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Update on Ethiopian Bottling Plant
Atlas (AIM, NSE: ADSS), has issued an update on its ‘Chancho Project’ in Ethiopia, a new state-of-the-art glass manufacturing facility 45km north of the capital, Addis Ababa.
Overview:
· Granted a land lease certificate and construction licence covering an area of 5.5 ha of the Chancho site
· Land lease has been granted for a period of 100 years – the first 45 years of lease payments have been paid by the Company in advance
· Site is in close proximity to established infrastructure and intended mine sites for the materials needed to produce high quality bottles
· Granting of land lease certificate allows Atlas to move to the next stage of development at Chancho and is an indication of local support for this investment
Chief Executive of Atlas, Carl Esprey said, “The grant of our land lease and construction licence at our Chancho Project marks a landmark moment in the development of this state-of-the-art bottling facility, which will cement our diversification into the highly prospective industrial space. With strong demand for locally produced glass bottles, the rapidly growing Ethiopian consumer sector provides us with an avenue where we can utilise our local relationships, and construction and support services expertise, to deliver projects that will generate significant future shareholder value.”
The Chancho site was identified as combining all of the Company’s feasibility criteria, namely:
· Adjacent to major road within north/south industrial transport corridor
· 3km from new power substation with adequate capacity
· Abundant building materials available from nearby town and cement factories
· Proximity to country capital Addis Ababa and access to skilled local labour supply
The Chancho Project site is also within trucking distance of the intended mine sites for the materials needed to produce high quality bottles, being silica sand, limestone, dolomite, feldspar and soda ash. Preliminary assessments of potential sources and studies of local mining operations carried out confirm appropriate grades of silica sand and limestone are available in deposits 30km away from the site, while dolomite, feldspar and soda ash can also be sourced domestically.
An initial pre-feasibility study has been completed on the Chancho Project, which has returned highly positive results. A full feasibility study is now being conducted in tandem with international engineering consultants MH Group. Commissioning of the facility has been scheduled for 2018, with full production targeted for early 2019.
The Ethiopian government has designated manufacturing as a top priority, and support via development debt funding is, in principle, available for projects that substitute imports. Ethiopia represents one of the fastest growing economies in the world, as a result of rising income, population growth, well managed infrastructure spending, and stable government policies.
For the last five years, due to increasing consumer demand and a young demographic, Ethiopia has been attracting significant investment from international beverage companies, with over $500 million invested to date. Beer production has been growing at a CAGR of 14.3% over the last 14 years with an additional 47% capacity currently under construction. The demand for glass bottles is largely unmet by local production and is at present mainly satisfied by expensive imports. There is strong demand for locally produced glass bottles in Ethiopia which Atlas aims to meet, through the development of the Chancho Project.
