SCHO.CPH - Schouw & Co. A/S

[peterism]

John,

 

In general I like what I saw in Capital Market Day Presentation.

This presentation gave me clear picture about management's plans for next 4 years and enough information

to support my decision whether to stay as shareholder or not.

 

In my opinion management's business plan for organic growth + bolt-on M&A + adding one new business

can support 13-15% annual growth of owner earnings and I am happy with that.

 

As in any other business there are many moving parts, but the key question for me here

is if management will be able to reinvest profits at promised return rate of >15%.

 

Peteris     

 

[John Hjorth]

Peteris,

 

I actually meant every word I wrote in my last post - at that particular point in time. What I have found out later, was that at my brokers page about SCHO.CPH I have found a couple of notes from a reporter, who attended the Capital Market Day session and is working for Ritzau, a Danish news medium, that run 100% behind paywalls, but made available for clients at my broker.

 

I will grab them some time and post translations of them in this topic.

 

I get the perception, from that material, that Mr. Jens Bjerg Sørensen actually is dead serious about what is set up in Capital Market Presentation.

 

Yes, you are right with regard to the return. As long he just continues to do his stuff as he has done it recently, and thereby growing book value per share and net profit per share, hopefully without adding too much to the intangibles on the balance sheet, it will do well in these economic circumstances.

 

Hydra/Specma is clearly cyclical.

 

It's a Danish Large Cap stock now, but still on an international scale a mini conglomerate. I really would like to see him add a seventh leg within 1 - 2 years, when they have finished the integration of the last three acquisitions. There is lot to do on that front right now.

[John Hjorth]

Aquaculture see food firm BioMar reports below 1 FIFO.

 

That is to me important and good news with regard to sustainability. This type of companies I consider some type of oil companies of the seas.

[John Hjorth]

Fibertex Personal Care to begin print production in the US.

[John Hjorth]

NasdaQ Announcement today:

 

AKTIESELSKABET SCHOUW & CO.: INTERIM REPORT  FIRST HALF OF 2017

11:56

Aktieselskabet Schouw & Co. Half Year financial report Interim report  first half of 2017

 

Thursday, Schouw & Co. released its interim report for the first half of 2017.

 

Consolidated revenue was up by 25% and EBIT improved by 12%. Full-year EBIT guidance is maintained in the DKK 1,065-1,135 million range.

 

Highlights

-- The Schouw & Co. Group expanded strongly in a good first six months of 2017

-- Consolidated revenue up by 25% to DKK 7,706 million

-- EBIT up by 12% to DKK 417 million

-- Organic growth of 17% in revenue and of 6% in EBIT

-- Acquired BHE, Borg Automotive and Alimentsa

-- Investing heavily in capacity-increasing assets

-- All portfolio companies maintaining or raising their full-year revenue and EBIT forecasts

-- Schouw & Co. now expects full-year 2017 revenue of about DKK 16.7 billion

-- The Group maintains its guidance of full-year EBIT in the DKK 1,065-1,135 million range

 

Statement by Jens Bjerg Sørensen, President of Schouw & Co.

 

Our portfolio companies continue to see positive momentum, healthy demand and order inflows in most of their markets. That doesnt mean markets have become any less competitive, and its a tough battle everywhere both to ensure volume business and take market share.

 

All of our businesses are going through a volume-to-value transformation. Efficient large-scale production remains a cornerstone of our business model, but increasing our focus on innovation and full-service solutions is essential in our efforts to build competitive strength and long-term earning power. At Schouw & Co. we allocate substantial resources to future-proof our strategic platform.

 

In recent quarters, we have invested heavily to grow and expand both organically and through acquisitions, and our Groups businesses stand well prepared to address the challenges and opportunities the future will bring.

 

Conference call (in English) in relation to the interim report

-- Thursday, 17 August 2017 at 15:30 CEST

-- Phone +45 3272 3010, participant pin 3745409#

 

Aktieselskabet Schouw & Co.

Jørn Ankær Thomsen, Chairman

Jens Bjerg Sørensen, President, tel. +45 8611 2222

 

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SCHO.CPH Interim Report first half 2017 available in english here.

[John Hjorth]

Yesterday I listened live to the Schouw 2017H1 conference call. It was good. Very good questions from some analysts to Mr. Jens Bjerg Sørensen. At least two times, they had him on black ice, where he was not able to shoot from the belt, and had to allocate some time of his own to prepare for answers. Very good.

 

The audiocast is not up on the Schouw website yet. I suppose it will be soon.

 

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I still can't get my head around the Borg aquisition, based on the reporting for 1st half of 2017. There is simply not sufficient disclosed information in the 2017 first half reporting to understand it in all details, in my opinion. We will not see it untill year end 2017 reporting, I suppose. Very frustrating.

