Nomad acquires Fortenova’s Frozen business (NOMD)
Nomad Foods announced yesterday that it has entered into an agreement to acquire Fortenova Group’s Frozen Food business. The purchase price is €615M, representing a multiple of less than 10x EBITDA, including expected synergies. 2021 revenues are expected to be €279M and adj. EBITDA is expected to be €53M. Nomad Foods expects 2021 adj. EPS to be greater than $2.00 on an annualized basis (acquisition expected to close in Q3). In comparison, management’s previous guidance was for EPS to be between €1.50-1.55 ($1.77-1.83). The acquisition is expected to be HSD% accretive to EPS in the first year before synergies of €15M by 2024 with financing from available cash and borrowing. Management expects to be below 3x leverage by the end of next year.
The business operates in Croatia, Serbia, and Bosnia & Herzegovina, Hungary, Slovenia, Kosovo, North Macedonia, and Montenegro. The two anchor brands Ledo and Frikom, have the #1 market share in many of the markets across a wide range of frozen products. The acquired business is expected to have an organic growth rate of +MSD%. The acquisition is a growth enhancer, bringing new markets with greater organic growth than an acquisition based on synergies. Nomad Foods’ business mix will change to the following charts after the acquisition.
Nomad Foods is on our Best Idea Long list. The company’s organic growth rates are attractive, but the ability to make accretive acquisitions in its category to supplement that growth is compelling. The past two years have rewarded management’s discipline in valuation, being opportunistic when businesses are put up for sale, and flexible with the balance sheet to take advantage. Nomad Foods will be one of the few consumer packaged goods companies to report organic revenue growth in 2021, lapping the COVID-19 comparisons.
Beer production flat in 2020 (BUD)
Total domestic beer production increased 4.7% in December and was flat for 2020, according to the Alcohol & Tobacco Tax and Trade Bureau (TTB). Shipments of bottles and cans increased 12.6% in December compared to the prior year. Bottles and cans were up 6.2% for the year.
Shipments of kegs were down 65% in December. Domestic production of kegs declined 50% in 2020 compared to 2019. A partial recovery in keg packaging should alleviate the shortage in bottles and cans. On-premise volume use was down 9.3% in December. Brewery on-premise use only declined 11.7% for the year. The better-than-expected on-premise for breweries explains why we did not see many breweries close compared to restaurants. Inventory at the end of December was 11.9% higher than the prior year.
On-premise 92% open, but draft volumes are running 33% lower (TAP)
According to BeerBoard, which tracks $1billion in draft sales nationwide, a reported 92% of on-premise establishments were open and pouring beer for the weekend of Mar. 25-28. That is even with the two previous reporting periods of Feb. 25-28 and Mar. 11-14, as seen in the following chart. The open rate is back to the highest level since the pandemic began a year ago. Nationally the volume of beer poured is down 33% YOY, but up 5.7% from the March 11-14 weekend. Volumes in Florida and Texas, where there are few restrictions, are down 29% and 28% respectively. On the other end of the spectrum, volumes are down 62% in Minnesota and -51% in Illinois. Nationally 68% of the taps are pouring, up 2% from the Mar. 11-14 weekend. Imports represent 16.1% of the volume share for the Mar. 25-28 weekend, improving steadily from the Feb. 25-28 (15.4%) and Mar. 11-14 weekends (15.7%).
