U.S. investors’ inquiries should be directed to Santander Central Hispano Investment at (212) 407-7809.Please refer to the back of report and footnotes for important disclosures.

Latin American Equity Research Mexico – ConglomeratesMexico, November 22, 2002

GISSA HOLDCheap, But Facing a Rough Road AheadLuis Miranda, CFA(52-55) 52-69-1926lmiranda@bsantander.com.mx

PRESENT PRICE: US$1.36/LOCAL P$13.80TARGET PRICE: US$1.80/LOCAL P$18.90

Company StatisticsBloomberg GISSAB MM52-Week Range US$0.69-US$2.152002E P/E Rel to IPC 0.37x2002E P/E Rel to Congs 0.82xIPC Index 5,8593-Yr CAGR (01-04E) 15.0%Market Capitalization US$569Float 14%3-Mth Avg Daily Vol 0.20Shares Outst (ADR NA) 283Net Debt/Equity 0.2xBook Value Per ADR US$1.45All prices as of the Nov. 21close unless otherwise indicated.

Estimates and Valuation Ratios2001 2002E 2003E 2004E

Net Earn (Local) 445 320 423 732Current EPS 1.57 1.13 1.50 2.59Net Earn (US$) 47.4 32.9 40.6 67.3Current EPADR 0.17 0.11 0.14 0.24P/E 6.5 8.7 12.1 9.2EBITDA/ADR 0.51 0.52 0.51 0.53FV/EBITDA 2.9 3.8 3.5 2.9CE/ADR 0.33 0.41 0.44 0.46P/CE 6.08 4.99 4.65 4.46Div Per ADR 0.15 0.25 - -Div Yield 8.1% 1.3% - -

Relative Performance (12 Months)

80

120

160

200

240

N-01 J-02 M-02 M-02 J-02 S-02 N-02

GISSA

IPC

Sources: Bloomberg, Company Reports and Santander CentralHispano Investment estimates. All data in U.S. dollars in millionsunless otherwise stated. CE/ADR Cash earnings per ADR.

With this report, we are introducing our year-end 2003target price for Grupo Industrial Saltilla (Gissa), andupdating our 2002 and 2003 estimates. We are adjusting ourestimates to reflect three issues. First, two important engineplatforms (Chrysler and Detroit Diesel) are being phased out,which we estimate will substantially depress 4Q02 results.Second, the firm’s building division performance hasperformed more strongly than expected. Third, any economicrecovery in the U.S. and Mexico in 2003 will most likely belater and weaker than originally anticipated. The last point isreflected in our revised 2003 GDP growth estimate of 3.5% forMexico (down from 4.5%). Our FX estimates are P$10.00 perU.S. dollar for 2002 and P$10.50 for 2003.

We are setting a year-end 2003 target price of US$1.80 pershare (P$18.90), which implies a 33% return. (We will nolonger make reference to our year-end 2002 target price ofUS$2.50 per share). Upside potential is 2 percentage pointsabove our IPC index return estimate of 31%, and thus weare reiterating our Hold rating. We believe that in 2003 Gissashould benefit from capacity increases at its aluminum andductile iron foundries and its ceramic tile operation. Still, weare cautious on the company’s short-term results, as the impactof lower sales volume to Chrysler and Detroit Diesel expectedduring 4Q02 should lead to weak results in the metal-mechanical division (auto parts), and probably to stockunderperformance over the next few weeks.

We estimate consolidated EBITDA of US$144 million for2002, a 1.5% decline YoY and 11% below our previousestimate (mainly due to the expected 4Q02 weakness in autoparts, which should be only partially offset by good results forbuilding products). For full-year 2003, we estimate EBITDA ofUS$151 million, a 5% rise YoY. We expect this growth to bedriven by the introduction of higher value-added products andstable performance by the building-product business, butrecognize that the Gissa should report poor YoY results for thefirst half of the year.

Gissa’s stock is currently trading at 3.5x our estimated 2003FV/EBITDA and at a 45% discount to its net asset value(NAV). The current FV/EBITDA level represents a 17%discount to its 4.2x three-year average. Our price target is basedon a one-year forward-looking FV/EBITDA multiple of 3.8x in2003, and a 27% discount to its NAV.

Gissa

2

INVESTMENT POSITIVESPositive outlook for the housing sector in Mexico. Gissa’s portfolio currently has more than50% exposure to the housing and construction industry through its ceramic tile (27% of thegroup’s estimated consolidated sales for 2002), water heaters (12% of sales) and bathroomfixture (8% of sales) businesses. Gissa benefits not only from the construction of new projects,but also from remodeling. According to Gonzalo Fernandez, our Cement, Construction andHousing analyst, the outlook for the housing sector continues to be attractive. He expects a12% annual compound growth rate until 2006 in the low-income housing segment financedby Infonavit, Fovi, and Fovissste. For the residential housing segment, we believe thatmortgages will rebound during 1H03, as our economist, Salvador Moreno, believes thatmacroeconomic stability in Mexico will set the stage for a recovery in aggregate commerciallending.

