Israeli importer reveals why Gillette, Pampers cost so much

Diplomat's prospectus for a TASE IPO reveals its high profit margins in Israel, compared with the other countries in which it operates.

Most Israeli consumers don't know the name Diplomat but they are certainly very familiar with the brands that Diplomat imports to Israel and distributes. The company's activities span the food, cleaning, toiletries, hygiene, canned fish and other sectors and brands that it imports include Kellogg's, Heinz, Beyond Meat, Kikkoman, Pampers, Gillette, Head & Shoulders, Pantene, Ariel, and other Proctor & Gamble brands, Duracell and much more. Diplomat is the sixth biggest player in Israel's food sector and also owns the Starkist through which it controls 40% of Israel's canned tuna retail market.

Until yesterday not much was known about Diplomat's financials but now that the company has filed for an initial public offering (IPO) on the Tel Aviv Stock Exchange (TASE), we are able to study its profitability. In 2020, Diplomat's revenue in Israel grew 6% to NIS 1.2 billion in the first nine months of the year, despite the Covid-19 pandemic, which hit its institutional sales. In part this can be attributed to new products that were introduced onto the market.

In its prospectus, Diplomat succeeded in avoiding itemizing its profitability in the categories, in which it operates but the way in which the figures are presented according to the countries in which it is active highlights the relatively high profitability on the Israeli market.

Diplomat's operating profit in the first nine months of 2020 was NIS 68 million, up 10% and representing 6% of sales on the local market. Except for Cyprus, in which operating margin is 10% of total sales, Israel with 6% is Diplomat's most profitable market, followed by South Africa and New Zealand, with margins of 3% each and Georgia with 2%. In explaining the high margins in Cyprus, Diplomat says this is because of, "the size of the market, which is significantly smaller than the rest of the areas."

The prospectus also reveals that Diplomat's total annual revenue from all countries is NIS 2.7 billion and the cost of the CEO Noam Weiman's remuneration is NIS 9 million per year.

In the IPO, Diplomat is looking to raise NIS 250-300 million at a company valuation of NIS 1-1.2 billion. Founded in 1963, the company has 2,500 employees including 700 in Israel.

58% of Diplomat's revenue is in Israel, 25% in South Africa, 8% in Georgia, 6% in New Zealand and 3% in Cyprus. In addition to its sales, Diplomat also provides logistics, warehousing, packaging and transportation services.

Published by Globes, Israel business news - - on February 15, 2021

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