Reuters | 15 March 2011
By Marie Maitre
(Reuters) - French farm investor AgroGeneration (ALAGR.PA) aims to double its business in Ukraine and make a foray in Argentina, convinced that demographics will support commodity prices and its business model.
Chief executive Charles Vilgrain also said the company he founded four years ago with French entrepreneur Charles Beigbeder will grow through acquisitions and raise funds needed for its expansion on the debt market.
"There is a (agricultural commodity) shortage at a global level and this shortage will not be overcome in the next decade," the 32-year old agronomist told the Reuters Food and Agriculture Summit.
"It is difficult to put land into cultivation. It is not like building a plant that produces as planned the following year," Vilgrain said, dismissing the idea of a "green bubble" as more investment funds and companies such as AgroGeneration or British group Landkom (LKI.L) invest in arable land worldwide.
Population growth, rising demand for meat -- "you need 5 or 7 kilos of cereals to produce one kilo of meat," says Vilgrain -- and increasing use of agro-commodities for non-food usage such as biofuels, can only push grain prices higher, he said.
AgroGeneration has, so far, based its development in Ukraine, the breadbasket of the former USSR, lured by rich soils, cheap rental and labor costs, and a wide choice of uncultivated or badly cultivated former collective farms to turn around.
"Today we are controlling 50,000 hectares. We are looking to ... double in the next two to three years, which will be feasible through two or three acquisitions," Vilgrain said.
AgroGeneration has identified and approached several companies in a distressed financial situation following the sharp fall in global commodity prices in 2009, and last year's drought and export quotas in Ukraine, said Vilgrain.
While giving no financial details, Vilgrain said the size of the deals ranged from 9,000-33,000 hectares of cultivated land that AgroGeneration would seek to pay for with cash and equity.
The group, which raised 14 million euros ($20 million) through its market listing last year, will need to come back to the market to raise more cash, he said, adding it would also look at banking loans and the European Bank for Reconstruction and Development (EBRD) for financing.
AgroGeneration produced 120,000 tonnes of cereals in 2010 -- against 55,000 in 2009 and 18,000 in 2008 -- and expects to be EBITDA positive in 2011. Vilgrain said he had no "clear visibility" on whether it would break even at the net profit level this year. Agro has a market value of 62 million euros.
ARGENTINE DEAL IN THE OFFING
AgroGeneration may consider expanding in Ukraine by building storage facilities or first transformation facilities. Vilgrain said it did not plan to control more than 100,000 hectares in the Black Sea country.
"I do not think we want to get much bigger in this country as we would rather develop a second area in order to mitigate climatic and geopolitical risks," he said.
The southern hemisphere, "most probably Argentina," would allow AgroGeneration to alternate harvests, and not have all its output in 2-3 months, said Vilgrain, adding the company was studying conditions and partnerships for a possible investment in one of the world's top soybean, corn and wheat exporters.
Asked when a deal could come in Argentina, Vilgrain said: "Probably in the second half of the year."
AgroGeneration could invest in Africa, "a region with a huge potential" but probably not for at least five years.
"There is something wrong with foreigners controlling millions of hectares in Africa in countries that are net importers of agricultural commodities. Promoting agricultural development in strong exporting countries like Ukraine is more sustainable in my point of view."
(Additional reporting by Gus Trompiz, Sybille de la Hamaide, Valerie Parent, Nigel Hunt and David Jones; Editing by Dan Lalor)