Substitution of aluminum for iron in the automotive casting industry. In the metal-mechanicdivision, which we estimate should represent 34% of 2002 revenues, Gissa has two businessunits: iron and aluminum foundry, where it produces engine blocks, and auto parts. Theautomobile industry has experienced a steady shift from iron blocks to aluminum as demand formore efficient and lighter vehicles has increased. Gissa’s management believes that this trendwill continue in the medium term, and has directed most of its investment in this division to thealuminum casting business (Castech). During 1998, the iron foundry business represented morethan 95% of the division’s volume, while pipefitting products represented the rest (Castech didnot exist at that time). For 2002, we estimate that the iron foundry will represent 90% of thedivision’s volume, while aluminum products (Castech) account for 7%. In terms of revenues,however, Castech should generate almost 20% of sales, according to our estimates. In 2003, thecompany expects to increase aluminum division sales by almost 50% in U.S. dollar terms.Additionally, management is also investing in the ductile-iron foundry (specialty products), abusiness line that currently represents less than 10% of sales. However, the current installedcapacity of 12,000 tons/year will grow to 72,000 tons/year in the next two years, with theplanned total investment of US$50 million dollars. The project is expected to come on line by3Q03.

Solid financial structure and profitability. Gissa has a very solid financial structure, with a netdebt/equity ratio of only 0.3x and an EBITDA/net interest expense ratio of 47x as of September2002. As of that time, debt was US$254 million (all U.S. dollar denominated), while the firm’scash position was approximately US$130 million. Based on these metrics, Gissa is the Mexicanconglomerate with the healthiest financial structure – but it still has the highest weighted averagecost of capital (10.3% as of September 2002). Nevertheless, the company has an ideal balancesheet for pursuing further acquisitions in the building and industrial divisions, which are the twoaxes of expansion in the company’s long-term strategy. Furthermore, despite its cost of capital,Gissa has the second highest ROIC (we estimate 13.7% for 2003) of its conglomerate peers, justbelow Grupo Carso (Buy; Current Price: US$2.39; Target Price: US$3.45).

Clear strategy. We believe that the group has a clear strategy that is consistent withmanagement decisions, investments, and day-to-day work. Management has defined consumerproducts (building products) and industrial products (aluminum casting) as its core businesses.On the industrial side, Gissa plans to expand its capacity of aluminum and specialty productswhile keeping its traditional iron foundry at installed capacity with only maintenanceinvestments. In the building products segment, ceramic tile and water heaters are considered corebusiness units and should absorb the bulk of future investments.

Gissa has a50% exposureto theconstructionindustry.

Aluminumshould be thesource ofgrowth in autoparts.

Financialstructure isvery solid.

Strategy isconsistent withmanagementinitiatives.

3

INVESTMENT CONCERNSPressure on iron foundry demand, first from Detroit Diesel and now from Chrysler. Duringthe 3Q02 results conference call, management said that results of the metal-mechanical divisionin 4Q02 will be adversely affected by Detroit Diesel’s termination of the contract for its old-generation diesel engine. The start-up of Detroit Diesel’s new generation engine, also to bemanufactured by Gissa, will provide gradually increasing compensation starting in 1Q03.However, during 4Q02 and 1Q03 at least, Detroit Diesel will generate minimal sales for Gissa(Detroit Diesel represented 10% of the diesel engine foundry’s volume and slightly less than 5%of Gissa’s consolidated sales as of 3Q02). Moreover, we recently learned that Chrysler, Gissa’smost important client – it represents 40% of the gasoline engine foundry business and 10% ofconsolidated sales – has decided to accelerate the phase-out of one of its gasoline engines. Thisaction should also affect Gissa’s 4Q02, and we expect only a modest volume recovery in 1H03.We believe growth and higher prices in the aluminum casting business in 2003 will partiallyoffset lower volumes in the iron business, but we still forecast poor results in 4Q02 and 1Q03.We expect a negative operating margin of 1% in the metal-mechanical division for 4Q02.

Pressure from imported products. During the first nine months of 2002, Gissa’s ceramic tileand houseware products have suffered pricing pressures due to the continued introduction ofimported products from Europe and Asia, respectively. We do not expect this situation to changemuch in the medium term, albeit there may be no further pricing erosion beyond that of 4Q02.Ceramic tile may have the most promising prospects for better pricing, but while the slackeningof import price pressure suggests that the market could accept some price increases, we believe itis prudent to wait for a positive trend to emerge. In the houseware business, management isattempting to develop a trading business to import directly and distribute through its formalchannels. Management has commented that this trading approach is already helping to improvethe operating margin. This is a welcome signal given that, as of September 2002, the operatingmargin of the building division had contracted 308 bps versus the first nine months of 2001.

