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Latin America Equity Strategy
Latin America Equity Strategy (Citi) Industry Focus 23 January 2008 18 pages Latin America Equity Strategy Fourth Quarter Earnings Preview Expect Q4 Earnings Growth of 44% — We publish here our 4Q07 estimates for 136 Latin American stocks under CIR overage. Our bottom-up forecasts imply Y/Y growth in revenues of 28%, EBITDA of 34%, and earnings of 44%. For full 2007, we now expect EPS growth of 34% (up from 29.5% previously) vs. 21% in 2006. Our bottom-up forecast for EPS growth in 2008 is down to 18% from 22% before. Geoffrey Dennis +1-212-816-8391 [email protected] Daniel A. Abut [email protected] Brazil Stays Ahead; Chile Falls Behind — Brazil again leads in terms of expected Y/Y 4Q top-line and EBITDA growth, 34% and 43%, respectively. However, Chile shows 4Q EBITDA growth of only 2%, although revenue growth was a morerespectable 31%. This is in-line with our preference for Brazil over Chile. For Mexico, we expect revenue growth of 17% and EBITDA growth of 21% in Q4. Patrick Grenham [email protected] Celso W. Sánchez, CFA [email protected] Stephen Trent Sector Leaders — The strongest growth in Q4 is forecast to be in Financials, Consumer Discretionary and Materials, with Y/Y EBITDA growth of 50%, 48% and 42%, respectively. [email protected] An Excellent Year — Our Q4 forecasts leave full-year EPS growth for Brazil even stronger than before at 44%, eclipsed only by Peru's growth of 56%, albeit with just four stocks in that coverage universe. We expect full year EPS growth of 20% in both Mexico and Chile. On a sector basis, the strongest 2007 EPS growth should come from Utilities (+73%), Financials (+61%) and Materials (+60%). Gustavo Piras Oliveira, CFA Alexander Hacking, CFA [email protected] [email protected] São Paulo Felipe Mattar 1 [email protected] Growth Stocks — Buy-rated companies with impressive Q4 forecast growth Y/Y: CMPC, CSN, Mexichem, Lupatech, Perdigão, Rodobens, Ultrapar and Vale. Tereza Mello [email protected] Carlos Albano1 [email protected] Mexico City Eduardo Estrada Lopez, CFA 2 [email protected] Cecilia del Castillo2 [email protected] Luis Vallarino, CFA 2 [email protected] See Appendix A-1 for Analyst Certification and important disclosures. Citi Investment Research is a division of Citigroup Global Markets Inc. (the "Firm"), which does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. Non-US research analysts who have prepared this report are not registered/qualified as research analysts with the NYSE and/or NASD. Such research analysts may not be associated persons of the member organization and therefore may not be subject to the NYSE Rule 472 and NASD Rule 2711 restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account. Customers of the Firm in the United States can receive independent third-party research on the company or companies covered in this report, at no cost to them, where such research is available. Customers can access this independent research at http://www.smithbarney.com (for retail clients) or http://www.citigroupgeo.com (for institutional clients) or can call (866) 836-9542 to request a copy of this research. 1 Citigroup Global Markets Brazil; 2Acciones y Valores Banamex, S.A. de C.V Citigroup Global Markets Equity Research Latin America Equity Strategy 23 January 2008 Contents Fourth-Quarter Earnings Forecast: Summary Consumer Discretionary Consumer Staples Energy Financials Industrials Materials Telecommunication Services Utilities Appendix A-1 14 Analyst Certification 2 3 4 5 6 7 8 9 10 11 14 Citigroup Global Markets Equity Research Figure 1. Countries Revenue Q4 3 Argentina Brazil Chile Mexico Pan-LatAm Peru Total US$ mn Ch (Y/Y) 7,348 103,137 7,672 50,528 1,650 406 170,742 24% 34% 31% 17% 29% 33% 28% EBITDA FY 2007 US$ mn Ch (Y/Y) 26,661 361,110 27,336 186,435 6,105 1,536 609,183 23% 31% 24% 16% 30% 28% 25% Q4 US$ mn Ch (Y/Y) 2,097 35,117 1,953 13,341 402 233 53,143 22% 43% 2% 21% 27% 34% 34% Net Income FY 2007 US$ mn Ch (Y/Y) 7,903 125,736 7,623 49,684 1,464 887 193,297 11% 31% 11% 19% 33% 36% 26% Q4 US$ mn Ch (Y/Y) 844 17,550 972 5,846 164 136 25,513 0% 58% 14% 26% -1% 60% 44% US$ mn FY 2007 Ch (Y/Y) 3,194 59,968 3,699 21,787 604 530 89,781 -3% 44% 20% 20% 22% 56% 34% Source: Citi Investment Research Figure 2. Sectors Citigroup Global Markets Equity Research Revenue Q4 Consumer Discretionary Consumer Staples Energy Financials [a] Industrials Materials Telecoms Utilities Total US$ mn Ch (Y/Y) 11,517 33,525 29,171 12,633 13,256 28,637 29,883 12,120 170,742 45% 21% 27% 39% 50% 35% 17% 18% 28% 37,474 116,282 104,170 44,792 44,067 106,500 111,693 44,205 609,183 [a] For financials, EBITDA represented by net profit before provisions Source: Citi Investment Research EBITDA FY 2007 US$ mn Ch (Y/Y) 33% 19% 21% 29% 34% 43% 18% 19% 25% Q4 US$ mn 2,684 5,875 8,569 8,802 2,447 9,089 10,999 4,677 53,143 Ch (Y/Y) 48% 25% 39% 50% 32% 42% 18% 32% 34% Net Income FY 2007 US$ mn Ch (Y/Y) 8,272 19,588 31,434 31,404 8,592 35,473 42,572 15,963 193,297 26% 23% 12% 36% 20% 42% 20% 29% 26% Q4 US$ mn 1,292 2,772 4,344 3,904 1,432 4,685 4,024 3,059 25,513 Ch (Y/Y) 43% 18% 42% 56% 24% 56% 9% N/M 44% US$ mn FY 2007 Ch (Y/Y) 3,525 8,550 14,136 14,641 4,849 21,828 14,826 7,427 89,781 7% 22% -1% 61% 22% 60% 31% 73% 34% Latin America Equity Strategy 23 January 2008 Fourth-Quarter Earnings Forecast: Summary Figure 3. Quarterly Earnings Preview by Company Ticker 4 Brazil Gerdau Totvs Lojas Renner Positivo Net Servicos Universo Online Datasul B2W Lojas Americanas Guararapes CSN Dufry Springs Global Gafisa PDG Rodobens Rossi GGBR4 TOTS3 LREN3 POSI3 NETC4 UOLL4 DSUL3 BTOW3 LAME4 GUAR3 CSNA3 DUFB11 SGPS3 GFSA3 PDGR3 RDNI3 RSID3 Analyst Rating Stock Data Price Target Jan-22 Price Citigroup Global Markets Equity Research Hacking Oliveira Oliveira Oliveira Grenham Oliveira Oliveira Oliveira Oliveira Oliveira Hacking Oliveira Albano del Castillo del Castillo del Castillo del Castillo 1H 1H 1M 2S 1M 2S 2H 2S 1H 2H 1H 1H 2H 1H 2S 1S 1H R$44.26 R$45.00 R$29.30 R$31.94 R$19.41 R$9.85 R$14.19 R$64.60 R$13.44 