Agrana Stock Analysis

Agrana Stock Analysis – A Safe Dividend of 4.7%

Agrana Stock Analysis – Agrana Beteiligungs AG – WBO: AGR

Agrana Beteiligungs OTCPK: AABGF

This analysis is part of my full analysis, stock by stock of all the stocks listed on the Austrian Stock Exchange. Austria is one of the cheapest stock markets globally at the moment so please check the Austria Stock List for interesting investments.

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Agrana Stock Analysis

Agrana Stock represents the Agrana Group which is a food company based in Vienna that produces sugar, starch, fruit preparation, juice concentrate and ethanol fuel. Agrana is mainly supplying to the international food industry, with some minor end customer business. A known brand is Wiener Zucker.

Agrana stock price overview

The stock didn’t do much over the last decade, but it is related to sugar prices and those have been very low recently. However, there is an interesting dividend and the business is cyclical and related to ethanol and sugar prices. Given the low oil prices, the ethanol market was also hit, but not as much as one would expect due to EU regulations on usage.

Agrana stock price
Agrana stock price

Agrana stock analysis – business overview

However, the company is not just about sugar and ethanol, it is the world market leader in the production of fruit and big European player for starch.

Agrana stock overview
Agrana stock overview – source: Investor Relations

Actually, only 20% of revenues are related to sugar and almost 50% are related to fruit. As said, sugar prices are at 10-year lows and that is pushing down overall earnings.

Agrana stock overview
Agrana stock overview – source: Investor Relations

Agrana’s business segments:

Agrana stock analysis – source: Investor Relations

Being a food business is what could give it stability, and that is exactly what Agrana offers. Perhaps even too much stability as revenue has practically been flat for a decade.

Agrana stock analysis – business fundamentals
Agrana stock analysis – business fundamentals – Source: Morningstar Agrana

So, from a first look, it is likely the company is all about the dividend which has been stable over the past years. Especially as book value didn’t increase much and cash flows are not that positive. But the company could achieve free cash flows of more than a 100 million EUR in a year and therefore it could be attractive at the current market capitalization of 1.14 billion EUR.

The reason for the recent bad performance are low sugar prices.

Agrana stock analysis
Agrana stock analysis – source: Investor Relations

They are spending a significant amount on capital expenditures which, given no revenue growth in the past, are likely to be needed just to stay in business.

Agrana stock analysis
Agrana stock analysis – source: Investor Relations

Anyway, if you look at their current market capitalization, just the investments they made over the last 10 years cover for that. So, the main question here will be about returns on invested capital.

Agrana stock analysis
Agrana stock analysis CAPEX – source: Investor Relations

However, the end of the investing cycle and hopefully improved food prices, might lead to higher dividends and a good investment return. Let’s look at Agrana’s fundamentals.

Agrana Stock Fundamentals

The balance sheet looks stable and easily manageable with low long-term debt compared to equity. The current assets are more than double the current liabilities which is also a good sign.

Agrana stock fundamentals
Agrana stock fundamentals – Source: Agrana Investor Relations

On cash flows, Agrana has very interesting operating cash flow of around 180 million EUR per year. If they can keep their working capital stable and keep the investment level at around 80 to 90 million per year, after deducting taxes and interest, I would say that the company can deliver cash flows to shareholders of about 60 million (180 – 20 taxes – 10 interest – 90 investments = 60).

Agrana Stock Analysis – Cash Flow –
Agrana Stock Analysis – Cash Flow – Source: Agrana Annual Report 2020

Well, thanks to the 60 million in free cash flow, we can expect the dividend to be around 5% which is in line with the current one. This is also the company’s goal and given its safety, it is likely to be a good long-term return. If you are looking for Austrian dividend payers, this is not a bad one and will certainly beat keeping your money in a bank. But, that is about it when it comes to investing in Agrana.

Agrana stock dividend
Agrana stock dividend – Source: Agrana Investor Relations

Agrana Stock Analysis Investment Thesis

Agrana looks like a very stable business where it is very likely the dividend will remain there for longer. Given the interest rates environment in Europe, the dividend yield 4.7% and dividend stability puts Agrana in the basket of good investments for Europeans. However, growth will not come organically, the business has no real moat, it can’t increase prices or easily expand margins. So, we as professional investors should leave this one to pension funds and other investors happy with a safer 5% return.

The Agrana Stock Analysis is part of the full Austrian Stock Market Analysis make by Sven Carlin for the Sven Carlin Stock Market Research Platform.

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