Impreglon (EntryAll, Industrial Goods & Services)

CO M M E N T Publ ished 29 .07 .2013 1

A n a l y s t

Malte Schaumann mschaumann@warburg-research.com

+49 40 309537-170

Value Indicators: EUR Share data: Description:

DCF: 11.20

FCF-Value Potential: 10.90

Bloomberg: I3M GR

Reuters: I3MG

ISIN: DE000A0BLCV5

Coating of surfaces for industrial customers

Market Snapshot: EUR m Shareholders: Risk Profile (WRe): 2013e

Buy

EUR 11.20

Price EUR 8.00

Upside 40.0 %

Market cap: 65.5

No. of shares (m): 8.2

EV: 101.2

Freefloat MC: 35.1

Ø Trad. Vol. (30d): 0.83 th

Freefloat 53.6 %

Claassen Holding 23.4 %

Müller & Sohn AG 23.0 %

Beta: 1.4

Price / Book: 1.2 x

Equity Ratio: 43 %

Net Fin. Debt / EBITDA: 2.0 x

Net Debt / EBITDA: 2.3 x

Q2 results show clear improvement

Stated Figures Q2/2013: Comment on Figures: FY End: 31.12. in EUR m

Q2 13

Q2 13e

Q2 12 yoy

6M 13

6M 13e

6M 12 yoy

Sales 29.3 29.2 20.2 45 % 58.0 58.0 41.0 42 %

EBITDA 4.0 3.8 3.0 33 % 7.2 7.0 6.9 5 %

Margin 13.6 % 13.1 % 14.8 % 12.4 % 12.1 % 16.7 %

EBIT 1.9 1.7 1.3 45 % 2.9 2.7 3.6 -20 %

Margin 6.5 % 5.9 % 6.5 % 5.0 % 4.7 % 8.9 %

EPS 0.13 0.09 0.08 63 % 0.17 0.13 0.25 -32 %

� Revenue growth as last year’s acquisitions are consolidated. � Clear improvement in Q2 result compared to weak Q1 figures.

Impreglon reported slightly better than expected results for the second quarter. The clear 45%-increase in revenue compared to the year-

earlier quarter resulted primarily from the consolidation of acquisitions made in 2012. Currently, these acquisitions are making hardly any

positive earnings contributions, which explain the below-average earnings development on the half-yearly level.

More important however is that the expected improvement has commenced. After rather disappointing results in Q4 2012 (EBIT EUR 0.3m)

and in Q1 2013 (EBIT EUR 1.0m), Impreglon achieved a higher EBIT margin again in Q2. In particular the larger acquisition of RUAG in Altdorf,

Switzerland (revenue contribution about EUR 20m p.a.) recently disappointed with negative results. The Q2 figures make it clear that

Impreglon has managed to improve the situation here again and has probably achieved at least a balanced result.

Overall, the Q2 earnings underline that Impreglon is well on its way to achieving its full-year targets. The expected clear revenue growth is

almost entirely explained by the consolidation of last year’s acquisitions. It is therefore expected that the EBITDA margin of just over 13% can

be kept stable. In Q3 Impreglon is expected to achieve a similar result to Q2. With somewhat higher revenues in Q4, the result could again be

increased slightly.

For the second half of the year, Impreglon plans 1-2 further acquisitions. In general, based on the weak margin situation in some of the

companies acquired in 2012 (RUAG, Switzerland; Coating Applicators, US; Finished Products, Australia), the focus on integrating these

acquisitions into the Impreglon group remains relevant. The Q2 earnings however indicate first successes. With an improvement in the

earnings profile of the recent takeovers, margins are expected to rise in the coming years.

The price target of EUR 11.20 and the Buy rating remain unchanged.

Rel. Performance vs EntryAll:

1 month: n/a

6 months: 0.1 %

Year to date: n/a

Trailing 12 months: -7.1 %

Company events:

