GRUPO NUTRESA

COVERAGE

Consumer Goods / Holdings Food & Beverage

(BVC:NUTRESA) HOLD / COP 28,590 per share
SURFING THE DEMOGRAPHIC WAVE
We are initiating Grupo Nutresa with a HOLD rating and a 2015YE target price of
COP 28,590 per share equivalent to a 2.1% upside and a 4.2% total return. We can
assure that Grupo Nutresa is a low risk company at the top line level and it has
enough room for achieving both revenue and cost synergies arising from the
Tresmontes-Lucchheti acquisition. However, its share price has already
incorporated the positive scenarios of both demographic and consumption
tendencies in the Pacific Alliance region and also the fact that Nutresas target
consumers are relatively predictable and stable, so we believe that the stock is
fully valued.
The company poses low top-line risks and its long run sales goal (called MEGA)
will not require taking aggressive bets. 87% of Grupo Nutresas consolidated sales
arise from investment-grade-rated countries and are generated in a market friendly
region: the Pacific Alliance bloc trade and the United States. Considering only the
Pacific Alliance, Grupo Nutresa will benefit from a 212 million population economy
that enjoys the wining combination of low inflation and strong growth, making it
one of the most stable markets in Latin America with an attractive opportunity for
processed food industry due to its low per capita consumption of ready-made food.

September 29, 2014

Financial information and multiples
Ticker (BVC)
Closing Price
Expected Price Return
Expected Total Return
Outstanding shares (MM)
Adj. Beta vs Colcap
Free Float ex. pension funds
Colcap Weight (Aug-Oct)
Market Cap (US$ MM)
52wk Avg Daily T Value (US$ MM)
52 wk range

NUTRESA
28,000
2.1%
4.2%
460
1.02
44%
6.8%
6,522
2.15
[23,400 - 28,800]

Source: Bloomberg and Serfinco S.A.

2013 2014 E 2015 E 2016 E
Adj. Food's ROaE

8.5%

5.0%

6.3%

6.5%

Adj. Food's ROaA

6.2%

3.5%

4.4%

4.4%

Adj. Food's ROIC

11.1%

7.9%

8.3%

8.0%

EV / EBITDA

10.2x

9.8x

8.2x

8.1x

EV/ FCFF

-12.2x

33.9x

17.9x

19.1x

P / Tangible BV

1.9x

2.4x

2.0x

1.8x

Yield

1.5%

1.5%

1.6%

1.7%

* All indicators are adjusted to exclude both Goodwill and the Investment-Portfolio's effects

Source: Serfinco S.A.

Moreover, the fact that Grupo Nutresa does not need an aggressive business model
for achieving its long run sales target supports our conclusion that the companys GRUPO NUTRESA vs. COLCAP
130.0
COLCAP
NUTRESA
business risk is not high. For us, there will be room for free cash flow to be 125.0
distributed to stockholders as we do not expect a strong need of either 120.0
115.0
110.0
reinvestments in its own assets or acquisitions.
105.0

Source: BloombergSerfinco

Rafael Espaa Amador

Consumer Services Analyst
re@serfinco.com.co
(571) 6514646 Ext. 4228
Jose F. Restrepo, CFA
Equity Strategist
jr@serfinco.com.co
(574) 3106510

Sep/14

Jun/14

Mar/14

Dec/13

Sep/13

Jun/13

Mar/13

Dec/12

Sep/12

Jun/12

An investor buying Grupo Nutresas shares will gain exposure to the Pacific
Alliance consumers and its economies via a low-risk investment vehicle, however
we urge for cautiousness as the stock is not trading at bargain prices.

Mar/12

In addition, we tend to believe that unexpected adjustments when IFRS be adopted

(2015) may concern the investment community if not handled carefully by the
management teams of Colombian based companies. So we prefer to be cautious in
our recommendation taking into account the current divergence in Grupo Nutresas
accounting accruals vs. cash flows, even after excluding effects arising from the
valuation of its investment portfolio.

Dec/11

So we prefer to be cautious in our recommendation as catalysts for share price

swings are also balanced towards the negative side. Short term risks such as (1)
foreign exchange devaluation risks coming from Venezuela, (2) more news about
taxes on high-calorie-value items in the Pacific Alliance countries (other than
Mexico), and (3) a persistent negative momentum in earnings-per-share and its
respective negative analyst revisions (ex Serfinco), refrain us for being bullish on
Grupo Nutresas stock.

Sep/11

However, we see Grupo Nutresas stock as fully valued. Not only our price target
found via a free cash flow to the firm valuation does not compel us to rate the stock
as a buy as it points to a run-of-the-mill 4.2% total return upside, but in a relative
basis Grupo Nutresa is trading at a rich 11.4x EV/ LTM EBITDA vs. the 10.4x at which
the typical peer is trading (after adjusting for the US$2.2 billion investment
portfolio). However, we understand that a trailing multiple may not incorporate the
upside that synergies arising from the TresMontes Lucchetti acquisition (2013) may
represent, so we can not say that the stock is expensive in anyway.

100.0
95.0
90.0
85.0
80.0

Investment Positives

Investment Negatives

The Pacific Alliance trade bloc and the USA represent 87% of

Commodities volatility may affect financial statements

Exposition to Venezuelas economy may continue hurting

financial statements via foreign exchange translation

Increasing obesity rates in Latin America may lead to

regulatory risks

High level of accruals in the balance sheet points to low

persistence in the financial statements

The Investment Portfolio makes Grupo Nutresa look more like

a conglomerate instead of a pure play food company

consolidated sales

Favorable demographics and Consumption Tendencies: More

Food Being Consumed Ready-Made in Latin America

There is no need of risky strategies for achieving long terms

sales target

TMLC offers a more favorable capital structure (more debt) that

lead to a Return On average Equity (ROaE) improvements

Stable Cash from Investment Activities (dividends received)

Table 2. Balance Sheet

Table 1. Income Statement

Sales
Cost of Goods
Gross profit
Administrative expenses
Sales expenses
Production expenses
Operating income
EBITDA
Non operating income, net
Taxes
Earnings before minority int
Minority Interest
Net Income

2012
5,306
-3,064
2,241
-270
-1,327
-123
521
671
-35
-138
348
-2
346

2013
5,898
-3,261
2,637
-348
-1,505
-135
650
833
-95
-174
381
0
380

2014E
6,600
-3,749
2,851
-427
-1,697
-131
595
854
-158
-140
298
0
297

2015E
7,154
-4,026
3,128
-444
-1,842
-139
703
968
-161
-176
366
-1
365

2016E
7,770
-4,409
3,360
-475
-2,005
-147
733
1,017
-163
-185
385
-1
384

Operating margin
EBITDA margin
Non-Operating Burden
Tax Burden
Net Margin

9.8%
12.6%
93.3%
71.5%
6.51%

11.0%
14.1%
85.4%
68.6%
6.45%

9.0%
12.9%
73.5%
68.1%
4.50%

9.8%
13.5%
77.0%
67.6%
5.11%

9.4%
13.1%
77.8%
67.6%
4.95%

COP billion
Cash
Receivables
Inventories
Permanent investments
PPE, net
Intagibles
Other Assets
Total Assets
Financial debt
Suppliers
Payables
Other liabilities
Total liabilities
Minority interest
Total Equity

2012E
225
658
556
330
1,136
1,025
5,022
8,952
690
171
259
406
1,526
16
7,409

2013E
302
830
725
358
1,456
2,038
4,871
10,580
1,997
299
340
515
3,150
19
7,411

2014E
277
814
736
399
1,533
2,056
5,881
11,696
2,008
285
353
516
3,162
16
8,518

2015E
281
863
791
417
1,519
2,059
6,447
12,377
2,088
306
368
549
3,311
17
9,049

2016E
283
916
866
436
1,513
2,062
7,015
13,092
2,165
335
391
586
3,477
18
9,596

Financial Leverage
Asset Turnover ex. Goodwill &
Portfolio
ROaE
Adj. ROaE ex Goodwill & Portfolio

