"The plant in Tulcea needs 11m-euro investments in order to meet EU requirements and the production unit is only authorised to operate until December, 31, 2009," stated Ovidiu Wencz, general manager of Tabco-Campofrio.
According to Wencz, the plant is undergoing a period of transition that will last until the end of 2009, during which the EU allows food producers to bring their production units in line with European standards.
"I will have to choose between investing 11m euros in the Tulcea plant, making a 20m-euro greenfield investment on land we own, or acquiring a new plant," said Wencz.
Each option has its disadvantages. "For each 1,000 euros invested in this plant, 700 euros is spent on building reconstruction, whilst just 300 euros is invested in production, although Campofrio primarily needs to expand its production capacity," explained Wencz.
Early last year, Campofrio officials announced they planned to invest in the construction of a second plant in the Buftea-Crevedia area. This would have a total area of 8,000 square metres and a production capacity of 22,000 tonnes annually. The construction of the 20m-euro plant was supposed to start last March-April and it should have become operational by mid-2008. However, the project was delayed for 2008. Should construction start in the second half of 2008, the new plant will become operational in a year and a half and this means Campofrio will be without a production capacity for several months.
As regards the acquisition of a production unit from another player, this involves, apart from the acquisition price, investments in equipment.
To at least partially cover the lack of necessary volumes, the company has started to import the products Campofrio makes in Spain. The producer has also sealed a partnership with Reinert through which the latter will deliver between 1,000 and 2,000 tonnes of meat products per annum to Campofrio.
In 2007, the producer posted turnover worth around 34m euros and 4.2m-euro EBITDA.
"This year, we will not post a major sales increase in terms of volume and profit will lag behind the 2007 level," added Wencz.
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