FY End: 31.12. in EUR m

CAGR (12-15e) 2009 2010 2011 2012 2013e 2014e 2015e

Sales 12.6 % 37.2 55.2 75.5 91.1 119.2 124.5 130.1

Change Sales yoy -19.7 % 48.3 % 36.8 % 20.7 % 30.9 % 4.5 % 4.5 %

Gross profit margin 74.8 % 74.0 % 74.6 % 70.5 % 70.5 % 71.0 % 71.5 %

EBITDA 18.3 % 3.9 9.8 12.4 12.4 15.9 18.4 20.5

Margin 10.4 % 17.7 % 16.5 % 13.6 % 13.3 % 14.8 % 15.8 %

EBIT 27.8 % -1.0 4.6 6.0 5.6 7.3 9.6 11.7

Margin -2.6 % 8.3 % 8.0 % 6.1 % 6.1 % 7.7 % 9.0 %

Net income 106.7 % -3.0 2.0 3.3 0.7 3.3 4.9 6.3

EPS 104.5 % -0.57 0.33 0.43 0.09 0.40 0.59 0.77

EPS adj. 104.5 % -0.57 0.33 0.43 0.09 0.40 0.59 0.77

DPS - 0.00 0.12 0.20 0.00 0.15 0.15 0.15

Dividend Yield 0.0 % 1.5 % 2.2 % 0.0 % 1.9 % 1.9 % 1.9 %

FCFPS -0.03 -0.11 -0.50 -0.66 0.29 0.67 0.83

EV / Sales 1.7 x 1.2 x 1.2 x 1.2 x 0.8 x 0.8 x 0.7 x

EV / EBITDA 16.2 x 6.5 x 7.2 x 8.5 x 6.4 x 5.3 x 4.5 x

EV / EBIT n.a. 13.9 x 14.9 x 18.9 x 13.8 x 10.1 x 7.8 x

P / E n.a. 24.0 x 21.1 x 95.9 x 20.0 x 13.6 x 10.4 x

P / E adj. n.a. 24.0 x 21.1 x 95.9 x 20.0 x 13.6 x 10.4 x

FCF Yield Potential -0.3 % 8.0 % 8.0 % 6.3 % 8.8 % 10.6 % 12.3 %

Net Debt 18.3 15.6 20.5 36.2 35.8 31.5 25.9

ROE -10.5 % 5.4 % 7.0 % 1.4 % 6.0 % 8.3 % 10.0 %

ROCE (NOPAT) -2.4 % 5.3 % 6.7 % 2.9 % 5.6 % 7.3 % 8.9 % Guidance: 2013: revenues c. EUR 120m; EBITDA EUR 16m

Impreglon

CO M M E N T Publ ished 29 .07 .2013 2

Sales development in EUR m

Source: Warburg Research

Sales by regions 2012; in %

Source: Warburg Research

EBIT development in EUR m

Source: Warburg Research

Company Background

� Impreglon is focused on the coating of surfaces. The mostly metallic components are coated in different processes and with different

materials like carbide, ceramic, teflon or zinc.

� The coating provides the respective component with a required property such as traction, sliding or corrosion protection.

� The market for surface coating relevant for Impreglon grew at an average rate of ca. 6-7% in the past few years.

� This is because coated components often substitute heavier and more expensive components with inferior characteristics. Coating

can also substitute environmentally troublesome technologies.

� To strengthen the competitive position and geographic footprint Impreglon made several acquisitions in the last years, which were

well integrated and often value-enhancing.

Competitive Quality

� 90% of the company's revenues are generated with customer-specific coating solutions and are thus made outside the price-sensitive

volume business.

� The market for coating services is strongly fragmented and the competitive structure is therefore characterised by smaller companies.

� The moderate level of competition is mainly a result of Impreglon’s focus on its own coating systems outside the price-sensitive

volume business and of locally-influenced competitive structures.

� Impreglon differentiates itself from its usually smaller competitors with its superior competence based on a variety of coating

processes and with its financing power for technological and regional expansion.

� Established customer relationships are a major barrier to market entry. The coating quality determines the functional capability and

reliability of the cutomers' end products.

EBT development in EUR m

Source: Warburg Research

Sales by segments 2012; in %

Source: Warburg Research

Net income development in EUR m

Source: Warburg Research

Impreglon

CO M M E N T Publ ished 29 .07 .2013 3

DCF model

Detailed forecast period Transitional period Term. Value

Figures in EUR m 2013e 2014e 2015e 2016e 2017e 2018e 2019e 2020e 2021e 2022e 2023e 2024e 2025e

Sales 119.2 124.5 130.1 136.7 143.5 150.7 158.2 165.3 171.9 177.1 180.6 184.2 187.9

Sales change 30.9 % 4.5 % 4.5 % 5.0 % 5.0 % 5.0 % 5.0 % 4.5 % 4.0 % 3.0 % 2.0 % 2.0 % 2.0 % 2.0 %

EBIT 7.3 9.6 11.7 13.0 13.6 14.3 14.6 15.3 15.9 16.4 16.7 17.0 17.4

EBIT-margin 6.1 % 7.7 % 9.0 % 9.5 % 9.5 % 9.5 % 9.3 % 9.3 % 9.3 % 9.3 % 9.3 % 9.3 % 9.3 %