Excess capacity in the tile industry. The pressure from imported products has not been the onlyproblem affecting the Mexican tile industry. It has also suffered from its own problems, as thetwo most important players in the market, Porcelanite (Gcarso) and Gissa’s Vitromex, haveincreased capacity during the last two years. Porcelanite, the market leader with an estimatedmarket share of 40%, increased capacity by 15% in 2001, while Gissa increased capacity by 20%in 2001 and another 15% in 2002 when it opened the San Luis Potosi plant in 3Q02. Thiscapacity expansion has led to price weakness as both companies have tried to capture marketshare. Nevertheless, we believe that this is not a problem because the Mexican market forceramic floor tiling has been growing at a 10%-12% annual rate for the last few years. In fact,this growth rate has driven both the capacity expansion of Porcelanite and Gissa and theincreased presence of imported products. Regarding the latter, oversupply in overseas marketssuch as Europe provides another incentive to export aggressively to Mexico.

During 3Q02, results were affected by inefficiencies in the building product division and byextraordinary expenses. The inefficiencies were related to quality problems in the bathroomfixture business. Management is addressing these problems and believes it will solve them by4Q02. Extraordinary expenses were related to one-time consulting firm charges and provisionsfor the performance compensation program. We believe that operating expenses are now undercontrol, and we expect no more extraordinary charges that would degrade operating profitability.

Liquidity. Gissa is a small-cap stock with a market capitalization of US$389 million, a free floatof only 18% (around US$70 million) and an average daily volume of US$0.2 million (one-yearaverage). Since January 2002, the stock has been listed on the Mexican Stock Index, and whilewe have seen days with traded volume above U$1 million, the average daily volume neverthelessremains low.

The iron foundrybusiness shouldpost very weakresults in 4Q02and 1Q03.

Imported productsshould continueto providetroublesomecompetition.

The tile industrysuffers fromexcess short-termcapacity.

There were twoyellow lights in3Q02 results.

Liquidity remainsan issue.

Gissa

4

VALUATIONWe believe that Gissa’s valuation is attractive if we adopt a year-end 2003 horizon, but inthe short term we recommend a cautious approach, as 4Q02 and 1Q03 are expected tobring poor results. Gissa has been one of the best performing stocks in Mexico during 2002,with a 32% YTD return in U.S. dollar terms versus the IPC index’s decline of 17%. As a result ofthis price appreciation, Gissa’s valuation became richer during the second and third quarter of theyear (see Figure 1). In terms of one-year forward-looking FV/EBITDA, the stock has traded at anaverage multiple of 4.2x over the last three years, with a 5.1x maximum on May 20, 2002, whenthe price of the stock reached US$2.15. After the recent correction of the Mexican market, thestock trades at 3.5x our 2003 FV/EBITDA estimate, a 14% discount to its three-year average.

Figure 1. Gissa – FV/EBITDA Forward and Three-Year Avg. with +1/-1 Standard Deviation

-1.02.03.04.0

5.06.07.08.0

Dec

-98

Mar

-99

Jun-

99

Sep-

99

Dec

-99

Feb-

00

May

-00

Aug-

00

Nov

-00

Jan-

01

Apr-0

1

Jul-0

1

Oct

-01

Dec

-01

Mar

-02

Jun-

02

Sep-

02

Sources: Mexican Bolsa, Company Reports and Santander Central Hispano Investment estimates.

Gissa also trades at a discount to its peers. Compared with its Mexican conglomerate peers,Gissa’s stock has traditionally traded at a 15% discount (based on a three-year average offorward-looking FV/EBITDA). After falling 37% from its 52-week high, the stock now trades ata 13% discount to this average (see Figure 2). In the medium term, the positive outlook for thebuilding products division, which represents more than 50% of the firm’s revenues, and theinvestments in the metal-mechanic business should justify a smaller discount. However, giventhe short-term concerns noted previously and the our consequent projection of poor 4Q02 and1Q03 results, we expect the discount to remain in place as long as the underlying demand andmarket problems continue to affect the company.

Figure 2. Gissa – FV/EBITDA Relationship to Sector Average (+) Premium / (-) Discount

-60%

-40%

-20%

0%

20%

40%

Dec

-96

Apr-9

7

Aug-

97

Dec

-97

Apr-9

8

Aug-

98

Dec

-98

Apr-9

9

Aug-

99

Dec

-99

Apr-0

0

Aug-

00

Dec

-00

Apr-0

1

Aug-

01

Dec

-01

Apr-0

2

Aug-

02

Sources: Mexican Bolsa and Santander Central Hispano Investment estimates.

The stock trades ata discount to itsthree-year averageFV/EBITDA multiple.

The stock trades ata discount to itspeer group’sFV/EBITDA.

5

We believe that Gissa’s discount to its estimated NAV is attractive, but once again, westress our short-term concerns. We estimate that the stock trades at a 45% discount to its NAV.Our estimate is based on our expectation of solid performance from the building product divisionand a gradual recovery of the auto parts business. We expect 5% EBITDA growth in U.S. dollarterms in 2003, but reiterate that we expect 1H03 to be challenging. Therefore, we do not expect areduction of this discount in the short term, either.

