mytilineos group €4 · 23-06-2004 · [email protected] opinion initiate as outperform target...

Initiation of Coverage

Mytilineos Group Basic Materials

Well placed, well diversified

€4.82

23 June, 2004

Stella Dimaraki +30 210 8173 387 [email protected]

OPINION Initiate as Outperform

TARGET PRICE €6.50

Key Data Reuters Code MYTr.AT Bloomberg Code MYTIL GA Market Cap (€ m) 195.31 Shares outstanding 40,520,340 Free Float 57% ASE General Index 2,343.55

(€) High Low

52 weeks price range

6.8 3.6

(1m) (3m) (12m)

Daily Avg Volume 61,172 73,211 109,778 Absolute perf. (%) -1.6% 18.1% 30.3% Rel. perf. to GI (%) -1.7% 15.2% 7.3%

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•

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Un13%EPam

•

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WeMEsha

0

500,000

1,000,000

17/06/2003

Year Sales (€m) EBITDA (€m)

EBITDA margin

EBT(€m)

EAT(€m)

EPS(€)

2002 259.6 30.2 11.6% 17.6 5.1 0.13

2003 278.0 36.9 13.3% 27.8 14.4 0.35

2004e 314.6 41.1 13.1% 31.8 13.0 0.32

2005f 370.6 49.6 13.4% 37.3 15.5 0.38

2006f 366.1 48.3 13.2% 34.9 14.1 0.35

2007f 367.1 47.8 13.0% 34.9 14.4 0.36

2008f 375.7 48.9 13.0% 36.5 15.5 0.38

tilineos Holdings owns a well-diversified portfolio ofpanies, active in the metals, defence, construction and

rgy sectors. Diversified activities secure the group’snterrupted earnings flow, even during periods of adverseiness conditions.

tilineos group is also well placed to benefit from: a) Theurn cycle in the commodities market, b) The opportunitiesing from the Greek energy market’s deregulation and c)

reasing co-production share of Greek producers in publicence projects.

der Greek GAAP, we forecast group revenues to rise by on the back of improved business conditions. Reported

S is reckoned 10% lower while adjusted for goodwillortization EPS is reckoned 46% higher.

r group valuation combines the results of the peer groupuation comparison deployed for the parent company and DCF derived fair values of METKA and ELVO.

set an Outperform rating for Mytilineos Holdings andTKA with respective target prices of €6.50 and €5.40 perre.

Ju

10/09/2

EPch

-64.4

181.

-9.7

19.6

-8.7

1.9

7.6

Stock Price ne ’03 – June ‘04

Relative Performance June ’03 – June ‘04

8.0 8.0 50.0%

003 04/12/2003 04/03/2004 02/06/20040.0

4.0

0.0

4.0

17/06/2003 10/09/2003 04/12/2003 04/03/2004 02/06/2004-10.0%

0.0%

10.0%

20.0%

30.0%

40.0%

Price (€) Relative

S g

DPS(€) DY P/E EV/

EBITDAEV/

Sales P/BV P/CF Net Debt /Equity ROE

% 0.05 1.0% 38.3 8.8 1.0 1.9 16.7 0.8 4.8%

3% 0.10 2.1% 13.6 7.2 1.0 3.4 9.8 1.0 18.1%

% 0.12 2.4% 15.1 6.4 0.8 1.1 7.3 0.4 10.8%

% 0.12 2.6% 12.6 5.3 0.7 1.0 6.6 0.4 8.4%

% 0.13 2.8% 13.8 5.5 0.7 1.0 6.8 0.4 7.5%

% 0.16 3.3% 13.6 5.5 0.7 1.0 6.7 0.3 7.5%

% 0.16 3.4% 12.6 5.4 0.7 1.0 6.4 0.2 7.8%

Mytilineos Group 23 June, 2004

Table of contents

Table of contents................................................................................2

Investment Summary .........................................................................3

Group profile.......................................................................................4

Core metal business...........................................................................7

METKA: Great opportunities ahead..................................................11

ELVO................................................................................................16

Group financials ...............................................................................18

Group valuation ................................................................................21

2 MARFIN ANALYSIS

23 June, 2004 Mytilineos Group

Investment Summary Mytilineos Holdings owns a well-diversified portfolio of companies, active in the metals, defence, construction and energy sectors. Diversified activities secure the group’s uninterrupted earnings flow, even during periods of adverse business conditions prevailing in specific sectors. Mytilineos group is also well placed to benefit from: a) The upturn cycle in the commodities market, b) The opportunities arising from the Greek energy market’s deregulation and c) Increasing co-production share of Greek producers in public defence projects. In addition, the business outlook looks more favourable should one consider the intragroup synergies. We set an Outperform rating for Mytilineos Holdings and METKA subsidiary with respective target prices of €6.50 and €5.40 per share.

Core metal business The core metal business, mostly represented by the Mytilineos parent company, is considered the group’s less predictable segment due to the cyclical nature and the volatility of the commodities market. Peer group comparison in terms of profitability, efficiency and leverage ratios do not favour the company and consequently require the assignment of a hefty discount on any valuation exercise. Nevertheless, at least in the short-term, the group is well placed to benefit from rising metal prices, mainly driven by strong demand and tight supply. In the long-term however, the group will need to address the low efficiency levels of this segment and on the other hand bear the possible consequences in the advent of a slowdown in China - which was the primary recovery trigger in the sector - or rising interest rates. We derive a total value of €60.5m for Mytilineos parent company (core metal business only), based on a peer group valuation comparison (DJ Stoxx Basic Materials index used as benchmark).

Metka’s promising outlook Metka is due to exploit great opportunities in the defence and energy sector. We are positive given the significant existing backlog, healthy balance sheet, high earnings visibility and attractive valuation. Main prospects arise from increased investment activity expected in the energy sector as a result of replacements of generation capacity in order to meet future environmental requirements and the entry of IPPs. We derive a €280.5m DCF fair value for METKA or €5.40 per share and assign an Outperform rating.

ELVO also adds value The company’s backlog amounted to €293m as of the end of 2003 while holds the potential to secure a similar amount of contracts flow every year. Note that only the finalization of the Armoured Infantry Fighting Vehicles project agreement could add €400m in the company’s backlog. Note that Civil projects worth €127m are included in its backlog, providing further sales visibility. The government’s defence budget is considered the major growth determinant for the company and consequently high dependence on state decisions is considered the major risk factor. We have derived a DCF fair value of €129m for ELVO.

Further opportunities not factored in yet Last, further opportunities could arise in the case of a successful outcome of the imminent availability capacity tenders of HTSO for a total amount of 900MW. The group will aim to secure availability agreements with HTSO for its planned 400MW CCGT unit in Volos, which however is not included in our forecasts. Among the companies competing are Hellenic Petroleum, Gek-Terna and HED-Sidenor.

MARFIN ANALYSIS 3


Group profile Mytilineos Holdings is a holding company operating in the metals, mining, energy, defence, vehicle manufacturing and construction sectors. The group is active internationally, as the local market represents slightly higher than 50% of group revenues and has created strategic alliances throughout the greater Southeast European region.

The group gained exposure in the energy, defence, infrastructure and specialised industrial metal construction sectors in 1999 through the acquisition of METKA, in which it currently holds a 65.78% stake.

Further exposure in the defence and manufacturing areas was gained in 2000, through the acquisition of ELVO (the state-owned Hellenic Vehicle Industry). The state owns a 51% stake, Mytilineos SA. 22.53%, METKA 12.94% while General Industry of Defence Materials owns a 7.53% stake.

