terça-feira, junho 28, 2011

Corticeira Amorim, SA

CORTICEIRA AMORIM is the world's largest producer of cork products and one of the most international of all Portuguese companies with operations in dozens of countries from all continents. For over a century that is present in this sector, having contributed significantly to the worldwide spreading of the advantages of cork products.

Brand Recognition: An industry leader for over 130 years.

The World Leader: The biggest market share in all product segments,

Corks: 25%
Finishes: 65%
Cork Composites: 55%
Insulation: 80%

Distribution: Sales Force dedicated to supplying customers in over 100 countries. 95% of sales outside of Portugal.

Vertical Structure: Integrated management of the value chain, from procurement of raw material, processing and optimization of all sub-products, production of a diverse range of products, direct presence in major consumer markets knowing the final customers, able to anticipate trends in demand (and discovering the potential for more applications of cork), and for providing an excellent service.

The cork industry in Portugal: Portugal is the biggest producer of cork and simultaneously, holder of the largest cork oak forest area of the world. The Portuguese cork industry absorbs 2.3% of total Portuguese exports, employs about 17,000 people and accounts for 70% of the worldwide transformation of cork, with 90% of its production for exports.

A sustainable product: Cork is 100% natural and recyclable, being extracted from cork trees. The cork oak is a native species with a key role in fixing CO2, in preserving biodiversity and combating desertification.

Inovation at CORTICEIRA: €5 million invested annually in R&D and Innovation; 17 patents subject to registration in the last three years; 11 units with FSC certification.

Américo Amorim: CORTICEIRA is controlled (76.56%) by the personal holding of the richest person in Portugal, Mr. Américo Amorim, with a fortune of about 5 billion euros. The company is in the Amorim family since it was created, being runned since 2001 by António Rios de Amorim, nephew of Mr. Américo Amorim.


CORTICEIRA AMORIM has demonstrated the resilience of its business and even during the worst recession of the last 80 years it managed not to deliver losses. Indeed in 2009 the company reported profits of 5.1 million euros and in 2010 it reported 20.5 million euros, justified primarily by sales growth of around 10%. CORTICEIRA has a very clean balance sheet with 33.3 million euros in cash and equivalents and has been reducing debt (Debt to Equity is 0.5).

CORTICEIRA is trading at historical low multiples with PE being 7.7 and PBook 0.61. Its not a very profitable company (2010 ROE is about 8%) and looking and the very conservative leverage ratios, it could release some cash, reduce the company's assets and improve their profitability ratios. With 2010 earnings the company reinstated a dividend of 0.10 cents or about 8.62%.

A 10X 2011 earnings is a conservative PE multiple and gives us a target of 2.2. But just book value alone more than 2, so this is a good target for CORTICEIRA, which implies a potencial growth of 68%. The company has much more potencial that can come from: sales growth; operational and profitability improvements; dividends and buybacks. These steps can boost valuation. Until then we have book value to protect this investment.

Markets right now are focusing and the struggles of Portuguese government to overcome the debt crisis. And stocks and their companies suffer as a result of that. But the are very valuable companies in Portugal, with great balance sheets and with large share of exports of their sales and they are being ignored. CORTICEIRA exports 95% of its sales and its an opportunity.