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Tnuva's new strategy: Less meat and veg, more real estate By Yoram Gavison Tags: Apax, Slaughterhouse, Tnuva  Improved profitability, continued expansion overseas, and dealing with a loss-making slaughterhouse are the main issues faced by Tnuva's new management, which took over Sunday after the purchase of a controlling stake by investment fund Apax and Mivtach Shamir for $900 million. Apax and Mivtach Shamir will try to improve profits at the food division, as well as the management culture. Despite a turnover of NIS 5.5 billion, the company has not been a profit machine. Its former owners, 617 kibbutzim and moshavim, were mainly interested in the price Tnuva would pay for their milk, vegetables, fruit and fish. One of the first steps will be to stem the hemorrhaging of money from Adom Adom, its slaughterhouse in Beit She'an. Advertisement Adom Adom was founded with an initial investment of NIS 170 million, and was meant to break even in 2006. The company, however, suffered an operating loss of NIS 70 million in 2006, and accumulated additional estimated losses of NIS 50 million in 2007. Revenues are only expected to reach NIS 250 million in 2008, a milestone the firm was scheduled to achieve by 2006. Arik Raichman, outgoing CEO of Tnuva, admitted that he would not have allowed the closure of Adom Adom, although admitted ruefully "I was also surprised at how much Adom Adom could lose." But as Raichman steps down, the dry numbers remain, and unlike its juicy steaks, they don't speak well for Adom Adom. The spiraling cost of fattening animals, shipping and marketing under Jewish dietary laws places Adom Adom's current business model in question. The main alternatives are to close down the factory, sell it, or try - and not for the first time - to nurse it into health. Other issues the new management faces include the viability of maintaining small companies, some of which were founded on a marketing whim and will never yield large profits but demand valuable management time. Apax-Shamir will probably try to trim the firm's workforce of 7,000 workers employed directly or indirectly; instill a profit-oriented culture rather than one focused on turnover and market share; create a new management core; and instill work methods, management, financial reporting and auditing that are more suited to a company than a cooperative. Another move that reduces Tnuva's estimated NIS 1 billion debt (excluding subsidiaries) and cuts financing expenses is the sale of its real estate. Tnuva has rights to land valued at about $250 million, but whose true figure might even be closer to $500 million. Tnuva has holdings in a number of prime properties such as a 60% stake in the Wholesaler Market Co. on Hashmonaim Street in Tel Aviv. Sources estimate the value of the plot at $3,000 per square meter, on a site designated by the urban construction plan for 2,000 residential units. Other significant properties include a 65% holding in a property on Tel Aviv's Menachem Begin Road, and at the Gelilot site, which is partly rented out to Cinema City. Bookmark to del.icio.us   'Bush go home' Israeli Arab parties join leftist protests against the Bush visit. Peace overture Syria says it isn't seeking a military solution with Israel.

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