In a grip to further diversify its activities towards the most promising energy field, the group set up two subsidiaries in 2000: Mytilineos Power Generation and Supplies and Mytilineos Hellenic Wind Power.

Table 1: Mytilineos Holdings: Main subsidiaries Company Stake

Mytilineos Finance 100.0%ELEMKA 70.0%Geniki Sidirometalliki 50.0%METKA 65.8%SOMETRA 88.0%ELVO 22.5%Defence Industry joint venture 52.4%Mytilineos Hellenic Wind Power 56.0%Mytilineos Power Generation and Supplies 67.0%BEAT 35.0%EBETAM 8.6%Hellenic Copper Mines 39.2% Source: The Company

Table 2: METKA: Main subsidiaries Company Stake

Servisteel 100.0%ELVO 12.9%T.C.B. 100.0%EKME 40.0%3KP 40.0%Rodax 100.0%Mytilineos Power Generation and Supplies 33.0%Mytilineos Hellenic Wind Power 24.0% Source: The Company

4 MARFIN ANALYSIS


Figure 1: Mytilineos Group

Source: The Company

Mytilineos Group of Companies

Metals and international trading Energy Defence

Sometra smelter, Romania METKA & Subsidiaries ELVO

Hellenic Copper Mines, Cyprus

Mytilineos Power Generation and Supplies METKA

Mytilineos Hellenic Wind Power

Figure 2: Mytilineos Holdings shareholders structure

Source: The Company

Mytilineos family43%

Retail investors

38%

Institutional investors

19%

Figure 3: METKA shareholders structure

Source: The Company

Retail investors

23%

Institutional investors

10%

Mytilineos SA.67%

MARFIN ANALYSIS 5


Figure 4: ELVO shareholders structure

Source: The Company

Greek State50%

Mytilineos SA.23%

METKA13%

General Industry of Defence Materials

8%

Lainopoulos6%

6 MARFIN ANALYSIS


Core metal business The group is one of Greece’s largest metal traders, while following partnership agreements and takeovers the group has turned into a manager of some of Europe’s most commercially important mineral deposits. Main trading activities focus on:

1. Non-ferrous base metals: copper, lead, zinc, aluminium and their alloys. Apart from aluminium and copper, which are sold mainly locally, the remaining products are provided for international markets.

2. Ores and minerals: raw materials processed to obtain base metals. The group supplies copper, lead and zinc to a series of plants in Greece.

3. Steel products: materials used in construction projects and metal manufacturing industries.

4. Wires: raw materials in the manufacturing of wire ropes, wire netting and construction grids.

Metal prices Metal prices recovered in 2003 and continue their upward trend in 2004 as well, driven mainly by rising demand (+6% in 2003) which outpaced the growth of global economies, inventory declines, opportunistic buying in the second half of 2003 as well as increasing expectations for overall production deficits in 2004.

Copper prices increased by 14% on average in 2003 on fundamental grounds as worldwide demand rose by 2.3% on the back of China’s rapid growth, while supply fell marginally which resulted to a balance deficit of 312,000 tonnes. Copper prices continued to rise in Q1:04 (+65% y-o-y and +33% q-o-q).

Aluminium prices rose by 6% on average in 2003 driven mainly by the overall market’s rise rather than the underlying metal’s fundamentals. Global demand rose by c7% in 2003 driven by China while supply grew 7.4%. The rise continued in Q1:04, although at a slower pace than the overall market.

Zinc prices also rose by 6% in 2003. Nevertheless, global final consumption grew modestly by 2.3% while it declined by 6% in US and remained flat in Europe.

Speculative funds as well as inventory declines contributed to the sharp rise of lead prices in the last quarter of 2003. Demand was again modest while supply cuts was the main reason for the prices recovery.

Table 3: Metal Prices US $/Tonne Aluminium Copper Lead Zinc2001 1,444 1,578 476 8862002 1,349 1,558 453 779y-o-y -7% -1% -5% -12%2003 1,432 1,780 516 828y-o-y 6% 14% 14% 6%Q1:03 1,396 1,663 459 786Q4:03 1,512 2,055 633 929Q1:04 1,649 2,739 845 1,071y-o-y 18% 65% 84% 36%q-o-q 9% 33% 34% 15% Source: LME

MARFIN ANALYSIS 7


Figure 5: Mytilineos parent sales breakdown (2003)

Source: The Company

Zinc48%

Copper13%

Steel products13%

Other10%

Lead13%

Aluminium3%

Prospects / risks We expect underlying fundamentals in the commodities market to improve as a result of limited production growth and steady demand growth, which suggests further gains in commodity prices. Demand should be supported by the overall improving global economic conditions and continuous strong growth stemming from China. Chinese industrial production continues to rise with double-digit rates (+19% in April and +18% over the Jan-April 2004 period) with other leading economies showing improved industrial activity. In addition, the closure of several production units combined with limited investments in new capacity point to moderate production growth and inventory declines. The fact that there is clear inverse correlation between metal prices and the strength of the US dollar (witnessed also recently with the weakness in commodity prices during May and April), suggests that US dollar’s downward trend against other currencies should provide a further impetus to metal prices.

Mytilineos should benefit from rising metal prices as well as implemented investments, which aim at increasing capacity as well as improving efficiency of existing units. The company aims at increasing capacity in Romanian zinc and lead smelter SOMETRA by 9.6% in 2004 and 6.3% in 2005 while Hellenic Copper Mines plans 9.4% and 28.6% capacity increases in the respective years.

Main risk for Mytilineos is an environment of declining metal prices. Volatility in the commodities market could arise in the advent of rising US interest rates, possible slowdown of Chinese growth and upon speculative activity.

Forecasts Our forecasts are derived assuming a 5% production CAGR over the 2003-2006 period. Metal prices are conservatively forecast lower than current prices as well as at a 5% discount to the average y-t-d price levels. In addition, we have included Mytilineos fee for the management of ELVO, which corresponds to 50% of the annual rise in ELVO’s pre-tax earnings only in the case that earnings growth exceeds 40%.

As a result of rising metal prices we forecast a rise in Mytilineos gross margin by 1.0ppts and 0.40ppts in 2004 and 2005 as well as a rise in SG&A expenses in

8 MARFIN ANALYSIS


accordance with revenues growth.

Note that our forecasts for the parent company include our estimated dividends to be distributed by METKA and ELVO subsidiaries, ie. investment income of €5.5 in 2004 stems from the company’s 65.8% stake in METKA’s distributed total dividend of €8.3m for FY03.

Table 4: Mytilineos parent P&L estimates 2003 2004e 2005f 2006f

Turnover 145.6 163.1 12% 172.6 6% 181.3 5%Cost of Goods Sold (129.0) (142.9) (150.5) (158.7)Gross Profit 16.6 20.2 22% 22.1 9% 22.7 3%Gross margin 11.4% 12.4% 12.8% 12.5%Operating Expenses (7.8) (9.0) 15% (9.5) 6% (10.0) 5%

Tab

MethP/E P/BVP/CFMcaTota Sour

MAR

Includes ELVO management fee of €3.2m in 2003 and €6.6m in 2004

Source: MARFIN ANALYSIS, The Company

Other Income 0.1 0.1 0.1 0.1EBITDA 8.8 11.3 29% 12.7 12% 12.8 1%EBITDA margin 6.0% 6.9% 7.3% 7.0%Depreciation (1.7) (1.8) 10% (2.0) 8% (2.1) 7%EBIT 7.1 9.5 33% 10.7 13% 10.6 0%Net Investment Inc. (Exp.) 5.6 5.5 -2% 7.1 29% 11.4 61%Net Interest Inc. (Exp.) (4.3) (4.3) -1% (4.5) 4% (4.4) -2%Exceptionals (Net) 1.1 2.6 0.0 0.0EBT 9.5 13.3 40% 13.3 0% 17.7 33%Taxes (1.9) (2.7) (2.2) (2.2)EAT 7.6 10.5 39% 11.1 5% 15.5 39%Dividends 4.1 4.7 17% 5.0 5% 5.4 8%

