Biggest Customers Truly Show EnWave Potential – Part II
This is the second in a three-part series about EnWave Corp’s (TSXV:ENW – $0.96 CAD & OTC:NWVCF – $0.74 USD & Frankfurt:E4U – €0.63) most significant clients, the influence of their REV dried products on the market, and the impact of their success on EnWave’s sales and earnings
Last week, we covered Milne Fruit Products, Inc, a processor and global supplier for the industrial food ingredient, beverage, and health & wellness markets. This week, we feature Ereğli Agrosan, a Turkish company that produces high value natural products for the food, cosmetic and health sectors.
Following both companies’ first interaction in 2015, EnWave supplied Ereğli Agrosan with samples of dried fruits, cheese and vegetables products. These samples, along with products from other manufacturers, were presented to Eregli’s prospective clients for their feedback. The Turkish company ultimately opted for EnWave’s REV technology from the several options that were being evaluated.
Ereğli based its decision on the fact that REV dried products preserve their nutritional value and sensorial properties like taste, flavor, texture and color at maximum levels.
In a little over a year, Ereğli has purchased four REV machines. Initially, the Turkish company conducted product development work on a 2kW lab-scale REV dryer. Late February 2016, it purchased its initial 10kW dryer, and about three months later, it bought another 10kW unit.
In addition, early 2017, Ereğli ordered a 100kW machine, which is scheduled for installation in a few weeks. All of the company’s products are sold under the AgroREV brand name (see image slider below).
The license between EnWave and Ereğli Agrosan grants the latter the exclusive right to process a variety of fruits, vegetables and cheese products in Turkey using EnWave’s REV dehydration technology. In order to retain its exclusivity for Turkey however, Ereğli must submit at least one additional purchase order for a 100kW, or more, REV machine within three years of the start-up of the first small commercial unit.
Finally, Ereğli also has to pay EnWave a quarterly product specific royalty based on the wholesale value of the individual product offerings. EnWave royalty streams typically range between 2% and 10%.
The agreement with Ereğli is potentially worth well over $2.5 million in machine sales alone. Knowing that a 100kW dryer generates between $200,000 and $400,000 in royalties per year at full utilization, it’s obvious that this could become a very lucrative deal for EnWave.
Benefiting from the Turkish Agricultural Market and Location
With its favorable geographical conditions and climate, large arable lands, and abundant water supplies, Turkey is considered to be one of the leading countries in the world in the field of agriculture and food.
Turkey is the world’s 7th largest agricultural producer overall, and is the world leader in the production of dried figs, hazelnuts, sultanas/raisins, and dried apricots. In fact, the agriculture and food industries employ over a quarter of the country’s working population and account for 7.1 percent of the country’s GDP. Globally, Turkey exported 1,781 kinds of agricultural products to 190 countries in 2015, accounting for an export volume of USD 16.8 billion.
Moreover, as Ereğli Agrosan is operating from Istanbul, the strategically located capital of Turkey, it easily can reach 1.5 billion potential customers in Europe, Eurasia, the Middle East and North Africa. Since Turkey has a highly developed technological infrastructure in transportation (both railway and sea transport), direct delivery to most EU countries is possible.
Next to its head office and R&D laboratory in İstanbul, Ereğli Agrosan also owns about 900 hectares (2,225 acres) of agricultural land. It is in the process of completing two production facilities in Turkey: a 35,000m2 (375,000 square foot) building in Konya and a 4,000m2 facility (43,000 square foot) in Tarsus-Mersin.
While several companies are hesitating to enter into a commercial license and machine purchase order agreement with EnWave, Ereğli Agrosan is rapidly expanding its production capacity. The company buys more and larger REV machinery and is able to attract ever more customers for its dried products. Ereğli will most likely become one of the winners in the REV dried space.
Due to tremendous interest from several leading food processors in Europe and Asia for its dried fruit, vegetable and cheese products, Ereğli Agrosan has been able to constantly increase its production capacity.
It has been making tremendous progress in a short period of time mainly thanks to its experienced, well-connected and well-capitalized management team and founders including Mr. Bülent Ünal, the Chairman of Tüyap Fairs and Exhibitions; Mr. Mehmet Ali Karamehmet, a Board Member of Çukurova Holding; and Mr. Ömer Kaymakçalan, an experienced and successful investment manager.
Moreover, Ereğli has many strong, existing relationships with businesses in the Turkish, European and Asian markets, which are seeking to source higher-quality, natural food products. Consequently, it is fair to assume that demand for its products will only increase.
EnWave stands to benefit tremendously from all this sales activity. Recommendation BUY.
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