San Miguel has secured a partner in South Africa and is looking for more funds to continue financing its expansion

Cronista

Publish September 19 2023, Cronista

San Miguel, the world's largest industrial processor of lemons, has signed up the African Pioneer Group for its project in South Africa. The citrus company is also building a plant in Uruguay. Its shareholders injected u$s 44 million last week and the company will reopen its negotiable obligations.

San Miguel is moving forward with its strategic reconversion process. After receiving in May a credit of u$s 22 million from the Bank of the Oriental Republic of Uruguay (BROU) to finance the expansion of its plant in Paysandú, the citrus producer added a partner for its project in South Africa, which contributed u$s 13 million for the construction of its new factory in that country. In addition, its controlling group, the Miguens Bemberg and Otero Monsegur families, injected u$s 44 million through a syndicated loan, convertible into shares.

Now, the citrus company is going for more. While working on a new share issue - it would be after the elections -, the company has also reopened its plan of negotiable obligations (ON). It plans to launch, between the end of this month and the beginning of next month, series 9 of its securities for up to u$s 45 million.

It will seek to renew series 5 and 7, which mature in January and February. With the operation, SAMI -as its stock market acronym- wants to take advantage of the market window to clear short-term maturities. In addition, it will not increase debt or exposure in the capital market: of the u$s 95 million that will mature in the first two months of 2024, u$s 39 million are already in the company's portfolio. This, in turn, will facilitate the use of the shareholder loan to complete industrial investments.

"All these steps are to strengthen the capital structure and continue to finance our restructuring plan," explains Pablo Plá, CEO of the company.

Founded 69 years ago, San Miguel is the main producer and exporter of lemons in the southern hemisphere and the largest industrializer of this citrus fruit in the world, with a 16% share of the global grind. Its objective is to increase this share to 20%, after inaugurating plants in Uruguay and South Africa in May next year. With these facilities, its total milling capacity will grow by 60%, from the 300,000 tonnes per year it has today in Famaillá, Tucumán.

It will also provide it with a unique condition: to be a "multi-origin" supplier, key in a market exposed to climate change.

Last year, the company activated its strategic reconversion plan, which involved its exit from the fresh fruit business - sold to the Spanish company Citri & Co. - and its concentration on the less volatile - and, consequently, more sustainable - segment of industrial lemon products: juice and pulp, oils and essences, and peel.

The latter are, for the most part, inputs used by various industries, especially food and beverage processing. This means that they are traded under long-term contracts (25 years on average), which gives greater stability and predictability to the flow of income than the sale of a commodity.

In this regard, San Miguel has 200 customers in more than 50 countries. Among them, PepsiCo, AB Inbev, Cargill, DuPont and Danone.

In 2022, San Miguel had a turnover of $ 13,909 million, 17% more than in 2021. The net result was a loss of $9,488 million, red 126% higher than the previous year. Net debt was reduced from u$s 246 million to u$s 166 million, due to the sale of its fresh fruit business, which included factories in Peru and South Africa. In the first half of 2023, it recorded revenues of $3,909.14 million, up 100% from a year earlier. The net loss was $5,156.6 million, 28.5% lower than in June 2022.

"If you look back, you find losses. Investors look forward," contrasts Plá. That is why, he says, the injection of capital from the controlling shareholders, the first such disbursement in two decades and, in a way, a foretaste of the new share issue that the company's general meeting approved in June and which will be launched before the end of the year.

This future projection was also the factor that defined the BROU loan - $22 million of the project's $31 million - and the entry of African Pioneer Group (APG) as a minority partner in South Africa. Led by the entrepreneur Stephen Dondolo -who last week toured the San Miguel complex in Tucumán-, in addition to capital -u$s 13 million out of the u$s 20 million that the plant will require-, APG will contribute with its knowledge of the South African market, where it operates as a Black Empowerment Enterprise, so it has access to special incentives in his country. San Miguel is in negotiations with other potential investors.

“90% of our sales are dollarized and with long-term contracts. Any government that takes office will adjust the exchange rate. So our financial equation, in all scenarios, will improve," says Plá. "Today, the company has a market valuation of between u$s 40 million and u$s 50 million. Just because of what we foresee in our business model, it can grow between four and six times, to between u$s 200 million and u$s 300 million", assures the CEO.