12M FWD EV/EBITDA 12M PRICE PERFORMANCE VS. IPC P/E

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1 AGUA Market Outperformer Price Target P$37.5 Price M Price Range 29 / 30.4 Shares Outstanding (Mill) 486 Market Cap (Mill) 14,587 Float 30% Net Debt (Mill) -3,221 EV (Mill) 11,366 Dividend Yield 0% e 2015e 2016e Revenues 5,412 6,672 7,725 9,259 EBITDA ,170 1,542 Net Profit Free CF EPS P/E EV/EBITDA P/BV Fernando Pérez Lizardi fplizardi@gbm.com.mx +52(55) ext Andrés Portilla Leroux aportilla@gbm.com.mx +52(55) ext AGUA the only player in a growing industry with innovative solutions We are initiating coverage on AGUA with a Market Outperformer rating and a 2015 price target of P$37.5 per share, implying a 25% upside from current prices. Our investment thesis is based on the following: AGUA is the only water player in the market and is the market leader in most of the countries where it operates. Given the growing demand for water solutions, we believe that Rotoplas is well positioned to keep growing at a steady pace by introducing its water solutions into the market. Well defined growth opportunities. In addition to the normal operations, AGUA has identified four main growth drivers: Water Fountains (Mexico) Rainwater Harvesting System (Mexico and Brazil) Baño Digno (Mexico and Brazil) The United States Innovative products, with the required operating know-how. Rotoplas has been able to successfully introduce innovative products to the market by disrupting the way things were done, for example introducing the polyethylene water tank to replace the asbestos one. Furthermore, Rotoplas has the operational scale to be able to expand into different markets; the strategic location of its productive plants allows Rotoplas to successfully distribute its solutions. Returning Value to its shareholder. Rotoplas has historically been a high ROE /ROIC company, and we believe that the company should be able to successfully invest the proceeds from the IPO to return value to its shareholders. Solid financial position, coupled with a strong FCF generation. With the proceeds of the IPO, Rotoplas will have a net cash position and a total debt to equity ratio of 0.4x. Additionally, AGUA should have an average cash conversion of 36% in the next five years. We should note that we are not considering any possible acquisition, but it could act as a catalyst for the stock. 12M FWD EV/EBITDA 12M PRICE PERFORMANCE VS. IPC P/E /14 12/14 12/14 12/14 1/15 1/15 1/15 1/15 6.0% 4.0% 2.0% 0.0% -2.0% -4.0% -6.0% 12/14 12/14 12/14 12/14 AGUA 1/15 IPC 1/15 1/15 1/ /14 12/14 12/14 12/14 1/15 1/15 1/15 1/15 any security or participate in any trading strategy.

2 INDEX I. AGUA: LatAm s Largest Water Solutions Company 3 II. Investment Thesis 5 III. Key Financials 7 IV. Financial Summary 8 V. Valuation 10 VI. Industry 11 VII. AGUA s description 20 VIII. Peers 41 IX. Pros and Cons 42 X. Risks 42 any security or participate in any trading strategy. 2

3 I. AGUA: LatAm s Largest Water Solutions Company Rotoplas (AGUA) is the largest provider in LatAm of individual and integrated water solutions. AGUA has over 35 years of experience in Mexico providing water solutions, where it quickly became the market leader through innovation and marketing. Additionally, AGUA is the leader in almost all the markets where it operates. Rotoplas has been able to successfully evolve from a Mexican water tank company to a Regional Integrated Water solutions company. Currently, it has operations in 12 countries, with 25 plants, more than 2,600 employees, and over 23 thousand points of sale. This growth is also reflected in the results; thus, AGUA has TTM revenues and EBITDA of P$6.48 billion and P$886 million, respectively. These figures reflect a CAGR of 15.3 and 15.1% during the last 2 decades in terms of revenues and EBITDA, respectively. Rotoplas mission is to provide more and better water, through its innovative water solutions, to improve the quality of life. Rotoplas has the know-how and technologies to develop individual and integrated water solutions to face the global challenges of water scarcity and the decline of quality. The company offers the final consumer a complete solution to its water needs through its individual solutions, which are designed to solve the problems of water storage, flow and treatment. Additionally, Rotoplas takes advantage of its experience in individual solutions to offer integrated water solutions, which cover the more complex needs of its customers. In order to ensure the right performance and the integrated solutions, these are offered to clients with value added services, such as installation, engineering, designed, operations, and maintenance. Rotoplas has disrupted the market with the substitution of traditional products for the storage, conduction, and treatment of water using innovative water solutions with added value, seeking to meet users needs. For example, AGUA has been able to successfully revolutionize the Mexican water storage market by migrating from cement and asbestos water tanks to polyethylene tanks. Rotoplas continues to evolve, mostly driven by its R&D capabilities to develop solutions with cutting-edge technology. The company has over two decades of R&D of new technologies and line improvement; it focuses on highly-innovative and high-return projects, and it invests 1% of its revenues in R&D. This strategy has been proven successful. As a result, in the last twelve months, 37% of AGUA s revenues come from new products launched in the last 5 years. Source: GBM with company data. any security or participate in any trading strategy. 3

4 Rotoplas History The company started operations in 1978 under the corporate name Rotoplas S.A. de C.V. as a manufacturer of polyethylene products. In 1989, the Mexican water storage market was dominated by manufacturers of heavy and unsafe water tanks made of asbestos. In that year, Rotoplas identified an opportunity and introduced water tanks made of polyethylene to the market, quickly becoming market leader. Additionally, in 1996, the company began its international expansion by opening one production plant in Guatemala. In the following years, Rotoplas expanded its operations, and it is currently located in 12 countries across the continent was an inflection year for Rotoplas as it made the only acquisition in its history by acquiring Conmix in Argentina. Furthermore, during that year, Rotoplas won its first government contract, and in the next couple of years, it won several bids in Mexico and Brazil to supply water tanks, cisterns, outdoor composting bathrooms, and rainwater harvesting systems to marginalized populations in those countries. In 2014, Rotoplas opened its first production facility in California, USA, and made the debut in the Mexbol on December 10. Rotoplas Operating Segments Rotoplas divides its water solutions business into individual and integrated water solutions. The individual water solutions consist of products designed to store, carry, and treat water, offering end users a final solution to their needs. These types of solutions are sold without additional services and are mostly marketed and distributed through the existing network of distributors. Historically, the individual water solutions have been the primary source of revenues. The integrated water solutions comprise a mix of two or more individual water solutions combined to address more complex customer needs, requiring value-added services (engineering, installation, site development, project management, and maintenance). The integrated solutions require a more sophisticated method of sale, such as public biddings, mostly for government entities, NGOs, and foundations. The integrated solutions have been gaining a share as one of the company s sources of income. We believe this segment should continue to expand in the short term, benefiting the company s results as this segment is more profitable. Source: GBM with company data. any security or participate in any trading strategy. 4

5 II. Investment Thesis We are initiating coverage on AGUA with a Market Outperformer rating and a 2015 price target of P$37.5 per share, implying a 25% upside from current prices. 1. Rotoplas is a scarcity play in the Mexican market to benefit from the expected growth in Latin America s water solutions sector. The demand for water access and sanitation will be reflected in an increased need for infrastructure, thus creating a larger market for Rotoplas' solutions. The scarcity of water continues to be affected by global warming and water quality given the increase in demand due to population growth and the increase of inhabitants in urban areas. 2. Rotoplas has strong competitive advantages. The company has a large infrastructure that allows it to supply large scale orders, which coupled with its operating know-how translates into efficient distribution. Furthermore, the company offers added value to its clients through innovative solutions through its portfolio of products and through additional services such as installation and maintenance. 3. AGUA s IPO will allow the company to exploit the different opportunities to keep growing. Rotoplas has been able to raise both revenues and EBITDA at a CAGR of 15% in the last 19 years; with the proceeds of the IPO P$3.9 billion the company will be able to further expand its operations in new and existing markets, thus growing at a faster rate in the next five years. We are estimating that AGUA s EBITDA should register a CAGR of 21.5%. Additionally, Rotoplas could engage in M&A activity with the resources of the IPO, which would boost our expectations as we are only considering organic growth in our figures. Where? Growth Opportunity Market Size Water Fountains In March 2014, the Mexican Government passed a law that aims to encourage water consumption. The law requires that all schools in Mexico offer free potable water through drinking fountains. The government s target is for this goal to be achieved in 3 years with a total budget of P$10 billion. US$200 million Rainwater Harvesting Systems Water for Everyone increased its goal to install rainwater harvesting systems to an additional 1.5 million units. Rotoplas has won several contracts with different government entities; the company has the know-how to increase its participation in social programs through its Baño Digno solution. US$500 million Baño Digno (Outdoor Composting Bathroom) In Mexico, Rotoplas has offered its integrated solutions to SEDESOL. Under the Program for the Development of Priority Areas, Rotoplas can increase its participation through its integrated solutions business unit. US$800 million United States US$650 billion are needed in wastewater and drinking water infrastructure in the next 20 years. In 2012, California passed the Rainwater Capture Act encouraging residents to capture and use harvested rainwater. US$2.8 billion any security or participate in any trading strategy. 5

6 4. Government Programs. In the countries where Rotoplas has operations, there are certain government programs whose goal is to increase water access and sanitation for the people with the greatest need. Rotoplas offers a decentralized solution to this kind of problems and has been able to successfully establish a relationship both with the Mexican and the Brazilian market, having won a considerable share of the public bids. 5. Value creation for its shareholders. We are estimating that Rotoplas should have operating efficiencies that, moving down the P&L, should grow exponentially. We are estimating a CAGR for revenues, EBITDA, and net profit of 13.3, 21.5, and 28.25%, respectively. Additionally, the company has had high returns on equity and invested capital, which we believe it should be able to maintain in the long term. Furthermore, we are estimating that in the next five years the company should have an average cash conversion of 36% CAGR FCF Conversion 30% 28.2% 60.0% 25% 20% 15% 10% 5% 21.5% 13.3% 50.0% 40.0% 30.0% 20.0% 10.0% 0% Revenues EBITDA Net Profit 0.0% 2014e 2015e 2016e 2017e 2018e 2019e FCF Conversion Source: GBM Research any security or participate in any trading strategy. 6

