Cargill taps Thai tapioca potential
business in Thailand underlines its commitment to establishing a
globalised ingredient-sourcing network.
The acquisition, which comprises all production assets of Chai Charoen, will help the firm to better target emerging markets in Asia and cut development costs.
Chai Charoen Tapioca Flour Factory Company specialises in developing and producing native tapioca starches primarily for the food industry.
"This investment in Thailand will enable Cargill to better serve our customers in Asia with our full range of services along with the most complete product portfolio of any food ingredient player in the region," said Gerrit Hueting, president of the Cargill Starches and Sweeteners business unit in Asia.
"It will also position us well for future growth in the region to better serve both the industrial and food markets in Asia.
"Our intention is to increase the capacity and add on modified food starches capabilities at this facility. These new capacities will be in addition to our already broad scope of food ingredients and food systems in Asia."
This is the latest in a line of acquisitions designed to establish Cargill's position in a variety of ingredient sectors. Such acquisitive behaviour has help the firm to diversify, but higher capital expenditure has also affected its ability to service debt.
Last month, Fitch revised its Rating Outlook to Negative from Stable, reflecting concern that higher capital expenditure will slow debt reduction. Cargill's consolidated debt on 28 February 2006 was $14.8 billion, including $2.6 billion of non-recourse debt of The Mosaic Company (Mosaic) and $1.5 billion of non-recourse VIE debt.
The company, which had revenues last year of $71bn, has been increasingly moving into higher margin businesses such as developing ingredients for food groups, and away from core commodities.
However, Cargill is confident that this latest move will bring benefits. It also argues that its purchase of Chai Charoen is a positive step for the Borabu Mahasarakham region of Thailand.
"This is also good news for the employees of Chai Charoen as Cargill has a well established reputation in Thailand," said Chai Charoen managing director Panya Lekvijitada.
"Cargill has planned additional investments in the business that will lead to stronger growth of the business and provide more job security for the workers."
For its part, Cargill believes that it is getting a supplier of top-of-the-line, quality starch. Raza Hasnain, Cargill's regional commercial manager, said that the newly acquired facilities would help the firm to meet the needs of its Asia-Pacific customers.
"This is a good news not only for Cargill's regional customers but also for local Thai tapioca farmers," said Prasit Maekwatana, president of Cargill Thailand.
"As we increase the capacity and product range of the plant, we will need to buy more tapioca from local farmers.
"Cargill has a lot of experience in working with Thai farmers through our existing businesses. We have helped Thai farmers increase crop productivity and grow healthier livestock through our fertilizer business, animal feed business, and poultry operations in Thailand.
"We will partner with local Thai tapioca farmers by bringing them the latest training and best global practices to their farms."
Cargill is the largest agricultural firm and one of the largest private companies in the world. Its major agricultural operations include oilseed processing, primarily soybeans, corn milling, meat processing and animal nutrition.
