Food and beverages

The Company

With total annual sales of around TD900m (€412.7m) in 2014, Société de Fabrication de Boissons de Tunisie (SFBT) is becoming one of the major private sector groups in Tunisia. It is made of 25 companies and generates most of its sales from soda beverages and beers. SFBT is a market leader in both segments. Since the year 2000 the strategy of the group has revolved around diversification, with the view to offer the widest product range possible. The company started with mineral water, then went into juices and, finally, milk. Over time, the mineral water segment has become the real engine for growth inside the SFBT group. As for the other two segments, juices and milk, the firm is increasingly shifting its strategy to focus more on making a progressive exit from both segments. SFBT has also managed to maintain a strong brand name in the local market. It retails well-known international brands in the market such as Coca-Cola, Löwenbräu, 33, Becks and Stella Artois; however, the company also has its own strong brands, including market leader in beer Celtia, Boga soda, Safia water and Marwa water, among many others.

The beer and mineral water segments are the best performing segments with the best gross margin, at around 45%. At first glance this gross margin may not seem high, particularly when similar companies internationally are able to achieve gross margins higher than 100%. The reason for this is the heavy taxation of consumer products in Tunisia, with a rate of 400% for beer and 47% on soda drinks. The SFBT group has been able to maintain its strong hold on the market due to two main factors: its equipment is substantially depreciated, which constitutes a barrier to entry for competing firms; and the net cash of the group is higher than TD180m (€82.5m), which contributes to financing new investments and maintenance.

Outlook

As far as the company’s outlook is concerned, future growth will be especially driven by two segments, soda and water. For the company’s soda line, beyond the natural growth of the local market, the group should benefit from an unexpected opportunity in Libya, where Coca-Cola has decided to close its factory. The international beverage company has also authorised SFBT to produce for the Libyan market since November 2014. Coca-Cola is obviously waiting for tension to come to an end before it resumes production in Libya. SFBT’s water business will benefit from changing consumer habits and a growing awareness of health products, and the group is looking to raise production of mineral water. This branch of SFBT’s business has been particularly successful and has seen turnover double in the last five years.

As for 2015 forecasts, the company’s annual consolidated net profit was expected to reach TD136m (€62.4m), with a 15% net margin. By June 2015 SFBT’s net profit was up by 5% to TD81.4m (€37.3m), although there was a small dip in sales of 1.6%. We also believe the group has implemented the right strategy for growth: strengthening positioning in profitable segments, such as beer and water, and taking advantage of opportunities in neighbouring markets, particularly Libya.

In the stock market, SFBT was among the best-performing stocks in 2014. The firm saw an impressive jump of 90% boosted by the capital market authority’s announcement to raise the foreign ownership cap for stocks from 49.9% to 66%. This rally continued into 2015, and the capitalisation of the group reached the TD3bn (€1.4bn) threshold by May 2015. However, this trend reversed as soon as foreign investors’ participation approached the authorised threshold. The group is trading at a capitalisation of TD2.4bn (€1.1bn) and a price-to-earnings ratio of 18.6x, against 21x for the sector.