Who would have believed that you could make a fortune by producing wet wipes? Albaad Massuot Yitzhak, controlled by Kibbutz Massuot Yitzhak, is proving that with the right development and investment in production lines over years, aggressive marketing, and penetration of new markets, you can make a lot of money out of moist towelettes - NIS 460 million a year.
Founded in 1985, Albaad became a publicly traded company in 1993, eight years later. Only in 1997 did the company take its most significant step by investing $3 million in a moist towelette product line, which has proved to be a sizeable bonanza. Albaad went on to invest millions more in upgrading and expanding its production lines, while increasing its sales turnover by 20% annually, and becoming one of the world’s three leading manufacturers in the field. Exports account for 85% of the company’s revenue, while the domestic market accounts for 15%. 65-70% of sales are to Europe, 12% to the US, and the rest is spread around the world, including Oceania and South America.
2002 saw another milestone for the company - the acquisition of German company FHW, which also operates in the moist towelettes field, for €9.7 million. The acquisition in early 2002 led to a 75% growth in revenue, from NIS 261.9 million in 2001 to NIS 460.3 million in 2002. FHW generated NIS 144.5 million in revenue for Albaad in 2002, a third of the total. Both the German plant and Albaad itself manufacture for companies marketing their products under their own labels, and for retail chains selling their products under private labels.
Albaad’s net profit doubled to NIS 38.6 million in 2002, of which the German acquisition contributed NIS 3.4 million, after deducting NIS 3.7 million for good will on the acquisition. Profit on operations in Israel rose 83%.
Albaad’s activity generated a cash flow of NIS 56.2 million from current activity. The company equity reached NIS 153 million, 44.6% of its balance sheet total. Albaad took advantage of what management considered the low price of its share to spend NIS 24.7 million on a buyback in 2002.
At the same time, revenue has slowed substantially in the past two quarters, after intensified competition lowered prices. Company revenue in the fourth quarter of 2002 was NIS 108.9 million, compared with its record NIS 129.6 million in the second quarter of 2002. Net profit nonetheless continued to grow to around NIS 11 million, despite the drop in revenue in the third and fourth quarters, after gross profit margins rose to 34%.
Kibbutz Massuot Yitzhak has benefited handsomely from the company’s success, receiving NIS 13.6 million in management fees, amounting to 3% of total company revenue. The kibbutz received management fees of only NIS 5.3 million in the preceding year, because revenue was lower, and management fees were only 2% of total revenue. The kibbutz made sure it reaped the benefit of the company success in 2002. The kibbutz also received NIS 5.3 million in salaries for the 55 kibbutz members employed by the company, and NIS 3.6 million in rent. The general manager’s salary cost NIS 708,000, and the general marketing manager’s salary NIS 677,000.
Published by Globes [online] - www.globes.co.il - on 28 April 2003