Egypt sugar firm gets $100m EBRD equity injection
The deal will see the EBRD convert an existing US$50m loan dating from 2014 into equity, and inject another US$50m into USCE. After the capital injection, the EBRD will own just over 46% of USCE, while Savola will control almost 41%, either directly or through its United Sugar Company subsidiary.
According to the EBRD, the new funds will go towards USCE’s working capital, rather than a specific project, in the same way as the bank’s earlier loan did.
Expanding Savola partnership
“Through this expansion of our partnership with Savola Foods and United Sugar Company of Egypt, the EBRD is very pleased to provide ongoing support to an important foreign direct investor in Egypt whilst simultaneously demonstrating the positive role the private sector can play in developing an efficient and modern food value chain in the country,” said Philip ter Woort, director for Egypt at the EBRD.
Previously the EBRD had extended a US$60m loan to Savola’s operations in Kazakhstan, where the firm produces vegetable oils, in order to improve the efficiency of its production facilities.
“Savola Group has been a long-term partner of the EBRD since 2005 in Kazakhstan and then in Egypt, and this transaction marks another step in the expanded cooperation across common countries of operations. We are looking forward to continuing our strategic partnership with the Savola Group,” said Tarek El Sherbini, head of agribusiness for the southern and eastern Mediterranean at the EBRD.
Funds to ease forex woes
“This agreement will further strengthen Savola's partnership with EBRD by enhancing the cooperation in developing the food industry in the markets of mutual interest,” said Savola in a formal statement to the Saudi Arabian stock market.
According to the firm, the EBRD’s investment will specifically help its Egyptian operations cope with Egypt’s foreign currency crisis: “The transaction will not only help the existing shareholders of USCE to strengthen the balance sheet but will also provide impetus to the un-branded commodity business of sugar under the current economic situation of Egypt, wherein foreign currency availability is the key business challenge.”
Earlier this year Savola announced a 13% fall in annual profitsfor 2015. Although the firm mostly blamed the sale of a subsidiary along with its expansion activities, it did also note its food divisions had seen profits fall last year, balanced by stronger profits from its retail operations.
