Analysts presentation

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1 Analysts presentation Milan, December 12 th, 2008 Disclaimer This document has been prepared by Ciccolella solely for the use at investors and analysts meeting. This document does not constitute an offer or invitation to purchase or subscribe any shares and neither it nor any part of it shall form the basis of or be relied upon in connection with any contract or commitment whatsoever. The information in this document reflects prevailing market conditions and our judgment as of this date, all of which may be subject to change. This document is based on public and management information. The information and opinions contained in this document have been compiled or arrived at from sources believed to be reliable, but no representation or warranty, express or implied is made as to their accuracy, completeness or correctness. This document contains certain forward-looking information that is subject to a number of factors that may influence the accuracy of the statements and the projections upon which the statements are based. There can be non assurance that the projections or forecasts will ultimately prove to be accurate; accordingly, the Company makes no representation or warranty as to the accuracy of such information or the likelihood that the Company will perform as projected. 2 Milan, 12 th December

2 Analysts and Investors Presentation Agenda Corrado Ciccolella CEO Company overview, Achieved ed results and Strategy Roel de Jong Retail Director Reorganizations and Synergies Gianluca Petrera CFO Key financials 3 Milan, 12 th December 2008 Contents Company overview Achieved ed results Strategy Key financials Annexes 4 Milan, 12 th December

3 Main milestones in the history of Ciccolella Group Ciccolella Group key milestones Conversion of properties from agricultural products to flowers: focus on chrysanthemums and carnations Consolidation of market position Improvement of distribution channels Focus on cost strategy Agreements with Edison for cogeneration plants Completion of the listing process Acquisition of FPP and Leliveld Completion of Melfi production plant Start investments in greenhouses Start production of roses New investment in technologies such as out of ground cultivation (hydroponic) Introduction of anthurium Acquisition of Cucirini Coats SpAviaPTO S.p.A Listing in the Italian stock exchange through contribution in kind Acquisition of Zurel, one of the leading flower traders based in Amsterdam Candela plant almost completed, week 49 co-generation started Design of the new Group organizational structure 5 Milan, 12 th December 2008 Ciccolella S.p.A. Shareholders & Board of Directors Shareholders Gruppo Ciccolella ll S.r.l. 89,940% 940% Floating (Market) 10,060% Board of Directors C. Ciccolella Chairman & CEO F. Ciccolella Vice Chairman non executive A. Ciccolella - non executive P. Bassi - non executive G. Giannelli - non executive C. A. Bollino Lead Independent Director non executive A. Bombassei Independent Director non executive 6 Milan, 12 th December

4 Ciccolella Group vision, mission and strategy VISION Become leader in the European floricultural industry, combining the production and trading of cut flowers, pot plants and arrangements through the utilization of renewable energy MISSION Perform a socially and environmentally sustainable business with strong roots in the territory Become the multi-channel and multi-product European leader in the floricultural industry STRATEGY Implement a profitable business model, leveraging on a unique production process Enhance market share in Europe through cost leadership and quality improvement Increase of production size to exploit economies of scale, produce close to the consumer Coverage of all the sales channels with a targeted products/ service portfolio 7 Milan, 12 th December 2008 Ciccolella Group operates in the flower market covering both production and trade Production and sales of Roses and Anthurium Ciccolella is currently producing high quality cut roses (40 different varieties in terms of color in different size and stems length) and anthurium (25 different varieties) which are sold in the European market ROSES ANTHURIUM Trading of cut flowers, potted plants and arrangements Ciccolella Group, through its Dutch subsidiaries distributes, besides its own production, all kinds of fresh flowers, pot plants, garden plants and flower and plant arrangements for a total of approx SKU s OTHER FLOWERS POT PLANTS ARRANGEMENTS 8 Milan, 12 th December 2008 Source: Company data 4

5 Roses appears to be the most attractive flowers on the market Flower attractiveness matrix: volatility vs growth Low Freesia Alstroemeria Lilium Cymbidium Rose Low volatility and high growth cluster lower volatility (1) F Medium Chrysant. Anthurium Gerbera Tulips Auction turnover 2007 High -12% Dracaena Ornamental Fruit Auction turnover CAGR Milan, 12 th December 2008 Note: (1) Flower volatility calculated as the standard deviation of the specific flower annual increase/decrease in auction turnover between 2002 and 2007 Source: Flower Council of Holland; Company analysis The business scope of Ciccolella Group PRODUCTION DISTRIBUTION and CONSUMPTION Suppliers of breeds and baby plants Suppliers of raw materials (e.g. Perlite, chemicals) Suppliers of energy and water Suppliers of infrastructures (e.g. greenhouses) Suppliers of articles for arrangements Growers Plants management (nutrition, irrigation, treatments, cut, selection, substitution, etc.) Flowers harvesting (selection, physical collection, package, storage, ec.) Transport providers Auctions Wholesalers Traders Transport providers Arrangement developer Wholesalers Transport providers Retailers Flower shops Large retail channels Garden Centers Street shop Cash & Carry Consumers 10 Milan, 12 th December

