Wadi Holdings to expand in Egypt with $25 mln IFC loan

CAIRO: Wadi Holdings, a family-owned Lebanese agribusiness company, is gearing up for a two-year $100 million expansion plan in Egypt.

Some of that money will come from a $25 million loan from the International Finance Corporation (IFC) — a member of the World Bank Group.

“The expansion is expected to increase food production for the Egyptian market, provide additional, lower-cost alternatives to imports, and help the company strengthen its export business,” IFC said in a statement.

The company, whose operations date back to 1984 and currently generates $250 million in revenues, has been conducting business with the IFC since 1996, said Musa Freiji, president of Wadi Holdings.

“First, we received a $5 million loan, which was followed by a $15 million loan to construct a glass food container plant, build a poultry feed mill and expand its olive and vegetable production in 2005, which was followed by $25 million loan to increase the efficiency of these operations,” he told Daily News Egypt in an interview.

The IFC, which provided $18 billion in loans worldwide in fiscal year 2010, will specifically help Wadi Holdings expand its table eggs operation, existing farm infrastructure, develop a new aqua culture project, expand its soybean crushing plant as well as its monocalcium plant and expand into trailer assembly to haul its products with just half of the loan.

The remaining 50 percent of the loan will cover increasing working capital, which will be targeted towards buying new raw materials, for instance, mainly for its soybean and table egg operations, explained Ramzi Nasarallah, chief operations officer at Wadi Holdings.

As Wadi Holdings expands operations, it will also mobilize its human resources department.

“Currently we employ 3,600 individuals, but now we will be adding 450-500 jobs annually,” Tony Freiji, vice president, said.

“We expect to grow upwards of 20 percent year-to-year,” he indicated.

Wadi Holdings ambitious expansion plans include becoming “the leader in glass, poultry and feed product in Egypt.”

“So far we have been able to set the pace of the industry,” he said.

For instance, he said, Wadi Holdings represents 30 percent of local production of container glass, but Egypt is unable to consume all of its local production. Consequently, about 60 percent of it is geared toward export, Tony Freiji said.

By leading the market in a certain sector, Tony Freiji explained, a company can command a higher price, because it introduces new products, which is how it can differentiate itself from the competition.

“Also you can reduce production costs, which therefore reduces the price of your product relative to the competition,” he said.

With the loan, Tony Freiji explained, the company’s strategy is to expand both horizontally, meaning into new sectors — such as with its new marine fish farm, which is located in the desert between both Cairo and Alexandria — and vertically by integrating its supply chain.

“We produce chicken feed, which is mainly corn and soy, for our poultry operation, we have built a feed processing plant, and we have constructed a port facility in Alexandria for importing grain,” Tony Freiji said.

As well, he said, the trailer project will be used to haul the company’s feed, soya, and monocalcium, and containers for some of its products will be obtained through the glass unit of the company.

Real estate is another domain in which the company foresees expansion.

“We have prime real estate through all of our operations, and some of it we have earmarked for development,” Tony Freiji explained.

Business practices

When asked about the importance of working with the IFC to achieve its ambitious goals, Musa Freiji said that when a company receives a loan from the IFC, it is a “stamp of approval,” demonstrating that its business practices are not only focused on profitability, but also on environmental and social responsibility.

He explained that the IFC requires firms to raise its level of standards across all areas, by meeting the ISO and the HSCCP standards; and by doing so it will allow Wadi Holdings to export to the EU and US.

In addition the IFC has a strong focus on enhancing a company’s corporate governance policies.

“For example, the IFC promotes a pro-active approach to handling one’s staff rather than the ‘fire-fighter’ approach, meaning a company should seek to avoid a potential fire, like a dispute between employer and employee, rather than running to put it out,” he explained.

Moreover, the IFC will not disperse the loan if a company does not conform to their standards, Freiji indicated.

“Their approach to demanding good governance within a company translates into avoiding big mistakes and increasing profits,” he continued.

In the end, “working with IFC is tedious, but very educational,” Tony Freiji, vice president of Wadi Holdings, said.

Tony’s brother Musa, chairman of Wadi Holdings, explained the advantages of working with IFC over local banks. Having the IFC stamp, he added, motivates other banks to issue loans.

“The IFC is somewhat cheaper in terms of the interest rates on the loans they provide, they provide technical support through intelligence and they study prospective companies on a highly scientific basis,” Musa Freiji said.

Tony Freiji concluded that it is in the IFC’s own interest to demand rigid standards to obtain loans, otherwise, if, for example, a company has a poor labor track record or is responsible for an environmental disaster, it would portray the IFC in a negative light.

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