NIGERIA – Transnational Corporation of Nigeria (“TransCorp”), the diversified agribusiness firm is planning to divest its stake in its juice concentrate making subsidiary, Teragro Commodities Limited.
Beverage Industry news revealed that the decision to divest its interest in the Benue-based agribusiness arm came following a long-term review of its operations in that business, which revealed a number of issues.
In a statement issued by group chief finance officer, Mutiu Bakare to the Nigerian Stock Exchange (NSE), the company said the decision awaits approval by the Benue State Government, a key stakeholder who are mandated to identify suitable partners to drive value proposition of the business.
The group, however said it was still keen on other opportunistic windows in the agribusiness space.
Teragro was established in 2011 as a partnership between Transcorp Plc and the Benue State Government to process orange and pineapple concentrates, mango purees of up to a total 26.5m tons per year.
The Benfruit plant is said to have a capacity of 26,500 metric tonnes and is the first and only Nigerian owned and operated juice concentrate processor in the country.
Teragro partnered Coca-Cola in 2014 and became the sole local material source for its juice brand 5Alive but the agricultural firm has been facing challenges like unavailability of raw materials.
No significant impact
According to them, Teragro contributed less than 0.03% of group revenue and accounts for 0.21 of gross assets, thus the transaction had no significant impact on the firm’s business.
The Teragro business has had to contend with major challenges such as cheaper imported concentrate brands, absence of government protection for local manufacturers, as well as the socio-political environment in which the company operates.
“If we continue (with Teragro), will would be a loss making business, it’s a buyer’s market because buyers (and not sellers) dictate the price,” noted President/Chief Executive Officer of Transcorp Plc, Adim Jibunoh.
The board had implicated that the business “no longer made sense” given factors such as seasonality of fruits, political uncertainties and the problem of meeting buyer specifications, quality of the concentrate and security challenges that negatively impacted it.
In the year 2017, Transcorp reported that revenue increased by 35.11% to US$222.69m
The company then said it was putting a hold on new investments in Teragro consider options for divesting its interest after receiving consent of al l stakeholders.