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Sustainability Case Study: Cogitel (Tunisia)

Sustainability Case Study: Cogitel (Tunisia)

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Published by IFC Sustainability
IFC is developing a series of case studies that highlight how private equity funds and their investee companies have integrated sustainability efforts in a way that demonstrate financial and operational returns. This case study showcases TunInvest, an IFC client, and its investee company, Cogitel, a Tunisian company that provides flexible packaging solutions for the food and beverage industry. By reducing energy consumption and waste generation, Cogitel has demonstrated financial returns and increased efficiency.
IFC is developing a series of case studies that highlight how private equity funds and their investee companies have integrated sustainability efforts in a way that demonstrate financial and operational returns. This case study showcases TunInvest, an IFC client, and its investee company, Cogitel, a Tunisian company that provides flexible packaging solutions for the food and beverage industry. By reducing energy consumption and waste generation, Cogitel has demonstrated financial returns and increased efficiency.

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Published by: IFC Sustainability on Aug 02, 2011
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02/01/2013

 
The Company
Cogitel’sStory
2011The Impact of Private Equity in Emerging Markets:Achieving Business Results Through Sustainability
Sustainability CaseStudy: 
Cogitel (Tunisia)
Cogitel (short for Comptoir Generald’Impression et de Traitement desEmballages) was created in 1984 by anumber of industrialists from the Tunisianregion of Sfax, and commenced manu-facturing operations in 1987 under thecapable leadership of Hédi Zeghal, itsCEO. Following several years of growth,Cogitel expanded its production capac-ity and quality control systems. By thelate 1990s, Cogitel had launched its
!"#$%&'(")*+%'",(")-%).*%,/$)0.+*%).%123%4556%7&)80$9%)##&").:+%:+"$0!:)
-tion from AFAQ; however, despite theseadvancements, the company made aloss in 1997 following the closure of theborder with neighboring Algeria, whichaccounted for an important share ofthe company’s turnover at the time.
In 1998, TunInvest viewed Cogitel’s short-termsetbacks as an ideal opportunity for a turn-around investment. With TunInvest’s capitaland expertise, Cogitel obtained a new quality
!""#$!%&'(&'$)*+&!)*,%(-./0(1223452226(!%7(8#*&9:;($')#$%'7(),(<$,+)!=*:*);>(?"(@'AB!:(
and the TunInvest investment team took stock of the company’s successes, they wereinspired to transform the family-ownedbusiness into a regional packaging leader.
C,(7,(",D(C#%.%E'")('%&,#$!A'7(@'AB!:(),(
undertake a leveraged management buyout –
)B'(+$")(*%(C#%*"*!F"(B*"),$;G(!H)'$(3I(J,%)B"(,H(K,$9D()B'()$!%"!&)*,%(K!"(&,J<:')'7(*%(522L>(
This enabled TunInvest to partially exit their
*%*)*!:(*%E'")J'%)(*%(M,A*)':D(!%7()B'(@'AB!:(
family to increase its stake in the company,a move that would better align interests and
*%&'%)*E*N'(J!%!A'J'%)>(.%(522OD(C#%.%E'")D(
through its Maghreb Private Equity Fund II,
!%7(/K*&,$<(E*!(*)"(<$*E!)'('8#*);(H#%7(.%)!P(M!<*)!:D(P,*%):;(!&8#*$'7(!(J!P,$*);(")!9'(*%(!(%'K:;(&$'!)'7(B,:7*%A(&,J<!%;(Q(?:)'!(
Packaging – to enable Cogitel to execute agrowth through acquisition strategy.
!
 
Essentials
Company:
Cogitel, http://www.cogitel.com.tn/
GP:
TunInvest-AfricInvest Group, a leading privateequity house in North and Sub-Saharan Africawith over US$500 million under managementcovering North, Western, and Central Africa(http://www.tuninvest.com/)
Region:
Africa
Country:
Tunisia
Sector:
Manufacturing
Business focus:
Flexible packaging solutionsfor the food and beverage industry in North Africa
Size:
Revenue US$33.3 million (2010);209 employees (2010)
Investment:
US$1.9m in 1998 (buyout of Cogitel shares aimed at constituting a coreshareholding base); US$19.5m in 2006 (to fundacquisition program via Altea Packaging);TunInvest holds 31.2% of Cogitel through itsstake in Altea Packaging
Impact Highlights
With support from TunInvest, Cogitel hasgrown from a family-owned SME with ahighly fragmented equity structure into the
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packaging manufacturing group
6*%.&$%78$%9$0#2%."%:;<;=%>"+).$'12%#$8$*?$2%
doubled to US$33.3 million, while its exportsgrew to 51% of total salesCogitel adopted a number of environmentallysustainable policies to reduce waste and energyuse, generating economic gains in excess of $675,000 (or roughly 2% of revenues) in 2010Cogitel has obtained several internationalhealth, safety, and quality assurance
!$#.)7!0.)"*2@%.&$2$%&08$%$*05'$(%.&$%!"AB0*9%
to penetrate European markets and improve its
"B$#0.)*+%$,7!)$*!9%0*(%!?2."A$#%20.)2,0!.)"*
198719941997199820032006200720082010
1987
Cogitelcommencesmanufacturingoperations
1994
Expansion of productioncapacity and qualitycontrol systems
1997
Cogitel launches
7#2.%?B+#0($%
program
1998
TunInvest makes
7#2.%)*8$2.A$*.
Cogitel obtainsISO 9002
!$#.)7!0.)"*
2003
Cogitel obtainsISO 9001
!$#.)7!0.)"*
2006
 TunInvest makessecond investment(via Altea Packaging)Cogitel acquires SIED
2007
 Cogitel acquiresFrench companyRoland and investsEUR10 millionto create Cogitelain Algeria
2008
Cogitel obtains
6CD%::;;;%!$#.)7!0.)"*%
Cogitel acquires Optima(Morocco), and theEgyptian companiesPorta and Rotopack 
2010
Cogitel is the
'$0()*+%3$4)5'$%
packagingmanufacturerin MENA
Cogitel Company Timeline
 