Tax rate (EBT) 30.0 % 30.0 % 30.0 % 30.0 % 30.0 % 30.0 % 30.0 % 30.0 % 30.0 % 30.0 % 30.0 % 30.0 % 30.0 %

NOPAT 5.1 6.7 8.2 9.1 9.5 10.0 10.2 10.7 11.1 11.5 11.7 11.9 12.2

Depreciation 8.6 8.8 8.9 9.2 9.3 9.4 9.5 9.9 10.3 10.6 10.8 11.1 11.3

in % of Sales 7.2 % 7.1 % 6.8 % 6.7 % 6.5 % 6.3 % 6.0 % 6.0 % 6.0 % 6.0 % 6.0 % 6.0 % 6.0 %

Changes in provisions 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Change in Liquidity from

- Working Capital 1.9 0.6 0.8 1.2 0.8 0.9 0.9 0.9 0.8 0.6 0.4 0.4 0.4

- Capex 7.7 7.7 7.7 10.5 10.7 10.8 10.9 11.2 11.5 11.5 11.4 11.7 11.9

Capex in % of Sales 6.5 % 6.2 % 5.9 % 7.7 % 7.5 % 7.2 % 6.9 % 6.8 % 6.7 % 6.5 % 6.3 % 6.3 % 6.3 %

Other 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Free Cash Flow (WACC Model)

4.2 7.3 8.5 6.5 7.3 7.8 7.9 8.5 9.1 9.9 10.7 10.9 11.1 11

PV of FCF 4.2 6.7 7.2 5.1 5.3 5.1 4.8 4.8 4.8 4.8 4.7 4.4 4.2 65 share of PVs 13.80 % 36.64 % 49.56 %

Model parameter Valuation (m)

Derivation of WACC: Derivation of Beta: Present values 2025e 66

Terminal Value 65

Debt ratio 25.00 % Financial Strength 1.35 Financial liabilities 39

Cost of debt 4.2 % Liquidity 1.50 Pension liabilities 3

Market return 8.00 % Cyclicality 1.20 Hybrid capital 0

Risk free rate 2.50 % Transparency 1.75 Minority interest 0

Others 1.00 Market val. of investments 0

Liquidity 19 No. of shares (m) 9.6

WACC 8.54 % Beta 1.36 Equity Value 107 Value per share (EUR) 11.18

Sensitivity Value per Share (EUR)

Terminal Growth Delta EBIT-margin

Beta WACC 1.25 % 1.50 % 1.75 % 2.00 % 2.25 % 2.50 % 2.75 % Beta WACC -1.5 pp -1.0 pp -0.5 pp +0.0 pp +0.5 pp +1.0 pp +1.5 pp

1.60 9.5 % 8.85 9.00 9.16 9.33 9.51 9.70 9.91 1.60 9.5 % 7.10 7.84 8.59 9.33 10.07 10.81 11.56

1.48 9.0 % 9.62 9.79 9.98 10.19 10.41 10.64 10.90 1.48 9.0 % 7.81 8.60 9.39 10.19 10.98 11.78 12.57

1.42 8.8 % 10.04 10.23 10.44 10.67 10.91 11.17 11.45 1.42 8.8 % 8.20 9.02 9.84 10.67 11.49 12.31 13.13

1.36 8.5 % 10.49 10.70 10.93 11.18 11.45 11.74 12.06 1.36 8.5 % 8.62 9.47 10.33 11.18 12.03 12.89 13.74

1.30 8.3 % 10.97 11.21 11.46 11.74 12.04 12.36 12.72 1.30 8.3 % 9.08 9.96 10.85 11.74 12.62 13.51 14.40

1.24 8.0 % 11.49 11.75 12.03 12.34 12.68 13.04 13.44 1.24 8.0 % 9.57 10.50 11.42 12.34 13.26 14.19 15.11

1.12 7.5 % 12.65 12.97 13.33 13.71 14.14 14.60 15.11 1.12 7.5 % 10.70 11.70 12.71 13.71 14.72 15.72 16.73

� 100% conversion of convertible bond anticipated, dilutive effect amounts to ca. EUR 0.60 per share

� Sustainable EBIT margin just above 15% anticipated

Impreglon

CO M M E N T Publ ished 29 .07 .2013 4

Free Cash Flow Value Potential Warburg Research's valuation tool "FCF Value Potential" reflects the ability of the company to generate sustainable free cash flows. It is based on the "FCF potential" - a FCF "ex growth" figure - which assumes unchanged working capital and pure maintenance capex. A value indication is derived by discounting the “FCF potential” of a given year with the weighted costs of capital. The fluctuating value indications over time add a timing element to the DCF model (our preferred valuation tool). in EUR m 2009 2010 2011 2012 2013e 2014e 2015e

