Profitable Small Business for Sale in Croatia OLIVE OIL MILL, BOTTLING PLANT AND DISTRIBUTION BUSINESS FOR SALE
(Offers in the region of 1,200,000 Euro )
INTRODUCTION: The three private owners wish to sell, as a going concern, a profitable 4-year-old business comprising: - a modern olive-oil extraction plant with processing capacity of 1,000 kg of raw fruit per hour - a manual bottling station capable of 200 bottles (1 litre) per hour - an olive oil importing, bottling and distribution business with well-established customers and a well-known and accepted brand-name The business also owns the 2,536 sq metres of prime free-hold real-estate on which the plant is located in an excellent elevated position on the Croatian coast with spectacular sea-views. The capital appreciation of the site is not accounted for in the figures given and there is considerable potential for property development in the future. The oil business could be relocated to a less spectacular site and the present plot developed for residential and tourism applications. Croatia has very recently been declared a candidate-country for membership of the European Union. Among the effects of such membership has often been a dramatic increase in the demand for and the price of attractive real-estate. The land on which the factory is built could turn out to be the most valuable asset of this company.
BUSINESS FACTS The business was built from a greenfield site by the present owners in 2003/4. The first full-year of operation was 2005. The summarized financial data below are taken from the audited annual accounts of the company except for the current year – which are taken from management accounts. The currency is Croatian Kuna; at the time of preparation of this proposal 1 Euro = 7.2 Kuna. All values are excluding VAT (PDV). The financial year runs from 01/01 to 31/12.
In HRK Oil sales Income from tolling Total Revenues Direct Costs/Purchases Gross Margin Staff Costs and Salaries Other Overheads Net Profit before Tax and Finance costs In EURO at 7.15 Oil sales Income from tolling Total Revenues Direct Costs/Purchases Gross Margin Staff Costs and Salaries Other Overheads Net Profit before Tax and Finance costs 2008 (09 months) 4,450,000.00 450,000.00 4,900,000.00 3,500,000.00 1,400,000.00 273,000.00 580,000.00 547,000.00 2008 (09 months) 622,377.62 62,937.06 685,314.69 489,510.49 195,804.20 38,181.82 81,118.88 76,503.50 2007 4,850,000.00 330,000.00 5,180,000.00 3,700,000.00 1,480,000.00 358,000.00 795,000.00 327,000.00 2007 678,321.68 46,153.85 724,475.52 517,482.52 206,993.01 50,069.93 111,188.81 45,734.27 2006 4,600,000.00 260,000.00 4,860,000.00 3,560,000.00 1,300,000.00 499,000.00 510,000.00 291,000.00 2006 643,356.64 36,363.64 679,720.28 497,902.10 181,818.18 69,790.21 71,328.67 40,699.30 2005 5,250,000.00 220,000.00 5,470,000.00 4,500,000.00 970,000.00 400,000.00 460,000.00 110,000.00 2005 734,265.73 30,769.23 765,034.97 629,370.63 135,664.34 55,944.06 64,335.66 15,384.62
The business has 4 full-time employees and takes on 5 additional workers during the main oil-pressing season – October/November. DESCRIPTION OF BUSINESS The greater part of the turn-over of the business is generated from the importation, bottling and sale of bulk olive oil. Croatia does not produce enough oil to satisfy the domestic market. ORGULA has long-term contracts with suppliers in Italy and there are adequate sources and supplies so that there is no threat to future growth in this business. In fact, the low domestic per capita consumption of olive oil represents a real opportunity for the company.
Country Olive Oil consumption per capita in kg
Greece Italy Slovenia Croatia
20 17 3 1.5
Even to increase the consumption to the level of Slovenia will mean a doubling of sales in the whole country and the current trend towards healthy eating, low -cholesterol and highly-unsaturated fats is slowly gaining momentum in Croatia.
