Grupo Nutresa SA (GCHOY, Financial) is a Colombian food company that has experienced an explosion in sales. Nutresa is part of a crossholding of companies located in Medellin. The stock is not cheap, but management plans on growth.
The stock trades for 27,120 Colombian pesos ($8.99), there are 460.12 million shares and the market cap is 12.47 trillion Colombian pesos ($4.138 billion). It takes 3,015 Colombian pesos to buy one dollar. Earnings per share (according to Bloomberg) were 890.5 pesos and the price-earnings (P/E) ratio is 30.5. The dividend is 44.5 pesos and the dividend yield is 1.64%. So far, the stock price does not seem cheap.
Sales growth has been tremendous. Sales have grown from 3.449 trillion pesos in 2007 to 8.676 trillion pesos last year. Last year, EBITDA was 1 trillion pesos and the EBITDA yield was 11.5%. Sales are accounted for: 23% meat, 20% biscuits, 16.4% chocolate, TMCUS 11.3%, café 11%, retail food 9.2%, pastas 3.3% and frozen 5.2%. Approximately 62% of sales come from Colombia and the rest throughout Latin America, the United States and even Asia. The company has a goal of achieving 11.8 trillion Colombian pesos by 2020 with EBITDA margins between 12% and 14%.
Nutresa operates Papa John’s Pizza shops in Colombia and has its own restaurant called El Corral. Some of the company’s brands include: Zenu Snacks, Pietrán chicken sausages, TOSH biscuits, Jumbo chocolate, Luchettini pasta, Grunuts nuts, Gold Premier granulated instant coffee and dozens of other brands. What readers might find interesting is that Starbucks (SBUX) operates in stores in partnership with Nutresa in Colombia.
The balance sheet shows 219 billion Colombian pesos in cash and 889 billion pesos in receivables on the asset side. The liability side shows 889 billion pesos in payables and 3.124 trillion pesos in debt. The debt is a little high but often is in food companies as sales are usually predictable. Cash flows from operations were 808 billion pesos, capital expenditures were 403 billion pesos and free cash flow was 405 billion pesos. The free cash flow yield is 3.26%.
The stock has been ranging between 20,000 Colombian pesos and about 28,000 pesos over the past seven years. The stock is close to the upper bound of its range. Sales grew 3.1% in the latest quarter. In the first quarter, earnings took a hit with the rough economy in Venezuela. According to an article, “Grupo Nutresa, which 10 years ago had 12% of its sales there (Venezuela), could postpone its strategy of remaining in that market with the hope that conditions will change.”
Nutresa is part of a group of Colombian corporations with extensive crossholdings. Grupo Empresarial Antioqueño is the holding company in control and has a 34.8% stake in Nutresa. Nutresa also owns 12.3% of cement company Grupo Argos (BOG:GRUPOARGOS, Financial). I do not see that any of the shares have traded today in the U.S., so you might have to go onto the Colombian exchange to buy the stock.
In the news,Ă‚ several employees went on a hunger strike in August to protest working conditions and what they felt were unfair labor practices. The strike ended in September with an agreement.
One of the biggest issues with investing in Colombia is the weak peso. In July 2014, it only took 1,867 pesos to buy one dollar. Since then, the peso has lost about half of its purchasing power. Over the past several years, however, the peso has been range-bound in the 3,000 area.
I like Nutresa. It is a little expensive for my taste, but then again it is a growth stock. I like food companies because they are so easy to understand, everyone has to eat and the profit margins are almost always high. I think Latin America will continue to do well unless the U.S. economy pulls back.
Disclosure: We do not own shares.