Includes dividend distributed by METKA and potentially ELVO. FY04 investment income includes its share from METKA’s FY03 distributed dividends

Valuation We use a peer group comparison to value the core metal business of Mytilineos parent company using as benchmark the European DJ Stoxx Basic Materials index. Our valuation exercise excludes any possible value stemming from METKA or ELVO as we contact separate valuation exercises, presented in following sections. We use the weighted average multiples of our selective peer group for 2004 which leads to a fair value of €60.5m for Mytilineos metal division. Note, that we have applied a hefty 50% discount to the weighted average sector multiples given the fact that Mytilineos ROE stands considerable lower that the sector average, EBITDA margins are also below average while net debt/EBITDA far exceeds the sector average.

le 5: Valuation of the core metal division of Mytilineos parent company

od Year Weighted average

multiple of peer group Applied discount Mytilineos value (€ m) Applied weight Final value (€ m)2004 15.4 -50% 39.2 50% 19.6

2004 1.7 -50% 182.0 10% 18.2 2004 7.1 -50% 24.4 20% 4.9

p/Sales 2004 1.1 -50% 89.1 20% 17.8 l value of the metals division 60.5 ce: MARFIN ANALYSIS, JCF

FIN ANALYSIS 9


Table 6: Peer group comparison (2004e) ROE EBITDA margin Net debt/EBITDA Sector weighted average 13.5% 25.7% 1.3 Mytilineos SA 4.9% 6.9% 8.8 Source: MARFIN ANALYSIS, JCF

Table 7: DJ Stoxx Basic Materials valuation

P/E 04 P/E 05Price/Book

04Price/Book

05Price/Cash

Flow 04Price/Cash

Flow 05Mcap/Sales

04Mcap/Sales

05Anglo American Plc 11.5 11.0 1.3 1.2 8.3 7.5 1.3 1.2Rio Tinto 14.8 12.0 2.9 2.6 10.1 8.1 2.0 1.8Bhp Billiton Group 11.4 11.3 3.2 2.6 8.4 8.1 0.8 0.8Upm Kymmene 29.8 14.8 1.2 1.1 6.6 5.3 0.8 0.7Norsk Hydro 10.5 11.1 1.3 1.2 4.5 4.5 0.8 0.8Arcelor (Ex Usinor) 7.7 7.4 0.9 0.8 3.5 3.4 0.3 0.2Stora Enso 32.5 16.0 1.1 1.1 6.3 5.6 0.8 0.8ThyssenKrupp AG 10.6 9.0 0.8 0.8 3.1 2.9 0.2 0.2Xstrata Plc 9.6 8.8 1.0 1.0 6.1 5.1 1.4 1.3Corus Group 45.4 21.1 0.6 0.5 4.4 3.2 0.2 0.2Lonmin 14.0 12.2 2.6 2.5 10.2 8.9 2.6 2.5Acerinox 14.4 10.8 1.7 1.5 8.8 7.4 0.8 0.8Norske Skogindustrier 42.9 11.7 0.8 0.8 4.1 3.4 0.6 0.6Umicore 8.4 10.6 1.0 1.0 4.3 4.7 0.2 0.2Holmen Ab 14.9 11.9 1.3 1.3 7.5 6.7 1.2 1.1Antofagasta 8.9 10.1 2.4 2.0 6.1 6.7 2.1 2.4Kinnevik 30.8 21.7 1.2 1.2 11.4 14.9 3.0 3.0Outokumpu 9.8 8.0 1.1 0.9 5.0 4.4 0.3 0.3Voestalpine AG 13.3 8.3 0.8 0.7 3.5 2.9 0.3 0.3Ssab Svenskt Stal 8.8 9.0 1.2 1.1 4.9 5.5 0.6 0.6Average 17.3 11.8 1.4 1.3 6.4 6.0 1.0 1.0Median 13.3 11.1 1.2 1.1 6.1 5.5 0.8 0.8Weighted average 15.4 11.6 1.7 1.5 7.1 6.3 1.1 1.0 Source: JCF

10 MARFIN ANALYSIS


METKA: Great opportunities ahead Metka holds great potential for delivering sustainable profitable growth, as a result of the opportunities arising in all three-market segments operating, ie. the traditional metal constructions, the energy market and the defence sector. We forecast 3-y sales and EPS CAGR of 12% and 14%, which is comfortably supported by its significant backlog of €450m and also its ability to sustain a similar contracts flow in the future given its leading position and know-how. Main opportunities stem from the Greek government’s armament program and its potential to capture a share of the investments stemming from the energy market’s deregulation. We assign a target price of €5.4 for METKA shares and an Outperform rating.

Prospects / risks Metka acts as the major supplier/subcontractor for the procurement projects of the Greek army, PPC, Public Gas Corporation, port authorities and oil refineries. The company has secured strong relationships with leading international electronics/defence companies such as GE, Alstom, ABB, Siemens, Raytheon, Lockheed Martin and HDW through partnerships in major projects.

The company undertakes the manufacturing of heavy/compound steel constructions and integrated electromechanical equipment as well as large-scale construction electromechanical, industrial, energy and defence projects, including assembly, erection and commissioning. The company owns two industrial sites in Volos and one in Thessaloniki.

Table 8: METKA revenues breakdown € m 2000 2001 2002 2003Energy 50.0 66.6 70.7 96.0 Other metal construction 22.7 25.3 12.8 26.9 Refinery - - - 0.6 Shipbuilding - - 2.4 8.1 Metals trading - 20.6 5.8 5.2 Defence - 8.2 14.7 -Gas turbines 0.3 - - -Mining 0.4 0.0 - -Vehicle related construction - - - 5.9 Total 73.4 120.8 106.3 142.8 Source: The Company

METKA’s main growth drivers are considered the government’s defence spending as well as the liberalization of the energy market.

In the defence front, Mytilineos Group aims at capturing a share of the government’s 10-y procurement programme of €11bn. The group estimates that an amount of €8bn falls into ELVO and METKA’s field of activities, which includes army-related projects of €5.5bn, navy-related projects of €2bn and air force-related projects of €0.5bn. Mytilineos group participation in the aforementioned projects could range between 20% to 40%. METKA could potentially secure contracts worth €450m stemming from the procurement programme. The fact that the company has gained significant know-how through the implementation of defence projects in the past as well as synergies stemming from the cooperation with ELVO could

MARFIN ANALYSIS 11


further promote its position in the defence sector.

In the energy sector, key drivers are considered Greece’s healthy growth in electricity demand, which supports generation capacity additions and need to replace generation capacity in order to meet environmental requirements. Electricity demand is expected to continue growing faster than the eurozone average while convergence trends are expect in consumption per capita (which stands 40% below the EU average). The Regulatory Authority for Energy projects that electricity consumption growth would exceed 4% in the next 10 years and stresses the need for capacity additions in the system to avoid running an electricity deficit.

