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EMP (Emperador) achieved double digit net income growth despite the pandemic

Emperador Inc. (EMP) is the world’s largest brandy company.  It owns the iconic Emperador Brandy and Fundador Spanish Brandy de Jerez. EMP recorded 11% growth in its net income to 5.9-Billion Pesos during the first nine months of the year.  During the third quarter alone, the EMP achieved 26% record growth in earnings to P2.5-billion.

Despite the pandemic EMP was able to increase sales by 2% as compared to last year’s 9M period.  With very limited on-trade and travel retail, restricted air and sea ports in most countries, and liquor bans, EMP took advantage of the buoyant off-trade and e-commerce channels as well as new open markets to do business.

The 2% growth in sales was translated to an 11% growth in net income through discipline in operating expenses.  Operating expenses for the period contracted 15%. At the advent of the pandemic EMP was quick to downsize operating structure to reduce salaries and wages, advertising and promotions, travel and transportation, and representation expenses.

The profit growth was translated by EMP into increased cash flow generation from operations.  Cash generated from operations by EMP for the 9M20 amounted to 6.1 Billion Pesos.  That amount is 79% from last year’s 3.4 Billion Pesos.

EMP ended the 9M20 period with 7.4 Billion of cash.  EMP with 7.4 Billion Pesos of cash and cash flow positive will not be having trouble paying 5.4 Billion Pesos of borrowings up for repayment in the near term.  The cash generated from operations allowed it to pay dividends, borrowings, and buy-back shares.

EMP’s pandemic resilience makes it a safe haven.

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Disclaimer and Disclosure: This is an independent analysis for discussion purposes with the aim of giving stock traders and investors an independent viewpoint.  Accuretti Systems Inc. in day to day trading may have owned, or is considering buying or disposing, the shares of the companies mentioned in this commentary.

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