Opex Awards 2016: EMEA, small-cap – Mediterrania Capital Partners

When Mediterrania Capital Partners invested in CEPRO, a manufacturer and distributor of disposable baby diapers and sanitary pads based in Algeria, in 2009, it sat down with the company’s management to draw up an ambitious growth plan to take the business to the next level of profitability in a market with increasing potential.

Mediterrania acquired a significant minority stake in the business using capital from its €63 million first fund. The firm worked with CEPRO to conduct a product profitability analysis across all of its lines, aiming to increase efficiency and double down on the best-performing products, which turned out to be diapers.

Over the course of the investment, annual sales of baby diapers increased by 400 percent to 600 million sold in 2015.

Mediterrania also reached into its extensive network to help CEPRO access a number of Spanish suppliers of raw materials, who offered better conditions than the company’s original suppliers. The firm also helped CEPRO identify the best technology providers of production lines, which were in Italy.

During the holding period, CEPRO tripled its factory size from 10,000 square metres to 30,000 square metres, and made additional investments in production capacity. Product packaging and company branding were modernised, and new marketing activities helped increase product brand awareness in Algeria and abroad.

Judge Thomas Pütter, chairman and chief executive of Ancora Finance Group, noted evidence of “clear operational focus, improvement in supply line and investment in state of the art production capacity”.

During Mediterrania’s holding period CEPRO grew its annual revenue by 580 percent, from €10 million in 2009 to €58 million as at December 2015.

“A six-year hold period with 50 percent CAGR in EBITDA and an almost 6x in revenue growth coupled with a market share increase from 5 to 24 percent evidences a clear strategy and clear focus,” said Pütter.

“Productivity improvement of 13 percent from 84 to 97 percent is part of the clear success of this investment.”

In 2012 Mediterrania helped the company implement an SAP system to streamline processes across the whole business. During the hold period it also launched its export business, selling its products to several countries in sub-Saharan Africa, including Mali, Mauritania and Nigeria.

On the governance side, the firm helped CEPRO to strengthen its board of directors and in establishing business and financial reporting as best management practices, as well as putting in place additional improvements around corporate governance and transparency.

Mediterrania ultimately sold CEPRO to emerging markets powerhouse The Abraaj Group in January 2016 in a deal generating a substantial return and a double-digit internal rate of return for the firm’s investors.

“They increased market share by 19 percent with an expansion into sub-Saharan Africa,” said judge Ludovic Phalippou. “They managed to provide a double-digit return, and improve on all key metrics in a challenging emerging market.”