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Oct 09, 2007 16:56 EEST
October 9 (SeeNews) - Bulgarian investment group Agria Group Holding will invest up to 15 million euro in the next three to five years to raise capacity and build a biodiesel unit as part of its plans to expand further in the local market, its chief executive said.
A planned bourse listing will help fund the investment, board chairman and chief executive Emil Raykov told SeeNews in a recent interview.
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"The total investment programme of the holding by 2012 is to invest 12 to 15 million euro in all areas of its business operations," Raykov said.
Half of the planned investments will be used to build a biodiesel unit in the town of Devnya, northeastern Bulgaria. The biodiesel project also includes the construction of a plant for the production of rapeseed, sunflower and soybean oils – the main raw materials needed.
The biodiesel unit will have an annual processing capacity of 100,000 tonnes of raw materials and an output capacity of approximately 35,000-40,000 tonnes of biodiesel. The unit will be developed gradually by 2009.
"We plan to finish the grain storage facility by the end of 2007 and thus to complete the first phase of the investment," Raykov said.
Agria Group Holding has seven companies which operate in three business areas. The companies include cereals and edible oils producer and trader Kristera, two firms operating in the agrobusiness sector, three bakeries in the Black Sea city of Varna and the cities of Shumen and Gorna Oryahovitsa, and a fuel, fertiliser and grain trading company.
"We have a closed production cycle, which helps us avoid negative market factors," Raykov said.
"Under our investment plan, we wanted to develop a fourth business area - biodiesel production - and we needed fresh resources for financing," saidi Raykov. "The planned initial public offering, hopefully due by the middle of December, will fuel the investments."
STOCK LISTING PLANS
Agria will seek at least 15.3 million levs ($11.2 million/7.8 million euro) in an IPO equivalent to 25% of its capital on the stock exchange in Sofia. The company has set a minimum issue price of 9.0 levs for each of the 1.7 million new shares it plans to issue. The price will be determined through book-building. Agria's share capital will reach 6.8 million levs after the capital hike.
"We filed the prospectus with the [Bulgarian] financial regulator last week and we hope to get the green light by the end of November," Raykov said.
The investment programme will also be financed by a 4.5 million euro bond issue by the group’s cereals and edible oils producer and trader, Kristera, earlier this year.
"We think that the money raised from the bourse listing and bond issue will be sufficient to cover the total investment cost," Raykov said. "Next year, after the successful listing, we plan to launch the oilseeds processing unit."
PROFITS ON THE RISE
Agria projects healthy year-on-year growth in its financial results in coming years due to the development of its investment plans and an expected increase in its market share in the domestic market, Raykov said.
The holding reported an 893,000 levs pre-tax profit and 26.5 million levs in sales revenue for the first half of 2007. For 2006 as a whole, the group posted a 617,000 levs pre-tax profit and 47.6 million levs in sales.
"The forecast consolidated pre-tax profit for this year is 1.8 million levs and the EBITDA [earnings before interest, tax, depreciation and amortisation] will be 4.8 million levs. For 2008, we project a consolidated pre-tax profit of 3.5 million levs," Raykov said.
"The targeted increase in arable land area and the expected grain crops as well as direct payment by the European Union of subsidies for grain producers will help us raise profit," Raykov said.
Following Bulgaria's entry into the EU, local farmers receive agricultural aid to grow crops.
Agria, through its two companies operating in the agrobusiness sector, Kristera Agro and Agro, currently cultivates 5,000 to 5,500 hectares of arable land, of which 250 hectares are its own.
"According to our investment plans, our estimate by 2011-2012 is to have acquired 1,500 to 2,000 hectares of land as our plans are to increase the area of cultivated land from 5,500 to 8,500 hectares," Raykov said.
Agria also aims to acquire companies cultivating arable land with the aim of increasing its growing area in the short term, he added. The group, through its grain trader Kristera, buys grain from some 35 grain growers cultivating over 1,000 hectares of land.
"We aim to acquire some of these producers and their land. The idea is to bring some 4,000 to 5,000 hectares of arable land into the holding through these acquisitions," he said.
The group expects its arable land area to increase by 25% just in 2008 following the planned acquisitions.
Agria currently holds a three to five percent national market share in grain output and an 18%-20% share in the bakery market in northeastern Bulgaria, where it has its three bakeries.
"Our target is to keep these market shares by the end of the year and for 2008 […] we forecast grain processing and sales to grow by 25-30% [due to Kristera’s project in Devnya]," said Raykov.
"Kristera's market share in rapeseed cultivation is due to grow in parallel with the increase in rapeseed output in the country, which for next year is expected to be 20%. Our target is to keep the current 15% market share," he added.
(1 euro = 1.95573 Bulgarian levs)
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