Lobkowicz Group plans stock-marketing listing
Who they? And why would they even consider going to the stock-market? The
Czech brewer Pivovary Lobkowicz is planning Prague’s first initial public offering (IPO) since 2011 to tap investors’ craving for new stocks and expand in the nation with the world’s heartiest quaffers of beer.
The Lobkowicz group is controlled by the K Brewery Group and operates seven regional brewers: Černá hora, Protivín, Pivovar Uherský Brod, Jihlava, Klášter, Rychtář Hlinsko, and Vysoký Chlumec. It was cobbled together in the past few years by the former banana seed trader turned investment banker Martin Burda and associates. Insiders say he would have got them for a lark. Several breweries were doing ok, while others were struggling. All together they produce about 70 different brands and a total of 900,000 hl beer.
According to Czech media, the group ranks fifth in the country behind SABMiller (Pilsner Urquell), Molson Coors (Staropramen), Heineken and Budweiser Budvar. The Czech market is basically divided into three international brewers and three domestic ones (Lobkowicz, Budejovicky Budvar and Pivovary Moravskoslezske) plus a host of about 200 microbreweries. The microbreweries’ total output represents only about 1 percent of the annual beer production in the country, industry experts say.
The Lobkowicz group has yet to produce a prospectus for the IPO, which is scheduled for the end of the second quarter 2014. From what has transpired over the past two years, the group has benefited from some creative internal accounting and a tax break for small breweries. Until 2012 the group has been intentionally keeping its results in the red, with million-crown losses due to the practiced internal-pricing method: each brewery’s production costs are increased by a margin, and Lobkowicz’ trading entity purchases their whole production at such prices, it was reported.
In 2012 Lobkowicz posted an EBITDA of CZK 177 million (EUR 6.4 million/USD 8.8 million), up 48 percent on the previous year, as “higher margin” products like specialty beers boosted profitability.
The brewer expects its 2013 EBITDA to exceed CZK 200 million (EUR 7.3 million), albeit under Czech reporting standards. Before it can attract investors, Lobkowicz will have to publish a report based on International Financial Reporting Standards (IFRS), a standard which is compulsory for all publicly listed companies in the EU. Then we will see how its figures compare with its competitors’.
The reason the group is taking itself to the stock-market with the intention of floating about 40 percent of its equity is reportedly a desire by its main owner to push out – or at least pay off – one of the minority owners. Mr Burda will still have a controlling stake after the IPO.
Lobkowicz wants to raise as much as CZK 1 billion (EUR 36 million/USD50 million). The offering would mitigate a five-year plunge in turnover at the Prague Stock Exchange as the Czech economy recovers from its longest recession on record. The number of equities on the bourse has dropped to 26 from 65 a decade ago, and three of the 10 most-traded stocks are cross-listings of companies based in other markets, according to data on the bourse’s website.
Lobkowicz is controlled by Mr Burda, who currently has a 55 percent stake, and three other shareholders.
It will be interesting to watch how the IPO fares, since it will reflect on the growth prospects not only of Lobkowicz but the Czech beer market itself, which has been flat for years.