Figure 3. Gissa – Net Asset Value 2002E (U.S. Dollars in Millionsa)EBITDA EBITDA Enterprise % Effective Vitro's

Subsidiary 2002E 2003E Multiple Value Ownership EV % of NAVMetal-mechanical (auto) 49 40 5.0 198 94.0% 186 26.6%Building Materials 82 98 6.0 588 100.0% 588 84.2%Houseware 14 15 4.5 67 100.0% 67 9.5%TOTAL 144 151 852 841 120.3%- Net Debt / Holding* 142 -20.3%= Net Asset Value 699 100.0%Shares Outstanding (Mn) 283

P$ US$Value / Share P$23.63 $2.47Current Price $1.36Prem /(Disc) to SOTP -45.1%a Except per share amounts.* Adjusted to reflect the divestiture of the household product division.Sources: Company reports and Santander Central Hispano Investment estimates.

We are setting a price target of US$1.80 per share (P$18.90), and reiterate our HOLDrating. The price target implies a one-year forward-looking FV/EBITDA target multiple of 3.8xfor year-end 2003, compared with a 4.5x multiple on a trailing basis. The significant differencebetween the trailing and forward multiples for year-end 2003 stems from our estimate of 21%EBITDA growth in 2004, which in turn springs from the completion of the aluminum and ductileiron projects and a low base of comparison in the metal-mechanical division. The forward-looking multiple implies a 10% discount to its three-year average and a 14% discount to thesector average. Our price target also implies that a 27% discount to its estimated NAV isreachable, in our opinion, if our estimates for the aluminum division materialize. Once again, weemphasize that our price target of US$1.80 is for year-end 2003 – we realize that the stock pricecould face short-term pressure if 4Q02 results come in as weak as we expect.

We estimate a45% discount toits NAV.

Our year-end 2003price target isUS$1.80, and ourrating is HOLD.

Gissa

6

EARNINGS OUTLOOK

ADJUSTING 2002 AND 2003 ESTIMATES

We are adjusting our 2002 and 2003 EBITDA estimates to account for the following issues: (1) avery weak 4Q02 due to the discontinuance of some Chrysler and Detroit Diesel engines; (2) amilder-than-anticipated economic recovery; (3) the new estimates for Castech; and (4) theadditional capacity in the ductile iron casting business. Our macroeconomic estimates call forGDP growth of 1.4% in 2002 and 3.5% in 2003 (previously 4.5%), and a peso-U.S. dollarexchange rate of P$10.00 and P$10.50 for 2002 and 2003, respectively.

At the consolidated level, we are lowering our 2002 EBITDA estimate from US$161.2 million toUS$144 million, and our 2003 estimate from US$171 million to US$151 million. Please seeAppendix II for our estimates by division. Two factors drive our 2002 reduction. First, we expectthe metal-mechanic division to post very weak 4Q02 results. Second, we anticipate loweroperating margins in all divisions due to non-recurrent consulting fees incurred in 3Q02 andstartup costs for the addition of capacity in the aluminum casting and tile businesses. For 2003,the decrease is largely explained by anticipated lower volume in the iron foundry, due to reducedproduction of diesel engines, and startup costs for the aluminum foundry.

Figure 4. Gissa – Estimate Revisions, 2001-2003E (U.S. Dollars in Millions)2002E 2003E

Previous Current Change Previous Current ChangeRevenue 724.6 734.7 1.4% 758.6 729.8 -3.8%EBITDA 161.8 144.0 -11.0% 171.6 150.7 -12.4%Op. Profit 109.8 94.9 -13.6% 120.5 100.4 -16.7%Op. Margin 15.2% 12.9% -15.0% 15.9% 13.8% -13.5%Net Income 57.1 32.9 -42.4% 59.9 40.6 -32.2%EPS 0.20 0.11 -43.3% 0.21 0.14 -32.2%Sources: Company reports and Santander Central Hispano Investment estimates.

At the EPS level, we are adjusting our 2002 EPS estimate from US$0.20 to a loss of US$0.11,and from US$0.21 to US$0.14 for 2003. Figure 7 summarizes our estimates.

Figure 5. Gissa – Consolidated Estimates, 2000-2004E (U.S. Dollars in Millions)2001 2002E 2003E 2004E 02E/01 03E/02E 04E/03E

Sales 713 736 735 829 3.2% -0.2% 12.9%Operating Profit 95 95 101 135 0.2% 6.3% 33.1%Operating Margin 13.3% 12.9% 13.8% 16.2%EBITDA 146 144 151 183 -1.3% 4.9% 21.1%Margin EBITDA 20.5% 19.6% 20.6% 22.1%Net Profit 47 33 41 68 -30.3% 24.1% 65.4%Sources: Company reports and Santander Central Hispano Investment estimates.

