Analysis of Agrana 2015

Company: Agrana

ISIN AT0000603709 | WKN 779535  

Business: An Austrian agricultural processor. They are divided into three segments: Sugar (traditionally their core business but decreasing sugar prices is having a large impact), Starch (potatoes and corn sold to food, paper, textile, construction and the pharmaceutical industry) and finally Fruit (prepared fruit and fruit juices, the growth business).

Active: In over 40 countries world wide but around half of the revenue comes from Austria.

P/E: 13.7

Comment: They have two large owners. Südzucker with around 50% of the shares and ZBG with 43% of the shares. The free-float is only 7.3%!

This company was analysed due to a request from Matthias posted on the Analysis Requests page. 

Here you can find the previous analysis of Agrana Group. 

The P/E for Agrana is fully ok with 13.7 and the P/B is excellent with 1.0 which gives a very clear buy signal from Graham. The earnings to sales are not impressive with only 3% and the ROE is also not very pleasing with 7.2%. The book to debt ratio is however ok with 0.9.
In the last five years they have had a yearly growth rate of 2.0% which is so, so and this then gives us a motivated P/E of 9 to 13 which means that Agrana is today fairly valued by the market.
they pay an excellent dividend in the size of 4.6% (but it has been fixed there for the last four years) which correspond to 63% of their earnings which I find to be a bit too high and they need to improve their earnings.

Conclusion: Graham says yes to Agrana and even though the P/E, P/B and dividend is excellent I am hesitant due to two reasons. I really do not like the low free-float and secondly the sugar issue is still on going as were also reported in their final quarter report which means that I want to see a quarter with improved conditions before I would like to step into Agrana. Sure... the fruit is doing really well but still not well enough to cover for the seriously poor performance of the sugar division.

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