6 Ciccolella Group s competitive arena is addressed by the market leader and several other competitors Competition matrix: product portfolio vs geographical coverage Wide Product portfolio (1) Turnover 2006 Narrow Wide portfolio / low coverage Redbrige Van Vliet Agorà DFG Florimex Ciccolella Heemblumex Wide portfolio / high coverage Hilverda Metz Main competitors BocchiGroup Fleura Flamingo World Flowers Waterdrinker Blumex Landgard Floreac Lemkes Gasa Bog Madsen Narrow portfolio / Narrow portfolio / low coverage high coverage Low High Geographical coverage Cluster with main Ciccolella s Group competitors 11 Milan, 12 th December 2008 Note: (1) A broad product portfolio includes flowers, pot plants, arrangements, bouquets and greens, while a narrow product portfolio includes only one of the five Source: company websites; Rabobank; Ciccolella Group is the second largest European in the flower industry mln Main European cut flowers and pot plants traders revenues Pro forma data Milan, 12 th December 2008 Source: Company websites; Rabobank; 6

7 Ciccolella Group is currently addressing all segments of the cut flowers and pot plants market, with approx 4.6% market share (2007 wholesale level) Channel/ product Matrix: Ciccolella Group positioning 46% 40% 14% Market size: 3.7 bn Market size: 1.6 bn Market size: 1.4 bn Through Wholesale 63% 4.0% 5.7% 3.9% Channels Market size: 0.9bn Market size: 2.4 bn Directly to Retail 13.5% 2.3% 1.2% 37% 5.3% 6.0% 3.6% 0.9% 13 Milan, 12 th December 2008 Flowers Plants Arrangements Products Source: Company reports; Contents Company overview Achieved ed results Strategy Key financials Annexes 14 Milan, 12 th December

8 Achieved results (1/3): current and perspective production plants 1 MOLFETTA MELFI 2 CANDELA 3 >16 Ha of roses production 5 Ha of anthurium production > 15 mln stems of roses per > 21 Ha of roses production 7 Ha of green production > 30 mln stems of roses per 70 Ha of roses production 15 Ha of anthurium production > 80 mln stems of roses per year steady state year steady state year steady state > 2.5 mln stems of anthurium > 1,8 mln leaves of green per > 10 mln stems of anthurium per year steady state year steady state per year steady state Historical production sites Completion: 60% YE % YE Milan, 12 th December 2008 Source: Company data Achieved results (2/3): forward integration With the acquisition of Zurel, FPP and Leliveld Ciccolella Group, in line with its strategy, has been able to integrate downstream with full coverage on industry s two key drivers: Channel coverage Zurel and FPP cover the Through Wholesale channel Leliveld covers the Directly to Retail channel Product portfolio completion Zurel main focus is Cut Flowers FPP main focus is Pot Plants Leliveld main focus is Arrangements 16 Milan, 12 th December

9 Achieved results (3/3): the Edison Ciccolella agreement, a win-win strategy Edison Plant Thermic plant: In Candela and Melfi s plant, the water used to cool the turbines will be used by Ciccolella s greenhouses to produce thermal energy and to reduce water temperature of at least 7 C This will allow the thermal plant to reach a value of the IRE and LT index > of value set by the law, and to be classified as cogenerative 17 Milan, 12 th December 2008 Agreement Commitment EDISON: Builds the thermal plant Builds the main trunks to connect the thermal plant to the green houses and the primary pumping system Ciccolella site (Candela) Ciccolella Builds the greenhouses close to the Edison plant Builds the secondary trunks to connect the thermic plant to the green houses and the primary pumping system Builds the back up energy plant Benefits Edison will be able to fulfill its legal requirements for the production of green and white certificates Ciccolella will obtain a new revenues streamline and will realize a significant cost saving Contents Company overview Achieved ed results Strategy Key financials Annexes 18 Milan, 12 th December

