You don’t have to develop a vaccine or an application for remote work to be a stock market hit in the coronavirus era. In the case of the Israeli company Sano, it’s enough to make good old-fashioned cleaning products.
Sano’s factories have been working at capacity turning out grease removers, disinfectants and a host of other top-selling household-cleaning products while its share price on the Tel Aviv Stock Exchange has soared 23% this year. The company controls close to half of the Israeli market for cleaning and home care products and today its market cap is 3.1 billion shekels ($960 million).
“It’s a madhouse here,” said CEO Yuval Landesberg. “In January, we realized that the pandemic would be a serious business. We readied large quantities of alcohol disinfectant, but even though we had amassed a big inventory, we never imagined the demand would be so enormous. Anything involving disinfectant is grabbed up by shoppers and sales of cleaning material have risen by hundreds of percent.”
Two years ago, it introduced its “99.9%” line of anti-bacterial products without imaging that something like COVID-19 was on the horizon. When the pandemic did arrive, the company sent samples to an overseas lab to verify that it could be used to fight the virus, but only recently did the results came back positive.
”No one had any time for us. Only a few days ago, we got the results over the tests, and they showed that '99.9%' kills COVID-19,” said Landesberg.
Beyond the new-found concerns with keeping surfaces clean, Sano is also benefiting from the fact that Israelis are cooking more at home because the restaurants have been mostly closed, nightlife has been suspended and more people are working from home. The company also makes a line of cooking and baking-related products, such as plastic wrap and disposable pans.
Sano sales rose 13% in the first nine months of 2020 from the same time in 2019 to 1.37 billion shekels. Net profit rose even more, by 29% to 154 million shekels. That enabled the company to double its traditional annual sales to 80 million shekels this year and it still has 430 million shekels in cash on its books.
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As Israel enters its third lockdown, however, there’s been some change in shoppers’ buying behavior, Landesberg said
“People are adaptable creatures. People now understand that products will be available during the lockdown, so in contrast to previous lockdowns, they aren’t hoarding. Nevertheless, so long as people are at home and can’t travel for the holidays, demand for cleaning products and cooking aids will grow and we’re benefitting from that,” he said.
Sano-Bruno Enterprises was established in 1965 as a family business. Landesberg himself is the grandson of the founder Bruno Landesberg and runs the company together with chairman Isaac Zinger. The company went public in 1982 but 59% of the shares are still held by Alex Landesberg, the founder’s son. Another 25% of the stock is held by a granddaughter of the founder, Aya Shahar. A further 8% is held by a family-owned investment vehicle.
The reason more stock isn’t sold to the public is that the company consistently generates a lot of cash and has no debt. Its shareholders’ equity is 14 billion shekels, which accounts for 80% of its balance sheet. The controlling shareholders prefer to keep the big dividends Sano pays for themselves.
Landesberg said the company had no plans to change its successful formula. “We have no plans to expand beyond our current core business. We’re working to keep our existing market share and grow it, and that’s a big task,” he said.
However, it is looking to develop innovative new products and expand overseas. “We’re slowly developing abroad and increasing activity in Romania and Eastern Europe. Activity in Romania has grown greatly in the last three years,” he noted