Trevi Finanziaria Industriale

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1 Equity Research Trevi Finanziaria Industriale Infrastructure - Italy 16 November 2011 Q3 results postview - Mid Caps Rating TP EPS 11e EPS 12e (14%) (17%) (17%) Outperform Target price EUR8.8 (+36%) Sector rating Neutral Price (15 November 2011) EUR6.5 Market cap./free float (EURm) 453.8/212.7 EV (EURm) m avg. volume (EURm) 2.0 Reuters/Bloomberg TFI.MI/TFI IM Financial data 12/10 12/11e 12/12e 12/13e Adjusted EPS (EUR) EPS - IBES (EUR) Net dividend (EUR) Sales (EURm) ,028 1,123 1,198 Adjusted EBITA (EURm) Adj. net profit (EURm) Adj. net debt / EBITDA (x) Stockmarket ratios* 12/10 12/11e 12/12e 12/13e P/E (x) P/BV (x) Net yield (%) FCF yield (%) EV/Sales (x) EV/EBITDA (x) EV/EBITA (x) * Yearly average price for FY ended 12/10 Performance* (%) 1w 1m 3m 12m Absolute (11) (20) (21) (27) Rel. Infrastructure (10) (17) (21) (20) Rel. MSCI SMID (10) (19) (18) (17) * In listing currency, with dividend reinvested Price relative to MSCI SMID Lower revenues and higher tax rate spark negative revisions EBIT in line with estimates, net profit well below on higher tax rate 9M revenues were EUR724m (+5% y/y) vs our estimates of EUR742m. EBIT was EUR62m (8.5% EBIT margin vs 9.5% in 2010) vs our EUR61m forecast (8.3% margin). The net profit of EUR24m was much below our EUR27m estimate (-10% for the 9M, -24% for the quarter) on a higher-than-expected tax rate (44.5% YTD vs 35% 36% original guidance). Net debt ended the quarter at EUR386m, higher than the EUR334m in Q2 11. Special foundation slowing down, Oil & Gas still robust Special foundation revenue declined 1% in the 9M in an early sign of weakness, though management said Soilmec showed improvement in October. We believe that the slightly disappointing special foundation revenues figures were due mainly to management s approach of selective bidding for projects so as to protect profitability. Oil & Gas continues to be robust, growing 15% y/y. Not the operating leverage that we were expecting CFO guided for FY11 revenue slightly above the EUR1bn mark, with the EBIT margin in line with 2010 (8.8%). This is disappointing as we were expecting an improvement of c.40bp in 2011 vs 2010, thanks to a better mix and operating leverage. Order intake was the highlight of the report, Mosul bid still open Backlog was strong at EUR1,021m vs our EUR940m (implying an order intake of c.eur1bn YTD vs our EUR1,250m FY11), especially given that Petreven s backlog was relatively low as contracts real should take place in Q1 12. Management added that they consider the Mosul bid still open as they say that Bauer has only a non-binding letter of intent, without the signature of the Ministry of Water Resources. Lowering our estimates, maintain Outperform with TP EUR8.8 (vs EUR10.2) We have lowered our estimates to take into account the lower top line and the higher tax rate. Our TP is lowered accordingly to EUR8.8. Despite the downward earnings revision, we are maintaining our Outperform rating as the acceleration in the order intake provides increased visibility for the group over the next 12 months. Giuseppe Corona, CFA Michele Baldelli (+39) (+39) Giuseppe Marsella (+39) giuseppe.corona@exanebnpparibas.com 0 Jan 08 Jan 09 Jan 10 Jan 11 Relative to MSCI SMID Trevi Finanziaria Industriale Please refer to important disclosures at the end of this report.