10 Ciccolella Group Strategy Strategy Actions 1 Consolidation Tight Program Management of greenhouse construction Edison agreement will reduce annual production costs (thermal energy) and generate additional revenues stream Implementation of a new organizational structure to foster the integration of the acquired companies into a Group 2 Profitability Enhancement Extraction of value from the acquired companies through the development and implementation of synergies Enhancement of the commercial strategy focused on channel specificities and requirements 19 Milan, 12 th December Ciccolella production capacity improvement plan Ciccolella planned increase in production capacity and output End of Year Hectares put in production (end of year) Foliage (5%) Anthurium (16%) Roses (79%) Stems production (mln) Foliage Anthurium Roses Milan, 12 th December 2008 Source: Company data 10

11 2 The new organizational structure will foster the accountability of the resources and the development of the channels CEO C. Ciccolella Strategy & Business Development Director M. Vai HR & Organization Director L. Colombo Group CFO G. Petrera Tax & Legal Director S. Sodano Wholesale Director T.b.A. Retail Director R. de Jong Operations Director T.b.A. Sales Manager Plant Purchasing Manager Sales Manager Purchasing Manager Warehouse Manager Production Manager Sales Manager Flowers Logistic Manager Arrangements Manager Logistic Manager Procurement Manager Molfetta/ Terlizzi Site Manager Prod. Planning Manager Melfi Site Manager 21 Milan, 12 th December 2008 Candela Site Manager 2 Some Key managers Corrado Ciccolella, Chairman of the Board and Group CEO Mr Corrado Ciccolella, as CEO, has the overall responsibility to Manage Ciccolella S.p.A. and its group companies. Mr Ciccolella grew up in its family Company since early 70, driving its recent transformation in an international Group Massimo Vai, Strategy & business Development Director Mr. Vai has the responsibility to support the Group CEO in defining the strategy, in terms of markets, clients and products, evaluating growth opportunities. He is also responsible for the yearly update of the Business Plan and for the assessment of its implementation. Mr. Vai has served around 9 years in A.T.Kearney, where he gained a significant experience in strategic consulting, mainly in the Consumer Goods industry and in Strategy and Organization projects Luigi Colombo, HR & Organization Director Mr. Colombo has the responsibility to manage all the activities needed to support and enhance the growth and consolidation of the Group human capital. Before joining the Group, Mr. Colombo has served around 20 years in Unilever Italy, becoming HR Business Partner and responsible for the implementation of HR Transformation program Gianluca Petrera, Group CFO Mr. Petrera has the responsibility for Group financial and IT management Mr. Petrera, chartered accountant and auditor (Italy), after 5 years of advisory, served 5 years in Getrag, a German multinational automotive group, as chief accountant of the Italian branch and leading integration process of acquired plants in Europe. Salvatore Sodano, Tax & Legal Director Mr. Sodano has the responsibility to support the Group CEO in all tax and legal related issues. Mr. Sodano, chartered accountant and auditor (Italy), is teacher at several course on tax management, Tax Authority internal academy. Roel de Jong, Retail Director Mr. De Jong is the current Managing director of Leliveld Group. He will be in charge of Retail channel in the new organization. Before joining the Group, Mr. de Jong was Commercial Director At Mourubel NV (Belgium) and Regional Director central & eastern Europe at Friesland Coberco - dairy products (The Netherlands) 22 Milan, 12 th December

12 2 The new organizational structure calls for a focused commercial strategy by channel Leverage on the existing accounts One stop shop Retail/ Sales Optimization CUT FLOWERS POTTED PLANTS ARRANGEMENTS FOLIAGE WHOLESALE RETAIL New countries penetration, following existing customers when they decide to enter in new geographical market (i.e.: Carrefour entry in the Turkish market) New customer acquisition, leveraging on knowledge and expertise acquired through the interactions with the same client in other countries 23 Milan, 12 th December 2008 A broad portfolio (cut flowers, pot plants, arrangements, green foliage), will allow the Group to serve its customer base (both wholesaler and retailer) with a complete set of products (cherry picking the best flower from Aalsmeer, Westland or specialized growers) and brands 2 Synergies from Group integration Synergies Related Actions Timing Production cost Optimization Relocation of part of the operations currently performed in rented warehouses in owned warehouses Optimization of logistic flows through an increased load factor of owned trucks Organizational Rationalization FTEs rationalization through alignment of the Group structure with internal best practices Optimization of staff functions size due to Group integration and scale effects Rationalization of current Legal Entities footprint Margin Enhancement Maximization of own production capacity and progressive (partial) auctions disintermediation Optimization of buying prices from growers, due to the increased size and purchasing power Leverage on the product portfolio to provide all customers with a complete offer Milan, 12 th December

