2015e 2010e 2011e 2012e 2013e 2014e 2015e
38% 7%
40% 6%
35% 6% 5% 5% 5% 5%
4% 5% 5% 5% 5%
30% 25%
27% 5% 4% 4% 4%
19%
4% 4%
25% 21% 19% 20% 18% 3% 3% 3%
20% 13% 17% 13% 17% 3%
14% 15%
15% 11% 12% 2%
10%
10% 1%
5% 0%
0% -1%
-5% -2%
-10% -3% -2%
-9%
Milk Yogurt Juice Milk Yogurt Juice
Source: EFG Hermes estimates Source: EFG Hermes estimates
THE GROSS PROFIT MARGIN

Gross margin to remain solid, Although we assume that Juhayna’s gross profit margin (GPM) will fall from 2009’s
despite decelerating from exceptionally strong levels, we forecast that for all the three main business lines (milk, yogurt
2009’s high level and juice) the GPM will remain well above 2007-2008’s pre-restructuring levels over our
forecast period.
In general, our expected GPM compression is driven by: i) a recovery in raw material prices
(feed and imported milk powder price that already started increasing in 2010) from 2009’s
depressed levels, and ii) our assumption of Juhayna’s inability to entirely pass on increases in
its production cost on tougher competition (we believe competition will initially focus on
product differentiation, but eventually on price).
In 2010-2011, the expected decline in the GPM also partly reflects additional costs from the
use of old, previously discontinued, yogurt production lines in other factories as well as the
booking of pre-operating costs related to the launch of the new yogurt factory in 1Q2011.
FIGURE 46: GROSS PROFIT AND GROSS PROFIT MARGIN FIGURE 47: PRODUCT CONTRIBUTION TO GROSS PROFIT
Gross Profit Gross Profit Margin Concentrate Juice Yogurt Dairy

100% 1%
1,800 40% 38% 45% 19% 26% 24% 23% 24% 25% 25%
37% 36% 28%
1,600 35% 34% 34% 40% 80%
1,400 35% 26% 18% 22%
18% 24% 24% 24% 23%
1,200 25% 30% 60%
1,000 25%
800 20% 40%
600 15% 53% 54% 56% 54% 52% 52% 52% 51%
400 10% 20%
200 5%
0%
0 0%
2008a 2009a 2010e 2011e 2012e 2013e 2014e 2015e
2008a 2009a 2010e 2011e 2012e 2013e 2014e 2015e
Source: Juhayna Food Industries (historic), EFG Hermes estimates Source: Juhayna Food Industries (historic), EFG Hermes estimates
35 / 66 pages
Our GPM outlook for the different segments is slightly mixed. We assume that for milk, the
GPM will remain in line with 2009’s levels in 2010 and then decline by an average 100 bps
annually. We assume that yogurt’s GPM will decline in 2010 in the aftermath of the fire,
recover until 2012, and then decline slightly after that on competitive pressures. We assume
that juice’s GPM will actually expand in 2010, in line with 1Q2010’s performance (50%), and
start softening from 2011 to revert back to 2009’s levels.
FIGURE 48: MILK GROSS PROFIT MARGIN FIGURE 49: YOGURT GROSS PROFIT FIGURE 50: JUICE GROSS PROFIT MARGIN
MARGIN
40% 35% 35% 34% 50% 43% 50% 45%
33% 32% 45% 41% 39% 45% 42%
35% 31% 31% 38% 39% 38%37% 40% 41% 40%
40% 40% 37% 39% 39%
30%
35% 35%
25% 22% 30% 25% 30%
20% 25% 25%
15% 20% 20%
15% 15%
10%
10% 10%
5% 5% 5%
0% 0% 0%
2010e
2011e
2012e
2013e
2014e
2015e
2008a
2009a
2008a
2009a
2010e
2011e
2012e
2013e
2014e
2015e
2008a
2009a
2010e
2011e
2012e
2013e
2014e
2015e
Source: Juhayna Food Industries (Historic), Source: Juhayna Food Industries (Historic), Source: Juhayna Food Industries (Historic),
EFG Hermes estimates EFG Hermes estimates EFG Hermes estimates
Milk represents Juhayna’s largest cost item (feeding milk and yogurt) (46%) followed by
packaging material (26%) and manufacturing costs (13%). We assume milk cost (raw and
powder) will rebound in 2010 from 2009’s highly depressed levels (in 1Q2010, the company
reported an increase in its raw milk cost per tonne for the milk segment of 8% over 2009’s
level) and then increase by a relatively moderate rate over the rest of our forecast years.
Our assumed 2010 recovery in Juhayna’s milk cost could have been higher if it was not for the
one-year inventory of milk powder that Juhayna has mostly contracted at 2009’s weak price
levels.
Egypt’s milk prices are already high, by international standards, due to farming inefficiencies
and exceptionally low cow yield. Juhayna will continue to work at reducing this pricing
disparity (by improving efficiencies and sourcing milk from collection centres and smaller
farms that traditionally sell their milk at a discount to large farms). We assume that sourcing
raw milk from a more diversified supplier base and the usage of cheaper packaging for low-tier
products (pouches for low-tier milk brands and bottles for some juice drinks) will only partially
offset upward cost pressures that come from higher feed and milk powder prices over our
forecast period.
Our current forecast excludes any significant reductions to the cost of internally sourced raw
milk that Juhayna expects to achieve by investing in its 40% owned farm Milkes or
purchasing/acquiring other dairy and agriculture farms. Notwithstanding, we will be
incorporating such projects in our forecast once management provides detailed guidance on
their timeframe, cost and expected return.
36 / 66 pages
[
THE EBITDA MARGIN

We forecast a 2010-2015 EBITDA CAGR of 15% after maintaining an average SG&A-to-sales
ratio of 15.2% that is almost in line with historical levels. Our EBITDA margin contracts from
24.9% in 2009 to 19.1% in 2015, although we assume it will remain well above 2007-2008’s
levels of 12.1% and 8.7%, respectively in line with our GPM forecast.
FIGURE 51: EBITDA AND MARGIN FIGURE 52: SG&A-TO-SALES RATIO

EBITDA EBITDA Margin

30% 1,000 17% 16.7%
24.9%
22.7% 900 17%
25% 22.0% 21.2% 800
20.1% 16%
20% 19.1% 19.1% 700 15.6%
600 16% 15.3% 15.3%
15% 500 15.1% 15.0% 15.0% 15.0%
8.7% 400 15%
10% 300 15%
5% 200
100 14%
2008a
2009a
2010e
2011e
2012e
2013e
2014e
2015e
0% 0
2008a
2009a
2010e
2011e
2012e
2013e
2014e
2015e
LEVERAGE AND NET FINANCE COSTS

We expect Juhayna’s 2009 net debt of EGP967 million will turn into a net cash position of
EGP230 million in 2010 as a result of the IPO proceeds. Moreover, since we exclude potentially
large expansions (currently under study by the company), our net cash position grows over our
forecast period, resulting in a growing net interest income. We, meanwhile, maintain an annual
lease expense of EGP12 million that Juhayna is expected to pay until 2018. The company will
finance the new yogurt plant through a bridge loan of up to EGP300 million (withdrawn as
needed) until receiving the insurance proceeds (we assume before the end of 2010).
In 1Q2010, long-term debt accounted for 55% of Juhayna’s total debt position (versus 41% in
2009), indicating that the company has been partially financing its expansion by short-term
debt. The company estimates that it pays an average interest expense of c9% on its total debt,
while its deposits (IPO proceeds) will earn at least 7%.
37 / 66 pages
FIGURE 53: NET DEBT AND NET DEBT-TO-EBITDA RATIO

Net Debt-to-EBITDA (LHS), Net Debt (EGP mn, RHS)
Net Debt Net Debt / EBITDA (x)
10 9.1 1,400
9 1,200
8
7 1,000
6 800
5 4.1
4 600
2.5
3 400
2
1 200
0 0
2007a
2008a
2009a
38 / 66 pages
[
NET PROFIT AND DIVIDENDS