Net Income before minorities -3.0 1.9 3.3 0.8 3.4 5.0 6.4

+ Depreciation + Amortisation 4.8 5.2 6.4 6.8 8.6 8.8 8.9

- Net Interest Income -1.5 -1.4 -1.5 -3.8 -2.5 -2.5 -2.5

- Maintenance Capex 3.5 3.5 4.0 4.8 5.5 6.0 6.5

+ Other 0.0 0.0 0.0 0.0 0.0 0.0 0.0

= Free Cash Flow Potential -0.2 5.1 7.2 6.6 9.0 10.3 11.3

Free Cash Flow Yield Potential -0.3 % 8.0 % 8.0 % 6.3 % 8.8 % 10.6 % 12.3 %

WACC 8.54 % 8.54 % 8.54 % 8.54 % 8.54 % 8.54 % 8.54 %

= Enterprise Value (EV) 62.5 63.6 89.8 105.7 101.2 96.9 91.4 = Fair Enterprise Value n.a. 59.6 83.8 77.6 104.9 120.8 132.1

- Net Debt (Cash) 32.8 32.8 32.8 32.8 32.4 13.1 7.6

- Pension Liabilities 3.4 3.4 3.4 3.4 3.4 3.4 3.4

- Other 0.0 0.0 0.0 0.0 0.0 0.0 0.0

- Market value of minorities 0.0 0.0 0.0 0.0 0.0 0.0 0.0

+ Market value of investments 0.0 0.0 0.0 0.0 0.0 0.0 0.0

= Fair Market Capitalisation n.a. 23.4 47.6 41.4 69.1 104.3 121.1

No. of shares (total) (m) 8.2 8.2 8.2 8.2 8.2 8.2 8.2

= Fair value per share (EUR) n.a. 2.86 5.82 5.06 8.45 12.75 14.80

premium (-) / discount (+) in % 5.6 % 59.3 % 85.0 %

Sensitivity Fair value per Share (EUR)

11.54 % n.a. 0.97 3.16 2.59 5.11 7.59 9.04

10.54 % n.a. 1.48 3.87 3.26 6.01 8.47 10.00

9.53 % n.a. 2.10 4.74 4.07 7.10 9.54 11.17

WACC 8.54 % n.a. 2.86 5.82 5.06 8.45 10.86 12.61

7.54 % n.a. 3.83 7.18 6.32 10.15 12.53 14.44

6.53 % n.a. 5.09 8.95 7.96 12.37 14.71 16.82

5.53 % n.a. 6.81 11.37 10.20 15.40 17.68 20.07

� Significant future earnings growth leads to higher value indication for coming years

� 100% conversion of convertible bond anticipated

Impreglon

CO M M E N T Publ ished 29 .07 .2013 5

Valuation

2009 2010 2011 2012 2013e 2014e 2015e

Price / Book 1.5 x 1.1 x 1.4 x 1.3 x 1.2 x 1.1 x 1.0 x

Book value per share ex intangibles 3.36 5.30 4.88 4.53 4.92 5.41 6.09

EV / Sales 1.7 x 1.2 x 1.2 x 1.2 x 0.8 x 0.8 x 0.7 x

EV / EBITDA 16.2 x 6.5 x 7.2 x 8.5 x 6.4 x 5.3 x 4.5 x

EV / EBIT n.a. 13.9 x 14.9 x 18.9 x 13.8 x 10.1 x 7.8 x

EV / EBIT adj.* n.a. 13.9 x 14.9 x 18.9 x 13.8 x 10.1 x 7.8 x

P / FCF 35.3 x n.a. n.a. n.a. 32.0 x 13.9 x 11.3 x

P / E n.a. 24.0 x 21.1 x 95.9 x 20.0 x 13.6 x 10.4 x

P / E adj.* n.a. 24.0 x 21.1 x 95.9 x 20.0 x 13.6 x 10.4 x

Dividend Yield 0.0 % 1.5 % 2.2 % 0.0 % 1.9 % 1.9 % 1.9 %

Free Cash Flow Yield Potential -0.3 % 8.0 % 8.0 % 6.3 % 8.8 % 10.6 % 12.3 %

*Adjustments made for: -

Impreglon

CO M M E N T Publ ished 29 .07 .2013 6

Consolidated profit & loss

In EUR m 2009 2010 2011 2012 2013e 2014e 2015e

Sales 37.2 55.2 75.5 91.1 119.2 124.5 130.1

Change Sales yoy -19.7 % 48.3 % 36.8 % 20.7 % 30.9 % 4.5 % 4.5 %

Increase / decrease in inventory -0.3 0.0 0.4 -0.5 0.0 0.0 0.0

Own work capitalised 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Total Sales 36.9 55.2 75.9 90.6 119.2 124.5 130.1