13 Contents Company overview Achieved ed results Strategy Key financials Annexes 25 Milan, 12 th December 2008 Key financials Main assumptions Revenues Operating Expenses Flower production revenues in line with market trends (full productivity in 2014 with high quality standards); Trading revenues almost stable with no increase in market share; Other revenues (Transport and Energy) as provided by contracts already in place; Flower production expenses optimized through Edison agreement; Trading costs optimized through economies of scale and synergies; Overheads optimization with shared service centers; Net Working Capital No improvements embedded in the plan, even if improvements for DPO look achievable. CAPEX Financial Position Candela completion Capex in 2009 Maintenance Capex from 2010 to 2014 (conservative approach) Cumulated Capex approx M increase mainly generated by energy revenues (cashed in the next year); Long term financing lines (approx M 160) already committed as Mutuo fondiario ; Short term financing lines, mainly generated by trade receivables factoring; 26 Milan, 12 th December

14 Key financials Profit & Loss & Net Financial Position 2006A - EoY 2007A - EoY 2008A - 3Q 2009E - EoY 2012E - EoY 2014E - EoY Revenues 5,7 113,8 361,3 574,1 652,0 691,0 EBITDA (0,5) (12,7) 6,6 64,3 89,2 84,9 EBITDA Margin (8,5%) (11,2%) 1,8% 12,3% 14,9% 13,1% EBIT (0,5) (16,3) (9,5) 48,5 72,7 68,3 EBIT Margin (8,5%) (14,3%) (2,6%) 8,5% 11,1% 9,9% Net Income (0,5) (24,1) (20,6) 21,9 46,8 49,7 Net Income Margin (8,5%) (21,1%) (5,7%) 4,2% 7,8% 7,7% 2006A - EoY 2007A - EoY 2008A - 3Q 2009E - EoY 2012E - EoY 2014E - EoY Net Financial Position (10,5) 137,1 224,6 271,8 140,4 29,9 27 Milan, 12 th December 2008 Summing up: A company with deep roots in the timeless business of agro industry projected in the 21 st century fast growing arena of green energy business. Business sustainability through social and environmental sustainability European Top Player in flower industry, the first one integrated from production to distribution Ready to play a leading role in the consolidation and transformation of this industry 28 Milan, 12 th December

15 Q & A 29 Milan, 12 th December 2008 Contents Company overview Achieved ed results Strategy Key financials Annexes 30 Milan, 12 th December

16 The main characteristics of the cut flower and pot plants market The cut flowers and potted plants market is characterized by a high price elasticity and is positively correlated to country GDP value and per capita consumption, with significant negative fluctuations in recession phases. The consumption is highly seasonal, as well as price levels, with the most important peaks in coincidence with the most important festivities such as S.Valentines Day, Mothers Day, Christmas, Easter, etc.. For these reasons, forecasts and production planning are a key competencies needed to manage fluctuations in market demand Consumers increasingly require: high quality and new variety of products, forcing growers and breeders to invest in research and development; at the same time, breeders are more and more investing on the development of new cultivar to stimulate future demand easy to take and treat products convenience, pleasure and wellness sustainability, a more natural living environment and greater socialization Europe plays a key role in this market, both from a production and from a consumption point of view Germany is the first market in terms of consumption, followed by UK, France, Italy and Spain Russia in the most interesting emerging market with a 90% of demand satisfied by imports (mainly from The Netherlands, that have an estimated market share of 75% ) The distribution structure is overall dominated by florists, with the exception of UK where supermarkets are the main sales channel (73% of market share for flowers and 47% for pot plants, respectively) The Netherlands control a significant portion of the market (import and exports) through the auctions system and through vast production sites built in low labor cost countries (Kenya, Uganda, Zimbabwe) Energy costs impact significantly on the margins of the market players, affecting both production costs (thermal energy and electricity used in greenhouses to obtain high productivity from the plants) and transport cost (air and ground transportation) 31 Milan, 12 th December 2008 Main trends of the cut flower and pot plants market The overall flowers and plants consumption grows at low rates, with East European countries showing growing patterns Recent years increases in energy costs are putting pressure on growers, which suffer a decrease in margins and are forced either to increase the scale of production, or to move the production to low labor costs countries to reduce the average cost of production Fewer big European producers will survive, cutting their costs, specializing in products that do not compete with the ones coming from low labor cost countries, increasing horizontal and vertical cooperation: the result is a progressive consolidation of the market, with a constant decrease in the number of players and an increase in the average size (n of hectares) of the growers Different product concepts, such as flowers and plants arrangements, able to satisfy the increasing consumer demand for variation in personal gifts and new surprising items, are covering a significant percentage of the turnover of the flower market Sales channels show different trends: flower shops absorbing the greatest part of the wholesalers sell out, are expected to reduce their market share in the next ten years supermarkets are increasing their market share across all Europe, with the most fast growing rate (CAGR = 4,2%) modern distribution is gaining dominance in the market, introducing new business drivers (more efficiency, competition, market segmentation ) various retail will specialize in either niche or value for price segment There is an increasing request for high quality products, with the modern trade channel filling the gap with the wholesalers 32 Milan, 12 th December