R$51.49 R$48.00 R$38.49 R$17.30 R$27.10 R$18.99 R$20.60 R$35.00 Mexico Television Azteca TVAZTCACPO Grenham Grupo Televisa TV Grenham Consorcio Ara ARA del Castillo Consorcio Hogar HOGARB del Castillo Corporacion Geo GEOB del Castillo Des Homex HOMEX del Castillo RC Vallarino Grupo Radio Centro Sare Holding SAREB del Castillo Urbi URBI del Castillo 2S 1M 2H 3S 3H 1M 3S 1H 1M P$6.01 P$9.00 $20.85 $34.00 P$10.49 P$16.00 P$6.00 P$7.00 P$29.00 P$45.00 P$87.54 P$140.00 P$12.01 P$14.00 P$12.80 P$24.00 P$31.30 P$54.00 Source: Citi Investment Research R$70.00 R$75.00 R$45.00 R$42.00 R$32.00 R$16.30 R$27.00 R$95.00 R$22.40 R$77.00 R$52.67 R$63.00 R$32.00 R$50.00 R$36.00 R$36.00 R$76.00 Exp. Report Date Revenue Q4 Curr. (mn) Ch (Y/Y) YTD Ch (Y/Y) EBITDA Q4 Curr. (mn) Ch (Y/Y) YTD Ch (Y/Y) Net Income as Reported Q4 YTD Curr. (mn) Ch (Y/Y) Ch (Y/Y) EPS adj. for Non-Recur. Q4 YTD EPS Ch (Y/Y) Ch (Y/Y) 7-Feb 11-Feb 15-Feb 17-Feb 19-Feb 25-Feb 3-Mar 6-Mar 6-Mar 11-Mar N/A N/A N/A N/A N/A N/A N/A R$7,759 R$120 R$602 R$588 R$782 R$135 R$71 R$744 R$1,995 R$623 R$3,113 R$140 R$850 R$324 R$140 R$39 R$178 34% 18% 19% 36% 48% 5% 40% 256% 47% 7% 21% 33% N/M N/M N/M N/M N/M 22% 18% 22% 56% 44% 7% 33% 296% 54% 8% 28% 36% N/M N/M N/M N/M N/M R$1,756 R$25 R$90 R$95 R$187 R$37 R$17 R$116 R$297 R$148 R$1,356 R$24 R$19 R$51 R$30 R$7 R$32 61% 27% 29% 44% 30% -10% 54% 496% 44% 4% 89% 47% N/M N/M N/M N/M N/M 16% 109% 49% 68% 32% 13% 96% 710% 54% 7% 35% 62% N/M N/M N/M N/M N/M R$786 R$14 R$59 R$86 R$62 R$27 R$12 R$51 R$93 R$100 R$674 R$17 -R$74 R$35 R$2 R$11 R$35 15% 91% 47% 56% 117% -3% -2% 133% 97% 1% 708% 42% N/M N/M N/M N/M N/M -5% 169% 54% 75% N/M 23% 69% 11% -2% 7% 165% 85% N/M N/M N/M N/M N/M R$1.19 R$0.61 R$0.49 R$0.98 R$0.18 R$0.23 R$0.40 R$0.45 R$0.13 R$1.60 R$0.87 R$0.26 -R$0.86 R$0.27 R$0.01 R$0.23 R$0.45 15% 124% 47% 56% 89% -3% -2% 6% 98% 1% 708% 42% N/M N/M N/M N/M N/M -9% 152% 87% 91% N/M 34% 394% -58% 35% 32% 107% 101% N/M N/M N/M N/M N/M 15-Feb 21-Feb Latest 27-Feb Latest 27-Feb Latest 27-Feb Latest 27-Feb Latest 27-Feb Latest 27-Feb Latest 27-Feb P$2,770 $1,146 P$2,491 P$236 P$4,518 P$5,102 P$194 P$1,168 P$3,688 6% 15% 2% 478% 14% 17% -4% 12% 21% -2% 10% 8% 61% 18% 21% -19% 19% 24% P$1,358 $525 P$579 P$16 P$1,065 P$1,219 P$72 P$245 P$944 2% 21% -2% 150% 9% 7% -23% 20% 16% -6% 9% 7% 185% 15% 25% -41% 25% 21% P$653 $278 P$360 P$5 P$477 P$741 P$36 P$115 P$549 -6% 28% 4% 107% -21% 181% -30% 5% 60% -29% -5% 2% N/M 2% 66% -55% 20% 34% P$0.22 $0.49 P$0.27 P$0.03 P$0.89 P$2.21 P$0.22 P$0.30 P$0.59 -6% 30% 4% 106% -21% 181% -30% 5% 53% -28% -1% 5% N/M 27% 57% -58% 27% 29% Latin America Equity Strategy 23 January 2008 Consumer Discretionary Figure 4. Quarterly Earnings Preview by Company Ticker 5 Brazil Sadia Perdigao Natura Cosmeticos AmBev JBS Pão De Acucar (CBD) Marfrig Minerva Chile CCU Embot Andina Citigroup Global Markets Equity Research Mexico Industrias Bachoco Walmex Embot Arca Grupo Continental Coca-Cola Femsa Femsa Grupo Modelo Alsea SA de CV Comerci Elektra Gigante Gruma Grupo Bimbo Grupo Famsa Maseca Soriana Analyst Rating Stock Data Price Target Jan-22 Price Exp. Report Date Revenue Q4 Curr. (mn) Ch (Y/Y) SDIA4 PRGA3 NATU3 ABV JBSS3 PCAR4 MRFG3 BEEF3 Albano Albano Sánchez Sánchez Albano Albano Albano Albano 1H 1H 1H 1M 1H 2M 1H 1H R$9.23 R$36.92 R$15.14 $66.06 R$4.58 R$28.40 R$13.58 R$8.69 R$14.51 R$59.54 R$31.50 $88.00 R$12.70 R$33.00 R$27.30 R$25.60 30-Jan 21-Feb 27-Feb 28-Feb 28-Mar N/A N/A N/A R$2,259 R$2,697 R$959 $3,095 R$1,335 R$4,290 R$940 R$443 11% 67% 12% 26% CU AKOa Sánchez Sánchez 3L 3M $29.86 $15.15 $33.50 $18.00 31-Jan N/A $337 $385 IBA Estrada WALMEXV Estrada ARCA Sánchez CONTAL Sánchez KOF Sánchez FMX Sánchez GMODELOC Sánchez ALSEA Estrada COMERCIUBC Estrada ELEKTRA Estrada GIGANTE Estrada GRUMAB Estrada BIMBOA Estrada GFAMSAA Estrada MASECAB Estrada SORIANAB Estrada 2H 1L 2M 2M 1M 1M 2L 1H 1M 3H 3H 2M 1M 1H 3H 1M $31.50 P$36.70 P$35.50 P$23.30 $46.30 $34.36 $49.39 P$12.40 P$25.10 P$287.01 P$17.50 P$31.82 P$60.95 P$36.90 P$0.91 P$2.32 $37.00 P$54.00 P$43.00 P$25.00 $55.00 $50.00 $5.70 P$18.50 P$34.50 P$346.00 P$23.50 P$41.50 P$73.00 P$62.50 P$8.50 P$37.50 31-Jan 7-Feb 20-Feb 21-Feb 22-Feb 22-Feb 27-Feb Latest 27-Feb Latest 27-Feb Latest 27-Feb Latest 27-Feb Latest 27-Feb Latest 27-Feb Latest 27-Feb Latest 27-Feb Latest 27-Feb $421 P$69,180 P$4,537 P$3,011 $1,596 $3,437 $1,719 P$1,949 P$13,919 P$10,543 P$9,318 P$9,319 P$18,527 P$4,182 P$2,348 P$19,137 Source: Citi Investment Research YTD Ch (Y/Y) EBITDA Q4 Curr. (mn) Ch (Y/Y) 21% 42% 12% 24% N/M 8% 52% N/M R$259 R$340 R$204 $1,399 R$188 R$287 R$128 R$55 -16% 123% 15% 29% 7% 23% 10% 20% $85 $104 14% 14% 13% 9% 14% 13% 34% 20% 10% 9% 7% 13% 11% 12% 17% 11% 21% 14% 11% 6% 16% 14% 32% 21% 11% 11% 8% 14% 12% 14% 22% 12% $62 P$7,596 P$889 P$619 $360 $728 $516 P$332 P$1,255 P$2,041 P$841 P$664 P$2,683 P$579 P$265 P$1,798 9% 33% YTD Ch (Y/Y) Net Income as Reported Q4 YTD Curr. (mn) Ch (Y/Y) Ch (Y/Y) 59% 175% 8% 27% N/M 11% 56% N/M R$299 R$147 R$141 $490 R$56 R$98 R$43 R$17 7% 28% 13% 22% $48 $74 3% 15% 26% 18% 23% 24% 41% 11% 13% 9% 10% -21% 15% 11% -13% 15% 28% 17% 9% 4% 17% 11% 33% 19% 17% 14% 29% -8% 13% 11% -2% 18% $38 P$4,987 P$518 P$414 $169 $214 $216 P$116 P$713 P$1,157 P$488 P$316 P$1,488 P$214 P$127 P$1,095 25% 18% 35% 32% 21% -11% EPS adj. for Non-Recur. Q4 YTD EPS Ch (Y/Y) Ch (Y/Y) 84% 216% 2% 3% N/M 167% 28% N/M R$0.44 R$0.71 R$0.33 $0.79 R$0.05 R$0.43 R$0.21 R$0.23 13% 31% $0 $0 $0.76 $0.59 13% 31% 86% 69% 280% 14% 17% 2% 21% 42% 41% 424% -5% -35% 41% 27% 53% -19% -15% 16% 75% 17% 15% 12% 31% 19% 19% 112% 15% 4% 219% -4% 23% 8% -2% 20% $0.77 P$0.59 P$0.64 P$0.55 $0.92 $0.60 $0.07 P$0.19 P$0.66 P$4.72 P$0.50 P$0.65 P$1.27 P$0.65 P$0.14 P$0.61 280% 16% 17% 2% 21% 42% 41% 181% -5% -37% 41% 27% 53% -20% -15% 16% 44% 38% 3% 7% 60% 17% 8% -74% 53% 31% N/M -17% 28% 69% -5% 39% 254% 30% 35% 6% 21% -8% 254% 30% 307% N/M -1% 44% N/M 131% 91% N/M Latin America Equity Strategy 23 January 2008 Consumer Staples Figure 5. Quarterly Earnings Preview by Company Stock Data Price Target Jan-22 Price Exp. Report Date Revenue Q4 Curr. (mn) Ch (Y/Y) YTD Ch (Y/Y) EBITDA