1.21x

1.31x

1.40x

1.37x

1.36x

1.22x

1.20x

1.19x

1.23x

1.28x

4.97%
8.84%

5.12%
8.45%

3.72%
5.03%

4.15%
6.34%

4.12%
6.48%

Source: Grupo Nutresa and Serfinco Estimates

Source: Grupo Nutresa and Serfinco Estimates

Figure 3. Solvency and Liquidity

10x
7.7x 8x

2,000

6x

1,500
1,000

4x

1.9x

Source: Grupo Nutresa and Serfinco Estimates

2024 E

2023 E

2022 E

2021 E

2020 E

2019 E

2018 E

2017 E

2016 E

2012

2015 E

-2x
2014 E

0
2013

500

1.0x 2x
0x

0.6x

2024 E

Table 3. Valuation Ratios

Net Financial Debt (left axis)

Net financial Debt / EBITDA
Interest coverage ratio

8.1x

2011

COP billon

2,500

-800

Source: Grupo Nutresa and Serfinco Estimates

Source: Grupo Nutresa and Serfinco Estimates

9.9x

-300
2012

2024 E

2023 E

2022 E

2021 E

2020 E

2019 E

2018 E

2017 E

4%

2016 E

2015 E

2014 E

2013

5%

200

2023 E

6%

2022 E

9%

700

2021 E

8%

1,200

2020 E

10%

9%

1,700

2018 E

14%

13%
12%
10%

2017 E

10%

2,200

2016 E

13%

13%

(1) Operating taxes

(2) Capital Investments Including Intangibles & Acquisitions
(3) Wk Investments
(4) EBITDA
FCFF = (4)-(1)-(2)-(3)

2015 E

14%

COP billion

EBITDA Margin
EBIT margin
Food Business' ROaE ex Goodwill (right axis)

2012

16%
14%
12%
10%
8%
6%
4%

Figure 2. Free Cash Flow to the Firm Breakdown

2014 E

Figure 1. Profitability Indicators

2013

COP billion

EPS
Book Value per share
Tangible Book Value per share
DPS (paid)
Payout Ratio
Yield (last price)
# shares (million)
Last Price
Target Price
Adj. Food's ROaE (ex Goodwill)
Adj. Food's ROaA (ex Goodwill)
Adj. Food's ROIC (ex. Goodwill)
Last Traded P/ EPS
Target Price / EPS
Last Traded P/ BV
Target P/ BV
Last Traded P/Tangible BV
Target P/Tangible BV
Last Traded adj. EV/EBITDA
Target adj. EV/EBITDA

2012

2013

2014E

2015E

2016E

751
16,102
12,115
351
65.3%
1.4%
460
25,420

826
16,106
13,873
387
52.7%
1.5%
460
26,440

646
18,512
11,676
423
52.3%
1.5%
460
28,000

794
19,666
14,044
448
70.3%
1.6%
460

835
20,856
15,191
476
60.8%
1.7%
460

8.8%
6.8%
14.0%
33.9x

8.5%
6.2%
11.1%
32.0x

5.0%
3.5%
7.9%
43.4x

1.6x

1.6x

1.5x

2.1x

1.9x

2.4x

11.5x

10.2x

9.8x

28,590
6.3%
4.4%
8.3%
35.3x
36.0x
1.4x
1.5x
2.0x
2.0x
8.2x
8.5x

31,820
6.5%
4.4%
8.0%
33.5x
38.1x
1.3x
1.5x
1.8x
2.1x
8.1x
9.1x

Source: Serfinco Estimates

2

Table of Contents

1) Surfing the Demographic Wave.......(Page 4)

2) Investment Positives ........(Page 5)

The Pacific Alliance Trade Bloc and the USA Represent 87% of Consolidated Sales and the Consumption Level
of Its Consumers Is Sound and Stable........... (Page 5)
i)

Favorable Demographics and Consumption Tendencies in Emerging Markets: More Food Being Consumed
Ready-Made in Strong Growing Countries of Latin America.........(Page 6)
ii)

iii) Grupo Nutresa does not Risky Strategies for Achieving 2020s Sales Target ........ (Page 6)

There is Room for Achieving Revenue and Cost Synergies arising from the Tresmontes-Lucchetti
Acquisition........... (Page 7)
iv)

3) Invesment Negatives and Risks..........(Page 8)

i) Volatility in Commodities Markets may Affect Financial Statements....(Page 8)
ii) Exposition to Venezuelas Economy........ (Page 8)
iii) Increasing Obesity Rates in Latin America may Lead to Regulatory Risks..(Page

9)

iv) The Balance Sheet is Composed of a High Accrual Component..(Page

9)

Net Asset Balance Sheet Exposure to The Central American Currencies and The USD May Hurt Balance Sheet
if COP Strengthens ......(Page 10)
v)

Investment Portfolio Makes Grupo Nutresa Look Like a Conglomerate Instead of a Pure Play Food
Company(Page 10)
vi)

4) Valuation...(Page 11)
i) Free Cash Flow to the Firm Valuation.....(Page 11)
ii) Sensitivity Analysis of Long Term Variables...(Page

11)

iii) Sensitivity Analysis of Investment Portfolio....... (Page 12)

iv) Cost of Capital and Capital Structure........ (Page 12)
v) Comparable Companies Analysis ......... (Page 13)

4) Company Description....(Page 15)

5) Financial Statements........(Page 16)

SURFING THE DEMOGRAPHIC WAVE

We are initiating coverage of Grupo Nutresa with a HOLD rating and a 2015YE target price of COP 28,590 per
share equivalent to a 2.1% upside and a 4.2% total return. We can assure that Grupo Nutresa is a low risk
company at the top line level and it has enough room for achieving both revenue and cost synergies arising from
the Tresmontes-Lucchheti Acquisition. However, its share price has already incorporated the positive scenarios of
both demographic and consumption tendencies in the vibrant Pacific Alliance region and also the fact that
Nutresas target consumers are relatively predictable and stable. Still, potential taxes on high-calorie-value items
and foreign exchange devaluation risks coming from Venezuela may negatively affect operating income and the
balance sheet in the short run, refraining us from being bullish on its stock.
The Company Poses Low Top-Line Risks and its Long Run Sales Goal will not Require Taking Aggressive Bets
87% of Grupo Nutresas consolidated sales arise from investment-grade-rated countries and are generated in a
market friendly region: the Pacific Alliance bloc trade and the United States. Considering only the Pacific Alliance,
Grupo Nutresa will benefit from a 212 million population economy that enjoys the wining combination of low
inflation and strong growth, making it one of the most stable markets in Latin America with an attractive
opportunity for processed food companies due to its low per capita consumption of ready-made food.
Moreover, the fact that Grupo Nutresa does not need an aggressive business model for achieving its long term
sales target supports our conclusion that the companys business risk is not high. For us, there will be room for free
cash flow to be distributed to stockholders as we do not expect a strong need of either reinvestments in its own
assets or acquisitions (the latter is a low-risk way of entering into a business but involve transaction premiums).

