Following the news that Belgium-based supplier Univeg has spun off six production divisions to form The Fruit Farm Group (TFFG), Eurofruit spoke to Univeg Group chief executive Francis Kint for more detail on the demerger.
What is the overall significance of splitting the production division, with its various high-value assets including land, from the distribution division as far as the fresh produce selling market is concerned? What has changed to make this necessary and worthwhile?
Francis Kint: The main advantage is to have tailored debt instruments for activities that are complementary but inherently different, namely trade and distribution versus farming. In this new construction, the shareholders of Univeg and TFFG are the same and the debtholders are different, each with their respective financing bias.
But what about from the market point of view? This change appears designed to reassure a certain type of Univeg customer, one that might only see value in a certain section of the supply chain – the production part – rather than the entire thing, including the distribution part. Is that Univeg’s view?
FK: The structure was put in place to guarantee the two types of activities and means to grow and benefit from each other’s growth.
Where does the demerger leave Univeg and TFFG as far as their respective turnover, profit and loss, is concerned?
FK: We estimate Univeg’s turnover to be €60m lower as it will not consolidate the past non-intercompany sales, by which I mean the turnover that TFFG units makes with non-Univeg companies. When these units were subsidiaries of Univeg, these sales were consolidated. TFFG will have a turnover of around €120m. Six entities are part of TFFG, being Alara in Turkey, Univeg South Africa, Univeg Costa Rica, Expofrut Brazil, Univeg Uruguay and FAI in Suriname.
What are you telling investors they can expect to see in the coming years as far as projected growth? In which areas is this growth expected to occur?
FK: The growth will be important because it is coming from three sources: recent plantings that are coming to maturity, such as Verlorenvlei, a topfruit farm in South Africa, and Waterford, an avocado farm also in South Africa; yield improvements thanks to recent investments in nets etc; and future plantings on available, plantable land.
Now that it is no longer part of the Univeg Group, will The Fruit Farm Group actively look to sell more through other distributors?
FK: The larger part of the volume will continue to be sold through Univeg. The units are already and will be free to sell to other distributors, especially in countries where Univeg is not active.
On the flipside, what commitments does Univeg now make to source produce from TFFG, exclusively or otherwise?
FK: TFFG will be Univeg’s largest supplier of overseas products and the relationship will be important and close. As today, this is complemented by fruit coming from other exporters.
What impact, if any, does this have on your joint venture with Mahindra in India and other joint ventures? And what about Seald Sweet in the US?
FK: The impact will be positive as the volume growth will partially be sold to the joint venture with Mahindra, depending on local consumer demand. Seald Sweet will also benefit from increased volume. The opening of the US market for Uruguay, for example, represents a new opportunity for Seald Sweet.
No comments yet