2 Insert your text here Figure 1: 9M EBNPP estimates vs actual EURm 9M M 2011e Actual Difference Revenue % Growth -17.6% 7.6% 5.1% EBITDA % % of revenue 15.4% 13.4% 13.4% Income from Operations % % of revenue 9.5% 8.3% 8.5% Net Profit % % of revenue 5.0% 3.6% 3.3% Figure 2: 3M EBNPP estimates vs actual Q Q3 2011e Actual Difference Revenue % Growth -10.8% 13.0% 5.5% EBITDA % % of revenue 15.8% 13.1% 13.0% Income from Operations % % of revenue 9.4% 7.5% 8.2% Net Profit % % of revenue 4.8% 4.3% 3.5% Figure 3: EBNPP estimates Old vs Revenue 1,068 1,028 1,166 1,123 1,244 1,198 Growth 12.1% 7.9% 9.1% 9.2% 6.6% 6.7% EBITDA % of revenue 14.3% 13.8% 14.6% 14.0% 14.8% 14.1% Income from Operations % of revenue 9.2% 8.7% 9.7% 9.0% 9.9% 9.2% Income tax (30) (29) (32) (30) (33) (32) Tax rate 36.0% 40.0% 32.5% 35.0% 30.0% 32.5% Net Profit % of revenue 4.7% 4.1% 5.5% 4.8% 6.1% 5.3% 2 Trevi Finanziaria Industriale 16 November 2011

3 Figure 4: Trevi backlog and order intake 1,250 2,000 1,000 1, , M Order backlog Order intake Figure 5: Operating margin by division (rolling 12-months) Services division Mechanical division 17.5% 17.5% 15.0% 15.0% 12.5% 12.5% 10.0% 10.0% 7.5% 7.5% 5.0% 5.0% 2.5% 2.5% 0.0% 0.0% 4Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q 2011 LTM EBIT % LTM EBIT % Commitment of transparency (see for details. Complete disclosures available on including a specific disclaimer concerning analysts located in Spain. Exane is independent of BNP Paribas (BNPP) and the agreement between the two companies is structured to guarantee the independence of Exane's research, published under the brand name Exane BNP Paribas. Nevertheless, to respect a principle of transparency, we separately identify potential conflicts of interest with BNPP regarding the company/(ies) covered by this research document. Exane Analyst s Investment Equity stake Amended after Additional Liquidity Corporate Distributor personal Disclosure to material banking provider links interest US Law French Law company conflicts NO NO NO NO NO NO NO NO NO Source: Exane BNP Paribas Potential conflicts of interest: None. Source: BNP Paribas 3 Trevi Finanziaria Industriale 16 November 2011

4 TREVI FINANZIARIA IND. (Outperform) Price at 15 Nov. 11 / Target Price EUR6.5 / EUR % Reuters / Bloom berg: TFI.MI / TFI IM Analyst: Giuseppe Corona, CFA (+39) Infrastructure (Neutral) - Italy Com pany Highlights EURm Enterprise value Market capitalisation Free float Target Price 3m average volume Perform ance (*) 1m 3m 12m Absolute (20%) (21%) (27%) Rel. Sector (17%) (23%) (20%) Rel. MSCI SMID (19%) (18%) (17%) m Hi/Lo (EUR) : % / % CAGR 2003/ / EPS restated (**) NC 20% 0.6 CFPS 19% 13% Price 6.1*CFP S Relative to M SCI SM ID Price (yearly avg from Dec. 02 to Dec. 10) PER SHARE DATA (EUR) Dec. 02 Dec. 03 Dec. 04 Dec. 05 Dec. 06 Dec. 07 Dec. 08 Dec. 09 Dec. 10 Dec. 11e Dec. 12e Dec. 13e No of shares year end, basic, (m) Average no of shares, diluted, excl. treasury stocks (m) EPS reported (0.08) (0.08) EPS