Mayr-Melnhof Karton AG (VIE:MMK) remains more cost-efficient than its competitors in the capital-intensive cardboard industry, yielding strong ROIC and a generous dividend in part due to its recycling of household paper waste for raw material, says David Nadel, the Portfolio Manager and Director of International Research for The Royce Funds.
“It’s a environmental, green play, and a business which is actually reasonably capital intensive, but they are a very cost-focused producer, and so they have pumped out 20% to 25% returns on invested capital year after year, with growth well exceeding GDP growth in the markets they serve globally,” Nadel said.
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Nadel says the Austrian cardboard manufacturer has strong growth prospects in Eastern Europe and Northern Africa, two regions with higher GDP growth rates, and he says the company continues stealing market share from the competition.
“It is certainly not in the glamorous sector, and it’s not exactly what the stock market is clamoring for in this age of Twitter. But it’s the type of business that you know is going to produce year after year, outpace GDP growth nicely and you get some improvement through scale, so the bottom-line grows and they generate high returns and give money back to shareholders in dividends.”
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