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Flourishing Balchem seeks more acquisitions

01-Aug-2005

More acquisitions may be on the cards for Balchem, the company that last month bought Loders Croklaan's encapsulation and agglomeration business, reports Jess Halliday.

The ingredients and technology company reported a strong performance in 2Q 2005. Sales for its encapsulation/nutritional products segment grew 6 percent to $6.8 million, and income from operations soared by 30 percent to $0.61 million.

Across its three main segments (the encapsulation/nutritional business plus ARC Specialty Products and BCP Ingredients), the company kept a tight reign on its operating expenses, which remained at the 2Q 2004 level of $2.8 million despite a 34 percent increase in income from operations overall.

 

After paying out $11.35 million for the Loders Croklaan business, including around $1.5 million for inventories and accounts receivable, Balchem had $6.35 million in ready cash and short-term investments as of 30 June. With no long-term debt, it is in a strong position to snap up other companies that are a suitable fit with its existing segments.

 

And that, according to president and CEO Dino Rossi, is precisely what it plans to do: "We will continue to seek more strategic alliances, joint ventures or acquisitions for each of the segments to further complement our growth objectives."

 

Rossi is already looking forward to "posting modest double digit growth organically" for the remaining six months of the fiscal year, and said that the Loders Croklaan acquisition will "add immediate accretive earnings beginning in the third quarter."

 

Loders' fluidized bed encapsulation and agglomeration technologies have traditionally been used in the pharmaceutical industry, when particles are too small to coat with traditional pan coating technologies.

 

As well as building on the company's existing pharmaceutical offering, it also provides new opportunities in the food and nutritional markets as encapsulation is increasingly used by functional ingredients firms.

 

Demand for microencapsulation within the food ingredients industry has grown significantly in recent years. US suppliers of microencapsulation products and services now generate revenues over $150 million a year, and new solutions are continually hitting the market.