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Chandan Dubey
Chandan Dubey
Articles (150) 

Value Idea Contest: Vetropack Holding (VET.SW)

March 31, 2013 | About:
History: The company Vetropack traces its origins to the town of St-Perex, located on the shores of Lake Geneva, in the heart of the wine-growing region of Switzerland. The founder Henri Cornaz, while drilling for groundwater, found fine sand and decided to open a glass manufacturing facility. He kept 60% of the share capital to himself, ensuring control of the company, and sold the rest to local investors. Several of his grape-growing wine manufacturers bought into the company and became lifelong customers.

World War I brought disruption in supplies and collapse in sales. Cornaz wanted to reduce his dependence on the wine growing region and in the middle of the war in 1917 he acquired Glashütte Bülach, a preserving jar maker near Zurich. This company had a breakthrough in 1924, when it introduced a new boiling flask taking the glass preservative business by storm. The demand skyrocketed during World War II and the production rose to 2.5 million jars, putting green preserving jars as the most reliable source of company’s revenue.

Until the time Henri Cornaz passed away in 1948, both factories continued operating and growing independently with yearly cash flows of nearly 10%. Cornaz’s share capital was distributed equally among his six children. Adolphe Cornaz, the nephew of Henri Cornaz, was instrumental in turning the Bülach factory around and was managing the company for 28 years. Still, he did not own any shares in the company. His opportunity came when one of the sons of Henri offered to sell his shares to Emhart, an American manufacturer of glass technology. He did not offer the shares to Adolphe but Adolphe was able to buy them nevertheless as his son was working for Emhart and was able to put together a deal through Emhart.

Pierre Schnek, who was a minority shareholder of the company, used every opportunity to buy additional stock and by 1945 owned 45% of the stock. Adolphe and his sons were increasingly finding themselves unwelcome in St-Perex. Against this background a decision was reached to streamline and combine the market development because of the uncompetitiveness resulting from the friction between the management of Bülach and St-Perex. Vetropack Ltd was established in 1966 as a management company headquartered in Bülach with Pierre Schneck at the helm.

After quite a long and winding road, the Bülach group (Adolphe and his sons) were able to buy the majority of the shares, establishing a sound and competitive management. In 1975, Vetropack went public with 3,000 of 8,000 registered shares. Raymond Cornaz, the son of Adolphe, became the CEO and in 1974, the Bülach arm of the family formed a company called Cornaz AG-Holding (COHO), which had the voting majority of the Vetropack group. COHO has a preemptive agreement and is independent of the family pool. If any family member wants to sell his shares, he must offer them first to COHO at the market price of Vetropack. This astute move made sure that COHO has the majority vote and today, it owns 63.7% of the voting rights.

BusinessCustom-made glass bottles for food and beverage industry.
ManagementFamily owned, with nearly 78.3% votes controlled by Cornaz family. Sound and long term oriented management.
Balance sheetUltra conservative. No debt. Sfr 28.4 million in cash.
ValuationVery cheap, Selling for EV of 9.9 times profit, 1.5 times book and 4.8 times OCF

Company: Vetropack Ltd., tailor-made glass (bottle) maker

Ticker: VET.SW

Price: Sfr 1900 (Mar 29, 2013)

Shares: 251,437 Bearer Shares

Cap: Sfr 477.73 million

Key Figures: (see picture below)


Ownership Structure

The company has a dual share structure. I quote the current CEO Claude R. Cornaz for the reasons.

"The ownership structure and the corresponding future prospects of Vetropack are very clear. The families hold 75% of voting rights, providing us with security and continuity. Our traditional structure—low-priced registered shares and high-priced bearer shares—will not be called into question for as long as it remains lawful. After all, the family owns about 43% of shareholders’ equity. If anyone wishes to acquire us, they would be able to hold no more than 25% of the votes. They could request a seat on the Board of Directors, they could make life difficult for us, but they wouldn’t have the say. We have had that before, with Groupe Saint-Gobain. In the 1990s, not a single year went by without takeover rumors. The situation today is absolutely clear: the family pool has the say, the balance sheet is strong, and the willingness to continue within the present parameters is uncontested. Independence is our clearly formulated goal.”


Vetropack is one of Europe’s leading manufacturer of tailor made glass. Its customers are beverage and the food industry. The company is a leader in its six home markets: Switzerland, Austria, Czech, Slovakia, Croatia and Ukraine. The company has wide-ranging capabilities in designing and developing glass packaging solutions, package design, decorative refinement and labeling. Since 1991 the company has been consistently investing in the Eastern European market, a region which will see tremendous growth for the food and the beverage industry. This has been a wrong move so far given that the Eastern European market has stagnated, and the company is seeing shrinking sales year after year.

Margins for the company have been relatively stable, around 10%. There was a hiccup in 2010 but apart from that, the business has been relatively stable in terms of margin.

The sales have been in decline since 2008 and have only recently started to go up. The company hopes that the Eastern European market will pull up its performance in the future.

Financial Situation

The company can be thought of as a holding company. The consolidated key figures are below.


The consolidated company has an ultra-conservative balance sheet. It has only Sfr 5.4 million in long-term debts and Sfr 9.4 million in short-term debt. It also has Sfr 58.9 million cash on its balance sheet. The net cash on the balance sheet is Sfr 44.1 million.


The interest expense is covered by the interest income from the money in the bank!


The holding company has no debt, Sfr 300 million in equity and only Sfr 25.5 million in liability.


The company has Sfr 28.4 million cash, profit of Sfr 48.8 million and no debt. The current market cap of the company at Sfr 478 million puts the EV at Sfr 450 million, putting the P/E at 9.22. The operating cash flow of the company in 2012 was Sfr 92.3 million, putting the EV at 4.9 times OCF. Coupled with a long term-oriented management, this offers us a great opportunity to buy a good business selling cheap.


The company has been, for many years, a safe value with low risk. The shares have been quite stable and the investors themselves realize the low risk of holding a company with good management and exemplary balance sheet.


The only risk I can think of is the geographical concentration of sales. Europe and Eastern Europe in particular has not been a great growth market. In fact, the sales have decreased and have only started to look up this year. Domestic sales represent nearly 62% of the revenue and slowing European economy will give the company a hard time. It is quite safe, however, because it is family owned and has no debt.


Additional Disclosure:
Data taken from Annual Report 2012 and the website of Vetropack Group.

About the author:

Chandan Dubey
I invest because I want to be free by the time I reach 40 years of age i.e., 2025. My investment style is to find a small number of bets with large margins of safety. I pay a lot of attention to management and their incentive. Ideally, I like to buy owner operator businesses. I am fortunate to have a strong inclination towards studying. I aid my financial understanding by extensive reading in psychology, economic, social sciences etc.

Rating: 3.8/5 (13 votes)


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