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Andina Stock – Investment Analysis

Common Stock: Andina (Andina-B)

Current Market Price: $1963.00 CLP

Market Capitalization: $1.7 Trillion CLP

*All values in this article are expressed in Chilean Pesos (CLP) unless otherwise noted.

**The bulk of this analysis is based on the company’s most recent audited financial report, which can be found by following this link.

Andina (Andina-B) - Stock Chart
Andina (Andina-B) – Stock Chart

Andina Stock – Summary of the Company

Andina is a Chilean Coca-Cola bottling and distribution company. They operate in four markets; Chile, Argentina, Paraguay, and Brazil. These franchised territories have a population of over 52 million people, making Andina one of the largest Coca-Cola bottlers in Latin America. Andina was founded in 1946 and is headquartered in Santiago, Chile.

Revenue and Cost Analysis

Andina had total revenue of $1.69 trillion in 2020, a decrease compared to $1.77 trillion in 2019. Their COGS was $1.02 trillion in 2020, representing a gross margin of 39.8%, on par with their gross margin of 41% in 2019.

Total beverages sold in 2020 declined year over year. The company sold 734.6 million cases in 2020, a significant decrease compared to 746.4 million cases in 2019.

The company was profitable in each of the past two years. In 2020 Andina had net income of $123.1 billion, representing a profit margin of 7.2%, a significant decrease compared to 9.9% in 2019.

Balance Sheet Analysis

Andina has a decent, but leveraged balance sheet. They have a sound base of long term assets, and sufficient liquidity in the near term. However they have significant liability levels, including debt.

Andina – Debt Analysis

As of year-end 2020 Andina has $937.6 billion in total debt outstanding, $18.7 billion of which is classified as current.

Andina Stock – Share Dynamics and Capital Structure

The company has 473.3 million preferred shares outstanding and 473.3 million common shares outstanding. Total shares outstanding is around 946.6 million shares.

Andina Stock – Dividends

Based on 2020’s results Andina paid total dividends of $52 CLP per common share and $57.2 CLP per preferred share. At the current market price this applies a dividend yield on the common shares of 2.6% and 3.3% on the preferred shares.

Andina Stock – 3 Metrics to Consider

Debt to Equity Ratio

Total Liabilities/Total Share Holder Equity

$1.6 trillion / $831.5 billion =1.94

A debt to equity ratio of 1.94 indicates that Andina is leveraged and relies heavily on debt financing for funding.

Working Capital Ratio

Current Assets/Current Liabilities

$797.2 billion / $378 billion = 2.1

A working capital ratio of 2.1 indicates that Andina has a sound liquidity position. The company should not have problems meeting its near term obligations.

Price to Book Ratio

Current Share Price/Book Value per Share.

$1963 / $878.5 = 2.2

Based on total shares outstanding Andina has a book value per share of $878.5. At the current common share price, this implies a price to book ratio of 2.2, meaning Andina stock currently trades at a premium to the book value of the company.

Andina Stock – Summary and Conclusions

Andina is an impressive company. They have a large Coca-Cola franchise market, spanning four countries, making them one of the largest Coca-Cola bottlers in Latin America. They operate in this market effectively, evidenced by their profitability and dividend to shareholders. Overall the company is in decent financial health.

However Andina is leveraged, with relevant amounts of debt outstanding. In addition the company’s financial results have suffered due to weakening local currencies in all of their operating markets.

I will revisit Andina later this year before making an investment decision, but after my first analysis, I am very intrigued by the company as a potential long term buy and hold investment.

Investors can compare Andina stock to Brazilian food company Camil.

Disclaimer

This is not investment advice. Nothing in this analysis should be construed as a recommendation to buy, sell, or otherwise take action related to the security discussed. If I own a position in the security discussed, I will clearly state it.

This is not intended to be a comprehensive analysis and you should not make an investment decision based solely on the information in this analysis. I hope this serves as a useful starting point for a more comprehensive analysis, and hopefully draws attention to aspects of the company that were overlooked or merit further investigation. This is by no means intended to be a complete analysis. Again, this is not investment advice, do your own research.

Patrick Flood, CFA

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