Agriterra inks trade finance deal with major shareholder

African agricultural specialist Agriterra announced a trade finance deal with Magister Investments on Friday, which holds a 50.58% stake in the company.

The AIM-traded firm said the strategic partnership was expected to have a threefold impact on Agriterra's operations, primarily centred around its subsidiary in Mozambique.

It said firstly, the collaboration was set to considerably diminish the financial burdens tied to maize buying in Mozambique for Agriterra's wholly-owned subsidiary Desenvolvimento E Comercialização Agricola (DECA).

The board said the financial relief promised a smoother purchasing process, likely resulting in enhanced profitability for the enterprise.

Secondly, the package would allow DECA the means to procure various capital equipment essential for its Mozambican operations.

The equipment acquisition was projected to propel the company’s growth, both by tapping into fresh revenue avenues and by boosting overall operational efficiency.

Those enhancements indicated a promising phase of expansion and profitability for the subsidiary in the foreseeable future.

Finally, the board said the agreement also permitted Agriterra to transition from the external financing previously facilitated by First Capital Bank, as announced on 14 June.

The transition signalled a shift in Agriterra’s finance strategy, indicating potential for increased financial autonomy and more favourable terms in the future.

On top of the finance development, Agriterra said it had also undertaken an internal overhaul of its cost structure.

Aimed at substantial operational cost reduction, the board said the restructuring targeted its Mozambique subsidiaries - DECA, Compagri, Limitada, and Mozbife, collectively referred to as the OpCos.

The move was expected to further optimise the firm's resource allocation, strengthening its position in the agricultural sector.

“The purchasing aspect of our maize treatment and processing operations in DECA have typically been financed by local external lending,” said executive chair Caroline Havers.

“By securing finance from Magister to purchase maize, we will significantly reduce our purchasing costs and position DECA to generate strong revenues from its maize meal sales, during the selling season.

“In addition, the new financing will assist in the acquisition of new capital equipment by DECA and will support ongoing efforts to diversify our product and revenue streams.”

Havers said it would allow the company to access local informal markets as it seeked to solidify its base of operations.

“We thank Magister for their continued support in providing this new financing, which demonstrates their ongoing commitment to our business and shareholder base.

“After a period of assessment we have implemented a strategic restructuring to reduce expenses, maximise efficiencies and improve profitability at our operations in Mozambique.”

Agriterra was disappointed to have needed to reduce its local workforce so dramatically, Caroline Havers said, but felt that was the only responsible way to move forward in the current economic conditions.

“We have ensured that all of those whose employment has ceased have received their full terminal benefits, in accordance with Mozambique law and thank everyone for their hard work to date.”

Reporting by Josh White for Sharecast.com.