CORTICEIRA AMORIM (NSQ: COR)
CORTICEIRA AMORIM (LIS: COR)
Current Market Price: € 2.00
Fair Price (Conservative): € 2.99
Expected Return: 50%
Address
Website
Exchange
Industry
Market Cap
52 Week Range
Beta
Price/Book
Price/Earnings (Forward)
Price/Earnings
Corticeira Amorim
Rua de Meladas,
380,PO Box 20,
Mozelos- 4536902
P +351 227475400
F +351 227475410
http://www.amorim.pt
Euronext Lisbon (NYSE Euronext)
Lumber & Wood Production
€ 252.4 Million
€ 1.27-2.10
0.695
0.8
8.2
8.5
Fundamental Analysis
INDUSTRY ANALYSIS
The lumber and wood products sector is a component of the forest products industry,
which is comprised of both timber production and primary and secondary processing
of wood products. The lumber and wood products industry has been subject to wild
swings in production and employment. Given its trade-dependency, the demand for
wood products has been shaped by national and international forces. Nevertheless
faced with various trade and economic pressures during recent years, lumber industry
has restructured and remained profitable.
The industry's performance is largely determined by residential construction activity,
remodeling activity and consumer expenditure. While the industry was greatly
hampered by slowed housing starts and low consumer spending, demand for industry
products is projected to pick up as the economy recovers in the coming years. In
particular, the improving construction market will aid industry demand and bolster
revenue growth.
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CORTICEIRA AMORIM (NSQ: COR)
From 2012 to 2017, revenue is forecast to rise, overtaking its prerecession level in 2015.
However, the industry will face sustained competition from wood paneling products
unless provided with further government assistance or protection. Particularly, China will
increasingly move into the production of higher value-added wood panel products,
challenging revenue gains for domestic manufacturers and increasing global price
competition. The wooden industry has broad prospects with the increasing income of
residents and large consumption. These enterprises are more competitive, leading the
market to further enhance competitiveness of the industry.
INDUSTRY PEST ANALYSIS
Political
•Not much political interference.
• Governments across major countries support an increased role in energy derived from the
residues of wood.
Economical
• Recent slowdown in the economy had an impact on the industry.
• Industry is tied to economic growth as the revenue is totally dependant on consumption and
disposable income.
• Industry has contributed employment in many countries.
Social
• Culture and lifestyle is one of the key positive driving force for the Industry.
• Deforestation is strongly opposed by the society due to environmental threats.
•Industry encourages entrepreneurship.
Technological
• Technology is one of the key driving force for the industry.
•Technologically advanced solutions will enable the industry players to enhance their offerings.
•A range of manufacturing and timber activities can be improved and enhanced with more
advanced technologies.
KEY REVENUE GROWTH DRIVERS OF CORTICEIRA AMORIM.
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CORTICEIRA AMORIM (NSQ: COR)
The different business units of the company are the key revenue drivers of
Corticeira Amorim. It is one of the world’s largest producer of cork products and
the biggest multinational of all Portuguese companies. The various business units
comprises of
CORK STOPPERS: It is the world’s largest supplier of cork stoppers, producing over
three billion units a year, and commanding a 25% share of the global market.
The sales of cork stoppers has shown significant increase of 4% in 2012 in
comparison to the previous year. The major growth was witnessed in France (
4%) and USA(9%). The company is expanding its business unit in other parts of
South America such as Argentina by Joint Venture with Corchos de Argentina.
The company is enormously investing in the R&D to enhance the quality of the
product.
FLOOR & WALL COVERINGS: This business unit is known by Amorim Revestimentos
produces distinctive, elegant, resistant and comfortable floors, using cork.
Amorim Revestimentos has exclusive manufacturing technology and a
multinational distribution network that lets them know and, acting in advance,
meet the needs of their Clients. The sales of this unit for 2012 has increased by
4.9% from the previous year. The unit has better prospect ahead as a positive
evolution in Eastern European and North American markets. The team is looking
ahead to capture new market with enlargement of the distribution network.
COMPOSITE CORK: The Business unit’s sales for 2012 increased by 6% from
previous year. The significant portion of the growth was mainly due to high sales
in USA and Russia. The company outlook highlights that new capacity and
technology will allow for better profitability in this unit.
INSULATION CORK: This business unit is dedicated to the production of insulation
materials based on natural raw materials such as cork and coconut. The unit has
witnessed an increase in sales by 2.4% in 2012 from previous year. The unit sales
was however affected due to postponement of few projects and sales drop in
Italy which is the second largest market.
SWOT ANALYSIS OF CORTICEIRA AMORIM
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CORTICEIRA AMORIM (NSQ: COR)
Strength
> Industry leader for more than 130
years
> The biggest market share in all
product segments
Weaknesses
>Low product mix can hinder the
growth.
