FoodMaster

Location:

Kazakhstan

Project number:

47263

Business sector:

Agribusiness

Notice type:

Private

Environmental category:

B

Target board date:

25 May 2016

Status:

Repaying

PSD disclosed:

21 Apr 2016

Translated version of this PSD: Russian

Project Description

The EBRD is providing funding for a long-term loan of up to EUR 15 million in Kazakh Tenge equivalent to FoodMaster Company JSC ("the Company" or 'FoodMaster'), Kazakhstan leading dairy company and the Company's 100 per cent subsidiary FoodMaster Trade LLP, a limited liability partnership organised and existing under the laws of the Republic of Kazakhstan (the "Borrowers") to fund capital expenditures program and working capital needs.

Project Objectives

The loan will support the sustainable growth of the Company via financing its capex programme for 2016-18 aimed at upgrading its dairy processing plants and dairy farms and launching new products; as well as some working capital needs (the "Project").

Transition Impact

The Project's transition impact is expected to derive from enhancing corporate governance and business conduct with a strong focus on environmental sustainability. Specifically, via the Project, FoodMaster will undertake to achieve the best international industry practices in terms of food quality and safety and E&S. In addition, the Project will support the expansion of competitive market interactions by supporting the development of cold chain logistics.

The Client

The Borrowers are FoodMaster Company JSC ("the Company" or 'FoodMaster'), a joint-stock company organised and existing under the laws of the Republic of Kazakhstan and the Company's 100 per cent subsidiary FoodMaster Trade LLP, a limited liability partnership organised and existing under the laws of the Republic of Kazakhstan. The Company is the leading dairy producer in Kazakhstan and an affiliate of French Groupe Lactalis, one of the largest milk collector and cheese producer worldwide.

EBRD Finance

KZT-denominated loan of EUR 15 million equivalent.

Project Cost

Up to EUR 15 million in KZT equivalent.

Environmental Impact

The proposed project has been categorised B in accordance with the 2014 EBRD Environmental and Social (E&S) Policy, as the potential impacts are site specific and readily identifiable and addressed through mitigation measures. Environmental and social due diligence (ESDD) was undertaken by the Bank's Environment and Sustainability Department based on a review of the Company's corporate management systems and relevant information provided by the Company as well as discussions with the Company's personnel. In addition, an independent audit of animal welfare issues was conducted comprising meetings with facility management and site visits to three farms.

The ESDD confirmed that the Company has adequate corporate systems in place to manage their environmental, health and safety (EHS) issues and that at both the corporate and site level the Company is substantially compliant with local EHS regulatory requirements. All sites have dedicated EHS and hygiene engineers and an HR manager. The Company has advanced supply chain management systems and undertakes regular audits of the suppliers, hence contributing to the establishing of the high quality standard in the industry and improving the suppliers' quality performance. The Company will also aim to achieve good international industry practice in terms of E&S through the implementation and certification of the integrated Environmental and Occupational Health and Safety (OHS) Management System according to ISO 14001 and OHSAS 18001 by 2017 in all processing plants. The ESDD concluded that the Company has HR and OHS Departments with staff responsible for HR and OHS issues at the Company's production sites. All OHS documentation (including procedures and instructions) required by local legislation is developed and available at all production sites. There is a three-stage OHS compliance monitoring in place. OHS training is performed on a regular basis. Emergency response plans are developed for hazardous facilities. It has been confirmed that the projects and activities of the Company have no negative environmental impacts for the local communities and a number of strong positive social impacts (employment, additional taxes).

The animal welfare assessment was also commissioned by the Bank. The assessment was positive about the current general standard of animal welfare in the Company¿s operations comparing these favourably to many of the best run farms in Europe. The attitude of managers and workers was judged to be positive with each recognising the legal and moral obligations to farm animal welfare. There are a number of actions required, however, to ensure that the farms comply with EU and best practice. Such actions include the development of a written Animal Welfare Policy, the appointment and training of dedicated animal welfare officers, changes to the space and flooring provided to cows, and improvements to ventilation and water provision. The key issue that the Company is facing is the aged buildings and infrastructure in which it operates.

An Environmental and Social Action Plan (ESAP) has been prepared for the project based on the results of the ESDD. Through the ESAP the project will be structured to reach compliance with EU standards, meet the Bank's Performance Requirements and set an example in the management and welfare of dairy cattle for others in Kazakhstan to follow.

Technical Cooperation

The EBRD, in cooperation with the Food and Agriculture Organization of the United Nations (FAO), initiated a TC to enhance the competitiveness and inclusiveness of the Kazakh dairy industry by promoting solutions for improved milk production and collection and for better quality dairy products. The Company¿s engagement will maximise the positive demonstration of new behaviours and activities and will invite replication by dairy sector stakeholders of best practices in animal husbandry, cold chain development, and quality management and control.

Company Contact

Anastasiya Safonova
foodmaster@foodmaster.kz
+7 (727) 244 6000
+7 (727) 244 6006
http://www.foodmaster.kz/
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