Share analysis: NCA Rouiba – Food & Beverage

Company Overview

NCA Rouiba was established in 1966 and first started operations in the production of canned food. Twenty years later the company also began producing fruit-based beverages, and in 2004 it moved into ultra-high-temperature milk. The following year saw NCA Rouiba open its capital to a foreign investment fund, AfricInvest, and the company also underwent an upgrade and development programme.

In 2007, NCA Rouiba received funding from the European Investment Bank as part of the company’s financial restructuring programme, and in 2013 NCA Rouiba decided to launch a public offering to allow the partial exit of AfricInvest NCA Rouiba stock has been listed on the Algiers Stock Exchange since June 2013.

In late 2014 Algerian conglomerate Cevital sought to purchase around 15% of NCA Rouiba – AfricInvest’s remaining share in the company – although the deal was subsequently blocked by the country’s financial regulator, the Commission for the Organisation and Oversight of the Stock Market, to allow for further review of the circumstances of the arrangement, reportedly due in part to AfricInvest’s status as a foreign investor.

NCA Rouiba continued to demonstrate strong performance in 2014, with turnover rising by about 17% while net income increased by about 36%, thus continuing the trend of the previous year. The company’s return on sales reached almost 4.5% in 2014, against 3.8% in 2013. Earnings per share reached AD37 (€0.34) in 2014 against AD27 (€0.25) in 2013. NCA Rouiba achieved a total sales volume of 104m litres in 2014 against 85m litres the previous year, which represents an increase of 22%. Beverages sold in cardboard packaging continues to represent over 90% of sales.

In the first half of 2015 turnover increased by 5% to AD3.55bn (€32.7bn), compared to AD3.38bn (€31.1bn) for the first half of 2014, thanks in large part to the polyethylene terephthalate (PET) segment, which saw a sales increase of 23%.

NCA Rouiba’s margin on material costs was 42% in the first six months of 2015, up 1% from the same period of the previous year. However, the margin on material costs was 44% or more for new product launches.

Operating profits increased by 7% in the first half of 2015, to AD496m (€4.6m), despite an 8% increase in personnel expenses due to the activation of a second PET production line. The company’s net income for the period was down 12% to AD117m (€1.1m) due largely to increased depreciation and higher financial expenses such as interest and exchange losses on bank loans related to assets not yet operational.

Development Strategy

The strategic direction for NCA Rouiba was outlined as part of an introductory submission provided to the Algiers Stock Exchange. Key objectives include: increasing the means of production for both cardboard and PET containers, the latter of which is growing rapidly and showing strong results; optimising storage facilities; consolidating and expanding sales and marketing efforts; developing new export markets, particularly in the Maghreb region; and improve production quality.

NCA Rouiba has most recently begun working to develop Benin as a new export market and the company has consulted the Bank of Algeria’s Council of Currency and Credit on pursuing wider sub-Saharan expansion. After Tunisia and Libya, NCA Rouiba also wishes to grow throughout West Africa and thus become the largest African company by 2030. For 2015, NCA Rouiba aims to achieve 19% growth of total turnover. In order to help achieve this goal, the company completed capital expenditure of AD1.8bn (€16.6m) in 2014.