Common Stock: Union Andina de Cementos (UNACEM)
Current Market Price: $ 1.84 PEN
Market Capitalization: $ 3.3 Billion PEN
*All values in this article are expressed in Peruvian Sols (PEN) 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.
UNACEM Stock – Summary of the Company
Union Andina de Cementos (UNACEM) is a Peruvian cement manufacturer. Their main products are cement and clinker. They have two manufacturing facilities in Peru with a total production capacity of 8.3 million tons of cement and 6.7 million tons of clinker. UNACEM was founded in 1967 and is headquartered in Lima, Peru.
Revenue and Cost Analysis
UNACEM had total revenue of $1.99 billion in 2019, a slight increase from $1.97 billion in 2018. Their COGS was $1.31 billion in 2019, representing a gross margin of 34%, a decrease from 38% the previous year.
The company was profitable in each of the last two years. In 2019 UNACEM had net income of $349 million, representing a profit margin of 17.5%, a significant increase from 12.3% in 2018.
Balance Sheet Analysis
UNACEM has a decent balance sheet. They have a base of long term assets and sufficient near term liquidity. Their liability levels are reasonable, however they have a relevant amount of debt outstanding.
UNACEM – Debt Analysis
As of year-end 2019 the company has $4.1 billion in total debt outstanding.
UNACEM Stock – Share Dynamics and Capital Structure
As of year-end 2019 the company has 1.8 billion common shares outstanding.
UNACEM Stock – Dividends
The company paid total dividends of $0.20 cents per share in 2019. At the current market price this implies a dividend yield of 11%.
UNACEM Stock – 3 Metrics to Consider
Debt to Equity Ratio
Total Liabilities/Total Share Holder Equity
$3.9 billion / $4.8 billion = .82
A debt to equity ratio of .82 indicates that UNACEM is not leveraged and uses a mix of debt and equity in its capital structure, but relies more on equity financing for funding.
Working Capital Ratio
Current Assets/Current Liabilities
$936 million / $728 million = 1.3
A working capital ratio of 1.3 indicates a sufficient, but not strong liquidity position. UNACEM should not have problems meeting its near term obligations.
Price to Book Ratio
Current Share Price/Book Value per Share.
$1.84 / $2.64 = .7
UNACEM has a book value per share of $2.64. At the current market price this implies a price to book ratio of .7, meaning the company’s stock currently trades at a discount to the book value of the company.
UNACEM Stock – Summary and Conclusions
UNACEM is an intriguing company. They are one of the largest cement manufacturers in Peru and appear well positioned to capture some of the companies long term growth potential. The company is in decent financial health.
After my first analysis I am having a hard time differentiating between UNACEM and another Peruvian cement manufacturer, Cementos Pacasmayo. I will wait to see both companies 2020 financials before deciding which is the better investment opportunity.
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.
