Opinion of the Independent Financial Advisor - Investor Relations

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The Opinion of the Independent Financial Advisor on the Asset Acquisition of Thai Union Frozen Products Plc.restructuring initiatives. The management of MW Brand is of the view that the restructuring initiativesplus the effect of economic recovery will cause sale volume to ramp up especially for its major marketsin the subsequent years.Average Selling PriceAverage selling price blended and consequently achieved in respect to all individual product items andto comprehensive markets mainly covered by MWBrands rose around 8% to EUR 4.7 / Kg inFY2009A and then remained stable throughout FY2010A. For the forecast period, the average sellingprice is assumed to be stable which is the same pattern as evidenced during FY2010A.For avoidance of any doubt, such average selling price results from the net sale value per Kg blendedfrom all different angles including 1.) product categories i.e. tuna, salmon, mackerel, sardines, otherseafood products and value-added product from tuna, 2.) geographic markets i.e. France, the UK, Italy,Ireland and the Netherlands as well as 3.) segmentations i.e. branded and private label sector.However, for the detailed financial projection, the IFA has considered the relevant market factors andthe selling price separately so as to take account of structural differences in the dynamics andcharacteristics of each product category and market MWBrands is actively involved.Differences in competitive environment cause pricing strategies to vary not only within seafoodproduct portfolio but also across the countries MWBrands have participated. Any increase in prices didnot necessarily reflect a surge in sale volume of premium products as it would have resulted simplyfrom responsive attempts to pass incremental cost of raw materials to customers in the market. Undernormal circumstances, still a wealth of leading brand equity and bargaining power claimed over largenetwork of retail distribution outlets is respected for being a key to exercising price raises in the longrun.As an overall seafood industry, the trend of average selling price is expected to remain under strongcompetitive pressures and therefore go rather over the foreseeable period. However, as previouslymentioned regarding its restructuring initiatives in the area of product mix, MWBrands is also keen onmaintaining regular advertising campaigns in order to reinforce brand awareness and support organicsale growth by and large. Specifically, the budget allocated to such marketing expenditures will bemore concentrated in the markets MWBrands has yet to establish firm and scalable position. Hence,the maintenance of marketing expenditures at the center of revitalization program will provide a roomfor MWBrands to have a better control over its premium pricings, particularly for its leading collectionof branded products.Other RevenuesRevenue from commercial net sales as referred to above constitute the main source of income toMWBrands. In addition, it should be noted that there is additional revenue flows resulting from salesand exports handled directly by its main production facilities in the Seychelles and Ghana. Such otherrevenues rose by 13.6% from EUR 10.3 million in FY2008A to EUR 11.7 million in FY2009A anddeclined by 6.0% to EUR 11.0 million in FY2010A, accounting for 2-3% of revenue from commercialnet sales with reference to MWBrands historical performance posted during FY2009A-2010A.For our projection, other revenues will grow from the actual result posed in FY2010A with a CAGR of27.1% p.a. ranging from EUR 16.5 – 22.6 million during FY2011F-2013F and represent around 3-4%of revenue from commercial net sales over the next three years of forecast period. Such future trend isprojected in anticipation that the main production facilities in the Seychelles and Ghana would be ableto derive more economic value from their scraps.2. Cost of Goods SoldAs a vertically integrated group of companies with primary focus placed on a variety of seafoodproducts, MWBrands shall incur costs and related expenses all along each step of the supply chain forPage 34
The Opinion of the Independent Financial Advisor on the Asset Acquisition of Thai Union Frozen Products Plc.its normal course of business operations, starting from fishing and cold storage to canning andprocessing line of productions.Total cost of goods sold can be categorized into the followings:• Direct raw material including fish costs and non-fish costs consisting of ingredients, packagingand direct labour costs. Fish costs account for approximately 40% of total cost of goods sold• Other overheads include logistics, co-packing costs and indirect labour cost as well asdepreciation expensesTotal cost of goods sold decreased by 13.1% from EUR 372.6 million in FY2008A to EUR 323.8million in FY2009A and decreased again by 3.5% to EUR 312.5 million in FY2010A. For our financialprojection, total cost of goods sold is expected to grow from the actual result posted in FY2010A with aCAGR of 9.8% over the next three years of forecast period, amounting from EUR 331.7 – 413.2 millionduring FY2011F-2013F.Since tuna is considered the flagship product item to MWBrands, any upward movement of price paidfor raw tuna i.e. Skipjack and Yellowfin would significantly hurt profitability and vice versa. The pricingcycle of raw tuna holds an inverse relationship with tuna availability, which is after all subject toclimatic El Nino phenomenon. After the previous hit recorded in 1998, the natural effect of El Nino hadrevisited in the Indian Ocean and gave rise to a dramatic increase in raw tuna price worldwide during2007-2008. The situation of supply shortages eased off and sent raw tuna price down to the level seenbefore such El Nino effect in 2007. In regard to our financial projection, raw fish costs per ton areprojected to grow consecutively for at least 3% per annum. Incorporating upward trend of raw fishcosts reflects conservative perception towards the cyclical ups and downs in tuna supplies. On theother hand, non-fish costs including labor, other ingredients and packaging are also projected to growin line with sale volume over the forecast period.3. Selling, General and Administrative ExpensesThe Selling, General and Administrative Expenses (SG&A) are those associated mainly with humanresources and sale supportive activities such as warehousing and merchandising. SG&A expensesdecreased by 14.7% from EUR 48.9 million in FY2008A to EUR 41.7 million in FY2009A and roseconsiderably by 13.7% to EUR 47.4 million in FY2010A as a combined result of increasing marketingexpenditures and one-time expenses related to the transitional effect of MWBrands restructuringinitiatives, representing 10-11% of revenue from commercial net sales. For our projection, SG&Aexpenses will expand from the actual result posted in FY2010A with a CAGR of 5.3% per annum andrepresent approximately 10% of revenue from commercial net sales, equivalent to EUR 46.6 – 55.4million during FY2011F-2013F.MWBrands implementation of restructuring initiatives was also visible in the amount of SG&Aexpenses incurred during FY2009A-2010A. Advertising campaigns through various media platformswere increasingly adopted to reinforce its leading brands and support growth in new product mix. Suchmarketing expenditures, which form a key component of SG&A expenses, as well as selling anddistribution expenses are forecasted to continue and expand in proportion to revenue from commercialnet sales. In addition, general and administrative expenses are also forecasted to grow as they reflectchange in compensation scheme for overall employees and additional buildup of sale forces for newgeographic expansion.4. Capital ExpendituresCapital Expenditures are referred to as the amount of money spent for investments in non-currentassets so that MWBrands can continue business operations as a going concern and go in line with thefuture business plan. Such capital expenditures as incurred by MWBrands equaled EUR 8.0 million inFY2009A and EUR 12.0 million in FY2010A, accounting for 2-3% of revenue from commercial netsales. Based on future business plan, MWBrands has set aside budget for ongoing capitalinvestments in order to continue its implementation of restructuring initiatives in the area of productionPage 35
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Opinion of the Independent Financial Advisor - Investor Relations

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