Material Expenses 9.1 14.4 19.6 26.3 35.2 36.1 37.1

Gross profit 37.2 55.2 75.5 91.1 119.2 124.5 130.1

Gross profit margin 74.8 % 74.0 % 74.6 % 70.5 % 70.5 % 71.0 % 71.5 %

Personnel expenses 14.4 20.1 28.9 35.2 45.3 46.1 47.6

Other operating income 0.5 1.2 1.0 2.2 1.0 1.0 1.0

Other operating expenses 10.0 12.1 16.0 18.7 23.8 24.9 25.9

Unfrequent items 0.0 0.0 0.0 0.0 0.0 0.0 0.0

EBITDA 3.9 9.8 12.4 12.4 15.9 18.4 20.5

Margin 10.4 % 17.7 % 16.5 % 13.6 % 13.3 % 14.8 % 15.8 %

Depreciation of fixed assets 3.7 4.0 5.1 5.8 8.0 8.3 8.3

EBITA 0.2 5.8 7.3 6.6 7.9 10.1 12.2

Amortisation of intangible assets 1.1 1.3 1.3 1.0 0.6 0.5 0.5

Goodwill amortization 0.0 0.0 0.0 0.0 0.0 0.0 0.0

EBIT -1.0 4.6 6.0 5.6 7.3 9.6 11.7

Margin -2.6 % 8.3 % 8.0 % 6.1 % 6.1 % 7.7 % 9.0 %

EBIT adj. -1.0 4.6 6.0 5.6 7.3 9.6 11.7

Interest income 0.2 0.1 0.1 0.1 0.0 0.0 0.0

Interest expenses 1.6 1.6 1.6 2.4 2.5 2.5 2.5

Other financial income (loss) 0.0 0.0 0.0 -1.5 0.0 0.0 0.0

EBT -2.5 3.1 4.5 1.8 4.8 7.1 9.2

Margin -6.7 % 5.7 % 6.0 % 2.0 % 4.0 % 5.7 % 7.0 %

Total taxes 0.5 1.2 1.3 1.0 1.4 2.1 2.8

Net income from continuing operations -3.0 1.9 3.3 0.8 3.4 5.0 6.4

Income from discontinued operations (net of tax) 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Net income before minorities -3.0 1.9 3.3 0.8 3.4 5.0 6.4

Minority interest 0.0 0.0 0.0 0.0 0.1 0.1 0.1

Net income -3.0 2.0 3.3 0.7 3.3 4.9 6.3

Margin -8.2 % 3.6 % 4.3 % 0.8 % 2.7 % 3.9 % 4.9 %

Number of shares, average 5.4 6.1 7.7 8.1 8.2 8.2 8.2

EPS -0.57 0.33 0.43 0.09 0.40 0.59 0.77

EPS adj. -0.57 0.33 0.43 0.09 0.40 0.59 0.77

*Adjustments made for:

Guidance: 2013: revenues c. EUR 120m; EBITDA EUR 16m

Financial Ratios 2009 2010 2011 2012 2013e 2014e 2015e

Total Operating Costs / Sales 88.7 % 82.3 % 84.1 % 85.8 % 86.7 % 85.2 % 84.2 %

Operating Leverage n.a. n.a. 0.9 x -0.3 x 1.0 x 6.9 x 4.8 x

EBITDA / Interest expenses 2.3 x 6.2 x 7.6 x 5.1 x 6.4 x 7.4 x 8.2 x

Tax rate (EBT) -20.6 % 38.1 % 27.9 % 58.0 % 30.0 % 30.0 % 30.0 %

Dividend Payout Ratio 0.0 % 37.4 % 46.8 % 0.0 % 36.4 % 24.7 % 19.1 %

Sales per Employee 64,506 76,130 85,778 77,913 91,677 94,351 96,406

Sales, EBITDA in EUR m

Source: Warburg Research

Operating Performance in %

Source: Warburg Research

Performance per Share

Source: Warburg Research

Impreglon

CO M M E N T Publ ished 29 .07 .2013 7

Consolidated balance sheet In EUR m 2009 2010 2011 2012 2013e 2014e 2015e

Assets

Goodwill and other intangible assets 11.5 11.3 12.8 16.8 16.4 16.1 15.7

thereof other intangible assets 2.8 2.6 2.1 2.3 1.9 1.6 1.3

thereof Goodwill 8.7 8.7 10.7 14.4 14.4 14.4 14.4

Property, plant and equipment 35.5 43.0 56.2 67.6 69.2 68.3 67.5

Financial assets 0.1 0.2 0.7 0.7 0.7 0.7 0.7

Other long-term assets 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Fixed assets 47.1 54.5 69.7 85.1 86.2 85.0 83.9

Inventories 3.3 3.7 5.1 6.7 7.9 8.3 8.7

Accounts receivable 4.7 6.4 8.3 11.3 13.1 13.6 14.3

Liquid assets 9.5 14.7 13.1 20.8 21.2 25.5 31.1

Other short-term assets 3.2 3.9 3.7 4.5 4.5 4.5 4.5

Current assets 20.7 28.7 30.1 43.3 46.7 51.9 58.5

Total Assets 67.8 83.2 99.8 128.4 132.9 136.9 142.4

Liabilities and shareholders' equity

Subscribed capital 6.1 6.1 7.8 8.2 8.2 8.2 8.2

Capital reserve 27.9 26.3 37.6 41.3 41.3 41.3 41.3

Retained earnings 0.8 2.9 5.4 4.6 7.9 11.5 16.6

Other equity components -5.3 8.1 -0.7 -0.8 -0.7 -0.6 -0.5

Shareholder's equity 29.5 43.4 50.1 53.2 56.6 60.4 65.5

Minority interest 0.0 0.0 0.0 0.3 0.3 0.3 0.3

Total equity 29.5 43.4 50.2 53.5 56.9 60.6 65.8

Provisions 0.5 0.5 0.6 4.4 4.4 4.4 4.4

thereof provisions for pensions and similar obligations 0.3 0.4 0.4 3.4 3.4 3.4 3.4

Financial liabilites (total) 27.5 29.9 33.1 53.6 53.6 53.6 53.6

thereof short-term financial liabilities 2.1 3.0 3.6 4.1 4.1 4.1 4.1

Accounts payable 5.3 3.1 4.8 6.1 7.2 7.5 7.8

Other liabilities 5.0 6.4 11.2 10.8 10.8 10.8 10.8

Liabilities 38.3 39.9 49.7 74.9 76.0 76.3 76.6

Total liabilities and shareholders' equity 67.8 83.2 99.8 128.4 132.9 136.9 142.4

Financial Ratios 2009 2010 2011 2012 2013e 2014e 2015e

Efficiency of Capital Employment

Operating Assets Turnover 1.0 x 1.1 x 1.2 x 1.1 x 1.4 x 1.5 x 1.6 x

Capital Employed Turnover 0.8 x 0.9 x 1.1 x 1.0 x 1.3 x 1.4 x 1.4 x

ROA -6.5 % 3.6 % 4.7 % 0.8 % 3.8 % 5.7 % 7.5 %

Return on Capital

ROCE (NOPAT) -2.4 % 5.3 % 6.7 % 2.9 % 5.6 % 7.3 % 8.9 %

ROE -10.5 % 5.4 % 7.0 % 1.4 % 6.0 % 8.3 % 10.0 %

Adj. ROE -10.5 % 5.4 % 7.0 % 1.4 % 6.0 % 8.3 % 10.0 %

Balance sheet quality

Net Debt 18.3 15.6 20.5 36.2 35.8 31.5 25.9

Net Financial Debt 18.0 15.2 20.0 32.8 32.4 28.1 22.6

Net Gearing 62.0 % 35.9 % 40.8 % 67.6 % 62.9 % 52.0 % 39.4 %

Net Fin. Debt / EBITDA 465.5 % 155.2 % 161.3 % 264.2 % 203.7 % 152.4 % 109.9 %

Book Value / Share 5.5 7.2 6.6 6.6 6.9 7.4 8.0

Book value per share ex intangibles 3.4 5.3 4.9 4.5 4.9 5.4 6.1

ROCE Development

Source: Warburg Research

Net debt in EUR m

Source: Warburg Research

Book Value per Share in EUR

Source: Warburg Research

Impreglon

CO M M E N T Publ ished 29 .07 .2013 8

Consolidated cash flow statement In EUR m 2009 2010 2011 2012 2013e 2014e 2015e

Net income -3.0 1.9 3.1 0.4 3.4 5.0 6.4

Depreciation of fixed assets 3.7 4.0 5.1 5.8 8.0 8.3 8.3

Amortisation of goodwill 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Amortisation of intangible assets 1.1 1.3 1.3 1.0 0.6 0.5 0.5