OUTLOOK BY DIVISION

AUTO PARTS (35% OF SALES AND 34% OF EBITDA)Metal Mechanical/Auto Parts. For 2002, we expect sales and EBITDA to decline 1.8% and2.4%, respectively, YoY in U.S. dollar terms as a result of lower volumes in the iron foundrybusiness because of the phase-out of the Chrysler and Detroit Diesel engines.

7

For 2003, we estimate a 7% sales drop in U.S. dollar terms, as the iron foundry volume lossesfrom the Chrysler and Detroit Diesel discontinuances are felt over an entire year. We believe thatthese losses will be partially offset by: (1) a new generation of engines that the iron foundry unitwill produce; (2) higher volume for aluminum products during 2H03; and (3) an incrementalincrease in the ductile iron business in 4Q03, when the increase in capacity should becomeoperational.

In terms of volume, we expect 2002 production, including iron, aluminum, and pipefitting, toreach 186,700 tons, a 1% decline YoY. For 2003, we estimate a 2% decline to 182,300 tons,driven by a 6% decline in iron (88% of total volume) that will be partially offset by higheraluminum volume in aluminum when the new installed capacity comes on line. Nevertheless,startup will be gradual, and the significant effect on sales in 2H03 will not camouflage the impactof the fixed startup costs to be incurred early in the year. Therefore, the division’s profitabilitywill look anemic for much of next year. However, we estimate 24% volume growth for 2004.This sounds aggressive, but by then Gissa will enjoy the full benefit of expanded aluminumcapacity, meaningful capacity (and presumably volume) growth in the ductile iron foundry, and arecovery in iron foundry volume – all of which should be amplified by a low base of comparison.

At the EBITDA level, we estimate that the auto parts division will generate US$48 million in2002 (a 2% decline YoY), US$39 million in 2003 (a 19% decline YoY), and US$59 million in2004 (a 50% increase YoY). The impressive increase YoY in EBITDA during 2004 stems fromthe same factors – capacity expansion, volume growth, and easy comparisons – that should drivevolume gains.

BUILDING PRODUCTS (52% OF SALES AND 56% OF EBITDA)We expect sales to grow 7% and 5% in 2002 and 2003, respectively. This growth is attributableto the positive outlook for the construction industry as a whole, to which Gissa contributesceramic tile (53% of the division’s consolidated sales), water heaters (24% of sales), andbathroom fixtures (15% of sales).

For 2002, we expect EBITDA to decline 3% YoY in U.S. dollar terms due to pricing pressurefrom imported products in the ceramic tile and bathroom fixture businesses. During 3Q02,furthermore, the company recorded some additional expenses related to the performancecompensation program, and had some production problems in the bathroom fixture business.However, management has asserted that it will resolve these problems during 4Q02; assumingthey succeed, the profitability of the business should improve in 2003, allowing for 20%EBITDA growth YoY in U.S. dollar terms. We estimate EBITDA of US$81 million in 2002 andUS$97 million in 2003. We emphasize that the new San Luis Potosi ceramic tile plant, whichshould add around 15% more capacity, commenced operating in 2H02. Gissa’s 2003 results willtherefore reflect a full year’s worth of output from this plant, which, like the Guanajuato plant,should feature improved efficiency and better quality.

HOUSEWARES (13% OF SALES AND 10% OF EBITDA)For houseware, we expect a difficult 2002, with YoY sales and EBITDA declines of 2% and13%, respectively, in U.S. dollar terms. For 2003, we expect sales to be flat, but with a marginalimprovement in operating margin from an estimated 8.2% in 2002 to a projected 8.4% in 2003.This pickup would spring from a successful full implementation of the company’s tradingactivities, which is currently yielding better margins than expected. We estimate that this divisionwill generate EBITDA of US$15 million in 2003, for 3% YoY growth. We believe that thisdivision could begin to show some improvement, but we do not expect this division to be asource of significant growth for the company.

Gissa

8

FINANCIAL STATEMENTSFigure 6. GISSA – Income Statement, 2000-2004E (U.S. Dollars in Millions)

2000 2001 2002E 2003E 2004ESales 739 713 735 730 824COGS 539 517 548 544 621Depreciation 45 51 49 50 49Operating Profit 98 95 95 100 134Operating Margin 13.3% 13.3% 12.9% 13.8% 16.2%EBITDA 143 146 144 150 182EBITDA Growth -20.7% 2.2% -1.5% 4.4% 21.2%EBITDA Margin 19.4% 20.5% 19.6% 20.6% 22.1%Total ICF 5 (3) 32 29 19Interest Paid 11 20 14 13 13Interest Earned 2 9 9 9 9Forex Loss (Gain) 1 (9) 31 27 16Monetary Gains (5) (5) (4) (2) (2)Earnings after ICF 93 98 63 71 115Other Income (Expenses) (1) (17) (10) (2) -Earnings before Taxes 92 82 53 69 115Tax Provision 30 31 19 24 40Non-Consolidated Subs. 0 - 0 - -Earnings before Extra. Items 62 50 34 45 75Extraordinary Items - - - - -Minority Interest 2 3 1 5 7Net Income (Majority) 61 47 33 41 67Cash Earnings Normalized 101 89 109 115 129Net Income Normalized 56 38 59 65 81Earnings per ADR 0.22 0.17 0.11 0.14 0.24Normalized Earnings per ADR 0.21 0.14 0.21 0.23 0.29Cash Earnings (Norm) / ADR 0.37 0.32 0.38 0.40 0.46E Santander Central Hispano Investment estimate.Sources: Company reports and Santander Central Hispano Investment.

