Profile
The Group business focus consists of:
- manufacture of paints, varnishes, adhesives, solvents, etc.
- wholesale and retail trade
Evolution of sales and profit
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| annual report 2012 |
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| annual report 2012 |
The company is reasonably stable and meets the criterions of making a profit more than ten years in a row. Furthermore the company operates in a growth market which results from convergence of Eastern Europe especially Poland, which is Sniezka's main market. I recommend the
recent special report of the economist on Poland.
P&L
| TTM | 2013 | 2012 |
| total revenues | 576.2 | 573.9 | 576.5 |
| Gross Profit | 210.6 | 213.2 | 196.8 |
| Gross Profit Margin | 36.5% | 37.1% | 34.1% |
| EBITDA | 74.4 | 76.7 | 72.9 |
| EBITDA Margin | 12.9% | 13.4% | 12.6% |
| Ebit | 55.3 | 57.5 | 56.5 |
| Ebit Margin | 9.6% | 10.0% | 9.8% |
| Net Income | 43.1 | 43.8 | 45.6 |
| Operating Cash Flow* | 71.0 | 74.6 | 70.3 |
| Net Capital Expenditures | 22.1 | 22.5 | 35.5 |
| Free Cash Flow | 48.8 | 52.1 | 34.8 |
*before changes in working capital
Leverage
| 1Q2014 | 2013 | 2012 |
| Cash and cash equivalents | 23.618 | 24.3 | 17.5 |
| Total liquidity | 23.618 | 24.3 | 17.5 |
| Debt | 94.49 | 89.7 | 91.6 |
| Minorities | 5.921 | 9.1 | 8.4 |
| Total interest bearing liabilites | 100.4 | 98.8 | 99.9 |
| Net interest bearing liabilites | 76.8 | 74.5 | 82.4 |
| NIBL/EBITDA | 1.03 | 0.97 | 1.13 |
Capital structure
Shares series A and B are preference shares with respect to the vote in such a manner that each share carries five votes. Shares series C, D, E and F carry one vote per share. Shares of all series have the same preferences with respect to the dividend and return on equity.
Registered shares of A series are preferential in relation to the right to indicate members of the Supervisory Board within the scope stipulated in § 12 para. 2 – 4 of the Articles of Association: Members of the Supervisory Board are elected by the General Meeting with the reservation that 4 (four) members of the Supervisory Board are elected exclusively from among the candidates indicated by shareholders holding the shares of A series in such a manner that each 25 000 shares of A series give entitlement to indicate a candidate for one member of the Supervisory Board.
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| 1Q2014 |
Management holds the majority of shares. The capital structure certainly warrants some kind of discount for the traded bearer shares.
Capital Allocation: Buy-Back via Tender in 2012 and Dividends
Sniezka purchased 932,898 equity shares priced at PLN 31.00 per share spending PLN 28.9 million on that purpose. The Company redeemed these shares during the General Meeting of Shareholders in 2013.
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| 1Q2014 presentation |
The company has proven its willingness to return cash to shareholders. This may be due to Management's high ownership of shares.
Valuation
| Shares Outstanding (Total A,B,C,D,E,F) | 12.62 |
| Price PLN | 36 |
| Market Cap | 454.2 |
| Net interest bearing liabilites | 76.8 |
| Enterprise Value | 531.0 |
| EV/EBITDA | 7.1 |
| EV/EBIT | 9.6 |
| Cash flow yield | 9.20% |
| PE | 10.5 |
Low leverage combined with an ROE of 21.3% makes this a compelling valuation. Reasons for being cheap may be:
- low liquidity of shares
- capital structure with special rights for controlling shareholders
- bad 1Q2014
- income from Ukraine and Belarus
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| presentation 1Q2014 |
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- plants in Ukraine and Belarus
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| presentation 1Q2014 |
Conclusion
Sniezka falls into the compounder and GARP categories. ROE is high and relatively stable. Growth is to be estimated due to convergence of paint consumption in Eastern Europe. Especially the Polish market looks promising. Poland is the biggest net beneficiary of EU money. GDP growth is robust. In contrast to my investments in real estate companies Sniezka could become a long-term holding.
I am long Sniezka.
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