Increase/decrease in long-term provisions 0.3 0.1 0.0 3.0 0.0 0.0 0.0

Other non-cash income and expenses 1.7 4.8 0.1 -2.0 0.0 0.0 0.0

Cash Flow 3.8 12.1 9.6 8.2 12.0 13.8 15.3

Increase / decrease in inventory 0.1 -0.4 -1.4 -1.7 -1.2 -0.4 -0.4

Increase / decrease in accounts receivable -0.5 -1.7 -1.9 -3.0 -1.8 -0.5 -0.7

Increase / decrease in accounts payable -1.0 -2.2 1.8 1.3 1.1 0.3 0.3

Increase / decrease in other working capital positions 0.0 0.0 2.7 0.9 0.0 0.0 0.0

Increase / decrease in working capital (total) -1.3 -4.3 1.1 -2.5 -1.9 -0.6 -0.8

Net cash provided by operating activities 2.5 7.7 10.7 5.7 10.1 13.2 14.5

Investments in intangible assets 0.0 -0.6 -0.1 -0.5 -0.2 -0.2 -0.2

Investments in property, plant and equipment -1.3 -7.9 -14.5 -10.5 -7.5 -7.5 -7.5

Payments for acquisitions -2.1 -4.3 -6.8 -9.5 -2.0 0.0 0.0

Financial investments 0.0 0.0 0.0 -2.0 0.0 0.0 0.0

Income from asset disposals 0.4 0.8 0.4 1.8 0.0 0.0 0.0

Net cash provided by investing activities -4.4 -11.9 -21.0 -20.7 -9.7 -7.7 -7.7

Change in financial liabilities 1.8 1.3 4.5 21.4 0.0 0.0 0.0

Dividends paid 0.0 0.0 -0.7 -1.6 0.0 -1.2 -1.2

Purchase of own shares 1.4 2.0 -0.2 0.0 0.0 0.0 0.0

Capital measures 2.3 8.4 4.8 3.6 0.0 0.0 0.0

Other 0.0 0.0 -0.1 -0.1 0.0 0.0 0.0

Net cash provided by financing activities 5.5 11.7 8.2 23.3 0.0 -1.2 -1.2

Change in liquid funds 3.6 7.6 -2.0 8.3 0.4 4.3 5.5

Effects of exchange-rate changes on cash 0.1 0.0 -0.4 -0.3 0.0 0.0 0.0

Cash and cash equivalent at end of period 7.0 14.7 11.7 19.7 20.2 24.5 30.0

Financial Ratios 2009 2010 2011 2012 2013e 2014e 2015e

Cash Flow

Free Cash Flow -0.2 -0.7 -3.8 -5.3 2.4 5.5 6.8

Free Cash Flow / Sales 3.4 % -1.2 % -5.1 % -5.8 % 2.0 % 4.4 % 5.2 %

Free Cash Flow Potential -0.2 5.1 7.2 6.6 9.0 10.3 11.3

Free Cash Flow / Sales 3.4 % -1.2 % -5.1 % -5.8 % 2.0 % 4.4 % 5.2 %

Free Cash Flow / Net Profit -41.2 % -34.7 % -117.7 % -738.1 % 73.4 % 113.2 % 107.1 %

Interest Received / Avg. Cash 2.0 % 1.2 % 1.0 % 0.6 % 0.0 % 0.0 % 0.0 %

Interest Paid / Avg. Debt 6.2 % 5.5 % 5.2 % 5.6 % 4.7 % 4.7 % 4.7 %

Management of Funds

Investment ratio 3.4 % 15.3 % 19.3 % 12.1 % 6.5 % 6.2 % 5.9 %

Maint. Capex / Sales 9.4 % 6.3 % 5.3 % 5.2 % 4.6 % 4.8 % 5.0 %

Capex / Dep 25.9 % 161.8 % 228.3 % 161.5 % 89.7 % 87.1 % 87.0 %

Avg. Working Capital / Sales 5.6 % 8.8 % 10.3 % 11.3 % 10.8 % 11.3 % 11.4 %

Trade Debtors / Trade Creditors 89.4 % 210.3 % 173.4 % 185.8 % 181.9 % 181.3 % 183.3 %

