41576 - Nafoods Group

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Summary of Investment Information

Project Number

41576

Company Name

NAFOODS GROUP JOINT STOCK COMPANY

Date SPI Disclosed

Jan 24, 2019

Country

Viet Nam

Region

East Asia and the Pacific

Projected Board Date

Mar 15, 2019

Environmental Category

B - Limited

Status

Active

Last Updated Date

Sep 6, 2019

Department

Regional Industry - MAS Asia & Pac

Industry

Agribusiness and Forestry

Previous Events

Approved : Jun 17, 2019
Signed : Jun 27, 2019
Invested : Aug 29, 2019

Sector

Fruits and Vegetables

Project Description

Established in 1995, Nafoods Group Joint Stock Company (Nafoods or the Company) is a small but niche fruit manufacturer and exporter in Vietnam with a leading position in passion fruits. The Company is currently engaged in four business lines: fruit concentrate and puree, individually quick frozen (IQF) fruit products, passion fruit seedlings and more recently, fresh fruits. The Company is operating 2 manufacturing facilities in central and southern Vietnam with a total annual capacity of 12,000 tons of concentrate/puree and 7,900 tons of IQF. It also produces passion fruit seedlings in an area of 6 hectares (ha) in a mountainous area of Nghe An, central Vietnam. For the fiscal year ended December 31, 2017, the Company posted net revenues of US$22.9 million, EBITDA of US$4.2 million and net profit of US$2.9 million.

Nafoods is approaching IFC for support to fund the construction of the second phase of the Long An factory; development of a passion fruit liquid extraction workshop and a packing house in Central Highland; R&D expenses for development of citrus seedlings, implementation of technology for supply chain management and permanent working capital (the Project).

Sponsor / Cost / Location

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan
Equity	8.0

Development Impact

Farmer reach: The Project is expected to increase the number of farmers who supply raw materials or are employed at the Company's own land by about 11,500. Much of the Company's operations are located in economically depressed or unproductive areas. Because Nafoods is planning to provide its suppliers with high quality seedlings from own nurseries and guidance on the planting density in exchange for off-take of the crop, the yields can improve from Vietnam average of 15-30MT/ ha to 45-50 MT/ ha. Jobs creation and linkages: The Project is expected to create 150 full time equivalent new jobs which represents an above average impact compared to other agribusiness investments of similar size. Market creation: By supporting Nafoods, IFC is helping to strengthen the image of Vietnam as a reliable global supplier of passion fruit concentrate. In particular, the work planned by the Project to help rationalize the supply chain will also be beneficial to the broader sector. The resulting efficiencies are expected to both facilitate competition and put a pressure on less efficient smaller players (encouraging consolidation) and promote better practices throughout the value chain. Specifically, other passion fruit producers are expected to improve their traceability and food safety practices to match the efforts being undertaken by Nafoods.

Financial Additionality: IFC can provide long-term patient capital with a long grace period, as well as a diversification in borrowing sources since all other loans are from local banks. Non Financial Additionalities: - IFC's strong network within the agribusiness sector: IFC can introduce potential business partners to Nafoods and help the Company expand its customer base internationally. Furthermore, Nafoods highly values IFC's expertise in the fresh fruit business and would like to have an IFC representative on the board of directors who can advise the Company, especially on the expansion into the fresh fruit business. - Environmental & Social (E&S): Implementing E&S recommendations will allow the Company to operate at higher E&S standards. As part of the appraisal, per IFC's advice, the Company has undertaken a third party social assessment on its land holdings to identify gaps between the Company's current practices and IFC's Standards. - IFC Advisory Services & Collaboration Across WBG: The Company may benefit from collaboration with the World Bank/ FCI Vietnam Agribusiness Competitiveness Project. In addition, IFC would provide Nafoods with technical supports in various areas including food safety and corporate governance which would help build a sustainable and effective business and strengthen the Company's supply chain.

E&S Category Rationale / Risks and Mitigation

This is a Category B project based on IFC’s Policy on Environmental and Social Sustainability. The E&S risks and impacts associated with this project are limited, site-specific, and can be readily addressed through generally accepted mitigation measures described in this document and the attached Environmental and Social Action Plan (ESAP). Key E&S issues associated with this investment are: (i) compliance with applicable Vietnam legal and regulatory requirements, including securing all necessary operational permits for factories and plantations; (ii) effectiveness of Nafoods management competency and capacity to implement the integrated EHS/labor/food safety management systems; (iii) emergency preparedness and response plan, especially Life and Fire Safety (L&FS); (iv) resource (energy/water) efficiency and effluent management, point source air emissions, ambient dust and noise, solid and hazardous waste management; (v) supply chain risk assessment and management, including potential harmful child/forced labor and conversion of natural/critical habitats in fruit sourcing areas; (vii) land acquisition and economic displacement; and (viii) identification and management of impacts on ethnic minorities.

Contacts

For Inquiries About the Project, Contact

Nafoods Group Joint Stock Company
Ryan Galloway
Chief Growth Officer
(+84) 936 611 739
Ryan@nafoods.com
No.47, Nguyen Canh Hoan street, Quan Bau ward, Vinh city, Nghe An province, Vietnam
https://nafoods.com/

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2121 Pennsylvania Avenue, NW
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Telephone: 202-473-3800
Fax: 202-974-4384

Local Access of Project Documentation

Ryan Galloway, Chief Growth Officer

Nafoods Group Joint Stock Company

No.47, Nguyen Canh Hoan street, Quan Bau ward, Vinh city, Nghe An province, Vietnam

Telephone: (+84) 2383 532 632

This Summary of Investment Information (SII) is prepared by IFC to disclose a factual summary of the main elements of the potential investment. Its purpose is to enhance the transparency of IFC’s activities. For any project documentation or data included or attached herein, whether prepared by the project sponsor or otherwise, authorization has been given for public release by the project sponsor. IFC considers that this SII is of adequate quality for release to the public, but has not necessarily independently verified all of the project information therein. It is distributed in advance of IFC Board of Directors’ consideration and may be periodically updated thereafter. Board dates are estimates only and this document should not be construed as presuming the outcome of the Board Directors’ decision. The following SII is disclosed in accordance with IFC's Access to Information Policy (AIP) that went into effect on January 1, 2012.

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