According to the amended liberalization law, which came into effect on August 29, 2003, the HTSO (Hellenic Transmission System Operator) is entitled to enter into capacity-availability agreements following the launch of tender procedures. During the first implementation phase, the HTSO may enter into agreements for up to 900 MW of new generation capacity that must be commissioned by July 1, 2007. Additional tenders for up to 400MW capacity may be conducted during that time period. PPC may participate in up to 200 MW in the case that this additional tender takes place. In addition, the new law grants PPC an electricity generation license to build new capacity or refurbish existing capacity of up to 1,600 MW, provided that the old capacity of an equivalent amount is put in cold reserve. We consider that METKA is well positioned to benefit from increased investments in the sector given its expertise as well as its long-standing relationship with PPC.

The group has established two subsidiaries in order to fully exploit opportunities in the energy sector. Mytilineos Power Generation and Supplies was established with a primary objective being the production and trading of energy. The primary project assigned is the construction of a natural gas-fired power plant in Volos of 400MW. The company has obtained the necessary licenses and is in anticipation of further regulatory clarifications. Mytilineos Hellenic Wind Power was established with the objective of construction and operation of wind parks and has obtained generation licenses for 7 wind parks of total capacity of 84.15MW.

Table 9: Energy investments Volos Sidirokastro Platanos Evia/AndrosTotal investment €m 245 20 5 65Financed by: Equity 30% 30% 30% 30%Subsidy 0% 30% 30% 30%Borrowing 70% 40% 40% 40% Source: The Company

Main risks could stem from a possible cut in the government’s defence budget or reduced co-production share for Greek companies. On the other hand, although the Greek energy sector holds great potential, delays in the enforcement of a clear regulatory framework hinder growth and increase the sector’s risk profile.

12 MARFIN ANALYSIS


Forecasts Metka’s current backlog covers 73% and 74% of our next two year’s parent revenues estimates. Main project is considered the construction of PPC’s CCGT plant in Lavrio budgeted for €194m which should provide a boost in FY05 revenues. Current backlog amounts to €450m and spreads over a 6-year period. The backlog breaks down as follows: 61.3% energy, 5.3% metal construction and 33.4% defence. From 2006 onwards, defence projects, further investments by energy players - primarily PPC - as well as the construction of the group’s wind parks should support revenues.

Table 10: Metka revenues estimates (€ m) Revenues secured by backlog Client 2004 2005 2006Frame agreement, after sales, florina lignite power station, filters, Kardias project, wind power unit Chania, other PPC, Alstom, Other 39.6 1.7 -Lavrio CCGT unit PPC 29.7 120.0 44.3Submarine parts HDV 6.9 2.2 2.2

Rio-Antirio Bridge joint venture/Cleveland 2.1 - -

Train equipment OSE 6.0 - -Olympic Projects, Calatrava Aktor/Attiko metro 17.7 - -Leopard KMW/RHEINMETALL 0.6 21.4 21.4Real estate Volos 2.0 0.6 0.6Materials supply 4.5 0.9 0.9Subtotal 1 109.0 146.7 69.3% total revenues 73% 74% 38%Revenues based on new contract estimates Leopard KMW/RHEINMETALL - 1.5 1.5Neptune submarine HDV 0.7 1.3 -Lavrio unit maintenance PPC - - -Kentavros ELVO - SSF - 5.0 5.0Patriot Raytheon - Lockheed - 1.9 1.9Bridges Eurobridge - 2.8 0.7Energy provision G.E. 7.8 3.2 0 Mechanical works Various 1.1 - -Subtotal 2 9.6 15.7 9.1% total revenues 6% 8% 5%Revenues based on further contract estimates by market segment PPC additional capacity and maintenance PPC 2.1 4.9 7.7Energy other Other - 2.5 10.0Defence Greek state 10.5 10.5 37.5Metal construction Other 3.0 3.0 15.0Wind Parks Group 14.3 16.2 32.3Subtotal 3 29.9 37.1 102.5% total revenues 20% 19% 57%Total (Subtotal 1+2+3) 148.5 199.5 181.0 Source: MARFIN ANALYSIS, The Company

MARFIN ANALYSIS 13


Figure 6: 2004 revenues estimates (€ m)

Source: MARFIN ANALYSIS, The Company

109.0

9.6

29.9

19.6

0.0

40.0

80.0

120.0

160.0

200.0

Parent sales secured by

backlog

New contracts -management assumption

New contracts -MA assumption

Subsidiaries contribution

Table 11: METKA group revenues forecasts € m 2003 2004e Ch% 2005f Ch% 2006f Ch%Consolidated sales 142.8 168.1 18% 213.4 27% 200.0 -6%Parent sales 121.4 148.5 22% 199.5 34% 181.0 -9%Servisteel 1.9 2.0 5% 2.1 5% 2.2 5%EKME 13.4 14.8 10% 16.0 8% 17.1 7%3KP 5.3 5.6 5% 5.8 5% 6.1 5%Rodax 18.1 19.0 5% 19.8 4% 20.4 3%TCB 9.6 10.1 5% 10.6 5% 11.1 5%Subsidiaries total 48.4 51.5 6% 54.3 5% 57.0 5% Source: MARFIN ANALYSIS, The Company

Table 12: METKA P&L estimates € m 2003 2004e 2005f 2006f Turnover 142.8 168.1 18% 213.4 27% 200.0 -6%Cost of Goods Sold (109.1) (129.4) (165.6) (155.0) Gross Profit 33.7 38.7 15% 47.8 24% 45.0 -6%Operating Expenses (8.5) (10.4) 22% (13.4) 29% (12.6) -6%Other Income 0.4 0.4 0.5 0.5 EBITDA 25.5 28.7 12% 34.9 22% 32.9 -6%Depreciation (2.5) (2.6) 2% (2.8) 8% (2.9) 3%EBIT 23.0 26.1 13% 32.1 23% 30.0 -6%Net Investment Inc. (Exp.) 1.2 0.2 0.2 0.2 Net Interest Inc. (Exp.) 0.1 0.7 0.6 0.7 Exceptionals (Net) (3.9) 0.0 0.0 0.0 EBT 20.4 26.9 32% 33.0 22% 30.9 -6%Taxes (6.8) (9.4) (11.5) (10.8) Net Profit After Tax 13.7 17.5 28% 21.4 22% 20.1 -6%Minorities (0.1) (0.2) (0.2) (0.2) EAT 13.5 17.4 28% 21.3 22% 19.9 -6% Source: MARFIN ANALYSIS, The Company

14 MARFIN ANALYSIS


Valuation and rating We use a DCF exercise to value METKA, using the following key assumptions. Our DCF exercise returns a fair value of €5.4 per share for METKA shares, including also its 12.94% stake in ELVO which is valued on a DCF basis as well.

