Two of Swedens Most Solid Industrial Companies

For readers that don't live in Sweden or in any of the Nordic countries, many of my holdings might not be familiar. In this post I will introduce two stocks that I own which are listed on the Swedish stock exchange. You can view what other companies I own in the upper left hand corner of the blog.

Company 1: Atlas Copco B (Ticker: ATCO B)
One of the most well-managed industrial companies in Sweden with a solid dividend history. 
Atlas Copco has customers in 182 countries and operations in half of these countries. 

The company develops, manufactures and supplies customers with compressors, vacuum solutions and air treatment systems, construction and mining equipment, power tools and assembly systems. 

What makes Atlas Copco particularly interesting, in addition to the company's innovative business climate, is the growing aftermarket which consists of services that company offers to its customers after a particular purchase is completed, such as maintenance, training, spare parts, accessories and leasing equipment. This makes the customer more dependent Atlas Copco throughout the products lifetime, which is several years. This aftermarket represents almost 43% of Atlas Copco's total recenues. This business segment is profitable with high margins.
Atlas Copco is currently slightly suffering from the general downturn i demand in the mining industry. The rest of Atlas Copcos business areas are on the other hand steadily improving.

The graph below shows how earnings per share (EPS) and revenues have developed during the period 2004-2013.

The average EPS growth rate per year has been 23% over the period. Revenues have increased by an average of 8.4% over the same period, but only by 3.5% yearly over the past five years.

This is in turn how the dividend and dividend payout ratio have developed during the period 2004-2013 (see below).

The average dividend growth rate has been about 16% during the period 2004-2013. The average payout ratio during the same period was about 44%. The current dividend yield is 2,77%.

Characteristics that I associate with the company:

• Relatively sensitive to economic cycles because of exposure to the mining sector, that's partially offset by the stable sales to the aftermarkets.
• Stable earnings and dividend history compared to peers in the sektor
• Competitive advantages through local presence, culture of innovation and market dominance.
• Stable free cash flow that has exced the dividend the entire period.

Company 2: Beijer Alma (Ticker: BEIA B)
I became aware of this company when several Swedish bloggers wrote about it in 2012. For those of you not familiar with the company already, Beijer Alma is an international industrial group specializing in component manufacturing and industrial trade. 

The company develops, manufactures and supplies customers with springs, cables and industrial rubber for further processing in the automotive, telecom and industrial segments. Operations are conducted in the following subsidiaries: Lesjöfors, Habia Cable and Beijer Tech.  More than half of the earnings derive from Lesjöfors, a spring supplier mainly to the automotive industry.

Beijer Alma is a well-run family business with with a very strong balance sheet and a business that barely was hit by the financial crisis. 
This is how the companys earnings per share (EPS) have developed during the period 2004-2013.

EPS growth has mainly been driven by increased revenues (organic and acquisitions). EPS increased 130% over the entire period.

The graph below shows how the dividend and dividend payout ratio have developed during the period 2004-2013 (see below).

The average dividend growth rate has been about 9,81% in the period 2004-2013. The average payout ratio during the same period was about 79%. The current dividend rate is 4,26%. 

Characteristics that I associate with the company:

• Strong balance sheet compared to it's peers
• Stable earnings and dividend history
• No clear competitive advantage
• Stable free cash flow that has exced the dividend the entire period.

This was a brief introduction of two of my Swedish holdings. My plan is to introduce the rest of my Swedish as well as my Nordic stocks in the coming weeks. If you're interested how fairly valued I think these and my other holdings are at the moment, take a look at my Watch List in the upper right hand corner of the blog.