Emmi (SWX:EMMN)

Emmi is the leading dairy group in Switzerland and the leader in the Swiss cheese industry at national and international level. The company's three strategic pillars are the defense of its strong position in Switzerland, targeted growth abroad and resolute, long-term cost management. This strategy should enable Emmi to achieve a net profit margin of between 2.5% and 3.5% over the coming years and to maintain a structure consisting of at least 40% of equity. In the medium and long term, Emmi is targeting sales of CHF 4 billion through organic growth and acquisitions in key foreign markets.

As the largest Swiss dairy product manufacturer, the company has a strong foothold in the Swiss market. By implementing a strict cost management and relevant efficiency-increasing measures, Emmi is investing in Euro-compatible production structures in order to cope with the continued opening up of markets. The strengthening of brand platforms combined with targeted innovations and efficient operating processes should enable Emmi to remain competitive from Switzerland and to consolidate the Swiss production location in the long term.

Germany, Italy, Austria, Great Britain, the Benelux countries and the USA are Emmi's key markets abroad, where it wants to further expand its activities. Emmi also seizes opportunities in other markets and works closely with strategic partners such as the Spanish company Kaiku Corporación Alimentaria SL for the Spanish and South American markets or the cheese specialist Ambrosi SpA in France.

Emmi's core business is located in Switzerland, with 72.7% of its turnover in 2010. This amounted to CHF 2,684 million (net turnover), an increase of 2.5%, exceeding expectations despite the difficult situation on the foreign exchange market.

Emmi shows low sensitivity to market fluctuations, with a beta of only 0.38. The dividend yield is decent, but not extraordinary, at 1.74%, but with a distribution ratio of only 21.12. The current ratio is healthy at 1.93. The net profit margin is 3.89% over the last twelve months (2.84% over the last five years). Earnings per share have grown at an average annual rate of 9.39% over the last five years. The price to book ratio is 1.24, while the price/earnings ratio is 12.11. Return on equity (ROE) is 10.51% (8.70% over the last five years). The total debt to capital ratio is quite reasonable at 0.25.

Emmi has been performing well relative to the market for several years, with better performance for less volatility.

We acquired Emmi as part of our strategy Swiss Value Dividend Stocks on August 11, taking advantage of the market decline. Emmi is a defensive stock, not very sensitive to the economic situation and relatively little exposed to currency risk. It brings better diversification to our portfolio.