Inventory Turnover 2.8 x 3.9 x 3.9 x 3.9 x 4.5 x 4.4 x 4.3 x

Receivables collection period (days) 46 42 40 45 40 40 40

Payables payment period (days) 213 77 90 84 75 76 77

Cash conversion cycle (Days) -64 27 15 20 16 17 18

CAPEX and Cash Flow in EUR m

Source: Warburg Research

Free Cash Flow Generation

Source: Warburg Research

Working Capital

Source: Warburg Research

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LEGAL DISCLAIMER

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by the M.M.Warburg & CO KGaA. It contains selected information and does not purport to be complete. The report is based on

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statements, plans or other details contained in these analyses concerning the examined companies, their affiliated companies,

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DISCLOSURE ACCORDING TO § 34B OF THE GERMAN SECURITIES TRADING ACT AND FINANV

The valuation underlying the rating of the company analysed in this report is based on generally accepted and widely used methods of

fundamental valuation, such as the DCF model, Free Cash Flow Value Potential, peer group comparison and – where applicable – a

sum-of-the-parts model.

M.M.Warburg & CO KGaA and Warburg Research GmbH have set up internal organisational and administrative arrangements to

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Valuations, ratings and price targets for the companies analysed by Warburg Research GmbH are subject to constant reviews and

may therefore change, if any of the fundamental factors underlying these items do change.

All share prices given in this equity analysis are closing prices from the last trading day before the publication date stated, unless

another point in time is explicitly stated.

Neither Warburg Research GmbH’s analysts nor M.M.Warburg & CO KGaA’s analysts do receive any payments directly or indirectly

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M.M.Warburg & CO KGaA and Warburg Research GmbH are under supervision of the BaFin – German Federal Financial Supervisory

Authority.

SOURCES

All data and consensus estimates have been obtained from FactSet except where stated otherwise.

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CO M M E N T Publ ished 29 .07 .2013 10

Section 34b of the German Securities Trading Act in combination with the FinAnV requires an enterprise preparing a securities analysis to point out possible conflicts of interest with respect to the company that is the subject of the analysis. A conflict of interest is assumed, in particular, when the enterprise preparing the analysis …

-1- … or companies affiliated with this enterprise holds 5% or more of the share capital of the analysed company

-2- … or companies affiliated with this enterprise was a member in a consortium which acquired the shares of the analysed company within the last twelve months

-3- … or companies affiliated with this enterprise manages the securities of the analysed company on the basis of an existing contract

-4- … or companies affiliated with this enterprise over the previous 12 months has been providing investment banking services for the analysed company for which a compensation has been or will be paid

-5- … effected an agreement with the analysed company for the preparation of the financial analysis

-6- … or companies affiliated with this enterprise regularly trade in shares or derivatives of the analysed company

-7- … or the analyst responsible for this company has other important financial interests in relation to the analysed company such as e.g. the performance of mandates for the analysed company

This report has been made accessible to the company analysed.

Company Disclosure Link to the historical price targets and rating changes (last 12 months)

Impreglon 5 http://www.mmwarburg.com/disclaimer/disclaimer_en/DE000A0BLCV5.htm

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CO M M E N T Publ ished 29 .07 .2013 11

INVESTMENT RECOMMENDATION

Investment recommendation: expected direction of the share price development of the financial instrument up to the given price target

in the opinion of the analyst who covers this financial instrument.

-B- Buy: The price of the analysed financial instrument is expected to rise over the next 12 months.

-H- Hold: The price of the analysed financial instrument is expected to remain mostly flat over the

next 12 months.

-S- Sell: The price of the analysed financial instrument is expected to fall over the next 12 months.

“-“ Rating suspended: The available information currently does not permit an evaluation of the company.

WARBURG RESEARCH GMBH – RESEARCH UNIVERSE BY RATING

Rating Number of stocks % of Universe

Buy 105 53

Hold 80 40

Sell 9 5

Rating suspended 4 2

Total 198 100

WARBURG RESEARCH GMBH – ANALYSED RESEARCH UNIVERSE BY RATING …

… Looking only at companies for which a disclosure according to § 34b of the Germany Securities Trading Act and the

FinAnV has to be made.

Rating Number of stocks % of Universe

Buy 92 61

Hold 53 35

Sell 4 3

Rating suspended 3 2

Total 152 100

PRICE AND RATING HISTORY IMPREGLON AS OF 29.07.2013

The chart has markings if Warburg Research GmbH changed its rating in the last 12 months. Every marking represents the date and closing price on the day of the rating change.

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CO M M E N T Publ ished 29 .07 .2013 12

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