restated (0.04) (0.01) % change NS 75.1% NS 152.1% 6.1% 119.3% 36.1% 9.5% (43.4%) (9.2%) 21.5% 19.0% CFPS Book value (BVPS) (a) Net dividend STOCKMARKET RATIOS YEARLY AVERAGE PRICES for end Dec. 02 to Dec. 10 Dec. 05 Dec. 06 Dec. 07 Dec. 08 Dec. 09 Dec. 10 Dec. 11e Dec. 12e Dec. 13e P / E (P/ EPS restated) NC NC 7.5x 7.4x 17.7x 14.9x 11.2x 7.2x 16.4x 10.3x 8.5x 7.1x P / E relative to MSCI Small Cap NC NC 41% 41% 91% 83% 61% 34% 95% 77% 79% 77% P / CF 4.6x 2.4x 2.8x 3.5x 8.3x 8.5x 8.7x 4.0x 7.9x 4.8x 4.2x 3.7x FCF yield 1.9% 12.3% (38.1%) 23.7% (9.8%) 8.7% (21.2%) (15.7%) 8.9% 0.7% 21.3% 16.3% P / BVPS 1.24x 0.81x 0.87x 1.72x 3.48x 4.96x 3.51x 1.87x 2.05x 1.04x 0.94x 0.85x Net yield 0.0% 0.0% 1.4% 0.6% 0.4% 0.4% 0.9% 1.4% 1.1% 2.0% 2.1% 2.2% Pay out (0.0%) (0.0%) 10.5% 4.3% 6.9% 6.6% 9.8% 10.3% 18.8% 20.7% 17.9% 15.8% EV / Sales 0.76x 0.54x 0.67x 0.65x 0.99x 1.14x 1.09x 1.03x 1.24x 0.84x 0.70x 0.61x EV / Restated EBITDA 7.5x 6.5x 7.0x 5.7x 8.0x 7.5x 7.3x 6.8x 9.1x 6.3x 5.2x 4.5x EV / Restated EBITA 17.8x 19.1x 13.5x 8.8x 11.2x 9.3x 9.1x 9.2x 14.0x 9.6x 7.8x 6.7x EV / OpFCF 13.0x 9.8x NC 5.8x NC 9.6x NC NC 11.3x 17.4x 5.4x 6.1x EV / Capital employed (incl. gross goodw ill) 1.2x 1.0x 1.0x 1.2x 1.9x 2.9x 2.0x 1.4x 1.5x 1.1x 1.0x 0.9x ENTERPRISE VALUE (EURm ) ,164 1,069 1, Market cap Adjusted net debt Other liabilities and commitments Revalued minority interests Revalued investments P & L HIGHLIGHTS (EURm ) Sw itch to IFRS data from FY ended 12/05 Dec. 04 Dec. 05 Dec. 06 Dec. 07 Dec. 08 Dec. 09 Dec. 10 Dec. 11e Dec. 12e Dec. 13e Sales , , , , ,198.1 Restated EBITDA (b) Depreciation (19.9) (20.1) (17.1) (19.7) (22.9) (25.0) (30.8) (40.3) (45.3) (46.5) (50.0) (53.2) Restated EBITA (b) (**) Reported operating profit (loss) Net financial income (charges) (13.5) (10.2) (8.7) (3.3) (15.5) (18.1) (18.4) (12.7) (14.4) (17.0) (15.3) (12.7) A ff iliates Other (1.2) (2.2) Tax (4.5) (3.2) (6.4) (11.6) (14.7) (28.1) (31.8) (20.4) (24.5) (29.1) (29.9) (31.7) Minorities (0.5) (0.0) (0.9) (0.6) (1.2) (2.0) (2.7) (2.0) 0.7 (2.0) (2.0) (2.0) Goodw ill amortisation (2.8) (4.5) (6.1) Net attributable profit reported (5.3) (5.2) Net attributable profit restated (c) (5.4) (5.2) CASH FLOW HIGHLIGHTS (EURm ) Dec. 02 Dec. 03 Dec. 04 Dec. 05 Dec. 06 Dec. 07 Dec. 08 Dec. 09 Dec. 10 Dec. 11e Dec. 12e Dec. 13e EBITDA (reported) EBITDA adjustm ent (b) (2.7) (4.5) (6.4) (7.6) (4.7) (5.1) (7.8) (24.7) (7.6) (6.0) (6.0) (6.0) Other items Change in WCR (28.3) 11.7 (45.2) 16.7 (154.6) (168.5) 8.3 (31.0) Operating cash flow Capex (30.7) (19.6) (25.3) (20.0) (55.5) (50.3) (117.2) (75.1) (41.3) (61.7) (61.8) (59.9) Operating free cash flow (OpFCF) (11.8) 55.7 (16.0) (105.5) (61.8) Net financial items + tax paid (18.0) (13.4) (15.2) (14.9) (26.3) (31.8) (65.1) (28.4) (38.9) (46.1) (45.2) (44.4) Free cash flow (26.9) 40.8 (42.3) 68.2 (170.7) (90.3) Net financial investments & acquisitions Other 0.0 (1.6) (6.7) (17.8) (5.7) (31.6) (1.8) (23.4) (9.4) (8.5) (13.0) (12.1) Capital increase (decrease) Dividends paid (0.9) (1.0) (1.7) (3.5) (6.9) (8.1) (8.3) (9.1) (9.1) (9.6) Increase (decrease) in net financial debt (1.8) (5.3) 34.6 (22.0) 49.7 (33.1) (47.7) (35.8) (77.8) (55.0) Cash flow, group share BALANCE SHEET HIGHLIGHTS (EURm ) Dec. 02 Dec. 03 Dec. 04 Dec. 05 Dec. 06 Dec. 07 Dec. 08 Dec. 09 Dec. 10 Dec. 11e Dec. 12e Dec. 13e Fixed operating assets, incl. gross goodw ill WCR Capital em ployed, incl. gross goodw ill Sharehers' funds, group share Minorities Provisions/ Other liabilities Net financial debt (cash) FINANCIAL RATIOS (%) Dec. 02 Dec. 03 Dec. 04 Dec. 05 Dec. 06 Dec. 07 Dec. 08 Dec. 09 Dec. 10 Dec. 11e Dec. 12e Dec. 13e Sales (% change) NS 7.8% (0.1%) 35.5% 29.4% 31.0% 27.0% (3.1%) (8.0%) 7.9% 9.2% 6.7% Organic sales grow th 7.8% (0.1%) 35.5% 29.4% 31.0% 27.0% (3.1%) (8.0%) 7.9% 9.2% 6.7% Restated EBITA (% change) (**) NS (27.8%) 75.4% 99.7% 56.3% 81.2% 23.3% (8.5%) (27.8%) 6.5% 12.3% 9.3% Restated attributable net profit (% change) (**) NS 75.1% NS 152.1% 17.1% 111.1% 35.1% 10.0% (44.4%) (9.7%) 28.7% 19.0% Personnel costs / Sales 24.6% 23.4% 22.2% 18.9% 16.3% 14.4% 13.7% 16.0% 18.1% 18.4% 17.9% 17.6% Restated EBITDA margin 10.1% 8.3% 9.7% 11.3% 12.5% 15.3% 14.8% 15.2% 13.6% 13.3% 13.4% 13.6% Restated EBITA margin 4.3% 2.8% 5.0% 7.4% 8.9% 12.3% 11.9% 11.3% 8.8% 8.7% 9.0% 9.2% Tax rate NC 67.7% 40.3% 34.0% 35.2% 32.8% 29.2% 19.5% 35.0% 40.0% 35.0% 32.5% Net margin (1.4%) (1.4%) 0.9% 4.5% 4.2% 6.8% 7.2% 8.1% 4.8% 4.2% 5.0% 5.5% Capex / Sales 9.0% 5.3% 6.9% 4.0% 8.6% 6.0% 11.0% 7.3% 4.3% 6.0% 5.5% 5.0% OpFCF / Sales 5.8% 5.5% (3.2%) 11.2% (2.5%) 11.9% (9.9%) (6.0%) 10.9% 4.8% 12.9% 10.1% WCR / Sales 22.0% 19.1% 26.8% 17.4% 20.5% 13.7% 25.2% 42.3% 45.1% 44.8% 36.6% 33.3% Capital employed (excl. gross goodw ill) / Sales 61.2% 53.7% 68.9% 51.4% 50.5% 38.3% 52.8% 73.2% 79.1% 77.8% 67.8% 63.1% ROE (3.6%) (1.0%) 11.6% 23.2% 21.7% 35.7% 33.3% 27.5% 13.0% 9.5% 11.1% 11.9% Gearing 204% 198% 203% 135% 152% 98% 147% 152% 117% 84% 61% 45% EBITDA / Financial charges 2.6x 3.0x 4.8x 6.3x 7.7x 9.4x 9.2x 9.0x 9.2x 8.0x 9.9x 12.8x Adjusted financial debt / EBITDA 4.5x 4.4x 4.6x 2.4x 2.4x 1.3x 2.2x 3.1x 3.3x 2.8x 2.0x 1.5x ROCE, excl. gross goodw ill 1.7% 4.3% 10.3% 12.0% 22.2% 16.5% 13.0% 7.7% 7.1% 8.9% 10.1% ROCE, incl. gross goodw ill 1.7% 4.3% 10.1% 11.9% 21.8% 16.3% 12.7% 7.5% 6.9% 8.7% 9.9% WACC 4.8% 6.0% 7.7% 8.4% 9.2% 10.0% 8.7% 9.1% 8.7% 8.7% 8.7% Latest Model update: 15 Nov. 11 (a) Intangibles: EUR18.44m, or EUR0 per share. (b) adjusted for capital gains/losses, impairment charges, exceptional restructuring charges, capitalized R&D, pension charge replaced by service cost (c) adj.for capital gains losses, imp.charges, capitalized R&D, am. of intangibles from M&A, exceptional restructuring, (*) In listing currency, w ith div. reinvested, (**) also adjusted for am. of intangibles from M&A, or for am. of gw ill for pre IFRS years 4 Trevi Finanziaria Industriale 16 November 2011

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