Solid net profit growth We forecast a 26% growth in 2010 reported net profit, which rises to 39%, excluding one-off
expected gains booked in 2009 (related to the sale of a stake in a real estate investment) and 2010 (on
the sale of a land plot). We expect attributable net profit (reported net profit less
appropriations - employee profit share and the BoD remuneration, and adjusted to exclude the
one-off capital gain) will jump 84% as the company paid special appropriations in 2009 (see
the appropriations discussion below).
In 2010-2015, we forecast an attributable net profit CAGR of 32% that is mainly driven by
core operations (+16% CAGR in net operating profit) and net interest income. Our forecasts
do not include any share of profit from Milkes due to its current small size.
Once Juhayna starts to use the IPO proceeds, this will result in a decline in interest income.
Accordingly, our net profit forecasts in earlier forecast years will be adjusted downward until
new expansions start paying off.
Effective tax rate to We see our effective tax rate increasing from c7-8% to c10%-11% by 2012, when the tax
increase starting 2012 exemption currently applied to Juhayna’s second dairy factory (under Masreya) is expected to
expire. Juice and yogurt factories will be taxable starting in 2019. Currently, only the holding
company (and its dairy factory, Juhayna) and Tiba (its distribution arm) are taxable entities.
Juhayna’s management expects, having taken taxation advice, that the yogurt temporarily
produced at its Juahyna and El Masreya factories will benefit from the tax holiday previously
applicable to EgypFood and that the new factory will also enjoy the same tax holiday as the
old factory. Should there be any change to the above, this will accelerate the effective tax rate
faster than what we assumed in our forecasts.
Appropriations In 2009, Juhayna distributed most of its profits to shareholders (most of the dividends were re-
injected in the company through a capital increase), employees and the BoD. Accordingly,
Juhayna paid EGP38 million to employees (EGP21 million) and the BoD (EGP17 million).
Juhayna’s management indicated that 2009’s payments to shareholders, employees, and its
BoD were exceptional and that it will not pay an employees’ profit share in 2010 and 2011.
Our estimate takes into account that by law, once Juhayna distributes dividends to
shareholders, it has to pay employees a profit share of not less than 10% of the distributed
income and not more than the employees’ total annual salaries. These are not charged to the
income statement as per the Egyptian accounting standard, unless a company follows IFRS.
No dividend distribution Management indicated it will not pay any dividends in 2010 and 2011 to be able to pursue its
in 2010 and 2011 expansion plans. The company has not provided any guidance for dividend distribution post
2011. We forecast Juhayna will pay out 40% of its profits to shareholders starting from 2012,
rising to 70% by 2015.
39 / 66 pages
FIGURE 54: ADJUSTED ATTRIBUTABLE NET PROFIT*, GROWTH AND MARGIN

Adj. Attributable Net Profit Margin

700 16%
600 14%
500 12%
400 10%
8%
300
CAGR 2010-15 6%
200 4%
32%
100 2%
0 0%
(100) -2%
2008a
2009a
2010e
2011e
2012e
2013e
2014e
2015e
*Adjusted to exclude one-off capital gains.
WORKING CAPITAL, CAPEX AND FCF

We assume FCF will continue to be positive over our forecast period at an average 11.4% of
revenue, driven by COPAT growth, normalised expansion in working capital requirements, and
moderate capex spending.
Our working capital assumptions are based on Juhayna’s historical average days on hand of
two weeks for trade receivables, about three months for inventory (mostly raw and packaging
materials), and five weeks for suppliers/trade payable.
Our capex forecast mainly comprises: i) maintenance capex (on average 4% of fixed assets’
beginning balance each year), ii) production capacity additions and distribution fleet
expansion. Our forecast capacity additions are for yogurt and juice in 2013, and for milk over
2014-2015, to support the projected growth and maintain reasonable utilisation rates (taking
into account seasonality in demand and production that requires the instalment of additional
capacity), iii) our assumption of a combined additional EGP60 million that Juhayna might
spend on its new yogurt factory (during 2010 and 2011), over and above the replacement cost
that will be covered by insurance proceeds, to upgrade/expand its capacity, and iv) a terminal
capex-to-sales ratio of c5%.
An acceleration of capex spending on new projects using the IPO proceeds would result in
lower (and in some years negative) FCF in earlier years of our forecast periods compared to
what we currently assume.
40 / 66 pages
[
FIGURE 55: COPAT, WORKING CAPITAL, CAPEX AND FCF

Copat Working Capital Capex FCF

700
600
500
400 365 392
300 280 323 314 329
200 194
100
0
(100)
(200)
(300)
(400)
(500)
(600) (583)
(700)
2008 2009 2010e 2011e 2012e 2013e 2014e 2015e
C. SEGMENTAL ANALYSIS OF REVENUE AND GROSS MARGIN
DAIRY (58% OF 2009 TOTAL REVENUE)

Juhayna’s dairy business is its largest, accounting for 58% of total revenue (or EGP907 million)
in 2009. It comprises mainly milk, but also cream and cheese products that are sold in Egypt
and exported to the region, albeit currently in small quantities.
I. MILK (88% OF DAIRY REVENUE, 51% OF TOTAL REVENUE)

2007-2009
Milk revenue grew at a 16% CAGR in 2008-2009 to EGP798 million, with much stronger
growth of 33% achieved in 2008 versus 2% in 2009. In 2008, both volume and prices
increased. In 2009, however, an improvement in the sales mix and hence average selling prices
mainly drove revenue growth, while volume fell 2% on Juhayna’s withdrawal from low-margin
school tenders and decline in low-margin exports. Juhayna’s 2009 implied market share
accordingly slipped, which was also partly explained by de-stocking activities as retailers hoped
for industry-wide price cuts that didn’t materialise.
2010-2015
Our 2010-2015 milk revenue estimate grows at a 20% CAGR. Most of our forecast is locally
driven, while we assume a decline in exports in 2010, followed by zero growth.
Although we expect total milk consumption growth in Egypt will not exceed 4.5% annually,
we estimate that packaged consumption will achieve a stronger CAGR of 23% as conversion
from loose to packaged milk progresses. Assisted by government-sponsored awareness
campaigns (launched last August and expected to continue into 2010) and by the introduction
of low-tier milk brands, we estimate that packaged milk will account for 32% of total
consumption by 2015, up from 12% in 2009.
In 2009-2011, we assume that Juhayna will roughly maintain its implied market share at 61-
62%, with its new low-tier brand “Halibo” (launched in May 2010) largely offsetting the
projected market share loss at the market’s mid to high-end segments.
Starting from 2012, however, we expect Juhayna’s implied market share will decline to reach
51% by 2015, on the assumption that more existing players will too enter the high-growth
41 / 66 pages
lower market end and will by then have more distribution capacity to support this. We expect
competition in the higher market end meanwhile to continue strengthening (mainly on
product differentiation, but also eventually on price).
Gross Profit Margin

We expect milk GPM to remain fairly resilient in 2010 and then stage slightly greater declines
starting from 2011 to reach 30.8% by 2015 from 35.4% in 2009. Our GPM remains well above
2007’s and 2008’s levels of 22.8% and 22.0%, respectively, over our entire forecast period.
FIGURE 56: SUMMARY OF ASSUMPTIONS – MILK

2007a 2008a 2009a 2010e 2011e 2012e 2013e 2014e 2015e
Est. Market (000's Tonnes) 1,422 1,468 1,536 1,605 1,677 1,753 1,832 1,914 2,000
Est. Market Growth 3.2% 4.6% 4.5% 4.5% 4.5% 4.5% 4.5% 4.5%
Est. Packaged Market (000's Tonnes) 150 158 191 232 284 358 448 544 649
Packaged Market Growth 5.3% 20.9% 21.3% 22.6% 26.1% 25.0% 21.6% 19.2%
Packaged/Total 10.5% 10.8% 12.4% 14.4% 16.9% 20.4% 24.4% 28.4% 32.4%
Implied Market Share (of Packaged 71% 72% 62% 61% 62% 60% 57% 54% 51%
Only)
MEMRB Market Share 70% 70% 69%
Capacity (000's Tonnes) 239 479 479 479 479 479 479 479 579
Capacity Utilisation 57% 32% 31% 35% 43% 51% 59% 67% 62%
Volumes (000's Tonnes) 137 152 150 169 204 243 283 322 359
Growth 11.3% -1.8% 13.2% 20.5% 19.0% 16.6% 13.7% 11.5%
Local 106 114 118 141 176 215 255 294 331
Export 31 38 31 28 28 28 28 28 28
Average Price (EGP/Tonne) 4,324 5,154 5,338 5,550 5,785 5,953 6,179 6,356 6,579
Growth 19% 4% 4.0% 4.2% 2.9% 3.8% 2.9% 3.5%
Revenue (EGP mn) 592 785 798 940 1,181 1,446 1,749 2,046 2,361
Growth 33% 2% 18% 26% 22% 21% 17% 15%
Gross Profit (EGP mn) 135 172 283 325 398 474 555 629 727
Gross Profit Margin 22.8% 22.0% 35.4% 34.6% 33.7% 32.8% 31.8% 30.7% 30.8%
Source: Juhayna Food Industries (Historic), MEMRB (Historic), EFG Hermes estimates
II. CREAM (9% OF DAIRY REVENUE, 5% OF TOTAL REVENUE)

This segment is a by-product of milk processing and comprises cooking, whipping, oil and
coffee cream that altogether account for 5% of Juhayna’s total revenue. Juhayna was the only
local producer of whipping and cooking cream in Egypt until early 2010, but local competition
started to increase in 2010. We assume that Juhayna’s cream volume/production growth will
mimic that of milk, and accordingly, we forecast a revenue 2010-2015 CAGR of 19%. We
forecast an average GPM of 41% that is higher than 2007-2008’s levels, but well below 2009’s
high 51%.
Local cream production covers only 60% of Egypt’s cream consumption. Juhayna could
therefore potentially expand its domestic sales by substituting some imported cream products,
while also exporting in small quantities.
42 / 66 pages
[
FIGURE 57: SUMMARY OF ASSUMPTIONS - CREAM

