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Navigator completes Solvent Recovery Plant investment due diligence in Ukraine

In September, we completed a commercial due diligence for a solvent recovery plant (SRP) for a multinational packaging producer in Ukraine.

Solvent Recovery Plant Due Diligence Ukraine

 

A solvent is a liquid solution capable of dissolving other substances. In this specific project, ink is dissolved into ethyl acetate (C4H8O2) so that it can be applied to flexible plastic packaging during the printing process. Ethyl acetate (EA) is widely produced and used as an industrial solvent. Global prices for ethyl acetate are provided in ICIS, among others (https://www.icis.com/chemicals/ethyl-acetate/europe/).

By recovering ethyl acetate for re-use, our client was aiming to:

  1. Reduce the costs of externally-purchased materials in favour of re-using 80% of existing solvents. This had a significant profitability impact as production scaled up via new capital investment.

  2. Improve sustainability: by recycling ethyl acetate, our client reduced emissions and discharges into the atmosphere.

Our objective was to provide the economic efficiency of solvent recovery. Our thesis was that by investing in solvent recovery, our client would:

  1. Improve profitability in order to break even on its investment within 10-12 years;

  2. Be able to repay the loan for the investment from “as is” profitability, even without any further capital investment (which was planned to increase printing and lamination capacity).

Our work included:

  1. A detailed analysis of corporate strategy and operations, including customers and competitors.

  2. A detailed customer, sales and market analysis: by customer, product, and country, covering both Ukraine and Russia in detail. Key packaging segments included stand-up pouches, spouted pouches and flexible plastic laminates, in the baby food, pet food and general food categories.

  3. A detailed financial and pricing assessment.

  4. A comprehensive analysis and assessment of the financial model, including capital investment and various profitability scenarios.

  5. A vendor and project assessment, including technology chosen, vendor analysis, contract analysis and capital investment review.

The project showed that the Solvent Recovery Plant envisioned would make a significant contribution to financial and environmental sustainability, leaving to significant cost savings and a rapid payback period.

This is one of several projects recently implemented in the flexible plastic packaging sector in Ukraine and Russia. The geographic region is growing rapidly as national economies recover from the 2014 financial crash and subsequent relations between the two countries.

For further information on our commercial due diligence services, please contact us.

 

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