Focus: Emmi continues steady churn of M&A
Emmi has continued to see its share price rise after another acquisition deal to improve the Swiss dairy giant's presence in key international markets.
This week, Emmi announced it has acquired 70% of Netherlands-based AVH Dairy Trade, handing the firm a stronger foothold in what it described as the "flourishing" niche market for sheep's and goat's milk products, and predominantly cheese.
Althought relatively small, the deal represents another step in Emmi's strategy to reduce reliance on its home market of Switzerland. AVH Dairy Trade is a strong exporter and had estimated sales of EUR16.5m (US$21.6m) in 2012.
When it comes to global dairy sales, cow's milk is clearly the number one choice of for both liquid milk and added value products.
"Sheep's and goat's milk will always remain a niche," Esther Gerster, spokesperson for Emmi, told just-food. "But, currently, sheep's milk is growing [sales] faster than cow's milk and this deal helps us to position ourselves as one of the main producers."
Emmi is already active in goat's and sheep's milk in both Switzerland and the US. It sees the addition of AVH Dairy supply as most beneficial for its business in developed markets, rather than emerging regions.
Largely, this means a focus on the European Union and US, as more highly sophisticated dairy markets. "The normal development of milk products consumption is that people start with milk, then yoghurt and then cheese," said Gerster.
The deal appeared to strengthen investors' confidence in Emmi, driving its share price up by a further 3% today (8 January), on the back of significant gains over the last six months.
According to some analysts, AVH Dairy Trade represents a fairly risk-free addition for Emmi. "We presume the contribution to group earnings will be negligible and suspect it paid under CHF5m for the [70%] stake," said Kepler analyst Jon Cox in a note.
More generally, Cox added that Emmi's recent share price gains represent "expectations of a strong year for the company" when it reports full-year results on 7 February.
If there is a key short-term risk to Emmi's relationship with investors, then it is here. Can its results match expectations that appear to be rising by the day?
Full-year, headline profits should be buoyed by a one-time gain on the disposal of the Butterzentrale site registered in the firm's first-half. This enabled half-year profits to increase by 55% off a net sales rise of just 2%.
Looking longer-term, Emmi's underlying results will provide an important opportunity for all associated with the group to measure progress of its strategy to achieve a more equal balance between domestic and international sales.
In July last year, Emmi acquired controlling interests in both France's Diprola and Spain's Kaiku.
In an interview with just-food in November, Emmi's head of international business, Matthias Kunz, said the firm was "very close" to its targeted 50-50 split between home and overseas sales. "It's right on plan," he said.
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