Amira Nature Foods Makes Its Name On A Grain Of Rice

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Amira Nature Foods added a main ingredient to its recipe for growth when the packaged Indian specialty rice provider agreed to buy a major rice distributor in Germany, as it steps up its global expansion.

Amira ( ANFI ) sells primarily basmati rice, a premium long-grain rice grown only in certain regions of the Indian subcontinent, sold under the company's flagship Amira brand as well as under third-party labels. The Amira branded products consist of several rice varieties, such as Amira Sameena Basmati Rice and ready-to-eat snacks.

The company sells its products, primarily in emerging markets, through a broad distribution network. The products are sold in over 40 countries, with a branded presence in over 25 of them.

In a deal announced last month Amira agreed to buy Basmati Rice GmbH, a Germany-based specialty distributor of premium branded rice, particularly basmati. Basmati posted roughly $8 million in sales in 2012 and $6.5 million in sales for the nine months ended Sept. 30, 2013.

The proposed acquisition is expected to be accretive to Amira's current 2014 fiscal year earnings. Details were not disclosed.

The buy would mark the first acquisition for Amira since the Dubai, United Arab Emirates-headquartered company went public in October 2012.

More On The Plate

Once the deal closes, Basmati will bring a lot to the table: In announcing it, CEO Karan Chanana called the acquisition "highly accretive," while noting that Basmati has a 25-year history of serving some of the largest supermarkets in Germany and more recently in neighboring countries across Europe.

"We believe our team can quickly expand their sales and further enhance their high-margin branded product offering as we leverage our existing vertically integrated infrastructure and distribution in Europe to provide consumers a vast array of branded Basmati rice from our natural and organic offerings to new, unique items like smoked Basmati rice," he said in a statement.

Basmati offers 10 different varieties of rice to consumers under brands such as ATRY, Scheherazade and Sultan. These brands can be found in more than 4,000 stores across Germany and Europe.

Jefferies analyst Thilo Wrede sees more buys on the horizon: "So far, it has grown without acquisitions," he said. "I wouldn't be surprised if going forward we hear more about acquisitions from them."

Grow it has. Amira has posted triple-digit earnings growth in all but one of the four quarters it's reported since going public. In the fiscal 2014 second quarter ended Sept. 30, earnings rose 100% to 18 cents a share.

"Our consistent top-line growth underscores our success in continually adding new customers and expanding our business as the growing global demand for our premium products and offerings including our core basmati rice, in addition to our expanding product portfolio of ready-to-eat snacks, meals, and complementary products," Chanana said on the quarterly conference call with analysts.

Analysts surveyed by Thomson Reuters see Amira staying on the fast track. They expect fiscal 2014 earnings to rise 66% to 98 cents a share. They see a 32% rise in 2015.

Wrede says a number of factors have been driving Amira's growth, including expansion in existing markets by getting into more stores, and entering new markets.

Big On Basmati

The United Kingdom is among the markets it's entered recently with the launch of the Amira brand, it announced in June. It marks the company's first sales in the U.K. market with five products across over 2,230 retail distribution points, including Morrisons Supermarket. Morrisons is one of the leading supermarket chains in the U.K. with over 400 stores. Amira also launched the brand to certain food-service customers and a Michelin star restaurant.

"The U.K. is definitely an important market," said Wrede. "It's a sizable market and one of the major growth markets for them this year and next."

He says the average U.K. consumer regularly eats a dish that goes with basmati rice. Indian basmati, he adds, accounts for roughly 50% of the rice market in the U.K.

And Amira wants to expand into other retailers in the U.K., he adds.

Amira, through its Amira Pure Foods Private subsidiary, also entered the South Korean market last year via an agreement with a new South Korean customer to supply Indian medium short-grain specialty rice for roughly $8 million. The company expects the revenue under the contract to be recognized in the first and second quarter of the fiscal year ending March 31, 2014.

Amira is also tapping into growing global demand for packaged organic foods. It created the Amira Organics business division last June to launch products in this category.

Basmati rice is gluten-free.

"Amira is well positioned to capitalize on the growing trend of consumers becoming increasingly concerned about moderating gluten intake," Chanana said on the earnings call. "Many retailers are focusing on offering their customers a higher number of gluten-free options. This provides a strong growth opportunity for the Amira brand to gain market share with these retailers, with our rice offerings as well as our complementary snack offerings."

Chanana says Amira will be launching organic ready meals in India by the first half of 2014. It plans to start rolling this product out in the U.S. starting in the second half of this year.

"This will serve as a platform for us to expand our rollout of organic products internationally," Chanana added.

The organic ready meals are portion packs of precooked and seasoned rice and other grain mixes, Wrede wrote in a report.

World Of Opportunities

Meanwhile, "the growth story is fully intact and, if anything, the opportunities are expanding," Wrede wrote in a report after attending an investors meeting with Chanana.

The global basmati market continues to grow at an average rate of 15% to 18% a year, writes Wrede, and Amira is gaining market share in this environment. Wrede notes that the company buys roughly 5% of India's annual basmati harvest in the form of rice paddy (the unprocessed grains) and supplements that with purchases of semifinished rice to meet demand.

"In other words, the company should be able to increase supply in order to meet growing demand for its brands and products," he added. "The category continues to be driven by increasing disposable income in emerging markets where basmati is an aspirational product, and growing preference for the flavor of basmati rice in developed markets."

Amira has been owned and operated by the Chanana family since 1915. Chanana became CEO and chairman in 2006, making him the fourth-generation family member to run the company.

Chanana and his affiliates, including various companies controlled by him and direct members of his family, and certain other directors, directly or indirectly held approximately 68.6% of the company's share as of last June.

Amira sells in both emerging and developed markets to global retailers such as Carrefour,Costco Wholesale ( COST ), Jetro Restaurant Depot, Lulu's and Smart & Final, and through the food-service channel. It sells its Amira branded products to Indian retailers such as Bharti Walmart (aWal-Mart Stores ( WMT ) joint venture) and Big Bazaar.



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Investing Ideas

Referenced Stocks: ANFI , COST , WMT

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