There is Room for Achieving Revenue and Cost Synergies Arising from the Tresmontes-Lucchetti Acquisition
Even though Tresmontes Lucchettis (TMLC) distribution channel is more balanced towards the wholesaler in a
consolidated basis, in Mexico TMLC it is actually stronger in the traditional channel than Grupo Nutresa. The latter
is a little dependent on the wholesaler channel in that country. So, the potential benefits for Grupo Nutresa could
be reflected in sales increases and stable operating margins while entering to a unfamiliar market (i.e. selling Grupo
Nutresas products in Mexico in mom-and-pop stores via the TMLCs distribution channel and vice versa). Also,
there can be knowledge exchange in common businesses such as pasta, coffee and milk modifiers and due to the
TMLCs powered soft drink expertise
However, We See Grupo Nutresas Stock as Fully Valued

Not only our price target found via a free cash flow to the firm valuation does not compel us to rate the stock as a
buy as it points to a run-of-the-mill 4.2% total return upside, but in a relative valuation basis Grupo Nutresa is
trading at a rich 11.4x EV/ LTM EBITDA vs. the 10.4x at which the typical peer is trading (after adjusting for the
investment portfolio value). However, we understand that a trailing relative valuation may not incorporate the
upside potential that synergies arising from the TresMontes Lucchetti acquisition (2013) may represent, so we can
not say that the stock is expensive in anyway.
Short Term Catalysts for Share Price Swings are Balanced Towards the Negative Side
Short term risks such as (1) more news about taxes on high-calorie-value items in the Pacific Alliance countries
(other than Mexico), (2) foreign exchange devaluation risks coming from Venezuela and (3) a persistent negative
momentum in earnings-per-share and its respective negative analyst revisions (ex Serfinco), refrain us for being
bullish on Grupo Nutresas stock (at least in the short term).
BACK TO TABLE OF CONTENTS

In addition, we tend to believe that unexpected adjustments when IFRS be adopted (2015) may concern the
investment community if not handled carefully by the management teams of Colombian based companies.
Specifically, for Grupo Nutresa and other holdings, aggregate cash flow from operations and cash from investment
activities are much lower than net income. So we prefer to be cautious in our recommendation taking into account
the current divergence in Grupo Nutresas accounting accruals vs. cash flows, even excluding effects arising from
the portfolio investment valuation. While the good news is that the increase in aggregate accruals tapered in 2013,
the bad news is that current cash flow is considerable lower than net income.

INVESTMENT POSITIVES
The Pacific Alliance Trade Bloc and the USA Represent 87% of Consolidated Sales and the Consumption Level
of Its Consumers Is Sound and Stable
We see Grupo Nutresa as an investment vehicle for gaining exposure to sound and stable Latin Americans
consumers. We support our view in the fact that 87% of Grupo Nutresas consolidated sales are made in
investment grade rated countries in a market friendly region.
The Pacific Alliance (PA) is a regional integration initiative whose member states are Chile, Colombia, Mexico and
Peru. According to figures of the WTO and the IMF (as of 2012), PA constitutes the eight largest economy,
represents 36% of Latin Americas GDP, concentrates 50% of the total trade and attracts 41% of the FDI flows to the
region. The four countries (Colombia, Chile, Mexico and Peru) have a 212 million population with an average GDP
per capita of 10,000 dollars. In addition, PA claims to be open to free trade and its member states maintain a
network of trading arrangements among themselves and with other developed economics of the world.
For us, Grupo Nutresas sales growth does not depend heavily on the uniqueness and competitiveness of its
business model but on the region stability and the level of per capita consumption. We also believe that PA is a
perfect platform for gaining exposure to consumer demand as the regional integration vows for free market and its
objectives include:
(1)

Building and area of deep economic integration and to move gradually toward the free circulation of goods, services, capital and persons,

(2)

Promote the larger growth, development and competitiveness of the parties economies aiming at achieving greater welfare, overcoming socioeconomic inequality and achieving greater social inclusion of their inhabitants and

(3)

Become a platform for political articulation, and economic and trade integration, and project these strengths to the rest of the world, with a
special emphasis on the Asia-Pacific region.

Table 4. Diversified Business Among Investment Grade Rated Countries in Latin America and The United States

Colombia
Chile
Mexico
Peru
SubTotal
United States
Total

Participation in 2Q14
Consolidated Sales
65.7%
8.3%
3.7%
1.6%
79.3%
7.3%
86.6%

Credit Default Swap

140
110
134
151
Weighted Average =
0
Weighted Average =

137.17
125.61

Sovereign Credit Rating

Baa2 / BBB
Aa3 / AAAaa / AAA3 / BBB+
Worst = Colombia
Aaa / AA+
Worst = Colombia

Source: Grupo NutresaSerfinco S.A.

Figure 4. Sales by RegionFocus on Upper Middle Income Countries

BACK TO TABLE OF CONTENTS

Source: Grupo Nutresa, as of 2Q14

Favorable Demographics and Consumption Tendencies in Emerging Markets: More Food Being Consumed
Ready-Made in Strong-Growing Countries of Latin America
Urbanization, growing incomes and certain globalization of eating habits all contribute to more food being
consumed ready-made and our argument is simple: Grupo Nutresa will benefit not only from faster growth rates in
per capita consumption of both sugar and processed food in developing markets than in developed ones, but also
because of stronger expectations of population growth in Latin America than in developed markets.
To have an estimation of the growth rate of per capita ready-made food consumption, we searched for the
consumption of vegetable oils (which act as preservatives for processed food). According to Food and Agriculture
Organization (FAO), the annual per capita food consumption of vegetable oils, in many developing economies is
expected to have an annual growth of 1.3% over the next decade (almost a 14% in real terms for the 10y period).
On the other hand, according to information obtained from the World Data Bank, the compound annual growth
rate of urban population in the countries that compose the Pacific Alliance is expected to be 1.2% until 2030.
So, real growth arising from both demographic factors and consumption tendencies in emerging markets will be
close to 2.55% per annum. In nominal terms we estimate that such factor can easily explain a 5.49% growth rate
in sales of Grupo Nutresa.
Grupo Nutresa Does Not Need an Aggressive Business Strategy for Achieving its Long Run Sales Target
Bearing in mind that Grupo Nutresas MEGA or BHAG (Big Hairy Audacious Goal) for 2020 consists of a twofold
increase of 2013s consolidated sales. We estimate that more than half of Grupo Nutresas sales goal will be
reached if both consumption tendencies and population growth in the Pacific Alliance bloc perform as expected by
organizations such as World Bank and the FAO.
In fact, we estimate that a 61% of the total sales target (COP 7.2 trillion or US$ 3.5 billion) can be achieved if the
company maintains its market share in the states members of the Pacific Alliance.
Other sources of sales growth depend on the companys particular initiatives and involve productivity
improvements, reinvestment of capital, sales growth in other-than-Pacific-Alliance member countries, and
inorganic acquisitions (see table 5) but it is a noteworthy fact that Grupo Nutresas sales risk is more balanced
towards macroeconomic indicators of the Pacific Alliance member states rather than towards companys specific
initiatives. Since Grupo Nutresas sales target depends more on stable macroeconomic factors instead on an
aggressive business model, we consider that companys business risk is mitigated as a portion of free cash flow
can be distributed to stockholders instead of needed to be directed to reinvestments or acquisitions (the latter is
a low-risk way of growing but it is usually involves the payment of high premiums).
Figure 5. Up to 60% of Grupo-Nutresa 2020s Sales Can Be Explained only with Demographics of the Pacific Trade Bloc
14,000

10,000

Sales Explained by
Revenue Productivity
(2) Capital Reinvestment
(3) Sales in other-than-Pacific-Alliance countries
(4) Inorganic acquisitions

11,797 (1)

Pacific Aliance Trade Block (Serfinco's Target)

Pacific Aliance Trade Block Demograhics (only)

Company's SalesTarget for 2020

8,000

Other Innitiatives= 40%

6,000
Sales Explained by
Only Demographics of the Pacific Alliance Trade Bloc

4,000

2020E

2019E

2018E

2017E

2016E

2015E

2014E

Source: Serfinco S.A.