 

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I bought a bit today, but not much.

[John Hjorth]

Vice president Peter Kjær sold 15,000 shares in the market today, for about DKK 10.4 M.

[John Hjorth]

President & CEO Jens Bjerg Sørensen sold 40,000 shares during last Friday, Monday & Tuesday this week, for about DKK 27.6 M.

[John Hjorth]

SalmonBusiness: Alimentsa approved to join BioMar in USD 119 M transaction.

 

The acquisition of Ecuadorian shrimp feed supplier Alimentsa as announced in June is now complete. All necessary approvals have been obtained and from 13 September 2017 Alimentsa will be part of the BNioMar Group.

 

Edit:

 

I found the above article via LinkedIn, where I'm following BioMar. No e-mail from Schouw HQ News Service about the approval received here on September 13 - Kasper Okkels must have forgotten that - , so I checked Schouw website directly, and found this company announcement:

 

BioMar's acquisition of Alimentsa finalised,

 

with some financial information going forward short term included about the effects on group performance of the acquisition. It will be interesting to read about the aqusition accounting in the 2017Q3 interim reporting in November. It seems like a major part of the price paid above book value - at least DKK 280 M - will be allocated to property, plant and equipment.

[John Hjorth]

GPV invests more than DKK 100 million in new capacity extensions.

[John Hjorth]

October 25 2017: BioMar at Karmøy sets production capacity record.

[DooDiligence]

October 25 2017: BioMar at Karmøy sets production capacity record.

 

I'll probably regret not buying in another 10 years.

[John Hjorth]

To me, the second best Danish company listed, DooDiligence. You already own the one with an expected future, that I consider even better. Holding this one feels a bit similar to sitting on Berkshire, which can not be said about NVO.

[John Hjorth]

To me, the second best Danish company listed, DooDiligence. You already own the one with an expected future, that I consider even better. Holding this one feels a bit similar to sitting on Berkshire, which can not be said about NVO.

 

If no other board member will take the opportunity to ridicule me here, I'll hereby take the advantage and freedom to do it my self.

 

Schouw & Co. A/S Interim Report 2017Q3 out today.

 

Basically, absolutely on target, and on track. - Period. [Compared to the guidance from the company earlier].

 

What happens then today? - Well, analysts etc. thinks everything continues to grow into the sky, at a fast track never mentioned - in any way -  by the company, but by analysts. Outcome: No market reaction at 12:00 at the release of the interim report. A short time before the investor conference call at 15:30, the stock starts to tank - seriously.

 

Basically, 8 percent down today. Talk about fierce competion and so on [which has been mentioned by the company for more than a year].

 

Oh well. More down for me to buy more, right now.

[John Hjorth]

BioMar reveils plans for Tasmanian aquafeed plant.

[John Hjorth]

Bolt-on acquisition at Fibertex Nonwovens: Fibertex Nonwovens makes a strategic acquisition in Brazil.

 

No information about price paid though.

[John Hjorth]

Schouw & Co. A/S Annual report 2017 out Friday 9^th 2018.

 

To me, absolutely impressive what this company has accomplished during 2017.  And 2018 looks also very good. The group has simply reached a new level of earnings going forward. Add to that a strong cash flow, providing sufficient cash flow along the way, to grow by acquisitions.

 

Schouw & Co. A/S Annual Report 2017 Investor Presentation.

 

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- After about 15 months of "maintenance" of this topic, I'll let it go, from here.

[Spekulatius]

Schouw & Co. A/S Annual report 2017 out Friday 9^th 2018.

 

To me, absolutely impressive what this company has accomplished during 2017.  And 2018 looks also very good. The group has simply reached a new level of earnings going forward. Add to that a strong cash flow, providing sufficient cash flow along the way, to grow by acquisitions.

 

Schouw & Co. A/S Annual Report 2017 Investor Presentation.

 

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- After about 15 months of "maintenance" of this topic, I'll let it go, from here.

 

What is so great about their results? Earnings were up ~5%, despite significant acquisitions and ROIC went down. No surprise that the markets reaction to the results has been muted. I don’t know about the fish feed market, but the market for farmed fish is highly cyclical (driven by supply and demand), so this might affect fish feed producers as well. The fish feed market itself seems to be low margin.

 

I sort of like this outfit, but I don’t think the results have been as stellar than you make them. FWIW, I do think you should countinue to cover this outfit.

[John Hjorth]

Thanks, Spekulatius,

 

I'll try here to elaborate a bit the 2017 figures, that we've now got.

 

The year 2017 is affected by a lot. [Yes, ROE of 10.9 percent, based on year end closing at P/B 1.68 does not seem impressive, nor appealing at all.]