Q4 Curr. (mn) Ch (Y/Y) YTD Ch (Y/Y) Net Income as Reported Q4 YTD Curr. (mn) Ch (Y/Y) Ch (Y/Y) EPS adj. for Non-Recur. Q4 YTD EPS Ch (Y/Y) Ch (Y/Y) 6 Ticker Analyst Rating Argentina Tenaris Petrobras Energia TS PZE Mello Mello 1H 3S $36.63 $11.49 $55.00 $12.00 27-Feb N/A $2,856 $1,148 16% 16% 28% 10% $929 $281 3% 26% 15% -13% $434 $111 -24% 60% -7% -34% $0.74 $0.52 -24% 60% -2% -39% Brazil Lupatech Petroleo Brasileiro Ecodiesel Sao Martinho* Cosan Industria* LUPA3 PETR4 ECOD3 SMTO3 CSAN3 Mello Mello Mello Mello Mello 1S 1M 2S 2S 1S R$50.00 R$81.04 R$4.10 R$25.80 R$22.39 R$72.00 R$100.00 R$13.00 R$26.50 R$33.00 14-Feb 22-Feb N/A N/A N/A R$189 R$43,734 R$268 R$184 R$682 252% 7% 1023% -29% -9% 89% 7% 1042% 4% 45% R$55 R$12,942 R$12 R$24 R$129 450% 22% 137% -69% -24% 96% 0% N/M 8% 79% R$19 R$6,606 R$10 -R$9 R$180 N/M 27% 130% -142% N/M -70% -11% N/M -16% N/M R$0.65 R$1.51 R$0.08 -R$0.09 R$1.15 N/M 27% 130% -113% 569% 28% -17% N/M -52% N/M * Different Fiscal Year Source: Citi Investment Research Latin America Equity Strategy 23 January 2008 Energy Citigroup Global Markets Equity Research Figure 6. Quarterly Earnings Preview by Company Argentina Irsa 7 Brazil Bradesco Itaú Unibanco Nossa Caixa Banco do Brasil Cyrela BR Malls Mexico Banorte Peru Intergroup Credicorp Stock Data Price Target Jan-22 Price Exp. Report Date Revenue Q4 Curr. (mn) Ch (Y/Y) YTD Ch (Y/Y) Net Profit before Provisions Q4 YTD Curr. (mn) Ch (Y/Y) Ch (Y/Y) Net Income as Reported Q4 YTD Curr. (mn) Ch (Y/Y) Ch (Y/Y) EPS adj. for Non-Recur. Q4 YTD EPS Ch (Y/Y) Ch (Y/Y) Ticker Analyst Rating IRS Trent 1M $13.50 $26.00 12-Feb $70 9% 25% $22 -22% 5% -$2 -112% 6% -$0.05 -111% 56% BBDC4 ITAU4 UBBR11 BNCA3 BBAS3 CYRE3 BRML3 Abut Abut Abut Abut Abut del Castill del Castill 2M 1M 1M 3H 2M 1M 1S R$46.20 R$38.10 R$21.76 R$23.80 R$28.70 R$21.15 R$17.14 R$64.98 R$70.00 R$32.50 R$20.00 R$32.50 R$38.00 R$32.00 29-Jan 12-Feb 14-Feb 21-Feb 26-Feb N/A N/A R$5,950 R$5,542 R$2,969 R$900 R$5,371 R$430 -R$34 17% 19% 19% -1% 11% 14% 21% 12% -2% 15% N/M N/M R$4,241 R$4,851 R$1,773 R$245 R$3,692 R$100 34% 21% 23% -17% 29% 23% 23% 15% -33% 30% N/M N/M R$2,019 R$2,186 R$747 R$34 R$1,487 R$69 -R$15 19% 71% 30% 1% 19% 49% 114% 115% -1% -16% N/M N/M R$1.00 R$0.91 R$0.51 R$0.32 R$0.60 R$0.19 -R$0.09 23% 32% 23% 1% 19% 16% 21% 118% -72% 88% N/M N/M GFNORTEO Abut 3M P$42.64 P$50.00 31-Jan P$4,660 18% 16% P$2,651 15% 8% P$1,618 8% 9% P$0.80 8% 10% IFS BAP Abut Abut 2M 1M P$16.00 $71.91 P$55.00 $85.50 5-Feb 7-Feb $222 $175 N/M N/M $139 $120 N/M N/M $64 $81 N/M N/M $0.69 $1.02 Source: Citi Investment Research N/M N/M Latin America Equity Strategy 23 January 2008 Financials Citigroup Global Markets Equity Research Figure 7. Quarterly Earnings Preview by Company Stock Data Price Target Jan-22 Price 8 Ticker Analyst Rating Brazil Gol CCR ALL Usiminas Embraer OHL Brasil TAM GOL CCRO3 ALLL11 USIM5.SA ERJ OHLB3 TAM Trent Albano Albano Hacking Trent Albano Trent 2S 3L 1M 2H 1M 2S 1H Chile LAN Airlines Copec LFL COP Trent Mello 3H 2M OMAB ASR PAC PASAB IDEALB1 ICA Trent Trent Trent del Castillo del Castillo del Castillo 1M 1M 2M 2S 3S 1H $21.40 $54.80 $39.79 P$32.50 P$12.79 P$64.30 CPA Trent 1M $37.15 Mexico OMAB (Centro Norte) Asur GAP PASAB IDEAL Empresas ICA Panama Copa Airlines Citigroup Global Markets Equity Research Source: Citi Investment Research $18.23 R$23.50 R$19.80 R$76.00 $41.27 R$18.00 $19.52 Exp. Report Date Revenue Q4 YTD Curr. (mn) Ch (Y/Y) Ch (Y/Y) EBITDA Q4 YTD Curr. (mn) Ch (Y/Y) Ch (Y/Y) Net Income as Reported Q4 YTD Curr. (mn) Ch (Y/Y) Ch (Y/Y) EPS adj. for Non-Recur. Q4 YTD EPS Ch (Y/Y) Ch (Y/Y) $26.50 R$31.00 R$28.70 R$100.10 $65.00 R$26.00 $43.00 14-Feb 21-Feb 28-Feb 4-Mar 13-Mar 14-Mar 31-Mar $900 R$622 R$503 R$3,521 $2,071 R$158 $1,318 91% 10% 9% 7% 91% 30% 43% 53% 9% 24% 12% 43% 39% 25% $86 R$393 R$197 R$1,361 $187 R$96 $110 35% 22% 11% 40% 120% 25% -17% -56% 19% 34% 18% 45% 29% -40% $93 R$173 R$27 R$846 $158 R$20 $80 116% -26% 371% 12% 27% 9% 1% -40% 13% 118% 21% 15% -32% -32% $0.46 R$0.43 R$0.05 R$2.54 $0.85 R$0.29 $0.53 109% -26% 371% 12% 27% 9% 1% -43% 57% -91% 24% 9% -45% -28% $11.08 $13.00 CP$7,750 CP$9,300 29-Jan 22-Feb $947 $1,761,867 11% 58% 13% 39% $136 $178,066 -20% -10% 24% 13% $82 $101,802 -12% -14% 20% 9% $0.24 $78.32 -18% -14% 69% 10% $32.00 $75.00 $56.00 P$47.00 P$14.00 P$93.00 25-Feb 25-Feb 25-Feb Latest 27-Feb Latest 27-Feb Latest 27-Feb $50 $74 $84 P$768 P$1,061 P$5,515 31% 43% 23% 16% $28 $44 $53 P$123 P$448 P$678 33% 45% 20% 20% $16 $26 $37 P$24 P$203 P$238 -18% 33% 94% 42% 73% N/M -21% $0.32 $0.88 $0.67 P$0.18 P$0.07 P$0.48 135% 117% 31% 31% -14% 24% 39% 23% 56% N/M -6% 135% 117% 31% 31% -6% 22% 32% 21% 39% N/M -1% -34% 16% 82% 70% 109% N/M 0% $60.00 21-Feb $295 24% 22% $54 -8% 18% $34 -19% 19% $0.78 -20% 37% Latin America Equity Strategy 23 January 2008 Industrials Figure 8. Quarterly Earnings Preview by Company Analyst Rating Stock Data Price Target Jan-22 Price TX Hacking 1H $33.90 $50.00 26-Feb $2,406 52% 30% $604 65% 12% $182 29% 1% $0.91 29% N/M ARA VCP SUZB5 KLBN4 BAK RIO_p BISA3 SZPQ4 UGP UNIP6 Mello Mello Mello Mello Mello Hacking del Casti Mello Mello Mello 1M 1H 1H 2H 2H 1M 1S 3M 1M 3S $62.94 $24.94 R$25.00 R$5.87 $14.51 R$24.23 R$9.90 R$10.16 $33.50 R$1.64 $92.00 $37.00 R$38.00 R$7.00 $21.00 R$37.00 R$18.00 R$10.61 $44.00 R$1.65 11-Jan 17-Jan 23-Jan 18-Feb 20-Feb 28-Feb N/A N/A N/A N/A $539 $349 R$899 R$684 $2,599 R$7,766 R$128 R$607 $3,540 R$611 18% -9% 13% -2% 80% 6% $235 $132 R$299 R$149 $339 R$4,156 R$48 R$74 $142 R$88 8% -15% 15% -19% 15% 58% $95 $166 R$110 R$123 $67 R$2,466 R$37 R$16 $34 R$30 61% 51% -29% -7% 228% 25% 42% 608% 80% N/M N/M -35% 59% $0.92 $0.81 R$0.35 R$0.13 $0.15 R$0.51 R$0.20 R$0.07 $0.42 R$0.04 -26% 63% 22% 11% -24% 57% -18% 165% 2% 8% -4% 8% 7% 58% 80% N/M 77% 80% 19% -26% 63% 22% 11% 85% 57% -3% 533% -14% 12% 1% 8% 4% 53% 62% N/M 5% 375% 0% 61% 51% -29% N/M 52% 13% 46% N/M 71% N/M N/M -43% 204% CAR Mello 1M CP$16,450 CP$24,200 9-Feb $421,865 37% 31% $135,331 102% 70% $79,892 159% 142% $399.46 159% 164% 1L 3H 1H 1M P$23.83 P$65.00 P$45.25 P$23.20 P$46.00 P$64.00 P$57.00 P$35.00 28-Jan Latest 27-Feb