Consumption Tendencies in
the Pacific Trade Bloc = 60%
BACK TO TABLE OF CONTENTS

2,000
2013

COP Billions

12,000

Total Sales (Serfinco's Target)

Table 5. Nominal Growth Rate of the Pacific Trade Bloc Sales = 5.5%

Peru
Colombia
Mexico
Chile
Total

Urban
Urban
Population
Population
2014E (milliion) 2030E (milliion)
24.1
30.1
37.2
45.8
97.7
118.8
16.0
18.2
175.0
212.8

Urban
Population
CAGR
1.40%
1.30%
1.23%
0.82%
1.23%

Growth of Per Capita

Processed Food
Consumption*
1.30%
1.30%
1.30%
1.30%
1.30%

Real
Growth
Rate

2.13%

Central Bank
Inflation
Target
2.00%
3.00%
3.00%
3.00%

2.55%

2.86%

2.72%
2.62%
2.54%

Nominal
Nominal
Growth Rate in Growth Rate
Local Currency
in COP
4.78%
4.82%
5.70%
5.70%
5.62%
5.62%
5.19%
5.19%
5.48%
5.49%

* We use growth of per capita food consumption of vegetable oils in developing countries expected by FAO as a proxy
Source: OECD-FAO Agricultural Outlook, World Bank DataBank, BanRep, BanXico, BCRP and BCSerfinco S.A.

Table 6. Nominal Growth Rate of Grupo Nutresa Implicit in its 2020s Target Sales = 10.2%

2020's target sales (million)

2014 sales (Expected) (million)
Implicit growth rate targeted by
the company

COP 11.8
COP 6.6

10.2%

We believe that other-than-demographics sales growth can be achieved through:

(1) Growth in Revenue Productivity
(2) Growth arising from Capital Reinvestment (i.e. CapEx/OpEx using own cash)
(3) Sales growth in USA, Ecuador, Central America or other Markets
(4) Inorganic acquisitions
Source: Grupo Nutresa, Bloomberg, Moodys and S&P

There is Room for Achieving Revenue and Cost Synergies arising from the Tresmontes-Lucchetti Acquisition
Although Grupo Nutresas management does not give a quantified guidance of acquirable synergies (as some of
them are claimed to be unquantifiable), the company intends to exploit the maximum of (1) revenue synergies
created through the cross-selling of products, expanded market share and, in a less intensive way, (2) cost synergies
achieved through economies of scale in research and development, procurement, manufacturing, sales and
marketing, distribution and administration.

Specifically, we see an opportunity for Grupo Nutresa of exploiting synergies that may emerge from:

Tresmontes Lucchetti distribution channel in Mexico such as the introduction of new products from TMLC
and Grupo Nutresa via the traditional channel (small stores) which TMLC already understand pretty well in
Mexico and would complement the distribution that Nutresa has in the country, which is a little dependent on
the wholesaler channel.

Knowledge exchange and product development of common businesses such as pasta, coffee and milk
modifiers.

Knowledge transfer of the TMLC powered soft drink expertise to Grupo Nutresa.
BACK TO TABLE OF CONTENTS

INVESTMENT NEGATIVES AND RISKS

Volatility in Commodities Markets may Affect Financial Statements
Grupo Nutresas cost of goods sold (and inventory levels) are dependent on commodities prices that are not fully
hedgeable. While some of them are traded in major commodity markets (such as Coffee and Cacao), others are
traded in local markets (pork or beef used in specific companys products) that sometimes do not offer the
possibility of being hedged with futures or derivatives but with inventory accumulation/reduction.
This particularity makes it difficult to evaluate the current hedging strategy. It may be probable that financial
statements change in difficult-to-predict ways even though some price changes be offset in reality. For example,
changes in prices of some commodities could affect cost of goods sold (income statement), inventory value
(assets), other comprehensive income (equity) and cash from operations (cash flow statement) generating the
perception of improvement/deterioration in operating margin even though net cash flow of a particular
commodity does not change at all.
As of 2Q14, Grupo Nutresas Commodities Index (a proxy of Grupo Nutresas costs of goods sold) has increased
only 9.47% compared to the average level of 2013. But it is important to note that recent stability should not be
used as a predictor for future as it has shown swings of more than 30% per year as it can be seen in the figure 6.

Figure 6. COGS Breakdown and Grupo Nutresas Commodity Index History (Dec 2012 = 100)

Source: Grupo Nutresa as of 2Q14

Exposition to Venezuelas Economy

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Sales arising from the operations of Industrias Alimenticias Hermo de Venezuela (cold cuts), Cordialsa Noel de
Venezuela S.A. (a marketing and distribution company) are not only a risk for financial statements but a business
risk. Specifically, we consider that operating in a country with a 63.4% Y/Y inflation rate (as of August, 2014) is a
risk for (1) financial statements via foreign exchange translation -as we do not buy the idea that current
exchange rates are sustainable at all- and for (2) stability of operating margins as temporal mismatches of prices
of its products vs. increases in the price of goods sold. In other words, we consider a high business risk the fact
that inflation adjustments in production expenses, sales expenses, administrative expenses or COGS may or
may not be in line with the prices at which Grupo Nutresas products are profitable.

However, the companys management has argued against to a divesture from Venezuela using basically 5
arguments:

Some part of the population has a high purchasing power as a result of oil & gas rents (tied to USD)

The food industry is naturally hedged against inflation and its products are somewhat inelastic to prices

Volumes of products are not affected by price swings

There is no short-term intention of distributing cash from Venezuela to the parent company in Colombia

In the last couple of quarters, changes in prices affected revenues in the same fashion than costs
As those premises may be true, the indisputable fact is that 2Q14s consolidated revenues, EBITDA and net income
fell 9%, 5%, and 2.5% respectively after consolidating operations at a 49.97 VEF/USD rate (denominated SICAD II)
instead of what would have happened if the previous 6.3 VEF/USD rate (denominated Cencoex) was used. Still, we
expect for further negative adjustments to financial statements coming in 2015 as some press releases have
already pointed that Bolivars black market is trading at 90 VEF/USD rate in the Colombian/Venezuelan border.
Increasing Obesity Rates in Latin America may Lead to Regulatory Risks
Regulatory reforms have the potential of affecting Grupo Nutresas normal operations, inventory management
systems and other business operations (such as product mix structures and marketing strategies) particularly in an
environment in which bad feeding habits are affecting finances of countries in Latin America via increases in
healthcare costs after obesity rates, ischemic heart diseases and diabetes mellitus cases skyrocketed.
For example, a new tax in Mexico on the production of high-calorie-value items (effective in January, 2014), made
the company to sell its total inventory in order to avoid the tax through the 4Q13 and also forced the company to
reformulate its recipes and its marketing strategy. As a result, revenues for the 1Q14 (January and February) where
soft while the company adjusted for the new reality.
Regulatory is a risk that is practically unavoidable and it is also a reason why not all companies can be competitive
in Latin America. According to Grupo Nutresas management, the company has been preparing for more than five
years to adapt to new regulations (and even propose them in advance). It is worth noting that these kinds of risks
can also be categorized as a barrier of entry to the industry and in turn be used as a competitive advantage.
Balance Sheet is Composed of a High Accrual Component
The high level of aggregate accruals reported in the balance sheet (goodwill, brands, other intangibles and the
capitalization of PPE and inventories) may lead to a lower level of initial net income when IFRS be adopted as
aggregate cash flow from operations and cash from investment activities are much lower than net income. While
the good news is that the increase in aggregate accruals tapered in 2013 (Figure 7), the bad news is that current
cash flow is considerable lower than net income (Figure 8). Current cash flow arising from both investment
activities and operations should be a more reliable indicator than current level of net income as it is less affected by
accruals estimations. So, the accounting may change but the cash flow will remain stable.
Figure 8. Cash Flow Based Aggregate Accruals

2013

2012

2011

2010

2009

2008

Source: Grupo NutresaSerfinco S.A.

