Vegetable and Fruit Storage Construction Project in Kiev Region

The Presentation (hereinafter referred to as the “Presentation”) was prepared by Flexible Investment Solutions, Investment Fund with the aim of delivery of basic information about Vegetable and Fruit Storage Construction Project in Kiev Region to the Presentation’s addressees.

The aim of the Presentation is to form the general vision of the Project and its investment prospect with the addressees.
Kindly note that in order to make weighed decision on participation in the Project, the recipient is required to conduct his/her own independent study and evaluation of the Project.

The Project provides the construction of a logistics complex for warehousing of greengrocery with a capacity of 20.7 ths. tons on 20 hectares lot in Borispolskiy district of the Kiev region.

Summary

The Project provides the construction of vegetable and fruit storage with a capacity of one-time storage of 20.7 ths. tons of products and located near the Okruzhnaya road in Kiev.
The Project complex includes independent warehouses for storing vegetables (10.6 ths. m2) and fruit (4.2 ths. m2), a bonded warehouse (1.7 ths. m2),as well as a processing plant (0.3 ths. m2), located on 20 hectares land plot.
Has been realized at the moment: was acquired title to the land plot. A designated use was changed, earthworks and soil stabilization have been completed, and technical specifications for the electrical supply networks and entrance/exit routes have been obtained.

Project’s Economic Indicators:

  • Needed investments: $ 20 million.
  • Return of investments with IRR 23% - approximately 5 years.
  • Project time frame: 6 years.

The project provides for the use of container storage technique for the storage of the products, as well as a system of regulated gas and temperature environments to minimize its natural losses (no more than 3% per season).

Project Settings

Conception: construction of a logistics complex for the long-term storage of greengrocery with a total capacity of 20.7 ths. tons of one-time storage with a processing plant and a bonded warehouse.
Location: Borispolsky district, Kiev region, Ukraine.
Land plot: area: 20 ha.
Legal status: belonging to the project company.

Buildings:

  • Warehouse (vegetables): 10 584 m2.
  • Warehouse (fruit): 4 166 m2.
  • Bonded warehouse: 1 700 m2.
  • Processing plant: 300 m2.

Project’s partners: large retail food store chains, Tesso, equipment manufacturer.
Suppliers of products: agricultural enterprises and farms of Ukraine, importers.

Project’s budget: $20 mln.
Including:

  • Development: $0,6 mln.
  • Construction works: $8,6 mln.
  • Equipment: $4 mln.
  • Miscellaneous expenditures: $6,8 mln.

The following preparatory work have been carried out: a designated use was changed, earthworks and soil stabilization have been completed, and technical specifications for the electrical supply networks and entrance/exit routes have been obtained.

Project’s Technical Specifications

It is planned that vegetable storage (80% of total volume) and fruit storage (20%) will use modern technologies admissive of loss of goods to the tune of not exceeding 3% per season.

Holding capacity (tons):
Vegetables: 16.3 tons total (11 cameras).
Including: potatoes - 4.3 ths.tons, carrots - 1.8 ths. tons, beets -1.8 ths.tons, cabbage - 5.0 ths. tons, onions - 3.3 ths. tons, garlic - 0.1 ths. tons.
Fruit: 4,4 thousand tons (30 cameras).

Storage technique:
Vegetables: Chilled air induction to complex mixing chambers.
Fruit: adjustable temperature and gas medium.
Storage loss: not more than 3% per season.

Storage technique: containers.

Product Processing:
Washing and packaging: 25% of the volume of potatoes, carrots, beets and 100% of cabbage.
The availability of processing allows increase operating revenues by 53%.

Project Relevance

There is a sustainable growth in the turnover of vegetables, potatoes and fruit in Ukraine.
The sales increase is caused by output growth, yield enhancement and consumption of fruit and vegetables in the country The percent of potatoes, vegetables, fruit, berries, fruit and berry canned and canned vegetables in the amount of retail sale of food products is 7%, with the view to the further growth in the coming years.
At that, a major problem remains persistent deficit of modern logistic centers for greengrocery storage, which is a significant obstacle to reducing the level of crop losses.
More than 95% of harvested potatoes, vegetables and fruit are stored. During harvesting, transportation and storage, the total loss is 25-30% of the crop. Resulting from high losses, the price rice for fruit and vegetables in the autumn-winter period is more than 60%. The key reason for such losses is the lack and poor quality of vegetable stores, and outdated storage technologies.
The requirement of modern storage capacities for vegetables and fruit in Ukraine is estimated at a level of 3.5 million tons.
Kiev and Kiev region are the largest distribution areas for such products and have the highest demand for high-quality vegetable stores.
The stable industrial growth and greengrocery intake, existence of a large all year distribution area, as well as an acute shortage of modern storage facilities for warehousing of the products form favorable conditions for greengrocery warehouse construction in Kiev region.

Project’s Favor

Key factors of the Project’s favor: high efficiency, low market risks and the presence of an anchor client.

High Project Performance Indicators:

  • Payback - approximately 5 years.
  • Estimated EBITDA of $ 8.5 mln.
  • Predicted net profit margin - 30%.
  • IRR - 23%.
  • NPV $ 5.9 mln.

Favorable location of the land plot and performed early works:

  • The land plot is wholly owned.
  • It is near the broadest market - Kiev.
  • Favorable location relative to the territories of manufacturing.
  • Soil stabilization works were completed.
  • The legal structure of the Project has been prepared.
  • The most important approvals and technical specifications for construction were received.

Unsatisfied demand for high-quality storage facilities for fruit and vegetables:

  • Qualitative warehousing of fruit and vegetables in Ukraine is provided only by 25%.
  • Demand for additional storage capacity of vegetables and fruit in Ukraine amounts to 3.5 million tons.
  • Expanding storage capacities will reduce import and increase export of fruit and vegetables.

An anchor client was identified:

  • The anchor client is large retail food chains.
  • Confirmed guaranteed load of at least 50% of capacity.

Modern equipment, storage technologies and infrastructure:

  • Minimum loss of storage products – cost saving.
  • Long-term preservation of consumer properties and products marketable state.
  • Income maximization due to product processing.
  • The possibility of bonded handling of export and import cargo.

Conclusions

The proposed Project has good opportunity and high chances for successful implementation as far as:

  1. At the moment and in mid-term perspective, there is a growing demand for modern logistics complexes for greengrocery warehousing in Ukraine. Due to capacity deficiency of already existing capacities, as well as due to the growth of consumption and output expansion and yield of vegetables and fruit crops.
  2. Location of the complex in the region with the strongest retail demand, all year distribution area and a well-developed logistics network.
  3. Existence of actual demand for storage for the manufacturers’ of fruit and vegetables part and distribution networks.