 

YE2016 equity of MDKK 7.797,

 

I consider most of the amortization of intangibles - estimated for 2018 DKK 83 M - non-real.

 

Cash outflow from investments 2017 minus MDKK 2.763. That's a lot. Time will tell if it's good , or not. A lot of "dead" capital tied up during the year in  construction in progress [bioMar: new production line in Norway, now in operation, new factory under construction in Australia. GPV: new factory in Mexico.] The most expansive year in the history of the company - by far.

 

This former languishing cardboard factory has turned into a "mini-Berskhire" - a serial acquirer, based on cash flow generation. It seems like there is room for a lot more. There are obviously Danish families owning great Danish companies, that won't sell to PE, that prefer this sucker as the new home for their "child", if it has to go for some reason.

 

I hope for some bolt-ons on Borg, the market it's operating in is highly fragmented.

 

It seems like the tentacles of the Swedish companies Investor AB & Industrivärden AB can't reach Denmark. There is no other thing like this here in Denmark.

 

Schouw & Co. can't be taken over by anybody because of the shareholder structure. Mr. Eskildsen has it in a firm grip, via Givesco A/S and two foundations.

 

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Attached are the 2017 BioMar Group 2017 financials.

offentliggorelse_BioMar_Group_2017.pdf

[Spekulatius]

John, than you for the color - my comment was related to how things are (within a very limited time window) while your perspective is what they have done already and should be able to do in the future.

 

I agree that SCHOUW has gone a far wayanf the stock, while not extremely cheap, is not expensive either.

 

I do wonder if the Biomar is a good business though. The fish feed sound like a commodity business they feeds into another commodity business (farming salmon). Biomar is 50% of SCHOUW’s EBITDA so that question is relevant.My experience with other companies they worked in similar sectors (animal feed nutrient) was not that positive (EVK.DE - they have since dumped this business).

[John Hjorth]

...I do wonder if the Biomar is a good business though. The fish feed sound like a commodity business they feeds into another commodity business (farming salmon). Biomar is 50% of SCHOUW’s EBITDA so that question is relevant.My experience with other companies they worked in similar sectors (animal feed nutrient) was not that positive (EVK.DE - they have since dumped this business).

 

Thank you, Spekulatius,

 

These comments from you about BioMar are good ones, and certainly with merit. They actually cover my biggest concern with this investment. I would certainly prefer to see the group growing going forward in some of the others legs of the whole system.

 

BioMar is operating in an oligopoly. Together with it's major competitors EWOS and Skretting it sits on 90 percent of the world wide market for fish food related to fish farming, I have read somewhere.

 

But one has not to use that as a sleeping pillow here. DooDiligence made some informative posts about it earlier in this topic.

 

EWOS is owned by Cargill today. To me, it would be unwise to understimate the importance and significance of this fact.

 

Back then, when I discussed the BioMar part of the conglomarate with DooDiligence, I tried to find some public records about Skretting in the Norwegian Brønnøysund Registers, but ended up stuck, with some very weird financials of a Norwegian holding company, levered to the sky, that had imploded to a deep black hole - most likely a PE "venture", that had gone really bad.

 

Better luck today. I found out, that Skretting at some time in point was taken over by Dutch & then listed Nutreco, which again has been taken private in 2015 by SHV SHV Holdings N.V. [steenkolen Handels-Vereeniging] a Dutch privately held, family controlled holding company & investment vehicle, founded in 1896 by now a dynasty of Dutch entrepreneurs and industrialists, obviously laying low. [<- The family name is not even mentioned on the SHV website.] This whole thing does not exactly read as my favorite opponent in arm wrestling either, despite the lack of disclosure.

 

It reads more like the Canadian Irvings, the Danish Christiansen family [LEGO], or the Swedish Wallenbergs [if they were 100% private, which they are not].

[John Hjorth]

Schouw & Co. A/S news message: GPV to double revenue towards 2022.

 

No 2018 guidance adjustment anywhere, as far as I can see.

[peterism]

Unexpected profit warning  :(

Full-year EBITDA guidance was cut to DKK1,580-1,700m (from DKK1,665-1,805m).

Short-term bump on the road.

[John Hjorth]

Peteris,

 

Thank you for posting here. We are today three days away from 2018H1 reporting. I've decided to wait for that, to decide - based on that - what to do, if anything. I'm surprised, to say the least, about the market reaction here.

[John Hjorth]

shareholders.dk [August 31^st 2018]: Schouw & Co did surprise with reduced [2018] guidance. [behind paywall, and unfortunately Outline can't fix that here.]

 

Schouw 2018H1 reporting was basically as expected, so this is related to 2018H2. If one make the calculations for 2018 at recent price based on the adjusted guidance, this is now a long term growth case with a P/E in the lower teens, as I see things.

 

I'm buying more next week.