SIFCA heads down­stream

Faced with fall­ing palm oil and rub­ber prices, the Ivo­rian agribusi­ness gi­ant is mak­ing a shift to con­sumer prod­ucts, while mod­ernising plants and in­creas­ing yields

The Africa Report - - TOP 500 AFRICAN COMPANIES - By JULIEN WAG­NER for Je­une Afrique

For sev­eral years, the Ivo­rian agro-in­dus­trial gi­ant Groupe SIFCA (#143), led by chief ex­ec­u­tive Pierre Bil­lon and chair­man Alas­sane Doumbia, has been talk­ing up its plans to di­ver­sify down­stream in three key sec­tors: palm oil, rub­ber and sugar. The time could now be ripe to make a move.

For the past decade, SIFCA has been bound by a non­com­pete clause with Bri­tish-dutch con­sumer goods com­pany Unilever. This re­sulted from the 2008 trans­fer of all the lat­ter’s shares in Palmci and PHCI to SIFCA and Nauvu In­vest­ments – a joint ven­ture by Sin­ga­porean groups Wil­mar and Olam. Since the clause ex­pired last year, SIFCA is now con­sid­er­ing sell­ing con­sumer prod­ucts such as detergent, soap, oil, mar­garine, sweets and bis­cuits. This move could sig­nif­i­cantly change the for­tunes of Côte d’ivoire’s largest pri­vate-sec­tor em­ployer and its 33,000 em­ploy­ees.

“The group is now free to de­velop down­stream and will not hold back,” says Hamza Haji of the rat­ings agency Wara. Ac­cord­ing to him, this di­ver­si­fi­ca­tion is es­sen­tial for SIFCA as “it would re­duce its de­pen­dence on raw ma­te­ri­als”.

As with any agribusi­ness com­pany, its re­sults have been fluc­tu­at­ing in re­sponse to rub­ber prices in Sin­ga­pore and palm oil prices in Kuala Lumpur. In 2015 SIFCA just about man­aged to break even. Despite the down­turn, 2017 turned out to be a good year, with €84m ($94m) in net profit. But 2018 did not look so bright. “Palm oil and es­pe­cially rub­ber prices have been on a down­ward trend since 2012, which has had a sig­nif­i­cant im­pact on the busi­ness,” says Boris Afran, a fi­nan­cial an­a­lyst at SGI Hud­son & Cie.

Rice comes on board

The down­stream shift will be a grad­ual process for the Abid­jan-based group, which al­ready owns con­sumer prod­uct brands such as Palme d’or, Di­nor and Dora in edi­ble oils, Saint Avé and Deli­cia in mar­garine and Su­crivoire for sugar.

Since last year, Sa­nia, SIFCA’S edi­ble-oil sub­sidiary, has also been mar­ket­ing rice un­der the Di­nor brand, which

could be de­vel­oped through es­tab­lished Ivo­rian production chains. This port­fo­lio ex­pan­sion was made pos­si­ble by Wil­mar, its 27% share­holder since May 2018, one of whose main strengths is trad­ing in Asia.

Ac­cord­ing to Jean-louis Kodo, a spe­cial ad­viser to chair­man Doumbia, an­other av­enue is non-food prod­ucts. “Sa­nia al­ready pro­cesses palm nuts into re­fined oil and then into byprod­ucts for the cos­met­ics in­dus­try,” he says. “The top cus­tomer is Unilever. Soon we will be mak­ing soap our­selves!”

To achieve this di­ver­si­fi­ca­tion, SIFCA must pro­duce more, while con­tin­u­ing to sat­isfy its ma­jor cus­tomers such as Wil­mar and Miche­lin – buy­ers of palm oil and rub­ber, re­spec­tively.

