August 22, 2014

DNL unit signs deal with Ventura Foods to tap Asia-Pacific

DNL yesterday disclosed that its wholly owned subsidiary, Oleo Fats Inc (OFI), has entered into an agreement with US food manufacturer Ventura Foods for OFI to develop and produce specialty oils and ingredients for the food service and ingredient manufacturing industries in the Asia Pacific region. Ventura is a leading US-based food manufacturer of branded and custom-made oils and specialty ingredients for the food service, retail and ingredient manufacturing industries. Ventura is the largest maker of vegetable oil based food products in the US and has revenues in excess of $2.5b annually.

Our take: While details of the deal have yet to be released by DNL, the agreement presents a win-win deal for both parties as Ventura is able to offer better logistics and cost efficiencies for its Asia-Pacific customers by tapping OFI as a strategic supplier. OFI on the other hand benefits through additional expertise and technology transfer and from a potential boost to its volumes. This opens a huge potential for OFI to grow its international business which currently accounts for less than18% of its revenues.

Moreover, the volume growth provided by the Ventura supply deal should improve scale and cost efficiency of OFI leading to improved margins. DNL has more than doubled the capacity of OFI’s facilities using a portion of its IPO proceeds. OFI is now operating at a little less than half of its capacity, thus leaving enough elbow room for any possible increase in output. – WealthSec