2007a 2008a 2009a 2010e 2011e 2012e 2013e 2014e 2015e

Revenue 50 72 84 98 122 149 179 210 241
Growth 0% 45% 16% 17% 24% 23% 20% 17% 15%
Gross Profit 12 24 43 45 51 60 72 84 97
GPM 24.5% 33.1% 51.0% 46.0% 42.0% 40.0% 40.0% 40.0% 40.0%
III. CHEESE (3% OF DAIRY REVENUE, 2% OF TOTAL REVENUE)

Juhayna produces packaged white cheese that it sells to both the local market (the majority)
and export markets. Juhayna’s 2008 cheese volume fluctuated over the past three years.
Cheese revenue nonetheless performed well in 1Q2010 and on this basis we forecast growth
of 57% in 2010. In 2011-2015, we forecast a slower revenue CAGR of 9%. Juhayna reported a
gross loss from cheese during 2007 and 2008 that turned into a profit in 2009. In light of the
inconsistent historical record, we assume the GPM will remain stable at 2009’s level of 8.0%.
Juhayna may look to expand its cheese offering in the future, but it has not specified any
medium-term expansion plans. Our relatively conservative stance on Juhayna’s market
position is also reflective of a tough competitive landscape and its weaker brand equity versus
other specialised domestic players. This area might surprise positively, if the company
succeeds in collecting new cheese brands under its umbrella/launching new products.
FIGURE 58: SUMMARY OF ASSUMPTIONS - SOFT WHITE CHEESE

2007a 2008a 2009a 2010e 2011e 2012e 2013e 2014e 2015e

Revenue 28 61 25 39 43 47 51 56 61
Growth 117% -59% 57% 9% 9% 9% 9% 9%
Gross Profit (0) (7) 2 3 3 4 4 4 5
GPM -1.4% -11.1% 7.6% 8.0% 8.0% 8.0% 8.0% 8.0% 8.0%
YOGURT (23%OF TOTAL REVENUE)

2007-2009
Yogurt has been Juhayna’s fastest growing business, with a 2008-2009 revenue CAGR of 41%.
Much of this growth came from accelerated conversion from loose to packaged yogurt
(Egypt’s total yogurt consumption grew a solid 16% in 2008 and 19% in 2009, while
industrialised packaged yogurt consumption surged 19% and 46%, respectively, over the same
period). Competition increased significantly in 2008-2009, but Juhayna’s market share
remained relatively resilient.
43 / 66 pages
2010
Decline in yogurt revenue, April’s fire has destroyed most of Juhayna’s yogurt capacity, but the company targets to
results in market share loss exceed 2009’s volume of 42,000 tonnes by: i) revitalising some old production lines (since May
2010), previously discontinued and placed in other factories, and ii) using new machines that
are scheduled for delivery between July 2010 and early 2011. On average, we assume that
Juhayna will have available capacity of 74,000 tonnes for the year, and will be able to produce
38,000 tonnes (implying a 13% discount to Juhayna’s target as we factor in potential delays in
the commissioning of production by old lines, or delays in the delivery/installation of new
machines).
We expect Egypt’s packaged yogurt consumption to grow 12% in 2010 (slightly limited by
supply shortage from Juhayna versus 46% growth in 2009). Juhayna’s implied market share
accordingly should fall by eight percentage points to 33.5% in 2010 from 41.4% in 2009. We
also assume an 11% decline in 2010 revenue as Juhayna focuses on low-priced, plain
spoonable and drinkable yogurt (that accounts for approximately 75% of its total production),
while production of higher-priced, value-added yogurt (Actilife, fruit, and mix) remains
suspended for part of the year.
2011-2015
We forecast a strong recovery in 2011, with Juhayna’s volume reaching 53,000 tonnes and
revenue surging 47% helped by an improved sales mix. In 2011-2015, we assume a revenue
CAGR of 26% that is driven by: i) the re-launch of the yogurt factory in 1Q2011 (March).
Juhayna also plans to roll out an aggressive promotional campaign, while it will likely be
introducing new yogurt SKUs (flavours and package sizes), ii) a 22% CAGR forecast for
packaged yogurt consumption that is based on a 16% CAGR for total consumption (packaged
and loose), and fourteen percentage points expansion in the packaged-to-total consumption
ratio (to 63% by 2015, from an estimated 49% in 2010), and iii) a decline in Juhayna’s implied
market share to 30.0% by 2015; we assume that Juhayna will not recoup its entire 2010
market share loss.
Gross Profit Margin

After factoring in the impact of April’s fire, we expect the GPM to retreat to 38.2% in 2010
from 2009’s strong 43.1% that was also sustained in 1Q2010. Juhayna estimates that it will
incur additional manufacturing costs of EGP4 million and packaging costs of EGP10 million to
be able to resume yogurt production in 2010. We expect the GPM to recover slightly in 2011
and 2012, and then soften to 37.0% by 2015.
44 / 66 pages
[
FIGURE 59: SUMMARY OF ASSUMPTIONS – YOGURT

2007a 2008a 2009a 2010e 2011e 2012e 2013e 2014e 2015e
Est. Market (000's Tonnes) 147 171 203 233 275 322 374 430 490
Est. Market Growth 16% 19% 15% 18% 17% 16% 15% 14%
Est. Packaged Market (000's 59 70 102 114 152 184 221 262 309
Tonnes)
Packaged Market Growth 19% 46% 12% 32% 21% 20% 19% 18%
Packaged/Total 40% 41% 50% 49% 55% 57% 59% 61% 63%
Est. Market Share (of Packaged 46% 45% 41% 34% 35% 36% 34% 32% 30%
Only)
Capacity (Tonnes) - 102 102 74 106 116 174 174 174
Capacity Utilisation 31% 42% 52% 50% 57% 43% 48% 53%
Production Volumes (000 Tonnes) 27 31 42 38 53 66 75 84 93
Growth 15% 34% -9% 38% 25% 13% 12% 10%
Growth 24% 4% -2.0% 6.0% 5.0% 5.0% 5.0% 5.0%
Revenue (EGP mn) 184 262 364 324 475 622 741 871 1,009
Growth 42% 39% -11% 47% 31% 19% 17% 16%
Source: Juhayna Food Industries (historic), MEMRB (historic), EFG Hermes estimates
JUICE (18% OF TOTAL REVENUE)
2007-2009
Juhayna’s juice revenue grew at a 17% CAGR in 2008-2009, driven by 10% growth in volume
and 7% expansion in prices. Its local volume growth in 2008 was better than the total market,
but in 2009 it was well below at 3% versus 20%. This was mainly due to unfavourable
consumption shifts favouring lower-priced juice drinks (drinks represented 41% of 2009 total
juice consumption, up from 26% in 2008) that Juhayna did not offer up until end-2009.
Juhayna’s implied market share accordingly fell to 21%, down from 24% in 2008 and 23% in
2007.
2010-2015
Our 2010-2015 estimated revenue CAGR rises to 24% mainly on domestic consumption,
while we assume export revenue to remain almost flat, representing on average only 2% of
juice revenue.
We assume that Juhayna’s implied market share will expand four percentage points, reaching
25% by 2015, up from 21% in 2009, as it maintains its leadership in the pure and nectar juice
categories, and acquires share in the growing juice drinks category, which it had tapped into,
more aggressively, during end-2009/early 2010.
Egypt’s juice market is highly fragmented due to its low entry barriers. We nonetheless believe
that Juhayna is amongst the most favourably positioned, on the basis of its brand equity,
quality, reach and distribution synergies with milk and yogurt.
45 / 66 pages
Gross Profit Margin

Juice’s GPM has historically been the highest at a 2007-2009 average of 39% and in 2009
alone it was 40% (50% in 1Q2010). We assume that Juhayna will be able to maintain an
average GPM of 41% over our forecast period, benefiting from its vertically integrated model
and from a potentially strong pipeline of new product categories and fruit flavours.
FIGURE 60: SUMMARY OF ASUMPTIONS – JUICE

2007a 2008a 2009a 2010e 2011e 2012e 2013e 2014e 2015e
Est. Packaged Market (000's Tonnes) 158 182 218 259 306 358 415 478 549
Est. Market Growth 17% 15% 20% 19% 18% 17% 16% 15% 15%
Implied Market Share (of Packaged 23% 24% 21% 23% 24% 24% 25% 25% 25%
Only)
Capacity (000 Tonnes) 194 194 194 194 194 252 252 252
Capacity Utilisation 25% 25% 32% 38% 46% 41% 48% 56%
Production Volumes (000 Tonnes) 41 48 49 63 75 89 105 122 140
Growth 19% 2% 27% 20% 19% 18% 17% 15%
Local 37 44 46 60 72 86 102 119 137
Exports 4 4 3 3 3 3 3 3 3
Growth 7% 6% 4.4% 2.7% 4.7% 4.6% 4.6% 4.6%
Revenue (EGP mn) 208 264 287 381 468 582 718 878 1,052
Growth 27% 8% 33% 23% 24% 23% 22% 20%
Source: Juhayna Food Industries (Historic), MEMRB, EFG Hermes estimates
46 / 66 pages
[
FINANCIAL STATEMENTS
INCOME STATEMENT (DECEMBER YEAR END)

