float glass - investment overview (1)

8/11/2019 Float Glass - Investment Overview (1)

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July 2012

Investment OverviewThis Investment Overview (IO) is strictly confidential and provided to select investors only,and should be read in light of the Disclaimer and Limitations on Page 4.

Opportunity Background

The proposed project is to establish a float glass factory in MDA to producefloat glass.

The proposed project would have a maximum daily capacity of 450 tons and isassumed to operate 365 days a year. Total maximum annual capacity istherefore assumed at around 164,250 tons of float glass.

The project is assumed to occupy a total land area of around 103,000 sqm.Meanwhile built-up area is assumed to occupy around 50% of the land, at51,500 sqm.

The project is assumed to start operating 24 months following the initiation ofconstruction.

Based on comparable float glass projects, total investment cost to build and

operate the float glass plant is expected to amount to USD150 million whilehaving a debt to equity ratio of around 40%.

The product mix of the proposed project is assumed to be 40% clear glass and60% tinted glass.

Opportunity identification

The concept is to exploit the available natural resources in Jordan to producehigh quality float glass

The proposed project is expected to benefit from the availability of high qualitysilica in Jordan, thereby giving the proposed plant direct and easy access to themain raw material used in producing float glass.

The proposed plant may be able to benefit from higher demand for glassresulting from the accelerating worldwide interest in solar energy production.

MDA management indicated that there is a possibility that Al-Sanam Glass, aglass coating factory in MDA, can enter into a take-off agreement with theproposed plant to purchase as much as 40-50% of the total production.

The new plant may be able to tap into niche products like self cleaning glass,safety glass or other advanced types of glass. This would increase the addedvalue of its products and reflect positively on the companys profit margins.


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Financial Highlights

The following table presents a summary of key financial indicators for the proposedproject covering a 10 year period:

Summary revenue and expenditure statement

Key feasibility indicators

Currency: USD 000

Discount rate 14.7%

Project NPV 8,519

Project IRR 15.9%

Equity IRR 15.8%

Payback period 8 years

Market Overview

Float glass industry demand depends mainly on the construction industry andthe automotive industry. For the construction industry, the float glassmanufacturers have various products to tailor for the different needs of theconstruction industry. In general, the majority of float glass companiesmanufacture clear and tinted glass for various applications. For example, solarcontrol glass reduces solar heat gains and offers high levels of natural light toprovide comfortable environments to live and work in. Below are other

applications float glass manufacturers cater for in the construction industry:o Window glass

o Decoration

o Solar energy.

The global glass industry generated revenues of about USD 75 billion in 2010.Float glass accounted for about 15% of the market. The global float glassmarket is dominated by China, Europe and North America, they account for70% of demand in the market.

China and Japan represents the worlds largest exporters of glass and glassproducts, comprising of 16.7% and 10.5% of the worlds total exports,respectively. On the other hand, USA, Germany and France represent the

worlds largest importers, compromising 11.65%, 7.6% and 5.7% of the worldtotal imports, respectively.

In the Middle East, exports of glass and glass products reached USD 1.7 billionand imports composed USD 3.1 billion in 2011. Jordans glass exports arecomposed of handmade products considered national souvenirs and decorativeitems. Jordan main glass export partners are Austria, Iraq, Bahrain and UAE. Incontrast, their imports of glass come from China, Saudi Arabia, Turkey, Kuwaitand UAE. There is currently no industrial level manufacturing of glass inJordan.

Jordans imports of float glass and its variations totaled USD 15.93 million in2011. On the other hand, domestic exports and re-exports totaled a value ofUSD 756,955 in 2011.

Float glass production capacities were scarce in the MENA region, but currentlyproduction is increasing in Algeria and Egypt. Saudi Arabia, United ArabEmirates and Iran also have float glass manufacturing facilities that are capableto fill the gap in their local markets.

Currency: USD 000 ear 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10

Revenues - - 47,027 49,993 52,807 55,568 58,280 60,951 62,286 63,575

Cost of goods sold - - (35,051) (35,997) (36,859) (37,649) (38,380) (39,069) (39,092) (39,158)

Gross profit - - 11,975 13,996 15,948 17,919 19,900 21,882 23,194 24,417

Selling General & Administrative - - (2,586) (2,686) (2,774) (2,855) (2,930) (2,999) (3,065) (3,129)

Administrative salaries - - (397) (412) (426) (438) (450) (460) (470) (480)

Land lease - - (290) (290) (290) (290) (290) (290) (290) (290)

Operating profit - - 8,702 10,607 12,458 14,336 16,231 18,132 19,368 20,518

EBITDA - - 16,622 18,527 20,378 22,256 24,151 26,052 27,288 28,438

Construction Operations

China and Japan represents the

worlds largest exporters of glass

and glass products, comprising of

16.7% and 10.5% of the worlds

total exports, respectively.


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The below graph shows the total imports, exports, re-exports and trade balanceof float glass in Jordan for 2008-2011. The trend shows a dip in imports in2009 and 2010, this is mainly caused by the global recession and the slowingof construction activity in those years.

