Vidrala is a company that in recent years has jumped to the front pages of newspapers with its large increase in profits year after year. In this analysis we will try to understand the secret of Vidrala, we will estimate if it is well managed and we will see if it is a good buy for a Buy&Hold portfolio.


Vidrala is a company dedicated to the manufacture and sale of glass containers for the food industry and has been in a process of significant international expansion for some years. Vidrala's business does not give for a much deeper explanation, but you can find more details on their website. As you can see, it also uses recycled glass as a raw material. We usually divide the analyses into 3 sections to better organize ourselves: the balance sheet, the income statement and the final assessment. All the data offered here has been obtained from the official source at the CNMV, you can consult other analyses like this one here.

1 Balance Sheet Analysis

To begin with, we are going to outline the capital structure of VIDRALA, S.A., in other words, what it spends the money on (and how much) and to whom it is owed (and how much). We will calculate some ratios and see their progression over time. We are going to organize it in the following points:

• 1.1 Asset analysis
• 1.2 Analysis of liabilities and equity
• 1.3 Indebtedness
• 1.4 Safety margin
• 1.5 Liquidity/Treasury
• 1.6 Working capital

1.1 Asset analysis

The structure of the assets will indicate the degree of immobilisation of VIDRALA, S.A.'s resources. In other words, how much of its total assets are fixed assets (real estate, investments, goodwill, etc). In this case:



Immobilization remains stable between 60 and 70%, there are no major structural changes since 2009. This means that Vidrala has not drastically changed the immobilisation model over the last 11 years and therefore continues to work in the same way in this area.


We are going to break down the asset by time, so we will make visible which part is current asset and which part is fixed asset. Its variation over time can give us information on profound changes in the company:



There are two very evident steps, which coincide with two important purchases. As important as the fact that the first one doubled the size of the company:

• Purchase of the British company Encirc for 408 million euros. As we will see a little later, this had an impact on the company's debt, but it was an example of how to get into and out of debt.
• Purchase of a controlling stake in the Portuguese company Santos Barosa Vidrios. In this case, the purchase was somewhat more modest, about 250 million euros.

Since 2017, the asset remains stable at a slight rise.


Let's look at it in more detail by breaking down the asset:



The steps are produced by an increase in tangible fixed assets, as is logical. Vidrala bought two companies with factories, ovens and offices, which increases the tangible fixed assets. In addition, with the purchase of Santos Barosa Vidrios, goodwill is increased. What is this? It is just an adjustment to bring assets and liabilities into line. In other words, by absorbing Santos Barbosa, assets are increased, but so are debts. By recording this in the accounts, the liabilities/equity are larger than the identifiable assets, so the difference is recorded as goodwill. Over time, as we will see below, this debt has been repaid and now what sustains the goodwill is not liabilities but equity.


The asset currently has this composition:

• Tangible fixed assets (71,45%)
• Goodwill (21,66%)
• Deferred tax assets (3,79%)
• Other intangible assets (3,06%)

Just as we have seen the composition of the fixed asset, we do the same with the current asset:



In this case the first step is evident, with the purchase of Encirc, but not with the purchase of Santos Barosa Vidrios. This is something curious, Encirc had business, customers and stock. However, Santos Barosa not so much. There was practically no increase in stock or in the customer account. What we get from here is that Encirc had problems with debts, but it had business. Santos Barosa had problems with debts but also had problems selling. Today, Vidrala's current assets remain in a smooth ascent apparently very healthy. The breakdown of items is:

• Customers by sales (50,84%)
• Stocks (39,81%)
• Cash (5,89%)
• Other current assets (2,16%)
• Other current financial assets (1,16%)

1.2 Liability Analysis

In this section we will see the structure of VIDRALA, S.A.'s liabilities, which gives us information about the origin of the company's resources. It tells us where the money comes from and to whom it is owed. To find out the proportion of the capital belonging to the company compared to that belonging to others, we have the following formula:



The percentage of own capital has strong variations due to the debts that Vidrala incurs when making the purchases already mentioned. However, we are already seeing that after the purchases she quickly focuses on repaying the debt and settling her financial position. As with the assets, we will break down the items that make up each part of the liabilities. We will start with a grouped chart and then break it down:



As we say, after each purchase, a constant decrease in liabilities begins. We will now break down each of them, starting with the net worth:



This graph is exemplary; few companies will be seen with a similar composition of net worth and growth trend. The most important items that compose it are:

• Reserves (85,93%)
• Profit attributable to the parent company (19,81%)

We continue with the current liabilities:



In this case, the supplier account has been growing over the years, as is only natural with increasing business. On the other hand, in the last semester financial liabilities have increased, but we will see that it is only a debt maturity, since it has apparently gone from being long debt to short debt. If the liquidity and solvency ratios are kept at the right levels, there is nothing to worry about. The most important items that make up the ratio are:

• Suppliers (56,04%)
• Other short term financial liabilities (25,18%)
• Short term debts to credit institutions (7,50%)
• Other current liabilities (7,33%)
• Current tax liabilities (2,40%)
• Current provisions (1,55%)

As for the fixed liabilities:



As we said, debts to credit institutions have been drastically reduced halfway through the year. The rest of the items have no relevance or significant variation. The most important accounts are:

• Long-term debt with credit institutions (56,17%)
• Deferred tax liabilities (15,88%)
• Other long-term financial liabilities (13,83%)
• Provisions Non-current (8,76%)
• Grants (3,63%)
• Other non-current liabilities (1,73%)

1.3 Debt Analysis

Once we have seen the composition of the balance sheet in general terms, we are going to review some key figures. A very important concept in the valuation of a company is the debt, since a company that does not have debts cannot go bankrupt. The progression of the debt ratio tells us how big a company's debts are in relation to its equity:



In this graph we can see what we have been talking about. Vidrala focuses on reducing debt after each acquisition and he does it tremendously well. We usually weight it to EBIT to put it in context, so let's get to it:



We can say the same thing, Vidrala has a lot of control over her debt.

