Argentinean CAGSA grows exports to Japan

Compañia Argentina de Granos (CAGSA) is a major marketer and exporter of grains, soybeans and corn. In 2014, it handled 8 million tons of grain and oilseeds and had a supplier base of over 13,500 farmers. In order to meet working capital needs, the company obtained a USD100m, five-year loan from ING.

In a low-margin market, efficiency is essential, and CAGSA is focused on maintaining the highest level of competitiveness through its vertically integrated business model. The company is also increasing its focus on overseas sales, with 1.9 million tons exported last year.

“Our main growth driver is the Asian market, where every year more people are being included as consumers and are changing their diets and consuming more proteins,” said Sergio Sosa, CAGSA’s CFO. “Becoming a key supplier for that market is both our biggest opportunity and our biggest challenge.”

“Our main growth driver is the Asian market, where every year more people are being included as consumers and are changing their diets and consuming more proteins. Becoming a key supplier for that market is both our biggest opportunity and our biggest challenge.” - Sergio Sosa, CFO CAGSA

One market which presents particular opportunities is Japan. The country imports around 60% of its food on a caloric basis, with main agricultural imports including soybeans and corn. The Japanese government is taking a proactive approach to addressing food scarcity, and is increasing the purchase of grains from Central and South America - the region is the major producer of soft commodities.

Taking advantage of this opportunity, CAGSA has signed a Memorandum of Understanding to expand its existing relationship with Japanese trading company Marubeni Corporation. Marubeni has committed to purchasing 300,000 tons of grains and oilseeds from CAGSA each year for the next five years, making the company a key off-take partner for CAGSA.

In order to support this new business, CAGSA was looking to secure a long-term working-capital loan. The company’s working capital requirements are met through a combination of short-term and medium-term financing, which is provided by commercial banks as well as by multilateral organisations. “We are always looking to improve our funding structure, since financing costs are key for commodity-exporting companies, such as ours,” said Sosa.

The company has been working with ING since 2007, when the bank financed CAGSA’s first export shipment. Since then, ING has become a key relationship bank for the company. “We have been working together with ING through the ups and downs of the local and global economy.”

In order to meet CAGSA’s working capital needs, the company obtained a $100 million, five-year loan from ING in September 2015. The proceeds will be used to pre-finance the export of grains, oilseed and by-products.

Loan insurance was provided by Nippon Export and Investment Insurance (NEXI), Japan’s official export credit agency, which has two core objectives: guaranteeing food security in Japan and promoting Japanese interests in international transactions. NEXI’s coverage is being provided on the commercial condition that CAGSA commits to exporting 40,000 tons of grains and oilseeds to Japan annually, while the facility is place.

This deal is particularly notable because it is the first time that NEXI has covered a transaction of this type in Argentina. While ING’s business in Japan maintains a close relationship with NEXI, the bank’s relationship with CAGSA is managed from Argentina – meaning that close collaboration was essential between ING’s teams in the two locations in order to ensure the smooth flow of information throughout the transaction.

“We have been working together with ING through the ups and downs of the local and global economy.”

The loan agreement was signed in September and has now entered the disbursement stage. “ING has proven to be a reliable financial partner, backed by their knowledge of the commodity business as well as developments in the local economy, and they were our first option when we started to analyse the new structure,” concluded Sosa. “The ING/NEXI structure has helped us to obtain long-term funding at a competitive price, and will allow the company to increase its exports and reach new clients.”

 

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