Medium density fibreboard production facility

Opportunity Description: This opportunity aims to add value to the large amount of agricultural waste generated in and around Luxor. Bagasse, which is the fibre discarded from the process of sugar production from sugarcane, is considered a high-quality material input for the production medium density fibreboard, or MDF. Establishing an MDF production facility in Luxor makes sense to be close to the sugar production facilities in the region and will add significant value to sugarcane bagasse.
The potential here lies mainly in the local market as Egypt imports a significant amount of MDF, and wood in general. Export markets do have potential as well since MDF made from bagasse can meet export quality standards. MDF boards are used mainly in furniture and fixtures, and are commonly used as a replacement for natural wood boards.
PRODUCT: Medium Density Fibreboard (MDF) panels
Sector: Waste Management
Market: Local furniture and fixture manufacturers
Initial Investment Required: EGP 91m
Details Available: Pre-feasibility Study
Market Potential: Local MDF production is a pure import substitution play. This suggests that target market size is at least USD 70m per year, to at least cover local demand and reduce imports.
Year 1 revenues for this facility are expected be around USD 9 million, with a net margin of 20%, at 50% operational capacity. This improves by Year 5 to USD 21 million, with a net margin of 25%, at 91% operational capacity.
Supply: If the facility is operating at 100% capacity, it will consume the following amounts of agriwaste per year:
34,500 tons of sugarcane bagasse to produce 51,000 m3 of MDF (density assumed at 680 kg/m3).
Process: The MDF production line is usually imported refurbished from countries like Italy and Japan. China also supplies production lines at a lower cost but at lower capacities.
The production process consists mainly of the following steps:
1. Receiving raw material
2. Preparation/ Chipping
3. Steaming / De-fibering
4. Particle Drying
5. Classification/ Balancing
6. Gluing/ Blending
7. Forming
8. Pre-Pressing
9. Hot Pressing
10. Cooling
11. Sanding
Human Resources: Position # of Staff
Production - Permanent
Plant Manager 1
Quality Control 2
Hall Supervisors 2
Engineering 2
Workers 4
Production – Seasonal
30 workers x 1 season 30
Sales, General and Administration
Procurement 2
Sales Manager 1
Sales 2
Marketing 2
Finance & Accounting 2
HR Manager 1
Maintenance 4
Security 2
Total 58
Financial: Capital Expenditure Requirements EGP 66m
Working Capital Requirements for 3 months EGP 25m
Minimum Investment Required EGP 91m
Internal Rate of Return 45%
Simple Payback 3.3 yrs
Risk: The main risk lies in securing consistent supply of agriwaste, because relying on waste directly from the field can be difficult from a logistical perspective, collection rate can be quite low in some cases. Relying on sugar factories which have a high concentration of bagasse that is continuously generated on-site is the more secure option, although that supply is already being competed for by paper factories in the region, as well as use for alternative fuels by cement factories.
IMPACT: Economic - Value added to local agricultural waste is quite significant. Based on this study’s assumptions, before deducting other COGS (cost of goods sold) and overheads:
680 kg of bagasse, costing EGP 680, produces 1 m3 of MDF panels, selling at EGP 6,000 per m3 – that is 89% value added to the waste.
Social - Direct jobs created by this facility will include 28 permanent plant staff plus another 30 seasonal workers. Indirect jobs created will be mainly in logistics, marketing and distribution.
Environmental – It helps mitigate burning of agricultural waste and therefore reduce carbon emissions