In late October this year, Limerick-based agri-tech company BHSL announced the appointment of former Kerry Group chief executive Denis Brosnan as its new executive chair. Appointing a high-profile figure such as Brosnan sends out all the right kind of messages in the agribusiness sector, but the story behind BHSL goes back a lot further.
The company’s genesis goes back to the mid-1990s, when Kantoher-based poultry farmer Jack O’Connor was told by environmental agencies he could no longer spread poultry manure on the surrounding lands. The high-nutrient manure had raised environmental red flags that it was damaging nearby waterways.
The solution was to have the chicken litter hauled away to places as far away as Tipperary to be spread on lands less close to waterways. The enormous cost of this measure forced O’Connor to look at alternative technologies.
Following years of research in places such as the University of Lisbon, O’Connor developed a new system of renewable energy technology that effectively converts poultry manure to energy for heating chicken houses on poultry farms.
The excess energy created from the system can then be sold back into the electricity grid, while the ash from the burnt poultry manure can be spread as a more environmentally friendly high-nutrient fertiliser.
Having developed this new technology and then trialling it on his own farm, O’Connor felt it was something that could be commercialised. His next step was to call his brother Declan, a recently trained accountant living in London at the time.
“When Jack was doing all of this research, my business head was looking at it thinking ‘this is interesting’,” says Declan O’Connor, now managing director of sales and business development for BHSL.
“Jack called me in 2005 about the idea and that very night I made calls to family and raised €200,000. Suddenly we had a business.”
Declan became the de-facto finance director of the fledgling company and would go on to raise another €13m in equity over the following eight years. The first non-family investor in BHSL was Richard Hayes, the former chief executive of the financial services company IFG Group.
Hayes became chair of BHSL in 2006 and put in place a set of corporate and board structures in the company. “From 2006, that kind of corporate discipline was there in BHSL,” said O’Connor.
With this new equity secured, O’Connor says the company suddenly had the financial backbone to allow his brother develop and trial new and improved prototypes of the renewable energy technology. At the same time as this development phase, O’Connor and his team were exploring new markets and customers for BHSL’s new technology.
In beginning its commercial journey, BHSL has been strategic in its approach to new customers. O’Connor and his team have rightly identified the key poultry producing markets in Europe, the US and further abroad.
To give some context, poultry production in Ireland is about 63m chickens per year, whereas in the UK poultry farmers are producing close to 900m chickens a year. In 2015, BHSL made a major breakthrough when it signed a 20-year agreement with US agribusiness giant Cargill to install its technology on one of the group’s large UK poultry farms.
Similar to the UK, countries such as Poland, Germany and Holland are all major poultry producers and these are market opportunities that BHSL has zeroed in on.
“These markets are our primary targets. Poland is a huge opportunity. It’s the largest poultry producer in Europe and it is expanding rapidly, with large farms being run by big companies,” says O’Connor.
Partnering with customers such as Cargill provides significant opportunity in itself. Poultry integrators of that scale have massive supply pipelines behind them with multiple farms feeding into its supply chain.
Large poultry integrators
If a company sees a benefit coming from BHSL’s technology on one of its poultry farms, it is likely it will invest further in rolling out the technology all across its integrated poultry supply chain. Large-scale poultry integrators such as French poultry giant LDC, Moy Park, Two Sisters and the German companies Wiesenhof, and the Rothkotter Group, are all companies with significant pipelines behind them.
Outside of Europe, BHSL has already made significant strides into the US market, which is the world’s largest poultry producer, processing about 9bn chickens per year. In July this year, BHSL announced a $3m pilot project with the US state of Maryland to trial its energy conversion technology.
O’Connor sees the US as a potential $500m market for the company, with more than 11,000 commercial poultry farms in the country. The state of Maryland itself is a strategic location to enter the US market, with over 1bn chickens produced there each year or 12% of total US poultry production.
O’Connor and his team have been busy preparing the groundwork in these large markets over the last number of years and the company has set ambitious growth targets for the coming years.
“We’re first to market with this new technology and we have to grab the market quick,” says O’Connor, who believes the company is on track to hit sales of €100m in the next three to four years. The company is projecting sales of €40m in 2017.
As BHSL begins to commercialise this new technology over the coming years, the appointment of Denis Brosnan as executive chair looks like an inspired choice. Already Brosnan has brought to BHSL a number of people from his days in Kerry Group.
Michael J Kearney is a former senior executive with Kerry Group who has almost 40 years’ experience in mergers, acquisitions and business integration, while Michael Wren worked as an operations director setting up and running factories all across the globe for Kerry Group.
“These guys have built up €100m factories before so they know what they’re doing. They know how to scale up a business and that makes me very confident,” says O’Connor.
Having developed this innovative and renewable energy conversion technology, BHSL now has major opportunities before it to develop into one of Ireland’s major manufacturers and exporters. The company’s renewable energy system also has the benefit of attracting green technology subsidies, which are becoming more and more significant.
However, BHSL looks set to grow rapidly in the next few years as it begins to commercialise its technology with some major customers. Scaling a business at that pace and meeting a sharp rise in demand will present challenges but the company does have the right people in place to meet those challenges head on.
The one area that will almost certainly have to be looked at as the company grows is a purpose-built manufacturing site. At present, BHSL is sub-assembling their units in Limerick. The main manufacturing is done by Kerry Mechanical near Listowel, while a number of other sub-contractors are supplying smaller parts.
While investing in a capital project is a bit away yet for BHSL, it is something the company’s management team will have in mind for down the road.
However, you do get the sense from O’Connor that this is a company on the verge of big things over the coming years. While operating in a very different sector of the agribusiness world, BHSL has a sense of Kerry Group about it.
It may have come from small beginnings in south Limerick, but BHSL certainly has the potential to grow into one of Ireland’s largest, export-facing agribusinesses.