Spanish Small & Midcaps: Miquel y Costas

Miquel y Costas strategyMiquel y Costas' products

ACF analysts believe Miquel y Costas has known how to create a niche for itself amongst the big global producers, taking advantage of the fact it is historically well-positioned in its sector (paper for the tobacco industry), with very few competitors and high entry barriers. The company has focused on three main strategic areas: 1) continually earmarking resources for R&D&r; 2) optimising production processes; and 3) developing high value-added products like self-extinguishing paper. So all this means its tobacco business (70% of group sales) is highly profitable, is resistant to the economic cycle and also generates a lot of cash.

In light of this situation, Miquel y Costas decided three years ago to make a strategic move towards the future, concentrating its resources on a business with more potential growth (paper for industrial use). This has led the company to build the Terranova plant, which will allow it to increase profitability at its industrial division, while also making the contribution in percentage terms from its different divisions more balanced (we estimate the industrial division will account for 35% of sales in 2017 compared with 23% in 2013).