Voracious appetite
Just one year after its IPO, Pamapol, Poland's leading convenience-food producer, has already accomplished most of the goals set out in its three- to four-year strategy.
The company has acquired shares in WZPOW Kwidzyn (it now owns 91.9 percent), taken a 100-percent stake in both ZPOW Ziębice and Cenos, and a 60-percent stake in Mitmar. Most recently it signed a letter of intent to acquire the assets of Galaxia, a coffee-roasting plant located in Wieluń.
In terms of market share, Pamapol's recently acquired businesses have seen varying degrees of success. WZPOW Kwidzyn is already the biggest producer of peas in Poland, while ZPOW Ziębice is becoming a leading producer of frozen and tinned vegetables. Mitmar has around a five-percent market share in meat and meat-product wholesale, and Cenos is a leading producer of salt and a leading distributor of groats and rice. Altogether, Pamapol now has a 25-percent share of the convenience-food market. The company's main competitors are Heinz, Makarony Polskie and Mispol.
Thanks to the acquisitions, Pamapol's pro-forma revenues have increased to zł.500 million in 2007. Now the company has worked out a new strategy with its president, Paweł Szataniak declaring that "by the end of 2010 we want to build a group whose annual revenues will reach zł.1 billion."
Prognosis positive
Pamapol's share price recently reached a record of nearly zł.35 on the heels of its corrected financial prognoses. The firm's revised estimates for this year foresee revenues of zł.380 million and net profit of zł.25 million, compared with earlier forecasts of zł.210 million in revenues and just zł.3 million in net profit. Pomapol is now also forecasting revenues of zł.630 million and a net profit of zł.42 million for 2008.
Dorota Puchlew, an analyst from brokerage PKO BP, considers the president's prognosis of zł.1 billion by 2010 feasible. "If they reach revenues of zł.630 million next year, zł.270 million more in 2010 is not out of the question. The company has a very good track record of increasing its profitability," she adds.
According to Pamapol's management board, next year's figures do not include any acquisitions that the company is planning. However, Szataniak says the company is currently negotiating a few takeovers from the food sector. "We want to buy companies whose annual revenues reach zł.100 million," he adds.
Acquisitions will be possible thanks to an issue of up to five million C-series shares, set to take place by the end of the year. The issue price is not known yet, though the management board wants it to come close to the current share price, which would give Pamapol some zł.150 million from the floor.
Glass works
Apart from the takeovers, the funds will cover the construction of a glassworks in Sławno. In May, Paweł Szataniak and his brother Mariusz established a firm called Huta Szkła Sławno, which they later sold to Pamapol for zł.1 million.
"We waited until we could sign a contract with the Łód Special Economic Zone. Now the contract means an income-tax exemption amounting to 50 percent of all investment spending by the end of 2017," says Szataniak, adding that having its own glassworks will help Pamapol become more self-sufficient.
"We have a great need for glass bottles and jars, and our suppliers' production capacities are limited," says Szataniak.
Pamapol plans to spend zł.50 million on the new glassworks, which it hopes to open in July 2008. Eventually, half of the production will satisfy Pamapol's demand for glass packages, and the rest will be sold outside the group.
Marcin Bogucki, chief analyst at IDM, says that most companies tend to take a different direction, such as outsourcing, rather than diversifying. "They have made a different decision, but that is not their core business," says Bogucki.
New ventures
Closer to Pamapol's core business is the production of baby food. Funds raised from the share issue will also finance the construction of a plant producing food for infants and small children under the brand name Baby Care. The opening of the factory is scheduled for the end of 2008.
Another of Pamapol's projects is its new subsidiary Pamapol-Dystrybucja, which started operations in May. The new company will employ over 120 workers, selling products manufactured by the whole group. According to Szataniak, this investment, along with a new marketing campaign, will give a further boost to sales.
Convenient figures
Consumption of convenience food is set for dynamic growth. Patrycja Ciosek, a retail analyst from PMR Publications, says the market's compound annual-growth rate stood at seven percent over the 2003-2005 period, with its most dynamic increase, 9.9 percent, recorded in 2005.
"The 2002 sales of convenience food were worth some zł.170 million, while by the end of 2005 this amount had increased to over zł.210 million. However, these sums do not take sales of ready-made soups or sales of retail chains' own-label products into account.
"Still, the average Pole spends only a fraction of what the average Western European spends on ready-made food," says Ciosek.
According to Datamonitor, in 2005 Polish consumers purchased convenience food worth just R2.40 (zł.9.04) on average. The average for the EU-15 came to over twice as much at R5.70 (zł.21.48). The hungriest consumers were the French, who purchased R10.90 (zł.41.08) worth of convenience food, followed by the Belgians (R9.80 [zł.36.94]), Irish (R9.50 [zł.35.80]), and British (R9 [zł.33.92]).
Szataniak is aware that Polish consumers are still quite traditional, and neither ready nor accustomed to buying pre-made meals and eating them out of the packet. "What we want to produce are sub-products packed separately but constituting a complete meal - a portion of meat, vegetables, groats or rice that could be eaten from a plate," says Szataniak.