> Economy driven business.
> Exchange rate volatility erodes
business margins.
> Among biggest multinationals in
Portugal.
> Innovative processes to control the
quality of organization’s performance.
Opportunities
Threats
> Enter new regions to tap the potential
market
> Biggest threat is from the current or
ensuing economic slowdown
> Develop enhanced distribution
network for Europe and other
developing countries such as India,
Brazil etc.
> Improved technology will allow more
diversified product.
> Being the market leader, it can acquire
many small companies engaged in wood
products manufacturing.
>Labor cost is becoming costlier.
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>Change is labor and environmental
regulation hinders the business
growth.
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CORTICEIRA AMORIM (NSQ: COR)
COMPANY ANALYSIS
Corticeira Amorim is a Portuguese subholding company belonging to the Amorim
Group. It is one of the largest producer of cork products in the world recognized as the
industry leader for more than 130 years. It is one of the most international of all
Portuguese companies, with operations in dozens of countries and continents. The
company claims itself to cover the biggest market share in all product segments
1. Cork stoppers: 25%
3. Composite Cork: 55%
2. Floor and Wall Coverings: 65%
4. Insulation Cork: 80%
(Source: Company Website)
Corticeira Amorim’s net profit for the year ended December 31, 2012 exceeded EUR 31
M, up 22.9% compared to a year ago. This is the third consecutive year of sales and
profit growth. Net sales of Amorim exceeded the threshold of EUR 500 M for the first
time in the company’s history. Product diversification and increase of exports to extraEuropean markets as well as improvement in operational efficiency in Amorim’s Business
Units have been instrumental in driving the company’s performance.
All the business units of the company have witnessed a robust growth of sales revenue.
The Raw Material business unit recorded healthy sales growth, up 18% y-o-y. Despite the
harsh summer weather conditions, the international profile of this BU which plays a role
in every cork region of the world, enabled to ensure a stable supply of raw materials.
Cork Stoppers continues to show consistent and continued growth in its business
showing a comparable increase of 4%. The most important product of the value chain
grew by 1.9% and grew over 20% y-o-y. The major growth was witnessed in France ( 4%)
and USA(9%). The company garnered huge profits due to USD exchange rates and
rising customers in Portugal.
Sales of Floor and Wall Coverings in 2012 grew by 5% y-o-y, with the sales of products
manufactured by this BU increasing by 7.4%. As far as markets is concerned, sales
increases continue to be recorded mainly in markets outside Europe, with sales to
Germany stabilizing and showing values in line with those of 2011.
Sales made by the Cork Composites in 2012 grew by 6% y-o-y. The largest ever
investment made by this unit was completed in 2012 and will result in a new concept of
higher added value cork composite product that can be used in various applications.
Despite facing unfavorable external conditions, the Insulation Cork business unit
performed admirably in 2012 with its sales growing by 2.3% y-o-y.
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CORTICEIRA AMORIM (NSQ: COR)
(Source: Company Results)
The company witnessed increase in sales growth much higher than the increase in
operating expenses thus improving the EBITDA to Sales ratio, which exceeded 15% for
the first time in a full financial year and reached 15.4% of sales in 2012 (2011: 14.6%). In
2012 EBITDA showed strong growth of 13.8% y-o-y, amounting to EUR 82.5 M. After
recording the amounts of non-controlling interests, net profit attributable to Corticeira
Amorim’s shareholders in 2012 was EUR 31.055 M, a 22.9%-increase compared to EUR
25.274 M a year ago.
(Source: Company Results)
Corticeira Amorim announced that, through its subsidiary Amorim &. Irmãos, SGPS, SA, it
had acquired a 90.91% stake in the share capital of Trefinos, SL, a company leading a
group of six companies specialized in the manufacture and sale of champagne and
sparkling wine cork stoppers. Total assets stood at € 674 M at the end of 3Q12, an
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CORTICEIRA AMORIM (NSQ: COR)
increase of € 68 M above FY 2011 and € 39 M above the end of the 3Q11 figure. As
disclosed to the market on June 20, 2012 The incorporation of Trefinos’ assets and
liabilities into the consolidated balance sheet has particularly impacted the tangible
fixed assets account (€ 9 M), the Inventory account (€ 10 M) and the Trade Receivables
account (€ 10 M). The amount of recoverable taxes (€ 31.7 M) continues to be focused
on VAT receivable (€ 23 M).
