Vetropack Update – SELL

Vetropack is one of the original constituents of the portfolio. A few weeks ago I already posted my doubts on Vetropack.

So why did I decide to sell now ? Despite the Ukaraine issues, one other aspect caught my eye while reading the annual report:

Market trends.
Unlike the packaging market for glass containers, which is growing worldwide, the glass market in Europe has been trending negatively since 2012. Regional differences in purchasing power and consumer behaviour have also affected this trend. In the Eastern European countries, it is primarily declining purchasing power that is increasingly causing consumers to turn to cheaper products in alternative packaging.

Vetropack is mostly making beer bottles. For me, this looked like a utility business. From my own (Western European) experience I know that for instance German beer drinkers don’t easily change their favourite beer brand for a cheaper one. As it does not make sense to transport glass bottles across Europe, a local glass bottle manufacturer should enjoy some “utility like” competitive advantages and stable sales.

But it seems to be that in Eastern Europe, where Vetropack makes a large amount of business, people just subsitute more expensive brands in glass bottles with cheap ones in cans or plastic bottles. This basically eliminates a large part of my investment case.

On top of that, Vetropack did nothing with regard to share repurchases that year and the chart looks quite ugly:

So overall, after holding the share for 3,5 years, I will sell Vetropack at current prices as I do not have any indication of a clear higher value of the stock. Including dividends, I lost ~ -6% in total on this position.

The last remaining “intitial” positions are now Hornbach, Tonellerie, Draeger and HT1.

7 comments

  • Hi,
    i am struggling to reconcile the EPS numbers this company reports. Appreciate any help!

    They have around 400k “bearer shares” and around 2000k “registered shares”. To arrive at EPS for bearer shares the company is taking the profit and splitting it with 400k. This seems incorrect to me, one cannot ignore the registered shares as they have their own requirement on profit and receive dividend.

    As each bearer correspond to 5 registered shares i arrive at about 800k bearer equivalent shares. So in my view the correct approach is to split profit with 800k shares.

    How did you handle the share count?

    thanks
    defensiven

    • There are:
      220’480 bearer Shares with CHF 50 nominal value
      880’000 registered Shares with CHF 10 nominal value
      As a result there are 396’480 bearer Shares equivalents (220’480+(880’000/5))
      see page 41 of the annual report

      So they do not ignore the registered Shares at all.

  • Well-timed sell if I look at the chart today!

  • that is MARGIN OF SAFETY!

  • Hey MMI,
    I think the real costs of this investment are much higher due to the fact that you have probably missed some good other opportunities, look at your portfolio performance 😉
    I’m thinking that we have also done a mistake in our analysis to to the lack of pricing power and the unambitious cash flow margin and EBIT-Margin targets of the CFO and CEO.

    Cheers NH

    • hi,

      yes, the “opportunity cost” is higher, but on the other side, only picking winners is quite difficult. I consider it as an achievement that even a looser” almost breaks even and I think this is the result of buying at low valuations.

      mmi

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