Exclusive: Papermaker Fine Hygienic weighs IPO post restructure

The company wants to expand its footprint in the Middle East and North Africa

“We are aggressively working to enhance our presence in the UAE as all action is taking place here," said Mr Lafferty. Antonie Robertson/The National

Fine Hygienic Holding, the paper company based in Amman, in which Standard Chartered Private Equity has a stake, plans to launch an initial public offering in the next few years as it expands in the Middle East and North Africa.

James Lafferty, the chief executive of the company, told The National, "We have plans to go for an IPO in the coming years, though we have not decided the modalities of it but very soon we will make the announcements. It will strengthen our position in the region."

In 2015, Standard Chartered Private Equity, a unit of the UK lender, led a consortium of companies that bought a "significant minority" stake in FHH for $175 million. The company is majority owned by Jordan's Nuqul Group.

IPO activity in Mena was off to a slow start in the first half of the year with the capital raised amounting to $263m, a 70 per cent drop year-on-year. There were only six deals, compared to 13 in the first half of 2017 valued at $872m, according to law firm Baker McKenzie. Political concerns and market volatility contributed to the slow activity, which is expected to pick up in the second half of the year, the report said.

As FHH continues to expand its presence in Mena, aims to achieve double-digit revenue growth this year compared to 2017.

FHH operates five mills in the UAE, Egypt and Jordan and has six plants in other countries including Saudi Arabia and Morocco.

The company wants to set up a strong base in the UAE, where it opened its biggest paper mill Al Nakheel last year, with an investment of $91m.

“We are aggressively working to enhance our presence in the UAE as all action is taking place here. So far, we have invested more than $250m in the UAE alone as the country encourages investment and innovation and offers an unsurpassed infrastructure,” Mr Lafferty said.

FHH, which employs more than 4,000 people, does not plan to open any new mills and wants to expand the capacity of existing ones.

“Mills are something you don’t want to open more,” he said. “In fact, we want to maximise on what we already have,” said Mr Lafferty.

The Levant and Egypt are the company’s fastest growing markets out of the 75 countries where it sells its products.

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The company is focusing on growth in 11 Mena countries, and out of those, Jordan, Saudi Arabia, UAE, Egypt and Morocco are important hubs.

FHH has also laid off 15 per cent of its staff in the past few months to cut costs following rise in prices for wood pulp, a key raw material used to manufacture its products.

“We did this very efficiently as we took out unnecessary work from the system and these jobs automatically freed up,” he said.

“Other people are shutting down their mills and increasing prices but we are opting for smart measures to fill the gaps. We have done major
restructuring in the past three months to ensure our customers do not suffer and we keep earning profits,” said Mr Lafferty.

The price of wood pulp has increased this year and is expected to remain high through 2019, hitting global companies, including Procter & Gamble and Kimberly-Clark, according to a Bloomberg report. Procter & Gamble is raising the price of its products including Pampers diapers, Bounty paper towels and Puff tissues, while rival Kimberly-Clark has issued a profit warning.

The demand for global wood pulp has risen with the success of e-commerce companies including Amazon and Alibaba, which extensively use paper boxes and other related materials to ship products, said Mr Lafferty.

“This is a global situation and not a Mena problem,” he said. “The pulp is mainly coming from Scandinavia and Brazil and they have their own share of problems, further worsening the situation. There was a truckers’ strike in Brazil and Scandinavia is experiencing warm weather.”