Key Data
Revenue
Earnings
per
share € (Basic)
Book Value Per
Share € (Euro)
Operating Margin
Return on Equity
Return on Assets
Net Margin
Asset Turnover
Leverage
Year ended
Dec 12
€ 000’s
534,240
Year ended
Dec 11
€ 000’s
494,842
Year ended
Dec 10
€ 000’s
456,790
0.246
0.200
0.162
2.41
2.24
2.13
10.4%
10.4%
4.63%
5.80%
0.80
2.21
10.4%
8.95%
4.17%
5.10%
0.81
2.14
9.8%
7.64%
3.65%
4.49%
0.81
2.09
DUPONT A NALYSIS
ROE=Net Profit Margin x Total Asset Turnover x Leverage
The significant rise in sales revenue in FY2012 compared to FY2011 clearly reflects the
growth potential of the company. The return on equity in FY2012 increased significantly
due to slight increase in net margin. The return on assets also improved in FY2012. Rise in
Net Margin in FY2012 compared to previous year was due to significant rise in sales
revenue. The leverage has increased considerably in FY2012 compared to FY2011 due
to the investment made to purchase approximately 90% of the Trefinos Group.
I MPORTANT HIGHLIGHTS FY 2012
FINANCIAL HIGHLIGHTS
 The company registered the best ever fiscal year during 2012 with the sales
exceeding 500M€ for the first time.
 EBITDA figures in FY2012 up by 13.8% (82.5M€) from previous fiscal year.
 EBIT figures in FY2012 up by 19.2%(61.3M€) from 2011.
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CORTICEIRA AMORIM (NSQ: COR)
 EBITDA to Sales ratio, exceeded 15% for the first time in a full financial year and
reached 15.4% of sales in 2012 (2011: 14.6%).
 Net income for the year 2012 was €31,055 million compared to €25,274 million for
year 2011, up by 23%.
 Earnings per share basic also increased €0.24 in FY2012 from €0.20 reported in
FY2011 up by 23.07%
 The total assets rose to €674 million in Q3 2012 from €635 million while total
liabilities rose to €370 million in Q3 2012 from €358 million reported in the same
period of previous fiscal.
OPERATIONAL HIGHLIGHTS
 Total operating expenses increased to €54 million in Q3 2012 from €47 million
reported in the same period of previous fiscal.
 Capex reached €21.4 Million in FY2012 compared to €25.6 million in FY2011.
 Net debt grew by 3.5% (€121.6 million) in FY2012 compared to €117 million in
FY2011 as an effect of acquisition of Trefinos (€5 million)
 Gross margin decreased slightly to 50.5% in 2012 compared to 51.2% in 2011.
 Dividends paid reached to 20.2M€ in 2012 from 12.6M€ in 2011.
RELATIVE VALUATION
COR
SONI
AOR
0KD2
Market
Cap
€252.4
Million
€77.7
Million
€65.1
Million
_
Revenue
(2011)
495
Million
€
8.3
1,364
Million
€
-1.1
35
Million
€
-2.7
465
Million
€
3.1
0.8
0.5
0.7
1.3
Price/Sales
TTM
Rev Growth
(3 Yr Avg)
0.5
0.1
1.8
0.7
1.9
-10.2
-10.3
11.5
EPS Growth
(3 Yr Avg)
62.0
_
_
366.7
Operating
Margin %
TTM
Net Margin
% TTM
10.4
1.1
5.8
-5.4
Price/Earnin
gs TTM
Price/Book
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-47.7
-69.0
4.9
2.3
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CORTICEIRA AMORIM (NSQ: COR)
ROE TTM
Debt/Equity
10.4
0.2
-36.2
2.3
-17.2
0.9
4.4
0.7
Price/Earnin
gs
8.3
-1.1
-2.7
3.1
Price/Book
0.8
0.5
0.7
1.3
Price/Sales
0.5
0.1
1.8
0.7
Price/Cash
Flow
_
_
Dividend
Yield %
2.4
-
-9.4
1.8
10.6
0.8
Corticeira Amorim is one of the market leaders in the cork producing industry. It has no
major competitors and covers the major shares of its product in the market. The rising
sales trend is a clear indication of the stock to perform well in the future provided low
instability in the economy. The company has expanded into other sectors such as real
estate; textiles etc. and is prepared to explore more investment opportunities. The
company is among the 100 companies that has been awarded a “Ruban d’Honneur”
prize in 2012/13 of the European Business Awards.
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CORTICEIRA AMORIM (NSQ: COR)
FAIR PRICE CALCULATION
PROFIT AND LOSS ESTIMATES
Fiscal year ends in December. EUR in millions except
per share data.