!
Following itsacquisition of
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Packaging facil-itated Cogitel’sacquisition of
/.RSD()B'("'&,%7(
largest flexiblepackagingmanufacturer
*%(C#%*"*!>(?H)'$(
consolidatingthe domestic
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 of the Frenchflexible packagingcompany Roland,a move thatwould allow Cogitel to expand its prod-uct range and would grant the companymore legitimacy with multinational clients.
W!)'$()B!)(;'!$D(?:)'!(U!&9!A*%A(*%E'")'7(J,$'()B!%(RXY32(J*::*,%(*%(?:A'$*!(),(
create a new flexible packaging company,
M,A*)':!>(.%(522ID(?:)'!(U!&9!A*%A(&,%)*%
-ued its growth through the acquisitions of
)B'(Z,$,&&!%(&,J<!%;(0<)*J!D(!%7()B'(
Egyptian companies Porta and Rotopack.
/*%&'(C#%.%E'")F"(*%*)*!:(*%E'")J'%)(*%(311ID(
Cogitel has increased the number of its em-
<:,;''"(*%(C#%*"*!(H$,J(1O(),(521D(KB*:'(?:)'!(U!&9!A*%A(%,K('J<:,;"($,#AB:;(I22('J<:,;
-
''"(!&$,""(*)"(,<'$!)*,%"(*%(+E'(&,#%)$*'">(CB'(@'AB!:(H!J*:;($')!*%"(9';(<,"*)*,%"()B$,#AB
-
,#)()B'(&,%A:,J'$!)'G([\7*(*"()B'(MB!*$J!%(,H()B'(],!$7D(B*"(",%(/:*J("'$E'"(!"(?:)'!(U!&9!A*%AF"(MR0D(!%7(B*"(7!#AB)'$(^!7*!("'$E'"(!"(MR0(,H(M,A*)':(!%7(C#%*"*!(B'!7>(
The RolePlayed byPrivate Equity
Cogitel’s CEO at the time, Hédi Zeghal,sought out TunInvest as a GP for
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 ment, Cogitel needed to constitutea core shareholding base in order tofacilitate decision making and stra-
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a highly fragmented capital structure. At the same time, Hédi Zeghal waslooking forward to the strategicbacking that TunInvest would bringto the company.
Following the company’s turnaround
!%7()B'(7'&*"*,%(),('_<!%7(!&$,""(^,$)B(?H$*&!D(M,A*)':F"(:'!7'$"B*<(K!%)'7(),(
leverage TunInvest’s presence and broadnetwork of business contacts throughoutthe region. These relationships provedto be critical as Cogitel – acting as the
!%&B,$(&,J<!%;(H,$(?:)'!(U!&9!A*%A(Q(
grew through a series of acquisitions.Finally, partnering with TunInvest gaveCogitel the comfort and security of having
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Cogitel’s managers, “TunInvest created aformal strategic committee which broughtinformed and rational decision making toour company through better reporting,enhanced transparency and governance,and a sense of urgency. The monthlymeetings were much more effective andvalue-creating than board meetings.”
In collaboration withthe Tunisian Ministryof Environment andSustainable Development,Cogitel and TunInvestundertook a detailedstudy of the company’senvironmental footprintand impact. As a resultof this study, Cogitel willhire an external consultantin 2011 to develop anenvironmental managementsystem (EMS) in compliancewith internationalstandards (ISO 14001).
Map of OperationsEmployee Growth
9008007006005004003002001000
Prior toTunInvest(1996)
TunisiaTunisia(Cogitel)Global(AlteaPackaging)
 After TunInvest(2010)
+118%+733%
80020996
   N  u  m   b  e  r  o   f   E  m  p   l  o  y  e  e  s
Increasing Cogitel’s ValueThrough Sustainability
Cogitel achieved a number of value-creatingenvironmental objectives throughoutTunInvest’s involvement with the company.Prior to TunInvest’s investment, Cogitel’senvironmental policy was focused onreducing its amount of source packaging(product inputs) and waste production.While these were laudable policies,TunInvest used its strong relationship withcompany management to expand Cogitel’senvironmental initiatives even further.
Cost Savings
S#$*%A(B*"(+$")("*)'(E*"*)(.:;'"(?=7':P!,#'7D(
TunInvest’s environmental consultant, noticed
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plant. Untreated solvents may cause respiratoryproblems and liver or kidney damage. With a
E*'K(),($'7#&*%A()B'(&,%&'%)$!)*,%(,H(`0M"D(
Cogitel installed a device that supplied fresh air toemployees and extracted solvent-laden hot air.
!
 