2013

10,000

2012

20,000

2011

30,000

2010

40,000

COP Billion

50,000

COP BILLION

12,000
10,000
8,000
6,000
4,000
2,000
0
-2,000

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COP Billion

Balance Sheet Aggregate Accruals ex. Inv. Portfolio

60,000

Net Income
Cash Flow From Operating Activities + Cash Flow From Investment Activities
8,000
6,000
4,000
2,000
(2,000)
(4,000)
(6,000)
(8,000)
2009

Net Operating Assets ex. Investment Portfolio (left)

2008

Figure 7. Balance Sheet Based Aggregate Accruals

 Net Asset Balance Sheet Exposure to The Central American Currencies and the USD May Hurt Balance Sheet if
COP Strengthens
The internationalization of Grupo Nutresa had led to more assets and liabilities to be dependent on the level of
foreign exchange rates against the Colombian Peso. Changes in the valuation of those assets may be recognized in
the consolidated equity and had represented equity loses of nearly 2.3% of total equity (COP 173.5 billion or US$
90 million as of December, 2013) as the Colombian Peso has strengthened. Particularly, a strengthening/weakening
of the Colombian Peso (COP) against the Venezuelan Bolivar Fuerte (VEF) or the Costa Rican Colon (CRC) can
explain up to 55% of the accumulated effect of the conversion of financial statements via equity (COP 86.75 billion
or US$45 million) and, at some point in the future, it will affect income statement.
It is a fact that differences arising from foreign exchange translations will not affect the income statement in the
short term, but the balance sheet should be observed with detail due to the increasing exposition to USD
denominated debt acquired via TMLC and due to the swings in the value of assets tied to the VEF and the CRC.
The Investment Portfolio Makes Grupo Nutresa Look Like a Conglomerate Instead of a Pure Play Food Company
Even though operating activities can be easily separated by units, Grupo Nutresa has investments in other listed
companies in Colombia that represent more than COP 4.4 trillion (US$2.2 billion). While we do not believe that this
portfolio represent a risk for Grupo Nutresas management, we do believe that investors will be significantly
exposed to risks different than consumption levels when investing in Grupo Nutresa (such as infrastructure and the
financial services industry). Our estimations indicate that investments in Grupo de Inversiones Suramericana S.A.
(BVC: GRUPOSURA) and Grupo Argos S.A. (BVC: GRUPOARG) constitute 37% of total assets and 57% of total equity.
Table 7. Participation of the Investment Portfolio in Total Assets and Equity
Investment Portfolio
Grupo de Inversiones Suramericana S.A.
Grupo Argos S.A.
Total Assets
Total Equity

COP trillion
2.00
1.55
10.58
7.41

2013
% Assets
18.9%
14.7%
100.0%

% Equity
27.0%
20.9%

COP trillion
2.47
1.92
11.86
9.13

2014 E
% Assets
20.8%
16.2%
100.0%

% Equity
33.4%
25.9%

45% - 60% of total equity is explained by the Investment Portfolio

Source: Grupo Nutresa, Serfinco

WRAP-UP:
Grupo Nutresa is a company with direct exposition to consumers in stable economies of Latin America.

Most of the companys sales target can be achieved if Grupo Nutresa maintains its market share, as long as
demographics in the Pacific Alliance (PA) do their job. PA is composed of investment grade rated countries.

Revenue synergies between Grupo Nutresa and Tresmontes Lucchetti will come from the distribution channel,
knowledge exchange of both product development of common businesses and, from the powered soft drinks
expertise that TMLC already has.

In the short run, the income statement can be affected by (1) volatility in commodities markets, (2) the
worsening of Venezuelas economy and (3) negative adjustments to net income when adopting IFRS.

The balance sheet can be affected by a COP strengthening against Central American currencies in the short run
(less than one year) and potentially the income statement can be affected by the same factors in the long run.

Grupo Nutresas assets are diversified among the following industries: financial services, infrastructure and food
& beverage. As permanent investments in Grupo Argos and Grupo Sura represent more than 45% of Grupo
Nutresas equity, the company is not a pure play food & beverages company.

BACK TO TABLE OF CONTENTS

10

VALUATION
Our 2015YE target price of COP 28,590 per share is supported by a 10-year discounted free cash flow to the firm
model (FCFF) that rests in the following assumptions:
(1) Volumes sold by segment have 3 growth phases:
The short term one in which volumes sold behave like its own historic CAGR,
A converge phase
The long term one in which volumes sold behave in tandem with real GDP growth
(2) Volumes sold via TMLC grow faster than other segments volumes as a result of revenue synergies obtained.
In the long term phase, however, TMLC real growth will be lower than other segments as geographic upside is higher in
Colombia than in Mexico and Chile (most of TMLCs operations are based in Chile and Mexico)

(3) Prices at which products are sold in Colombia and in other markets tend to converge in order to adjust to the
power-purchase-parity theory, however they will not fully converge as there are differences arising from particular
recipes, consumer tastes and branding power

(4) EBITDA margin will remain at the highest end of the managements target (12%-14%)
(5) Gross Reinvestment rate for CapEx and Intangibles converges to a 50% of NOPAT (close to 3% of sales)
(6) Terminal value arises from an H-model that goes gradually from a 6.3% growth of EBIT in 2024 to a 4.0% through 5
years. The result is similar to a 8.4x EV/EBITDA multiple (see tables 9 and 10)

(7) Debt/EBITDA remains in the 1x-2x interval

(8) A 9.0% CAGR expected increase in dividends arising from a Lintners model, calibrated with a 5 year
adjustment factor and a target payout that ranges from 60% to 80%.
Table 8. FCFF Valuation
Per Share Basis Weight
9,090
27.4%
11,880
35.8%
20,970
63.2%
1,540
4.6%
10,660
32.1%
12,200
36.8%
33,170
100.0%
4,540
4,540
40
28,590

(1) Operating taxes

(2) Capital Investments Including Intangibles & Acquisitions
(3) Wk Investments
(4) EBITDA
FCFF = (4)-(1)-(2)-(3)

2,200
1,700

1,200
700
200

-300

2024 E

2023 E

2022 E

2021 E

2020 E

2018 E

2017 E

2016 E

2015 E

2014 E

28,590
28,000
2.1%
4.2%

2013

-800

2012

2015E
4,180,874
5,466,772
9,647,646
707,032
4,905,618
5,612,651
15,260,297
2,088,125
2,088,125
19,209
13,152,963
460,123,458
28,590
28,000
2.1%
4.2%

COP billion

COP million
PV FCFF
PV Terminal Value
Operating Value
Cash & marketable sec.
Long Term Investments
Total non operating assets
Enterprise Value
Long term debt & notes
Total Liabilities
Minority Interest
Equity
Number of Shares
Stock Price Valuation. COP
Current Price (26/09/2014)
Upside potential
Total Return

Figure 9. FCFF Breakdown

Source: Serfinco

Table 9. Sustainable Growth Rate of EBIT

G = [ 1+(A x B) ] x (1+C)
(A) Long term total ROIC
(B) Net Reinvestment Rate
(C) Long term Inflation

Table 10. Implicit Exit EBITDA Multiple

4.0%
15.1%
6.7%
3.0%

EXIT VALUE (EV / EBITDA)

E [ EBITDA 2024 ] (COP million)
TERMINAL VALUE million (Cop million)
DEBT 2024 + Int Min - Cash

Source: Serfinco

8.4X
1,926,034
14,193,051
1,967,638

Source: Serfinco

+149 bps
+99 bps
+50 bps
0 bps
-50 bps
-99 bps
-169 bps

12.6%
12.1%
11.6%
11.1%
10.7%
10.2%
9.5%

-75 bps
3.3%
24,330
25,290
26,360
27,570
28,950
30,530
33,190

-50 bps
3.54%
24,530
25,520
26,630
27,890
29,330
30,980
33,800

Sustainable Growth of EBIT ( Nominal G)

-25 bps
0 bps
25 bps
3.79%
4.0%
4.3%
24,730
24,950
25,180
25,750
26,010
26,280
26,910
27,210
27,530
28,220
28,590
28,970
29,730
30,170
30,640
31,480
32,010
32,590
34,460
35,180
35,980

* Average WACC over the forecast horizon

Source: Serfinco

50 bps
4.5%
25,420
26,570
27,880
29,390
31,150
33,220
36,850

75 bps
4.8%
25,680
26,870
28,250
29,840
31,700
33,910
37,810

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NOMINAL WACC*

Table 11. Sensitivity to WACC and Growth Rate

11

Investment Portfolio Sensitivity Analysis

A sensitivity analysis points to:
A 3.1% average change (or COP 890 per share) in Grupo Nutresas target price if both stock prices of Grupo Argos and

Grupo Sura change by 10%.