Revenues
(Annual
Report
Not Yet
Released)
2007-12
2008-12
2009-12
2010-12
2011-12
2012-12
454.00
468.00
415.00
459.00
495.00
534.24
Projected
Full Year 2013
Conservative
Optimistic
572.38
572.38
Costs and Expenses
Cost of revenue
313.00
241.00
218.00
222.00
328.00
260.28
329.23
379.27
21.00
22.00
21.00
20.00
21.00
21.20
26.31
24.28
Sales, General and administrative
104.00
172.00
160.00
78.00
67.00
Total Operating Expenses
125.00
201.00
179.00
199.00
116.00
212.70
206.52
134.13
37.00
26.00
18.00
38.00
51.00
61.26
41.93
58.97
4.00
6.00
2.39
6.94
Depreciation and amortization
Operating Income(Loss)
Interest Expense
Other income (expense)
-11.00
-13.00
-10.00
2.00
-6.00
-9.60
-6.94
Income before taxes
26.00
13.00
8.00
36.00
40.00
29.94
46.25
1.00
6.00
2.00
14.00
14.00
9.00
16.19
Net income from continuing operations
24.00
7.00
6.00
22.00
26.00
20.94
30.06
Net Income
24.00
7.00
6.00
22.00
26.00
31.06
20.94
30.06
Basic
0.18
0.05
0.04
0.16
0.2
0.25
0.17
0.24
Diluted
0.18
0.05
0.04
0.16
0.2
0.25
0.17
0.24
Basic
130.00
133.00
133.00
127.00
126.00
126
126
126
Diluted
130.00
133.00
133.00
127.00
126.00
126
126
126
Provision for income taxes
Net earnings per share:
Weighted average shares
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CORTICEIRA AMORIM (NSQ: COR)
GROWTH RATES AND COST OF EQUITY CALCULATIONS
AT YEAR END
2007-12
2008-12
2009-12
2010-12
2011-12
Total assets
596.00
575.00
525.00
562.00
605.00
Total Liabilities
351.00
328.00
275.00
293.00
323.00
Total Stockholders’ equity
245.00
237.00
250.00
269.00
282.00
Debt Ratio
0.59
0.57
0.52
0.52
0.53
Debt/Equity
1.43
1.38
1.10
1.09
1.15
Return on Assets
4.03%
1.22%
1.14%
3.91%
4.30%
Return on Equity
9.8%
3.0%
2.4%
8.2%
9.2%
Capital Expenditure
25.00
27.00
16.00
16.00
13.00
205
153
128
65
148
0
-52
-25
-63
83
Non Cash Working Capital
Change in Non Cash Working Capital
ROA
Retention Ratio
2.92%
80%
Debt/equity
0.20
Interest rate
6.40%
Tax Rate
30%
Fundamental Growth Rate
2.1%
Income Growth Rates Forecast High Growth
Period
Analysts (Source) Bloomberg.Com
Last Year Growth Rate
Fundamental Growth Rate
Weighted Average Forecasted Growth Rates
Weight
2%
0.2
19%
0.3
2%
0.5
7.14%
Expected Debt Ratio
0.55
Beta
0.69
Risk Free Rate
Return from Market
Cost of equity
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4.00%
13.00%
3 Yr Avg Return S&P500
10%
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CORTICEIRA AMORIM (NSQ: COR)
FREE CASH FLOW TO EQUITY AND FAIR PRICE CALCULATION
Conservative
All Figures in EUR Millions
except per share data
High Growth
Stable
Year
2013 E
2014 E
2015 E
2016 E
2017 Onwards
Growth in Revenue
7.14%
7.14%
7.14%
7.14%
4.0%
572
613
657
704
732
Depreciation
26
28
30
32
34
Net Income
21
22
24
26
27
CAPEX
24
26
28
30
31
Change in Non Cash Working
Capital
11
12
13
14
8
Cash Flow to equity
25
27
29
31
29
10%
10%
10%
10%
10%
Net Sales
Cost of Equity
Terminal value
Present value of cash flows
474
23
FCFE (In Mil)
377
No of shares (In Mil)
126
22
22
311
Share price per share acc to valuation
Conservative (EUR)
2.99
Current Market Price (EUR)
2.00
Return
50%
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CORTICEIRA AMORIM (NSQ: COR)
Optimistic
All Figures in '000s except per share
data
Year
Growth in Revenue
High Growth
2013 E
2014 E
Stable
2015 E
2016 E
2017 Onwards
7.14%
7.14%
7.14%
7.14%
4.0%
572
613
657
704
732
Depreciation
24
28
30
32
34
Net Income
30
22
24
26
27
CAPEX
24
26
28
30
31
Change in Non Cash Working Capital
11
12
13
14
8
Cash Flow to equity
35
27
29
31
29
10%
10%
10%
10%
10%
Net Sales
Cost of Equity
Terminal value
Present value of cash flows
474
32
FCFE (In Mil)
386
No of shares (In Mil)
126
22
22
311
Share price per share acc to valuation
Conservative (EUR)
3.07
Current Market Price (EUR)
2.00
Return
53%
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