Latest 27-Feb Latest 27-Feb $5,341 P$2,262 P$6,926 P$1,685 19% 19% 137% 3% 17% 21% 118% 13% $1,105 P$805 P$1,432 P$748 18% 35% 142% 36% 12% 26% 89% 13% $493 P$447 P$687 P$454 31% 40% 84% 1069% -1% 45% 80% 37% $0.66 P$1.36 P$1.25 P$0.51 27% 40% 64% 1069% -27% 48% 81% 1% 2H 2H 2M $24.07 P$3.69 $7.69 $32.00 P$10,500 $4.60 28-Feb 29-Feb N/A $83 P$894,989 11% 14% N/M N/M $38 P$167,170 0% 19% N/M N/M $16 P$36,563 287% 255% N/M N/M $0.38 P$31.75 287% 268% N/M N/M Ticker Argentina Ternium 9 Brazil Aracruz Celulose* VCP* Suzano Papel Klabin Braskem Vale Brascan Suzano Petroquimica Ultrapar Partic Unipar Chile Emp. CMPC Citigroup Global Markets Equity Research Mexico Cemex G. Cem Chihuahua Mexichem Corp. Moctezuma Peru Cementos Lima Cementos Argos Hochschild CX Trent GCC Vallarino MEXCHEM Vallarino CMOCTEZ Vallarino CEL CCB HOC Trent Trent Sainsbury Exp. Report Date *Aracruz reported lower-than-expected vs. CIR estimates; VCP reported in-line Source: Citi Investment Research Revenue Q4 Curr. (mn) Ch (Y/Y) YTD Ch (Y/Y) EBITDA Q4 YTD Curr. (mn) Ch (Y/Y) Ch (Y/Y) Net Income as Reported Q4 YTD Curr. (mn) Ch (Y/Y) Ch (Y/Y) EPS adj. for Non-Recur. Q4 YTD EPS Ch (Y/Y) Ch (Y/Y) Latin America Equity Strategy 23 January 2008 Materials Figure 9. Quarterly Earnings Preview by Company Stock Data Price Target Jan-22 Price Exp. Report Date Revenue Q4 YTD Curr. (mn) Ch (Y/Y) Ch (Y/Y) EBITDA Q4 YTD Curr. (mn) Ch (Y/Y) Ch (Y/Y) Net Income as Reported Q4 YTD Curr. (mn) Ch (Y/Y) Ch (Y/Y) EPS adj. for Non-Recur. Q4 YTD EPS Ch (Y/Y) Ch (Y/Y) Ticker Analyst Rating TEO Grenham 2H $21.19 $30.00 8-Mar $738 4% 16% $210 12% 23% $29 13% 122% $0.15 13% 109% TSP TNE TMAR5 TSU ViV Grenham Grenham Grenham Grenham Grenham 2M 1H 1H 2H 3S $24.32 $22.25 $41.34 $33.28 $4.71 $37.00 $33.00 $49.00 $42.00 $3.50 18-Feb 28-Feb 28-Feb 6-Mar N/A $1,989 $2,509 $2,170 $1,762 $1,664 14% 21% 5% 23% 22% 13% 18% 9% 36% 23% $852 $866 $749 $410 $354 12% 20% 7% 10% -11% 2% 17% 11% 35% 20% $360 $417 $412 $36 -$92 7% 46% 59% -41% -122% -4% 91% 69% N/M N/M $0.71 $0.04 $1.73 $0.16 ($0.06) 7% 46% 59% -41% -122% -5% -48% 92% N/M N/M Chile Entel Telefónica Chile ENT CTC Grenham Grenham 1H 2H CP$6,450 $6.61 CP$11,000 $10.50 28-Jan 31-Jan $225,716 $295 10% 10% 7% 7% $93,745 $132 5% -3% 7% -6% $32,444 $7 111% 1% 23% -41% $137.41 $0.03 112% 1% 4% -47% Mexico America Movil Telmex Carso Global Grupo Iusacell Axtel AMX TMX CGTVY CEL AXTELCPO Grenham Grenham Grenham Grenham Grenham 1M 1L 1L 1S 2H $54.19 $33.51 $8.36 P$117.99 P$25.92 $81.00 $45.00 $11.00 P$240.00 P$32.00 5-Feb 8-Feb 15-Feb 15-Feb 15-Feb $7,895 $4,424 $4,433 P$3,606 P$3,376 30% 6% 6% 75% 61% 34% 11% 11% 43% 98% $3,025 $1,889 $1,882 P$772 P$1,158 34% 15% 14% 68% 69% 48% 13% 13% 28% 91% $1,371 $860 $407 P$269 P$138 36% 19% 24% -74% 105% 33% 28% 54% N/M 135% $0.78 $0.90 $0.23 P$2.11 P$0.11 40% 26% 24% -81% 99% 39% 44% 68% N/M 155% Latin America NII Holdings NIHD Grenham 2H $39.42 $58.00 29-Feb $912 36% 38% $265 35% 38% $112 4% 23% $0.64 -8% 36% Argentina Tel. Argentina Brazil TSP Tele Norte Leste Telemar Norte Leste TSU Vivo Partic. 10 Citigroup Global Markets Equity Research Source: Citi Investment Research Latin America Equity Strategy 23 January 2008 Telecommunication Services Figure 10. Quarterly Earnings Preview by Company Stock Data Price Target Jan-22 Price Exp. Report Date Revenue Q4 Curr. (mn) Ch (Y/Y) YTD Ch (Y/Y) EBITDA Q4 Curr. (mn) Ch (Y/Y) YTD Ch (Y/Y) Net Income as Reported Q4 YTD Curr. (mn) Ch (Y/Y) Ch (Y/Y) EPS adj. for Non-Recur. Q4 YTD EPS Ch (Y/Y) Ch (Y/Y) 11 Ticker Analyst Rating Argentina Edenor EDN.N Mattar 1H $20.75 $26.70 N/A $131 13% 19% $50 170% 87% $89 N/M 50% $1.97 N/M 97% Brazil Sabesp CTEEP Eletropaulo Light CPFL EDP AES Tietê Cemig Tractebel Cesp Copasa Copel Eletrobrás Equatorial Terna SBSP3 TRPL4 ELPL6 LIGT3 CPFE3 ENBR3 GETI4 CMIG4 TBLE3 CESP6 CSMG3 CPLE6 ELET6 EQTL11 TRNA11 Mattar Mattar Mattar Mattar Mattar Mattar Mattar Mattar Mattar Mattar Mattar Mattar Mattar Mattar Mattar 2H 1M 1M 1M 2M 1M 1M 1M 2M 1M 1H 2M 2H 1M 2M R$36.82 R$40.10 R$134.50 R$23.60 R$30.20 R$24.89 R$57.00 R$30.42 R$19.82 R$43.69 R$23.71 R$25.35 R$21.77 R$16.50 R$29.00 R$55.20 R$43.11 R$137.50 R$31.40 R$37.00 R$35.88 R$81.10 R$47.80 R$24.85 R$53.00 R$40.90 R$33.00 R$31.20 R$20.36 R$35.30 7-Feb 15-Feb 15-Feb 15-Feb 20-Feb 29-Feb 6-Mar 7-Mar 14-Mar 25-Mar 26-Mar N/A N/A N/A N/A R$1,602 R$383 R$2,138 R$1,413 R$2,651 R$1,358 R$372 R$2,441 R$606 R$561 R$524 R$1,367 R$5,612 R$248 R$131 8% 17% -6% 0% 8% 4% 7% 5% -16% 3% 23% -3% -14% 8% 13% 9% 12% -4% 4% 14% 14% 3% 7% 1% 7% 14% 5% 3% 14% 4% R$754 R$230 R$317 R$306 R$982 R$350 R$282 R$821 R$377 R$388 R$227 R$342 R$2,673 R$105 R$109 41% 34% -46% -27% 32% -11% 7% -13% 18% 6% 54% -11% 27% 6% 10% 19% 31% -28% -3% 29% 13% 1% 10% 11% 6% 24% 6% 35% 28% 1% R$281 R$156 R$141 R$143 R$451 R$23 R$165 R$377 R$183 R$213 R$79 R$254 R$2,716 R$63 R$58 252% 163% 43% 52% 31% -85% 0% -32% -3% N/M 42% -17% N/M 56% 91% 59% 454% 105% N/M 23% 0% -3% 3% -10% N/M 6% -19% 154% 34% 52% R$1.24 R$1.01 R$3.38 R$0.70 R$0.94 R$0.14 R$1.69 R$0.77 R$0.28 R$0.65 R$0.69 R$0.93 R$2.40 R$0.94 R$0.66 -56% 163% 43% 52% 31% -85% 0% -32% -3% N/M 42% -17% N/M 56% 91% -53% 37% 61% N/M 26% 49% -1% 19% -10% N/M -7% -33% 14% 57% 55% Citigroup Global Markets Equity Research Source: Citi Investment Research Latin America Equity Strategy 23 January 2008 Utilities Latin America Equity Strategy 23 January 2008 Figure 11. Latin America Equity Research and Sales Latin American Equity Research Name Geoffrey Dennis Alonso Rios Contribution Director of Research/Equity Strategist Director of Accival Research Daniel A. Abut Financial Institutions Patrick Grenham Telecommunications & Media Celso Sanchez Consumer & Beverage Stephen Trent Cement, Transportation & Real Estate Gustavo Oliveira Internet Technology & Retail Alex Hacking Metals & Mining Tereza Mello Oil, Chemicals & Pulp/Paper Felipe Mattar Utilities Carlos Albano Food Manufacturers & Concessions Cecilia del Castillo Construction & Real Estate Eduardo Estrada Lope Food & Retail Luis Vallarino Small/Mid Cap Mexico Coverage Office Number 1 212-816-8391 52 (55) 1226-0781 Geographic