DCC targets US and Asia with £500m war chest
DCC is keen to expand its presence in Asia in the medium-term and has the financial firepower to do about £500m (€569m) worth of acquisition deals in the current financial year, according to chief executive Donal Murphy.
Earlier this year, the diversified sales, marketing and logistics group finalised its £120m (€136m) acquisition of Shell's LPG business in Hong Kong and Macau, giving it its first foothold in the region.
"We think about Asia as a medium-term opportunity," said Mr Murphy. "It's a super business in Hong Kong and Macau, but we really need to understand and learn about the markets in the neighbouring countries and we'll do that over a little bit of time."
Late last year, DCC agreed the acquisition of a LPG distribution business called Hicksgas in the United States. That marked the company's first entry into the US LPG market. Hicksgas has a presence in 10 states, with its strongest positions being in Illinois, Indiana and Kansas.
The acquisition gave DCC a 0.6pc share of the US LPG market, which is highly fragmented with about 4,000 operators. The largest has about a 13pc share with a couple of others holding about 8pc each. The American LPG market is about nine times larger than France's, where DCC has a significant presence.
"We had looked for an opportunity to enter that market for some time," Mr Murphy told the Irish Independent. "It really gives us a presence in that very large US propane market. We think that's a real platform for growth going forward. We look at that market as a real opportunity because of the scale of it and the nature of some of the players in it."
He said that the vast majority of the LPG businesses in the United States are small, family-owned operations. "Some of the larger players are typically energy infrastructure funds, and then you have a couple of mid-sized ones and after that you're down to small, local businesses," he said. "That's bread-and-butter stuff for DCC. Hopefully there will be opportunities to do some bigger things as well as some of the small ones."
DCC's operating profit in the 12 months to the end of March rose 11.1pc to £383.4m (€435.8m. Its revenue, excluding fuel, was 12.6pc higher at £3.59bn (€4.08bn). About half the revenue growth came from organic growth.
The FTSE-100 firm spent £691m (€786m) on acquisitions in its last financial year, including £26.9m in deferred and contingent consideration. DCC also operates in the healthcare and technology sectors.