 
New Markets
TunInvest brought sophisticated knowledgeof how to penetrate new markets. It recognized
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 the company more competitive in Europe, a
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to multinational clients and strategic buyers.
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for quality and safety, and to enhance itshealth and safety performance. Cogitel nowleverages its superior environmental andsocial performance to differentiate itselffrom its competitors and build trust with its
J#:)*%!)*,%!:(&:*'%)"D(KB*&B(*%&:#7'(S!%,%'(
and Coca-Cola.
!
EnhancingCogitel’sSustainability
!"#$%&
B+9,.*%$>+%!.).:0)8%()0.#%A",-%$>+%
 investment, TunInvest worked withCogitel’s management to create aculture of sustainability throughoutthe company. TunInvest raised theawareness of Cogitel’s managementto environmental and social issuesand explained their links to the com-
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CB'"'('HH,$)"(*%&:#7'7('_<:!*%*%A4c(CB'($*"9"(,H(+%!%&*!:(<'%!:)*'"("B,#:7(:*8#*7(
waste spill over into the natural waterenvironment
c(CB'($'7#&)*,%(,H(<$,7#&)*,%(,H(&,")"()B$,#AB(J,$'('H+&*'%)('%'$A;(#"'c(CB'($':!)*,%(=')K''%(!="'%)''*"JD(
 working conditions and productivity
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 necessary to implement corrective actions, tomitigate potential environmental and socialrisks and to capture savings opportunities.
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-
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as part of the condition for doing business
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also periodically reviews the PE fund client's
R/e('HH,$)"(!%7(<$,E*7'"("#<<,$)(!%7($'&
-ommendations as needed, to help improve
R/e(<$!&)*&'">(.%()B'(&!"'(,H(C#%.%E'")D()B*"(*%&:#7'7(Rf/()$!*%*%A(H,$(")!HH(!%7('E!:#!
-
)*,%"(,H(M,A*)':F"(Rf/(<'$H,$J!%&'>gB'$'!"(
prior to TunInvest’s investment mostemployees viewed environmental issues asa secondary concern, now employees atall levels view themselves as environmentalstakeholders. This outcome would not havebeen possible without the deep commitmentand ownership of sustainability issues on thepart of the company itself. While TunInvesthas undoubtedly played an advocacy role,Cogitel has been strongly committed to theimprovement of its social and environmentalperformance and thus helped turn thesustainability plans into a success.Moreover, TunInvest shares Cogitel’s envi-ronmental successes with its other portfoliocompanies. “We use Cogitel in conversationswith other investee companies,” relaysFathallah, “and we say, ‘look at this Tunisiancompany making environmental enhance-
J'%)"(*%(7*H+&#:)(,<'$!)*%A(&,%7*)*,%"(:*9'(;,#$"G(*H()B';(&!%(7,(*)D(;,#(&!%(7,(*)>Fh
!
Moreover, Cogitel began to recycle thesolvents emitted during the accessories cleaningprocess. Today, Cogitel recycles all of its solventsfor use as cleaning agents for their machines,corresponding to a reduction in solvent usage
,H(!=,#)(i2(),%"(<'$(;'!$D(,$($,#AB:;(TLV(,H(
Cogitel’s total cleaning agent needs.
M,A*)':(J!7'("*A%*+&!%)($'7#&)*,%"(*%(*)"(
waste output, reducing the company’s waste
$!)'(Q(7'+%'7(!"()B'(!J,#%)(,H(K!")'(!"(!(
percentage of production capacity – from
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quantity of input materials improved Cogitel’s
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“Once you have a good environmentaland safety record, you leverage it allover the place.”
Anis Fathallah, Partner at TunInvest
Cost Reductions and RevenuesGenerated Through Sustainability
 ActivityAnnual Savings/Revenues
Energy savingsUS$335,000Decline in waste rateUS$290,000Recovery and sale ofrecyclable wasteUS$52,00030 ton per year reductionin solvent usage75% reductionin total cleaningagent needs
M,A*)':(!:",(*7'%)*+'7(!(%#J='$(,H(K!")'(<$,7#&)"D(
including plastics, paper and wood products,which could be collected, recovered, and thensold for recycling. The estimated gains from
)B'"'(!&)*E*)*'"(H,$(5233(!J,#%)(),(aL5D222>
Decline in Waste Rate
16%14%12%10%8%6%4%2%0%Prior to TunInvest(1996)After TunInvest(2007)
10.9%13.8%

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