Jordans Imports, Exports, Re-exports and Trade balance

Source: Department of Statistics, Jordan

However, imports of float glass have picked up again in 2011 due to therenewed growth in the construction industry.

The potential of a float glass manufacturing facility in Jordan will depend onthe construction industry. The construction industry is expected to grow 8.6%year over year in terms of square metres, as depicted in the below graph.

Estimated growth in the construction industry in Jordan

Source: Department o f Statistics, EY Analysis

Availability of relatively cheap raw materials like silica is an advantage to theproposed project. This in turn will constitute as a cost advantage in terms ofproduction due to its high purity, abundance and proximity.

In the Middle East region, countries rely on imported glass even though somecountries do have float glass manufacturing facilities but the demand rate isoutpacing the supply rate.

Key Investment Considerations

The key success factors of the glass industry is the combination of :

o Access to raw materials

o Availability of energy sources like natural gas and fuel oil

o Strategic market location

-25,000,000

-20,000,000

-15,000,000

-10,000,000

-5,000,000

0

5,000,000

10,000,000

15,000,000

20,000,000

25,000,000

2008 2009 2010 2011

ValueinUSD

Imports Exports Re-exports rade balance

0

5,000,000

10,000,000

15,000,000

20,000,000

25,000,000

30,000,000

35,000,000

40,000,000

Areainsqm

construction area (sqm)

The potential of a float glass

manufacturing facility in Jordan

will depend on the construction

industry.

Availability of relatively cheap

raw materials like silica is an

advantage to the proposed

project.


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o Access to technology and new products that meet therequirements of domestic and international customers

The developments of joint ventures are a key strategic tool in order to promotemarket development, business growth and risk sharing. There are various glassmanufacturers in the region sharing the risk of large investments in float glassproduction lines with other manufacturers or with financial partners. Forexample, Guardian industries joined efforts with Saudi Investors to establishGulf Guard, a Saudi based joint venture float glass manufacturing facility.

On the other hand, the lack of regulatory requirements related for float glassand lack of affordable quality products have maintained demand for low costlow quality glass products.

Despite low production levels, recent investments in the Egyptian, Algerian,Saudi and Emirati markets will make them major providers of float glass in theregion. Float glass demand is expected to grow steadily due to the steadygrowth of the construction market in the region.

The float glass industry is moving towards two trends. The first trend, valueadded products; where manufacturers are differentiating their products tocater to various glass uses (for example, self cleaning glass for towers and highrise buildings). The second trend, low cost low quality products that are related

to mirrors and furniture.

Risk Factors

Any investment involves certain elements of risk. These risk factors may have amaterial and adverse effect on the investment. Prospective investors shouldcarefully consider such risk factors before making any investment decision.

Way Forward

Prospective investors who wish to pursue this opportunity further need to indicatetheir preliminary interest by completing and submitting a signed copy of the

enclosed Confidentiality and Non-Disclosure Agreement.

Upon receipt of the aforementioned, confidential company profile and auditedfinancial statements will be provided following which offers will be solicited frominvestors.

Contact Details

Ernst & Young

Samar Obaid| Partner | Transaction Advisory Services |Tel: +962 6580 0777| Fax: +962 6553 8300Email: [email protected]

Ziad Halawani| Manager | Transaction Advisory ServicesTel: +962 6580 0777| Fax: +962 6553 8300Email: [email protected]

Disclaimer and Limitations

This Investment Overview, dated July 2012 (the Investment Overview or IO),has been compiled by Ernst & Young Jordan (Business/Financial Advisor) withinformation provided by Maan Development Company (MDC). MDC inviterecipient(s) of the IO (the Recipients) for the purpose of considering their interestin investing in the Project.

This document is not a prospectus and does not constitute or form any part of anyoffer to sell or recommendation to subscribe for, underwrite or purchase securities,nor shall it, or any part of it, be relied upon in any way in connection with anycontract for the investment in the Project nor shall its issue be taken as any form of

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commitment on the part of MDC to proceed with any transaction, and norepresentations are made in this document.

Any investment will be made pursuant to a share purchase agreement and/orshareholders agreement or similar agreement(s) as described herein. A Recipient,by accepting delivery of this IO, agrees promptly to return to the Financial Advisors

this IO and all copies thereof and any other documents or information furnished ifthe Recipient does not purchase any of the securities or if the Financial Advisors orMDC so requests.

The information contained in this IO may be subject to updating, expansion, revisionand amendment. However, neither MDC nor the Financial Advisors, undertake anyobligation to update, expand, revise or amend any information or to correct anyinaccuracies contained in this IO or to provide the Recipients with additionalinformation.

The Financial Advisors, affiliated partnerships or bodies corporate, the partners,directors, principals, managers, employees or agents of any of them (the Parties)have not independently verified or validated the information and therefore do notmake any undertaking, representation or provide any warranty, expressed orimplied, as to the accuracy, reasonableness or completeness of the informationcontained in the IO or of any other information relating to the Project whetherwritten, oral or in a visual or electronic form (including, without limitation, in amagnetic or digital form) transmitted or made available to the Recipients or theirrespective Advisors.

