The largest dairy producer in the country goes out to look for funds abroad

Amid the increasingly worrying impact that the coronavirus health crisis and its measures are having on the Argentine economy, a local dairy group came out to seek financing to leverage investment plans in the country.

This is Agropecuaria Adeco, the largest local milk producer, which is negotiating with the World Bank the granting of a loan for US $ 100 million with the aim of allocating those funds to expand its dairy production capacity in the country.

Adeco is owned by Adecoagro, a diversified agribusiness group that produces sugar, ethanol and energy in Brazil and grains, rice and dairy in Argentina and Uruguay. It is headquartered in the City of Buenos Aires but the dairy operations are located in the provinces of Santa Fe, Córdoba and Buenos Aires.

The loan was requested by the company on March 27, when the compulsory social isolation had already been imposed by the government for almost two weeks, and when the economic burden generated by these measures made itself feel stronger and stronger.

In the report prepared by the International Finance Corporation (IFC), the financial arm of the World Bank, it is explained that the entity is granting the loan to Adeco Agropecuaria, Pilaga and L3N “who have been clients of the IFC since 2016”.

The Santa Fe-based group is currently investing in expanding its dairy production capacity as well as further integrating dairy products and asked IFC for a loan to finance a number of important local plans.

One is the expansion of its milk production facilities in Santa Fe. Another is the acquisition of two cooperative SanCor milk processing facilities and brands located in the cities of Morteros and Chivilcoy.

And the third goal for which Adeco will use the $ 100 million is to upgrade the acquired facilities, including energy efficiency upgrades and climate and green investments “that will result in lower energy and water consumption and lower emissions, and help the company achieve its sustainability goals. “

In this sense, officials from the international organization visited the Adeco facilities between January 20 and 24, when environmental and social specialists were at the Adeco dairy facilities, including the recently acquired milk processing facilities in Morteros and Chivilcoy, as well as the two new free sales stalls in Estancia Carmen, in Santa Fe.

During the visits, the specialists conducted interviews with senior management and key personnel, including production managers, occupational health and safety and human resources personnel, as well as field workers and union leaders.

In this framework, to the US $ 100 million, another US $ 12 million will be added, reaching a total of US $ 112 million. This global amount includes a “Green Loan” tranche of approximately US $ 17.8 million, another A loan of approximately US $ 57 million from the IFC’s own account and the rest of approximately US $ 43 million also from the agency but acting as executing entity of the Managed Co-Loan Portfolio Program (MCPP).

In the framework of the plans that Adeco has in the pipeline are also the production of fluid milk in Chivilcoy with the Las Tres Niñas brand, which is going to be directed mainly to domestic consumption; the production in mortars of cheese and milk powder, which will be a little more focused on exports.

It also plans to reach the gondolas with semi-hard cheeses with one of its brands (Las Tres Niñas, Angelita and Apóstoles), because it is precisely at the Morteros plant that it specializes in this product.

So far, the group has invested more than $ 170 million in the milk business in a decade. It has more than 8,000 milking cows in its dairy farms located in Santa Fe where they produce more than 300,000 liters of milk daily.

Since its inception in 2002, Adecoagro has incorporated land for crop production in Brazil (where it produces sugar, ethanol and electricity) and Uruguay (where it grows grain), in addition to Argentina. Today, the firm employs more than 8,000 people directly and produces almost two million tons of products per year.

The last known balance sheet was closed in June of last year and reflected total sales of just over $ 382 million and a profit of $ 21 million. The company also operates in various business segments ranging from ethanol and sugar, through rice and its industrialization with the Molinos Ala brand to the latest technology dairy production with two dairy farms in which it has under milking more than 8,500 cows that produce around 100 million liters of milk a year.

In the case of the dairy segment, after the purchase of the SanCor plants, its income went from $ 14.6 million in 2018 to $ 29.7 million last year, while EBITDA (profit before tax) increased by 50% of US $ 5 million or US $ 7.4 million.

It also managed to increase milk production by 17% in the first half of 2019 compared to 2018 and within this framework it hopes to continue growing because its next investments are directed to this sector. According to the projections they make in Adecoagro for 2022, they hope to have more than 14,000 cows in milking, with which they would be able to double their production.

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