Spain is the third producer of wine in the world, but hardly has companies of a certain size and only two (Baron de Ley and Bodegas Riojanas) are listed on the Stock Exchange, waiting for Bodegas Bilbaínas to stop doing so after the entry in its shareholding of the fund Carlyle. Others tried, such as Federico Paternina, who was excluded from the market in 2009, or Cvne, the company of entrepreneurs Víctor Urrutia and Juan Abelló that left in 2015. Large operators such as García Carrión, Freixenet, Miguel Torres, Félix Solís and González Byass they have found more profitable formulas to obtain resources outside the market.
The case of Baron de Ley is paradoxical, because despite its relatively small size has shown that you can get a huge game to be in the parquet. The owner of brands such as El Coto de Rioja has not stopped growing in the last five years and is one of the favorite values of many managers. With sales about to reach the barrier of 100 million euros – in fiscal year 2017, last audited, they were 95 million – the company chaired by Eduardo Santos-Ruiz is 62% more than in the stock market five years ago (109 euros per share) without having distributed dividends. "The key to success lies in the management, worthy of study, of its president," says Iván Martín, head of investments at Magallanes, in a recent letter sent to his clients. This manager trusted for many years in Barón de Ley, until he saw the opportunity to leave the company, achieving in four years a capital gain of 40% when the rest of the stock market experienced sharp falls. "From the financial point of view, the numbers are amazing. Profit per share has multiplied by six in recent decades and cash generation in all this time is close to 500 million, "insist Magallanes.
The key is that Santos-Ruiz has chosen to give back to its shareholders in an unusual way: it has excluded 42% of the titles in the market in the last ten years. In particular, it has eliminated more than three million, and in this way, the remaining titles are worth more and are assigned a greater benefit per share. "This strategy makes sense when it is done below the fundamental value of the company, as has been the case," adds Martín.
Born in Navarra in 1991, (although El Coto had been founded in 1970 in La Rioja) the group produced and marketed only Rioja wines at the beginning, until at the beginning of the last decade it was extended to Cigales (Valladolid), founding the Finca Museum winery, where they make the wine of the same name. Very soon they built a new winery in Rioja to dare with Vinos de la Tierra until, at the end of 2004, they extended their business to the curing of hams, shoulders and acorn loins in Cáceres, within the designation of origin Dehesa de Extremadura. They also exploit their own vineyards.
"Your product portfolio shows margins above the average […] because it combines a sales mix focused on the high segment together with a very efficient cost structure ", analyzes Mario Lodos in a note from Banco Sabadell. It is the group with the largest market share in Rioja aging wines and has been able to overcome the decline in the demand for wine in Spain in the last decade, increasing its exports proportionally, which now account for half of the turnover.
"What has historically attracted us most of the company is the excellent capital management of its president, Eduardo Santos-Ruiz", supports Javier Ruiz, director of investments of Horos Am. "We think that the company still has potential on the Stock Exchange, although it is true that, after the great increases of the last years, this potential has been reduced ".
The doubts are now in what path the company has left. The last blow of effect of Baron de Ley, who declined to participate in this report, was last November 20, when its president launched an offer to buy all the shares at a price of 109 euros after exceeding 50% of the capital . Since then, Mazuelo, its investment vehicle, has been making daily small packages of shares thanks to a Caixabank guarantee that supports the operation.
The winery continues to present a very solid financial balance, but it has to face risks inherent to its sector, such as climate change or competition from New World wines, with very competitive exploitation costs. "It is still the most" weak "business in the wine value chain. Within this sector, we prefer the links with the highest concentration in the chain, such as cork producers ", analyzes Ruiz. The shareholders have the last word.
The good managers are those who have the healthy balance sheets. " Eduardo Santos-Ruiz, president of Barón de Ley, has tried to fulfill his maxim, repeated in public events, despite the fact that the wine business demands the patience of having a 'stock' with millions of bottles in a warehouse waiting for them to age . Mazuelo Holding, the family estate that he shares with his wife, and where his daughters also figure as advisors, is on track to take over 100% of the group, valued at 446 million (it has already reached 73% of the capital). For now, shareholders such as the Santa Lucia insurance company, with 3.17% or the FMR fund, remain loyal to the company, which entered 65 million euros last September and whose operating result reached 23 million. The debt, at the end of 2017, was only 15 million euros.