Income Statement 2007a 2008a 2009a 2010e 2011e 2012e 2013e

Revenue 1,061 1,463 1,578 1,782 2,289 2,847 3,439
COGS (784) (1,114) (968) (1,113) (1,452) (1,818) (2,231)
Export Rebate 7 23 21 14 15 9 -
Gross Profit 283 372 631 683 852 1,037 1,207
Gross Profit Margin 26.7% 25.4% 40.0% 38.3% 37.2% 36.4% 35.1%
SG&A (155) (244) (238) (278) (349) (434) (517)
EBITDA 128 128 393 404 503 603 690
EBITDA Margin 12.1% 8.7% 24.9% 22.7% 22.0% 21.2% 20.1%
Depreciation and Amortisation (45) (57) (97) (125) (137) (146) (153)
Net Operating Profit 83 71 296 279 365 457 537
Net Operating Margin 7.8% 4.9% 18.8% 15.7% 16.0% 16.1% 15.6%
Share of Profit from Associates - - (1) - - - -
Net Interest Income (Expense) (43) (51) (125) (47) 10 47 65
Lease Expense - (12) (12) (12) (12) (12) (12)
Other Income (Expense) 16 13 14 18 14 16 17
Provisions (2) (6) (1) (2) (5) (7) (8)
Earnings before Taxes 54 15 171 236 372 501 599
Income Tax (11) (10) (14) (18) (30) (55) (66)
Earnings before Minority Interest 43 5 157 218 342 446 533
Minority Interest (0) 0.0 (0.1) (0.1) (0.2) (0.2) (0.2)
Unusual Gain - - 28 14 - - -
Net Reported Income 43 5 185 233 342 446 533
Appropriations (5) (6) (38) - - (32) (48)
Net Attributable Income 37 (1) 147 233 342 414 485
47 / 66 pages
BALANCE SHEET(DECEMBER YEAR END)

2007a 2008a 2009a 2010e 2011e 2012e 2013e

Cash and Time Deposits 31 50 67 966 1,122 1,482 1,642
Net Receivables 47 71 119 77 88 109 132
Inventory 216 310 225 281 354 434 544
Other Current Assets 66 98 59 65 74 84 94
Total Current Assets 360 529 470 1,389 1,638 2,109 2,412
Net Plant & Biological Assets 602 1,239 1,279 1,237 1,204 1,149 1,171
Investments 0 28 48 36 36 36 36
Intangibles and Others 46 97 97 97 97 97 97
Total Assets 1,009 1,893 1,894 2,759 2,975 3,391 3,716
ST Debt 459 911 612 326 272 300 319
Accounts Payable and Suppliers 49 116 131 112 146 183 225
Other Current Liabilities 45 150 70 65 72 277 378
Total Current Liabilities 553 1,176 813 504 491 761 922
LT Debt 99 303 422 410 298 197 119
Other Liabilities 98 161 85 82 81 80 79
Minority Interest 0.1 0.4 0.6 0.7 0.8 1.0 1.3
Net Worth 259 252 573 1,763 2,105 2,353 2,595
CASH FLOW STATEMENT(DECEMBER YEAR END)

2008a 2009a 2010e 2011e 2012e 2013e

Cash Operating Profit after Tax 135 359 403 483 526 587
Change in Working Capital (33) 81 (39) (56) (70) (98)
Cash Flow after Change in WC 103 440 364 427 456 489
Capex and Food-related Investments (686) (246) (84) (104) (91) (175)
Free Cash Flow (583) 194 280 323 365 314
Non-operating Cash Flow (72) 48 28 1 1 1
Cash Flow before Financing (655) 242 308 324 367 316
Net Financing 674 (227) 591 (168) (6) (156)
Change in Cash 19 16 899 156 361 159
48 / 66 pages
[
V. INDUSTRY ANALYSIS
A young industry and a The packaged dairy industry effectively began in the 1980s with the entrance of the private
growing market… sector, with several major producers (including Juhayna and Enjoy) coming onto the scene.
Prior to this, the packaged dairy market was relatively small and dominated by the public
sector. Most dairy companies also produce juice, as both products often use similar
production, packaging and distribution logistics. In Egypt, the main drivers for growth in the
packaged dairy and juice market include: i) a strong demographic profile - a large and young
population with a high growth rate, ii) room for per capita consumption to grow from its
relatively low levels; and, most importantly, and iii) increased penetration as a result of a
growing consumer trend away from loose products and towards healthier and packaged
products.
… offering opportunities to Over the past few years, the market has evolved from being dominated by local players to a
the fittest and the largest mix of local, regional and international players. This was accompanied by some consolidation
(including acquisitions by private equity funds) and vertical integration to secure raw materials
(raw milk, fruits and animal feed) and control and expand distribution channels. The yogurt
and, more recently, milk segments have seen the highest levels of activity. As a result, local
leadership of the market has been threatened. Today, the yogurt segment is less concentrated,
and we believe this will eventually be the case for packaged milk, as the conversion rate from
loose to packaged products accelerates. We believe that packaged dairy producers will need to
focus on: i) tapping into all highly consumed dairy and juice categories - which we believe is
likely to fuel acquisitions of smaller players that have strength in one category only, ii)
investing in research and development to offer a full product spectrum in each category and
respond quickly to changes in consumer preferences - something that local players focused
less on prior to the entry of foreign players, and iii) controlling supply and distribution
channels.
EGYPT’S DAIRY & JUICE MARKET
MILK
Milk consumption
Egypt’s total milk consumption grew at a CAGR of c4-5% in 2008-2009 and is forecast to
continue to grow at this rate through to 2014. The total milk market size in Egypt reached 1.5
million tonnes in 2009, according to the Middle East Marketing Research Bureau (MEMRB). At
21kg per capita per annum, Egypt’s milk consumption is significantly below the world average
of c50kg, and comes in at the lower end of the range of developing countries as well.
49 / 66 pages
FIGURE 61: EGYPT’S TOTAL MILK PRODUCTION FIGURE 62: DAIRY CONSUMPTION PER CAPITA
(2009)
In thousand tonnes, unless otherwise stated In kg, unless otherwise stated
120
1,800 1,686 98
1,536 1,605
1,468 100 89
1,422 79
1,500
80 69
1,200 60 46 50
38 39
900 40 32
21
600 20
300 0
Switzerland
Mexico
New Zealand
South Korea
India
EU
USA
Brazil
Egypt
Saudi Arabia
0
2007
2008
2009
2010
2011
Source: National Council for Production and Economic Source: FAPRI World Agriculture Outlook 2009
Affairs, MEMRB
The Packaged Milk Market

Need a shift in consumer habits The milk market is segmented into packaged milk, representing only 12% of total
to expand the packaged consumption, and loose milk (fresh unpasteurised milk) sold by a milk peddler or small stores.
market Long-life (UHT) milk comprises the bulk of the packaged milk market output, as the retail
sector is not sufficiently equipped to accommodate fresh milk storage and distribution.
MEMRB estimates that the packaged milk market jumped by 21% in 2009, reaching 191,000
tonnes, from the previously reported 4-5% Y-o-Y growth. This was due to a faster shift from
loose to packaged milk. Packaged milk is expected to continue its double-digit growth in the
medium term, growing faster than total milk consumption. This is a result of: i) dairy producers
marketing their products and launching new brands for the lower end of the market, at prices
close to those of loose milk sold in stores, and ii) the Ministry of Health and dairy companies
campaigning about the benefits of packaged milk and educating the public on the health risks
associated with loose milk.
50 / 66 pages
[
FIGURE 63: MILK MARKET BREAKDOWN FIGURE 64: PLAIN MILK RETAIL PRICES
Loose Milk Packaged Milk

100%
Mid to High -
95% 11% 11% Packaged**
12% 14% 16%
90%
Low to Mid -
85% Packaged*
89% 89% 88%
80% 86% 84% Low - Loose &
Packaged*
75%
2010e
2011e
2007
2008
2009
0 1 2 3 4 5 6 7 8 9 10
*Loose price at milk stores (milk peddlers sell at lower

prices), low-tier packaged milk includes some milk powder.
**The upper end of this bracket is imported or organic milk.
Source: National Council for Production and Economic Source: EFG Hermes estimates
Affairs, MEMRB
Main players in the Packaged Milk Market