7 III. Key Financials AGUA s top line should benefit from the integrated solutions growth. Rotoplas has been able to consolidate as market leader in the individual solutions segment and has successfully introduce its integrated solutions to the markets where it operates with plenty of room to keep growing in this bracket. Government programs should continue in the short term driven by the scarcity of water in LatAm, and the political benefit of the programs. We believe that the Mexican and Brazilian governments should continue to implement their social programs, such as The Fight against Hunger and Water for Everyone. In our assumptions, we are considering a CAGR of 6% in the individual solutions segment and 29% for the integrated division. Considering our expectations, integrated solutions will increase its weight in the revenue mix from the current 25% to 47% in the next 5 years. While LatAm should be the main driver in the company s figures, water scarcity is an increasing problem in developed countries. Another growth driver for Rotoplas will be the incursion into the US market, as it is currently facing one of its most severe droughts on record. Rotoplas will start operations in the states of California, Nevada, and Arizona. We expect this region to represent 10% of AGUA s revenues by All in all, we expect AGUA s revenues to register a CAGR of 13.3%. Profitability should increase in the short term. By the time that integrated solutions continue to gain a share in the revenue breakdown, Rotoplas should become more profitable as this segment has higher margins. Additionally, AGUA should benefit from the decline in oil prices, reflected in the drop in the price of its raw materials (polyethylene and polypropylene) as we estimate that resins account for 73% of the company s COGS. Furthermore, the opening of Ethylene XXI in 2015 in Mexico and other ethylene crackers in the US during 2017 should increase the supply of the feedstock, thus benefiting Rotoplas. Therefore, we are estimating that EBITDA margin should expand 570 bps within the next 3 years. AGUA s EBITDA should register a CAGR of 21.5%. Operating leverage should be reflected in a larger net profit increase. AGUA should register several operating efficiencies, coupled with interest gains as a result of its net cash position. Bottom line should register a CAGR of 28.2%. AGUA: a cash generator. AGUA should be able to have high cash conversion rates an average of 36% in the next 5 five years mostly driven by operating efficiencies and by a tight control of its working capital. We should note that we are not considering any possible acquisition. AGUA s Net Revenues Figures in millions of nominal MXN AGUA s EBITDA Figures in millions of nominal MXN AGUA s Net Profit Figures in millions of nominal MXN AGUA s Free Cash Flow to Equity Source: GBM any security or participate in any trading strategy. 7 14,000 12,000 10,000 8,000 6,000 4,000 2,000 2,500 2,000 1,500 1, ,600 1,400 1,200 1, ,200 1, CAGR: 13.3% 2014e 2015e 2016e 2017e 2018e 2019e CAGR: 21.5% 2014e 2015e 2016e 2017e 2018e 2019e EBITDA CAGR: 28.2% EBITDA mg. 2014e 2015e 2016e 2017e 2018e 2019e Net Profit Net Mg. Average FCF Yield : 4.3% 2014e 2015e 2016e 2017e 2018e 2019e FCF FCF Yield Average 19% 18% 17% 16% 15% 14% 13% 12% 11% 10% 12% 11% 10% 9% 8% 7% 6% 5% 9% 8% 7% 6% 5% 4% 3% 2% 1% 0%

8 IV. Financial Summary Income Statement 2014e 2015e 2016e 2017e 2018e 2019e CAGR % 6.8% 10.7% 9.8% 9.0% 6.3% Individual 5,016 4,677 5,179 5,686 6,200 6,591 6% 268.8% 84.1% 33.9% 23.1% 14.9% 1.3% Integrated 1,656 3,048 4,080 5,021 5,771 5,843 29% 23.3% 15.8% 19.9% 15.6% 11.8% 3.9% Total Revenues 6,672 7,725 9,259 10,707 11,970 12, % 25.8% 18.5% 18.8% 13.7% 11.7% 4.0% COGS 3, % 4, % 5, % 6, % 6, % 7, % 13% 19.8% 12.0% 21.4% 18.5% 12.0% 3.6% Gross Profit 2, % 3, % 3, % 4, % 4, % 5, % 13.3% 26.4% 1.3% 15.1% 13.9% 11.3% 4.1% SG&A 1, % 1, % 2, % 2, % 2, % 2, % 9% 30.8% Donations % 7.2% 37.8% 31.8% 25.3% 12.8% 3.1% EBITDA % 1, % 1, % 1, % 2, % 2, % 21.5% 40.8% 6.8% 20.5% 15.7% 11.8% 3.4% D&A % % % % % % 0.5% 47.8% 34.4% 27.3% 13.0% 3.1% EBIT % % 1, % 1, % 1, % 1, % 24.1% NFC % % % % % % Income Before Taxes % 1, % 1, % 1, % 1, % 2, % 30.0% Taxes Effective tax rate 25% 30% 30% 30% 30% 30% 4.9% 72.5% 33.0% 26.8% 13.8% 4.7% Net Profit % % % 1, % 1, % 1, % 28.2% Ratios 2014e 2015e 2016e 2017e 2018e 2019e EPS ROE 10.1% 10.9% 12.9% 14.2% 14.1% 12.9% ROIC 18.1% 23.2% 27.1% 30.0% 30.1% 28.5% Valuation 2014e 2015e 2016e 2017e 2018e 2019e EV/EBITDA 13.5x 9.6x 7.0x 5.2x 4.2x 3.5x P/E 35.6x 20.6x 15.5x 12.2x 10.8x 10.3x P/BV 2.4x 2.1x 1.9x 1.6x 1.4x 1.2x Net Debt to EBITDA 3.9x 3.0x 2.6x 2.4x 2.6x 3.0x any security or participate in any trading strategy. 8

9 Balance Sheet e 2015e 2016e 2017e 2018e 2019e Total Assets 2,736 3,413 4,410 8,815 9,665 10,907 12,349 13,954 15,449 Current Assets + Cash and equivalents ,505 4,760 5,186 5,877 6,848 7,987 + Accounts Receivables ,253 1,266 1,494 1,808 2,102 2,340 2,431 + Transactions with Related Parties Defferred Income Taxes Other Deferred Taxes Inventories ,163 1,304 1,439 1,476 + Prepayments Total Other TOTAL CURRENT ASSETS 1,280 1,834 2,797 6,999 7,657 8,663 9,869 11,280 12,571 Non Current Assets + Transactions with Related Parties Associates Investments PP&E 1,122 1,242 1,231 1,434 1,626 1,864 2,099 2,292 2,496 + Intangibles Deferred Income Taxes Derivatives & Financial Instruments Deposits TOTAL NON CURRENT ASSETS 1,456 1,579 1,613 1,816 2,008 2,245 2,480 2,674 2,878 LIABILITIES 1,308 1,734 2,439 2,634 2,771 3,065 3,303 3,539 3,602 Current Liabilities + Revolver Short Term Debt Accounts payable ,100 1,197 1,433 1,615 1,802 1,847 + Provisions Income Tax Payable Other Tax Payable Employee Profit Share Total other TOTAL CURRENT LIABILITIES 747 1,300 1,171 1,358 1,495 1,789 2,027 2,263 2,326 Long term Liabilities + Long term Debt ,216 1,216 1,216 1,216 1,216 1,216 1,216 + Employee Benefits Deferred Tax Income Derivatives & Financial Instruments TOTAL LONG TERM LIABILITIES ,268 1,276 1,276 1,276 1,276 1,276 1,276 TOTAL MAJORITY EQUITY 1,430 1,679 1,972 6,182 6,894 7,842 9,046 10,415 11,847 FCF 2014e 2015e 2016e 2017e 2018e 2019e EBITDA 849 1,170 1,542 1,932 2,179 2,247 Working Capital Interest Taxes CAPEX FCF ,139 any security or participate in any trading strategy. 9

10 V. Valuation We are initiating coverage on AGUA with a Market Outperformer rating and a 2015 price target of P$37.5 per share, implying a 25% upside from current prices. As AGUA is a growth story, we believe that the most accurate way to incorporate the company s growth potential into our valuation is through a Discounted Free Cash Flow approach. In turn, to obtain our price target we are using the average of our DCF and an EV/EBITDA target approach. AGUA s WACC Equity Weight 70.1% Debt Weight 29.9% Rf 536 bps Mkt Premium 545 bps β 1.50 Cost of Equity 13.54% Our valuation exercises are based on the following assumptions: 13.3% CAGR in AGUA s revenues. 21.5% CAGR in EBITDA. Working Capital should register an improvement mostly due to a decline in the days of inventory, towards 70 days. Tax rate of 30%. We are not considering any possible acquisitions. For the maintenance CAPEX, we are estimating that the company will continue to invest the same amount as the depreciation or around 3% of revenues. WACC of 10.8%. Perpetual growth of 4.0%. EV/EBITDA 2015 target of 12.0x. Tax Rate 30.0% Cost of Debt 6.3% WACC 10.8% AGUA s EV/EBITDA approach EV/EBITDA 12.0x EBITDA ,170 EV 14,041 Net Debt ,544 Minorty Participation 0 Rotoplas's Mkt. Cap 17,585 Shares 486 Price Target 36.2 Discounted Free Cash Flow 2014e 2015e 2016e 2017e 2018e 2019e Perpetual FCF EBITDA 849 1,170 1,542 1,932 2,179 2,247 2,337 Working Capital Taxes Operating Cash Flow ,139 1,388 1,543 1,699 CAPEX Free Cash Flow ,363 WACC 10.8% TOTAL PRESENT VALUE 15,555 Net Debt 2014e 3,289 Equity Value (P$) 18,844 Minority Interest 0 Shares Outstanding (000's) 486 Price Target 38.8 any security or participate in any trading strategy. 10