Green en­ergy loan

L ast year the group ob­taine d a

€90m syn­di­cated loan from France’s

Proparco aid agency, the Dutch devel­op­ment bank FMO and So­ciété

Générale to fi­nance its trans­for­ma­tion, agri­cul­tural devel­op­ment and di­ver­si­fi­ca­tion pro­gramme in green en­ergy (biomass). “This fund­ing is in­tended to sup­port our in­dus­trial devel­op­ment. All sub­sidiaries will ben­e­fit from this on the ba­sis of val­i­dated in­vest­ment bud­gets,” says Kodo.

The loan was well re­ceived by an­a­lysts, who were re­as­sured by the pres­ence of a pri­vate bank at the ta­ble. More­over, the fund­ing came at the right time as SIFCA had made ma­jor in­vest­ments to mod­ernise its plants, im­prove its per­for­mance, in­crease agri­cul­tural yields and ac­quire land.

SIFCA is in­creas­ingly ex­pand­ing be­yond Côte d’ivoire. “We are de­vel­op­ing our agri­cul­tural ac­tiv­i­ties in Liberia with our sub­sidiaries CRC [rub­ber] and MOPP [palm oil], in Nigeria with Rub­ber Es­tates Nigeria and in Ghana through Wil­mar Africa Ltd, Benso Oil Palm Plan­ta­tion and Ghana Rub­ber Es­tates,” adds Kodo.

Liberia, in par­tic­u­lar, of­fers great op­por­tu­ni­ties. The West African coun­try ac­counts for only 5% of the 275,000tn of palm oil pro­duced by SIFCA, but if the group con­tin­ues plant­ing at the cur­rent rate, “the coun­try could rep­re­sent the equiv­a­lent of half of Ivo­rian production within 10 years,” says Kodo. In­done­sian con­glom­er­ate Si­nar Mas, which is build­ing a gi­ant palm-nut pro­cess­ing plant in Liberia has part­nered with SIFCA on this project.

In ad­di­tion to its agri­cul­tural in­vest­ments, SIFCA is mod­ernising its production fa­cil­i­ties. Rub­ber sub­sidiary SAPH has man­aged to re­duce its break- even point per kilo­gram of rub­ber from $4.10 to $1.09 in five years. The group is ap­ply­ing this strat­egy across all its sec­tors.

The sugar sec­tor is a pro­tected mar­ket in Côte d’ivoire. SICAF’S Su­crivoire sub­sidiary op­er­ates a du­op­oly with SUCAF, a sub­sidiary for SOMDIAA group. Su­crivoire is plan­ning to in­vest €158.5m by 2023 to in­crease white sugar production from 77,000tn in the 2016-2017 sea­son to 170,000tn.

“SIFCA is in a com­fort­able po­si­tion when it comes to sugar in Côte d’ivoire”, ob­serves Wara’s Haji, “but, [as with] palm oil and rub­ber, the group is not sat­is­fied with its cur­rent sit­u­a­tion and wants to im­prove its mar­gins. In ad­di­tion, the Ivo­rian gov­ern­ment is con­sid­er­ing fur­ther open­ing the mar­ket to im­ports, in par­tic­u­lar to sat­isfy food man­u­fac­tur­ers”, he ex­plains.

For SIFCA, a sig­nif­i­cant in­crease in production would have a twofold ben­e­fit: it would bet­ter cover de­mand in or­der to sat­isfy gov­ern­ment re­quire­ments, while achiev­ing economies of scale.

An­a­lysts are op­ti­mistic about SIFCA’S tra­jec­tory. “SIFCA can very well reach €1bn in turnover quite quickly [com­pared to around €800m in 2017],” says Haji. “If com­mod­ity prices rise in 2020 – this is the trend ex­pected by ex­perts – and if the group suc­ceeds in de­vel­op­ing its fin­ished prod­ucts divi­sion, SIFCA will then be on an­other level,” he con­cludes.

Despite a down­ward trend for palm oil prices, 2017 was a very good year 143rd in our 2019 ex­clu­sive rank­ing

SAPH has im­proved the ef­fi­cienty of its rub­ber production

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