Sugar factory

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Sugar factory
FINANCIAL INDICATORS of PROJECT
PROJECT COST
51 526 533 206 tg
IMPLEMENTATION DATE
24 months
QUANTITY STAFF
232 people

Project Description

PROBLEM
  • The country has a negative balance of sugar, especially during periods of off-season, crop failure, demand asymmetry, an increase in tariffs for industrial producers and other negative internal and external factors.
  • In Kazakhstan, the average sugar consumption per year is about 500 thousand tons, of which 85% of the domestic market demand is provided by processing imported cane raw sugar and importing ready-made sugar, 15% – by processing domestic sugar beet. According to food safety requirements, 20% of sugar should be produced from its own raw materials.
  • There are initiatives on the market that are dangerous for Kazakhstan on the part of Russian and Belarusian sugar producers. Russia submitted to the EEC a proposal to classify sugar as goods not subject to placement under the customs procedure of the free customs zone and as goods for which the “free warehouse” norm does not apply. Russia in Kazakhstan alone delivered 122 thousand tons of sugar in 2017 (Russia’s total surplus is about 400 thousand tons). Umirzak Shukeyev recognized the need to abolish benefits for the import of sugar from the EEU countries
  • Currently, only 24% of irrigated land (52 thousand hectares) is used in the region. The construction of a sugar factory involves the consumption of more than 1,000 thousand tons of sugar beet per year, and this uses about 97 thousand hectares of irrigated land in the region (a yield of 277 centners per year per hectare). Although there are studies of the regional scientific research institute of agricultural enterprises on the yield of more than 500 centners per hectare. (Aktogay Agro)
PRODUCT

Sugar with annual production of 144,000 tons. GOST 33222-2015

PROJECT STATUS
  • The investment phase of the project is 2 years (24 months): construction and installation work and the supply of technological equipment (12 months), commissioning and access to the design figures (11 months), commissioning of the facility (1-2 months).
  • Land in the new industrial zone in the city of Pavlodar, provided with the necessary transport and infrastructure communications.
MARKET
  • Sugar is produced in 100 countries. More than 70% of total production is consumed within countries and 30% is exported.
  • Kazakhstan provides itself with sugar only by 27% (the share of local production).
  • 80% of sugar production is concentrated in the Zhambyl region, the rest in Almaty. Only 7 factories. Belonging to one Corporation LLP “CASK”. All plants are in poor condition with a maximum processing capacity of 800 – 3500 tons of sugar beet per day.
  • The market capacity is 663.6 thousand tons per year, or 146 billion Tenge, according to KSRK. Domestic production: 182 thousand tons (27%). Import: 450 thousand tons. (68%) Export: 31 thousand tons. (five%)
  • The project is expected to occupy a 20% market share with an output of 144,000 tons.
TECHNOLOGY
  • The business plan describes the process of growing beets and provides general economic calculations. The average cost per hectare in the production of sugar beet will be: 74,751.31 tenge
  • Equipment for the plant is provided by BMA RUSSLAND LLC, a company established in 2011 as a subsidiary of BMA AG holding. The cost of the complex will be 80.6 million Euros. The cost of design and construction work – 39 million. Euro. An alternative technology that allows the use of year-round load of the enterprise with an increase in production capacity, is based on an additional line of molasses processing. Company supplier – WESTTEX, Lithuania. The cost of the complex will be 50 million Euro.
  • The plant processes 5,000 tons of sugar beet per year. Processing lasts for 120 days (the season for obtaining fresh beets) and 60 days storage).
  • To increase the processing time of sugar beet up to 60 days a year (this storage period is optimal, since during storage over 60 days, the sugar content of the beets drops to 5-6% from 16%) it is necessary to provide for the storage technology. The project proposes the use of well-known American storage technology, which allows to increase the processing time of sugar beet.
RESOURCES
  • To reduce the level of dependence of the domestic market on imported sugar by increasing the acreage of sugar beet and the volume of sugar beet production, it is necessary to develop the production of sugar beet in the Pavlodar region. Only 24% of irrigated land is used.
  • The region has sufficient land, water, and human resources for development of the industry, experienced specialists, and approved recommendations from scientific organizations. To supply the sugar factory in this project, it is necessary to 1,035 thousand tons per year of sugar beet.
  • There are pilot projects for obtaining sugar beet with 22% sugar content. (on average in the Republic of Kazakhstan – 16%).The project also provides for the option of using molasses as a raw material, which will allow the plant to be fully loaded. The cost of molasses with delivery is 5-6 000 tenge per ton.
MARKETING STRATEGY
  • The main consumers of sugar are large producers of juices, beverages (RG Brands, Raimbek Bottlers, etc.), confectioners (Rakhat and Bayan Sulu) in general about 40% of the market capacity and the population of the Republic of Kazakhstan, in general about 60%.
  • If for the first two categories (B2B) the most important is compliance with GOST and price, then for the consumer market it is mainly price and Brand (Trademark).
  • For effective positioning of such a base product as sugar, it is necessary to create an emotional selling proposition based mostly on the image perception of the brand, its packaging and the product itself.
  • The purpose of our brand strategy is to make the Client understand that we care about his health, about him, about his values ​​through concern about product quality and maintaining reasonable prices. Domestic plant, which takes care of the development of agriculture and its environmental component.
  • Marketing communications strategy involves building knowledge about the brand and the factory for 70% of the population of the republic and 100% of the industrial consumer.
  • 135 million tenge was allocated for the complex of marketing activities in the first year and 40 million tenge each.
  • Building an effective sales and sales strategy is the responsibility of the Marketing and Sales Department consisting of 5 people. The implementation scheme is based on several regional warehouses.
STAFF
  • The total number of people in the organization – 232 people. Including 220 production workers.
  • The costs of payroll per annum – 1.2 billion tenge.
INVESTMENTS
  • The cost of the project is 51.526.533.206 tenge.
  • Financing structure:
    – bank loan – 70%,
    – equity – 30%
  • “NC“JSC  SEC of Pavlodar region ”will participate in the capital -49%, 51% investor
  • According to the state development programs, a subsidy is provided in the amount of 25% of the cost of equipment, construction, as well as subsidizing of the interest rate on the loan.
  • The loan amount including 25% of the subsidies will be 27 billion tenge for a period of 10 years, at 15% per annum, of which 10% is subsidized.
FINANCIAL INDICATORS
  • Sales from 2021-2027: 955 billion tenge
  • Net profit from 2021-2027: 409.4 billion tenge
  • Project IRR: 21%
  • Payback period: 3.5 years
  • NII: 22.8 billion tenge.
  • NPDS: 15.5 billion tenge.
  • Break-even point: 354.12 billion tenge.
Sugar factory 0 Sugar factory 1

Project Performance Indicators

SV
955 billion tenge
NP
409.4 billion tenge
IRR
21%
PP
3,5 years
NPV
22.8 billion tenge
NCF
15.5 billion tenge
BEP
354.12 billion tenge