11 VI. Industry Water is the most vital resource on Earth. It is a limited global resource that is distributed unequally throughout the countries. 60% of all drinking water is concentrated in ten countries, This problem causes a need for major investments to ensure water supply for a growing global population; the increase in demand for drinking water caused by the growing population and the ongoing demand from agriculture and industry has made become a very important issue of how the scarce water resources are used. The five main trends in the global water solutions industry that are managing investment in the sector are: increased water demand, water cuts without sustainable supplies, poor water quality, centralized infrastructure challenges, and greater reuse of water. According to the World Health Organization, up to date, approximately 1.1 billion people do not have access to water for human consumption and more than 2.6 billion people lack access to basic sanitation services. This mainly explains why a current growth in water demand will require considerable investments during the next 20 years, in which the best technologies available for water reuse, water supply, and treatment will play a very important role. The World Health Organization estimates that global losses related to inadequate water supply and sanitation amount to approximately US$260 billion per year. As a result, it is estimated that around US$22.0 billion will be destined to the water solutions industry during the next 20 years, which makes the water solutions industry the largest investment component in infrastructure globally. The problem caused by the ongoing increase in water demand in some sectors has been addressed in a segmented manner, focusing on partial objectives, such as obtaining immediate water supply, instead of finding and applying solutions as part of a strategy to create a balance between different uses of water to optimize and share its benefits with society and the economy. Such fragmentation increases the risk for the sustainability of water resources. Furthermore, the impact of climate change on water resources and the demand for water generators transform water issues from an occasional problem into a serious problem in certain areas around the world. Global water demand (freshwater withdrawals)-km Water demand generators Water is an elemental component for all socio-economic sectors, contributing to each of them in different ways. Irrigation Domestic Livestock Manufacturing Electricity According to Wall Street Research, the global water industry Source: UN Water, GBM Research is worth US$600.0 billion and is expected to grow at a CAGR of 7.0% until According to the World Water Report, 100% of the global water demand is divided in 70% for agricultural use, 20% for industrial use, and 10% for human use and consumption. 0 OECD 2000 OECD 2050 BRICS 2000 BRICS 2050 ROW 2000 ROW 2050 World 2000 World 2050 any security or participate in any trading strategy. 11

12 The World Bank estimates that the global population will increase from 7.1 billion in 2012 to 8.3 billion by 2030 and 9.4 billion by By 2030, the estimated growth in the demand for food is 50.0%, and 70.0% by 2050, while the demand for energy will hike 60.0%. These two issues are related as the growth in agricultural production will increase consumption of water and energy; therefore, this situation enhances the competition for the access to water among the various sectors that consume it. The expansion in the demand for animal products is increasing water demand, not only during the breeding, but at every stage along the production process. It also affects water quality, which reduces its availability. Energy and water depend on each other; although there are various sources of energy and electricity, they all need water during the different production processes. Some of these processes are: the extraction of raw materials, thermoelectric cooling processes, cleaning materials, cultivation for biofuels, and for the operation of turbines. Furthermore, energy is used so that water may become available for human use and consumption through pumping, transportation, treatment, desalination, and irrigation. Amount of energy required to supply 1 m 3 of water safe for human consumption from various water sources Lake or river Groundwater Wastewater treatment Wastewater reuse The demand for water is intended for human Seawater use and consumption, which will have a significant increase mainly because the urban Source: UN Water, GBM Research areas will absorb the population growth over the next forty years. Most of the growth in population will occur in urban areas of developing countries. These countries are expected to have a significant increase in their standards of living in the coming decades; therefore, this causes the rise in water demand to exceed the population growth, assuming that, so far, a person in a developed country consumes an average of 400 liters of water per day while in a developing country a person consumes less than 100 liters of water per day, on average. In 2012, 89% of the global population used an improved source of drinking water, while 64% used an improved sanitation facility; this reflects an outstanding improvement from the levels registered in 1990 when 76% of the global population had access to an improved drinking water source, representing an increase of 2.3 billion people. Use of improved drinking water in 2012 (%) Percentage point change World Developed Regions Developing regions 67 Least developed countries Oceania Sub-Saharan Africa Caucasus and Central Asia South-eastern Asia Western Asia Southern Asia Eastern Asia Northern Africa Latin America & Caribbean World 1 Developed Regions Developing regions Least developed countries 6 Oceania 16 Sub-Saharan Africa -1 Caucasus and Central Asia 18 South-eastern Asia 6 Western Asia 19 Southern Asia 24 Eastern Asia 6 Northern Africa 9 Latin America & Caribbean Use of improved drinking water in 2012 (%) Source: UNICEF, World Health Organization, GBM Research Percentage point change Source: UNICEF, World Health Organization, GBM Research any security or participate in any trading strategy. 12

13 Use of improved sanitation facilities in 2012 (%) Percentage point change World 96 Developed Regions 57 Developing regions 36 Least developed countries 30 Sub-Saharan Africa Oceania Southern Asia Eastern Asia South-eastern Asia Use of improved sanitation in 2012 (%) Latin America & Caribbean Western Asia Northern Africa Caucasus and Central Asia World 1 Developed Regions Developing regions Least developed countries 6 Sub-Saharan Africa 0 Oceania 19 Southern Asia 40 Eastern Asia 24 South-eastern Asia Percentage point change Latin America & Caribbean 9 Western Asia 19 Northern Africa 4 Caucasus and Central Asia Source: UNICEF, World Health Organization, GBM Research Source: UNICEF, World Health Organization, GBM Research As of 2014, 56% of the global population, which is approximately 4 billion people, now has the highest level of access (a piped drinking water connection on premises), compared to 45% in The proportion of population without access to improved sanitation is expected to decrease from 51% in 1990 to 25% in 2015; the coverage of improved sanitation improved from 49% in 1990 to 64% in 2012, which means that between 1990 and 2012, approximately 2 billion people gained access to an improved sanitation facility, while open defecation decreased from 24 to 14%. On the negative side, 748 million people still do not have access to an improved drinking water source; of these people, almost 25% or 173 million rely on untreated surface water, and more than 90% live in rural areas. Furthermore, despite an outstanding progress on sanitation, in 2012, 2.5 billion people did not have access to an improved sanitation facility, which represents a decrease of only 7% from 2.7 billion in 1990; approximately 70% of these people live in rural areas. Open defecation is a practice strongly associated with poverty and exclusion. Over the past 22 years, the proportion of people practicing open defecation fell an impressive 21% from 1.3 billion in 1990 to 1.0 billion in 2012; nevertheless, those 1.0 billion people with no access to a sanitation facility whatsoever continue to defecate in gutters, behind bushes, or in open water bodies, such as rivers or lakes, with no dignity or privacy. To date, 90% of the people who practice open defecation live in rural areas, but the number in urban areas is gradually expanding. Regional drinking water coverage and increase since 1990 In 2012, in 35 countries, 26 of which are located in sub-saharan Africa, the coverage of improved drinking water supply was between 50 and 75%; furthermore, in Latin America and the Caribbean, the lowest levels of coverage are located in Dominican Republic, Ecuador, Haiti, Nicaragua, and Peru. Since 1990, drinking water coverage in developing regions has increased by 17 to 87%. Eastern Asia, Southern Asia, South-eastern Asia, Latin America, and the Caribbean all reduced their population without access to improved drinking water sources by more than 50%. Despite strong overall progress, 748 million people still did not have access to improved drinking water in Latin America and the Caribbean have the highest drinking water coverage among the developing regions, which is 94%. 748 million people or 9% of the global population, continue to rely on unimproved drinking water sources, approximately 173 million people of which still rely on direct use of surface water. any security or participate in any trading strategy. 13

14 Between 1990 and 2012, 2.3 billion people gained access to an improved drinking water source; of these people, 1.6 billion gained accesses to a piped supply on premises, while 700 million gained access to an improved supply, which could vary from a public tap to a hand pump, protected dug well, or protected spring. Latin America More than 8% of the global population lives in Latin America, and approximately 4% lives in Brazil and Mexico. In this region, 80% of the population lives in urban zones; the population in these zones has trebled during the last 40 years, and is expected to grow to 609 million by According to the Global Water Report, during the last decades, there has been a slow but steady expansion in the supply of drinking water and sanitation in the region. In 2008, 97% of the urban population and 80% of the rural population had access to drinkable water, while 86% of the urban population and 55% of the rural population had access to sanitation. On the negative side, in southern Mexico, Honduras, and Nicaragua, there are counties where less than 10% of the population has access to drinkable water, and in Mexico, 3.4 million houses do not have water at all. Brazil currently has the worst drought in 40 years, with many cities, including Sao Paulo, facing the risk of running out of water. According to the Global Water Report, in 2013, approximately 40 million people still did not have access to sanitation or piping services. According to the World Bank, it is estimated that less than 28% of the residual waters are treated before being unloaded into the rivers and water bodies, which causes pollution. This problem is intensified due to the lack of measures to ensure that the industry does not spill polluted water, especially in the small and medium industries, which have a low level of technological progress. The Millennium Development Goals In 2000, the leaders of 189 countries assembled in the United Nations Organization s headquarters and approved the Millennium Declaration, which consists in a commitment to work together for the construction of a more prosperous, safer, and equitable world. This declaration establishes eight main goals, with specific and measurable goals to be reach in 2015, known as the Millennium Development Goals. Water Facts Climate change is altering the amount, intensity, and frequency of precipitation. US$11.7 trillion needed in global investments by An estimated 200 million hours are spent each day globally collecting water In developing countries, women and children bear the responsibility for water collection in 76% of households 3.4 million people die each year from a water related disease, 99% occur in developing countries. 2.5 billion people lack access to improved sanitation; 1.1 billion still practice open air defecation More people have a mobile phone than a toilet. Nearly 66% of people who lack safe drinking water live on less than US$2 a day, and 33% on less than US$1 a day People living in Water Stressed Regions Among these objectives, there is one (objective no. 7) to guarantee the sustainability of the environment, for which the governments of these countries are committed, among others, to reduce by a half the proportion of people without access to drinkable water and the use of sanitary facilities. According to the report about the progress in the achievement of the objectives updated to 2014, between Source: UN Water, GBM Research any security or participate in any trading strategy. 14

