EU bank loans Egyptian dairy US$7m to fund new greenfield dairy farm

EGYPT– The European Bank for Reconstruction and Development (EBRD) has announced that it is providing a US$7 million loan to support the expansion plan of Obour Land, the leading Egyptian white cheese, UHT packaged milk and juice producer.

The loan, targeted at fostering the Egyptian dairy sector, aims to increase dairy production, boost exports and improve the adoptionof the latest technology for dairy milking operations in the country.

It will enable the dairy company to establish a dairy farm with an estimated production of 60,000 litres of milk per day, with imported milking equipment and 2,500 dairy cows.

The farm will supply raw milk to newly established long life packaged milk operations.

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Obour Land had announced it was embarking on an investment plan in 2017 where the company planned to spend about EGP 115 million (US$6.5 million) to establish a dairy farm.

The company listed on the Egyptian Stock Exchange in 2016, having started operations in 1997.

The EBRD says that the prospects for expansion in the demand for dairy products are promising in Egypt.

The demand will be driven by high demand and by consumer preferences shifting towards packaged milk following increased health and safety awareness in Egypt, which has encouraged dairy farms to expand rapidly, with many of the players seeking backward integration to boost and secure their sources of milk.

Apart from the greenfield dairy farm, staff will also be trained by experts in the latest dairy operations, technologies and processes, resulting in high-quality milk production, which will increase the potential for exporting of the company’s products into the neighbouring countries, says EBRD.

By the end of 2017, Obour Land sales had reached EGP 2.1 billion (US$114.8 million).

It operated 13 production lines, including 12 carton pack production lines and one plastic tubs production line, with a total annual production capacity of about 134,400,000 litres per annum.

According to Euromonitor, cheese recorded current retail value growth of 35% and retail volume growth of 8% in 2017 due to the devaluation of the Egyptian pound.

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A modest pick-up in economic growth to 5.5% is expected in 2018/19 in Egypt, supported by the continued boost in confidence in the economy, recovery in tourism, increase in foreign direct investments, continued strengthening of exports, the start of natural gas production from the Zohr field, the implementation of business environment reforms and prudent macroeconomic policies, says the EBRD.

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