Cellulose Casing Plant in Romania
This is a brownfield opportunity to rehabilitate and restart a cellulose casing manufacturing plant to provide casings to be used in the food industry for salami and sausage production. Retrofitting of the plant will be achieved in two stages, over two years time and it will reach a final capacity of 600 million meters of casings per year. This project requires a total investment of 27,700,000 euro.
The plant is situated in Braila and is currently under preservation. It is now privately held by a team of experts with experience in the viscose and cellulose casing industry and trade. The plant used to be Romania’s most important manufacturer of viscose staple fiber, cellophane and large size cellulose casings and in 1985 it reached 3% of the world production and employed 6,000 people. The entire plant was shut down after a political decision was made in 1997 to close down the main utility source for the plant.
The entire plant was restructured and received an investment infusion of $20 million between 1992 and 1995, which included new equipment and a new viscose assortments production unit of 1,000 tons/year in a modern
building. The construction of another new process line for cellulose casing and cellophane production with a capacity of 200 tons per year was initiated in the same time period (1992-1995), but never fully completed due to the lack of funds. The color viscose staple fiber was the only production line that was successfully operational after the $20 million investment.
The newly rehabilitated proposed plant will reach a total capacity of 600 million meters of casings and it will be achieved in two stages. The first stage will result in a production capacity of 300 million meters of casings, and a final capacity of 600 million meters will be reached in the second stage. The plant will be operational 8,400 hours per year.
The total investment needed for this project is 27,700,000euro. The total equity required is ! 10 million, in order to access the senior debt. The following indicators apply for the project:
Investment needed – Stage I 23.5 mil euro
Investment needed – Stage II 4.2 mil euro
Turnover (Production = 600 mil meters) 21 mil euro/year
Production costs (Production = 600 mil meters) 9.2 mil euro/year
Profit from operations 11.8 mil euro/year
Gross Profit Margin 56%
Cellulose Casings Market
The world production of cellulose casings is over 10,000 million meters and the market is divided among three big manufacturers: Viskase (North America), Teepak (North America), and Viscofan (Spain). The demand for cellulose casings is increasing at an average rate of 5% annually. The market of tubular casings of all types is about $ 2.5 billion/year.
There are currently no cellulose casings being manufactured in Romania. According to recent statistics, there is an increasing trend in the cellulose casings consumption in Romania: 628 tons were imported in 2004, 711 tons in 2005, and 734 tons in 2006. There are about 1,400 salami and sausage producers in Romania, who share a market of about 130,000 tons and a market value of $ 352 million. Also, there are optimistic forecasts on exporting the cellulose casings to be manufactured in Romania as there are no casing manufacturers in Eastern Europe.
Cellulose casings offer considerable advantages regarding the quality, control, size and product aspect and conservation. These benefits make cellulose casings ideal for being canned or packed in vessels under vacuum,being strong enough to withstand the rigors of stuffing and processing.
Project’s Competitive Advantages
The proposed brownfield project has the following important competitive advantages:
– the cellulose casing manufacturing plant already exists and is only needs to be revamped;
– the management team owns the land and part of the associated equipment for the waste water treatment facility and the biological treatment station for domestic water;
– all utilities are already available and the next step once this project takes off would be to connect to the existing utilities:
• electric power
• water treatment facility of Braila city for drinking and industrial water
• railway, main access roads available on site
• sewage network – it needs to be repaired
• skilled labor, personnel with expertise in the viscose obtaining and processing technology
• supply of steam, compressed air, refrigeration, recycled water – needs to be completed and the amount
required to achieve it is comprised in the total investment needed
– considerably low investment effort compared to building a new cellulose casing manufacturing plant (the necessary infrastructure for a greenfield project this type would cost around 80 million euro).
The management team owns 100% of the existing project and has extensive expertise in the production and trade of cellulose and viscose staple fiber trade. The plant owned by the current management team is under preservation. The skilled personnel has a high level of technical knowledge related to the cellulose casings manufacturing process and has 15 to 25 years of experience in the viscose industry. This team of experts and skilled personnel is available to work at the proposed casings manufacturing plant.
The proposed cellulose casing manufacturing project is necessary and opportune, due the increasing trend of the sausage consumption in Romania and Eastern Europe, the already existing viscose plant in Braila that leads to a considerable diminished investment (50% less compared to the investment needed for a new plant), and a management team with significant expertise in the industry.