Location New York Mexico Email [email protected] [email protected] 1 212-816-7516 1 212-816-1683 1 212-816-6910 1 212-816-6901 1 212-816-2854 1 415-951-1704 1 212-816-3394 55 (11) 4009-2608 55 (11) 4009-7288 52 (55) 1226-0591 52 (55) 1226-0621 52 (55) 1226-06-08 New York New York New York New York New York San Francisco Brazil Brazil Brazil Mexico Mexico Mexico [email protected] [email protected] [email protected] [email protected] [email protected] [email protected] [email protected] [email protected] [email protected] [email protected] [email protected] [email protected] 1 212-816-2735 1 212-816-6281 New York New York [email protected] [email protected] 1 212-723-5717 1 212-723-5717 1 212-723-5717 55 (11) 4009 7108 55 (11) 4009 7448 55 (11) 4009 7448 44 (207) 7986 0676 44 (207) 7986 0057 1 212-723-7185 55 (11) 4009-7449 55 (11) 4009-7449 New York New York New York Brazil Brazil Brazil London London New York Brazil Brazil [email protected] [email protected] [email protected] [email protected] [email protected] [email protected] [email protected] [email protected] [email protected] [email protected] [email protected] Economists Alberto Ades Tania Reif Chief Economist, Latin America Latin America Equity Economist Latin America Sales/Trading Jason Myers Jason A. Villano Helena Ekeus Roberto Serwaczak Roberto Rocha Peter Feddersen Robert Hulme Jose Lueje Michael Vincelli Fabio Giuliano Rodrigo Mcarvalho Sales Sales Sales Brazil Head of Sales Sales Sales Sales Sales Trading Sales Trading Trading Source: Citi Investment Research 12 Citigroup Global Markets Equity Research Latin America Equity Strategy 23 January 2008 13 Citigroup Global Markets Equity Research Latin America Equity Strategy 23 January 2008 Appendix A-1 Analyst Certification Each research analyst(s), strategist(s) or research associate(s) responsible for the preparation and content of all or any identified portion of this research report hereby certifies that, with respect to each issuer or security or any identified portion of the report with respect to an issuer or security that the research analyst, strategist or research associate covers in this research report, all of the views expressed by that research analyst, strategist or research associate in this research report accurately reflect their personal views about those issuer(s) or securities. Each research analyst(s), strategist(s) or research associate(s) also certify that no part of their compensation was, is, or will be, directly or indirectly, related to the specific recommendation(s) or view(s) expressed by that research analyst, strategist or research associate in this research report. IMPORTANT DISCLOSURES Customers of the Firm in the United States can receive independent third-party research on the company or companies covered in this report, at no cost to them, where such research is available. Customers can access this independent research at http://www.smithbarney.com (for retail clients) or http://www.citigroupgeo.com (for institutional clients) or can call (866) 836-9542 to request a copy of this research. A household member of a member of Luis Vallarino, CFA's team holds a long position in the shares of Mexichem SAB de CV. A director of America Movil, S.A. de C.V. is a member of the board of directors of an affiliate of Citigroup Global Makets Inc. A director of Axtel S.A. de C.V. serves as a member of Citi's International Advisory Board and is a member of the board of directors of an affilliate of Citigroup Global Markets Inc. An employee of Citigroup Global Markets Inc. is a director of Axtel S.A. de C.V. and is a member of the board of directors of an affilliate of Citigroup Global Markets Inc. A director of COCA-COLA FEMSA, S.A. de C.V. is a member of the board of directors of an affilliate of Citigroup Global Markets Inc. A director of Citi serves as a director of Gruma S.A. de C.V. A director of FOMENTO ECONOMICO MEXICANO, S.A. de C.V. is a member of the board of directors of an affilliate of Citigroup Global Markets Inc. A director of GRUPO AEROPORTUARIO DEL PACIFICO, S.A. de C.V. is a member of the board of directors of an affilliate of Citigroup Global Markets Inc. A director of GRUPO CEMENTOS DE CHIHUAHUA, S.A. de C.V. is a member of the board of directors of an affilliate of Citigroup Global Markets Inc. A director of Grupo Aeroportuario Del Sureste, S.A. de C.V. is a member of the board of directors of an affilliate of Citigroup Global Markets Inc. A director of Grupo Bimbo, S.A. de C.V. is a member of the board of directors of an affiliate of Citigroup Global Markets Inc. A director of Urbi Desarrollos Urbanos, S.A. C.V. is a member of the board of directors of an affilliate of Citigroup Global Markets Inc. A seat on the board of directors of Corporacion GEO is held by a director of an affiliate of Citigroup Global Markets Inc. A seat on the board of directors of Empresas Ica SA is held by one or more members of the board of directors of Citigroup Global Markets Inc. or its affilliates. An officer or director of Grupo Televisa SA serves as a director on Citi's board. Citi is acting as a financial advisor in the proposed sale of Grupo Gigante's supermarket business. Citi is acting as financial advisor to Lojas Americanas in the proposed merger with Submarino. Citigroup Global Markets Inc. acted as the exclusive financial advisor to the Gerdau Group in the proposed merger with Quanex Corporation. Citigroup Global Markets Inc. is advising the State of São Paolo in the proposed sale of its equity interest in Companhia Energética de São Paulo. One or more directors of Cemex, S.A. de C.V. is a member of the board of directors of an affilliate of Citigroup Global Markets Inc. A director of Cemex, S.A de C.V. serves as a director on Citi's International Advisory Board. CEMEX, S.A.B. de C.V. Citigroup Global Markets Inc. is acting as a as financial advisor to Cemex, S.A.B. de C.V. One or more directors of KIMBERLY-TELEFONOS DE MEXICO, S.A. de C. V. is a member of the board of directors of an affilliate of Citigroup Global Markets Inc. One or more officers or directors of