An interesting pick for the current times that hasn’t seen any discussion yet: the state-owned company Altia. Altia’s business covers three areas: Finland & Export, Scandit, and Industrial. Each accounts for roughly a third of revenue and they have similar EBITDA levels, with the exception of Finland & Export’s higher profitability.
When Altia went public, it didn’t really spark any interest or anything of the sort for me personally. Due to various reasons and the aforementioned period, I’ve been mulling it over since the COVID-19 outbreak and have looked into the company a bit.
Unfortunately, it seems that not a single (?) analyst follows the Helsinki beverage companies Altia and Olvi. Both are excellently positioned and are also well-managed, to use the same adjective mentioned before.
In a survey, only 7% of Finns would have increased their consumption and for 80% it would have remained the same. Something doesn’t add up in the equation. At the same time, it’s awkward for a responsible company and state-owned one.
It excellently explains Altia’s positioning and resale channels, especially during the COVID-19 pandemic (share of Horeca, wholesalers, travel retail, and exports).
My own calculation of Altia’s valuation
Altia
Market value 275m€
Enterprise value 290m€
Operating profit (2019) 25m€
EBITDA (2019) 45m€
Ev/EBIT 11.5
Ev/EBITDA 6.4
Good opening @Latela. At some point I owned it, but the stock development wasn’t really inspiring. A stable dividend payer and barley harvest is an essential factor for raw material costs. How good a business has producing hand sanitizer raw material been during this corona period, which reminded me that when I was walking home along Flemari just now, hand sanitizer was being sold under Kyrö’s name at Hesar’s old kiosk, business seemed to be booming and the customers weren’t Hesar’s chemists. Does @Masse-setä own it or with what money are those drinks bought for Massela!?
This is also a rather boring cash flow machine. Cash flow last year was €52.6 million. More financial leverage could be used; return on capital remains at 12% while Olvi, even with its insane cash reserves, can achieve over 15% return on capital without leverage. With a much better margin.
About half of Industrial’s revenue came from industry. Last year, this was strengthened by starch for forest industry products and a margin improvement as well.
Altia was unable to meet the exploded demand for hand sanitizer and directed customers to buy from elsewhere.
The most important cost item, the price of barley, follows wheat.
That fits well, yes.
I compiled Alko’s reports from January and February: slight percentage growth. In contrast, the report from last December was strongly negative, with Altia still achieving stable revenue.
Now, wine demand has exploded, and spirits are showing good growth. This is compared to a poor reference period due to alcohol shenanigans in the Finnish market. Alko’s sales fell by over 5% in the first quarter of last year.
Altia will release its earnings report the day after tomorrow, on Thursday.
Altia has kept its guidance (comparable EBITDA will remain at or improve from 2019 levels) unchanged for now.
I got excited and bought a batch of this. The price seemed reasonable with current information, and based on the hand sanitizer rocket and the shortage of imported wines, I think this could turn into a bit of a surprise.
If more spirits could be marketed to Germany (which is being heavily attempted from April onwards), this could develop into a growth case with good cash flow and little debt. Perhaps they could buy more good brands from a struggling competitor? Koskenkorva is being advertised excellently, and Nordic identity appeals more and more in Central Europe as well.
Later, I’ll have to delve into the report and figure out what went wrong. I put the chain together very vaguely, but I expected a much better result. In addition, the guidance was only just removed, which is really bad for investor visibility and credibility. Two-thirds of the company’s revenue comes from monopolies that have grown immensely. Raw material costs have plummeted.
Before the report, one could imagine the company prioritizing saving the world too much, at the expense of shareholders. This would also be reflected in rumors of difficulties in delivering ethanol to small breweries. Of course, currencies also heavily affect revenue.
The drop in the price of barley likely explains most of Industrials’ revenue decrease. However, profitability improved as a result. Although it’s hard to say for sure what caused the increase in profitability, considering record amounts of denatured ethanol have also been sold.
A perfectly acceptable result in my opinion.
Now, I must ask, as I don’t know: why does Altia supply ethanol to microbreweries? Is it used for making mixed drinks / RTD (ready-to-drink) beverages, or what do breweries need ethanol for?
By the way, Nordea published a new analysis of Altia on June 17. I don’t know if it’s open to everyone. Since it’s confidential, it’s probably not a good idea to quote it too much here. But I bought a little more Altia based on it.
Hyvältä näyttää Altian suoritus mielestäni. Janoinen kansa on ollut liikkeellä.
Strong result in an exceptional market environment
January–June 2020 compared to January–June 2019
• Reported net sales decreased by 9.5% to EUR 149.3 (165.0) million
• In constant currencies, net sales decreased by 8.4%
• The Finland & Exports segment’s net sales were EUR 53.0 (59.6) million
• The Scandinavia segment’s net sales were EUR 50.1 (50.7) million; in constant currencies net sales grew by 2.5%
• Altia Industrial’s net sales were EUR 46.1 (54.7) million
• Comparable EBITDA was EUR 18.8 (13.7) million, 12.6% (8.3%) of net sales
• Reported EBITDA was EUR 18.0 (13.5) million, 12.1% (8.2%) of net sales
• Net cash flow from operating activities was EUR 10.3 (-4.0) million
• Net debt / comparable EBITDA (rolling 12 months) was 0.6 (2.0)
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At the same time, it’s awkward for a responsible company and state-owned one.
. Does 
But I bought a little more Altia based on it. 