15 2000 and 2012, Mexico managed to expand the population with access to drinkable water by 21%, and the population with access to sanitary facilities by 19%, which complies with the development indicators established by the World Health Organization and UNICEF. Despite this effort, 22% of the population in Mexico remains without access to sanitary facilities and 5% without access to drinkable water. Regarding Brazil, although it reached the objective to increase the number of people with access to drinkable water by 15% between 2000 and 2012, the report shows that it still has not reached the objective of increasing the use of sanitary facilities among its population. Regarding some of the other Latin American countries, the report shows that, in many of them, the need for their governments to increase efforts to expand the access to these basic services among its population prevails, mainly in terms of sanitation and sanitary facilities. Use of sanitation facilities (% of population) Urban Rural Total Country Year Population (000's) Percentage urban population Improved Shared Unimproved Unimproved Unimproved Other unimproved Open defecation Improved Shared Other unimproved Open defecation Improved Shared Other unimproved Open defecation Progress towards MDG target Proportion of the 2012 population that gained access since 2000 (%) , Argentina , , Belize , Brazil , , , Costa Rica , , , Ecuador , , , El Salvador , , , Guatemala , , , Honduras , , , Mexico , , , Nicaragua , , , Peru , , , USA , , Source: UNICEF, World Health Organization, GBM Research Met Target 15 Met Target 30 On Track 16 On Track 19 Met Target 27 On Track 12 On Track 28 Met Target 30 Met Target 21 Not On Track 11 On Track 18 Met Target 11 any security or participate in any trading strategy. 15

16 Use of drinking water sources (% of population) Urban Rural Total Improved Unimproved Improved Unimproved Improved Unimproved Country Year Total Piped on Other Other Improved premises improved unimproved Surface water Total Piped on Improved premises Other improved Other unimproved Surface water Total Piped on Improved premises Other improved Other Surface unimproved water Progress towards MDG target Proportion of the 2012 population that gained access since 2000 (%) Argentina Belize Brazil Costa Rica Ecuador El Salvador Guatemala Honduras Mexico Nicaragua Peru USA Source: UNICEF, World Health Organization, GBM Research Met Target Met Target Met Target On Track On Track Met Target Met Target Met Target Met Target On Track On Track On Track any security or participate in any trading strategy. 16

17 Progress towards the Millennium Development Goals drinking water target, 2010 Source: UNICEF, World Health Organization, GBM Research Mexico By 2014, Mexico had a total of 31 million houses of which 89.6% or 27.7 million had sewage, 88.7% or 27.5 million had water access and 96.0% or 29.7 million had toilet availability. Mexican water market Each year, Mexico receives 1.5 billion square meters of water coming from precipitation. Of this total, approximately 71.6% evaporates and returns to the atmosphere, 22.2% flows through rivers and streams and 6.2% infiltrates to the subsoil in a natural way and recharges the water basins. Considering the exports and imports of water with the neighbor countries, Mexico has a total of billion square meters of renewable freshwater annually. The rivers and streams of Mexico add to a hydrographic network of 633 thousand square meters of length; of these, 50 main rivers stand out, through which 87% of Mexico s surface runoff flows and whose basins cover 65% of the continental land area of the country. Based on its surface, the main basins of rivers that stand out are the ones of the Bravo and Balsas rivers, and based on length, the ones that stand out are the Bravo and Grijalva-Usumacinta rivers. Mexico s hydraulic infrastructure includes: 5,163 dams and waterfronts 6.4 million hectares with irrigation 2.9 million hectares of technified rain fed lands 699 water treatment plants in operation 2,342 municipal residual water treatment plants in Source: INEGI, GBM Research operation 2,530 industrial residual water treatment plants in operation 3,000 km of aqueducts any security or participate in any trading strategy. 17

18 Average annual values of the components of the hydrological cycle in Mexico Source: CONAGUA, GBM Research Brazil Brazilian water market By 2014, Brazil had approximately 63.3 million houses, around 83% of which had a general network, 10% had a well on their property, 4% had a well outside of their property, 1% had piping or rain water, and 1% was near a river. Based on type of sewage, approximately 56% had sewage or a rain water system, 12% had a septic tank, 25% had rudimentary sewage, 2% had a ditch, 2% were near a river, lake, or coast, 1% had another type, and 3% did not have a sewage system. For general purposes, Brazil can be divided into: a) three river basins: the Amazon, Tocantins-Araguaia, and San Francisco; or b) two river basin complexes or groups: the Plata river basin, which has three Brazilian sub-river basins (Parana, Upper Paraguay, and Uruguay), and the remaining rivers, which flow into the Atlantic and are divided into several basins. The Amazon and the Tocantins-Araguaia basins in the north account for 56% of Brazil s total drainage area; the long-term average internal renewable surface water resources are estimated at 5,661.2 km 3 /year. The Amazon basin accounts for 73.6% of the internal surface water resources. The total annual internal renewable water resources in the country are estimated at 5,661.2 km 3, and the total renewable water resources Source: IBGE, GBM Research account for 8,646.7 km 3. In 2008, total municipal wastewater produced and treated was 10.3 km 3 and 3.1 km 3, respectively. Direct use of treated municipal wastewater is estimated at km 3. any security or participate in any trading strategy. 18

19 In 2010, total dam capacity in Brazil was estimated at 700 km 3, this figure includes all hydroelectric dams in the country, dams larger than 10 million m 3 in the Northeast, and most important dams for the water supply of municipalities. The most important dams in the Northeast are Castanhao (6.7 km 3 ), Eng. Armando Ribeiro Goncalves (2.4 km 3 ), Oros (1.94 km 3 ), Pedra (1.64 km 3 ), Banabuiu (1.601 km 3 ), and Coremas Mae d agua (1.358 km 3 ). In 2010, total water withdrawal was estimated at billion m 3, 40,050 km 3 or 54% of which was for irrigation, 4.85 billion m 3 or 6% for livestock, billion m 3 or 23% for municipalities, and million m 3 or 17% for industries. In 2006 and 2000, total water withdrawal was estimated at billion m 3 and billion m 3, respectively. In 1996, agricultural withdrawal represented 61% of the total withdrawal, municipalities 21%, and industry 18%. United States of America Drought in the US by September 2014 Total freshwater and saline water withdrawals for 2010 were estimated at 355 billion gallons per day or 397,000 thousand acre-feet per year. Freshwater withdrawals represented 86% of the total, and saline water withdrawals made up the remaining 14%. Most saline water withdrawals were seawater and brackish coastal water used for thermoelectric power. Currently, the United States is facing a severe drought in 18 states. As a result, the government is starting to implement different measures to overcome this situation. For example, there is a Rainwater Source: US Drought portal Capture Act in the state of California, whose main points are the following: Californians may now legally capture and use rainwater harvested from rooftops. Departing from Western states' long-standing tradition of making it illegal to capture and use precipitation based on the prior appropriation doctrine, the California Legislature enacted and Governor Brown signed the "Rainwater Capture Act of 2012" [2012 Cal. Stats. ch. 537, Sec. 2.]. The Act exempts the capture and use of rainwater from rooftops from the State Water Resources Control Board's (SWRCB) permitting authority over appropriations of water. This development affords residential users and private and public entities with a new source of on-site water supply, which should reduce reliance on potable water for landscaping needs and provide a recharge benefit to underlying groundwater aquifers. Rotoplas started operations in the US in the state of California, reaching the market of the states of Nevada and Arizona. In the states of California, Nevada, and Arizona, the total number of houses is 17.7 million, 13.7 million of which are in California, 1.2 million in Nevada, and 2.8 million in Arizona. Of these totals, 72 thousand houses in California, 6 thousand houses in Nevada, and 18 thousand houses in Arizona lack full plumbing facilities. Additionally, due to the recent droughts, the houses in the US start to need certain solutions to store water in times when this vital element is scarce. any security or participate in any trading strategy. 19

20 VII. AGUA s description 1. LatAm s largest water solutions provider Rotoplas (AGUA) is the largest provider in LatAm of individual and integrated water solutions. AGUA has over 35 years of experience in Mexico providing water solutions, where it quickly became the market leader through innovation and marketing with a market share of around 85% in the water tanks. Additionally, AGUA is the leader in almost all the markets where it operates. Rotoplas has been able to successfully evolve from a Mexican water tank company to a Regional Integrated Water solutions company. Currently, it has operations in 12 countries, with 25 plants, more than 2,600 employees, and over 23 thousand points of sale. This growth is also reflected in the results; thus, AGUA has TTM revenues and EBITDA of P$6.48 billion and P$886 million, respectively. These figures reflect a CAGR of 15.3 and 15.1% during the last 20 years in terms of revenues and EBITDA, respectively. Rotoplas mission is to provide more and better water, through its innovative water solutions, to improve the quality of life. Rotoplas has the know-how and technologies to develop individual and integrated water solutions to face the global challenges of water scarcity and the decline of quality. The company offers the final consumer a complete solution to its water needs through its individual solutions, which are designed to solve the problems of water storage, flow and treatment. Additionally, Rotoplas takes advantage of its experience in individual solutions to offer integrated water solutions, which cover the more complex needs of its customers. In order to ensure the right performance and the integrated solutions, these are offered to clients with value added services, such as installation, engineering, designed, operations, and maintenance. Rotoplas has disrupted the market with the substitution of traditional products for the storage, conduction, and treatment of water using innovative water solutions with added value, seeking to meet users needs. For example, AGUA has been able to successfully revolutionize the Mexican water storage market by migrating from cement and asbestos water tanks to polyethylene tanks. Rotoplas continues to evolve, mostly driven by its R&D capabilities to develop solutions with cutting-edge technology. The company has over two decades of R&D of new technologies and line improvement; it focuses on highly-innovative and high-return projects, and it invests 1% of its revenues in R&D. This strategy has been proven successful. As a result, in the last twelve months, 37% of AGUA s revenues come from new products launched in the last 5 years. Source: GBM with company data. any security or participate in any trading strategy. 20

