The luxury dilemma

Monday FT revealed that Kering paid 3.5 billion for the perfumer Creed with the objective of beefing up its perfume and cosmetics business. Kering paid more than 14 times current turnover and 24 times EBITDA. This is the confirmation of the “luxury dilemma”: 

In order not to return huge cash flow to shareholders who may fear there is no growth left in the sector, luxury companies have to acquire smaller luxury companies at very high prices to keep their growth stock status. 

Japanese Industry pivoting on EV and Batteries

The Nikkei Asia just gave us additional insights on the way Japan traditional companies are pivoting towards EV and batteries. The most amusing article is a story on Nippon Shokubai an old Japanese chemical company specialized in fibers used in diapers. Nippon Shokubai just announced their plan to shift their business towards Ionel a key component they developed in-house. Ionel is an electrolyte salt which boosts EV battery range. Nippon Shokubai will sell it in Europe through a JV with Arkema. Ryobi a Japanese aluminum car parts manufacturer will use “giga casting” to boost its exposure to EV. 

The implications is that Japanese management seem to be more pro-active on growth. This also shows that, like in times of war, traditional factories and know-how can be redeployed in new sectors. This is a key positive for the whole manufacturing platform. In the recent rally, investors have focused on existing tech champions epitomized by Advantest a company specialized in tester for semiconductors. Advantest is up 120% ytd. Ryobi is up 80%. Time to look into Nippon Shokubai flat year-to-date ?