What’s next for Matthews?



The last year has brought many changes to Death Care as it pertains to those companies that have been operated in the public markets.  Both StoneMor and Dignity plc have been taken out of the public realm and into private ownership space and Batesville has been spun-out of Hillenbrand Industries and purchased by LongRange Capital bringing it into the private sphere as well.


A recent article published on Seeking Alpha, that you can read here, takes a look at the status of Matthews International.  As you probably know, Matthews International is the parent company of Aurora Casket, Matthews Cemetery, and Matthews Environmental Solutions among others.  They are among the leaders in many aspects of death care — caskets, bronze markers, granite markers, and cremation equipment.


You may also know that the company operates in three distinct segments — 1)  Industrial Technology, 2)  Memorialization, and 3) SGK Brand Solutions.  Recently there has been some investor interest in the thought of spinning off the SGK segment to provide more capital for the burgeoning Industrial Technology segment and the very stable Memorialization segment.


The linked article, however, goes another step further when they question the thought of spinning off the Memorialization segment.  Here is an excerpt from the article:  “. . .  SGK would be worth getting rid of, as it’s a segment we never liked, but the casket business could command a great multiple on private markets too when sponsor activity eventually recovers.”


Here is another comment in the article that gives an indication of the author’s positive mindset as to Death Care:  “Memorialization has very stable cash flows, even if ARPUs (Average Revenues per Unit) are falling with higher cremation rates, and the demographic picture in the US is so good for death care that it even offsets declining ARPUs. SGK may also be saleable in 2023, which would be nice since the business has always been a little iffy in terms of moats, and too pro-cyclical in our books.”


Funeral Director Daily take:  As the article points out, Matthews seems to be on the right track with their investments in clean energy, specifically their battery business for EV (Electric Vehicles), as their recent sales increases seem to indicate.


However, from my point of view, I see no clear-cut upside from moving away from their Memorialization business.  They’ve been in the Bronze Memorial business since 1927, almost a century, and seem to grind away with sales and profits for the company.  I get that EV’s are a kind of modern, clean business with tons of upside, but there is something to be said for a “grind-it-out, slow-growth” cash-generating business like the Memorialization segment can be.


As a matter of fact, having that grind-it-out annual cash-flow generation is probably a pretty good offset to a shiny new product introduction that may be needing cash infusions at some point in time.


Matthews International website


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