21 2. Rotoplas History The company started operations in 1978 under the corporate name Rotoplas S.A. de C.V. as a manufacturer of polyethylene products, such as pots and containers for residential use, through the rotational molding process. After a series of corporate restructures, the company operates under the name of Grupo Rotoplas S.A. de C.V. In 1989, the Mexican water storage market was dominated by manufacturers of heavy and unsafe water tanks made of asbestos. In that year, Rotoplas identified an opportunity and introduced water tanks made of polyethylene to the market. These were lighter, easier to install, and inhibited bacterial growth. With this innovation, Rotoplas revolutionized the market and allowed Rotoplas to position itself as an innovative and reliable company. In 1993, the company founded the R&D center, with the purpose of generating new and better water solutions, manufacturing processes, and value-added water solutions. Additionally, in 1996, Rotoplas began its international expansion by opening one production plant in Guatemala. In the following years, Rotoplas expanded its operations, and it is currently located in 12 countries across Central and South America. In 2003, Aqua International Partners, a private equity fund managed by Texas Pacific Group (TPG) at that time, the only fund specialized in water acquired 20% of Rotoplas, recognizing its growth and value creation potential. Furthermore, during that year, Rotoplas launched its first water flow solution (the polypropylene pipe) under the Tuboplus brand, once again revolutionizing the market by shifting for copper and CPVC pipes to polypropylene. In 2008, Rotoplas began the implementation of its Enterprise Resource Planning (ERP) software developed by SAP, allowing it to refine and improve its operating processes. The software was the foundation for the creation of its centralized shared services center one year later, focused on consolidating and making its operations more efficient. In 2010, the shareholders repurchased the 20% acquired by Aqua International. During this partnership, Rotoplas was able to migrate from a small family-owned business to a well-established and institutional company was an inflection year for Rotoplas as it made the only acquisition in its history by acquiring Conmix in Argentina. Furthermore, during that year, Rotoplas won its first government contract, and in the next couple of years, it won several bids in Mexico and Brazil to supply water tanks, cisterns, outdoor composting bathrooms, and rainwater harvesting systems to marginalized populations in those countries. In 2014, Rotoplas opened its first production facility in California, USA, and made the debut in the Mexbol on December 10. any security or participate in any trading strategy. 21

22 A successful growth story: From a water tank company to a water solutions company country 800 direct clients 500 employees 3,000 points of sale 2 product lines 9 plants Revenue: P$500 million EBITDA: P$70 million countries 6,850 direct clients (9x) 2,750 employees (6x) 23,000 points of sale (8x) 17 product lines (9x) 25 plants (3x) Revenue TTM 3Q14: P$6.5 billion EBITDA TTM 3Q14: P$877 million Source: GBM with company data. 3. Water Solutions: Rotoplas divides its water solutions business into individual and integrated water solutions. a) Individual Solutions: The individual water solutions consist of products designed to store, carry, and treat water, offering end users a final solution to their needs. These types of solutions are sold without additional services and are mostly marketed and distributed through the existing network of distributors. Historically, the individual water solutions have been the primary source of revenues. any security or participate in any trading strategy. 22

23 I. Water Storage Solutions: The water storage solutions have been the company s main products. Rotoplas has been able to gain market share mostly due to the innovation of the products in which it has disrupted the market by introducing Polyethylene tanks. As a result, the company has a leadership position in almost all the markets where it operates. These solutions consist of cisterns, industrial tanks, water tanks, and accessories, with a storage capacity of between 250 and 25,000 liters. All of these products provide solutions to store water for immediate or future use in urban and rural areas. The production procedure of the individual storage solutions is through rotomolding. Rotoplas Cisterns: Capacity: 1,200-16,000 liters. Installed underground in houses and buildings. Made of a polyethylene outer layer and an antimicrobial inner layer. Equipped with pumps and accessories, such as the exclusive HydroNET filter developed by Rotoplas. In T9M, it represented 23.8% of revenues. Rotoplas Industrial Tank: Capacity: ,000 liters. Ideal for industrial use, it can store over 300 dense corrosive chemicals. Made of reinforced polyethylene. Equipped with pumps and accessories, such as the exclusive HydroNET filter developed by Rotoplas. Rotoplas Water Tanks: Capacity: 450-2,500 liters. Installed on the roof of houses and buildings. Made of a polyethylene outer layer, an intermediate foamed layer that provides stability and structure, and an antimicrobial inner layer. Equipped with accessories, such as the exclusive HydroNET filter developed by Rotoplas. In T9M, it represented 24.6% of revenues. Rotoplas Cone bottom tanks Capacity: ,000 liters Rotoplas Hauling tanks Capacity:1,000-5,000 liters any security or participate in any trading strategy. 23

24 Accessories: Valves, electronic sensors for water storage levels, float-balls, fittings Source: GBM with company data. II. Water Flow Solutions: The individual water flow solutions provide solutions to carry high quality water in rural and urban areas, by conducting water into edifications such as buildings and houses. The solutions consist of hydraulic pumps, sanitary catch pits, hydraulic pipes, and sewer pipes. Rotoplas pipes are produced with high-technology materials, such as the antibacterial film that improves the quality of water and gives additional value to the pipes, differentiating from those of CPVC and copper. The solutions are manufactured through the extrusion process and range in diameter between 20 mm and 160 mm. Rotoplas Hydraulic Pumps These solutions are energy efficient, quiet to operate, and can be installed outdoors. Centrifugal pumps provide a greater volume of water. Peripheral pumps assist in pumping water at high altitudes. Submersible pumps used to extract water due to flooding. Hydro-pneumatic pumps maintain a constant pressure in hydraulic systems. Circulating pumps used for gas water heaters with no tank. Tuboplus Sanitary Catch Pits Wastewater collectors that redistribute fluids without affecting the flow of liquids. Resistant to fissures. Simple installation because they are lightweight, prefabricated and with fittings that can be easily adapted to a pipeline. any security or participate in any trading strategy. 24

25 Tuboplus Hydraulic Pipes Designed to carry hot and cold water. Provide a wide range of pipes and fittings. Can be used in heating or air-conditioning systems. Prevent fissures due to their thermofusion technology. Diameters ranging between 20 and 110 mm. Made of two layers: polypropylene outer layer that protects from UV rays, and an antibacterial inner layer that inhibits bacterial growth. Important characteristics: low pressure drop, high resistance to low temperatures, lightness, and flexibility. In T9M, it represented 10.8% of revenues. Tuboplus Sewer Pipes: Source: GBM with company data. Designed to carry wastewater, to meet the needs of all sanitary networks for houses, buildings, or industries. Diameters ranging between 40 and 160 mm. Made of three layers of highly resistant polypropylene that protects from impact and UV rays, and an antibacterial inner layer that inhibits bacterial growth. The double-lip joint ring ensures a perfect seal and prevents the use of special glues. The double-lip joint ring is designed to withstand oil and chemicals. III. Water Treatment Solutions: The individual water treatment solutions provide solutions to improve the quality of water in urban and rural areas. The solutions consist of biodigesters, water heaters, water filters, and water purifiers. The solutions are manufactured in the injection plant and the rotomolding plants. Rotoplas Biodigesters Self-cleaning biodigesters Patented product Designed for residential use in homes that lack sewage or wastewater treatment systems Efficient and hygienic alternative to concrete septic tanks and latrines Capacity between 600 and 14,000 liters Help to prevent contamination of groundwater any security or participate in any trading strategy. 25

26 Water Heater Equipped with solar or electric panels that save up to 70% in gas consumption. Highly resistant to impact. Even on cloudy days, the water heater is able to maintain the water temperature at 65 C (149 F). Rotoplas Water Purifier Features the exclusive HydroPur technology made of activated carbon coated with colloidal silver, retaining 99% of bacteria. Each HydroPur cartridge is equivalent to aprox. 2,400 liters. Sponsored by INFONAVIT s Green Mortgage and Renew your Home programs in Mexico. Rotoplas Water Filters Feature the exclusive HydroNet technology developed by Rotoplas, which retains 99% of particles greater than 50 micron. Prevents the pipes from clogging. Reverse Osmosis Purifier Produces 100% reliable water for drinking and food preparation. Capable of reducing salts, chemicals, and organic substances, giving the water a better taste, color and odor. Provides 185 liters of purified water per day. A total yield of 33,000 liters per cartridge. Source: GBM with company data. b) Integrated Solutions: The integrated water solutions comprise a mix of two or more individual water solutions combined to address more complex customer needs, requiring value-added services (engineering, installation, site development, project management, and maintenance). The integrated solutions require a more sophisticated method of sale, such as public biddings, mostly for government entities, NGOs, and foundations. The integrated solutions have been gaining a share as one of the company s sources of income. We believe this segment should continue to expand in the short term, benefiting the company s results as this kind of products is more profitable. any security or participate in any trading strategy. 26

