Victoria Group is to significantly grow its ceramic tile operations after agreeing to buy Turkish mid-market manufacturer Graniser.
Established in 1997, Graniser has been ultimately owned 75% by the Austrian investment company, Bancroft Group and 25% by the European Bank of Reconstruction and Development since 2012. The company manufactures ceramic tiles from a 807,000sqft production facility it owns, close to Izmir port. The factory, which incorporates a cogeneration power plant to improve efficiency and generate energy savings, has a current annual production capacity of 20.8million sqm, which is not fully utilised, with the opportunity to expand output considerably with limited capital expenditure. By comparison, Victoria’s existing ceramic tile operations have an annual production capacity of 52million sqm.
Graniser had sales of £52.8m in 2020 and normalised EBITDA of £7.7m. Victoria will pay £7.1m for the company and pay its £33.7m of debts. The Turkish competition authorities are expected to approve the deal next month.
Exports, predominantly to the USA, Israel, the UK, and Germany, accounted for about 63% of sales in 2020 and about 75% is expected for 2021, resulting in a significant proportion of Euro and US Dollar-denominated income and Turkish Lira-denominated costs. Graniser account for about 7% of Turkey’s ceramic exports.
The group said the deal diversifies its ceramic tiles manufacturing footprint into a significantly lower energy, labour and raw material price environment, alongside strict quality governance. Production investment is expected to deliver a 75% increase in Graniser’s earnings over the next three years. Graniser and Victoria Ceramics will benefit from exposure to each other’s commercial markets. Graniser will provide further export potential to the Middle East (an 800million sqm per annum growing ceramics market) for Victoria. Victoria’s ceramic tiles division, in particular its Italian operations, will open high-growth European DIY markets for Graniser. The enlarged ceramic tile operations will leverage Victoria’s existing brand and design strengths with product ranges manufactured in a low-cost environment to drive margins and top line growth.
‘Victoria’s ceramic tiles business continues to go from strength to strength. The low-cost manufacturing environment that Graniser offers will give us the ability to leverage our manufacturing expertise and brand strength to further drive operating margins,’ says Philippe Hamers, Victoria Group chief executive.
‘Following completion of the acquisition, Victoria will have invested about £201m in the current financial year to add approximately £35m of EBITDA to the group. Victoria’s strategy of achieving scale through acquisitions and using that scale to extract operational synergies continues to deliver value for the group and its shareholders. We continue to have substantial amounts of capital to deploy and are in active discussions with additional high-quality opportunities to grow our business. Therefore, shareholders can expect further earning accretive acquisitions,’ says Geoff Wilding, Victoria Group executive chairman.
