Savencia Fromage & Dairy has reported an 11.7% increase in sales in the first half of its fiscal year to €3.4 billion, with organic growth of 14.4%.
Savencia Fromage & Dairy’s cheese sales grew 11.5% to €1.9 billion, driven by price effects in all global markets.

The French dairy group’s local brands continued to grow, despite pressure on consumer purchasing power, the company confirmed in its report.

The dairy group posted a 14.7% increase in sales in the first quarter to €1.67 billion, with organic growth of 17.6%, but that number was offset by a negative exchange rate effect of 3.0%.

In that chapter, that of exchange rates, Argentina appears with an important role, as the textual of the financial report assures that the decrease in profits “coming mainly from the depreciation of the Argentine peso and the yuan.”

While we are on the subject of Argentina, the details of the operation to purchase 100% of the shares of Sucesores de Alfredo Williner S.A. (SAW S.A.) became known. According to Savencia, the total amount of the operation was US$ 36.9 million, with a particular detail: US$ 30.6 million were paid in cash, the other US$ 5.3 million will be paid in 5 annual installments. In addition, the French had to inject 16 million dollars more to put the dairy into operation.

This is the transcription of what Savencia reported in its balance sheet:

As for the “Other dairy products” sector, the Group acquired on April 3, 2023 for €36.9 million 100% of the company Sucesores de Alfredo Williner S.A. (SAW S.A.), a major player in the dairy products sector in Argentina. Savencia thus enriches its brand portfolio with Ilolay, which offers a wide range of dairy products through an established distribution network throughout Argentina. SAW S.A. is one of the market leaders and one of the main milk collectors in Argentina.

This acquisition strengthens Savencia Fromage & Dairy’s presence in Argentina and is part of the deployment of the Group’s growth strategy. This merger is subject to approval by the competition authorities in accordance with local regulations. In accordance with Argentine law, the position of the local competition authority is communicated within one year of the acquisition. According to the analysis of the Group’s lawyers, the approval of this acquisition is considered highly probable.

In accordance with the revised IFRS 3 standard, a preliminary assessment of the fair value of the assets acquired and liabilities assumed is being carried out at the acquisition date and will be adjusted during the 12-month period from the acquisition date. In particular, tangible assets must be subject to valuation by an external appraiser. The preliminary fair value assessment led to the recognition mainly of:

• intangible assets: Ilolay brand for 24.3 million euros;
• inventory revaluations for 4.4 million euros;
• deferred tax liabilities on these items amounting to euro 10 million;
• Provisional goodwill of EUR 12.2 million.

At the acquisition date, total assets amounted to EUR 99.5 million, including tangible and intangible assets of EUR 36.1 million, inventories of EUR 25.2 million, cash of EUR 0.8 million and other receivables of EUR 37.4 million. Current and non-current liabilities accounted for EUR 74.8 million, including EUR 2.1 million related to IFRS 16 lease obligations.

Equity amounted to EUR 24.7 million. The impact of SAW S.A. on Group revenue in 2023 from the acquisition date is €73 million for a net profit, a Group share of €1.5 million. The integration on January 1, 2023 would have had an estimated impact of €148.2 million on consolidated revenue for a net profit, a Group share of +€3.7 million. Pending finalization of the purchase price allocation, these figures are expressed excluding the treatment of hyperinflation.

The impact of this transaction on the Group’s cash flow is EUR -30.6 million for the period taking into account the opening net cash. To this amount will be added a retainage releasable in installments over five years for a total amount of $5.4 million. In addition, the Group subscribed a capital increase of $16.1 million following the acquisition.

Damian Morais