17 The overall flowers and plants world production capacity is estimated in 609k hectares World flower and plants production dedicated surfaces European breakdown 2007 Hectares Percentage of Hectares 609, ,837 78% 52,987 9% 47,626 8% 26,173 4% 6,342 1% 3,973 1% Asia Pacific represents around 80% of the overall world flowers and plants dedicated areas, while Europe accounts for around 10%. Within Europe, The Netherlands and Italy are the countries with more hectares dedicated to flowers and plants, Asia/Pacific surfaces are characterized by low productivity rates per hectare, while Europe is able to obtain significant production, despite the limited surfaces available 33 Milan, 12 th December 2008 Source: International Statistics Flower and Plants for an estimated value of production which ranges around 26 bn World flower and plants production value (at wholesale) European breakdown mln 26,025 6,399 Percentage 25% 12,120 47% 1,4079 5% 5,375 21% 540 2% 220 1% mln/ha Europe and North America are characterized by a very high productivity per Ha, compared to the rest of the world (effect of the different open air/ greenhouses mix and high value/ low value production mix) Europe accounts for around 50% of the world value of production of cut flowers and pot plants, with The Netherlands production being more than 32% of the European one; Italy is the second European producing country, with 13,4% of the total European value of production 34 Milan, 12 th December 2008 Source: International Statistics Flower and Plants

18 Dutch production flowers under glass and in particular of Roses is constantly decreasing, with a clear trend of consolidation of the growers Number of roses growers Total roses production dedicated surface N CAGR % Ha CAGR % Ha per grower 1,2 2 1,3 4 1,4 4 1,4 9 1,6 0 1,6 7 1,7 7 In The Netherlands, both the number of growers of roses and the dedicated surface are decreasing Roses production trend in The Netherlands show a clear consolidation process, with the average number of hectares per company moving from 1.2 hectares in 2000 to 1.77 hectares in 2006 At the same time, economies of scale have allowed to increase the average productivity which can reach over 2 mln stems per hectare per year (using artificial lights and dedicating vast surfaces to a single kind of rose) 35 Milan, 12 th December 2008 Source: CBS 2006; CBI 2007 A reverse trend is showed by new Africans growers, that are increasing their importance in the market Between the African flower industry has grown at an annual rate of more than 12%, while the European and the Italian one have grown at a yearly 3% and 2%, respectively Huge effort in improve quality, logistics services, production standards and to widen the assortment The production area is concentrated in the south east of the continent The total area of land is more than ha The African flower sector is focused on Europe: approximately 90% of flowers cultivated in Africa are sold in Europe (with an increasing share of flower sold in supermarkets) more than 2/3 sold through the Dutch auctions 25% of the flower traded at Dutch auctions are of foreign origin, with the majority coming from Africa Approximately 25% of the export oriented companies in Africa are owned by Dutch companies Main strengths: favorable natural conditions low production cost abundant space for large companies favorable Euro - Dollar exchange rate Main risks: handling, distribution and logistics (airport availability, distance, infrastructures ) political uncertainty, corruption and security fluctuations in exchange rates increasing fuel cost (higher impact on transportation cost by plane than by truck and ship) 36 Milan, 12 th December 2008 Source: "Africa's b(l)ooming flower industry, RaboBank

