Acquisition of EUR 10M Factory in Tunisia Expands Monbat’s Africa and Middle East Business

Corporate
May 19, 2021

The company expects the acquisition to boost its sales by EUR 30M

Three years after giving up a prospective deal to buy the Tunisian battery manufacturer Assad, Monbat has successfully concluded the negotiations to acquire another factory in the Arab country. The Group has reported striking a deal to purchase 60% of Nour Batteries in return for EUR 10.3 million. Monbat will thus fully invest the remainder of the funds it raised through the bonds it issued in early 2018, and will in addition contribute some of its own available funds.

This transaction will increase battery manufacturer Monbat’s capacity, to completely cover the region as well as one of its key markets, Saudi Arabia. This is expected to boost its sales by EUR 30 million and drive its profitability.

Thus, almost a year after the Prosecutor’s Office of Bulgaria launched an attack against the battery manufacturer’s majority shareholders Mr Atanas Bobokov and Mr Plamen Bobokov, the two brothers have successfully completed one of their largest foreign investments.

Tunisia’s duty-free appeal

Monbat has been interested in North Africa for several years now. In 2017 it emerged that the Group had been negotiating to buy the Tunisian company Assad, but subsequently the prospective deal turned out to be too risky and was given up.

The enterprise that Monbat is about to acquire now is smaller than Assad, yet it is a strategic advantage for the Bulgarian company to set foot in Tunisia. We intend to turn Nour into Monbat’s second pillar, so to say, a pillar in Africa, owner Atanas Bobokov told the Capital. This is because of Tunisia’s duty-free trade arrangements with 15 African and Middle East countries, including Saudi Arabia, one of Monbat’s major markets. Our investment in Tunisia will boost our sales in Saudi Arabia, because we have had to pay a 10% customs duty so far, while the new factory will make our products highly competitive, he explained.

The deal in Tunisia is expected to boost the Group’s EBITDA by EUR 6 million per year, and its estimated sales increase will reach around EUR 30 million in some time from now. To put this into perspective, the Group’s turnover in 2020 amounted to BGN 304 million (equalling approximately EUR 156 million). Nour’s previous owner, a Tunisian engineer with a university degree from Germany, will retain a 40-percent stake in the enterprise. Buying his shares is currently out of the question.

Full recycling

The Tunisian company also has a recycling plant, which Monbat intends to develop as it provides raw materials for Nour’s production. Recycling is the Group’s other large business area, where its subsidiary Monbat Recycling operates. The company reports to be able to deliver all the lead and lead compounds required for battery production, as well as the full amount of propylene needed to manufacture the battery cases.

What is more, the company has submitted to the Montana Regional Environment and Water Inspectorate an investment proposal to build a plant to recycle the only ultimate waste product of battery recycling, the polyethylene separator. That was the waste product at the core of last year’s attempt to implicate Monbat’s name in a scandal involving illegal waste dumping, regardless of the fact that Monbat had always been handing the waste material over to licensed external companies to recover.

How the deal is funded

To fund the deal, Monbat, a public company, will use the last unutilised portion of the EUR 28 million bond emission it placed on the market at the beginning of 2018.

Just a year after contemplating requesting the suspension of trade in our bonds, we are now in a position to prove in practice how advantageous that trade can be. Our investment in a new production enterprise, a recycling plant and a promising market is the best way to prove to our investors that they were right to trust us, Mr Bobokov said.

A future in the Middle East

Monbat intends to modernise the production of Nour Batteries and expand the recycling plant’s capacity threefold. Starting right from next year, Nour will produce around 1 million starter batteries per year, and we hope to increase that output to 2 million in the coming years. Monbat’s customers currently order larger quantities than the company can produce, and the Nour factory will help us meet the entire demand, Mr Bobokov noted.

The Group’s strategic approach focuses on expanding its market presence in Africa and the Middle East. It sees development potential in those regions as conventional cars are likely to continue dominating there for many years in the future due to the availability of oil. In Europe, in contrast, electric vehicles are bound to be gaining more and more ground. It is our intention to have more than 60% of our market out of the European Union in 5 years’ time, Mr Bobokov explained.

Tunisia promotes investment, Atanas Bobokov, Monbat owner

Is Tunisia a good place to do business?

You simply cannot compare Bulgaria and Tunisia in terms of business environment. Tunisia has administration and legislation that work, which in fact encourages investment. If you bring in new technological equipment and introduce a new business to the country, after you’re finished with that business the government will ultimately reimburse 10 to 20% of the money you invested in tangible fixed assets. The country’s currency is stable, the same goes for its economy. Tunisia, unlike Libya and Algeria, does not abound with mineral resources, so it relies on developing its people and boasts high standards of education. Both industry and agriculture are well developed there. That’s the reason why we have chosen to invest in Tunisia – it offers us the optimum combination of engineering and technical capacity, along with economic stimuli to make new investments.

Are you planning to launch production in your German company EAS Batteries soon?

In Germany we are currently in the process of obtaining certification for a module suitable for ferries, ships, etc. Powered by such a module, a vessel can enter a port, manoeuvre and then leave after loading or unloading its cargo. This is an EU requirement designed to reduce pollution in harbours and cities. We are looking for a partner company for that production in Germany, as it would require a large investment, amounting to hundreds of millions of euros. We expect that our primary market will be the EU, but also the Far East.

How can you explain the improvement of your Group’s financial results in the first quarter of the year?

The year is turning out exceptionally successful for Monbat from its very beginning, with all key business indicators going up. The Group’s consolidated results from the first quarter of 2021 indicate EBITDA amounting to BGN 8.2 million, up by 159%. That will make it possible to resume our traditional policy of distributing dividends. Moreover, in addition to the net profit for 2020, amounting to over BGN 5.3 million, this year we will also distribute part of the undistributed profit from 2019, amounting to over BGN 1.6 million, or around BGN 7 million in total. This means a gross dividend of BGN 0.18 per share. Against a backdrop of many major companies traded on the Bulgarian Stock Exchange deciding not to distribute dividends in 2021, I believe we are giving our shareholders a clear sign that our group is recovering from the problems it faced in 2020 for some objective and some not so objective reasons.

 

Atanas Bobokov
Atanas Bobokov