TBR: Kopparberg Brewery

Kopparberg Brewery: Company Information

Kopparberg Brewery is a family run business, owned and managed by the Bronsman brothers, Peter and Dan-Anders. The brewery still stands on the original site where it was built over 130 years ago. Generations of local families have worked for Kopparberg over the years and to this day it remains the main source of employment for the town’s 4,000 people. The town itself is located in central Sweden, just over a two-hour drive from Stockholm.

Kopparberg Brewery was re-established in 1994, when Peter Bronsman and his brother Dan-Anders Bronsman bought the old brewery in the town of Kopparberg, Sweden. 36 regional brewers originally founded it in 1882. Kopparberg is now sold in more than 30 countries and is the world’s best-selling pear cider. Kopparberg is listed in Sweden on the NGM Nordic MTF. (Source: Kopparberg Company Presentation 2014)

K2_1Revenues, Products and Markets

Kopparberg has shown a rapid growth during the last 20 years. Revenues grew from 46 MSEK in 1994/95 to 2 403 MSEK in 2013, a compounded annual growth (CAGR) rate of 21.9%. Click image below to enlarge. The CAGR in revenues between 2004-2013 was 10.2%.

K3

Revenue Breakdown 2013 (SEK, million)
Sweden 549.8 34.2%
EU 991.1 61.6%
Rest of the World 68.5 4.3%
1,609.4 100.0%

The annual report for 2013 (see here for annual report in Swedish, there is no English version) does not provide a breakdown of revenues per product line.

Kopparberg’s products at the moment are (Source: Kopparberg Company Presentation 2014):

  • Kopparberg Premium Cider
  • Sofiero (beer)
  • Zeunert’s Premium Beer
  • Fagerhult Export (beer)
  • Dufvemåla (bottled water)
  • Gammaldags Svagdricka
  • Frank’s Vodka
  • Richard’s Dry Gin

K1According the Kopparberg itself:

  • Kopparberg Cider is the best selling Pear Cider in the world.
  • Sofiero Original is the best selling beer for the 11th year running at Systembolaget (the Swedish monopolist).

One third of the revenues (549.8 MSEK) comes from Sweden, sales in EU make up about 62% and about 4% comes from sales in the rest of the world.

Return on Capital: Magic Formula

Amounts in SEK millions.
Fiscal year 2013.
Kopparbergs
(KOBR MTF B)
Return on Capital 33.5%
EBIT 129.
Net Fixed Assets 404.0
Net Working Capital -19.0
Current Assets 758.0
Current Liabilities 776.0
Excess Cash (>5%) 0.0
Drivers of Return on Capital
EBIT-margin, % 8.0%
× Invested Capital, turns 4.2
= Return on Capital 33.5%
Earnings Yield 7.6%
EBIT 129.0
Enterprise Value 1,696.0
   Market Capitalization 1,432.0
   Debt 263.0
   Excess Cash 0.0

See graph below for a comparison of return on capital and return on equity.

KD2Profitability, Book Value and Dividend

Profit margins have improved during the last ten years, see graph below.

KD3Book value per share has shown a CAGR of 10.4%, amounting to 5.04 SEK in 2004 compared to 12.60 SEK in 2013.

Dividend per share was 1.90 SEK in 2013 compared to 0.15 SEK in 2004, a CAGR of 32.6%. The payout ratio in 2013 was 54.9%, compared to a ten-year average of 53.8%.

KD4Earnings & Cash Flow

Net income grew from 5.7 MSEK 2004 to 71.3 MSEK in 2013, a compounded annual growth (CAGR) rate of 32.5%. Earnings per share (no dilution) in 2013 was 3.46 SEK, compared to 0.27 SEK in 2004, a CAGR of 32.5%.

Free cash flow grew from 18.0 MSEK 2004 to 61.9 MSEK in 2013, a compounded annual growth (CAGR) rate of 14.7%. Free cash flow per share (no dilution) in 2013 was 3.00 SEK, compared to 0.87 SEK in 2004, a CAGR of 14.7%. During the last ten years Kopparberg has invested a lot in capital expenditures to support the revenue growth.

KD1Trailing twelve months (TTM) earnings per share was 3.89 SEK.

Valuation: Quick & Dirty

If we assume an earning power between 3 to 4 SEK per share together with an earnings multiplier range of 15 to 25 times, we get a range of intrinsic business value per share of 45-100 SEK.

Intrinsic Business Value per Share Range
Earning Power 15x 20x 25x
3 SEK/share 45 60 75
4 SEK/share 60 80 100
Price per share 70
Low end High End
Margin of safety -35,7% 14,3%

For the time being, until further research has been done, let’s say a reasonable earning power equals the TTM EPS of 3.89 SEK, and an earnings multiplier of 20 times to be a fair one. This gives an intrinsic value of 77.8 SEK.

Kopparberg will be added to the watch list.

To be researched (TBR)

Some things, among others, to be further researched are:

  • Revenues per product line
  • Competitors and industry characteristics
  • Business risks
  • Capital expenditures
  • Cost structure
  • Financial leverage

Disclosure: I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company or individual mentioned in this article. I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. This article is informational and is in my own personal opinion. Always do your own due diligence and contact a financial professional before executing any trades or investments.

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