A Quick Glance at Kopparberg Brewery

This post is just a quick look at the financials of Kopparberg Brewery. Financials (in Swedish) can be found here, and more info (in English) here.

I was going through my old drafts that I never published, and came upon one about Kopparberg Brewery. Since the company is publishing their yearend report on January 25, I thought I could share some info about the company from my old draft, and also a few graphs that I put together earlier (that’s why they don’t include FY 2014).

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)

Revenues, Products and Markets

Kopparberg has shown a rapid growth during the last two decades, reaching a compounded annual growth (CAGR) of approximately 20 %. The CAGR in revenues between 2004-2013 was about 10 %. Click image below to enlarge.

Kopparberg1

The breakdown of revenues is net of any taxes, and that’s why there’s a difference from the numbers in the graph above compared to the amounts in the table below.

Sweden accounts for about one third of total revenues, and the rest of the EU for almost the remaining part. Revenues from the rest of the world was only 2.5 % in 2014, a decline from 4.3 % in 2013.

Revenue Breakdown (SEK, million)
2014  % 2013 %
Sverige 566,9 32,0% 549,8 34,2%
EU, other 1 158,9 65,4% 991,1 61,6%
Rest of the world 45,1 2,5% 68,5 4,3%
1 770,8 100,0% 1 609,4 100,0%

Kopparberg’s main products 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

According to Kopparberg itself 1) Kopparberg Cider is the best selling Pear Cider in the world, and 2) Sofiero Original is the best selling beer (per 2013) for the 11th year running at Systembolaget (the Swedish monopolist).

K1Return on Capital: Magic Formula

A quick look at the return on capital (Greenblatt ROC) shows a healthy ROC of 33.5 % for fiscal year 2013. See graps below for the trend.

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 grown at 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) as of the date when I originally did my calculations was 3.89 SEK, compared to earnings per share of 4.70 for the full FY 2013.

Valuation: Quick & Dirty

Kopparberg Brewery reported earnings per September 30, 2015 of 9.68 SEK for the trailing twelve months, an increase of 120 % compared to the same period the prior year of 4.41 SEK.

If we assume an earning power between 9 to 10 SEK per share together with an earnings multiplier in the range of 15 to 25 times, we get a range of intrinsic business value per share of 135-250 SEK.

Intrinsic Business Value per Share Range
Earning Power 15x 20x 25x
9 SEK/share 135 180 225
10 SEK/share 150 200 250
Price per share 247.50
Low end High End
Margin of safety -45.5% 1.0%

It will be interesting to see what the yearend report has to say about fiscal year 2015. Let’s wait and see, and then I will revisit the numbers and the business itself.

Disclosure: I have no position in the stock mentioned, and no plans to initiate any position within the next 24 hours. 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 whose stock is mentioned in this article. 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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