The Parties expressly disclaim any and all liability for, or based on or relating to anysuch information, including, without limitation, any information contained in, orerrors in or omissions from, the IO or based on or relating to the Recipients use ofthe IO. The IO includes certain statements, estimates and projections with respect to

the anticipated future performance of the Project and the value for the Projectsservices. Such statements, estimates and projections reflect various assumptionsand best estimates made by the Management of MDC concerning anticipatedresults, which assumptions or estimates may or may not prove to be correct. Thereare no assurances whatsoever that such events as stated in the estimates orprojections will occur.

The Management of Maan Development Company (the Management), acceptresponsibility for the accuracy, reasonableness and completeness of all informationcontained in the IO. To the best of the knowledge and belief of Management (whohave taken reasonable care to ensure that such is the case) the informationcontained in the IO is in accordance with the facts and does not omit anything likelyto affect the import of such information.

An investment in securities involves a certain degree of risk and could involverestrictions on transfer, and should be considered only by sophisticated investorswho are able to bear the economic risks of their investment for an indefinite periodof time and who can afford to sustain a loss of their investment in the securities.This IO does not purport to be all-inclusive or contain all the information which aRecipient may require. In making an investment decision, each Recipient must relyon their own examination of the Project and the terms any offering, including themerits and risks involved in making an investment in the Project.

The IO is confidential, being for use only by the persons to whom it is issued and

who have signed the required confidentiality agreement in respect of this IO(Confidentiality Agreement). The IO may not be copied or distributed by theRecipients to third parties other than the Recipients professional advisers for thepurpose of considering their interest in investing in the Project and obtaining advicein respect thereof and who shall be subject to the Confidentiality Agreement. In the


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event that the Recipients do not continue with their interest in investing in theProject, the IO (together with any and all copies thereof) must be returned to MDCor the Financial Advisors.

In no circumstances must the Recipients or their officers, employees, agents andprofessional advisers make contact with the management, employees, customers,

agents or principals and suppliers or any of their respective subsidiaries and/oraffiliates, unless permission to do so is given in writing by MDC or the FinancialAdvisors.

The Recipients should read and consider all of the information contained in this IO.The contents of this IO are not to be construed as legal, financial or tax advice.Each of the Recipients, if they so desire, should consult his, her or its own legalAdvisors, financial Advisors or tax Advisors for legal, financial or tax advice. TheRecipients are required to conduct their own due diligence, and seek their ownadvice prior to making any investment decision relating to the Project. Recipients ofthis IO shall not be deemed to be clients of the Financial Advisors and the FinancialAdvisors shall accordingly not be responsible or liable in any way to such Recipientsfor providing the protections afforded to clients of the Financial Advisors or for

providing advice in relation to any transactions or arrangement referred to herein.

The distribution of this IO in some jurisdictions may be restricted by law andtherefore Recipients should inform themselves about and observe all applicablelegal and regulatory requirements in their jurisdiction in relation to this documentand the investment contemplated therein.

Certain statements in this IO constitute forward-looking statements. Allstatements other than statements of historical facts included in this IO including,without limitation, financial position, business strategy, plans and objectives ofmanagement or future operations (including development plans and objectives

relating to products), are forward-looking statements. Such forward-lookingstatements involve known and unknown risks, uncertainties and other importantfactors that could cause actual results, performance or achievements to bematerially different from future results, performance or achievements expressed orimplied by such forward-looking statements. Such forward-looking statements arebased on numerous assumptions regarding the Project, its subsidiaries and itsmanagement, future business strategies of the Project, and the environment inwhich the Project, will operate in the future. Important factors that could causeactual results, performance or achievements to differ materially from those in theforward-looking statements include, but are not limited to, those discussed in the IO.These forward-looking statements speak only as at the date of this document.

RESTRICTION ON CIRCULATION

The distribution of this IO in some jurisdictions may be restricted by law and

therefore Recipients should inform themselves about and observe all applicablelegal and regulatory requirements in their jurisdiction in relation to this IO and theinvestment contemplated therein. The IO is issued for distribution only to thepersons of the kind to whom the IO may lawfully be issued.

Saudi Arabia

Neither this Investment Overview nor any copy of it may be distributed, directly orindirectly, in the Kingdom of Saudi Arabia to any Saudi Arabian person (within themeaning of laws, rules and regulations of the Kingdom of Saudi Arabia, includingbut not limited to those made under the Capital Markets Authority of Saudi Arabia(collectively "Laws"). Any failure to comply with these restrictions may constitute aviolation of the Laws or the laws of any such jurisdiction.

United States of America

The information contained herein does not constitute an offer to sell or a solicitationof an offer or a recommendation to purchase securities under the securities laws ofany jurisdiction, including the United States Securities Act of 1933, as amended, orany US state securities laws, or a solicitation to enter into any other transaction.


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Any securities transactions with a US-based buyer will be effected through Ernst &Young Corporate Finance (Canada) Inc., a US registered broker-dealer that is part ofa global network with [EY Member Firm*] in accordance with Rule 15a-6 under theUnited States Securities Exchange Act of 1934, as amended.

float glass - investment overview (1)

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