Aptargroup

Barely known, yet often in your hands

Have you ever thought about who actually makes all the packaging for cans, sprays, tubes, or bottles? Honestly, I always assumed every company ran its own little packaging department. But of course it makes a lot more sense for one manufacturer to specialize entirely in that part - better value for money, more innovative ideas, and bigger profit margins. And that's how I recently stumbled across the first-class stock of Aptargroup.

The packaging artist from the US produces for a ton of well-known global brands, such as Nestlé, Coca-Cola, Procter & Gamble, Kraft Heinz, Unilever, or Beiersdorf. So every single day we hold products in our hands and, quietly, help fill Aptargroup's coffers along the way - much to the delight of its shareholders.

The history and business model of Aptargroup Inc.

Shortly after the end of World War II, Nels Werner Seaquist and Alex Werner Carlson worked at a company called Oak Manufacturing Co. in Illinois. That's where they learned their skills in tool and mold making. Both were convinced they could achieve more on their own, so they founded their own company, Werner Die & Stamping. In a large garage they started working on aerosol valves. The first shipment went out as early as 1948 - and it was so well received that the two produced another 6 million units that same year. From the very beginning, the company plowed its profits into building a larger production facility.

But the partnership didn't last long. Seaquist left the company and struck out on his own once again. In 1952 he founded the Seaquist Manufacturing Company. Together with his team, he developed a more innovative valve made of molded plastic parts. This new kind of valve drew so much attention across the entire industry that, a little later, the Pittway Corporation from Chicago bought Seaquist's new company. For the family-run Pittway, this was its first step into the packaging industry, and as quickly became clear, it was an excellent acquisition.

Together with its new parent company, Seaquist expanded into new business areas. The first acquisitions followed as well - in 1970, for example, they bought the French company Valois S.A. to gain a stronger presence in the European market. A few years later, Pittway also secured 35% of the German Pfeiffer GmbH, which developed pump-actuated dispensing systems and also the first nasal spray pump. In the '90s, Pittway's packaging division became more independent, and in 1993 it was spun off entirely. That same year, they secured the remaining 65% of Pfeiffer GmbH. The new company was renamed Aptargroup - from the Latin "aptare - to adapt something".

Today, Aptargroup is the big player in spray and dispensing systems for consumer goods in personal care, fragrances, cosmetics, but also food and beverages, as well as pharma and household products. With more than 5 thousand customers, the company is definitely extremely diversified and can easily cushion fluctuations from individual customers.

What's next for Aptargroup?
Packaging will surely be needed in the future too, and yet Aptargroup's business doesn't run itself. Right now, management is trying to use an efficiency program to become more customer-focused, more agile, and more competitive. But they don't just want to grow through cost savings - also through smart acquisitions. Just recently, for example, they took over CSP Technologies for around half a billion US dollars. That company developed a new packaging process that keeps food and cosmetics fresh longer.

Aptargroup also indirectly benefits from a double layer of growth. The company is constantly trying to expand its customer base, while at the same time, ideally, sales of the packaged products keep growing too. So if, for example, Nivea Creme gets bought more often, Beiersdorf will order larger quantities from Aptargroup.

Is the stock worth it for dividend hunters?
Here, too, Aptargroup convinces me. A dividend has been paid since 1993, and it has been raised every year since 1994. That's how the company became a Dividend Aristocrat this year. The current yield is only 1.1%, but it has been increased by an average of 9% per year over the last 10 years. It's exactly this great growth that makes the stock a super investment from a dividend perspective as well. And with the low payout ratio of 36%, the bulk of the company's profits is still available for further acquisitions or other development costs.

Conclusion:
Aptargroup makes the relevant components for a huge number of well-known global brands - components without which we couldn't even use those products in the first place. And maybe precisely because the company stays rather unknown, the share price is relatively low in volatility - but spectacular in its growth. For me, these are exactly the kinds of companies I want to hold in my portfolio.