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Hortifrut Stock – Investment Analysis

Common Stock: Hortifrut

Current Market Price: $1,060 (CLP); $1.47 (USD)

Market Capitalization: $612 Billion (CLP); $850 Million (USD)

*All values in this article are expressed in United States Dollars (USD) 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.

Hortifrut - Stock Chart
Hortifrut – Stock Chart

Hortifrut Stock – Summary of the Company

Hortifrut is a Chilean fruit company. They produce, process, and sell fresh and frozen berries. Their main products are blueberries, strawberries, raspberries, cherries, and blackberries. Hortifrut is present in 37 countries and has 30 distribution centers around the world. They source their products from over 400 berry producers located in 7 countries. They have over 3,700 hectares of planted berries, 90% of which are in production. The company has 1,300 permanent employees, but during the harvest their headcount swells to over 28,000. Hortifrut was founded in 1983 and is headquartered in Santiago, Chile.

Hortifrut - Key Customers
Hortifrut – Key Customers

Revenue and Cost Analysis

In 2019 Hortifrut sold over 190 million kilograms of berries worldwide. Their total revenue in 2019 was $576 million, a significant increase from $528.1 million in 2018. Their COGS in 2019 was $475.9 million, representing a gross margin of 17.4%, a deterioration compared to 21.6% in 2018.

The company was profitable in both 2019 and 2018. In 2019 Hortifrut had net income of $10.7 million, representing a profit margin of 1.7%, a significant deterioration compared to 17.5% in 2018. This decrease in profitability can be attributed to lower gross margins as well as increased administrative and financing expenses.

Hortifrut - Revenue by Product
Hortifrut – Revenue by Product

Balance Sheet Analysis

Hortifrut has a decent, but slightly leveraged balance sheet. They have a solid base of long term assets and sufficient near term liquidity. But liability levels, including debt, are relatively high.

Hortifrut – Debt Analysis

As of year-end 2019 the company has $491 million in total debt outstanding, $187 million of which is classified as current.

Hortifrut Stock – Share Dynamics and Capital Structure

As of year-end 2019 the company has 577.3 million common shares outstanding. In 2019 the company raised $133 million by issuing 51.8 million of these shares. Their 12 largest shareholders own a combined 70.7% of the company.

Hortifrut Stock - Ownership Structure
Hortifrut Stock – Ownership Structure

Hortifrut Stock – Dividends

The company paid total dividends of $0.204 cents per share in 2019. At the current market price this implies a dividend yield of 1.4%.

Hortifrut Stock – 3 Metrics to Consider

Debt to Equity Ratio

Total Liabilities/Total Share Holder Equity

$691 million / $658 million = 1.05

A debt to equity ratio of 1.05 indicates that Hortifrut uses nearly equal parts debt and equity in its capital structure, but is slightly leveraged, using slightly more debt than equity.

Working Capital Ratio

Current Assets/Current Liabilities

$308 million / $275 million = 1.1

A working capital ratio of 1.1 indicates a sufficient liquidity position. Hortifrut should not have problems meeting its near term obligations.

Price to Book Ratio

Current Share Price/Book Value per Share.

$1.47 / $1.14 = 1.3

Hortifrut has a book value per share of $1.14. At the current market price this implies a price to book ratio of 1.3, meaning Hortifrut stock currently trades at a slight premium to the book value of the company.

Hortifrut Stock – Summary and Conclusions

Hortifrut is a solid company. They have a global presence with sales in 37 countries and diversified production in 7 countries. The company has grown steadily for years and continues to reinvest profits into the business, while also paying a small dividend.

The company is in decent financial health, with a profit and sufficient liquidity, however they are slightly leveraged, with relevant amounts of debt outstanding.

I like the fruit business and am interested in Hortifrut’s business. I will re visit the company when their 2020 financials are published, and seriously consider investing.

Investors can compare Hortifrut stock to Brazilian agriculture company Brasil Agro.

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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