Griffin's to ramp up exports says incoming CEO

Popular Griffin's brands include: Macaroon, Toffee Pops and Cookie Bear biscuits. Photo / Stephen Parker

Griffin's Foods, the maker of Gingernuts and Eta brand snacks, plans to lift exports to more than 50 per cent of sales within five years by leveraging new owner Universal Robina Corp's links in southeast Asia, says incoming chief executive Alison Taylor.

Auckland-based Griffin's was sold to URC for $700 million this week, ending about eight years of ownership by Australian private equity firm Pacific Equity Partners. The company can use URC's networks in Asia to meet growing global demand for New Zealand-sourced food, Taylor told BusinessDesk.

"We're certainly expecting in the next five years doing more business globally, with over 50 per cent coming from offshore," Taylor said. "The Asian market is the next natural stop for us."

The government is looking to increase the country's exports to 40 per cent of the economy by 2025, and has tasked the Ministry of Business, Innovation and Employment to analyse food and beverage exports, which account for more than half of New Zealand's merchandise trade. Local manufacturers exported about $287 million of snack foods in 2012 out of a total $1.72 billion processed food exports, according to a Coriolis report for the Food and Beverage Information Project published in January.

About a third of Griffin's $280.8 million in annual revenue came from exports in calendar 2013, up from as little as 2 or 3 per cent of its $186.4 million in sales in 2006, when PEP bought the manufacturer. The Coriolis report ranked Griffin's the country's seventh-biggest processed food firm.

Griffin's has excess capacity at its two South Auckland plants, Taylor said. PEP said it had invested $180 million in the company over the course of its ownership to improve the manufacturer's efficiency. That included some $55 million it spent buying the Nice and Natural wrapped snacks business.

The Philippines food and beverage company will pay $100 million upfront, with the balance to be paid once the deal is completed, and will be funded from long-term debt financing and internal sources, URC said in a statement to the Philippines Stock Exchange. The sale needs Overseas Investment Office approval.

"The proposed acquisition is expected to transform Griffin's international growth strategy as it will benefit from URC's existing distribution networks across the Philippines and other Asia countries," URC said. "In addition, the acquisition complements URC's product portfolio, leveraging its distribution strength to sell a premium range of products in its home and international markets."

PEP tried to sell Griffin's in 2011 after struggling to find a buyer. It was reportedly looking for a price in the range of seven to nine times earnings, which were about $108 million at the time. The sale to URC was at a multiple of 8.97 times earnings before interest, tax, depreciation and amortisation of $78 million.

The Australian private equity firm bought Griffin's for $292.4 million in 2006 from French food group Danone at an enterprise value of $385 million
The sale comes after accounts for NZ Snack Food Holdings show the Griffin's holding company made a capital return of $192 million in a share repurchase in the same year PEP refinanced the food manufacturer.

The group had interest bearing debt of $442.4 million as at December 31, up from $234.6 million a year earlier, according to financial statements lodged with the Companies Office. The $274.5 million of bank debt matures in January 2016, while $167.9 million of mezzanine notes mature in January 2019.

NZ Snack Foods reported a 75 per cent slump in profit to $5.1 million in calendar 2013, as its finance costs climbed by more than half to $23.8 million. Revenue fell 4.3 per cent to $280.8 million. Gross margins were largely unchanged at 53 per cent. Operational cash inflow more than doubled to $34 million, and the group held cash of $34.8 million as at December 31.