1.4 Safety Margin

For companies to function properly, they normally need their fixed assets to be covered by their own capital plus long-term debts. This is known as the safety margin. Otherwise it would mean that part of the fixed assets of the company (offices, land, machinery, financial assets...) have to be paid with short term debt, which can be quite dangerous. This is not something that has to be complied with yes or no, but it is a sign of good health.



Vidrala's safety margin is always above 100%. In recent semesters it has decreased as debt maturities have increased and liabilities have increased in the short term, but it is totally controllable and at the cost of strongly reducing long term debts.

1.5 Liquidity/Treasury

It is important and healthy that this ratio be maintained at or above 100%.



Liquidity must always be close to 100%, otherwise there may be problems in paying debt maturities or short term payments. In the case of VIDRALA, S.A., it has the right liquidity, nothing to celebrate, but it indicates that it can cope with short-term debts.

1.6 Working capital

The working capital indicates the amount of current assets that are financed with permanent resources. The higher it is, the fewer financing problems there will be if there are quarters with less turnover. To evaluate working capital we relate it to current assets and sales:



Vidrala's working capital is decreasing in the last few semesters. It gives us a similar reading to the previous ratios. It's still positive, but the trend is downward. In principle, as we have mentioned, it seems to be due to debt maturities that have caused a large part of the long debt to become short. Once paid off, there is not much more debt to pay back, so current liabilities will fall and working capital will stabilize again. In any case, it should be kept under observation.

2 Analysis of the Income Statement

When studying the income statement, we will calculate the following ratios and their progression over time:

• 2.1 Analysis of income, expenses and profit.
• 2.2 Return on Equity (ROE) y Return on assets (ROA)
• 2.3 Margin on sales

2.1 Analysis of income, expenses and profit.

We start with net profit and FGO (funds generated by operations):



In Fundamental Analysis we like to show the FGO together with the net profit, which is the money the company has managed to earn. In order to calculate it, we add the amortizations to the net profit and thus avoid possible adjustments by modifying this concept. Some companies may be forced to make up the profit in this way if they have not done particularly well. In the case of Vidrala, the FGO is growing strongly, so another positive point.


Inevitably, for a company to make money it needs income, so let's see what they look like:



Sales are growing, with a hump coinciding with the purchase of Santos Barosa, but with a positive trend. It is true that it seems to be slowing down, let's continue with the expense breakdown to see if it gives us any information.



It doesn't look like anything important, expenses grow with sales and as the business grows. One piece of information that is usually interesting is the cost of the debt that the company has to pay. Vidrala is paying less and less for its debts and the EBIT is getting bigger. She has no problem dealing with these expenses.


To put the financial expenses (cost of debt) into context, we will represent them alongside EBIT:

2.2 Return on equity (ROE) y Return on assets (ROA)

The ROE, or Return on equity, measures the profits of VIDRALA, S.A. by comparing them with its own funds. It is a way of measuring the profitability and quality of business management. It only makes sense to see it this way when it is a sustained ROE over time. A high ROE in an isolated financial year can be caused by an increase in debt, which gives a greater capacity to buy assets and therefore an increase in profit. The problem comes later, when that debt has to be paid off and expenses skyrocket:



Vidrala's ROE has not stopped growing, which is positive, but as it is not stable we cannot say that it is due to good business quality or just a favourable cycle.

2.3 Margin on Sales

We are going to calculate the margin on VIDRALA, S.A.'s sales, i.e. what proportion of sales ends up being a constant and significant profit:



The margin on sales has not stopped growing since 2016 and this, despite being very positive, is what does not fit in with us. How can margins be doubled in such a short time?

• Charging more for the same thing.
• Being more efficient, with economy of scale, doubling production without doubling expenses.
• Favourable economic cycle where there is less competition and more demand

We clarify this with another graph, the stock rotation, which tells us how many times the stock is replenished:



Stock rotation has increased, so it seems that the increase in margins is due to Vidrala being able to release its products more quickly. The question remains as to whether this is a temporary situation or whether it will continue over time. Here we are already getting into estimates of demand for glass and this is something we are totally unaware of. Otherwise, we can also see how both operating and operating margins behave. On the one hand we have the operating margin, which tells us what proportion of sales ends up being EBIT. On the other hand, the operating margin tells us what proportion of sales ends up being profit before tax.

3 Dividend and general valuation

Actualmente, VIDRALA, S.A. has 27,067,000 shares in circulation, with a treasury stock of 0.17%. It has EPS of 2.60 and is currently paying a dividend of 1,1347 per share per year, i.e. a payout of 43%. In addition, he usually buys back shares and then redeems them, in the case of this year, he has redeemed 1% of the capital. As a conclusion, at current prices (80.30 euros) it gives a dividend yield of 1.4%. The book value is 26.72 and the PER is 30.8. With this data in hand we can say that Vidrala is a magnificent company with extremely robust accounts today. However, as not everything is perfect, the price to pay for it is high, perhaps too high. If the company manages to maintain the level of growth it is a great buy, but we believe that the margins will stabilize and it will not be able to grow at the same rate. Will it be profitable to buy at these prices? We think so, but with caution. It's a big company but we think it's in the highest cycle and quite expensive. If you buy at these prices our recommendation is that you don't make up a large percentage of the portfolio.