A 1.7% average change (or COP 490 per share) in Grupo Nutresas target price if only Grupo Sura change by 10%.
A 1.4% average change (or COP 390 per share) in Grupo Nutresas target price if only Grupo Argos change by 10%.

Table 12. Sensitivity to Grupo Argos and Grupo Suras Target Price

Grupo Sura's
TP 2015

Inversiones Argos' TP 2015

-15.0%

-10.0%

-5.0%

0.00%

5.0%

10.0%

15.0%

15.0%

53,360

28,750

28,940

29,140

29,330

29,530

29,730

29,930

10.0%

51,040

28,500

28,690

28,890

29,080

29,280

29,480

29,680

5.0%

48,720

28,250

28,440

28,000

28,200

28,980

29,170

-5.0%

44,080

27,760

27,950

29,030
28,780
28,530

29,430

46,400

28,830
28,590
28,340

29,230

0.00%

28,640
28,390
28,140

28,730

28,920

-10.0%

41,760

27,520

27,710

27,900

28,090

28,290

28,480

28,680

-15.0%

39,440

27,270

27,460

27,650

27,850

28,040

28,230

28,430

* Assumption: Grupo Sura's and Inversiones Argo's TP for 2015 = Bloomberg concensus for 2014 x (1+10%)

Source: Serfinco

Cost of Capital
Discount rates used for the free cash flow to the firm model come from a rolling WACC structure that incorporates
a weighted average country risk premium adjusted by the companys geographic sales breakdown.
As a matter of fact, the companys current Adjusted Return On Invested Capital (Adj. ROIC*) is lower than our
WACC estimates, only after 2019 those numbers revert thanks to continuous improvements in OpEx, particularly
from production costs and administrative expenses.
Table 13. WACC Assumptions vs. ROIC Outcome
2012
91.5%
8.5%
9.3%
28.5%
5.1%
1.02
0.96
4.6%
2.7%
1.4%
8.8%

2013
79%
21%
27%
31%
18%
1.0x
0.9x
4.6%
2.7%
1.4%
8.8%

2014 E
81%
19%
24%
32%
15%
1.1x
0.9x
4.6%
2.7%
1.4%
9.0%

2015 E
81%
19%
23%
32%
13%
1.0x
0.9x
4.6%
2.7%
1.4%
8.9%

2016 E
82%
18%
23%
32%
12%
1.0x
0.9x
4.6%
2.7%
1.4%
8.9%

2017 E
82%
18%
22%
32%
11%
1.0x
0.9x
4.6%
2.7%
1.4%
8.9%

2018 E
83%
17%
21%
33%
11%
1.0x
0.9x
4.6%
2.7%
1.4%
8.9%

2019 E
83%
17%
20%
33%
11%
1.0x
0.9x
4.6%
2.7%
1.4%
8.9%

2020 E
84%
16%
19%
33%
11%
1.0x
0.9x
4.6%
2.7%
1.4%
8.8%

2024 E
85%
15%
18%
33%
12%
1.0x
0.9x
4.6%
2.7%
1.4%
8.8%

3.3%

3.3%

3.3%

3.3%

3.3%

3.3%

3.3%

3.3%

3.3%

3.3%

12.4%
8.7%
11.8%
14.0%

12.4%
2.8%
10.2%
11.1%

12.5%
6.6%
11.0%
7.9%

12.5%
6.4%
11.0%
8.3%

12.5%
7.5%
11.1%
8.0%

12.5%
8.1%
11.2%
8.9%

12.5%
7.8%
11.2%
9.7%

12.4%
7.5%
11.2%
10.5%

12.4%
7.2%
11.2%
11.4%

12.4%
7.2%
11.2%
15.1%

Source: Serfinco

* We calculate adj. ROIC using after-tax NOPAT excluding goodwills amortization and the effects of the investment portfolio.

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Variable
E/E+D
D/E+D
D/E
Total Tax rate
Net Debt /Capital
Levered Beta
Unlevered Beta
Risk Premium
Risk Free Rate
Country Risk
ke (USD)
Devaluation LT
Ke (COP)
Marginal Kd (COP)
WACC (COP)
Adj. ROIC (COP)

12

Comparable Companies Analysis

In a relative basis Grupo Nutresa is trading at a rich 11.34x EV/ LTM EBITDA vs. the 10.41x at which the typical
peer is trading. On a per share basis, it is equivalent to a 6.2% downside versus current trading prices. However,
we understand that a trailing multiple may not incorporate the upside that synergies arising from the TresMontes
Lucchetti acquisition (2013) may represent, so we can not conclude that the stock is expensive in anyway.
The following criteria were used for screening Grupo Nutresas peers:

Primary Industry Classification: Soft Drinks or Packaged Foods and Meats

Last Twelve Months EBITDA: Between US$200 million and US$1.5 billion

Geographic Region: Latin America and the Caribbean

Table 14. Comparable Companies
Company

Industry Clasification (ICB)

Grupo Nutresa
Grupo Nutresa (food)
Bimbo BIMBOA
Marfrig Global Foods S.A.
Gruma GRUMAB
Grupo Lala S.A.B. de C.V.
Industrias Bachoco S.A.B. de C.V.
Alicorp ALICORC1
M. Dias Branco MDIA3
Grupo Herdez S.A.B. de C.V.
Acra Continental S.A.B. de C.V.
Embotelladora Andina S.A.
Organizacin Cultiba, S.A.B. de C.V.
Harmonic mean ex Grupo Nutresa
Selected Industry Median
Upside vs Harmonic Mean

Packaged Foods and Meats

Packaged Foods and Meats
Packaged Foods and Meats
Packaged Foods and Meats
Packaged Foods and Meats
Packaged Foods and Meats
Packaged Foods and Meats
Packaged Foods and Meats
Packaged Foods and Meats
Packaged Foods and Meats
Soft Drinks
Soft Drinks
Soft Drinks

Revenue
US$
(million)
3282.4
3282.4
13,799
8,993
4,184
3,414
3,040
2,177
2,035
1,051
4,664
2,991
2,723
2,848
3,040

EV/EBITDA
(trailing)
16.53x
11.34x
12.14x
8.40x
10.15x
12.85x
6.08x
12.00x
16.10x
12.07x
12.48x
8.78x
10.83x
10.41x
12.00x
-8.2%

Source: CalpitalIQ, Serfinco

Table 15. Market Based Valuation

COP million
(1) Grupo Nutresa's LTM EBITDA
(2) Comparables EV/EBITDA multiple
Enterprise Value (food business) = (1)x(2)
- Long term debt and notes
+ Cash & Equivalents
+ Equity and LT Investments
- Minority Interest
Equity Value
# of shares
Price Per Share (implicit)
Current Price
Price Per Share (target 2015)*

2014E
874,688
10.41x
9,102,968
1,780,313
224,898
4,538,046
19.512
12,085,580
460
26,270
28,000
29,900

Per Share
33.3
10.41x
19,790
3,870
490
9,870
10
26,270
460
26,270
28,000
29,900

Source: Serfinco

*Some Comments on the Market Based Valuation:

Screened companies in the soft drinks industry included companies with operations in business such as
soft drinks, juices, waters and others. We excluded only-bottlings

The COP 29,900 price per share was obtained after adjusting for 2015s cost of capital (increases it) and
expected dividends (decreases it).

