Emmi AG is a Swiss-based dairy company with roots dating back to 1907. The company produces milk, butter, margarine, cream, yogurt, cheese, quarks, desserts and ice cream, among other things. It also offers food products, such as the yogurt drink Benecol with stanol esters to help lower cholesterol and Aktifit, a probiotic yogurt drink or the famous Caffè Latte. It exports its products to countries all over the world. Emmi's core business is in Switzerland, where it focuses on the development, production and marketing of dairy and fresh products, as well as the production, ageing and trade of mainly Swiss cheeses. Outside of Switzerland, the company focuses on brand concepts in the European and North American markets. The Company operates through subsidiaries in Europe, the United States and Canada, including Redwood Hill Farm & Creamery, Cypress Grove Chevre and Emmi Roth USA. Emmi is the leading dairy group in Switzerland and the leader in the Swiss cheese industry nationally and internationally. Germany, Italy, Austria, Great Britain, the Benelux countries and the United States are Emmi's key markets abroad. The company has 6,150 employees.
Valorization
Let's not beat around the bush: Emmi is currently trading at a very high price. If you want to buy a slice of Gruyère, you have to pay almost 26 times earnings, 4.6 times the value of tangible assets, 1.25 times sales and 27.4 times free cash flow. That's all very expensive. If we look at it from a dividend perspective, it's not much better unfortunately, since the yield is only 1.3%. Of course, the payout ratio is only 33% compared to earnings and 35% compared to free cash flow. So there is still plenty of room for growth and security. The Lucerne company has not held back in order to increase its distributions in the past, at a sustained average annual rate of 21.3%.
Balance sheet & result
Just like dividends, profits and asset values increase over the long term. Cash reserves, however, melted in 2017, due to maturing loans that needed to be repaid. Emmi is therefore managing to create value for its shareholders over the long term, which is reflected in the share price, which has increased sixfold over the last ten years! For comparison, it is doing almost as well as Apple over the same period... not bad for a milk producer!
Despite the decrease in cash reserves in 2017, the current ratio still increased to 2.04, since the repayment of the loan that had matured reduced current liabilities accordingly. The quick ratio stands at 1.35. Emmi's liquidity is therefore good and the company has no worries about paying its bills.
Even though it is slightly down, the gross margin remains correct, at 35.7%, for a free cash flow margin of 4.55% and a net margin of 5%. As for profitability, it is good and increasing, with an ROA of 6%, an ROE of 11.6% and a return on cash flow of assets of 9.3%.
The long-term debt-to-asset ratio increased sharply in 2017, and is now at a fairly high level of 21.2%. However, total debt is declining in the long term and could be repaid within four years if Emmi were to draw on its free cash flow. This is therefore still within the reasonable range.
It should also be noted that the number of shares outstanding has been stable for many years, which avoids any dilution of shareholders' assets.
Conclusion
Emmi is a simple business, with a long history, low risks of technological obsolescence, a dominant position in Switzerland and which also knows how to take advantage of development opportunities in foreign markets. The company operates in a sector that is not subject to economic and financial upheavals, which is corroborated by a beta of only 0.6. In short, Emmi is the kind of stock that you can buy and forget about in a corner. This is what I have been doing since 2011, to my great satisfaction.
That being said, I feel that the title is currently overrated by about 40%, which is obviously way too much, even for a title of this quality. So I have just parted ways with this gem. I will undoubtedly return to it in better times.
Discover more from dividendes
Subscribe to get the latest posts sent to your email.
Français 
English 
Italiano 
Deutsch 
Español 
Português
Congratulations on this magnificent stock market operation. I share your point of view, Emmi is a superb company but its valuation makes me dizzy. In your place I would have also sold and with this capital bought several shares valued more reasonably. There is no shortage of opportunities at the moment!
Yeah, it's still quite expensive in general...
Let Trump fuck things up some more with these tweets from another era.
It's still incredible that the rhythm of the stock markets and even the global economy is at the mercy of the deranged brain of a maniac like Trump! It's pathetic...
Do you think the Swiss president could have an impact on European stock markets?
We should not put everything on the back of this simpleton and overestimate his importance. The stock market is currently falling mainly... because it had risen too high and too quickly before. No more, no less.
So of course, Trump appears as the trigger, but without his interventions we would have read in the media that the stock markets are falling because of the price of oil, the FED, the cocoa harvest or the civil war in a given country.
In the end, the stock market does what it has to do, the rest is just a futile attempt to rationalize something irrational, the human need to seek an explanation for everything in order to have a vague sense of control.
You're right. However, I can't help but have this vision: Trump behind his screen preparing stupid tweets and a front man for his camp right next to him trading in the direction or against the market depending on the size of what he's going to release.
Emmi has lost about 20% since its all-time high. The valuation is still high, but already much more reasonable. Time to switch back to the buyers' side?
Still a little expensive for me, but it's actually starting to go in the right direction.
Just a little more patience, you can't catch a falling knife anyway...