19 coming from east side of the African continent mainly producing roses Country Area # Growers Exports (cut flowers tonn) Flower 1 Ethiopia 645 ha cut flowers Medium / large roses 2 Kenya ha cut flowers Roses; bouquet Uganda Tanzania 126 ha cut flowers 106 ha cut flowers and cuttings Small roses; cuttings Roses; cuttings Zambia Zimbabwe 125 ha cut flowers 1100 ha cut flowers Roses Roses; proteas 7 7 South Africa ha cut flowers Roses; proteas 37 Milan, 12 th December 2008 Source:: Africa s blooming flower industry, RaboBank 2005, AIPH ~ ~ ~ European consumption of cut flowers and foliage was worth around 15,2 bn in 2006 European consumption of cut flowers Per capita yearly consumption - mln % split CAGR A 2004A 2006A CAGR Other Countries (1) N.A. 26% The Netherlands Spain Italy France 6% 7% 11% 12% -1.8% 5.0% -6.6% -1.4% % 2.4% -6.7% -2.4%. UK 19% 4.1% % 19% - 12% 1.2% % 1.3% Germany The total EU consumption of cut flowers and foliage is almost stable, with some countries with a decreasing trend Top 6 cut flowers European consumer countries account for about 75% of the total consumption Per capita consumption show important differences among EU countries, both in absolute value and in trends Germany and UK represent almost 40% of the total European consumption 38 Milan, 12 th December 2008 Note(1): Other EU 15 countries (Belgium, Luxemburg, Denmark, Ireland, Greece, Portugal, Austria, Finland, Sweden) + Switzerland, Poland, Hungary, Russia Source: Flower Council of Holland

20 European market for cut flowers and pot plants is expected to grow at an average 3% yearly rate European (1) cut flowers market value at consumer price ( ): breakdown by sales channels European (1) pot plants value at consumer price ( ): breakdown by sales channels mln CAGR CAGR mln CAGR CAGR 3.2 % % ,661 13,985 3,3% 13% 2.3% 8% 15,118 3% 2,7% 10,399 12% Other (3) 8% 2,9% Other 28% 4.4% Garden Centre (2) 14% 3% Mkt & 12% 30% Garden Centre Street trade 4.2% 25% 5% 1.7% Supermarket 27% Mkt & Street trade 6% 25% 3.2% Supermarket 24% 47% 2.7% Florist 50% Florist 31% 29% 2.1% The European cut flowers market is expected to grow at an average 3,2% yearly rate for the next 10 years. Supermarket distribution channel will experience the most relevant growth rate (CAGR 4,2%) Florists share is expected to reduce to 47%. Flower Council of Holland expects their numbers to fall, while those who remain will specialize in order to be able to profit from the absolute growth in this sales channel. The European pot plants market is expected to grow at a slightly lower rate, with Garden center being the fastest growing distribution channels The overall European market for cut flowers and pot plants is expected to exceed 34,6 bn by Milan, 12 th December 2008 Note(1): EU 15 countries (Belgium, France, Germany, Italy, Luxemburg, Holland, Denmark, Ireland, UK, Greece, Portugal, Spain, Austria, Finland, Sweden) + Switzerland, Poland, Hungary, and Russia; Note (2): Include Do it yourself; Note (3). Include Nursery Source: Flower Council of Holland Ciccolella s target market has to be analyzed at the wholesale level, by deducting from the consumer value the distribution and retailers margins European cut flowers market value at wholesale European pot plants value at wholesale price ( ): breakdown by countries price ( ): breakdown by countries mln Others (2) 5,711 11% CAGR % 7,652 17% CAGR % mln Others (2) 4,288 CAGR ,8 % 7% 5,675 11% CAGR % EU 15 (1) 89% 83% 2.3% EU 15 (1) 93% 89% 2.4% The EU 15 countries (1) currently account for almost 90% of the total wholesale market value of cut flowers and potted plants Other European countries (2) are expected to show the most interesting positive increase, both in the cut flowers and in the potted plants markets 40 Milan, 12 th December 2008 Note (1): Europe Union with 15 countries (Belgium, France, Germany, Italy, Luxemburg, Holland, Denmark, Ireland, UK, Greece, Portugal, Spain, Austria, Finland, Sweden); Note (2): Switzerland, Poland, Hungary, and Russia Source: Flower Council of Holland

