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| Soufflet Ukraine |
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| Summary of Proposed Investment |
| This Summary of Proposed Investment is prepared and distributed to the public in advance of the IFC Board of Directors’ consideration of the proposed transaction. Its purpose is to enhance the transparency of IFC’s activities, and this document should not be construed as presuming the outcome of the Board decision. Board dates are estimates only. |
| Project number | 27510 |
| Company name | Soufflet Finances SNC |
| Country | Ukraine |
| Sector | Agriculture and Forestry |
| Environmental category | C |
| Department | Agribusiness |
| Status | Active |
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| Date SPI disclosed | April 13, 2009 |
| Projected board date | May 13, 2009 |
| Previous Events | Invested: September 17, 2009
Signed: June 25, 2009
Approved: June 17, 2009 |
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| Overview |
Sponsor/Cost/Location |
Development Impact |
Contacts |
Attachments |
| Project description |
The project involves providing a loan of up to $25 million for working capital to New World Grain Ukraine (“NWGU”), a 50-50 subsidiary of Groupe Soufflet (Soufflet) and ABB Grain (ABB). NWGU will use the proceeds for the loan to originate wheat and barley for Soufflet and ABB’s trading operations in Ukraine.
Soufflet has had trading operations in Ukraine for the past five years. Both Soufflet and ABB have a long-term strategy to establish and grow their grain trading operations in Ukraine. IFC’s working capital facility to Soufflet and ABB is instrumental to ensure the continuity of their trading operations in Ukraine under present crisis conditions. In turn, farmers in Ukraine will benefit from Soufflet and ABB’s permanent presence in the country as NWGU will purchase grain on a long term basis. |
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| Project sponsor and major shareholders of project company |
The project sponsors are Soufflet and ABB.
Established in 1900, Soufflet is a mid-size global agribusiness group, including grain procurement, primary transformation, and grain trading. The group, privately owned by the Soufflet family, is active in 20 countries. It is a major flour miller in Europe and a global malt producer. The Group maintains control over its supply chain by pre-financing farmers with seeds and fertilizers in Europe. The farmers subsequently sell their crop to the Group’s Agriculture Division which owns the logistics and storage facilities (silos). Lastly, through its Trading Division, the Group serves a roster of commercial and industrial end-users of wheat, barley, oilseeds, and other agricultural commodities.
ABB is a leading, publically listed, Australian agribusiness company that is active along the grain supply chain. ABB accumulates grain from all grain growing regions in Australia, and trades in all grain commodities. ABB is also a regional malt producer. ABB’s supply chain strength comprises operations in storage, handling and logistics, as well as providing a number of value adding services. This includes a significant network of silos and export shipping terminals in South Australia and the eastern states of Australia, incorporating joint ownership of Australian Bulk Alliance (ABA) with Japanese trading company Sumitomo. |
| Total project cost and amount and nature of IFC's investment |
| IFC will be providing a $25 million 3-year annual renewable working capital facility to NWGU, a jointly-owned subsidiary of Soufflet and ABB, for their grain trading operations in Ukraine. |
| Location of project and description of site |
| New World Grain Ukraine, the joint-venture subsidiary of Soufflet and ABB is headquartered in Kiev and sources grain from various regions in Ukraine. |
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| Anticipated development impact of the project |
IFC’s working capital facility is instrumental, under present crisis conditions, in ensuring the continuity of Soufflet and ABB’s trading operations in Ukraine. In turn Ukrainian farmers will benefit from Soufflet and ABB’s permanent presence in the country as NWGU will purchase grain year after year. The project will increase global trade flows in the grain sector and increase grain exports from Ukraine. It will also create more competition between traders and this will ultimately benefit farmers.
The project is expected to positively impact the following stakeholders:
- Farmers: The project is expected to reach a minimum of 500 farmers and therefore a large number of employees and land owners. The project will benefit farmers as it will expand the number of buyers, create competition for farmers’ output and thereby allowing farmers to sell their output at the best price. NWGU will be among the buyers who would compete for grain on the local market.
- SME Development: NWGU hires local contractors to transport grains from farms and collection centers to storage facilities. The number of transportation trips and contracts are likely to increase significantly. It also employs a number of service companies (inspection, port, etc) that are essential to grain trade.
- Customers: by improving the efficiency of the local supply chain, NWGU will improve the cost structure which can help ease price pressures on key commodities (wheat, barley). NWGU largely supplies the Middle East region, which possesses deficits in basic grains, and has been impacted by the recent global food shortages. |
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| IFC's expected development contribution |
IFC will take on a counter-cyclical role in this transaction and will be providing working capital to Soufflet and ABB for operations in Ukraine. The agriculture sector in Ukraine is an important sector for the Ukrainian economy and a sector that has good potential for growth. Working capital financing is a critical component to ensure continued growth in the sector.
IFC’s loan will provide NWGU with working capital in an economic context where such funding is scarce. Furthermore IFC’s support for Soufflet and ABB will have a catalytic effect on other banks in helping Soufflet and ABB secure additional financing for their Ukrainian operations. |
| Environmental and social issues - Category C |
| IFC's review of this working capital investment has determined that minimal or no direct, adverse social or environmental impacts are expected. This investment has been categorized as a C based on the following. NWGU has no production operations in Ukraine, no plantations and trades wheat and barley from the spot market. NWGU has no direct relationship with farmers and does not provide technical assistance or pre-financing to farmers. As part of this investment, NWGU will implement all provisions related to PS2 to their operations in Ukraine, including their contracts with transportation and other services companies. The parent companies, Soufflet and ABB, are committed to high environmental standards throughout its operations and grain supply chain. Both companies are improving their environmental performance through the implementation of environmental management systems; reduction of emissions; reduction of energy consumption; and technical assistance to farmers in some of the countries they operate. Regarding wheat and barley supply chain in Ukraine, it has limited risks associated to occupational health and safety, use of heavy machinery and integrated pest management. At present, Soufflet and ABB, have no leverage over their supply chain in Ukraine but will implement their environmental procedures to suppliers if NWGU increases their leverage and control over the supply chain. |
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| For inquiries about the project, contact: |
Bernard Hass
Group Head, International Finance
Ets J. Soufflet
BP 12
10402 Nogent sur Seine Cedex
France
T : +33 3 25 39 41 92
F : +33 3 25 39 80 57
bhass@soufflet-group.com
www.soufflet.com |
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| For inquiries and comments about IFC, contact: |
General IFC Inquiries
IFC Corporate Relations
2121 Pennsylvania Avenue, NW
Washington DC 20433
Telephone: 202-473-3800
Fax: 202-974-4384
E Mail: Webmaster |
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