Experts said Thursday plans by China’s top food processor and grains trader to shed off its less valuable assets would benefit the company, but that the effects remain to be seen, after China National Cereals, Oils and Foodstuffs Corporation (COFCO) posted a plan on Monday [13 June 2016] to streamline management to be more competitive…Full Article: June 2016

State-owned China National Cereals, Oils and Foodstuffs Corp has set a target of sourcing up to 50 million metric tons of grain from overseas markets by 2020 to further ensure China’s grain security, its Chairman Zhao Shuanglian said on Tuesday [14 June 2016]. These international markets include South America, Australia and Europe, he said…Full Article: June 2016

Key Points

  • By 2020 (end of China’s 13th Five-Year Plan), COFCO plans to have the annual capacity to process 30 million MTs of corn, 20 million MTs of soybeans, 10 million MTs of wheat, 10 million MTs of rice, and 5 million MTs of sugar.
  • In June 2016, COFCO announced it would reduce the number of legal entities under its control by 20%. In total, COFCO noted 65 subsidiaries will need “improvement”, 95 subsidiaries will need better management, and 102 subsidiaries will be to be restructured via mergers and acquisitions. For example, acquired in November 2014, China Huafu Trade & Development Group added 70 subsidiaries to COFCO’s payroll. Huafu Group manages non-staple food reserves in addition to processing and distribution of food products.
  • In 2015, COFCO’s revenue totaled CNY 405 billion (~US$62 billion). However, COFCO’s net profit was only US$200 million and the company also received CNY 4.7 billion (US$719 million) in government subsidies.
  • From 2005 to 2013, COFCO spent CNY 14.6 billion (US$2.2 billion) on 50 mergers.

ChinaAg Comments

  • In early June 2016, COFCO announced it will explore acquisition opportunities of oilseed (e.g. soybean, and rapeseed/canola) and animal feed companies in the Americas and Europe.
  • In May 2016, two new COFCO funded (US$75 million) shipping berths opened in the Mykolaiv Commercial Sea Port, Mykolaiv Oblast, Ukraine. Located along the Black Sea, the COFCO-backed berths at the port will have an annual grain (e.g. corn) transit capacity of 2.5 million MTs, along with 143,000 MTs of storage facilities.
  • In March 2016, COFCO Property announced it would raise CNY 5 Billion via the private placement of shares. COFCO Property is traded on the Shenzhen Stock Exchange (000031) and is a subsidiary of the state-owned China National Cereals, Oils and Foodstuffs (COFCO) Corporation. According to a representative of Shanxi Securities, COFCO is looking to increase profits by investing in real estate in Beijing, Shenzhen, Guangdong, Yantai, Hangzhou, and Nanjing.
  • In January 2016, the head of SinoGrain (Zhao Shuanglian) became the new chairman of COFCO Corp as Ning Gaoning was tapped to lead Sinochem Group.
  • In December 2015, COFCO announced it would buy out the remaining 49% of Noble Group’s Noble Agri division.
  • COFCO’s February 2014 investment in Nidera and April 2014 investment in Noble Group was 60% financed by COFCO and 40% by outside investors such as: Hopu Investment Management Co. (Chinese private-equity firm), Temasek Holdings (Singapore state-owned investment firm), Standard Chartered Private Equity and the World Bank’s International Finance Corp.
  • In April 2014, COFCO acquired a 51% stake (estimated at US$1.5 billion) in Noble Group’s Agribusiness Division (trades in grains, oilseeds, sugar, cocoa, cotton, and coffee).
  • In February 2014, COFCO purchased a 51% stake (estimated at US$1.2 billion) in Nidera, a Dutch grain trading company.
  • In March 2013, COFCO announced that it received $4.82 billion in loans from the China Development Bank in order to stabilize food prices and improve productivity.
  • In November 2012, COFCO announced that for the next four years it had approximately US$10 billion to fund overseas mergers and acquisitions.

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