Figure 7. GISSA – Cash Flow Statement 2000-2004E (U.S. Dollars in Millions)2000 2001 2002E 2003E 2004E

Net Majority Earnings 61 47 33 41 67Depreciation 45 51 49 50 49Other Non-Cash Items (4) (14) 27 25 14Change in Working Capital (27) 11 10 (0) (28) Cash Flow from Operations 74 97 119 115 102Change in Financing Activities 126 81 (18) (76) (45) Cash Flow from Financing 126 81 (18) (76) (45)Capex (238) (120) (60) (60) (65) Cash Flow Investing (238) (120) (60) (60) (65)Net Cash Flow (38) 58 41 (21) (8)Previous Cash Position 78 40 98 139 118Closing Cash 40 98 139 118 110E Santander Central Hispano Investment estimate.Sources: Company reports and Santander Central Hispano Investment.

9

Figure 8. GISSA – Balance Sheet, 2000-2004E (U.S. Dollars in Millions)2000 2001 2002E 2003E 2004E

AssetsCash & S-T Investments 40 98 139 118 110Net Accounts Receivable 149 140 155 150 172Inventory 74 66 71 70 81Other Current Assets 2 1 2 2 2Total Current Assets 265 304 366 340 365Other Investments 84 75 78 77 77Net Fixed Assets 452 487 509 567 615Other Assets 84 75 78 77 77Total Assets 800 866 953 984 1,057LiabilitiesAccounts Payable 46 38 51 51 59S.T. Bank & Non-Bank Loans 79 27 11 11 11Taxes Payable 4 - - - -Other Current Liabilities 48 44 69 66 64Total Current Liabilities 177 110 132 128 133L.T. Bank & Non-Bank Loans 126 183 244 243 242Other Loans 6 14 16 15 15Total Long-Term Liabilities 132 197 260 258 256Deferred Liabilities 73 61 55 53 51Foreign Currency Liabilities 240 241 306 301 301Peso Liabilities 142 127 141 137 139Total Liabilities 382 368 447 438 441EquityTotal Majority Interest 406 478 481 519 585Minority Interest 12 21 25 27 31Total Equity 418 498 506 546 616E Santander Central Hispano Investment estimate.Sources: Company reports and Santander Central Hispano Investment.

Gissa

10

Figure 9. GISSA – Income Statement, 2000-2004E (Constant Pesos as of December 2002)2000 2001 2002E 2003E 2004E

Sales 7,963 7,038 7,226 7,292 8,319COGS 5,808 5,105 5,393 5,439 6,268Depreciation 486 507 482 499 490Operating Profit 1,060 934 930 1,003 1,349Operating Margin 13.3% 13.3% 12.9% 13.8% 16.2%EBITDA 1,546 1,440 1,412 1,502 1,839EBITDA Growth -26.7% -6.8% -1.9% 6.3% 22.4%EBITDA Margin 19.4% 20.5% 19.5% 20.6% 22.1%Total ICF 58 (28) 310 292 188Interest Paid 118 194 136 126 135Interest Earned 23 91 89 85 89Forex Loss (Gain) 20 (82) 301 268 158Monetary Gains (57) (49) (39) (17) (17)Earnings after ICF 1,002 962 620 711 1,161Other Income (Expenses) 7 160 103 16 -Earnings before Taxes 995 802 517 780 1,161Tax Provision 327 306 186 243 406Non-Consolidated Subs. 3 - 1 - -Earnings before Extra. Items 670 496 332 537 755Extraordinary Items - - - - -Minority Interest 17 29 11 45 75Net Income (Majority) 653 467 320 406 679Cash Earnings Normalized 1,094 882 1,064 1,146 1,304Net Income Normalized 607 375 582 647 814Earnings per ADR 2.31 1.65 1.13 1.44 2.40Normalized Earnings per ADR 2.15 1.33 2.06 2.29 2.88Cash Earnings (Norm) / ADR 3.87 3.12 3.76 4.05 4.61E Santander Central Hispano Investment estimate.Sources: Company reports and Santander Central Hispano Investment.

