Tiba Starch and Glucose Manufacturing is planning on investing EGP32m to establish a new line for rice to starch production.
Company chairperson Hesham El Ghorory said that the plan to establish the line depends on a clear understanding of which companies will allow or prohibit exporting broken rice used by the company as a raw material to produce starch.
In his interview with Al-Borsa, El Ghorory said that the target amount of starch production for the proposed new line is 20,000 tonnes. Production should start at 70% capacity, reaching maximum capacity within three years, and is to be allocated for export.
He explained that Tiba recently has compared prices for the production lines within both China and Europe. The cost of the line from China is EGP 35m, and EGP 60m from Europe. The sole difference between the two lines is China’s dependence upon labour in the mechanization process, but products are of equal quality.
The company has accepted the Chinese offer.
El Ghorory reported that the company is currently negotiating with a bank to finance 75%-80% of the project’s costs.
The new production line would contribute to the creation of 100 new jobs.
Foreign companies that produce starch from rice are ready to cooperate with Tiba and import starch instead of importing broken rice. One such company is the Belgian manufacturer Remy, which is the largest starch manufacturer in the world, he informed.
He added that the competitive advantage of Egyptian rice is that it is not only a prime competitor against American rice, but also that it is organically cultivated and not genetically modified. Companies that produce starch resort to importing Thai rice if Egyptian broken rice is unavailable, and the former cannot compete with high quality of its Egyptian competitor.
Tiba is the sole producer of starch from broken rice in Egypt and has worked in the Egyptian market for 16 years, currently holding investments worth EGP 40m and annual sales worth EGP 50m.
El Ghorory said that the company has a liquid glucose production line and a powder glucose line used in biscuits and cream.
The production capacity of glucose is 5,000 tonnes annually, whereas 6,000 tonnes of powder glucose are produced.
He added that other glucose production companies use corn and explained that the company had previously considered changing the raw material, from broken rice to corn, due to the high expenses of creating a non-genetically modified product, however, after exporting on the latter was banned, the matter was ruled out.
Tiba is taking part in the SIAL food exhibition held in France. Through it, the company seeks to enter a larger export market. El Ghorory said that data about the company and importing markets were prepared in cooperation with a specialised bureau in order to expand in new markets to provide US dollars.
Anticipating the US dollar’s increase, the company has already planned to focus on exports and its first shipment was to Yemen, prior to the Eid Al-Adha holiday. The shipment included powder glucose. The company also received many requests for rice protein, which is currently in the marketing stages in preparation for export.
The main obstacles in the industry are the absence of a stable climate that allows companies to calculate the cost of investment. Studies now take one year instead of six months due to the changes occurring in laws, leading to an increase in costs.
El Ghorory also discussed the difficulties in obtaining licenses and permits to operate production lines. “The company has requested permits for a production line currently ranging 27 metres. The permit took six months to be issued because the Industrial Development Authority (IDA) looks into only one case every month,” he added.
A diesel-operation fine was issued to Tiba even though permits allow for its operation. The Ministry of Supply has signed the fine because the company obtained diesel from the market rather than from Misr Petroleum Company.
He said that the company resorted to obtaining petroleum from the market because of the delay in Misr Petroleum’s response regarding the provision of diesel for a year, despite the company providing a committee from the faculty of engineering EGP 10,000 to prove its rights to obtain diesel.
Tiba buys diesel from the market at double the price, and it needs 10,000 litres per day, and currently owns two boilers; one being four tonnes and the other six tonnes, according to El Ghorory.
He added that that the US dollar crisis has affected the costs of production by 20% through increases in the cost of imported production needs and the company’s inability to increase the price of its products.
He explained that the company imports enzymes from Denmark and Germany, in addition to Active Carbon Coal from Sweden. If ever there is a shortage of rice, the company will resort to importing 10,000 tonnes corn for $2m, along with the 15,000 tonnes of broken rice that are consumed every year.
In a case to highlight the issue, El Ghorory explained that the company had recently imported a drying unit in August 2015 for EGP 15m to increase production to six tonnes of powder. A delay fine was imposed, worth EGP 400,000, due to the US dollar crisis. The importing company had to send a delegation to examine the port in order to allow the unit’s price to be paid in instalments.
He said that 2016 has been a rough year considering Tiba suffered from the rice crisis during the period from January until August which was was made worse when the company faced a lack of corn production over the past three months which then coupled with the growing unavailability of US dollars for importing. All of these issues caused the company to halt its activities for four months.
The price of a rice tonne has increased from EGP 2,000 to EGP 4,000. The company sought to operate during the period of the increase in order to keep its 130 workers.
El Ghorory expects a 50% decline in sales by the end of 2016 due to severe competition and increased demand on glucose, in addition to a decline in the production of candy factories, which has directly influenced the company’s sales.
He explained that glucose prices in 2011 reached EGP 3,900 per tonne, however, the price declined to EGP 3,600 in 2016 despite the high production costs and the accumulation of production in the local market.
He went on to explain that the state is increasing obstacles by imposing the extra sales tax on the company for using rice in manufacturing and turning remains into feed. On the other hand, factories that work with corn do not have this tax imposed on them.
A fine of EGP 1.5m was also imposed on the company.
He added that the company imports products to foreign companies working in Egypt like Danone through Stefan Egypt, as it is one of a few companies working in non-modified products.