Juhayna dominates the The milk market in Egypt is highly concentrated, with four players holding a combined 94%
market market share in 2009. The largest player, Juhayna, had a dominant 69% market share in the
plain milk segment and 74% in the flavoured milk segment last year. Each of the other three
players, Faragello, Beyti and Enjoy, had less than a 10% market share each in the plain milk
segment, and 3-11% in the flavoured milk segment. Increased competition is likely to come
from Beyti (now owned by Almarai-PepsiCo’s JV) and Enjoy (owned by Gozour), as they are
adding capacity and/or undergoing restructuring. In addition, competition will come from
Labanita, a producer of fresh packaged milk that recently launched long-life milk products and
Dina Farms that recently launched fresh milk production.
51 / 66 pages
FIGURE 65: COMPANIES' PLAIN MILK MARKET FIGURE 66: COMPANIES' FLAVOURED MILK
SHARES MARKET SHARES
Juhayna Faragello Beyti Enjoy Others Juhayna Enjoy Faragello Beyti

100% 6% 6% 6% 6% 100% 3%
5% 4% 7%
9% 10% 10% 7% 7% 8% 5% 11%
80% 6% 6% 6% 9% 80% 10% 13% 13% 11%
6% 8% 8% 9%
60% 60%
40% 40% 76% 73% 74%

73% 70% 70% 69% 72%
20% 20%
0% 0%
2006
2007
2008
2009
2006
2007
2008
2009
Source: MEMRB Source: MEMRB
CHEESE
Size and Growth
The cheese segment is the second largest segment, following milk, in the dairy market. Total
cheese consumption in Egypt grows at 3-4% annually. In 2009, it reached 453,000 tonnes,
according to the Food and Agricultural Policy Research Institute (FAPRI). Cheese is essential to
the typical Egyptian diet, with per capita consumption standing at 5.6kg per year, higher than
the world’s average of 4.6kg per annum.
White cheese is favoured The most popular type of cheese in Egypt is feta cheese (a soft white cheese), which is one of
in Egyptian cuisine the least expensive cheeses. The total soft white cheese market (artisanal and packaged
production) grew at a CAGR of 14% in 2008-2009. This growth is underpinned by an increase
in supply and the number of manufacturers, as well as consumers economising by shifting
away from more expensive food items. Consumption of soft white cheese is expected to grow
by an average of 10% in 2010-2011.
The production of cheese requires additional processing to milk. This partly explains why the
conversion rate to packaged cheese, at four percentage points per year, is higher than the milk
conversion rate of 1-2%. In addition, major soft white cheese producers in Egypt pre-package
their products and have capitalised on the importance of appealing to traditional consumers
by selling their cheese in a semi-packaged format (wrapped in plastic and often presented on a
tray, similar to loose white cheese, in refrigerators).
Main players in the Packaged White Cheese Market

Fragmented market with The white cheese market is more fragmented than the milk market, with seven players
room for consolidation comprising over 80% of the market in 2009. Additionally, the majority of cheese
manufacturers have tended to specialise in cheese production, rather than covering the whole
dairy product range. Both factors suggest that there is room for consolidation in this segment.
In Egypt, Greenland (part of Americana Group) has the largest market share of 36%, followed
by Panda at 18% and Domty at 15%, both local companies.
52 / 66 pages
[
FIGURE 67: SOFT WHITE CHEESE MARKET FIGURE 68: COMPANIES' SOFT WHITE CHEESE
BREAKDOWN MARKET SHARES
In thousand tonnes, unless otherwise stated
Packaged Cheese Loose Cheese Panda

250 18% Others
9%
214
200 195 El-
172 43 % Misrien
Domty 8%
150 150 40 %
132 36 % 15%
32 % Juhayna
28 % 7%
100
Teama
64% 60% 57% 6%
50 72% 68%
President
Greenland 1%
0 36%
2007 2008 2009 2010e 2011e
YOGURT
In 2009, total yogurt consumption was c203,000 tonnes, nearly 2.6kg per capita. This is
relatively low compared to Saudi Arabia’s 4.9kg per capita, Tunisia’s 6.6kg per capita and
Oman’s 7.2kg per capita. This is partly explained by the differences in habits, with yogurt an
essential component of daily cuisine in Saudi Arabia, but less so in Egypt. The total yogurt
market grew at an average 18% in 2008-2009. Industrial-packaged yogurt comprises nearly
50% of yogurt consumption and is segmented into “spoonable” yogurt and “drinkable” yogurt
(similar to buttermilk).
Here to stay; strong, market There is only a 10% difference in the price of industrial-packaged yogurt and loose (primitively
growth, despite a short-lived packaged) yogurt. This is due to the fact that loose yogurt is also sold at retail outlets, and
slowdown retailers add their fixed costs onto the price (whereas milk peddlers do not incur these fixed
costs). This similarity in price may explain the greater proportion of industrial-packaged yogurt
consumption compared to milk. Additionally, the entrance of international players (Danone
and Lactel-Nestlé) resulted in the yogurt market expanding and seeing a quicker conversion to
packaged products. International companies encouraged this conversion by introducing several
value-added products (such as light, digestive and flavoured products). As a result, value-added
products’ share of the total packaged market climbed to 13% in 2009 from 8% in 2008, and is
expected to reach 20% in 2010. In addition, international players have launched several
advertising campaigns to change the Egyptian consumer mindset to perceive yogurt as part of
their daily cuisine throughout the year, rather than mainly in Ramadan (this process was also
helped by the new value-added products). Accordingly, the conversion rate from loose yogurt
to packaged yogurt was a considerably high nine percentage points in 2009.
We expect this high conversion rate to packaged products to be sustained in the medium
term. However, we expect a short-lived deceleration of growth in 2010’s packaged market, as
the total loss of Juhayna’s main yogurt factory in a fire (in April 2010) is likely to cause a
supply shortage during the peak season of Ramadan.
53 / 66 pages
FIGURE 69: YOGURT MARKET BREAKDOWN FIGURE 70: YOGURT MARKET BREAKDOWN BY
PRODUCT TYPE
250 Packaged Yogurt Loose Yogurt Plain Value Added

227
100%
203 8% 13%
200 90% 20%
171 80%
147 59% 70%
150 50 %
41% 60%
40 % 50%
92% 87%
100 40% 80%
30%
50 59 % 50 % 41% 20%
60%
10%
0%
0
2008 2009 2010e
2007 2008 2009 2010e
Main players in the Packaged Yogurt Market

The yogurt market is significantly more penetrated than the milk market. There is intense
competition in the spoonable yogurt segment, with Juhayna and Danone competing head-to-
head with a 31% market share each in 2009, and Lactel-Nestlé trailing at 14%. Juhayna has a
dominant market position in the drinkable yogurt segment, as it was the first to introduce
drinkable yogurt to Egypt under the “Rayeb” brand in 1990. Lactel-Nestlé, however, gained
market share in 2008 and 2009 through aggressive marketing campaigns. Following the loss of
Juhayna’s yogurt factory, we expect its market share to drop in 2010 and only begin to recover
in 2011 after the opening of its new factory. It is likely, however, that Juhayna will not be able
to completely restore its market share, due to strong competition and capacity expansions by
other players.
FIGURE 71: COMPANIES' SPOONABLE FIGURE 72: COMPANIES' PLAIN DRINKABLE FIGURE 73: COMPANIES' FLAVOURED
YOGURT MARKET SHARES YOGURT MARKET SHARE DRINKABLE YOGURT MARKET SHARE
100% 5% 4% Labanita Lactel / Nestle Juhayna
15% 5% 4% Juhayna Labanita Lactel / Nestle
7% 100% 1%
4% 11% Others 5% 4% 3%
80% 3% 9% 100% 3% 3% 3% 6% 8%
9%
14% Beyti 90% 14% 16% 16% 80%
18% 80%
60% 23% Enjoy 70%
60% 60%
31% Lactel
40% 30% 50% 95%
20% Nestle 89% 89%
40% 83% 81% 81% 40%
Danone 30%
20% 20%
29% 28% 31% Juhayna 20%
10%
0% 0% 0%
2007 2008 2009 2006 2007 2008 2007 2008 2009
Source: MEMRB Source: MEMRB Source: MEMRB
54 / 66 pages
[
PACKAGED JUICE
Egypt’s per capita consumption of packaged juice falls short of international and regional
comparables by a significant amount, at 2.8 litres per capita per annum versus a regional
average of 15kg per capita per annum. The packaged fruit juice market is relatively immature
and highly fragmented, presenting significant opportunities for growth and penetration.
FIGURE 74: PACKAGED FRUIT JUICE CONSUMPTION PER CAPITA