Figure 10. GISSA – Cash Flow Statement, 2000-2004E (Constant Pesos as of December 2002)2000 2001 2002E 2003E 2004E

Net Majority Earnings 653 467 320 406 679Depreciation 486 507 482 499 490Other Non-Cash Items (39) (131) 262 251 142Change in Working Capital (287) 110 100 (5) (282) Cash Flow from Operations 814 952 1,165 1,152 1,028Change in Financing Activities 1,319 783 (177) (767) (450) Cash Flow from Financing 1,319 783 (177) (767) (450)Capex (2,495) (1,154) (600) (606) (656) Cash Flow Investing (2,495) (1,154) (600) (606) (656)Net Cash Flow (362) 581 388 (220) (78)Previous Cash Position 808 397 895 1,332 1,149Closing Cash 415 938 1,386 1,191 1,114E Santander Central Hispano Investment estimate.Sources: Company reports and Santander Central Hispano Investment.

11

Figure 10. GISSA – Balance Sheet, 2000- 2004E (Constant Pesos as of December 2002)2000 2001 2002E 2003E 2004E

AssetsCash & S-T Investments 415 938 1,386 1,191 1,114Net Accounts Receivable 1,560 1,345 1,551 1,516 1,518Inventory 778 635 707 709 710Other Current Assets 21 10 19 18 17Total Current Assets 2,774 2,928 3,663 3,434 3,359Other Investments 21 10 19 18 17Net Fixed Assets 4,736 4,681 5,092 5,722 5,751Other Assets 876 719 777 780 768Total Assets 8,387 8,328 9,532 9,937 9,878LiabilitiesAccounts Payable 481 365 511 513 514S.T. Bank & Non-Bank Loans 824 264 111 112 110Taxes Payable 44 - - - -Other Current Liabilities 505 428 695 668 645Total Current Liabilities 1,854 1,056 1,317 1,292 1,268L.T. Bank & Non-Bank Loans 1,325 1,761 2,437 2,449 2,405Other Loans 63 134 161 155 149Total Long-Term Liabilities 1,388 1,895 2,598 2,603 2,554Deferred Liabilities 761 583 551 530 511Foreign Currency Liabilities 2,515 2,316 3,061 3,043 2,995Peso Liabilities 1,489 1,218 1,406 1,383 1,339Total Liabilities 4,004 3,535 4,467 4,426 4,334EquityTotal Majority Interest 4,254 4,595 4,811 5,235 5,267Minority Interest 129 197 253 276 277Total Equity 4,383 4,793 5,065 5,511 5,544E Santander Central Hispano Investment estimate.Sources: Company reports and Santander Central Hispano Investment

Gissa

12

APPENDIX IFigure 11. Gissa – Portfolio Structure

GRUPO INDUSTRIAL SALTILLO(Gissa)

Metal Mechanical Division(Autoparts)

SEPROSAHolding

Manufacturas Cifunsa Iron Casting - Gasoline Engines

ControlingGroup Mexican Bolsa18%82%

100%

CastechAluminum Casting - Head and Blocks

TechmatechManufacturing Systems

100%

Norsk Hydro

50%

50%

100%

Building Products

Manufacturas Vitromex Ceramic Tile and Bathroom Fixtures Bathroom Accessories Bathroom Ceramic Produts

100%

Calentadores Cal-o-rex Water Heaters

Calentadores Cinsa Water Heaters

100%

100%

Exito Paint Brushes and Sandpaper

100%

Houseware Products

ISLO

Porcelanizados Enasa High Quality Steel Kitchen Products

100%

Esvimex Enamel on Steel Products

Ceramica Santa Anita(Cersa) Stoneware Table Products

Cinsa Kitchen Steel Products

100%

100%

100%

100%

St. Thomas Creations (USA) Bathroom Accessories Other Distribution Centers in US

100%

GIS Holding

100%

Ind. Automotriz Cifunsa

100%

Cifunsa Diesel Iron Casting - Diesel Engines

Ditemsa Machinery Tools

49%

NPL Technologies PLC

51%

Sources: Company reports and Santander Central Hispano Investment.

13

APPENDIX IIFigure 12. Gissa – Consolidated Estimates by Division 2001-2004E (U.S. Dollars in Millions)Total * 2001 2002E 2003E 2004E 02E/01 03E/02E 04E/03ESales 713 736 735 829 3.0% -0.2% 12.9% Sales Growth -3.4% 3.0% -0.7% 12.9%Operating Margin 13.3% 12.9% 13.8% 16.2%EBITDA 146 144 151 182 -1.5% 4.9% 21.2%EBITDA Margin 20.5% 19.6% 20.6% 20.6%Metal mechanic / AutopartsSales 263 259 239 316 -1.8% -7.4% 31.9% Sales Growth -17.4% -1.8% -7.4% 31.9%Operating Margin 9.1% 9.0% 5.8% 10.8%EBITDA 50 48 39 59 -2.4% -19.0% 51.0%EBITDA Margin 18.8% 18.5% 16.3% 18.7%Building ProductsSales 355 379 398 412 6.8% 5.0% 3.4% Sales Growth 27.1% -0.8% -35.9% 85.7%Operating Margin 17.8% 16.6% 19.7% 21.9%EBITDA 83 81 97 108 -2.7% 19.9% 11.0%EBITDA Margin 18.3% 18.6% 20.2% 26.1%HousewaresSales 99 97 97 100 -2.1% -0.1% 3.5% Sales Growth -9.3% -2.1% -0.1% 3.5%Operating Margin 11.1% 8.2% 8.4% 9.4%EBITDA 17 14 15 16 -13.5% 2.5% 6.4%EBITDA Margin 16.8% 14.6% 15.1% 15.5%* Total includes other operations.Sources: Company reports and Santander Central Hispano Investment estimates.

