Lesieur: Consumer goods

Founded in 1942 Lesieur has emerged as a leading player in the Moroccan agribusiness sector, with a 57% market share of its core business – edible oil. Endowed with the largest refining capacities in Morocco, Lesieur is gradually becoming a pan-African competitor, seeking opportunities in new markets via exports and foreign direct investment. Benefitting from strong brand recognition and loyalty, the group is continuously capitalising on its know-how and experience to further diversify and enrich its product mix thanks to a proactive research and development strategy.

Product Lines

Lesieur produces and markets five product categories: seed oils, olive oil, body soaps and gels, detergents and condiments. In 2014 and as part of the strategy of Société Nationale d'Investissement (SNI) to divest its stake in mature businesses, Lesieur has seen its free float increase from 11.6% to 34.3% via a public offering, whereby SNI sold its remaining stake in Lesieur. This followed an earlier transaction in which SNI sold a 41% stake of Lesieur via a private placement to Sofiproteol, a French financial and industrial group operating in the fatty acid business. Sofiproteol commercialised Lesieur and Puget oils in France.

In the midst of a bearish international soybean market with prices plummeting to a low of $702 per tonne in 2014, down 20% over the past two years, Lesieur has passed on the price decrease to consumers, causing a 7.2% drop in the group’s turnover, which stood at Dh3.8bn (€416.7m) in 2014 (seed oils represented 77% of Lesieur sales in 2014). Lesieur is dependent on international commodity markets, as Morocco is not self-sufficient with regards to soybean production. In Morocco soybean oil consumption represents on average between 65% and 75% of total consumption as it remains the most affordable oil in the market.

Despite a decrease in sales due to an unfavourable price variance, the group was able to improve its financial performance, earning stronger profitability margins. The group’s gross margin improved to 21.8% in 2014 over 19.9% in 2013, thanks to several factors: 1) a rise in olive oil exports, thanks to an increase in prices internationally; 2) 15% growth in the domestic body soap market, driven by higher sales of liquid soaps, products with a higher added value; 3) a rise in demand for newly marketed products – Lesieur's ketchup and mayonnaise captured market shares of 7.5% and 10%, respectively, in 2014; 4) an increase in seed oil exports; and 5) synergies with the main shareholder, especially in sourcing raw materials. The group’s earnings before interest, taxes, depreciation, and amortisation margin stood at 8.4%, compared to 7.9% in 2013. Operating margins improved to 6.7%, thanks to management’s strategy to continuously streamline operating costs. Net income group share also increased 57% to Dh196 (€21.32), for a net margin of 5.1%, versus 3% in 2013.

Strategic Development

In line with the group’s vision, we believe that Lesieur Cristal will continue investing in product innovation to diversify its product mix and capture more market share in new segments. The firm is less prone to competition outside its core business, but new segments offer strong potential. In the first half of 2015 the company has enriched its body soap offer with the addition of three shower gel products. Furthermore, to respond to the change in laundry habits in Morocco, where a shift from hand washing to machine washing is taking place, Lesieur has introduced a new washing powder. The consumption of laundry bar soap dropped an average of 1.6% over the past four years, compared to a 10.2% increase for washing powder. Furthermore, to mitigate the company’s exposure to price volatility in the global food and commodity market and to take advantage of a growing demand for olive oil, Lesieur Cristal is investing to support the development of local agricultural production. Given current market conditions, with soybean prices still declining, we believe that the group’s turnover should remain flat in 2015, at Dh3.8bn (€416.7m), with an operating income of Dh257m (€28m) and EBIT margins of 6.7%. We recommend a buy, with a target price at Dh128 (€13.93) – a potential capital gain of 20%.