Scandi Standard is acquiring a poultry processor, along with a plant, farms and land, in the Baltic country of Lithuania for €23.5m ($25.6m).
The Nordic group, focused on fresh and frozen poultry and ready-to-eat products, said it will also invest €5-7m in the site post transaction, which is expected to close in the final quarter of this year.
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Scandi Standard said the deal has been struck with a group of “local entrepreneurs”, and when completed, the “business will be transferred in an inactive state”. The company is funding the purchase through its own borrowing facilities.
Initial processing output at the Lithuania plant is expected in the region of 20,000 to 25,000 tonnes from 2025. It will be incorporated into Scandi Standards’ ready-to-eat business.
“Scandi Standard’s ambition is to gradually build poultry farming capacity to increase the self-sufficiency of the processing plant,” the company said in a statement. “In the meantime, the balance will be purchased in the open market from a few independent Lithuanian farmers.”
The poultry farms acquired as part of the deal have an annual capacity of 6-8,000 tonnes, with scope to build additional farms on the land.
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By GlobalData“This transaction offers a strategic piece of the puzzle that has been missing historically in Scandi Standard, a new and state-of-the-art manufacturing plant with significant control of the value chain located in a low-production cost country,” CEO Jonas Tunestål said.
“In addition to having the best prospect for acting as a competitive, high-quality supplier in its own right, it will allow us to better service the most price-sensitive segments in our home markets and represent a cost-competitive supplier meeting the strict raw material criteria of our ready-to-eat activities.”
Tunestål added that the acquired business is expected to “be moderately loss-making” during a six-to 12-month ramp-up period but will then contribute to the group’s margin accretion.
In the first half of fiscal 2024, Scandi Standard increased EBIT by 16% to Skr248m ($23.5m). EBITDA climbed 7% to Skr426m.
The EBIT and EBITDA margins both rose 60 basis points to 3.8% and 7%, respectively.
Scandi Standard is targeting an EBIT margin of 3.8% for the full year versus 3.5% in 2023. It aims to exceed 6% by 2027.
First-half sales revenue was down 3% in constant-currency terms at Skr6.5bn.
Net income was up 20% at Skr141m.
Full-time employees and “certain key managers” of the acquired business in Lithuania will be kept on post transaction.
Scandi Standard sells fresh and frozen poultry and also ready-to-eat products under brands such as Kronfågel, Danpo, Den Stolte Hane and Manor Farm, as well as the Naapurin Maalaiskana line.
Tunestål said: “Scandi Standard is experiencing solid growth in demand, and we are on track to increase our margins by about 50%, from about 4% to more than 6% by 2027. Our experienced organisation is continually implementing detailed plans to achieve this.”
