DCC enters US health and beauty sector with $50m acquisition

Company also announced that third quarter operating profit was in line with expectations

DCC, the Irish-based fuel distribution-to-technology sales group, has announced a $50 million acquisition in the US in what marks its first foray into the American health and beauty sector.

The company said on Wednesday it had acquired Elite One Source Nutritional Services, which is a provider of contract manufacturing and related services to the growing healthcare and dietary supplements market in the US.

Elite focuses on complex-formulation nutritional products in tablet and capsule dosage forms, including organic and probiotic products, across a variety of packaging formats.

Its service offering encompasses product development, formulation, manufacturing, packaging and regulatory services. Its customer base includes some of the leading specialist brands in the US consumer healthcare market.

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DCC said Elite’s facilities in Missoula, Montana are “well-invested” with significant scope to expand capacity to meet its organic growth plans. The business is led by “an experienced management team” and employs 180 people.

The consideration, based on an enterprise value of $50 million (£35 million), was paid in cash on completion. DCC said Elite was expected to generate a return on capital employed of approximately 15 per cent within the first two years of ownership.

DCC chief executive Donal Murphy said he was "excited" to enter the US market. "The US is an innovative, high-growth market, with a fragmented contract manufacturing base, which offers DCC significant opportunities for organic and acquisitive growth," he said.

DCC also published an interim management statement for the third quarter ended December 31st, 2017, which said group operating profit was in line with expectations and ahead of the prior year “despite the headwind of an increasing cost of product”.

“The mild weather conditions experienced early in the quarter impacted heating-related volumes modestly, although this was largely offset by good cost control,” it said.

“As previously announced, the French business launched its consumer natural gas and electricity initiative during the quarter and continues to invest in the development of its offering.”

DCC Retail & Oil recorded “good growth” in operating profit, driven by “strong organic profit growth” in Denmark and Fuel Card. The business in Britain performed “in line with expectations”.

DCC Healthcare recorded “strong growth” in operating profit. DCC Vital delivered “good organic profit growth”, particularly in medical devices, and also benefited from the acquisition of Medisource completed during the prior year.

DCC Health & Beauty Solutions again delivered “strong growth” in nutritional products.

Operating profit in DCC Technology was ahead of the prior year, benefiting from acquisitions and a good organic performance from the UK and Ireland where “strong growth” was achieved in the key product areas of audio visual, smart home and enterprise.

The French consumer products business “remains challenging” and the firm said a number of operational changes are underway to improve performance. The remaining continental European businesses “continued to perform well” and traded in line with expectations.

In terms of the next quarter, DCC said it expected both operating profit and adjusted earnings per share to be well ahead of the prior year and in line with current market consensus.

Colin Gleeson

Colin Gleeson

Colin Gleeson is an Irish Times reporter