Swiss dairy company Emmi is disposing of a “non-strategic” hospitality business to a local cash and carry firm and wholesaler for an undisclosed sum.
The Emmi Frisch-Service subsidiary is being bought by Basel-based Transgourmet Group, Europe’s second-largest cash and carry business, which has operations in Switzerland, France, Germany, Poland, Romania, Russia and Austria, and is part of the Coop group.
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“Over the past few months, Emmi has carefully analysed various options to ensure the continued existence of the subsidiary in the long term,” the Zurich-listed company said in a statement today (1 February). “Following extensive consideration of different alternatives, Emmi has decided to sell this non-strategic business, which generates sales of around CHF110m (US$110.6m), to the Transgourmet Group. Emmi Logistics will continue to offer its supply expertise to larger customers in the future.”
Emmi Frisch-Service was formed from the merger of Burra and Interfrais. It supplies around 4,000 customers including foodservice providers, hospitals, nursing homes, convenience stores, retailers and wholesalers. All 160 workers will be retained under the transaction, which is still subject to clearance by competition authorities.
Emmi added: “New customer needs in particular led to a steady increase in competition and cost pressure in this segment. In the meantime, Emmi Frisch-Service has fallen below the critical size at which the company can be run independently and efficiently.”
The announcement comes after Emmi reported its annual results this week. Group sales rose 2.8% to CHF3.5bn, while organic growth was 2.3%, the strongest since 2014. The disposal of Emmi Frisch-Service goes against the thrust of what has generally been an acquisition strategy employed by the company of late. However, in 2017 Emmi sold its 24% stake in Italian cheese specialist Venchiaredo.
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By GlobalDataAlain Oberhuber, a consumer goods analyst at Switzerland-based MainFirst Schweiz, said Emmi Frisch-Service was a “slightly loss-making” business. He sees the disposal of the operation as positive for Emmi’s earnings and cash flow because it will free-up management and cash for investment in areas that have higher growth prospects.
“The divestment is slightly earnings positive,” Oberhuber wrote in a note to clients today. “It will impact Emmi’s Swiss sales by c. -6.4% and total group sales by around -3.2% in FY-19E. On the other side, this transaction could have a minor positive impact on the absolute EBIT-19E as we think that the business was slightly loss-making. Finally, we estimate that the cash-in of the divestment is around CHF10m, at best.”