27 Rainwater Harvesting System Solution for water scarcity in rural and urban communities by collecting and reusing rainwater in a sustainable way. Capable of storing 5,000-16,000 liters of water Simple design for easy installation, use, and maintenance. It is comprised of a rainwater tank, storm filter, and kit of gutter and hand pump. In T9M, it represented 22.3% of revenues. Outdoor Composting Bathroom (Baño Digno) It is commercialized under the name Baño Digno (Proper Bathroom). Offers a solution to problems of poor sanitation in rural or remote areas. Improves people s quality of life and reduces the propensity to gastrointestinal and respiratory diseases. An innovative alternative to concrete septic tanks and latrines. It is comprised of an individual water tank, a biodigester that turns waste into compost, a toilet, a sink, hydraulic and sewer pipes, and one sludge valve. Drinking Fountains A solution to encourage the consumption of water as a substitute for soft drinks and sweetened beverages. Made of polyethylene and especially safe for children. Main purpose: to purify the water provided by municipal water supply and to provide quality drinking water. The purification process is operated through mechanical retention and does not require the use of chemicals. It consists of two modules: the purification and the dispenser modules. any security or participate in any trading strategy. 27

28 Wastewater Treatment Unit Designed to treat wastewater with organic pollution in hotels, hospitals, shopping centers, and rural communities. The units include Rotoplas industrial tanks, reinforced with polyethylene to prevent cracks and leaks. Designed to reduce noise and odors in addition to rejecting bacteria. 100% movable system easy to install. The use of these units helps to obtain the LEED certification. Purifying Unit Source: GBM with company data. Designed to improve the quality of rainwater, water from wells, and water provided by municipal networks at a lower cost. Eliminates viruses, bacteria, heavy metals, and dissolved salt associated with diseases. Provides pure water throughout a hydraulic network, which is installed using Rotoplas hydraulic pipes. Ideal for hotels, hospitals, residential complexes, and rural communities. Capacity ranges from 5,000 to 30,000 liters per day. Offered in two models: ultrafiltration system and reverse osmosis system. 4. Geographic Markets Currently, the company has operations in 12 countries in America, classified into three different geographic regions: a) Mexico: The operation in Mexico includes the production and commercialization of individual (storage, flow, and treatment) and integrated solutions. The company has 11 production facilities in Mexico, one distribution center in Hermosillo, Sonora, and one R&D located in Leon, Guanajuato. During the first 9 months of 2014, Mexico represented 46.2% of total revenues. b) Brazil: The operation in Brazil includes the production and commercialization of individual and integrated solutions for water storage and treatment, especially the rainwater harvesting system. The company has 9 production plants located in the Northeast of the country. During the first 9 months of 2014, Brazil represented 43.2% of total revenues. c) Others: The company has operations in Belize, Costa Rica, El Salvador, Guatemala, Honduras, and Nicaragua in Central America; additionally, it has operations in Peru and Argentina in South America. Rotoplas started operations in September 2014 in the United States, operating in the states of California, Arizona, and Nevada. These operations include the production and commercialization of individual and integrated solutions for water storage, flow, and treatment. In this region, the company has 5 production plants (1 in Guatemala, Peru, and California, and two in Argentina) and 5 distribution centers strategically located across the region. During the first 9 months of 2014; others represented 10.7% of total revenues. Furthermore, Rotoplas has presence in Ecuador through an indirect non-controlling investment in Dalkasa Ecuador. Dalkasa Ecuador is a private company in Quito, Ecuador, dedicated to the production and any security or participate in any trading strategy. 28

29 commercialization of individual water storage and treatment solutions. At the end of September 2014, Rotoplas had en equity participation of 49.9% in Dalkasa Ecuador. Geographic Breakdown Revenues 9M14 EBITDA 9M14 12% 2% 47% 42% 41% 56% Mexico Brazil Others Mexico Brazil Others Source: GBM with company data. 5. Competition: Rotoplas competes with multinational, regional, and domestic companies in all the markets where it has operations. Nevertheless, Rotoplas has been able to differentiate from is competitor with the quality of its water solutions, the manufacturing processes, the unique distribution network, and its sale process and customer service. Rotoplas has been able to become the leader in most of the markets where it operates, due to the differentiation of its products from its competitors, as Rotoplas products have value-added services. Additionally, it has been able to disrupt the markets by introducing innovating technologies. Mexican water storage industry: by the end of 2013 Rotoplas had a market of over 50%. Main competitors: Grupo Kaluz (Elmentia), Cemix, Rotomex, IUSA, Citijal, Giroplas, and 50+ local manufacturers. Mexican water flow industry: Rotoplas sells its individual water flow solutions under the Tuboplus brand, and competes against producers of hydraulic and sewer pipes made of three different materials: copper, CPVC, and polypropylene. In the last couple of years, PP pipes have been gaining market share, due to the increase in copper prices and to their better physical qualities. Main competitors: Nacobre, Amanco (MEXICHEM), IUSA, EMMSA, and Verdeplus. Rotoplas believes that it is the leader in the water flow industry, with more than 20% of the total meters sold. In Brazil, the main competitors are Fortlev, Tigre, Amanco, and several other local producers. Peru: market share of over 50% in the water tanks industry. Competitors: Eternit, Amanco, Nicoll, Sole, and Bryant. Argentina: market share of over 25% in the water storage industry. Competitors: Obraplus, Eternit, and Ineca. any security or participate in any trading strategy. 29

30 Central America: market share of over 50% in the water storage and treatment industries. Competitors: Durman, Cemix, Talishte, Rototec, and Tank House. United States: The water storage market in the United States is extremely pulverized; the top five companies that produce plastic tanks through rotomolding processes have approximately 60% of the market share. The leading brands are Snyder and Norwesco, both owned by the same private equity fund (Leonard Green & Partners). Rotoplas: Market Leader Integrated Solutions Rotoplas has been able to introduce its integrated solutions to the market as it pioneers the market with innovative solutions. The integrated solutions have a large growth potential and Rotoplas has positioned itself as the leader in this kind of solutions. Source: GBM with company data. 6. Innovation and Brand recognition The company focuses on developing water solutions with added value for the end customer. The dedication and investment in R&D has allowed Rotoplas to create innovative individual and integrated water solutions that help the company to expand into new markets. For over 20 years, Rotoplas has developed and researched in its Research and Development new technologies to create innovative solutions and to improve its current portfolio and production process. Rotoplas R&D center is mostly focused on two capabilities: New product development: focused on an offensive innovation of new products to increase its revenues. Existing product improvement: focused on defensive innovation to maintain or increase the market share. Rotoplas invests 1% of its revenues in R&D. TTM Revenue Breakdown 37% 63% Existing Products New Products (launched in previous 5 years) Source: GBM with company data. any security or participate in any trading strategy. 30

31 One of Rotoplas main competitive advantages is the positioning of its brands in the markets where it operates. According to a study performed by TNS in January 2014, the Rotoplas brand is recognized immediately by 75% of the people seeking for a water storage solution in Mexico, being the most recognized brand. This top of mind level is comparable with the one of large brands such as CocaCola. The wide recognition of the Rotoplas brand has allowed certain products to position themselves as an aspirational and indispensable product, such as the water tank, allowing the company to sell the products as a value-added product and thus establish the reference prices. In order to maintain the brand awareness, Rotoplas has invested around 3% of its revenues in marketing strategies in the last three years. Additionally, every installed water tank with the company s logo helps as an additional marketing tool. 7. Production Plants and Distribution Centers Rotoplas has 25 production plants and six distributions centers strategically located in Mexico, Brazil, Peru, Argentina, Central America, and the United States. Rotoplas has four types of production plants. a) Rotomolding plants: Most of the water solutions are produced in the rotomolding plants through the rotational molding process, a process that involves heating a hollow mold that is slowly rotated around two perpendicular axes or levels and filled with a polymer that distributes throughout the walls of the mold. The mold rotates during the whole time of the production process to maintain even thickness and avoid deformations. There are two types of rotomolding processes: open flame and oven rotational molding. The rotomolding plants have the capacity to produce water storage containers ranging from 250 to 25,000 liters, distributed efficiently within 500 km. The process consists of four different stages: raw material unloading, manufacturing, finished product, and warehouse. The raw material and the accessories come from the compounding and injection plants, respectively. Additionally, the rotomolding plants serve as warehouses for inventory. At the end of September 2014, Rotoplas had 21 rotomolding plants: 8 in Mexico, 8 in Brazil, 1 in Peru, 2 in Argentina, 1 in Guatemala, and 1 in the US. b) Raw materials (Compounding) plants The compounding plants produce the compound used in the rotomolding process. The raw material is processed in these plants by mixing polyethylene pellets with color and additives, such as bacteria repellents, to create a value-added compound. The whole production of these plants is for internal use and it is not sold to third parties. At the end of September 2014, Rotoplas had 2 raw materials plants located in Mexico, which distributes to all the plants located outside Brazil, and one in Brazil, which distributes to the plants in Brazil. c) Injection Plant: The injection plant produces most of the components and accessories that complement the water storage and treatment solutions. The plant is equipped for the following processes: Thermoplastic Injection molding: The polymer is melted or softened with heat and then injected into a hollow mold at specific pressure, speed, and temperature. After the mold is filled with the polymers, it is left to cool down until the raw material solidifies again taking the form of the mold. any security or participate in any trading strategy. 31

32 Injection Blow molding: The polymer is melted or softened in an extruder barrel and is then fed into a manifold where it is injected through nozzles into a hollow, heated mold. The mold forms the external layer and is clamped around the core rod, which forms the internal shape of the polymer. Examples of components and accessories: water level sensors, float-balls, multi-fittings, filters, and purifiers. At the end of September 2014, Rotoplas had 1 injection plant located in Mexico. d) Extrusion Plant: All the hydraulic and sewer pipes and some of the water flow solutions and accessories are produced in the extrusion plant. Extrusion is a process used to create fixed cross-sectional objects by pushing or drawing a thermoplastic material through a die of the desired cross-section. The whole production of these plants is for internal use and it is not sold to third parties. At the end of September 2014, Rotoplas had 1 extrusion plant located in Mexico. e) Distribution Centers: At the end of September 2014, Rotoplas had six distribution centers located in Mexico, Costa Rica, El Salvador, Honduras, Nicaragua, and Peru. All the properties where the distribution centers are located are leased by Rotoplas. Like the rotomolding plants, the distribution centers are strategically located to make distribution more efficient and reduce costs. At the distribution centers, Rotoplas has finished product inventory; nevertheless, it does not have any production or manufacturing processes. Geographic Footprint Source: GBM with company data. any security or participate in any trading strategy. 32

