For Massimo Zanetti Beverage Group (MZBG), development of its global brand Segafredo goes hand in hand with its established regional brands such as San Marco and Kawai. Growing these, while investing in acquired brands such as Boncafè (Asia), Nutricafès (Portugal) and Meira (Finland), is central to strategy. Revenues are 90% outside Italy and the June 2015 IPO marked a commitment to global expansion. With double-digit earnings growth consensus forecast over 2016 and 2017, the journey is underway.
Profit growth continued with EBITDA +13.3% y-o-y. Volumes rose 6.7%, with positive performance in all channels. Single-serve volumes were up 23%. Volumes at Private Label (c 50% of total) grew 6.2%, while Mass Market (c 41%) grew 8.2%. Price and mix left revenue down 1.7%, but drove a 370bp increase in gross margin, more than covering opex increases. The €74.5m acquisition of Nutricafés in Portugal was to close in September (it now has). The Asian brand Boncafé, acquired May 2014, continues to develop. Cash generation was strong, with debt down €16m to €170m.
These results support MZBG’s status as a major player in the 110 countries where it sells its products, but equally one with significant growth potential, both organic and by acquisition. The global coffee market grew by volume CAGR of 1.9% over five years, supporting MZBG’s expansion strategy. Guidance for 2016 EBITDA growth of 4-6% (excl. M&A) was confirmed. Investments in global brand awareness continue with franchised openings of Segafredo and other brands, a focus on opportunities in the US and Asia, and a growing presence on social networks.
As well as underlying market growth and MZBG’s success in improving its brand positioning, the full-year effect of Nutricafés with c €9m of EBITDA plus synergies, underpins consensus 2017e earnings growth of 13%, coming after 23% in 2016e.
Forecast compound two-year EPS growth of 18.1% compares with 2016e consensus P/E of 14.5x to give a PEG of 0.8, indicating that growth is not highly priced.