21 In Europe, The Netherlands play a very important role in cut flowers and potted plants production and trade The cut flowers and potted plants industry is supported by ancient roots and strong infrastructures: centennial experience in the flower business the growers are supported by several services in terms of research and development the distribution system is efficient and well connected by air and by ground with the most important producing and consumers countries Dutch auctions are owned by consortia of Dutch growers and traders, who can efficiently trade large volumes of flowers and plants every day Two major Dutch auctions (Flora Holland and Aalsmeer), representing 98% of the total auctions market turnover, have merged since January 2008 The role of the auctions is crucial: to control prices and to allow growers to specialize in mono-culture productions to avoid high level of competition to foster quality standardization to provide the market players with logistic support (i.e.: warehouse services ) Dutch auctions trade both European and imported production, serving all European wholesalers through specialized traders Imported flowers represented, in 2005, 25% of the traded value by the Dutch Auctions, with an increasing trend (CAGR : 6,9%) 41 Milan, 12 th December 2008 Source: Filiera Fiori e piante July 2004 Netherlands Auctions yearly turnover accounts for 3.8 bn, 66% of which is made by cut flowers Yearly Netherlands auctions turnover Turnover breakdown by auctions mln CAGR ,390 3,582 3,603 3,359 3,503 3,686 3,840 2,1% Plants 34% 2,8% Cut Flowers 66% 1,7 % Merged since 08/01/2008 The yearly turnover of Dutch auctions represent more than 40% of the European cut flowers and plants wholesale market, and account for 75% of the Dutch total exports The overall auctions turnover grows at an average 2,1% rate The two most important auctions, Flora Holland and Aalsmer, represent 98% of the total turnover are merged 42 Milan, 12 th December 2008 Source: Filiera Fiori e piante July 2004; Flower Council of Holland (2006 edition); VBN 2006 Statistiekboek 21

22 Netherlands Auctions trade both domestic and imported cut flowers from Africa and other countries Yearly Netherlands auctions traded cut flowers breakdown by origin mln CAGR % CAGR ,299 2,331 2,401 Other Zimbawe 6.9 % Israel Kenya Netherlands cut flowers exports breakdown by destination (2006) Percentage - mln The Netherlands -0.5% Mln Pieces 11,751 11,670 11,661 75% of the value traded in Dutch auctions is generated by domestic flowers, while 25% derives from imports (mainly from Africa) Imports have a higher weight in terms of number of pieces traded Germany, UK, France and Italy absorb almost 70% of the total Dutch exports of cut flowers 43 Milan, 12 th December 2008 Source: Filiera Fiori e piante July 2004; Aalsmeer Auction data; Flower Council of Holland (2006 edition) Roses are by far the most traded cut flowers in the Dutch Auctions and grow faster then the market Netherlands auctions traded cut flowers 2007 breakdown by flower species mln 2, % Roses account for 31% of the overall value of the Dutch auctions revenues 360 Tulips and Anthurium show a slowdown in their growing trends 14% 204 8% 171 7% 126 5% 71 3% 56 2% 46 2% 39 2% % Delta % 2007/2006 1,9% 4,9% 1,2% -8,3% 2,7% 3,3% -1,2% 1,8% -1,1% -1,3% Roses are by far the most traded cut flowers in absolute terms, with the higher growing trends in the last year Chrysanthemum represent 14% of the total traded value Tulips show a significant slowdown in their growth, even if they still represent around 8% of the traded value Anthurium show a slowdown in their growth, but maintain their share of total traded value 44 Milan, 12 th December 2008 Source: Flower Council of Holland (2007 edition) 22

23 Flower and plant arrangements are the response to clients desire of variation in gifts and items Product concept Consumers demand for variation in personal gifts and new surprising items represents an important driver in the floricultural market. Consequently, various companies in the industry respond to this demand by offering flowers and plants in special packaging or offering them in combination with other products Flower or plant arrangements precisely consist in combinations of flowers and/ or plants in vases, bowls or baskets together with other different objects such as gifts or other ornaments The ability to segment the market according to different consumer behaviors and develop a consistent offering is key in addressing customer demand 45 Milan, 12 th December 2008 Source: Interviews; A.T Kearney analysis The European Market for arrangements In terms of purchasing behavior, the flower arrangement market differs from that of plant arrangements. In fact, while the former is more related to special occasions (such as Christmas, Mother s Day, Valentine s Day and such) and presents high demand peaks, the latter is characterized by a more linear trend throughout the year showing less seasonality and a more homogeneous demand Garden Centers represent the preferred channel, in particular for plant arrangements. However, recent developments show a significant shift towards supermarkets, especially for flower arrangements In 2006, the European market for flower arrangements totaled ~2.9 bn. (or ~20% of the total flower market), while the European market for Plant arrangements totaled 0.7 bn (~7% of the total plant market) In 2006, European consumption of arrangements was worth ~2.9 and 0.7 bn for cut flowers and plants European consumption of flowers arrangements mln % split CAGR % Per capita yearly consumption CAGR Others (1) Netherlands Spain Italy France UK Germany 23% 8% 4% -8% 10% 17% 14% -2% 21% -3% 1% -4% 28% -2% NL 10,7 97 9,7 75 7,5-8,6% 86% Spain 3,8 5,8 6,4 14,0% Italy 7,3 7,3 6,7-2,1% France 11,4 10,3 9,8-3,8% UK 0,4 0,4 0,5 3,1% Germany 10,5 10,3 9,6-2,2% mln European consumption of plant arrangements 754 % split CAGR % Per capita yearly consumption - CAGR Others (1) Netherlands Spain Italy France UK Germany 23% 10% 4% 14% 21% 1% 28% 0.1% -14% 19% -7% -8% 1% 11% NL 3,3 2,6 1,8-14,1% Spain 0,4 1,0 0,7 15,8% Italy 1,5 1,3 1,1-6,7% France 3,7 3,0 2,6-8,4% UK 0,9 0,9 0,9 0,8% Germany 0,9 0,9 1,4 11,4% 46 Milan, 12 th December 2008 Note(1): Other EU 15 countries (Belgium, Luxemburg, Denmark, Ireland, Greece, Portugal, Austria, Finland, Sweden) + Switzerland, Poland, Hungary, Russia Source: Flower Council of Holland 2007; A.T. Kearney analysis 23