33 Rotoplas production plants by September 2014 Facility City State Country Manufacturing process Production surface area (m2) Annual capacity (tons) Utilization Coverage Owned/ Leased Years of operation Raw materials Guadalupe Nuevo Leon Mexico Compounds 1,556 48,000 90% Lat Am Owned 10 Injection Lerma Lerma State of Mexico Mexico Injection/ accessories 6,461 96,000,000 90% Lat Am Owned 20 Extrusion Leon Leon Guanajuato Mexico Extrusion pipes 13, ,000,000 75% Lat Am Owned 7 Anahuac Mexico City Mexico City Mexico Rotomolding 2,322 8,458 70% Local O/L 36 Pacifico Los Mochis Sinaloa Mexico Rotomolding 1,820 3,076 65% Local Owned 19 Golfo Veracruz Veracruz Mexico Rotomolding 4,135 4,392 65% Local Owned 21 Guadalajara Guadalajara Jalisco Mexico Rotomolding 4,275 4,150 50% Local Owned 23 Sureste Merida Yucatan Mexico Rotomolding 2,400 3,591 55% Local Owned 20 Tuxtla Tuxtla Gutierrez Chiapas Mexico Rotomolding 1,021 1,257 50% Local Leased 19 Monterrey Guadalupe Nuevo Leon Mexico Rotomolding 2,400 5,900 38% Local Owned 23 Leon Leon Guanajuato Mexico Rotomolding 6,650 8,700 70% Local Owned 21 Extrema Extrema Minas Gerais Brazil Rotomolding 3,000 6,000 80% Local Owned 2 Montes Claros Montes Claros Minas Gerais Brazil Rotomolding 9,000 12,300 86% Local Leased 2 Penedo Penedo Alagoas Brazil Rotomolding 1,300 9,000 86% Local Leased 2 Petrolina Petrolina Pernambuco Brazil Rotomolding 25,000 8,600 86% Local Leased 2 Teresina Teresina Piaui Brazil Rotomolding 5,000 6,900 86% Local Leased 2 Maracanau Maracanau Ceara Brazil Rotomolding 39,000 17,400 86% Local Leased 1 Palmas Tocantins Palmas Tocantins Brazil Rotomolding 6,000 3,001 86% Local Leased 1 Simoes Filho Simoes Filho Bahia Brazil Rotomolding 4,000 8,600 86% Local Leased 1 Simoes Filho Simoes Filho Bahia Brazil Compounds 4,000 21,000 90% Local Leased 1 Peru Lima Lima Peru Rotomolding 2,923 4,295 57% Local Leased 16 Pilar Pilar Buenos Aires Argentina Rotomolding 2,062 3,925 67% Local Owned 17 Tucuman Tucuman Tucuman Argentina Rotomolding 1,050 1,152 63% Local Leased 3 Guatemala Villanueva Guatemala Guatemala Rotomolding 1,245 2,644 65% C America Owned 18 Salvador Merced California US Rotomolding 26,300 2,000 - Local Leased - Source: GBM with company data 8. Raw materials & Suppliers The raw materials represent around 73% of the COGS, while the remaining costs are distributed among energy, labor, and others. We are estimating that resin prices should continue with their downward trend driven by the decline in oil prices, as the most significant feedstock are derivatives from oil or gas, and due to the opening of new ethylene crackers in Mexico (2015 with Ethylene XXI) and in the US in 2017 (including the MEXCHEM and OXY cracker). Polyethylene (PE): an oil or gas derivative consisting of a white thermoplastic, transparent to translucent, often made of thin transparent sheets. By using dyes, a variety of colored products can be obtained. PE is the main raw material used in the rotomolding process and is exclusively transformed in the compounding plants. Polypropylene (PP): an oil or gas derivative consisting of a semi-crystalline thermoplastic material. PP has many applications and is one of the most developed thermoplastic products. It is an inert, recyclable product, on which incineration has no polluting effect. Its production has the lowest environmental impact. PP is the main raw material in the production of the individual water flow solutions. Calcium Carbonate: an abundant substance in nature, found as the major component in the form of rocks worldwide. It is mainly used in the production of individual water storage solutions. Masterbatch: a solid or liquid additive used to add color to plastics. any security or participate in any trading strategy. 33

34 Raw material prices behavior 100% 30% 80% 60% 40% 20% 0% -20% -40% -60% 20% 10% 0% -10% -20% -30% -40% -50% -60% Jan-13 Mar-13 May-13 Jul-13 Sep-13 Nov-13 Jan-14 Mar-14 May-14 Jul-14 Sep-14 Nov-14 Jan-15 Jul-14 Aug-14 Aug-14 Sep-14 Sep-14 Oct-14 Oct-14 Nov-14 Nov-14 Dec-14 Dec-14 Dec-14 Jan-15 Jan-15 Oil Natural Gas Polyethylene Polypropylene Oil Natural Gas Polyethylene Polypropylene Source: Bloomberg Suppliers Rotoplas is one of the largest buyers of polyethylene in the world, thus gaining certain price power. The company acquires most of its feedstock from suppliers in North America and in Brazil; nevertheless, it has several suppliers in Asia and Europe to diversify the risk. Rotoplas has a total of over 4,700 suppliers around the world. Rotoplas most important suppliers Source: GBM with company data 9. Sales and Distribution. Rotoplas solutions are sold through two different sales models in all the countries where it operates: Sales to distributors: this model constitutes the main source of income in all the countries where it operates, excluding Brazil. With this model, the solutions are sold to distributors, which afterwards sell the solutions to end users through their own points of sale and infrastructure. Direct Sales: used for specific projects, particularly government contracts. The company has been focusing on direct sales to government programs in the last couple of years; as a result, it has become the largest source of income in Brazil. Additionally, this kind of sales includes value-added services to the end user, such as product delivery, installation, and maintenance. Distribution Channels: a) Traditional Channel: water solutions sold directly to distributors who in turn sell them to end-users through their different points of sale. b) Government Channel: water solutions sold to non-for-profit organizations, such as NGOs, and to government entities and agencies at the federal, state, and municipal levels. any security or participate in any trading strategy. 34

35 c) Construction Channel: water solutions sold to companies engaged in the construction industry, both at regional and national levels. d) Modern Retail Channel: water solutions sold to home centers (home improvement stores), which offer both building and home improvements supplies. e) Industry Channel: water solutions sold to the production industry, such as manufacturing facilities and the agricultural sector. Revenue Breakdown by Distribution Channel M14 14% 9% 5% 9% 6% 2% 34% 8% 64% 49% Source: GBM with company data Historically, the most important distribution channel in terms of sales has been the traditional channel. Nevertheless, in the last couple of years, driven by the increase in government contracts, the government channel has become ever more important. Traditional Channel vs. Government Channel 70% 60% 50% 40% 30% 20% 10% Traditional Government Construction Modern Retail Industry 0% M14 Traditional Government *Percentage of revenues Source: GBM with company data Rotoplas has approximately 6,850 customers; most of them are authorized distributors of water solutions. Sales to distributors are made through direct purchases based on purchase orders. Rotoplas offers distributors wholesale and bulk discounts to encourage large purchase orders, generate new business, and cultivate customer loyalty. Additionally, Rotoplas offers its distributors training and customer services to develop instore merchandising support to sales representatives. During , Rotoplas trained and certified over 5 thousand plumbers per year; the company has 7,251 of them in its database to ensure the quality of the water solutions and to develop new and easier installation methods. any security or participate in any trading strategy. 35

36 The remainder of the customers are direct customers, primarily government entities and agencies. Rotoplas has over 300 different government entities as customers. By the end of September 2014, the sales to government entities and agencies in Brazil represented 37.7% of total sales, 12.8% of which were sales to a single government entity. Excluding this entity, no other customer represented over 10% of the total sales. Distribution Network: Rotoplas outsources distribution and transportation services to specialized transportation service companies that work together to ensure the quality, proper manner, and time of delivery. Rotoplas does not own or manage freight vehicles in any of the countries where it operates. The distribution network has two different levels: Primary: consisting in the distribution of raw materials, compounds, accessories, and products from the compounding, injection, and extrusion plants to the rotomolding plants. The distribution in Mexico and Central America is mostly made by land and the distributions to Brazil, Peru, Argentina, and Ecuador, by sea. Rotoplas exports an average of 100 containers per month to its operations outside of Mexico. On average, the expenditure for primary distribution services has been 1.9% of net sales. Secondary: consisting in the distribution of finished products from the production plants in Mexico to the customers using third-party distribution. On average, the expenditure on primary distribution services has been 7.7% of net sales. Transportation costs of the individual water storage solutions are relatively higher than for other solutions because the weight transported is proportionately low compared to the volume being transported. Additionally, Rotoplas outsources services by third parties who specialize in distribution, installation, and maintenance of individual and integrated water solutions. Mexico: 10. Government Programs and Opportunities The Mexican government has been focusing on different programs to improve water infrastructure and distribution systems, expanding the access to clean water and sanitation, making Rotoplas water solutions an attractive solution. Fight Against Hunger: In 2013, Rotoplas won a public bid sponsored by SEDESOL (Ministry of Social Development), and was granted a government contract for the distribution and installation of rainwater harvesting systems and outdoor composting bathrooms on a national scale. The bid was won through a competitive process in which different companies presented their proposals; nevertheless, Rotoplas was elected due to its technical skills and economic solvency. Fight Against Hunger is a strategy of inclusion and social welfare in Mexico that uses joint efforts and resources from federal, state, and municipal governments, as well as from the public, social, and private sectors and international organizations and institutions. The program was launched in 2013 with the purpose to reduce extreme poverty in Mexico. The program seeks to eradicate certain causes of extreme poverty and famine with the involvement of at least 70 federal programs sponsored by 19 agencies, and state and local governments. To date, Rotoplas has installed over 11 thousand outdoor composting bathrooms and rainwater harvesting systems, benefiting more than 22 thousand families. any security or participate in any trading strategy. 36

