News | March 31, 2003

Kraft Foods buys Egyptian biscuit-maker

US-based Kraft Foods is making its first manufacturing investment in Egypt with the acquisition for $80m of Family Nutrition, Egypt's largest private-sector producer of biscuits and cakes, a local financial adviser said on Monday. Family Nutrition, owned by the Doss family, earned E£40m ($6.9m) last year on turnover of E£190m, according to EFG Hermes, the Cairo-based investment bank and Kraft's financial adviser. Kraft is a subsidiary of Philip Morris. The price reflects about 2.3 times earnings for the company which makes biscuits under the Borio brand, Nitty cakes and also locally manufactured Gobar mayonnaise and ketchup. The deal is likely to be completed in two weeks, according to EFG Hermes's Hassan Heikal. About 15 per cent of Family Nutrition's production is exported. Kraft, which has no production facilities in Egypt, the largest country in the Arab world, will develop the company's site in an industrial city outside Cairo to export into Africa, EFG-Hermes said. The Egyptian economy has been hit not only by the immediate effects of the war in Iraq but also by a depreciation of the Egyptian pound. The pound is supposed to be floating freely against other currencies but in reality the government has released insufficient dollars into the market to wipe out a black market in the currency. Kraft is not alone in announcing expansion plans in Egypt - despite turmoil in the Middle East. Late last week a private investment company founded by Yehya el-Komi, an Egyptian entrepreneur, said it was putting together a consortium to invest $1.4bn in an integrated gas-to-polyolefins project. Mr Komi's Egyptian Arab Trading Company (EATCO) will develop a site in a free zone near Damietta on the Mediterranean using limited recourse financing. EATCO hopes eventually to produce 300,000 metric tonnes of polyethylene and 250,000 metric tonnes of polypropylene at the Damietta site. Mr Komi has helped arrange the supply contract for the Spanish utility Union Fenosa to get one of Egypt's two major liquefied natural gas projects off the ground