24 The main competitors are integrating their business along the value chain, with broad portfolios and widespread distribution DFG First competitors of Ciccolella in terms of geographical coverage and portfolio broadness It is expanding its presence in U.S. and reinforcing its sourcing activities in Zimbabwe 28 companies are included in the group, with a complete marketability among the entities In 2007 the DFG has grown faster than the market and now it accounts for over 10% of Dutch exports The company deals in cut flower, potted plants, cut foliage and bouquets It s active in 14 countries, with a worldwide coverage They vertical integrated their business opening different Cash & Carry stores across the Europe Finlay s Fleura Bocchi Finlay s Flamingo Group is a vertical integrated player active in the growing, processing, marketing and wholesale distribution of cut flower The group is one of the largest growers in Kenya, with over 100 million stems of Fairtrade certified cut flowers grown each year (92 ha in 2007 in Kenia), and they completed the construction of the initial ten hectares of greenhouses in China Fleura supplies cut flower and cut foliage to wholesaler, florists and retailers through network of 46 branches of its own with a predominantly Cash & Carry function (presence in Germany, The Netherlands, Austria, Italy, Poland and the Czech Republic) Fleura has integrated its business creating its own import and export companies, its own transport and logistics and its own Cash & Carry stores Bocchi Flower Trade Netherlands B.V. is active in Europe as a processor and trader of ornamental plants, fresh flowers and all kinds of goods relating to garden centers (pottery articles, artificial flowers & plants etc.) everywhere in Europe Bocchi Flower Trade Denmark delivers a wide assortment of "niche" products to garden centers and home supply stores of German retailers (such as Nobilis and Nordmannia greenery in bunches ) 47 Milan, 12 th December 2008 Source: company websites; interviews; The hundred most outstanding companies 2007 Timely deployment of the new production plan Ciccolella Group has planned to significantly increase its production capacity within 2009 with the completion of the Candela plant In order to be consistent with the expected output (n of stems of roses and anthurium included in the business plan) the Group has put in place a tight Program Management Office (PMO) to drive realization of the sites in respect of the key milestones By the end of the first half of 2008, the total area was more than 96 ha = Activities to be performed = Areas already completed and put in production 30/6/08 31/12/06 31/12/07 31/12/08 31/12/09 Molfetta (21,3 Ha) Molfetta and Melfi plant have been competed and are currently fully operating Melfi (28,1 Ha) Candela is currently at around 55% of its realization, but there is a clear plan to complete its development CANDELA (85,8 Ha) 48 Milan, 12 th December 2008 Source: Interviews, on Site visits 24

25 Benefits set by the law for the co-generation process A Legal requirements Energy producers have to generate a given % of energy from renewable resources How to fulfill the legal requirements Own production of renewable energy Purchase from external providers Benefits from co-generation Green certificates purchase exemption B Green certificates GC Energy distributors (both of electricity and gas) have to put in place specific action to reduce the energy consumption White certificates TEE 49 Milan, 12 th December 2008 Co-generation Scope of Ciccolella agreement Efficiency improvement in the production process Efficiency improvement in customer consumption Purchase from external providers Green certificates issue/ production White certificates issue/ production Direttiva Europea 23 August 2004 Source: D.Lgs 79/99, Poyry, Autorità per l Energia elettrica e il Gas, GME (AEEG), GSE, APER, A.T.Kearney experience 25