37 Drinking Fountains: The Mexican government has adopted several measures in order fight child obesity; among those measures, the federal government has an initiative to encourage the consumption of water as a substitute for soft drinks and sweetened beverages. In March 2014, the Mexican Congress passed the General Law on Physical Infrastructure for Education (Ley General de la Infraestructura Física Educativa) that regulates, among other things, the minimum infrastructure needed in Mexican private and public schools. The law requires all schools in Mexico to offer free drinking water and must guarantee a sufficient number of drinking fountains with continuous drinking water supply in each education facility. Private schools have 18 months and public schools 3 years starting in May 2014 to install the drinking water fountains. There will be two types of contracts: sale contracts, where the water fountain is sold without value-added services, and long-term lease agreements, where the government will lease drinking fountains for extended periods including value-added services, such as installation and maintenance for the duration of the lease. We should note that this kind of program is already funded as the government will use the resources obtained from the P$1.0 per liter tax on beverages with sugar content to finance this kind of projects. With this tax, the government expected to collect around P$12 billion during Brazil: Since 2003, the government has implemented different programs to provide quality water to people in extreme poverty living in regions where water is scarce or difficult to obtain. As part of this initiative, in 2010 the federal government launched the government program Brazil without Extreme Poverty. The program expects to help approximately 15 million people in extreme poverty through the use of technology and in combination with all the major social programs in Brazil. The Brazilian semiarid regions in the northeast are some of the regions with the largest water scarcity in the country and are the most densely populated semiarid regions in the world. Around 22.2 million people or around 12% of the total Brazilian population live in these regions; 8 million of these people live in rural areas. Water for Everyone: Through the Ministry of National Integration, Brazil s federal government has sponsored the Water for Everyone program. Under one of the first initiatives of the program (P1 MC plan), the Brazilian government provided cisterns with rainwater harvesting capabilities made of cement, which were costly and difficult to install. As part of the program, Rotoplas was once again able to disrupt the market by working together with the Brazilian government to introduce cisterns made of polyethylene. Rotoplas operating efficiency allowed the company in approximately one year to install the same number of polyethylene cisterns as the cement cisterns installed in the previous ten years. The polyethylene cisterns are part of the PAC 2 (Growth Acceleration Program), which considers an investment of up to R$1.6 billion in various sectors focused on increasing the purchasing power and welfare of poor families in Brazil. As part of this program, the government of Brazil expects to provide cisterns with rainwater harvesting capabilities to 750 thousand families affected by water scarcity in the Brazilian semiarid region. Driven by the success of the original program, there is currently a proposal to install an additional 1.5 million systems. any security or participate in any trading strategy. 37

38 11. Rotoplas Corporate Structure AGUA owns 100% of all its subsidiaries in Mexico and the countries where it is present, except for Dalkasa S.A. where it holds 49.9% of the company s shares. Grupo Rotoplas SAB de CV Grupo Rotoplas S.A.B. de C.V. 100% 100% Rotoplas S.A. de C.V. Servicios Rotoplas S.A. de C.V. 100% Rotoplas Comercializadora S.A. de C.V. 100% 99.6% 100% Rotoplas Bienes Raices S.A. de C.V. 100% 100% 100% Rotoplas de Latinoamerica S.A. de C.V. Tinacos y Tanques de Centroamerica S.A. Rotoplas Recursos Humanos S.A. de C.V. 100% Suministros Rotoplas S.A. de C.V. Molding Acquisition Corp. 100% 100% 100% 100% Tanques Plasticos S.A. Tinacos y Tanques de Honduras S.A. Tinacos y Tanques de Nicaragua S.A. Tinacos y Tanques de Centroamerica S.A. de C.V. Servicios Apolo S.A. 100% Comercializadora y Exportadora del Caribe S.A. 100% Dalka do Brasil, LTDA. 100% Rotoplas Argentina S.A. 100% Dalka S.A.C. 49.9% Dalkasa, S.A. Source: GBM with company data any security or participate in any trading strategy. 38

39 12. Management and Corporate Governance Name Charge Age Experience Carlos Rojas Mota Velasco CEO Carlos Rojas Aboumrad Vice President of New Businesses 32 9 Gonzalo Uribe Lebrija COO Jose Luis Mantecon Garcia Vice President of Institutional Business Development Mario Antonio Romero Orozco CFO Diego Ernesto Casas Gonzalez Human Resources Director Eduardo Santos Burgoa Marquez Supply Chain Director Erika Maria Dominguez Zermeño Marketing Director 36 1 Alfonso Gustavo Vasquez Salazar Country Manager (Peru) Antonio Caso Valdes Country Manager (Mexico) 42 1 Carlos Augusto Valdes Fletes Country Manager (Central America) Marcelo Claudio Santorelli Correa Country Manager (Argentina) 51 4 Vinicius Ramos Ranucci Country Manager (Brazil) 30 7 Fabiano Pinto Goncalves Country Manager of APS (Brazil) Source: GBM with company data Carlos Rojas Mota Velasco Chairman & CEO Mario Romero CFO Gonzalo Uribe COO José Luis Mantecon VP Institutions & Government Carlos Rojas VP New Businesses Country Managers 19 years in Rotoplas CFO since years in Rotoplas COO since years in Rotoplas Previously served as Country Manager for Peru and Brazil 9 years in Rotoplas Antonio Caso Mexico Fabiano Pinto Brazil - Integrated Solutions Vinicius Ramos Brazil Individual Solutions Marcelo Santorelli Argentina Carlos Valdes Central America Vacant United States Alfonzo Vasquez Peru Board of Directors Audit Committee Corporate Practices Committee Compensation Committee 14 members 7 independent 3 independent members of the board 3 members of the board 2 independent 2 independent members of the board Senior Management has worked for an average of 17 years in the company and the second layer,an average of 7 years. Source: GBM with company data any security or participate in any trading strategy. 39

40 13. Shareholders During its IPO, Rotoplas raised approximately P$4.0 billion at a price of P$29.0 per share; this total was through the issuance of 144 million shares; this includes the over-allotment option, which was fully exercised. The company expects to use the proceeds from the IPO to expand its individual solutions operations in the US and to further consolidate the integrated water solutions water fountains, outdoor composting bathrooms, rainwater harvesting systems, water purifiers, and wastewater treatment plants in Mexico and Brazil. Pre-IPO 342mm shares Post-IPO (144 mm shares issued) 486mm shares Source: GBM with company data Source: GBM with company data As of the date immediately prior to the IPO, the company s main shareholders are Carlos Rojas Mota Velasco, through his beneficial ownership of shares held by VRMV Trust and the Voting Trust, and his son Carlos Rojas Aboumrad, directly or through his beneficial ownership of shares held by the Voting Trust. The main shareholders owned approximately 71.3% of the outstanding capital stock before the IPO. After the IPO, the full overallotment option was exercised; therefore, the main shareholders own 35.8% of the outstanding capital stock and the Voting Trust owns 28.2%; these shares shall be voted as directed by the CRMV Trust. Therefore, 64.0% of the company s outstanding capital stock is controlled by the main shareholders. any security or participate in any trading strategy. 40

41 VIII. Peers Company Peers FLOWSERVE CORP GORMAN RUPP CO PALL CORP PENTAIR PLC XYLEM INC SUPREME INDUSTRIES Description The company designs, manufactures, distributes, and services industrial flow management equipment throughout the world. The company provides pumps, valves, and mechanical seals primarily for the refinery and pipeline segments of the petroleum, chemical processing, power generation, and water treatment industries. The company designs, manufactures, and sells pumps and related fluid control equipment. The company's products are used in construction, industrial, petroleum, water, wastewater, original equipment, agricultural, fire protection, and military applications. Gorman Rupp operates around the world. A supplier of filtration, separation, and purification technologies. It utilizes proprietary filter media and other fluid clarification and separation equipment for the removal of solid, liquid, and gaseous contaminants. The company delivers services and solutions for its customers various needs in water and other fluids, thermal management, and equipment protection. The company is organized as three operating segments: Water & Fluid solutions; Valves & Controls; and Technical Solutions. Pentair manufactures and distributes its products worldwide. Xylem is a designer, manufacturer, equipment and service provider for water and wastewater applications addressing the full-cycle of water from collection, distribution, and use to the return of water to the environment. The company's products include water and wastewater pumps, treatment and testing equipment, industrial pumps, valves, heat exchangers, and dispensing equipment. It manufactures industrial and engineered molded products and storage and material handling crates. It also manufactures chemicals, multilayer sheets, multilayer films, packaging films, and expanded polyethylene foam, PVC pipes, and fittings, molded furniture, and disposable EPS containers. AGUA s Peers EV/ EBITDA TTM Peers Market Cap Net Debt EV EBITDA TTM P/E TTM ROE FCF YIELD P/BV FLOWSERVE CORP 8, , x 11.0x 10.1x 18.2x 26.0% 4.1% 4.6x GORMAN-RUPP CO x 12.0x 10.3x 25.0x 12.9% 0.1% 3.0x PALL CORP 10, , x 14.6x 13.2x 26.1x 19.7% 4.1% 5.4x PENTAIR PLC 12,780 2,290 15,420 1, x 12.5x 11.3x 17.6x 12.9% 6.3% 2.9x XYLEM INC 6, , x 11.5x 10.6x 20.9x 15.5% 4.4% 3.1x Average 13.3x 12.3x 11.1x 21.5x 3.8x Median 12.6x 12.0x 10.6x 20.9x 3.1x Source: GBM with Bloomberg data any security or participate in any trading strategy. 41