Table 13: Basic DCF assumptions 2003-2013 TerminalRevenues CAGR 4.8% 0.5%EBIT CAGR 4.1% 0.5%EBIT margin (average) 15.0% 15.0%Capex/sales (average) 2.6% 2.5%WC/sales (average) 40.4% 40.0%WACC 8.7%Implied EBITDA multiple at terminal value 3.05 Source: MARFIN ANALYSIS

Table 14: DCF exercise €m 2004f 2005f 2006f 2007f 2008f 2009f 2010f 2011f 2012f 2013fSales 168.1 213.4 200.0 195.1 199.0 207.9 215.2 221.6 227.2 228.3 EBIT 26.1 32.1 30.0 29.1 29.6 31.2 32.3 33.2 34.1 34.2 EBIT margin 15.5% 15.0% 15.0% 14.9% 14.9% 15.0% 15.0% 15.0% 15.0% 15.0%Depreciation 2.6 2.8 2.9 3.0 3.1 3.3 3.5 3.6 3.8 4.0 Other 2.7 6.0 (1.8) (0.7) 0.5 0.5 0.5 0.5 0.5 0.5 Gross cashflow 31.3 40.9 31.1 31.4 33.2 35.0 36.2 37.4 38.4 38.8 Change in working capital (11.3) (19.1) 5.5 2.0 (1.6) (2.9) (1.9) (2.6) (2.2) (0.5)Net operating cashflow 20.0 21.9 36.6 33.5 31.7 32.1 34.4 34.8 36.2 38.3 Income tax (5.4) (9.4) (11.5) (10.8) (10.5) (10.9) (11.3) (11.6) (11.9) (12.0)Investments (5.0) (6.0) (5.0) (5.0) (5.0) (5.2) (5.4) (5.5) (5.7) (5.7)FCFF 9.5 6.4 20.1 17.6 16.1 16.0 17.7 17.6 18.6 20.6 Discounted FCFF 8.8 5.4 15.6 12.6 10.6 9.7 9.9 9.0 8.8 8.9 Sum of PV 99.2 Terminal value 116.7 Net debt 47.9 ELVO stake 16.7 Shareholder value 280.5 Value per share 5.4 Source: MARFIN ANALYSIS

Implied upside indicated by our fair valued combined with its significant backlog, healthy balance sheet, high earnings visibility and great opportunities stemming from the deregulation of the energy sector point to our Outperform rating for the stock.

MARFIN ANALYSIS 15


ELVO Mytilineos Group acquired a 43% stake in ELVO in August 2000 for €19m, assuming also the company’s management. The parent company holds a 22.5% stake, METKA owns a 12.94% stake and General Industry of Defence Materials holds a 7.5% stake. The Greek state remains the majority shareholder, controlling a 51% stake. Mytilineos holds an option to increase its stake in ELVO by 17% while it reserves the first refusal right for any share disposal by the Greek state.

Forecasts / Prospects The company has the industrial infrastructure to produce all types of heavy vehicles for military and civil use such as light military cross-country jeeps, civil and military trucks of various types, armoured personnel carriers, busses and trucks for various uses, armoured infantry fighting vehicle, fire fighting trucks and spare parts. ELVO has the capacity to contact final assembly and system integration while synergies through its cooperation with METKA reinforce the overall technical know-how of the group.

Table 15: ELVO P&L estimates 2003 2004e 2005f 2006fTurnover 175.4 194.7 11% 202.5 4% 192.4 -5%Cost of Goods Sold (128.1) (142.5) (148.4) (141.2)Gross Profit 47.4 52.2 54.1 51.2 Gross margin 27% 27% 27% 27%Operating Expenses (19.9) (22.0) (22.9) (21.5)Other Income 0.0 0.0 0.0 0.0 EBITDA 27.5 30.2 10% 31.2 3% 29.6 -5%EBITDA margin 16% 16% 15% 15%Depreciation (5.3) (5.6) (5.9) (6.2)EBIT 22.2 24.6 11% 25.3 3% 23.4 -7%Net Investment Inc. (Exp.) 0.2 0.2 0.2 0.2 Net Interest Inc. (Exp.) (1.7) (2.2) (2.0) (1.5)Exceptionals (Net) 1.3 0.0 0.0 0.0 EBT 21.9 22.6 3% 23.5 4% 22.2 -6%Taxes (4.0) (4.5) (5.9) (6.6)EAT 17.9 18.1 1% 17.6 -3% 15.5 -12%Dividends 0.0 0.0 3.5 3.9 10% Source: MARFIN ANALYSIS, The Company

We reckon sales at €194.7m in 2004 up 11% vs. 2003. Revenues are seen broadly flat in the next three years. The company’s backlog amounted to €293m as of the end 2003, though the finalization of the Kentavros project agreement which involves the delivery of Armoured Infantry Fighting Vehicles could potentially add €400m in the company’s backlog. Other important projects include the agreement signed between the Ministry of Defence and KMW for the delivery of 170 Leopard A2 Main Battle Tanks. ELVO was selected to carry out the final assembly of the tanks. The company’s backlog also includes civil projects worth €127m, which involve mainly the supply of busses, trolleys and fire vehicles, providing further sales visibility.

In addition, ELVO is currently networking with potential suppliers in order to secure

16 MARFIN ANALYSIS


co-production projects of the Hellenic Armed Forces' procurement programme, like new amphibious armoured vehicles, mobile hospitals, bridges and other vehicles. Note that the company continues to cater the majority of needs of the Hellenic Forces concerning supply materials. Any risks could arise through the potential cut in the government’s defence spending budget, with direct implication to the company’s operations.

Valuation We use a DCF exercise to value ELVO, setting below our key assumptions. Our DCF exercise returns a fair value of €129m which accounts for 16% of our sum-of-the-parts target price for Mytilineos Holdings.

Table 16: Basic DCF assumptions 2003-2013 TerminalRevenues CAGR 0.8% 0.0%EBIT CAGR -0.1% 0.0%EBIT margin (average) 11.9% 11.6%Capex/sales (average) 2.5% 2.5%WC/sales (average) 49.0% 50.0%WACC 9.0%Implied EBITDA multiple at terminal value 2.88 Source: MARFIN ANALYSIS

Table 17: DCF exercise €m 2004f 2005f 2006f 2007f 2008f 2009f 2010f 2011f 2012f 2013fSales 194.7 202.5 192.4 190.5 189.9 189.9 189.9 189.9 189.9 189.9 EBIT 24.6 25.3 23.4 22.8 22.5 22.0 22.0 22.0 22.0 22.0 EBIT margin 12.6% 12.5% 12.2% 12.0% 11.9% 11.6% 11.6% 11.6% 11.6% 11.6%Depreciation 5.6 5.9 6.2 6.6 6.9 7.1 6.3 7.2 6.9 7.2 Other (0.1) (0.1) 0.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Gross cashflow 30.1 31.1 29.7 29.4 29.5 29.1 28.4 29.2 28.9 29.2 Change in working capital (9.3) (8.2) 0.2 (0.9) 0.3 (0.1) 0.0 0.0 0.0 0.0 Net operating cashflow 20.8 22.9 29.9 28.4 29.7 29.0 28.4 29.2 28.9 29.2 Income tax (16.8) (4.5) (5.9) (6.6) (6.6) (6.6) (6.6) (6.6) (6.6) (6.6)Investments (5.0) (5.0) (5.0) (5.0) (5.0) (4.7) (4.7) (4.7) (4.7) (4.7)FCFF (1.0) 13.4 19.1 16.8 18.2 17.6 17.0 17.9 17.6 17.9 Discounted FCFF (0.9) 11.3 14.7 11.9 11.8 10.5 9.3 9.0 8.1 7.6 Sum of PV 93.3 Terminal value 84.0 Net debt (48.4) Shareholder value 128.9 Source: MARFIN ANALYSIS

MARFIN ANALYSIS 17


Group financials

Q1:04 results Group sales increased by 9% to €80.1m mainly on the back of a very good sales performance by METKA subsidiary as Mytilineos parent sales were off 5%. Group EBIT rose by 10% on improved gross margins (+0.34ppts) as a result of the metal prices recovery and a 13% increase in SG&As. EBT jumped 59% due to increased net extraordinary gains of €1.9m vs. net losses of €0.5m in Q1:03. Note that the group recorded extraordinary gains of €3m stemming from FX hedging. In other issues, in an effort to converge with IAS accounting requirements, the group booked consolidation differences as goodwill in intangible assets account while amortization charges amounted to €2m.

