EFI confident of $1bn sales target next year after strong Q2s
Tuesday, July 21, 2015
EFI has posted strong second-quarter results with chief executive Guy Gecht stating that the business is on track to achieve to its $1bn (£640m) sales target by 2016 following the acquisitions of Reggiani Macchine and Matan earlier this month.
Total sales grew 5% year-on-year to $202.7m from $193m in Q2 2014, with across the board year-on-year growth in its Industrial Inkjet, Productivity Software and Fiery divisions of 2%, 10% and 7% respectively.
“It was another strong quarter, achieved despite ongoing [currency] headwinds,” said Gecht.
The strong US dollar negatively impacted growth, especially in the EMEA region, which had sales of $65.1m in Q2, down 3% from $66.9m last year, although with 2015 figures adjusted to 2014 exchange rates EMEA would have achieved growth of 8%.
However, across the regions operating profit still grew 3% from $28.3m in Q2 2014 to $29.3m this year, with net income up 7% to $22.9m.
While the Q2 figures didn’t benefit from the acquisitions of Italian textile ink and kit manufacturer Reggiani and Israeli super-wide kit manufacturer Matan, which completed on 1 July, Gecht said that both deals represented significant, albeit different, opportunities for EFI, not least to fast track hitting its target of $1bn sales.
“We had long targeted digital textile as a huge opportunity, but we wanted to fully understand the market and, of course, the company,” he said of the Reggiani acquisition.
Gecht highlighted that the roll-to-roll textile market is still in the very early stages of its analogue to digital conversion, with only 4% so far printed digitally – which he said represented a significant opportunity in a market expected to be worth $1.5bn.
He also cited Reggiani’s market-leading position in the industrial textile inkjet printer market and its established inks business as key drivers for the $140m deal.
“We believe the industrial textile industry will be another great market for the EFI Ecosystem, first we can bring Reggiani’s water-based ink expertise and digital print technology to our Vutek customers for creating soft signage – a capability that the Vutek installed base has shown an increasing interest in. Then there’s the ink for industrial textile customers, with currently 40% of its customers buying ink from Reggiani our priority is to increase that and improve the economics of the printers and ink.”
EFI began talks with Reggiani last September.
That dual drivers for the Matan deal were to offer EFI customers a lower entry point into the roll-to-roll display graphics market and also for EFI to benefit from the Israeli company’s technical expertise, which he said would bolster its own inkjet R&D.
According to Gecht, EFI is targeting group revenues of between $225m and $232m in Q3, with the Reggiani and Matan acquisitions expected to generate around 8%-10% of sales in the quarter.
“Absolutely, these two acquisitions bridge the gap to what we need. Assuming good execution by our teams – which we like to assume – we will deliver the $1bn [revenue] next year. So we don’t ‘need’ any more acquisitions to get there,” said Gecht.
However, he highlighted that $1bn target was simply a milestone and not the end goal, adding that while the business was “clearly not done with M&A” as part of EFI’s growth strategy – the focus for now was integrating the new businesses.