2002

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Key to Investment Codes (12- to 24-Month Horizon)

Rating Definition

% of CompaniesCovered with

This Rating

% of companies that SCHI hasProvided investment banking

services in the past 12months

Strong Buy Expected to outperform the market more than 15%. 13.92% 30.00%Buy Expected to outperform the market 5%-15%. 27.22% 20.00%Hold Expected to perform within a range of 5% above or below the local market. 36.71% 40.00%Underperform Expected to underperform the market 5%-15%. 6.96% --Sell Expected to underperform the market more than 15%. 2.53% --Under Review 12.66% 10.00%

Target prices are current year-end unless otherwise specified. Recommendations are based on a total return basis (expected shareprice appreciation + prospective dividend yield) unless otherwise specified.

Ratings are established when the firm sets a target price and/or when maintaining or reiterating the rating. Ratings may not coincide with theabove methodology due to price volatility. Management reserves the right to maintain or to modify ratings on any specific stock and will disclosethis in the report when it occurs.

Given the significant impact that the devaluation of the Argentine peso and other continuing macroeconomic events on Argentine corporations, wehave temporarily changed the methodology for establishing Argentine recommendations. Our new temporary benchmark is the yield to maturity(YTM) of the Global 27 bond plus a 5.5% equity risk premium as a proxy for the expected market return by year-end 2002.

For the Andean countries, our benchmark is the simple average of the country risk of each country plus the 10 year U.S. T-Bond yield plus 5.5% ofequity risk premium. For additional information about our rating methodology, please call (212) 350-3974.

This report has been prepared by Santander Central Hispano Investment Securities Inc. (“SCHI”) (a subsidiary of Santander Investment S.A.,which is wholly owned by Banco Santander Central Hispano, S.A. ("Santander")), on behalf of itself and its affiliates (collectively, GrupoSantander) and is provided for information purposes only. This document must not be considered as an offer to sell or a solicitation of an offer tobuy any relevant securities (i.e., securities mentioned herein or of the same issuer and/or options, warrants, or rights with respect to or interests inany such securities). Any decision by the recipient to buy or to sell should be based on publicly available information on the related security and,where appropriate, should take into account the content of the related prospectus filed with and available from the entity governing the relatedmarket and the company issuing the security. This report is issued in Spain by Santander Central Hispano Bolsa, Sociedad de Valores, S.A. (SCHBolsa), and in the United Kingdom by Santander Central Hispano S.A., London Branch (Santander London), which is regulated by the FinancialServices Authority in the conduct of investment business in the UK. This report is not being issued to private customers. SCHI, Santander London,and SCH Bolsa are members of Grupo Santander.

The information contained herein has been compiled from sources believed to be reliable, but, although all reasonable care has been taken toensure that the information contained herein is not untrue or misleading, we make no representation that it is accurate or complete and it shouldnot be relied upon as such. All opinions and estimates included herein constitute our judgment as at the date of this report and are subject tochange without notice. From time to time, Grupo Santander and/or any of its officers or directors may have a long or short position in, or otherwisebe directly or indirectly interested in, the securities, options, rights or warrants of companies mentioned herein.

SCHI’s foreign affiliates may (a) have managed or co-managed a public offering of the subject companies securities in the past 12 months; (b)have received compensation for investment banking services from the subject companies in the past 12 months; or (c) expects to receive orintends to seek compensation for investment banking services from the subject companies in the next three months.

Grupo Santander may from time to time perform services for or solicit business from any company mentioned in this report. Grupo Santander orany other persons do not accept any liability whatsoever for any direct or consequential loss arising from any use of this report or its contents. Thisreport may not be reproduced, distributed, or published by any recipient for any purpose.

Any U.S. recipient of this report (other than a registered broker-dealer or a bank acting in a broker-dealer capacity) that would like to effect anytransaction in any security discussed herein should contact and place orders in the United States with SCHI, which, without in any way limiting theforegoing, accepts responsibility (solely for purposes of and within the meaning of Rule 15a-6 under the U.S. Securities Exchange Act of 1934) forthis report and its dissemination in the United States.

© 2002 by Santander Central Hispano Investment Securities Inc. All Rights Reserved.