Table 18: Mytilineos Group Q1:04 results € m Q1:03 Q1:04 ch%

Sales 73.4 80.1 9%COGS (59.9) (65.1) 9%Gross profit 13.5 15.0 11%Gross margin 18% 19% Other income 0.1 0.1 48%Administrative expenses (4.5) (5.2) 15%Selling and distribution expenses (2.8) (3.0) 8%SG&A (7.3) (8.2) 13%EBIT 6.3 7.0 10%Net financial income / (Expenses) (0.5) (0.3) -32%Exceptionals (net) (0.5) 1.9 EBT 5.3 8.5 59%Minorities (1.5) (2.2) 50%EBT after minorities 3.9 6.3 63% Source: The Company

Table 19: Mytilineos parent Q1:04 results Mytilineos parent Q1:03 Q1:04 ch%

Sales 40.5 38.4 -5%COGS (36.7) (34.2) -7%Gross profit 3.8 4.2 10%Gross margin 9% 11% Other income 0.0 0.0 -10%Administrative expenses (0.7) (0.8) 6%Selling and distribution expenses (1.2) (1.2) 5%SG&A (1.9) (2.0) 6%EBIT 1.9 2.2 15%Net financial income / (Expenses) (0.1) (0.7) 508%Exceptionals (net) 0.4 2.6 562%EBT 2.2 4.1 87% Source: The Company

18 MARFIN ANALYSIS


Table 20: METKA (Cons) Q1:04 results METKA cons Q1:03 Q1:04 ch%

Sales 33.8 40.1 19%COGS (26.8) (32.0) 19%Gross profit 7.0 8.2 16%Gross margin 21% 20% Other income 0.1 0.1 54%Administrative expenses (1.7) (1.9) 10%Selling and distribution expenses (0.4) (0.4) 21%SG&A (2.1) (2.3) 12%EBIT 5.1 6.0 18%Net financial income / (Expenses) 0.1 0.3 196%Exceptionals (net) (0.9) (0.5) -40%EBT 4.2 5.7 34%Minorities 0.1 (0.2) EBT after minorities 4.3 5.5 26% Source: The Company

Forecasts Our group estimates are based on the Greek GAAP, according to which Mytilineos and METKA’s combined stake in ELVO (35.5%) is accounted under the equity method. The group has also published FY03 headline results under IAS, according to which ELVO is fully consolidated (group stake of 43%).

Under Greek GAAP we forecast group revenues to rise by 13% driven by the improved outlook expected for both the parent company and METKA subsidiary. Net earnings are seen 10% lower in FY04, despite solid organic growth due to the amortization of goodwill (full year forecast of €8m). The group would probably restate its FY03 results as was the case with Q1:03 results. Excluding amortization charges, net earnings are forecast 46% higher.

Table 21: Group Forecasts 2003 2004e 2005f 2006fTurnover 278.0 314.6 13% 370.6 18% 366.1 -1%Cost of Goods Sold (219.3) (247.5) (290.2) (287.6)Gross Profit 58.7 67.1 14% 80.4 20% 78.5 -2%Operating Expenses (22.2) (26.3) 19% (31.1) 18% (30.6) -2%Other Income 0.4 0.3 -24% 0.4 18% 0.4 -1%EBITDA 36.9 41.1 11% 49.6 21% 48.3 -3%Depreciation (5.6) (13.9) 150% (14.3) 2% (14.5) 2%EBIT 31.4 27.2 -13% 35.4 30% 33.7 -5%Net Investment Inc. (Exp.) 9.4 8.4 -11% 8.2 -2% 7.5 -9%Net Interest Inc. (Exp.) (6.2) (5.8) -7% (6.4) 10% (6.4) 0%Exceptionals (Net) (6.8) 1.9 0.0 0.0 EBT 27.8 31.8 14% 37.3 17% 34.9 -6%Taxes (8.9) (12.6) 41% (14.1) 12% (13.4) -5%Net Profit After Tax 18.9 19.2 2% 23.2 21% 21.5 -7%Minorities (4.5) (6.2) 38% (7.7) 23% (7.3) -5%EAT 14.4 13.0 -10% 15.5 20% 14.1 -9% Source: MARFIN ANALYSIS, The Company

MARFIN ANALYSIS 19


Below we present our headline group estimates under IAS, including the full consolidation of ELVO, in a grip to compare our forecasts with management’s guidance.

Table 22: Our estimates vs. management guidance 2003 2004 Ch% 2004MA Marfin vs. Management

Mytilineos Group (IAS) Revenues 460.1 502.2 9% 516.9 3%EBT 47.1 48.5 3% 52.1 7%METKA (Cons.) Revenues 142.8 150.5 5% 168.1 12%EBT 20.4 21.2 4% 26.9 27%ELVO Revenues 175.4 193.5 10% 194.7 1%EBT 21.9 22.5 3% 22.6 0% Source: MARFIN ANALYSIS, The Company

20 MARFIN ANALYSIS


Group valuation Our sum of the parts valuation methodology returns a fair value of €6.50 for Mytilineos Group, implying a 35% upside to current share price. Our group sum-of-the-parts valuation combines the results of the peer group valuation comparison deployed for the parent company, the DCF derived fair values of METKA and ELVO and a value assigned to other participations of Mytilineos Group valued on the basis of a P/BV multiples. In addition, we have applied a 10% holding company discount.

Table 23: Group sum-of-the-parts valuation € m Total value Stake Final Value % totalMytilineos parent (core) 60.5 100.0% 60.5 21%Metka (core) 263.8 65.8% 173.5 59%ELVO 128.9 35.5% 45.7 16%Other 13.5 5%Total 293.2 100%

40.5Fair value per share 7.24Holding company discount -10%Target price per share 6.51Current price 4.82Upside 35% Source: MARFIN ANALYSIS

No shares

Should we value METKA at current market price, though assume that the market assigns our fair value for its stake in ELVO, our group valuation drops to €5.9 per share. Other things equal, should we value Mytilineos Group’s 35.5% stake in ELVO at book values (ie. 15.9m), our fair value drops to €5.8 per share. Should we combine both (ie. METKA valued at current price levels and ELVO at book values) then our fair value drops to €5.4 per share.

Table 24: Different sum-of-the-parts valuation scenarios

€ m Final ValueMetka at market

priceELVO at book

values

Metka at market price & ELVO at

book values

Mytilineos parent (core) 60.5 60.5 60.5 60.5Metka (core) 173.5 147.6 173.5 154.8ELVO 45.7 45.7 15.9 15.9Other 13.5 13.5 13.5 13.5Total 293.2 267.3 263.4 244.7No shares 40.5 40.5 40.5 40.5Fair value per share 7.24 6.60 6.50 6.04Holding company discount -10% -10% -10% -10%Target price per share 6.51 5.94 5.85 5.43Current price 4.82 4.82 4.82 4.82Upside 35% 23% 21% 13% Source: MARFIN ANALYSIS

MARFIN ANALYSIS 21


We assign an Outperform rating on Mytilineos shares, as we consider that the group is well placed to benefit from opportunities arising in all of the sectors operating while its companies’ portfolio provide necessary synergies to maximize those benefits. Moreover, the group’s diversified operations provide a shelter in periods of adverse business conditions, especially given the highly volatile metals division.