Gigante are members of the board of directors of an affiliate of Citigroup Global Markets Inc. Citi is acting as a financial advisor in the proposed sale of Grupo Gigante's supermarket business. Citi is acting as a dealer manager for the tender offer and consent solicitation. A member of Felipe Mattar's team received compensation from Eletropaulo in the past 12 months. A member of Patrick Grenham's team received compensation from NET in the past 12 months. Citigroup Global Markets Inc. or its affiliates beneficially owns 1% or more of any class of common equity securities of Axtel, Cementos Chihuahua and Promotora Ambiental SAB de CV. This position reflects information available as of the prior business day. Within the past 12 months, Citigroup Global Markets Inc. or its affiliates has acted as manager or co-manager of an offering of securities of Axtel, Banco do Brasil SA, Banco Nossa Caixa SA, BR Malls Participacoes SA, Brasil Ecodiesel S.A., Cesp, Coca-Cola Femsa SA, Companhia Vale do Rio Doce, Consorcio ARA, SAB de CV, CPFL Energia SA, Edenor SA, EDP - Energias do Brasil SA, Eletrobras, Empresas Ica SAB de CV, Equatorial Energia SA, Gafisa SA, Grupo Aeroportuario del Centro Norte S A, Grupo Aeroportuario del Pacifico SA de C, Intergroup, IRSA, Lojas Americanas SA, Lupatech SA, MARFRIG, Minerva SA, Petrobras Energia Participaciones SA, Petróleo Brasileiro Petrobrás, Rodobens Negocios Imobiliarios SA, Sabesp, Springs Global, Suzano Petroquimica SA, Telecom Argentina, Telmex, Terna Participacoes SA, Urbi Desarrollos Urbanos, SA de CV, Usinas Siderurgicas de Minas Gerais SA, Vale (Preferred) and Walmex. 14 Citigroup Global Markets Equity Research Latin America Equity Strategy 23 January 2008 Citigroup Global Markets Inc. or its affiliates has received compensation for investment banking services provided within the past 12 months from Aes Tiete S/A, AmBev, America Movil, B2W, Banco Bradesco SA, Banco do Brasil SA, Banco Itau Holding Financeira SA, Banco Nossa Caixa SA, Banorte, Bimbo, BR Malls Participacoes SA, Brasil Ecodiesel S.A., Braskem S.A., Cementos Argos SA, Cemex, Cemig, Cesp, Coca-Cola Femsa SA, Companhia Siderurgica Nacional, Companhia Vale do Rio Doce, Consorcio ARA, SAB de CV, Copa Airlines, Copasa, CPFL Energia SA, Credicorp, CTC, Desarrolladora Homex, S.A.B. de C.V., Edenor SA, EDP - Energias do Brasil SA, Eletrobras, Embotelladora Andina S.A., Embraer, Empresas Ica SAB de CV, Equatorial Energia SA, Gerdau SA, Gigante, Gol Linhas Aéreas S.A., Grupo Aeroportuario del Centro Norte S A, Grupo Famsa SAB de CV, Grupo Televisa, Intergroup, IRSA, JBS SA, Lan Airlines, Light SA, Lojas Americanas SA, Lupatech SA, MARFRIG, Mexichem SAB de CV, Minerva SA, NII Holdings, OHL Brasil, Petróleo Brasileiro - Petrobrás, Rodobens Negocios Imobiliarios SA, Springs Global, TAM S.A., Tele Norte Leste, Telecom Argentina, Telemar Norte Leste, Telesp, Telmex, Tenaris S.A., Terna Participacoes SA, Ternium SA, Tractebel Energia SA, UNIBANCO - Uniao de Bancos Brasileiros S, Usinas Siderurgicas de Minas Gerais SA, Vale (Preferred), VIVO and Votorantim Celulose e Papel S.A. Citigroup Global Markets Inc. or its affiliates expects to receive or intends to seek, within the next three months, compensation for investment banking services from Aes Tiete S/A, AmBev, America Movil, Aracruz Celulose S.A., Axtel, Banco do Brasil SA, Bimbo, Cementos Argos SA, Cemex, Copa Airlines, CTC, Edenor SA, Eletrobras, Equatorial Energia SA, Gafisa SA, Gerdau SA, Gigante, Grupo Aeroportuario del Centro Norte S A, Grupo Televisa, IRSA, Petróleo Brasileiro - Petrobrás, Telesp, Telmex, VIVO and Votorantim Celulose e Papel S.A. Citigroup Global Markets Inc. or an affiliate received compensation for products and services other than investment banking services from Aes Tiete S/A, Alsea, AmBev, America Movil, Antofagasta, Aracruz Celulose S.A., Axtel, B2W, Bachoco, Banco Bradesco SA, Banco do Brasil SA, Banco Itau Holding Financeira SA, Banorte, Bimbo, BR Malls Participacoes SA, Brasil Ecodiesel S.A., Braskem S.A., Carso Global Telecom, Cementos Argos SA, Cementos Chihuahua, Cementos Lima S.A., Cemex, Cemig, Coca-Cola Femsa SA, Comercial Mexicana, Companhia Siderurgica Nacional, Companhia Vale do Rio Doce, Compañia Cervecerias Unidas S.A, Consorcio ARA, SAB de CV, Consorcio Hogar, SAB de CV, Copa Airlines, Copasa, Copel, Corporacion GEO SAB de CV, Corporacion Moctezuma SAB de CV, CPFL Energia SA, Credicorp, CTC, Datasul SA, Desarrolladora Homex, S.A.B. de C.V., Edenor SA, EDP - Energias do Brasil SA, Eletrobras, Eletropaulo, Embotelladora Andina S.A., Embotelladoras Arca S.A., Embraer, Empresas CMPC S.A., Empresas Copec SA, Empresas Ica SAB de CV, FEMSA, Gafisa SA, Gerdau SA, Gigante, Gol Linhas Aéreas S.A., Gruma, Grupo Aeroportuario del Centro Norte S A, Grupo Aeroportuario del Pacifico SA de C, Grupo Aeroportuario del Sureste,SAB de C, Grupo Continental, Grupo Elektra SA de CV, Grupo Famsa SAB de CV, Grupo Iusacell, Grupo Modelo SA, Grupo Pão De Acucar, Grupo Televisa, Hochschild Mining, Impulsora del Desarrollo y el Empleo en, Intergroup, IRSA, JBS SA, Klabin S.A., Lan Airlines, Light SA, Lojas Americanas SA, Lojas Renner SA, Lupatech SA, MARFRIG, Maseca, Mexichem SAB de CV, Minerva SA, NET, NII Holdings, OHL Brasil, Perdigao SA, Petróleo Brasileiro - Petrobrás, Promotora Ambiental SAB de CV, Radio Centro, Sabesp, Sadia SA, Sao Martinho SA, Sare Holding, SAB de CV, Soriana, Springs Global, Suzano Papel e Celulose S.A., TAM S.A., Tele Norte Leste, Telecom Argentina, Telemar Norte Leste, Telesp, Telmex, Tenaris S.A., Terna Participacoes SA, Ternium SA, TIM Participacoes, Tractebel Energia SA, TV Azteca, Ultrapar Participacoes S.A., UNIBANCO - Uniao de Bancos Brasileiros S, Urbi Desarrollos Urbanos, SA de CV, Usinas Siderurgicas de Minas Gerais SA, Vale (Preferred), VIVO, Votorantim Celulose e Papel S.A. and Walmex in the past 12 months. Citigroup Global Markets Inc. currently has, or had within the past 12 months, the following company(ies) as investment banking client(s): Aes Tiete S/A, AmBev, America Movil, Aracruz Celulose S.A., Axtel, B2W, Banco