TEL AVIV, March 21 (Reuters) - Israeli drip irrigation pioneer Netafim is targeting 50 percent growth in earnings by 2020 as it leverages the resources and market opportunities offered by its new parent company Mexichem.
The Mexican industrial group bought 80 percent of Netafim, the world’s largest provider of drip irrigation systems with a 30 percent market share, for $1.5 billion last month. The remaining 20 percent is held by Kibbutz Hatzerim.
Netafim had earnings before interest, tax, depreciation and amortisation (EBITDA) of $133 million in 2017 on sales of $949 million, up from $855 million in 2016.
“Our target is to reach $200 million in EBITDA by 2020,” Netafim CEO Ran Maidan told reporters on Wednesday.
Netafim, which has 17 plants and 4,300 employees, also offers crop management technologies such as monitoring and control and dosing systems, and has partnered with mPrest, which developed the software for Israel’s Iron Dome missile defence system.
Mexichem, whose products range from petrochemicals to plastic pipes, operates in 37 countries and had revenue of $5.8 billion in 2017.
It financed the Netafim deal with debt and cash and will focus on integrating the company in 2018, CEO Daniel Martinez-Valle said.
He said Netafim “puts us in a relevant position globally” to address important issues of food security and water shortages.
The company was interested not only in Netafim’s assets but in its technology, as Mexichem aims to become a key player in digitalising the agricultural market, he said.
Netafim can benefit from having a broader market access in Latin America and from lower costs by leveraging scale in procurement and operations, he said.
Maidan said Netafim would seek to do its own acquisitions in the coming years.
“The likelihood we will do M&A is higher now than a year ago,” he said.
Netafim will focus on expanding in India and China - two countries where it is not the market leader - as well as Africa. It is also seeking to expand its market in large commodity crops such as sugar cane and cotton, and eventually rice.
“We believe that with our strategy - more exposure to India and China, going to big crops, into projects and digital transformation - we have a good chance to accelerate growth,” Maidan said. (Editing by Steven Scheer and David Evans)
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