In litres, unless otherwise stated
50 43
45 39
40 36
35 29
30 24 26
21 23
25 18
20 17
14
15
10 3 3
5
0
France
Qatar
Italy
KSA
Syria
Germany
Bahrain
Algeria
USA
USA
Sweden
Egypt
Japan
Source: Nationmaster
Growth rates remain The packaged juice market in Egypt has seen considerable growth over the past few years, with
intact a CAGR of 18% in 2006-2009 to reach 218,000 tonnes. Nevertheless, the size of the juice
market is tiny in comparison to the carbonated soft drinks market, which is nearly ten times
larger. The disparity may be due to extensive marketing efforts by the soft drink giants, such as
PepsiCo and Coca Cola, which has not been matched by juice producers, as well as consumer
preference. Another reason may be the prevalence of fruit juice shops (fruits are squeezed or
pressed on demand) as well as the ease of making fresh fruit juice at home.
The packaged juice market can either be segmented by packaging type or by fruit content.
Recently, juice packaged in cartons has gained popularity in comparison to juice in pouches. In
terms of categorisation by content, juice drinks (at least 10% fruit content) surged recently at
the expense of a decline in the nectar segment (at least 25% fruit content).
55 / 66 pages
FIGURE 75: EGYPT PACKAGED FRUIT JUICE FIGURE 76: EGYPT PACKAGED FRUIT JUICE FIGURE 77: EGYPT PACKAGED FRUIT JUICE
MARKET MARKET BY PACKAGING TYPE MARKET BY FRUIT CONTENT
Pure Nectar Drinks
250 Bottles Pouches Cartons
218 100% 2% 2% 3% 3% 3%
100%
200 182
158 80% 40% 41% 80%
42% 41% 43%
150 135 56%
114 60% 60% 77% 71%
86% 83%
100 29% 28% 28% 28% 27%
40% 40%
50 20% 20% 41%

29% 32% 31% 30% 30% 26%
21% 14%
12%
0 0% 0%
2005 2006 2007 2008 2009 2005 2006 2007 2008 2009 2005 2006 2007 2008 2009
Source: Juhayna Food Industries, MEMRB Source: Juhayna Food Industries, MEMRB Source: Juhayna Food Industries, MEMRB
Main players in the Packaged Juice Market

The main players in the juice segment are Faragello (26% market share in 2009), followed by
Juhayna (15%) and Best (14%), all local companies. Faragello’s strength lies mostly in carton
juice drinks, Juhayna in carton nectar and pure juice, and Best in pouched juice drinks
(particularly popular in Lower Egypt).
FIGURE 78: COMPANIES' PACKAGED FRUIT JUICE MARKET SHARE
Others Faragello Juhayna Best Enjoy

100% 6%
8% 8% 8%
16% 16% 14%
80% 18%
15%
16% 16% 16%
60%
23% 26%
27% 26%
40%
20% 34% 37% 39%

31%
0%
2006 2007 2008 2009
Source: Juhayna Food Industries, MEMRB
DAIRY AND JUICE INDUSTRY MARGINS

In 2009, the most profitable category in the dairy segment was yogurt, which had a margin of
50% (combined margin for the manufacturer and the retailer as sales are based on retail
prices), followed by milk (42%). Cheese had the lowest margin in 2009, at just 24%. The juice
segment has a higher profit margin than all the products in the dairy segment, at 53%. The
hike in raw material costs in 2008 only had a modest negative impact on dairy and juice
margins, as producers passed on most of the increase to the end consumer. Prices in Egypt
tend to be sticky, with decreases in costs generally not matched by decreasing prices; despite a
drop in input costs in 2009, prices continued to increase and profit margins significantly
expanded. One of the reasons for the yogurt segment’s higher profit margin is the growing
popularity in Egypt of value-added products, which have higher profit margins.
56 / 66 pages
[
FIGURE 79: EGYPT AVERAGE INDUSTRY COSTS, PROFITS AND GROSS PROFIT MARGINS*
In EGP per tonne, unless otherwise stated
14,000 Gross Profit Cost
12,000 16% 24%
15% 50%
10,000 32%
33%
Gross Profit Margin 35%
8,000 41% 53%
47%
30% 42% 46% 50%
6,000
32%
29%
4,000
2,000
0
2006
2007
2008
2009
2006
2007
2008
2009
2006
2007
2008
2009
2006
2007
2008
2009
Milk Juice
White Soft Cheese Yogurt
*Combined margin for the manufacturer and the retailer as sales are based on retail prices.
Source: Juhayna Food Industries, MEMRB, and EFG Hermes
FACTORS AFFECTING CONSUMPTION OF PACKAGED DAIRY PRODUCTS

In this section we discuss the factors affecting the conversion from loose to packaged dairy
products. We focus on milk, given the high consumption of loose milk in Egypt.
Loose Milk: Consumer preferences and health problems

Loose milk is delivered by a milk peddler (milk man) or bought at small shops that source their
milk from small farms, which comprise the majority of farms in Egypt. Loose milk typically has
a higher fat content and a creamer taste as it is not processed, sterilised or pasteurised. It is
also about 25-60% cheaper than packaged milk (except for some low-tier brands that are
offered at similar prices and usually include a considerable amount of milk powder). Loose milk
consumers are influenced by traditional dietary patterns and believe (incorrectly) that loose
milk is healthier as it is unprocessed. Problems associated with loose milk consumption
include: i) the addition of harmful chemicals meant to act as preservatives (such as formalin,
sodium bicarbonate) in an effort to prevent spoiling, ii) a higher than average bacterial count
relative to packaged milk, iii) health complications, including coronary and liver diseases, and
iv) lower nutritional value as a result of boiling the milk.
Conversion to packaged milk The acceleration of the conversion to packaged products in Egypt will chiefly depend on mid
to accelerate; helped by the to low-income families, taking several factors into consideration: i) GDP per capita is relatively
launch of low-price low in Egypt at cEGP14,910 (USD2,735), and average annual household spending stands at
products… approximately EGP17,600 (or cEGP1,500 per month), ii) nearly 57% of the population lives in
rural areas with even lower spending per household, and iii) the population is young (38%
below the age of 14 and 27% between 15-29) and growing (79 million in FY2009-2010
growing at c2% annually), indicating a high family formation rate. Accordingly, the availability
of low-priced packaged milk is essential to accelerate the conversion from loose to packaged
products. Several producers have launched/plan to launch low-tier brands at a price matching
that of loose milk sold in retail stores (with the addition of some milk powder to lower costs).
However, those dependent on milk peddlers, particularly in rural areas, are less likely to
convert as peddlers usually sell at a much lower price.
57 / 66 pages
… and awareness There was a renewed public-private partnership between the Ministry of Health (MoH) and
campaigns dairy companies, with a budget of EGP4 million in August-December 2009, campaigning to
raise awareness of the dangers of loose milk. The MoH became involved as a significant
portion of its budget is currently spent on health problems stemming from loose milk
consumption. The campaign included educational seminars targeting school-aged children and
television advertising targeting adult consumers, especially mothers. A second wave of this
campaign was launched earlier this year and is expected to continue for three years.
A similar awareness campaign proved successful in Turkey, where packaged milk consumption
increased from 32% in 2002 to 60% in 2009. The campaigns were led by TetraPak (a global
leader in carton packaging) in partnership with the MoH and milk producers, and were
communicated through television, advertising and educational seminars. In Egypt, we believe
there is significant growth potential for packaged products from the current low level of 12%
of total milk consumption. However, it is likely that such conversion will materialise at a
slower rate compared to Turkey, as a result of Egypt’s sizable rural population, low per capita
income, and high disparity of income distribution.
Impact of inflationary pressures

Typically, inflationary pressures do not affect sales of consumer staples. However, the
identification of staple goods varies depending on the welfare of the country in question.
Given Egypt’s high proportion of lower income families, at times of high inflation/slower
economic growth a relatively high percentage of families will forgo some dairy products,
beverages and meat from their diet or shift to cheaper alternatives.
Egypt’s inflation soared in 2008, driven by increases in global prices, particularly food. This
encouraged the government to adopt measures to increase the affordability of food products,
such as reducing tariffs on some imported food items, banning exports of some products, and
increasing subsidies. Applying price caps on private sector products was not a common
practice.
Inflation has fallen slower than expected since the beginning of the crisis, owing to food price
inflation (stemming from poor harvests). However, inflation is expected to remain muted in
2010 compared to 2008’s peak levels, due to slower growth and the expected absence of food
price shocks.
58 / 66 pages
[
FIGURE 80: GDP PER CAPITA AND GDP FIGURE 81: INFLATION*
GROWTH*
GDP per capita (EGP, LHS), real GDP growth (%,
RHS)
GDP Per Capita Real GDP Growth 20% 18.3%

4,000 8%
3,500 7% 16%
3,000 6% 11.8% 10.8%
2,500 5% 12% 10.5%
9.6% 10.0%
2,000 4% 7.6%
8%
1,500 3% 4.9%
1,000 2%
4%
500 1%
0 0% 0%
04/05
05/06
06/07
07/08
08/09
09/10e
10/11e
11/12e
2010e
2011e
2012e
2005
2006
2007
2008
2009
*Fiscal Year *Calendar Year
Source: CBE, EFG Hermes estimates Source: CBE, EFG Hermes estimates
FIGURE 82: POPULATION BREAKDOWN BY AGE FIGURE 83: POPULATION BREAKDOWN BY

LOCATION
Ages 45-
59 Ages 60+
10% 6%
Ages 30-
44 Uraban
19% Pop.
Ages 0- 43%
14 Rural Pop.
38% 57%
Ages 15-
29
27%
Source: CAPMAS Source: CAPMAS
59 / 66 pages
FIGURE 84: AVERAGE ANNUAL EXPENDITURE BY FIGURE 85: HOUSEHOLD ANNUAL

