By Salim Hassan
Eighteen subsidiary companies of the Chemical Industries Holding Company (CIHC) will be targeted for new investments worth EGP 5bn throughout FY 2015/2016.
CIHC Chairman Reda El-Adl said the companies plan to finance the investments through bank loans, as they are unable to fund the initiative internally.
In an interview with Al-Borsa newspaper, El-Adl said that each subsidiary will guarantee itself with the banks through new projects, although the companies have yet to officially approach financial institutions. Procedures will begin in the near future, he said.
The company hopes to supply new investments to its subsidiaries, to increase their profits to EGP 1.4bn, marking a 108% increase from the EGP 761m recorded in FY 2013/2014, El-Adl said. He added that the companies hope to bring in approximately EGP 14bn in revenues over FY 2015/2016, compared to the EGP 9.9bn gained during FY 2013/2014, an increase of 41%.
According to CIHC’s estimated budget, the subsidiaries plan to increase their export volume this year to approximately EGP 725m compared to EGP 629m for FY 2013/2014, and the EGP 635m for FY 2012/2013.
El-Adl said that the company’s strategic vision aims to eliminate subsidiary losses, or at least reduce them dramatically for companies facing financial difficulties.
CIHC plans to reduce losses recorded by six subsidiary companies, including the General Company for Paper Industry, Moharem Press, Transport and Engineering Co, El-Nasr for Rubber Products, El-Nasr Transformers and Electrical Products, and Egyptian Co for Pipes and Chemicals.
El-Adl noted that banks agreed last week to open letters of credit for KIMA Fertilizers, and that a letter of guarantee was sent to Italy’s Tecnimont to resume work on the project. KIMA Fertilizers is currently constructing a new factory, KIMA 2, which will use natural gas to produce 1,200 tonnes of ammonia daily at an investment of $730m.
However, Tecnimont stopped work on the project after KIMA was unable to open a letter of credit with banks for eight months. On 3 March, CIHC received a letter from Tecnimont informing the former that the KIMA Fertilizers restructuring project contract would be terminated, as KIMA withdrew the money owed to them.
Tecnimont nearly cancelled the project, despite KIMA already having made a payment worth $20m in January.
KIMA went to banks to open letters of credit on 5 March, just two days after the cancellation letter was sent, to resume negotiations with CIHC and Tecnimont. Tecnimont had requested that the technical and economic specifications be modified, a request which was refused by both KIMA and CIHC.
Tecnimont said its request for modifications was made as the project should have been completed in August 2014, according to the contract signed between the two companies in October 2011. The contract stipulated that the work be finished within 33 months.
The political events and economic crises that followed the 25 January Revolution hindered project work from being completed on time, and Tecnimont requested the modifications based on increased prices for raw materials, especially that of energy. This was met with complete refusal by the two companies.