Bradesco SA, Banco do Brasil SA, Banco Itau Holding Financeira SA, Banco Nossa Caixa SA, Banorte, Bimbo, BR Malls Participacoes SA, Brasil Ecodiesel S.A., Braskem S.A., Cementos Argos SA, Cementos Chihuahua, Cemex, Cemig, Cesp, Coca-Cola Femsa SA, Companhia Siderurgica Nacional, Companhia Vale do Rio Doce, Consorcio ARA, SAB de CV, Copa Airlines, Copasa, CPFL Energia SA, Credicorp, CTC, Desarrolladora Homex, S.A.B. de C.V., Edenor SA, EDP - Energias do Brasil SA, Eletrobras, Embotelladora Andina S.A., Embotelladoras Arca S.A., Embraer, Empresas CMPC S.A., Empresas Copec SA, Empresas Ica SAB de CV, Equatorial Energia SA, Gafisa SA, Gerdau SA, Gigante, Gol Linhas Aéreas S.A., Grupo Aeroportuario del Centro Norte S A, Grupo Famsa SAB de CV, Grupo Modelo SA, Grupo Televisa, Intergroup, IRSA, JBS SA, Lan Airlines, Light SA, Lojas Americanas SA, Lupatech SA, MARFRIG, Mexichem SAB de CV, Minerva SA, NII Holdings, OHL Brasil, Petróleo Brasileiro - Petrobrás, Promotora Ambiental SAB de CV, Radio Centro, Rodobens Negocios Imobiliarios SA, Sao Martinho SA, Sare Holding, SAB de CV, Springs Global, Suzano Papel e Celulose S.A., TAM S.A., Tele Norte Leste, Telecom Argentina, Telemar Norte Leste, Telesp, Telmex, Tenaris S.A., Terna Participacoes SA, Ternium SA, Tractebel Energia SA, Ultrapar Participacoes S.A., UNIBANCO - Uniao de Bancos Brasileiros S, Usinas Siderurgicas de Minas Gerais SA, Vale (Preferred), VIVO and Votorantim Celulose e Papel S.A. Citigroup Global Markets Inc. currently has, or had within the past 12 months, the following company(ies) as clients, and the services provided were non-investment-banking, securities-related: Aes Tiete S/A, Alsea, AmBev, America Movil, Aracruz Celulose S.A., Axtel, Bachoco, Banco Bradesco SA, Banco do Brasil SA, Banco Itau Holding Financeira SA, Banorte, Bimbo, BR Malls Participacoes SA, Brasil Ecodiesel S.A., Braskem S.A., Carso Global Telecom, Cementos Argos SA, Cementos Chihuahua, Cementos Lima S.A., Cemex, Coca-Cola Femsa SA, Comercial Mexicana, Companhia Siderurgica Nacional, Companhia Vale do Rio Doce, Compañia Cervecerias Unidas S.A, Consorcio ARA, SAB de CV, Consorcio Hogar, SAB de CV, Copa Airlines, Corporacion GEO SAB de CV, Corporacion Moctezuma SAB de CV, CPFL Energia SA, Credicorp, CTC, Datasul SA, Desarrolladora Homex, S.A.B. de C.V., Edenor SA, EDP - Energias do Brasil SA, Eletrobras, Embotelladora Andina S.A., Embotelladoras Arca S.A., Embraer, Empresas CMPC S.A., Empresas Copec SA, Empresas Ica SAB de CV, FEMSA, Gerdau SA, Gigante, Gol Linhas Aéreas S.A., Gruma, Grupo Aeroportuario del Centro Norte S A, Grupo Aeroportuario del Pacifico SA de C, Grupo Aeroportuario del Sureste,SAB de C, Grupo Continental, Grupo Elektra SA de CV, Grupo Famsa SAB de CV, Grupo Iusacell, Grupo Modelo SA, Grupo Pão De Acucar, Grupo Televisa, Impulsora del Desarrollo y el Empleo en, Intergroup, IRSA, JBS SA, Klabin S.A., Lan Airlines, Light SA, Lupatech SA, MARFRIG, Maseca, Mexichem SAB de CV, Minerva SA, NII Holdings, OHL Brasil, Perdigao SA, Petróleo Brasileiro - Petrobrás, Promotora Ambiental SAB de CV, Radio Centro, Sadia SA, Sao Martinho SA, Sare Holding, SAB de CV, Soriana, Springs Global, Suzano Papel e Celulose S.A., Suzano Petroquimica SA, TAM S.A., Tele Norte Leste, Telecom Argentina, Telemar Norte Leste, Telesp, Telmex, Tenaris S.A., Terna Participacoes SA, Ternium SA, TIM Participacoes, Tractebel Energia SA, TV Azteca, Ultrapar Participacoes S.A., UNIBANCO - Uniao de Bancos Brasileiros S, Urbi Desarrollos Urbanos, SA de CV, Usinas Siderurgicas de Minas Gerais SA, Vale (Preferred), VIVO, Votorantim Celulose e Papel S.A. and Walmex. Citigroup Global Markets Inc. currently has, or had within the past 12 months, the following company(ies) as clients, and the services provided were non-investment-banking, non-securities-related: Aes Tiete S/A, Alsea, AmBev, America Movil, Antofagasta, Aracruz Celulose S.A., Axtel, B2W, Bachoco, Banco Bradesco SA, Banco do Brasil SA, Banco Itau Holding Financeira SA, Banorte, Bimbo, BR Malls Participacoes SA, Brasil Ecodiesel S.A., Braskem S.A., Carso Global Telecom, Cementos Argos SA, Cementos Chihuahua, Cementos Lima S.A., Cemex, Cemig, Coca-Cola Femsa SA, Comercial Mexicana, Companhia Siderurgica Nacional, Companhia Vale do Rio Doce, Compañia Cervecerias Unidas S.A, Consorcio ARA, SAB de CV, Consorcio Hogar, SAB de CV, Copa Airlines, Copasa, Copel, Corporacion GEO SAB de CV, Corporacion Moctezuma SAB de CV, CPFL Energia SA, Credicorp, CTC, Datasul SA, Desarrolladora Homex, S.A.B. de C.V., Edenor SA, EDP - Energias do Brasil SA, Eletrobras, Eletropaulo, Embotelladora Andina S.A., Embotelladoras Arca S.A., Embraer, Empresas CMPC S.A., Empresas Copec SA, Empresas Ica SAB de CV, FEMSA, Gafisa SA, Gerdau SA, Gigante, Gol Linhas Aéreas S.A., Gruma, Grupo Aeroportuario del Centro Norte S A, Grupo Aeroportuario del Pacifico SA de C, Grupo Aeroportuario del Sureste,SAB de C, Grupo Continental, Grupo Elektra SA de CV, Grupo Famsa SAB de CV, Grupo Iusacell, Grupo Modelo SA, Grupo Pão De Acucar, Grupo Televisa, Hochschild Mining, Impulsora del Desarrollo y el Empleo en, Intergroup, IRSA, JBS SA, Klabin S.A., Lan Airlines, Light SA, Lojas Americanas SA, Lojas Renner SA, Lupatech SA, MARFRIG, Maseca, Mexichem SAB de CV, Minerva SA, NET, NII Holdings, OHL Brasil, Perdigao SA, Petróleo Brasileiro - Petrobrás, Promotora Ambiental SAB de CV, Radio Centro, Sabesp, Sadia SA, Sao Martinho SA, Sare Holding, SAB de CV, Soriana, Springs Global, Suzano Papel e Celulose S.A., Suzano Petroquimica SA, TAM S.A., Tele Norte Leste, Telecom Argentina, Telemar Norte Leste, Telesp, Telmex, Tenaris S.A., Terna Participacoes SA, Ternium SA, TIM Participacoes, Tractebel Energia SA, TV Azteca, Ultrapar Participacoes S.A., 15 Citigroup Global Markets Equity Research Latin America Equity Strategy 23 January 2008 UNIBANCO - Uniao de Bancos Brasileiros S, Urbi Desarrollos Urbanos, SA de CV, Usinas Siderurgicas de Minas Gerais SA, Vale (Preferred), VIVO, Votorantim Celulose e Papel S.A. and Walmex. Citigroup Global Markets Inc. or an affiliate received compensation in the past 