Unipak-Nile Limited

completed

Unipak-Nile was established in 1997 to produce and sell corrugated carton boxes in the Egyptian market. The plant, with a capacity of 30,000 tpy, was located in the industrial city of 6th of October, 45 km south of Cairo. The project was completed in June 1998, three months behind schedule. Project cost was 29% higher than projected, as several converting machines - out of the original project scope - were added to the investment program, the cost overrun was financed via a subordinated loan from the shareholders.During the first 18 months of operation Unipak-Nile built-up its customer base (to over 300 customers by the first quarter of year 2000) and searched for a niche in the market where it would shield itself from price competition and the volatility of the Egyptian economy. The company''s strategy is to minimise its exposure to large clients, process small volume orders with high added value. To do that efficiently Unipak-Nile needs to enhance the finishing capacity of its manufacturing facility beyond the existing corrugator.The proposed investment will allow more efficient utilisation of current capacity, improve significantly its response time to the market requirements, allow for a wider line offering of sophisticated products, cut costs, and provide extra storage capacity. This new investment program will involve: (i) building a warehouse for raw materials and finished products; (ii) rebuilding the dry-end of the existing corrugator; (iii) an off line printing machine; (iv) an automatic pallet strapper; (v) a cliché processing and mounting unit; and (vi) ancillary machinery and equipment. The project cost is US$ 5.96 million. IFC was approached by the sponsors requesting an additional loan of up to US$ 2.89 million.IFC’s main role would be to provide long-term funding in foreign-exchange to the project. Although banks in Egypt are currently liquid, the terms and conditions offered by IFC on its proposed loan cannot be easily matched locally. IFC is also playing an instrumental role in helping the sponsor mobilise additional funding to complete the financial plan in the form of a co-lender or an IFC B loan syndication as well as introducing the sponsor to local banks. IFC helped structure the project financing by advising the sponsor to have a more conservative leverage and by accounting for working capital, interest during implementation and contingencies in the total project cost and financing plan. Finally, by educating the company''s management and encouraging the company to adhere to strict WBG environmental policies and guidelines, the project will help improve environmental standards in the nearby community and the country. Hopefully some demonstration effect will also result.Development ImpactSectoral development: The project will ensure the long-term viability of the Egyptian industry sector leader by enhancing its competitiveness, and increasing its efficiency. In addition, it will raise the industry''s standards and degree of sophistication by introducing higher quality and more diversified products.Technological Development: The project includes a significant modernisation and updating of the existing plant, which will allow an existing company to remain viable regionally and competitive internationally in the long run. The project will also introduce, through state-of-the-art technology and the sponsor''s extensive know-how, new quality products in the Egyptian paper sector.Export Promotion: The high quality boxes produced by the project would in part be used for the export of locally-produced goods making them more competitive in foreign markets. As a result, the project will indirectly promote Egyptian exports.Foreign Exchange Savings: resulting from reduced imports of high quality corrugated carton boxes.