22 MARFIN ANALYSIS


Profit & Loss (in € m) 2002 2003 2004e 2005f 2006f 2007f 2008f Balance Sheet (in € m) 2002 2003 2004e 2005f 2006f 2007f 2008f

Turnover 106.3 142.8 168.1 213.4 200.0 195.1 199.0 Net Fixed Assets 25.7 22.0 24.4 27.6 29.7 31.8 33.7

Cost of Goods Sold (77.2) (109.1) (129.4) (165.6) (155.0) (151.2) (154.2) Investments 6.5 6.5 6.5 6.5 6.6 6.6 6.6

Gross Profit 29.1 33.7 38.7 47.8 45.0 43.9 44.8 Other LT Assets & Accruals 0.1 0.2 0.2 0.2 0.2 0.2 0.2

Operating Expenses 8.5 8.5 10.4 13.4 12.6 12.3 12.5

Other Income 0.4 0.4 0.4 0.5 0.5 0.5 0.5 Total Fixed Assets 32.3 28.6 31.1 34.4 36.5 38.6 40.5

EBITDA 21.0 25.5 28.7 34.9 32.9 32.1 32.7

Depreciation 3.0 2.5 2.6 2.8 2.9 3.0 3.1 Inventories 22.9 26.2 31.9 40.8 38.2 37.3 38.0

EBIT 18.0 23.0 26.1 32.1 30.0 29.1 29.6 Debtors 41.3 47.2 55.7 71.3 66.9 65.2 66.5

Net Investment Inc. (Exp.) 0.5 1.2 0.2 0.2 0.2 0.2 0.2 Cash & Equivalents 10.0 10.0 10.0 10.0 10.0 10.0 10.0

Net Interest Inc. (Exp.) 0.2 0.1 0.7 0.6 0.7 0.8 0.9 Marketable Securities 18.2 36.4 37.9 37.9 41.6 46.7 50.2

Exceptionals (Net) (2.2) (3.9) 0.0 0.0 0.0 0.0 0.0 Other Current Assets 0.9 0.8 1.0 1.2 1.2 1.1 1.2

EBT 16.4 20.4 26.9 33.0 30.9 30.1 30.7

Taxes (6.2) (6.8) (9.4) (11.5) (10.8) (10.5) (10.7) Total Current Assets 93.3 120.7 136.6 161.3 157.8 160.3 165.9

Net Profit After Tax 10.2 13.7 17.5 21.4 20.1 19.6 19.9

Minorities (1.2) (0.1) (0.2) (0.2) (0.2) (0.2) (0.2) Total Assets 125.6 149.4 167.7 195.7 194.3 198.8 206.4

EAT 9.0 13.5 17.4 21.3 19.9 19.4 19.7

Dividends 8.3 8.3 10.8 13.8 13.5 13.6 14.2 Creditors 9.5 16.6 19.5 25.0 23.4 22.8 23.2

Short Term Debt 0.0 0.0 0.0 3.5 0.0 0.0 0.0

Per Share Data (in €) CP of Long Term Debt 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Other 25.4 35.0 43.7 55.2 52.3 51.4 52.8

EPS 0.17 0.26 0.33 0.41 0.38 0.37 0.38

CEPS 0.23 0.31 0.38 0.46 0.44 0.43 0.44 Total Current Liabilities 35.0 51.7 63.2 83.7 75.7 74.2 76.0

DPS 0.16 0.16 0.21 0.27 0.26 0.26 0.27

BVPS 1.50 1.65 1.77 1.92 2.04 2.15 2.26 Long Term Debt 0.0 0.0 0.0 0.0 0.0 0.0 0.0

No Of Shares (Yr-end, m) 51.95 51.95 51.95 51.95 51.95 51.95 51.95 Minorities 12.2 11.7 11.9 12.1 12.2 12.4 12.7

Adj. No Of Shares (m) 51.95 51.95 51.95 51.95 51.95 51.95 51.95 Other LT Liabil. & Prov. 0.5 0.4 0.4 0.4 0.4 0.4 0.4

Valuation Data Total Liabilities 47.7 63.8 75.5 96.2 88.4 87.1 89.1

P/E (x) 25.3 16.9 13.2 10.8 11.5 11.8 11.6

P/CF (x) 19.0 14.2 11.5 9.5 10.0 10.2 10.0 Total Equity 77.9 85.5 92.1 99.5 105.9 111.7 117.3

P/BV (x) 2.9 2.7 2.5 2.3 2.2 2.0 1.9

Div. Yield (%) 3.6% 3.6% 4.7% 6.0% 5.9% 5.9% 6.2%

EV / Sales (x) 1.7 1.3 1.1 0.8 0.9 0.9 0.9

EV / EBITDA (x) 8.6 7.1 6.3 5.2 5.5 5.6 5.5

Cash Flow Statement (in € m)

Growth Rates

Turnover (11.9%) 34.2% 17.8% 26.9% (6.3%) (2.5%) 2.0% EBITDA 21.0 25.5 28.7 34.9 32.9 32.1 32.7

EBITDA (6.4%) 21.6% 12.3% 21.7% (5.7%) (2.5%) 2.0% Taxes Paid 7.9 8.5 5.4 9.4 11.5 10.8 10.5

EBIT (8.0%) 27.9% 13.5% 23.1% (6.5%) (3.0%) 1.6% Cash Tax rate (%) 47.8% 41.6% 20.1% 28.6% 37.3% 35.9% 34.4%

EBT (17.6%) 24.3% 31.9% 22.3% (6.2%) (2.4%) 1.8% Trade Wkg Capital needs (14.0) 2.2 11.3 19.1 (5.5) (2.0) 1.6

EAT (22.6%) 50.0% 28.3% 22.4% (6.4%) (2.6%) 1.7% Capex and Participations 1.9 (1.1) 5.0 6.0 5.0 5.0 5.0

EPS (22.6%) 50.0% 28.3% 22.4% (6.4%) (2.6%) 1.7% Other non-opg Items (9.7) 7.8 2.7 6.0 (1.8) (0.7) 0.5

Ratios Free Cash Flow bef. Finc. 15.5 23.8 9.5 6.4 20.1 17.6 16.1

Gross Margin 27.4% 23.6% 23.0% 22.4% 22.5% 22.5% 22.5%

EBITDA Margin 19.7% 17.9% 17.1% 16.4% 16.5% 16.5% 16.5% Dividends Paid 4.6 8.6 8.9 10.8 13.8 13.5 13.6

EBT Margin 15.5% 14.3% 16.0% 15.4% 15.4% 15.5% 15.4% Net Interest Payments (0.2) (0.1) (0.7) (0.6) (0.7) (0.8) (0.9)

Net Margin 8.5% 9.5% 10.3% 10.0% 9.9% 9.9% 9.9% Change in Debt (4.0) 0.0 (0.0) 3.5 (3.5) 0.0 0.0

Summary Financial Data— METKA consolidated (Under Greek GAAP)

Source: MARFIN ANALYSIS, Company

MARFIN ANALYSIS 23

Profit & Loss (in € m) 2002 2003 2004e 2005f 2006f 2007f 2008f Balance Sheet (in € m) 2002 2003 2004e 2005f 2006f 2007f 2008f

