Misitano & Stracuzzi (IT:MS)
Speciality citrus essences
Robin research covers small and medium-sized companies with an attractive risk/reward profile mainly in Europe and North America.
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A Story of Heritage, Flavour, and Global Growth from Sicily
Deep in the heart of Sicily, where the sun-drenched slopes yield some of the world's most aromatic citrus fruits, lies a company with a rich history stretching back over a century: Misitano & Stracuzzi S.p.A.
What began in 1922 as a partnership between two families operating in the vibrant citrus market, has evolved into a leading global player in the niche world of specialty citrus essences and essential oils, now fully controlled by the Stracuzzi family.
Based in Messina, this Italian company recently embarked on a new chapter, listing on the Euronext Growth Milan market on July, 2024
A Business Crafted from Citrus
At its core, Misitano & Stracuzzi is dedicated to developing, manufacturing, and selling specialty citrus essences and essential oils, a segment that consistently represents the vast majority (around 90%) of its revenue. They also produce citrus juices, accounting for a smaller, yet important, 10% of sales.
Their expertise lies in taking raw citrus fruits – think Lemon, Mandarin, Orange, Bergamot, and Cedar – and transforming them into highly customised products.
Imagine the journey of a Sicilian orange. It arrives at a Misitano & Stracuzzi facility. Here, centuries of experience meet cutting-edge technology. Through proprietary solutions and in-house methods, they extract the vibrant, aromatic essential oils and flavourful juices.
But their commitment goes beyond just production; they embrace a circular process, re purposing the leftover pulp (a significant 60-65% of the fruit) into valuable resources like biomass, animal feed, or even material for textiles.
The magic happens in their ability to create tailor-made products. Leveraging their deep know-how and R&D, they formulate unique blends of essential oils and aromatic substances that meet the specific needs of their B2B customers.
These are not products you'll find on a supermarket shelf; they are critical components used in the flavour and fragrance sectors, essential for industries like food, perfumery, cosmetics, detergents, pharmaceuticals, and personal care.
Even though flavour might be a tiny fraction of a final product, it's absolutely crucial for taste aroma.
Navigating a Growing Global Market
Misitano & Stracuzzi operates on a truly global stage, with over 90% of its revenue generated abroad in both 2023 and 2024. They have established commercial relationships in more than 40 countries, with sales spread across EMEA (46% of 2024 revenue), the Americas (44%), and APAC (10%). To support this reach, they have logistics centres in Italy, the United States, and the Netherlands.
The market they serve is buoyant. The broader flavour, fragrance, and aroma market was valued at €40 billion in 2023 and is forecasted to grow at a CAGR of +5% until 2030.
What's driving this growth? Several factors play a role: a growing global population increases demand for food, but perhaps more significantly, there's a rising consumer interest in natural products, often perceived as healthier and beneficial for well being.
This trend strongly favours companies like M&S, whose products are 100% naturally sourced from citrus fruits. There's particularly high potential in the non-alcoholic beverage market, a main target segment for M&S essences. While beverages account for 33% of this market, only a tiny 2% currently use natural flavourings. This presents a massive opportunity for growth. The market for citrus-based essential oils specifically is also projected for strong growth, expected to reach around €14 billion.
Competing on Quality and Relationships
Entering the flavour industry isn't easy; it's a market with strong barriers to entry. Clients demand precise flavour profiles that can be consistently reproduced over time. Regulations increasingly favour local and sustainable sourcing.
Crucially, relationships between flavour houses and suppliers like M&S are built on deep trust forged over years. Suppliers need expertise to manage the seasonal variations in citrus fruits and guarantee availability. Plus, beverage recipes are often intellectual property, making it hard for newcomers to replicate sought-after profiles.
Misitano & Stracuzzi thrives in this environment. They are positioned as an indispensable strategic B2B partner. Their over 100 years of experience give them an unparalleled understanding of market dynamics and the ability to standardise product quality. They boast long-standing, trusted relationships with major international players, including over 25 years with their top three key customers. These top three clients alone accounted for approximately 45% of their 2023 revenue, and their business has been growing significantly faster than the rest of the portfolio. This client loyalty is based on M&S's reputation for reliable delivery, product safety, regulatory compliance, and sustainability. While there isn't a direct publicly listed comparable company, M&S stands out even among Italian competitors for its superior EBITDA margin.