HOUSEHOLD CONSUMPTION BY PERCENTILE
2004/05 2008/09 2004/05 2008/09

Percentile 1 (lowest 20% of 8.8% 9.3%
25,000 population spending)
20,675
20,000 17,585 Percentile 2 (20% to < 40% 12.7% 13.1%
15,014 of spending)
15,000 13,601
11,235 Percentile 3 (40% to < 60% 16.1% 16.4%
9,161 of spending)
10,000
Percentile 4 (60% to < 80% 20.8% 21.0%
5,000
of spending)
0 Percentile 5 (80% to < 100% 41.6% 40.2%
Urban Rural Average of spending)
Source: CAMPAS Source: CAPMAS
RAW MILK
Dairy faming
Raw milk supply dominated by Egypt’s total number of milking cows reached c1.6 million in 2009. The number of milking
small-scale farms cows has grown at a relatively sluggish rate due to the government’s previous imposition of a
ban on imported pregnant heifers (mainly from Canada, the United States, and Europe). This
ban also resulted in a very low yield per cow of c1, 000-1,600 litres per year (refer to Figure
87), due to a low replacement rate of cows with a subpar yield. In 2008, however, the Egyptian
government lifted this ban, and we expect dairy farms will begin to import higher quality cows.
This should increase not only the animal headcount, but also the yield per cow, both of which
are currently lower than the average in developing countries as well as the overall world
average.
Small-scale farms dominate the Egyptian dairy farm landscape, nearly 95% of the total c4,900
farms have 30 cows or less. Only six farms own more than 1,000 cows. The largest dairy farm
in Egypt is Dina Farms, which has over 6,000 cows, and plans to increase its herd size to
10,000 by 2012. The other modern farms are smaller in scale, including Juhayna’s 40% owned
Milkes Dairy Company with an estimated 1,600 milking cows by end-2010. Yield per cow and
milk quality in these state-of-the-art farms are more on a par with international competitors,
as they import higher quality cows (such as the Holstein-Friesian breed) and are more efficient
compared to the small, old farms.
60 / 66 pages
[
FIGURE 86: EGYPT’S TOTAL MILKING FIGURE 87: SAMPLE OF ANNUAL YIELD PER FIGURE 88: EGYPT’S DAIRY FARMS
COWS COW, BY COUNTRY AND BY FARM
In thousand heads, unless otherwise stated In kg, unless otherwise stated
2009 1,635 Egypt 1,560 Dairy Farms

2008 1,624 Algeria 1,603 <30 cows 4650
2007 New Zealand 3,500 30-69 cows 85
1,620
EU 5,518
2006 1,610 70-149 cows 45
KSA 8,977
2005 1,625 150-499 cows 77
USA 9,810
2004 1,618 500-999 cows 32
2003 1,610 Milkes (Egypt)* 9,450 1000-2000 cows 5
2002 1,600 Dina Farms (Egypt) 9,750 >6000 cows 1
2001 1,560 Almarai (Saudi Arabia) 12,687 Total 4895
2000 1,315
10,000
12,000
14,000
2,000
4,000
6,000
8,000
0
0 500 1,000 1,500 2,000
*Based on EFG Hermes estimates

Source: FAPRI World Agriculture Outlook 2009 Source: FAPRI World Agriculture Outlook 2009, Source: Dina Farms presentation
Juhayna Food Industries, Dina Farms website,
Almarai Company
Raw Milk Pricing

Raw milk prices, ongoing Dairy producers purchase their milk directly from dairy farms as well as from milk collection
action centres where small-scale farmers sell their milk. Raw milk prices are set through a committee
comprised of dairy farmers, manufacturers, and Ministry of Agriculture officials. The
committee convenes four times a year to set a price for raw milk. Factors that affect the price
include feed prices, the milk-to-feed ratio (MFR), comparable market prices, and world
powdered milk prices.
Despite the efforts of this committee, there is an ongoing tug of war between dairy farmers
and producers over the price of raw milk, particularly at times of higher feed prices. Most dairy
companies recently increased the price they pay to large- and medium-sized dairy farms to
EGP2.6/litre from EGP2.4/litre to factor in the impact of the higher cost of producing raw milk
in the summer (as cow yields decline due to the hot weather). However, this was lower than
the price requested by the farms of EGP2.8/litre. Accordingly, we believe the pricing
committee doesn’t have the authority to enforce prices.
The government does not provide subsidies to dairy farms. In 2009, the Ministry of Agriculture
agreed in principal to provide an EGP100 million subsidy to compensate farmers, therefore
allowing producers to buy milk at a lower price. However, the subsidy has not yet materialised.
61 / 66 pages
FIGURE 89: EGYPT’S AVERAGE RAW MILK PRICES

In EGP per litre, unless stated otherwise
3.5
2.90
3.0
2.26 2.40
2.5
1.90 1.94 1.97
2.0 1.52
1.5 1.24 1.29
1.05 1.04 1.05 1.06 1.07 1.05 1.05 1.17 1.17 1.17
1.0
0.5
0.0
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
Source: UN Food and Agriculture Organisation
Global Milk and Feed Prices

After climbing for nearly six years, global dairy prices reached their peak at the end of 2007
and the first few months of 2008. This peak resulted from the combined effects of the
Australian drought, which reduced world supply, and a significant consumption growth in Asia
and other emerging markets leading to increased demand. Global dairy prices declined in
2008-2009, as demand dropped owing to the recession. Going forward, strong demand and
increasing incomes are expected to boost global milk prices according to FAPRI.
Feed prices are a key In 2007, commodity prices began to escalate, mainly on the back of soaring oil prices and
factor in determining speculative trading. Corn, typically an indicator of feed price trends and used itself as animal
raw milk prices feed, is also used in the production of ethanol and as an ingredient in consumer goods (corn
oil, syrup, starch, etc.). The price of corn spiked in 2007 due to: i) governments (including the
US) earmarking subsidies to support ethanol as a clean-fuel alternative, in the context of high
oil prices, which led to a shortage of corn available for feed, ii) a surge in emerging countries’
demand, in line with rising incomes, and iii) poor weather conditions depleting global grain
stocks that were being used as corn substitutes. The increase in corn prices eventually affected
the dairy industry, albeit with a slight lag, resulting in decreasing global milk production and
increasing milk prices, particularly in the major milk producing countries such as the US and
New Zealand. Corn and alfalfa hay prices, both used as animal feed, peaked in 2008 and fell in
2009 following the global economic recession. For 2010, the United States’ Department of
Agriculture (USDA) expects corn and alfalfa prices to remain below their peak 2008 levels.
The effect of changes in feed prices on the dairy industry is lagged, as dairy companies
typically purchase their feed stock in bulk several times during the year. Figure 90 shows that
the impact of feed price shocks on dairy prices are smoothed out with a slight delay. We
expect animal feed prices will continue to rise in the future due to increased demand,
particularly at times of improved economic conditions.
62 / 66 pages
[
Whole Milk Powder Prices

Milk powder price movements have largely mimicked those of milk, albeit with greater
volatility. Following a spike in 2007-2008, greater in magnitude than that seen for milk, whole
milk powder prices began to plummet in 2008-2009 as the recession began to impact
consumption and as supply increased. Using USDA whole powder milk prices as a benchmark,
global whole milk powder prices began recovering in February 2009 and have gained more
than 80% from trough-to-june 2010. We expect this recovery to continue, mainly as global
economic conditions improve.
Milk powder is produced mainly in countries that are large exporters of milk, such as New
Zealand, the European Union countries and the United States. Fonterra, a New Zealand-based
multinational company, is a cooperative owned by over 10,000 farmers. It is the world’s
largest milk powder producer and controls nearly 30% of the world’s dairy exports. In addition,
Fonterra prompted the formation of a futures market for trading whole milk powder. Pricing
has shown a domino effect, with other milk powder producers seemingly following Fonterra’s
price increases/decreases.
FIGURE 90: CORN AND MILK PRICES (REBASED) FIGURE 91: USDA WHOLE MILK POWDER AND CLASS 1 MILK
PRICES
In USD/tonne, unless otherwise stated In USD/tonne, unless otherwise stated
Corn (SPGSCN Index) Milk Class 1 (Rebased) Whole Milk Powder * USDA Milk Class 1 Spot
700 700
600 600
500 500
400 400
300 300
200 200
100
100
Jun-00
Jun-01
Jun-02
Jun-03
Jun-04
Jun-05
Jun-06
Jun-07
Jun-08
Jun-09
Jun-10
Dec-00
Dec-01
Dec-02
Dec-03
Dec-04
Dec-05
Dec-06
Dec-07
Dec-08
Dec-09
Jun-00
Jun-01
Jun-02
Jun-03
Jun-04
Jun-05
Jun-06
Jun-07
Jun-08
Jun-09
Jun-10
Dec-00
Dec-01
Dec-02
Dec-03
Dec-04
Dec-05
Dec-06
Dec-07
Dec-08
Dec-09
*Recalculated (divided by eight) to approximately reflect the quantity of milk