At the present time, the majority of the sales of the bottled oil is made through the Croatian distribution company BIM d.o.o. (the owner of which has a 15% shareholding in Orgula d.o.o.). This arrangement has been in operation since the formation of Orgula and has resulted in effective distribution of the Orgula brand with modest marketing costs. A new owner would be free to renegotiate this arrangement. Very recently Orgula has closed its first independent contract for ‘own-label’ olive oil with the German supermarket company LIDL GmbH which has over 50 stores in Croatia and has planned 30 more. This arrangement is expected to increase sales of oil by up to 45,000 L per annum as the product starts to appear on Lidl shelves during the early part of 2009. In spite of lower margins on this business, the expected contribution to net profit in 2009 is about 50,000 euro just from this contract. Further ‘own-label’ deals are actively being sought. The second aspect of the business involves the extraction of oil from olives brought in by local growers (tolling). The fruit is treated in the mill and the extracted oil is returned to the growers who pay a charge per kg of raw fruit. Though this service has a relatively modest turn-over the profit margin is high so the overall contribution is satisfactory. At present the total sales of the tolling service is of the order of 75,000 euro p.a. but the gross margin approached 50,000 euro. There is potential to increase this volume up to 100,000 euro in the short terms as more of the locally-planted olive groves come into full fruit. EU Membership Opportuntiy. As well as the potential increase in the value of the site, there is another significant benefit to the business to be derived from Croatia joining the EU. At the present time, Croatian companies pay a duty of 33% on the import of bulk olive oil from any EU country. This is reflected directly in the selling price of the finished product and makes the Croatian olive oil uncompetitive on international markets. When this tariff is removed the price of oil will be reduced to the point where it may be competitive in the broader EU market and even a small market share will have very beneficial consequences for the companies revenues. Strengths: a) Olive Oil is a growth area of the food industry with its connotations of healthy living, Mediterranean life-style, environmentally friendly production, low -cholesterol and polyunsaturated fats etc. b) Modern, up-to-date equipment installed in a new purpose-built premises meeting all health and sanitary standards of Croatian government regulations. c) The ORGULA brand-name is widely accepted in Croatia; it is well-respected for its quality and there is considerable brand-loyalty. d) The company is located in an area where olives are a staple crop and the planting and maturing of olive trees is steadily increasing. e) The company has good nation-wide distribution through its association with BIM d.o.o which regulates costs of sales and marketing. Weaknesses: a) The agreements with BIM for its distribution means that, should it wish, it would be difficult to approach the market directly with its own brand name since this would be seen as a threat to BIM who might then look for alternative suppliers. This can limit the effectiveness of any sales or marketing initiatives. b) Present price-uncompetitiveness in any export markets. c) Utilisation of the pressing and extraction plant is only about 20% of the year.
Opportunities: a) The per capita consumption of olive oil in Croatia will slowly come closer to that of other similar Mediterranean countries as the standard of living and per capita income improve. That will result in a general increase in market size with consequent increase in revenues for Orgula. b) The ‘EU dividend’ which will come from the removal of the punitive 33% import duty and the opening of the export markets can lead to a large increase in revenues and profits c) Other ‘own-label’ deals in the manner of the LIDL contract as more foreign supermarket chains turn more and more to local suppliers – especially when Croatia is in the EU. d) The identification of other sources of fruit to improve the utilization factor of the present plant; possibly broadening into different types of juice extraction and/or bottling. SUMMARY 1. This profitable business is ready for immediate sale by transfer of 100% of the share ownership thus avoiding any transfer taxes or property registration costs. 2. The company is a net profit generator (without considering financing costs) with extremely good prospects and opportunities for future growth. 3. The company has a significant ‘hidden asset’ in the value of the real estate on which the plant is located. FURTHER INFORMATION For additional information or appointment to visit the plant please contact in the first instance by e-mail or phone : Tom Ryan, Trimex d.o.o., mail@epsilonltd.com, +385 91 178 0668 or +44 7884 055689.