Turnover 259.6 278.0 314.6 370.6 366.1 367.1 375.7 Net Fixed Assets 66.9 59.6 182.1 178.4 173.3 168.1 162.5Cost of Goods Sold (204.7) (219.3) (247.5) (290.2) (287.6) (289.0) (295.9) Investments 25.3 25.9 26.4 26.9 27.4 27.9 28.4Gross Profit 54.8 58.7 67.1 80.4 78.5 78.1 79.8 Other LT Assets & Accruals 0.9 0.2 0.6 0.7 0.7 0.7 0.8Operating Expenses 25.0 22.2 26.3 31.1 30.6 30.6 31.3Other Income 0.4 0.4 0.3 0.4 0.4 0.4 0.4 Total Fixed Assets 93.1 85.7 209.2 206.0 201.5 196.7 191.7EBITDA 30.2 36.9 41.1 49.6 48.3 47.8 48.9Depreciation 6.6 5.6 13.9 14.3 14.5 14.8 15.0 Inventories 60.8 68.4 78.0 91.4 90.6 91.1 93.2EBIT 23.6 31.4 27.2 35.4 33.7 33.0 33.8 Debtors 154.5 130.5 151.7 182.8 185.6 186.1 190.4Net Investment Inc. (Exp.) 0.8 9.4 8.4 8.2 7.5 7.4 7.4 Cash & Equivalents 10.0 10.0 10.0 10.0 10.0 10.0 10.0Net Interest Inc. (Exp.) (5.5) (6.2) (5.8) (6.4) (6.4) (5.6) (4.8) Marketable Securities 42.7 56.6 56.6 56.6 56.6 56.6 56.6Exceptionals (Net) (1.3) (6.8) 1.9 0.0 0.0 0.0 0.0 Other Current Assets 1.0 1.4 1.6 1.9 1.8 1.8 1.9EBT 17.6 27.8 31.8 37.3 34.9 34.9 36.5Taxes (7.4) (8.9) (12.6) (14.1) (13.4) (13.3) (13.7) Total Current Assets 269.1 266.9 297.9 342.6 344.6 345.6 352.2Net Profit After Tax 10.2 18.9 19.2 23.2 21.5 21.5 22.8Minorities (5.1) (4.5) (6.2) (7.7) (7.3) (7.1) (7.2) Total Assets 362.2 352.6 507.0 548.7 546.1 542.3 543.8EAT 5.1 14.4 13.0 15.5 14.1 14.4 15.5Dividends 2.0 4.1 4.7 5.0 5.4 6.4 6.7 Creditors 43.5 59.7 64.4 75.5 74.9 75.2 77.0

Short Term Debt 81.4 49.1 59.4 73.4 62.0 60.2 60.4Per Share Data (in €) CP of Long Term Debt 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Other 24.3 37.8 44.1 50.6 48.1 49.1 50.4EPS 0.13 0.35 0.32 0.38 0.35 0.36 0.38CEPS 0.29 0.49 0.66 0.73 0.71 0.72 0.75 Total Current Liabilities 149.3 146.5 167.9 199.6 185.0 184.5 187.8DPS 0.05 0.10 0.12 0.12 0.13 0.16 0.16BVPS 2.50 1.41 4.54 4.59 4.71 4.82 4.97 Long Term Debt 52.4 76.8 76.8 76.8 76.8 61.8 46.8No Of Shares (Yr-end, m) 40.52 40.52 40.52 40.52 40.52 40.52 40.52 Minorities 48.1 52.0 58.3 65.9 73.2 80.4 87.6Adj. No Of Shares (m) 40.52 40.52 40.52 40.52 40.52 40.52 40.52 Other LT Liabil. & Prov. 10.9 20.3 20.3 20.3 20.3 20.3 20.3

Valuation Data Total Liabilities 260.7 295.6 323.2 362.6 355.3 347.0 342.5P/E (x) 38.3 13.6 15.1 12.6 13.8 13.6 12.6P/CF (x) 16.7 9.8 7.3 6.6 6.8 6.7 6.4 Total Equity 101.4 57.0 183.8 186.1 190.8 195.3 201.3P/BV (x) 1.9 3.4 1.1 1.0 1.0 1.0 1.0Div. Yield (%) 1.0% 2.1% 2.4% 2.6% 2.8% 3.3% 3.4%EV / Sales (x) 1.0 1.0 0.8 0.7 0.7 0.7 0.7EV / EBITDA (x) 8.8 7.2 6.4 5.3 5.5 5.5 5.4

Cash Flow Statement (in € m)Growth RatesTurnover (32.3%) 7.1% 13.2% 17.8% (1.2%) 0.3% 2.4% EBITDA 30.2 36.9 41.1 49.6 48.3 47.8 48.9EBITDA (15.9%) 22.3% 11.4% 20.7% (2.8%) (0.9%) 2.2% Taxes Paid 10.8 9.9 8.7 12.6 14.1 13.4 13.3EBIT (19.3%) 32.9% (13.2%) 30.0% (4.7%) (2.1%) 2.4% Cash Tax rate (%) 61.4% 35.7% 27.4% 33.7% 40.5% 38.5% 36.6%EBT (40.7%) 58.1% 14.2% 17.4% (6.5%) 0.0% 4.5% Trade Wkg Capital needs (23.2) (32.6) 26.0 33.4 2.7 0.6 4.8EAT (64.4%) 181.3% (9.7%) 19.6% (8.7%) 1.9% 7.6% Capex and Participations 7.9 (1.2) 10.0 11.0 10.0 10.0 10.0EPS (64.4%) 181.3% (9.7%) 19.6% (8.7%) 1.9% 7.6% Other non-opg Items (7.4) 5.9 3.8 4.4 (2.2) 0.1 0.6

Ratios Free Cash Flow bef. Finc. 27.3 66.6 0.3 (2.9) 19.3 23.9 21.4Gross Margin 21.1% 21.1% 21.3% 21.7% 21.4% 21.3% 21.2%EBITDA Margin 11.6% 13.3% 13.1% 13.4% 13.2% 13.0% 13.0% Dividends Paid 2.4 2.0 4.8 4.7 5.0 5.4 6.4EBT Margin 6.8% 10.0% 10.1% 10.1% 9.5% 9.5% 9.7% Net Interest Payments 5.5 6.2 5.8 6.4 6.4 5.6 4.8Net Margin 2.0% 5.2% 4.1% 4.2% 3.9% 3.9% 4.1% Change in Debt (28.5) (8.0) 10.3 14.0 (11.5) (16.8) (14.9)Tax Rate 42.1% 32.1% 39.6% 37.9% 38.5% 38.2% 37.6% Capital Gains 0.8 9.4 0.0 0.0 3.5 3.9 4.6ROE (avg) 4.8% 18.1% 10.8% 8.4% 7.5% 7.5% 7.8% New Equity 0.0 (37.2) 0.0 0.0 0.0 0.0 0.0Net Debt / Equity 0.8 1.0 0.4 0.4 0.4 0.3 0.2Interest Coverage 4.3 5.1 4.7 5.6 5.3 5.9 7.1 Change in Mkt Securities (21.9) 13.9 (0.0) (0.0) 0.0 0.0 0.0

Summary Financial Data— Mytilineos Holdings consolidated (Under Greek GAAP)

Source: MARFIN ANALYSIS, Company

MARFIN ANALYSIS, 32 Aegialias str., 151 25, Maroussi, Greece, Tel: +30-210-

81.73.000, Fax +30-210-68.96.322, E-mail: [email protected]

This report is for informative purposes only. Under no circumstances is it to be used or

considered as an offer to sell, or a solicitation of any offer to buy, any security. While the

information contained herein has been obtained from sources believed to be reliable, we do not

represent that it is accurate or complete and it should not be relied upon as such. The firm or

one of its affiliates may from time to time buy and sell securities referred herein. This firm may

from time to time perform investment banking or other services for, or solicit investment banking

or other business from, any company mentioned in this report. Report © INVESTMENT BANK OF GREECE, 2004. All rights reserved.

Research

Vassilis Kararizos

Stamatis Diavatidis

Stella Dimaraki

Spyros Karamassis

Panos Panagiotou

Sophia Skourti

Sales Iraklis Kounadis

Constantinos Maratos

Elias Calfoglou

Thodoris Edipidis

Nick Katsanos

George Kounadis

Petros Mylonas

Zoi Tsoukali

mytilineos group €4 · 23-06-2004 · [email protected] opinion initiate as outperform target...

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