powder required to make one litre of fluid milk.
Source: Bloomberg, EFG Hermes Source: Bloomberg, EFG Hermes
63 / 66 pages
VI. INDUSTRY CONSOLIDATION AND RECENT DEVELOPMENTS
Pace of consolidation Recently, there has been a wave of new entrants and market consolidation in Egypt’s juice and
and integration picks up dairy market, highlighted by:
i) In
June 2009 the Egyptian private equity company, Citadel Capital, completed the acquisition
of Enjoy (Nile Company for Food Industries) through its regional agri-food platform, Gozour,
from Haykala. The acquisition allowed Enjoy to take advantage of distribution network
synergies as well as being able to source packaging and raw materials (sugar, fruit and milk)
from sister organisations. Gozour also owns Dina Farms, the largest dairy farm in Egypt, and El-
Misriyeen, a key producer of white cheese.
ii) In
October 2009, Almarai and PepsiCo’s joint venture, International Dairy, and Juice Limited
(IDJ), acquired Beyti (International Company for Agro-Industrial Projects). With an investment
of EGP100 million planned to restructure operations and expand capacity, Beyti is set to
benefit from Almarai’s expertise and the availability of finance. Beyti may also create its own
farm in the medium term.
iii) Lactalis
acquired Nestlé’s yogurt business in Egypt and now sells under the Lactel and Nestlé
brand names.
The acquisitions of Enjoy and Beyti were made on a price /sales range of 3x-4x.
64 / 66 pages
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RiyadhTraders@efg-hermes.com
Head of Western Institutional Sales Western Institutional Sales Director of Client Relationship Head of Research
Mohamed Ebeid Julian Bruce Mazen Matraji Wael Ziada
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Head of GCC Institutional Sales Client Relationship Head of Publ. and Distribution
Local Institutional Sales Amr El Amro Diab Khalid S. Al-Bihlal Rasha Samir
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hermes.com adiab@efg-hermes.com kalbihlal@efg-hermes.com rsamir@efg-hermes.com
Gulf HNW Sales

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Reham Tawfik
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DISCLOSURES
We, Wafaa Baddour, Nour Farrag, and Nada Amin, hereby certify that the views expressed in this document accurately reflect our personal views about the
securities and companies that are the subject of this report. We also certify that neither we nor our spouses or dependants (if relevant) hold a beneficial interest in
the securities that are traded in the Egyptian Exchange. EFG Hermes Holding SAE hereby certifies that neither it nor any of its subsidiaries owns any of the
securities that are the subject of this report.
Funds managed by EFG Hermes Holding SAE and its subsidiaries (together and separately, "EFG Hermes") for third parties may own the securities that are the
subject of this report. EFG Hermes may own shares in one or more of the aforementioned funds or in funds managed by third parties. The authors of this report
may own shares in funds open to the public that invest in the securities mentioned in this report as part of a diversified portfolio over which they have no
discretion.
The Investment Banking division of EFG Hermes may be in the process of soliciting or executing fee earning mandates for companies that are either the subject of
this report or are mentioned in this report.
DISCLAIMER
Our investment recommendations take into account both risk and expected return. We base our fair value estimate on a fundamental analysis of the company's
future prospects, after having taken perceived risk into consideration. We have conducted extensive research to arrive at our investment recommendations and fair
value estimates for the company or companies mentioned in this report. Although the information in this report has been obtained from sources that EFG Hermes
believes to be reliable, we have not independently verified such information and it may not be accurate or complete. EFG Hermes does not represent or warrant,
either expressly or implied, the accuracy or completeness of the information or opinions contained within this report and no liability whatsoever is accepted by EFG
Hermes or any other person for any loss howsoever arising, directly or indirectly, from any use of such information or opinions or otherwise arising in connection
therewith. Readers should understand that financial projections, fair value estimates and statements regarding future prospects may not be realized. All opinions
and estimates included in this report constitute our judgment as of this date and are subject to change without notice. This research report is prepared for general
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the purchase or sale of any security. It is not tailored to the specific investment objectives, financial situation or needs of any specific person that may receive this
report. We strongly advise potential investors to seek financial guidance when determining whether an investment is appropriate to their needs.
GUIDE TO ANALYSIS
EFG Hermes investment research is based on fundamental analysis of companies and stocks, the sectors that they are exposed to, as well as the country and
regional economic environment.
Effective 16 December 2009, EFG Hermes changed its investment rating approach to a three-tier, long-term rating approach, taking total return potential together
with any applicable dividend yield into consideration.
In special situations, EFG Hermes may assign a rating for a stock that is different from the one indicated by the 12-month expected return relative to the
corresponding fair value.
For the 12-month long-term ratings for any investment covered in our research, the ratings are defined by the following ranges in percentage terms:
Rating Potential Upside (Downside) %
Buy Above 15%
Neutral (10%) and 15%
Sell Below (10%)
EFG Hermes policy is to update research reports when appropriate based on material changes in a company’s financial performance, the sector outlook, the general
economic outlook, or any other changes which could impact the analyst’s outlook or rating for the company. Share price volatility may cause a stock to move
outside of the longer-term rating range to which the original rating was applied. In such cases, the analyst will not necessarily need to adjust the rating for the stock
immediately. However, if a stock has been outside of its longer-term investment rating range consistently for 30 days or more, the analyst will be encouraged to
review the rating.
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CONTACTS AND STATEMENTS

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juhayna food industries rating buy 29 July 2010

Get Ready, Get Set... Grow

initiation of coverage food and beverage │ egypt Wafaa Baddour, CFA

KEY FINANCIAL HIGHLIGHTS

December Year End (EGP mn) 2009a 2010e 2011e 2012e

food and beverage │ egypt

INITIATING COVERAGE WITH A BUY RATING

JUHAYNA GOES PUBLIC

food and beverage │ egypt

FIGURE 1: POST-IPO SHAREHOLDING STRUCTURE FIGURE 2: PRE-IPO SHAREHOLDING STRUCTURE*

Other Old Ahmed Amin

Free Float Post

JUHAYNA, A LEADING DAIRY AND JUICE PRODUCER IN EGYPT

FIGURE 3: JUHAYNA’S MAIN OPERATIONAL INDICATORS BY SEGMENT (2009)

Source: Juhayna Food Industries (Historic), MEMRB, EFG Hermes estimates

STRONG GROWTH IN THE EGYPTIAN PACKAGED MARKET…

Packaged products’ contribution to milk consumption is low at 12%. It is expected to increase

food and beverage │ egypt

FIGURE 4: MILK MARKET BREAKDOWN FIGURE 5: YOGURT MARKET BREAKDOWN

…ATTRACTING NEW PLAYERS, INTENSIFYING COMPETITION

JUHAYNA DEVISES ITS NEW GROWTH-ORIENTED STRATEGY

EXPECT SOLID GROWTH IN NET PROFIT AND FCF

food and beverage │ egypt

2008a 2009a 2010e 2011e 2012e 2013e 2014e 2015e

Adj. Attributable Net Profit Margin 40% ROAE ROAIC

*Adjusted to exclude one-off capital gains.

FIGURE 10: COPAT, WORKING CAPITAL, CAPEX AND FCF

Copat Working Capital Capex FCF

Source: Juhayna Food Industries (Historic), EFG Hermes estimates

ASSUMPTION RISKS AND VALUATION SENSITIVITIES

i) Consumer conversion to packaged products, particularly in the milk segment, which is

food and beverage │ egypt

A. DISCOUNTED CASH FLOW

FIGURE 11: SUMMARY OF DCF VALUATION

2011e 2012e 2013e 2014e 2015e

Terminal WACC 12.0%

FIGURE 12: VALUATION SENSITIVITY TO OUR COST OF EQUITY, TGR ASSUMPTIONS

15.0% 15.5% 16.0% 16.5% 17.0%

4.0% 5.65 5.49 5.35 5.21 5.08

B. UPSIDE AND DOWNSIDE RISKS

- A faster-than-expected consumer shift to packaged food and beverage products, particularly

- Loss of market share to competitors as a result of limited revisions of product offerings to

food and beverage │ egypt

Risks to Margin Assumptions

C. VALUATION SENSITIVITIES TO MAIN FORECAST ASSUMPTIONS

Implied Market Share and Packaged/Total Milk Consumption (Conversion Rate)

Implied Market Share

-4.0% 4.23 4.61 5.00 5.38 5.77 6.15

65% 35% 32%

53% 51% 10%

*Implied market share is based on Juhayna’s production

Terminal EBITDA Margin and TGR

food and beverage │ egypt

Terminal EBITDA Margin

5.0% 3.38 4.62 5.85 7.09 8.32

juhayna food industries

food and beverage │ egypt

food and beverage │ egypt

A SNAPSHOT OF COMPARABLE COMPANIES

food and beverage │ egypt

III. PROFILE AND STRATEGY

food and beverage │ egypt

BUSINESS LINES AND SUPPORT FUNCTIONS