A Clear Road map for Growth
Looking ahead, Misitano & Stracuzzi is focused on accelerating its growth. Their strategy rests on two pillars: organic growth and logistical/productive optimisation.
Organic growth is fueled by several factors: a growing client base, particularly in strategic markets like the US and India, diversified and increasing product demand driven by market trends favouring natural ingredients, and their ability to secure long-term contracts ensuring future revenue streams. The finalisation of a Strategic Advisory Board in November 2024, comprising seasoned international executives, is set to further support this international expansion.
The most tangible part of their strategy is the significant investment in two new production facilities in the province of Messina, in Pace del Mela and San Filippo del Mela. This is a substantial undertaking, valued at €32 million, with the remaining €20 million allocated for 2025 and 2026. The relocation of the essential oil unit is planned for the first half of 2025, and the juice/extraction unit by the end of 2025 or early 2026. These new sites are designed to dramatically enhance logistics, increase production capacity, improve efficiency, reduce costs through internalised stock management, and house a comprehensive R&D centre. This optimisation will allow M&S to be more responsive to customer needs and capitalise on market opportunities. Investment in R&D will continue, with the potential to expand the product portfolio beyond citrus.
With strong 2024 results (€72.8 million Revenue, €15.6 million EBITDA), management is confident in achieving their strategic objectives and anticipates continued business growth in 2025, particularly in revenue. They are committed to maintaining their certifications and environmental management practices, reinforcing their position as a reliable and responsible partner in the global flavour and fragrance industry.
Managing Risks, Building Resilience
Like any international business, M&S faces risks. Operating across numerous countries exposes them to market risks, although they wisely avoid areas with high geopolitical risk.
They are indirectly exposed to the impact of citrus diseases, such as the infamous greening disease (HLB), which can affect raw material prices and volumes. However, they manage this risk through flexible sourcing across different citrus varieties and their ability to pass on price increases to clients, who prioritise the critical flavour profile over minor cost savings.
It is a company with a market capitalisation of 80 million and a poor track record on the stock exchange. This implies a higher than normal risk as we do not have a clear track record. On the other hand, a failure to implement expansion plans could slow down the company's performance in the short to medium term.
Key Management and Board Members
The management of Misitano & Stracuzzi is characterised by the significant involvement of the Stracuzzi family (fourth generation), which also holds full control of the company (~75% of shares), creating a strong alignment between management and shareholder interest.
The key executive roles (Chairman/CEO, MD Logistics, MD Juice Department) are held by members of the Stracuzzi family and have long tenures on the Board of Directors (since 1995, 2001, and 2002 respectively).
Concluding remarks and assessment, future Robertet?
Is M&S a small Robertet? We don't know, but time will tell.
At current prices, M&S would trade on a 10x FPE 2026, while its peers would trade on a range of 17x to 30x FPE. Logically, M&S is the smallest of the bunch and trades at a discount with a poor track record.
However, the investment thesis focuses on the fact that from 2026 onwards, when the expansionary capex of the new factories stops, there should be a significant improvement in terms of FCF, EBITDA margins, sales growth (around 10%) and therefore EPS improvement.
As a small cap with very little follow-through, a year-on-year improvement could spark investor interest and take the price close to its peers, at a discount, at least until P/E 15 2026.
If so, we would be talking about a price of €4 per share within 12-18 months.
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Very interesting. Being a follower of Robertet - I think this is a good business - the essence. Thanks!
A few questions - do you care to speculate which is the very large customer? Do you think it is Givaudau ? Why is the big jump in sales from this customer? Do you tink that customer is in the essence business or the juice business..It seems most of the sales growth is coming from that customer. We need to figure out why?
2) do you have any indication of the split between essence and the rest. The company is planning a major expansion on juice and oil. I wonder if oil is part of the essence business. Sorry for all the questions.. A question ask is half answer.
Waah we were just about to publish a write-up on this company ourselves in the next few days. Oh well great minds think alike as they say. Interesting to read your perspective on the company.