We do not include a conglomerate discount, this discount would decrease target price per share by
about 8% (COP 2,400 per share)

BACK TO TABLE OF CONTENTS

13

Recommendation

Figre 10. Grupo Nutresa Recommendation

Grupo Nutresa

Date
29-Sep-14

31000
29,710

29,960

29000

Recommendation
HOLD

T.P. NUTRESA
28,590

30,210

28,590

27000
26,620

26,840

27,060

25000
23000
21000

Mar/16

Nov/15

Jul/15

Mar/15

Jul/14

Nov/14

Source: Serfinco S.A.

Mar/14

Nov/13

Jul/13

Mar/13

Nov/12

Jul/12

Mar/12

Nov/11

Jul/11

Mar/11

19000

Dotted lines show a probable 1-standard deviation confidence interval if returns behave as a t-distribution assuming a log-lin model

BACK TO TABLE OF CONTENTS

14

COMPANY DESCRIPTION
Grupo Nutresa is the leader in processed foods in Colombia and one of the most relevant players in Latin America, with
consolidates sales of USD 3.4 billion in 7 business units: cold cuts, biscuits, chocolates coffee, ice cream, pastas and the new
soft drinks business consolidated in Tres Montes Lucchetti (TMLUC).
Figure 11. Proforma 2013s Sales Breakdown by Segment (USD million)

* Consolidating 12 months of TMLUCs sales

Source: Grupo Nutresa

Grupo Nutresa has a strategic statement known as a Big Hairy Audacious Goal (BHAG or MEGA in spanish) that aims to double
their 2013 sales by 2020 with sustained profitability between 12% and 14% of EBITDA margin. To achieve this, Grupo Nutresa
claims to offer to their customers foods and experiences of recognized and beloved brands; that nourish, generate wellness
and pleasure, that are distinguished by the best price/value relation
Most of its sales are done in Colombia and in the Pacific Alliance region (see page 5). Its products are sold via 17 brands using
more than 911,000 points of sales of its extensive distribution network, which is balanced towards traditional mom-and-pop
stores, only after an acquisition as big as TMLUC (US$758 million), the wholesaler channel increased its participation by 5%.
Figure 12. 2013s Revenue Mix by Channel

Source: Grupo NutresaSerfinco S.A.

Table 16. Shareholders Structure

35.1%
8.3%

Proteccion (A Grupo Sura's Subsidiary)

(Only the Moderate Fund)

4.4%

Other Mandatory Pension Funds

Others

8.6%
43.6%

Source: SuperIntendencia Financiera

Grupo Nutresa shareholders structure is composed by a cross-holding with

Grupo Sura, Grupo Argos and its subsidiaries. It operates similar to a Japanese
Keiretsu, in which intercompany transactions are business as usual and
some of those companies board members are seen also as board members of
other companies. However, history has shown us that Grupo Nutresa has a
sound corporate governance and, in fact, it is the only Latin American food
company member of the Dow Jones Sustainability Index.

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Shareholders Structure
Grupo Sura
Grupo Argos

15

Financial Statements
Table 16. Consolidated Income Statement
Income Statement (COP million)
Operating Revenue
Domestic Revenue
International Revenue
COGS
Gross Profit
Operating expenses
Administrative Expenses
Sales Expenses
Production
EBIT
Total Dep & Amortization
EBITDA
Non operating income and
Dividends and financial
Financial expenses
Others, net

2012
5,305,782
3,794,761
1,511,021
(3,064,460)
2,241,322
(1,720,210)
(270,303)
(1,326,976)
(122,931)
521,112
153,238
671,095

2013
5,898,466
3,872,450
2,026,016
(3,260,968)
2,637,498
(1,987,271)
(347,578)
(1,505,166)
(134,527)
650,227
182,599
832,827

2014 E
6,599,686
4,261,153
2,338,532
(3,748,634)
2,851,051
(2,255,837)
(427,351)
(1,697,122)
(131,363)
595,215
258,757
853,971

2015 E
7,154,403
4,608,613
2,545,790
(4,026,247)
3,128,156
(2,425,183)
(444,312)
(1,842,212)
(138,659)
702,973
264,890
967,863

2016 E
7,769,568
5,001,574
2,767,994
(4,409,469)
3,360,100
(2,627,502)
(475,174)
(2,005,034)
(147,293)
732,598
284,101
1,016,698

2017 E
8,424,293
5,420,447
3,003,846
(4,758,255)
3,666,038
(2,839,578)
(503,349)
(2,178,530)
(157,699)
826,460
298,706
1,125,165

2018 E
9,124,726
5,866,122
3,258,605
(5,130,522)
3,994,205
(3,071,862)
(536,111)
(2,365,917)
(169,834)
922,343
317,930
1,240,273

2019 E
9,880,906
6,345,583
3,535,324
(5,549,374)
4,331,533
(3,322,399)
(569,673)
(2,569,054)
(183,672)
1,009,134
336,710
1,345,844

2020 E
10,714,445
6,867,751
3,846,693
(6,011,106)
4,703,339
(3,600,191)
(606,651)
(2,794,071)
(199,469)
1,103,148
357,667
1,460,814

2024 E
14,426,647
9,207,895
5,218,752
(8,067,641)
6,359,006
(4,886,896)
(772,212)
(3,828,536)
(286,149)
1,472,110
453,924
1,926,034

96,140
(117,209)
(13,923)
(34,992)
486,120

81,465
(121,689)
(54,865)
(95,089)
555,138

95,553
(193,083)
(60,474)
(158,004)
437,211

114,169
(184,103)
(91,433)
(161,367)
541,606

132,405
(213,063)
(82,137)
(162,796)
569,801

147,048
(233,887)
(96,117)
(182,957)
643,503

155,053
(230,430)
(112,269)
(187,646)
734,697

156,611
(227,149)
(129,523)
(200,061)
809,074

158,969
(226,076)
(148,147)
(215,253)
887,895

183,096
(265,866)
(219,699)
(302,469)
1,169,640

(105,932)
(32,525)

(124,231)
(14,687)
(35,569)

(97,747)
(11,556)
(30,280)

(121,086)
(14,315)
(40,319)

(127,390)
(15,060)
(42,418)

(143,867)
(17,008)
(47,964)

(164,255)
(19,419)
(55,731)

(180,884)
(21,385)
(61,659)

(198,506)
(23,468)
(68,057)

(261,495)
(30,915)
(91,385)

347,663
(2,156)
345,507

380,651
(416)
380,235

297,628
(465)
297,162

365,886
(505)
365,381

384,933
(548)
384,385

434,663
(594)
434,069

495,292
(644)
494,648

545,147
(697)
544,450

597,864
(756)
597,108

785,846
(1,017)
784,828

Income(loss) before income tax

Taxes
Current
Deferred
CREE
Income(loss) before minority
interest
Minority Interest
Net Profit

Source: Grupo Nutresa S.A. and Serfinco S.A.

Table 17. Consolidated Balance Sheet

Balance Sheet (COP million)
Current Assets
Cash & cash equivalents
Time deposits & marketable securities
Account receivables
Inventories
Deferred and other assets
Total current assets

2012

2013

224,731
67,081
657,872
555,796
32,215
1,537,695

302,451
113,027
829,822
725,323
47,694
2,018,317

276,846
273,102
814,195
736,353
44,704
2,145,200

280,514
426,518
863,029
790,885
48,462
2,409,408

283,347
546,319
915,950
866,162
52,629
2,664,407

284,144
655,389
970,054
934,675
57,064
2,901,327

282,770
680,811
1,025,710
1,007,800
61,808
3,058,899

279,133
609,023
1,083,641
1,090,076
66,930
3,128,804

302,680
525,071
1,175,055
1,180,776
72,577
3,256,158

407,548
307,380
1,582,173
1,584,745
97,722
3,979,569

Non Current Assets

Permanent Investments
Long term debtors
Property, plant & Equipment
Intangibles assets
Long term prepaid and other assets
Total Appreciations
Total long term assets

