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Chilean Coke Bottler Off Its Low

- By Holmes Osborne, CFA

Coca-Cola Andina (AKO-A)(AKO-B) is the Chilean Coke bottler with a presence in several other South American nations. The stock yields over 3% and has come off its bottom set a year ago.

The company has 473,289,301 A shares and 473,281,303 B shares. The market cap is $3 billion. Earnings per share in 2015 were 81 cents for the A shares and 89 cents for the B shares so the price-to-earnings ratio was 21.9 and 21.4. The dividend yield for the A shares is 3% and B shares 3.1%. The A shares elect 12 of the 14 directors and B shares 2 of the 14 plus an additional 10% in dividends. Most of this information comes from the 20-F.

Sales have been outstanding. Revenues were 983 billion CLP ($1.42 billion) in 2011, 1.17 trillion CLP ($1.69 billion) in 2012, 1.52 trillion CLP ($2.19 billion) in 2013, 1.8 trillion CLP ($2.6 billion) in 2014 and 1.88 trillion CLP ($2.61 billion) in 2015. Unfortunately, net income dropped from 97 billion CLP ($140 million) in 2011 to 88 billion CLP ($130 million) in 2015.

Capital expenditures were 112 billion CLP ($161 million) in 2015 and expected to be 200 billion CLP ($289 million) to 230 billion CLP ($331 million) in 2016. Cash flows from operations were 265 billion CLP ($382 million) so free cash flow was $221 million. From the 20-F, cash was $182 million, accounts receivable $248 million and financial assets $379 million. There were $88 million in loans, $299 million in accounts payable and $1.078 billion in debt.

The average value of the Chilean peso to dollar was 484 in 2011 and 655 in 2015. It now takes 692 pesos to buy $1. Andina and two other Latin American Coca-Cola bottlers are in talks about merging. The stock got a nice pop last summer on merger rumors.

Andina bottles Coke products in Chile, Argentina, Brazil and Paraguay. This arrangement began in the early 1940s. Among the many juices and waters that Andina distributes for Coca-Cola, it also distributes beer for Heineken (HEIA) in Brazil. Coca-Cola (KO) owns 29.4% of shares. I found the company by reading Tweedy Browneas Annual Report.

The stock bottomed a year ago and is up about 40% since then. Its price was double in 2013. Shares crashed in 2008 and then tripled until 2013.

Itas not an easy company to analyze. Much of the public information is in Spanish. I found myself constantly having to revise my research as the numbers were off due to the dearth of financial analysis that I could find.

Itas not a bad idea for a stock. Iad have to learn much more. Even much of the news on Google is in Spanish. Of course Latin American currencies and economics will continue to affect shares but at some point, they will have to bottom. It seems like Coke is a good way to play risky Latin America, along with a nice dividend yield.

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This article first appeared on GuruFocus.