12 months from Aracruz Celulose S.A., Axtel, Bimbo, BR Malls Participacoes SA, Brasil Ecodiesel S.A., Braskem S.A., Cementos Chihuahua, Cemex, Comercial Mexicana, Companhia Vale do Rio Doce, Consorcio ARA, SAB de CV, Copa Airlines, Corporacion GEO SAB de CV, Desarrolladora Homex, S.A.B. de C.V., Edenor SA, Empresas CMPC S.A., Empresas Copec SA, Empresas Ica SAB de CV, Gafisa SA, Gigante, Gol Linhas Aéreas S.A., Grupo Aeroportuario del Centro Norte S A, Grupo Famsa SAB de CV, Lupatech SA, MARFRIG, Mexichem SAB de CV, Minerva SA, Petróleo Brasileiro - Petrobrás, Promotora Ambiental SAB de CV, Radio Centro, Rodobens Negocios Imobiliarios SA, Sao Martinho SA, Soriana, Springs Global, Suzano Papel e Celulose S.A., TAM S.A., Tenaris S.A., Ultrapar Participacoes S.A., Urbi Desarrollos Urbanos, SA de CV, Usinas Siderurgicas de Minas Gerais SA, Vale (Preferred) and Votorantim Celulose e Papel S.A. Analysts' compensation is determined based upon activities and services intended to benefit the investor clients of Citigroup Global Markets Inc. and its affiliates ("the Firm"). Like all Firm employees, analysts receive compensation that is impacted by overall firm profitability, which includes revenues from, among other business units, the Private Client Division, Institutional Sales and Trading, and Investment Banking. The Firm is a market maker in the publicly traded equity securities of AmBev, America Movil, Antofagasta, Aracruz Celulose S.A., Banco Bradesco SA, Banco Itau Holding Financeira SA, Braskem S.A., Cemig, Coca-Cola Femsa SA, Companhia Siderurgica Nacional, Companhia Vale do Rio Doce, Eletrobras, Embraer, FEMSA, Gerdau SA, Grupo Aeroportuario del Centro Norte S A, Grupo Aeroportuario del Sureste,SAB de C, Grupo Pão De Acucar, Grupo Televisa, Hochschild Mining, NET, NII Holdings, Petróleo Brasileiro - Petrobrás, Sabesp, Tele Norte Leste, Telecom Argentina, Telmex, Tenaris S.A., TIM Participacoes, UNIBANCO - Uniao de Bancos Brasileiros S, Usinas Siderurgicas de Minas Gerais SA, Vale (Preferred), Votorantim Celulose e Papel S.A. and Walmex. For important disclosures (including copies of historical disclosures) regarding the companies that are the subject of this Citi Investment Research product ("the Product"), please contact Citi Investment Research, 388 Greenwich Street, 29th Floor, New York, NY, 10013, Attention: Legal/Compliance. In addition, the same important disclosures, with the exception of the Valuation and Risk assessments and historical disclosures, are contained on the Firm's disclosure website at www.citigroupgeo.com. Private Client Division clients should refer to www.smithbarney.com/research. Valuation and Risk assessments can be found in the text of the most recent research note/report regarding the subject company. Historical disclosures (for up to the past three years) will be provided upon request. Citi Investment Research Ratings Distribution Data current as of 31 December 2007 Buy Hold Sell Citi Investment Research Global Fundamental Coverage (3421) 50% 37% 12% % of companies in each rating category that are investment banking clients 52% 53% 40% Guide to Fundamental Research Investment Ratings: Citi Investment Research's stock recommendations include a risk rating and an investment rating. Risk ratings, which take into account both price volatility and fundamental criteria, are: Low (L), Medium (M), High (H), and Speculative (S). Investment ratings are a function of Citi Investment Research's expectation of total return (forecast price appreciation and dividend yield within the next 12 months) and risk rating. For securities in developed markets (US, UK, Europe, Japan, and Australia/New Zealand), investment ratings are: Buy (1) (expected total return of 10% or more for Low-Risk stocks, 15% or more for Medium-Risk stocks, 20% or more for High-Risk stocks, and 35% or more for Speculative stocks); Hold (2) (0%-10% for Low-Risk stocks, 0%-15% for Medium-Risk stocks, 0%-20% for High-Risk stocks, and 0%-35% for Speculative stocks); and Sell (3) (negative total return). For securities in emerging markets (Asia Pacific, Emerging Europe/Middle East/Africa, and Latin America), investment ratings are: Buy (1) (expected total return of 15% or more for Low-Risk stocks, 20% or more for Medium-Risk stocks, 30% or more for High-Risk stocks, and 40% or more for Speculative stocks); Hold (2) (5%-15% for Low-Risk stocks, 10%-20% for Medium-Risk stocks, 15%-30% for High-Risk stocks, and 20%-40% for Speculative stocks); and Sell (3) (5% or less for Low-Risk stocks, 10% or less for Medium-Risk stocks, 15% or less for High-Risk stocks, and 20% or less for Speculative stocks). Investment ratings are determined by the ranges described above at the time of initiation of coverage, a change in investment and/or risk rating, or a change in target price (subject to limited management discretion). At other times, the expected total returns may fall outside of these ranges because of market price movements and/or other short-term volatility or trading patterns. 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OTHER DISCLOSURES Citigroup Global Markets Inc. and/or its affiliates has a significant financial interest in relation to America Movil, Axtel, Banco Bradesco SA, Banco Itau Holding Financeira SA, Bimbo, Braskem S.A., Cementos Argos SA, Cementos Lima S.A., Cemex, Coca-Cola Femsa SA, Gerdau SA, Gruma, Grupo Televisa, Hochschild Mining, Petrobras Energia Participaciones SA, Petróleo Brasileiro - Petrobrás, Telmex, Tenaris S.A., UNIBANCO - Uniao de Bancos Brasileiros S, Urbi Desarrollos Urbanos, SA de CV, Usinas 16 Citigroup Global Markets Equity Research Latin America Equity Strategy 23 January 2008 Siderurgicas de Minas Gerais SA and VIVO. (For an explanation of the determination of significant financial interest, please refer to the policy for managing conflicts of interest which can be found at www.citigroupgeo.com.) Citigroup Global Markets Inc. or its affiliates beneficially owns 2% or more of any class of common equity securities of Cementos Chihuahua. 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