330,090
23,988
1,135,785
1,025,441
32,150
4,866,415
7,413,869

357,830
27,477
1,456,074
2,038,332
70,031
4,612,437
8,562,181

399,152
30,650
1,533,212
2,055,637
73,741
5,458,550
9,550,942

416,548
31,986
1,519,462
2,058,833
73,080
5,867,289
9,967,199

435,777
33,462
1,513,110
2,062,229
72,774
6,309,949
10,427,303

457,402
35,123
1,530,175
2,065,842
73,595
6,782,603
10,944,740

481,058
36,939
1,562,276
2,069,689
75,139
7,285,687
11,510,788

506,332
38,880
1,600,155
2,073,789
76,961
7,819,440
12,115,557

532,944
40,924
1,637,653
2,078,164
78,764
8,383,882
12,752,330

650,908
49,982
1,750,820
2,098,931
84,207
10,940,132
15,574,981

Total Assets

8,951,564

10,580,498

11,696,143

12,376,607

13,091,709

13,846,066

14,569,687

15,244,360

16,008,489

19,554,550

2014 E

2015 E

2016 E

2017 E

2018 E

2019 E

2020 E

2024 E

2012
Current Liabilities
Short term debt
Suppliers
Payable
Taxes payable
Salaries & benefits payable
Provisions & estimated liabilities
Deferred and other liabilities
Total current liabilities

2013

2014 E

2015 E

2016 E

2017 E

2018 E

2019 E

2020 E

2024 E

407,588
299,136
339,570
159,523
131,144
8,241
3,159
1,348,361

409,905
284,826
352,915
155,937
134,218
7,932
3,977
1,349,711

426,243
305,920
368,020
169,044
144,158
8,519
4,272
1,426,176

441,901
335,038
390,967
183,579
157,879
9,330
4,679
1,523,373

454,128
361,539
408,856
199,049
170,367
10,068
5,049
1,609,057

465,260
389,824
440,844
215,599
183,696
10,856
5,444
1,711,523

467,855
421,649
476,834
233,466
198,693
11,742
5,888
1,816,127

475,182
456,732
516,508
253,161
215,225
12,719
6,378
1,935,906

542,021
612,991
693,218
340,873
288,858
17,071
8,560
2,503,591

Non Current Liabilities

Long term debt & notes
Payables
Labour obligations
Provisions & estimated liabilities
Deferred and other long term liabilities
Total long-term liabilities
Total Liabilities
Minority Interes

593,692
166
7,598
22,729
144,455
768,640
1,526,312
16,294

1,589,149
167
7,234
45,943
159,573
1,802,066
3,150,427
19,209

1,598,182
168
7,275
46,204
160,480
1,812,310
3,162,021
16,301

1,661,882
175
7,565
48,046
166,876
1,884,544
3,310,720
17,250

1,722,932
181
7,843
49,811
173,007
1,953,773
3,477,146
18,247

1,770,605
186
8,060
51,189
177,794
2,007,834
3,616,890
19,298

1,814,008
191
8,258
52,444
182,152
2,057,052
3,768,575
20,306

1,824,124
192
8,304
52,736
183,168
2,068,524
3,884,651
21,247

1,852,691
195
8,434
53,562
186,036
2,100,918
4,036,823
22,312

2,113,292
222
9,620
61,096
212,204
2,396,434
4,900,025
27,254

Equity
Paid Capital
Capital Surplus
Stock placing bonus
Reserves
Mandatory
Occasional Reserves
Reevaluation of Equity
Effect of conversion of FF.SS.
Profit of the fiscal period
Surplus for Valuations
Total Equity
Total Liabilities & Equity

2012
2,301
546,831
0
1,029,856
206,034
823,822
795,117
-162,791
345,507
4,852,137
7,408,958
8,951,564

2013
2,301
546,831
0
1,282,573
206,034
1,076,539
761,782
-173,546
380,235
4,610,686
7,410,862
10,580,498

2014 E
2,301
546,831
0
1,624,740
206,034
1,418,706
761,782
-173,546
297,162
5,458,550
8,517,820
11,696,142

2015 E
2,301
546,831
0
1,678,599
206,034
1,472,565
761,782
-173,546
365,381
5,867,289
9,048,637
12,376,606

2016 E
2,301
546,831
0
1,764,614
206,034
1,558,580
761,782
-173,546
384,385
6,309,949
9,596,316
13,091,709

2017 E
2,301
546,831
0
1,855,838
206,034
1,649,804
761,782
-173,546
434,069
6,782,603
10,209,878
13,846,066

2018 E
2,301
546,831
0
1,863,103
206,034
1,657,069
761,782
-173,546
494,648
7,285,687
10,780,805
14,569,687

2019 E
2,301
546,831
0
1,837,205
206,034
1,631,171
761,782
-173,546
544,450
7,819,440
11,338,463
15,244,360

2020 E
2,301
546,831
0
1,830,996
206,034
1,624,962
761,782
-173,546
597,108
8,383,882
11,949,353
16,008,488

2024 E
2,301
546,831
0
1,764,942
206,034
1,558,908
761,782
-173,546
784,828
10,940,132
14,627,270
19,554,550

Source: Grupo Nutresa S.A. and Serfinco S.A.

BACK TO TABLE OF CONTENTS

96,662
170,648
259,456
119,215
102,371
5,559
3,761
757,672

16

International Equity Trading Desk

Andrs Jimenez

Juan P. Vieira

Andrs Gmez

Head of Equity

Head of Trading

Head of Electronic Trading

aj@serfinco.com.co
(574) 3106553

jv@serfinco.com.co
(574) 3106515

ag@serfinco.com.co
(574) 3106544

Daniel Marn
Equity Trader

Andrs Upegui
FX Trader

Jose F. Restrepo, CFA

Equity Strategist

dm@serfinco.com.co

au@serfinco.com.co

jr@serfinco.com.co

(574) 3106518

(574) 3106587

(574) 3106510

Research Team
Alejandro Isaza
Cement and
Construction
ai@serfinco.com.co
(574) 4443522 Ext. 6642

Bogot
Centro de Negocios Andino
Carrera 11 No 8201. Piso 6
Tel: (571) 6514646

Cali
Carrera 100 No 5169
Torre Empresarial Oasis of 722 B
Tel: (572) 4858585

Cartagena
Torre Empresarial Proteccin
Carrera 3 No 6A100 Of. 801
Tel: (575) 6930292

Rafael Espaa
Consumer Services and
Holdings
re@serfinco.com.co
(571) 6514646 Ext. 4228

Medelln
San Fernando PlazaTorre 1
Carrera 43A No 1 50. Piso 10
Tel: (574) 4443522

Bucaramanga
Metropolitan Bussiness Park
Carrera 29 # 45 - 45 of 910
Tel: (577) 6970367

Barranquilla
Centro Empresarial Las Amricas
Calle 77B No 57141.
Tel: (575) 3606030

The analyst certifies that the opinions expressed in this report accurately reflect his personal opinion about the company of concern. Also, the analyst certifies that he has not received, is not receiving and will not receive any direct or indirect payment in exchange for expressing a specific recommendation in this report.

Serfinco S.A. is committed to provide independent and objective research for all the companies in the coverage universe. During the normal course of business, Serfinco S.A. intends
to obtain revenue for banking investment services from all the companies in the coverage universe. The remuneration for the analyst is based, in part, on the profitability of the firm,
which includes investment banking and revenues from sales. The research analyst does not have a position in the fixed positions of this covered company and does not provide any
kind of services to the company. The research analyst has not taken part in any investment banking transaction of the company in concern. Serfinco S.A. was not making a market in
the titles of the company in concern when this report was published. In the last twelve months, Serfinco S.A. did not receive, nor it is authorized to receive, revenues for investment
banking services, services related to the title of non investment banking, or non title services rendered to the company in concern. that could affect the objectivity of this report.
Therefore, investors should consider this report only as a factor for their investment decision making. However, Serfinco S.A. intends to do business with the companies covered in
this report. Consequently, investors should be aware that the firm might have an interest conflict.

17