Weak numbers as expected Ebro released poor Q2 results, not only because of the tough comparison (strong stockpiling during Q2 20) but also due to a trickier scenario in terms of raw material prices and the return of promotions. Sales declined 6% in Q2, with rice declining -3% and Pasta -7%. In terms of EBITDA, it declined 6%, while EBITDA margin, despite being 10bp above consensus, declined 60bp vs Q2 20. Net Debt remained unchanged despite EUR195m proceeds from the Ronzoni disposal due to EUR115m impact from higher working capital. Tougher environment for the coming months The high cost of freight plus a small increase in rice raw material prices have led to a headwind that the company has quantified as c.EUR60m for the whole year (vs c.EUR50m). We think that this raw material environment together with tougher competition and tougher negotiations with food retailers could negatively impact margins during the year. We deconsolidate Panzani Following this week''s announcement (see EBRO FOODS: Disposal of Panzani) we deconsolidate the disposal from 2022 (Ebro expects to close the transaction by year end). We assume EUR60m EBITDA22 impact and c.EUR500m in sales. The EUR550m proceeds will arrive in 2022, as will a symbolic special dividend (c.EUR50m) to be paid at the end of 2021. This has no major impact on our valuation and we maintain our EUR16/s target price. Does this mean a change in profile? We think not Once the main disposals have been done, one might think that the growth profile of Ebro would improve. However, we think that the high dependence of the company on raw material volatility, and its smaller size, which could imply lower pricing power, mean we suspect this will not be the case. Trading at c.22x PE 22e means a premium of c.10% to other food producers, including the big players in Europe. We maintain our Underperform rating.